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Transcript
REPORT AND CONSOLIDATED FINANCIAL STATEMENTS
2015
Report and Consolidated Financial
Statements of the Bipiemme Group
at 31 December 2015
Approved by the Supervisory Board on 30 March 2016
Cooperative Bank founded in 1865
Parent Company of the BPM – Banca Popolare di Milano – Banking Group
Share capital at 31.12.2015: Euro 3,365,439,319.02
Milan Companies Register no. 00715120150
Enrolled in the National Register of Cooperative Companies no. A109641
Registered Office and General Management:
Piazza F. Meda, 4 – Milan
www.gruppobpm.it
Member of the Interbank
Guarantee Fund
Registered Bank
and Parent Company of the
BPM – Banca Popolare di Milano – Banking Group
enrolled in the Register of Banking Groups
2015
This English version in not an official translation and is not a substitute for the original
Italian document. It is for informational purposes only and has been prepared solely
for the convenience of international readers.
1
Contents
Directors and Officers, General Management and Independent Auditors7
Notice of Ordinary General Meeting9
Report and Consolidated financial statements of the Bipiemme
Group Year 201517
Key figures and ratios of the Bipiemme Group19
Structure of the Bipiemme Group 20
General aspects 21
Reclassified balance sheet 22
Reclassified balance sheet – quarter by quarter 23
Reclassified income statement24
Reclassified income statement – quarter by quarter 25
Key figures26
Key ratios27
Reclassified income statement, net of non-recurring items 28
Report on operations of the Bipiemme Group 31
The macroeconomic scenario and the banking system32
Significant events for Banca Popolare di Milano and the
Bipiemme Group38
The activities of the Bipiemme Group in 2015 46
The distribution network and human resources62
The Bipiemme Group’s scope of consolidation69
Principal balance sheet aggregates71
Income statement 87
Statement of cash flows96
Information on the main Bipiemme Group companies97
Related party transactions 106
Outlook108
Consolidated Financial Statements111
Consolidated Balance Sheet112
Consolidated Income Statement114
Statement of consolidated comprehensive income115
Consolidated statement of changes in shareholders’ equity116
Consolidated statement of cash flows120
3
Consolidated explanatory notes121
Part A – Accounting policies 123
Part B – Information on the consolidated balance sheet193
Part C – Information on the consolidated income statement273
Part D – Consolidated statement comprehensive income299
Part E – Information on risks and related hedging policies303
Part F – Information on consolidated capital 401
Part G – Business combinations413
Part H – Related party transactions417
Part I – Share-based payments425
Part L – Segment reporting431
Certification of the consolidated financial statements pursuant to
art. 81-ter of Consob Regulation no. 11971 dated 14 May 1999
and subsequent additions and amendments439
Attachments to the consolidated financial statements441
Reconciliation between the consolidated balance sheet and the
consolidated reclassified balance sheet442
Reconciliation between the consolidated income statement and the
consolidated reclassified income statement444
Consolidated reclassified income statement net of non-recurring
items -- quarter by quarter446
Consolidated reclassified income statement net of non–recurring
items – quarter by quarter448
Disclosure of fees paid for auditing and other services
pursuant to with art. 149-duodecies of the Consob Issuers’
Regulation450
Public disclosures (Country by Country reporting)451
Report of the Independent Auditors on the consolidated financial
statements453
Report and Financial statements of Banca Popolare di Milano
Year 2015457
4
Key figures and ratios of Banca Popolare di Milano
459
General aspects
Reclassified balance sheet Reclassified balance sheet – quarter by quarter
Reclassified income statement
Reclassified income statement – quarter by quarter
Key figures Key ratios
Reclassified income statement, net of non-recurring items
Report on Operations of Bipiemme
461
462
463
464
465
466
467
468
471
The macroeconomic scenario and the banking system
Significant events for Banca Popolare di Milano
Distribution network and human resources
Principal balance sheet aggregates
Income statement
Statement of cash flows
473
473
473
475
483
490
Contents
Banca Popolare di Milano shareholders, stock price and ratings
491
Report on the criteria followed for running the business for the
achievement of its mutual objectives pursuant to art. 2545 of the
Civil Code
495
Related party transactions 497
Subsequent events
498
Outlook498
Proposed allocation of net income
500
Financial statements501
Balance sheet 502
Income statement
504
Statement of comprehensive income
505
Statement of changes in shareholders’ equity
506
Statement of cash flows
510
Explanatory notes511
Part A – Accounting policies
513
Part B – Information on the balance sheet 571
Part C – Information on the income statement
651
Part D – Statement of comprehensive income
683
Part E – Information on risks and related hedging policies
687
Part F – Information on capital
743
Part G – Business combinations
755
Part H – Related party transactions
759
Part I – Share-based payments
767
Part L – Segment reporting
773
Certification of the separate financial statements pursuant to
art. 81-ter of Consob Regulation no. 11971 dated 14 May 1999
and subsequent additions and amendments777
Attachments to the financial statements
Reconciliation between the balance sheet and the reclassified
balance sheet
Reconciliation between the income statement and the reclassified
income statement
Reclassified income statement net of non-recurring items – quarter
by quarter
Disclosure of amounts paid for the audit and other services in
accordance with art. 149-duodieces of Consob’s Issuers’ Regulation
Summary of significant accounting policies
Summary of property owned by the Bank with revaluations Report of the Independent Auditors
779
780
782
786
788
789
794
797
Report of the Supervisory Board 801
Item 2 on the agenda for the Ordinary General Meeting of Members809
Item 3 on the agenda for the Ordinary General Meeting of Members863
Item 4 on the agenda for the Ordinary General Meeting of Members869
Item 5 on the agenda for the Ordinary General Meeting of Members877
Resolutions879
Contents
5
Directors and Officers,
General Management
and Independent
Auditors
Directors and Officers
Supervisory Board
Management Board
Chairman
Dino Piero Giarda
Chairman
Mario Anolli
Deputy Chairmen
Mauro Paoloni
Marcello Priori
Managing Director and
General Manager
Giuseppe Castagna
Directors
Alberto Balestreri
Andrea Boitani
Angelo Busani
Emilio Luigi Cherubini
Maria Luisa Di Battista
Carlo Frascarolo
Roberto Fusilli
Donata Gottardi
Piero Lonardi
Alberto Montanari
Maria Luisa Mosconi
Giampietro Giuseppe Omati
Luca Raffaello Perfetti
Cesare Piovene Porto Godi
Lucia Vitali
Directors
Davide Croff
Paola De Martini
Giorgio Girelli
Arbitration Committee
Independent Auditors
Italo Ciancia
Cinzia Finazzi
Guido Mina
Reconta Ernst & Young S.p.A.
7
Notice of call
of an Ordinary
General Meeting of
Shareholders
Notice is hereby given that the Shareholders of Banca Popolare di Milano Scrl
are called to an Ordinary General Meeting at 9:00 a.m. on 29 April 2016
in first call at the company’s registered office in Piazza Filippo Meda 4, Milan
to discuss the following
AGENDA
1. Presentation of the separate and consolidated financial statements at
31/12/2015 pursuant to article 26 of the Articles of Association.
Allocation of net income. Related resolutions.
2. Examination of and resolutions relating to remuneration policies. Related
resolutions, including the adoption of plans based on financial instruments
to service the remuneration policies.
3. Authorisation to purchase and dispose of treasury shares. Related
resolutions.
4. Appointment of all the members of the Supervisory Board for 2016, 2017
and 2018 and determination of their fees, pursuant to articles 47 and 63
of the Articles of Association. Related resolutions.
5. Proposal to make changes to the Regulations for General Meetings.
Related resolutions.
If the number of shareholders attending the meeting in first call on 29 April 2016
is insufficient for constituting a quorum in accordance with article 30 of the
Articles of Association, the meeting shall accordingly be called in
second call
on 30 April 2016 at 9:00 a.m. at
Fiera Milano – Pavilion 2 – S.S. Sempione 28 – Rho (Milan)
with the same agenda.
***
A) Information on share capital
Given the cooperative nature of the Company each Member is entitled to only one
vote, however many shares they hold (the “one man, one vote” rule); the Bank’s share
capital is variable and at 31/12/2015 amounted to Euro 3,365,439,319.02,
fully represented by 4,391,784,467 ordinary shares with no nominal value. At the
date of this notice the Bank owns 1,524,259 treasury shares.
B) Attendance at the Shareholders’ Meeting and representation
The following Members are entitled to attend the Shareholders’ Meeting and
exercise their voting rights:
those who have been included in the Members’ Register for at least
ninety days before the date set for the Shareholders’ Meeting in first
call, and accordingly by 29 January 2016. At that date there were
46,901 voting rights (which given the “one man, one vote” rule is the
same as the number of Members);
those for whom the bank has received – pursuant to and within the deadline
established by article 83-sexies of Legislative Decree no. 58/98 as
amended – the relative certification issued by the intermediary belonging
to the Monte Titoli SpA centralised management system.
Notice of call of an Ordinary General Meeting of Shareholders
9
Accordingly Members intending to attend the Meeting must request the
intermediaries with whom their shares are deposited to send the Bank the
prescribed certification.
Members whose shares are already lodged with Banca Popolare di Milano
for safe custody and administration must in any case request the required
certification in writing from any of the Bank’s branches during the hours they
are open to the public. Alternatively they may go in person to the Members’
Secretariat in Piazza Filippo Meda 4, Milan between 9:00 a.m. and 1:30
p.m. where they can request the document (“Attestation of Communication”)
for presentation at the Meeting to facilitate registration procedures at the
entrance, which will be issued immediately on request.
Without prejudice to article 83-sexies, Legislative Decree no. 58/98 (as
amended), it is noted that such Attestations of Communication will be issued
from 14 March 2016 to 27 April 2016 (inclusive).
Members holding shares which are still in material form must deliver such
shares to a qualified intermediary in good time so that they may be input into
the centralised electronic administration system in accordance with current
regulations.
Each Member is entitled to one single vote however many shares they hold
and may not exercise this right by correspondence.
A Member entitled to attend the Meeting may ask to be represented by another
Member by means of a written proxy. No Member may represent more than
ten members by proxy. Proxies may not be issued to persons that cannot be
delegated pursuant to applicable legislation. Members can obtain a proxy form
inter alia at the Company’s registered office and the bank’s branches, on the
website www.gruppobpm.it, section Shareholders’ Meeting 29/30 April 2016,
as well as at the foot of the above-mentioned “Attestation of Communication”.
Proxies may not be issued with the name of the representative left blank and
the signature of the person delegating must be authenticated by a public
official, by an employee empowered to authenticate the proxy at the Bank’s
head office or at one of its branches, or by the intermediary who issued the
communication for the Member to attend the General Meeting.
In accordance with article 13 of the Articles of Association, the Chairman of
the Meeting has the responsibility to check – in accordance with the law, the
Articles of Association and the Regulations for General Meetings – the validity
of the proxies and the right of those present to attend the General Meeting;
Members who wish to do so may submit their proxies in advance of the General
Meeting to any of the Bank’s branches or to the Members’ Secretariat (Piazza
Filippo Meda 4, Milan) by 27 April 2016; proxies submitted subsequent to this
date, or directly at the General Meeting, must in any case also be completed
and authenticated in the same manner as indicated above.
Legal entities, with the exception of Italian and non-Italian Undertakings for
Collective Investment in Transferable Securities (UCITS), as well as non-Italian
collective entities and legal entities, may only attend meetings through their
legal representative; alternatively the legal representative may give a proxy to
another Member in accordance with the above.
10
Notice of call of an Ordinary General Meeting of Shareholders
For attendance purposes, only the certifications and proxies handed over by
each participant when registering for the first time that they enter the meeting
will be considered valid.
C) Appointment of the Supervisory Board
In respect of point 4 on the agenda the Meeting will be called to appoint all
the members of the Supervisory Board pursuant to article 47 of the Articles of
Association, without prejudice to article 63 of the Articles of Association (see
below). In this regard in compliance with current legislation on gender balance
the Meeting shall appoint the members of the Supervisory Board on the basis
of the lists on which candidates’ names must be assigned a sequential number.
In this connection, under penalty of inadmissibility from the list:
1. if a list is submitted containing a number of candidates equal to or greater
than eleven, it must include at least five people meeting the independence
requirements laid down in the Corporate Governance Code for listed
companies promoted by Borsa Italiana S.p.A. and at least three candidates
who are enrolled in the Register of Auditors and have worked in the
field of legal auditing for at least three years, subject to the possibility of
overlapping;
2. if a list is submitted containing a number of candidates less than eleven
but greater than three, it must contain at least two people meeting the
independence requirements laid down in the Corporate Governance Code
for listed companies promoted by Borsa Italiana S.p.A. and at least one
candidate who is enrolled in the Register of Auditors and has worked in
the field of legal auditing for at least three years, subject to the possibility
of overlapping;
3. if a list is submitted containing a number of candidates equal to or greater
than three, it must be drawn up to ensure the gender balance required by
current legislation.
In particular, each list has to be presented by at least three hundred Members
or otherwise by Members representing in total at least 0.5% of the share
capital, who have been included in the Members’ Register for at least ninety
days prior to the date set for the General Meeting in first call and who can
document their right in the prescribed manner. UCITSs may also submit a list,
also non Members, providing they hold at least 0.5% of the share capital
and can document their possession at the time of submission of the lists in the
prescribed manner.
Each Member or UCITS may only submit one list or join in the submission
of one list; if this rule is not complied with, the Member’s signature will not
be taken into account for any of the lists.
A candidate’s name may only be included on one list under penalty of ineligibility.
All the members of the Supervisory Board must be registered in BPM’s
Register of Members; in addition, anyone who on appointment has made
an application to become a Member may be appointed as a member of the
board (without prejudice to the fact that if such application is turned down the
person involved shall fall from office).
Pursuant to article 47 of the Articles of Association, the members of the
Supervisory Board must meet the requirements of integrity, professionalism and
independence prescribed by applicable laws and regulations. In any case:
(i) all of the members must have at least three years’ experience, in Italy
or abroad, of administration, management or control activities in
Notice of call of an Ordinary General Meeting of Shareholders
11
banking, asset management or insurance companies or management
activities in other companies providing they have a turnover of more than
1 billion euros in the year prior to their election or shares traded on an
Italian or foreign regulated market; candidates can be elected without
this experience as long as they are or have been full-time university
professors of law or economics;
(ii) at least five of the members have to meet the independence requirements
laid down in the Code of Corporate Governance promoted by Borsa
Italiana SpA;
(iii) at least three members have to be chosen from persons listed in the
Register of Auditors who have worked in the field of auditing for not less
than three years;
(iv)the lesser represented gender must be reserved at least the share of
board members established by current legislation on equal access to
administrative and control bodies of companies with shares listed on
regulated markets.
The requirements mentioned in points (ii) and (iii) can be satisfied by the same
person.
In respect of point (iv), complying with the requirements of Law no. 120 of
12 July 2011 and the relative regulations means that each list containing a
number of candidates equal to or greater than three must be made up in such a
way as to ensure compliance with laws and regulations on gender balance. Such
compliance requires the lesser represented gender to be reserved at least one
third of the seats on the Supervisory Board elected by the Shareholders’ Meeting.
The lists must be accompanied by the following:
1) a list of the persons submitting the voting lists, duly signed and containing
information as to their identity, with a statement of the total number of the
Bank’s shares held for the purpose of submitting the list. In this respect
the ownership of the investment and entitlement to submit the list must be
certified (on filing the lists or else subsequently, provided this is before the
deadline for the publication of the lists which the Bank will carry out on
8 April 2016) by sending the Bank the notifications/certifications prescribed
in this respect by article 83-quinquies of Legislative Decree no. 58/98
and the related “Rules governing central depositories, settlement services,
guarantee systems and related management companies” adopted by the
Bank of Italy and Consob on 22 February 2008, as amended;
2) a professional curriculum of the designated persons, containing full
information on the personal and professional characteristics of each. This
information should also be sent in electronic form – for the purpose of the
related disclosure formalities – by certified electronic mail (PEC) to the
following address: [email protected];
3) statements in which the individual candidates accept the candidacy and
certify under their responsibility that there are no reasons for which they
are ineligible or incompatible and that all or certain of the board members
satisfy the requirements prescribed by current legislation or the Articles of
Association for holding office.
The means by which the members of the Supervisory Board are appointed
as laid down in the Articles of Association are described in the illustrative
report prepared by the Management Board and also published pursuant to
law on the Bank’s website www.gruppobpm.it, section Shareholders’ Meeting
29/30 April 2016 (see below).
12
Notice of call of an Ordinary General Meeting of Shareholders
The lists of candidates must be submitted by the persons presenting them –
together with the related documentation prescribed by law and the Articles
of Association – within a timescale that enables the Bank to fulfil its due
operational and informational obligations, and in any case at least twenty five
days before the date established for the Shareholders’ Meeting in first call,
and accordingly by 4 April 2016, and by the following alternative means:
by filing them at the Bank’s registered office (Chairman’s Secretariat,
Piazza Filippo Meda 4 – Milan) on working days between 9:00 a.m.
and 5:00 p.m.,
or by sending them by certified electronic mail (PEC) to
[email protected] (in this case a hard copy of the
original documents should be sent to the Bank to arrive by the day preceding
that on which the Shareholders’ Meeting in first call is to be held).
Again with reference to point 4 on the agenda, given that the Shareholders’
Meeting is required among other things to appoint a Supervisory Board
pursuant to article 63 of the Articles of Association, it should be noted that
such appointment will be made on the basis of a relative majority and on the
basis of a list that the Supervisory Board may present to meet the commitments
undertaken by the Bank with the Cassa di Risparmio di Alessandria Foundation.
This list – together with the professional curriculum of the candidate and the
statement by which the candidate accepts the candidacy and certifies under
his or her responsibility that there are no reasons for which he or she ineligible
or incompatible and that he or she satisfies the requirements prescribed by
current legislation or the Articles of Association for holding office – will be filed
at the Company’s registered office by 4 April 2016 and made public by the
Bank by 8 April 2016.
The document on the qualitative and quantitative composition of the Supervisory
Board required by the provisions on corporate governance of the Supervisory
Office issued by the Bank of Italy (Circular no. 285 of 17 December 2013 as
amended and supplemented) on “Application of supervisory provisions on the
organisation and corporate governance of banks” will be made available to
Members on the website www.gruppobpm.it, section Shareholders’ Meeting
29/30 April 2016 (see below), in time for the submission of the lists of
candidates for the position as member of the Supervisory Board.
The relative forms and instructions required for submitting lists for the
appointment of the Supervisory Board may be found on the website
www.gruppobpm.it, section Shareholders’ Meeting 29/30 April 2016.
D) Additions to the agenda and the submission of new proposed resolutions.
Pursuant to and within the terms established by article126-bis of Legislative Decree
no. 58/98 (as amended), Members representing at least one fortieth of the total
number of Shareholders may, within ten days from the publication of this notice,
request the inclusion of other matters on the agenda for discussion, stating in
their request the additional subjects they propose, or else may submit proposed
resolutions on matters already on the agenda. Additions to the agenda are not
permitted for subjects on which the Shareholders’ Meeting adopts resolution by
law on proposals made by the management body or on the basis of a project
or report prepared by such, other than those stated in article 125-ter, paragraph
1 of Legislative Decree no. 58/98 (as amended). Requests must be submitted
to the Bank in writing (Chairman’s Secretariat, Piazza Filippo Meda 4 – Milan),
Notice of call of an Ordinary General Meeting of Shareholders
13
and in accordance with article 126-bis of Legislative Decree no. 58/98, or by
certified electronic mail (PEC) to [email protected]
Applications must be accompanied by a report motivating the resolution on
the new subject for which discussion is proposed or motivating the proposed
resolution submitted on a matter already on the agenda.
Detailed information about the terms and conditions to be observed for adding
matters to the agenda are available on the Bank’s website www.gruppobpm.it,
section Shareholders’ Meeting 29/30 April 2016. Any additions to the agenda
or submission of proposals of resolutions on the matters already on the agenda
will be announced at least ten days before the date set for the General Meeting
in the same manner as is required for publication of this notice. Concurrently
with the publication of such notice, and in the same manner provided for the
documentation relating to the Meeting, the reports prepared by those proposing
amendments to or new items for the agenda will be made available to the public
accompanied by any comments made by the Corporate Bodies.
***
Members are reminded that in order to exercise the rights referred to in
paragraphs B), C) and D) above, the Bank must be permitted – within the terms
and by the means prescribed by the relative regulations – to verify that they are
entitled to exercise such rights (in particular by performing certain formalities with
respect to the Bank, prescribed – depending on the case and where applicable
– by articles 83-quinquies and 83-sexies of Legislative Decree no. 58/98 (as
amended)).
***
E) Documentation
The following should be noted:
the annual report for the year ended 31.12.2015, and the related reports
of the Independent Auditors, the annual report of the Supervisory Board
as well as the Report on Corporate Governance and Ownership Structures
and the Remuneration Report will be made available to the general
public, in accordance with current legislation, by 8 April 2016 at the
Bank’s registered office in Piazza Filippo Meda 4, Milan, on its website
(www.gruppobpm.it), section Shareholders’ Meeting 29/30 April 2016,
and on the authorised storage mechanism (www.emarketstorage.com).
In the same manner the documentation on the topics covered by items 3,
4 and 5 on the agenda is made public as from today’s date, as well as
further documentation relating to item 2;
the lists of candidates standing for the position as a member of the
Supervisory Board, as discussed in point 4 of the agenda, will be made
available to the public – together with the supporting documentation – at
the Bank’s registered office in Piazza Filippo Meda 4, Milan, on its website
(www.gruppobpm.it), section Shareholders’ Meeting 29/30 April 2016,
and on the authorised storage mechanism (www.emarketstorage.com)
from 8 April 2016;
14
Notice of call of an Ordinary General Meeting of Shareholders
the documentation pursuant to article 77, paragraph 2-bis of Consob
Regulation no. 11971/99 (as amended) will be made available to the
public at the Bank’s registered office in Piazza Filippo Meda 4, Milan
from 14 April 2016.
***
Shareholders can obtain a copy at their own expense of the documentation
lodged at the Bank’s registered office.
This notice – also issued for the purposes of article 84, paragraph 1 of
Consob Regulation no. 11971/99 (as amended) to the extent necessary – is
published, pursuant to article 125-bis of Legislative Decree no. 58/98 (as
amended), on the website www.grup-pobpm.it, section Shareholders’ Meeting
29/30 April 2016, and in extract in the daily newspapers “Il Sole 24 Ore”
and “Italia Oggi” published on 14 March 2016.
***
Requests for further information concerning attendance at the Shareholders’
Meeting may be made to the Members’ Secretariat at Piazza Filippo Meda 4,
Milan or by calling the toll free number 800-013090 on working days between
9:00 a.m. and 5:00 p.m. or by sending an email to [email protected]
Milan, 14 March 2016
Notice of call of an Ordinary General Meeting of Shareholders
On behalf of the Management Board
The Chairman
Mario Anolli
15
Report and Consolidated Financial
Statements of the Bipiemme Group
Year 2015
17
Key figures and ratios of the Bipiemme Group
19
Structure of the Bipiemme Group at 31 December 2015
S.c. a r.l. (*)
Retail Banking
Banca Popolare
di Mantova
S.p.A.
ProFamily
S.p.A.
Investment
Banking
Corporate
Center
Banca Akros
S.p.A.
BPM Covered
Bond S.r.l.
Other activities
Ge.Se.So.
S.r.l.
BPM Covered
Bond 2 S.r.l.
(*) Banca Popolare di Milano is organised into the following separate lines of business: Retail Banking, Investment Banking, Corporate Center and
Corporate Banking; the other companies are shown in the table according to their main line of business.
20
Key figures and ratios of the Bipemme Group
Consolidated reclassified financial statements: general aspects
To provide readers with a more immediate understanding of the Group’s net assets and results for the year, a summarised
reclassified balance sheet and income statement have been prepared in which line items have been aggregated and
reclassified in keeping with market practice in such a way as to provide a clearer picture of performance. To enable the
items in the reclassified statements to be easily reconciled with those in the official statements based on the Bank of Italy’s
Circular no. 262/05, schedules are included in the attachments that provide details of the various reclassifications and
aggregations.
The following aggregations have been made in the reclassified balance sheet:
1. “Financial assets carried at fair value and hedging derivatives” include the following line items: 20 “Financial
assets held for trading”, 30 “Financial assets designated at fair value through profit and loss”, 40 “Financial assets
available for sale”, 50 “Investments held to maturity”, 80 “Hedging derivatives” and 90 “Fair value change of
financial assets in hedged portfolios”;
2. “Fixed assets” include the following line items: 100 “Investments in associates and companies subject to joint control”,
120 “Property and equipment” and 130 “Intangible assets”;
3. “Other assets” include line items: 140 “Tax assets” and 160 “Other assets”;
4. “Financial liabilities and hedging derivatives” include line items: 40 “Financial liabilities held for trading”,
50 “Financial liabilities designated at fair value through profit and loss”, 60 “Hedging derivatives” and 70 “Fair
value change of financial liabilities in hedged portfolios”;
5. “Other liabilities” include line items: 80 “Tax liabilities” and 100 “Other liabilities”;
6. “Provisions for specific use” comprise line items: 110 “Employee termination indemnities” and 120 “Allowances for
risks and charges”;
7. “Capital and reserves” include line items: 140 “Valuation reserves”, 150 “Redeemable shares”, 160 “Equity
instruments”, 170 “Reserves”, 180 “Share premium reserve”, 190 “Share capital” and 200 “Treasury shares”.
The income statement line items have been reclassified as follows:
1. The profits (losses) on investments carried at equity recognised in line item 240 “Profits (losses) on investments
in associates and companies subject to joint control” have been reported on a separate line forming part of
“Operating income” in the reclassified income statement, but only with respect to the component relating to the
results of investees;
2. “Net income from banking activities” includes the line items 70 “Dividend and similar income”, 80 “Profits (losses)
on trading”, 90 “Fair value adjustments in hedge accounting”, 100 “Profits (losses) on disposal or repurchase”,
110 “Profits (losses) on financial assets and liabilities designated at fair value” and 130 b) “Net losses/recoveries
on impairment of financial assets available for sale”. Line item 100 a) “Profits (losses) on disposal/repurchase of
loans” has been removed from this aggregate;
3. “Other operating expenses/income” (line item 220) classified as part of “Operating expenses” in the financial
statements have been reduced by the recovered portion of “indirect taxes and duties” and increased by the
“depreciation of leasehold improvements”. This item, reclassified in this way, is included in “Operating income” in
the reclassified income statement;
4. “Other administrative expenses” (line item 180 b)) in the reclassified income statement have been reduced by the
recovered portion of “indirect taxes and duties” discussed in point 3 above;
5. “Net adjustments to property and equipment and intangible assets” (line items 200 and 210) in the reclassified
income statement have been increased by the “depreciation of leasehold improvements” discussed in point 3 above;
6. “Net adjustments for impairment of loans and other activities” reported after “Operating profit” in the reclassified
format include line item 130, net of the sub-item 130 b) “Net losses/recoveries on impairment of financial assets
available for sale” (reclassified under “Net income from banking activities”) and line item 100 a) “Profits (losses)
on disposal/repurchase of loans” (removed from “Net income from banking activities”);
7. “Profits (losses) from equity and other investments and adjustments to goodwill and intangible assets” in the reclassified
format include the line item 260 “Goodwill impairment” and a portion of the line item 240 “Profits (losses) on investments
in associates and companies subject to joint control” relating to the write-down of the goodwill component included in
the book value of investments accounted for at equity. It also includes the line item 270 “Profits (losses) on disposal of
investments”.
Key figures and ratios of the Bipemme Group
21
Bipiemme Group – Reclassified balance sheet
Assets
Cash and cash equivalents
Financial assets carried at fair value and
hedging derivatives:
– Financial assets held for trading
– Financial assets designated at fair value
through profit and loss
(euro/000)
31.12.2015
A
30.09.2015
B
31.12.2014
C
300,714
226,822
322,840
Change A-B
Change A-C
Amount
%
Amount
%
73,892
32.6
(22,126)
–6.9
11,416,540 11,965,118 11,887,806 (548,578)
–4.6
(471,266)
–4.0
–1.9
(123,644)
–6.4
1,797,874
1,832,200
1,921,518
(34,326)
97,449
(5,311)
–6.6
(21,906)
–22.5
9,670,272 (455,994)
–4.6
(179,024)
–1.9
75,543
80,854
9,491,248
9,947,242
– Hedging derivatives
40,638
91,173
178,460
(50,535)
–55.4
(137,822)
–77.2
– Fair value change of financial assets in hedged
portfolios (+/–)
11,237
13,649
20,107
(2,412)
–17.7
(8,870)
–44.1
1,224,717
1,287,592
984,777
(62,875)
–4.9
239,940
24.4
34,186,837 33,401,500 32,078,843
785,337
2.4
2,107,994
6.6
31,517
2.7
81,580
7.3
(6,118) –100.0
0
n.a.
– Financial assets available for sale
Due from banks
Loans to customers
Fixed assets
Non–current assets and disposal groups held
for sale
1,199,459
1,167,942
1,117,879
0
6,118
0
Other assets
1,875,033
1,459,941
1,879,666
415,092
28.4
(4,633)
–0.2
Total assets
50,203,300
49,515,033
48,271,811
688,267
1.4
1,931,489
4.0
Liabilities and shareholders’ equity
31.12.2015
A
30.09.2015
B
31.12.2014
C
Amount
%
Amount
%
4,839,439
4,550,638
3,318,564
288,801
6.3
1,520,875
45.8
28,622,852 28,577,221 27,702,942
45,631
0.2
919,910
3.3
Due to banks
Due to customers
Change A-B
Change A-C
Securities issued
8,849,290
8,281,217
8,981,834
568,073
6.9
(132,544)
–1.5
Financial liabilities and hedging derivatives:
1,379,948
1,450,858
1,690,396
(70,910)
–4.9
(310,448)
–18.4
– Financial liabilities held for trading
1,183,557
1,256,371
1,463,445
(72,814)
–5.8
(279,888)
–19.1
129,627
132,536
152,116
(2,909)
–2.2
(22,489)
–14.8
– Hedging derivatives
48,678
43,438
58,751
5,240
12.1
(10,073)
–17.1
– Fair value change of financial liabilities in
hedged portfolios (+/–)
18,086
18,513
16,084
(427)
–2.3
2,002
12.4
1,429,895
1,568,866
1,501,993 (138,971)
–8.9
(72,098)
–4.8
434,555
459,406
519,975
(24,851)
–5.4
(85,420)
–16.4
4,338,440
4,404,959
4,304,390
(66,519)
–1.5
34,050
0.8
19,974
19,816
19,424
158
0.8
550
2.8
288,907
202,052
232,293
86,855
43.0
56,614
24.4
50,203,300
49,515,033
48,271,811
688,267
1.4
1,931,489
4.0
– Financial liabilities designated at fair value
through profit and loss
Other liabilities
Provisions for specific use
Capital and reserves
Minority interests (+/–)
Net income (loss) for the period (+/–)
Total liabilities and shareholders’ equity
22
Key figures and ratios of the Bipemme Group
Bipiemme Group – Reclassified balance sheet quarter by quarter
Assets
Year 2015
Cash and cash equivalents
(euro/000)
Year 2014
31.12
30.9
30.6
31.3
31.12
30.9
30.6
31.3
300,714
226,822
224,184
209,129
322,840
232,295
248,942
242,900
Financial assets carried at fair
value and hedging derivatives:
11,416,540 11,965,118 11,715,087 12,780,251 11,887,806 11,959,086 11,434,356 10,941,852
– Financial assets held for
trading
1,797,874 1,832,200 1,824,944 2,284,325 1,921,518 1,954,084 1,712,025 1,587,646
– Financial assets designated at
fair value through profit and
loss
– Financial assets available for
sale
75,543
80,854
81,410
105,443
97,449
101,861
172,235
202,542
9,491,248 9,947,242 9,632,210 10,208,114 9,670,272 9,662,753 9,336,110 8,969,488
– Hedging derivatives
40,638
91,173
161,979
160,497
178,460
223,056
198,790
170,081
– Fair value change of financial
assets in hedged portfolios
(+/–)
11,237
13,649
14,544
21,872
20,107
17,332
15,196
12,095
Due from banks
Loans to customers
Fixed assets
1,224,717 1,287,592 1,162,731 1,050,829
984,777 1,562,185 1,849,987 2,254,757
34,186,837 33,401,500 33,483,029 32,600,377 32,078,843 32,095,916 32,520,786 32,821,420
1,199,459 1,167,942 1,156,028 1,127,543 1,117,879 1,099,811 1,099,688 1,085,101
Non-current assets and disposal
groups held for sale
0
6,118
6,118
0
0
0
0
134,596
Other assets
1,875,033 1,459,941 1,561,095 1,541,504 1,879,666 1,519,517 1,627,113 1,544,831
Total assets
50,203,300 49,515,033 49,308,272 49,309,633 48,271,811 48,468,810 48,780,872 49,025,457
Year 2015
Liabilities and shareholders’
equity
Due to banks
31.12
30.9
Year 2014
30.6
31.3
31.12
30.9
30.6
31.3
4,839,439 4,550,638 4,494,906 4,171,724 3,318,564 3,792,622 4,313,017 6,015,928
Due to customers
28,622,852 28,577,221 28,777,043 27,589,895 27,702,942 26,979,219 26,812,018 26,025,446
Securities issued
8,849,290 8,281,217 7,867,754 8,677,218 8,981,834 9,271,996 9,316,712 9,503,147
Financial liabilities and hedging
derivatives:
1,379,948 1,450,858 1,543,437 1,981,271 1,690,396 1,716,900 1,544,651 1,477,065
– Financial liabilities held for
trading
1,183,557 1,256,371 1,326,834 1,746,892 1,463,445 1,491,342 1,321,381 1,240,546
– Financial liabilities designated
at fair value through profit and
loss
– Hedging derivatives
– Fair value change of financial
liabilities in hedged portfolios
(+/–)
Other liabilities
Provisions for specific use
Capital and reserves
Minority interests (+/–)
Net income (loss) for the period
(+/–)
129,627
132,536
157,702
161,759
152,116
150,573
157,846
184,224
48,678
43,438
44,092
58,053
58,751
57,102
45,742
30,833
18,086
18,513
14,809
14,567
16,084
17,883
19,682
21,462
1,429,895 1,568,866 1,650,859 1,686,438 1,501,993 1,622,393 1,777,531 1,645,410
434,555
459,406
467,674
502,403
519,975
518,136
539,284
542,693
4,338,440 4,404,959 4,333,508 4,613,588 4,304,390 4,328,863 4,266,963 3,732,552
19,974
19,816
19,038
19,493
19,424
19,418
19,228
18,895
288,907
202,052
154,053
67,603
232,293
219,263
191,468
64,321
Total liabilities and shareholders’
equity
50,203,300 49,515,033 49,308,272 49,309,633 48,271,811 48,468,810 48,780,872 49,025,457
Key figures and ratios of the Bipemme Group
23
Bipiemme Group – Reclassified income statement
Line items
(euro/000)
Year 2015
Year 2014
Amount
%
Interest margin
806,746
800,171
6,575
0.8
Non-interest margin:
860,471
821,395
39,076
4.8
– Net fee and commission income
605,996
556,566
49,430
8.9
– Other income:
254,475
264,829
(10,354)
–3.9
32,577
22,857
9,720
42.5
181,724
188,572
(6,848)
–3.6
40,174
53,400
(13,226)
–24.8
Operating income
1,667,217
1,621,566
45,651
2.8
Administrative expenses:
(944,978)
(898,831)
(46,147)
–5.1
a) personnel expenses
(612,382)
(612,420)
38
0.0
b) other administrative expenses
(332,596)
(286,411)
(46,185)
–16.1
– Profits (losses) on investments carried at equity
– Net income from banking activities
– Other operating charges/income
Net adjustments to property and equipment and intangible assets
Change
(74,773)
(74,884)
111
0.1
(1,019,751)
(973,715)
(46,036)
–4.7
647,466
647,851
(385)
–0.1
(342,236)
(423,839)
81,603
19.3
Net provisions for risks and charges
10,758
(3,545)
14,303
n.a.
Profits (losses) from equity and other investments and adjustments
to goodwill and intangible assets
37,433
104,474
(67,041)
–64.2
Operating expenses
Operating profit
Net adjustments for impairment of loans and other activities
Income (loss) before tax from continuing operations
353,421
324,941
28,480
8.8
Taxes on income from continuing operations
(63,512)
(92,008)
28,496
31.0
Net income (loss) for the period
289,909
232,933
56,976
24.5
(1,002)
(640)
(362)
–56.6
288,907
0.066
232,293
0.059
56,614
24.4
Diluted EPS from continuing operations – Euro
0.066
0.059
Basic EPS – Euro
0.066
0.059
Diluted EPS – Euro
0.066
0.059
Net (income) loss for the period attributable to minority interests
Net income (loss) for the period attributable to the Parent Company
Basic EPS from continuing operations – Euro
24
Key figures and ratios of the Bipemme Group
Bipiemme Group – Reclassified income statement quarter by quarter
Line items
Interest margin
Year 2015
(euro/000)
Year 2014
Fourth
quarter
Third
quarter
Second
quarter
First
quarter
Fourth
quarter
Third
quarter
Second
quarter
First
quarter
199,930
203,936
206,759
196,121
197,922
195,003
201,157
206,089
171,497
191,007
229,646
213,382
150,952
221,011
236,050
Non-interest margin:
268,321
– Net fee and commission income
154,357 144,886 158,461 148,292
– Other income:
113,964
26,611
32,546
81,354
64,033
20,096
85,021
95,679
8,225
5,269
7,574
11,509
6,300
4,612
6,910
5,035
100,077
10,820
12,434
58,393
38,082
5,799
65,253
79,438
5,662
10,522
12,538
11,452
19,651
9,685
12,858
11,206
468,251
375,433
397,766
425,767
411,304
345,955
422,168
442,139
– Profits (losses) on investments carried at
equity
– Net income from banking activities
– Other operating charges/income
Operating income
149,349 130,856 135,990 140,371
Administrative expenses:
(287,722) (209,007) (220,251) (227,998)
(236,376) (207,166) (236,573) (218,716)
a) personnel expenses
(160,339) (148,678) (148,632) (154,733)
(147,232) (144,708) (168,601) (151,879)
b) other administrative expenses
(127,383)
(60,329)
(71,619)
(73,265)
(89,144)
(62,458)
(67,972)
(66,837)
Net adjustments to property and
equipment and intangible assets
(24,067)
(17,582)
(16,629)
(16,495)
(18,612)
(18,728)
(19,478)
(18,066)
Operating expenses
(311,789) (226,589) (236,880) (244,493)
(254,988) (225,894) (256,051) (236,782)
Operating profit
156,462
148,844
160,886
181,274
156,316
Net adjustments for impairment of loans
and other activities
(95,925)
(77,972)
(94,029)
(74,310)
(136,633)
Net provisions for risks and charges
120,061
166,117
205,357
(88,216) (113,653)
(85,337)
14,638
(4,972)
2,364
(1,272)
(8,004)
Profits (losses) from equity and other
investments and adjustments to goodwill
and intangible assets
(19)
(1)
37,453
0
0
Income (loss) before tax from continuing
operations
75,156
65,899
106,674
105,692
11,679
31,559
164,504
117,199
Taxes on income from continuing
operations
11,938
(17,306)
(20,339)
(37,805)
1,450
(3,532)
(36,960)
(52,966)
Net income (loss) for the period
87,094
48,593
86,335
67,887
13,129
28,027
127,544
64,233
Net (income) loss for the period
attributable to minority interests
(239)
(594)
115
(284)
(99)
(232)
(397)
88
86,855
47,999
86,450
67,603
13,030
27,795
127,147
64,321
Net income (loss) for the period attributable
to the Parent Company
Key figures and ratios of the Bipemme Group
(286)
7,566
(2,821)
0 104,474
0
25
Bipiemme Group – Key figures
Key balance sheet figures
Loans to customers
of which: net bad loans
Fixed assets
Direct deposits
(*)
Indirect customer deposits
(euro/000)
31.12.2015
A
30.09.2015
B
31.12.2014
C
Change A-B
Change A-C
Amount
%
Amount
%
34,186,837
33,401,500
32,078,843
785,337
2.4
2,107,994
6.6
1,490,591
1,512,162
1,344,404
(21,571)
–1.4
146,187
10.9
1,199,459
1,167,942
1,117,879
31,517
2.7
81,580
7.3
37,601,769
36,990,974
36,836,892
610,795
1.7
764,877
2.1
34,060,203
33,743,960
32,610,223
316,243
0.9
1,449,980
4.4
–3.5 (1,579,111)
–10.7
of which: assets under
administration
13,158,758
13,635,441
14,737,869
(476,683)
of which: assets under management
20,901,445
20,108,519
17,872,354
792,926
3.9
3,029,091
16.9
50,203,300
49,515,033
48,271,811
688,267
1.4
1,931,489
4.0
Shareholders' equity (excluding Net
income (loss) for the period)
4,338,440
4,404,959
4,304,390
(66,519)
–1.5
34,050
0.8
Own funds
5,020,521
5,011,442
5,169,508
9,079
0.2
(148,987)
–2.9
4,037,388
3,995,212
3,899,672
42,176
1.1
137,716
3.5
31.12.2015
A
30.09.2015
B
31.12.2014
C
Change A-C
Amount
%
Total assets
(**)
of which: Common Equity Tier 1
(**)
Key income statement figures
Interest margin
806,746
606,816
800,171
6,575
0.8
1,667,217
1,198,966
1,621,566
45,651
2.8
(1,019,751)
(707,962)
(973,715)
(46,036)
–4.7
(612,382)
(452,043)
(612,420)
38
0.0
647,466
491,004
647,851
(385)
–0.1
(342,236)
(246,311)
(423,839)
81,603
19.3
Income (loss) before tax from
continuing operations
353,421
278,265
324,941
28,480
8.8
Net income (loss) for the period
attributable to the Parent Company
288,907
202,052
232,293
56,614
24.4
31.12.2015
A
30.09.2015
B
31.12.2014
C
Change A-B
Amount
%
Amount
%
7,743
7,747
7,759
(4)
–0.1
(16)
–0.2
655
655
654
0
0.0
1
0.2
Operating income
Operating expenses
of which: personnel expenses
Operating profit
Net adjustments for impairment of
loans and other activities
Operating structure Headcount (employees and other
personnel)
Number of branches
Change A-C
(*) This item consists of: due to customers, securities issued and financial liabilities designated at fair value through profit and loss.
26
Key figures and ratios of the Bipemme Group
Bipiemme Group – Key ratios
Structure ratios (%)
(euro/000)
31.12.2015
30.09.2015
31.12.2014
68.1
67.5
66.5
2.4
2.4
2.3
Direct deposits/Total assets
74.9
74.7
76.3
Funds under management/Indirect deposits
61.4
59.6
54.8
Loans to customers/Direct deposits
90.9
90.3
87.1
Profitability ratios (%) (annualised)
Net income (loss)/Shareholders' equity (excluding Net
income (loss) for the period) (ROE) (a)
6.7
6.1
5.4
Net income (loss)/Total assets (ROA)
0.6
0.5
0.5
61.2
59.0
60.0
Net bad loans/Loans to customers
4.36
4.53
4.19
Coverage of gross bad loans to customers
54.5
54.7
55.9
Index of coverage of gross performing loans to customers
0.60
0.64
0.73
Direct deposits per employee
4,856
4,775
4,748
Loans to customers per employee
4,415
4,312
4,134
Assets under management per employee
2,699
2,596
2,303
Assets under administration per employee
1,699
1,760
1,899
Common Equity Tier 1 ratio
11.53
11.44
11.58
Tier 1 ratio
12.06
11.98
12.21
Total Capital ratio
14.33
14.36
15.35
Number of shares:
4,391,784,467
4,391,784,467
4,391,784,467
– outstanding
4,390,260,208
4,390,255,978
4,390,388,893
1,524,259
1,528,489
1,395,574
0.925
0.894
0.543
Loans to customers/Total assets
Fixed assets/Total assets
Cost/income ratio
Risk ratios (%)
Productivity ratios (Euro/000)
(b)
Capital ratios (%)
Information on BPM stock
– treasury shares
Official stock price at the end of the period – ordinary
shares (Euro)
(a) Shareholders’ equity at the end of the period.
(b) Number of employees at the end of the period including personnel with other types of contract.
Key figures and ratios of the Bipemme Group
27
Bipiemme Group – Reclassified income statement, net of non-recurring items
As required by Consob communication DEM/6064293 of 28 July 2006 the table below sets out the effect of
non-recurring items on the Net income (loss) for the period.
Line items
Year 2015
Year 2014
Change
Change
A –D
C–F
A=B+C
B
C
D=E+F
E
F Net result
Net income
(loss) from
non-recurring
items
Net income
(loss) from
recurring
items
Net result
Net income
(loss) from
non-recurring
items
Net income (loss) from
recurring
items
Amount
% Amount
%
Interest margin
806,746
0
806,746
800,171
0
800,171 6,575
0.8 6,575
0.8
Non-interest margin:
860,471
39,289
821,182
821,395
0
821,395 39,076
4.8 (213)
0.0
– Net fee and commission
income
605,996
0
605,996
556,566
0
556,566 49,430
8.9 49,430
8.9
– Other income:
254,475
39,289
215,186
264,829
0
264,829 (10,354)
–3.9 (49,643)
–18.7
– Profits (losses) on
investments carried at
equity
32,577
0
32,577
22,857
0
22,857 9,720
42.5 9,720
42.5
– Net income from
banking activities
181,724
39,289
142,435
188,572
0
188,572 (6,848)
–3.6 (46,137)
–24.5
– Other operating
charges/income
40,174
0
40,174
53,400
0
53,400 (13,226)
–24.8 (13,226)
–24.8
1,667,217
39,289
1,627,928
1,621,566
0
1,621,566 45,651
2.8 6,362
0.4
Administrative expenses:
(944,978)
(46,641)
(898,337)
(898,831)
(13,217)
(885,614) (46,147)
–5.1 (12,723)
–1.4
a) personnel expenses
(612,382)
(6,908)
(605,474)
(612,420)
(13,217)
(599,203) 38
0.0 (6,271)
–1.0
b) other administrative
expenses
(332,596)
(39,733)
(292,863)
(286,411)
0
(286,411) (46,185)
–16.1 (6,452)
–2.3
(74,773)
0
(74,773)
(74,884)
0
(74,884) 111
0.1 111
0.1
(1,019,751)
(46,641)
(973,110)
(973,715)
(13,217)
(960,498) (46,036)
–4.7 (12,612)
–1.3
647,466
(7,352)
654,818
647,851
(13,217)
661,068 (385)
–0.1 (6,250)
–0.9
81,603
19.3
Operating income
Net adjustments to property
and equipment and
intangible assets
Operating expenses
Operating profit
Net adjustments for
impairment of loans and
other activities
(342,236)
0
(342,236)
(423,839)
0
(423,839) 81,603
19.3 Net provisions for risks and
charges
10,758
21,915
(11,157)
(3,545)
0
(3,545) 14,303
n.a. Profits (losses) from equity
and other investments and
adjustments to goodwill and
intangible assets
37,433
(1,422)
38,855
104,474
104,474
0 (67,041)
–64.2 38,855
n.a.
Income (loss) before tax
from continuing operations
353,421
13,141
340,280
324,941
91,257
233,684 28,480
8.8 106,596
45.6
Taxes on income from
continuing operations
(63,512)
15,731
(79,243)
(92,008)
(682)
(91,326) 28,496
31.0 12,083
13.2
Net income (loss) for the
period
289,909
28,872
261,037
232,933
90,575
142,358 56,976
24.5 118,679
83.4
Net (income) loss for the
period attributable to
minority interests
(1,002)
101
(1,103)
(640)
3
(643) (362)
–56.6 (460)
–71.6
Net income (loss) for the
period attributable to the
Parent Company
288,907
28,973
259,934
232,293
90,578
141,715 56,614
24.4 118,219
83.4
28
(7,612) –214.7
Key figures and ratios of the Bipemme Group
Bipiemme Group – Consolidated reclassified income statement excluding non-recurring items
Year 2015
Year 2014
Non-recurring transactions
28,973
90,578
Other income:
39,289
–
Net income from banking activities:
Repurchase of bonds
Gain on the sale of Edipower
Gain on the sale of ICBPI
Write-off BPEL subordinated security
Taxes on income (a)
Operating income, net of taxes
(11,504)
– 338
– 75,415
– (24,960)
– 6,940
– 46,229
– Administrative expenses: a) personnel expenses
(6,908)
(13,217)
Solidarity Fund charge
(6,908)
(13,217)
1,899
3,635
(5,009)
(9,582)
Administrative expenses: b) other administrative expenses
(39,733)
–
Extraordinary charge resolution fund
(39,733)
– 12,918
– (26,815)
–
Net provisions for risks and charges
21,915
–
Adjustment to provision for convertible loan
17,443
–
Taxes on income (b)
Personnel expenses, net of taxes
Taxes on income (c)
Other administrative expenses, net of taxes
Provisions for contractual commitments relating to the sale of the custodian
bank
4,472
– Taxes on income (d)
(6,027)
–
Net provisions for risks and charges, net of taxes
15,888
–
Profits (losses) from equity and other investments and adjustments to
goodwill and intangible assets
(1,422)
104,474
–
104,474
(1,422)
–
Gain on the sale of Anima Holding
Effect of agreement for divestment Pitagora 1936
Taxes on income (e)
–
(1,261)
Profits (losses) from equity and other investments and adjustments to
goodwill and intangible assets
(1,422)
103,213
Taxes on income from continuing operations:
15,731
(682)
–
(3,056)
Increase in taxes from 12% to 26% on the gain on the investment in the
Bank of Italy
Taxes on income (a+b+c+d+e)
15,731
2,374
Net income (loss) for the period attributable to minority interests
101
3
Overall effect of the above transactions on minority interests
101
3
Key figures and ratios of the Bipemme Group
29
Report on operations
of the Bipiemme Group
31
The macroeconomic scenario and the banking system
The international economy
According to estimates of the International Monetary Fund, global GDP growth is projected to decline from 3.4% in
2014 to 3.1% in 2015. At the core of the slowdown in the economy are the difficulties in China and the major emerging
markets (Brazil, Russia, South Africa and, to a lesser extent, India), closely associated with the decline in commodity
prices and the high financial market instability, which resulted in a decline in capital flows. Conversely, recovery picked
up in advanced economies: stronger recovery was experienced in the United States and United Kingdom, and much
less marked in the euro area, where there are still significant differences between the various countries. Inflation rates
across all advanced economies are close to zero, well below the central banks target which, for the most part, except
for the Fed, confirmed their expansionary monetary policy.
During 2015, oil prices continued the downward trend that began in mid-2014. Brent oil prices at the end of the year
dropped to 37 dollars a barrel, the lowest price since 2009 and down 43% compared to the start of the year. The drop
in prices was particularly intense in December (down about 17%), following the downward pressure triggered by the
decision of OPEC to set an oil production ceiling. The steady decline in oil prices, influenced by the imbalance between
supply and demand and by an international geopolitical climate not without its share of tensions, affected producing
countries and had a negative effect on the economic activity and on public accounts.
According to the forecasts of the IMF, GDP in the United States is expected to grow + 2.5% in 2015, the highest rate
since the end of the crisis. The labour market ended the year with an encouraging increase in job openings (+2.7
million new jobs including 300,000 in December alone) with the unemployment rate declining to 5%, its lowest level
since 2008. Household consumption was the main driver of growth, supported by the increase in disposable income
that has benefited from the drop in oil prices and the moderate increase in wages. Exports declined, penalised by the
strengthening of the Dollar and the downturn in global trade. Inflation remained close to 0% throughout the second half
of the year, far from the medium-term objective of 2% dictated by the Fed. The expectations of an increase in policy
rates was confirmed in the meeting held on December 16, when the Fed raised interest rates by 0.25% (from 0-0.25%
to 0.25%-0.5%), the first raise after nine years at near-zero rates. The rate hike has put an end to an exceptional period
and, according to a statement released by the Fed, future decisions on the monetary policy will take into consideration
labour market conditions and inflation.
GDP in Japan is expected to grow +0.6% in 2015, following a year of zero growth in 2014. Despite the weak yen,
exports suffered from the downturn in trade with emerging Asian economies and especially with China (source: World
Bank). Private consumption declined and capital expenditures remained almost unchanged, while the Bank of Japan
has recalibrated its massive monetary stimulus programme, expanding the range of assets included in the purchase
plan, with the intention of increasing the monetary base: in particular, the Bank will allocate 300 billion yen to buy EFTs
that specifically target firms actively spending on capital expenditure; furthermore, it extended the duration of Japanese
government bonds it buys to 12 years.
For full year of 2015, GDP in China expanded by +6.9%, the lowest growth rate since 1990 (+7.3% in 2014). In Q4,
GDP growth was 6.8% year-on-year (+6.9% in July – September), while it rose by +1.6 % on a quarter-over-quarter
basis (+1.8% in the previous quarter). The slowdown is most visible in the real estate and manufacturing industry; it also
reflects several structural factors such as weak export, the slowdown in investments and high debt levels. The company
is going through a challenging phase of transition in which the Government is focused on shifting growth drivers from
foreign demand (exports) to domestic demand. Trade is down: in December, China’s exports fell for the 6th consecutive
month, although to a lesser extent than November, by 1.4% from one year earlier in December (-6.8% in the previous
month) while imports decreased 7.6% ( -8.7% in November). In December, the country registered a USD 60.09 billion
trade surplus. The annual inflation rate was recorded at 1.5% in November. To give oxygen to an economy that is no
longer growing as fast as it did in past years, the People’s Bank of China cut rates a number of times and, starting last
August, repeatedly devalued the Yuan. Starting in September, the growing concerns about growth prospects for the
32
Report on operations of the Bipiemme Group
second-largest economy triggered a sudden fall in prices on the Shanghai Stock Exchange, plunging over 40% in the
following two months, with a volley of measures taken by the monetary authority to reduce the high volatility.
According to the Monetary Fund, the Eurozone GDP is expected to grow +1.5% in 2015. Manufacturing PMI came to
53.2 points in December, its highest level since April 2014 (source: Markit). All nations monitored reported expansions,
including Greece, where the PMI came to over 50 points (threshold between economic contraction and expansion).
Italy rose to 55.6 points, its highest level since March 2011. Significant growth also seen in Germany (53.2, a 4-month
high) and France (51.4, its best reading in 21 months). Slower growth was posted in the Netherlands (53.4, a 3-month
low), Spain (53, a 2-month low) and Austria. The unemployment rate was down 10.5% in November, the lowest rate
since October 2011. Compared to November 2014, the largest decreases were in Spain (from 23.7% to 21.4%),
Bulgaria (from 10.6% to 8.8%) and Italy (from 13.1% to 11.3%). The fall in unemployment and favourable financial
conditions boosted consumption and investment. Nevertheless, in December, according to preliminary data released by
Eurostat, the consumer price index in the Eurozone remained +0.2% on an annual basis, in line with previous figures,
also due to the negative contribution of the energy component.
In December, the European Stability Mechanism (ESM) approved the payment of a 1 billion euro aid tranche to Greece
after Athens’ completion of a package of social justice reforms. The payment by the ESM is the third disbursement since
August 2015, when the German Bundestag approved the third bailout for about 86 billion euro after Greece failed
to pay the IMF the tranche of 1.6 billion euro due at the end of September. The Greek government also approved a
privatization deal for 14 regional airports and launched the sale of its stake in the port of Piraeus.
The monetary policy of the ECB, after launching the Quantitative Easing policy in March, has remained ultra-expansive:
in the meeting in early December, the Bank announced a package of additional measures intended to help push back
inflation to ECB’s target of 2%. Specifically, the deposit rate has been lowered to minus 0.3% (-10 basis points); the
QE programme has been extended to March 2017 (it was supposed to stop in September 2016) with the Governing
Council entitled to decide to extend it until inflation returns to about 2%; it was decided to reinvest the principal of
assets purchased under QE and, lastly, the eligible assets were broadened, with the inclusion of regional and local
government bonds of the eurozone member states.
The Italian economy
2015 has been considered the year of Italy’s recovery from recession, with GDP expected to rise by +0.7%, compared
with -0.4% in 2014, although quarterly rates are increasing at slower paces and there are still areas of vulnerability.
Growth appears to be driven by internal components such as domestic demand helped by the improvement in the
labour market and the recovery of real disposable income, while the foreign component suffered a slowdown.
According to forecasts by Istat, in Q3 2015 GDP grew by +0.2% over the previous quarter, against +0.3% in Q2
and +0.4% in the first quarter of the year. The economic slowdown is a result of a decline in exports (-0.8%) while
for the main aggregates of domestic demand diverging trends were recorded: national end-consumption grew
+0.4%, while gross capital investments fell -0.4%. Imports increased by +0.5%. Based on Istat data, Non-EU trade
showed signs of recovery in November, stronger in exports (+ 3.7%) than imports (+1.1%). The growth in sales
was also confirmed on a trend basis (+3.0%) following three consecutive months of decline. On an annual basis,
growth in sales picked up at a steady pace in the United States (+13.2%), after suffering a setback in October. Sales
to emerging and advanced East Asian economies are also on a sharp upswing: Japan (+21.4%), DAC countries
(+6.7%), China (+6.6%). On the other hand, the downward trend of export in Russia continues but to a lesser
extent (-6.7% in November, -25.9% from the beginning of the year) while the challenges have intensified for sales
of Italian companies in the MERCOSUR (-27.7%) and OPEC (-10.4%) countries. Generally, always in November,
export grew +3.5% over the previous period (+6.4% over the previous year), while imports rose +1.4% (+3.8%
over November 2014). In the third quarter of 2015, taking into account price trends, households’ purchasing power
rose +1.4% over the previous quarter and +1.3% y/y. (Istat) Purchasing power in the first nine months of 2015
increased +0.9% compared with the same period of 2014. The seasonally adjusted gross savings rate in consumer
households reached 9.5% in the third quarter, increasing 0.9 percentage points over the second quarter and 0.3
Report on operations of the Bipiemme Group
33
points compared to the same period in 2014. Industrial production in November fell -0.5% on October, in part
because there were fewer working days. Looking back on the first eleven months of 2015, recovery of the industrial
sector remains bleak, with annual growth just slightly over 1%. Cars, among the individual sectors, recorded the
highest growth, leading the automotive area to a growth rate of +13.6% y/y. A leap forward that affects a number
of sectors of the supply chain, but it is unable to provide the impetus needed to return to pre-crisis levels. In December,
according to the final estimates of Istat, the national consumer price index, including tobacco, showed no change
compared with the previous month and increased by 0.1% compared with December 2014. On a yearly average,
in 2015 inflation has slowed for the third consecutive year (+0.1% from +0.2% registered in 2014). The economy is
weaker than that indicated by the government in the Economic and Financial Document, which expected the inflation
rate to reach +0.3% in 2015.
The unemployment rate in November fell 11.3% (-0.2% compared with October 2015), the lowest level since
November 2012. In absolute terms, the number of people seeking employment dropped by 48,000. The employment
rate was 56.4%, increasing 0.1 percentage point, while the inactivity rate remained unchanged at 36.3%, synthesis
of a decline for women and growth for men. There were positive signs for the youth unemployment rate, which
decreased by 1.2 percentage points with respect to October, and came to 38.1%, bringing the figure of unemployed
young people between 15 and 24 years to the lowest level since September 2013. The September-November
quarter dropped 1.5 points with respect to the previous quarter. In particular, the growth in employment in November
was due to an increase of permanent employees (+40,000 compared with October, or +0.3%), while the number
of fixed-term workers fell by 32,000 units (-1.3%). Independent contractors were up 0.5% (+28,000). On an annual
basis, the number of permanent employees increased by 141,000 (+106,000 fixed term). Over the first 10 months
of 2015 tax and social security contributions increased by 1% (+5,350 million euro) compared with the same period
of the prior year (Economy and Finance Ministry) while in the third quarter of 2015 the General Government debt
to GDP ratio was 2.4%, down 0.5 percentage points from the same quarter in 2014. On average, for the first three
quarters of 2015, the debt-to-GDP ratio was 2.9%, improving 0.4 percentage points compared with the same period
of the previous year.
Financial and foreign exchange markets
With reference to the yield on the ten-year Italian government bond, the differential against the German Bund in
2015 hit a low of 88.5 bps around mid-March, as a direct consequence of the start-up of ECB’s Quantitative Easing
programme, to then rise, reaching a peak 164.9 bps in early July, as a result of tensions related to the Greek debt
negotiations. Subsequently, after a short downward period, the spread widened again in the wake of the turmoil on
financial markets triggered off by the collapse of the Chinese and other Asian stock markets, in addition to the fall in
commodity prices. The year ended with the spread at 96 basis points, down about 38 bps on the value at the end
of 2014 (134 points). On equity markets, the best stock market in Europe during 2015 was Italy’s, with the FTSE
MIB index that rose by 12.7%. Germany’s DAX 30 rose by 9.6% while the French Stock Exchange index (Cac 40)
increased by 8.5%. UK’s FTSE 100 posted a decline of -4.9%, while US S&P’s 500 closed with a decrease of -0.7%.
In 2016, the European banking sector index (Euro Stoxx Banks) declined by roughly -3.3%, opposite to the trend with
FTSE Italia All Shares Banks which rose by +14.78%.
The Euro/Dollar exchange rate in 2015 fluctuated between 1.05 and 1.21 and hit a low in mid-March following the
start of the Quantitative Easing programme launched by the ECB. Subsequently, the exchange rate was characterised
by extreme volatility in the initial wake of tensions connected with the risk of Greece leaving the Eurozone at the end
of September and later due to the turbulence on the Asian markets and the drops in oil prices. During the third quarter
of the year, the expectations on the Fed’s decision on interest rates led to a new strengthening of the dollar against the
euro which in early December stood at about 1.05, subsequently recovering to 1.09 mid-month after the announcement
made by the President of the ECB, Mario Draghi, concerning the asset purchase plan and other monetary policy
measures. The EUR/USD exchange rate closed the year at 1.09, down about 9% compared with the fixing at the end
of 2014 (1.21) in a context of greater volatility as a result of plummeting oil prices.
34
Report on operations of the Bipiemme Group
As regards the Japanese yen, the exchange rate fluctuated in the period, ranging between a maximum of 145.5 at the
start of the year and a minimum of 126 in mid-April, closing the year at a rate of around 131.
The banking industry
According to the figures issued by ABI in the ABI Monthly Outlook report, funding from resident customers,
represented by deposits (current accounts, time deposits, deposits repayable with notice and repurchase
agreements, net of transactions with central counterparties and transactions involving the sale of receivables) and
bonds (in the hands of resident and non-resident customers and recorded at nominal value, including subordinated
liabilities and excluding those repurchased by banks), amounted to approximately 1,697 billion euro, a decline of
0.6% y/y; this is equal to a decrease in stock of about 10 billion euro. The trend reflects an increase in deposits
of (+3.7%) and a contraction in bonds (about -13%).
Bank loans to companies and families came to 1,420.5 billion euro, recording an annual increase of about +0.5%.
Considering the breakdown by maturity, the long-term component (over 1 year) posted a change of +2.24%, whereas
the short-term component (up to 1 year) decreased by -4.76%.
Italian banks: changes in funding
Italian banks: headline changes in loans
dec14 jan15 feb15 mar15 apr15 may15june15 july15 aug15 sep15 oct15 nov15 dec15
4.0
5.1
4.4
3.5
3.7
3.9
3.9
3.7
2.7
3.3
5.2
0.2
2.4
dec14 jan15 feb15 mar15 apr15 may15june15 july15 aug15 sep15 oct15 nov15 dec15
3.7
- 1.6
- 0.6
-1.2
-13.6 -13.8
-1.3
-0.6
-1.6
-1.6
-1.7
-1.3
-1.6
-2.0
-1.5
-1.7
0.5
0.3
- 0.2
- 0.4
- 0.2 - 0.3
- 2.0 - 2.3
- 2.4
-2.5
- 0.8
- 0.6
- 0.2
- 1.0
- 0.9
- 0.6
- 2.0
- 1.3 - 1.2
- 1.8
- 1.5 - 1.5
- 2.6
- 2.3 - 2.5
- 1.4
0.5
1.4
-13.8 -13.2 -13.0
-14.7 -14.0 -14.7 -15.7 -14.7 -15.1 -14.5 -14.3
1.8
- 0.3
1.8
0.7
2.2
0.5
- 2.4
- 4.8
- 5.5
- 6.5
deposits
bonds
Source: Abi Monthly Outlook – December 2015
total deposits
loans to households and non-fin cos.
up to 1 year
beyond 1 year
Source: Abi Monthly Outlook – December 2015
Gross bad loans in November 2015- the latest figure available – exceeded 200 billion euro, a new record in
absolute terms and up 20 billion euro compared with one year ago, up +11% year-on-year. Bad loans net of
writedowns totalled approximately 89 million euro, up about 4 billion compared with the same month of the
previous year (an annual increase of +4.7%, slowing compared to +12.2% of the previous year). The ratio of net
bad loans to total loans came to 4.89% (vs. 4.67%. in November 2014).
Report on operations of the Bipiemme Group
35
Interest rates compared with 3-months Euribor-monthly averages
dec14 jan15 feb15 mar15 apr15 may15june15 july15 aug15 sep15 oct15 nov15 dec15
3.62 3.61 3.58 3.53 3.49
3.43 3.43 3.38 3.37 3.34 3.32 3.30
3.26
1.50 1.44 1.40 1.37 1.35 1.37
1.32 1.27 1.26 1.25 1.22 1.22 1.19
The average 3-month Euribor rate for December 2015 stood at
-0.13%, -21 basis points compared with December 2014. The
index fell for the first time in April 2015 as a direct result of the
ECB’s Quantitative Easing programme.
The average rate on 10-year interest rate swaps stood at 0.94%
in December 2015.
0.08 0.06 0.05 0.03 0.01 - 0.01 - 0.01 - 0.02 - 0.03 - 0.04 - 0.05 - 0.09
- 0.13
average funding rate (deposits+repos+bonds)
monthly average 3-month Euribor
average rate on loans
Source: Abi Monthly Outlook – December 2015
The average interest rate on deposits in euros applied to households and non-financial companies (on deposits, repos
and bonds) in December came to 1.19% (1.5% in December 2014) and the weighted average interest rate on loans
to households and non-financial companies came to 3.26% (vs. 3.62% in December 2014).
The spread between the average rate on loans and the average rate on borrowings from households and non-financial
companies came to 207 basis points in December 2015 (vs. 212 bps in December 2014). The average spread for
2015 was 212 basis points (vs. 210 bp in 2014).
Italian Banks: interest rates on deposits
dec14 jan15 feb15 mar15 apr15 may15june15 july15 aug15 sep15 oct15 nov15 dec15
3.16 3.12 3.10 3.06 3.07 3.06 3.06 3.04 3.03 3.03
3.00 2.97 2.94
Italian Banks: tendential changes in loans
dec14 jan15 feb15 mar15 apr15 may15june15 july15 aug15 sep15 oct15 nov15 dec15
3.62 3.61 3.58
3.53 3.49
3.43 3.43 3.38 3.37
3.34 3.32 3.30 3.26
1.50 1.44 1.40 1.37
1.35 1.37 1.32 1.27 1.26 1.25 1.22 1.22
1.19
0.73 0.67 0.66 0.65 0.62 0.67 0.61
0.56 0.56 0.56 0.54 0.54 0.53
average rate on bonds (balance)
average rate of funding
average rate on deposits from households and companies
Source: Abi Monthly Outlook – December 2015
2.83 2.82 2.75
2.77 2.75 2.82
2.68 2.63 2.65
2.67 2.61
2.57 2.51
loans to households and non-financial companies (amount)
loans to households for purchase of homes (amount)
Source: Abi Monthly Outlook – December 2015
As regards the securities portfolio, ABI notes that this aggregate amounted to 741.4 billion euro in December 2015, a
decrease of 827 billion (-10%) in December 2014.
36
Report on operations of the Bipiemme Group
Asset management
The total funds handled by the asset management industry at the end of December came to 1,823 billion euro, with
net inflows that in the twelve months of the year exceeded 140 billion euro, including approximately 95 billion euro
in collective management schemes and the rest in individual portfolio management schemes. In particular, Italian and
foreign open-ended funds had total assets under management of 842 billion euro, representing an increase of 24%
compared with the same period in 2014.
Italian open-ended funds had total assets under management amounting to 234 billion euro and reported an increase
of 14% compared with December 2014. Net inflows since the beginning of the year were positive and totalled 26.3
billion euro. Foreign funds (608 billion euro of assets under management) have increased by 28% since December
2014 (net inflows since the start of the year total about 68 billion euro).
A breakdown of open-ended mutual funds by type of investment shows a predominance of bond funds (41.4%),
followed by flexible funds (24.2%) and by equity funds (21.7%), while balanced funds represent 8% and monetary
funds 4.1%. Lastly, hedge funds represent 0.6% of the total.
As regards retail portfolio management schemes, assets under management came to 124.5 billion euro in December
2015, almost 13 billion euro higher than in December 2014 (+11%).
Source: Assogestioni –Asset management monthly statistics – December 2015.
Report on operations of the Bipiemme Group
37
Significant events for Banca Popolare di Milano and the Bipiemme Group
The main events that took place in 2015 are reported below.
Governance
On 20 January 2015, the Supervisory Board of the Bank performed its annual verification of its members’
independence requirements in accordance with art. 148, paragraph 3, of Legislative Decree 58/98 (“CFA”) and
art. 3 of the Code of Conduct for Listed Companies (i.e. the “Code”). Based on these checks, all of the members
of the Supervisory Board were found to meet the independence requirements of the CFA; the following Board
members met the independence requirements of the Code: Dino Piero Giarda (Chairman), Mauro Paoloni (Deputy
Chairman), Marcello Priori (Deputy Chairman), Alberto Balestreri, Andrea Boitani, Angelo Busani, Emilio Luigi
Cherubini, Maria Luisa Di Battista, Donata Gottardi, Piero Lonardi, Flavia Daunia Minutillo, Alberto Montanari,
Giampietro Giuseppe Omati, Luca Raffaello Perfetti, Cesare Piovene Porto Godi and Lucia Vitali.
On the same date, the Supervisory Board approved the composition of the following sub-committees:
Internal Control Committee: Alberto Balestreri (Chairman), Carlo Frascarolo, Dino Piero Giarda, Piero Lonardi e
Cesare Piovene Porto Godi (subsequently reformed on 17 September 2015, see below).
Nominations Committee: Dino Piero Giarda (Chairman), Angelo Busani, Carlo Frascarolo, Alberto Montanari and
Luca Raffaello Perfetti.
Remuneration Committee: Dino Piero Giarda (Chairman), Andrea Boitani, Carlo Frascarolo, Roberto Fusilli and
Lucia Vitali.
On 24 February 2015, the Management Board of the Bank performed its annual verification of whether or not its
members qualified as independent or executive directors in compliance with art. 148, paragraph 3, of Legislative
Decree 58/98 (CFA) and with the supervisory provisions of the Bank of Italy concerning corporate governance and
based on the principles of the Code. The results are reported in the following table:
Name
Office
Independent ex
CFA
Independent ex
Code of Conduct
Executive
Mario Anolli
Chairman
YES
NO
NO
Giuseppe Castagna
Managing Director and General Manager
NO
NO
YES
Davide Croff
Board member
NO
NO
YES
Paola De Martini
Board member
YES
YES
NO
Giorgio Angelo Girelli
Board member
YES
NO
NO
On 11 April 2015 the Ordinary General Meeting of the Members of Banca Popolare di Milano took place in Milan,
chaired by Dino Piero Giarda.
Having taken note of the consolidated financial statements of the Bipiemme Group at 31.12.2014, which closed with
net income of 232 million euro, and the financial statements of the Parent Company at 31.12.2014 approved on
schedule by the Supervisory Board on 17 March, the General Meeting of Members resolved to distribute the net income
of Banca Popolare di Milano by paying a dividend of 0.022 euro per share, that is payable from 20 May 2015, on
presentation of coupon no. 45. BPM’s shares will go ex-coupon on 18 May 2015.
The General Meeting of Members of 11 April – after having approved the remuneration policies and having
authorised the Management Board to purchase and sell treasury shares – appointed the Arbitration Committee
for the years 2015-2017, consisting of Italo Ciancia, Cinzia Finazzi and Guido Paolo Mina (Acting Arbitrators)
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Report on operations of the Bipiemme Group
and Piergiovanni Rizzo and Giancarlo Tarantola (Alternate Arbitrators). The General Meeting of Members also
appointed PricewaterhouseCoopers SpA to audit the separate financial statements of the Bank and the consolidated
financial statements and half-yearly financial report of the Bipiemme Group for the period 2016-2024, approving
their fees.
On 21 April 2015, Flavia Daunia Minutillo, Supervisory Board Member, resigned in order to comply with Consob’s
regulations concerning limits to the accumulation of offices that members of the supervisory bodies of listed companies
can hold simultaneously, as well as of the so-called ban on interlocking directorates. In accordance with art. 48,
paragraph 1, of the Articles of Association, the Supervisory Board has been integrated with the inclusion of Maria
Luisa Mosconi, the first candidate not elected from the same list as the outgoing board member. On 12 May 2015 the
Supervisory Board verified positively that the Board member Maria Luisa Mosconi met the requirements of integrity,
professionalism and independence for holding office laid down by the legislation, by the Articles of Association and by
the Code of Conduct for listed companies.
On 17 June 2015, the Supervisory Board proceeded to restructure the composition of the Internal Control Committee
with the inclusion of Maria Luisa Di Battista to replace Dino Piero Giarda. The Committee is now composed of: Alberto
Balestreri (Chairman), Maria Luisa Di Battista, Carlo Frascarolo, Piero Lonardi and Cesare Piovene Porto Godi.
Assignment of shares of Istituto Centrale Banche Popolari Italiane (ICBPI)
On 18 December 2015, following the authorisation received from the competent Supervisory Authorities the agreement
was concluded for the sale to Mercury Italy S.r.l. (an investment vehicle owned indirectly by funds advised by Bain
Capital, Advent International and Clessidra S.g.r.) of 85.29% of the share capital held in the Istituto Centrale delle
Banche Popolarei Italiane S.p.A. (ICBPI) by Credito Valtellinese S.c., Banco Popolare S.c., Banca Popolare di Vicenza
S.c.p.A., Veneto Banca S.c.p.A., Banca Popolare dell’Emilia Romagna S.c., Iccrea Holding S.p.A., Banca Popolare
di Cividale S.c.p.A., Ubi Banca S.p.A., Banca Popolare di Milano S.C.ar.l.,Banca Carige S.p.A. and Banca Sella
Holding S.p.A., based on a valuation of 100% of the share capital of ICBPI of 2,150 million euro.
As part of this transaction, BPM:
sold 4% of ICBPI share capital with a cash-in of 86.5 million euro and a net gain of 70 million euro;
after the sale, the Bank retained a 1% stake in the share capital of ICBPI.
Ownership structure of Anima Holding
On 25 June 2015, Banca Popolare di Milano announced that final agreement had been reached for the acquisition by
Poste Italiane (“Poste”) of 10.3% of the investment held by Monte dei Paschi di Siena (“MPS”) in Anima Holding SpA.
(“Anima”), given that all the conditions precedent stipulated in the preliminary contract between MPS and Poste had
been satisfied. At the date of execution of the sale, Poste took over all of the rights and obligations of MPS under the
shareholder agreement relating to the Anima shares originally signed on 5 March 2014 by MPS and BPM.
As part of this transaction, BPM has undertaken (i) to sell to third parties that are not related parties of BPM and/or
Poste the shareholding in excess of the thresholds listed in art. 106 of Legislative Decree 58 of 24 February 1998, no
later than twelve months from the date of completion of the sale of the Anima shares held by MPS to Poste and (ii) not
to exercise its voting rights for the shares in excess of this threshold until completion of the sale mentioned in point (i).
This commitment will automatically become ineffective if Consob, to which a specific question has been posed, is of
the opinion that the signatories of the shareholder agreement are not obliged to make a takeover bid for 100% of the
Anima shares.
Report on operations of the Bipiemme Group
39
Share buy-back plan
On 23 June 2015, having received the required authorisation from the European Central Bank, BPM’s Management Board
approved a plan to purchase treasury shares to be allocated to employees (“Plan”), in accordance with the resolution of
the Bank’s General Meeting of Members of 11 April 2015, with the aim of:
implementing the provisions of art. 60 of the Articles of Association, in accordance with accepted market practice,
which provide for the distribution in shares, to all current employees, with the exception of those who hold senior
positions, for an amount equal to 5% of gross profit for the year 2014;
establishing a stock of shares, in accordance with accepted market practice, to implement the Bank’s remuneration
policies and, in particular, to carry out the plan to allocate BPM ordinary shares to so-called “key personnel”,
as approved by the Ordinary General Meeting of Members held on 11 April 2015 pursuant to art. 114-bis of
Legislative Decree 58/98 and art. 84-bis of the Issuers’ Regulation.
The duration of the Plan was set by the Management Board, namely 24 June 2015 – 27 July 2015 (both included), and
the total maximum value of BPM shares purchased in execution of the Plan was set at 17.1 million euro.
On 27 July 2015, BPM terminated the plan, by purchasing a total of 16,821,746 treasury shares (0.383% of the
ordinary shares issued), at an average price of 0.956481 euro each, for a total of 16,089,677.84 euro. On the same
date, the Bank assigned 16,688,831 BPM shares to all current employees, except for top management positions. As of
28 July 2015, taking into account the other treasury shares already in portfolio at the beginning of the Plan (1,395,574),
the share purchases made in execution of the Plan (16,821,746) and the shares assigned to current employees as per
art. 60 of the Articles of Association (16,688,831), BPM now holds 1,528,489 treasury shares, equal to 0.035% of
its share capital. As of 31 December 2015, the number of remaining treasury shares was 1,524,259.
Redemption and repurchase of bonds and issue of Covered Bonds
On 16 March 2015, Banca Popolare di Milano launched a voluntary public offer for the partial repurchase of some
of the senior bonds that it had issued and placed with retail customers up to a maximum nominal value of 165 million
euro (“Offer”). During the Offer acceptance period, the Bank increased the maximum nominal value of the securities
involved in the Offer by up to a further 200 million euro, bringing the maximum nominal value of the repurchase to
365 million euro. On 22 April 2015, the Bank announced that the aggregate nominal value of the bonds validly
submitted in acceptance of the Offer and repurchased by BPM amounted to 358,450,000 euro. On the same date, the
Bank has also announced that the Offer was effective, given that none of the negative events to which it was subject
had taken place. This transaction had a cost for the Bank, being the difference between the repurchase price and the
book value of the securities issued, namely 11.5 million euro.
Having verified that the transaction was compatible with the economic and capital situation and with market conditions
and having obtained authorisation from the European Central Bank, on 2 April 2015, Banca Popolare di Milano went
ahead with early redemption of the innovative capital instruments called “BPM Capital Trust I 8.393% Noncumulative
Perpetual Trust Preferred Securities”, with a residual outstanding value of 70,717,000 euro, according to the terms
laid down in the loan regulation. The redemption did not have any impact on the capital ratios and generated savings
in terms of the maintenance cost of the instrument.
On 23 April 2015, having obtained the necessary authorisations, Banca Popolare di Milano repaid ahead of schedule
all of its bonds backed by a government guarantee issued on 23 March 2012 with a maturity date of 23 March 2017
and a total nominal value of 500 million euro, subscribed for upon issue by the Bank without any market placement.
Early repayment was decided after the ECB’s decision to no longer accept these instruments as collateral for liquidity
requests. Repayment of this liability – which does not have any effect on the financial statements nor on regulatory
capital – enables the Bank to save on the cost of the guarantee.
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Report on operations of the Bipiemme Group
On 7 September 2015, Banca Popolare di Milano successfully placed a 7-year covered bond for 1 billion euro with
institutional investors as part of its 10 billion euro Guaranteed Bank Bond (OBG2) programme. To carry out the new
covered bond issue programme we set up a new vehicle called BPM Covered Bond 2 S.r.l. (80% held by BPM). The
issue has a coupon rate of 0.875% and the final maturity date will be 14 September 2022.
Subsequently, on 25 November 2015, the Bank successfully placed a 10-year covered bond for 750 million euro with
institutional investors, as part of the abovementioned programme. This is the first issue of covered bonds placed by BPM
on the market with a 10-year maturity; the coupon rate is 1.50% and the final maturity date will be 2 December 2025.
