Interim report on operations

Interim
report on
operations
as at 31 March 2015
INTERIM REPORT ON OPERATIONS
AS AT 31 MARCH 2015
________________________________________________________________________________________________________________________________________________
Banco Popolare Società Cooperativa
Registered office and General headquarters: Piazza Nogara, 2 - 37121 Verona
Fully paid up share capital as at 31 March 2015: euro 6,092,996,076.83
Tax Code, VAT No. and Verona Companies’ Register Enrolment No. 03700430238
Member of the Interbank Deposit Guarantee Fund and the National Guarantee Fund
Parent Company of the Banco Popolare Banking Group
Enrolled in the register of Banking Groups
2
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OFFICERS, DIRECTORS AND INDEPENDENT AUDITORS
AS AT 31 MARCH 2015
Chairman
Deputy Chairman
Deputy Chairman
Managing Director
Directors
Board of Directors
Carlo Fratta Pasini (*)
Guido Castellotti (*)
Maurizio Comoli (*)
Pier Francesco Saviotti (*)
Patrizia Codecasa
Luigi Corsi
Domenico De Angelis (*)
Maurizio Faroni (*)
Gianni Filippa
Cristina Galeotti
Andrea Guidi
Valter Lazzari
Maurizio Marino
Daniela Montemerlo
Giulio Pedrollo
Enrico Perotti
Claudio Rangoni Machiavelli
Fabio Ravanelli
Cecilia Rossignoli
Sandro Veronesi
Franco Zanetta
Tommaso Zanini
Cesare Zonca (*)
Cristina Zucchetti
(*) members of the Executive Committee
Chairman
Standing Auditors
Alternate Auditors
General Manager
Joint General Manager
Standing members
Alternate Members
Board of Statutory Auditors
Pietro Manzonetto
Maurizio Calderini
Gabriele Camillo Erba
Claudia Rossi
Alfonso Sonato
Marco Bronzato
Paola Pesci
General Management
Maurizio Faroni
Domenico De Angelis
Ethics and Disciplinary Committee
Aldo Bulgarelli
Luciano Codini
Giuseppe Germani
Matteo Bonetti
Donato Vestita
Manager responsible for preparing
the Company’s financial reports
Gianpietro Val
Independent Auditors
Reconta Ernst & Young S.p.A.
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CONTENTS
Group structure ........................................................................................................................................................ 6
Banco Popolare Group Territorial Network.................................................................................................................. 8
Group financial highlights....................................................................................................................................... 10
Notes to the Interim Report on Operations ............................................................................................................... 12
Operating performance of the Group ....................................................................................................................... 18
Results .................................................................................................................................................................. 24
Risk management................................................................................................................................................... 49
Other information................................................................................................................................................... 58
Key financial highlights of the main Group companies.............................................................................................. 58
Significant events after the end of the period ........................................................................................................... 58
Outlook for business operations.............................................................................................................................. 60
Declaration of the Manager responsible for preparing the Company’s financial reports .............................................. 61
6
GROUP STRUCTURE: MAIN COMPANIES
100%
ALETTI GESTIELLE SGR
83.4%
BANCA ALETTI
100%
80%
BANCA
RELEASE
ITALEASE
BP LUXEMBOURG
100%
16.6%
ITALEASE
GESTIONE BENI
80%
BP PROPERTY
MANAGEMENT
100%
100%
SOCIETÀ
GESTIONE SERVIZI
RELEASE
100%
ITALEASE
GESTIONE BENI
BIPIELLE REAL ESTATE
100%
100%
ALBA LEASING
TECKMARKET
TECMARKET
32.8%
30.2%
100%
HOLDING
DI PARTECIPAZIONI
100%
AGOS DUCATO
39%
POPOLARE
VITA
ALBA LEASING
24.4%
30.2%
25.6%
POPOLARE
VITA
AVIPOP
ASSICURAZIONI
24.4%
49.9%
25.6%
AVIPOP ASSICURAZIONI
49.9%
7
GROUP STRUCTURE: BUSINESS LINES
COMMERCIAL NETWORK
INVESTMENT
& PRIVATE BANKING
ASSET MANAGEMENT
LEASING
CORPORATE CENTRE
AND OTHER
BANCO POPOLARE
BANCA ALETTI
BANCA
RELEASE
ITALEASE
BANCO POPOLARE
BPV division (North East)
BPL division (North and
Centre)
BPN division (North West,
Centre and South)
CB division (Bergamo)
ALETTI GESTIELLE SGR
RELEASE
ASSOCIATED
COMPANIES
GROUP FUNCTIONS
• Group Finance
• Securities portfolio
• Institutional funding
• Custodian bank
FOREIGN BANKS
• Alba Leasing
PRODUCT AND
REAL ESTATE COMPANIES
• Società Gestione Servizi
• Bipielle Real Estate
ASSOCIATED
COMPANIES
• Agos Ducato
Alba Leasing
• Popolare
Vita
Popolare
Vita
• Avipop
Assicurazioni
• Avipop Assicurazioni
The BPV division works with the trademarks: Banca Popolare di Verona, Banco S. Geminiano e S. Prospero, Banco S.
Marco, Banca Popolare del Trentino and Cassa di Risparmio di Imola.