The Bank’s 150th anniversary celebration
On 17 March 2015, Dino Piero Giarda, Chairman of the Supervisory Board, Mario Anolli, Chairman of the Management
Board, and Giuseppe Castagna, Managing Director, held a special press conference to launch the celebrations for the
150th anniversary of BPM. The event provided an opportunity to illustrate the main initiatives organised for 2015, including:
Casa BPM: a space made available to the city, local partners and customers for the organisation of conferences,
painting and photography exhibitions, meetings addressing historical and economic issues, musical and sporting
events and other initiatives;
BPM Tour: a journey through the main areas where the Bank is present, to allow local stakeholders to bear witness
to this important anniversary;
the issue of a commemorative postage stamp depicting the Bank that the Ministry of Economic Development has
agreed to include in Poste Italiane’s philatelic programme for 2015;
the Album of Milan: 150 picture cards drawn by cartoonist Emilio Giannelli and distributed free of charge as a
supplement to Sette magazine, showing the characters who have left their mark on Milan’s history over the years
from 1865 to 2015;
Food for Thought, Food for Soul: an initiative – under the patronage of the Presidency of the Council, of various
Ministries and of UNESCO – which allowed us to exhibit at the head office of the Bank, on a special stand, a
book that is also being exhibited at the Expo to reflect on images and texts that remind us of the culture, art and
knowledge that have nourished us;
a varied programme of celebratory events for the public, which, beginning with the General Meeting held on
11 April, continued until the end of 2015.
The reform of Italian cooperative banks
Article 1 of Legislative Decree 3 of 24 January 2015, ratified by Law 33 of 24 March 2015, has amended a number
of provisions of Legislative Decree 385/1993 (“CBA”) with regard to cooperative banks. The amended text:
has made it possible for banks to follow the cooperative banking model only if their assets do not exceed 8 billion
euro; banks that exceed this threshold must – within 12 months of exceeding it – adopt the necessary measures
to ensure compliance with the law, such as: reducing their assets below the permitted limit, transforming the
bank into a joint-stock company or going into voluntary liquidation (art. 29, paragraphs 2-bis and 2-ter, CBA);
introducing amendments to certain aspects of the rules governing those cooperative banks that are able to retain
this status. In particular, it is envisaged that the reimbursement of shares to shareholders in the event of withdrawal,
including the exercise of withdrawal rights in the case of transformation, may be limited, even as an exception to
the rules of law, in cases where such limitations are necessary to include such shares in the bank’s Common Equity
Tier 1 (art. 28, paragraph 2-ter, CBA). The reform also makes it possible for cooperative banks – as is the case for
cooperative companies under the Italian Civil Code – to issue the financial instruments envisaged in art. 2526 of
the Italian Civil Code, the characteristics of which allow their inclusion in the bank’s Common Equity Tier 1 (CET1);
the same limitations on the reimbursement of shares to members also apply to these instruments.
Report on operations of the Bipiemme Group
41
The above law requires that cooperative banks existing at the time Decree Law 3/2015 came into force, comply with
art. 29, paragraphs 2-bis and 2-ter, within 18 months of the Bank of Italy’s implementation instructions on this law take
effect, i.e. from 27 September 2015.
On 9 June 2015, BPM’s Management Board, assisted by the Internal Control Committee and the Chairman of the
Supervisory Board, identified Citigroup and Lazard as the Bank’s financial advisors for (i) the project to transform the
Bank into a joint-stock company, following the conversion into law of Decree 3 of 24 January 2015, and (ii) the analysis
and assessments in relation to any possible strategic options in view of the potential consolidation of the banking sector.
On 7 July 2015, the Management Board of Banca Popolare di Milano verified that it exceeded the threshold of 8 billion
euro of assets and therefore formally acknowledged that the BPM was one of the banks involved in the reform and the
various obligations that resulted from it.
On 6 August 2015, after the favourable opinion expressed by the Supervisory Board, the Management Board
approved the amendments to the Articles of Association needed to bring them into line with the new rules on
cooperative banks, pursuant to art. 2365, paragraph 2 of the Italian Civil Code and art. 39, paragraph 2, letter
u) of the Articles of Association, in particular: (i) raising the maximum number of proxies that can be given to each
Member of the Bank to represent others at General Meetings to 10; (ii) attribution to the Management Board, after
consulting the Supervisory Board, of the right to limit or delay, in whole or in part, the right to reimbursement of
the shares subject to withdrawal. The amended Articles of Association obtained the approval of the Bank of Italy
pursuant to art. 56 of Legislative Decree 385/1993 and were made available to shareholders and the public as
required by law.
On 29 September 2015, after consulting the Supervisory Board, the Management Board approved the plan
containing the steps needed to comply with the provisions of Legislative Decree 3 of 24 January 2015 (as
converted into law) on the subject of cooperative banks. In particular, given that the Bipiemme Group’s total
assets exceed the legal threshold of 8 billion euro, the Management Board has indicated in the plan that they
intend to comply with the law on cooperative banks by transforming it into a joint-stock company. BPM intends
to complete the transformation, probably by the end of June 2016; in any case, it intends to ensure to comply
with the legal deadlines.
“Convertendo BPM 2009/2013 – 6.75%” Bond Loan
As mentioned in previous financial statements, on 3 August 2012, Banca Popolare di Milano signed, also with
Adiconsum, Adoc and Federconsumatori, a Memorandum of Understanding (which is available on BPM’s website)
to commence a joint mediation procedure for the “Convertendo BPM 2009/2013 – 6.75%” bond loan. On
30 June 2014, Banca Popolare di Milano signed an agreement that amended and supplemented the Memorandum
of Understanding, which provided for extending the deadline for the submission of applications for admission by
Retail customers and allowing BPM Shareholders to access the procedure under certain conditions. In order to
fund the payments expected to be made under this procedure, the Bank allocated 40 million euro in the financial
statements, which was subsequently increased during 2012 to 47.4 million euro at Group level.
The period for submitting applications for access to the conciliation procedure ended on 30 September 2015. The
conciliation procedure ended on 31 December 2015. Therefore, after recognising total costs of about 27.5 million
euro, an amount of 17.4 million euro was released from the Provision for Risks and Charges, whilst retaining an
amount of 2.5 million euro to cover the remaining liabilities due to cases not subject to conciliation.
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Report on operations of the Bipiemme Group
Extraordinary contribution to the Resolution Fund
By way of provision dated 21 November, 2015, as approved by the Economic and Finance Ministry, the Bank of Italy,
pursuant to art. 32 of Legislative Decree no. 180 of 16 November 2015, started a plan to rescue the following banks:
Banca delle Marche, Banca Popolare dell’Etruria e del Lazio, Cassa di Risparmio di Ferrara, Cassa di Risparmio della
Provincia di Chieti, all of which are under special administration.
In this respect, we would like to stress that the whole burden to bail out the 4 banks in crisis was first placed on
the subordinated bonds and shares of the four banks, the remaining portion was sustained by the Italian banking
system to provide funding with its contributions, ordinary and extraordinary, to the National Resolution Fund; this
fund was set up by the Bank of Italy in accordance with the regulations laid down in Legislative Decree 180/2015 of
16 November 2015.
The total financial commitment of the National Resolution Fund, amounting to 3.6 billion euro, was collected by
requesting, to each Italian bank, an ordinary contribution for 2015 and an extraordinary contribution of three times the
amount of the ordinary contribution.
Specifically: (i) Bipiemme Group banks, at the request of the Bank of Italy, paid a total of 53 million euro (as an
ordinary and extraordinary contributions) into the National Resolution Fund for 2015.
Supervisory Review and Evaluation Process (SREP)
As requested by Consob, on 26 February 2015, Banca Popolare di Milano announced it had been notified of the
European Central Bank’s decision regarding Bipiemme Group’s minimum capital requirements. The minimum capital
ratios communicated by the European Central Bank for Bipiemme Group are 9% for the Common Equity Tier 1 ratio and
11% for the Total Capital ratio. In this context, it was announced to the market that the Bipiemme Group fully complied
with these minimum capital ratios, indeed its current and future ability to meet these prudential requirements was also
highlighted.
Subsequently, on 27 November 2015, Banca Popolare di Milano announced that it received the European Central
Bank’s final decision containing the findings of the annual Supervisory Review and Evaluation Process (“SREP”)
carried out by the Supervisory Authority on the banks under the Single European Supervision, pursuant to article
97 of Directive 2013/36/EU. Based on the analysis and the evaluations conducted by the Supervisory Authority
during the SREP – which highlighted that BPM has implemented strategies, processes and mechanisms to comply with
Directive 2013/36/EU and European Regulation 575/2013 and also to ensure a sound and prudent management
and to cover the bank’s risk exposure – ECB confirmed the prudential capital requirements communicated last
February. It set the consolidated minimum Common Equity Tier 1 ratio at 9%. In this regard, it should be noted that
Bipiemme Group is already well above the minimum capital ratio set by ECB though it does not yet benefit from
adoption of AIRB models.
Compound interest
As part of the well-known issue of compound interest (anatocism) in banking relationships, it should be noted that in
late 2013 the “Stability Law 2014” (Law no. 147 of 27 December 2013, art. 1, paragraph 629), amending art. 120
of the Banking Code, asserted that “the Interministerial Committee for Credit and Savings (CICR) establishes the terms
and methods for the production of interest in transactions undertaken as part of the banking business, providing in any
case that: a) in the current account transactions with customers, interest on deposits and interest on loans both have
to be calculated on the basis of the same period of time; b) the interest capitalised periodically cannot generate more
interest, which in subsequent capitalisations, has to be calculated solely on the principal element”. Subsequently, the
Report on operations of the Bipiemme Group
43
legislature intervened with the publication of Decree Law 91 of 24/06/2014, reintroducing the principle that charging
compound interest was legitimate based on capitalisation periods of not less than one year.
However, this rule was not converted into law, so the previous provisions of the Law of Stability still apply, albeit with
doubts about the application and interpretation of the rule, both for the reference to the CICR and for the terms used. On
23 December 2014 an appeal filed by the Consumer Movement Association before the Court of Milan was notified to
the Bank with the intention of obtaining – with an emergency order – an injunction to block all forms of capitalisation of
interest expense and, in any case, the application of compound interest with all the appropriate measures to eliminate
the effects.
At first instance, the application was declared inadmissible (order dated 12 January 2015). The Consumer Movement
Association appealed against this decision and on 3 April 2015 the Court of Milan ordered the Bank to stop any
additional form of compounding of interest expense in relation to contracts for current accounts already in existence or
to be concluded with consumers and belonging to the types of account specified by the Association in its appeal, with
the obligation to take steps to give adequate publicity to this measure.
The Bank complied with the order and subsequently acted judicially to challenge the assumption of the order and obtain
a proper interpretation of art. 120 of the Banking Code.
Other significant events
On 13 July 2015, BPM and Fondazione Cassa di Risparmio di Alessandria agreed that the shareholder agreements of
September 2011 (subsequently amended to expire on 31 December 2015) would be extended for another three years
from 13 July 2015 (excluding any automatic renewal after that deadline), taking into account that these agreements
will terminate when BPM’s transformation into a joint-stock company takes effect or when a corporate concentration
involving BPM becomes effective.
On 17 September 2015, the European Central Bank announced its intention to start inspection activities related to the
market risk, liquidity and the interest rate risk of the banking book at the Parent company and Banca Akros. These
inspection activities were concluded in January 2016 and the related findings are expected to be announced in the
first half of this year.
On 3 November 2015, the transfer of performing loans to the SPV Profamily Securitisation srl by the subsidiary Profamily
was concluded. The transfer was carried out as part of a securitisation under Law 130/99, which was completed with
the issuance of securities by the SPV. The securities were subscribed by Profamily to increase the assets that can be used
for the Group’s liquidity position.
Events subsequent to 31 December 2015
On 18 January 2016, on Consob’s request – in accordance with article 114, paragraph 5, Legislative Decree
58/1998 – Banca Popolare di Milano announced to the market that it had been informed by ECB that they had started
an assessment on the Non Performing Loans strategy, governance, processes and methodology as part of the ongoing
supervision process which will involve, among other Italian and European banks, also BPM.
On 29 January 2016, Banca Popolare di Milano announced that it signed the second-level collective bargaining
agreement with trade unions for over 7,700 employees of the Bipiemme Group. As part of the legislative reference
framework, defined with the renewal of the national collective labour contract in March 2015, the new contract
focuses on the following aspects: (i) enhancement of human resources, through an employee benefit system intended
for a number of specific professional profiles also based on the way they perform their tasks related to the level of
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Report on operations of the Bipiemme Group
responsibility, experience and professional qualifications, in the allocated time and in line with the changing demands
of the relative organisational and production context; (ii) the definition of criteria to ensure transparency, simplification
and flexibility with respect to part-time employment and mobility, with the aim to achieve a better work and life balance
for employees; (iii) the formalisation of measures for new hires on supplementary pension systems, resulting in an
increase in the employers’ contribution to the supplementary fund; (iv) the development the welfare policies typical of
bank systems, through the confirmation of the current contractual arrangements relating to supplementary health care
and welfare, as well as the awarding of a “company social bonus”.
On 2 February 2016, the Management Board of the Bank performed its annual verification of its members’ independence
requirements, confirming the results of the checks carried out on 24 February 2015 (details of which are contained in
this report).
On 23 February 2016, BPM appeared in court for the lawsuit filed by Piero Luigi Montani, the bank’s former Managing
Director and CEO – who resigned on 31 October 2013 – for recognition of the compensation to be payable in the
event of resignation for good reason, rejecting all of the plaintiff’s claims.
Report on operations of the Bipiemme Group
45
The activities of the Bipiemme Group in 2015
Status of the Business Plan
Based on the guidelines laid down in the Bipiemme Group’s Business Plan for the period 2014-2016, projects are
underway which take the form of 10 actions, several of which have already been completed and others which are still in
progress, as outlined below:
1. Strengthening of the capital base. An internal rating system is currently being developed – the models and rating
processes of which were established in 2015 for the Private and Corporate segments – for the validation of
advanced AIRB methods for calculating the capital requirements for credit risk;
2. Strengthening of liquidity position. During 2015 we successfully placed a covered bond for a nominal value of 1
billion euro with 7 year maturity and a covered bond for a nominal value of 750 million euro with 10 year maturity.
In the same period, all 1,700 million euro of the institutional bonds were repaid, while the TLTRO (Targeted longer
term refinancing operations) position increased from 1,500 million euro to 3,350 million euro;
3. Constant monitoring of credit position. The main initiatives involving the review and optimisation of the process for
monitoring performing and non-performing loans have been concluded. In particular, new processes for monitoring
performing loans and granting credit for customers in the Corporate customers and Businesses were released.
For non-performing loans, instead, we made the dispute management process more efficient, strengthened the
“recovery machine” and activated the new mechanism for the recovery of NPLs through outsourcers;
4. Development of multi-channel banking. Taking advantage of the absorption of WeBank in BPM – which took place
in November 2014- the activities designed to strengthen the Group’s platform with the view to creating a sole
“multi-channel bank” continued, with particular focus on the solutions for sales visits and remote digital signatures.
Moreover, the Group’s Customer Centre has been enhanced in terms of the services offered and size;
5. The creation of a centre of excellence in the “core” retail segments and the expansion of the network of financial
advisors. In keeping with the Business Plan, the monitoring of the different customer segments has been reinforced
through fine-tuning the Hub & Spoke model and an advanced service model for customers in the Personal segment;
the development of the network of financial advisors and the steady release of products/services in line with the
target model continue according to the plan;
6. The offer of value-added services for Corporate customers. We have adopted a distinctive business model, helped
by the synergies with Banca Akros, for corporate finance, advisory, customer support for the issue of mini-bonds,
with the progressive strengthening of the segment in terms of human resources and the quality of its operational
processes;
7. Creating a centre of excellence in Private Banking for entrepreneurs and professionals. The initiatives planned with
Akros and BPM Private continue, as does the recruitment of highly skilled Private Bankers;
8. Enhancement of human resources. In pursuance of this objective, new persons with professional skills and talented
young people have been recruited, significant investments have been made in employee training and retraining;
the performance-based assessment system has been enhanced.
9. A constant focus on cost containment (spending review). An action plan was implemented for streamlining several
processes at Group level which, already in 2015, has made it possible to achieve significant savings. In particular,
in addition to the specific intervention plans – already carried out in 2014 – aimed at reducing current expenditure,
a program to digitalise the business processes which entails a number of initiatives – some of which have already
been implemented and others will be implemented at the end of next year;
10.Development of the property portfolio. During 2015, the Bank made major improvements to the buildings in line
with Plan; these improvements included revamping the head office in Milan and renovating 74 branches.
The following are the main activities related to the commercial, financial, risk management, audit and compliance,
organisation and information technology areas.
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Report on operations of the Bipiemme Group
1. Sales and marketing
Individuals
Customer dynamics
During 2015, numerous initiatives were implemented to support the acquisition and retention of customers, with excellent
results (over 46,000 new customers). In this area, the partnership with AC MILAN continues to develop through the
“Scendi in campo con noi” sweepstakes, in conjunction with the new 2015/2016 season ticket campaign.
e-money
A new card named Cartaimpronta Debit MasterCard was released to the entire sales network in February. This
innovative debit card allows customers to make purchases through physical and online merchants guaranteed by high
security standards through the introduction of the “pin change” and “secure code” feature. A large number of customers
appear to be very satisfied with this initiative (+25,000 customers at the end of the year). In December 2015, an
agreement was signed with American Express for marketing the Green and Gold Card. These products will initially be
dedicated to the Advisors channel.
As regards prepaid cards, during 2015 we continued the channelling of regional payments from the Fondi Regionali
Cresco (for the proper nutrition of mothers and their children) and Sostengo (for parents who are separated), as was the
case for the Fondo Nasko (with more than 20 million euro disbursed in three years from 2010).
In the second half of the year, work began on preparing a new prepaid card designed for businesses (Business
Prepaid). This card is expected to be launched in 2016.
Current Accounts
The new version of the New Welcome account was made available in 2015. This account is for new account holders
with no fees for 24 months. The new account is BPM’s response to promotions underway at several competitors with the
aim of supporting the new customer acquisition campaign.
Mortgage loans to individuals and personal loans
We launched a number of campaigns to promote mortgages and loans during 2015. In particular, as regards
mortgages, we would like to remind you of the commercial offering – launched in March 2015 – called Mortgage
Promo (a floating-rate mortgage with spreads differentiated according to the duration of the loan) and for fixed-rate and
floating-rate mortgages with spreads differentiated according to the duration of the loan and the LTV (loan to value). In
this regard, a new mortgage was marketed in October offering a discounted interest rate of 1.50% for an initial period
of time supported by a mass media campaign (television, radio and the internet). This innovative product is the only one
of its kind on the market; it offers a fixed rate for the first 5 years and the possibility to change the rate 3 times over the
life of the mortgage, with deadlines chosen by the customer and not by the bank.
With reference to the loans segment, in 2015 the personal loans campaign continued which offers an advantageous
rate for all customer profiles and for loans of up to 30,000 euro.
Lastly, the “Consolida 2015” debt consolidation loan was launched which gives customers the opportunity to consolidate
all of their debts into one loan, so they only have one payment to make, can obtain additional liquidity, and increase
the duration in order to lower the amount of each instalment.
Report on operations of the Bipiemme Group
47
Non-life insurance
During 2015 a partnership was established with Europe Assistance. As of July, the bpmbanking portal offers the
possibility to purchase insurance policies in the “Travel” range, by accessing the insurance company’s website directly.
This initiative was promoted through interactive Direct E-Mail Marketing (DEM) tools.
In August a new “instant quote” service was introduced to the physical network to promote Bipiemme Assicurazioni
car insurance policies. This service not only facilitates the network’s sales activities but also makes it possible to
quickly obtain information on the policy premium for all of the solutions offered. This application was released on the
bpmbanking portal and Contact Centre channel in the months that followed.
The “car insurance showcase” campaign was launched in the last quarter of 2015 and gave wide visibility to the “Sci
Noproblem” insurance policy offered by Europe Assistance, also through the banking and Direct E.Mail Marketing (DEM)
channel.
Small Businesses
To enhance the bank’s role in the Small business segment, we revised the operational model for the small business
network in early 2015, in order to make it more effective and responsive to market needs. The aim is to follow
businesses with greater professionalism and speed in order to seize the opportunities and help them to grow.
The most important changes were:
1. further specialisation on the part of the network of managers devoted to this segment. So-called Premium businesses
were identified in this segment (i.e. businesses with a turnover between 5 and 15 million euro), to which we have
dedicated new specially trained managers;
2. appointment of cluster business specialists, professional figures to support the Business Managers;
3. allocation of greater and more effective powers of pricing and credit to the Territorial Districts;
4. opening of a “Development Office”, reporting to head office but based locally to provide support in acquiring new
small business customers.
The acquisition of new customers was supported by “Welcome Businesses”, a product launched at the end of 2014
allowing us to acquire 9,181 new customers as of 31 December 2015, and by “Conto Condominio PLUS 2”, an
account dedicated to the specific customer segment, through which 1,352 new current accounts were opened.
The main initiatives undertaken in 2015 were:
the New Sabatini credit line for capital assets: this initiative is able to foster business development. BPM signed up
for the new agreement between the Italian Banking Association (ABI)/Ministry of Economic Development (MED)
and Cassa Depositi e Prestiti (CDP) which provides for the granting of loans from CDP funds with a 275 bps interest
subsidy from the MED. Micro, small and medium-sized enterprises in almost all productive sectors can benefit from
this agreement. The funding must be used entirely for the purchase or acquisition (in the case of financial leases) of
brand-new plant and machinery, capital goods and equipment for use in production, as well as hardware, software
and digital technologies;
EIF microcredit: having achieved positive results, the initiative commenced last year together with the European
Investment Fund was expanded by increasing the credit line available for micro-credit operations by 6 million euro.
The loans granted from this credit line are intended for micro-enterprises and self-employed people working in
various sectors of the economy, and the eligible activities have to meet specific characteristics such as the business
was set up as a result of a career change or job loss, the business has a good growth potential, but is struggling
to get credit for lack of guarantees, etc. The objective is to provide loans of up to 24,500 euro to support local
initiatives, also by means of agreements at local level, such as the Under 35 Microcredit project to help business
ventures in the Milan area;
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Report on operations of the Bipiemme Group
Agreement with Finlombarda – Finpiemonte – Puglia Sviluppo: BPM supports the local economy is also by entering
into agreements with public sector entities in the area that offer start-ups or existing businesses various types of
subsidies, which result in specific lines of action such as mixed funds (co-financing by both the entity and the bank),
sureties, interest subsidies to reduce the cost of the investment;
EIB Funding: funding by third-party entities, particularly those provided by the European Investment Fund (EIB),
for the benefit of companies that need to finance their working capital or are planning to make investments.
Use of these funds is revolving, which makes it possible to continue the offer over time. In situations of large and
well-defined investments, EIB makes direct loans, asking the Bank to share the risk by issuing specific guarantees;
Female entrepreneurs’ credit line: the facility of 300 million euro for female entrepreneurs is for companies run by
women seeking to set up a new company, invest or obtain help for recovery. The initiative, currently under renewal,
forms part of the Memorandum of Understanding signed by ABI, the Department for Equal Opportunities of the
Presidency of the Council of Ministers and by Trade Associations;
Guarantee consortia: an agreement was signed in 2015 with GA.FI Sud, a guarantee consortium operating mainly
in the regions of Campania, Puglia and Basilicata. The agreement with Coopfidi Roma was revised, providing
for the issuing of direct guarantees and subsequent operating activities with FCG (Central Guarantee Fund for
SMEs) counter-guarantees. With several select guarantee consortia initiatives were promoted to provide funding to
“Female Entrepreneurs”, in accordance with the specific ABI memorandum of understanding. Lastly, the promotion
of BPM products at credit guarantee consortia were renewed in 2015, with funding proposal for taxes and yearend bonuses;
arrangements are being made to enter into an agreement with AGID, the Agency for Digital Italy, in order to comply
with the obligation – which concerns the public administration – to join the e-payment system.
as regards the MyBank and CBILL services, steps are being taken so that it is accessible to customers using the
Webank service;
we have continued to offer our customers the electronic invoicing service in collaboration with ICBPI, and we are
preparing to release the new Strong Authentication system to be included in the provisions for corporate customers.
Under the new process, a personal token will be provided to replace the current advanced electronic signature
system.
Lastly, to provide local support, additional new agreements have been entered into with trade associations, most
notably:
the agreement with Confindustria Pavia, through which the Bank has made available to SMEs operating locally, a
15 million euro credit line to finance investment in plant and machinery, expansion of production, development of
human capital, research and innovation;
the sponsorship, as the only banking partner, of the “Outside Expo Confartigianato” Italian Makers Village, an
event showcasing the best of Italian craftsmanship that took place during the EXPO 2015.
Report on operations of the Bipiemme Group
49
Private banking
The private banking business concentrated above all on customer relations with a focus on advisory services from
a protective point of view, characterised by an extremely volatile climate in the financial markets in 2015. BPM’s
Private Banking structure has increased its distribution network which now consists of 12 private banking branches
and 13 offices with the opening of branches in Bari and Naples, located in areas where the Group has a longstanding presence and others that are considered strategic for the growth of this sector, with a total of 75 account
managers.
Product diversification continued throughout the year, thus making new investment solutions available to private customers.
This included broadening the offerings of Anima Holding (fixed-term bond funds and Open funds), the development of a
multi-brand range, thanks to the new distribution agreements with leading international asset management companies,
as well as the offer of certificates that guarantee and protect the initial capital. In the insurance segment, in order to be
able to be able to offer increasingly personalised services, we signed a new agreement with the Luxembourg-based
company Ame Life Lux (Coveà Group) for private insurance policies.
As regards Banca Akros’s Private Banking business – focused on a select clientele in the high net-worth segment – the
bank continued to develop tailor-made services in asset management, in a context of “open architecture”, and in asset
administration, leveraging on its capabilities in the execution of orders on domestic and international market.
Multi-channel banking
Following the merger of Webank with Banca Popolare di Milano in November 2014, the Multi Channel Banking
function was launched to supervise the direct channels and external networks as well as projects to develop the multichannel model for the benefit of all BPM customers. The Webank brand retains its distinctive position in the acquisition
and management of customers with a greater propensity to use digital channels, relying also on the support of the
Group’s Customer Centre; the network of financial advisors develops the form of service and the distribution coverage
of the Group; the new business partnerships with external networks (credit brokers and Profamily agents) have enabled
new business channels. In detail:
WeBank
Webank offers innovative banking services and is one of the leaders in online trading and a key player in online
loan brokerage. Webank customer acquisition in 2015 (+23,000 new customers, up compared to the previous
year, despite the presence of new online competitors) was bolstered by online advertising and facilitated by the
consolidated partnership model with major Italian e-commerce platforms and the member get member word-of-mouth
referral initiative.
Particularly important among the activities of 2015 was the development of the financial advisory service, which
– building on the skills of the physical network – will give pure digital customers the opportunity to benefit from
the advisory service offered at branches starting in early 2016 and – subsequently- to benefit from an advisory
service through remote channels. Our strategy in recent years has allowed us to create a solid base of affluent pure
digital customers with great potential for developing asset management products, as evidenced by the constant
inflow of assets under management.
With regard to the Online Trading services, during 2015, development of apps designed for trading financial instruments
via tablets continued. In addition to the maintenance operations on the T3 app for iPads, a new version of the app was
introduced for tablets running on the Android operating system, which has strengthened the Bank’s position as a market
leader in advanced trading platforms on mobile devices.
The online home mortgage business, characterised by a range of distinctive products at an all inclusive rate, attention to
the levels of customer service, also achieved significant results. During the year special emphasis was put on customer
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Report on operations of the Bipiemme Group
retention, through customer care related activities and assessing their needs regarding mortgages and the banking
relationship.
In early 2015 we launched a new mobile banking application, first compatible with wearable iOS operating systems
and then with Android and Tizen operating systems, which – in addition to the features for topping up cell phones and
prepaid cards – has introduced a cardless cash feature. This feature, the first of its kind on the Italian market, allows
customers to withdraw cash from any of the Group’s ATMs using a smartphone, without the need for a card. The new
app immediately won important awards, most notably it was awarded as the best financial app by the Osservatorio
Finanziario and received the “MT4 Award 2015” from Business International in the “Digital Transformation at Banks”
category for the Cardless withdrawal function, as well as first prize at ”Milano Finanza Innovation Award 2015” in
the “Digital financial services” category. Lastly, EFMA (European Financial Management Association) identified the
new Webank mobile banking app in the “Worldwide best practice in retail finance”. All of these innovations and the
constant development of the mobile channel have resulted in a significant increase (+22%) of active mobile customers
compared to 2014 and strong growth of these devices (+38.5%).
Financial advisors
The “Advisors Network Development” project was started in 2015 in order to support and develop Webank and BPM’s
affluent customers with a high-tech approach (e.g. sales visits, digital/paperless processes, etc.), all on a multi-channel
distribution platform that provides integration between virtual and physical channels. The aim of this initiative, which
is one of the development projects of the 2014-2016/2018 Business Plan, is to acquire new customers, increase
the volume of assets under management, and extend coverage in areas where there is little or no presence of the
traditional network. The infrastructure and the technical equipment to enable an “advanced sales visit” through specific
apps available on tablets with graphometric signature are up and running to support the network. To complete the
infrastructure, a single advisors branch was implemented to strengthen relationships and the operational channelling
of processes. It verifies customer eligibility and checks and confirms the information; after which it opens relationships
through the transmission of a welcome kit with the credentials for the Multichannel Bank.
Lastly, we developed a commercial offer dedicated to “BPM Personal Banking” including a new set of products for the
following categories: advisory services; asset management; indirect deposits (e.g. bond loans); insurance products
(life/non-life); opening of overdraft facilities, mortgages, loans, personal loans and other cash lending products; direct
deposits and banking products (credit card, direct debit of utility bills).
Customer Centre
In 2015 we completed the expansion of the Customer Care structure, started last year, and new business activities were
started, allowing us to perform outsourced activities in-house. We have started outbound marketing activities employing
internal resources, for BPM and Webank customers, as well as the reactive inbound activities (soft selling during a
service call) and web engagement (business contacts developed through customer engagement on the internet through
chat and call back). The commercial activities mainly focused on banking type products for retail customers (credit cards
for individuals and small business, other e-money products, loans and mortgages, car and non-life insurance, customer
retention and development campaigns), but also investment type products (securities custody, PAC, trading platforms) in
particular for Webank customers.
A major project is underway to renew the Customer Centre technologies, which involves changing the contact
infrastructure and the software used by the operators.
Virtual Branches and External Networks
During 2015 the company continued activities to monitor and safeguard customer using the remote channel (Webank
service), ensuring support to both the new online customer acquisition campaign and to the commercial initiatives
to increase cross-selling to existing customers, recording a overall increase in the number of cases handled by 14%
compared to 2014. During the year, a new single virtual business unit was set up with operational decentralisation
in Florence, for the management of customers from external networks. The branch provides support to the back
Report on operations of the Bipiemme Group
51
office operations of the new financial advisors network and supervises over the new network of credit brokers and
Profamily agents.
Development of channels
The multi-channel approach in the banking sector is rapidly changing the relationship between the bank and its
customers. The distribution channels for financial services and products are evolving; the change in the way of using
the services offered by Credit Institutions is mainly due to the increasing use of on-line channels. At Banca Popolare di
Milano, the New Network Platform forms the basis of the multi-channel area, characterised by high security standards
and aimed at increasing commercial effectiveness and promoting the dematerialisation of paper.
It is in this context that the Bank’s multi-channel strategy was designed. The purpose of which is to establish a new
market position following the merger of Webank with BPM, raising the visibility of both the BPM and Webank brands,
complementary to one another on two separate markets, but with significant elements of synergy. Accordingly,
guidelines have been laid out for the different multi-channel areas, with the objective of creating an integrated Group
multi-channel, to allow interoperability between the channels, optimize the customer experience on the internet and
mobile devices, enable cross-branch and cross-channel selling, to define and implement procedures for door-to-door
and distance selling. The work done in 2015 made it possible for us to achieve important results including the door-todoor infrastructure for the Advisors Network and the Webank customer onboarding program at branches. Under this
program Webank customers can seek advice at BPM branches on Webank deposit accounts, thus creating the first
concrete step of the interoperability process between physical and digital channels.
Our branches have also been the object of continuous innovations such as the nationwide sales network, which
allows customers to buy products at any BPM branch without having to go to their own branch and the mortgage
calculator and application system using paperless processes. Moreover, table scanners were installed in 2015 to
enable the digital acquisition of documents. Developments of the Network Platform from 2013 to date have allowed
us to dematerialise over 18 million sheets of paper. Lastly, we enabled the Remote Digital Signature infrastructure,
already activated for BPM/Webank customers, which enables two more digital sales arrangements: the Paperless
self offer and the Remote offer. As regards the remote offer, the Bank has already enabled the Customer Centre
for distance selling its flagship debit cards (Cartimpronta Debit MasterCard) using 100% paperless processes, by
sending the proposal on internet banking and signing by the customer via digital signature.
Companies
The corporate sector in 2015 was characterised, at system level, by a complex competitive situation consisting of:
strong competition from primary credit institutions on growth in loans to customers with high credit standing and on
all durations (short and medium term);
widespread availability of liquidity in the system;
a stagnant demand for credit with some signs of recovery only in the second half of the year.
In this market environment, Banca Popolare di Milano continued to pursue a customer approach based on:
guidance from head office through targeted marketing initiatives;
concession of special pricing condition in support of lending policies;
preferential approval procedures for companies with an average-to-good credit standing and uncomplicated
requirements;
assistance with internationalisation for companies with the potential to grow abroad.
Leveraging the expertise of the central units, Banca Popolare di Milano has also assisted customers with sophisticated
financial needs (in particular, structured finance transactions, hedging interest and currency risk and operations abroad).
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Report on operations of the Bipiemme Group
The corporate segment has also intensified its focus on preventive management of company crises and on the selective
development of loans, also lending to counterparties with non-optimal ratings with the help of a dedicated team of
professionals.
In 2015, Banca Popolare di Milano continued its strategy of strengthening its commercial effectiveness and upgrading
its regional coverage through the implementation of a series of coordinated actions, including:
strengthening of the sales force with professionals who have different skills and contacts;
activation of the operational headquarters for the corporate segment based in Padua and to monitor the Triveneto
area with the aim to increase the Bank’s presence in an area of high strategic importance;
the makeover of some of the local operational offices (for the corporate segment) with the aim of improving the
quality of work for employees in the network and to strengthen transmission of the corporate identity.
The project entitled “Evolution of the corporate service and supply model” was set-up and further developed in 2015;
the design interventions, divided into different fields of action, included:
completion of the offer, by broadening the range of foreign products and the development of a platform for the
purchase without recourse of tax credits and trade receivables due from the public administrations;
the development of processes and tools through the introduction of a “dedicated” commercial approach targeting
key relationships and through the release of an information platform aimed at supporting the work of relationship
managers;
the development of a reorganisation plan for the international segment with the creation of specialised cores able
to meet the technical and commercial requirements of the local area;
the strengthening of the credit enhancement tools to encourage the development of lending with timely risk
monitoring.
Lastly, training courses were held in 2015 on new instruments (electronic loan dossier) and models (AIRB) and on
developing skills in financial analysis, assessing creditworthiness, managing risk and customer relationship management.
2. Financial activities
Treasury & Investment Banking
The Group’s liquidity position remained strong throughout 2015. The LCR indicator was close to 108% at the end of
the year, exceeding the objectives of the Group’s Risk Appetite Framework.
With reference to BPM, 2015 saw the return of covered bonds onto the public market. In August, the new Guaranteed
Bank Bond programme was finalised. This program uses only residential mortgages as collateral to guarantee the
bonds and to which the Moody’s rating is assigned. The bonds placed with institutional investors during the year
where all carried out under this new programme. In particular, a 7-year covered bond for 1 billion euro was issued in
September, while in November a second issue was made in the amount of 750 million euro for 10 years.
The liquidity of the Bank was also the result of the participation in the TLTRO auctions held in 2015, for a total of
1.9 billion euro, which the Bank was able to take part in thanks to the availability of unencumbered assets in the
balance sheets, thus bringing the total amount of TLTRO funding to 3.4 billion euro at the end of 2015.
The portfolio of government securities at the end of the year amounted to around 8 billion euro, roughly the same levels
recorded at the end of 2014; the portfolio, mainly comprised of Italian government securities, ensured a significant
contribution in economic terms, accompanied by a marginal increase in the average duration of the portfolio.
Report on operations of the Bipiemme Group
53
In the second quarter of 2015, the difficult situation on bond and equity markets in Europe had a negative impact on
the positive reserves of AFS government bonds, which recorded a decline due to the sharp rise in interest rates and
credit spreads of countries like Italy.
In the second half of the year, the narrowing of the credit spreads in peripheral countries, due to the strategies
implemented for the management and coverage of the portfolio, enabled a significant recovery and increase of the
positive reserves of AFS government bonds.
Work continued in the field of asset and liability management (ALM) to monitor the interest rate risk of the banking book
and to monitor liquidity risk. In particular, the Bank carried out a liability management action (i.e. a takeover bid) for the
securities issued by the Parent Company (around 360 million euro) and placed with its own customers.
Banca Akros achieved positive results and confirmed adequate capital and liquidity ratios in 2015. In implementing the
policies formulated in the budget for the year, the bank made greater use of market risk measurements in compliance
with the operational limits; the proprietary bond book, which still consists mainly of Italian government bonds and
senior bonds issued by leading domestic banks, increased by over 25% during the period.
In market making and trading, over-the-counter market making in government securities and corporate bonds continues
to be an important activity, with around 29 billion euro of securities traded.
Work continued on equity derivatives, as well as on hedging instruments and financial risk management services to
institutional and corporate customers, also as part of the coverage activities carried out jointly with the Parent Company
in Corporate & Investment Banking, with particular attention to the specific target represented by the Mid Corporate
segment present in the area where the Group operates. Significant notional volumes traded on hedges against interest
risk (about 16 billion euro) and exchange rate risk (about 102 billion euro); also worth mentioning is the development
of commodity operations.
In the field of dealing on behalf of third parties, Banca Akros (source: Assosim) has consolidated its presence in bond
markets, ranking 2nd in the DomesticMOT segment and in Borsa Italiana’s EuroMOT segment (with market shares
of 17.8% and 20.5% respectively), 3rd in the EuroTLX market (with a market share of 17.6%) and 1st in the Hi-MTF
and Extra/MOT markets (with a market share of 37.4% and 30.4%, respectively). These results were facilitated by
SABE, the proprietary system that automatically seeks dynamic best execution. The Bank also achieved 4th place
in Borsa Italiana’s Screen-Based Equities Market (MTA), 3rd place on the ETFPlus market and took first place on the
SeDeX market; in the regulated derivative products segment, it placed 3rd in options on the FTSEMIB index. Customers
continue to be offered brokerage services on stock markets through ESN – European Securities Network, the European
partnership in equities research and trading set up by Banca Akros with seven other investment banks which are
independent and active on their respective national stock markets.
In the Equity Capital Market, Banca Akros acted as sponsor and joint-lead manager in the listing of Banzai, as the entity
responsible for the placement of the public offer and as joint-book runner in the listing of Banca Sistema, as joint-book
runner for SPAC Capital for Progress 1, as Placing Agent in the increases in capital of Aedes, as Financial Advisor and
Placing Agent in the increases in capital of I Grandi Viaggi and Fiera Milano, as well as Guarantor and Placing Agent
in the recapitalisation of Banca Monte dei Paschi di Siena and Banca Carige. The Bank also took part in the initial
public offering of Poste Italiane (as Co-Lead Manager, Guarantor and Placing Agent) and the initial public offerings for
the listing of several important companies.
In the Debt Capital Market, the Bank participated as joint-lead manager and bookrunner in the placement of bonds
issued by Prysmian (representing the highest European issue by an unrated issuer). It also participated, as additional
guarantor, in the public offering to the retail public of a bond issued by Autostrade per l’Italia. Still in the corporate
sector, the Bank participated as co-manager in the two issues by International Game Technology, carried out as part
of the business combination with GTECH. In the institutional segment, Banca Akros participated as joint-lead manager
and bookrunner, in the already mentioned two covered bond issues undertaken by the Parent Company BPM and
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Report on operations of the Bipiemme Group
the subordinated Lower Tier II issue undertaken by Veneto Banca. It also took part in over twenty issues by leading
international issuers, including, in particular, those of the European Investment Bank and the German KFW.
In the Advisory area, Banca Akros acted as the intermediary responsible for coordinating the collection of acceptances
for the voluntary public offering launched by the Parent Company to repurchase part of its own bonds. Among other
operations, it acted as Advisor and Arranger in the structuring of a medium-term loan for FIAMM S.p.A. It also continued
credit advisory activities in the energy segment by organising the renewal of operations due to expire.
3. Risk management and internal control system
Chief Risk Officer
The new regulatory framework on the Single Supervisory Mechanism went into effect in 2015. To respond to the new
complex challenges posed by the new framework and to maintain a high degree of reliability and overall effectiveness
of its internal control system, the Group launched an organisational restructuring plan which, in July, led to creation
of the Chief Risk Officer function. This, in turn, involves the following units: Risk Management & Capital Adequacy,
Validation, both of which are set up basically in line with the functions existing at the end of 2014, Regulatory
Relationship and Risk Control, which are instead newly established functions. The main activities carried out and the
results achieved are summarised below.
Risk Management & Capital Adequacy
During 2015, Risk Management & Capital Adequacy function, created as a result of the reorganization carried out
at the start of the second half of the year, concluded several specific projects, such as the consolidation of the risk
appetite framework, the definition of the Group’s Recovery Plan in line with new regulatory framework introduced
by the Bank Recovery and Resolution Directive, and the revision of the risk identification process. Work continued on
the AIRB (Advanced Internal Rating Based) project, aimed at improving the internal rating system, and strengthening
those concerning ICAAP (Internal Capital Adequacy Assessment Process) and ILAAP (Internal Liquidity Adequacy
Assessment Process). Discussions have continued and intensified with the Joint Supervisory Team (JST) as part of the
Single Supervisory Mechanism (SSM) with respect to various issues regarding both methodology and assistance in
preparing the data requests from the Regulator, such as the STE (Short Term Exercise) and TE (Transparency Exercise).
Below is a summary of the main activities carried out in 2015 by the organisational units making up the function.
Risk Integration & Capital Adequacy
With full definition of the Risk Appetite Framework (RAF), work continued on discussing and agreeing on the RAF with
the JST, which verified its consistency with the business model, the strategic plan, the ICAAP and ILAAP processes, the
budget and the overall system of internal controls.
Support has been provided for the strategic processes involved in the methodological definition and execution of the
ICAAP report and, as part of the risk governance activities, the overall regulations governing risk management have
been consolidated.
Activities have been developed in order to define the Recovery Plan, in line with regulatory requirements, leveraging
on the main business processes such as, in particular, the Risk Governance system, including activities related to capital
adequacy and risk identification.
Report on operations of the Bipiemme Group
55
Operational Risk
During 2015, in accordance with EU Regulation no. 575 (the so-called CRR), we revised the system of calculating capital
requirements for operational risk according to the standardised approach (TSA) on the basis of the new definition of
“Relevant Indicator”. In addition, at the request of the JST (ECB) and in application of the CRR, work started to introduce
the TSA to Banca Popolare di Mantova and ProFamily was concluded.
Various activities took place during the year in connection with the assessment of “reputational risk” and “risk self
assessment”, as defined in the framework adopted by the Group in 2014.
Credit Risk
During the year, work continued on the AIRB project aimed at the revision of the Internal Rating System (IRS), also
in view of validation by the ECB for reporting purposes. In particular, the review and subsequent implementation of
rating models was completed for all of the parameters in the AIRB project, which includes Corporate PD, Individuals
PD , corporate and individuals LGD and retail EAD. Particular attention was paid to the identification and assessment
of specialised lending relationships (Project Finance, Object Finance and Income Producing Real Estate) for which
a management process based on the supervisory slotting criteria approach was implemented. A methodological
framework for managing Group influences was also completed during the year, in order to obtain a more complete
assessment of corporate counterparts.
Regarding the use of credit risk parameters, 2015 saw a strengthening of the metrics used for ICAAP purposes for
calculating regulatory capital under stress conditions according to scenarios and methods in line with recent guidance
provided by EBA/ECB. Furthermore, the methods for stress testing were revised to incorporate the updates to the
abovementioned AIRB parameters.
With reference to company policy in the field of Data Governance and the architectural model of DQM (Data Quality
Management) adopted, the structure of the control systems for AIRB Data Quality has been defined.
Lastly, we have defined the criteria to be adopted by the Group for the correct identification of so-called “forborne”
exposures for which concessions have been granted, in accordance with the EBA ITS on “Forbearance and nonperforming exposures”, helping to define the process of identifying and monitoring them once the system is up and
running.
Market Risk
During 2015, work continued on monitoring the measurement of market risk, in accordance with the system of operating
limits and benchmark indicators, and the results have been reported to the corporate bodies. For the risks mentioned
above, we also defined the second-level indicators of the Risk Appetite Framework and related thresholds. At the same
time, activities were undertaken to update the internal rules on Finance Regulations, the Hedge Accounting and Credit
Valuation Adjustment (CVA) and Debit Valuation Adjustment (DVA) policy, with the approval and publication of:
CVA and DVA related policies;
methodological manuals – Hedge Accounting.
As part of the developmental activities, the Kondor Plus position keeping system at the bank was upgraded to the new
version. We also started a project to integrate the Numerix libraries with Kondor Plus in order to automate the CVA and
DVA calculation relating to the mark-to-market value of derivatives.
Liquidity Risk
During 2015, the Liquidity Risk unit continued monitoring the measurement of interest rate and liquidity risks, in
accordance with the system of operating limits and benchmark indicators. The results thereof have been reported to the
corporate bodies. For the risks mentioned above, we also defined the Risk Appetite indicators and related thresholds.
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Report on operations of the Bipiemme Group
In terms of approach, as part of the developmental activities concerning liquidity risk, we updated the system for
calculating the Liquidity Coverage Ratio, in line with rules set out in the delegated regulation (EU) 2015/16. Studies are
currently underway for reporting on the additional monitoring metrics provided for by Regulation (EU) no. 575/2013,
the detailed characteristics of which are still pending a uniform definition.
As regards interest rate risk, during the last quarter of 2015 the behavioural model of demand deposits was updated.
we also updated the stress scenarios for testing the sensitivity of interest margins and the economic value in adverse but
realistic scenarios resulting in changes in the interest rate curves.
The Liquidity risk unit also participated in the Quantitative Impact Study (QIS) initiated by the Basel Committee on Banking
Supervision. Since 2015, together with the other corporate functions involved, it has contributed to the compilation of
the STE (Short Term Exercise) requested by the European Central Bank under the Single Supervisory Mechanism.
Validation
During 2015, the Validation unit was mainly involved in AIRB-related verification activities for purpose of revising the
IRS. In particular, they reviewed the methodological structure proposed by the development functions with the purpose
of verifying compliance by the proposed model with the regulatory requirements. In-depth ad hoc checks were carried
out to verify the methodology aspects relating to each model implemented by the Credit Risk unit.
Also in 2015, as required by supervisory regulations, they analysed the processes and systems used by the Group to
assign a rating to the counterparty under analysis.
As regards market risk, checks continued on the internal model of Banca Akros to verify whether they meet the minimum
requirements established by the supervisory regulations.
In the area of counterparty, interest rate and liquidity risk, we carried out the necessary analyses to ensure that the
models currently implemented are in line with best market practices from an operational point of view.
Regulatory Relationship
The Regulatory Relationship unit was created to support the Chief Risk Officer in maintaining relations with the
Supervisory Authority, monitoring and consultation of regulatory provisions, coordinating the proactive management of
the SREP (i.e. SREP Mirroring) and in the development and dissemination of a risk culture. The function started operating
in July 2015 as a result of the aforementioned reorganisation process.
As regards maintaining relations with the Supervisory Authority, in 2015 the requests of the JST to the Bank structures
were coordinated and conveyed. We monitored their timely fulfilment and maintained the required standards of
consistency.
The work also involved accurately monitoring the regular on-site visits.
As regards SREP Mirroring activities, we conduct self-assessment and presented a report on it to top management in
order to illustrate the bank’s degree of compliance with the provisions set out in the SREP manual. Proactive monitoring
and prudential regulatory developments, started at the end of 2015, resulted in setting up a methodological approach
for the definition of macro impact areas and the determination of indicators and the related quantification metrics. The
resulting analyses will be consolidated in the first half of 2016.
Report on operations of the Bipiemme Group
57
Risk Control
The Risk Control unit contributes to the Group’s integrated risk management process by carrying out second tier
management controls on the credit and financial risks of the main financial statement components, in line with the
requirements set out in applicable supervisory regulations. The aim of the new organisational unit is also to assess the
adequacy of the controls, the tools used and the measures proposed by the first tier structures, indicating any possible
work/improvements and also focusing on the accuracy and representativeness of the information used. The work,
which began in the second half of the year, in the financial area focused on initiating controls on the market data
used for management, accounting and risk analysis purposes, on an initial qualitative/quantitative survey of several
figures involved in the funds transfer pricing (i.e. FTP) and of several components and derivative strategies in the Bank’s
portfolio. In the credit area, we focused on regularly checking the adequacy of the monitoring of credit exposures and
conducted several analyses in support of business (preliminary analyses following the adoption of AIRB and mortgage
eligibility analyses).
Audit and Compliance
Audit
The Audit Function supervised the system of controls in 2015, using a new work approach based on risks and processes,
in line with current supervisory instructions and aligned with sector best practices.
The following activities were completed for both the Parent Company and Group companies:
66 audits of processes in accordance with the Audit Plan prepared at the start of the year;
30 extraordinary unplanned audits (on targeted processes or checks);
28 specific checks.
With regard to audit activities at BPM’s Commercial Network, Banca Popolare di Mantova and ProFamily, 321
inspections were carried out during the period.
Compliance
The internal regulation on monitoring non-compliance risk was revised in 2015 to bring it into line with the new
regulatory and organisational framework. The new regulations is the regulatory framework for the formalisation
of the methodological framework for assessing compliance risk; it defines the content of the activities to be carried
out for monitoring compliance and formalises the outsourcing activities with respect to compliance.
Based on the mandate received from the Management Board related to enhancing the conformity model, the
Compliance unit gradually began Specialist controls relating to the “Manger in Charge Law 262”, “Anti-Money
Laundering”, “Anti-Terrorism”, “Taxes” and “FATCA” regulatory areas lead to the signing of specific service
agreements containing, among other things, the description of the tasks assigned to “Specialist Supervision”, the
procedures and times for carrying out these activities, the scope of applicable external regulations, the information
flows required as well as the specific service levels. In view of the scale and diversity of the area covered by the
regulatory framework under the remit of the conformity function as well as the availability of internal resources, in
2015, the Compliance unit employed external specialists (co-sourcers) to carry out the conformity assessment in the
regulatory areas requiring specialist expertise and are characterised by major risks. The co-sourcing engagements
were entrusted to leading consultancy firms.
At Group level, work continued in 2015 for the functional integration of compliance of the companies falling within the
scope of management and coordination.
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Report on operations of the Bipiemme Group
The companies, which since 2014 have adopted the same risk-based methodology used by the Parent Company for
mapping the relevant regulatory areas and assessing non-compliance risk, were provided with the tools, techniques
and methods required to perform assessment activities. In particular, the subsidiaries (Akros and Profamily) conducted
audits on banking transparency issues in conjunction with the Parent Company’s Compliance unit.
Lastly, in 2015 the Compliance unit started providing so-called “ComplyMenti – Value-added Compliance Products”
which is part of an innovation process of the compliance function with the aim of to offer all Bank departments, from the
central offices to the network, a service for monitoring and in-depth review of regulatory requirements.
4. Organisation and IT
Organisation
In addition to the work carried out to support the initiatives of the Business Plan, during 2015, the Organisation focused
on the efficiency and review of several corporate functions, in order to:
ensure the effective and integrated monitoring of risk management (Chief Risk Officer) and the Legal area (General
Counsel);
foster greater synergy in the Human Resources and Organisational Development area (Chief Organizational &
Human Resources Officer);
keep the work of a more strategic nature separate from the work of a primarily operational nature (activation of the
Planning and Financial Reporting” and “Finance” functions);
ensure greater support by the Operations function to the business area (Information Technology and Smart Centre);
simplify the Product Development, Pricing, CRM and marketing communication areas (Marketing).
Information Technology
Information systems
IT activities in 2015 were mainly dedicated to creating solutions in support of the initiatives of the Business Plan,
regulatory compliance and updating the technological infrastructure, completing the renewal process for the
bank’s information system. This involved – among others – the Integrated Datawarehouse project, the Electronic
Loan Dossier, the new condition setting software (Price Lab) and Management Reporting project.
In 2015, we focused, in particular, on the “Multichannel – Direct Channels” project which plays an important role for
both the Group, protagonist in the sale of innovative products and functions, and for customers with increasingly better
services. In this context, the work involved, in particular:
the “Mobile Webank and BPM” project with objective of developing bank apps;
the “Advisorship” project with the aim of extending financial advisory services to Webank customers;
the “Remote Digital Signature” project, with the aim of gradually releasing the Remote Digital Signature to all
Webank and BPM private banking customers, giving customers the opportunity to sign directly online any product
and service agreements purchased using the “Self” or via “Distance Selling” methods.
the “Distance Selling” project which has the aim to develop the offer for customers by introducing the distanceselling of products by the different channels (with the Customer Channel as the first channel started up),
resulting in the signing of contracts by customers, online in the private section of internet banking, using
the Remote Digital Signature. In the private part of the BPM Banking website, an archive of documents
was created and provides direct access to all contracts signed by graphometric signature. The first product
available under Distance Selling is the Cartaimpronta MasterCard Debit card.
Report on operations of the Bipiemme Group
59
Other developments were carried out in the “Trading and Investments” area, with the new pricing model for
trading cash and derivative instruments. This model is more user-friendly and more competitive than what is
offered our direct competitors. Significant improvements in the performance of the powerful T3 trading platform
were made by adding several functions requested by top traders. The assets under management offer was
enhanced with four new sicavs and about 750 new funds and portfolios, bringing it into line with what is
available at the branches.
Below is a summary of the initiatives in support of the Business Plan.
Commercial effectiveness
We completed the “Advisors Network Development” project to support and develop Webank and BPM’s affluent
customers with a high-tech approach (e.g. sales visits, digital/paperless processes, etc.), all on a multi-channel
distribution platform that provides integration between virtual and physical channels.
In addition to the aforementioned “Multichannel – Indirect Channels” project, we are currently working on the following
projects and activities:
the “New Network System”, with the activation of new modules (Single Advisors Branch, Portfolio Management,
Expansion of the Mortgage application network , Policies Placement);
work aimed at strengthening the Group’s multichannel platform (including the advanced CRM);
work relating to the “Price Lab” project with the release relating to current accounts, cards, credit facilities, portfolio
and wire transfers;
the “Contact Centre” with the activation of the OUTBOUND and INBOUND platform;
the “Evolution of the corporate service and supply model” project, with the creation of the “Corporate Dashboard”,
a summary reporting tool for corporate trends and commercial results, and for the development of new products
to be sold by the International sector.
Efficiency in supporting growth
Work continued on the “Integrated Datawarehouse” project with the conclusion of 80 IDEA Datawarehouse ledgers,
and the “Workplace Strategy- IT” project, which involves arranging the tools need to start smart working on IT (pilot
phase). We are still working on implementing the “Management Reporting” project to meet the bank’s new policy
requirements and the “Stabilisation and development of dematerialisation platform” project with the release of the
component for bills of exchange.
Solidity and Resilience
We have completed the “Line Control” project which resulted in the completion of the activation modules for affixing the
electronic stamp, completion of activities for remote controls and expansion of the Sphera Controller Corporate module.
The following projects are currently underway:
“New PEF – Electronic Loan Dossier” with the launch of the AIRB PEF for multichannel procedures (novations, CPI,
multi-unit buildings), which provides for automatically checking due diligence and the areas linked to money
laundering and specialised lending;
the “NPL Nonperforming loans” project, with the objective to optimise debt recovery operations;
The “AIRB – Advanced Internal Rating Based” project aimed at the identification of internal models for the
determination of capital requirements for credit risk. As part of this complex project, we have already released
several modules concerning the implementation of AIRB Phase1 , the Rating desk, Data Quality Remediation and
the new report;
work is in progress for the “Information Security” project which aims to raise the bank’s security level with a view
to mitigating cyber risks and increase the level of protection for business assets (data and IT infrastructure), also by
raising awareness, policies and operating procedures.
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Report on operations of the Bipiemme Group
Regulatory Compliance
As regards regulatory compliance, the following projects were concluded during the year:
the “FATCA (Foreign Account Tax Compliance Act)” which renders the Bipiemme Group compliant with US tax
authorities’ FATCA regulations;
“EASY: Help Desk – Evolution” which makes the company help desk services more user-friendly;
“Transparency and Usury” (T.R.U.S.T. 2015) to ensure compliance with current regulations.
The following projects and activities are currently underway:
“Anti-Money Laundering” which involves activating the Gianos AML Analyzer and Gianos software programs for
high-value banknotes and the activation of controls/blocks where adequate “ADV” checks are not provided on
Multichannel processes.
“Fast Closing”, which includes the steps to take for the preparation of financial statements, to comply with the
requirements of the supervisory bodies and bring forward the closure and publication of financial statements.
Technological Infrastructure
The following projects were completed in 2015:
the replacement of BMC and Serena products with IBM products for the following areas: Mainframe (monitoring,
automation and optimisation), Storage (prevention and resolution of problems related to abnormal termination of
the program), Open (software lifecycle management solution);
“Workplace Strategy – Construction Technology” project, which involved a comprehensive review of the workstation
to ensure access to mobility and the completion of the WIFI and VOIP for Workplace Strategy infrastructure;
“CICO E SSE” with the installation of 185 new CICO (Cash in- Cash out) machines at branches.
Report on operations of the Bipiemme Group
61
The distribution network and human resources
The distribution network
As of 31 December 2015, the Bipiemme Group’s distribution network totalled 705 points of sale and comprises:
655 retail branches, including 105 hubs and 3 virtual branches;
9 Corporate Centres;
14 Private Banking Centres (of which 12 pertain to Banca Popolare di Milano and 2 to Banca Akros);
27 ProFamily branches.
Compared with 31 December 2014, the distribution network decreased by 1 unit. Note that, within this aggregate,
there was a decrease of 6 Corporate centres and increase of 2 Private centres, 2 outlets of the Profamily network and
1 retail branch. Overall, the distribution network decreased by 1 unit in total compared with 30 September 2015. This
was due to the decrease in the outlet of the Profamily network.
Distribution network
Total branches
Corporate Banking Centres
31.12.2015
30.09.2015
31.12.2014
Change
Change
A
B
C
A–B
A–C
655
655
654
0
1
9
9
15
0
(6)
14
14
12
0
2
27
28
25
(1)
2
705
706
706
(1)
(1)
(1)
Private Banking Centres(2)
Financial shops and direct branches
(3)
Total distribution network
(1) Following the new segmentation and portfoliation, the Corporate Banking Centres have replaced the 10 SME units which catered for companies with
revenues of up to 50 million euro and the 5 Large Corporate branches, which looked after companies with revenues of more than 50 million euro. The
new Corporate Centres handle the following customers: Large Corporate (turnover in excess of 250 million euro), Upper Corporate (turnover between
50 and 250 million euro) and Middle Corporate (turnover between 15 and 50 million euro).
(2) The 14 Private Banking Centres, 12 belonging to Banca Popolare di Milano and 2 to Banca Akros, provide customised advisory services on financial matters.
(3) The financial shops and direct branches provide financial advice and loans to households.
Branches of Group Banks
Banca Popolare di Milano
Banca Popolare di Mantova
Banca Akros
Total branches
Geographical distribution of branches
Lombardia
31.12.2015
30.09.2015
31.12.2014
Change
A
%
B
C
A–B
A–C
637
97.3%
637
636
0
1
17
2.6%
17
17
0
0
1
0.2%
1
1
0
0
655
100%
655
654
0
1
30.09.2015
31.12.2014
31.12.2015
Change
A
%
B
C
A–B
A–C
410
62.6%
410
410
0
0
Piemonte
87
13.3%
87
87
0
0
Lazio
65
9.9%
65
64
0
1
Puglia
36
5.5%
36
36
0
0
28
4.3%
28
28
0
0
Emilia Romagna
Other regions
29
4.4%
29
29
0
0
Total branches
655
100%
655
654
0
1
(1)
(1) Other regions comprise the following branches: 11 (Liguria), 7 (Veneto), 5 (Toscana), 2 (Campania), 1 (Marche), 1 (Molise), 1 (Abruzzo) and 1 (F.V.Giulia).
62
Report on operations of the Bipiemme Group
The other distribution channels
The distribution network, with its strong local roots, is being integrated more and more by the services offered by remote
channels such as internet banking, the call centre and a network of financial advisors.
As regards the network of financial advisors, its main task being to place asset management and asset administration
products, at 31 December 2015 consists of 52 sole agents (37 of whom report to BPM and 15 to Banca Akros), 6
fewer than December 2014. This network operates alongside that of our in-house financial advisers, which consists of
176 people (a decrease of 9 compared with September 2015).
The results from internet banking, in terms of distribution and utilisation of services by customers, continue to be highly
satisfactory. At 31 December 2015, the Bipiemme Group had 746,974 customers who use the internet banking
services, including 637,334 individual customers and 109,640 companies. The number of Group customers that use
the online channel rose by 6.8% on the end of December 2014, reflecting an increase of about 45 thousand individual
customers and 3 thousand companies compared with the same period of the previous year. Overall, about 24 million
e-banking and e-trading instructions were transmitted through the Group’s on-line channel during 2015.
Lastly, the telephone banking service of the Group’s commercial banks had roughly 596 thousand customers at
31 December 2015 compared with about 465 thousand at the end of December 2014.
Personnel
At 31 December 2015 Group personnel, including employees, project workers and staff on other types of contracts,
amounted to 7,743 units, a decrease of 16 units compared with the end of 2014 and 4 units compared with
September 2015.
On 6 December 2012 a framework agreement was entered into that, following the guidelines laid down by the
Business Plan, provides for a voluntary retirement plan for those who are already or will be eligible for a pension or
who meet the conditions for access to the sector’s Solidarity Fund, as from the first quarter of 2013. During 2015 there
were 132 leavers and this was the last year of the voluntary retirement plan. The Solidarity Fund recorded an outflow
of 715 people (709 from the Parent Company) during the three-year period.
Moreover, note that, within this aggregate, people employed in commercial network functions represent 67.2% of the
total. 14.4% of the total number of employees have a part-time contract.
Personnel (number at year end)
31.12.2015
30.09.2015
31.12.2014
Change A-B
Change A-C
A
B
C
amount
in %
amount
in %
146
144
150
2
1.4
(4)
–2.7
2,798
2,744
2,798
54
2.0
0
0.0
1,461
1,427
1,472
34
2.4
(11)
–0.7
c) other employees
4,792
4,852
4,792
(60)
–1.2
0
0.0
Total employees
7,736
7,740
7,740
(4)
–0.1
(4)
–0.1
a) managers
b) total officials
– of which: 3rd and 4th level
Staff with project-related and other
types of contract
Total personnel
Report on operations of the Bipiemme Group
7
7
19
0
0.0
(12)
–63.2
7,743
7,747
7,759
(4)
–0.1
(16)
–0.2
63
Number of employees by company
Banca Popolare di Milano
Banca Popolare di Mantova
Banca Akros
31.12.2015
30.09.2015
31.12.2014
A
B
C
change A-B
change A-C
7,264
7,269
7,253
(5)
11
69
69
70
0
(1)
258
256
261
2
(3)
ProFamily
93
92
102
1
(9)
Ge.Se.So
52
54
54
(2)
(2)
7,736
7,740
7,740
(4)
0
Total employees
Contract staff
7
7
19
0
(12)
Total personnel
of which head office personnel
7,743
2,545
7,747
2,546
7,759
2,471
(4)
(1)
(12)
74
of which total network personnel
5,198
5,201
5,288
(3)
(90)
Human Resources
Management and training activities during 2015 focused on reaching the objectives of the strategic plan, completing
the quantitative/qualitative coverage of resources for the commercial structure, rebalancing staff in the head office
structures and the centralisation of several functions in the Parent Company.
As regards the Network, a new model has been introduced for the allocation of premium customer portfolios to
relationship managers and at the same time work began on repositioning administrative branch personnel into more
commercial roles as they were no longer needed due to the modernisation of IT procedures.
Regarding the Head Office, the management of human resources supported the reorganisation of central functions
and the steps taken to complete the activities for closing the critical issues, with particular reference to the qualitativequantitative upgrade of the control functions and the lending organisation.
Remuneration policies
In 2015, the Human Resources function coordinated the Group’s remuneration policies ( Policy), in compliance with
applicable regulations laid down by the supervisory authorities in Italy and Europe, as approved by the Bank’s
corporate bodies.
In the implementation of the remuneration policies, particular emphasis was placed on the following initiatives:
the incentive scheme, which is designed for the further involvement of and profit-sharing by employees on having
achieved or company and Group targets, drawn up bearing in mind the characteristics and peculiarities of each
Group company as well as overall consistency at Group level in terms of rules and methods for its application;
the reward scheme, which forms part of the overall discretionary policy for personnel, designed to establish
a consistent relationship between responsibility, professionalism, commitment and level of pay. Adjustments to
remuneration in particular have enhanced consolidation in the organisational role/job, positively verified in a
reasonable period of time in the position and/or increased responsibilities objectively demonstrated and/or the
consolidation of professional skills (knowledge and capabilities) applied to the role and/or the specific nature of
the role.
The two systems represent a management tool used by the company to recognise the importance of staff contribution
and show appreciation for individual merit.
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Report on operations of the Bipiemme Group
Personnel management
During 2015, 214 persons were hired at Group level – including 177 at the Parent Company and 15 intragroup
transfers. Tools such as social networks and targeted searches in the market helped us in the recruitment of new
professional resources, as did selecting from the numerous unsolicited CVs received.
Distribution of BPM staff
52
49
22
TI
N
G
O
RP
AT
O
E
RA
BN
M
TE
K
UL
W
TI
EA
C
H
LT
AN
H
M
N
.
EL
BA
G
N
EN
KI
N
ER
G
AL
C
O
O
U
C
N
RG
O
SE
M
AN
L
UN
IS
IC
AT
C
A
IO
H
TI
IE
O
N
F
N
AN
RI
SK
D
H
O
UM
FF
IC
AN
ER
RE
SO
UR
C
ES
O
PE
RA
TI
O
N
S
IV
PR
Breakdown of employees by age
WOMEN
6%
43%
65%
1
C
L
RE
TA
I
.C
G
M
AR
KE
E
O
RT
IN
G
N
C
IA
O
M
PL
C
D
N
.A
IT
N
O
M
MEN
51%
2
15
7
MARKET
Breakdown of employees by gender
52%
16
5
2
1
.O
.R
EP
E
3
LO
AN
S
T
N
AN
C
FI
AU
DI
9
4
4
1%
26%
50%
> 60
51 – 60
76%
41 – 50
31 – 40
49%
48%
GRUPPO
BPM
BANCA
POPOLARE
DI MILANO
57%
35%
BANCA
AKROS
50%
25 – 30
27%
24%
PROFAMILY
S.P.A.
GE.SE.SO
BANCA
POPOLARE
DI MANTOVA
40%
Development and Training
Development
In line with previous years, in 2015, the structure oversaw personnel management to make better use of the professional
skills already available in-house.
In December we started the assessment phase of the performance management system for 2015. Several changes
were made to the system following the analysis of the results of previous cycles in order to improve the tool provided
to managers and associates and to increase the objectivity and fairness of the assessment stage. About 7,000 people
at Group level were involved in the different stages of the assessment process. In particular, we improved interviews in
order to disseminate the evaluation culture, also enhancing the conscious use of interim interviews as a time to listen,
useful for taking stock of the work, providing guidance to associates and, where necessary, realigning performance.
Report on operations of the Bipiemme Group
65
In the second half of the year, we concluded the skills assessment of the commercial/retail network involving a total of
about 4,300 people, followed by the private network (about 70 people), the corporate network (about 200 people)
and the Banca Popolare di Mantova (about 70 people). Reading the information obtained will make it possible for us
to take the appropriate steps in order to ensure controls over the roles in terms of knowhow, to plan suitable training
programmes and the growth of potentials towards increasingly complex positions.
Work continued in 2015 on the project mapping Professional Families in the central structures. The mapping of jobs and
skill profiles will make it possible to identify professional development programmes, the criteria for internal mobility and
place more value on human capital at the company by highlighting the levels of expertise of people. At the end of 2015
the human resources, audit, compliance, general counsel, planning and financial reporting, organisation, communication
and risk management functions were involved. The remaining corporate functions will be involved in 2016.
As regards internships and selection, the Young Graduates project and Customer Centre project were concluded.
The aim of these projects was to ramp up the commercial network and customer centre with new skills by selecting
highly educated young people through the well-established and positive relationship with universities and training
institutions nationwide.
Training
A total of 54,000 training days were provided at Group level in 2015, marking an increase compared with previous
years, mainly related to the planning and provision of new training projects based upon the Business Plan. 97% of the
days were dedicated to the Parent Company.
The breakdown by training areas shows the main issues covered this year: 71% was dedicated to training for the
development of professional and commercial roles, 8% for management training and the development of soft skills and
21% was dedicated to so-called mandatory training.
Training was provided using traditional classroom methods and via distance learning methods.
Breakdown by training area
Breakdown by training method
3%
5%
5%
FAD
Professional
Traditional Classroom
Mandatory
Management
21%
!
66%
Commercialy
45%
!
55%
Soft skill
The 2015 training plan, developed in line with the 2014-2016/18 Business Plan, focused on strengthening the new
corporate culture based on performance, meritocracy, equal opportunity, the development of skills and retraining
personnel in support of the new business models.
In summary, the plan included the following lines of action:
1. recruitment of young people, with preferential placement in the new Customer Centre and Retail network through
dedicated training courses;
2. new appointments through training programmes highly focused on core skills;
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Report on operations of the Bipiemme Group
3. enhancement of professional skills of the central functions also through the promotion of attitudes needed to deal
positively with change (under the “Responsibility and Resilience” Project);
4. a common management model spread through training courses devoted to new appointments of positions with
responsibility, under the “Creating Value” Project, with the aim of promoting a culture of assessment and feedback;
5. the “Women at Work” project which aims to enhance the potential of a group of young women and a greater
appreciation of skills typically regarded as feminine;
6. so-called compulsory training, in particular on money laundering and administrative liability of banks, also through
dedicated sessions with senior executives of the Bipiemme Group and for a particular qualification (IVASS – the
Italian Insurance Supervisory Authority);
7. refresher and retraining courses, to upgrade skills to support the following projects:
evolution of the service model for small businesses;
credit and loans and corporate functions;
the new “credit granting process” – Corporate and company Electronic Application for Credit;
the new rating model (AIRB);
the new pricing procedure (Price Lab);
the “Service Levels”;
evolution of the private banking and wealth management model with a training course for certification that is
recognised nationwide;
evolution of the private banking model to support the management of personal premium portfolios.
Industrial relations
The first part of 2015 was marked by the continuation of discussions at national level with the trade unions concerning
the renewal of the National collective bargaining agreement.
In this context, industrial relations continued within the Group in reporting and discussing with the trade unions to
establish the best conditions for the continuation of the work to:
1. streamline the organisation and operating efficiency of several structures at the head office of Banca Popolare di
Milano and Profamily;
2. further develop the Hub&Spoke model, with particular focus on monitoring portfolios of a significant value within
the personal and company segments.
Furthermore, and agreement was reached with regard to the FBA (Training Fund for the Banking and Insurance
Industries) involving 5 projects designed to confirm the central nature of training as a tool for the enhancement,
requalification and acquisition of skills needed to support the professional development of human resources, also
enhancing participation of trade union representatives to training initiatives being funded.
Work also started on a contractual comparison for the performance assessment procedure with a view, as was already
the case last year, to reward the skills, level of responsibility and merit of employees, in line with the remuneration policy
and the legislative changes made by the European Supervisory Authority (ECB).
The second part of the year was marked by intense discussions with trade unions on company issues in line with an
industrial relations model already experimented and implemented in the light of the Protocol on Industrial Relations,
while recognising the respective roles and consequent responsibilities.
As of 31 December 2015, there were a total of 14 legal disputes with employees or former employees at Group level,
compared with 18 cases pending in December 2014.
Report on operations of the Bipiemme Group
67
Welfare
During 2015, the series of conferences carried out in collaboration with LILT (Italian League for the Fight against
Cancer) to provide information to BPM staff were concluded; after the first meeting, held on 24 September 2015,
dedicated to skin cancer prevention, two conferences discussing proper nutrition were held in the second half of the
year (25 September 2015, and 5 October 2015) followed by two weeks where the company restaurants offered a
“healthy menu” option.
Another meeting has held on 16 October 2015 to discuss breast cancer. This was followed by a prevention campaign
at the company’s infirmaries, directed by specialised doctors from LILT, to which over 300 colleagues participated.
Finally, a session was held on 16 November 2015 to talk about preventing prostate cancer.
As regards the Social Bonus, new ways in which it can be used were introduced as part of the welfare plan: ATM
(Azienda Trasporti Milanesi – public transport in Milan) home-work pass, supplemental health care coverage and
reimbursement of interest paid on loans.
After the summer break, work continued at the company’s fitness centre, which was opened in the first half of the year,
with improvements to the opening hours, a new programme of courses offered and a pick-up in memberships which
exceed 350 people.
The initiative named “Children’s Christmas” was confirmed, adopting new and more user-friendly methods in the
welfare tools portal already in use for the Social Award programme, also increasing opportunities to purchase on
e-commerce sites.
The Welfare structure also actively participated in corporate volunteering initiative, helping in the organisation of the
days dedicated to the project.
Personnel administration
2015 was marked by the gradual consolidation of a new dedicated application called “HR for Me” in BPM and at the
Group companies.
Rationalisation of the administrative processes continued during the year on the basis of the organisational review
completed in 2014. Monitoring and management reporting functions were also developed.
68
Report on operations of the Bipiemme Group
The Bipiemme Group’s scope of consolidation
The following tables show the contribution made by each Bipiemme Group company to total consolidated assets and
consolidated net income.
Contribution made by each Group company to consolidated total assets
% held (*)
Company
Parent Company:
47,443,264
(2,173,655)
45,269,609
90.17
13,680,164
(8,746,473)
4,933,691
9.83
96.89
3,705,352
(715,644)
2,989,708
5.96
Companies consolidated line-by-line:
ProFamily
% Contribution
to consolidated
assets
Contribution to
consolidated
assets
Eliminations and
consolidation
adjustments
Banca Popolare di Milano
Banca Akros
Total assets
(euro/000)
100.00
1,016,089
(49,836)
966,253
1.92
Banca Popolare di Mantova
62.91
552,423
(197)
552,226
1.10
Bpm Covered Bond
80.00
4,607,497
(4,435,009)
172,488
0.34
Bpm Covered Bond 2
80.00
2,134,501
(2,007,489)
127,012
0.25
Bpm Securitisation 3
n.a.
583,693
(527,837)
55,856
0.11
ProFamily Securitisation
n.a.
726,906
(684,583)
42,323
0.08
Bpm Securitisation 2
n.a.
352,336
(324,788)
27,548
0.05
100.00
1,367
(1,090)
277
0.00
61,123,428
(10,920,128)
50,203,300
100.00
Ge.Se.So.
Total
(*) Calculated based on equity ratios.
Contribution made by the individual Group companies to consolidated net income
% held (*)
Company
Parent Company:
Banca Popolare di Milano
Companies consolidated line-by-line:
Banca Akros
ProFamily
Banca Popolare di Mantova
Ge.Se.So.
Bpm Capital I **
(
)
Bpm Luxembourg **
(
)
Total
Net income Net income
(loss)
(loss) as per
financial pertaining to
the Group
statements
(euro/000)
Consolidation Contribution to % Contribution
adjustments consolidated net to consolidated
income (loss) net income (loss)
241,117
241,117
25,933
267,050
92.43%
22,850
21,848
9
21,857
7.57%
96.89
16,570
16,055
9
16,064
5.56%
100.00
5,668
5,668
5,668
1.96%
62.91
1,313
826
826
0.29%
100.00
89
89
89
0.03%
(288)
(288)
(288)
–0.10%
(502)
(502)
(502)
–0.17%
262,965
288,907
100%
25,942
(*) Calculated based on equity ratios.
(**)Company wound up in 2015.
Report on operations of the Bipiemme Group
69
The table below shows a summary of the reconciliation process of the net income of the Parent Company and the
consolidated net income as of 31 December 2015.
Reconciliation of the Parent Company and consolidated net income
(euro/000)
Net income (loss) of Banca Popolare di Milano
241,117
Net income (loss) pertaining to companies consolidated line-by-line
21,848
Net income (loss) pertaining to companies consolidated at equity and effect of sales during the year
68,081
Effect of reversing intragroup dividends
(24,297)
Reversal of the writedowns/revaluations of consolidated investments made in BPM's separate financial statements
(12,603)
Other adjustments
Net income (loss) consolidated of the Bipiemme Group
70
(5,239)
288,907
Report on operations of the Bipiemme Group
Principal balance sheet aggregates
Banking intermediation for customers
At 31 December 2015, direct and indirect deposits from customers of the Bipiemme Group came to 71,662 million
euro, an increase of 2,215 million euro compared with the end of December 2014 (+3.2%) and with 30 September
2015 (+ 927 million euro; +1.3%).
Total customer deposits
(euro/000)
31.12.2015
30.09.2015
A
B
amount
%
C
Direct deposits
37,601,769
36,990,974
610,795
1.7
Indirect deposits
34,060,203
33,743,960
316,243
0.9
of which
Change A-B
31.12.2014
Assets under management
20,901,445
20,108,519
792,926
3.9
Assets under administration
13,158,758
13,635,441
(476,683)
–3.5
71,661,972
70,734,934
927,038
1.3
Total direct and indirect deposits
Change A-C
amount
%
36,836,892
764,877
2.1
32,610,223
1,449,980
4.4
17,872,354
3,029,091
16.9
14,737,869 (1,579,111)
–10.7
69,447,115
2,214,857
3.2
Direct deposits
Direct deposits
(euro/000)
31.12.2015
30.09.2015
A
B
Due to customers
28,622,852
Securities issued
8,849,290
Financial liabilities designated at fair value
through profit and loss
Total direct deposits
Change A-B
31.12.2014
amount
%
C
28,577,221
45,631
0.2
27,702,942
919,910
3.3
8,281,217
568,073
6.9
8,981,834
(132,544)
–1.5
amount
%
129,627
132,536
(2,909)
–2.2
152,116
(22,489)
–14.8
37,601,769
36,990,974
610,795
1.7
36,836,892
764,877
2.1
Direct deposits: breakdown by type
Change A-C
(euro/000)
31.12.2015
30.09.2015
Change A-B
31.12.2014
Change A-C
A
B
amount
%
B
amount
%
24,333,403
23,808,906
524,497
2.2
22,306,372
2,027,031
9.1
4,161,292
4,611,434
(450,142)
–9.8
5,267,799 (1,106,507)
–21.0
128,157
156,881
(28,724)
–18.3
128,771
Due to customers
28,622,852
28,577,221
45,631
0.2
27,702,942
919,910
3.3
Bonds and structured securities
6,053,696
6,529,791
(476,095)
–7.3
6,554,710
(501,014)
–7.6
Subordinated liabilities
1,463,042
1,449,655
13,387
0.9
2,095,802
(632,760)
–30.2
Repos on own securities repurchased
1,194,440
136,054
1,058,386
n.s.
–
1,194,440
n.a.
138,112
165,717
(27,605)
–16.7
331,322
(193,210)
–58.3
8,849,290
8,281,217
568,073
6.9
8,981,834
(132,544)
–1.5
Current and savings accounts
Repurchase agreements
Other types of loans
Other types of deposits
Securities issued
Financial liabilities designated at fair value
through profit and loss
Total direct deposits
Report on operations of the Bipiemme Group
(614)
–0.5
129,627
132,536
(2,909)
–2.2
152,116
(22,489)
–14.8
37,601,769
36,990,974
610,795
1.7
36,836,892
764,877
2.1
71
Total “direct deposits” – consisting of amounts due to customers, securities issued and financial liabilities designated at
fair value through profit and loss – came to 37,602 million euro at 31 December 2015, up compared with the end of
2014 (+ 765 million euro; +2.1%) and up (+611 million euro; +1.7%) on the 30 September 2015 figure.
Comparing the aggregate figures with those recorded in December 2014 shows that:
amounts due to customers have risen to 28,623 million euro, up by 920 million euro compared with the end of
2014 (+3.3%) attributable to:
• growth in current and savings accounts (+2,027 million euro; +9.1%), including on-demand current
accounts which have risen by 2,935 million euro (+15.4%) on the end of 2014. This growth is entirely
due to customers in the corporate and retail segments. Restricted accounts were down (-908 million
euro);
• the contraction in repurchase agreements (-1,107 million euro; -21%) due to fewer transactions on the “MTS
Repo” market through Cassa di Compensazione e Garanzia in its role as central counterparty;
securities issued, in the amount of 8,849 million euro, recorded a decrease of 133 million euro compared with the
end of 2014 (-1.5%). This change was mainly due to:
• contraction of the aggregate Bonds and structured securities (-501 million euro; -7.6%) as a result of the
following transactions:
– the repayment of retail bonds in the amount of 0.6 billion euro, not renewed as a result of the various
investment choices made by the subscribers;
– the re-purchase of bonds for nominal 358 million euro taking place in the first part of the year (buy-back)
plus other repurchases in the amount of roughly 100 million euro;
– the issue of two covered bonds for a nominal amount of 1 billion euro in September and 0,75 billion euro
in December 2015, against the maturity of a covered bond in November 2015 in the amount of 0.9 billion
euro;
• a decrease in subordinated liabilities in the amount of 0.6 billion euro, largely due to the maturity of
a subordinated bond (Lower Tier 2) and to early repayment of the Preferred Securities issued by BPM
Capital I.
• the inclusion in this aggregate of short-term repurchase agreements(1), made with own security issues,
including: covered bond in the amount of 681 million and Profamily Securitisation in the amount of 487 million
euro;
financial liabilities designated at fair value through profit and loss, represented by structured bonds placed with
retail customers, amounted to 130 million euro and declined both compared with the end of 2014 (-22 million euro;
-14.8%) and with the end of September 2015 (-3 million euro; -2.2%).
The quarterly analysis shows an increase in aggregate
direct deposits compared with the previous quarter
(+1.7%) due to the contribution of securities issued and
financial liabilities designated at fair value throgh profit
and loss (+ 565 million euro; +6.7%), while the amounts
due to customers remained essentially stable (+46 million
euro; +0.2%).
In detail, for amounts due to customers, the solid
performance of the current and savings account (+524
million; +2.2%) is offset by the decrease in repurchase
agreements in the amount of 450 million euro (-9.8%).
Quarterly trend of direct deposits (euro/million)
35,713
26,025
9,687
31.03.14
36,287
36,402
36,837
36,429
36,802
36,991
37,602
26,812
26,979
27,703
27,590
28,777
28,577
28,623
9,475
9,423
9,134
8,839
8,025
8,414
8,979
31.03.15
30.06.15
30.06.14
30.09.14 31.12.14
Securities issued and financial liabilities designated
at fair value through profit and loss
30.09.15 31.12.15
Due to customers
(1) These transactions are recorded as securities issued in compliance with a specific provision of the Bank of Italy.
72
Report on operations of the Bipiemme Group
Direct deposits by counterparty
(euro/000)
31.12.2015
30.09.2015
A
B
amount
%
C
amount
%
21,989,188
21,364,251
624,937
2.9
19,054,341
2,934,847
15.4
Unrestricted current and savings accounts
Change A-B
31.12.2014
Change A-C
Restricted deposits and other term deposits
2,478,005
2,604,578
(126,573)
–4.9
3,515,619 (1,037,614)
–29.5
Securities issued
2,536,748
2,823,962
(287,214)
–10.2
3,984,000 (1,447,252)
–36.3
715,389
711,117
4,272
0.6
719,058
(3,669)
–0.5
63,352
74,247
(10,895)
–14.7
249,068
(185,716)
–74.6
129,627
132,536
(2,909)
–2.2
152,116
(22,489)
–14.8
27,133,568
26,925,327
208,241
0.8
26,706,076
427,492
1.6
of which subordinated
of which CDS
Financial liabilities designated at fair
value through profit and loss
Direct deposits from retail customers
Covered bonds and securitisations
2,816,333
3,043,807
(227,474)
–7.5
2,077,609
738,724
35.6
EMTN and subordinated liabilities
2,301,769
2,277,394
24,375
1.1
2,920,225
(618,456)
–21.2
Repos entered into with Cassa
Compensazione e Garanzia
4,155,659
4,608,392
(452,733)
–9.8
5,132,982
(977,323)
–19.0
Repos on own securities repurchased
1,194,440
136,054
1,058,386
n.s.
–
1,194,440
n.a.
Direct deposits from institutional customers
10,468,201
10,065,647
402,554
4.0
10,130,816
337,385
3.3
Total direct deposits
37,601,769
36,990,974
610,795
1.7
36,836,892
764,877
2.1
The Group’s market share of direct deposits (excluding repos with central counterparties) is 1.62% (updated to
November 2015), stable compared with December 2014 (1.61%).
Indirect deposits and assets under management
At 31 December 2015, the volume of indirect deposits from ordinary customers, measured at market value, came
to 34,060 million euro, up compared with the end of December 2014 (+4.4%) and slightly up compared with
30 September 2015 (+0.9%).
Breakdown of indirect deposits from ordinary customers at market value
Funds
(euro/000)
31.12.2015
30.09.2015
A
B
amount
Change A-B
%
31.12.2014
C
amount
Change A-C
%
12,593,870
11,978,543
615,327
5.1
10,279,397
2,314,473
22.5
2,291,262
2,269,616
21,646
1.0
2,344,018
(52,756)
–2.3
Insurance-sector reserves
6,016,313
5,860,360
155,953
2.7
5,248,939
767,374
14.6
Total assets under management
20,901,445
20,108,519
792,926
3.9
17,872,354
3,029,091
16.9
Assets under administration
13,158,758
13,635,441
(476,683)
–3.5
14,737,869
(1,579,111)
–10.7
Total indirect deposits from ordinary
customers
34,060,203
33,743,960
316,243
0.9
32,610,223
1,449,980
4.4
Individual portfolio management
(1)
(1) Includes: securities-based portfolio management schemes, fund-based management schemes and cash accounts.
The performance compared with the end of 2014 (+1,450 million euro; +4.4%), this aggregate has benefited from
the positive results of assets under management (+3,029 million euro; +16.9%), which more than offset the decline
in assets under administration (-1,579 million euro; -10.7%) mainly due to the reallocation of cash from Government
bonds as they matured to assets under management.
In detail, the increase in assets under management benefited from both the positive trend in markets and positive
net deposits for the year in the amount of 2,612 million euro, of which 2,019 million in mutual funds/individual
portfolio management and about 593 million euro in insurance products. In detail: the funds segment – which came to
Report on operations of the Bipiemme Group
73
12,594 million euro – increased by 2,314 million euro (+22.5%) compared with the end of 2014 and the insurance
reserves, which came to 6,016 million euro, increased by 767 million euro (+14.6%). Individual portfolio management
declined by 53 million euro (-2.3%) compared with December 2014.
Assets under management totalled 13,159 million euro as of 31 December 2015; the decrease with respect to the end
of 2014 (-10.7%) reflects the ongoing tendency of subscribers switch into asset management.
The market share of the Group’s funds has remained stable at 1.49% (vs. 1.50% in December 2014), while there
was an increase in the share of new insurance premiums, which came to 2.18% in November 2015 (vs. 2.04% in
December 2014).
Looking at the breakdown of assets under administration, it can be seen that there is a lower weighting of government
securities (-3.1 p.p.) and bonds (-5.4 p.p.) but a higher weighting of equities (+8.6 p.p.).
Distribution of assets under administration at December 2015
32.1%
Distribution of assets under administration at December 2014
23.6%
Treasury Bonds
Treasury Bonds
Bonds
Bonds
Stocks
Stocks
40.7%
27.2%
Indirect customer deposits increased by 316 million euro (+0.9
Q/Q) in the last quarter of 2015, attributable to the following
trend:
assets under management grew to 793 million euro
(+3.9%), mainly due to the positive performance of both
the funds segment which increased by 615 million euro
(+5.1%) and the insurance reserves (+156 million euro;
+2.7%);
assets under administration declined 477 million euro
(-3.5%) due to the impact of reallocation to assets under
management.
43.8%
32.6%
Quarterly trend of direct deposits (euro/million)
32,114
32,171
32,433
32,610
15,798
16,633
17,406
17,872
16,316
15,538
15,027
14,738
31.03.14
30.06.14
30.09.14 31.12.14
34,885
34,207
33,744
34,060
19,633
20,227
20,109
20,901
15,252
13,980
13,635
13,159
31.03.15
30.06.15
30.09.15 31.12.15
Under management
Under administration
Loans to customers
As at 31 December 2015, loans to customers amounted to 34,187 million euro, up by 2,108 million euro compared
with the end of 2014 (+6.6%) and 785 million euro compared with the end of September 2015 (+2.4%). Compared
with the end of 2014, the rise in the aggregate is mainly attributable to the increase in other loans (+1,663 million
euro; +22.9%) and the line item mortgage loans which increased by 731 million euro (+4.6%). The growth in other
loans was mainly driven by the performance of syndicated loans (+33.4%) and stand-by loans(2) (+43%), to a large
extent in the corporate segment.
(2) Management figures at the end of the period.
74
Report on operations of the Bipiemme Group
The evolution of loans has benefited from the recovery in new mortgages in loans compared with the end of 2014
(about +43% based on management figures). In particular, mortgage loan disbursements in 2015 amounted to 2.5
billion euro, up 41% on 2014, reflecting a positive trend for the private banking sector (+72%). New loans increased
by 46%, mainly attributable to the corporate segment (+57%).
As regards performance by segment – based on period end management figures – there have been the following
changes compared with December 2014:
a) growth in loans to individuals (+3.2%);
b) growth in loans to companies (+6.2%), mainly attributable to loans to the corporate segment (+10.1%).
Loans granted (cumulative amounts) (euro/million)
1,394
550
148
811
206
349
435
jan
feb
mar
apr
1,860
2,388
1,038
553
may
2,687
1,841
284
129
1,595 1,691
2,076
Mortgage loans granted (cumulative amounts) (euro/million)
705
june
877
july
2014
963
aug
1,098
sep
1,298
1,515
121
oct
nov
dec
267
103
214
jan
feb
459
586
357
460
mar
apr
2015
826
601
1,029
795
may
2014
june
1,332 1,467
983 1,067
july
A
B
amount
%
C
Mortgage loans
16,505,014
16,237,546
267,468
1.6
Other types of deposit
17,660,797
17,096,543
564,254
3.3
Current Accounts
3,160,116
3,326,950
(166,834)
232,956
104,771
1,510,931
196,463
Finance leases
oct
1,532
2,452
1,740
nov
dec
(euro/000)
30.09.2015
Credit cards, personal loans and salary
assignments
sep
1,382
2,209
2015
31.12.2015
Repurchase agreements
1,235
aug
Breakdown of loans to customers
1,712
1,976
Change A-B
31.12.2014
Change A-C
amount
%
15,773,904
731,110
4.6
16,189,974
1,470,823
9.1
–5.0
3,468,453
(308,337)
–8.9
128,185
122.3
64,875
168,081
259.1
1,476,860
34,071
2.3
1,566,559
(55,628)
–3.6
202,402
(5,939)
–2.9
218,713
(22,250)
–10.2
Other loans
8,936,107
8,270,222
665,885
8.1
7,273,473
1,662,634
22.9
Non-performing exposures
3,624,224
3,715,338
(91,114)
–2.5
3,597,901
26,323
0.7
Total loans to customers
34,165,811
33,334,089
831,722
2.5
31,963,878
2,201,933
6.9
21,026
67,411
(46,385)
–68.8
114,965
(93,939)
–81.7
34,186,837
33,401,500
785,337
2.4
32,078,843
2,107,994
6.6
Debt securities
Total loans to customers
As regards changes in loans to companies by economic sector (comprising large companies, SMEs and Small Businesses)
as of 31 December 2015, there was a general increase in loans in all sectors, especially wholesale trade (+10.7%)
and the manufacturing sector (+9.2%). The real estate segment has decreased (-3.8%).
The Group’s market share of loans (excluding repurchase agreements with central counterparties) came to 1.94%
(November 2015 figure), which is considerably higher than the figure reported in December 2014 (1.83%).
Report on operations of the Bipiemme Group
75
Loans to businesses by economic sector – December 2015
(weighting in %)
Loans to businesses by economic sector – December 2015
(weighting in %)
3.8%
3.7%
20.5%
9.6%
Agriculture
10.0%
19.1%
Agriculture
Services
Services
9.3%
2.0%
22.5%
Wholesale trade
(vehicles excluded)
Real estate
(infrastructures excluded)
Wholesale trade
(vehicles excluded)
8.8%
1.5%
Real estate
(infrastructures excluded)
Manufacturing
Manufacturing
Financial and insurance
activities
Financial and insurance
activities
Other
Other
21.6%
35.2%
32.3%
(1)The business sector includes corporate, SMEs and small retail
businesses.
Compared with the previous quarter, loans to customers
increased by 785 million euro (+2.4%). Within this
aggregate it’s worth noting the positive performance
of mortgage loans (+1.6%) and other types of deposit
(+3.3%), reflecting the increase in other loans (+666
million; 8.1%).
As regards performance by segment – based on
period-end management figures – there has been a
positive change with respect to September 2015 both
in loans to individuals (+1.5%) and loans to companies
(+1.3%).
Quarterly trends in loans to customers (euro/million)
32,821
194
32,628
31.03.14
32,521
287
32,233
30.06.14
32,096
344
31,752
32,079
33,483
33,402
92
105
33,391
33,297
32,600
97
65
32,014
30.09.14 31.12.14
32,503
31.03.15
30.06.15
34,187
233
33,954
30.09.15 31.12.15
Repurchase agreements
Asset quality
Since the end of 2014, the Italian economy has been experiencing a gradual, albeit slight, improvement, as confirmed
by several factors such as low oil prices, a more favourable exchange rate and the liquidity injected by the ECB.
Recovery is still sluggish and the macroeconomic scenario in the final quarter of 2015 does not help to clearly define the
trend. Istat data confirms an attractive growth rate, primarily due to domestic consumption. Similarly, the construction
industry has yet to report positive signs; it continues to show declines in production levels, although at a slower pace.
ANCE (National Association of Builders) figures highlight a drop in investments in construction which stood at 1.3%
in 2015, albeit lower than previous years (-5.2% in 2014), mainly due to the extension of tax incentives for building
renovations and energy efficiency as per the Stability Law for 2015.
Figures relating to new homes are still down, but we are seeing the first signs of recovery (-6% in 2015 vs. -13.9% in
2014) as is also the case for the non-residential property market with a decrease in investments of 1.2% vs. -6.4% in
2014; investments for home renovation continue to grow (+0.8% in 2015).
The recovery and consolidation of property sales has been confirmed, increasing even more than last year; home
mortgage loans to families are also once again on the upswing.
76
Report on operations of the Bipiemme Group
At system level, ABI confirms a positive trend in bank loans to companies and families which recorded an annual
change of +0.5%.
As regards non-performing exposures, the related ABI figures, updated in November 2015, indicate a rise in bad loans
of 9.4% compared with December 2014, exceeding the threshold of 200 billion euro. The ratio of bad loans to total
loans is 10.4%, confirming the figure of the previous month. At system level, the ratio of net bad loans to total loans
stood at 4.89%, an increase compared with December 2014 (4.64 %).
Bad loans-Italian banking Sector
Bad loans-business area
10,6%
50%
10,4%
48%
46%
10,2%
44%
10%
42%
9,8%
40%
9,6%
38%
36%
9,4%
34%
9,2%
32%
9,0%
30%
nov dec jan
oct nov
feb mar apr may june july aug sep
2014 2014 2015 2015 2015 2015 2015 2015 2015 2015 2015 2015 2015
Gross bad loans/loans
Gross bad loans/capital (rhs)
Source: ABI monthly January 2016
30
25
20
15
10
5
0
nov dec jan
oct nov
feb mar apr may june july aug sep
2014 2014 2015 2015 2015 2015 2015 2015 2015 2015 2015 2015 2015
Corporate
Retail
Source: ABI monthly January 2016
As regards the entire business spectrum, according to Cerved figures for the first nine months of 2015, the number
of business bankruptcies decreased by 4.5% compared with the first nine months of 2014. The drop in bankruptcies
concerned in particular industries, which was –14% compared with the nine month period of 2014 (-6% in construction
and -1.8% in services). Voluntary liquidations of active companies continued to fall (-9.1% compared with the same
period of last year), reaching the lowest level since 2006. The number of non-bankruptcy settlements also dropped,
mainly because of the reduction in pre-bankruptcy arrangements: in the first nine months of 2015, it decreased by
16.7% compared with 2014.
Bipiemme Group figures as at 31 December 2015 show gross non-performing exposures of 5,997 million euro, up
compared with December 2014 (+2.5%) while underlining a reduction the incidence to loans which went from 16.9%
in December 2014 to 16.3% in December 2015. These changes are attributable to a slowdown in inflows of NPEs
(-33%), as well as the transfer of positions classified as bad and the increase in performing loans.
In detail, we observe the following trends:
bad loans increased in the year by 7.5%, totalling 3,276 million euro, down 1.9% compared with the previous
quarter; this change is in part due to the disposal of bad loans. By adjusting the figure for disposal transactions,
the quarterly trend shows in any case a slowing of the aggregate in the fourth quarter compared with previous
quarters in 2015, accompanied by a drop in the number of arrangements opened during 2015 compared to those
in 2014. The flow of new bad loans is mainly attributable to the deterioration of loans to companies operating in
the real estate and commerce sector (previously classified under the category “unlikely to pay”). The ratio of gross
bad loans to total Group loans was 8.9%, basically in line with the figure at the end of 2014 (8.8%), and down
with respect to the previous quarter (9.3%);
“unlikely to pay” decreased 1.4% year-on-year, confirming the trend of the last quarters and amounted to 2,622
million euro. The decrease is mainly due to certain positions being reclassified as bad loans; the ratio of “unlikely
to pay” to total loans stood at 7.1%, a decrease compared with the end of 2014 (7.7%);
Report on operations of the Bipiemme Group
77
past due totalled 99.5 million euro and declined 33% compared with the figure at the end of 2014 (149 million
euro) and especially on the figure for the last quarter (-41.1%). Past due represents 0.3% of the Group’s total loans,
a decrease on the comparative figures at the end of 2014 (0.4%).
Gross non-performing exposures (euro/million)
Net non-performing exposures (euro/million)
6,139
5,693
5,751
5,853
5,999
6,062
221
149
128
100
169
198
149
2,714
2,658
2,793
2,629
2,677
2,736
2,638
2,704
2,795
2,888
3,046
3,078
mar – 14
june – 14
sep – 14
dec – 14
mar – 15
5,585
Bad loans
3,226
june – 15
Unlikely to pay
3,341
sep – 15
5,997
3,596
100
3,594
3,591
3,598
3,699
3,678
3,715
3,624
91
152
90
181
199
134
136
117
2,208
2,165
2,181
2,117
2,221
2,131
2,051
2,043
1,206
1,230
1,276
1,344
1,361
1,456
1,512
1,491
mar – 14
june – 14
sep – 14
dec – 14
mar – 15
june – 15
sep – 15
dec – 15
2,622
3,276
dec – 15
Unlikely to pay
Bad loans
Post Due
Post Due
Improved coverage of non-performing exposures was confirmed, from 38.5% in December 2014 to the current 39.6%
at the end of 2015.
In detail:
coverage of bad loans came to 54.5%, slightly down from the figure reported in December 2014 (55.9%),
influenced in part by the transfer of bad loans with high levels of coverage, and in part by the flow of new bad
loans backed by real guarantees. This level increases to 60.8% if no account is taken of write offs of individual
positions made in the past;
coverage of “unlikely to pay “came to 22.1%, up on the December 2014 figure (20.3%);
coverage of past due came to 9.3%, also up compared to the December 2014 figure (8.4%).
As regards performing loans, they increased by 7.2% on the December 2014 figure, confirming the positive trend
already shown in the previous quarter. The growth in loans was fuelled by the manufacturing, commerce, hotel and
public services sectors. The coverage of performing loans was 0.60% versus 0.73% in December 2014. This trend is
attributable to the outflow of high-risk positions to the category of non-performing exposures and especially the growth
in new business.
Coverage (%)
Mar-14
Jun-14
Sept-14
Dec-14
Mar-15
Jun-15
Sept-15
Dec-15
Total non-performing
exposures
35.6
36.9
37.6
38.5
38.3
39.3
39.5
39.6
Bad loans
55.4
56.0
55.8
55.9
55.8
54.9
54.7
54.5
Unlikely to pay
17.7
19.1
19.6
20.3
20.5
22.1
22.0
22.1
8.4
9.8
10.3
8.4
8.4
9.7
9.8
9.3
0.72
0.68
0.73
0.73
0.69
0.67
0.64
0.60
6.3
6.6
6.9
7.1
7.1
7.2
7.3
7.0
Past due
Performing loans
Total adjustments to loans
78
Report on operations of the Bipiemme Group
Asset quality
Gross loans to
customers
(euro/000)
31.12.2015
A
30.09.2015
%
B
31.12.2014
%
Changes (A – B)
Changes (A – C)
C
%
Amount
%
Amount
%
of which: Nonperforming exposures
5,997,174
16.3 6,139,397
17.0 5,852,919
16.9
(142,223)
–2.3
144,255
2.5
a) Bad loans
3,276,069
8.9 3,341,143
9.3 3,046,339
8.8
(65,074)
–1.9
229,730
7.5
b) "Unlikely to pay"
2,621,568
7.1 2,629,361
7.3 2,658,033
7.7
(7,793)
–0.3
(36,465)
–1.4
0.3
0.5
148,547
0.4
(69,356)
–41.1
(49,010)
–33.0
c) Past due
99,537
168,893
of which: Performing
loans
30,747,953
83.7 29,878,636
83.0 28,690,833
83.1
869,317
2.9
2,057,120
7.2
Total gross loans to
customers
36,745,127
100.0 36,018,033
100.0 34,543,752
100.0
727,094
2.0
2,201,375
6.4
Changes (A – B)
Changes (A – C)
C Coverage %
Amount
%
Difference
in coverage
Amount
Total adjustments
31.12.2015
30.09.2015
A Coverage %
31.12.2014
B Coverage %
%
Difference
in coverage
of which: Nonperforming exposures
2,372,950
39.6 2,424,059
39.5 2,255,018
38.5
(51,109)
0.1
117,932
1.0
a) Bad loans
1,785,478
54.5 1,828,981
54.7 1,701,935
55.9
(43,503)
–0.2
83,543
–1.4
578,252
22.1
578,447
22.0
540,584
20.3
(195)
0.1
37,668
1.7
9,220
9.3
16,631
9.8
12,499
8.4
(7,411)
–0.6
(3,279)
0.8
185,340
0.60
192,474
0.64
209,891
0.73
(7,134)
–0.04
(24,551)
–0.13
7.3 2,464,909
7.1
(58,243)
–0.3
93,381
–0.2
b) "Unlikely to pay"
c) Past due
of which: Performing
loans
Total adjustments
2,558,290
Net loans to customers
7.0 2,616,533
31.12.2015
A
30.09.2015
%
B
31.12.2014
%
Changes (A – B)
Changes (A – C)
C
%
Amount
%
Amount
%
of which: Nonperforming exposures
3,624,224
10.6 3,715,338
11.1 3,597,901
11.2
(91,114)
–2.5
26,323
0.7
a) Bad loans
1,490,591
4.4 1,512,162
4.5 1,344,404
4.2
(21,571)
–1.4
146,187
10.9
b) "Unlikely to pay"
2,043,316
6.0 2,050,914
6.1 2,117,449
6.6
(7,598)
–0.4
(74,133)
–3.5
0.3
0.5
136,048
0.4
(61,945)
–40.7
(45,731)
–33.6
c) Past due
90,317
152,262
of which: Performing
loans
30,562,613
89.4 29,686,162
88.9 28,480,942
88.8
876,451
3.0
2,081,671
7.3
Total net loans to
customers
34,186,837
100.0 33,401,500
100.0 32,078,843
100.0
785,337
2.4
2,107,994
6.6
Report on operations of the Bipiemme Group
79
Net interbank position
The net interbank situation at 31 December 2015 reflects net borrowing of 3,615 million euro, increasing both in
respect to the net borrowing of 2,334 million euro as of December 2014 (-1,281 million euro) and the 3,263 million
euro as of September 2015 (-352 million euro). This trend is largely attributable to the increase in amounts due from
banks, which were 1,521 million euro higher than the end of 2014.
To determine the unsecured net interbank position at 31 December 2015, the following components should be deducted
from the difference between amounts due to and from banks:
3,450 million euro from open market operations with the European Central Bank, almost all relating to the
participation in the TLTRO (Targeted longer term refinancing operation) auctions;
roughly 174 million euro resulting from repurchase transactions with banks;
391 million euro relating to amounts due from banks shown in the financial statements of BPM Securitisation 2,
BPM Securitisation 3 and BPM Covered Bond, BPM Covered Bond 2 and Profamily Securitisation, as they relate to
liquidity that is not immediately available.
Net of the above components, the unsecured net interbank position as of 31 December 2015 shows a negative balance of
212 million euro, an improvement on 31 December 2014 (-598 million euro) and slightly lower than 30 September 2015
(-136 million euro).
Net interbank position
(euro/000)
31.12.2015
30.09.2015
A
B
amount
%
C
amount
%
1,224,717
1,287,592
(62,875)
–4.9
984,777
239,940
24.4
Due from banks
Change A-B
31.12.2014
Change A-C
Due to banks
4,839,439
4,550,638
288,801
6.3
3,318,564
1,520,875
45.8
Total
(3,614,722)
(3,263,046)
(351,676)
–10.8
(2,333,787)
(1,280,935)
–54.9
Difference between amounts due from and due to banks
(euro/million)
Unsecured net interbank position (euro/million)
267
- 2,463
- 2,230
- 598
- 2,334
- 3,121
- 3,761
mar
2014
june
2014
sep
2014
124
dec
2014
mar
2015
- 3,332
june
2015
- 3,263
sep
2015
- 3,615
dec
2015
june
2014
sep
2014
- 136
- 212
- 722
- 845
mar
2014
- 187
dec
2014
mar
2015
june
2015
sep
2015
dec
2015
Liquidity position
The Group’s liquidity position remains strong and the main indicators of the liquidity situation have remained within
the set limits.
80
Report on operations of the Bipiemme Group
Net liquidity – being assets available for use as collateral plus net inflows and outflows over a given time horizon –
totalled 4,336 million euro at 31 December 2015, with a time horizon of 1 month, giving a ratio of total assets of 8.6%
(11.3% at the end of December 2014).
Liquidity at three months amounted to 3,205 million euro at the end of December 2015 (6.4% of total assets).
The assets eligible as collateral with the European Central Bank amounted to 13.7 billion euro at the end of December
2015, which is slightly higher on the previous quarter, and are committed for 8.6 billion euro – including 3.5 billion
euro committed to TLTRO and other advances at the ECB– while the remaining 5.1 billion euro is represented by free
assets.
As expected, the liquidity requirement of commercial banks, being the difference between commercial funding and
lending to customers, amounted to 5.1 billion euro at the end of December 2015 (management figures), up 2 billion
euro on the December 2014 figure.
Assets eligible as collateral with the ECB (euro/billion)
11.6
12.1
11.4
11.9
1.8
12.7
12.7
2.4
3.1
2.9
1.8
4.0
4.3
5.3
3.9
5.3
5.3
4.8
5.0
mar – 14
june – 14
sep – 14
dec – 14
mar – 15
4.1
Breakdown of total eligible assets at 31 December 2015
3.5
2.0%
june – 15
Government securities
Government guaranteed
securities
4.8%
11.2%
Covered Bond
ABS
19.6%
5.1
sep – 15
dec – 15
committed in ECB
3.3%
67.9%
5.0
Breakdown of total eligible assets at 31 December 2014
1.0%
9.3%
5.1
5.0
6.1
committed in repos and other
free
3.5
3.3
5.3
3.6
13.7
13.3
0.6%
76.0%
Government securities
Government guaranteed
securities
Covered Bond
4.2%
ABS
Abaco receivables
Abaco receivables
Other
Other
0.1%
Financial assets
The financial assets of the Bipiemme Group, net of financial liabilities, totalled 10,166 million euro, down on both the
September 2015 figure (-481 million euro; -4.5%) and the figure at the end of 2014 (-183 million euro; -1.8%).
Report on operations of the Bipiemme Group
81
In detail:
the net balance of financial assets and financial liabilities held for trading of 614 million euro at 31 December 2015
is up by 156 million euro (+34.1%) on December 2014 and by 38 million euro on September 2015 (+6.7%). This
aggregate is largely represented by the trading book of Banca Akros, whose operations mainly consist of trading,
market making and risk management with dynamic hedging strategies within a system of operating limits;
financial assets designated at fair value through profit and loss – which include structured debt securities and other
debt securities for which regular valuations are available from independent sources – totalled 76 million euro, a
decrease following the repayments made during the year (-22 million euro; -22.5% compared with the end of 2014;
-5 million euro; -6.6% compared with September 2015);
financial assets available for sale totalled 9,491 million euro, down compared with the end of December 2014
(-179 million euro; -1.9%) and compared with September 2015 (-456 million euro; -4.6%). This trend is attributable
to the sale of part of the portfolio of Italian government securities and the disposal of several significant shareholders’
equity in this portfolio.
Financial assets/liabilities of Group: breakdown
(euro/000)
31.12.2015
30.09.2015
A
B
amount
%
C
amount
%
1,797,874
1,832,200
(34,326)
–1.9
1,921,518
(123,644)
–6.4
75,543
80,854
(5,311)
–6.6
97,449
(21,906)
–22.5
9,491,248
9,947,242
(455,994)
–4.6
9,670,272
(179,024)
–1.9
Hedging derivatives receivable
40,638
91,173
(50,535)
–55.4
178,460
(137,822)
–77.2
Fair value change of financial assets in
hedged portfolios (+/-)
11,237
13,649
(2,412)
–17.7
20,107
(8,870)
–44.1
Total financial assets
11,416,540
11,965,118
(548,578)
–4.6
11,887,806
(471,266)
–4.0
Financial liabilities held for trading
1,183,557
1,256,371
(72,814)
–5.8
1,463,445
(279,888)
–19.1
Hedging derivatives payable
48,678
43,438
5,240
12.1
58,751
(10,073)
–17.1
Fair value change of financial liabilities in
hedged portfolios (+/-)
18,086
18,513
(427)
–2.3
16,084
2,002
12.4
10,166,219
10,646,796
(480,577)
–4.5
10,349,526
(183,307)
–1.8
Financial assets held for trading
Financial assets designated at fair value
through profit and loss
Financial assets available for sale
Total net financial assets
Breakdown of net financial assets portfolio (euro/million)
Mutual fund units
132
Shares
426
Derivatives(*)
65
of which other
637
of which Italian
sovereign debt
8,907
Change A-B
31.12.2014
Change A-C
As regards the type of securities in portfolio, as at 31 December
2015 financial assets are made up of bonds for around 94%
(of which 8,907 million euro relating to Italian sovereign debt).
Equities, mutual funds and Sicavs in total represent 6%. The
remainder consists mainly of hedging derivatives.
Bonds
9,845
(*) This mainly includes hedging derivatives.
82
Report on operations of the Bipiemme Group
Fixed assets
At 31 December 2015, total fixed assets, including investments in associates and companies subject to joint control,
property and equipment and intangible assets, totalled 1,199 million euro, up compared with December 2014 (+7.3%)
and 30 September 2015 (+2.7%).
Investments in associates and companies subject to joint control, in the amount of 342 million euro, have increased with
respect to December 2014 (+48 million euro; +16.5%) and with respect to the end of September 2015 (+6 million
euro; +1.8%). The increase with respect to the end of 2014 mainly reflects the increase in shareholders’ equity of
Selmapipiemme following the company’s merger with Palladio Leasing.
Property and equipment totalled 720 million euro, stable with respect to December 2014 (+0.7%) and slightly up on
the end of September 2015 (+1.4%).
Intangible assets (consisting mainly of software) totalled 137 million euro, an increase compared to December 2014
(+29 million euro) and the end of September 2015 (+16 million euro) as a consequence of investments during the period.
Fixed assets: breakdown
(euro/000)
31.12.2015
30.09.2015
Change A-B
31.12.2014
Change A-C
A
B
amount
%
C
amount
%
Investments in associates and companies
subject to joint control
342,145
336,239
5,906
1.8
293,797
48,348
16.5
Property and equipment
720,383
710,371
10,012
1.4
715,705
4,678
0.7
Intangible assets
136,931
121,332
15,599
12.9
108,377
28,554
26.3
Total fixed assets
1,199,459
1,167,942
31,517
2.7
1,117,879
81,580
7.3
Provisions for specific use
At 31 December 2015, the provisions for specific use totalled 435 million euro and comprise 309 million euro for the
provision for risks and charges and the remaining 126 million euro for the employee termination indemnities.
Report on operations of the Bipiemme Group
83
Shareholders’ equity and capital adequacy
At 31 December 2015, the Group’s shareholders’ equity, including income for the period of 289 million euro, totalled
4,627 million euro, up compared with the end of 2014 (+2%) and stable compared with the end of September 2015
(+0.4%).
Shareholders’ equity of the Group: breakdown
(euro/000)
31.12.2015
30.09.2015
A
B
3,365,439
3,365,439
445
447
753,717
749,804
(1,416)
5. Valuation reserves
6. Equity instruments
1. Share capital
2. Share premium reserve
3. Reserves
4. (Treasury shares)
7. N
et income (loss) pertaining to the
Group
Total
Change A-B
amount
31.12.2014
%
C
–
–
3,365,439
–
–
–2
–0.4
–
445
n.a.
3,913
0.5
617,888
135,829
22.0
(1,422)
6
0.4
(854)
(562)
–65.8
220,255
290,691
(70,436)
–24.2
321,917
(101,662)
–31.6
–
–
–
n.a.
–
–
n.a.
288,907
202,052
86,855
43.0
232,293
56,614
24.4
4,627,347
4,607,011
20,336
0.4
4,536,683
90,664
2.0
Valuation reserves of the Group: breakdown
Change A-C
amount
%
(euro/000)
31.12.2015
30.09.2015
A
B
amount
%
C
amount
%
Financial assets available for sale
272,351
341,278
(68,927)
–20.2
377,758
(105,407)
–27.9
Actuarial gains (losses) on defined-benefit
pension plans
(59,082)
(57,383)
(1,699)
–3.0
(61,977)
2,895
4.7
Cash flow hedge
(4,429)
(4,251)
(178)
–4.2
(4,502)
73
1.6
Share of valuation reserves connected
with investments carried at equity
(2,027)
(2,395)
368
15.4
(2,804)
777
27.7
Special revaluation laws
13,442
13,442
–
–
13,442
–
–
220,255
290,691
(70,436)
–24.2
321,917
(101,662)
–31.6
Total
84
Change A-B
31.12.2014
Change A-C
Report on operations of the Bipiemme Group
Minority interests
Minority interests amounted to about 20 million euro at 31 December 2015, an increase over the end of 2014 (+2.8%)
and the end of September 2015 (+0.8%).
Minority interests: breakdown
(euro/000)
31.12.2015
1. Share capital
2. Share premium reserve
3. Reserves
30.09.2015
Change A – B
31.12.2014
Change A – C
A
B
amount
%
B
amount
%
2,363
2,355
8
0.3
2,359
4
0.2
11,893
11,915
(22)
–0.2
11,982
(89)
–0.7
4,706
4,707
(1)
–0.0
4,353
353
8.1
–
–
–
n.a.
–
–
n.a.
5. Valuation reserves
4. Treasury shares
10
76
(66)
–86.8
90
(80)
–88.9
6. Equity instruments
–
–
–
n.a.
–
–
n.a.
1,002
763
239
31.3
640
362
56.6
19,974
19,816
158
0.8
19,424
550
2.8
7. Income (loss) pertaining to minority
interests
Total
Valuation reserves of minority interests: breakdown
Valuation reserves: financial assets
available for sale
Valuation reserves: actuarial gains (losses)
on defined-benefit pension plans
Total
(euro/000)
31.12.2015
30.09.2015
Change A – B
31.12.2014
Change A – C
A
B
amount
%
B
amount
%
58
121
(63)
–52.1
151
(93)
–61.6
(48)
(45)
(3)
–6.7
(61)
13
21.3
10
76
(66)
–86.8
90
(80)
–88.9
Valuation reserves on financial assets available for sale
At 31 December 2015, the positive balance of valuation reserves on financial assets available for sale – including the
portion attributable to minority interests – totalled 272 million euro, down 106 million euro on the balance recorded
on 31 December 2014. This was mainly caused by the contraction in the reserves for debt securities (-42 million euro),
changes in the portfolio and the drop in equities (-74 million euro) due to the disposal of stake held in ICPBI.
Valuation reserves on financial assets available for sale: breakdown
31.12.2015
(euro/000)
31.12.2014
Changes A – B
Gross book
value
Tax effect
Net book
value
Gross book
value
Tax effect
Net book
value
a1
a2
A = a1 – a2
b1
b2
B = b1 – b2
amount
in %
Debt securities, of which:
312,145
(103,228)
208,917
367,284
(121,463)
245,821
(36,904)
–15.0
Italian sovereign debt
302,904
(100,169)
202,735
365,117
(120,745)
244,372
(41,637)
–17.0
9,241
(3,059)
6,182
2,167
(718)
1,449
4,733
n.s.
56,051
(3,978)
52,073
135,541
(9,374)
126,167
(74,094)
–58.7
5,921
5,498
92.9
377,909 (105,500)
–27.9
other
Equities
Mutual Funds
Total valuation reserves AFS
17,041
(5,622)
11,419
8,820
(2,899)
385,237
(112,828)
272,409
511,645
(133,736)
Report on operations of the Bipiemme Group
85
Own funds and capital adequacy ratios
At 31 December 2015, the Common Equity Tier 1 ratio was 11.53%, Tier 1 capital ratio 12.06% and Total capital
ratio 14.33%. The CET 1 ratio was slightly down compared with the end of December 2014 (11.58%) and reflects,
among other things, the development in RWA (+1.4 billion euro compared with the end of 2014) in line with the trend
in loans, which increased by 6.6%. In detail, compared with 31 December 2014, the assets weighted for credit and
counterparty risk increased by 1,076 million euro, with an additional 286 million euro to cover market, credit value
adjustment (CVA) and regulatory risk.
Compared with 30 September 2015, the Common Equity Tier 1 Ratio was slightly up against the weighted assets which
remain more or less stable.
Note that, currently, the capital adequacy ratios do not benefit from any impact arising from the adoption of AIRB
internal models, which are in the process of being validated.
Quarterly trend of capital ratios
15.7%
10.8%
11.2%
11.8%
15.4%
15.4%
11.3%
11.9%
11.6%
12.2%
14.4%
11.6%
12.1%
14.4%
11.4%
11.9%
14.4%
11.4% 12.0%
14.3%
11.5%
12.1%
7.3% 7.8%
mar – 14
june – 14
sep – 14
dec – 14
mar – 15
Tier 1
Common equity Tier 1
june – 15
sep – 15
dec – 15
Total capital ratio
Quarterly trend in risk-weighted assets (euro / million)
43,265
35,194
mar – 14
34,590
34,408
33,677
33,895
34,983
34,910
35,030
june – 14
sep – 14
dec – 14
mar – 15
june – 15
sep – 15
dec – 15
Total with add-ons
86
Total without add-ons
Report on operations of the Bipiemme Group
Income statement
As regards the income statement, 2015 closed with net income of 288.9 million euro, an increase of 24.4% compared
with 31 December 2014.
Income for 2015 increased (+2.8%) compared with the same period last year and is characterised by the growth in net
fee and commission income (+8.9%), while the net result from banking activities, slightly down (-3.6%), does however
provide a positive contribution of 181.7 million euro.
Operating expenses show an increasing trend (+4.7%) mainly due to non-recurring items.
Net adjustments to loans decreased by 19.3%, while the already good levels of coverage improved, reaching 39.6%
of total non-performing exposures at 31 December 2015.
Excluding non-recurring items, the normalised net result totalled 259.9 million euro and is a major improvement over
the 2014 figures (+118.2 million euro, i.e. +83.4%).
Operating income benefitted from a total of +39.3 million euro in non-recurring items, due to the income from the
disposal of 4% in ICBPI, partially offset by the write-off of a subordinated bond issued by Banca Popolare Etruria and
by the effects of the IPO for the buyback of its own bonds. Net of these items, operating income increased by 0.4%.
Operating expenses were penalised by non-recurring items by –46.6 million, primarily related to the extraordinary
contribution ordered by the Bank of Italy on 21 November 2015 for the implementation of a solution for four banks
under special administration (Banca Popolare Etruria, Banca Marche, CariChieti and CariFerrara).
Please note that the net result in 2014 included the gain from the partial disposal of Anima Holding S.p.A. in the
amount of 103 million euro before taxes.
Operating income
At 31 December 2015, operating income totalled 1,667.2 million euro versus 1,621.6 million euro last year, an
increase of 2.8%.
This figure is the net of the following changes:
a rise in interest margin from 800.2 million euro in December 2014 to 806.7 million (+0.8%);
an increase in the net fee and commission income of 49.4 million euro (+8.9%);
a decline in other income (–10.4 million euro; –3.9%). This mainly reflects the decline in the margin from other
operating charges/income (–24.8%) and from the decline in the net income from banking activities (–3.6%).
Interest margin
Interest margin amounted to 806.7 million euro, increasing some 6.6 million euro (+0.8%) over December 2014,
thanks to the increase in commercial margin which benefited from the higher volume of loans and the lower cost of
interbank and institutional funding which more than offset the decline in the contribution made by the Parent Company’s
securities portfolio.
Report on operations of the Bipiemme Group
87
Interest margin
(euro/000)
Year 2015
Year 2014
Changes
amount
%
Interest and similar income
1,160,394
1,289,302
(128,908)
–10.0
Interest and similar expense
(353,648)
(489,131)
135,483
27.7
806,746
800,171
6,575
0.8
Total interest margin
An analysis of the interest margin by business line, on the
basis of the allocation of interest income and expense for
management purposes to the various business segments
is shown below. The following trends emerge from this
analysis:
Trend in interest margin by business line
(euro/mln)
800.2
commercial margin: has increased by 8.9 million euro
(+1.3%) compared with 2014, from 712.4 million
euro to 721.3 million euro. This increase is attributable
to the greater volume of loans and the resilience of the
spread between interest rates payable and receivable;
treasury and investment banking margin: this totalled
190.1 million euro, down about 18.3 million euro
on 2014, mainly due to the lower profitability of the
Parent Company’s securities portfolio (-36.3 million
euro; -17.1%)
interest expense on institutional funding: 115.6 million
euro in 2015, a decrease of 6.2 million euro compared
with December 2014, due primarily to the contraction
in funding volumes.
The interest margin during the fourth quarter of 2015
decreased by 4 million euro (-2%) compared with the
previous quarter. This was primarily due to the decline
in the treasury & investment margin (-4.6%) reflecting the
reduction in income from the Parent Company’s securities
portfolio, to a certain extent offset by the increase in
commercial margin (+1.4%), thanks to the higher volume
of loans.
The interest spread in the fourth quarter of 2015 stood
at 2.12%, down 3 bps on the figure for the previous
quarter (2.15%), while the average annual rate (2.15%)
is basically in line with the rate in 2014. Lending rates
came to 2.58% , falling 9 bps compared with the third
quarter of 2015, while borrowing rates continued the
downward trend that commenced in mid-2012, with an
average rate of 0.46%, falling 6 bps compared with the
0.52% recorded in the previous quarter.
10.9
208.4
190.1
712.4
721.3
-121.8
-115.6
Year 2014
Year 2015
Other
Institutional funding
Treasury & Investment Banking
Commercial margin
Quarterly trend in interest margin (euro/mln)
206
201
195
198
196
1Q 14
2Q 14
3Q 14
4Q 14
1Q 15
207
204
200
2Q 15
3Q 15
4Q 15
Quarterly trend in the Group’s interest rate spread (%)
3.23
3.22
2.07
2.15
1.16
1.07
1Q 14
2Q 14
3.16
2.19
0.97
3Q 14
borrowing rates
88
806.7
1.3
3.03
2.17
0.86
4Q 14
2.92
2.17
0.75
1Q 15
lending rates
2.77
2.67
2.58
2.17
2.15
2.12
0.60
0.52
0.46
2Q 15
3Q 15
4Q 15
interest spread
Report on operations of the Bipiemme Group
Non-interest margin
Non-interest margin, in the amount of 860.5 million euro, posted an increase of 39.1 million euro at the end of 2015
(+48%) compared with the same period of the last year. This change was due to growth in net fee and commission
income (49.4 million euro; +8.9%) and the profits on investments carried at equity (9.7 million euro; +42.5%) partially
offset by the drop in net income from banking activities (- 6.8 million euro; -3.6%) and the other operating charges/
income (- 13.2 million euro; -24.8%).
Non-interest margin
(euro/000)
Year 2015
Year 2014
Changes
amount
%
Net fee and commission income
605,996
556,566
49,430
8.9
Other income:
254,475
264,829
(10,354)
–3.9
Profit (loss) on investments carried at equity
Net income from banking activities
Other operating charges/income
Non-interest margin
The quarterly analysis of non-margin interest shows a
significant increase (96.8 million euro; +56.5%) primarily
due to the net income from banking activities (+89.3
million euro) and the increase in net fee and commission
income (+9.5 million euro; +6.5%).
The considerable increase in net income from banking
activities – which in the fourth quarter of 2015 was 100
million euro – includes the capital gains realised with the
disposal of 4% of ICBPI (+ 75.4 million euro) partially
offset by the writedown of a subordinated bond of Banca
Popolare dell’Etruria e del Lazio (about -12.6 million euro
in the quarter), plus other writedowns for a total of about
13.9 million euro. Excluding these effects, the finance
result was positive in the quarter, totalling 48.9 million
euro.
32,577
22,857
9,720
42.5
181,724
188,572
(6,848)
–3.6
40,174
53,400
(13,226)
–24.8
860,471
821,395
39,076
4.8
Quarterly trend in non – interest margin
(euro/mln)
268
236
221
213
230
191
12
171
100
151
38
58
6
26
23
149
148
158
145
154
4Q 14
1Q 15
2Q 15
3Q 15
4Q 15
79
65
16
20
14
140
136
131
1Q 14
2Q 14
3Q 14
Net fee and commission income
Net income from banking activities
20
11
16
14
Profits on investments carried at equity +
other income
As regards the performance net fee and commission income, the fourth quarter benefited from both higher net fee and
commission income from management, dealing and advisory services (especially commissions in the insurance segment,
+5.8 million euro on the third quarter) and the higher net fee and commission income from collection and payment
services (+5 million euro).
Report on operations of the Bipiemme Group
89
Net fee and commission income
Net fee and commission income
(euro/000)
Year 2015
Year 2014
amount
%
Fee and commission income
678,897
636,506
42,391
6.7
Fee and commission expense
(72,901)
(79,940)
7,039
8.8
Total net fee and commission income
605,996
556,566
49,430
8.9
Breakdown:
Changes
32,799
24,860
7,939
31.9
–
–
–
n.a.
306,721
255,302
51,419
20.1
71,623
74,730
(3,107)
–4.2
–
–
–
n.a.
58,473
64,189
(5,716)
–8.9
other services
136,380
137,485
(1,105)
–0.8
Total net fee and commission income
605,996
556,566
49,430
8.9
guarantees given and received
credit derivatives
management, dealing and advisory services
collection and payment services
servicing for securitisation transactions
management of current accounts
Net fee and commission income increased by 49.4 million euro (+8.9%) compared with 2014, mainly due to an
increase in net fee and commission income from management, dealing and advisory services in the amount of
51.4 million euro (+20.1%). Net fee and commission income on guarantees given and received also increased
(+7.9 million, +31.9%).
Profits (losses) on investments carried at equity
This item totalled 32.6 million euro, an increase of 9.7 million euro over the figure in 2014, thanks to the solid results
obtained by associated companies, especially Anima Holding Sgr, Factorit SpA and Bipiemme Vita.
Net income from banking activities
Net income from banking activities
(euro/000)
Year 2015
Year 2014
Changes
amount
%
Dividends
13,065
17,699
(4,634)
–26.2
Profits (losses) on trading
37,937
52,870
(14,933)
–28.2
Fair value adjustments in hedge accounting
(9,623)
411
(10,034)
n.s.
Profits/losses on disposal or repurchase of financial assets/
liabilities
187,999
150,667
37,332
24.8
Profits (losses) on financial assets/liabilities measured at fair
value
(5,136)
7,667
(12,803)
n.s.
Net losses/recoveries on impairment: financial assets
available for sale
(42,518)
(40,742)
(1,776)
–4.4
Total net income from banking activities
181,724
188,572
(6,848)
–3.6
90
Report on operations of the Bipiemme Group
Net income from banking activities: detail by company
(euro/000)
Year 2015
Banca Popolare di Milano
Banca Popolare di Mantova
151,439
Year 2014
140,132
Changes
amount
%
11,307
8.1
(7)
57
(64)
n.s.
Banca Akros
33,586
45,781
(12,195)
–26.6
Consolidation eliminations/adjustments
(3,294)
2,602
(5,896)
n.s.
Total net income from banking activities
181,724
188,572
(6,848)
–3.6
Net income from banking activities totalled 181.7 million euro, down 6.8 million with respect to December 2014
(-3.6%). The following should be noted regarding the components of this aggregate:
dividends from companies classed as financial assets available for sale and trading totalled 13 million euro, a
decrease of 4.6 million euro compared with December 2014.
profits (losses) on trading – in the amount of 37.9 million euro – decreased by 14.9 million euro compared with
December 2014 due to transactions in derivatives on interest and foreign exchange rates and foreign currency
transactions. This result reflects, among other things , the negative effect from the “mark to market “ valuation of
financial assets held for trading, as well as the contraction in the results of market making by Banca Akrros on account
of lower flows of customers, especially in the fixed income segment. As a matter of fact, in 2015 there were first
serious concerns about the state of Greece’s public finances, and later on concerns about the slowdown in the Chinese
economy and the major emerging economies (Brazil, Russia, South Africa and to a lesser extent India), closely tied to
the decline in commodity prices and high financial instability, resulting in a decline in capital movements.
fair value adjustments in hedge accounting – posting a loss of 9.6 million euro – reflects the interest rate risk hedging
transactions and the price on the debt securities held in portfolio and on own bonds;
profit on the disposal or repurchase of financial assets/liabilities totalled 188 million euro (+37.3 million euro
compared with December 2014) and includes the capital gains realised on the disposal of 4% of ICBPI (+75.4
million euro), but also the charge (-11.5 million euro) for the purchase of treasury shares resulting from the above
mentioned public offer for the repurchase of bonds. Excluding the above effects, gains on disposal/repurchase totalled
124.1 million euro versus 150.7 million euro last year;
profits (losses) on financial assets and liabilities measured at fair value was negative by 5.1 million euro, down on the
positive balance of 7.7 million euro at December 2014, due to losses on disposal in the amount of 3.7 million euro
and potential losses of 5.6 million, only partly offset by unrealised gains of 4.2 million euro;
net losses/recoveries on impairment relating to financial assets available for sale posted a loss of 42.5 million euro
compared with a loss of 40.7 million euro in December 2014. This amount includes the writedown of the subordinated
bond of Banca Popolare dell’Etruria e del Lazio in the amount of about 25 million euro, in addition to adjustments on
shares (-14.2 million euro) and on mutual fund units (-3.3 million euro).
Other operating charges/income
Other operating charges/income totalled 40.2 million euro as of 31 December 2015, down on the prior year
(-13.2 million; 24.8%) which had benefited – among other things – from an insurance recovery of about 7 million euro.
Report on operations of the Bipiemme Group
91
Operating expenses
As of 31 December 2015, the aggregate of operating expenses – comprising administrative expenses and net
adjustments to property and equipment and intangible assets – amounted to about 1,019.8 million euro, an increase of
46 million euro (+4.7%) compared with the same period in 2014; a good part of this increase was due to non-recurring
items (46.6 million euro). The cost/income ratio was 61.2%, up slightly compared with the previous year (60%).
Operating expenses: breakdown
(euro/000)
Year 2015
Year 2014
Changes
amount
%
Administrative expenses:
(944,978)
(898,831)
(46,147)
–5.1
a) personnel expenses
(612,382)
(612,420)
38
0.0
b) other administrative expenses
(332,596)
(286,411)
(46,185)
–16.1
(74,773)
(74,884)
111
0.1
(1,019,751)
(973,715)
(46,036)
–4.7
Net adjustments to property and equipment and intangible
assets
Total
Operating expenses: detail by company
(euro/000)
Year 2015
Banca Popolare di Milano
Year 2014
Changes
amount
%
(937,665)
(896,410)
(41,255)
–4.6
Banca Popolare di Mantova
(10,401)
(10,177)
(224)
–2.2
Banca Akros
(54,399)
(51,120)
(3,279)
–6.4
ProFamily
(20,573)
(19,408)
(1,165)
–6.0
(2,873)
(3,012)
139
4.6
6,160
6,412
(252)
–3.9
(1,019,751)
(973,715)
(46,036)
–4.7
Other companies
Consolidation eliminations/adjustments
Total operating expenses
In detail, personnel expenses, in the amount of 612.4 million euro, were stable compared with December 2014 and
include the variable components and costs due to the adjustment of the Solidarity Fund. Excluding these items, personnel
expenses decreased by 1.4%, benefiting from the structural reduction in the cost of labour due to the departure of those
that signed up for the Solidarity Fund. Overall, there have been 715 leavers at Group level since the fund was set up
at the end of March 2013, of which 132 in 2015.
92
Report on operations of the Bipiemme Group
Other administrative expenses: breakdown
(euro/000)
Year 2015
Year 2014
Changes
amount
%
3.2
IT expenses
(72,334)
(74,693)
2,359
Expenses for buildings and furniture
(46,720)
(51,036)
4,316
8.5
Property leases
(34,204)
(38,216)
4,012
10.5
Other expenses
(12,516)
(12,820)
304
2.4
Purchases of assets and non-professional services
(52,806)
(60,718)
7,912
13.0
Purchases of professional services
(52,041)
(45,617)
(6,424)
–14.1
(3,780)
(4,381)
601
13.7
(21,953)
(20,325)
(1,628)
–8.0
(102,168)
(109,537)
7,369
6.7
Insurance premiums
Advertising expenses
Indirect taxes and duties
Other
(67,763)
(9,327)
(58,436)
n.s.
Total
(419,565)
(375,634)
(43,931)
–11.7
86,969
89,223
(2,254)
–2.5
(332,596)
(286,411)
(46,185)
–16.1
Reclassification of "indirect tax recoveries"
Total
Other administrative expenses totalled 332.6 million euro (+ 46.2 million euro; +16.1% compared with December 2014)
excluding indirect tax recoveries. This increased was affected by the “one-off” contribution – in the amount of 39.7
million euro – paid as a result of the order by the Bank of Italy on 21 November 2015 for the so-called bank
bail-in of Banca delle Marche, Banca Popolare dell’Etruria e del Lazio, Cassa di Risparmio di Ferrara, Cassa di
Risparmio della Provincia di Chieti, as explained in the section of this report on “Significant events for Banca Popolare
di Milano and the Bipiemme Group”.
The changes in the aggregate included:
a decrease in “IT expenses” (-2.4 million euro) due to the early renegotiation of agreements with suppliers;
a decrease in expenses for “Property leases” (-4 million euro) following the renegotiation of property rents and lower
rent due to the closures of 62 branches in 2014;
a reduction in “Purchases of assets and non-professional services” (-7.9 million euro) which in 2014 included the costs
for the integration of Webank project.
an increase in “Advertising expenses”, in the amount of 1.6 million euro, in part due to the costs incurred for the
Bank’s 150th anniversary and in part due to the new customer acquisition campaigns and initiatives;
an increase in professional fees (6.4 million euro) for management consulting services, mainly relating to the validation
project for internal AIRB models.
Net adjustments to property and equipment and intangible assets totalled 74.8 million euro, stable compared with
December 2014.
Report on operations of the Bipiemme Group
93
The quarterly analysis of operating expenses shows an
increase compared with the third quarter of 2015 in the
amount of 85.2 million euro (+37.6%).
Quarterly trend in operating expenses (euro/mln)
312
In detail, personnel expenses for the fourth quarter of
the year totalled 160.3 million euro, an increase over
the 148.7 million euro posted in the previous quarter
(+7.8%) due to the higher provisions regarding the
variable components linked to the results.
237
152
18
Other administrative expenses increased considerably
from the previous quarter (+ 67 million euro). This increase
includes the extraordinary contribution to the Resolution
Fund in the amount of 39.7 million euro, booked in the
last quarter; excluding this effect, the aggregate decreased
slightly compared with the fourth quarter of 2014.
256
255
226
169
19
147
145
19
68
62
1Q 14
2Q 14
3Q 14
Other administrative
expenses
155
237
149
227
160
149
24
16
17
89
73
72
60
4Q 14
1Q 15
2Q 15
3Q 15
19
67
244
personnel expenses
18
127
4Q 15
Net adjustments to property and
equipment and intangible assets
Profits (losses) from equity and other investments
Profits/losses from equity and other investments amounted to 37.4 million euro, a decrease compared with December
2014 (-67 million euro) which included the capital gain from the sale of a portion of Anima Holding SpA, in the amount
of 104.5 million euro. The December 2015 figure reflects the higher values of equity of Selmabipiemme Leasing
(+38.8 million euro) following the company’s merger with Palladio Leasing, also part of the Mediobanca Group.
Net adjustments, provisions and other items
Net adjustments for impairment of loans and other activities, in the amount of 342.2 million euro at December 2015,
declined compared to the 423.8 million euro posted in the same period of 2014 (about -81.6 million euro; -19.3%).
The breakdown of this aggregate is shown in the table below.
Net adjustments for impairment of loans and other activities: breakdown
Transactions/ Income
elements
Loans:
Due from banks
Loans to customers
Profits/losses on
disposal/repurchase
of loans
Other financial
activities
Total
94
Adjustments
Specific
(525,525)
(240)
(525,285)
Portfolio
Write-backs
Total
Specific
Portfolio
(21,324) (546,849)
169,281
45,350
868
–
(523)
(763)
(20,801) (546,086) 168,413
Total
(euro/000)
Year
2015
Year
2014
Changes
amount
%
77,186
18.9
(479)
584
121.9
45,350 213,763 (332,323) (408,925)
76,602
18.7
214,631 (332,218) (409,404)
868
105
(25,904)
–
(25,904)
997
–
997
(24,907)
(927)
(23,980)
n.s.
(5,175)
(1,031)
(6,206)
18,974
2,121
21,095
14,889
(13,508)
28,397
n.s.
(22,355) (578,959)
189,252
47,471
236,723 (342,236) (423,839)
81,603
19.3
(556,604)
Report on operations of the Bipiemme Group
The cost of credit, which is the ratio of annualised net loan adjustments to total loans outstanding, decreased from 132
bps at 31 December 2014 to 100 bps at 31 December 2015 (-32 bps). For further analysis, please see the section in
this report on “Asset quality”.
The quarterly analysis of adjustments on loans and other
activities show, in the fourth quarter of 2015, an amount
of 96 million euro, up compared with the previous
quarter.
Quarterly trend in net adjustments for impairment of
loans and other activities (euro/mln)
and the annualised cost of credit (bps)
The cost of credit shows a similar trend, reaching 112
bps on a quarterly basis.
140
104
85
1Q 14
170
110
114
88
2Q 14
3Q 14
91
137
4Q 14
112
93
112
74
94
78
96
1Q 15
2Q 15
3Q 15
4Q 15
Net adjustments for impairment of loans and other activities
Annualized quarterly cost of credit
Provisions for risks and charges include the following items:
write-back – in the amount of 17.4 million – of the quota exceeding the provisions for disputes arising out of the
now closed mandatory convertible bond Prestito Obbligazionario “Convertendo BPM 2009/2013 – 6.75%”, as
described in this report under the section “Significant events”;
write-back – in the amount of 4.5 million euro- of the provisions made for contractual commitments relating to the
sale- in 2010 – of the custodian bank activities to the BNP Paribas Group. In particular, under this agreement it was
established that the price could be subject to adjustment based on the achievement of certain levels of annual revenue;
estimate of the cost – in the amount of 8.4 million euro – relating to reimbursements to customers required as a solution
to some problems which emerged as a result of the transparency checks, carried out by the Bank of Italy, at some
branches during the fourth quarter of 2014. Further details are available in the explanatory notes (section 12 on
liabilities).
Net result
Net income as of 31 December 2015, in the amount of 289.9 million euro, increased by about 57 million euro compared
with the net income of 232.9 million euro in 2014. The net income of the Parent Company, after recognising minority
interests (1 million euro), amounted to 288.9 million euro compared with a net income of 232.3 million in 2014.
Excluding the above mentioned non-recurring items, the net income of 2015 totalled 259.9 million euro, a significant
improvement compared with the net income of 118.2 million euro in 2014 (+83.4%).
Report on operations of the Bipiemme Group
95
Statement of cash flows
The following statement of cash flows of the Bipiemme Group for the year ended 31 December 2015 shows cash
absorption of 22 million euro, compared with cash absorption of 40 million euro in 2014.
During 2015, operating activities generated total cash of 170 million euro and in particular:
operations generated cash of 728 million euro, down on last year;
financial assets absorbed 2,260 million euro of liquidity compared with 694 million euro generated in 2014, also
thanks to the increase in loans;
financial liabilities generated liquidity for 1,701 million euro compared with absorption of 2,282 million euro in
December 2014, due essentially to the growth in interbank deposits.
The investing activities absorbed some 95 million euro, compared with the liquidity generated for 160 million euro last
year, primarily due to the disposal of a share of Anima Holding.
Bipiemme Group – Statement of cash flows (indirect method)
A. OPERATING ACTIVITIES
1. Cash flow from operations
2. Cash flow from/used in financial assets
3. Cash flow from/used in financial liabilities
Net cash flow from (used in) operating activities
(euro/000)
Year 2015
Year 2014
728,276
903,393
(2,259,828)
694,245
1,701,319
(2,282,179)
169,767
(684,541)
B. INVESTING ACTIVITIES
1. Cash flow from
8,780
225,306
(103,532)
(65,744)
(94,752)
159,562
Net cash flow from/ used in financing activities
(97,151)
484,617
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(22,126)
(40,362)
2. Cash flow used in
Net cash flow from/used in investing activities
C. FINANCING ACTIVITIES
RECONCILIATION
Line items
31,12,2015
31,12,2014
Cash and cash equivalents at the beginning of the period
322,840
363,202
Net increase (decrease) in cash and cash equivalents
(22,126)
(40,362 )
Cash and cash equivalents: foreign exchange effects
0
0
300,714
322,840
Cash and cash equivalents at the end of the period
Key: (+) generated (–) absorbed
96
Report on operations of the Bipiemme Group
Information on the main Bipiemme Group companies
For a complete description of the Bipiemme Group, information on the 2015 results of the main companies included in
the scope of consolidation is shown below. Key income statement and balance sheet figures are provided, together with
a brief commentary.
Companies consolidated line-by-line
Banca Akros S.p.A.
Banca Akros – Reclassified balance sheet
Assets
Cash and cash equivalents
(euro/000)
31.12.2015
30.09.2015 31.12.2014
Change A-B
Change A-C
A
B
C
amount
%
amount
%
417
100
95
317
n.s.
322
n.s.
Financial assets carried at fair value and
hedging derivatives:
2,441,934
2,449,110
2,556,772
(7,176)
–0.3
(114,838)
–4.5
– Financial assets held for trading
1,929,836
1,941,418
2,124,616
(11,582)
–0.6
(194,780)
–9.2
0
0
0
0
n.a.
0
n.a.
512,098
507,692
432,156
4,406
0.9
79,942
18.5
0
0
0
0
n.a.
0
n.a.
– Financial assets designated at fair value
through profit and loss
– Financial assets available for sale
– Hedging derivatives
– F air value change of financial assets in
hedged portfolios
0
0
0
0
n.a.
0
n.a.
Due from banks
672,523
888,931
696,723
(216,408)
–24.3
(24,200)
–3.5
Loans to customers
522,581
425,628
318,494
96,953
22.8
204,087
64.1
38,926
38,996
39,795
(70)
–0.2
(869)
–2.2
Fixed assets
Non-current assets and disposal groups
Other assets
Total assets
Report on operations of the Bipiemme Group
0
0
0
0
n.a.
0
n.a.
28,971
26,342
30,827
2,629
10.0
(1,856)
–6.0
3,705,352
3,829,107
3,642,706
(123,755)
–3.2
62,646
1.7
97
Liabilities and shareholders’ equity
31.12.2015
A
30.09.2015 31.12.2014
B
C
amount
Change A-B
%
Change A-C
amount
%
Due to banks
1,461,709
1,502,077
1,248,482
(40,368)
–2.7
213,227
17.1
Due to customers
667,986
695,344
530,297
(27,358)
–3.9
137,689
26.0
Securities issued
0
0
0
0
n.a.
0
n.a.
Financial liabilities and hedging
derivatives:
1,309,688
1,365,357
1,599,659
(55,669)
–4.1
(289,971)
–18.1
– Financial liabilities held for trading
1,309,688
1,365,357
1,599,659
(55,669)
–4.1
(289,971)
–18.1
– Financial liabilities designated at fair
value through profit and loss
0
0
0
0
n.a.
0
n.a.
– Hedging derivatives
0
0
0
0
n.a.
0
n.a.
– F air value change of financial liabilities
in hedged portfolios
0
0
0
0
n.a.
0
n.a.
Liabilities included in disposal groups
classified as held for sale
0
0
0
0
n.a.
0
n.a.
43,101
48,461
41,999
(5,360)
–11.1
1,102
2.6
Other liabilities
Provisions for specific use
Capital and reserves
Income (loss) for the period (+/-)
Total liabilities and shareholders' equity
Other information
19,085
18,092
23,410
993
5.5
(4,325)
–18.5
187,213
189,126
181,057
(1,913)
–1.0
6,156
3.4
16,570
10,650
17,802
5,920
n.s.
(1,232)
–6.9
3,705,352
3,829,107
3,642,706
(123,755)
–3.2
62,646
1.7
31.12.2015
30.09.2015 31.12.2014
Changes A–B
Changes A–C
A
B
C
amount
%
amount
%
Indirect customer deposits (at market
value)
2,189,000
2,083,000
2,020,000
106,000
5.1
169,000
8.4
- of which assets under management
902,000
882,000
810,000
20,000
2.3
92,000
11.4
255
253
259
2
0.8
(4)
–1.5
1
1
1
0
0.0
0
0.0
Headcount at period-end *
(
Number of branches
)
(*) Employees + net secondees + temps + project-based workers.
An analysis of the principal balance sheet aggregates shows:
financial assets and liabilities consist of securities and financial derivatives, the fair value of which is mainly represented
by prices drawn from active markets or determined based on observable parameters (levels 1 and 2). The measurement
of regulatory VaR (“Value at Risk 99%, 1 day”) of the trading book in 2015 amounted on average to 0.52 million
euro (0.42 million euro in 2014); the measurement of VaR, which also incorporates the issuers risk on debt securities
and credit derivatives, amounts to an average of 1.07 million euro (0.55 million euro in 2014);
the change in the level of amounts due to and from banks and customers is mainly due to the trend in normal
operations in repurchase agreements and securities, which were also entered into with Group banks, and the amount
of cash collateral exchanged with counterparties for exposures in OTC financial derivatives.
shareholders’ equity totalled about 204 million euro as of 31 December 2015;
the Common Equity Tier 1 ratio was 14.7% as of 31 December 2015.
98
Report on operations of the Bipiemme Group
Banca Akros – Reclassified income statement
Line items
(euro/000)
Year 2015
Year 2014
Changes
Amount
%
Interest margin
18,203
10,549
7,654
72.6
Non-interest margin:
62,313
71,784
(9,471)
–13.2
- Net fee and commission income
27,962
24,557
3,405
13.9
- Other income:
34,351
47,227
(12,876)
–27.3
- Dividends from equity investments
0
0
0
n.a.
33,586
45,780
(12,194)
–26.6
765
1,447
(682)
–47.1
80,516
82,333
(1,817)
–2.2
Administrative expenses:
(49,354)
(46,645)
(2,709)
–5.8
a) personnel expenses
(26,646)
(27,568)
922
3.3
b) other administrative expenses
(22,708)
(19,077)
(3,631)
–19.0
(5,045)
(4,475)
(570)
–12.7
(54,399)
(51,120)
(3,279)
–6.4
Operating profit
26,117
31,213
(5,096)
–16.3
Net adjustments for impairment of loans and other activities
(2,941)
(1,314)
(1,627)
–123.8
1,997
(1,783)
3,780
n.a.
0
0
0
n.a.
Income (loss) before tax from continuing operations
25,173
28,116
(2,943)
–10.5
Taxes on income from continuing operations
(8,603)
(10,314)
1,711
16.6
Net income (loss)
16,570
17,802
(1,232)
–6.9
- Net income from banking activities
- Other operating charges/income
Operating income
Net adjustments to property and equipment and intangible
assets
Operating expenses
Net provisions for risks and charges
Profits (losses) from equity and other investments
An analysis of the principal income statement aggregates shows:
the interest margin increased from 10.55 million euro in 2014 to 18.2 million euro in 2015, primarily reflecting the
increase in the average amount of own bonds in portfolio carried out in implementation of the policies formulated in
the budget for 2015;
a positive non-interest margin amounting to roughly 62.31 million euro, mainly generated by:
• net commission flows of 27.96 million euro (24.56 million euro in 2014), achieved via the core activities of
collecting and trading orders on regulated markets, including other services such as the provision of access to
financial, markets for interconnected professional customers, subscription/placement of equity and bond issues
and, in private banking, thanks to individual portfolio management and the fees generated by customers with
assets under administration;
• net income from banking activities in the amount of 33.59 million euro (vs. 45.78 million euro in 2014);
total operating income in the amount of 80.52 million euro (vs. 82.33 million euro in 2014);
total operating expenses in the amount of 54.4 million euro (vs. 51.12 million euro in 2014), which includes the
extraordinary contribution in 2015 (3.03 million euro) paid into the National Resolution Fund in relation to the
resolution to the crisis at four Italian banks.
income before tax from continuing operations (after deducting net adjustments for impairment of loans and net
provisions for risks and charges) in the amount of 25.17 million euro (28.12 million euro in 2014);
net income for the period in the amount of 16.57 million euro (17.8 million euro in 2014), after tax corresponding to
a tax rate of approximately 35%.
Report on operations of the Bipiemme Group
99
Banca Popolare di Mantova S.p.A.
Banca Popolare di Mantova – Reclassified balance sheet
Assets
31.12.2015
(euro/000)
30.09.2015 31.12.2014
Changes A–B
Changes A–C
A
B
C
Amount
%
Amount
%
5,782
4,601
6,557
1,181
25.7
(775)
–11.8
11,794
11,815
11,782
(21)
–0.2
12
0.1
167
181
227
(14)
–7.7
(60)
–26.4
0
0
0
0
n.a.
0
n.a.
11,627
11,634
11,555
(7)
–0.1
72
0.6
– Hedging derivatives
0
0
0
0
n.a.
0
n.a.
– F air value change of financial assets in
hedged portfolios
0
0
0
0
n.a.
0
n.a.
Cash and cash equivalents
Financial assets measured at fair value
and hedging derivatives:
– Financial assets held for trading
– Financial assets designated at fair value
through profit and loss
– Financial assets available for sale
Due from banks
Loans to customers
Fixed assets
Non-current assets and disposal groups
7,142
7,179
25,364
(37)
–0.5
(18,222)
–71.8
504,863
495,813
475,501
9,050
1.8
29,362
6.2
7,842
7,916
8,139
(74)
–0.9
(297)
–3.6
0
0
0
0
n.a.
0
n.a.
Other assets
15,000
13,593
15,006
1,407
10.4
(6)
0.0
Total assets
552,423
540,917
542,349
11,506
2.1
10,074
1.9
Liabilities
31.12.2015
30.09.2015 31.12.2014
Changes A–B
Changes A–C
A
B
C
Amount
%
Amount
%
Due to banks
178,454
168,310
125,406
10,144
6.0
53,048
42.3
Due to customers
306,276
298,176
326,745
8,100
2.7
(20,469)
–6.3
Securities issued
11,916
16,080
22,541
(4,164)
–25.9
(10,625)
–47.1
Financial liabilities and hedging
derivatives:
198
206
228
(8)
–3.9
(30)
–13.2
– Financial liabilities held for trading
198
206
228
(8)
–3.9
(30)
–13.2
– Financial assets designated at fair value
through profit and loss
0
0
0
0
n.a.
0
n.a.
– Hedging derivatives
0
0
0
0
n.a.
0
n.a.
– F air value change of financial liabilities
in hedged portfolios
0
0
0
0
n.a.
0
n.a.
Liabilities included in disposal groups
classified as held for sale
Other liabilities
Provisions for specific use
Capital and reserves
Income (loss) for the period (+/-)
Total liabilities and shareholders' equity
100
0
0
0
0
n.a.
0
n.a.
18,031
20,640
30,979
(2,609)
–12.6
(12,948)
–41.8
879
971
1,095
(92)
–9.5
(216)
–19.7
35,356
35,372
35,126
(16)
0.0
230
0.7
1,313
1,162
229
151
n.s.
1,084
n.s.
552,423
540,917
542,349
11,506
2.1
10,074
1.9
Report on operations of the Bipiemme Group
Other information
31.12.2015
Indirect customer deposits (at market
value)
30.09.2015 31.12.2014
Changes A–B
A
B
C
Amount
Changes A–C
%
Amount
%
181,009
177,354
154,746
3,655
2.1
26,263
17.0
- of which assets under administration
98,668
98,395
97,322
273
0.3
1,346
1.4
- of which assets under management
82,341
78,959
57,424
3,382
4.3
24,917
43.4
Headcount at period-end *
78
78
77
0
0.0
1
1.3
Number of branches
17
17
17
0
0.0
0
0.0
(
)
(*) Employees + net secondees + temps + project-based workers.
An analysis of the principal balance sheet aggregates shows:
Loans to customers, as of 31 December 2015, amounted to about 504.9 million euro, up by 29.4 million euro
(+6.2%) with respect to 31 December 2014. Compared with December 2014, the change was mainly attributable to
an increase of 24 million euro in mortgage loans of (+7.9%). The Bank has continued with its policy of splitting loans,
increasing the private and SME component.
As of 31 December 2015, the aggregate “direct deposits” – comprising amounts due to customers, securities issued
and financial liabilities designated at fair value through profit and loss – totalled 318.2 million euro, down 31.1 million
euro with respect to 31 December 2014 (-8.9%) as a result of the contraction in both amounts “due to customers” by
20.5 million euro (-6.3%) and the “securities issued” by 10.6 million euro (-47.1%). In detail, comparing the aggregate
with the figures reported at the end of 2014, note that:
amounts due to customers totalled 306.3 million euro, a decrease of 20.5 million euro (-6.3%), following a significant
decrease in “current and savings accounts” (-6.3%) reflecting a preference shown by customers for asset management
products with more attractive remuneration;
securities issued in the amount of 11.9 million euro, halved compared with December 2014 (-47.1%) due to repayments
made in the year and the decrease in certificates of deposit (- 0.4 million euro), reflecting a preference shown by
customers for forms of indirect deposits.
At 31 December 2015, the volume of “indirect deposits” with ordinary customers, measured at market value, came to
181 million euro, up 17% compared with 31 December 2014.
In particular, assets under management totalled about 82 million euro, a significant increase compared with December
2014 (+43.4%) primarily due to the performance of the fund segment (+11.2 million euro; +38.1%) and the considerable
increase in insurance reserves (+12.8 million euro; +46.9%), while assets under administration came to 98.7 million
euro, up compared with December 2014 (+1.3 million euro; +1.4%) also thanks to the recovery of financial markets.
At 31 December 2015, shareholders’ equity, including income for the year, totalled 36.7 million euro, up 1.3 million
euro compared with the end of 2014, as a result of the income for 2015. Capital and reserves reached a total of
35.4 million euro including 30.9 million euro for the share premium reserve.
The Bank’s financial position as of 31 December 2015 shows a Total Capital Ratio of 9.35% which is above the trigger
of the Risk Appetite Framework (8.7%).
Report on operations of the Bipiemme Group
101
Banca Popolare di Mantova – Reclassified income statement
Line items
Interest margin
(euro/000)
Year 2015
Year 2014
Changes
Amount
%
11,934
9,166
2,768
30.2
Non-interest margin:
5,585
5,558
27
0.5
– Net fee and commission income
4,794
4,778
16
0.3
791
780
11
1.4
– Other income:
– Dividends from equity investments
0
0
0
n.a.
– Net income from banking activities
(7)
57
(64)
n.a.
798
723
75
10.4
17,519
14,724
2,795
19.0
– Other operating charges/income
Operating income
Administrative expenses:
(9,535)
(9,363)
(172)
–1.8
a) personnel expenses
(5,338)
(5,151)
(187)
–3.6
b) other administrative expenses
(4,197)
(4,212)
15
0.4
(867)
(814)
(53)
–6.5
(10,402)
(10,177)
(225)
–2.2
7,117
4,547
2,570
56.5
(5,090)
(3,776)
(1,314)
–34.8
36
(42)
78
n.a.
0
0
0
n.a.
2,063
729
1,334
183.0
Taxes on income from continuing operations
(750)
(500)
(250)
–50.0
Net income (loss)
1,313
229
1,084
n.s.
Net adjustments to property and equipment and intangible
assets
Operating expenses
Operating profit
Net adjustments for impairment of loans and other activities
Net provisions for risks and charges
Profits (losses) from equity and other investments
Income (loss) before tax from continuing operations
Operating income, as of 31 December 2015, amounted to 17.5 million, up 19% compared with the previous year,
thanks to the good performance of the interest margin (+ 2.8 million; +30.2%).
In detail:
the interest margin came to 11.9 million euro in December 2015, posting an increase of 30.2% compared with
December 2014, due to an increase in the commercial margin which benefits from the widening of the spread
between lending and borrowing rates (+46 bps compared with 2014) and was 2.29% (average annual figures);
the non-interest margin amounted to 5.6 million euro as of 31 December 2015, slightly higher than the same
period in 2014. This result reflects the basic stability of net fee and commission income (+0.3%) and the increase in
“other operating charges/income” (+75 thousand euro) largely offset by the reduction in “net income from banking
activities” (-64 thousand euro).
The aggregate of operating expenses – comprising administrative expenses and net adjustments to property and
equipment and intangible assets – totalled 10.4 million euro at the end of 2015, a slight increase compared to
December 2014.
In detail:
personnel expenses totalled 5.3 million euro, an increase of 187 thousand euro (i.e. +3,6%) compared with the
previous year and include the burden of adjustment to the Solidarity Fund in the amount of 66 thousand euro;
Other administrative expenses totalled 4.2 million euro net of “tax recoveries”, and are stable compared with
31 December 2014 (-0.4%).
The cost/income ratio was 59.4%, a significant reduction of about 9.7 p.p. compared with December 2014 (69.1%)
due to the increase in operating income.
102
Report on operations of the Bipiemme Group
Operating profit totalled 7.1 million euro, an increase of 2.6 million euro; (+56.5%) compared with December 2014.
Following the considerable growth in loan adjustments of 5.1 million euro (3.8 million euro in December 2014),
the result before tax from continuing operations came to 2.1 million euro, compared with the positive result of 729
thousand euro in December 2014.
2015 closed with a positive net result of 1.3 million euro, marking a significant improvement over the 0.2 million euro
recorded in December 2014.
ProFamily S.p.A.
ProFamily – Reclassified balance sheet
Assets
(euro/000)
31.12.2015
30.09.2015
31.12.2014
A
B
A
amount
%
amount
%
Cash and cash equivalents
0
1
0
(1)
–100.0
0
n.a.
Financial assets carried at fair value and
hedging derivatives
0
0
0
0
n.a.
0
n.a.
4,318
3,902
7,525
416
10.7
(3,207)
–42.6
996,450
928,753
898,425
67,697
7.3
98,025
10.9
4,649
4,121
5,463
528
12.8
(814)
–14.9
0
0
0
0
n.a.
0
n.a.
10,672
10,859
10,694
(187)
–1.7
(22)
–0.2
1,016,089
947,636
922,107
68,453
7.2
93,982
10.2
31.12.2015
30.09.2015
31.12.2014
Due from banks
Loans to customers
Fixed assets
Non-current assets and disposal groups
Other assets
Total assets
Liabilities and shareholders’ equity
Changes A–B
Changes A–C
Changes A–B
Changes A–C
A
B
A
amount
%
amount
%
937,346
871,156
853,910
66,190
7.6
83,436
9.8
Due to customers
4,850
5,180
2,447
(330)
–6.4
2,403
98.2
Securities issued
0
0
0
0
n.a.
0
n.a.
Financial liabilities and hedging
derivatives
0
0
0
0
n.a.
0
n.a.
Liabilities included in disposal groups
classified as held for sale
0
0
0
0
n.a.
0
n.a.
11,554
10,776
8,829
778
7.2
2,725
30.9
1,810
2,092
2,060
(282)
–13.5
(250)
–12.1
54,861
54,861
52,091
0
0.0
2,770
5.3
5,668
3,571
2,770
2,097
n.s.
2,898
104.6
1,016,089
947,636
922,107
68,453
7.2
93,982
10.2
31.12.2015
30.09.2015
31.12.2014
A
B
C
amount
%
amount
%
93
92
102
1
1.1
(9)
–8.8
33
28
25
5
17.9
8
32.0
Due to banks
Other liabilities
Provisions for specific use
Capital and reserves
Income (loss) for the period (+/–)
Total liabilities and shareholders' equity
Other information
Headcount at period-end *
(
)
Number of branches
Changes A–B
Changes A–C
(*) Employees + net secondees + temps + project-based workers.
Report on operations of the Bipiemme Group
103
An analysis of the principal balance sheet aggregates shows:
total assets have reached a total of 1,016.1 million euro, up on the 922.1 million euro recorded at the end of 2014;
over 98% of this figure is related to the loans, comprising 4.3 million euro due from banks and 996.5 million euro
mainly relating to increase in loans granted to customers with respect to last year.
property and equipment totalled 0.7 million euro and intangible assets totalled some 4 million euro, are related to
furniture and hardware e software, respectively;
other assets totalled 10.7 million euro and mainly contain tax assets (7.8 million euro);
due to banks, recorded as liabilities in the financial statements, amount to 937.3 million euro, are entirely due to the
Parent Company and are attributable to the utilisation of lines of credit related to loans granted;
other liabilities, in the amount of 11.6 million euro, mainly include the invoices to be received (5.5 million euro);
shareholders’ equity comes to 60.5 million euro and consists of share capital in the amount of 50.0 million euro,
reserves of 4.9 million euro and profit for the year of 5.7 million euro.
ProFamily – Reclassified income statement
Line items
Interest margin
Non-interest margin:
– Net fee and commission income
– Other income:
(euro/000)
Year 2015
Year 2014
Changes
amount
%
34,293
31,116
3,177
10.2
3,223
1,302
1,921
147.5
642
(1,335)
1,977
n.a.
2,581
2,637
(56)
–2.1
– Dividends from equity investments
0
0
0
n.a.
– Net income from banking activities
0
0
0
n.a.
2,581
2,637
(56)
–2.1
– Other operating charges/income
Operating income
Administrative expenses:
a) personnel expenses
b) other administrative expenses
Net adjustments to property and equipment and intangible
assets
Operating expenses
37,516
32,418
5,098
15.7
(18,253)
(16,680)
(1,573)
–9.4
(7,380)
(7,559)
179
2.4
(10,873)
(9,121)
(1,752)
–19.2
(2,320)
(2,728)
408
15.0
(20,573)
(19,408)
(1,165)
–6.0
Operating profit
16,943
13,010
3,933
30.2
Net adjustments for impairment of loans and other activities
(8,689)
(8,323)
(366)
–4.4
(88)
(344)
256
74.4
0
0
0
n.a.
Net provisions for risks and charges
Profits (losses) from equity and other investments
Income (loss) before tax from continuing operations
Taxes on income from continuing operations
Net income (loss)
104
8,166
4,343
3,823
88.0
(2,498)
(1,573)
(925)
–58.8
5,668
2,770
2,898
104.6
Report on operations of the Bipiemme Group
An analysis of the principal income statement aggregates shows:
operating income for 2015 amounts to 37.5 million euro, up 5 million euro with respect to 2014; the interest margin
included in this item was 34.3 million euro (+3.2 million euro; +10.2%);
loan adjustments came to 8.7 million euro. This figure has increased slightly with respect to the previous year
(8.3 million euro) in line with the growth in the portfolio volume;
total administrative expenses incurred by the company at December 2015, amount to 18.3 million euro, up by
16.7 million euro compared with 2014. In particular:
• personnel expenses amounted to 7.4 million euro, of which 6.9 million euro pertain to employees;
• other administrative expenses amounted to 10.9 million euro, an increase with respect to the 9.1 million
euro reported in 2014 due to an increase in variable costs relating to the volume of disbursements and
costs for the securitisation transaction. The main component, which accounts for 40% of total administrative
expenses, is professional fees and third-party services that amount to 4.7 million euro and mainly include
the costs for the “ProFamily Securitisation Srl” securitisation transaction, the consortium service provided by
the Parent Company and the outsourcing services for credit recovery, bank-office, contact centre, help desk
and digital storage;
net adjustments to property and equipment and intangible assets totalled 2.3 million euro; the most significant
depreciation charge relates to the software purchased for the management/information system;
income before tax from continuing operations totalled 8.2 million euro, a substantial improvement on the 4.3 million
euro recorded at the end of 2014. Income taxes were negative and amounted to 2.5 million euro;
net income for the year totalled 5.7 million euro, an increase compared with income of 2.8 million euro in
December 2014. This result is due to the increase in volumes disbursed to customers, the steady decrease in funding
costs and the fact that the bank was able to keep the portfolio at excellent quality levels.
Report on operations of the Bipiemme Group
105
Related party transactions
As is known, the rules on related party transactions aim to limit the risk that membership or at least proximity to the
company’s decision-making centres of by certain parties (so-called “related parties”) might compromise the impartiality
of business decisions and exclusive pursuit of the company’s interests, with possible distortions in the allocation of
resources, exposure of the company to risks not adequately measured or controlled and potential damage to the
company and its stakeholders.
In this regard, the Bipiemme Group has adopted special internal regulations, approving the “Regulation of the process
of related parties and related entities” (hereinafter the “Regulation”), prepared in accordance with the provisions
of the prudential supervision of the Bank of Italy on the subject of associated persons (circular 263/2006, title V,
chapter 5) and the Consob Regulation on related party transactions (resolution 17221 of 12.3.2010 and subsequent
amendments), as well as art. 136 of the Banking Code and available on the website www.gruppobpm.it (to which
reference should be made for a detailed description).
In particular, the Group regulation:
i. sets out the criteria for the identification of the Bipiemme Group’s related parties and related entities (hereinafter
“Associated Persons”);
ii. defines quantitative limits for the assumption by the Banking Group of risk-weighted assets involving Associated
Persons, establishing the methods for their calculation and, at the same time, regulating the system of internal controls
over transactions with Associated Persons;
iii. establishes the manner in which transactions with Associated Persons are approved, differentiating between less and
more material transactions and defining in this context the role and the duties of the Independent Directors;
iv. identifies cases for exemptions and exceptions for certain categories of transactions with Associated Persons;
v. regulates the disclosure (and accounting) requirements as a result of entering into related party transactions.
The Bipiemme Group has also prepared suitable “implementation instructions” (adopted individually by Bipiemme
Group companies) to accompany this Regulation. These are designed (i) to define certain aspects regarding the correct
management of transactions with related parties, to optimise the monitoring and management of the related positions
by operators, and to identify the specific authorisation levels; (ii) to collect in a single integrated text (available on
www.gruppobpm.it to which reference should be made for details) the internal policies regarding controls over risk
assets and conflicts of interest in respect of Associated Persons adopted by the Bipiemme Group.
Therefore, having set out the general legal framework and regulatory system for “related parties” within the Group,
it should be pointed out that, with particular reference to the granting of loans (one of the Bank’s main businesses),
the IT procedures currently used by the Bank make it possible, among other things, to recognise immediately – and
consequently to centralise automatically with the pertinent head office structures – any lines of credit granted to those
who are considered to be a related party.
Having said this by way of general introduction, as regards the first nine months of 2015 and, in particular, the
relationships between BPM and its subsidiaries and associates, as well as with other related parties, we would point out
that any such transactions have been carried out as part of the Bank’s normal day-to-day activities. They are regulated
at market conditions for transactions of that type and, where these do not exist, based on an adequate remuneration of
the costs incurred to produce the services rendered.
In this regard, we would like to point out that:
there were no atypical or unusual transactions during 2015 with related parties or any such that would significantly
affect the balance sheet, income statement or financial position and hence requiring disclosure to the market in
accordance with the Consob’s Issuers Regulation in force;
106
Report on operations of the Bipiemme Group
all loans to subsidiaries and associates, as well as to other affiliates were subjected to Board approval regardless of
the amount, as foreseen in the internal Credit Line Regulations (without prejudice, where applicable, to the instructions
on related party/associated persons transactions contained in the “Rules”);
also subject to board resolution – i.e. approved by a unanimous vote of Directors and with the unanimous vote in
favour of the audit committee – are the transactions carried out directly or indirectly (and, thus, also through “close
relatives”) with persons that fall into the field of application of art. 136 of the Banking Code (“Obligations of bank
corporate officers”).
With reference to the requirements of art. 5, para. 8, of Consob Regulation 17221/2010 (and subsequent amendments)
on interim accounting information, note that as part of its normal operations the Bank carried out a number of
transactions with related parties in 2014 that would qualify as being of “greater relevance” (under Consob’s regulation
and the related internal procedure); in particular, these transactions were carried out with direct or indirect subsidiary
companies or associates of the Bank.
In this connection, with particular reference to credit line relationships (understood as the overall credit positions
granted), the following is a summary table of the credit line relationships maintained by BPM with these companies,
approved or revised by BPM during 2015 and falling within the said relevance parameters.
(Amounts in thousands of euro)
Counterparty
Nature of relationship
Total credit grantedminimum
Total credit grantedmaximum
Anima SGR SpA
Associated company
286
300,286
BPM Covered Bond Srl
Subsidiary company
6,870,664
7,188,535
BPM Covered Bond 2 Srl
Subsidiary company
1,363,874
2,863,874
Factorit SpA
Associated company
290,000
330,000
ProFamily SpA
Subsidiary company
1,122,042
1,122,042
SelmaBipiemme Leasing SpA
Associated company
361,078
411,078
In addition, the Parent Company also carries out routine transactions with Banca Akros S.p.A. involving the specific
activities of that subsidiary. These include, in particular, the provision of rotating funds that are used by Banca Akros S.p.A.
for operations in the capital markets, as well as overnight transactions and repurchase agreements.
As regards intercompany transactions, it should be noted that during the second half of 2015, the Bank – as part of
a new programme to issue covered bonds – transferred to the SPV BPM Covered Bond Srl 2 (a BPM subsidiary) a
portfolio of residential mortgage loans with a nominal value of 1.3 billion euro, and a portfolio of residential mortgage
loans with a nominal value of about 756 million euro, granting the SPV a loan of the same amount. The total value of
the portfolio was paid for by BPM Covered Bond Srl 2 using the above loans.
Lastly, during the second half of 2015, the subsidiary ProFamily SpA – as part of a securitisation – transferred to
the SPV (ProFamily Securitisation Srl, a company consolidated line-by-line) a loan book for a total amount of some
712.6 million euro, subscribing to the related securities issued by the SPV.
As part of the aforementioned securitisation transaction, an irregular pledge was granted on the senior notes (issued by
ProFamily Securitisation Srl and underwritten by ProFamily SpA) for an amount of about 584 million euro as security
for the loans granted by the Parent Company.
Report on operations of the Bipiemme Group
107
Outlook
The IMF World Economic Outlook update of January cut global growth forecasts in 2016 by 0.2 percentage points to
3.4%. The main reason for this is due to a slowdown in major emerging market economies, but also the less optimistic
view of several advanced economies. The projected growth of GDP in China has stopped at +6.3%, the lowest
value since 1990. The GDP for the United States is expected to accelerate to +2.6%, a figure that is higher than the
performance in 2015, but slightly below the forecasts of October; the downward revision is due to the slowdown in
exports, which appears to be penalised by the appreciation of the dollar and subdued foreign demand. In the euro
area, the GDP at the end of 2016 is projected to increase +1.7%, up from 2015 (+1.5%); this trend would be supported
by more expansive economic, budgetary and monetary policies in addition to buoyant domestic demand. According
to Prometeia (update of the December 2015 Brief), Italy’s GDP is expected to pick up (+1.2%); household expenditure
should increase by +1.4% , taking advantage of the expansionary stance of the fiscal policy contained in the Stability
law, not to mention the effects of an increased employment rate (+0.6%). State expenditure should decrease by -0.3%,
while investments in construction are expected to increase by +1.5%, after almost nine years of declines, supported by
the confirmation of tax breaks for building renovations and for energy saving measures contained in the stability law.
The banking business should benefit from the fact that the Quantitative Easing programme has been extended to March
2017, as announced by Draghi at the meeting held on 3 December. Forecasts by Prometeia indicate a slight decline
in direct deposits, with the bond component suffering a further decline of about 11%, while the trend in deposits is
expected to be +2.9%; the allocative choices made by investors will increasingly shift towards forms of time deposits
that can offer greater returns than more liquid forms of deposits. Prometeia estimates that lending to households will
increase by +2.9% and by +1.8% to non-financial companies.
Under these circumstances, the Bipiemme Group’s operations will continue in line with the guidelines pursued to date
as set out in the Business Plan approved in March 2014. Our commercial operations will remain focused on improving
our territorial presence and the level of customer service, while our financial intermediation activities, supported by solid
capital and liquidity bases, should confirm, above all in the corporate segment, signs of recovery in volumes, even if
faced with an increase in competitive pressure. On the deposits front, the shift out of term deposits into sight deposits
is expected to continue, with a consequent reduction in cost which will help contain the erosion of the spread between
lending and borrowing rates. Among the components of service income, fees should still be supported by the positive
performance of assets under management, also benefiting from the growth in lending and the effect of the economic
recovery on the use of banking services. Tight control over operating expenses and risks will continue to be an important
lever to maintain profitability. New development initiatives will be aimed at achieving greater efficiency, productivity and
organisational simplification.
Risks and uncertainties
The Group’s operations are exposed to the risk of a macroeconomic trend that differs from that expected, with particular
reference to the domestic economy and the territories in which the Group is more present. A further element of risk could
come from a higher than expected slowdown of the Chinese economy and other emerging countries (Brazil and Russia)
for the adverse impact on world trade. The massive drop in oil prices, the geopolitical tensions in the Middle East and
the possible worsening of the Greek crisis could be causes of more unstable growth, while the uncertainties arising from
low inflation in the Eurozone are currently being fought by a highly expansionary monetary policy. In the event of such
adverse scenarios, the Group would be expected to be resilient, given its adequate level of capital, confirmed by the
outcome of the Comprehensive Assessment conducted by the Supervisory last year.
The Group is expected to continue operating in the foreseeable future, so this report on operations has been prepared
on a going concern basis.
108
Report on operations of the Bipiemme Group
Opt-out from the obligation to publish a prospectus in the event of significant transactions
Pursuant to art. 3 of Consob Resolution no. 18079 of 20 January 2012, the Management Board of Banca Popolare di
Milano has decided to take advantage of the opt-out provided for in arts. 70, paragraph 8, and 71, paragraph 1-bis
of Consob Regulation no. 11971/99 (as amended).
Report on operations of the Bipiemme Group
109
Consolidated financial statements
111
Bipiemme Group – Consolidated balance sheet
Line items – assets
(euro/000)
31.12.2015
31.12.2014
10.
Cash and cash equivalents
20.
Financial assets held for trading
30.
Financial assets designated at fair value through profit and loss
40.
Financial assets available for sale
50.
Investments held to maturity
60.
Due from banks
70.
Loans to customers
80.
Hedging derivatives
90.
Fair value change of financial assets in hedged portfolios (+/–)
11,237
20,107
100. Investments in associates and companies subject to joint control
342,145
293,797
0
0
120. Property and equipment
720,383
715,705
130. Intangible assets
136,931
108,377
– goodwill
0
0
140. Tax assets
1,101,490
1,091,309
110. Technical insurance reserves reassured with third parties
300,714
322,840
1,797,874
1,921,518
75,543
97,449
9,491,248
9,670,272
0
0
1,224,717
984,777
34,186,837
32,078,843
40,638
178,460
of which:
a) current
229,901
187,310
b) deferred
871,589
903,999
716,452
710,044
0
0
773,543
788,357
50,203,300
48,271,811
of which Law 214/11
150. Non-current assets and disposal groups held for sale
160. Other assets
Total assets
112
Consolidated financial statements
Bipiemme Group – Consolidated balance sheet
Line items – liabilities and shareholders’ equity
(euro/000)
31.12.2015
31.12.2014
10.
Due to banks
4,839,439
3,318,564
20.
Due to customers
28,622,852
27,702,942
30.
Securities issued
8,849,290
8,981,834
40.
Financial liabilities held for trading
1,183,557
1,463,445
50.
Financial liabilities designated at fair value through profit and loss
129,627
152,116
60.
Hedging derivatives
48,678
58,751
70.
Fair value change of financial liabilities in hedged portfolios (+/–)
18,086
16,084
80.
Tax liabilities
132,166
165,201
a) current
b) deferred
90.
Liabilities associated with non-current assets and disposal groups held for sale
100. Other liabilities
0
22
132,166
165,179
0
0
1,297,729
1,336,792
110. Employee termination indemnities
125,451
137,730
120. Allowances for risks and charges:
309,104
382,245
91,913
92,568
217,191
289,677
a) post-employment benefits
b) other allowances
130. Technical reserves
0
0
140. Valuation reserves
220,255
321,917
0
0
0
0
753,717
617,888
445
0
3,365,439
3,365,439
(1,416)
(854)
150
Redeemable shares
160. Equity instruments
170. Reserves
180. Share premium reserve
190. Share capital
200. Treasury shares (–)
210. Minority interests (+/–)
220. Net income (loss) for the period (+/–)
Total liabilities and shareholders’ equity
Consolidated financial statements
19,974
19,424
288,907
232,293
50,203,300
48,271,811
113
Bipiemme Group – Consolidated income statement
Line items – income statement
(euro/000)
Year 2015
Year 2014
10.
Interest and similar income
1,160,394
1,289,302
20.
Interest and similar expense
(353,648)
(489,131)
30.
Interest margin
806,746
800,171
40.
Fee and commission income
678,897
636,506
50.
Fee and commission expense
(72,901)
(79,940)
60.
Net fee and commission income
605,996
556,566
70.
Dividend and similar income
13,065
17,699
80.
Profits (losses) on trading
37,937
52,870
90.
Fair value adjustments in hedge accounting
(9,623)
411
100. Profits (losses) on disposal or repurchase of:
163,092
149,740
a) loans
(24,907)
(927)
b) financial assets available for sale
200,980
150,764
c) investments held to maturity
0
0
(12,981)
(97)
(5,136)
7,667
120. Net interest and other banking income
1,612,077
1,585,124
130. Net losses/recoveries on impairment of:
(359,847)
(463,654)
(332,218)
(409,404)
(42,518)
(40,742)
0
0
d) financial liabilities
110. Profits (losses) on financial assets and liabilities designated at fair value
a) loans
b) financial assets available for sale
c) investments held to maturity
d) other financial activities
140. Net income from banking activities
150. Net insurance premiums
160. Other net insurance income (expenses)
170. Net income from banking and insurance activities
180. Administrative expenses:
14,889
(13,508)
1,252,230
1,121,470
0
0
0
0
1,252,230
1,121,470
(1,031,947)
(988,054)
a) personnel expenses
(612,382)
(612,420)
b) other administrative expenses
(419,565)
(375,634)
190. Net provisions for risks and charges
200. Net adjustments to/recoveries on property and equipment
10,758
(3,545)
(41,018)
(44,450)
210. Net adjustments to/recoveries on intangible assets
(29,125)
(25,859)
220. Other operating expenses/income
122,513
138,048
230. Operating expenses
(968,819)
(923,860)
240. Profits (losses) on investments in associates and companies subject to joint control
70,004
127,331
250. Net result of valuation differences on property, equipment and intangible assets measured at fair value
0
0
260. Goodwill impairment
0
0
6
0
280. Income (loss) before tax from continuing operations
270. Profits (losses) on disposal of investments
353,421
324,941
290. Taxes on income from continuing operations
(63,512)
(92,008)
300. Income (loss) after tax from continuing operations
289,909
232,933
0
0
289,909
232,933
(1,002)
(640)
288,907
232,293
310. Income (loss) after tax from discontinued operations
320. Net income (loss) for the period
330. Net (income) loss for the period attributable to minority interests
340. Net income (loss) for the period attributable to the Parent Company
114
Basic EPS from continuing operations – Euro
0.066
0.059
Diluted EPS from continuing operations – Euro
0.066
0.059
Basic EPS – Euro
0.066
0.059
Diluted EPS – Euro
0.066
0.059
Consolidated financial statements
Bipiemme Group – Statement of Consolidated comprehensive income
Line items
10.
Net income (loss) for the period *
( )
Other comprehensive income, net of tax, without reversal to the income statement
(euro/000)
Year 2015
Year 2014
289,909
232,933
2,833
(22,902)
20.
Property and equipment
0
0
30.
Intangible assets
0
0
2,908
(22,827)
0
0
(75)
(75)
(104,575)
199,706
40.
Actuarial gains (losses) on defined benefit plans
50.
Non-current assets held for sale
60.
Share of valuation reserves connected with investments carried at equity
Other comprehensive income, net of tax, with reversal to the income statement
70.
Hedging of foreign investments
0
0
80.
Foreign exchange differences
0
0
90.
Cash flow hedges
73
(4,502)
(105,500)
203,909
100. Financial assets available for sale
110. Non-current assets held for sale
120. Share of valuation reserves connected with investments carried at equity
130. Total other comprehensive income, net of tax
140. Total comprehensive income (line items 10+130)
150. Total consolidated comprehensive income attributable to minority interests
0
0
852
299
(101,742)
176,804
188,167
409,737
(922)
(678)
160. Total consolidated comprehensive income attributable to the Parent Company
187,245
409,059
(*)
288,907
232,293
Net income (loss) for the period attributable to the Parent Company
Net income (loss) for the period attributable to minority interests
Net income (loss) for the period
1,002
640
289,909
232,933
The statement of comprehensive income is a restatement of the result for the year that includes changes in the value of
assets recognised directly in the valuation reserves (net of tax).
Consolidated financial statements
115
Bipiemme Group – Consolidated statement of changes in shareholders’ equity Balance at
31.12.2014
Share capital:
a) ordinary shares
3,367,798
3,367,798
b) other shares
Changes
in opening
balances
0
Balance at Allocation of net income
1.1.2015
of the previous year
Reserves
Changes for the year
Dividends Changes in
and other reserves(*)
allocations
Operations on
shareholders’ equity
Issue of new
Purchase
shares(**) of treasury
shares
3,367,798
0
0
0
0
0
0 3,367,798
0
0
0
0
0
0
0
0
0
0
0
0
0
11,982
0
11,982
0
0
0
445
0
Reserves:
622,241
0
622,241
136,061
0
16,094
(15,969)
0
a) Retained earnings
600,443
0
600,443
136,061
0
0
0
0
Share premium reserve
21,798
0
21,798
0
0
16,094
(15,969)
0
Valuation reserves:
b) Others
322,007
0
322,007
0
0
0
0
0
a) Available for sale
377,909
0
377,909
0
0
0
0
0
b) Cash flow hedges
(4,502)
0
(4,502)
0
0
0
0
0
(62,038)
0
(62,038)
0
0
0
0
0
0
0
0
0
0
0
0
0
c) A
ctuarial gains (losses) on
defined benefit pension plans
d) N
on-current assets held
for sale and discontinued
operations
e) P
ortion of valuation reserves
connected with investments
carried at equity
(2,804)
0
(2,804)
0
0
0
0
0
f) Special revaluation laws
13,442
0
13,442
0
0
0
0
0
0
0
0
0
0
0
0
0
(854)
0
(854)
0
0
0
16,445
(17,007)
Equity instruments
Treasury shares
Net income (loss) for the period
232,933
0
232,933
(136,061)
(96,872)
0
0
0
Shareholders’ equity
4,556,107
0
4,556,107
0
(96,872)
16,094
921
(17,007)
Group shareholders’ equity
4,536,683
0
4,536,683
0
(96,589)
16,094
921
(17,007)
19,424
0
19,424
0
(283)
0
0
0
Minority interests
(*) The amounts shown in this column mainly relate to the charge to income relating to profit sharing by means of the allocation of shares to employees
pursuant to article 60 of the bylaws.
(**)The amounts shown in this column relate to:
–
the allocation of 16,688,831 shares to employees relating to profit sharing pursuant to article 60 of the 2014 bylaws. Such allocation led to an
increase in the share premium reserve of 442 thousand euro;
–
changes in treasury shares which led to an increase of 2 thousand euro in the share premium reserve.
116
Consolidated financial statements
as at 31 December 2015
(euro/000)
Changes for the year
Comprehensive
income 2015
Shareholders’
equity at
31.12.2015
Group
shareholders’
equity at
31.12.2015
Minority
interests at
31.12.2015
Operations on
shareholders’ equity
Extraordinary
dividends
Change
in equity
instruments
Derivatives
on treasury
shares
Stock
options
Changes
in equity
interests
0
0
0
0
4
0
3,367,802
3,365,439
2,363
0
0
0
0
4
0
3,367,802
3,365,439
2,363
0
0
0
0
0
0
0
0
0
0
0
0
0
(89)
0
12,338
445
11,893
0
0
0
0
(4)
0
758,423
753,717
4,706
0
0
0
0
(4)
0
736,500
731,794
4,706
0
0
0
0
0
0
21,923
21,923
0
0
0
0
0
0
(101,742)
220,265
220,255
10
0
0
0
0
0
(105,500)
272,409
272,351
58
0
0
0
0
0
73
(4,429)
(4,429)
0
0
0
0
0
0
2,908
(59,130)
(59,082)
(48)
0
0
0
0
0
0
0
0
0
0
0
0
0
0
777
(2,027)
(2,027)
0
0
0
0
0
0
0
13,442
13,442
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
(1,416)
(1,416)
0
0
0
0
0
0
289,909
289,909
288,907
1,002
0
0
0
0
(89)
188,167
4,647,321
4,627,347
19,974
0
0
0
0
0
187,245
4,627,347
4,627,347
0
0
0
0
(89)
922
19,974
Consolidated financial statements
117
Bipiemme Group – Consolidated statement of changes in shareholders’ equity
Balance at
31.12.2013
Share capital:
a) ordinary shares
2,868,071
2,868,071
b) other shares
Changes
in opening
balances
0
Balance at Allocation of net income
1.1.2014
of the previous year
Reserves
Changes for the year
Dividends Operations
Operations on
on sha- shareholders’ equity
and other
allocations reholders’
Issue of new
Purchase
equity(*)
shares(**) of treasury
shares
2,868,071
0
0
0
499,729
0
0 2,868,071
0
0
0
499,729
0
0
0
0
0
0
0
0
0
12,638
0
12,638
(506)
0
0
(8)
0
Reserves:
590,353
0
590,353
29,729
0
17,273
(15,109)
0
a) Retained earnings
570,748
0
570,748
29,729
0
(29)
0
0
Share premium reserve
19,605
0
19,605
0
0
17,302
(15,109)
0
Valuation reserves:
b) Others
145,174
0
145,174
0
0
29
0
0
a) Available for sale
174,000
0
174,000
0
0
0
0
0
b) Cash flow hedges
0
0
0
0
0
0
0
(39,211)
0
(39,211)
0
0
0
0
0
0
0
0
0
0
0
0
0
c) A
ctuarial gains (losses) on
defined benefit pension plans
d) N
on-current assets held
for sale and discontinued
operations
e) P
ortion of valuation reserves
connected with investments
carried at equity
(3,057)
0
(3,057)
0
0
29
0
0
f) Special revaluation laws
13,442
0
13,442
0
0
0
0
0
0
0
0
0
0
0
0
0
(859)
0
(859)
0
0
0
4,518
(4,513)
Equity instruments
Treasury shares
Net income (loss) for the period
29,389
0
29,389
(29,223)
(166)
0
0
0
Shareholders’ equity
3,644,766
0
3,644,766
0
(166)
17,302
489,130
(4,513)
Group shareholders’ equity
3,625,705
0
3,625,705
0
0
17,302
489,130
(4,513)
19,061
0
19,061
0
(166)
0
0
0
Minority interests
(*) The amounts shown in this column relate to:
–
the recognition in the income statement of 16,526,497.60 euro relating to profit sharing by means of the allocation to employees pursuant to
article 60 of the bylaws and to the variable component of remuneration again payable in shares accounted for in accordance with IFRS 2 with a
counter-entry to shareholders’ equity;
–
an amount of 775,000 euro relating to an associated company’s staff incentive plan;
(**)The amounts shown in this column relate to:
–
the issue of 1,162,161,765 new ordinary BPM shares at 0.43 euro for a total of 499,729,558.95 euro;
–
income of 1,251,293 euro from the sale of unexercised options recognised entirely in the share premium reserve;
–
expenses of 22,544,682 euro incurred in connection with the capital increase, net of the relative tax effect of 6,199,788 euro, of which
1,235,681 euro charged to the share premium reserve and 15,109,214 euro charged to the reserves set up on issuing the 2009/2013 BPM
warrants;
–
changes in treasury shares which reduced the share premium reserve by 23,886 euro.
118
Consolidated financial statements
as at 31 December 2014
(euro/000)
Changes for the year
Comprehensive
income 2014
Shareholders’
equity at
31.12.2014
Group
shareholders’
equity at
31.12.2014
Minority
interests at
31.12.2014
Operations on
shareholders’ equity
Extraordinary
dividends
Change
in equity
instruments
Derivatives
on treasury
shares
Stock
options
Changes
in equity
interests
0
0
0
0
(2)
0
3,367,798
3,365,439
2,359
0
0
0
0
(2)
0
3,367,798
3,365,439
2,359
0
0
0
0
0
0
0
0
0
0
0
0
0
(142)
0
11,982
0
11,982
0
0
0
0
(5)
0
622,241
617,888
4,353
0
0
0
0
(5)
0
600,443
596,090
4,353
0
0
0
0
0
0
21,798
21,798
0
0
0
0
0
0
176,804
322,007
321,917
90
0
0
0
0
0
203,909
377,909
377,758
151
0
0
0
0
0
(4,502)
(4,502)
(4,502)
0
0
0
0
0
0
(22,827)
(62,038)
(61,977)
(61)
0
0
0
0
0
0
0
0
0
0
0
0
0
0
224
(2,804)
(2,804)
0
0
0
0
0
0
0
13,442
13,442
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
(854)
(854)
0
0
0
0
0
0
232,933
232,933
232,293
640
0
0
0
0
(149)
409,737
4,556,107
4,536,683
19,424
0
0
0
0
0
409,059
4,536,683
4,536,683
0
0
0
0
(149)
678
19,424
Consolidated financial statements
119
Bipiemme Group – Consolidated statement of cash flows – indirect method
A. OPERATING ACTIVITIES
1. Cash flow from operations
– net income (loss) for the period (+/–)
– profits/losses on financial assets held for trading and on financial assets/liabilities designated
at fair value through profit and loss (–/+)
– profits/losses on hedging activities (–/+)
– net losses/recoveries on impairment (+/–)
– net adjustments to/recoveries on property and equipment and intangible assets (+/–)
– net provisions for risks and charges and other income/expense (+/–)
– net insurance premiums to be collected (–)
– other insurance income/expense to be collected (–/+)
– taxes and duties to be settled (+)
– net adjustments to/recoveries on discontinued operations net of tax effect (+/–)
– other adjustments (+/–)
2. Cash flow from/used in financial assets
– financial assets held for trading
– financial assets designated at fair value through profit and loss
– financial assets available for sale
– due from banks: repayable on demand
– due from banks: other
– loans to customers
– other assets
3. Cash flow from/used in financial liabilities
– due to banks: repayable on demand
– due to banks: other
– due to customers
– securities issued
– financial liabilities held for trading
– financial liabilities designated at fair value through profit and loss
– other liabilities
Net cash from (used in) operating activities
B. INVESTING ACTIVITIES
1. Cash flow from
– sales of investments in associates and companies subject to joint control
– dividends collected from associates and companies subject to joint control
– sales of investments held to maturity
– sales of property and equipment
– sales of intangible assets
– sales of subsidiaries and business branches
2. Cash flow used in
– purchases of investments in associates and companies subject to joint control
– purchases of investments held to maturity
– purchases of property and equipment
– purchases of intangible assets
– purchases of subsidiaries and business branches
Net cash flow from (used in) investing activities
C. FINANCING ACTIVITIES
– issue/purchase of treasury shares
– issue/purchase of equity instruments
– dividends distributed and other
Net cash flow from (used in) financing activities
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
RECONCILIATION
Line items
Cash and cash equivalents at the beginning of the period
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents: foreign exchange effects
Cash and cash equivalents at the end of the period
(euro/000)
Year 2015
728,276
288,907
Year 2014
903,393
232,293
(30,956)
9,623
389,798
70,143
8,675
0
0
63,512
0
(71,426)
(2,259,828)
158,800
18,440
171,095
2,323
(242,158)
(2,461,398)
93,070
1,701,319
(214,845)
1,735,720
914,873
(78,934)
(279,888)
(23,223)
(352,384)
169,767
(7,098)
(411)
499,814
70,309
26,879
0
0
104,463
0
(22,856)
694,245
(461,774)
121,373
(126,010)
(355,406)
1,176,457
829,164
(489,559)
(2,282,179)
269,494
(2,864,858)
1,272,309
(1,134,294)
299,707
(127,736)
3,199
(684,541)
8,790
8,780
0
0
10
0
0
(103,532)
0
0
(45,559)
(57,973)
0
(94,742)
225,306
225,304
0
0
2
0
0
(65,744)
0
0
(22,309)
(43,435)
0
159,562
(562)
0
(96,589)
(97,151)
(22,126)
484,617
0
0
484,617
(40,362)
31.12.2015
322,840
(22,126)
0
300,714
31.12.2014
363,202
(40,362)
0
322,840
Key: (+) from activities (–) used in activities
120
Consolidated financial statements
Consolidated Explanatory Notes
Part A – Accounting Policies
Part B – Information on the consolidated balance sheet
Part C – Information on the consolidated income statement
Part D – Consolidated comprehensive income
Part E – Information on risks and related hedging policies
Part F – Information on consolidated capital
Part G – Business combinations
Part H – Related party transactions
Part I – Share-based payments
Part L – Segment reporting
121
Part A
Accounting Policies
123
A. 1 – General Part
Section 1
Declaration of conformity with IFRS
In application of Legislative Decree no. 38 of 28 February 2005, the consolidated financial statements of the Bipiemme
Group at 31 December 2015 have been prepared in accordance with the International Accounting Standards/
International Financial Reporting Standards issued by the International Accounting Standards Board (IASB) and the
relative interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC) and by the
Standing Interpretations Committee (SIC) as emborsed by the European Commission, pursuant to Regulation (EC)
no. 1606 of 19 July 2002.
The IAS/IFRS applicable at 31 December 2015 and adopted by the European Commission have been used to prepare
consolidated financial statements, including IFRIC/SIC interpretations. A list of the standards and interpretations applied
is included as an attachment to these financial statements.
Reference should be made to “Section 2 – General basis of preparation” below for details of the standards adopted
by the European Commission in 2015 and in previous years whose application is planned for 2015 (or future years).
Section 2 also discusses the main effects of these for the Group.
Section 2
General basis of preparation
These consolidated financial statements have been prepared pursuant to paragraph 1 of article 38 of Decree no. 136
of 18 August 2015, as Banca Popolare di Milano (hereafter “BPM” or the “Parent Company”) is an IFRS intermediary,
as defined in article 2, paragraph 1c) of Legislative Decree no. 38 of 28 February 2005 as amended.
The consolidated financial statements have also been prepared in accordance with the instructions issued by the Bank
of Italy – in compliance with the powers established by art. 9, paragraph 1, of Legislative Decree no. 38/2005 – under
the Bank of Italy’s Circular no. 262/05 of 22 December 2005 “Bank financial statements: formats and rules for their
preparation” and subsequent updates. These instructions establish the format of the financial statements and the related
method of compilation, as well as the contents of the explanatory notes, and are binding.
In preparing the consolidated financial statements the IAS/IFRS effective at 31 December 2015 have been applied
(including all SIC and IFRIC interpretations) as listed in the attachments to these financial statements. To help interpret
and support application other documents prepared by the IASB or IFRIC to supplement the accounting standards have
also taken into account, even if they have not yet been emborsed, including: The Conceptual Framework for Financial
Reporting, Implementation Guidance, Basis for Conclusions, IASB Updates and IFRIC Updates.
In addition, the interpretations for applying IAS/IFRS in Italy prepared by the Italian Accounting Board (OIC) and the
Italian Banking Association (ABI) have been used, as well as the documents issued by ESMA (European Securities and
Markets Authority) and Consob which make reference to specific IAS/IFRS standards or guidelines.
In accordance with article 5, paragraph 2 of Legislative Decree no. 38 of 28 February 2005, the consolidated financial
statements have been prepared with the euro as the reporting currency. In particular, in line with the instructions issued
by the Bank of Italy, the amounts reported in the financial statements and in the explanatory notes, as well as those
indicated in the report on operations, are expressed in thousands of euro unless otherwise specified. Roundings have
been made on the basis of the Bank of Italy’s recommendations.
The financial statements have been prepared taking into account the following general principles laid down in IAS 1
“Presentation of Financial Statements” and the specific accounting principles emborsed by the European Commission
and explained in Part A.2 “Part relating to the main line items in the financial statements” and in compliance with
Part A – Accounting Policies
125
the general assumptions from The Conceptual Framework for Financial Reporting issued by the IASB with particular
regard to the fundamental principle regarding the prevalence of substance over form, and the concept of relevance
and materiality.
No exceptions have been made to the application of IAS/IFRS.
The explanatory notes and the report on operations provide the information required by international accounting
standards, by laws, by the Bank of Italy and by Consob (Commmissione Nazionale per le Società e la Borsa – the
public authority responsible for regulating the Italian financial markets), as well as other information even if not required
but nonetheless deemed necessary to give a true and fair view of the Group’s situation.
The consolidated financial statements of the Bipiemme Group at 31 December 2015 relate to the companies (subsidiaries,
associates and joint ventures) included in the scope of consolidation as detailed in the below section 3 entitled “Scope
of consolidation and consolidation procedures”, which also reports the changes that took place during the period.
Evolution of international accounting standards
Changes in the accounting standards adopted by the European Commission
The following table sets out the changes to the standards and interpretations emborsed by the European Commission
in 2015 or in previous years, application of which became mandatory from 2015, in relation to which no significant
effects on the preparation of these consolidated financial statements were identified.
International accounting standards applicable from 2015
Approved
regulation
Published in the Official
Journal of the European
Union
Titles and comments
1361/2014 of
18.12.2014
L 365 of 19.12.2014
IFRS Annual Improvements Cycle 2011-2013 – Amendments to IFRS 1 1 July 2014
“First-time Adoption of International Financial Reporting Standards”,
IFRS 3 “Business Combinations”, IFRS 13 “Fair Value Measurement”
and IAS 40 “Investment Property”.
The improvements cycle introduces minimal changes designed to
rationalise IFRSs. The aim of these amendments is to resolve certain
inconsistencies and provide methodological clarifications.
126
Effective for
annual periods
beginning on or
after
Part A – Accounting Policies
IAS/IFRS accounting standards and the relative SIC/IFRIC interpretations adopted by the European Commission whose mandatory
effective date falls after 31 December 2015
Pursuant to paragraphs 30 and 31 of IAS 8 the following Regulations emborsed by the European Commission amend
accounting standards already effective, with mandatory application – in the case of financial statements that coincide
with the calendar year – from 1 January 2016 or a later date. The Group has not elected early application.
Approved
regulation
Published in the Official
Journal of the European
Union
Titles and comments
28/2015 of
17.12.2014
L 5 of 9.1.2015
1 February 2015
IFRS Annual Improvements Cycle 2010-2012
Amendments to IFRS 2 “Share-based Payment”, IFRS 3 “Business
Combinations”, IFRS 8 “Operating Segments”, IAS 16 “Property,
Plant and Equipment”, IAS 24 “Related Party Disclosure” and IAS 38
“Intangible Assets”.
29/2015 of
17.12.2014
L 5 of 9.1.2015
Amendment to IAS 19 “Employee Benefits” – Defined Benefit Plans:
Employee Contributions.
1 February 2015
2173/2015 of
24.11.2015
L.307 of 25.11.2015
Accounting for acquisitions of an interest in a joint operation
Amendment to IFRS 11 “Joint Arrangements”
1 January 2016
2231/2015 of
2.12.2015
L.317 of 3.12.2015
Clarification of acceptable methods of depreciation and amortisation 1 January 2016
Amendments to IAS 16 “Property, Plant and Equipment” and IAS 38
“Intangible Assets”
2343/2015 of
15.12.2015
L. 330 of 16.12.2015
IFRS Annual Improvements Cycle IFRS 2012-2014
Amendment to IFRS 5 “Non-current Assets Held for Sale and
Discontinued Operations”, IFRS 7 “Financial Instruments:
Disclosures”, IAS 19 “Employee Benefits” and IAS 34 “Interim
Financial Reporting”.
1 January 2016
2406/2015 of
18.12.2015
L. 333 of 19.12.2015
Amendment to IAS 1 “Presentation of Financial Statements”
1 January 2016
2441/2015 of
18.12.2015
L. 336 of 23.12.2015
Amendment to IAS 27 “Separate Financial Statements”
1 January 2016
Part A – Accounting Policies
Effective for
annual periods
beginning on or
after
127
IAS/IFRS accounting standards, amendments and interpretations issued by the IASB and yet to be emborsed by the European
Commission
For information purposes, set out below are the accounting standards, amendments and interpretations issued by the
IASB, the application of which is subject to adoption by the European Commission and which are consequently not yet
applicable to these consolidated financial statements.
Standard/Interpretation/Amendment
Date of IASB
approval
Indicative effective date
IFRS 14 “Regulatory Deferral Accounts”
30/01/2014
Annual periods beginning on or after 1 January 2016
IFRS 15 “Revenue from Contracts with Customers”
28/05/2014
Annual periods beginning on or after 1 January 2018 (*)
Amendment to IAS 16 “Property, Plant and Equipment” and
IAS 41 “Agriculture”– Agriculture: Bearer Plants
30/06/2014
Annual periods beginning on or after 1 January 2016
IFRS 9 “Financial Instruments”
24/07/2014
Annual periods beginning on or after 1 January 2018 (**)
Amendment to IFRS 10 “Consolidated Financial Statements” 11/09/2014
and IAS 28 “Investments in Associates and Joint Ventures”
– Sale or Contribution of Assets between an Investor and its
Associate or Joint Venture
To be established (***)
Amendment to IFRS 10 “Consolidated Financial Statements”, 18/12/2014
IFRS 12 “Disclosure of Interests in Other Entities” and IAS 28
“Investments in Associates and Joint Ventures” – Investment
Entities: Applying the Consolidated Exception
Annual periods beginning on or after 1 January 2016
IFRS 16 “Leases”
13/01/2016
Annual periods beginning on or after 1 January 2019
Amendment to IAS 12 “Income Taxes” – Recognition of
Deferred Tax Assets for Unrealised Losses
19/01/2016
Annual periods beginning on or after 1 January 2017
(*) The IASB published the amendment to the standard on 11 September 2015, formalising the deferral of the application date to 1 January 2018.
(**)Date established by the IASB. Pending confirmation by the competent bodies of the European Union.
(***)On 17 December 2015 the IASB published an amendment that defers the effective date for the amendments to IFRS 10 and IAS 28 for an indefinite
period.
IFRS 9 – Financial instruments
IFRS 9 will replace the currently effective IAS 39 at the prescribed date of first-time adoption.
The new standard covers three areas:
Classification and Measurement:
– Financial assets: IFRS 9 requires financial assets to be classified in three distinct categories: amortised cost, fair
value through other comprehensive income (an equity reserve) and fair value through profit and loss on the basis
of the business model applied and the contractual nature of the cash flows of the financial instrument. Recognition
and derecognition criteria remain essentially unchanged with respect to IAS 39.
– Financial liabilities: IFRS 9 makes no changes to the present standard apart from those relating to financial
liabilities designated at fair value through profit and loss for which any change in fair value due to an entity’s
own credit risk must be recognised in comprehensive income (an equity reserve) and no longer in profit and
loss (the standard permits this provision to be early adopted from the endorsement date).
Impairment: an impairment model is introduced based on expected losses, replacing the present model in IAS 39
based on incurred losses. The standard classifies loan impairment in three stages depending on the credit quality of
the counterparty, where 12-month expected credit losses are recognised in profit and loss for the stage that includes
counterparties with the best credit standing, while full lifetime credit losses are recognised for the other two stages.
Hedge accounting: simplified hedging models are envisaged compared to the current standard by introducing a
closer alignment with the way in which the risk is managed, as determined by the Parent Company.
The Parent Company started up a project at a Group level in the fourth quarter of 2015 to manage the transition to IFRS
9. The aim of this project is to determine the effects of the adoption of the standard on the Group’s equity and results
128
Part A – Accounting Policies
using a prudent approach, as well as to identify suitable methods for implementing the standard from an organisational
point of view and information systems standpoint, together with appropriate controls that ensure it is effectively applied.
Given the complexity of the standard’s requirements in the various areas discussed above and the interrelations between
the more significant aspects establishing the way in which items are classified and determining the impairment models
and hedging policies, it has not been possible to quantify the expected effects at the present time. In particular, as far
as the new impairment model is concerned, these effects will among other things depend on the composition of the
loans portfolio and current and expected future economic conditions (for the stages for which the lifetime approach is
applied) when the standard is first adopted.
IFRS 15 “Revenue from Contracts with Customers”
The IASB issued IFRS 15 “Revenue from Contracts with Customers” in May 2014. Following a resolution adopted by
the IASB in 2015 this standard will be effective for years in progress on 1 January 2018.
IFRS 15 specifies the principles for recognising revenue, introducing an approach that establishing that revenue shall
only be recognised when all contractual obligations have been satisfied.
The Bank is assessing the impact of IFRS 15, although as a preliminary conclusion believes that the effects of its
application will not be significant.
General principles
The consolidated financial statements have been prepared in accordance with the following general principles laid
down in IAS 1 “Presentation of Financial Statements”.
Going concern. The accounting principles have been adopted with a view to the Group companies continuing in
business as a going concern; they also respond to the accrual principle, the concepts of relevance and materiality of
accounting information, and the prevalence of substance over legal form. The assumptions underlying the preparation
of the financial statements on a going concern basis are explained in the section of the report on operations entitled
“Outlook for operations”. It is believed that, at present, there is no uncertainty about the Group’s ability to continue in
business as a going concern, in accordance with the provisions of IAS 1.
Accrual principle. Except for the cash flow statement, the financial statements have been prepared in accordance with
the accrual principle of accounting, whereby revenues and expenses are recognised according to their economic
maturity, regardless of when they are paid, and according to the matching principle.
Consistency of presentation. The methods of presentation and classification of the items in the financial statements are
kept the same from one financial period to the next, except in the case where a change is required by an international
accounting standard or by an interpretation or if it is required to raise the meaningfulness of the accounting presentation.
In the event of a change and to the extent possible, the new approach is adopted retroactively and the nature,
reason and amount of the items affected by the change are disclosed. The presentation and classification of the line
items complies with the international accounting standards and with the Bank of Italy’s instructions for bank financial
statements.
Relevance and aggregation. the balance sheet and income statement are made up of line items (indicated by numbers),
sub-items (indicated by letters) and other details. Line items, sub-items and other details constitute the account headings
of the financial statements. The formats comply with those laid down by the Bank of Italy in its Circular no. 262/2005.
New line items can be added provided that their content is not the same as others already envisaged in the format and
only if the amounts concerned are significant. Other information is provided in the explanatory notes. The sub-items of
the tables can be grouped together if one the following two conditions occur:
a) the amount of the sub-items is immaterial;
b) combining them makes for greater clarity in the financial statements; in this case the explanatory notes show the
sub-items separately.
Part A – Accounting Policies
129
The tables in the notes are only provided if they contain figures for one of the two years.
No offsetting of balances. Assets and liabilities and costs and revenues cannot be offset against each other except as
required or permitted by IAS/IFRS or by an interpretation of these, or by instructions issued by the Bank of Italy for bank
financial statements. Measuring assets net of impairment charges, such as the provision for bad and doubtful accounts, is
not considered offsetting.
Comparative information. Comparative figures from previous periods are provided for all information in the financial
statements – including that of a qualitative nature if this helps explain the Group’s situation – unless IAS/IFRS, or their
interpretation, or instructions from the Bank of Italy on the financial statements of banks require or allow otherwise. If the
accounts are not comparable, those of the previous period are adjusted to make them so; any lack of comparability and
the adjustments made (or the fact that it was not possible to adjust the figures) is disclosed and explained in the notes.
Content of the financial statements
The consolidated financial statements consist of the primary statements (balance sheet, income statement, statement of
comprehensive income, statement of changes in shareholders’ equity and statement of cash flows prepared using the
indirect method) and the explanatory notes, accompanied by the report of the directors on the operations of the set of
companies included in the consolidation. The consolidated financial statements have been prepared with clarity and
give a true and fair view of the financial position at the balance sheet date and the results of operations, cash flows and
changes in shareholders’ equity for the year then ended.
Balance sheet and income statement: the balance sheet and income statement are made up of line items, sub-items
and other details. For the sake of completeness, in the schedules laid down by the Bank of Italy it has been decided to
include all of the recommended items even if they had a nil balance in both years. In the income statement (tables and
explanatory notes), revenues are shown without a sign, whereas costs are shown in brackets.
Statement of comprehensive income: The statement of comprehensive income presents the net income (loss) for the
period (income statement line item 320) together with other items of income and expense, net of taxation, that are
recognised in shareholders’ equity as an opposite entry to valuation reserves; on the basis of the amendment to IAS 1,
these items are grouped into two categories depending on whether or not they will be subsequently reclassified to profit
and loss if certain conditions take place. This statement has been prepared showing the part attributable to the Group
separately from the part attributable to minority interests. As for the balance sheet and income statement schedules, in
the schedules laid down by the Bank of Italy it has been decided to include all of the recommended items even if they
had a nil balance in both years.
Negative figures in the statement of comprehensive income are shown in brackets.
Statement of changes in shareholders’ equity: this statement shows the composition of and changes in shareholders’
equity during the year, analysed between share capital, capital reserves, retained earnings, valuation reserves and the
result of comprehensive income. Treasury shares are deducted from shareholders’ equity. The portions of share capital,
reserves and the result of comprehensive income pertaining to minority interests are shown separately from those of the
Group.
Statement of cash flows: the statement of cash flows during the year and the previous year has been prepared according
to the indirect method, whereby cash flows from operations are represented by the result for the year adjusted for costs
and revenues of a non-monetary nature. Cash flows are analysed between cash flows generated by operating, investing
and financing activities. In the statement, cash flows generated are without a sign, whereas cash flows absorbed have
a minus sign. As for the balance sheet and income statement schedules, in the schedules laid down by the Bank of Italy
it has been decided to include all of the recommended items even if they had a nil balance in both years.
The statement of cash flows, which has been prepared under the indirect method, follows the rules laid down in IAS 7.
130
Part A – Accounting Policies
Content of the explanatory notes: the explanatory notes include the information required by IAS/IFRS and by Circular
no. 262/2005 of the Bank of Italy and subsequent updates.
The explanatory notes are subdivided into parts: A – Accounting policies, B – Information on the consolidated balance
sheet, C – Information on the consolidated income statement, D – Consolidated comprehensive income, E-Information
on risks and related hedging policies, F – Information on consolidated capital, G – Business combinations, H – Related
party transactions, I – Share-based payments, L - Segment reporting.
Each part of the note is divided into sections, each of which in turn illustrates one aspect of operations.
Uncertainties in the use of estimates in the preparation of the consolidated financial statements
The preparation of consolidated financial statements also requires the use of estimates that may determine significant
changes in the amounts reported in the balance sheet and income statement, and in the information relating to contingent
assets and liabilities disclosed therein. The determination of these estimates involves using the available information
and making subjective judgements, also on the basis of historical trends, used for deriving reasonable assumptions for
reporting the results of operations.
These estimates and assumptions have been made on a going concern basis and are strongly influenced by growing
uncertainty in the current economic and market climate, characterised by extremely volatile financial indicators and the
very high levels of deterioration in asset quality.
The parameters and information used to determine estimates and assumptions are heavily influenced by these factors,
which by their nature may undergo developments that are hard to predict. As a consequence, the estimates used may
vary from period to period, meaning that in future years the amounts reported in these financial statements may differ
materially as a result of changes in the nature of the assumptions made and the amounts of the parameters used.
The estimates are subject to review to take into account any changes that have taken place during the period.
The main areas in which management is required to make subjective judgements are as follows:
the quantification of losses that are inherent in risk exposures, typically represented by “non-performing” loans and
“performing” loans as well as by other financial assets;
the use of valuation models for measuring the fair value of financial instruments that are not listed on active markets;
the determination of the fair value of financial instruments to be used for reporting purposes;
the quantification of employee-related provisions and allowances for risks and charges;
the estimates and assumptions relating to the recoverability of deferred tax assets.
The use of estimates in the above cases is closely linked to the evolution of the national and international economic
environment and the performance of financial markets, which generate a significant impact on interest rate trends, price
fluctuations, actuarial bases and the creditworthiness of counterparties.
For certain of the assets or liabilities associated with the above cases, the most significant estimates made by the Group
are for the purpose of the preparation of interim financial reports and they may thus be used in the determination of
the book value of these assets and liabilities. Accordingly, it should be noted that the most significant assumptions and
estimates adopted consist of the following:
for the determination of the fair value of financial instruments not listed in active markets, securities and derivatives,
where there is a need to use parameters not derived from the market, the main estimates relate to the development
of future cash flow (coupons, dividends, etc.) that is subject to correction factors derived from probable future events
(e.g. default events) as well as the need to use specific input parameters not directly derived from active markets;
Part A – Accounting Policies
131
as far as the estimation of future cash flow from non-performing loans is concerned, the elements taken into
consideration essentially relate to: cash flows arising from ordinary operations and/or from extraordinary events
that are a feature of the debtor’s business, the estimated realisable value of any guarantees, as well as costs
expected to be incurred and the expected timing of the recovery of the loan exposure. For the determination of
estimated future cash flows arising from loans for which no objective evidence of impairment has been identified,
that is, collective evaluation, account is taken of information derived from historical series and other observable
elements at the measurement date, which permits estimates to be made of the latent loss (“incurred but not reported”)
in each homogeneous category into which the Group’s portfolio has been stratified for the purpose of monitoring
the management of credit risk;
for the quantification of allowances for post employment benefits, an estimate is made of the present value of
commitments, taking account of discounted probable outflows inclusive of financial aspects (interest rates), the
expected trend in remuneration and employee turnover rates, as well as demographic aspects (mortality);
for the quantification of allowances for risks and charges an estimate is made, where possible, of the amount of
outflows needed to meet commitments, taking account of the actual probability of costs being incurred;
for the determination of the components of deferred taxation, an estimate is made of the probability of taxation
arising in the future (taxable temporary differences) and of the reasonable degree of certainty, if this exists, of future
taxable amounts as and when the tax deductibility will arise (deductible temporary differences).
Section 3
Scope of consolidation and consolidation procedures
The consolidated financial statements of the Bipiemme Group include the balance sheet and income statement of Banca
Popolare di Milano (Parent Company) and its direct and indirect subsidiaries.
Subsidiaries
IFRS 10 governs the consolidated financial statements and establishes how the scope of consolidation should be
identified.
According to this standard, “control” is the situation in which a company is exposed to the risk of variability in the
results because of its links with another company and is able to influence these results through the power held over it.
In particular, subsidiaries are companies in which the following three conditions jointly hold:
power over the company;
exposure to the risk of variability of the company’s results;
the ability to influence the results through the power held over the company.
Power over the company is the ability to direct the key activities of a company in which the investor holds a participatory
interest and/or an interest that consists of other legal or contractual rights.
This power generally flows from the ownership of rights (not necessarily voting rights) that are legally recognised and of
which the entity that holds the interest in the company is the owner or which has links with it; rights that give it the power
to direct the company’s activities: for example, holding a majority of the voting rights (which can also be acquired
through agreements with other shareholders) or, in any case, enough of the voting rights to keep the company under
control thanks to fragmentation of the other votes or because it has the right to appoint or remove the company’s key
management personnel.
These rights include the power to direct the company to carry out transactions (or to prohibit changes in them) in its own
interest, while they do not include the rights of mere “protection” of the interests of whoever holds them (e.g. a pledge
or similar rights).
132
Part A – Accounting Policies
In any case, in determining the extent of the voting rights for the purpose of checking the existence of control situations,
one must also consider potential voting rights (both proprietary and third party), i.e. the rights attached to call options
(including those embedded in convertible bonds) or similar instruments on the ordinary shares of investee companies,
assuming that such rights can effectively be exercised.
Exposure to the risk of variability of the company’s results depends on the presence of returns arising from the investor’s
relationship with it, which may vary according to the economic performance of the entity making the investment. To
this end, the dividends on shares and interest on securities must be considered as well as changes in the value of the
investments held.
As regards the ability to influence the results through the power held over the company, in order to identify the entity
that actually controls the company it has also to be ascertained whether the power to affect the results is exercised
in its own interest (in which case it is the controlling entity or parent company) or on behalf of another entity (in
which case it is merely an agent of the real parent company). Various factors have to be taken into consideration for
this purpose, such as: the scope of application of this power (i.e. if there are limits or discretion in the way that it is
exercised), the right of any other parties to remove or restrict the decisions taken by the entity exercising the power,
the extent and variability of the remuneration foreseen for the services provided (the greater the extent and variability
of the remuneration compared with the results expected from the company, the more likely that the recipient is the
parent), whether or not other interests are held in the company and the related exposure to the risk of variability in
the results. For example, having other interests in the company is usually typical of a parent company, especially if
its interest is of a subordinated nature that constitutes forms of credit enhancement of the company’s other liabilities.
The Group’s legal entities are all included in the scope of consolidation on the basis of holding the majority of voting
rights at the company’s ordinary general meetings, hence legal control.
The only exceptions relate to vehicle companies set up for securitisation operations where, despite the absence of
any direct equity interests, BPM (BPM Securitisation 2 S.r.l. and BPM Securitisation 3 S.r.l.) and ProFamily (ProFamily
Securitisation S.r.l.) are the holders of contractual rights (“credit enhancement”) which give them substantial exposure
to the variability in the results of those companies.
Joint ventures or companies subject to joint control
The aim of IFRS 11 is to lay down the accounting treatment of entities that are party to agreements involving jointly
controlled activities. The standard has to be applied by the entities participating in joint control agreements.
This accounting treatment and its presentation in the financial statements is based on rights and obligations laid down
in the agreement in which the entities are involved; the entities themselves have to ensure that the agreement contains
certain specifics in order to help identify the type of arrangement:
a joint operation, in which the parties that have joint control have rights and obligations for the assets and liabilities
involved in the agreement, which are accounted for as assets or liabilities based on the share of assets held jointly
or of liabilities incurred jointly, or
a joint venture, namely a joint control agreement in which the parties have rights to the net assets of the agreement,
which can therefore only be accounted for by the equity method.
The Group considers as joint ventures those companies in which the voting rights and joint control over a business
activity are equally shared, directly or indirectly, by Banca Popolare di Milano and by another entity. Also considered a
joint venture is an investment in which despite the fact that voting rights are not held equally the unanimous agreement
of all the parties sharing control is required for taking decisions on material activities.
The only investment that falls into this category is Calliope S.p.A., which given the nature of the underlying contractual
arrangements qualifies as a joint venture.
Part A – Accounting Policies
133
Associates
Associates, meaning companies subject to significant influence, are defined as all those enterprises over which the
Group is able to exercise significant influence but not control. This influence is generally presumed to exist when the
Group holds between 20% and 50% of the voting rights, including potential voting rights.
Companies in which an interest of less than 20% of the voting rights are held are also considered subject to significant
influence if the power exists to participate in the determination of financial and operating policies by virtue of contractual
rights, such as shareholders’ agreements of various forms.
These cases involve:
Bipiemme Vita, for which there is a partnership agreement with the Covéa Group connected with the development
of bancassurance activities;
Anima Holding, pursuant to the shareholders’ agreements arranged with the other shareholders.
Further information is provided in Section 10 – Investments in associates and companies subject to joint control of
Part B of the notes.
Changes in the scope of consolidation
Changes in the scope of consolidation with respect to 31 December 2014 involve the following companies:
Entering the scope of consolidation
Subsidiaries
BPM Covered Bond 2 S.r.l.
On 7 August 2015 Banca Popolare di Milano acquired 80% of the special purpose vehicle BPM Covered Bond
2 S.r.l. set up to carry out a second programme of guaranteed bank bonds; the special purpose vehicle therefore
entered the scope of consolidation of the Bipiemme Group. The first operation of the new programme was completed
on 14 September 2015 with BPM issuing a covered bond of 1 million euro. Further details may be found in the
report on operations and in the notes: Part E – Information on risks and related hedging policies – Section 1.1 Credit
risk – E.4 “Covered bond transactions”.
ProFamily Securitisation S.r.l.
In November 2015 the subsidiary ProFamily sold loan receivables to the special purpose vehicle ProFamily Securitisation
S.r.l., which in order to carry out the securitisation transaction issued notes of approximately 725 million euro, wholly
subscribed by ProFamily.
ProFamily Securitisation S.r.l. therefore entered the scope of consolidation of the Bipiemme Group from the
financial statements at 31 December 2015, as ProFamily holds contractual rights (“credit enhancement”) which
give it substantial exposure to the variability in the results of that company. Further details may be found in the
report on operations and in the notes: Part E – Information on risks and related hedging policies – Section 1.3
Liquidity risk – “Self-securitisation”.
Changes in the percentage of ownership/Changes in company status
Subsidiaries
Banca Popolare di Mantova
The investment held by the Parent Company in Banca Popolare di Mantova rose to 62.91% (from 62.62% at
31 December 2014) as the result of the purchase of additional shares in 2015.
134
Part A – Accounting Policies
Leaving the scope of consolidation
Subsidiaries
BPM Capital I and BPM Luxembourg SA
On 2 April 2015, following authorisation received from the ECB on 25 February 2015, the “8.393% Noncumulative
Perpetual Trust Preferred Securities” issued by BPM Capital Trust I and included in Own Funds consolidated in the
“Additional Tier 1” instruments were redeemed.
This led to the redemption of the subordinated bonds issued by the subsidiaries BPM Capital I LLC and BPM Luxembourg
SA as part of the transaction which enabled the Preferred Securities to be issued in 2001.
BPM Capital I LLC completed liquidation procedures in September and accordingly left the scope of consolidation as of
30 September 2015, while BPM Luxembourg was wound up on 1 December 2015, leaving the scope of consolidation
on 31 December 2015.
Associates
Pitagora 1936 S.p.A.
During the second quarter of 2015 Pitagora 1936 and Cassa di Risparmio di Asti entered a preliminary agreement for
the sale of the controlling investment – held by Pitagora 1936 – in Pitagora S.p.A..
BPM and the other shareholders of Pitagora 1936 consequently signed an agreement for the divestment of the
investment.
On 21 December 2015 the transaction was completed through the sale of the interest of 24% held by BPM in Pitagora
1936; the company therefore left the scope of consolidation.
Wise Venture SGR S.p.A.
In July 2015 BPM signed an agreement for the sale of its investment of 20% in Wise Venture SGR.
On 19 November 2015 the entire investment was sold; as a result the company left the scope of consolidation.
Aedes Bipiemme Real Estate SGR S.p.A.
On 23 December 2015 the Parent Company sold the investment of 39% it held in this company; as a result the
company left the scope of consolidation.
Part A – Accounting Policies
135
1. Investments in subsidiaries where control is exclusive
The following table lists investments in subsidiaries where control is exclusive. Reference should be made to Part B
– Information on the consolidated balance sheet – Section 10. Investments in associated companies and companies
subject to joint control for information on investments in jointly-controlled subsidiaries (accounted for under the equity
method) and companies over which the Group has significant influence.
Company name
Registered and
operational
office
Type of
relationship(1)
Investment relationship
Investor
Holding %
Availability of
votes(2)
Parent Company
Banca Popolare di Milano S.c.a r.l. Milan
Subsidiaries where control is
exclusive
1
Banca Akros S.p.A.
2
3
Milan
1 Banca Popolare di Milano S.c.a r.l.
96.89
Banca Popolare di Mantova S.p.A. Mantua
1 Banca Popolare di Milano S.c.a r.l.
62.91
ProFamily S.p.A.
1 Banca Popolare di Milano S.c.a r.l.
100.00
Milan
4
Ge.Se.So. S.r.l.
Milan
1 Banca Popolare di Milano S.c.a r.l.
100.00
5
BPM Covered Bond S.r.l.
Rome
1 Banca Popolare di Milano S.c.a r.l.
80.00
6
BPM Covered Bond 2 S.r.l.
Rome
1 Banca Popolare di Milano S.c.a r.l.
80.00
7
BPM Securitisation 2 S.r.l. *
Rome
4 Banca Popolare di Milano S.c.a r.l.
n.a.
n.a.
8
BPM Securitisation 3 S.r.l. *
Conegliano
4 Banca Popolare di Milano S.c.a r.l.
n.a.
n.a.
9
ProFamily Securitisation S.r.l. (*)
Conegliano
4 ProFamily S.p.A.
n.a.
n.a.
(
(
)
)
Key:
(1) Type of relationship:
1. majority of voting rights in ordinary general meetings
4. other forms of control
2. dominant influence in ordinary general meetings
5. s ingle management pursuant to article 26, paragraph 1 of Legislative
Decree no. 87/92
3. agreements with other shareholders 6. s ingle management pursuant to article 26, paragraph 2 of Legislative
Decree no. 87/92
(2) Votes available for ordinary general meetings. Voting rights are only stated if they differ from the percentage held.
(*) These entities are consolidated on a line-by-line basis as the Group has exposure and rights to variable returns from its involvement with those
companies (IFRS 10, paragraph 7(b)).
2. Significant judgements and assumptions made in determining the scope of consolidation
With regard to wholly owned subsidiaries, inclusion in the Group’s scope of consolidation is basically connected with
the concept of holding the majority of voting rights at ordinary general meetings, apart from situations where the Group
has legal control.
The only exceptions relate to special purpose vehicles set up for securitisations where, despite the lack of any directly
held interests the originating entities of the securitisation, BPM (BPM Securitisation 2 S.r.l. and BPM Securitisation 3
S.r.l.) and ProFamily (ProFamily Securitisation S.r.l.) hold contractual rights (“credit enhancement”) which give them
substantial exposure to the variability in the results of those companies.
The only jointly-controlled subsidiary in the Group is Calliope S.p.A. which, given the nature of the underlying contractual
arrangements, qualifies as a joint venture under IFRS 11.
Associates are considered to be companies in which the Group exerts a significant influence, which is presumed to
exist when voting rights of between 20% and 50% are held. In addition, as an exception to this principle, two cases
of “investments” have been identified for companies to be included in this category due to the existence of agreements
or legal ties deriving from contractual agreements between shareholders: Bipiemme Vita S.p.A. (held as to 19%) and
Anima Holding Spa (held as to 16.85%).
136
Part A – Accounting Policies
Further information in this respect may be found in Section 10 – Investments in associates and companies subject to joint
control of these notes.
3. Investments in subsidiaries with exclusive control with significant minority interests
For the purpose of the disclosures required for this section all the investments in subsidiaries with minority interests have
been identified as significant with the exception of those in special purpose vehicles.
3.1 Minority interests, minority voting rights and dividends distributed to holders of minority interests
(Euro/000)
Company name
Minority interest %
Minority voting rights %
Dividends distributed to holders
of minority interests
3.11
3.11
258
37.09
37.09
0
Banca Akros SpA
Banca Popolare di Mantova SpA
3.2 Investments with significant minority interests: accounting information
(Euro/000)
Item
Banca Akros SpA
Banca Popolare
di Mantova SpA
3,705,352
552,423
417
5,782
3,637,038
523,799
38,926
7,842
3,439,382
496,844
203,783
36,670
Interest margin
18,203
11,934
Net interest and other banking income
79,751
16,721
(51,637)
(9,568)
Income (loss) before tax from continuing operations
25,173
2,063
Income (loss) after tax from continuing operations
16,570
1,313
0
0
Net income (loss) for the period (1)
16,570
1,313
Other comprehensive income (net of tax) (2)
(2,575)
3
Comprehensive income (3) = (1) + (2)
13,995
1,316
Total assets
Cash and cash equivalents
Financial assets
Property and equipment and intangible assets
Financial liabilities
Shareholders’ equity (including net income for the year)
Operating expenses
Income (loss) after tax from discontinued operations
4. Significant restrictions
Within the Bipiemme Group there are no significant legal, contractual or regulatory restrictions that could limit the
Parent Company’s ability to transfer liquid funds or other assets to other Group entities, nor any guarantees that could
limit the distribution of dividends or capital, or loans and advances granted or repaid to other Group entities.
Part A – Accounting Policies
137
5. Other information
Consolidation procedures
Investments in subsidiaries are consolidated on a line-by-line basis while interests in associates and companies subject
to joint control are accounted for using the equity method.
Line-by-line consolidation: this method of consolidation involves combining the contents of subsidiary company balance
sheets and income statements on a ‘line by line’ basis. For consolidation purposes, the book value of the investment in
each subsidiary is eliminated against the corresponding portion of its net equity.
Subsidiaries are consolidated line-by-line from the date of acquisition, i.e. from the date when the Group acquires
control, and they are excluded from the scope of consolidation from the date on which control is transferred outside
the Group.
If the closing date of the subsidiary is different from that of the Parent Company, the subsidiary provides a separate
report specifically for consolidation purposes. If this is not feasible, the Parent Company uses the latest available
financial statements (prepared not more than three months prior to the reporting date), adjusted to take account of the
main transactions that have taken place during the intervening period.
The financial statements of subsidiaries used to prepare the consolidated financial statements refer to the same period
and are prepared with the same accounting policies of the Parent Company, adjusted where necessary for consistency.
All intragroup (or “intercompany”) balances and transactions, including any unrealised post-tax profits resulting from
intragroup transactions, are eliminated in full upon consolidation. The result of the comprehensive income statement for a
subsidiary is attributed to minority interests even if this means that the minority interests have a negative balance.
If the Parent Company loses control of a subsidiary, it:
eliminates the assets (including any goodwill) and the liabilities of the subsidiary;
eliminates the book values of any minority interests in the former subsidiary;
eliminates any accumulated exchange differences recognised in shareholders’ equity;
recognises the fair value of the proceeds received;
recognises the fair value of any interest maintained in the former subsidiary;
recognises any gain or loss in the income statement;
reclassifies the interest pertaining to the parent company in the items previously recognised in the statement of
comprehensive income in the income statement or in retained earnings, as appropriate.
Acquisitions are accounted for under the acquisition method in accordance with IFRS 3 as amended by Regulation
no. 495/2009, under which all business combinations, except for those between companies under common control,
are treated like genuine business acquisitions for accounting purposes. Application of the acquisition method requires:
identification of the acquirer (i.e. the identity of the entity that takes control of a group or entity); the acquisition date
(i.e. the date on which the acquirer obtains control of the acquiree); recognition at the purchase date of the identifiable
assets acquired and liabilities assumed (including contingent liabilities) at their respective fair values. In addition, for
each business combination, any minority interests in the acquiree may be recognised at fair value or in proportion to
the share of the minority interest in the identifiable net assets of the acquiree.
Goodwill is initially valued at cost, which arises as the excess of the sum of the consideration paid plus any minority
interests over the fair value of the net assets (identifiable assets acquired less liabilities) assumed by the Group. If the
acquisition cost is lower than the fair value of the net assets acquired, the difference is expensed to income for the
period.
After initial recognition, goodwill is measured at cost less any impairment losses. For impairment testing purposes,
goodwill acquired in a business combination is, from the acquisition date, allocated to the cash-generating unit or units
of the Group expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities
of the acquiree are assigned to those units.
138
Part A – Accounting Policies
If goodwill has been allocated to a cash-generating unit and the Group disposes of part of the assets of that unit, the
goodwill associated with the business being divested is included in the book value when determining the gain or loss
on disposal. The goodwill associated with the divested business is determined on the basis of the relative values of the
divested business and the cash-generating unit retained.
The identification of the fair value of the assets acquired and liabilities assumed has to be completed within a year of
the acquisition.
In the case of a “step acquisition” (one that takes place in various stages), the acquirer has to recalculate the interest
held in the acquiree prior to gaining control at its fair value at the acquisition date and recognise any gain or loss in
the income statement.
Consistent with this, sales of minority shares that do not entail a loss of control do not have any impact on the income
statement but translates into changes in Group shareholders’ equity.
The costs related to the acquisition (except those for issuing debt securities or equities, which follows the rules laid down
in IAS 32 and IAS 39) are charged to the income statement in the period when they are incurred.
Minority interests in each subsidiary are also initially recognised at fair value at the date on which control is obtained.
In periods subsequent to that in which consolidation differences are recognised for the first time, the changes in equity of
subsidiaries are recognised in the appropriate items of consolidated shareholders’ equity.
Consolidation using the equity method: the equity method, which is used to recognise and measure investments in
associates and companies subject to joint control, requires the investment to be initially recorded at cost and adjusted
thereafter to recognise the investor’s share of post-acquisition profits and losses.
At the acquisition date the difference between the cost of the investment and the corresponding share of the fair value
of the investee’s equity (meaning its assets, liabilities and contingent liabilities) is calculated.
In case of positive difference the goodwill is included in the investments in associates book value and neither amortised
nor subject to impairment test individually.
If the difference is negative, after being submitted to a second valuation test to confirm its value, it is recognised as
income in the investor’s income statement as an addition to the investor’s share of the investee’s results in the year in
which the investment is acquired.
The income statement reflects the Group’s portion of the associate’s result for the year. In the event that an associate
recognises adjustments directly in equity, the Group recognises its portion of the adjustments in equity and shows it
separately in the statement of comprehensive income. The value of the investment is also reduced by the amount of any
dividends received periodically by the Group.
The overall value of the investment is subjected to impairment testing in accordance with IAS 28 and IAS 36. If the
losses are greater than the book value of the investment, the Group books the losses to the extent of that value, i.e.
writing it down to zero without recognising any additional loss unless it has an obligation to make payments on behalf
of the associate.
Unrealised gains relating to transactions between and with associates are eliminated upon consolidation in proportion to
the equity interest held. Any unrealised losses are eliminated upon consolidation, unless there is evidence of impairment
of the assets transferred.
For the purposes of consolidating investments in associates, their financial statements at the reporting date are used. If
the reporting date of associates differs from that of the Parent Company they prepare interim statements at the Parent
Company’s reporting date for consolidation using the equity method; if this is not practicable, associates prepare
financial statements having a balance sheet date not more than three months before the reporting date and the main
transactions taking place between the two dates are then taken into consideration.
If no information is available under IAS/IFRS, then the financial statements prepared under local accounting standards
are either adjusted accordingly or used directly for consolidation purposes provided the differences between local and
international accounting standards are insignificant.
Part A – Accounting Policies
139
Consolidation of subsidiaries classified as “Non-current assets and disposal groups held for sale and discontinued
operations” under IFRS 5: if an investment in a subsidiary is classified as a non-current asset held for sale, it is fully
consolidated in accordance with IFRS 5; this means that the assets and liabilities relating to the unit being divested are
presented separately from other assets and liabilities in the balance sheet, while a single amount is shown in the income
statement to represent the costs and revenues of the operating unit being disposed of. If the fair value of the assets or net
assets of the disposal group is lower than their book value an adjustment is made that is recognised in profit and loss.
Section 4
Subsequent events
In relation to the requirements of IAS 10, the main events occurring between 31 December 2015, the balance sheet date
of the consolidated financial statements, and 23 February 2016, when the draft financial statements were approved
by the Management Board and forwarded to the Supervisory Board for approval at a meeting convened for 30 March
2016, that are not reflected in the figures shown in the consolidated financial statements are described in the 2015
report on operations of the Banca Popolare di Milano Group in the section entitled ‘Subsequent events’, to which
reference should be made.
Section 5
Other aspects
Update to Bank of Italy Circular no. 262/2005
The fourth update to Bank of Italy Circular no. 262/2005 was issued on 15 December 2015.
The main changes relate to a revision by the Bank of Italy of the categories of non-performing loans. In particular
disclosures on the quality of loans are adapted to the new definitions of non-performing assets (unlikely to pay and
exposures with forbearance measures) in line with the definitions of non-performing exposures and forborne exposures
established by the European Commission by way of Regulation no. 2015/227. Further details are provided below.
In addition, the tables relating to committed assets have been removed from Part E – Information on risks and related
hedging policies – Section 1.3 Liquidity Risk (as they are already required by the Pillar 3 Disclosure Requirements),
and certain disclosures have been rationalised consistent with international practice. For example the tables for annual
changes in financial instruments (assets and liabilities) previously provided in Part B – Information on the consolidated
balance sheet have been eliminated as have certain tables in Part E – Information on risks and related hedging policies –
Section 1.1 Credit risk – C. Securitisation transactions.
For the first year of presenting the disclosures required by the fourth update to the Circular there is an exemption from
having to present comparative figures for the previous year.
The Circular is first applicable to financial statements ending on 31 December 2015, with the exception of the disclosures
for changes in gross exposures and adjustments to the value of forborne exposures for which first application has been
deferred to financial statements ending on 31 December 2016.
New classification of non-performing loans and forbearance
The Bank of Italy has revised the definitions of non-performing loans from 1 January 2015.
This revision became necessary in order to adapt previous risk classes to the definition of “Non Performing Exposure”
(NPE) introduced by the European Banking Authority (“EBA”) through the issue of Implementing Technical Standards
(“ITS”), EBA/ITS /2013/03/rev1 on 24 July 2014.
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Part A – Accounting Policies
The “Asset quality” section of Circular no. 272 of 30 July 2008 has accordingly been updated (6th update of 7 January
2015), identifying the following categories of non-performing loans:
Bad loans;
Unlikely to pay;
Past due and/or overdrawn.
In this respect reference should be made to Section A.2 – Part relating to the main line items in the financial statements
– 4. Loans and receivables for a precise definition of each category.
The total balances for the loans classified in the non-performing loans categories used for the financial disclosures
provided as at 31 December 2014 have been allocated to the new risk classes by:
transferring balances included in the “Restructured loans” class to the “Unlikely to pay” class;
allocating balances classified as “Doubtful loans” to the classes:
– “Unlikely to pay” for balances where the debtor is unlikely to pay his credit obligation at the due date,
regardless of any unpaid overdue amounts or instalments;
– “Past due and/or overdrawn” for all the balances previously classified as “Doubtful loans” only as the result of
overdue instalments and/or days overdrawn.
Overall, the amounts of non-performing assets at 31 December 2014 restated in accordance with the new definitions
introduced by the EBA are substantially in line with the non-performing assets determined in accordance with the
previously applicable instructions of the Bank of Italy. The following is a table of reconciliation between the balances
shown according to the classes used at 31 December 2014 and those restated according to the new classifications.
(euro/000)
Situation at 31.12.2014
Gross exposure
Bad loans
Bad loans
Doubtful
loans
Restructured
loans
Past due
exposure
3,051,730
1,657,014
1,031,808
129,831
3,051,730
Unlikely to pay
1,638,298
Past due and/or overdrawn
18,716
Adjustments
Bad loans
1,707,326
1,707,326
427,810
Unlikely to pay
426,234
Past due and/or overdrawn
1,576
Net exposure
Bad loans
1,344,404
1,229,204
1,031,808
124,529
124,529
907,279
1,344,404
Unlikely to pay
1,212,064
Past due and/or overdrawn
17,140
907,279
Situation
at 31.12.2014
using the new classes
3,051,730
2,670,106
129,831
148,547
10,923
1,707,326
550,763
10,923
12,499
118,908
1,344,404
2,119,343
118,908
136,048
In its ITS the EBA introduces an additional disclosure requirement on forbearance. The term “forbearance“ is used
by the EBA to indicate debtors that find or could find themselves in difficulty with respect to their loan repayment
terms and for which concessions have been made concerning the renegotiation of the original contractual conditions.
Accordingly, a necessary condition for the identification of an exposure as forborne is the existence at the time of the
request for renegotiation of a situation whereby a debtor is experiencing financial difficulty.
Part A – Accounting Policies
141
In January 2015 the Bank of Italy issued an update to Circular no. 272, which provides definitions for “non-performing
exposures” and “forborne exposures“ (i.e. exposures for which concessions have been made), based on the EBA’s technical
standards. The latter definition does not represent a new category of non-performing loan, but is an additional information
tool, since the “forborne” loan category applies to all existing risk classes and both performing and non-performing loans
may be included in the scope of renegotiation.
The allocation of forborne status may be reversed subsequent to a review of the results and financial position of the
debtor. This review process takes place after a period of 2 or 3 years, depending on whether the loan is performing
or non-performing.
The Bipiemme Group has analysed the EBA and Bank of Italy documents and has identified the loans that fall within the
definition of forborne. Further details are provided in Part E – Information on risks and related hedging policies – Section
1.1 Credit Risk in compliance with the requirements of Bank of Italy Circular no. 262/2005.
Deductibility of loan losses and write-downs – Decree Law no. 83/2015
Decree Law no. 83 of 27 June 2015 introduced, among other things, a number of new elements related to the
deductibility of loan losses and write-downs by financial and credit institutions. Briefly:
write-downs and losses on loans to customers stated as such in the financial statements and losses realised by selling
them for a consideration are fully deductible for IRES and IRAP purposes in the year in which they are recognised.
Previously, they were deductible over 5 years;
in the first period that this new rule is applied, write-downs and losses other than those realised by selling them for
a consideration are deductible up to 75% of the amount involved;
the excess and the amount of write-downs not yet deducted at 31 December 2014 are deductible as to 5% in
2016, 8% in 2017, 10% in 2018, 12% in the years from 2019 to 2024 and the remaining 5% in 2025.
The provisions of the decree are applicable from the tax year in progress at 31 December 2015.
The new system of tax deductibility of loan losses and write-downs will not have any significant effects on the income
statement, because regardless of the period of deductibility the tax effect of the adjustments to loans is in any case
recognised, even now, in the income statement for the year in which the adjustments are recognised through the direct
reduction of the tax liability for the adjustments that are deductible immediately and by recognising deferred tax assets
for those that are deductible in future years.
Italian group tax election
Banca Popolare di Milano and the Italian companies of the Group have elected to file for tax on a group basis since
2004, in accordance with articles 117-129 of the Income Tax Consolidation Act (ITCA), introduced by Decree no.
344/2003. This optional tax regime makes it possible for each of the subsidiaries to calculate its tax charge for the
year and then transfer the equivalent taxable income (or tax loss) to the parent company, adjusting for intercompany
interest according to the rules on the deductibility of interest expense. It then calculates a single taxable income or tax
loss for the entire group, adding together the profits and subtracting the losses of the individual companies, filing a
single tax return and declaring a single amount payable to or receivable from the Tax Authorities.
The Parent Company and the subsidiaries taking part in the Italian group tax regime have signed contracts that regulate
the compensatory flows relating to the transfers of taxable income and tax losses. These flows are determined by
applying the IRES rate currently in force to the taxable income of the companies concerned. For companies with tax
losses, the compensatory flow, calculated as above, is recognised by the consolidating company to the consolidated
company for the losses incurred after joining the Italian group tax regime, to the extent that such losses are covered by
the taxable income of the Group. The losses incurred prior to joining the Italian group tax regime have to be offset by
the consolidated company against its own taxable income in accordance with current tax rules.
The compensatory flows determined in this way are recorded as receivables and payables versus the companies
taking part in the Italian group tax regime and classified in “Other assets” and “Other liabilities”, with the counter-entry
recognised in “Taxes on income from continuing operations”.
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Part A – Accounting Policies
Country by country reporting
Bank of Italy Circular no. 285 of 17 December 2013 (“Supervisory Provisions for Banks”), in the fourth update of
17 June 2014, provides for the requirement to publish the information required in subparagraphs a), b) and c) in
Appendix A of Part One, Title III, Chapter 2 of the Circular.
The information required by the Circular is disclosed in an attachment to these consolidated financial statements.
Deadlines for approval and publication of reports
1. Annual report
Art. 154-ter, paragraph 1, of Legislative Decree no. 59/98 (CFA) lays down that the financial statements have to be
approved and the annual report, consisting of the separate and consolidated financial statements, report on operations
and the certificate referred to in art. 154-bis, paragraph 5, has to be published within one hundred and twenty days
of the year-end.
The draft financial statements were approved by the Management Board of the Parent Company on 23 February 2016.
The draft has been submitted to the Supervisory Board, which is responsible for the final approval thereof. A meeting
of the Supervisory Board will be held on 30 March 2016 to approve the financial statements.
The consolidated financial statements (consisting of the balance sheet, income statement, statement of comprehensive
income, statement of changes in shareholders’ equity, statement of cash flows and explanatory notes) are audited by
Reconta Ernst & Young S.p.A. in accordance with Legislative Decree no. 39/2010, in execution of the resolution of the
General Meeting of Members of 21 April 2007 which appointed this firm for the period from 2007 to 2015 inclusive.
2. Half – yearly report
The Bank prepared and approved on 6 August 2015 the half-yearly report of the Bipiemme Group at 30 June 2015, in
accordance with article 154-ter of Legislative Decree no. 58/98 introduced by Legislative Decree no. 195/2007 which
adopted the European regulations on the transparency of listed companies (EC/2004/109). The condensed interim
financial statements were reviewed by Reconta Ernst & Young S.p.A., in compliance with Consob Communication no.
97001574 of 20 February 1997 and with Consob Resolution no. 10867 of 31 July 1997 and in accordance with the
decision of the General Meeting of Members of 21 April 2007.
3. Interim report on operations
The Bank prepared interim reports of the Bipiemme Group as at 31 March 2015 and 30 September 2015 in accordance
with article 154-ter, paragraph 5 of Legislative Decree no. 58/98, introduced by Legislative Decree no. 195/2007, and
published these on 12 May 2015 and 10 November 2015 respectively. The interim report on operations as at 31 March
2015 was not audited, whereas that as at 30 September 2015 was prepared in accordance with IAS 34 was reviewed
by Reconta Ernst & Young S.p.A..
Part A – Accounting Policies
143
A.2 – Part relating to the main line items in the financial statements
The accounting policies followed in preparing the consolidated financial statements at 31.12.2015, as regards the
classification, recognition, measurement and derecognition of the various asset and liability items, as well as the
recognition of revenues and costs are described in the following.
1 – Financial assets held for trading
Classification
In this category are classified the debt securities and equities, shares in investment funds and derivatives (except
those designated as effective hedging instruments, recorded in assets under “Hedging derivatives”) with a positive
fair value. They must be held primarily for the purpose of profiting from short-term fluctuations in price or from the
operator’s profit margin. A financial asset is classified as held for trading if, regardless of why it was acquired, it is
part of a portfolio for which there is evidence of a recent actual pattern of short-term profit-taking.
Reclassifications to other categories of financial assets are not allowed, except when it is possible to reclassify
assets other than derivatives, no longer held for trading purposes, in other categories foreseen by IAS 39 “Financial
Instruments: Recognition and Measurement” (Investments held to maturity or financial assets available for sale when
there are unusual events that are unlikely to recur in the short term, or credits when there is the intention and ability to
hold them for the foreseeable future or until maturity), always assuming that the conditions for recognition are satisfied.
The transfer value is represented by the fair value at the time of reclassification. In the event of reclassification, a check
is carried out to see if there are any embedded derivatives that have to be separated. The Bipiemme Group has never
exercised this option, neither for the current year nor for previous years.
The derivative is a financial instrument or other contract with all three of the following characteristics:
a) its value changes in response to changes in a specific interest rate, security price, commodity price, foreign exchange
rate, index of prices or rates, a credit rating or credit index, or other variables;
b) it requires no initial net investment or little initial net investment relative to other types of contracts that have a similar
response to changes in market conditions;
c) it is settled at a future date.
This category consists of financial and credit derivatives.
Financial derivatives have the function of transferring market risks (interest rate risk, foreign exchange risk, price risk)
and consist of instruments underlying items such as debt and equity securities, interest rates, stock indices, currencies
and commodities. They can assume the most varied and complicated contractual forms which can however be traced
to three essential basic models: “futures” or “forwards” (fixed contracts, including the forward purchase and sale of
securities and currencies), “options” (option contracts) and “swaps” (swap contracts). These include contracts for the
forward purchase and sale of securities and currencies, derivative contracts having or not having underlyings linked to
interest rates, indices or other items and currency derivative contracts.
Credit derivatives are contracts enabling the underlying credit risk to a specific item by the party purchasing protection
to the party selling protection. In these operations the object of the transaction is the credit risk of the final borrower.
This category includes the following main types of contract: “credit default swaps” (other than those regarding signatory
loans), “credit default options”, “total rate of return swaps”, “credit spread options”, “credit spread swaps” and “credit
linked notes” (limited to the embedded derivative component).
Derivatives include those embedded in other hybrid financial instruments which have been recognised separately from
the host instrument to the extent that:
the economic characteristics and risks of the embedded derivative are not closely related to the economic
characteristics and risks of the host contract;
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Part A – Accounting Policies
the embedded instrument, even if separated, meets the definition of a derivative;
the hybrid instrument is not measured at fair value with changes in value reported in profit and loss.
Recognition
Initial recognition of financial assets held for trading takes place, for securities, on the settlement date of the underlying
purchase transactions – if settled on schedule according to current market practice (known as “regular way”) – and, for
derivatives, the trade date. In the case of recognition of financial assets at the settlement date, any changes in fair value
recognised between the trade date and the settlement date are recognised in the income statement.
Financial assets held for trading are initially recognised at fair value, which generally corresponds to the price paid,
without considering any transaction costs or income which are charged directly to income.
Any derivatives embedded in these complex financial instruments and separated from them from an accounting point
of view (see the previous section on ‘Classification’) are recognised at their fair value at recognition date.
Measurement and recognition of items affecting the income statement
Following initial recognition, financial assets held for trading are measured at their current fair value, with any changes
being recognised in the income statement. If the fair value of a financial asset becomes negative, it is accounted for as
a financial liability.
The fair value of investments listed on active markets is determined with reference to the market bid price reported
at the balance sheet date. The fair value of investments for which no price is listed on an active market is determined
using estimates and valuation models that take account of all the risk factors related to the instruments along with
published price quotations, if available. These techniques may take account of prices reported for recent similar
market transactions, discounted cash flows, option pricing models and other well-established methods used in
financial markets. For further details, reference should be made to section A.4 “Fair value disclosures”.
Equities for which it is not possible to determine the fair value reliably in accordance with the above guidelines, and the
derivatives related to them, which have to be settled through physical delivery of the equity instruments are maintained
at cost and written down in the event of impairment losses.
Profits and losses from trading activities and the unrealised gains and losses arising from changes in fair value with
respect to the purchase cost, determined on the basis of the weighted average cost on a daily basis, are expensed in the
period in which they emerge under the item “Profits (losses) on trading”, except for financial derivatives linked to the fair
value option, whose result is recognised in “Profits (losses) on financial assets and liabilities designated at fair value”.
Interest income on debt securities is calculated on the basis of the nominal interest rate. Dividends from equities are
recorded when the right to receive them arises. Differentials and margins on derivatives are recognised upon the right to
collect them or the obligation to settle them. Interest income and dividends appear in the income statement, respectively,
under “Interest and similar income” and “Dividends and similar income”. Differentials and margins on derivatives
are allocated in the income statement to “Profits (losses) on trading”, except for those that are operationally linked to
financial assets or liabilities designated at fair value (subject to the fair value option) or linked to financial assets or
liabilities classified as held for trading and with settlement of differentials or margins with various maturities (“multiflow”
contracts), which are classified in the income statement as “Interest and similar income”.
Derecognition
Financial assets are derecognised when the contractual right to receive cash flows from the financial asset is
terminated, or if substantially all of the risks and benefits associated with holding that particular asset are transferred.
Part A – Accounting Policies
145
Conversely, if legal ownership of a financial asset has effectively been transferred, but the bank retains a substantial
part of the rewards and benefits of the asset sold, it continues to be reported as an asset in the balance sheet.
In such cases, the Group making the transfer recognises a liability to the buyers equal to the price received; the
respective costs and revenues are recorded on the assets sold and any related liabilities.
2 – Financial assets available for sale
Classification
Investments “available for sale” are financial assets that will be maintained for an indefinite period and that can also be
sold for reasons of liquidity, changes in interest rates, exchange rates and market prices. This category excludes derivatives
but includes financial assets not otherwise classified as loans and receivables, financial assets held for trading, investments
held to maturity or financial assets designated at fair value through profit and loss. In particular, this item includes equity
investments not held for trading and which do not qualify as investments in subsidiaries, associates and joint ventures,
including direct and indirect private equity investments.
Where allowed by IAS 39, reclassifications to the category “Investments held to maturity” are permitted. It is also
possible to reclassify the debt securities not only in “Investments held to maturity” but also in “Loans and Receivables”
when the company has the intention and ability to hold them for the foreseeable future or until maturity and assuming
that the conditions for them to be recognised are satisfied. The transfer value is represented by the fair value at the time
of reclassification. The Bipiemme Group has never taken advantage of this possibility, either for the current year or for
previous years.
Recognition
Initial recognition of financial assets available for sale takes place on the settlement date of the underlying
purchase transactions in the “regular way”. Any changes in fair value recognised between the trade date and the
settlement date are recognised in shareholders’ equity.
Financial assets available for sale are initially recognised at fair value, which generally corresponds to the price paid
including any transaction costs or income directly attributable to the instrument concerned.
If, as permitted by IAS 39, the entry is made as a result of reclassification of investments held to maturity or, in the
presence of unusual events, of financial assets held for trading, the book value is represented by the fair value at the
time of transfer.
Measurement and recognition of items affecting the income statement
After initial recognition, financial assets available for sale are measured at their current fair value, booking:
to the income statement, the interest calculated under the effective interest rate method (which takes account of the
amortisation of both the transaction costs and the difference between cost and the redemption amount);
to equity (in the valuation reserve), increasing or decreasing a specific reserve (net of tax), the unrealised gains
and losses resulting from the measurement at fair value until such time as the financial asset is derecognised or
an impairment loss is recognised. On derecognition of the financial asset from the balance sheet (e.g. in the case
of the asset being sold) or on recognition of an impairment loss, the valuation reserve in question is reclassified,
in whole or in part, to the income statement. Exchange gains and losses on monetary instruments (e.g. debt
securities) are charged directly to income. Changes in fair value indicated by the line item “Valuation reserves”
are also reported in the consolidated statement of comprehensive income.
The fair value is determined based on the guidelines already explained for financial assets held for trading. Equities
for which it is not possible to determine the fair value reliably are maintained at cost and written down in the event of
impairment losses.
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Part A – Accounting Policies
Financial assets available for sale are tested for impairment at the end of each financial year or interim period to
identify whether there is objective evidence of a deterioration in quality that might compromise the recoverability of the
investment. Objective evidence of impairment, as defined by IAS 39, is identified on the basis of two circumstances:
if one or more negative events take place after initial recognition of the financial asset;
if this event has a negative impact on future expected cash flows.
In particular, the factors taken into account as indicators of critical circumstances were: the announcement or launch of
financial restructuring plans or, in any case, significant financial difficulties, a significant downgrade in the issuer’s rating,
a material adverse change in book net equity since the last published financial statements, or a market capitalisation
significantly lower than the book net equity.
The indicators relating to market values and parameters are verified with reference to specific information available on
the company’s situation to determine whether the indications given by the market do in fact reflect difficulties on the part
of the company.
As regards equities, a significant or prolonged decrease in fair value below the original purchase price is objective
evidence of impairment (IAS 39, paragraph 61). In this regard, the following quantitative limits have been set for
identification of the impairment:
a decrease in fair value at the balance sheet date exceeding 50% of the original book value;
a decrease in the fair value below the original book value for a continuous period of:
– 18 months for equity securities or similar (for example participating instruments);
– 48 months for units of mutual funds.
In either case exceeding one of these two thresholds means that an impairment loss has to be recognised on the security.
However, even if these automatic thresholds are not exceeded, a check should be made for the existence of other
symptoms of impairment that require further analysis of a particular financial instrument and may lead to the need for
an adjustment.
If there is evidence of an impairment loss, the amount of the write-down, measured as the difference between the asset’s
original purchase cost and its current fair value, is recorded as an expense in the income statement for the year in “Net
impairment adjustments/write-backs of financial assets available for sale” including any equity reserve accumulated
up to the balance sheet date. If the reasons for impairment no longer exist because of an event that took place after
recognising the loss:
in the case of debt securities or loans and receivables a reversal of the loss is recognised in the income statement
up to the book value, while any excess is recognised in a valuation reserve in equity;
in the case of equities and units of mutual funds a reversal of the loss is recognised in an equity reserve.
Derecognition
A financial asset is derecognised when the right to receive cash flows from the asset has expired, or when all the
risks and rewards associated with holding this asset are effectively transferred.
Conversely, if legal ownership of a financial asset has effectively been transferred, but the Bank retains a substantial
part of the rewards and benefits of the asset sold, it continues to be reported as an asset in the balance sheet. In such
cases, the Group making the transfer recognises a liability to the buyers equal to the price received; the respective costs
and revenues are recorded on the assets sold and any related liabilities.
Part A – Accounting Policies
147
3 – Investments held to maturity
Investments held to maturity comprise non-derivative financial assets with fixed or determinable payments and fixed
maturity that the Group has the intention and ability to hold to maturity.
The Bipiemme Group has not classified any financial assets in this category.
4 – Loans and receivables
Classification
Loans and receivables form part of the wider category of non-derivative financial assets that call for fixed or determinable
payments and which are not listed on an active market. They originate when the Group provides money, goods or services
directly to a debtor without the intention of selling the related receivable. This category therefore does not include loans
and receivables originated with the intention of being sold immediately or in the short term.
Receivables include loans to customers and banks, whether provided directly or acquired from third parties, securities
acquired by subscription or private placement, with identified or identifiable payments, not listed on active markets,
debt securities not listed on an active market deriving from debt restructurings and receivables arising from finance
leases.
They also include the swaps and repurchase agreements with a forward obligation to resell, other than those for trading
purposes, and securities lending transactions in which the collateral is represented by cash that remains entirely at the
lender’s disposal. Such operations are accounted for as lending transactions and do not lead to any changes in the
proprietary securities portfolio. In particular, repurchase agreements are recorded as loans for the amount paid spot.
This category also includes operating receivables associated with the provision of financial services as defined in the
Consolidated Banking Act (CBA) and the Consolidated Finance Act (CFA).
Reclassifications are not allowed in the other categories of financial assets under IAS 39.
Recognition
Loans are recognised in the financial statements only when the Group is a party to the loan agreement. This means that
the loan must be unconditional and the creditor acquires a right to payment of the contractually agreed sums. Initial
recognition of the loans takes place on the date of payment or, in the case of a debt security, on the settlement date of the
underlying purchase transactions according to the timing provided by market practice (“regular way”), on the basis of the
related fair value, which normally corresponds to the amount granted or the price paid, including costs/revenues directly
attributable to the individual instrument and determinable from the outset of the operation, even if settled at a later date.
Costs are excluded, even if they have the above characteristics, if they are subject to repayment by the debtor or can be
considered normal internal administrative costs. In cases where the date of signing the contract does not coincide with the
delivery date, a commitment to grant finance is recorded; this commitment ends on the date that the funds are disbursed.
For loans concluded on terms other than market conditions, where the fair value is lower than the amount disbursed
or settled as a result of applying a lower interest rate than the market rate or the one normally charged for loans
with similar characteristics, initial recognition is made for an amount equal to the future cash flows discounted at a
market rate. The difference compared with the amount paid/settled is recognised in the income statement on initial
booking, except for loans to employees for whom this difference is amortised over the shorter of the expected
period of employment and the duration of the loan.
Receivables arising from the sale of goods or services are recognised at the time the sale or service is completed,
meaning the moment at which it is possible to recognise the income and hence the right to its receipt.
If recognition in the category of loans and receivables takes place when the company has the intention and ability to
hold them for the foreseeable future or up to maturity, assuming it meets the conditions for booking, for reclassification
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Part A – Accounting Policies
from financial assets available for sale or from financial assets held for trading, the fair value of the asset at the date of
reclassification is taken as the new amortised cost of the asset.
Measurement and recognition of items affecting the income statement
Following initial recognition, receivables are measured at amortised cost, equal to the initial value less any repayments
of principal, reduced by adjustments and increased by any write-backs of the impairment testing and adjusted
accumulated amortisation – calculated under the effective interest rate method – of the difference between the amount
paid and that repayable on maturity, which is typically attributable to ancillary costs/revenues booked directly to the
individual loan.
The effective interest rate is the rate that equates the present value of future cash flows of loans, principal and
interest, estimated during the expected life of the loan to its initial value, for fixed-rate instruments, or its book value
at each repricing date for floating-rate instruments. The estimate of cash flows takes into account all contractual
terms which may affect the amounts and maturities, without considering the expected losses on the loan. The
calculation includes all the payments between the parties which form an integral part of the interest, even if otherwise
specified (fees, expenses, etc.), the transaction costs and all other premiums or discounts. This accounting method,
using a financial logic, makes it possible to distribute the economic effect of the costs/revenue over the residual
life of the loan.
The amortised cost method is not used for short-term receivables for which the effect of discounting is immaterial. These
receivables are valued at historical cost. The same method is applied to loans without a defined maturity or which can
be revoked at any time.
Each time financial statements are prepared, a review of financial assets classified as loans is carried out to identify
those which show objective signs of impairment as a result of events that occurred after they were recognised. These
signs become visible as a consequence of the following events in particular:
significant financial difficulties on the part of the issuer or the debtor to settle the payments due;
situations of default on the part of the issuer or the debtor or non-payment of interest or principal;
concession to the debtor or issuer, for economic or legal reasons linked to the financial difficulties of the issuer, of
facilities that the Group would not otherwise have taken into account;
probable bankruptcy of the debtor or issuer or their involvement in other insolvency proceedings;
lack of access to an active market for that particular financial asset because of the financial difficulties of the debtor
or issuer;
deterioration in the quality of a homogeneous group of loans due for example:
– payment difficulties on the part of debtors within the group;
– national or local economic conditions that adversely affect the group.
The impairment test of the loans is divided into two phases:
the phase of individual or specific assessments, in which individual non-performing loans are selected and the related
losses estimated;
the phase of collective or portfolio assessments, in which latent potential losses on performing loans are estimated.
First of all a valuation is made of the assets representing non-performing exposures (non-performing loans) classified in
the various risk categories on the basis of the Bank of Italy’s regulations, consistent with IAS/IFRS standards, together
with internal provisions establishing the criteria and rules for the transfer of loans within the various risk categories. In
this respect it should be noted that the Bank of Italy has revised the definitions of non-performing loan categories as
from 1 January 2015.
This revision became necessary in order to adapt previous risk classes to the definition of “Non-Performing Exposure”
(NPE) introduced by the European Banking Authority (“EBA”) through the issue of Implementing Technical Standards
(“ITS”), EBA/ITS /2013/03/rev1 on 24 July 2014.
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The “Asset quality” section of Circular no. 272 of 30 July 2008 was accordingly updated (6th update of 7 January
2015), identifying the following categories of non-performing loans:
Bad loans: cash and “off-balance sheet“ exposures to borrowers in a state of insolvency (even if not yet established
by a court) or substantially similar situations, independent of any loss forecasts made by the bank. Bad loans also
include exposures to local authorities (municipalities and provinces) in a state of financial distress for the amount
subject to the relevant liquidation;
Unlikely to pay: classification in this category is above all the result of the bank’s opinion on the likelihood that the
obligor will be able to pay its credit obligations (principal and/or interest) in full without recourse to measures such
as enforcing guarantees. This assessment has to be carried out whether or not there are any amounts or instalments
past due and unpaid. This means that it is not necessary to wait for explicit signs of an anomaly, such as failure
to repay, if there are elements that imply a situation of risk of default on the part of the borrower (for example, a
crisis in the industry in which the debtor operates). “Unlikely to pay” status applies to all of the cash and off-balance
exposures to the same debtor that finds itself in such as situation;
Past due and/or overdrawn: cash exposures, other than those classified as bad loans or unlikely to pay, that have
a past due and/or overdrawn position for more than 90 days at the reporting date. As regards the Bipiemme
Group, non-performing past due and/or overdrawn exposures are determined with reference to the position of the
individual debtor.
In its ITS the EBA introduces an additional disclosure requirement on forbearance. The term “forbearance” is used
by the EBA to indicate debtors that find or could find themselves in difficulty with respect to their loan repayment
terms and for which concessions have been made concerning the renegotiation of the original contractual conditions.
Accordingly, a necessary condition for the identification of an exposure as forborne is the existence at the time of the
request for renegotiation of a situation whereby a debtor is experiencing financial difficulty.
In January 2015 the Bank of Italy issued an update to Circular no. 272 which provides definitions for “non-performing
exposures” and “forborne exposures“ (i.e. exposures for which concessions have been made), based on the EBA’s
technical standards. The latter definition does not represent a new category of non-performing loan but is an additional
information tool, since the “forborne” loan category applies to all existing risk classes and both performing and nonperforming loans may be included in the scope of renegotiation.
The allocation of forborne status may be reversed subsequent to a review of the results and financial position of the
debtor. This review process takes place after a period of 2 or 3 years, based on whether the loan is performing
or non-performing.
If there is objective evidence of impairment, the amount of the write-downs is equal to the difference between the book
value of the asset at the time of the evaluation (amortised cost) and the present value of the expected future cash flows
of principal and interest, calculated by applying the effective interest rate on impairment.
The expected cash flows take into account the foreseeable recovery time, the realisable value of any guarantees on
the positions, any prepayments received (excluding future loan losses that have not yet arisen), and the costs that
will be incurred to recover the loan. The present value of future cash flows of a collateralised financial asset reflects
the cash flows that might result from the collateral, net of realisation costs, regardless of the actual probability of
realisation. Cash flows related to loans that are expected to be recovered in the short term are not discounted. The
original effective interest rate for each loan remains unchanged over time even in the case of a restructuring that has
led to a change in the contractual rate and also when the relationship becomes, in practice, non-interest bearing
from a contractual point of view. If a loan has a variable interest rate, the discount rate for measuring the loss is the
current effective interest rate determined under the contract.
In the event of an adjustment, the book value of the asset is reduced by setting up an allowance for bad and doubtful
accounts that offsets the value of the asset and the amount of the adjustment is recognised in the income statement
under ‘Net losses/recoveries on impairment of loans’. If the loan is regarded as uncollectable, it is written off against
the allowance. If in a subsequent period the amount of the adjustment decreases and the decrease is objectively
attributable to an event that occurred after determination of the write-down, as an improvement in the creditworthiness
of the borrower, the adjustment recorded previously is eliminated or reduced by booking a write-back to the income
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statement, although the write-back cannot in any case exceed the amortised cost that the loan would have had if no
adjustments had been made previously.
Reversals of impairment losses, like reversals associated with the passage of time, for interest earned in the period on
the basis of the original effective interest rate (previously used for calculating the impairment loss), are recognised at
each balance sheet date under ‘Net losses/recoveries on impairment of loans’ in the income statement.
The restructuring of loans that envisages the cancellation thereof in exchange for equity instruments (shares, participating
instruments, units of mutual funds) via debt/equity swap transactions is tantamount to, from an accounting point of view,
a substantial amendment to the original contractual terms leading to the termination of the pre-existing relationship and
the consequent fair value measurement of the new relationship, with the recognition in the income statement of a profit
and loss equating to the difference between the book value of the terminated loan and the fair value of the financial
instruments received.
Loans for which no objective evidence of impairment has been identified (“performing loans”) are submitted to collective
or portfolio evaluation.
The evaluation of performing loans (loans to borrowers who, at the balance sheet date, have not shown any specific
risk of default) takes place for homogeneous categories of loans in terms of credit risk and loss rates are estimated
taking into account past statistics and other elements that are observable at the valuation date, which makes it possible
to estimate the latent loss in value of each loan category.
For this purpose a model is used that is developed on the basis of risk management methodologies seeking all possible
synergies (as permitted by the various regulations) with the advanced approach for evaluating the creditworthiness
of a counterparty, under current supervisory legislation. From an operational standpoint, the best possible proxy for
determining the creditworthiness of a counterparty is the rating calculated by the models that have been developed and
validated internally. All of the positions identified using the methods explained above are evaluated on a collective basis
by determining the amount of adjustments to be recognised in the income statement, as the product of the exposure at
the balance sheet date, the probability of default (PD) and the loss in case of default (LGD).
The estimation process for the above factors, PD and LGD, takes account of assumptions that permit the closest possible
approximation of the notion of “incurred loss”, that is, the loss arising from actual events but which have not yet been
reflected in the revision of the level of risk of the counterparty (“incurred but not reported”), as envisaged by IAS 39.
In particular, a time horizon of one year is used for the identification of a deterioration in creditworthiness that is then
corrected by means of a mitigating factor (“Loss Confirmation Period”) that represents the time period between the
detection of the initial signs of anomalies and the point in time when the default event is recorded by the Bank.
The adjustments are determined collectively and recognised in the income statement. At each balance sheet and interim
report date, the assessment is updated with reference to the entire portfolio of performing loans as of that date and any
additional adjustments or write-backs are recalculated differentially with reference to the entire portfolio.
Interest on the loans is classified in the income statement under “Interest and similar income” and is recognised on an
accrual basis. Any gains and losses on disposal are reported in the income statement under “Profits (losses) on disposal
or repurchase of: loans”.
A similar method is used for determining specific and general write-downs against guarantees given which do not
represent derivative contracts. The liabilities resulting from this valuation process are recognised in “Other liabilities” in
accordance with the Bank of Italy’s instructions. Impairment losses on the guarantees issued and any subsequent writebacks are recognised in the income statement under “Net losses/recoveries on impairment of: other financial activities”.
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Derecognition
Loans and receivables are derecognised when the right to receive cash flows from the financial asset has expired, or
when all the risks and rewards associated with holding the asset in question are effectively transferred or when the asset
is regarded as definitively irrecoverable upon completion of all the necessary recovery procedures.
Conversely, if the legal ownership of loans has been effectively transferred and the Group retains substantially all their
rewards and benefits, these loans continue to be reported as assets in the Bank’s balance sheet, with the consideration
received from the purchaser recognised as a liability.
In such cases, the Group making the transfer recognises a liability to the buyers equal to the price received; the
respective costs and revenues are recognised on the assets sold and any related liabilities.
5 – Financial assets designated at fair value through profit and loss
Classification
In general terms the application of the fair value option is extended to all financial assets and liabilities which, if
otherwise classified, would give rise to a distortion in the accounting treatment of income and shareholders’ equity, as
well as to all instruments that are managed and measured at fair value.
The following are therefore included in this category:
structured instruments purchased (hybrid debt instruments whose return is linked to equity instruments, foreign
exchange, credit instruments or indices), other than those allocated to trading instruments;
debt securities not included in financial assets held for trading and subject to financial hedging for which the fair
value is applied in order to reduce and/or eliminate valuation and accounting asymmetries;
open-ended funds (including hedge funds), for which regular valuations are available from independent sources
and which, not being held for short-term trading, form part of a suitably documented investment strategy, designed
to achieve an overall return based on the change in the fair value of the instrument, with regular detailed reports
on their performance provided to management.
Reclassifications to other categories of financial assets are not allowed.
Recognition
The initial recognition of financial assets designated at fair value through profit and loss takes place on the settlement
date of the underlying purchase transactions according to the timing provided by market practices (“regular way”).
Changes in fair value between the trade date and the settlement date are recognised in the income statement.
Financial assets designated at fair value through profit and loss are initially recognised at fair value, which generally
corresponds to their purchase price. Their transaction costs or proceeds are recognised directly in the income statement.
Measurement and recognition of items affecting the income statement
After initial recognition financial assets are valued at their current fair value.
The fair value of investments listed on active markets is determined with reference to the market bid price reported
at the balance sheet date. The fair value of investments for which no price is listed on an active market is determined
using estimates and valuation models that take account of all the risk factors related to the instruments along with
published price quotations, if available. These techniques may take account of prices reported for recent similar
market transactions, discounted cash flows, option pricing models and other well-established methods used in
financial markets. For further details, reference should be made to section A.4 “Fair value disclosures”.
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Gains and losses realised on sale or redemption and the unrealised gains and losses arising from changes in fair value
with respect to the purchase cost, determined on the basis of the weighted average cost on a daily basis, are expensed
in the period in which they emerge under the item “Profits (losses) on financial assets and liabilities designated at fair
value”, to which are also booked the capital gains and losses on derivatives linked to the fair value option.
Under the terms of article 6 of Legislative Decree no. 38 of 28 February 2005, the share of operating profit, corresponding
to gains recognised in the income statement, net of the related tax charge, which stems from the application of fair value
to instruments other than those for trading and to foreign exchange operations and hedging instruments, is recognised
in a restricted reserve that is reduced by the amount of any capital gains that are realised. The amount reported in
the restricted reserve refers to the net gains on financial assets and liabilities, not hedged by derivatives, and those on
hedged financial instruments.
Interest income on debt securities is calculated on the basis of the nominal interest rate. Dividends from equities
are recorded when the right to receive them arises. Interest income and dividends appear in the income statement,
respectively, under “Interest and similar income” and “Dividends and similar income”.
Derecognition
Financial assets designated at fair value through profit and loss are derecognised when the right to receive the cash
flows from the financial asset has expired, or if substantially all the risks and benefits associated with holding that
particular asset are transferred.
Conversely, if legal ownership of a financial asset has effectively been transferred, but the bank retains a substantial
part of the rewards and benefits of the asset sold, it continues to be reported as an asset in the balance sheet. In such
cases, the Group making the transfer recognises a liability to the buyers equal to the price received; the respective costs
and revenues are recognised on the assets sold and any related liabilities.
6 – Hedging transactions
Classification
Risk hedging transactions are designed to neutralise potential losses on a particular item or group of items attributable to
a given risk, should a specific risk actually occur. The instruments that may be used for hedging are derivatives (including
purchased options) and non-derivative financial instruments, but only to hedge exchange risk. Hedging instruments are
classified in the balance sheet under asset line item “80. Hedging derivatives” if positive at the balance sheet date, or under
liability line item “60. Hedging derivatives”, if negative.
Of those permitted by the standard, the Group uses the following types of hedging:
Fair value hedges divided into:
– microhedging: this has the aim of hedging the risk of changes in the fair value of individual assets or liabilities in
the financial statements, or portions thereof, attributable to a particular risk, such as interest rate risk or price risk;
– macrohedging: this has the aim of reducing fluctuations attributable to interest rate risk in the fair value of
an indistinct portion (a monetary amount) of a portfolio of financial assets and/or liabilities. Net amounts
corresponding to mismatches of assets and liabilities cannot be macrohedged.
Cash flow hedges: the objective of these is to hedge the exposure to changes in future cash flow attributable to particular
risks associated with financial statement components. This type of hedging is used to stabilise cash flows generated by
interest on floating rate loans or to hedge the risk of a price change on future purchases of financial assets.
Financial instruments are designated as hedging instruments only if they involve a counterparty that is external to the
Group, which means that transactions between Group companies and their economic results are eliminated from the
consolidated financial statements.
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Recognition
Hedging derivatives are initially recognised at the trade date (the date the contract is signed).
Like all derivatives, financial derivative instruments used for hedging are initially recognised at fair value.
Measurement and recognition of items affecting the income statement
Fair value hedges
Financial derivative instruments used for hedging are measured at their current fair value. The fair value of derivatives is
based on prices published by regulated markets or provided by financial markets, option pricing models or discounted
future cash flow models. For further details reference should be made to section A.4 “Fair value disclosures”.
Hedged positions are also carried at fair value, but only for changes in value produced by the risk being hedged
(e.g. interest rate risk), “sterilising” the other risk components that are not subject to such transactions and, for hedged
positions subject to the amortised cost method and involved in microhedging, with the counter-entry adjusting their
amortised cost. In macrohedging operations changes in fair value of hedged positions do not involve adjusting their
amortised cost, but are recognised in the balance sheet under the asset item “90. Fair value change of financial assets in
hedged portfolios” or under the liability item “70. Fair value change of financial liabilities in hedged portfolios”.
The accounting treatment of unrealised gains and losses corresponding to changes in fair value depends on the type
of hedging. In particular:
specific fair value hedge: the change in the fair value of the hedged item is connected with the change in the fair value
of the hedging instrument. Such compensation is recognised through recognition in income statement item “90. Fair
value adjustments in hedge accounting” of the changes in value related to the hedged item (as regards the changes
produced by the underlying risk factor), and to the hedging instrument. Any difference, which represents the partial
ineffectiveness of the hedge, therefore constitutes the net economic effect. Recognition in the income statement of
changes in the fair value of the hedged item, attributable to the risk being hedged, also applies if the hedged item is
a financial asset available for sale; if there is no hedge, this change would be recognised in equity. In microhedging
transactions the difference between the book value of the hedged position (carried at amortised cost) at the time the
hedge comes to an end and what would have been its book value if the hedge had never been activated is amortised
to income over the residual life of the hedged item based on the effective rate of return. If the hedged item is sold or
redeemed, the unamortised portion of fair value is recognised immediately in profit and loss;
generic fair value hedge: changes in the fair value of assets or liabilities being hedged are recognised in income
statement item “90. Fair value adjustments in hedge accounting” and in the balance sheet under asset item
“90. Fair value change of financial assets in hedged portfolios” or liability item “70. Fair value change of financial
liabilities in hedged portfolios”. If the hedging relationship no longer fulfils the conditions for hedge accounting
or the hedge relationship is divested, the amount included in asset item 90 or liability item 70 is amortised to the
income statement over the estimated life of the hedged items at the time of defining the generic (or “macro”) hedge.
If the hedge no longer applies as the elements being hedged have been cancelled or reimbursed, the portion of fair
value not yet amortised is recognised immediately in profit and loss.
Cash flow hedges
Cash flow hedging derivatives are measured at fair value. The change in the fair value of hedging derivatives:
if effective is recognised in line item “140. Valuation reserves” of shareholders’ equity;
is recognised in the income statement line item “90. Fair value adjustments in hedge accounting” when, in relation
to the hedged item, there is a change in the hedged cash flow or the ineffective portion of the hedge.
If the cash flow hedge is no longer considered effective or the hedging relationship has been terminated, the entire
amount of the profits or losses arising from the hedging instrument, already recorded in “Valuation reserves”, is
recognised in the income statement only when the hedged transaction takes place or when it is deemed that there is no
longer any possibility that the transaction will take place; in the latter circumstances the profits or losses are reclassified
from shareholders’ equity to the income statement line item “90. Fair value adjustments in hedge accounting”.
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Changes in fair value indicated by the line item “140. Valuation reserves” are also reported in the statement of
comprehensive income.
Differentials accrued on derivatives to hedge interest rate risk are recorded in the income statement under “Interest and
similar income” or “Interest and similar expense” (the same as the accrued interest on the hedged positions).
A transaction qualifies for hedge accounting if there is formal documentation of the relationship between the hedging
instrument and risks hedged, of the enterprise’s risk management and strategy for undertaking the hedge and of how it
will assess the hedging instrument’s effectiveness. Furthermore, the effectiveness of the hedging relation must be tested
when initiated and, in the future, over its entire life.
The effectiveness of the hedge depends on the extent to which changes in the fair value of the hedged instruments or
of the expected cash flows are offset by those of the hedging instrument. Effectiveness is measured by comparing the
above changes, taking into account the intent pursued by the company when the hedge was put in place.
A hedge is effective (within a range of 80%-125%) when the actual and expected changes in the fair value or cash flows
of the hedging instrument almost completely neutralise the changes in the hedged item, for the type of risk being hedged.
Effectiveness is assessed at each annual or interim balance sheet date.
Hedge accounting is discontinued in the following circumstances:
a) the hedging derivative ceases to exist or is no longer highly effective;
b) the hedged item is sold or repaid;
c) the hedge is terminated prematurely;
d) the derivative expires or is sold, terminated or exercised.
In cases a), b) and c) the derivative contract is reclassified to trading instruments (under “20. Financial assets held
for trading” or “40. Financial liabilities held for trading”). In cases a), c) and d) the hedged instrument is recognised
in its category with a value equal to its fair value at the time when it ceases to be effective and it goes back to being
measured according to the class to which it originally belonged.
Derecognition
Financial assets and liabilities used for hedging are derecognised when there is no longer the contractual right to
receive the cash flows relating to financial instruments, assets/liabilities hedged and/or derivative object of the hedging
transaction (e.g. expiry of the contract, early termination exercised in accordance with the terms of the contract –
so-called “unwinding”) or when the financial asset/liability is sold, transferring substantially all of the risks/benefits
associated with it.
7 – Investments in associates and companies subject to joint control
Classification
This item consists of interests that meet the criteria of IAS 28, investments in companies over which the investor has
significant influence, and of IFRS 11, joint ventures. The recognition criteria are consistent with those stated in Section
3 “Scope of consolidation and consolidation procedures”.
Recognition
This item consists of interests in joint ventures and associates, which are initially recognised at acquisition cost.
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Measurement and recognition of items affecting the income statement
Investments in associates and companies subject to joint control are carried in the balance sheet at equity, which
requires initial recognition at cost and subsequent adjustment to calculate the share of profits and losses realised after
the acquisition. A pro-rata share of the company’s operating results is recognised under “Profits (losses) on investments
in associates and companies subject to joint control” in the consolidated income statement.
The book value of investments in associates and companies subject to joint control is reduced by the dividends received
periodically by the Group.
In the event it is necessary to account for changes in value originating from changes in equity in an investee that the
investee has not recognised in the income statement (for example, for changes originating from the measurement at fair
value of financial assets available for sale), the portion of the changes attributable to the Group is recorded in the line
item “Valuation reserves”.
If there are signs that the value of an investment may be non-performing, an estimate of the recoverable amount of the
investment is made, this being represented by the higher of the fair value net of costs to sell and its value in use. The
value in use is the present value of the cash flows that the investment is expected to generate, including its ultimate
disposal value, while fair value is determined in accordance with Section A.4 – Fair value disclosures. If the recoverable
amount is less than the book value, the difference is recognised in the consolidated income statement under item “240.
Profits (losses) on investments in associates and companies subject to joint control”.
If the reasons for making a write-down cease to exist due to an event occurring after recognition of an impairment,
write-backs are made in the consolidated income statement to the same line item “240. Profits (losses) on investments
in associates and companies subject to joint control”.
Derecognition
Investments in associates and companies subject to joint control are derecognised when the contractual rights to the
cash flows from the assets expire or when the investment is sold and substantially all of the risks and benefits associated
with it are transferred. On the other hand the investment is reclassified as a financial instrument in the case of partial
disposal that involves the loss of significant influence or joint control.
8 – Property and equipment
Classification
This item mainly includes land and buildings for business purposes and those held for investment purposes, together
with equipment, vehicles, furniture, furnishings and equipment of any kind.
Assets used for business purposes are those held for use in the supply of goods and services or for administrative
purposes, which are deemed to be used for more than one period, while investment assets include property held to
earn rentals, for capital appreciation or both. The land and buildings held are mostly used as branches and offices of
the Parent Company and Group companies.
Property and equipment also include leasehold improvements in the case of additional expenses relating to identifiable
and separable assets; in this case, the classification relates to the specific category, taking into account the nature of
the asset in question. Leasehold improvements are classified under “Other assets” if they relate to property, plant and
equipment that is identifiable but not separable.
As regards property, the components relating to land and buildings are treated separately for accounting purposes as
they have different useful lives. The subdivision between the value of land and the value of buildings is made on the
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basis of valuations performed by independent experts. Land is attributed an unlimited useful life and is therefore not
depreciated, whereas buildings are depreciated as they have a limited useful life. An increase in the value of the land
on which a building stands does not affect the determination of the building’s useful life.
If a property includes a portion that is used in the business and a portion that is held for investment purposes, it is
classified on the basis of whether these parts can be sold separately or otherwise. If they can be sold separately, they
are recorded separately as business property and investment property accordingly. If the portions cannot be sold
separately, the entire property is classified as a business property, unless only an insignificant portion of the property
is used for business purposes.
Recognition
Property and equipment are initially recorded at purchase price or production cost, including all directly attributable
costs of purchase or of bringing the asset to its working condition.
Non-routine maintenance expenditure is included in the book value of the asset or recorded as a separate asset, as
appropriate, only when it is probable that the future economic benefits will flow to the enterprise and the cost can be
measured reliably. Expenditure on repairs, maintenance or other work to ensure the functioning of assets is recognised
as an expense in the period incurred.
Measurement and recognition of items affecting the income statement
Subsequent to initial recognition, items of property and equipment, including investment property, are carried at cost
less any accumulated depreciation and any accumulated impairment losses. Property and equipment are depreciated
over their estimated useful lives by adopting the straight-line method and the amount is recognised as “Net adjustments
to/recoveries on property and equipment”. Land is not depreciated, regardless of whether it was separately acquired
or forms part of the value of buildings, since it has an unlimited useful life. Works of art are not depreciated since their
useful life cannot be estimated and their value usually increases over time.
Depreciation starts when the asset is available and ready for use, or when it is in the required place and condition to
be able to operate. In the first year of depreciation the charge is recognised in proportion to the period during which
the asset is effectively used.
Depreciation ceases when the asset is classified as “held for sale” or, if earlier, from the date when the asset is
derecognised. Depreciable assets are adjusted for any impairment losses whenever events or changes in circumstance
indicate that their book value might not be recoverable. An impairment loss is recognised for the amount by which the
book value of an asset exceeds its recoverable amount. The recoverable amount is the higher of fair value, net of any
costs to sell, and the related value in use of the asset, understood as the present value of expected future cash flows
generated by the asset.
Any adjustments are recognised in the income statement as “Net adjustments to/recoveries on property and equipment”.
If the reasons underlying the recognition of an impairment loss no longer exist, the loss may be reversed but by no more
than the book value that the asset would have had (net of depreciation) if no impairment losses had been recognised
in prior years.
Apart from specific determination of the useful life of individual assets, the Group depreciates property and equipment
over the following useful lives:
property: from 15 to 30 years;
furniture, machines, vehicles: from 3 to 10 years;
plant and leasehold improvements: from 3 to 12 years.
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Derecognition
Property and equipment are removed from the balance sheet on disposal or when permanently withdrawn from use and
therefore no future benefits are expected from their sale or use. Gains or losses arising from the retirement or disposal
of items of property and equipment are determined as the difference between the net disposal proceeds and the book
value of the assets and are recognised in the income statement on the date on which the assets are derecognised.
9 – Intangible assets
Classification
Intangible assets are non monetary assets, which are identifiable even if they lack physical substance, are long-term and
originate from legal or contractual rights, from which the Group will derive future economic benefits.
This item consists exclusively of software licences that cannot be associated with a tangible asset. The cost incurred to
purchase and implement the specific software is recognised in the balance sheet as “Own software”, providing all the
rights relating to the software have been acquired; if only the user licence has been purchased this is classified as a “User
licence” under Software.
Recognition
Intangible assets are recognised as assets at cost, adjusted for any ancillary charges, if it is probable that future
economic benefits attributable to the asset are realised and if the cost of the asset can be reliably determined and
provided it consists of identifiable elements, i.e. it is protected by legal recognition or negotiable separately from other
assets. In the absence of these conditions, the cost of the intangible asset is expensed to income in the period incurred.
Internally produced software in the development phase is capitalised when the related costs can be reliably determined;
these costs usually consist of the cost of internal staff working on the development project and any other directly related
charges. If the technical feasibility of completing the related projects and their ability to generate future economic benefits
fails to be demonstrated or if the cost of production cannot be determined reliably the costs are expensed to income.
Measurement and recognition of items affecting the income statement
After initial recognition, intangible assets with a “finite” life are carried at cost less accumulated amortisation and any
accumulated impairment losses.
Amortisation is on a straight-line basis (or, for intangible assets relating to the enhancement of customer relationships
with defined maturity, on a declining basis), which reflects the long-term use of the assets based on their estimated useful
life, and amortisation is recognised under “Net adjustments to/ recoveries on property and equipment” in the income
statement.
Amortisation starts when the asset is available for use, or when it is in the place and conditions allowing it to operate in
the established manner. In the first year of amortisation the charge is recognised in proportion to the period the asset is
effectively used. Amortisation is no longer charged from the earlier of the date when the intangible asset is classified as
“held for sale” or the date on which the asset is derecognised. If there is evidence of impairment, the asset’s recoverable
amount is estimated at each balance sheet date. The amount of the impairment loss, expensed to income under “Net
adjustments to/recoveries on intangible assets”, is the difference between the book value of an asset and its recoverable
value.
Apart from the specific determination of the useful life of individual assets, the Group amortises intangible assets over
the following useful lives:
licenses: over the term of the license;
software developed internally: 6 years.
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The Group has no intangible assets with an “indefinite” life.
Derecognition
An intangible asset is eliminated from the balance sheet on disposal or when no future economic benefits are expected
from its use and subsequent disposal. Gains or losses arising from the retirement or disposal of an intangible asset are
determined as the difference between the net disposal proceeds and the book value of the asset.
10 – Non-current assets held for sale
Classification
Non-current assets and disposal groups held for sale are classified as such if their book value will be recovered
principally through a sale rather than through continued use. This condition is considered met only when the sale is
highly probable and the asset or disposal group is available for immediate sale in its present condition. Management
must be committed to the sale and completion of the sale should be expected within one year of the classification.
In accordance with IFRS 5, discontinued operations are also accounted for separately; these are components that have
either been disposed of or classified as held for sale and:
represent either a separate major line of business or a geographical area of operations;
form part of a single co-ordinated plan to dispose of a separate major line of business or geographical area of operations;
are a subsidiary acquired exclusively with a view to resale.
At 31 December 2015 there were no assets or groups of assets classified as such under IFRS 5.
Recognition
Non-current assets and disposal groups classified as held for sale are measured at the lower of their book value and
fair value, less costs to sell.
Measurement and recognition of items affecting the income statement
As a result of being classified in this category these assets are measured at the lower of their book value and the related
fair value less costs to sell. In cases where the assets being sold are not fully depreciated, the depreciation process is
interrupted from the time they are classified as non-current assets held for sale. Non-current assets and disposal groups
held for sale as well as “discontinued operations” and the related liabilities are shown in specific items under assets
(“Non-current assets and disposal groups held for sale”) and liabilities (“Liabilities associated with non-current assets
and disposal groups held for sale”).
The results of valuations, revenues, charges and profits (losses) on disposal (net of tax), of “discontinued operations”
are recognised in the income statement as “Income (loss) after tax from discontinued operations”.
Derecognition
Non-current assets and disposal groups held for sale are derecognised on disposal.
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11 – Current and deferred taxation
“Current and deferred tax assets and liabilities” respectively include current and deferred tax assets and current and
deferred tax liabilities relating to income taxes. These are calculated in accordance with national tax laws and are
recognised in the income statement on an accrual basis, in line with the recognition of the costs and revenues that
generated them. An exception to this is the tax on items debited or credited directly to shareholders’ equity, for which
the recognition of the related tax takes place in shareholders’ equity for the sake of consistency.
Current taxation: “Current tax assets and liabilities” show the taxes payable or recoverable on the taxable result for the
year. These basically relate to the taxes that will be declared in the tax return. Current taxes show the balance between
current tax liabilities for the year, calculated on a conservative basis in accordance with current tax legislation, and
current tax assets represented by advance payments, tax credits for withholding taxes incurred and other tax credits
from previous years for which the Group has asked for an offset against future taxation. Current tax assets also include
tax credits for which a refund has been requested from the competent Tax Authority.
Deferred taxation: application of the tax rules to the separate financial statements leads to differences between taxable
income and statutory income which may be permanent or temporary in nature. Permanent differences are definitive
and consist of costs or revenues which under current tax laws may be non-deductible (totally or partially) or exempt.
Temporary differences are formed when the book value of an asset or liability differs from its tax base, thus giving rise
to deferred tax, which is determined on the basis of the ‘balance sheet liability method”. Deferred taxation determined
on the basis of this method takes account of the tax effect of the differences, which will lead to taxable or deductible
amounts in future periods; it follows that the temporary differences can be divided into “taxable temporary differences”
and “deductible temporary differences”.
“Taxable temporary differences” arise when the book value of an asset is higher than its value for tax purposes, or
when the book value of a liability is lower than its value for tax purposes. These differences indicate a future increase
in taxable income and consequently generate “deferred tax”, as these differences result in taxable amounts in later
periods to those in which they are recognised in the Bank’s income statement, resulting in a deferral of taxation with
respect to the period when it accrues from a statutory point of view.
“Deferred tax liabilities” are recognised for all taxable temporary differences except for equity reserves in suspense for
tax purposes or those for which there are no planned distribution to the shareholders.
Differences between lower taxable profit compared with accounting profit are principally the result of:
positive components of income taxable in periods subsequent to those in which they were recognised for
accounting purposes;
negative components of income that are deductible for tax in periods prior to those in which they are recognised
for accounting purposes.
“Deductible temporary differences” arise when the book value of an asset is less than its value for tax purposes, or
when the book value of a liability is greater than its value for tax purposes. These differences indicate a future reduction
in taxable income, which therefore generates “deferred tax assets” (effectively prepaid taxes), as these differences
result in taxable amounts in the year they are recognised, leading to an anticipation of the tax with respect to the period
when it accrues from a statutory point of view.
“Deferred tax assets” are recognised in the financial statements for all deductible temporary differences to the extent
that they will probably be recovered. This probability is assessed on the ability of the company concerned, or of all
the companies taking part in the Group tax regime, to generate positive taxable income against which deductible
temporary differences can be offset.
Differences between higher taxable profit compared with accounting profit are principally the result of:
positive components of income taxed in years prior to those in which they are recognised for accounting purposes;
negative components of income that are deductible for tax in periods subsequent to those in which they were
recognised for accounting purposes.
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Deferred tax assets may also be recognised for the carry forward of unused tax losses and unused tax credits.
Deferred taxation is calculated by applying the tax rates that, according to the laws in force at the time of preparing the
financial statements, will be applied in the period in which the asset will be realised or the liability settled.
Deferred tax assets and liabilities are offset if they relate to taxes levied by the same tax authority and when there is a
legally enforceable right of set-off.
The assets and liabilities recognised as deferred tax assets and liabilities are systematically assessed to take into
account any changes in the rules or tax rates, or any other circumstances relating to the individual Group companies.
The amount of the provision for taxation is also adjusted to meet any charges that could arise from tax assessments
already notified or in any case from disputes with the tax authorities.
If deferred tax assets and liabilities relate to items affecting the income statement, the counter-entry is recognised in “Taxes
on income from continuing operations”; if the amount of deferred tax assets exceeds the aggregate cost for current taxes
and deferred tax liabilities, a positive amount of “tax revenue” is shown in the above-mentioned item of the income
statement. In cases where deferred tax assets and liabilities relate to transactions that directly involved shareholders’ equity
(the “valuation reserves”) without passing through the income statement (for example, recognition of actuarial gains or
losses, and valuations of financial instruments available for sale and cash flow hedges), these are recorded with a counterentry to the specific valuation reserves in shareholders’ equity and in the statement of comprehensive income.
The deferred taxation of companies taking part in the Group tax regime is recognised on an accrual basis
by the individual companies in their financial statements, as the Group tax regime can only be used to settle
current tax positions.
12 – Allowances for risks and charges
Allowances for risks and charges include provisions for risks and charges covered by IAS 37 as well as allowances for
employee benefits covered by IAS 19, both post-employment and long-term benefits.
Allowances for risks and charges are liabilities whose amount and timing are uncertain and are recognised in the
financial statements when all the following conditions are met:
a) a present obligation exists at the balance sheet date as a result of a past event. The obligation must be of a
legal nature (i.e. based on a contract, regulation or other provision of law) or implicit (i.e. arising any time the
company generates an expectation in third parties that it would honour its commitments, even if not covered by
legal obligations);
b) it is probable that an outflow of financial resources will be required;
c) a reliable estimate can be made of the amount of the obligation.
The following paragraphs provide a description of the contents of the allowances for risks and charges and the way
in which they are recognised and measured, analysed between “Allowances for post-employment benefits” and “other
allowances” as required by the Bank of Italy.
Allowances for post-employment benefits
“Allowances for post-employment benefits” consist of provisions for employee benefits to be paid after termination of
the employment relationship; depending on the legal and economic substance of the obligation, they can be defined
contribution or defined benefit plans.
Under defined contribution plans, the employer pays contractually established contributions into a separate fund and
accordingly has no legal or constructive obligation to pay further contributions if the fund does not hold sufficient assets
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to pay all employee benefits. The contribution is accounted for on an accrual basis under “Administrative expenses: a)
personnel expenses”, as the cost of the benefit to the employee.
Defined benefit plans are structured quite differently. In fact, in this case, the Group guarantees benefit payments to
those entitled by assuming the actuarial risk itself but not that of the investment, insofar as the amounts set aside to satisfy
the pensioners’ entitlements are not invested in specific assets that are separate from those of the Group in general.
These plans are financed by a specific provision recognised in “Allowances for risks and charges: a) post employment
benefits”. In this case the future benefits payable are valued by an independent actuary using the “projected unit
credit method”.
More specifically, this method, also known as the “accrued benefit cost method” pro-rated over the years of service
or as the “benefit/years of service method”, sees each period of service as giving rise to an additional unit of benefit
entitlement and measures each unit separately to build up the final obligation.
The projection of future payments (including future salary increases for whatever reason: contract renewals, inflation,
career promotion, etc.) is carried out on the basis of historical statistics and analyses of the demographic curve; these
flows are discounted at a market interest rate. The contributions paid in each period are treated as separate units,
recognised and measured individually for the purpose of determining the final obligation.
The amount recognised as a liability is therefore the present value of the liability at the balance sheet date, plus the
annual interest accruing on the present value of the Bank’s obligations at the start of the year, calculated using the
discount rate for estimating the liability for future outflows adopted at the end of the prior year and adjusted for the
portion of actuarial gains/losses.
The rate used to discount the obligations linked to post-employment benefits is determined on the basis of market yields
at the reporting date on bonds of leading companies with an average residual duration equal to that of the liabilities
being measured.
The full amount of actuarial gains and losses, defined as the difference between the book value of the liability
and the present value of obligations at period end, is recognised directly to shareholders’ equity line item
“Valuation reserves”.
Obligations to employees are evaluated by an independent actuary every six months.
Other allowances
“Other allowances” consist of provisions recognised for the estimated payments to be made for obligations arising from
past events. These payments may be of a contractual nature, such as for example those relating to bonuses payable to
managers in cash and on a deferred basis, those for amounts to be paid for staff leaving incentives or indemnities and
those provided in contractual clauses which trigger on the occurrence of certain specific events, or of a compensatory
and/or restitutory nature, such those relating to losses expected to be incurred in legal cases including clawback
actions or to customer litigation regarding security brokerage activities.
The amount recognised as an allowance is the best estimate of the financial benefit needed to implement the obligation
that exists at the reporting date of the financial statements and reflects risks and uncertainties that are inherent in the
facts and circumstances under review.
If deferral of the obligation is significant, with the result that the effect of the time value of money is material, then
provisions are discounted to the present value of the expenditure expected to be required to settle the obligation. The
discount rate is a pre-tax rate that reflects current market assessments of the time value of money and the risks specific
to the liability. It is usually considered significant if 12 months pass between the date of preparation of the financial
statements and the disbursement. The provision made to the allowance is recognised in the income statement, where
the interest accruing on allowances that are subject to discounting is also recognised.
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Provisions are adjusted, if necessary, at each balance sheet date to reflect the current best estimate; if the reasons for
past provisions no longer apply, the amount involved is released to income.
If liabilities are only potential and not likely, no provision is made, but information is given in the notes, except in cases
where the probability of incurring a cost is remote or the situation is immaterial.
13 – Payables and securities issued
Classification
Payables and securities issued fall within the broader category of financial instruments and consist of those relationships
for which the company is obliged to pay certain amounts to third parties at certain deadlines.
The items “due to banks”, “due to customers” and “securities issued” include the various technical forms of interbank
funding and customer deposits, repurchase agreements (forward agreements with an obligation to repurchase) and
the funds raised by issuing certificates of deposit, bankers’ drafts and bonds in circulation, i.e. net of any amount
repurchased. “Securities issued” also include securities that are past due but not yet reimbursed at the balance
sheet date and exclude portions of debt securities issued but not yet placed with third parties. Payables also include
those associated with the provision of financial services as defined in the Consolidated Banking Act and in the
Consolidated Finance Act.
Subordinated loans are classified as financial liabilities, as their regulations require periodic coupon payments and/or
mandatory redemption of capital for a fixed or determinable amount at a specified future date or give the holder the
right to request a refund on or after a set date for a fixed or determinable amount.
Recognition
Initial recognition of these financial liabilities are on receipt of the money raised or the issuance of debt securities and
is carried out based on the fair value of the liabilities, normally the amount received or the issue price, adjusted for any
costs/income directly attributable to each funding transaction or issue and not reimbursed by the creditor. This does not
include internal administrative expenses.
The portion of convertible bonds with the characteristics of a liability are recognised as payables less their issue costs.
The fair value of the portion of the debt representing a financial liability is determined upon issue using the market price
of an equivalent non-convertible bond; this amount, classified as a long-term payable, is adjusted using the amortised
cost method until it is extinguished through conversion or redemption. The rest of the amount received is attributed to
the conversion option and recognised in shareholders’ equity under “Reserves”.
Repurchase agreements are recognised as funding transactions for the amount paid spot.
Measurement and recognition of items affecting the income statement
After initial recognition, financial liabilities are carried at amortised cost using the effective interest rate method.
Exceptions to this are short-term liabilities where the time factor is negligible, which are recognised at the amount
received and any costs are charged to the income statement on a straight-line basis over the contractual life of the
liability. Funding instruments subject to an effective hedging relationship are evaluated according to the rules for
hedging transactions.
Interest expense on debt instruments is classified as “interest and similar expense”.
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Derecognition
Financial liabilities are derecognised when they have expired or have been extinguished. The repurchase of securities
issued previously is regarded as an extinguishment of the liability or part of it. The difference between the carrying
value of the liability extinguished and the amount paid for its repurchase is recognised in the income statement under
“Profits (losses) on disposal or repurchase of: d) financial liabilities”.
Any repurchase of securities issued previously is recognised as a decrease in the liability item to which the issue had
been booked, while the difference between the book value of the liability and the amount paid to purchase the securities
is recognised in the income statement under “Profits (losses) on repurchase of financial liabilities”. The re-placement
of these securities on the market after their repurchase is considered, for reporting purposes, as a new issue that is
recognised at the new placement price, with no effect on the income statement.
14 – Financial liabilities held for trading
Classification
The following items are classified in this category:
derivative contracts held for trading (except for those designated as effective hedging instruments, recorded in
liabilities under “Hedging derivatives”) with a negative fair value;
derivatives linked to assets/liabilities carried at fair value;
the sub-items “due to banks” and “due to customers” include liabilities arising from short selling as part of
securities trading.
Recognition
Initial recognition of financial liabilities held for trading takes place, for the liability in cash, on the settlement date of
the underlying operations, if settled on schedule according to market practice (“regular way”); for derivatives, on the
trade date. In the case of recognition of financial liabilities on the settlement date, any changes in fair value between
the trade date and the settlement date are recognised in income.
Financial liabilities held for trading are recognised on the subscription date at fair value, which generally corresponds to
the amount received, without considering transaction costs or income directly attributable to the instrument concerned,
which are charged directly to income statement.
Measurement and recognition of items affecting the income statement
Financial liabilities held for trading are measured at current fair value, with the result of the valuation being charged to
income. If the fair value of a financial liability turns positive, the item is recorded as a financial asset.
Profits and losses from trading activities and gains and losses on the valuation of the trading book are recognised in
the income statement under “Profits (losses) on trading”, except for financial derivatives relating to the fair value option,
whose result is recorded under “Profits (losses) on financial assets and liabilities designated at fair value”.
Differentials and margins on derivatives are allocated in the income statement to “Profits (losses) on trading”, except
for those that are operationally linked to financial assets or liabilities designated at fair value (subject to the fair value
option) or linked to financial assets or liabilities classified as held for trading and with settlement of differentials or
margins with various maturities (“multiflow” contracts), which are classified in the income statement as “Interest and
similar income”.
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Derecognition
Financial liabilities held for trading are derecognised when the contractual rights to the cash flows cease or when the
liability is sold and substantially all of the risks and benefits associated with it are transferred.
15 – Financial liabilities designated at fair value through profit and loss
Classification
Financial liabilities designated at fair value through profit and loss form part and this item, based on the fair value
option granted to companies by IAS 39 and the case studies provided in the standard.
This category includes:
structured instruments issued (hybrid debt instruments whose return is linked to equity instruments, foreign exchange,
credit instruments or indices);
debt securities issued by the Group not included in financial assets held for trading and subject to financial hedging
for which the fair value is applied in order to reduce and/or eliminate valuation and accounting asymmetries.
Recognition
These financial liabilities are recognised at the issue date for an amount equal to their fair value, including the value
of any embedded derivative, which generally corresponds to the amount received. Any transaction costs (including
placement fees paid to third parties) are charged immediately to income.
Measurement and recognition of items affecting the income statement
After initial recognition financial liabilities are measured at current fair value.
The fair value of securities issued listed in active markets is determined with reference to the market bid price
reported at the balance sheet date. For unlisted securities issued on an active market, fair value is determined using
valuation models and estimation methods that take into account the risk factors related to the instruments and that are
based on observable market data where available. These techniques may take account of prices reported for recent
similar market transactions, discounted cash flows, option pricing models and other well-established methods used in
financial markets. As regards the credit spread on own issues aimed at ordinary customers, in order to determine the
difference between the original and the current spread as at the reporting date, use is made of the implicit spreads
of new retail issues made by the Group.
Gains and losses realised on redemption and the unrealised gains and losses arising from changes in fair value with
respect to the issue cost, are recognised in the income statement in the period in which they emerge under the item
“Profits (losses) on financial assets and liabilities designated at fair value”, in which the capital gains and losses on
derivatives linked to the fair value option are also recognised.
Interest expense on debt instruments is classified as “interest and similar expense”.
Derecognition
Financial liabilities designated at fair value through profit and loss are eliminated from the financial statements once they
have expired or been extinguished. The repurchase of securities issued previously is regarded as an extinguishment of
the liability or part of it. The difference between the carrying value of the liability extinguished and the amount paid for
the repurchase is recorded in the income statement under “Profits (losses) on financial assets and liabilities designated
at fair value”.
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Any repurchase of securities issued previously is recorded as a decrease in the liability item to which the issue had been
booked. Re-placement of these securities on the market after their repurchase is considered, for reporting purposes, as
a new issue that is booked at the new placement price, with no effect on the income statement.
16 – Foreign currency transactions
Classification
Foreign currency assets and liabilities include not only those explicitly denominated in a currency other than the euro,
but also those with financial indexation clauses linked to the euro exchange rate against a specific currency or against
a specific basket of currencies.
For the purposes of the conversion method to be use, foreign currency assets and liabilities are separated into monetary
and non-monetary items.
Monetary items consist of sums of money and assets and liabilities that express the right to receive or an obligation
to pay fixed or determinable amounts of money (receivables, debt securities, financial liabilities). Non-monetary items
(such as equities) are assets or liabilities that do not include the right to receive or an obligation to pay fixed or
determinable amounts of money.
Recognition
Foreign currency assets and liabilities are recorded, at the time of initial recognition, in the reporting currency, by
applying the spot exchange rate at the date of the underlying transactions to the foreign currency amounts.
Measurement and recognition of items affecting the income statement
At each balance sheet or interim period, foreign currency balances are valued as follows:
monetary items are translated at the spot exchange rate at the closing date;
non-monetary items carried at historical cost are translated at the spot exchange rate on the date of initial recognition
in the financial statements (historical exchange rate);
non-monetary items carried at fair value are translated using the spot exchange rate at the closing date.
Exchange differences that arise as a result of this process of translation into euro of assets and liabilities denominated in
foreign currency relating to monetary and non-monetary items carried at fair value are reported in the income statement
item “Profits (losses) on trading”, except for differences attributable to the “valuation reserves” (e.g. those of securities
available for sale), which are recognised directly in these reserves.
17 – Insurance assets and liabilities
There are no insurance companies in the Group.
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18 – Other information
a) Recognition, measurement and derecognition of other significant items in the financial
statements
Cash and cash equivalents
This item consists of currencies that are legal tender, including foreign banknotes and coins and demand deposits at the
central bank of the country in which the Group operates.
This item is recorded at face value. The face value of foreign currencies is converted into euro at the spot exchange
rate at the balance sheet date.
Other assets
This item consists of assets that are not classifiable elsewhere as assets in the balance sheet. It includes inter alia:
gold, silver and precious metals;
leasehold improvements other than those related to “property and equipment”, i.e. those not related to separately
identifiable fixed assets. The restructuring costs of commercial property not owned by the Group are recognised
as “Other assets” as required by the Bank of Italy’s instructions, considering the fact that for the duration of the
lease the Group has control over the assets and can obtain future economic benefits from them. These costs are
depreciated over a period not exceeding the duration of the lease and are recognised in the income statement
under “Other operating expenses”;
tax receivables other than those included in “Tax assets” (e.g. those involved in acting as a tax withholding agent).
Prepayments and accrued income relating to financial assets and liabilities are recognised as an adjustment to the
assets or liabilities to which they relate. In the absence of an asset or liability of this nature, for example in the case of
a prepayment not attributable to property and equipment or commission income from guarantees pledged, deferrals
and accruals are recognised as other assets or other liabilities.
Employee termination indemnities
Employee termination indemnities are designated as “post-employment benefits”.
Following the pension reform under Legislative Decree no. 252 of 5 December 2005, introduced by the 2007 Budget
Law, the portions of staff termination indemnities that accrued up to 31 December 2006 remain in the company,
whereas the amounts accruing from 1 January 2007 onwards can be transferred, at the employee’s discretion, to
supplementary pension schemes or to a treasury fund managed by INPS.
The consequence of this is that:
the termination indemnities that accrued before 1 January 2007 (or at the date when the decision was made to
assign these to a supplementary pension fund) continue to be shown as a “post-employment benefit” classified as
a “defined benefit plan” and, as a consequence, the liability for “accrued termination indemnities” is subject to
an actuarial valuation; this valuation, which compared with the methods applied up until 31 December 2006,
no longer takes account of the average annual increase in wages and salaries, as the employee benefits are
to be considered almost entirely accrued (with the sole exception of the revaluation equal to a fixed amount
of 1.5% plus 75% of the increase in the ISTAT consumer price index). The full amount of actuarial gains and
losses, defined as the difference between the book value of the liability and the present value of the obligation
at period end, is recognised directly in shareholders’ equity in “Valuation reserves”;
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the amounts accruing from 1 January 2007 are considered a “defined contribution plan” as the company’s
obligation ceases when it pays the accrued indemnities to the fund chosen by the employee, so the amounts
involved, which are accounted for on an accrual basis in personnel costs, are determined on the basis of the
contributions payable without applying actuarial methods. For the accruing termination indemnities kept in the
company and then transferred to INPS, the amounts paid year after year to the treasury fund managed by INPS do
not include the revaluation applied by law; consequently, the cost of revaluing the amounts paid by the company
falls on INPS.
This legislation does not apply to Group companies that had fewer than 50 employees at the date the reform came
into effect (which specifically regards Banca Popolare di Mantova); for these companies, the previous law remains
in force, which considers employees’ termination indemnities as a defined benefit plan, the accrued amount of
which has to be projected into the future to estimate the amount that will have to be paid at the time the employee
leaves the company; it is then discounted using the projected unit credit method to take account of the time that will
pass prior to the actual payment. The calculation only concerns the termination indemnities accrued for periods of
service already rendered and will have to take account of future wage rises.
Further details on the projected unit credit method can be found in Section 12 “Allowances for Risks and Charges”.
Other liabilities
This item consists of liabilities that are not classifiable elsewhere as liabilities in the balance sheet. It includes inter alia:
the commissions received on initial recognition of guarantees given and subsequent write-downs due to impairment
of the risks guaranteed;
payables associated with the purchase of supplies of goods and services;
tax payables other than those included in “Tax liabilities” (e.g. those involved in acting as a tax withholding agent).
Share capital and treasury shares
Share capital consists of the amount of shares issued net of any capital subscribed but not yet paid at the balance sheet
date. The item is shown gross of any treasury shares held by the Parent Company or other Group company. Treasury
shares are shown with a minus sign in a specific equity item.
If these shares are subsequently resold, any proceeds are classified in treasury shares up to the amount of the book
value of the shares themselves. The difference, positive or negative, between the selling price of the treasury shares
and the corresponding book value is recorded as an increase or decrease in shareholders’ equity under “Share
premium reserve”.
Transaction costs relating to an operation on capital, such as an increase in share capital, are accounted for as a
reduction in shareholders’ equity, net of any related tax benefit.
Dividends on ordinary shares are recognised as a reduction in shareholders’ equity in the year in which the shareholders
approve their distribution. Any interim dividends paid to shareholders are recognised in the balance sheet liability item
“Interim dividends” with a minus sign.
Minority interests
This item represents the portion of consolidated net equity attributable to shares belonging to minority shareholders,
calculated on the basis of equity ratios. The amount is calculated net of any treasury shares repurchased by consolidated
companies.
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b) Other significant accounting treatments
Finance and operating leases
a) Group lessee companies: the lease agreements entered by Group companies are all operating leases. Total
payments due on contracts are accounted for in the income statement under “Administrative expenses: b) other
administrative expenses” over the term of the contracts. If an operating lease is extinguished before its maturity, all
the payments required by the lessor by way of penalty are recognised as an expense in the period in which the
lease is extinguished.
b) Group lessor companies: the lease agreements made by Group companies are operating and finance leases. In
the case of finance leases the present value of the payments due by the lessee is recognised as a receivable. The
difference between the gross value of the receivable (value of the leased asset net of the advance paid by the
customer) and its present value (sum of instalments, principal amount, plus interest, discounted at the contractual
rate including any transaction costs and income) is recognised as “Interest and similar income” in accordance with
the terms of the contract, using the effective interest rate method.
Repurchase agreements, securities lending and carry-overs
Repurchase agreements or carry-over transactions by which the Group sells securities to third parties with the obligation
to repurchase them in the future at a predetermined price are recorded in liabilities to other banks or customers,
depending on the counterparty. Similarly, repurchase agreements or carry-over transactions by which the Group buys
securities from third parties with the obligation to repurchase them in the future at a predetermined price are recorded
in loans or advances to other banks or customers, depending on the counterparty. The difference between the spot price
and forward price of these transactions is recognised as interest (income or expense depending on the circumstances)
and recorded on an accrual basis over the life of the operation. Securities lending transactions where the collateral is
represented by cash that remains entirely at the lender’s disposal are recorded in the financial statements in the same
way as repurchase agreements (see above).
In the case of securities lending with collateral consisting of other securities, or without collateral, the lender and the
borrower continue to recognise in their balance sheet, respectively, the security involved in the loan and that given as
a guarantee (if any). If the security being lent is sold by the borrower, the latter has to book a payable to the lender
on the liabilities side of its balance sheet. If, on the other hand, it is used in repurchase agreements, the amount due to
the repo counterparty is booked as a liability. The revenue from such transactions is recognised by the lender as “Fee
and commission income”, whereas the cost incurred by the borrower is recognised as “Fee and commission expense”.
Offsetting of financial instruments
Financial assets and liabilities can be offset, showing the net balance in the financial statements, when there is a legal
right to do so and when there is the intention to settle the transactions for the net amount or to realise the asset and settle
the liability simultaneously.
Share-based payments
Personnel remuneration plans based on shares are recognised in the income statement, with a corresponding increase
being made to an equity reserve, at the fair value of the instruments allocated at the grant date, with the cost charged
over any allocation period envisaged by the plan.
The fair value of the allocated instruments takes into account the current price of such at the grant date.
Any reduction in the number of instruments granted is accounted for as the derecognition of a part of such.
Securitisations
For operations completed after 1 January 2004, the receivables are derecognised where there is a substantial retention
of risks and benefits, even though formally being sold without recourse to a special purpose vehicle (SPV). This occurs,
for example, if the Group subscribes to the junior tranche of securities or similar exposures, and therefore bears the risk
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of first loss and, in the same way, benefits from the performance of the operation. In particular, the Group retains all of
the risks and benefits of securitised loans, not proceeding to their derecognition when, according to the specifications
of the contracts in place, there is no change in the Group’s risk and exposure to them.
The receivables are therefore maintained as assets in the financial statements by recording:
in the separate financial statements, a payable versus the SPV for the loan received, net of the securities issued by
the company and underwritten by the Group that made the transfer,
in the consolidated financial statements, as the effect of the consolidation of the SPV, the value of the notes issued
by the SPV and subscribed by entities not belonging to the Group.
In covered bond transactions, against the maintenance of the receivables on the assets side of the balance sheet,
the value of the covered bonds issued directly by the Group is recorded among liabilities in the transferor’s financial
statements (separate and consolidated).
A similar approach is taken in the previous cases in the recognition of income and expense, giving preference to
substance over form.
Cost and revenue recognition
Revenues are recognised when they are earned or, in the case of the sale of goods or products, when it is probable
that the future benefits will be received and these benefits can be reliably quantified, or, in the case of the provision of
services, at the time when they have been rendered. In particular:
interest is recognised on a pro-rata temporis basis at the contractual interest rate or at the effective rate if amortised
cost is applied. Interest income (or interest expense) also includes differentials or margins, positive (or negative),
accrued up to the balance sheet date on the related financial derivatives:
a) to hedge assets and liabilities that generate interest;
b) classified in the balance sheet in the trading book, but linked to financial assets/liabilities designated at fair
value through profit and loss (under the fair value option);
c) linked for operational purposes to assets and liabilities classified as held for trading and which provide for the
settlement of differentials or margins with several maturities;
any past due interest provided for in the contract is only recognised in the income statement when actually collected;
dividends are recognised in the income statement in the period when their distribution is decided and shareholders
gain the right to receive payment;
net fee and commission income is recognised in the period when the services are rendered, based on contractual
agreements. The fees and commissions considered in amortised cost for the purpose of determining the effective
interest rate are recognised as interest. In particular:
– fees and commissions relating to syndicated loans are recognised as revenue when the organisation of the
syndicated loan is completed, provided the Group has not financed part of the loan itself or has financed part of
the loan at the same effective interest rate as the other syndicate members;
– fees and commissions on the negotiation or participation in negotiation of a transaction for another party,
such as fees for preparing the purchase of shares or the purchase/sale of a business, are recognised upon
completion of the underlying transaction;
– management fees and other fees relating to advisory services are recognised in accordance with the terms
of the related contracts and nonetheless using an appropriate time horizon. Management fees relating to
investment funds are accounted for proportionately over the period the service is provided. The same principle
applies to fees on wealth management and custody services;
net income from trading, in addition to the recognition of capital gains/losses and trading profits/losses, includes
the result of valuing contracts for the purchase and sale of securities not yet settled at the balance sheet date;
expenses are recognised in the income statement in the periods when the related revenues are recorded; costs that
are not directly associated with revenues are charged immediately to income statement.
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A.3 – Disclosures relating to transfers between portfolios of financial assets
The Group has not carried out any portfolio reclassifications of financial assets from categories measured at fair value
to categories carried at amortised cost in the current period or in prior periods.
A.4 – Fair value disclosures
Qualitative information
Introduction
Fair value measurements and disclosures are governed by IFRS 13 “Fair Value Measurement”, which in paragraph
9 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”.
As regards the type of financial instruments to be measured at fair value, the requirements of paragraph 9 of IAS 39
remain valid, that is, fair value measurement applies to all financial instruments with the exception of: financial assets
classified as “investments held to maturity” and “loans and receivables”; investments in equity instruments for which it
is not possible to establish a reliable fair value; non-trading financial liabilities to which the fair value option has not
been applied. Moreover, it is worth reiterating that accounting standards and the Bank of Italy require, in any event, to
disclose the fair value of assets and liabilities measured at amortised cost (receivables and payables, securities issued).
IFRS 13 is based on the definition of market based fair value, in that the fair value of assets or liabilities should
be measured based on the characteristics thereof that a market participant would take into account.
Fair value measurement assumes a transaction involving the sale of an asset or the transfer of a liability taking place in
the principal market for the asset or liability, or in the absence of a principal market, the most advantageous market for
the asset or liability; if this is not available reference should be made to the most advantageous market, meaning the
market that maximises the amount that would be received to sell the asset or minimises the amount that would be paid
to transfer the liability, after taking into account transaction costs.
Compared with the previous definition provided by IAS 39, there is no emphasis on an “arm’s-length transaction
between knowledgeable, willing parties”, that is, on the neutrality of the transaction, but on a concept of fair
value based on an exit price. In fact, the price should reflect the view of the participant that sells the asset or that
pays to transfer the liability at the measurement date. There is thus no longer an issue of inconsistency of financial
statement presentation between those measuring fair value as a seller and those as a buyer.
Under these circumstances, there is a need for the fair value of financial instruments to reflect the risk an entity will not
fulfil an obligation by means of appropriate adjustments to take account of the credit standing of the counterparty.
Fair value levels
The Bipiemme Group identifies a hierarchy of three levels depending on the extent to which the inputs used in the
measurements may be observed, as follows:
quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the
measurement date (Level 1). It is accordingly implicit in the concept of fair value hierarchy that the decision on
measurement must give priority to the official prices available on active markets;
inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly
(as in the case of prices) or indirectly (as derived from the prices) (Level 2). In the absence of this information, the
decision is based on recent transactions (non-active markets for the instrument being measured) or data regarding
similar assets and liabilities (the comparable approach) or else valuation techniques based on observable inputs;
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inputs for assets and liabilities that are not based on observable market data (unobservable inputs) (Level 3). A
lower priority is given to valuation techniques based on unobservable inputs, for example those based on internal
models and therefore of a more discretional nature.
Observable inputs are parameters that are developed using market data, such as publicly available information about
actual events or transactions, and that reflect the assumptions that market participants would use when pricing the asset
or liability; on the other hand unobservable inputs are inputs for which market data are not available and that are
developed using the best information available about the assumptions that market participants would use when pricing
the financial instrument.
A financial instrument must be classified in its entirety at a single level; when for the purpose of measuring an instrument
inputs belonging to different levels of the hierarchy are used, the instrument being measured is assigned the level in
the fair value hierarchy to which the significant input of the lowest level belongs. As a consequence, when observable
(level 2) and unobservable (level 3) market inputs are used to measure a financial instrument, if the latter is significant,
as defined further in the following, the instrument is classified at level 3 of the fair value hierarchy.
The way in which financial instruments are classified at the three levels is as follows.
Level 1 – Quoted prices (unadjusted) in active markets
This level consists of financial instruments measured by using quoted prices in active markets for identical assets and
liabilities without adjustment.
An active market is a trading platform where transactions and volumes are such as to guarantee that the observed
inputs effectively represent the price at which counterparties are prepared to exchange a specific financial instrument.
A market is active when:
quoted prices represent effective and regular market transactions occurring over a reasonable reference period
between independent parties;
prices are promptly and regularly available through stock exchanges, brokers, intermediaries, companies in the
sector, quotation services or authorised bodies and are effectively executable.
In this respect and considering the instruments held in portfolio the following are considered active markets:
the markets of the company Borsa Italiana (MTS, MOT, MTA, …);
ECB exchange rates;
other regulated markets that meet the minimum volume requirements for being called an active market (MTF –
Multilateral Trading Facilities);
unregulated exchange systems (e.g. Bloomberg Trading System) which provide a quotation considered to be active
market in accordance with the same requirements.
The above-mentioned markets are considered active markets by virtue of the fact that the Group, directly or indirectly,
has access to those markets. If a principal market is not identifiable for a certain specific financial instrument, the most
advantageous market is taken.
The price quoted on an active market provides the most reliable evidence of fair value and when available is used without
adjustment. Any adjustments lead to the classification of the financial instrument at a lower level (for example the fact that
information is not immediately available or that the price is not available at the measurement date).
A market is considered active for a specific financial instrument at a specific date if within the previous 20 working days
price variations occur for at least 50% of the working days considered.
The markets where the inputs are observable for certain financial instruments are as follows: securities markets, dealer
markets (for example over-the-counter markets whose prices are published), brokered markets (for example electronic
trading platforms) and principal-to-principal markets.
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The above considerations also apply to short positions in securities (for example technical short positions).
Bid prices are used for financial assets listed on active markets and ask price for financial liabilities, both at the end of
the reference period.
Level 2 – Measurement methods based on observable market inputs
For Level 2 instruments, an input is directly or indirectly “observable”, when it is continuously available to all market
participants with a regular distribution of information through appropriate channels (stock exchanges, data providers,
brokers, market makers, websites, etc.).
The measurement of a financial instrument is based on prices which can be derived from market quotations of similar
assets (comparable approach) or by valuation techniques for which all relevant factors – including credit spreads and
liquidity – are derived from observable market parameters (mark-to-model approach).
The comparable approach requires the search for transactions on active markets, relating to instruments that, in terms
of risk factors, are comparable with the instrument being valued. The valuation techniques used in the mark-to-model
approach are those commonly used and accepted as market “best practice”.
The Group considers level 2 inputs to be quotations other than inputs classifiable as level 1 that are directly observable
for the financial instrument (as in the case of prices) or indirectly observable (in the case of quotations that can be
derived from prices).
Level 2 inputs are defined as:
prices quoted for similar assets and liabilities on active markets (comparable approach);
prices quoted for the instrument being analysed or for similar instruments on inactive markets;
observable market inputs other than quoted prices (e.g. interest rates or yield curves, implicit volatility, credit risk
data, exchange rates);
market-corroborated inputs, that is, derived from observable market inputs or corroborated by correlation analysis.
The above-mentioned market inputs (directly or indirectly observable) form part of commonly accepted valuation
techniques that are used as best practice. In identifying inputs, therefore, a critical approach is taken where elements
of discretion may be found by those carrying out the valuation.
As a result market data that are observable for markets that do not qualify as an active market are classified at level 2
(for example an average of Bloomberg contributors that do not qualify as an active market) as are prices resulting from
the application of valuation techniques based on level 2 inputs.
Level 3 – Measurement methods based on unobservable market inputs
Level 3 includes all financial instruments that are not quoted on an active market, for which the determination of fair
value has to be carried out through valuation models that require the use of parameters that are not directly observable
in the market.
Unobservable inputs have to be used to the extent that relevant observable inputs are not available and, therefore,
unobservable inputs shall reflect the assumptions that market participants would use when pricing the asset or liability,
including assumptions about risk. Measurement has to be performed using the best information available in the
circumstances, internal data included.
The measurement of assets and liabilities belonging to level 3 is generally carried out using the same valuation
methodologies as those used for level 2 instruments; the difference lies in the fact that input parameters used in the
pricing model are unobservable. The valuation techniques for the latter, as detailed below, make use of various
approaches, depending on the parameter. Unobservable inputs may be: derived using mathematical techniques based
on the option quotations of brokers or market-makers (for example, correlations or implicit volatility), or arrived at
by extrapolation from observable data (for example, credit spread curves), or obtained from historical figures (for
example, volatility of investment funds) or based on a comparable approach.
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In addition, positions where the adjustment portion of the fair value that takes into consideration the risk of default
is significant compared to the total value of the financial instrument are included in level 3 of financial assets and
liabilities, as stated in the Group’s internal policy.
The above inputs reflect commonly accepted valuation techniques used as best practice. In identifying inputs a critical
approach is taken where elements of discretion may be found by those carrying out the valuation.
Financial assets whose fair value corresponds to recognition cost are included in level 3.
A.4.1 Fair value levels 2 and 3: valuation techniques and inputs used
The following section provides information on the techniques used to measure the financial instruments classified in
levels 2 and 3, analysed by type of instrument.
The valuation techniques are used continuously and consistently over time unless alternative valuation techniques exist
that provide a more representative measurement of fair value (for example, in the case of the development of new
markets, information that is no longer available or new information or different market conditions).
The fair value used for measuring financial instruments is determined on the basis of the criteria set out below, which
assume, as indicated above, the use of observable or unobservable inputs.
Assets and liabilities measured at fair value on a recurring basis
Bonds without an official price expressed on an active market
As regards plain vanilla bonds, that is, those without any option or derivative component, a discounted cash flow (DCF)
model is used, based on discounted expected future cash flows, which, in the case of floating-rate coupons, is estimated
based on forward rates implicit in the curves for the indexing.
In the case of bonds with an option component (for example, structured bonds), the component is estimated based
on the same methodologies adopted for stand-alone options, described below consistent with the complexity of the
product, widely used by market operators. For these types of securities the level of the fair value hierarchy assigned
to the derivative component contributes, on the basis of an analysis of the significance of the amount of the option in
comparison to the overall value of the bond, to the definition of the fair value hierarchy level of the bond, as required
by specific internal policy.
For bonds measured on the basis of a model, the issuer’s creditworthiness is incorporated in the measurement
process and is obtained from the credit spread curves of that issuer, if available. In the event that credit spread
information is not directly observable, measurement techniques that entail classification in level 3 are generally
adopted. These include, for example credit spreads based on internal estimates of default rates.
OTC (over the counter) financial derivatives
This section regards interest rate, currency, share and commodity derivatives, known as over-the-counter (OTC)
instruments because they are traded bilaterally by counterparties. These instruments are measured by using suitable
pricing models based on input parameters such as interest rate curves, volatility matrices and exchange rates that are
normally observable on the reference markets.
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The following methods are used to measure such contracts:
for non-option instruments (interest rate swaps, forward rate agreements, overnight interest swaps, domestic currency
swaps, etc.) the valuation techniques adopted belong to the discount cash flow model category in which certain or
trend-based cash flows are discounted;
for financial options:
– in the case of plain vanilla options, the methods used most often form part of the “forward risk-neutral” framework
and are based on analytical Black-like formulae, in which volatility depends on the maturity date and the strike
(volatility skew);
– for the more complex pay-off types (typically share options on baskets of indices or path dependent share
options) a numerical method is used based on Monte Carlo simulations, remaining in a risk-neutral environment,
under which the option pay-off is measured through simulations using a sufficiently high number of repetitions
relating to the evolution over time of the risk factors underlying the option. The price of the derivative is then
calculated by taking the discounted arithmetic average obtained for each scenario.
In the case of instruments containing derivative components of a different nature, options and non-options, the
measurement is carried out by applying the appropriate valuation method to each component of the instrument.
In addition, the risk of default is also considered to arrive at the determination of fair value. As required by the
accounting standard concerned, fair value must take account of the counterparty risk (Credit Valuation Adjustment –
CVA) and the risk arising from changes in own creditworthiness (Debt Valuation Adjustment – DVA). To this end the
Bipiemme Group has adopted algorithms for determining fair value and the Credit Valuation Adjustment (CVA) and
Debt Valuation Adjustment (DVA) which are estimated on the basis of market parameters and internal risk (PD, LGD,
interest rate curves).
At the stage of determining the CVA and the DVA the calculation algorithms take into consideration:
the probability of default (PD) of the specific counterparty. This is determined on the basis of the official external
rating of the counterparty and the relative default statistics to be found on the market, where available; conversely,
this is determined on the basis of an internally assigned rating. A multi-period PD is then determined from these
data, based on the residual contract term of the instrument being measured;
the loss given default (LGD): a uniform value is used depending on the nature of the counterparties that is determined
on the basis of market practice.
Even if only traded residually within the Group, other types of derivative consist of credit derivatives consisting of simple
single name credit default swap contracts and derivatives traded bilaterally with counterparties. Measurement in these
cases is carried out starting from an estimate of the implicit default probability curve for the issuer or issuers underlying
the contract, arrived at using a bootstrapping technique based on market price, whereby the expected cash flows from
the contract are weighted.
Unlisted equities
These are essentially minority interests in unlisted financial and non-financial companies. These instruments are initially
measured with reference to significant transactions in the same stock or similar securities observed over a reasonable period
of time compared with the valuation date, to the method of market multiples of comparable companies and, to a lesser extent,
to alternative valuation methods based on financial parameters, earnings and net assets.
In particular, for certain minority interests, in line with generally accepted valuation techniques, use is made of the
excess capital variant of the dividend discount model (DDM) income approach. This method assumes that a company’s
economic value is the sum of the present value of: 1) present value of estimated distributable dividends in the “explicit
period” (period covered by the business plan); 2) excess/lack of Common Equity Tier I at the end of the explicit period;
3) terminal value comprising the perpetual return of normalised dividends.
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If suitable information is not available, such as updated business plans, for carrying out a valuation using earnings
models, the estimate of the fair value of the equity interest is carried out by starting with the information provided in the
most recent set of financial statements, determining a net asset value of the investee.
Securities for which it is impossible to estimate the fair value on a reasonable basis are maintained at their original
purchase cost in accordance with IAS 39, paragraph AG 81.
Mutual funds
Fair value is determined by applying the NAV reported by the management company, as this is considered the
most reliable estimate of the fair value of the instrument, being an exit value on disposal of the investment, taking
account of any adjustments due to dividends and distributions.
Financial liabilities designated at fair value through profit and loss
Bonds issued by Group companies and recognised using the fair value option permitted by IAS 39 are measured
using a model that in addition to the inputs used for bonds recognised as assets includes an appreciation of the issuer’s
creditworthiness. The credit spread used is obtained implicitly from the retail issues made by the Group in the last
quarter of reference. The decision to use a level 2 or a level 3 classification essentially depends on the percentage of
observable and unobservable inputs used for determining the total fair value of the instrument.
Assets and liabilities not measured at fair value or measured at fair value on a non-recurring
basis
For financial instruments recognised as assets at amortised cost and for the most part classified as receivables from
banks or customers or as securities issued, fair value is only determined for disclosure purposes.
Amounts due from and to customers and banks
For current receivables and payables or those that can be settled on demand, meaning those due within 12 months, fair
value is conventially considered to be carrying value given the proximity of the repayment date. Certificates of deposit
that have a maximum maturity of 18 months are also conventially measured at cost.
For receivables and payables due after 12 months fair value is determined using a valuation method based on a markto-model approach whose essential features are as follows:
identification of future cash flows, corresponding to contractual cash flows. As regards loans to customers, cash
flows are weighted based on PD (Probability of Default) and LGD (Loss Given Default). For retail and corporate
customers, PD is assigned based on a matrix of reliability ratings used to categorise customers on the basis of
internal procedures for assessing creditworthiness. As regards balances included in the line item due from banks,
use is made of parameters provided by external rating agencies; the cash flows on non-performing loans are
quantified on the basis of the repayment plan. As regards the assignment of LGD, solely to customers, this is
differentiated based on the customer segment and the technical form of the facility;
discounting of cash flows quantified as explained above, using a market interest rate curve. For amounts due
from customers and banks, the risk free rate is adopted, since the credit risk is quantified based on PD and
LGD parameters.
For debt securities classified as held in the “Due from banks or loand to customers” portfolio, fair value is determined
through the use of valuation models, as described above for financial assets and liabilities carried in the balance sheet
at fair value.
Given the high proportion of unobservable components, amounts due from and to customers and banks, other than
securities, are normally categorised in level 3 of the fair value hierarchy.
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Securities issued
For bonds carried in the balance sheet at amortised cost, the valuation falls into Level 1 if there is a quoted price in
an “active market“; otherwise, the valuation is carried out by discounting the cash flows on the basis of the relevant
interest rate curve. As regards valuation techniques, bonds are valued on the basis of quoted prices, where available,
which already include an assessment of credit risk. In the absence of market prices, subordinated bonds are measured
using internal models, applying a credit spread derived from quotations of subordinated Credit Default Swaps (CDS).
Property and equipment – held for investment purposes
The fair value of properties carried as assets and held for investment purposes is determined on the basis of an
estimate carried out on a regular basis by independent external experts who perform their valuation using information
concerning the location of a property and the use to which it is put.
The current composition of the property portfolio envisages a level 3 classification.
Valuation techniques
Discounted Cash Flow
Discounted cash flow valuation techniques consist of determining an estimate of the expected cash flows over the
life of the instrument. The time horizon is generally obtained from the contractual documentation. The model requires
assumptions to be made for determining the cash flows to be discounted and market parameters to be used for
determining the discount rate.
The discount rate includes a margin, the spread that reflects the requested conditions for instruments with similar credit
risk profiles and liquidity. The fair value of the contract consists of the sum of the discounted expected cash flows.
Credit/Debit Valuation Adjustments
The effect of non-performance risk is also taken into consideration in determining fair value.
In particular, for derivatives the Bilateral Credit Value Adjustment (bCVA) model also takes fully into consideration
the value of variations in own creditworthiness as well as those of the counterparty.
The bCVA depends on the exposure, the probability of default and the loss given default of the counterparties.
Dividend Discount Model
This model is used to determine the market value of a share unquoted on an active market ad is based on estimated
future dividend flows.
The dividend expected to be paid is estimated for each year of the period covered by a company’s profit forecasts,
an annual dividend growth assumption is made, at a constant rate (g), and the fair value of the equity security is then
determined as the sum of the present value of all future dividends, discounted at a rate that takes into account the
risk free rate plus a risk premium for an equity investment. This risk premium is determined by referring to a historical
series of data.
Option pricing models
These are valuation techniques generally used for financial instruments in which the Bank has a right or an obligations
based on the occurrence of a future event, such as for example if a financial asset exceeds a certain price or a reference
market parameter (interest rate or foreign exchange rate) exceeds a predetermined strike level. These models estimate
the probability that a specific event will occur by incorporating assumptions such as the volatility of estimates or the
price of the underlying instrument.
Models commonly recognised as market practice are by way of example Black&Scholes, Black-like and Hull&White.
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Net asset value
This valuation technique is used for equity instruments, units of mutual funds or equity securities where the fair value of
the instrument is based on the value of the issuer’s assets and liabilities. Valuing the instrument by using this technique
may take into consideration any contractual features such as for examples restrictions or privileges on the distribution
of profits or in the event of liquidation.
Market valuation approach
This valuation technique uses prices generated by market transactions that involve identical or comparable assets,
liabilities or groups of assets and liabilities.
Inputs used to measure the fair value of level 2 and 3 instruments
Yield curves
The interest rates to be used in valuation techniques are determined on the basis of a selection of the most suitable
financial instruments for each currency (EUR, USD, CHF, GBP, JPY).
For EUR, the curves depend on the reference rate (Euribor 1M, Euribor 3M, Euribor 6M, EONIA).
Credit spread
The credit spreads implicit in the Credit Default Swap curves of the individual issuer are used if available. As an
alternative these are deduced from the generic credit curves for sector and rating.
Volatility
Volatility measures the speed and size of the variations in the market price of an instrument, parameter or market index
given the actual change in value over time of that specific instrument, expressed as a percentage of the change relating
to the price. The greater the volatility of the underlying, the greater the risk connected with the instrument.
Two types of volatility are used:
implicit: this is the implicit volatility included in the market price of options, meaning the volatility that used in a
specific pricing model returns their market value;
historical: this measures the fluctuations that a price has undergone over a specific past period and is measured as
the standard deviation of the historical price over the period.
Correlations
These measure the relationship between the movements of two underlyings over time.
Correlations are inputs in valuing a derivative product where the payoff is determined from a whole series of underlying
risks. The level of the correlation used in the valuation of derivatives with several underlying risks depends on a variety
of factors, including the nature of those risks.
Loss given default (LGD)/Recovery rate
Loss given default is the percentage of contractual cash flows that is not recovered in the event of default by the counterparty.
With all other parameters unchanged, an increase in the LGD implies a fall in the measurement of fair value.
The recovery rate is the complement of the LGD with respect to 100%, meaning the percentage of contractual cash
flows that are expected to be recovered in the event of default by the counterparty.
Given that losses depend on the specific features of the financial instrument or the transaction, such as the existence of
collateral or the subordination ranking, the LGD should be dealt with case by case.
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Probability of default (PD)
The probability of default (PD) is an estimate of the probability of not receiving contractual cash flows over a certain
temporal horizon. The PD of a debtor depends on the creditworthiness of the particular debtor and current and future
market conditions.
Cost of equity (Ke)
Ke (cost of equity) is the minimum return rate that an issuer of equity securities expects to have to offer its shareholders
to remunerate their investment.
Growth rate – g
This is the constant growth rate used to estimate future dividends.
A.4.2 Valuation processes and sensitivity
The Group’s valuation processes are subject to verification that extends to the valuation techniques for all financial
instrument positions.
The valuation, also for accounting purposes, of all financial instruments classified in the HFT, AFS and FVO portfolios is
carried out by specific internal functions, depending on the individual Group entity.
The Bipiemme Group has procedures in place and manuals that describe the valuation techniques and inputs used.
For certain valuations relating to a limited group of financial instruments, the Group is assisted by external companies
that, as the case may be, supply the prices of the assets and liabilities or the pricing models used.
For financial instruments, the fair value of which is based on a valuation model, analysis of the sensitivity of such instruments
to market data is carried out by means of standard stress techniques, which, acting on input parameters to the pricing
model, determine corresponding changes in the fair value of the instrument. Sensitivity is obtained individually for each
curve or risk factor by applying to the latter an increase or decrease (shift) of a pre-defined size, obtaining as an output the
corresponding change in fair value. In the case of non scalar risk factors, such as those pertaining to an interest rate curve
or volatility surface, a uniform shift is generally applied to the entire structure, thus obtaining an estimate of the sensitivity
to parallel movements of the corresponding curve.
A.4.3 Fair value hierarchy
The fair value hierarchy, according to IFRS 13, has to be applied to all financial instruments for which their fair value is
recognised in the balance sheet. In this regard, for these instruments top priority is given to the official prices available
in active markets and a lower priority to the use of unobservable inputs, as they are more discretionary. Fair value
is therefore determined through the use of prices obtained from financial markets in the case of instruments listed on
active markets, or, for other financial instruments, by using valuation techniques with the aim of estimating the fair value
(exit price).
Criteria for transfers between levels
The transfer of a financial instrument from Level 1 to Level 2 of the fair value hierarchy and vice versa is based mainly
on the degree of liquidity of the instrument at the time of recognition of its listed price that determines the use of a
listed price in an active market rather than a price obtained from a pricing model. In practice, if, for a financial asset
or liability, there are objective indications of a significant loss or the lack of availability of a price in an active market
(absence of multiple prices from market makers, prices that have not changed much or which are inconsistent), the
instrument is categorised in Level 2 of the fair value hierarchy and, in certain cases, recourse is made to a modelbased valuation. This valuation technique may no longer be necessary, if, for the same financial instrument, a price
in an active market once again becomes available, with a corresponding transfer to Level 1.
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Such an event mainly arises with debt securities, whereas derivatives listed on regulated markets normally pertain to
Level 1, given that, for these, a price is normally provided by the relevant stock market. Vice versa, OTC derivatives are
normally valued based on pricing models and thus are categorised in Level 2 or 3 of the fair value hierarchy, based on
the significance of the input data.
A transfer from Level 2 to Level 3 and vice versa is determined by the weighting or the significance, at various times
during the life of the financial instrument, of the unobservable input variables compared to the overall valuation of the
instrument. In order to define whether an input is significant or not for the purpose of the categorisation of the fair value
of an instrument, three significance thresholds have been adopted. Of these, the first two relate to the significance of
unobservable market parameters, while the third specifically relates to adjustments to the fair value of OTC derivatives
to reflect the risk that the obligation will not be fulfilled in the mark-to-market.
The two thresholds relating to input data are applied on the basis of whether it is possible (first threshold) or not
possible (second threshold) to accurately isolate the components of the financial instrument that, for the valuation
thereof, require unobservable inputs. In other words, the first threshold applies if a financial instrument can be exactly
unbundled into more simple financial instruments, some of which require unobservable inputs, while the second
applies in cases where it is not possible to isolate or unbundle from the instrument the component influenced by the
unobservable factor.
In detail:
1. the first threshold (fair value ratio threshold) is defined based on the ratio of the fair value of the contractual
component valued with unobservable inputs (for example, an implicit option) to the fair value of the entire contract:
if this ratio equals or is less than 5%, the impact of the unobservable input is not considered significant for the
purpose of the determination of the fair value and the latter is categorised as Level 2; otherwise the contract is
classified as Level 3;
2. the second threshold (sensitivity ratio threshold) is defined based on the sensitivity of the price of the financial
instrument to the unobservable parameter: an input is considered not to be significant for the purpose of the
determination of fair value if changes in the unobservable input of plus or minus 5% produce a change in the
absolute amount of the fair value of the instrument equal to or less than 5% of the fair value, with a consequent
classification as Level 2; otherwise, the contract is classified as Level 3. The shock is applied to the unobservable
parameter in a symmetric manner, thus acknowledging in the classification any asymmetry of the nonlinearity of
the pricing function.
As regards adjustments made to the fair value of OTC derivatives, to establish the degree of significance of these
adjustments a materiality threshold is defined for counterparty risk (CVA ratio threshold). This is identified based on the
ratio of the amount of the reduction in fair value, which represents the estimate of counterparty risk, to the overall fair
value of the contract, that is, with the inclusion of counterparty risk. If this ratio is equal to or less than 20%, the impact
of the adjustment for counterparty risk is not considered significant for the purpose of the determination of fair value
and the latter is assigned to the level it would have been classified in, in the absence of the CVA. Otherwise, the entire
fair value is classified as Level 3.
180
Part A – Accounting Policies
A.4.4 Other information
The Group has not applied the option provided by IFRS 13, paragraph 48 to assess a group of financial assets and
liabilities on the basis of its net exposure to market risk or credit risk.
Quantitative information
A.4.5 Fair value hierarchy
A.4.5.1 Assets and liabilities measured at fair value on a recurring basis: analysis by
fair value level
Financial assets and liabilities measured at fair value
1. Financial assets held for trading
2. F inancial assets designated at fair value through
profit and loss
31.12.2015
31.12.2014
L1
L2
L3
L1
L2
L3
512,315
1,258,972
26,587
497,598
1,341,597
82,323
7,731
19,902
47,910
10,710
75,118
11,621
8,870,343
99,619
521,286
8,892,830
110,706
666,736
4. Hedging derivatives
–
40,638
–
–
178,460
–
5. Property and equipment
–
–
–
–
–
–
3. Financial assets available for sale
6. Intangible assets
–
–
–
–
–
–
9,390,389
1,419,131
595,783
9,401,138
1,705,881
760,680
120,942
1,049,494
13,121
156,118
1,243,657
63,670
2. F inancial liabilities designated at fair value through
profit and loss
–
129,627
–
–
152,116
–
3. Hedging derivatives
–
48,678
–
–
58,751
–
120,942
1,227,799
13,121
156,118
1,454,524
63,670
Total
1. Financial liabilities held for trading
Total
Key: L1 = Level 1; L2 = Level 2; L3 = Level 3
Part A – Accounting Policies
181
Level 3 financial assets as a whole amount to 596 million euro and represent 5.2% of the total of Financial assets
designated at fair value through profit and loss (6.4% at 31 December 2014); level 3 financial liabilities amounted to
13 million euro, representing 1.0% of total financial liabilities designated at fair value through profit and loss (3.8% at
31 December 2014).
The following table provides an analysis of financial assets carried at fair value in Level 3:
Debt
Financial assets and
liabilities measured at securities
fair value; analysis by
product
Financial assets held
for trading
Financial assets
designated at fair
value through profit
and loss
Financial assets
available for sale
Hedging derivatives
Total
Equities
Mutual Derivatives 31.12.2015
Debt
funds
securities
Equities
Mutual Derivatives 31.12.2014
funds
645
11
–
25,931
26,587
805
8
–
81,510
82,323
47,910
–
–
–
47,910
11,621
–
–
–
11,621
115,891 275,622 129,773
–
521,286 111,811 438,241 116,684
–
–
–
–
164,446 275,633 129,773
25,931
–
666,736
–
–
–
595,783 124,237 438,249 116,684
81,510
760,680
–
–
–
As can be seen from this classification, financial assets measured at fair value consist of:
a) Debt securities: 164.4 million euro. These are structured or subordinated debt securities issued directly by leading
Italian or international banks.
b) Equities: 275.6 million euro. These are essentially minority interests in unlisted finance and non-financial companies.
For certain of these financial instruments, amounting to 1.8 million euro, it has not been possible to make reasonable
estimates of fair value. In accordance with IAS 39, paragraph AG 81 these instruments have therefore been maintained
at their original purchase cost, which in any case is close to the book net equity value of the companies concerned.
c) Mutual funds: 129.8 million euro. These are:
i. Real estate funds: 65.2 million euro;
ii. Mutual investment and similar types of funds: 64.6 million euro.
These financial instruments are valued on the basis of the NAV communicated by the management company, as this
is considered the most reliable estimate of the instrument’s fair value, given that NAV is the ‘exit value’. This decision
is due to the fact that, in accordance with the Group’s investment strategies, these instruments are intended for a
medium/long term investment and their unwinding only occurs on repayment of all or part of the shares decided
by the management company after selling off the fund’s investments.
d) Financial derivatives: 25.9 million euro entirely recognised as financial assets held for trading. These are financial
derivatives valued at fair value stipulated with institutional counterparties and customers. As regards derivatives
with customers, financial assets designated at fair value through profit and loss Level 3 include, among others, those
positions for which the quota of fair value adjustment that takes account of credit risk (i.e. the “Credit Valuation
Adjustment”) is significant compared with the overall value of the financial instrument.
182
Part A – Accounting Policies
Sensitivity analysis based on unobservable parameters (level 3)
(euro/000)
Valuation techniques and inputs for estimating level 3 fair value – assets and liabilities
Type of instrument
Valuation technique
Parameter
Financial assets/liabilities held for trading
Debt securities
Liabilities
Correlations – market indices
504
0
Option pricing models
Correlations – interest rates
96
0
Cost
Purchase cost
45
0
645
0
11
0
11
0
15,187
2,716
9,651
8,913
Cost
Purchase cost
Total equities
Derivatives
Assets
Option pricing models
Total debt securities
Equities
Fair Value at 31.12.2015
Option pricing models
Correlations – market indices
Option pricing models
Volatility – interest rates
Option pricing models
Correlations – equities
Option pricing models
Volatility – equities
Discounted cash flow
Correlations – interest rates
Credit/Debit Valuation
Adjustments
PD and LGD
0
230
131
35
0
1,227
962
0
Total derivatives
25,931
13,121
Total financial assets/liabilities held for trading
26,587
13,121
Assets
Liabilities
33,662
0
9,761
0
Financial assets destignated at fair value through profit and loss
Bonds
Market valuation approach
Broker quotations
Option pricing models
Volatility – equities
Option pricing models
Correlations – interest rates
4,487
0
Total debt securities
47,910
0
Total financial assets designated at fair value throught profit and loss
47,910
0
Financial assets available for sale
Debt securities
Option pricing models
Correlations and volatility – inflation
Cost
Purchase cost
Total debt securities
Equities
0
5
0
115,891
0
Earnings, net assets or financial data
149,615
0
Market valuation approach
Market quotations or values of recent
transactions
124,239
0
Cost
Purchase cost
Mutual funds
Net asset value
Earnings, net assets or financial data
Cost
Purchase cost
Total mutual funds
Total financial assets available for sale
Part A – Accounting Policies
Liabilities
Net asset value
Total equities
Total
Assets
115,886
1,768
0
275,622
0
120,876
0
8,897
0
129,773
0
521,286
0
595,783
13,121
183
The following table sets out an analysis of the sensitivity of the fair value of Level 3 instruments to a change in
unobservable parameters:
Net sensitivity of fair value to changes in unobservable inputs:
(euro/000)
Net sensitivity of fair value to changes in unobservable inputs of +/– 5%:
Portfolio
classification/type of
instrument
Valuation technique
Parameter
Changes
Fair value:
clean price at Favourable Unfavourable
31.12.2015
Financial assets held for trading
Bonds
Option pricing models
Derivatives
Credit/Debit Valuation Adjustments PD and LGD
Correlation – market indices
Option pricing models
Volatility – interest rates
Option pricing models
Correlation – market indices
Option pricing models
504
3
–2
711
67
–115
9,651
2
–2
15,187
456
–591
Volatility – equities
131
21
–10
Volatility – equities
6,774
317
–303
Volatility – inflation
114,510
30
–718
Assets measured under the fair value option
Debt securities
Option pricing models
Financial assets available for sale
Debt securities
Option pricing models
Sensitivity analysis was carried out for financial instruments for which the valuation techniques adopted made it possible
to do so. The reasons as to why, for certain instruments, it was not possible to perform reliable sensitivity analysis
are essentially linked to the fact that, for the measurement of these instruments, valuation techniques were used that
were either based on information derived from observed prices of similar market securities or on valuations and/or
information provided by third parties.
Disclosures relating to transfers between level 1 and level 2 in 2015
The following transfers took place in 2015:
Financial assets held for trading
Euro 26.9 million from level 1 to level 2;
Euro 15.2 million from level 2 to level 1.
These transfers mainly relate to data becoming available or no longer being available for prices quoted on organised
markets and which, due to volumes traded and the frequency of the prices reported, permit or do not permit the
instruments to be classified in Level 1 on the basis of the above parameters.
184
Part A – Accounting Policies
A.4.5.2 Annual changes in assets measured at fair value on a recurring basis (level 3)
Financial assets
held for trading
Financial assets
designated at fair
value through profit
and loss
Financial assets
available for sale
fair value
Hedging
derivatives
Property
and
equipment
Intangible
assets
1.
Opening balance
82,323
11,621
666,736
–
–
–
2.
Increases
161,984
47,271
70,378
–
–
–
2.1.
Purchases
143,225
10,231
43,209
–
–
–
2.2.
Profits recognised in:
6,699
754
–
–
–
–
4,260
98
–
–
–
–
X
X
17,978
–
–
–
8,756
33,254
2,974
–
–
–
2.2.1. Income statemtent
– of which unrealised gains
2.2.2. Shareholders’ equity
2.3.
Transfer from other levels
2.4.
Other increases
3.
Decreases
3.1.
Sales
3.2.
Redemptions
3.3.
Losses recognised in:
3.3.1. Income statemtent
– of which unrealised losses
3.3.2. Shareholders’ equity
3.4.
Transfer to other levels
3,304
3,032
6,217
–
–
–
217,720
10,982
215,828
–
–
–
10
–
1,162
–
–
–
143,597
6,152
1,000
–
–
–
2,775
4,429
16,936
–
–
–
1,045
4,429
16,934
–
–
–
X
X
38,515
–
–
–
65,079
–
128,416
–
–
–
3.5.
Other decreases
6,259
401
29,799
–
–
–
4.
Closing balance
26,587
47,910
521,286
–
–
–
A.4.5.3 Annual changes in liabilities measured at fair value on a recurring basis (level 3)
Financial liabilities held
Financial liabilities
for trading designated at fair value
through profit and loss
1.
Opening balance
2.
2.1.
2.2.
Losses recognised in:
2.2.1
Hedging derivatives
63,670
–
–
Increases
66,825
–
–
Issues
54,209
–
–
Income statemtent
3,249
–
–
– of which unrealised losses
1,319
–
–
X
X
–
2.2.2
Shareholders’ equity
2.3.
Transfer from other levels
8,197
–
–
2.4.
Other increases
1,170
–
–
3.
Decreases
117,374
–
–
3.1
Redemptions
–
–
–
3.2.
Repurchases
54,201
–
–
3.3.
Profits recognised in:
3.3.1
Income statemtent
2,876
–
–
– of which unrealised gains
2,413
–
–
3.3.2
Shareholders’ equity
3.4
Transfer to other levels
X
X
–
58,244
–
–
3.5
4.
Other decreases
2,053
–
–
Closing balance
13,121
–
–
Part A – Accounting Policies
185
A.4.5.4 Assets and liabilities not measured at fair value or measured at fair value on a
non-recurring basis: analysis by fair value level
Financial assets/liabilities
not measured at fair value or
measured at fair value on a nonrecurring basis
31.12.2015
31.12.2014
BV
L1
L2
L3
BV
L1
L2
L3
–
–
–
–
–
–
–
–
1,224,717
–
4,602 1,224,973
984,777
–
–
987,282
3. Loans from customers
34,186,837
–
– 37,213,017 32,078,843
–
4. Investment properties
22,939
–
–
36,926
23,632
–
–
36,343
–
–
–
–
–
–
–
–
1. Investments held to maturity
2. Due from banks
5. N
on-current assets and disposal
groups held for sale
97,095 34,812,139
Total
35,434,493
–
4,602 38,474,916 33,087,252
–
1. Due to banks
4,839,439
–
– 4,848,133 3,318,564
–
–
28,622,852
–
– 28,622,852 27,702,942
–
– 27,702,942
2. Due to customers
3. Securities issued
4. L iabilities associated with
non-current assets and disposal
groups held for sale
Total
8,849,290 4,958,705 3,835,456
–
–
–
97,095 35,835,764
138,112 8,981,834 4,816,758 4,087,265
–
–
–
–
3,314,872
331,322
–
42,311,581 4,958,705 3,835,456 33,609,097 40,003,340 4,816,758 4,087,265 31,349,136
Disclosures relating to sovereign debt exposure
With reference to the request made by ESMA (European Securities Markets Authority) by way of Communication
ESMA/2011/226 of 28 July 2011 and by Consob by way of Communication DEM/11070007 of 5 August 2011,
in respect to the figures shown at 31 December 2015 in A.4.5.1 “Accounting portfolios: analysis by fair value
level”, the following is the Bipiemme Group’s exposure to sovereign debt, the majority of which consisting of Italian
government securities.
186
Part A – Accounting Policies
The table sets out the following information for the accounting portfolios, analysed by individual country:
fair value hierarchy level;
nominal value;
book value at 31 December 2015;
effect of the valuation recognised in the income statement for the year for securities classified as “Financial assets
held for trading” and “Financial assets designated at fair value through profit and loss”;
effect of the gross overall valuation recognised at the date of the balance sheet in shareholders’ equity under “Valuation
reserves”, in relation to securities classified as “Financial assets available for sale”.
(euro/000)
Financial assets measured at fair value: debt securities
Accounting
portfolios/
issuers
L1
L2
L3
Valuation Nominal Book value Valuation
Valuation Nominal Book value Valuation
Nominal Book value Valuation
value 31.12.2015 recognised
value 31.12.2015 recognised recognised in
value 31.12.2015 recognised recognised in
in income
in income shareholders’
in income shareholders’
statement
equity
statement
equity
statement
1. Financial
assets held for
trading
141,526
158,972
729
X
2,388
2,046
–8
X
8
9
–
Italy
140,361
157,864
778
X
257
302
15
X
–
–
–
224
230
3
X
711
718
–1
X
–
–
–
Austria
Argentina
21
14
2
X
1,420
1,026
–22
X
–
–
–
Greece
–
–
–
X
–
–
–
X
3
3
–
United States
–
–
–
X
–
–
–
X
3
4
–
920
864
–54
X
–
–
–
X
2
2
–
–
–
–
X
–
–
–
X
–
–
–
3. Financial
assets available
for sale
8,381,511 8,777,370
–1,918
302,851
–
–
–
–
5
5
–
Italy
Other countries
2. Financial
assets
designated
at fair value
through profit
and loss
–1,918
302,905
–
–
–
–
5
5
–
United States
18,371
18,292
–
28
–
–
–
–
–
–
–
Spain
10,000
10,062
–
–82
–
–
–
–
–
–
–
8,523,037 8,936,342
–1,189
302,851
2,388
2,046
–8
–
13
14
–
Total
8,353,140 8,749,016
Part A – Accounting Policies
187
For comparative purposes the following was the situation at 31 December 2014.
(euro/000)
Financial assets measured at fair value: debt securities
L1
L2
L3
Accounting
portfolios/
issuers
Valuation Nominal Book value Valuation
Valuation Nominal Book value Valuation
Nominal Book value Valuation
value 31.12.2015 recognised
value 31.12.2015 recognised recognised in
value 31.12.2015 recognised recognised in
in income
in income shareholders’
in income shareholders’
statement
equity
statement
equity
statement
1. Financial
assets held for
trading
157,582
157,050
–106
Italy
X
1,984
1,604
–50
X
42
44
1
157,440
156,929
–104
X
144
157
5
X
–
–
–
Austria
39
40
1
X
617
622
3
X
40
41
1
Argentina
98
81
2
X
1,182
781
–59
X
–
–
–
Other countries
5
–
–5
X
41
44
1
X
2
3
–
2. Financial
assets
designated
at fair value
through profit
and loss
–
–
–
X
–
–
–
X
–
–
–
3. Financial
assets available
for sale
8,307,818 8,771,442
18,384
365,105
–
–
–
–
5
5
–
Italy
–
–
–
–
5
5
–
1,984
1,604
–50
–
47
49
1
United States
Total
188
8,299,581 8,763,268
18,384
365,117
8,174
0
–12
8,465,400 8,928,492
18,278
365,105
8,237
Part A – Accounting Policies
The following table sets out these amounts restated by issuer:
Analysis by issuer
Italy
Nominal value
Book value
31.12.2015
Valuation
recognised in
income statement
Valuation
recognised in
shareholders’
equity
8,493,763
8,907,187
–1,125
302,905
Financial assets available for sale
8,353,145
8,749,021
–1,918
302,905
– of which maturing in 2016
1,234,999
1,245,448
–
8,839
– of which maturing from 2017 to 2018
2,653,646
2,781,249
–95
122,361
– of which maturing from 2019 to 2020
1,619,500
1,688,704
–147
57,091
– of which maturing after 2020
2,845,000
3,033,620
–1,676
114,614
Financial assets held for trading
140,618
158,166
793
X
Argentina
1,441
1,040
–20
–
Financial assets held for trading
1,441
1,040
–20
X
Austria
935
948
2
–
Financial assets held for trading
935
948
2
X
3
3
–
–
Greece
Financial assets held for trading
3
3
–
X
United States
18,374
18,296
–
28
Financial assets available for sale
18,371
18,292
Maturing from 2019 to 2020
18,371
18,292
–
Financial assets held for trading
28
28
3
4
–
X
Spain
10,000
10,062
–
–82
Financial assets available for sale
10,000
10,062
–
–82
Maturing after 2020
10,000
10,062
–
–82
922
866
–54
–
Other countries
Financial assets held for trading
Total
922
866
–54
X
8,525,438
8,938,402
–1,197
302,851
In addition to these exposures, asset item 70 “Loans to customers” includes exposures of 503 million euro to the Italian
government and to Italian local public bodies.
At 31 January 2016, the positive balance between potential gains and losses on the “available-for-sale” Italian
government securities portfolio amounted to 324 million euro (compared to 303 million euro at 31 December 2015).
Part A – Accounting Policies
189
The situation at 31 December 2014 was as follows.
Analysis by issuer
Nominal value
Book value
31.12.2014
Valuation
recognised in
income statement
Valuation
recognised in
shareholders’
equity
8,457,170
8,920,359
18,285
365,117
8,299,586
8,763,273
18,384
365,117
574,768
575,880
–
5,297
– of which maturing from 2016 to 2017
3,138,268
3,223,912
–
87,560
– of which maturing from 2018 to 2021
4,251,550
4,568,677
11,566
238,793
– of which maturing after 2021
335,000
394,804
6,818
33,467
Financial assets held for trading
Italy
Financial assets available for sale
– of which maturing in 2015
157,584
157,086
–99
X
Argentina
1,280
862
–57
–
Financial assets held for trading
1,280
862
–57
X
696
703
5
–
Austria
Financial assets held for trading
696
703
5
X
United States
8,237
8,174
–
–
Financial assets available for sale
8,237
8,174
Maturing 2019
8,237
8,174
Other countries
48
47
–4
–
Financial assets held for trading
48
47
–4
X
8,467,431
8,930,145
18,229
365,105
Total
In addition to these exposures, asset item 70 “Loans to customers” included exposures of 309 million euro to the Italian
government and to Italian local public bodies at 31 December 2014.
A.5 Disclosure of “day one profit/loss”
IAS 39 requires a financial instrument to be initially recorded at its fair value, which is normally the amount paid or
collected for the transaction; in other words, at the cost or amount paid for financial assets or the amount received for
financial liabilities. On initial recognition, the fair value of a financial instrument does not always coincide with the price
paid or received; this difference is defined as a “day-one profit/loss”.
If there is a difference between these values, the fair value of the instrument has to be accounted for rather than
the transaction price, but only if the fair value is calculated from other observable market transactions on the same
instrument or if it is determined by the use of valuation techniques, whose inputs originate from information derived from
observable markets. In such cases the difference between the transaction price and the fair value on initial recognition
is immediately charged to income. This criterion applies to the instruments that fall into one of the classes that require
the booking of the instrument at fair value through profit and loss: fair value option and trading book.
With regard to these categories the following is specified:
1. Instruments listed on an active market. In this case, the concept of “day-one profit” is not usually applied since on
initial recognition in the financial statements the fair value of a financial instrument which falls within Level 1 of the fair
value hierarchy coincides with the transaction price.
2. Instruments not listed on an active market. In this case, classification of the financial instrument in Levels 2 or 3 of the
fair value hierarchy leads to a different accounting treatment of the difference between fair value and the transaction price.
190
Part A – Accounting Policies
In the case of Level 2, initial recognition, in many cases, sees fair value substantially coinciding with the transaction
price. Any differences between price and fair value are recognised in the income statement on the first remeasurement
of the financial instrument.
In the case of Level 3, the presence of model risk and/or input not directly observable in the market significantly
influences the outcome of the assessment, to be compared with the transaction price. In this case the difference, if
positive, is amortised over the residual life of the financial instrument (“day-one profit”) or of the holding period, if
this is believed to be lower; if this difference is negative, it is charged directly to income for the purpose of prudence
(“day-one loss”).
Subsequent to initial recognition of the fair value, mark-to-model valuations are made using the same methodology and
the same input sources as were used when the fair value was calculated on day one.
Subsequent changes in fair value after day one will therefore be linked to the trend in the related risk factors to
which the instrument is exposed (interest rates, equity prices, exchange rates, etc.) and recognised directly in the
income statement.
At the date of these consolidated financial statements there were no significant amounts for which recognition in the
income statement had been suspended.
Part A – Accounting Policies
191
Part B
Information on the consolidated balance sheet
193
194
Part B – Information on the consolidated balance sheet – Assets
Assets
Section 1 – Cash and cash equivalents
Line item 10
This item consists of currencies having legal tender. including foreign bank notes and coins and unrestricted deposits
with the central bank
1.1 Cash and cash equivalents: analysis
a) Cash
b) Unrestricted deposits with central banks
Total
Part B – Information on the consolidated balance sheet – Assets
31.12.2015
31.12.2014
300,714
322,840
–
–
300,714
322,840
195
Section 2 – Financial assets held for trading
Line item 20
This line item consists of financial assets (debt securities, equities, mutual funds, derivatives), classified in the trading
portfolio, including expired and impaired derivatives.
The underlying technical forms also include assets sold that do not satisfy the requirements of IAS 39 for derecognition
from the financial statements “‘sold but not eliminated”) and impaired assets.
2.1 Financial assets held for trading: analysis by product
Line item/amount
L1
L2
L3 31.12.2015
L1
L2
L3 31.12.2014
A. Cash assets
1. Debt securities
1.1 Structured securities
1.2 Other debt securities
2. Equities
331,342
168,345
645
500,332
236,102
157,047
805
393,954
1,552
102,381
519
104,452
3,605
93,600
697
97,902
329,790
65,964
126
395,880 232,497
63,447
108
296,052
73,448
–
11
73,459
1
8
112,700
112,691
3 Mutual funds
4
–
–
4
–
–
–
–
4. Loans
–
–
–
–
–
–
–
–
4.1 Repurchase agreements
–
–
–
–
–
–
–
–
4.2 Other
–
–
–
–
–
–
–
–
404,794
168,345
656
573,795
348,793
157,048
813
506,654
107,521
1,090,627
25,931
1,224,079
148,805
1,184,549
81,510
1,414,864
Total A
B. Derivatives
1. Financial derivatives
1.1 trading
107,521 1,089,689
25,909 1,223,119 148,805 1,180,209
80,886 1,409,900
1.2 linked to the fair value option
–
938
22
960
–
4,340
624
4,964
1.3 other
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2. Credit derivatives
2.1 trading
2.2 linked to the fair value option
–
–
–
–
–
–
–
–
2.3 other
–
–
–
–
–
–
–
–
Total B
107,521
1,090,627
25,931
1,224,079
148,805
1,184,549
81,510
1,414,864
Total (A+B)
512,315
1,258,972
26,587
1,797,874
497,598
1,341,597
82,323
1,921,518
Reference should be made to Part A “Accounting Policies” for the criteria used for determining the fair value and the
classification of financial instruments in the three levels of the fair value hierarchy.
Line item “B.1.2 – Derivatives linked to the fair value option” includes the fair value of derivatives related to the
instruments for which the fair value option has been adopted. These derivatives are mainly to hedge the risks implicit
in the issue of bonds for which the Group has elected the fair value option available under IAS 39, paragraph 9. Such
risks arise from possible fluctuations in interest rates and the presence of options that are embedded in the structured
securities issued.
196
Part B – Information on the consolidated balance sheet – Assets
Analysis of sub-item A.1.1 “Structured debt securities”
Line item/amount
Level 1
Level 2
Level 3
31.12.2015
Level 1
Level 2
Level 3
31.12.2014
– Credit linked notes
–
–
–
–
–
–
–
–
– Reverse convertibles
–
–
–
–
–
–
–
–
27
50,663
9
50,699
13
50,221
–
50,234
3
42,349
504
42,856
785
25,722
–
26,507
– Other
1,522
9,369
6
10,897
2,807
17,657
697
21,161
Total
1,552
102,381
519
104,452
3,605
93,600
697
97,902
Level 1
Level 2
Level 3
31.12.2015
Level 1
Level 2
Level 3
31.12.2014
– Reverse floaters
– Index linked
Subordinated financial assets
A. Cash assets
1.2 Debt securities – Other
– Issued by banks
– Issued by financial
institutions
– Issued by insurance
companies
– Issued by other companies
Total
19,969
2,153
–
22,122
13,634
1,450
–
15,084
17,873
1,153
–
19,026
12,256
1,450
–
13,706
1,160
428
–
1,588
1,366
–
–
1,366
936
–
–
936
12
–
–
12
–
572
–
572
–
–
–
–
19,969
2,153
–
22,122
13,634
1,450
–
15,084
Part B – Information on the consolidated balance sheet – Assets
197
2.2 Financial assets held for trading analysis by debtor/issuer
Line item/amount
31.12.2015
31.12.2014
500,332
393,954
160,835
158,606
212
93
c) Banks
232,166
152,361
d) Other issuers
107,119
82,894
2. Equities
73,459
112,700
a) Banks
1,529
14,173
71,930
98,527
3,822
314
A. Cash assets
1. Debt securities
a) Governments and central banks
b) Other public entities
b) Other issuers:
– insurance companies
– financial institutions
– non-financial companies
– others
3. Mutual funds
4. Loans
77
32
68,023
98,181
8
–
4
–
–
–
a) Governments and central banks
–
–
b) Other public entities
–
–
c) Banks
–
–
d) Other parties
Total A
–
–
573,795
506,654
791,977
918,741
B. Derivatives
a) Banks
– Fair value
791,977
918,741
432,102
496,123
432,102
496,123
Total B
1,224,079
1,414,864
Total (A + B)
1,797,874
1,921,518
b) Customers
– Fair value
The analysis of financial assets by the business sector to which debtors and securities issuers belong has been made in
accordance with the classification recommended by the Bank of Italy.
198
Part B – Information on the consolidated balance sheet – Assets
Section 3 – Financial assets designated at fair value through profit and loss
Line item 30
This line item consists of all the cash financial assets (debt securities, equities, mutual funds) designated at fair value
through profit and loss on the basis of the “fair value option” permitted by IAS 39, IAS 28 and IFRS 11.
The following instruments are classified in this category:
debt securities with embedded derivatives;
debt securities not classified as financial assets held for trading, whose cash flows have been hedged;
open-ended funds (including hedge funds), for which regular valuations are available from independent sources
and which, not being held for short-term trading, from an operational and financial standpoint form part of a duly
documented investment strategy, designed to achieve an overall return based on the change in the fair value of the
instrument itself, with regular detailed reports on their performance provided to management.
The underlying technical forms also include assets sold that do not satisfy the requirements of IAS 39 to be derecognised
from the financial statements (“sold but not eliminated”) and impaired assets.
3.1 Financial assets designated at fair value through profit and loss: analysis by product
Line item/amount
L1
L2
L1
L2
1. Debt securities
7,731
19,902
47,910
75,543
7,692
75,118
11,621
94,431
–
19,902
14,249
34,151
–
41,864
11,621
53,485
7,731
–
33,661
41,392
7,692
33,254
–
40,946
2. Equities
–
–
–
–
–
–
–
–
3. Mutual funds
–
–
–
–
3,018
–
–
3,018
4. Loans
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1.1 Structured securities
1.2 Other debt securities
4.1 Structured
4.2 Other
L3 31.12.2015
L3 31.12.2014
–
–
–
–
–
–
–
–
Total
7,731
19,902
47,910
75,543
10,710
75,118
11,621
97,449
Cost
4,815
47,793
19,068
71,856
7,320
69,582
12,373
89,275
The criteria used for determining the fair value and the classification of financial instruments in the three levels of the fair
value hierarchy are defined in Part A “Accounting Policies”.
The amounts at cost correspond to the purchase cost of financial assets held at the balance sheet date.
The remainder of the structured securities classified in level 3 includes, among other things, a Credit Link Note for
4,487 million euro (3,248 million euro at 31 December 2014) held by the Parent Company.
Part B – Information on the consolidated balance sheet – Assets
199
Purpose of using the fair value option and the financial assets concerned
Portfolios
of financial
assets
managed
internally on
a fair value
basis
31.12.2015
34,151
–
75,543
Type of transaction/
amount
Natural Structured
hedges
financial
instruments
1. Debt securities
41,392
1.1 Structured securities
Natural Structured
hedges
financial
instruments
Portfolios
of financial
assets
managed
internally on
a fair value
basis
31.12.2014
40,946
53,485
–
94,431
–
34,151
–
34,151
–
53,485
–
53,485
41,392
–
–
41,392
40,946
–
–
40,946
2. Equities
–
–
–
–
–
–
–
–
3. Mutual funds
–
–
–
–
–
3,018
3,018
4. Loans
–
–
–
–
–
–
–
–
4.1 Structured
–
–
–
–
–
–
–
–
4.2 Other
–
–
–
–
–
–
–
–
41,392
34,151
–
75,543
40,946
53,485
3,018
97,449
1.2 Other debt securities
Total
This table provides details of table 3.1 above and shows the book value (fair value) of assets for which the fair value
option has been adopted, distinguishing the type of use.
The amount in the “structured financial instruments” column includes operationally hedged securities of 19,902 million
euro (41,864 million euro at 31 December 2014).
Subordinated financial assets
At the balance sheet date, the portfolio of assets designated at fair value includes subordinated securities issued by
insurance companies of 7,731 million euro.
200
Part B – Information on the consolidated balance sheet – Assets
3.2 Financial assets designated at fair value through profit and loss: analysis by debtor/issuer
Line item/amount
31.12.2015
31.12.2014
1. Debt securities
75,543
94,431
–
–
a) Governments and central banks
b) Other public entities
–
–
c) Banks
58,051
78,367
d) Other issuers
17,492
16,064
2. Equities
–
–
a) Banks
–
–
b) Other issuers:
–
–
– insurance companies
–
–
– financial institutions
–
–
– non-financial companies
–
–
– others
–
–
3. Mutual funds
–
3,018
4. Loans
–
–
a) Governments and central banks
–
–
b) Other public entities
–
–
c) Banks
–
–
d) Other parties
–
–
75,543
97,449
Total
The analysis of financial assets by the business sector to which debtors and securities issuers belong has been made in
accordance with the classification recommended by the Bank of Italy.
Mutual funds: analysis by category of open funds
Line items/amounts
31.12.2015
31.12.2014
Bonds/money market
–
1,205
Equity
–
621
Funds of funds
–
–
Other
–
1,192
Total
–
3,018
This table provides details of the main types of investments made in mutual funds, the balance of which, at the respective
dates, is reported in table 3.2 under line item 3 ‘Mutual funds’.
Part B – Information on the consolidated balance sheet – Assets
201
Section 4 – Financial assets available for sale
Line item 40
This line item consists of all the financial assets (debt securities, equities, etc.) classified in the “available for sale”
portfolio. Equities essentially include interests in companies which, in accordance with international accounting
standards, are no longer defined as equity investments.
The underlying technical forms also include sold assets that do not satisfy the requirements of IAS 39 to be derecognised
from the financial statements (“sold but not eliminated”) and impaired assets.
4.1 Financial assets available for sale: analysis by product
Line item/amount
L1
L2
L1
L2
L3
31.12.2014
1. Debt securities
8,826,814
56,294
115,891
8,998,999
8,855,568
83,836
111,811
9,051,215
–
56,294
115,886
172,180
–
56,736
110,803
167,539
8,826,814
–
5
8,826,819
8,855,568
27,100
1,008
8,883,676
41,618
43,325
275,622
360,565
36,227
–
438,241
474,468
41,618
43,325
273,854
358,797
36,227
–
436,466
472,693
1.1 Structured securities
1.2 Other debt securities
2. Equities
2.1 Measured at fair
value
2.2 Valued at cost
–
–
1,768
1,768
–
–
1,775
1,775
1,911
–
129,773
131,684
1,035
26,870
116,684
144,589
–
–
–
–
–
–
–
–
8,870,343
99,619
521,286
9,491,248
8,892,830
110,706
666,736
9,670,272
3. Mutual funds
4. Loans
Total
L3 31.12.2015
The criteria used for determining the fair value and the classification of financial instruments in the three levels of the fair
value hierarchy are defined in Part A “Accounting Policies”.
In accordance with the provisions of IAS 39 on the derecognition of financial assets, line item “1.2 Other debt
securities” also includes debt securities forming part of repurchase agreements made on own securities for 4,157.562
million euro (5,392.593 million euro at 31 December 2014).
Line item “2. Equities” includes equity interests for which the investees do not qualify as subsidiaries, associates or joint ventures.
The following table shows the composition of securities carried at fair value, as well as those valued at cost, which have
been maintained at their initial book value as it is not possible to determine a reliable fair value, as required by IFRS
7, paragraph 30.
Level 1
Composition of line item 2.1.
Equities measured measured at fair
value
Banks
–
Level 2
Level 3 31.12.2015
Level 1
43,325 162,961
206,286
–
Level 2
Level 3 31.12.2014
– 304,753
304,753
Financial institutions and other
companies
41,618
– 110,893
152,511
36,227
– 131,713
167,940
Total
41,618
43,325 273,854
358,797
36,227
– 436,466
472,693
%
holding
Level 1
Level 2
Level 3 31.12.2015
Level 1
Level 2
10.34
–
–
1,137
1,137
–
–
1,137
1,137
n.a.
–
–
631
631
–
–
638
638
–
–
1,768
1,768
–
–
1,775
1,775
Composition of line item 2.2.
Equities valued at cost
Visconti S.r.l.
Other equities
Total
202
Level 3 31.12.2014
Part B – Information on the consolidated balance sheet – Assets
The following table sets out financial assets with a subordination clause.
Subordinated financial assets
1. Debt securities
1.2 Other debt securities
Issued by banks
Total
Level 1
Level 2
Level 3
31.12.2015
Level 1
Level 2
Level 3
31.12.2014
20,005
–
–
20,005
24,520
18,813
–
43,333
20,005
–
–
20,005
24,520
18,813
–
43,333
20,005
–
–
20,005
24,520
18,813
–
43,333
20,005
–
–
20,005
24,520
18,813
–
43,333
4.2 Financial assets available for sale: analysis by debtor/issuer
Line item/amount
1. Debt securities
a) Governments and central banks
b) Other public entities
c) Banks
d) Other issuers
31.12.2015
31.12.2014
8,998,999
9,051,215
8,777,375
8,771,448
–
–
192,184
270,618
29,440
9,149
2. Equities
360,565
474,468
a) Banks
206,286
304,797
b) Other issuers:
154,279
169,671
4,582
70
– financial institutions
– insurance companies
52,982
48,920
– non-financial companies
96,715
120,681
–
–
131,684
144,589
–
–
a) Governments and central banks
–
–
b) Other public entities
–
–
c) Banks
–
–
d) Other parties
–
–
9,491,248
9,670,272
– other
3. Mutual funds
4. Loans
Total
The analysis of financial assets by the business sector to which debtors and securities issuers belong has been made in
accordance with the classification recommended by the Bank of Italy.
Part B – Information on the consolidated balance sheet – Assets
203
Mutual funds: analysis by category of closed-end funds
Line item/amount
31.12.2015
31.12.2014
Equity
15,035
30,352
Bonds/money market
10,022
3,804
Real estate
65,179
71,710
Other
41,448
38,723
Total
131,684
144,589
This table provides details of the main types of investments made in mutual funds, the balance of which, at the respective
dates, is reported in table 4.2 under line item 3 ‘Mutual funds’.
‘Other’ also includes investments in Sicar (Société d’Investissement en Capital à Risque) and in private equity firms.
4.3 Financial assets available for sale with specific hedges
Line item/amount
31.12.2015
31.12.2014
1,182,643
1,197,186
735,802
876,705
b) exchange rate risk
–
–
c) credit risk
–
–
d) price risk
446,841
320,481
–
–
115,886
110,803
115,886
110,803
1. Financial assets with specific fair value hedges
a) interest rate risk
e) several risks
2. Financial assets with specific cash flow hedges
a) interest rate risk
b) currency risk
–
–
c) other
–
–
1,298,529
1,307,989
Total
Section 5 – Investments held to maturity
Line item 50
The Group had no investments held to maturity at the balance sheet date.
204
Part B – Information on the consolidated balance sheet – Assets
Section 6 – Due from banks – Line item 60
This line item consists of financial assets not quoted on an active market (level 2 and level 3) that are due from banks
(current accounts, security deposits, debt securities, etc.) and are classified in the loan portfolio. They include operating
receivables connected with the provision of financial services.
The underlying technical forms also include assets sold that do not satisfy the requirements of IAS 39 to be eliminated
from the financial statements (“sold but not eliminated”) and non-performing assets.
6.1 Due from banks: analysis by product
Type of transaction/amount
31.12.2015
BV
FV
Level 1
A. Due from central banks
1. Restricted deposits
2. Compulsory reserve
3. Repurchase agreements
4. Other
31.12.2014
BV
Level 2
Level 3
FV
Level 1
Level 2
Level 3
105,590
–
–
105,590
80,688
–
–
80,688
–
X
X
X
–
X
X
X
105,573
X
X
X
80,682
X
X
X
–
X
X
X
–
X
X
X
17
X
X
X
6
X
X
X
1,119,127
–
4,602
1,119,383
904,089
–
–
906,594
1,115,302
–
– 1,119,383
900,427
–
–
902,036
1.1 C
urrent accounts and
unrestricted deposits
457,776
X
X
X
455,453
X
X
X
1.2 Restricted deposits
150,590
X
X
X
150,181
X
X
X
1.3 Other loans:
506,936
–
–
–
294,793
–
–
–
32,002
X
X
X
388
X
X
X
B. Due from banks
1. Loans
– Repurchase agreements
– Finance leases
–
X
X
X
–
X
X
X
474,934
X
X
X
294,405
X
X
X
3,825
–
4,602
–
3,662
–
–
4,558
–
X
X
X
–
X
X
X
3,825
X
X
X
3,662
X
X
X
1,224,717
–
4,602
1,224,973
984,777
–
–
987,282
– Other
2. Debt securities
2.1 Structured securities
2.2 Other debt securities
Total
Reference should be made to Part A “Accounting Policies” for an explanation of the criteria used to determine fair value.
Subordinated financial assets
There were no loans to banks with subordination clauses at the balance sheet date and this was also the case at the
end of the previous year.
Part B – Information on the consolidated balance sheet – Assets
205
Non-performing assets
Type of transaction/amount
31.12.2015
31.12.2014
Restricted deposits
–
461
Total
–
461
6.2 Due from banks with specific hedges
There were no amounts due from banks with specific hedges at the balance sheet date and this was also the case at
the end of the previous year.
6.3 Finance leases
No financing had been granted for finance lease contracts at the balance sheet date and this was also the case at the
end of the previous year.
206
Part B – Information on the consolidated balance sheet – Assets
Section 7 – Loans to customers
Line item 70
This line item consists of unlisted financial assets (level 2 and level 3) that are represented by loans to customers
(mortgage loans, finance leases, factoring, debt securities, etc.) and are classified in the loans and receivables portfolio.
The underlying technical forms also include assets sold that do not satisfy the requirements of IAS 39 to be eliminated
from the financial statements (“sold but not eliminated”) and non-performing assets.
7.1 Loans to customers: analysis by product
Type of transaction/
amount
31.12.2015
Performing
Fair Value
Non-performing
Purchased
Loans
1. Current accounts
2. R epurchase
agreements
3. Mortgage loans
4. C
redit cards,
personal loans and
salary agreements
5. Finance leases
6. Factoring
31.12.2014
Book value
30,541,587
3,160,116
232,956
L1
L2
Book value
L3
Performing
Other
Fair Value
Non-performing
Purchased
L1
L2
L3
Other
– 3,598,644
–
– 37,169,429 28,365,977
– 3,571,668
–
– 34,768,415
–
716,884
X
X
–
704,190
X
X
–
–
X
3,468,453
64,875
X
–
X
X
X
–
X
X
X
– 1,807,949
X
X
X 15,773,904
– 1,703,436
X
X
X
1,510,931
–
100,132
X
X
X
1,566,559
–
95,494
X
X
X
196,463
–
62,538
X
X
X
218,713
–
69,950
X
X
X
16,505,014
–
–
–
X
X
X
–
–
–
X
X
X
7. Other loans
8,936,107
–
911,141
X
X
X
7,273,473
–
998,598
X
X
X
Debt securities
21,026
–
25,580
–
–
43,588
114,965
–
26,233
– 97,095
43,724
8. Structured securities
13,880
–
–
X
X
X
15,513
–
–
X
X
X
–
25,580
X
X
X
99,452
–
26,233
X
X
X
– 3,624,224
–
–
9. Other debt securities
Total
7,146
30,562,613
37,213,017 28,480,942
– 3,597,901
– 97,095 34,812,139
Reference should be made to Part A “Accounting Policies” for an explanation of the criteria used to determine fair value.
Current account balances due from customers include transactions “in transit” or “in suspense” relating to such accounts at
year end; these balances are not affected by non-cash debits and credits relating to bill and document collection services.
“Other loans” mostly relate to advances on bills, documents and similar instruments subject to collection, other amounts
not settled via current accounts, receivables from post offices and Cassa Depositi e Prestiti, derivative transaction
margin changes at clearing houses, documents discounted without recourse and operating loans associated with the
provision of financial services (those associated with the payment of supplies of goods and non-financial services are
shown under “Other assets”).
Discounted bills are recognised at their face value, less any deferred income; they also include those sent for collection
by the Bank’s own branches or others.
This item also includes lease contracts that involve transfer of the risks, with BPM as lessor, relating to assets under
construction and those waiting to be leased.
Part B – Information on the consolidated balance sheet – Assets
207
The “Non-performing” column includes bad loans, unlikely to pay and past due, net of value adjustments, as defined
by the Bank of Italy. Details of these exposures are given in Part E of the notes – Asset quality.
Subordinated financial assets
Type of transaction/amount
7. Other loans: subordinated loans granted to insurance companies
9. Other debt securities
Total
31.12.2015
31.12.2014
38,492
37,999
4,609
6,523
43,101
44,522
Subordinated financial assets versus insurance companies at 31 December 2015 refer to loans granted by the Parent
Company to the associate Bipiemme Vita S.p.A. with the following features:
a)
original amount of 8 million euro with unspecified maturity – interest rate 12-month Euribor + 250 bps – drawdown
on 27 June 2003;
b)
original amount of 8 million euro, drawdown on 31 March 2011 with a 5-year duration – interest rate 5-year
mid-swap + 270 bps,
c)
original amount of 26.05 million euro, drawdown on 21 March 2012 with a 10-year duration – interest rate
12-month Euribor.
“Other debt securities” relate for 4.609 million euro to PHARMA Finance securities originating from third party
securitisations which are subordinated by their terms to superior classes.
Line item 3. “Mortgage loans” consists of the balances, at the respective dates, of the following portfolio of
securitised loans:
Performing
Nonperforming
288,443
35,527
– transactions carried out in 2008 for 1,218 million
euro, in 2009 for 1,305 million euro, in 2010 for
1,616 million euro, in 2011 for 639 million euro, in
2013 for 1,426 million euro and in 2014 for 1,294
million euro
4,354,910
102,868
31.12.2015 Performing
Nonperforming
31.12.2014
352,886
37,802
390,688
4,457,778 5,243,189
95,246
5,338,435
• BPM Securitisation 2 S.r.l.:
– transaction carried out in 2006 for 2,011.3 million
euro
323,970
• BPM Covered Bond S.r.l.:
• BPM Covered Bond 2 S.r.l.:
– two transactions carried out in 2015 for 1,364
million euro and 756 million euro respectively
2,011,102
1,407
2,012,509
–
–
–
517,925
5,221
523,146
723,938
2,243
726,181
7,172,380
145,023
7,317,403
6,320,013
135,291
6,455,304
• BPM Securitisation 3 S.r.l.:
– s ecuritisation of commercial mortgage backed
securities (CMBS) carried out in the third quarter of
2014 for 864 million euro(*)
Total
(*) The Bank has subscribed the securities which were issued wholly through the special purpose vehicle.
208
Part B – Information on the consolidated balance sheet – Assets
Line item 4. “Credit cards, personal loans and salary agreements” consists of the balances, at the respective dates, of
the following portfolio of securitised loans:
Performing
Nonperforming
683,789
2
31.12.2015 Performing
Nonperforming
31.12.2014
–
–
–
• ProFamily Securitisation S.r.l.:
– transaction carried out in 2015 for 712.6 million
euro(*)
683,791
(*) Profamily S.p.A. has wholly subscribed the securities issued by the special purpose vehicle.
For details of the above transactions reference should be made to the following sections of Part E of these explanatory
notes “Information on risks and related hedging policies”:
1 – Credit risk
• “C. Securitisation transactions”
• “E.4 Covered bond transactions”
3 – Liquidity risk
• Self-securitisations
7.2 Loans to customers: analysis by debtor/issuer
Type of transaction/amount
31.12.2015
Performing
1. Debt securities
21,026
31.12.2014
Non-performing
Performing
Purchased
Other
–
25,580
114,965
Non-performing
Purchased
Other
–
26,233
a) Governments
–
–
–
–
–
–
b) Other public entities
–
–
–
–
–
–
21,026
–
25,580
114,965
–
26,233
19,483
–
3,260
113,009
–
–
c) Other issuers
– non-financial companies
1,543
–
22,320
1,956
–
26,233
– insurance companies
– financial companies
–
–
–
–
–
–
– other
–
–
–
–
–
–
30,541,587
–
3,598,644
28,365,977
–
3,571,668
a) Governments
353,828
–
–
212,048
–
–
b) Other public entities
148,703
–
678
94,974
–
1,631
30,039,056
–
3,597,966
28,058,955
–
3,570,037
15,065,576
–
2,975,824
14,013,520
–
2,937,346
3,062,405
–
121,616
2,516,464
–
143,823
55,582
–
–
49,374
–
–
11,855,493
–
500,526
11,479,597
–
488,868
30,562,613
–
3,624,224
28,480,942
–
3,597,901
2. Loans to:
c) Other parties
– non-financial companies
– financial companies
– insurance companies
– other
Total
The analysis of financial assets by the business sector to which debtors and securities issuers belong has been made in
accordance with the classification recommended by the Bank of Italy.
Part B – Information on the consolidated balance sheet – Assets
209
7.3 Loans to customers: assets with specific hedges
There were no loans to customers with specific hedges at the balance sheet date and this was also the case at the end
of the previous year.
7.4 Finance leases
The disclosures required by IAS 17, paragraph 47 are set out below.
Reconciliation between the gross investment in leases and the present value of the minimum payments due at the
balance sheet date
Gross investment in leases
Deferred financial income
31.12.2015
31.12.2014
357,650
402,048
72,924
86,840
284,726
315,208
–
–
Present value of minimum payments due
284,726
315,208
Net investment
Unguaranteed residual value
Adjustments
(25,725)
(26,545)
Book values: line item 5. “Finance leases” in table 7.1
259,001
288,663
Performing
196,463
218,713
62,538
69,950
31.12.2015
31.12.2014
Gross investment
12,412
11,476
Present value of minimum payments due
12,219
11,267
Adjustments
(4,754)
(3,264)
7,465
8,003
2,586
1,992
Gross investment
15,684
30,833
Present value of minimum payments due
14,704
28,863
Adjustments
(1,393)
(1,783)
Net exposure
13,311
27,080
2,866
4,101
Gross investment
329,554
359,739
Non-performing
Within 1 year
Net exposure
– of which non-performing
Between 1 and 5 years
– of which non-performing
Beyond 5 years
Present value of minimum payments due
257,803
275,078
Adjustments
(19,578)
(21,498)
Net exposure
238,225
253,580
57,086
63,857
– of which non-performing
The finance lease portfolio consists of 1,035 contracts; the investments related to properties for 96%, functional assets
for 3% and motor vehicles for the remainder.
210
Part B – Information on the consolidated balance sheet – Assets
Section 8 – Hedging derivatives
Line item 80
This line item consists of financial derivatives used for hedging purposes which have a positive fair value at the balance
sheet date.
8.1 Hedging derivatives: analysis by type of hedge and level
31.12.2015
31.12.2014
FV
NV
L1
L2
L3
Total
–
40,638
–
40,638
1) Fair value
–
39,884
–
39,884 2,011,965
2) Cash flows
–
754
–
754
A) Financial derivatives
3) Foreign investments
FV
NV
L1
L2
L3
Total
–
178,460
–
178,460
– 178,460
–
178,460 2,248,945
116,232
–
–
–
–
–
2,128,197
2,248,945
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1) Fair value
–
–
–
–
–
–
–
–
–
–
2) Cash flows
–
–
–
–
–
–
–
–
–
–
–
40,638
–
40,638
2,128,197
–
178,460
–
178,460
2,248,945
B) Credit derivatives
Total
Legenda:
Key: NV = Notional value L1 = Level 1 L2 = Level 2 L3 = Level 3
The criteria used for determining the fair value and the classification of financial instruments in the three levels of the fair
value hierarchy are defined in Part A “Accounting Policies”.
The table presents the positive book value (fair value) of hedging derivative contracts, including the amount accruing
at the balance sheet date, for hedges made through hedge accounting. This instrument is used to account for hedges
of financial instruments recognised in balance sheet items that do not envisage their measurement at fair value
through profit and loss.
The hedging of financial liabilities represented by securities is normally accounted for by using the fair value option.
The fair value option is adopted for structured debt securities and fixed-rate securities issued by Group banks, whose
risk of changes in fair value has been hedged with derivatives; derivatives used as part of the “fair value option” are
classified in the trading portfolio.
Reference should be made to the information provided in Part E – Information on risks and related hedging policies –
Section 1.2 – Market risks for the objectives and strategies underlying hedging transactions.
Part B – Information on the consolidated balance sheet – Assets
211
8.2 Hedging derivatives: analysis per hedged portfolio and type of hedge (book values)
Type of transaction/amount
Fair value
Cash flows
Specific hedging
Interest Exchange
rate risk rate risk
1. F inancial assets available for
sale
Credit Price risk
risk
Several
risks
Macro
hedging
Specific
hedging
Macro
hedging
Foreign
investments
147
–
–
881
–
x
754
x
x
2. Loans and receivables
–
–
–
x
–
x
–
x
x
3. Investments held to maturity
x
–
–
x
–
x
–
x
x
4. Portfolio
x
x
x
x
x
–
x
–
x
5. Other transactions
–
–
–
–
–
x
–
x
–
147
–
–
881
–
–
754
–
–
30,580
–
–
x
–
x
–
x
x
x
x
x
x
x
8,276
x
–
–
Total assets
1. Financial liabilities
2. Portfolio
Total liabilities
30,580
–
–
–
–
8,276
–
–
–
1. Forecast transactions
x
x
x
x
x
x
–
x
x
2. P
ortfolio of financial assets
and liabilities
x
x
x
x
x
–
x
–
–
This table reports the positive fair value of hedging derivatives according to the asset or liability hedged and the type
of hedge contract. The item “Cash flows – Specific hedging 1. Financial assets available for sale” includes the positive
fair values of forward hedging derivatives on the purchase of government securities.
As far as the detail of hedged portfolios are concerned:
Specific hedging of fair value
Line item 1.” Financial assets available for sale” relates to the positive fair value of financial derivatives:
hedging interest rate risk for a total notional amount of 20 million euro on fixed-income government securities;
hedging price risk for forward sales of government securities for 104.900 million euro.
Line item 1.” Financial liabilities” relates:
for 27.260 million euro to the positive value of the financial derivatives taken out by the vehicle BPM Covered Bond
with external counterparties to hedge the interest rate risk on the interest payable on the fixed-rate covered bonds
issued by the Parent Company; the fixed-rate coupons of the covered bonds are converted to floating rate coupons
at Euribor plus a spread;
for 3.320 million euro to the positive value of the financial derivatives taken out by the vehicle BPM Covered
Bond 2 with external counterparties to hedge the interest rate risk on the interest payable on the fixed-rate
covered bonds issued by the Parent Company; the fixed-rate coupons of the covered bonds are converted to
floating rate coupons at Euribor plus a spread.
212
Part B – Information on the consolidated balance sheet – Assets
Macrohedging of fair value
Line item 2. “Portfolio” relates to the positive fair value of financial derivatives for a notional amount of 410 million
euro, acquired to hedge the interest rate risk of a portfolio of core deposits.
Specific hedging of cash flows
Line item 1. “Financial assets available for sale” relates to the positive fair value of financial derivatives hedging price
risk for forward purchases of government securities of 116.232 million euro.
Part B – Information on the consolidated balance sheet – Assets
213
Section 9 – Fair value change of financial assets in hedged portfolios
Line item 90
This item consists of the positive balance of fair value changes in the assets covered by macrohedges against interest
rate risk.
9.1 Fair value adjustment of hedged assets: analysis by hedged portfolio
Fair value adjustment of hedged assets/amount
1. Positive adjustment
1.1 of specific portfolios:
a) loans
b) financial assets available for sale
1.2 overall
2. Negative adjustment
31.12.2015
31.12.2014
11,237
20,107
11,237
20,107
11,237
17,801
–
2,306
–
–
–
–
–
–
a) loans
–
–
b) financial assets available for sale
–
–
2.1 of specific portfolios:
2.2 overall
Total
–
–
11,237
20,107
The adjustment for financial assets hedged by fair value macrohedges relates to a mortgage loan portfolio of
11.2 million euro of which:
6.9 million euro relating to loans having a nominal amount of 97.9 million euro;
4.3 million euro for the residual of ineffective transactions to be released to income statement on a temporal basis.
The amount stated at line item 1.1.b) at 31 December 2014 related to a portfolio of fixed-income government securities.
The related hedging derivatives, which at 31 December 2015 have a negative valuation, are shown as liabilities under
“Hedging derivatives”.
Income and expenses arising from the valuation of hedging derivatives and the hedged portfolio are recognised in the
income statement under “Fair value adjustments in hedge accounting”.
9.2 Assets covered by macrohedges against interest rate risk
Hedged assets
1. Loans and receivables
31.12.2015
31.12.2014
97,928
158,970
2. Financial assets available for sale
–
250,000
3. Portfolio
–
–
97,928
408,970
Total
The table sets out the nominal value of assets covered by macrohedges against interest rate risk as per table 9.1.
214
Part B – Information on the consolidated balance sheet – Assets
Section 10 – Investments in associates and companies subject to joint control
Line item 100
This item consists of investments in joint ventures (or companies subject to joint control as per IFRS 11) and associates
(or companies subject to significant influence as per IAS 28).
10.1 Investments in associates and companies subject to joint control: disclosures
Company name
Type of
Share capital Registered Operational
office headquarters relationship(1)
in euro/
Original
currency
Nature of investment
Investor
% held
Conegliano
(TV)
1 Banca Popolare di
Milano S.c.a r.l.
50.00
Voting
rights(2)
A Companies subject to joint
control
Unlisted financial companies
1. Calliope Finance S.r.l.
B
600,000 Conegliano
(TV)
Companies subject to significant
influence
Unlisted financial companies
1. SelmaBipiemme Leasing S.p.A.
41,305,000
Milan
Milan
2 Banca Popolare di
Milano S.c.a r.l.
40.00
2. Factorit S.p.A.
85,000,002
Milan
Milan
2 Banca Popolare di
Milano S.c.a r.l.
30.00
4,500,000
Milan
Milan
2 Banca Popolare di
Milano S.c.a r.l.
24.44
5,765,463
Milan
Milan
2 Banca Popolare di
Milano S.c.a r.l.
16.85
179,125,000
Milan
Milan
2 Banca Popolare di
Milano S.c.a r.l.
19.00
3. Etica SGR S.p.A.
Listed financial companies
4. Anima Holding S.p.A.
Unlisted insurance companies
5. Bipiemme Vita S.p.A.
Key:
(1) Nature of investment: 1 joint control 2. significant influence.
(2) Voting rights at ordinary shareholders’ meetings. Voting rights are only shown if they differ from the percentage holding.
The following investments held by BPM were sold in full in 2015:
1. the interest of 39% in Aedes Bipiemme Real Estate SGR S.p.A.;
2. the interest of 20% in Wise Venture Sgr S.p.A.;
3. the interest of 24% in Pitagora 1936 S.p.A..
Part B – Information on the consolidated balance sheet – Assets
215
10.2 Significant investments in associates and companies subject to joint control: book value, fair value
and dividends received
Company name
Book value
Fair value
Dividends
received
535
X
–
66,426
23,966
X
–
–
2,898
X
390
70,273
67,106
X
3,060
31.12.2015
31.12.2014
702
A. Companies subject to joint control
1. Calliope Finance S.r.l.
B. Companies subject to significant influence
1. SelmaBipiemme Leasing S.p.A.
2. Aedes Bipiemme Real Estate SGR S.p.A.
3. Factorit S.p.A.
4. Etica SGR S.p.A.
2,308
1,763
X
269
5. Pitagora 1936 S.p.A.
–
6,953
X
–
6. Wise Venture SGR S.p.A.
–
548
X
–
134,862
124,510
405,119
8,436
7. Anima Holding S.p.A.
8. Bipiemme Vita S.p.A.
Total
67,574
65,518
X
1,497
342,145
293,797
X
13,652
The fair value of investments in companies subject to significant influence is only provided for listed companies.
Comprehensive income (3)= (1)
+ (2)
Other comprehensive income (net
of tax) (2)
Net income (loss) for the period
(1)
122
Income (loss) after tax from
discontinued operations
19,910
Income (loss) after tax from
continuing operations
Non-financial liabilities
92
Income (loss) before tax from
continuing operations
Financial liabilities
14,003
Interest margin
Net adjustments to/recoveries
on property and equipment and
intangible assets
Non-financial assets
–
Total revenues
Financial assets
Company name
Cash and cash equivalents
10.3 Significant investments in associates and companies subject to joint control: accounting information
A. Companies subject to
joint control
1. Calliope Finance S.r.l.
2,212 1,184
–
(7,003) (7,003)
– (7,003)
– (7,003)
X
X
(1,709) (2,344)
– (2,344)
970 (1,374)
688,326
X
X 122,451 84,851
– 84,851
889 85,740
42,974
85,182
X
X
– 25,515 (123) 25,392
2,806
13,863
X
X
X 6,125,481 169,163 1,242,510 4,802,424 1,380,412
X
X
B. Companies subject to
significant influence
1. SelmaBipiemme
Leasing S.p.A.
X 1,533,763 141,825 1,592,141
21,368
48,307
2. Anima Holding S.p.A.
X
271,226
159,563
3. Factorit S.p.A.
X 1,707,093
50,628 1,506,023
4. Etica SGR S.p.A.
X
5. Bipiemme Vita S.p.A.
309,169 828,907
9,541
3,204
2,394
38,024 25,515
2,797
1,810
26,040 17,245
–
1,810
40
1,850
– 17,245 6,433 23,678
The table sets out details of all companies subject to joint control or subject to significant influence. The figures shown
are taken from the financial statements at 31 December 2014 except for those of SelmaBipiemme Leasing S.p.A.
which are taken from the financial statements at 30 June 2015. The figures for Anima Holding have been taken from
its consolidated financial statements. The “total revenues” column shows the overall amount of income items with plus
signs before income taxes.
216
Part B – Information on the consolidated balance sheet – Assets
10.4 Non-significant investments in associates and companies subject to joint control: accounting
information
Section 10.3 sets out details of all companies subject to joint control or subject to significant influence.
10.5 Investments in associates and companies subject to joint control: changes during the year
A. Opening balance
B. Increases
B.1 Purchases
31.12.2015
31.12.2014
293,797
395,587
72,570
129,890
–
–
B.2 Write-backs
–
–
B.3 Revaluations
71,426
22,857
1,144
107,033
C. Decreases
24,222
231,680
C.1 Sales
8,780
225,304
–
–
15,442
6,376
342,145
293,797
B.4 Other increases
C.2 Adjustments
C.3 Other decreases
D. Closing balance
E. Total revaluations
F. Total adjustments
–
–
6,899
8,442
Detail of changes during the year
B. Increases
B.3 Revaluations
Profits on investments carried at equity
B.4 Other increases
Change in revaluation reserves of investments carried at equity
C. Decreases
72,570
71,426
71,426
1,144
1,144
24,222
C.1 Sales
8,780
Pitagora 1936 S.p.A.
5,531
Aedes Bipiemme Real Estate SGR S.p.A.
2,687
Wise Venture SGR S.p.A.
C.3 Other decreases
Dividends paid during the year
Change in revaluation reserves of investments carried at equity
Loss on disposal of Pitagora 1936 S.p.A.
F. Total adjustments
SelmaBipiemme Leasing
Part B – Information on the consolidated balance sheet – Assets
562
15,442
13,653
367
1,422
6,899
6,899
217
10.6 Significant judgements and assumptions made in establishing the existence of joint control or significant
influence
Part A – Accounting Policies, paragraph ‘A.1 – General Part’ and Section 3 – Scope of consolidation and consolidation
procedures of the notes explain the general criteria for the significant judgements and assumptions made in establishing
the presence or otherwise of control over an investee or another entity, as well as the existence of a joint control
agreement or the ability to exercise significant influence.
In the case of Bipiemme Vita S.p.A., despite holding an equity interest of less than 20% the Bank is of the opinion that
it is able to exercise significant influence as it has signed a shareholders’ agreement with Covéa (which holds 81% of
the voting rights) that contains the rules of corporate governance as well as the industrial aspects of the partnership
including, among other things, the fact that the insurance company should have access to the distribution networks
of the Bipiemme Group for a period of 10 years from the closing date (8 September 2011), with the possibility of
renewal on expiry.
In the case of Anima Holding S.p.A., despite the fact that the Bank holds an equity interest of less than 20% (it fell
from 35.29% to 16.85% after completion of the Public Offering in 2014) the investee is still classified as a company
subject to significant influence because of the content of the Planning Agreement signed in 2015 between BPM and
Poste Italiane (which took over from MPS) which includes clauses that determine the corporate governance of Anima
Holding S.p.A..
10.7 Commitments relating to investments in companies subject to joint control
At the balance sheet date there were no commitments relating to investments in companies subject to joint control.
10.8 Commitments relating to investments in companies subject to significant influence
SelmaBipiemme Leasing S.p.A.
SelmaBipiemme Leasing (hereafter “Selma”) is controlled by Mediobanca.
A shareholders’ agreement has been entered by BPM, Mediobanca and Compass, extended to 31 December 2016,
which regulates their reciprocal rights and obligations in terms of the company’s governance and disposal of the
investment (providing for reciprocal sale and purchase options).
Call options have been taken out by Mediobanca and put options have been taken out by BPM for BPM’s investment
in Selma; these can be exercised on the one hand in the event of cancellation or failure to renew the commercial
agreement on the part of BPM, a change of control over BPM, the sale of more than 50% of BPM’s branch network
or if there is no longer exclusive collaboration with Selma, and on the other in the event of cancellation of the
commercial agreement on expiry by Selma.
These options must be exercised within 180 days of the event that triggers the exercising of the option. The strike
price for Mediobanca will be equal to the pro-rata share of Selma’s net equity as shown in its latest financial
statements; the price will discount the restructuring charges that Selma will have to pay if it loses BPM’s distribution
channel. The strike price for BPM will be equal to its pro-rata share of the company’s economic value determined
on the basis of a method laid down in the agreement.
The agreement also includes a call option for BPM to buy Mediobanca’s investment in Selma, in the event that
Mediobanca loses control over Selma, or if a banking or insurance group acquires control over Mediobanca. The
strike price of the option, which must be exercised within 180 days of the event, will be equal to its pro-rata share of
Selma’s economic value determined on the basis of the method laid down in the agreement.
218
Part B – Information on the consolidated balance sheet – Assets
Factorit S.p.A.
On 29 July 2010, Banca Popolare di Milano and Banca Popolare di Sondrio (“BPS”) bought 30% and 60.5%
respectively of Factorit S.p.A. from Banca Italease, which has kept the remaining 9.5%. On the same day, BPM and BPS
signed a shareholders’ agreement to regulate the company’s governance; in particular, BPM has the right to appoint
two out of the seven directors, the chairman of the Board of Statutory Auditors and an alternate statutory auditor. These
agreements also provide for:
BPM’s willingness to sell a shareholding of not more than 5% of Factorit’s share capital to Banca Italease, or to
Banco Popolare or to another company controlled by it, at conditions to be negotiated;
a right to sell in favour of BPM in the event that BPS decides to sell 50% of Factorit plus one share.
By way of an exchange of correspondence finalised on 4 February 2015, BPM and BPS extended the term of the
shareholders’ agreement which will continue to hold until the date of the shareholders’ meeting approving the financial
statements of Factorit S.p.A. for the year ended 31 December 2015.
Anima Holding S.p.A.
In 2014 the investee was subject to a public offering, as part of which the Parent Company sold a part of its equity
holding, reducing its interest from 35.29% to16.85%.
BPM and Poste Italiane, which purchased the whole of the investment held by Monte Paschi Siena, entered
a shareholders’ agreement in 2015, which, in addition to establishing rules for the appointment of Anima
Holding’s Board of Directors provides for a lock up commitment whereby the two companies may not reduce
their equity interest in Anima below 9.9% prior to April 2017, as well as a stand still commitment and a public
tender offer commitment.
As part of the operation, BPM has undertaken to sell to third parties the portion of its investment in Anima Holding
exceeding the ceiling stated in article 106 of Legislative Decree no. 58/98 within 12 months of the date of completion
of the sale of the Anima Holding shares to Poste Italiane. This commitment will become automatically ineffective if
Consob considers that the members of the shareholders’ agreement do not have the obligation to launch a public tender
offering for the whole of Anima Holding’s shares.
Bipiemme Vita S.p.A.
On 8 September 2011 – following the agreements signed on 19 April 2011 by Banca Popolare di Milano and the
Covéa Group (the “parties”) to set up a strategic partnership in bancassurance selling life and accident insurance –
the Covéa Group completed its acquisition of 81% of Bipiemme Vita S.p.A., which also holds 100% of Bipiemme
Assicurazioni S.p.A..
The sale agreement provides for a mechanism whereby the price will be increased on the achievement of certain
business targets by Bipiemme Vita and Bipiemme Assicurazioni – in the period comprising the year ended
31 December 2011 up to the year ending 31 December 2020 – with the potential price increase to be determined
by means of an “Earn Out Vita” (up to a maximum of 11.7 million euro) and an “Earn Out Danni” (up to a
maximum of 2.5 million euro). The calculation of any price adjustment will take place at the end of this period,
subject to renewal of the strategic partnership with the Covéa Group.
The Sale and Purchase Agreement requires BPM to pay indemnification for any losses that Bipiemme Vita may
incur as a result of any default involving:
(i) securities in the trading portfolio of Italian sovereign debt;
(ii) securities of the trading portfolio of bank bonds;
(iii)securities of the investment portfolio of Greek sovereign debt (for which default also includes the restructuring of
debt assuming a recovery rate of 79%).
Part B – Information on the consolidated balance sheet – Assets
219
The indemnification obligation also extends to any loss recognised when, in the event of exceptional future liquidity
needs on the part of Bipiemme Vita due to extraordinary redemptions of insurance contracts outstanding at 31 August
2011, Bipiemme Vita may have to sell the securities indicated above.
During the course of 2012 the indemnification mechanism for the Greek government securities referred to in point iii)
was activated, as provided for in the contract (difference between the nominal value and the recovery rate of 79%),
which led to an award to Covéa of around 7.3 million euro (already provided for in the 2011 financial statements).
So, as things stand, no further compensation is due on such securities.
As concerns the maximum indemnification obligation for the securities referred to in points i) and ii) – taking into
account repayments and sales that have taken place – it is believed that there is no need to make any provision as the
risk of any indemnification is considered remote.
The agreements also include reciprocal options which, on the occurrence of certain extraordinary events involving one or
both parties – including by way of example non-compliance and/or non-renewal of the partnership agreements (termination
for breach of the partnership agreement or of the distribution arrangements), any change of control over the parties,
liquidation or insolvency/bankruptcy of the parties, a decision-making stalemate regarding a proposal to wind up and
liquidate Bipiemme Vita and/or Bipiemme Assicurazioni, the revocation of the state of liquidation or the appointment or
dismissal of liquidators (a so-called “triggering event”) – BPM or the Covéa Group may, according to the party affected by
the event in question, exercise their option to acquire the other party’s interest in Bipiemme Vita, or sell their own interest to
the other party. The strike price of the options is determined according to a predetermined reciprocal mechanism based on
a valuation of the life and accident businesses.
For the first five years of the strategic partnership there is provision for a penalty in favour of the Covéa Group if the option
is exercised linked to certain types of triggering events originated by BPM (termination due to breach of the partnership
agreement or of the distribution agreements); the amount of this penalty decreases over time from the date of signing the
partnership agreements.
Aedes BPM Real Estate SGR S.p.A.
BPM sold its investment in Aedes BPM Real Estate SGR S.p.A. in December 2015. In this respect the sales price may be
adjusted upwards or downwards on the basis of the net equity of Aedes BPM Real Estate SGR S.p.A. at 31 December 2015.
The difference must be settled within15 days following the approval of that company’s financial statements.
10.9 Significant restrictions
There are no significant restrictions requiring disclosure within the meaning of IFRS 12.
10.10 Other information
The associate SelmaBipiemme Leasing has a 30 June year end and accordingly its latest financial statements are for the
year ended 30 June 2015. In order to measure the investment in this company using the equity method, a pro-forma
income statement was prepared consisting of the results for the second half of the year ended 30 June 2015 and the
results approved by the Company for the six months ended 31 December 2015.
Section 11 – Technical insurance reserves reassured with third parties
Line item 110
This line item had a nil balance at the balance sheet date as there are no insurance companies in the Group.
220
Part B – Information on the consolidated balance sheet – Assets
Section 12 – Property and equipment
Line item 120
12.1 Functional property and equipment: analysis of assets measured at cost
Asset/amount
31.12.2015
1.1 Owned assets
31.12.2014
697,444
692,073
a) land
291,489
289,067
b) buildings
307,817
319,006
25,813
25,436
c) furniture
d) electronic equipment
15,184
17,180
e) other assets
57,141
41,384
–
–
–
–
1.2 Assets acquired under finance leases
a) land
b) buildings
–
–
c) furniture
–
–
d) electronic equipment
–
–
e) other assets
–
–
697,444
692,073
Total
12.2 Investment properties: analysis of assets measured at cost
Asset/amount
31.12.2015
Book value
1. Owned assets
a) land
b) buildings
2. Assets acquired under
finance leases
a) land
b) buildings
Total
31.12.2014
Fair value
Book value
Fair value
L1
L2
L3
L1
L2
L3
22,939
–
–
36,926
23,632
–
–
36,343
4,660
–
–
6,774
4,660
–
–
6,868
18,279
–
–
30,152
18,972
–
–
29,475
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
22,939
–
–
36,926
23,632
–
–
36,343
This line item consists of property and equipment (buildings, plant, machinery and other tangible assets, including work
of art) used in the business, which are governed by IAS 16, and investment properties (land and buildings), which are
governed by IAS 40.
12.3 Functional property and equipment: analysis of revalued assets
At the balance sheet date, as at the end of the previous year, there were no items of functional property and equipment
measured at fair value.
Part B – Information on the consolidated balance sheet – Assets
221
12.4 Investment properties: analysis of assets measured at fair value
At the balance sheet date, as at the end of the previous year, there were no investment properties measured at
fair value.
12.5 Functional property and equipment: changes during the year
A. Opening balance, gross
A.1 Total net reductions in value
A.2 Opening balance, net
B. Increases
Land
Buildings
Furniture
Electronic Other assets
systems
Total
289,067
873,708
130,709
197,964
205,924
1,697,372
–
554,702
105,273
180,784
164,540
1,005,299
289,067
319,006
25,436
17,180
41,384
692,073
2,463
7,399
4,246
5,176
26,615
45,899
2,463
7,392
4,192
5,046
26,314
45,407
B.2 Capitalised improvement expenditure
–
–
–
–
–
–
B.3 Write-backs
–
–
–
–
–
–
B.4 Fair value increases recognised in:
B.1 Purchases
–
–
–
–
–
–
– a) shareholders’ equity
–
–
–
–
–
–
– b) income statement
–
–
–
–
–
–
B.5 Foreign exchange gains
–
–
–
–
–
–
B.6 Transfers from investment properties
–
–
–
–
–
–
B.7 Other increases
–
7
54
130
301
492
41
18,588
3,869
7,172
10,858
40,528
C.1 Sales
–
8
–
1
1
10
C.2 Depreciation
–
12,610
3,827
7,034
10,732
34,203
C.3 Impairment adjustments recognised in:
–
5,970
–
–
–
5,970
– a) shareholders’ equity
–
–
–
–
–
–
– b) income statement
–
5,970
–
–
–
5,970
C. Decreases
C.4 Fair value decreases recognised in:
–
–
–
–
–
–
– a) shareholders’ equity
–
–
–
–
–
–
– b) income statement
–
–
–
–
–
–
C.5 Foreign exchange losses
–
–
–
–
–
–
C.6 Transfers to
–
–
–
–
–
–
– a) investment properties
–
–
–
–
–
–
– b) non-current assets held for sale
–
–
–
–
–
–
C.7 Other decreases
41
–
42
137
125
345
D. Closing balance, net
291,489
307,817
25,813
15,184
57,141
697,444
D.1 Total net reductions in value
D.2 Closing balance, gross
E. Measurement at cost
222
–
573,895
108,867
187,687
174,857
1,045,306
291,489
881,712
134,680
202,871
231,998
1,742,750
–
–
–
–
–
–
Part B – Information on the consolidated balance sheet – Assets
12.6 Investment properties: changes during the year
A. Opening balance
B. Increases
Land
Buildings
Total
4,660
18,972
23,632
–
152
152
B.1 Purchases
–
152
152
B.2 Capitalised improvement expenditure
–
–
–
B.3 Fair value increases
–
–
–
B.4 Write-backs
–
–
–
B.5 Foreign exchange gains
–
–
–
B.6 Transfers from functional use
–
–
–
B.7 Other increases
–
–
–
–
845
845
C. Decreases
C.1 Sales
–
–
–
C.2 Depreciation
–
845
845
C.3 Fair value decreases
–
–
–
C.4 Impairment adjustments
–
–
–
C.5 Foreign exchange losses
–
–
–
C.6 Transfers to other asset portfolios
–
–
–
a) buildings for functional use
–
–
–
b) non-current assets held for sale
–
–
–
–
–
–
D. Closing balance
C.7 Other decreases
4,660
18,279
22,939
E. Measurement at fair value
6,774
30,152
36,926
12.7 Commitments to purchase property and equipment
Contractual commitments to purchase property and equipment (unexecuted orders) amount to 1,859 million euro at the
balance sheet date (5,583 million euro at 31 December 2014).
Part B – Information on the consolidated balance sheet – Assets
223
Section 13 – Intangible assets
Line item 130
This item consists of the following intangible assets as per IAS 38, which are all measured at cost.
13.1 Intangible assets: analysis by asset type
Asset/amount
A.1 Goodwill
A.1.1 Pertaining to the Group
A.1.2 Pertaining to Minority interests
Finite life
Indefinite 31.12.2015
life
Finite life
Indefinite 31.12.2014
life
x
–
–
x
–
–
x
–
–
x
–
–
x
–
–
x
–
–
136,931
–
136,931
108,377
–
108,377
136,931
–
136,931
108,377
–
108,377
325
–
325
619
–
619
136,606
–
136,606
107,758
–
107,758
–
–
–
–
–
–
a) Internally generated intangible assets
–
–
–
–
–
–
b) Other assets
–
–
–
–
–
–
136,931
–
136,931
108,377
–
108,377
A.2 Other intangible assets
A.2.1 Assets valued at cost:
a) Internally generated intangible assets
b) Other assets
A.2.2 Assets measured at fair value:
Total
A.2 Other intangible assets
As required by paragraph 118a) of IAS 38, it is noted that software is fully classified as an intangible asset with a finite
useful life; amortisation is being charged over periods between 3 and 7 years.
Line item A.2.1 b) “Other assets” with finite life is made up as follows:
Software
224
31.12.2015
31.12.2014
136,606
107,758
136,606
107,758
Part B – Information on the consolidated balance sheet – Assets
13.2 Intangible assets: changes during the year
Goodwill
Other intangible assets:
internally generated
Other intangible assets:
Finite life Indefinite life
Finite life Indefinite life
Total
A. Opening balance
–
3,083
–
481,659
–
484,742
A.1 Total net reductions in value
–
2,464
–
373,901
–
376,365
A.2 Opening balance, net
–
619
–
107,758
–
108,377
B. Increases
–
–
–
58,065
–
58,065
B.1 Purchases
–
–
–
57,973
–
57,973
B.2 Increase in internal intangible assets
x
–
–
–
–
–
B.3 Write-backs
x
–
–
–
–
–
B.4 Fair value increases recognised in
–
–
–
–
–
–
– shareholders’ equity
x
–
–
–
–
–
– income statement
x
–
–
–
–
–
B.5 Foreign exchange gains
–
–
–
–
–
–
B.6 Other increases
–
–
–
92
–
92
C. Decreases
–
294
–
29,217
–
29,511
C.1 Sales
–
–
–
–
–
–
C.2 Adjustments
–
188
–
28,937
–
29,125
– amortisation
x
188
–
28,937
–
29,125
– impairment losses
–
–
–
–
–
–
+ shareholders’ equity
x
–
–
–
–
–
+ income statement
–
–
–
–
–
–
C.3 Fair value decreases recognised in
–
–
–
–
–
–
– shareholders’ equity
x
–
–
–
–
–
– income statement
x
–
–
–
–
–
C.4 Transfers to non-current assets held for sale
–
–
–
–
–
–
C.5 Foreign exchange losses
–
–
–
–
–
–
C.6 Other decreases
–
106
–
280
–
386
D. Closing balance, net
–
325
–
136,606
–
136,931
D.1 Total net reductions in value
–
2,758
–
400,232
–
402,990
E. Closing balance, gross
–
3,083
–
536,838
–
539,921
F. Measurement at cost
–
–
–
–
–
–
13.3 Other information
The following disclosures are made as required by paragraphs 122 and 124 of IAS 38:
there are no intangible assets that have been revalued; as a result, there are no restrictions on the distribution to
shareholders of the revaluation surpluses that relate to intangible assets (paragraph 124b) of IAS 38);
there are no intangible assets that have been acquired under a government grant (paragraph 122c) of IAS 38);
there are no intangible assets that have been pledged as security for liabilities (paragraph 122d) of IAS 38);
contractual commitments for the purchase of intangible assets (unexecuted orders) amounted to 1.555 million euro
at 31 December 2015 (4.543 million euro at 31 December 2014) (paragraph 122e) of IAS 38);
there are no leased intangible assets.
Part B – Information on the consolidated balance sheet – Assets
225
Section 14 – Tax assets and liabilities
Asset line item 140 and liability line item 80
These line items consist of current and deferred tax assets (asset line item 140) and current and deferred tax liabilities
(liability line item 80) in accordance with IAS 12.
14.1 Deferred tax assets: analysis
The following types of temporary difference gave rise to the recognition of deferred tax assets:
Description
31.12.15
31.12.14
Deferred tax assets with counter-entry to the income statement:
840,600
868,413
a) DTA under Law no. 214/2011
716,452
710,044
• Write-downs of loans to customers
587,973
563,240
• Goodwill and other intangible assets
128,479
146,804
• Tax losses under Law no. 214/2011
–
–
124,148
158,369
487
2,596
• Tax losses
–
–
• Adjustments to financial assets held for trading and financial liabilities designated at
fair value through profit and loss
–
–
8,721
21,921
–
–
• Impairment adjustment to guarantees pledged recognised as other liabilities
13,437
18,308
• Allowances for risks and charges
b) Other
• Write-downs of amounts due from banks
• Adjustments to securities issued
•A
djustments to financial liabilities held for trading and financial liabilities designated
at fair value through profit and loss
66,507
86,533
• Costs mainly of an administrative nature
3,987
4,601
• Write-downs of hedging derivatives
3,301
–
26,576
24,211
1,132
199
30,989
35,586
•D
ifference between tax basis and book value of property and equipment and
intangible assets
• Other items
Deferred tax assets with counter-entry to shareholders’ equity:
– Valuation reserves:
• Losses on financial assets available for sale
– Other:
• Actuarial gains/losses on employee allowances and other items
• Cost of share capital increases
Total sub-item 140 b) Deferred tax assets
226
5,012
5,710
5,012
5,710
25,977
29,876
22,259
23,247
3,718
6,629
871,589
903,999
Part B - Information on the consolidated balance sheet- Assets
Tax credit arising from the conversion of deferred tax assets recognised in the financial
statements (Law no. 214/2011)
Article 2 of Legislative Decree no. 225 of 29 December 2010, (the “mille proroghe”, an annual decree extending
the life of various government measures), converted, with amendments, to Law no. 10 of 26 February 2011 and
subsequently amended by art. 9 of Legislative Decree no. 201 of 6 December 2011 (the “Monti” decree), converted,
with amendments, to Law no. 214/2011, provides for the introduction of rules for the conversion to tax credits of a
portion of certain deferred tax assets recognised in the financial statements if a company’s separate financial statements
show a loss for the financial year.
Pursuant to the aforementioned rules, items which can be transformed into tax credits, within certain limits, are deferred
tax assets relating to loan write-downs not yet deducted from taxable income under paragraph 3 of article 106 of the
ITCA, as well as those relating to goodwill and other intangible assets that are deductible over more than one fiscal
period for income tax purposes.
With respect to the quantification of the amount that can be converted, the law states that the amount of the deferred
tax asset that can be converted is that which results from multiplying the loss for the financial year by the ratio of the
relevant deferred tax asset to the sum of share capital and reserves.
The law also provides for another possibility for conversion, concerning a deferred tax asset arising from tax losses,
governed by paragraph 56-bis of the aforementioned article 2.
The tax credit resulting from the conversion of a deferred tax asset is non-interest bearing, it may be used for offsetting
in accordance with article 17 of Legislative Decree no. 241/1997, it may be sold at nominal value in accordance with
the procedure set out by article 43-ter of Presidential Decree no. 602/1973 and, lastly, a refund may be requested for
any balance remaining after offsetting.
In the above table the deferred tax asset under Law no. 214/2011 is presented separately from other traditional
deferred tax asset components in order to take account of their different nature.
More specifically, the amounts shown in the table represent the portion of deferred tax assets that is potentially capable
of being converted to tax credits at the balance sheet date.
The rules relating to the conversion to a tax credit of a deferred tax asset introduce a means of recovery of the asset that
are supplementary to the ordinary rules to be applied when there is a loss for the financial year or a tax loss.
This method provides certainty of recovery, whatever the circumstances, of a deferred tax asset under Law no. 214/2011,
automatically meeting the requirements of probable recovery of the deferred tax asset as required by IAS 12.
Other deferred tax assets
The above table also provides details of other deferred tax asset components that differ from those under Law no.
214/2011. Deferred tax assets are recognised to the extent that there is a likelihood of recovery on the basis of
the company’s ability to generate positive taxable income on an ongoing basis. The assessment of the probability of
recovery of the traditional deferred tax asset components was made on the basis of available information represented
by the estimate of future taxable income derived, for the years 2016-2018, from the figures presented in the Bipiemme
Group’s 2014-2016/2018 business plan approved on 11 March 2014 by the Bank’s Management Board.
The tax rates used for the computation of deferred tax assets for IRES and IRAP purposes were applied according to
the laws in force.
Part B - Information on the consolidated balance sheet- Assets
227
14.2 Deferred tax liabilities: analysis
The following types of temporary difference gave rise to the recognition of deferred tax liabilities:
Description
31.12.15
31.12.14
15,821
27,263
–
197
7,717
20,149
–
–
•P
ortion of the provision for employee termination indemnities already recognised for
tax purposes
6,063
6,226
•A
djustments to financial liabilities designated at fair value through profit and loss
and securities issued
2,006
–
–
–
Deferred tax liabilities with counter-entry to the income statement:
•R
evaluation of financial assets held for trading and financial assets designated at fair
value through profit and loss
• Revaluations of hedging derivatives
•P
ortion of implicit fees in bonds besilinated at fair value trought profit and loss
recognised as other liabilities
•D
epreciation of property and equipment and amortisation of intangible assets
already recognised for fiscal purposes
35
691
Deferred tax liabilities with counter-entry to shareholders’ equity:
• Other items
116,345
137,916
– Valuation reserves
116,345
137,916
116,345
137,916
• Gains on financial assets available for sale
• Actuarial gains/losses on employee allowances
Total sub-item 80 b) Deferred tax liabilities
228
–
–
132,166
165,179
Part B - Information on the consolidated balance sheet- Assets
14.3 Changes in deferred tax assets (with counter-entry to the income statement)
1. Opening balance
2. Increases
2.1 Deferred tax assets recognised in the year
31.12.15
31.12.14
868,413
820,745
53,464
134,801
53,464
134,656
a) relating to prior years
–
–
b) due to changes in accounting policies
–
–
c) write-backs
–
–
53,464
134,656
2.2 New taxes or increases in tax rates
d) other
–
–
2.3 Other increases
–
145
81,277
87,133
81,277
86,805
81,025
85,336
–
–
45
–
3. Decreases
3.1 Deferred tax assets written off during the year
a) reversals
b) written down and now considered unrecoverable
c) due to changes in accounting policies
207
1,469
3.2 Decrease in tax rates
d) other
–
9
3.3 Other decreases
–
319
–
294
a) Conversion to tax credits pursuant to Law no. 214/2011
b) Other decreases
4. Closing balance
–
25
840,600
868,413
The following table sets out changes in the year in deferred tax assets under Law no. 214/2011, providing details of
the figures shown in table 14.3.
14.3.1 Changes in deferred tax assets pursuant to Law no. 214/2011 (with counter-entry to the income
statement)
1. Opening balance
31.12.15
31.12.14
710,044
644,598
2. Increases
27,514
110,598
3. Decreases
21,106
45,152
21,106
44,046
3.1 Reversals
3.2 Conversion to tax credits
–
319
a) arising from the loss for the year
–
319
b) arising from tax losses
–
–
–
787
716,452
710,044
3.3 Other decreases
4. Closing balance
Part B - Information on the consolidated balance sheet- Assets
229
14.4 Changes in deferred tax liabilities (with counter-entry to the income statement)
1. Opening balance
2. Increases
2.1 Deferred tax liabilities recognised in the year
31.12.15
31.12.14
27,263
42,173
2,637
21
2,637
21
a) relating to prior years
–
–
b) due to changes in accounting policies
–
–
2,637
21
2.2 New taxes or increases in tax rates
–
–
2.3 Other increases
–
–
14,079
14,931
14,079
14,922
c) other
3. Decreases
3.1 Deferred tax liabilities written off during the year
a) reversals
14,079
14,922
b) due to changes in accounting policies
–
–
c) other
–
–
–
9
3.2 Decrease in tax rates
3.3 Other decreases
4. Closing balance
–
–
15,821
27,263
31.12.15
31.12.14
35,586
26,096
3,590
17,571
3,590
17,571
–
–
14.5 Changes in deferred tax assets (with counter-entry to shareholders’ equity)
1. Opening balance
2. Increases
2.1 Deferred tax assets recognised in the year
a) relating to prior years
b) due to changes in accounting policies
–
–
3,590
17,571
2.2 New taxes or increases in tax rates
–
–
2.3 Other increases
–
–
c) other
3. Decreases
8,187
8,081
8,145
8,081
8,145
8,081
b) written down and now considered unrecoverable
–
–
c) due to changes in accounting policies
–
–
d) other
–
–
–
–
42
–
30,989
35,586
3.1 Deferred tax assets written off during the year
a) reversals
3.2 Decrease in tax rates
3.3 Other decreases
4. Closing balance
230
Part B - Information on the consolidated balance sheet- Assets
14.6 Changes in deferred tax liabilities (with counter-entry to shareholders’ equity)
1. Opening balance
2. Increases
2.1 Deferred tax liabilities recognised in the year
31.12.15
31.12.14
137,916
64,184
32,846
93,565
32,846
93,565
a) relating to prior years
–
–
b) due to changes in accounting policies
–
–
32,846
93,565
2.2 New taxes or increases in tax rates
–
–
2.3 Other increases
–
–
54,417
19,833
54,417
19,833
c) other
3. Decreases
3.1 Deferred tax liabilities written off during the year
a) reversals
54,417
19,833
b) due to changes in accounting policies
–
–
c) other
–
–
–
–
3.2 Decrease in tax rates
3.3 Other decreases
4. Closing balance
–
–
116,345
137,916
14.7 Other information
An update on pending tax disputes is provided in the following.
2005 – Former Bipiemme Immobili
Following a tax audit on 2005 at the former Bipiemme Immobili S.p.A., which the Bank absorbed in 2007, assessments
were notified on 9 December 2010 claiming higher IRES of 230 thousand euro, IRAP for 29 thousand euro and VAT for
93 thousand euro, plus fines. On 24 May 2012, the Provincial Tax Commission of Milan upheld the appeal relating to VAT
and rejected that regarding IRES and IRAP. The Bank appealed against this decision. Given that the tax authorities have not
challenged the decision of the Provincial Tax Commission, the part relating to VAT has become final.
The Milan Regional Tax Commission, with judgement no. 2911/28/14 filed on 29/05/2014, upheld to a large extent
the appeal relating to IRES and IRAP, confirming the first-level court ruling.
The tax authorities have appealed against this decision to the Supreme Court.
2008 – Registration tax
During 2010 three payment requests were received for registration tax on the purchase of branches disposed of
by UniCredit S.p.A. in 2008. The notices of liquidation dispute the application of different rates for calculating
registration tax.
These documents claim taxes for a total of 4,061 thousand euro. Appeals have duly been filed to obtain the cancellation
of these claims.
On 16 May 2011 the Provincial Tax Commission of Milan rejected the appeal concerning the disputed rates. The Bank
appealed against this decision and the appeal was upheld in June 2013, setting aside the judgement of first instance and
remitting the case to the Milan Provincial Tax Commission. The Milan Provincial Tax Commission upheld the appeal with
a judgement dated 25/9/2014 which was filed on 16/1/2015 and has become final.
Part B - Information on the consolidated balance sheet- Assets
231
On 20 April 2012 the other two appeals concerning disputed rates were upheld and the tax authorities appealed.
For both of the disputes, the Regional Tax Commission dismissed the tax authorities’ appeal with judgements dated 5
February 2014 and 17 April 2014.
The tax authorities have appealed against one of the judgements to the Supreme Court and BPM has made an
appearance, while the other sentence has become final.
2009-2010 – Substitutive tax on loans contracted abroad
All the disputes relating to the alleged failure to apply substitute tax under articles 15 et seq. of Presidential Decree
no. 601/1973 on various medium-long term loans contracted abroad, as discussed in previous financial statements,
have ended with the cancellation of the notifications which had been notified on the basis of an erroneous assumption
regarding applicability of the tax.
2010 – Registration tax payable on the sale of the custodian bank business
On 25 June 2012 an assessment was received contesting the amount of registration tax payable on the sale of the
custodian bank business to BNP Paribas on 29 June 2010. The latter, as a principal, was also notified of the same
assessment. The assessment assumes a different value of the business sold and claims that additional registration tax is
payable of 0.4 million euro plus interest.
BPM, together with the assignee BNP Paribas (principal), filed an appeal to challenge the tax claims. The appeal was
upheld by the Milan Provincial Tax Commission with judgement no. 1255/47/2015, filed on 11/2/2015.
The tax authorities have filed an appeal and BPM has made an appearance.
2010 – Former WeBank S.p.A.
In 2013 an inspection by the tax authorities relating to fiscal 2010 concluded with the notification of a report that
disputed taxation (IRES, IRAP and VAT) amounting to some 300,000 euro. On 25 October 2013 WeBank filed a
tax settlement proposal to close the dispute and reduce the tax claimed. The proposal procedure was finalised in
October 2015.
2010 – BPM ed ex BDL: IVA sulle commissioni di servicing
On December 3rd 2015 two tax assessment notices, related to fiscal year 2010, has been notified to the Bank. These
notices are related to VAT exemption of servicing fees in the context of the Covered Bond issues.
The first notice, notified to BPM, claims additional taxes for Euro 134272 and penalties for Euro 167840
The second one, notified to BPM in relation the merged subsidiary BDL, claims additional taxes for euro 7646 and
penalties for euro 9557
The Bank appealed against the notices on January 29 2016.
2012 – Former Banca di Legnano – inspection by tax authorities
On 2 February 2015 the tax authorities commenced an inspection of fiscal 2012 for the merged entity Banca di
Legnano.
This inspection is still in progress and has been extended to fiscal 2011 for the treatment of VAT on servicing fees
relating to the covered bond transaction.
232
Part B - Information on the consolidated balance sheet- Assets
Section 15 – Non-current assets and disposal groups held for sale and associated liabilities
– Line item 150 of assets and line item 90 of liabilities
The Group did not have any non-current assets and disposal groups held for sale and associated liabilities at the
balance sheet date.
Section 16 – Other assets – Line item 160
This line item consists of assets that are not classified elsewhere in the balance sheet. In particular, accrued income
includes items not capitalised as part of the related financial assets; leasehold improvements are those not attributable
to property and equipment. It also includes receivables from the provision of non-financial goods and services.
16.1 Other assets: analysis
31.12.2015
31.12.2014
4,653
4,927
27,922
22,103
740,968
761,327
364,618
355,419
1,544
1,669
Cheques drawn on third party current accounts
43,562
41,910
Advances paid to the tax authorities on behalf of others
88,381
88,853
108,470
110,890
3,256
3,975
32,877
37,950
2,199
2,299
96,062
118,362
773,543
788,357
Accrued income
Leasehold improvements
Other assets
Items being processed
Miscellaneous items and duty stamps
Other tax-related items
Non-interest bearing guarantee deposits on own account
Prepayments
Consolidation difference
Other
Total
Leasehold improvements include the expenses incurred on assets not relating to property and equipment; in this case
the depreciation charge is recognised in the income statement under other income and expenses.
Items being processed mainly consist of cash receipts, ATM withdrawals, bills and payments in process and yet
to be charged.
Other tax-related items include tax credits for which a refund has been requested, receivables arising from acting as a
tax withholding agent and other tax-related items not recognised in the balance sheet as tax assets.
Part B - Information on the consolidated balance sheet- Assets
233
Liabilities and shareholders' equity
Section 1 – Due to banks
Line item 10
This line item consists of amounts due to banks in all their technical forms (deposits, current accounts, loans). These
include operating payables connected with the provision of financial services.
1.1 Due to banks: analysis by product
31.12.2015
31.12.2014
1. Due to central banks
Type of transaction/amount
3,619,305
1,772,342
2. Due to banks
1,220,134
1,546,222
2.1 Current accounts and unrestricted deposits
343,052
557,897
2.2 Restricted deposits
473,126
574,286
2.3 Loans
396,574
402,357
2.3.1 Repurchase agreements
206,228
211,240
2.3.2 Other
190,346
191,117
2.4 Payments for commitments to repurchase own equity instruments
2.5 Other payables
Total
Fair value – level 1
–
–
7,382
11,682
4,839,439
3,318,564
–
–
Fair value – level 2
–
–
Fair value – level 3
4,848,133
3,314,872
Total fair value
4,848,133
3,314,872
Reference should be made to Part A “Accounting Policies” for an explanation of the criteria used to determine the
fair value. The balance on the item "Due to central banks" at the balance sheet date consists primarily of financing
transactions with the Bank of Italy within the Eurosystem secured by pledged securities: in particular, the total includes
3,353 million euro relating to the participation of the Group in the TLTRO (Targeted Long Term Refinancing Operations)
auctions. Item 2.3.1 "Repurchase agreements" includes financial liabilities deriving from repurchase agreements with
banks based on own securities and on securities received as part of reverse repurchase agreements.
1.2 Details of line item 10 "Due to banks": subordinated loans
At the balance sheet date, as at the end of the previous year, there were no subordinated loans due to banks.
1.3 Details of line item 10 "Due to banks ": structured debts
At the balance sheet date, as at the end of the previous year, there were no structured debts due to banks.
234
Part B - Information on the consolidated balance sheet - Liabilities and shareholders' equity
1.4 Due to banks with specific hedges
At the balance sheet date, as at the end of the previous year, there were no amounts due to banks with specific hedges.
1.5 Payables for finance leases
At the balance sheet date, as at the end of the previous year, there were no amounts due to banks for finance leases.
Part B - Information on the consolidated balance sheet - Liabilities and shareholders' equity
235
Section 2 – Due to customers
Line item 20
This line item consists of amounts due to customers in all their technical forms (deposits, current accounts, loans),
derivative transaction margin changes at clearing houses and operating payables other than those for the supply of
goods and services.
2.1 Due to customers: analysis by product
Type of transaction/amount
31.12.2015
31.12.2014
21,989,188
19,054,341
2. Restricted deposits
2,344,215
3,252,031
3. Loans
4,249,793
5,359,275
4,161,292
5,267,799
88,501
91,476
–
–
1. Current accounts and unrestricted deposits
3.1 Repurchase agreements
3.2 Other
4. Payments for commitments to repurchase own equity instruments
5. Other payables
39,656
37,295
28,622,852
27,702,942
Fair value – level 1
–
–
Fair value – level 2
–
–
Fair value – level 3
28,622,852
27,702,942
Fair value
28,622,852
27,702,942
Total
Reference should be made to Part A “Accounting Policies” for an explanation of the criteria used to determine fair value.
Line item 3.1 “Repurchase agreements” also includes financial liabilities deriving from repurchase agreements with
customers based on own securities and on securities received as part of reverse repurchase agreements.
Line item 5. “Other payables” also comprises operating payables related to financial services received.
2.2 Details of line item 20 "Due to customers": subordinated loans
At the balance sheet date, as at the end of the previous year, there were no subordinated loans due to customers.
2.3 Details of line item 20 " Due to customers ": structured debts
At the balance sheet date, as at the end of the previous year, there were no structured debts due to customers.
236
Part B - Information on the consolidated balance sheet - Liabilities and shareholders' equity
2.4 Due to customers with specific hedges
At the balance sheet date, as at the end of the previous year, there were no amounts due to customers with specific
hedges.
2.5 Payables for finance leases
At the balance sheet date, as at the end of the previous year, there were no amounts due to customers for finance leases.
Part B - Information on the consolidated balance sheet - Liabilities and shareholders' equity
237
Section 3 – Securities issued
Line item 30
This line item includes securities issued (including certificates of deposit and banker's drafts), valued at amortised cost.
The amount reported is stated net of repurchased securities and also includes securities which have matured at the
balance sheet date but have not yet been repaid.
The amount of these securities comprises their principal, accrued interest at the balance sheet date and, in the case of
hedged securities, the effective portion of the associated hedge.
3.1 Securities issued: analysis by product
31.12.2015
Book value
31.12.2014
Fair Value
Level 1
Book value
Level 2
Level 3
Fair Value
Level 1
Level 2
Level 3
– 8,650,512 4,816,758 4,087,265
–
–
–
–
– 8,650,512 4,816,758 4,087,265
–
A. Securities
1. Bonds
1.1 structured
1.2 other
2. Other securities
2.1 structured
2.2 other
Total
8,711,178 4,958,705 3,835,456
–
–
–
8,711,178 4,958,705 3,835,456
–
–
138,112
–
–
138,112
331,322
–
–
331,322
–
–
–
–
–
–
–
–
138,112
–
–
138,112
331,322
–
–
331,322
8,849,290
4,958,705
3,835,456
138,112
8,981,834
4,816,758
4,087,265
331,322
The fair value column shows the theoretical market value of financial instruments at the date of preparation of the
financial statements. Reference should be made to Part A “Accounting Policies” for the criteria used for determining fair
value and for the classification of financial instruments in the three levels of the fair value hierarchy.
238
Part B - Information on the consolidated balance sheet - Liabilities and shareholders' equity
With reference to line item 1.2 “Other bonds”, the following table shows the composition of the bonds outstanding at
31 December 2015 of the EMTN and Covered Bonds issue programmes. With reference to the latter, reference should
be made to Part E, section E.4 on covered bond transactions.
31.12.2015
Euro Medium Term Notes Issues
• Fixed rate
Of which subordinated
• Floating rate
Amount
Nominal
issued value net of
repurchases
1,975,000
475,000
Book
value
31.12.2014
Fair Value
Level 1
1,945,579 2,094,746 2,106,340
446,091
540,130
513,547
Level 2
Amount
Nominal
issued value net of
repurchases
– 1,975,000
–
475,000
Book
value
Fair Value
Level 1
1,936,183 2,098,261 2,143,406
447,991
554,780
539,134
Level 2
–
–
–
–
–
–
–
600,000
541,425
541,512
541,215
–
–
–
–
–
–
600,000
541,425
541,512
541,215
–
1,975,000
1,945,579
2,094,746
2,106,340
–
2,575,000
2,477,608
2,639,773
2,684,621
–
475,000
446,091
540,130
513,547
– 1,075,000
989,416 1,096,292 1,080,349
–
1. Covered bonds of Banca
Popolare di Milano S.c.a.r.l.
9.10.2009/17.10.2016 3.5%.
1,000,000
877,065
902,472
925,741
– 1,000,000
876,965
930,747
979,940
–
2. Covered bonds of Banca
Popolare di Milano S.c.a.r.l.
4.11.2010/16.11.2015 3.25%
–
–
–
–
– 1,100,000
900,330
911,836
939,324
–
3. Covered bonds of Banca
Popolare di Milano S.c.a.r.l.
18.7.2011/18.1.2014 Floating
rate – maturity extended to
18.1.19 (**)
500,000
130,000
119,686
– 119,686 1,000,000
–
–
–
–
4. Covered bonds of Banca
Popolare di Milano S.c.a.r.l.
28.11.2013/28.5.2016
Floating rate (*)
650,000
170,000
156,868
– 156,868
650,000
–
–
–
–
5. Covered bonds of Banca
Popolare di Milano S.c.a.r.l.
16.03.2015/16.3.2020
Floating rate callable from
16/09/2016 (*)
750,000
194,634
177,107
– 177,107
–
–
–
–
–
6. Covered bonds of Banca
Popolare di Milano S.c.a.r.l.
14.09.2015/14.09.2022
0.875%
1,000,000
995,000
996,908
–
–
–
–
–
–
900,000
250,000
222,537
– 222,537
–
–
–
–
Of which subordinated
Total EMTN bonds:
Of which subordinated
Covered Bond Issues
7. Covered bonds of Banca
Popolare di Milano S.c.a.r.l.
19.11.2015/22 Floating rate
8. C
overed bonds of Banca
Popolare di Milano S.c.a.r.l.
2.12.2015/2.12.2025 1.5%
Total covered bonds
984,085
–
–
750,000
750,000
734,951
725,280
–
–
–
–
–
–
5,550,000
3,366,699
3,310,529
2,635,106
676,198
3,750,000
1,775,295
1,842,583
1,919,264
–
(*) The issue was fully repurchased by the Bank and the relative securities were used for refinancing operations with the European Central Bank. The
amounts stated in the residue, book value and fair value columns relate to repo transactions with primary banking and financial counterparties having
these securities as the underlying
(**)A nominal amount of 500 million euro was redeemed in 2015
Part B - Information on the consolidated balance sheet - Liabilities and shareholders' equity
239
EMTN bonds
The EMTN bonds form part of a programme approved on 2 December 2003 for 2 billion euro, gradually increased
over time to reach the amount of 10 billion euro with a resolution of the Board of Directors of 22 April 2008. At the
balance sheet date there were three bond loans outstanding for a total amount of 1.975 billion euro (2.575 billion
euro at 31 December 2014).
The nominal value of the EMTN securities is shown net of the repurchased component for an amount of 29.421 million
euro (97.392 million euro at 31 December 2014).
The Banca Popolare di Milano subordinated (Lower Tier 2) floating rate loan – 29.6.05/15 was repaid during 2015
for an original nominal value on issue of 600 million euros.
Covered bonds
The nominal value of the Guaranteed Bank Bonds shown at points 1 of the above table relating to the “BPM
9.10.2009/17.10.2016 3.5%” bond is stated net of the repurchased component of 122.935 million, of which
cancelled 121.935 million.
Composition of line item “2.2 Other securities – other”
This line item consists of certificates of deposit subscribed by customers and bankers’ drafts. More specifically:
Type of security/
amount
31.12.2015
Carrying
amount
31.12.2014
Fair Value
Level 1
Level 2
Level 3
Carrying
amount
Fair Value
Level 1
Level 2
Level 3
Certificates of deposit subscribed
by customers
63,352
–
–
63,352
249,068
–
–
249,068
Bankers’ drafts
74,760
–
–
74,760
82,254
–
–
82,254
138,112
–
–
138,112
331,322
–
–
331,322
Total
Since these instruments are mainly short-term or on demand, their book value is a reasonable approximation to their
fair value. These financial instruments have been conventionally classified in level 3.
240
Part B - Information on the consolidated balance sheet - Liabilities and shareholders' equity
3.2 Details of line item 30 "Securities issued": subordinated securities
Unlisted bonds (type B.1.2) comprise the following subordinated securities. The classification is that required by the
prudential regulations in force at the date of their issue:
Bond
Innovative capital instruments (Tier 1):
31.12.2015 31.12.2014
Original
nominal
amount
issued
Issue price Interest rate
Issue/maturity
date
Notes
207,023
279,801
–
71,646
160,000
100
Floating
02.07.2001
Perpetual
1
207,023
208,155
300,000
98.955
Floating
25.6.2008
Perpetual
2
Hybrid capital instruments (Upper Tier
2):
500
651
Banca Popolare di Milano subordinated
bond (Upper Tier 2) Floating rate – 18
June 2008/2018
500
651
17,850
100
Floating
18.6.2008/18
3
1,255,519
1,815,350
Banca Popolare di Milano subordinated
bond (Lower Tier 2) Floating rate –
29.6.05-15 (issued as part of the
EMNT Programme)
–
541,512
600,000
99.716
Floating
29.6.2005/15
4
Banca Popolare di Milano subordinated
bond (Lower Tier 2) Fixed rate 4.5% 18
April 2008/2018
260,646
264,258
252,750
100
4.50%
18.4.2008/18
5
Banca Popolare di Milano subordinated
bond (Lower Tier 2) Floating rate 20
October 2008/2018
454,743
454,800
502,050
100
Floating 20.10.2008/18
6
Banca Popolare di Milano subordinated
bond (Lower Tier 2) Rate 7.125% – 1
March 2011/2021 (issued as part of
the EMNT Programme)
540,130
554,780
475,000
99.603
7.125% 01.03.2011/21
7
1,463,042
2,095,802
Preferences shares BPM Capital Trust
I – 8.393%
Perpetual Subordinated Fixed/Floating
rate Notes – 9%
Subordinated liabilities (Lower Tier 2):
Total
Part B - Information on the consolidated balance sheet - Liabilities and shareholders' equity
241
1 Preference shares BPM Capital Trust I – 8.393%
Issue price:
The subordinated bonds were issued at par, at a price of 100% of their nominal value
Interest rate:
Fixed rate 8.393% until 2 July 2011; floating rate (Euribor + 4.70%) starting from 2 July
2011
Quotation:
Luxembourg Stock Exchange (*)
Redemption:
Following approval by the ECB was fully repaid on 2 April 2015.
2 Perpetual Subordinated Fixed/Floating Rate Notes – 9%
Issue price:
The bonds were issued below par, at a price of 98.955% of nominal value
Interest rate:
Fixed rate of 9% until 25 June 2018; floating rate (Euribor 3 months + a spread of
6.18%) from 25 June 2018
Quotation:
Luxembourg Stock Exchange (*)
Early redemption clause:
An early redemption clause is envisaged on the initiative of the issuer from 25 June 2018
subject to authorisation by the ECB.
Early redemption:
The notes were issued with the clauses required at the time by the ECB for inclusion in Tier
1 capital; this means that if the Bank should go into liquidation the holders of the bonds,
preferred over ordinary shares, are subordinated to all other creditors.
Other information:
There is also provision for:
optional suspension of interest payments if the Bank does not have distributable
earnings and/or has not paid dividends for the last year ended prior to the payment
date of the interest;
obligatory suspension of interest payments in the case of a “capital deficiency event”
(which takes place when the total capital ratio falls below the minimum level required
by the Supervisory Authority);
a “loss absorption” clause, whereby reimbursement of the notes is suspended if a
capital deficiency event takes place
Any undistributed interest may not be accumulated
The closing date of the public purchase offer was 16 December 2009 (acceptance period
7 December – 16 December 2009), and this obtained 34.92% acceptance for a nominal
value of the securities accepting the offer of 104,750,000 euro
The repurchase price (ex-coupon) was 98%. At the date of preparation of the financial
statements the nominal value of the securities issued had fallen to 195,250,000 euro.
3 Banca Popolare di Milano Subordinated Bond (Upper Tier 2) – Floating Rate – 18 June 2008/2018
242
Issue price:
The bonds were issued below par, at a price of 100% of nominal value
Interest rate:
Floating (EONIA + a spread of 0.75%)
Quotation:
Not listed
Early redemption:
Early redemption of the subordinated bond is not envisaged
Subordination clause:
The subordinated bonds represent “hybrid capital instruments” as per the supervisory
regulations in force at the issue date. The bonds are issued with an Upper Tier II
subordination clause, which means that in the event of the Bank being liquidated
bondholders will only be reimbursed after all the other creditors of the Bank who are
not equally subordinated except for those with an equal or higher level of subordination
compared with the subordinated bonds
Repurchases:
The Group has repurchased a total nominal amount of 17,350 thousand euro.
Part B - Information on the consolidated balance sheet - Liabilities and shareholders' equity
4 Banca Popolare di Milano Subordinated Bond (Lower Tier 2) – Floating Rate – 29 June 2005/2015
Issue price:
The bonds were issued below par, at a price of 99.716% of nominal value
Interest rate:
Floating (Euribor 3 months + a spread of 0.45% until June 2010, Euribor 3 months + a
spread of 1.05% from that date)
Quotation:
Luxembourg Stock Exchange (*)
Redemption:
The bond has matured and was fully repaid on 29 June 2015.
5 Banca Popolare di Milano Subordinated Bond (Lower Tier 2) – Fixed Rate 4.50% 18 April 2008/2018
Issue price:
The bonds were issued below par, at a price of 100% of nominal value.
Interest rate:
Fixed annual interest rate of 4.50% gross
Quotation:
Not listed.
Early redemption:
Early redemption of the subordinated bond is not envisaged
Subordination clause:
The subordinated bonds represent “Tier 2 subordinated liabilities” of BPM as per the
supervisory regulations in force at the issue date. This means that in the event of the Bank
being liquidated bondholders will only be reimbursed after all the other creditors of the
Bank who are not equally subordinated except for those with an equal or higher level of
subordination compared with the subordinated bonds
Repurchases:
The Group has repurchased a total nominal amount of 5,762 thousand euro.
6 Banca Popolare di Milano Subordinated Bond (Lower Tier 2) – Floating Rate 20 October 2008/2018
Issue price:
The bonds were issued below par, at a price of 100% of nominal value.
Interest rate:
Floating (Euribor 3 months 365 + a spread of 0.60% until 20 October 2013, Euribor 3
months + a spread of 1.50% after that date).
Quotation:
Not listed.
Early redemption:
Subject to authorisation by the ECB, from 20 June 2013, at the coupon date, the issuer
may early redeem the whole subordinated bond at a price of 100% of its nominal value.
Subordination clause:
The subordinated bonds represent “Tier 2 subordinated liabilities” of BPM as per the
supervisory regulations in force at the issue date. This means that in the event of the Bank
being liquidated bondholders will only be reimbursed after all the other creditors of the
Bank who are not equally subordinated except for those with an equal or higher level of
subordination compared with the subordinated bonds
Repurchases:
The Group has repurchased a total nominal amount of 48,750 thousand euro.
7 Banca Popolare di Milano Subordinated Bond (Lower Tier 2) – Fixed Rate 7.125% 1 March 2011/2021
Issue price:
The bonds were issued below par, at a price of 99.603% of nominal value.
Interest rate:
Fixed annual interest rate of 7.125% gross
Quotation:
Luxembourg Stock Exchange (*)
Early redemption:
Not envisaged
Subordination clause:
The subordinated bonds represent “Tier 2 subordinated liabilities” of BPM as per the
supervisory regulations in force at the issue date. This means that in the event of the Bank
being liquidated bondholders will only be reimbursed after all the other creditors of the
Bank who are not equally subordinated except for those with an equal or higher level of
subordination compared with the subordinated bonds
Repurchases:
The Group has repurchased a total nominal amount of 28,909 thousand euro.
(*) Subordinated securities listed on the Luxembourg Stock Exchange have been classified as unlisted for IAS/IFRS purposes since their trading volumes
are not such as to satisfy the definition of an active market, as explained in section A.3 of the Accounting Policies on "Fair value disclosures".
Part B - Information on the consolidated balance sheet - Liabilities and shareholders' equity
243
3.3 Details of line item 30 "Securities issued": securities with specific hedges
31.12.2015
31.12.2014
2,634,331
2,397,363
2,634,331
2,397,363
b) exchange rate risk
–
–
c) several risks
–
–
–
–
a) interest rate risk
–
–
b) exchange rate risk
–
–
c) other
–
–
1. Securities with specific fair value hedges:
a) interest rate risk
2. Securities with specific cash flow hedges:
The above table sets out the bonds classified as securities issued that at year end were hedged by specific fair value
or cash flow hedges.
The securities hedged by specific fair value hedges are as follows:
Loans with specific hedges:
31.12.2015
31.12.2014
Banca Popolare di Milano S.c.a.r.l. covered bonds
2,634,331
1,842,583
–
554,780
2,634,331
2,397,363
Banca Popolare di Milano subordinated bonds (Lower Tier 2) Rate 7.125% – 1 March
2011/2021 (issued as part of the EMTN Programme)
Total
The amount at 31 December 2014 referring to the Banca Popolare di Milano (Lower Tier 2) Rate 7.125% subordinated
bonds was no longer hedged at 31 December 2015.
As stated in Section 5.1 of the income statement the net result from hedging activities and the relative securities issued
that are hedged generated a loss of 3.6 million euro in 2015 (a gain of 5.4 million euro in 2014), recognised under
line 90 “fair value adjustments in hedge accounting”.
244
Part B - Information on the consolidated balance sheet - Liabilities and shareholders' equity
Section 4 – Financial liabilities held for trading
Line item 40
This line item consists of debt securities and equities which make up 'short positions' for trading purposes and derivative
financial instruments other than those formally designated as hedging instruments.
4.1 Financial liabilities held for trading: analysis by product
Type of transaction/
amount
31.12.2015
NV
31.12.2014
FV
L1
L2
FV*
L3
NV
Total
FV
L1
L2
FV*
L3
Total
A. Cash liabilities
1. Due to banks
2. Due to customers
6,945
15,530
–
–
15,530
–
3,740
4,489
175
–
4,664
–
21,952
23,564
–
1
23,565
– 145,620
29,176
100
–
29,276
–
–
–
–
–
–
–
–
–
–
–
–
3. Debt securities
3.1 Bonds
3.1.1 Structured
3.1.2 Other bonds
3.2 Other securities
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
x
–
–
–
–
–
x
–
–
–
–
–
x
–
–
–
–
–
x
–
–
–
–
–
–
–
–
–
–
–
–
3.2.1 Structured
–
–
–
–
–
x
–
–
–
–
–
x
3.2.2 Other
–
–
–
–
–
x
–
–
–
–
–
x
28,897
39,094
–
1
39,095
–
149,360
33,665
275
–
33,940
–
x
81,848 1,049,494
13,120
1,144,462
x
x 122,453 1,243,382
63,670
1,429,505
x
x
81,848 1,048,143
12,890
1,142,881
x
x 122,453 1,239,458
62,802
1,424,713
x
Total A
B. Derivatives
1. Financial derivatives
1.1 Trading
1.2 Linked to the fair
value option
x
–
1,351
230
1,581
x
x
–
3,924
868
4,792
x
1.3 Other
x
–
–
–
–
x
x
–
–
–
–
x
2. Credit derivatives
x
–
–
–
–
x
x
–
–
–
–
x
2.1 Trading
x
–
–
–
–
x
x
–
–
–
–
x
2.2 Linked to the fair
value option
x
–
–
–
–
x
x
–
–
–
–
x
2.3 Other
x
–
–
–
–
x
x
–
–
–
–
x
Total B
x
81,848
1,049,494
13,120
1,144,462
x
x
122,453
1,243,382
63,670
1,429,505
x
Total A+B
x
120,942
1,049,494
13,121
1,183,557
x
x
156,118
1,243,657
63,670
1,463,445
x
Key:
NV = Nominal or notional value
FV = Fair value
FV* = Fair value calculated excluding the differences in value due to changes in the issuer's credit rating since the issue date
L1 = Level 1
L2 = Level 2
L3 = Level 3
Reference should be made to Part A “Accounting Policies” for the criteria used for determining fair value and the
classification of financial instruments in the three levels of the fair value hierarchy.
Line item A. Cash liabilities includes short positions of the subsidiary Banca Akros amounting to 39.095 million euro,
of which 30.876 million euro relating to debt securities and 8.218 million euro relating to equity securities.
Part B - Information on the consolidated balance sheet - Liabilities and shareholders' equity
245
Line item B.1.2 – Derivatives linked to the fair value option contains the fair value of derivatives related to the instruments
for which the fair value option has been adopted. These derivatives hedge the risks involved mainly in the issue of bonds
for which the Group has elected for the fair value option in accordance with IAS 39, paragraph 9. Such risks arise from
possible fluctuations in interest rates and the presence of options that are embedded in the structured securities issued.
4.2 Details of line item 40 “Financial liabilities held for trading”: subordinated liabilities
At the balance sheet date there were subordinated liabilities due to banks and insurance companies of 520 thousand
euro (1,168 thousand euro at 31 December 2014).
4.3 Details of line item 40 “Financial liabilities held for trading”: structured debts
At the balance sheet date, as at the end of the previous year, there were no structured debts recognisable as liabilities
held for trading.
246
Part B - Information on the consolidated balance sheet - Liabilities and shareholders' equity
Section 5 – Financial liabilities designated at fair value through profit and loss
line item 50
This line item consists of securities issued designated at fair value with changes in fair value through profit and loss
under the option allowed by IAS 39 ("fair value option").
5.1 Financial liabilities designated fair value through profit and loss: analysis by product
Type of transaction/
amount
31.12.2015
NV
31.12.2014
FV
FV*
NV
FV
FV*
L1
L2
L3
Total
L1
L2
L3
Total
–
–
–
–
–
–
–
–
–
–
–
–
1.1 Structured
–
–
–
–
–
x
–
–
–
–
–
x
1.2 Other
–
–
–
–
–
x
–
–
–
–
–
x
2. Due to customers
–
–
–
–
–
–
–
–
–
–
–
–
2.1 Structured
–
–
–
–
–
x
–
–
–
–
–
x
2.2 Other
–
–
–
–
–
x
–
–
–
–
–
x
3. Debt securities
128,804
–
129,627
–
129,627
129,873
148,914
–
152,116
–
152,116
153,656
3.1 Structured
128,804
1. Due to banks
3.2 Other
Total
– 129,627
– 129,627
x 148,914
– 152,116
–
152,116
x
–
–
–
–
–
x
–
–
–
–
–
x
128,804
–
129,627
–
129,627
129,873
148,914
–
152,116
–
152,116
153,656
Key:
NV = Nominal or notional value
FV = Fair value
FV* = Fair value calculated excluding the differences in value due to changes in the issuer's credit rating since the issue date
L1 = Level 1
L2 = Level 2
L3 = Level 3
Reference should be made to Part A “Accounting Policies” for the criteria used for determining fair value and for the
classification of financial instruments in the three levels of the fair value hierarchy.
Financial liabilities designated at fair value through profit and loss include financial liabilities represented by structured,
fixed-rate bonds, which are classified at fair value and are hedged by derivatives. This hedging concerns both the
risk of changes in interest rates and the risk arising from the presence of embedded options. The fair value option is
used to eliminate or significantly reduce accounting mismatches, as an alternative to hedge accounting. Otherwise the
derivatives would still be carried at fair value while the bonds would be recognized at amortised cost.
Derivatives used as part of the "fair value option" are classified in the trading book.
As regards the use of the credit spread on own issues aimed at retail customers, these issues are expected – from both a
contractual and a commercial point of view – to be reimbursed at their natural maturity; it follows that when measuring
these instruments at fair value, own creditworthiness is valued in line with this hypothesis, also taking into account the
recommendations contained in IFRS 13.
In the income statement, interest income and expense also include positive or negative differentials or margins accrued or
paid up to the balance sheet date on the related financial derivatives, whereas valuation gains and losses are recognised
under line item 110. "Profits (losses) on financial assets/liabilities designated at fair value", with a presentation that is
consistent with that adopted for the funding instruments for which the fair value option was adopted.
Part B - Information on the consolidated balance sheet - Liabilities and shareholders' equity
247
Purpose of using the fair value option and the financial liabilities concerned
Natural
hedges
Structured
financial
instruments
Portfolios
of financial
liabilities
managed on
the basis of
fair value
31.12.2015
Natural
hedges
Structured
financial
instruments
Portfolios
of financial
liabilities
managed on
the basis of
fair value
31.12.2014
–
–
–
–
–
–
–
–
1.1 Structured
–
–
–
–
–
–
–
–
1.2 Other
–
–
–
–
–
–
–
–
2. Due to customers
–
–
–
–
–
–
2.1 Structured
–
–
–
–
–
–
–
–
2.2 Other
–
–
–
–
–
–
–
–
3. Debt securities
–
129,627
–
129,627
–
152,116
–
152,116
3.1 Structured
–
129,627
–
129,627
–
152,116
–
152,116
Type of transaction/
amount
1. Due to banks
3.2 Other
Total
–
–
–
–
–
–
–
–
–
129,627
–
129,627
–
152,116
–
152,116
The table provides details of table 5.1 above and shows the book value (fair value) of the liabilities for which the fair
value option was adopted, distinguishing the method of use.
5.2 Details of line item 50 “Financial liabilities designated at fair value through profit and loss”:
subordinated liabilities
At the balance sheet date, as at the end of the previous year, there were no subordinated liabilities measured at fair
value.
248
Part B - Information on the consolidated balance sheet - Liabilities and shareholders' equity
Section 6 – Hedging derivatives
Line item 60
This line item consists of financial derivatives used for hedging purposes, which have a negative fair value at the
balance sheet date.
6.1 Hedging derivatives: analysis by type of hedge and level
31.12.2015
31.12.2014
Fair Value
NV
Fair Value
NV
L1
L2
L3
Total
L1
L2
L3
Total
–
48,678
–
48,678
1,916,539
–
58,751
–
58,751
1,578,668
1) Fair value
–
41,013
–
41,013
1,558,884
–
51,885
–
51,885
1,478,668
2) Cash flows
–
7,665
–
7,665
357,655
–
6,866
–
6,866
100,000
3) Foreign investments
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1) Fair value
–
–
–
–
–
–
–
–
–
–
2) Cash flows
–
–
–
–
–
–
–
–
–
–
–
48,678
–
48,678
1,916,539
–
58,751
–
58,751
1,578,668
A. Financial derivatives
B. Credit derivatives
Total
Key:
NV = Notional value L1 = Level 1 L2 = Level 2 L3 = Level 3
Reference should be made to Part A “Accounting Policies” for the criteria used for determining fair value and for the
classification of financial instruments in the three levels of the fair value hierarchy.
The table shows the negative book value (fair value) of derivative hedging contracts for hedging carried out through fair
value hedges (hedge accounting). This instrument is used to account for the hedging of financial instruments recognised
in balance sheet items that do not envisage measurement at fair value through profit and loss.
The hedging of financial liabilities represented by securities is normally dealt with by using the fair value option. The
fair value option is adopted for structured debt securities and fixed-rate securities issued by Group banks, where the
risk of changes in fair value is hedged with derivatives; derivatives used as part of the "fair value option" are classified
in the trading book.
Reference should be made to the information provided in Part E – Information on risks and related hedging policies –
Section 1.2 – Market Risk for the objectives and strategies underlying hedges.
Part B - Information on the consolidated balance sheet - Liabilities and shareholders' equity
249
6.2 Hedging derivatives: analysis by hedged portfolio and type of hedge
Transaction/type of hedge
Fair Value
Cash flows
Specific
Interest Exchange
rate risk rate risk
1. F inancial assets available
for sale
Credit
risk
Price
risk
Macro
Specific
Macro
Foreign
investments
Several
risks
20,392
–
–
4,029
–
x
7,665
x
x
2. Loans and receivables
–
–
–
x
–
x
–
x
x
3. Investments held to maturity
x
–
–
x
–
x
–
x
x
4. Portfolio
x
x
x
x
x
6,925
x
–
x
5. Other transactions
Total assets
1. Financial liabilities
2. Portfolio
Total liabilities
–
–
–
–
–
x
–
x
–
20,392
–
–
4,029
–
6,925
7,665
–
–
9,667
–
–
x
–
x
–
x
x
x
x
x
x
x
–
x
–
x
9,667
–
–
–
–
–
–
–
–
1. Forecast transactions
x
x
x
x
x
x
–
x
x
2. P
ortfolio of financial assets
and liabilities
x
x
x
x
x
–
x
–
–
The table shows the negative fair values of the hedging derivatives, analysed by asset or liability hedged and the type
of hedge.
In particular, as regards assets, specific and generic fair value hedging is used to hedge against the risk of changes in
interest rates on mortgages and bonds classified as available for sale in order to protect them from possible adverse
changes in interest rates.
Specific fair value hedge
The amount indicated at item “1. Financial assets available for sale” relates to the negative fair value of financial
derivatives:
to hedge interest rate risk for a total notional amount of 630 million euro (755 million euro at 31 December 2014), taken
out to hedge a debt security issued by an issuing bank for a nominal value of 50 million euro (50 million euro at 31
December 2014) and fixed-rate government securities for 580 million euro (705 million euro at 31 December 2014);
to hedge the price risk on forward sales of government securities for 330.957 million euro (314.8 million euro at
31 December 2014);
to hedge the interest rate risk on fixed-rate covered bonds issued by the Parent Company for a total notional amount
of 500 million euro; the fixed-rate coupons of the covered bonds are converted to floating rate Euribor plus a
spread.
Macro fair value hedges
The amount indicated at item 4. “Portfolio” relates to the negative fair value of derivatives:
taken out to hedge the interest rate risk on a portfolio of fixed-rate government securities included in “Financial
assets available for sale” for a notional amount of nil (0.25 billion euro at 31 December 2014);
taken out to hedge the interest rate risk on a portfolio of mortgage loans granted by the merged company WeBank
S.p.A. for a notional amount of 97.927 million euro (159 million euro at 31 December 2014).
250
Part B - Information on the consolidated balance sheet - Liabilities and shareholders' equity
Specific cash flow hedges
The amount indicated at item “1. Financial assets available for sale” relates to the negative fair value of financial
derivatives for:
a total notional amount of 100 million euro (100 million euro at 31 December 2014) taken out to hedge cash flows of
a debt security issued by a bank for a nominal value of 100 million euro (100 million euro at 31 December 2014);
to hedge the price risk on forward purchases of government securities for 257,655 million euro.
The prospective and retrospective tests performed during 2015 in accordance with the rules laid down in IAS 39 have
confirmed the effectiveness of the hedges.
Reference should be made to the detailed tables presented in this part (Part B) of the explanatory notes, in the sections
relating to balance sheet items in which there are items being hedged, for further information on the financial assets
and liabilities covered.
Part B - Information on the consolidated balance sheet - Liabilities and shareholders' equity
251
Section 7 – Fair value change of financial liabilities in hedged portfolios
Line item 70
This item consists of the negative balance of fair value changes in the liabilities for which macrohedges have been used
against interest rate risk.
7.1 Fair value change of hedged financial liabilities
Fair value change of financial liabilities/components of the group
1. Positive adjustment of financial liabilities
2. Negative adjustment of financial liabilities
Total
31.12.2015
31.12.2014
18,086
16,084
–
–
18,086
16,084
This line item relates to the fair value adjustment made to "core deposits":
for 11,046 thousand euro relating to liabilities for which a macro fair value hedge was arranged in 2010 using
derivatives. During 2011, the hedges were closed and the amounts reported at 31 December 2015 and 2014
represent the residual value of the effective portion of the hedge on the date of revocation, which will be released
to income on a temporal basis up to the original maturity of the hedging transactions (the latest envisaged maturity
is March 2020);
for 7,040 thousand euro relating to new macrohedges taken out at the end of September 2015 for a nominal of
410 million euro.
Section 8 – Tax liabilities
Line item 80
The information relating to this section is provided in Section 14 of the balance sheet “Part B – Information on the
consolidated balance sheet” of these notes.
Section 9 – Liabilities associated with non-current assets and disposal groups held for sale
Line item 90
There were no non-current assets and disposal groups held for sale and the associated liabilities at the balance
sheet date.
252
Part B - Information on the consolidated balance sheet - Liabilities and shareholders' equity
Section 10 – Other liabilities
Line item 100
This line item consists of liabilities that are not classified elsewhere in the balance sheet.
10.1 Other liabilities: analysis
31.12.2015
31.12.2014
Liabilities for the deterioration in:
52,533
66,808
Guarantees given
52,533
66,808
Accrued liabilities
365
225
1,244,831
1,269,759
Other liabilities
Guarantee deposits received from third parties
15,190
6,859
315,419
342,336
8,539
6,071
Adjustments for illiquid items concerning the portfolio
170,671
154,890
Amounts available for recognition to customers
131,246
136,297
Items being processed
365,359
368,644
Due to suppliers
130,785
141,464
Due to social security authorities
37,608
37,672
Personnel expenses
40,303
45,476
1,806
1,870
27,905
28,180
1,297,729
1,336,792
Amounts payable to tax authorities on behalf of third parties
Amounts payable to tax authorities on own account
Deferred income
Other
Total
Part B - Information on the consolidated balance sheet - Liabilities and shareholders' equity
253
Section 11 – Employee termination indemnities
Line item 110
11.1 Employee termination indemnities: annual changes
A. Opening balance
B. Increases
B.1 Provision for the year
B.2 Other increases
C. Decreases
C.1 Indemnities paid
C.2 Other decreases
D. Closing balance
31.12.2015
31.12.2014
137,730
133,425
2,263
16,181
2,263
3,797
–
12,384
14,542
11,876
8,164
11,662
6,378
214
125,451
137,730
Line items B.2 “Other increases” and C.2 “Other decreases” include the actuarial gains and losses recognised as
a result of the expert appraisal carried out by an independent actuary with counter-entry to the valuation reserve
“actuarial gains (losses) on defined benefit pension plans”.
11.2 Other information
As described in Part A “Accounting Policies,” following the reform of supplementary pensions (Decree no. 252 of 5
December 2005, introduced by the 2007 Budget Law), termination indemnities only refer to the portion accrued up to
31 December 2006, while the amounts accruing from 1 January 2007 have to be transferred to supplementary pension
funds, depending on the explicit or tacit choice of the employee, or maintained in the company and then subsequently
transferred to a treasury fund set up with INPS.
The provision for the year does not therefore include the amounts that are paid to supplementary pension schemes
or to the treasury fund at INPS as a result of that reform of the pension system. In this case, the amounts of employee
termination indemnities accruing from 1 January 2007 are considered a “defined-contribution plan” and are accounted
for under “personnel expenses – termination indemnities” on the basis of the contributions due without applying
actuarial methods, with the counter-entry going to “Other liabilities” in the balance sheet or as an outflow of cash.
The termination indemnities that accrued up to 1 January 2007 (or to the date when the decision was made to assign them
to a supplementary pension fund) continues to be shown as a “post-employment benefit” classified as a “defined benefit
plan”; subsequently the liability linked to the “accrued termination indemnities” is submitted to an actuarial assessment,
which compared with the methods applied up until 31 December 2006 no longer takes account of the average annual
increase in wages and salaries as the employee benefits are to be considered almost entirely accrued (with the sole
exception of the revaluation). The full amount of actuarial gains and losses, defined as the difference between the book
value of the liability and the present value of the obligation at period end, is recognised directly in the valuation reserve
“actuarial gains and losses on defined benefit pension plans”.
254
Part B - Information on the consolidated balance sheet - Liabilities and shareholders' equity
For companies with fewer than 50 employees at the date the reform came into effect the previous law remains in
force, which considers employees' termination indemnities as a defined benefit plan, the accrued amount of which
continues to be valued through the actuarial method known as the “projected unit credit method” explained in Part
A “Accounting Policies”.
This was the case for Banca Popolare di Mantova within the Bipiemme Group.
The actuarial valuation of termination indemnities performed by an independent actuary is carried out under the
“accrued benefit” method by using the projected unit credit criterion as required by IAS 19, and is based on the
following main demographic, economic and financial assumptions:
Demographic assumptions: IPS55 tables were used to estimate death rates and INPS-2000 tables were used to
forecast permanent disability; staff turnover was estimated at 3.5%, in line with the previous year.
Financial assumptions: the valuation was based on a discount rate of 2.03%, corresponding to market long-term
returns (1.58% at 31 December 2014).
Economic assumptions: annual inflation was estimated at 1.5% , in line with 31 December 2014.
The following table provides details of the sensitivity to changes in the discount rate of the liability for employee
termination indemnities as required by IAS 19, paragraph 145 (millions of euro):
Analisi di sensibilità
31.12.2015
31.12.2014
Termination indemnity with discount rate of -0.5%
5.8
6.3
Termination indemnity with discount rate of +0.5%
(5.5)
(5.9)
Part B - Information on the consolidated balance sheet - Liabilities and shareholders' equity
255
Section 12 – Allowances for risks and charges
Line item 120
12.1 Allowances for risks and charges: analysis
Line item/element
1. Post-employment benefit obligations
2. Other allowances for risks and charges
2.1 Legal disputes
2.2 Personnel expenses
2.3 Other
Total
31.12.2015
31.12.2014
91,913
92,568
217,191
289,677
43,550
72,141
137,490
184,800
36,151
32,736
309,104
382,245
31.12.2015
31.12.2014
Allowances for risks and charges: analysis
Line item/element
1. Company post-employment benefit obligations:
– Pension funds:
– former Banca Popolare di Bologna e Ferrara
– former Banca Agricola Milanese
91,913
92,568
12,924
14,203
12,902
14,179
22
24
– Supplementary pension funds
77,618
77,110
– Banca Popolare di Milano
56,165
52,588
– former Cassa di Risparmio di Alessandria
21,453
24,522
1,371
1,255
217,191
289,677
43,550
72,141
43,550
72,141
2.2 Personnel expenses:
137,489
184,800
– solidarity fund
– Other post-employment benefit obligations
2. Other allowances for risks and charges:
2.1 Legal disputes:
– provisions for estimated losses from legal disputes
126,172
172,549
– executives’ indemnities
2,592
3,503
– estimated losses from legal disputes with personnel
1,654
3,022
– other expenses
7,071
5,726
2.3 Other
36,152
32,736
12,010
11,405
– charity and social fund
168
501
– miscellaneous charges
23,974
20,830
309,104
382,245
– clawback actions
Total
256
Part B - Information on the consolidated balance sheet - Liabilities and shareholders' equity
12.2 Allowances for risks and charges: annual changes
Line item/element
Pension funds
Other allowances
Total
A. Opening balance
92,568
289,677
382,245
B. Increases
12,746
34,993
47,739
B.1 Provision for the year
7,777
34,097
41,874
B.2 Changes due to the passage of time
1,485
896
2,381
–
–
–
3,484
–
3,484
B.3 Changes due to changes in the discount rate
B.4 Other increases
C. Decreases
C.1 Utilisations of the year
C.2 Changes due to changes in the discount rate
C.3 Other decreases
D. Closing balance
13,401
107,479
120,880
11,999
69,763
81,762
–
–
–
1,402
37,716
39,118
91,913
217,191
309,104
12.3 Defined benefit pension plans
1. Illustration of the features of the plans and the various risks
Company post-employment benefit obligations consist of the following pension funds, whose main characteristics are
summarised below:
a) Pension fund of former Banca Popolare di Bologna e Ferrara
This is a defined benefit plan associated with the commitment by the former Banca Popolare di Bologna e Ferrara,
now merged into BPM, to pay all its employees in retirement at 31 December 1995 a defined pension in line with their
grade whilst in service. The sum provided in the financial statements represents the amount of the mathematical reserve
calculated on an actuarial basis, being the amount considered necessary to recognise to the pensioners registered with
the “Supplementary Pension Fund” the amounts envisaged in the Regulations.
b) Pension fund of former Banca Agricola Milanese
This represents the commitment by the former Banca Agricola Milanese, now merged into BPM, to pay a supplementary
pension to its employees in retirement at 31 December 1972; the liability represents an actuarial valuation of the
mathematical reserve at the balance sheet date, being the amount considered necessary to recognise a life-long annuity
to the pensioners registered with the Pension Fund.
c) Supplementary pension fund of Banca Popolare di Milano
Under the rules of the supplementary pension plan, the commitment consists of:
the payment of a supplementary pension to former retired employees whose state pension is less than a pre-defined
percentage of the salary for the corresponding grade in service (known as employees with supplementary pensions);
or, if the state pension paid by INPS is higher than this percentage, the payment to all pensioners of 50% of a
monthly amount frozen at 31 December 1991.
Employees entering service after 28 April 1993 and those hired following merger transactions do not qualify for
these benefits.
The amount provided in the financial statements represents the mathematical reserve calculated on an actuarial
basis, being the amount considered necessary to recognise the benefits envisaged by the Regulations to the current
beneficiaries.
d) Supplementary pension fund of former Cassa di Risparmio di Alessandria
This is a defined benefit plan without separate legal form that supplements (or replaces only in specified circumstances)
the state pension. The beneficiaries of this plan consist only of former retired employees or their survivors. The amount
provided in the financial statements represents the mathematical reserve calculated on an actuarial basis.
Part B - Information on the consolidated balance sheet - Liabilities and shareholders' equity
257
2. Changes in the year in net defined benefit liabilities (assets) and reimbursement rights
Changes in the provisions for post-employment benefits are shown in table 12.2.
The items B.4 “Other increases” and C.3 “Other decreases” are mainly attributable to actuarial gains and losses.
The post-employment benefits are fully funded and there are no obligations in currencies other than the euro.
3. Information on the fair value of plan assets
None of the defined benefit plans classified as post-employment benefits has plan assets.
4. Main actuarial assumptions
With reference to defined benefit supplementary pensions, the determination of the actual values required by the
application of IAS 19 “Employee Benefits” is performed by independent actuaries. The following are the actuarial
assumptions (demographic, financial and economic) used for each fund.
a) Pension fund of former Banca Popolare di Bologna e Ferrara
Demographic assumptions: the IPS55 tables were used for estimating mortality rates.
Financial assumptions: the valuations used an annual compound interest rate of 2.03%, corresponding to the estimated
long-term return (1.58% at 31 December 2014). The recent decrease in market interest rates led to a valuation based
on future returns that are lower than the estimate used for prior years but in any case higher than the end of last year.
Economic assumptions: pensions were assumed to have zero future growth., in line with the previous year.
b) Pension fund of former Banca Agricola Milanese
Demographic assumptions: the IPS55 tables were used for estimating mortality rates.
Financial assumptions: the valuations used a compounded interest rate of 2.03%, corresponding to the estimated longterm return (1.58% at 31 December 2014). The recent decrease in market interest rates led to a valuation based on
future returns that are lower than the estimate used for prior years but in any case higher than the end of last year.
Economic assumptions: pensions were assumed to grow at 1% per annum, since the plan rules provide for indexation
once every two years for certain pensioners, in line with the previous year.
c) Supplementary pension plan of Banca Popolare di Milano
Demographic assumptions: the IPS55 mortality tables were used in addition to the permanent disability tables prepared
by INPS in 2000.
Financial assumptions: the valuations used an annual compound interest rate of 2.03%, corresponding to the estimated
long-term return (1.58% at 31 December 2014). The recent decrease in market interest rates led to a valuation based
on future returns that are lower than the estimate used for prior years but in any case higher than the end of last year.
Economic assumptions: pensions were assumed to grow at 75% of the annual inflation rate. Inflation was assumed to
be 2% (unchanged with respect to the previous year), so the assumed growth rate in pensions is 1.5% (also in line with
the previous year). Annual wage inflation was established at 2.5% (unchanged with respect to the previous year). The
annual rate of increase in the INPS pension ceiling has been set at 1.5%; the INPS pension ceiling amounts to 46,123
euro (46,031 euro at 31 December 2014).
d) Pension fund of former Cassa di Risparmio di Alessandria
Demographic assumptions: the IPS55 mortality tables were used in addition to the permanent disability tables prepared
by INPS in 2000.
258
Part B - Information on the consolidated balance sheet - Liabilities and shareholders' equity
Financial assumptions: the valuations used a compounded interest rate of 2.03%, corresponding to the estimated longterm return (1.49% at 31 December 2014). The recent decrease in market interest rates led to a valuation based on
future returns that are lower than the estimate used for prior years but in any case higher than the end of last year.
Economic assumptions: inflation was assumed to be 2% (unchanged with respect to the previous year).
5. Information on the amount, timing and uncertainty of cash flows
The following table sets out the sensitivity of pension funds to the discount rate as required by IAS 19, paragraph 145
(amounts are in millions of euro):
Sensitivity analysis:
31.12.2015
31.12.2014
Mathematical reserves with a discount rate of –0.5%
3.2
3.6
Mathematical reserves with a discount rate of +0.5%
(3.0)
(3.4)
6. Multi-employer plans
There are no multi-employer plans.
7. Defined benefit plans sharing risks between entities under common control
There are no defined benefit plans sharing risks between entities under common control.
12.4 Allowances for risks and charges – other allowances
Details of other allowances for risks and charges as stated in table 12.1 are as follows:
2.1 Legal disputes: the provision covers the estimated obligations arising from outstanding legal disputes involving
the Group (see the explanation provided in Part E – Information on risks and related hedging policies – Section
1.4 Operational risks). The average timing for the payment of such obligations is around 3 years. The amount
of this provision reflects the present value of the outlays needed to meet the estimated obligations, calculated at
market interest rates.
The allowance includes an amount of the 2.5 million euro (26.1 million euro at 31 December 2014) made by the
Company in relation to the "Convertendo 2009-2013 6.75%" bond. On 3 August 2012, Banca Popolare di Milano,
Adiconsum, Adoc and Federconsumatori signed a Memorandum of Understanding (which is available on BPM's website)
to commence a joint settlement procedure for the "Convertendo BPM 2009/2013 – 6.75%" bond loan. On 30 June
2014, Banca Popolare di Milano signed an agreement with Adiconsum, Adoc and Federconsumatori that amended and
supplemented the Memorandum of Understanding, extending the deadline for the submission of applications for admission
by retail customers and allowing BPM shareholders to access the procedure under certain conditions. To provide against
the payments expected to be made as the result of the settlement, the bank accrued an amount of 40 million euro, which
was increased to 47.4 million euro in 2012 at Group level.
The period for applications for access to the conciliation procedure ended on 30 September 2015 and the settlement
proceed was closed on 31 December 2015. As a result, after recognising total costs of 27.5 million euro an amount
of 17.4 million euro was released from the allowance, retaining 2.5 million euro for any residual liabilities relating to
disputes not forming part of the settlement procedure.
Part B - Information on the consolidated balance sheet - Liabilities and shareholders' equity
259
2.2. Personnel expenses: this mainly covers the charges relating to:
employees entitled to the "Solidarity Fund" joining in 2009 and 2012, particularly:
• the "Solidarity Fund" set up in 2012 relating to the agreement signed by the Bank and the trade unions on 6
December 2012 for an amount of 125.73 million euro recognised at the balance sheet date (169.774 million
euro at 31 December 2014). The actuarial assumptions used by an independent actuary to determine the
liability at the balance sheet date led to the use of a discount rate of 0.53% (0.46% at 31 December 2014)
and a mortality rate taken from the IPS55 tables;
• with regard to the "Solidarity Fund" set up in 2009, the amount recognised at the balance sheet date is 0.455
million euro (2.776 million euro at 31 December 2014);
the indemnities specifically reserved for executives of 2.592 million euro (3.503 million euro at 31 December 2014);
the indemnities in connection with the non-competition agreement reserved for the former employees of
Bipiemme Private Banking SIM, which was merged during 2010, for 0.618 million euro (0.693 million euro
at 31 December 2014).
As regards the last two obligations, the actuarial assumptions used by an independent actuary for determining the
liability at the balance sheet date were as follows:
Demographic assumptions: the IPS55 tables for mortality rates were used together with the permanent disability tables
prepared by INPS in 2000.
Financial assumptions: the valuations are based on a discount rate of 2.03%, corresponding to the estimated long-term
return (1.58% at 31 December 2014).
Economic assumptions: annual rate of real increase in remuneration of 2.50% (unchanged with respect to the
previous year).
2.3 Other: This line item includes the following:
an estimate of the obligations arising from clawback actions against Group companies. The average timing for the
payment of such obligations is around 3 years. The amount of this provision reflects the present value of the outlays
needed to meet the estimated obligations, calculated at market interest rates;
tax disputes, illustrated in Section 13 “Tax assets and liabilities” for 5.2 million euro (5.4 million euro at 31
December 2014);
on 24 August 2015 BPM received notification from the Bank of Italy concerning the outcome of the transparency
checks carried out at a number of branches in the fourth quarter of 2014. These checks led to the emergence of
certain limited critical matters referring to contractual matters, the remuneration of lines of credit and overdrafts
and communications with customers. In this respect, at the request of the Bank of Italy, BPM provided indications
concerning the action taken to resolve these critical matters, describing the initiative for reimbursement to customers.
Line item 2.3 “Other allowances for risks and charges” contains an amount of 8.4 million euro as the estimate of
the cost that could result from this initiative.
The contractual commitments regarding the sale of custodian banking activities to the BNP Paribas group in 2010
envisage the possibility that for the ten years following the conclusion of this transaction the price may be adjusted
on the basis of predetermined annual revenue thresholds; on the basis of the results achieved, a previously provided
amount of 4.5 million euro was released to income in 2015.
260
Part B - Information on the consolidated balance sheet - Liabilities and shareholders' equity
Section 13 – Technical reserves
Line item 130
This item had a nil balance at 31 December 2015 as there are no insurance companies in the Group.
Section 14 – Redeemable shares
Line item 150
There were no redeemable shares at the balance sheet date.
Section 15 – Group shareholders’ equity
Line items 140, 160, 170, 180, 190, 200 and 220
This section provides details of line items 140, 160, 170,180, 190, 200 and 220
15.1 "Share capital" and "Treasury shares": analysis
Share capital Euro
Number of ordinary shares
Of which treasury shares
31.12.2015
31.12.2014
3,365,439,319.02
3,365,439,319.02
4,391,784,467
4,391,784,467
1,524,259
1,395,574
Share capital: at the date of the financial statements the Bank’s share capital was fully subscribed and paid in and
amounted to 3,365,439,319.02 euro consisting of 4,391,784,467 ordinary shares with implicit par value of 0.766
euro, given by the ratio between the total amount of share capital and the number of outstanding shares; the shares
have no restrictions or privileges, and each share has the same rights in terms of dividends and repayment of capital.
Treasury shares: at the date of the financial statements there were 1,524,259 shares in portfolio.
Part B - Information on the consolidated balance sheet - Liabilities and shareholders' equity
261
15.2 Share capital – number of the Parent Company’s shares: changes during the year
Item/type
A. Number of shares at the beginning of the year
– wholly unrestricted
– not wholly unrestricted
A.1 Treasury shares (–)
A.2 Outstanding shares: opening balance
B. Increases
B.1 New issues
Ordinary
Other
4,391,784,467
–
4,391,784,467
–
–
–
–1,395,574
4,390,388,893
–
17,727,161
–
–
–
–
–
– business combinations
–
–
– conversion of bonds
–
–
– for payment:
– exercising of warrants
–
–
– other
–
–
–
–
–
–
– to directors
–
–
– other
–
–
1,038,330
–
16,688,831
–
17,855,846
–
– bonus shares :
– to employees
B.2 Sale of treasury shares
B.3 Other increases
C. Decreases
C.1 Cancellation
C.2 Purchase of treasury shares
C.3 Sales of businesses
C.4 Other decreases
D. Outstanding shares: closing balance
D.1 Treasury shares (+)
D.2 Number of shares at the end of the year
– wholly unrestricted
– not wholly unrestricted
– 17,855,846
–
–
– –
–
–
4,390,260,208
–
1,524,259
–
4,391,784,467
–
4,391,784,467
–
–
–
Line item A.1 / D.1 Treasury shares. There were 1,395,574 treasury shares on 1 January 2015.
On 23 June 2015, following the issue of the prescribed authorisation by the European Central Bank, the Management
Board approved a treasury share purchase programme to be used for employees, in accordance with the resolution
adopted by the Bank’s members in an ordinary general meeting held on 11 April, having the aim of i) implementing
the requirements of article 60 of the bylaws that provide for the distribution to all employees in service, apart from
those holding senior positions, of 5% of the gross profit earned in 2014 and ii) establishing a stock of securities for
implementing the Bank’s remuneration policies, and in particular a plan for granting ordinary BPM shares to “key
personnel” approved by members in an ordinary general meeting held on 11 April 2015 pursuant to article 114-bis
of Legislative Decree no. 58/98 (the “TUF”) and article 84-bis of the Issuers’ Regulations.
As part of the programme the Bank purchased 16,821,746 treasury shares between 24 June 2015 and 27 July 2015,
of which 16,688,831 were granted to employees (cf. line item B.3 other increases) in compliance with article 60 of
the bylaws as mentioned above.
262
Part B - Information on the consolidated balance sheet - Liabilities and shareholders' equity
As the result of these transactions, BPM currently own 1,524,259 treasury shares, almost all of which to be used for
“key personnel” by the means established for implementing remuneration policies.
Line item D.2 Number of shares at the end of the year. This is the number of Banca Popolare di Milano shares
outstanding at 31 December 2015, a total of 4,391,784,467 (including 1,524,259 treasury shares), whose implicit
value is 0.766 euro per share, taking into account the fact that the share capital amounts to Euro 3,365,439,319.02.
15.3 Share capital : other information
The Parent Company's share capital is variable and is represented by shares without an explicit nominal value, in
accordance with the resolution of the members’ general meeting of 25 June 2011.
The management board can purchase or reimburse shares of the Parent Company in accordance with current legislation,
within the limits of the distributable earnings and unrestricted reserves stated in the latest approved financial statements,
allocated for this purpose by members in general meeting.
Following the resolution adopted by members on 11 April 2015, the provision for the purchase of treasury shares
amounts to 25,000,000 euro and is available for 23,583,898.14 euro, as it was adjusted for the value of the
1,524,259 treasury shares held in portfolio at the balance sheet date (1,416,101.86 euro).
As governed by the bylaws the shares constitute a guarantee to the Bank for any commitments of a member
towards the Bank. No member’s interest may exceed 0.50% of the share capital. As soon as it becomes aware
that this limit has been exceeded, the Parent Company serves formal notice of the breach on the member
concerned. The excess shares must be sold within a year of such notice; after this deadline, the related rights
pertaining to these shares are acquired by the Bank until their disposal.
This limit does not apply to mutual investment funds; the relevant limits in such cases are those imposed by the
rules of the fund concerned.
Shares cannot be split. In the event that they are owned jointly, the rights of the joint owners have to be exercised by
a common representative.
Dividends not claimed within five years from the date they become payable fall and are absorbed by the Parent
Company.
15.4 Retained earnings: other information
Reference should be made to the Parent Company's financial statements for the disclosures required by article 2427,
paragraph 7-bis, of the Italian Civil Code.
15.5 Reserves: other information
Valuation reserves:
Financial assets available for sale: this consists of the unrealised post-tax gains and losses arising on financial assets
classified as "available for sale", as defined by IAS 39. Gains and losses are transferred from the fair value reserve to
profit and loss when the financial asset is disposed of or becomes impaired.
Actuarial gains (losses) on defined-benefit pension plans: these consists of actuarial gains and losses, deriving from the
change of certain assumptions formulated in prior years.
Part B - Information on the consolidated balance sheet - Liabilities and shareholders' equity
263
Portion of valuation reserves connected with investments carried at equity: this consists of the portions of valuation
reserves of companies consolidated using the equity method.
Special revaluation laws: this line item consists of the reserve created on first-time adoption of IAS/IFRS as a result of
valuing property and equipment at their "deemed cost", as permitted by the "IAS decree".
Cash flow hedges: this consists of the unrealised post-tax gains and losses arising on cash flow hedges.
15.6 Equity instruments: analysis and changes during the year
The Bipiemme Group has not issued any equity instruments.
264
Part B - Information on the consolidated balance sheet - Liabilities and shareholders' equity
Section 16 – Minority interests
line item 210
16.1 Details of line item 210 “minority interests”
Name of company
31.12.2015
31.12.2014
Investments in consolidated companies with significant minority interests
1. Banca Akros SpA
2. Banca Popolare di Mantova SpA
6,337
6,185
13,601
13,215
36
24
19,974
19,424
31.12.2015
31.12.2014
Other investments
Total
16.2 Equity instruments: analysis and annual changes
No equity instruments have been issued by consolidated companies with minority interests.
16.3 Minority interests: analysis
Item/amount
1. Share capital
2,363
2,359
11,893
11,982
4,706
4,353
–
–
5. Valuation reserves
10
90
6. equity instruments
–
–
1,002
640
19,974
19,424
31.12.2015
31.12.2014
58
151
2. Property and equipment
–
–
3. Intangible assets
–
–
4. Hedging of foreign investments
–
–
5. Cash flow hedges
–
–
6. Exchange differences
–
–
7. Non-current assets held for sale
–
–
–48
–61
–
–
2. Share premium reserve
3. Reserves
4. Treasury shares
7. Net income (loss) for the period attributable to minority interests
Total
16.4 Valuation reserves: analysis
Item/component
1. Financial assets available for sale
8. Actuarial gains (losses) on defined benefit pension plans
9. Portion of valuation reserves connected with investments carried at equity
10. Special revaluation laws
Total
Part B - Information on the consolidated balance sheet - Liabilities and shareholders' equity
–
–
10
90
265
Other information
1. Guarantees given and commitments
Transaction
1) Financial guarantees:
31.12.2015
31.12.2014
203,382
310,158
230
60,407
a) Banks
b) Customers
203,152
249,751
2,948,919
2,968,731
102,461
77,818
2,846,458
2,890,913
5,261,422
4,482,370
752,306
732,028
i) certain to be called
231,381
43,278
ii) not certain to be called
520,925
688,750
4,509,116
3,750,342
442,398
312,648
4,066,718
3,437,694
4,653
3,553
2) Commercial guarantees
a) Banks
b) Customers
3) Irrevocable commitments to grant funding:
a) Banks
b) Customers
i) certain to be called
ii) not certain to be called
4) Commitments underlying credit derivatives: sales of protection
5) Assets pledged in guarantee for third party obligations
6) Other commitments
Total
79,702
72,413
140,523
106,632
8,638,601
7,943,857
“Guarantees given” are stated at nominal value net of any drawdowns and any adjustments.
“Irrevocable commitments to grant funding” are stated on the basis of the commitment given less the sums already
disbursed and any adjustments. They exclude commitments arising from derivative contracts.
“Irrevocable commitments to grant funding” which are certain to be called include forward and spot purchases of
securities awaiting settlement and loans and deposits to be made on a specified future date.
“Commitments underlying credit derivatives: sales of protection” refer to the notional amount of such commitments, less
the sums already disbursed and any adjustments.
“Assets pledged in guarantee for third party obligations” include an amount of 79,702 million euro (72,413 million
euro at 31 December 2014) relating to contribution quotas to the Default Fund paid into the Cassa di Compensazione
e Garanzia for MTS Repo operations.
266
Part B - Information on the consolidated balance sheet - Liabilities and shareholders' equity
2. Assets pledged as guarantees for own liabilities and commitments
Portfolio
1. Financial assets held for trading
2. Financial assets designated at fair value through profit and loss
3. Financial assets available for sale
31.12.2015
31.12.2014
249,076
225,066
27,633
82,810
4,989,357
5,926,342
–
–
427,132
32,627
10,772,139
6,318,122
–
–
4. Investments held to maturity
5. Due from banks
6. Loans from customers
7. Property and equipment
Guarantee funding transactions
In accordance with the requirements of the Bank of Italy communicated on 16 February 2011 and 10 February 2012,
assets not reported in the financial statements in compliance with IAS 39, which the Group has established as a
guarantee of its own liabilities and commitments, are shown below.
The following are the own bonds issued and repurchased as part of the refinancing operations with the European Central
Bank and provided as collateral for the advances received from central banks (OMO – Open Market Operations):
Covered bonds “BPM CB 18.07.2011–18.01.2014 Floating rate with maturity extended to 18.1.2019” for a
nominal value of 0.37 billion (1 billion at 31 December 2014);
Covered bonds “BPM CB 25.05.2013–28.05.2016 Floating rate” for a nominal value of 0.48 billion (0.65 billion
at 31 December 2014);
Covered bonds “BPM CB 16.03.2015-16.03.2020 Floating rate 1A and 2A”, for a nominal value of 0.555 billion
(nil at 31 December 2014);
Covered bonds “BPM CB 19.11.2015–22 Floating rate” for a nominal value of 0.65 billion (nil at 31 December 2014);
Covered bonds “BPM 9.10.2009–17.10.2016 3.5%” with a nominal value of 1 million.
In addition, the following have been provided as collateral:
“BPM Securitisation 15.01.06/43 Floating rate” bonds, arising from the securitisation carried out by the Parent
Company in 2006, for a residual nominal value of 73.98 million euro (93.62 million euro at 31 December 2014);
“BPM Securitisation 3 20.01.14/57 Floating rate A” bonds with a residual nominal value of 254 million euro (573
million euro at 31 December 2014);
securities arising from lending repurchase agreements or securities lending of a nominal value of 353.29 million
(107 million at 31 December 2014).
3. Information on operating leases
Leased assets basically consist of:
POS equipment;
the central computer;
motor vehicles under long-term rental contracts;
machinery – hardware.
Part B - Information on the consolidated balance sheet - Liabilities and shareholders' equity
267
The POS equipment is installed on the premises of authorised businesses and allows the holders of “Pagobancomat”
cards and other debit and credit cards to pay for goods and services offered by businesses in Italy and abroad.
The computer lease forms part of an all-comprehensive agreement entered into with IBM in September 2012 to replace
the previous lease agreement that expired on 31 December 2012. The new agreement, whose term ends on 31
December 2016, provides for integrated management, inter alia, of:
technological evolution/substitution of the storage infrastructure;
provision of the services needed to support technological renovation;
maintenance of central hardware;
software licences and new releases for the operating system and certain subsystems.
Motor vehicles under long-term rental contracts are leased for a contractual term of 36-48 months, with the provision of
full service assistance (maintenance, insurance, ownership tax, breakdown service, etc.). There is no option to acquire
the vehicles at the end of the lease.
During the course of 2015 operating lease payments totalled 9,120 million euro (8,888 million euro in 2014) with
long-term vehicle rental costs of 1,621 thousand euro (1,425 thousand euro in 2014).
Future operating lease and car rental payments under outstanding contracts fall due as follows.
Up to 1
year
Between
1 and 5
years
Beyond 5
years
31.12.2015
Up to 1
year
Between
1 and 5
years
Beyond 5
years
31.12.2014
POS
3,330
3,395
–
6,725
3,134
3,187
–
6,321
Central computer
5,929
15,668
–
21,597
5,741
2,600
–
8,341
Motor vehicles
1,603
8,015
–
9,618
1,523
5,015
–
6,538
–
–
–
–
–
–
–
–
10,862
27,078
–
37,940
10,398
10,802
–
21,200
Leased assets
Machinery – hardware
Total
4. Analysis of investments relating to unit-linked and index-linked policies
There are no insurance companies in the Bipiemme Group.
268
Part B - Information on the consolidated balance sheet - Liabilities and shareholders' equity
5. Administration and dealing on behalf of third parties
Type of service
1. Execution of instructions on behalf of customers
31.12.2015
31.12.2014
180,512,914
205,178,531
a) Purchases
89,288,492
103,110,061
1. settled
89,165,775
102,968,608
122,717
141,453
2. not settled
b) Sales
91,224,422
102,068,470
91,127,769
101,954,492
2. not settled
96,653
113,978
2. Portfolio management
824,337
750,043
a) Individual
824,337
750,043
b) Collective
–
–
–
–
–
–
1. securities issued by the reporting bank
–
–
2. other securities
–
–
25,238,109
26,150,868
1. settled
3. Custody and administration of securities
a) Third party securities on deposit as custodian bank (excluding portfolio
management schemes)
b) Third party securities on deposit (excluding portfolio management schemes): other
1. securities issued by the reporting bank
2. other securities
c) Third party securities deposited with third parties
d) Portfolio securities deposited with third parties
4. Other transactions
2,360,802
3,923,616
22,877,307
22,227,252
17,950,768
20,413,497
9,837,094
11,118,084
17,609,244
16,970,178
11,695,435
11,274,466
5,762,382
5,559,788
1. Current accounts
17,850
17,915
2. Central portfolio
1. Collection of receivables for third parties: debit and credit adjustments
a) Debit adjustments
5,744,532
5,541,873
3. Cash
–
–
4. Other accounts
–
–
5,933,053
5,714,678
b) Credit adjustments
1. Current accounts
2. Presenters of notes and documents
3. Other accounts
2. Other transactions
a) Collection of notes, documents and other instruments on behalf of third parties
Part B - Information on the consolidated balance sheet - Liabilities and shareholders' equity
13,112
14,583
5,917,323
5,697,706
2,618
2,389
5,913,809
5,695,712
5,913,809
5,695,712
269
Regarding the above amounts:
Service 1. “Execution of instructions on behalf of customers”: consists of purchase and sale transactions, forward
contracts traded on Italy's future's market (MIF) and derivatives traded on Italy's derivatives market (IDEM) in which
Group banks execute orders received from their customers (trading for and on behalf of third parties). Amounts of
derivatives transactions are as follows:
31.12.2015
a) Purchases
31.12.2014
15,551,091
32,339,338
15,551,091
32,339,338
–
–
a) Sales
14,820,398
30,186,492
1. settled
14,820,398
30,186,492
–
–
1. settled
2. not settled
2. not settled
Service 3. “Custody and administration of securities”: securities received for custody and administration, including those
received and held in guarantee, are stated at their nominal value. Line item b) also includes securities received from
third parties to guarantee lending transactions, for which Group banks provides custodian and administration services.
Service 4. Other transactions – 1 “Collection of receivables for third parties: debit and credit adjustments”: the notes and
documents received by the Bank subject to collection or after collection and for which the Group handles collection on
behalf of third parties are only recognised in the balance sheet (as cash, loans to banks and customers, amounts due
to banks and customers) at the time these amounts are settled. As a result, the notes portfolio has been reclassified in
the financial statements by settlement date, making the accounting adjustments specified.
6. Financial assets subject to offsetting in the financial statements, or subject to framework offsetting
agreements or similar arrangements
Technical form
Amount of Net amount of Related amounts not subject
Gross amount
financial financial assets to offsetting in the financial
of financial
statements
reported in
assets (a) liabilities offset
the financial
in the financial
Financial Cash deposits
statements
statements (b)
instruments (d)
received as
(c=a–b)
collateral (e)
Net amount
31.12.2015
(f = c – d – e)
Net amount
31.12.2014
1. Derivatives
1,045,924
–
1,045,924
805,848
214,023
26,053
55,852
2. R
epurchase
agreements
396,496
196,931
199,565
199,543
–
22
–
3. Securities lending
–
–
–
–
–
–
–
4. Other
–
–
–
–
–
–
–
31.12.2015
1,442,420
196,931
1,245,489
1,005,565
214,023
26,075
x
31.12.2014
1,650,054
214,368
1,435,686
1,168,333
211,501
x
55,852
270
Part B - Information on the consolidated balance sheet - Liabilities and shareholders' equity
7. Financial liabilities subject to offsetting in the financial statements, or subject to framework offsetting
agreements or similar arrangements
Technical form
Amount of
Gross amount
financial
of financial
liabilities (a) assets offset in
the financial
statements (b)
Net amount Related amounts not subject
of financial to offsetting in the financial
statements
liabilities
reported in
Financial Cash deposits
the financial
instruments (d)
given as
statements
collateral (e)
(c=a–b)
Net amount
31.12.2015
(f = c – d – e)
Net amount
31.12.2014
1. Derivatives
1,141,358
–
1,141,358
777,663
259,251
104,444
45,632
2. Repurchase agreements
5,353,135
196,931
5,156,204
5,154,682
263
1,259
3,576
–
–
–
–
–
–
–
3. Securities lending
4. Other
676,199
–
676,199
676,196
3
–
–
31.12.2015
7,170,867
196,931
6,973,936
6,608,541
259,517
105,703
x
31.12.2014
7,108,344
214,368
6,893,976
6,562,829
281,939
x
49,208
The Group has entered offsetting contracts on financial instruments and foreign exchange operations. The amount
relating to repurchase agreements mainly regards operations carried out with the Cassa di Compensazione e Garanzia.
8. Securities lending transactions
Securities lending activities are not significant at consolidated level and accordingly no disclosures are provided.
9. Disclosures on joint arrangements
The Group is not party to any joint arrangements.
Part B - Information on the consolidated balance sheet - Liabilities and shareholders' equity
271
Part C
Information on the consolidated income
statement
273
Section 1 – Interest
Line items 10 and 20
1.1 Interest and similar income: analysis
Item/technical form
1. Financial assets held for trading
2. Financial assets designated at fair value through profit and
loss
3. Financial assets available for sale
4. Investments held to maturity
5. Due from banks
6. Loans to customers
Debt
securities
Loans
Other
transactions
Year 2015
Year 2014
14,307
–
4,458
18,765
8,704
5,231
–
–
5,231
7,076
171,798
–
–
171,798
204,466
–
–
–
–
–
188
4,914
–
5,102
11,704
6,235
899,947
–
906,182
1,008,498
7. Hedging derivatives
–
–
45,477
45,477
43,406
8. Other assets
–
–
7,839
7,839
5,448
197,759
904,861
57,774
1,160,394
1,289,302
Total
Line item 1. “Financial assets held for trading: other transactions" includes positive margins related to derivative
contracts linked for operational purposes with financial assets and liabilities designated at fair value through profit and
loss (under the fair value option) for 4.458 million (0.049 million in 2014).
Line items 5 and 6 "Due from banks" and "Loans to customers" show, in the "Debt securities" column, interest income
on own securities not listed on active markets, classified in these portfolios. The "Loans" column also includes interest
income accrued on repurchase agreements used for lending purposes.
Interest, other than that reported in line item 130. "Write-backs", accrued during the year on "impaired" positions,
totals 33.922 million (39.924 million in 2014). This interest, calculated on financial assets measured at amortised
cost under the effective interest rate method, is reported in the various columns according to the technical form that
gave rise to the interest. Any past due interest accruing during the year is only recognised in the income statement
when actually collected.
1.2 Interest and similar income: differentials on hedging transactions
Item
A. Positive differentials on hedging transactions
B. Negative differentials on hedging transactions
C. Balance (A–B)
Year 2015
Year 2014
81,616
90,330
(36,139)
(46,924)
45,477
43,406
The following table provides an analysis of the differential balance, positive and negative, accrued on "hedging
derivatives", reported in sub-item 7. "Hedging derivatives".
Part C - Information on the consolidated income statement
275
1.3 Interest and similar income: other information
1.3.1 Interest income on financial assets in foreign currency
Item
Interest income on financial assets in foreign currency
Year 2015
Year 2014
15,326
14,155
"Interest and similar income" on financial assets in foreign currency relates to income received and accrued on assets
in currencies other than the euro.
1.3.2 Interest income from finance leases
Interest income from finance leases amounts to 4.934 million (6.516 million in 2014).
1.4 Interest and similar expense: analysis
Item/technical form
1. Due to central banks
Payables
Securities
Other
transactions
Year 2015
Year 2014
(2,886)
x
–
(2,886)
(5,868)
2. Due to banks
(19,719)
x
–
(19,719)
(24,412)
3. Due to customers
(65,839)
x
–
(65,839)
(154,259)
4. Securities issued
x
(258,295)
–
(258,295)
(300,180)
5. Financial liabilities held for trading
(2,115)
–
(348)
(2,463)
(2,385)
6. F inancial liabilities designated at fair value through profit
and loss
–
(4,338)
–
(4,338)
(1,984)
7. Other liabilities and provisions
x
x
(108)
(108)
(43)
8. Hedging derivatives
x
x
–
–
–
(90,559)
(262,633)
(456)
(353,648)
(489,131)
Total
Line items 2. and 3. "Due to banks/customers" in the "Payables" column include the interest related to amounts due for
repurchase agreements on own securities and charges relating to amounts due for repurchase agreements on securities
whose availability was obtained through reverse repurchase agreements.
Line item 4. "Securities issued" shows the interest expense accrued on bonds and certificates of deposit measured at
amortised cost.
Line item 5. "Financial liabilities held for trading", in the "Other transactions" column, shows a net negative balance
of 0.348 million (1.609 million in 2014) which relates to differentials and positive/negative margins on derivatives
operationally linked to financial assets and liabilities classified in the trading book and which accrue interest. These are
multiflow derivatives (interest rate swaps) connected to fixed rate debt securities classified as held for trading.
Line item 6. "Financial liabilities designated at fair value through profit and loss" includes interest expense accrued on
structured and fixed-rate bonds issued, hedged by derivative contracts.
In line item 8. "Hedging derivatives", the "Other transactions" column shows a nil balance, as the difference between
the positive and negative differentials related to derivatives classified as hedges according to the hedge accounting
rules is positive. Consequently this balance is shown in the table 1.1 "Interest and similar income: analysis".
276
Part C - Information on the consolidated income statement
1.5 Interest and similar expense: differentials on hedging transactions
The balance of interest on differentials in hedging transactions was positive in 2015. Details are provided in table "1.2
Interest and similar income: differentials on hedging transactions".
1.6 Interest and similar expense: other information
1.6.1 Interest expense on foreign currency liabilities
Item
Interest expense on foreign currency liabilities
Year 2015
Year 2014
(1,690)
(2,528)
“Interest and similar expense” on foreign currency liabilities relate to expenses paid and accrued on liabilities in
currencies other than the euro.
1.6.2 Interest expense from finance leases
There is no interest expense from finance leases.
Part C - Information on the consolidated income statement
277
Section 2 – Fee and commission
Line items 40 and 50
2.1 Fee and commission income: analysis
Type of service/amount
Year 2015
Year 2014
a) guarantees given
34,937
34,838
b) credit derivatives
–
–
327,885
273,487
26,213
20,545
2. currency trading
5,523
4,522
3. portfolio management
6,991
6,650
3.1. individual
6,991
6,650
3.2. collective
–
–
10,270
11,789
–
18
191,789
153,239
24,310
26,409
2,632
1,536
87
211
2,545
1,325
c) management, dealing and advisory services:
1. trading of financial instruments
4. custody and administration of securities
5. custodian bank
6. placement of securities
7. receipt and translission of instructions
8. advisory services
8.1 on investments
8.2 on financial structure
9. distribution of third party services
60,157
48,779
9.1 portfolio management
4,297
4,196
9.1.1. individual
4,297
4,196
9.1.2. collective
–
–
54,077
42,493
1,783
2,090
103,473
108,184
e) servicing for securitisation transactions
–
–
f) factoring services
–
–
g) tax collection services
–
–
h) management of multilateral trading systems
–
–
58,473
64,189
j) other services
154,129
155,808
Total
678,897
636,506
9.2 insurance products
9.3 other products
d) collection and payment services
i) management of current accounts
Line item j) “Other services” includes: net fee and commission income on loans granted of 119.900 million (121.544
million in 2014), on the use of safe deposit boxes of 2.306 million (2.284 million in 2014), fee and commission income
on securities lending of 0.425 million (0.706 in 2014) and the recharge of expenses for other banking services of
31.497 million (31.274 million in 2014).
278
Part C - Information on the consolidated income statement
2.2 Fee and commission expense: analysis
Type of service/amount
Year 2015
Year 2014
(2,138)
(9,978)
–
–
c) management and dealing services
(21,164)
(18,185)
1. trading of financial instruments
(12,881)
(8,986)
–
–
(1,434)
(1,491)
(1,434)
(1,491)
–
–
4. custody and administration of securities
(3,336)
(4,081)
5. placement of financial instruments
(1,554)
(1,934)
a) guarantees received
b) credit derivatives
2. currency trading
3. portfolio management:
3.1 own
3.2 mandated by third parties
(1,959)
(1,693)
d) collection and payment services
6. door-to-door sales of financial instruments, products and services
(31,850)
(33,454)
e) other services
(17,749)
(18,323)
Total
(72,901)
(79,940)
Line item e) “Other services” includes, among other things, brokerage commissions and order processing fees.
Section 3 – Dividend and similar income
Line item 70
3.1 Dividend and similar income: analysis
Year 2015
Item/income
Year 2014
Dividends Income from
mutual funds
Total
Dividends Income from
mutual funds
Total
A. Financial assets held for trading
4,202
3
4,205
5,215
–
5,215
B. Financial assets available for sale
7,457
1,403
8,860
10,052
2,432
12,484
C. F inancial assets designated at fair value through
profit and loss
–
–
–
–
–
–
D. Investments in associates and companies subject to
joint control
–
x
–
–
x
–
11,659
1,406
13,065
15,267
2,432
17,699
Total
Part C - Information on the consolidated income statement
279
Section 4 – Profits (losses) on trading
Line item 80
4.1 Profits (losses) on trading: analysis
Transaction/income item
1. Financial assets held for trading
Unrealised profits
(A)
Trading profits Unrealised Losses
(B)
(C)
Trading losses
(D)
Net result
[(A+B) – (C+D)]
Year 2015
12,826
38,025
(31,505)
(16,338)
3,008
1.1 Debt securities
3,726
14,939
(5,649)
(10,677)
2,339
1.2 Equities
1,312
20,996
(18,492)
(5,642)
(1,826)
1.3 Mutual funds
–
8
–
(11)
(3)
1.4 Loans
–
–
–
–
–
1.5 Other
7,788
2,082
(7,364)
(8)
2,498
400
2,041
(224)
(3,072)
(855)
–
–
–
–
–
400
2,041
(224)
(3,072)
(855)
–
–
–
–
–
x
x
x
x
12,532
339,314
719,753
(285,483)
(753,563)
23,252
339,314
719,753
(285,483)
(753,563)
23,252
272,209
400,366
(257,794)
(401,199)
13,582
64,157
306,240
(24,801)
(339,330)
6,266
x
x
x
x
3,231
2,948
13,147
(2,888)
(13,034)
173
2. Financial liabilities held for trading
2.1 Debt securities
2.2 Payables
2.3 Other
3. Other financial assets and liabilities:
foreign exchange differences
4. Derivatives
4.1 Financial derivatives:
– On debt securities and interest rates
– On equities and stock indices
– On currency and gold
– Other
4.2 Credit derivatives
Total
–
–
–
–
–
352,540
759,819
(317,212)
(772,973)
37,937
The table shows the profits or losses attributable to the portfolio of financial assets and liabilities held for trading, with
the exception of derivatives hedging financial instruments for which the fair value option is adopted, with the valuation
results being shown in Section 7 – "Profits (losses) on financial assets and liabilities designated at fair value – Line item
110".
1. Financial assets held for trading: line item "1.5 Other" includes the profits and losses from trading in currency, gold
and other precious metals.
3. Other financial assets and liabilities: foreign exchange differences: this item includes the positive or negative
balance of changes in the value of financial assets and liabilities in foreign currency, other than those designated
at fair value, those subject to fair value hedging (currency risk or fair value) or cash flow hedging (exchange risk),
as well as changes in the value of hedging derivatives.
4. Derivatives: positive and negative differentials and margins are reported in the "trading profits" and "trading
losses" columns respectively.
280
Part C - Information on the consolidated income statement
Section 5 – Fair value adjustments in hedge accounting
Line item 90
5.1 Fair value adjustments in hedge accounting: analysis
Income item/amount
Year 2015
Year 2014
22,132
32,094
A. Income relating to:
A.1 Derivatives with fair value hedges
A.2 Financial assets with fair value hedges
1,857
43,014
57,339
26,529
A.4 Cash flow hedges
–
–
A.5 Foreign currency assets and liabilities
–
–
81,328
101,637
B.1 Derivatives with fair value hedges
(63,830)
(70,689)
B.2 Financial assets with fair value hedges
(16,353)
(2,121)
B.3 Financial liabilities with fair value hedges
A.3 Financial liabilities with fair value hedges
Total income from hedging activities (A)
B. Expenses relating to:
(10,768)
(28,416)
B.4 Cash flow hedges
–
–
B.5 Foreign currency assets and liabilities
–
–
(90,951)
(101,226)
(9,623)
411
Total expenses from hedging activities (B)
C. Fair value adjustments in hedge accounting (A–B)
The table shows the net result of the fair value adjustments in hedge accounting. It therefore shows the realised income
items recognised in the income statement and arising from valuation of hedged assets and liabilities and the related
derivative contracts, including any exchange differences. For information on the hedging derivatives, whose income
and expenses are classified in lines A.1 and B.1 of this table, reference should be made to Section 8 "Hedging
derivatives – Line item 80" in assets and Section 6 "Hedging derivatives – Line item 60" in liabilities in Part B of these
explanatory notes.
For further information on hedged financial assets and liabilities reference should be made to the detailed tables set
out in Part B of these explanatory notes, in the sections relating to balance sheet items in which the items being hedged
are classified.
Part C - Information on the consolidated income statement
281
The following table provides details of net income items.
Fair value adjustments in hedge accounting: details of income items
Item/amount
Income
Expenses
Year 2015
Net result
Income
Expenses
Year 2014
Net result
16,836
(59,801)
(42,965)
32,094
(58,873)
(26,779)
Exchange rate risk
–
–
–
–
–
–
Credit risk
–
–
–
–
–
–
5,296
(4,029)
1,267
–
(11,816)
(11,816)
–
–
–
–
–
–
1,857
(9,338)
(7,481)
30,092
(300)
29,792
–
(7,015)
(7,015)
12,922
(1,821)
11,101
57,339
(3,729)
53,610
26,529
(28,416)
(1,887)
–
(7,039)
(7,039)
–
–
–
Forecast transactions
–
–
–
–
–
–
Foreign investments
–
–
–
–
–
–
Currency risk
–
–
–
–
–
–
Assets in foreign currency
–
–
–
–
–
–
Liabilities in foreign currency
–
–
–
–
–
–
81,328
(90,951)
(9,623)
101,637 (101,226)
411
1 Derivatives for fair value hedges:
Interest rate risk
Price risk
Several risks
2 Financial assets with fair value hedges:
Specific
Macro
3 Financial liabilities with fair value hedges:
Specific
Macro
4 Financial derivatives for cash flow hedges:
5 Assets and liabilities in foreign currency:
Total
Details of the net result of fair value adjustments in hedge accounting with regard to their underlying positions are set
out below.
Description
2015
Net result
2014
Net result
Assets
Debt securities available for sale
(2,506)
(1,819)
Equities available for sale
–
(2,581)
Due from banks
–
–
(3,486)
(560)
Due from customers
(28)
–
Outstanding bonds
(3,603)
5,371
(9,623)
411
Loans to customers
Liabilities
Net result of fair value adjustment in hedge accounting
282
Part C - Information on the consolidated income statement
Section 6 – Profits (losses) on disposal or repurchase – Line item 100
6.1 Profits (losses) on disposal or repurchase: analysis
Income item/amount
Year 2015
Year 2014
Profits
Losses
Net result
Profits
Losses
Net result
–
–
–
–
–
–
Financial assets
1. Due from banks
2. Loans to customers
997
(25,904)
(24,907)
–
(927)
(927)
202,408
(1,428)
200,980
154,171
(3,407)
150,764
124,979
(1,394)
123,585
154,040
(125)
153,915
76,434
(32)
76,402
105
(83)
22
995
(2)
993
26
(2,422)
(2,396)
–
–
–
–
(777)
(777)
–
–
–
–
–
–
203,405
(27,332)
176,073
154,171
(4,334)
149,837
1. Due to banks
–
–
–
–
–
–
2. Due to customers
–
–
–
–
–
–
3. Securities issued
26
(13,007)
(12,981)
–
(97)
(97)
3. Financial assets available for sale
3.1 Debt securities
3.2 Equities
3.3 Mutual funds
3.4 Loans
4. Investments held to maturity
Total assets
Financial liabilities
Total liabilities
Total
26
(13,007)
(12,981)
–
(97)
(97)
203,431
(40,339)
163,092
154,171
(4,431)
149,740
The table shows the result of selling financial assets other than those held for trading and those designated at fair value
through profit and loss and the result of repurchasing own financial liabilities.
Analysis of “Financial assets: Due from banks and Loans to customers”
Item/amount
Year 2015
Year 2014
Profits
Losses
Net result
Profits
Losses
Net result
Loans
–
–
–
–
–
–
Debt securities
–
–
–
–
–
–
997
(25,904)
(24,907)
–
(927)
(927)
–
–
–
–
–
–
997
(25,904)
(24,907)
–
(927)
(927)
1. Due from banks:
2. Loans to customers:
Loans
Debt securities
Total
Part C - Information on the consolidated income statement
283
Section 7 – Profits (losses) on financial assets and liabilities designated at fair value
Line item 110
7.1 Profits (losses) on financial assets and liabilities designated at fair value: analysis
Transaction/income item
1. Financial assets
1.1 Debt securities
Unrealised
gains
(A)
Profits on
disposal
(B)
Unrealised
losses
(C)
Losses on
disposal
(D)
142
694
(3,608)
Net result
[(A+B) − (C+D)]
Year
2015
Year
2014
(1,426)
(4,198)
7,304
142
656
(3,608)
(1,426)
(4,236)
6,813
1.2 Equities
–
–
–
–
–
–
1.3 Mutual funds
–
38
–
–
38
491
1.4 Loans
–
–
–
–
–
–
2. Financial liabilities
428
2,151
(1,162)
–
1,417
(2,727)
2.1 Debt securities
428
2,151
(1,162)
–
1,417
(2,727)
2.2 Due to banks
–
–
–
–
–
–
2.3 Due to customers
–
–
–
–
–
–
x
x
x
x
–
–
643
69
(815)
(2,252)
(2,355)
3,090
1,213
2,914
(5,585)
(3,678)
(5,136)
7,667
3. Financial assets and liabilities: foreign exchange
differences
4. Credit and financial derivatives
Total
This item consists of capital gains and losses arising from the measurement at fair value of financial assets and liabilities
classified in fair value option portfolios and their hedging derivatives.
Debt security liabilities consist of the net result of bonds for which the fair value option has been used, in the same way
as the result of the derivatives hedging them. In this case, the use of the fair value option addresses the need to reduce
the accounting mismatch that would otherwise result from measuring the financial liabilities issued at amortised cost
and the related hedging derivatives at fair value. For further details reference should be made to section 5 of liabilities
under “Financial liabilities designated at fair value through profit and loss”.
284
Part C - Information on the consolidated income statement
Section 8 – Net losses/recoveries on impairment
Line item 130
8.1 Net losses/recoveries on impairment of loans: analysis
Transaction/income item
Adjustments
Specific
Write-backs
Portfolio
Write-offs
Other
– Loans
–
(240)
– Debt securities
–
– Loans
– Debt securities
Specific
Year 2015
Year 2014
Portfolio
A
B
A
B
(523)
–
868
–
–
105
(479)
–
–
–
–
–
–
–
–
–
–
x
–
–
x
x
–
–
–
–
x
–
–
x
x
–
–
(55,827) (467,419)
(20,801)
50,700 117,713
–
A. Due from banks
B. Loans to customers
Impaired loans
purchased
Other receivables
– Loans
– Debt securities
C. Total
45,350 (330,284) (406,738)
–
(2,039)
–
–
–
–
–
(2,039)
(2,187)
(55,827)
(469,698)
(21,324)
50,700
118,581
–
45,350
(332,218)
(409,404)
Key: A = for interest B = other write-backs
This item consists of adjustments and write-backs to cover the impairment of the financial instruments allocated to the
"loans to customers" and "due from banks" portfolios. In particular, the "Write-offs" column shows the losses recognised
on final derecognition of the loans, while the "Other" column consists of specific write-downs on impaired loans subject
to analytical assessment. The portfolio adjustments are quantified on performing financial instruments.
As part of the specific write-backs, column A mainly consists of the write-backs represented by the release of interest on
impaired loans measured at amortised cost.
8.2 Net losses/recoveries on impairment of financial assets available for sale: analysis
Transaction/income item
A. Debt securities
B. Equities
C. Mutual funds
Adjustments
Specific
Write-backs
Specific
Year 2015
Year 2014
Write-offs
Other
A
B
(24,960)
–
–
–
(24,960)
–
(7)
(14,229)
x
x
(14,236)
(35,155)
–
(3,322)
x
–
(3,322)
(5,587)
D. Loans to banks
–
–
–
–
–
–
E. Loans to customers
–
–
–
–
–
–
(24,967)
(17,551)
–
–
(42,518)
(40,742)
F. Total
Key: A = for interest B = other write-backs
Part C - Information on the consolidated income statement
285
Specific adjustments to equities relate to the write-offs and write-downs made to the investments held in the following
companies and investment funds:
Specific adjustments
Year 2015
Year 2014
(14,229)
(35,155)
–
(26)
Equities
• Aedes S.p.A
• Alba Leasing S.p.A.
• Cuki S.p.A. formerly Comital S.p.A.
• Equinox
• Eurofidi S.p.A.
• Expo Piemonte S.p.A.
–
(101)
(1,224)
(330)
–
(1,655)
(245)
–
(39)
(84)
(443)
–
• Gabetti S.p.A. – ordinary shares
–
(1,912)
• Industria e Università S.c.r.l.
–
(269)
• Fiera Milano S.p.A.
• Milanosesto S.p.A. – participating instruments
(18)
(325)
• Premuda
–
(691)
• Prelios S.p.A.
–
(9,639)
(5,993)
(10,070)
• Release S.p.A.
• Risanamento S.p.A.
• Sorgenia S.p.A. – participating instruments
• Targetti S.p.A.– participating instruments
• Telegate AG
• Terme di Acqui S.p.A.
• Zucchi S.p.A.
Mutual funds
• Cambria Co-Invest Fund
• Amber Energia Fund
–
(9,304)
(6,010)
–
–
(488)
(32)
–
(76)
(7)
(149)
(254)
(3,322)
(5,587)
(122)
–
(69)
(1,192)
• Fondo immobiliare italiano Goethe
(679)
(2,976)
• Fondo immobiliare italiano Tikal
(323)
(41)
(1,568)
–
• Fondo Italiano di Investimento
• Fondo immobiliare italiano Sei
• Wisequity II Fund
Total
(561)
–
–
(1,378)
(17,551)
(40,742)
8.3 Net losses/recoveries on impairment of investments held to maturity: analysis
There were no investments held to maturity at the balance sheet date.
286
Part C - Information on the consolidated income statement
8.4 Net losses/recoveries on impairment of other financial activities: analysis
Transaction/income item
Adjustments
Specific
Write-backs
Portfolio
Write-offs
Other
A. Guarantees issued
–
(5,175)
B. Credit derivatives
–
–
C. Commitments to disburse funds
–
D. Other transactions
E. Total
Specific
Year
2015
Portfolio
Year
2014
A
B
A
B
(1,031)
–
18,974
–
2,121
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(5,175)
(1,031)
–
18,974
–
2,121
14,889 (13,508)
14,889 (13,508)
Key: A = for interest B = other write-backs
This line item shows the adjustments/write-backs made on guarantees given in conjunction with the expected loss in the
event of their enforcement.
The adjustments in the “Other” column relate to provisions made on specific positions of guarantees given, while the
portfolio adjustments are calculated by the same method adopted for collective write-downs. This item includes the
provision on the portion attributable to the commitment made by the Interbank Deposit Guarantee Fund for the rescue
interventions that have been approved.
Section 9 – Net insurance premiums
Line item 150
This item has a nil balance as there are no insurance companies in the Group.
Section 10 – Other net insurance income (expenses)
Line item 160
This item has a nil balance as there are no insurance companies in the Group.
Part C - Information on the consolidated income statement
287
Section 11 – Administrative expenses – Line item 180
11.1 Personnel expenses: analysis
In addition to employee expenses, these costs include:
the cost of employees seconded to other companies and the related recharges;
costs for non-standard employment contracts (e.g. temporary and contract workers);
reimbursement of cost of employees of other companies seconded to Group companies;
remuneration payable to the members of the Management Board and the Supervisory Board of the Parent Company
and to the directors and the statutory auditors of the other Group companies (including the costs incurred for civil
liability insurance policies);
costs associated with share-based payments;
provisions made with counter-entry to “other liabilities” for productivity bonuses relating to the year but paid the
following year.
Type of expense/amount
Year 2015
Year 2014
1) Employees
(608,130)
(607,985)
a) wages and salaries
(402,740)
(403,761)
b) social security charges
(117,136)
(119,901)
c) termination indemnities
(22,159)
(20,827)
–
–
(2,448)
(3,797)
(10,156)
(6,375)
d) pension costs
e) charge to employee termination indemnities
f) charge to provision for post employment benefits:
– defined contribution
–
–
(10,156)
(6,375)
(9,425)
(9,415)
(9,425)
(9,415)
–
–
h) costs associated with share-based payments
(16,331)
(16,526)
i) other employee benefits
(27,735)
(27,383)
–
(126)
(4,252)
(4,309)
– defined benefit
g) payments to external supplementary pension funds:
– defined contribution
– defined benefit
2) Other personnel
3) Directors and statutory auditors
4) Retired personnel
Total
–
–
(612,382)
(612,420)
The following should be noted for these expenses:
Line item c) "employee termination indemnities" comprises, in addition to the employees who left during the year, also
the termination indemnities paid directly to INPS and to pension funds.
Sub-item g) "payments to external supplementary pension funds – defined contribution" comprises the contribution
paid to external retirement benefit plans.
Sub-item "h) costs associated with share-based payments" refers to the portion reserved to employees of the Parent
Company, except for those who hold senior management positions, in compliance with article 60 of the Articles of
Association approved by the Extraordinary General Meeting of Members held on 22 October 2011. This portion
is equal to 5% of the pre-tax profit of the Parent Company (“income (loss) before tax from continuing operations”)
288
Part C - Information on the consolidated income statement
calculated prior to the amount to be determined, unless the general meeting decides not to distribute dividends from
the net income for the year. This amount is paid in the form of shares, which are subject to a three-year retention
period before the assignee can dispose of them. The reference value of the shares is equal to the average market price
recorded during the 30 days before the grant date.
That said, it is noted that – based on the results of the Parent Company for 2015 – “income (loss) from continuing
operations before taxes” (that is, income prior to the effect of the above), prior to the computation of amounts to be
allocated to employees, came to 310,649,739.92 euro. Accordingly, on the basis of the Articles of Association the
amount payable to employees was 15,532.487 euro.
After deducting this amount, income from continuing operations before taxes comes to 295,117,252.92 euro,
as shown by income statement line item 250. In 2014 the amount accrued payable to employees was
15,975,983.60 euro.
Sub-item i) "other employee benefits" is discussed in paragraph 11.4 of this Section.
The line item "3) Directors and statutory auditors" consists of the following remuneration:
1.269 million euro to members of the Management Board of the Parent Company;
2.164 million euro to members of the Supervisory Board of the Parent Company;
0.653 million euro to members of the Boards of Directors of subsidiaries;
0.166 million euro to members of the Boards of Statutory Auditors of subsidiaries.
11.2 Average number of employees by level
Item
Employees
a) managers
b) officials
– of whom: 3rd and 4th level
c) other employees
Year 2015
Year 2014
7,197
7,260
148
153
2,700
2,751
1,433
1,466
4,349
4,356
Other personnel
9
23
Consultants and temporary workers
9
23
7,206
7,283
Total
The average is calculated as the weighted average number of employees where the weighting is given by the number
of months worked during the year. Part-time employees are conventionally considered at 50%.
Part C - Information on the consolidated income statement
289
Actual number of employees by level
Item
Employees
a) managers
b) officials
– of whom: 3rd and 4th level
c) other employees
31.12.2015
31.12.2014
7,736
7,740
146
150
2,798
2,798
1,461
1,472
4,792
4,792
Other personnel
7
19
Consultants and temporary workers
7
19
7,743
7,759
Total
The number of employees includes 1,114 part-timers (1,095 at 31.12.2014), with a proportion of 14.39% of total
personnel in service at the balance sheet date.
Changes in the number of employees are shown in the “The distribution network and Human resources” chapter of the
report on operations, to which reference should be made.
11.3 Defined benefit pension plans: income and expense
Year 2015
Year 2014
(7,559)
(1,703)
(7,559)
(1,703)
– plan of the former Banca popolare Bologna e Ferrara
–
–
– plan of the former Banca popolare Agricola Milanese
–
–
– plan of the former CR Alessandria
–
–
(1,484)
(2,331)
– BPM supplementary pension plan
(830)
(1,415)
– plan of the former Banca popolare Bologna e Ferrara
(288)
(213)
– plan of the former Banca popolare Agricola Milanese
(1)
(1)
(365)
(702)
(9,043)
(4,034)
• pension cost:
– BPM supplementary pension plan
• interest expense:
– plan of the former CR Alessandria
Total
In addition to the above costs, for 2015 there is also a solidarity contribution of 10% pursuant to Law no. 166/91
of 1.113 million euro (2.341 million euro in 2014) recognised in the income statement in the sub-item “charge to
provision for post employment benefits”.
Analysis of “actuarial gains (losses) recognised in shareholders’ equity”
Item
31.12.2014
Change
31.12.2015
BPM supplementary pension plan
(32,451)
(3,485)
(35,936)
Plan of the former Banca popolare Bologna e Ferrara
(10,114)
96
(10,018)
(7)
1
(6)
Plan of the former CR Alessandria
Plan of the former Banca popolare Agricola Milanese
(10,977)
1,305
(9,672)
Total actuarial gains (losses)
(53,549)
(2,083)
(55,632)
290
Part C - Information on the consolidated income statement
11.4 Other employee benefits
“Other employee benefits” include an expense of 6.908 euro relating to the Solidarity Fund agreement signed by the
Group's banks and the trade unions in December 2012 (13.217 million euro in 2014).
This item also includes contributions towards the running of staff canteens, the cost of subsidised-rate loans given to
employees and the cost of staff severance incentives.
11.5 Other administrative expenses: analysis
Type of service/amount
IT expenses
Maintenance and rent of hardware and software and data transmission
Services rendered by Group companies
ATM running costs
Outsourced IT services
Expenses for buildings and furniture
Property leases
Property leases
Office machine lease charges
Other expenses
Year 2015
Year 2014
(72,334)
(74,693)
(57,990)
(60,514)
–
–
(1,371)
(1,270)
(12,973)
(12,909)
(46,720)
(51,036)
(34,204)
(38,216)
(33,448)
(37,560)
(756)
(656)
(12,516)
(12,820)
Maintenance
(7,811)
(8,107)
Cleaning
(4,705)
(4,713)
(52,806)
(60,718)
(9,620)
(11,360)
(10,476)
(14,910)
(7,942)
(8,479)
(12,122)
(13,032)
Transport
(7,318)
(6,916)
Stationery and printing
(3,759)
(4,156)
Removals and porterage
(1,106)
(1,385)
(463)
(480)
(52,041)
(45,617)
Professional fees
(34,508)
(29,798)
Legal expenses and company information
(17,295)
(15,576)
(238)
(243)
(3,780)
(4,381)
Purchase of non-professional assets and services
Telephone and postage
Sub-contract work
Security and cash-counting services
Electricity, heating and water
Subscriptions to newspapers and magazines
Purchases of professional services
Corporate body fees
Insurance premiums
Advertising expenses
Indirect taxes and duties
Other
Charity
Membership fees and fees mandatory by law
Other
Total
Part C - Information on the consolidated income statement
(21,953)
(20,325)
(102,168)
(109,537)
(67,763)
(9,327)
(550)
(1,037)
(63,902)
(3,969)
(3,311)
(4,321)
(419,565)
(375,634)
291
“Indirect taxes and duties” include indirect taxes (stamp duty and flat-rate tax) recharged to customers of 86.969 million
euro. In the reclassified income statement, as indicated in the notes thereto, this amount has been reversed from both
“other administrative expenses” and “other operating charges/income”.
Starting from 2015, “membership fees and fees mandatory by law” include the contribution paid to the National
Resolution Fund – by way of an ordinary and extraordinary contribution – for an amount of 53 million euro and the
ordinary contribution of 5.9 million euro paid to the Deposit Guarantee Fund.
Section 12 – Net provisions for risks and charges
Line item 190
12.1 Net provisions for risks and charges: analysis
Year 2015
Provisions
Year 2014
(22,762)
(20,496)
Legal disputes
(11,867)
(15,257)
Other risks and charges
(10,895)
(5,239)
(1,160)
(2,227)
– Provision for clawback actions
– Provision for tax disputes
– Provision for other future charges
Reallocations
Legal disputes
Other risks and charges
– Provision for clawback actions
– Provision for tax disputes
– Provision for other future charges
Total
–
–
(9,735)
(3,012)
33,520
16,951
28,547
13,587
4,973
3,364
90
75
–
3,000
4,883
289
10,758
(3,545)
Net provisions for risks and charges regard the risk related to pending legal disputes, and others, to provide against
any loss that might arise from contractual disputes of a commercial nature; they also include changes in provisions
during the year as the timing of expected liabilities approaches to reflect the financial component relating to the time
value of money.
292
Part C - Information on the consolidated income statement
Section 13 – Net adjustments to/recoveries on property and equipment
Line item 200
This item consists of the depreciation charged on properties and other fixed assets.
13.1. Net adjustments to/recoveries on property and equipment: analysis
Asset/income item
Impairment
adjustments
(b)
Write-backs
(c)
(35,048)
(5,970)
(34,203)
Depreciation
(a)
Net result
(a + b + c)
Year 2015
Year 2014
–
(41,018)
(44,450)
(5,970)
–
(40,173)
(43,561)
(845)
–
–
(845)
(889)
A. Property and equipment
A.1 Owned by the company
– for business use
– for investment
A.2 Acquired under finance leases
–
–
–
–
–
– for business use
–
–
–
–
–
– for investment
–
–
–
–
–
(35,048)
(5,970)
–
(41,018)
(44,450)
Total
The adjustment of 6 million euro for impairment (2.3 million euro in 2014) reduced the total book value of properties
(land and buildings) from 26.6 million euro to 20.6 million euro at 31 December 2015. This latter amount was
established by an appraisal performed by an independent expert.
Section 14 – Net adjustments to/recoveries on intangible assets
Line item 210
14.1 Net adjustments to/recoveries on intangible assets: analysis
Asset/income item
Amortisation
(a)
Impairment
adjustments
(b)
Write-backs
(c)
Net result
(a + b + c)
Year 2015
Year 2014
A. Intangible assets
A.1 Owned by the company
(29,125)
–
–
(29,125)
(25,859)
– Internally generated
(188)
–
–
(188)
(383)
(28,937)
–
–
(28,937)
(25,476)
–
–
–
–
–
(29,125)
–
–
(29,125)
(25,859)
– Other
A.2 Acquired under finance leases
Total
Part C - Information on the consolidated income statement
293
Section 15 – Other operating expenses/income
Line item 220
15.1 Other operating expenses: analysis
Income item/amount
Year 2015
Year 2014
(4,630)
(4,575)
Other operating expenses
(16,267)
(16,793)
Total
(20,897)
(21,368)
Year 2015
Year 2014
86,969
89,223
7,106
7,955
24
35
–
–
Amortisation of leasehold improvements recognised in "Other assets"
15.2 Other operating income: analysis
Income item/amount
Tax recoveries
Rental and leasing income
Income and IT services rendered to:
Group companies
Third parties
24
35
41,617
41,688
On deposits and overdrafts
26,031
27,372
Other
15,586
14,316
Recharge of costs
Other income
Total
Total line item 220 Other operating expenses/income
7,694
20,515
143,410
159,416
Year 2015
Year 2014
122,513
138,048
“Tax recoveries” mainly relate to the stamp duty on current accounts and securities deposits and the flat-rate tax on
medium-term loans recovered from customers.
294
Part C - Information on the consolidated income statement
Section 16 – Profits (losses) on investments in associates and companies subject to joint
control – Line item 240
16.1 Profits (losses) on investments in associates and companies subject to joint control: analysis
Income item/sector
Year 2015
Year 2014
167
8
1) Companies subject to joint control
A. Income
1. Revaluations
167
8
2. Profits on disposal
–
–
3. Write-backs
–
–
4. Other income
B. Expense
–
–
–
1. Write-downs
–
–
2. Impairment losses
–
–
3. Losses on disposal
–
–
4. Other expense
–
–
167
8
71,259
129,879
71,259
25,405
2. Profits on disposal
–
104,474
3. Write-backs
–
–
Net result
2) Companies subject to significant influence
A. Income
1. Revaluations
4. Other income
B. Expense
–
(1,422)
(2,556)
1. Write-downs
–
(2,556)
2. Impairment losses
–
–
(1,422)
–
–
–
69,837
127,323
70,004
127,331
3. Losses on disposal
4. Other expense
Net result
Total
The “revaluations” and “write-downs” lines show adjustments made to investments in companies subject to joint control
and companies subject to significant influence to align them with the corresponding portion of the investee’s net equity
at the balance sheet date, inclusive of the result for the year attributable to the Group.
Total net income pertaining to the Group from investments carried at equity value amounted to 70,004 million euro.
This is mainly due to the amount attributable to the Group of the results of SelmaBipiemme Leasing, Anima Holding,
Bipiemme Vita and Factorit. In particular, the result of SelmaBipiemme Leasing takes into account the positive effect
arising from the increase in the investee’s equity following the merger of Palladio Leasing into that company.
Losses on disposal relate wholly to the sale of the investment in Pitagora 1936.
Profits on disposal in 2014 arose from the sale of the Group’s 18.44% interest in Anima Holding.
Part C - Information on the consolidated income statement
295
Section 17 – Net result of valuation differences on property, equipment and intangible
assets – Line item 250
The Group does not hold and property, equipment and intangible assets measured at fair value or revalued.
Section 18 – Goodwill impairment
Line item 260
There is no balance for goodwill at 31 December 2015 as this was written-off in the first half of 2012.
Section 19 – Profits (losses) on disposal of investments – Line item 270
19.1 Profits (losses) on disposal of investments: analysis
Income item/amount
Year 2015
Year 2014
6
–
– Profits on disposal
6
–
– Losses on disposal
–
–
A. Buildings
B. Other assets
–
–
– Profits on disposal
1
–
– Losses on disposal
(1)
–
6
–
Net result
296
Part C - Information on the consolidated income statement
Section 20 – Taxes on income from continuing operations – Line item 290
20.1 Taxes on income from continuing operations: analysis
Income item/sector
Esercizio 2015
Esercizio 2014
1. Current taxes (–)
(70,554)
(167,942)
23,413
13,210
–
–
2. Change in prior period income taxes (+/–)
3. Reduction in current taxes (+)
3. bis Reduction in current taxes due to tax credits pursuant to Law no. 214/2011 (+)
4. Change in deferred tax assets (+/–)
5. Change in deferred tax liabilities (+/–)
6. Income taxes for the year (–) ( -1+/-2+3+3bis+/-4+/-5)
–
187
(27,813)
47,628
11,442
14,909
(63,512)
(92,008)
The balance on line item 290 “Taxes on income from continuing operations” is negative for 63.5 million euro (negative
for 92 million euro in 2014).
The negative change in deferred tax assets of 27.8 million euro is explained in the notes in asset section 14 – tables
14.3 and 14.5.
The change in deferred tax liabilities of 11.4 million euro is explained in the notes in asset section 14 – tables 14.4
and 14.6.
Section 21 – Income (loss) after tax from discontinued operations
Line item 310
There was no income (loss) from discontinued operations during the year.
Section 22 – Net income (loss) for the period attributable to minority interests
Line item 330
22.1 Details of line item 330 “net income (loss) for the period attributable to minority interests”
Net income (loss) for the period attributable to minority interests relates to the following consolidated companies:
Company
Year 2015
Year 2014
1. Banca Popolare Mantova
487
86
2. Banca Akros
515
554
–
–
1,002
640
Net income (loss) for the period attributable to minority interests:
Other investments
Total
Part C - Information on the consolidated income statement
297
Section 23 – Other information
Further information on the 2015 results is provided in the section of the report on operations on the various
business sectors.
Section 24 – Earnings per share
International accounting standards (IAS 33) emphasise the importance of the “profit per share” return – commonly
known as “EPS – earnings per share”, making its disclosure compulsory as follows:
“Basic EPS”, calculated by dividing the net income attributable to the holders of the ordinary shares of the parent
company by the weighted average number of ordinary shares outstanding during the period;
“Diluted EPS”, calculated by dividing net income by the weighted average number of ordinary shares outstanding
during the period as adjusted for the dilutive effect of all potential shares, i.e. those financial instruments and/or
contracts which give their owners the right to obtain ordinary shares.
The profit (or loss) from continuing operations and the profit (or loss) from discontinued operations are shown separately.
24.1 Average number of diluted ordinary shares
The average number of ordinary shares used as the denominator in the calculation of basic EPS (4,390,322,436) was
determined taking into account the number of ordinary shares outstanding during the period, adjusted by the number
of treasury shares held.
At 31 December 2015 there were no outstanding instruments that could have a dilutive effect on earnings per share;
consequently, the basic and diluted EPS shown below are the same.
Basic and diluted EPS are therefore as follows:
Net income per share attributable to the Group
(in Euro)
31.12.2015
31.12.2014
0.066
0.059
–
–
Basic EPS
0.066
0.059
Diluted EPS from continuing operations
0.066
0.059
Basic EPS from continuing operations
Basic EPS from discontinued operations
Diluted EPS from discontinued operations
Diluted EPS
298
–
–
0.066
0.059
Part C - Information on the consolidated income statement
Part D
Consolidated statement of comprehensive
income
299
Detailed consolidated statement of comprehensive income
Line items
10.
Gross amount
Income tax
Net amount
Net income (loss) for the period *
X
X
289,909
Other comprehensive income without reversal to the income statement
( )
20.
Property and equipment
0
0
0
30.
Intangible assets
0
0
0
40.
Actuarial gains (losses) on defined benefit plans
4,012
(1,104)
2,908
50.
Non-current assets held for sale
0
0
0
60.
Share of valuation reserves connected with investments carried at equity
70.
80.
90.
(75)
0
(75)
Other comprehensive income with reversal to the income statement
Hedging of foreign investments:
0
0
0
a) changes in fair value
0
0
0
b) reclassification to income statement
0
0
0
c) other changes
0
0
0
Foreign exchange differences:
0
0
0
a) change in amount
0
0
0
b) reclassification to income statement
0
0
0
c) other changes
0
0
0
Cash flow hedges:
108
(35)
73
a) changes in fair value
108
(35)
73
b) reclassification to income statement
0
0
0
c) other changes
0
0
0
(126,412)
20,912
(105,500)
49,080
(22,614)
26,466
(175,492)
43,526
(131,966)
7,170
(2,319)
4,851
(182,662)
45,845
(136,817)
100. Financial assets available for sale:
a) changes in fair value
b) reclassification to income statement
– impairment adjustments
– profits (losses) on disposal
c) other changes
110. Non-current assets held for sale:
0
0
0
0
a) changes in fair value
0
0
0
b) reclassification to income statement
0
0
0
c) other changes
0
0
0
120. Share of valuation reserves connected with investments carried at equity
a) changes in fair value
b) reclassification to income statement
– impairment adjustments
– profits (losses) on disposal
c) other changes
130. Total other comprehensive income
140. Total comprehensive income (line items 10+110)
852
0
852
852
0
852
0
0
0
0
0
0
0
0
0
0
0
0
(121,515)
19,773
(101,742)
188,167
187,245
150. Total consolidated comprehensive income attributable to minority interests
160. Total consolidated comprehensive income attributable to the Parent Company
(922)
(*) Net income (loss) for the period attributable to the Parent Company288,907
Net income (loss) for the period attributable to minority interests1,002
Net income (loss) for the period
Part D – Consolidated statement of comprehensive income
289,909
301
Part E
Information on risks and related hedging
policies
303
Section 1 – Risks of the Banking Group
Unless indicated otherwise, the information contained in Section 1 “Risks of the Banking Group” refers only to the
Banking Group, except in the cases specified in Bank of Italy Circular no. 262/2005.
The figures are shown prior to elimination of intercompany transactions with other consolidated companies not included
in the Banking Group and conventionally also include assets and liabilities of banking, financial and near-banking joint
ventures in proportion to the interest held.
Bipiemme Group includes three companies (BPM Securitisation 2 S.r.l., BPM Securitisation 3 S.r.l. and ProFamily
Securitisation S.r.l.) that are consolidated on a line-by-line basis but are not part of the Banking Group, given that
they are special purpose vehicles for securitisations and in which no equity interests are held, and one jointlycontrolled company (Calliope Finance S.r.l.) which, in the consolidated financial statements is accounted for using
the equity method.
The figures contained in the other sections of these notes (in parts B and C) include the figures of companies which are
not part of the Banking Group and exclude the figures relating to the joint ventures.
Introduction
The risk monitoring and control process
Based on thorough analyses conducted as part of the Risk Identification Process, Bipiemme Group manages the risks
to which it is or could be exposed by means of a Risk Appetite Framework (RAF), through which the corporate bodies
approve the Group’s mission in terms of risk based on an integrated and structured approach which has implications
for governance and integrated risk management policies and affects almost all Group functions.
The Risk Appetite approved by the corporate bodies is therefore considered to be the framework through which
the Group defines its mission in terms of risk, through an organic and structured approach that has implications for
governance and the processes of integrated risk management, as well as widespread impacts on almost all business
functions. In this context, the long-term vision of the desired risk profile was made explicit and the area of risk within
which the Group intends to operate was defined. The RAF can be set up both in terms of metrics and limits and in terms
of quality guidelines.
The definition of risk appetite is a management tool that permits effective application of Supervisory Authority provisions
and that:
strengthens the capacity to govern and manage corporate risks;
supports the strategic process;
facilitates the development and dissemination of an integrated risk culture;
develops a system to rapidly and effectively monitor and communicate the assumed risk profile;
guides actions of escalation as may be required for definition of the Recovery Plan.
The RAF has to be integrated with key business processes in line with the new prudential supervisory provisions for
banks: “Banks ensure consistency and timely compliance between the business model, strategic plan, risk appetite
framework, ICAAP, budget, corporate organisation and the internal control system”.
In 2015, with completion of the Risk Appetite Framework, analysis and coordination of the RAF continued with the Joint
Supervisory Team of the European Central Bank, which confirmed its overall structure, instruments, and consistency with
the business model, strategic plan, ICAAP, corporate organisation, and the internal control system.
The Group’s Recovery Plan was defined in line with regulatory guidelines, based on principal corporate processes and
primarily on the Risk Governance model.
Part E – Information on risks and related hedging policies
305
In accordance with the role assigned to it by the Supervisory Regulations, the Management Board of the Parent
Company is responsible for making strategic decisions concerning risk management and control at Group level, with a
view to achieving an integrated and coherent risk management policy that, at the same time, takes into account the type
of operations and associated risk profile of each Bipiemme Group company, with the aim of preserving the Group’s
sound and prudent management.
In November 2014 BPM’s Management Board set up a Risk Committee, which was created as a sub-committee of
the former, in compliance with Bank of Italy Circular no. 285, with functions of strategic supervision of risk and of the
internal control system; the Board Committee works alongside the Group Risks Committee, set up by the Bipiemme
Group in 2013 to support the corporate bodies in achieving integrated management of risks. The latter meets at least
once a month and has the task of supervising the integrated management of all business risks to which the individual
members of the Group and the Group as a whole are exposed to.
The Bank’s Internal Control System (ICS) reflects an articulated, systemic vision, which sets out the general principles that
are designed to ensure the correct and effective management of the systems to be checked for risks, defining, in particular,
how they function and the guidelines for the monitoring and coordination of the Group companies’ control activities.
The ICS is a set of rules, functions, structures, resources, processes and procedures designed to ensure the achievement
of the following goals in accordance with sound and prudent management:
checks on the implementation of corporate strategies and policies;
mitigation of risk within the limits laid down in the RAF;
protection of the value of assets and protection against losses;
effectiveness and efficiency of business processes;
reliability and security of corporate information and IT procedures;
prevention of the risk that the Group may be involved, even unwittingly, in unlawful activities (with particular
reference to those related to money laundering, usury and the financing of terrorism);
compliance of operations with the law and regulatory provisions, as well as with internal policies, regulations and
procedures.
As part of a more general process of value creation for the Group, the correct functioning, formalisation and updating of the
Organisational Model for the ICS is also an essential condition for the maintenance of this process, given that the methods
for carrying out business processes always have to be suitably aligned with the processes of governance and control.
This Model constitutes a point of reference for a common, standard approach on the part of the entire Group, which
presumes widespread knowledge of its contents, complete awareness of the underlying assumptions and common
acceptance of the values on which it is based.
The Parent Company also favours the development of a suitable corporate risk culture based on customer assistance,
providing customers with adequate information regarding complaints and matters that need reporting. This represents,
above all, a means of protection for customers and also supplements the Group’s broader ICS.
Based on the relevant generally accepted principles, on the Supervisory Regulations of the Bank of Italy and on the
Corporate Governance Code of Borsa Italiana S.p.A., it can be stated that the ICS consists of a set of rules, procedures
and organisational structures which, through a suitable process of identification, permits:
the measurement, management and monitoring of risks to which the Group is or might be exposed;
the company to be run in a healthy, correct and consistent way in line with objectives set by the governing bodies;
the safeguarding of the company’s assets, the efficiency and effectiveness of its operations, the reliability of the
financial reporting process and compliance with all laws and regulations.
The adequacy, efficacy and effective functioning of the Internal Control System are assessed, according to their
respective areas of competence, by:
the Management Board of the Parent Company, which is responsible for risk management and internal controls in
accordance with article 39, paragraph 2d of the Articles of Association, without prejudice to the powers and duties
of the Supervisory Board;
306
Part E – Information on risks and related hedging policies
the Managing Director of the Parent Company, who is assigned the power to promote integrated risk management
(article 45, paragraph 2m of the Articles of Association);
the Supervisory Board of the Parent Company, which is responsible for assessing the level of efficiency and
adequacy of the internal control system, with particular regard to risk control, the Internal Auditing function and
the accounting and reporting system; it also checks that the Parent Company properly performs its strategic and
management control activities over the other Group companies (article 51e of the Articles of Association);
the Parent Company’s Internal Control Committee, by which the Supervisory Board carries out its control functions
and to which the Committee must report with up-to-date and timely information;
the Parent Company’s Internal Auditing Department, which carries out audit work, the Compliance Department,
which checks compliance with the Bank’s policies, and the Chief Risk Officer, who is responsible at a Group level
for monitoring risk and implementing processes to ensure risk management.
As established by the Management Board in the new corporate structure that took effect in the third quarter of 2015,
risk monitoring and control is delegated to the Parent Company’s Chief Risk Officer (CRO), who, by means of the
various organisational units over which he/she presides is in charge of ensuring, at a Group level, coordinated control
of the risks for which he/she is responsible and guaranteeing the development and continuous improvement of methods
and models for their measurement.
The Risk Management & Capital Adequacy function, which collaborates on the definition and implementation of
the RAF, of ICAAP and ILAAP Reports, on the Recovery Plan, and on related risk management policies by means
of an adequate risk management process, understood as the identification, measurement or evaluation, monitoring,
prevention or mitigation and reporting of the risks to which the Group is or might be exposed, guarantees adequate
capital resources of the First and Second Pillar and an adequate liquidity profile.
With reference to market risk, the Parent Company’s Risk Management & Capital Adequacy function also avails itself
of the operations conducted by the homologous function at Banca Akros. Also formed within the CRO structure is
the Regulatory Relationship unit, which supports the Chief Risk Officer in relations with the Supervisory Authority, in
monitoring and consulting with regard to regulatory provisions, in proactive management of SREP Mirroring and in the
development and dissemination of risk culture.
The Risk Control unit contributes to integrated risk management at a Group level by conducting second-level management
checks on the credit and financial risks inherent to the main balance sheet items in line with rules contained in current
supervisory provisions, focusing on the accuracy and representativeness of the information used for such purpose and,
in particular, for evaluating the adequacy of the instruments used and of the actions proposed by first-level structures,
specifying any steps that may be needed for reorganisation and/or improvement.
For such purpose, the Parent Company:
ensures that consistent methodologies, measurement criteria and risk control instruments, appropriate to the type
and extent of assumed risks, are used throughout the Group;
involves the Corporate Bodies of subsidiaries in decisions concerning risk management procedures and policies;
periodically assesses the Group’s Risk Profile in the Risk Management report (risk actually assumed by the Group,
measured in a specific time period) and compares it to the threshold values defined in the RAF.
The Validation Unit is involved in audit activities linked to overall operations in the CRO, and ensures checking of and
compliance with regulatory provisions and alignment with market best practices.
As regards the principal risks to which the Group is exposed, for credit and concentration risk, the Parent Company
ensures that a Group lending and credit management policy is defined and adopted, that “significant exposures” are
monitored centrally and that the overall quality of the loan and commitment portfolio is kept under control. The Parent
Company is also responsible for setting up and maintaining the internal rating system (IRS), which is currently used
in various processes: granting/renewing credit, monitoring/measuring credit risk, calculating portfolio adjustments,
measuring risk-adjusted performance and defining risk-adjusted pricing for new lending operations.
Part E – Information on risks and related hedging policies
307
In matters of financial risks (market risk, counterparty risk, liquidity risk, interest rate risk on the banking book), the
Parent Company’s Management Board identifies and authorises the Group companies that can assume and manage its
own financial risks in compliance with the limits established by the Parent Company.
With reference to market risk, the limit system for the various types of portfolio is organised as follows:
company macro-limits, i.e. the maximum exposure that can be assumed by the companies authorised to take on
financial risks;
directional limits, i.e. the allocation of company limits to individual portfolios, to be defined in specific Regulations
for Financial Operations for each Group company.
The Group’s Finance Committee ensures the coordination of the Group’s policies for investing in financial assets,
the implementation of the liquidity policy and related annual ILAAP Report and the monitoring and management of
exposure to interest rate risk on the banking book.
For such purpose, the Committee performs the following tasks:
monitoring the Group’s operational and structural liquidity – by checking exposure to short-term liquidity gaps, the
exposure on the interbank market, cash flow and the pricing of intragroup liquidity – and the definition of guidelines
for managing liquidity;
approving new banking book investments, within the limits established by the Management Board of the Parent
Company on the proposal of the Risk Committee;
monitoring the activity of the Asset & Liability Management (ALM) function and defining corrective policies to
balance the exposure of the banking book to interest rate risk for the Group as a whole and for the individual
companies.
As regards operational risk, the Parent Company has responsibility for setting up and operating the system of operational
risk management and control, this being understood as a structured series of processes, functions and resources for the
identification, measurement, valuation, prevention/mitigation and control of exposure to operational risks.
The Parent Company’s Risk Management & Capital Adequacy Function supervises Operational Risk activities and
coordinates the Operational Risk Managers of Group banks.
Through the Risk Management & Capital Adequacy Function, the Parent Company ensures the measurement, monitoring,
and management of capital requirements for each type of risk, ensuring supervision and quantification of the Group’s
capital resources to cover exposure to risks in order to comply with the regulatory obligations of the First and Second Pillar
of Basel 2.
In particular, centralised control over the Group’s capital adequacy, which involves comparing the amount of available
capital with the capital requirements deriving from the risks to which the Group is exposed, on an actual and prospective
basis, in conditions of normality and of stress, is carried out through the Internal Capital Adequacy Assessment Process,
as required by the “Minimum Capital Requirements for Banks” (Circular no. 285/2013).
The Parent Company also ensures continuous measurement, monitoring and management of the consolidated capital
ratios, defining their target levels in the medium term in line with the evolution of regulatory requirements.
Lastly, with regard to compliance with Pillar 3 requirements, the disclosure on risk monitoring and management activities
will be published on Bipiemme Group’s website (www.gruppobpm.it). Bipiemme Group’s Pillar 3 disclosure, based on the
provisions of Regulation (EU) No. 575/2013 (Capital Requirements Regulation) and the EBA/GL/2014/14 guidelines of
23 December 2014 (Guidelines on materiality, proprietary and confidentiality and on disclosure frequency under Articles
432(1), 432(2) and 433 of Regulation (EU) No.575/2013), will be published semi-annually.
308
Part E – Information on risks and related hedging policies
1.1 – Credit risk
Qualitative information
1. General aspects
The policies for managing and controlling the quality of the loan portfolio and the associated risks are based on rules
of sound and prudent management.
They are implemented through the processes of disbursing, managing and monitoring credit for which specific activities
are required and special instruments made available for controlling the risk that varies according to the circumstances
of the market and business sector and, specifically, the characteristics of each borrower.
The Bipiemme Group grants credit to households and businesses in its territory in order to meet their needs and to
help them achieve sustainable growth, with the goal of increasing profitable long-term relationships, encouraging
development and the arrival of new customers, in compliance with objectives of proper management of the risk/
return profile. The Group, with a business model aimed at operating as a local bank, gives preference to development
activities geared to Italian households and companies.
The loan portfolio is closely monitored on a continuous basis in order to rapidly identify any symptoms of imbalance
and to take corrective action to prevent any deterioration.