The BPL division works with the trademarks: Banca Popolare di Lodi, Cassa di Risparmio di Lucca Pisa e Livorno, Banco di
Chiavari e della Riviera Ligure, Banca Popolare di Cremona and Banca Popolare di Crema.
The BPN division works with the trademarks: Banca Popolare di Novara and Banco Popolare Siciliano.
The CB division works with the trademark Credito Bergamasco.
GROUP TERRITORIAL NETWORK
Figures as at 31 03 2015
Banca Popolare di Verona
Banco S.Geminiano e S.Prospero
Banco San Marco
Banca Popolare del Trentino
Cassa di Risparmio di Imola
TERRITORIAL DEPARTMENT
BANCO S.GEMINIANO E S.PROSPERO
Banca Popolare di Novara
Banco Popolare Siciliano
TERRITORIAL DEPARTMENT
CENTRE SOUTH (ROME)
Credito Bergamasco
Banca Popolare di Lodi
Cassa di Risparmio di Lucca Pisa Livorno
Banco di Chiavari e della Riviera Ligure
Banca Popolare di Cremona
Banca Popolare di Crema
TERRITORIAL DEPARTMENT
CASSA DI RISPARMIO DI LUCCA PISA E LIVORNO (LUCCA)
Multi trademark areas
Banco Popolare not present
NUMBER OF BANCO POPOLARE GROUP BRANCHES
EXCLUDING 36 TREASURY BRANCHES
Banco Popolare
Banca Aletti
Total
1,779
34
1,813
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Banco Popolare Group Branches in Italy (*)
Banco Popolare
Banca Aletti
Total
9
Number
1,779
34
1,813
(*) Excluding 36 treasury branches
Presence abroad
Overall, the Group has 3 foreign branches, managed by its subsidiary companies BP Luxembourg, Banca Aletti Suisse
and Banco Popolare in London.
The Group’s presence on markets of interest for Italian exports takes the form of Representative Offices in China (Hong
Kong and Shanghai), India (Mumbai) and Russia (Moscow).
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GROUP FINANCIAL HIGHLIGHTS
The highlights and main ratios of the Group, calculated on the basis of the reclassified financial statements, are
presented below.
In previous years, the Banco Popolare Group exercised the option of designating financial liabilities issued by the bank
at fair value (“fair value option”) as an alternative to hedge accounting, also for issues classified as institutional.
Measuring the financial liabilities placed on the institutional market at fair value also entails measuring the impact of
the change in its own creditworthiness following the date of issue of the liability. Due to said previous option, the
Group’s profit (loss) is influenced to a significant extent by its creditworthiness measured on the basis of market
quotations of the specific credit default swap. Given the fact that the economic impact of the fair value option has no
value in terms of analysing the Group’s effective profitability, in the tables below, it was considered appropriate to
show the impact of the afore-mentioned fair value option in a separate item, also showing the profit (loss) of previous
(1)
periods compared net of said impact .
(in millions of euro)
Income statement figures
Financial margin
Net fee and commission income
Operating income
Operating expenses
Income (loss) from operations
Income (loss) before tax from continuing operations
Net income (loss) without FVO
FVO Impact
Net income (loss)
(in millions of euro)
Statement of financial position figures
Total assets
Loans to customers (gross)
Financial assets and hedging derivatives
Shareholders' equity
Customers financial assets
Direct funding
Indirect funding
- Asset management
- Mutual funds and SICAVs
- Securities and fund management
- Insurance policies
- Administered assets
Information on the organisation
Average number of employees and other staff (*)
Number of bank branches (**)
Q1 2015
Q1 2014
Change
412.2
422.3
954.0
(539.5)
414.5
186.3
217.2
(8.4)
208.8
391.9
371.7
892.6
(554.7)
337.9
5.9
1.2
(20.1)
(19.0)
5.2%
13.6%
6.9%
(2.7%)
22.7%
not significant
not significant
(58.0%)
31/03/2015
31/12/2014
Change
125,745.6
88,635.4
29,120.4
8,418.7
123,081.7
87,661.2
26,190.6
8,064.2
2.2%
1.1%
11.2%
4.4%
85,701.3
73,405.6
35,206.5
19,790.7
4,651.0
10,764.8
38,199.0
86,513.5
66,476.0
32,552.6
15,539.4
6,716.1
10,297.1
33,923.4
(0.9%)
10.4%
8.2%
27.4%
(30.7%)
4.5%
12.6%
17,169
1,852
17,575
1,858
(*) Weighted average calculated on a monthly basis. This does not include the Directors and Statutory Auditors of Group companies.
(**) Including treasury and foreign branches.
(1)
It should also be noted that on 24 July 2014, the International Accounting Standard Board (“IASB”) issued the final version of the new
accounting standard “IFRS 9 – Financial Instruments”. One of the changes introduced by the new standard is the elimination of income
statement volatility resulting from changes in creditworthiness. The latter changes will now be recognised directly as changes in
shareholders’ equity, without passing through the income statement. Companies may apply this new approach for recognition of the same
even before implementing the other changes introduced by the new accounting standard. The standard must be applied from 1 January
2018, however early application will be permitted as soon as the same has become part of Community regulations. The proposed
presentation of income statement figures therefore anticipates the expected change in the accounting recognition of this particular
phenomenon, immediately providing an income statement result that is free of the impact of changes in creditworthiness.
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Financial and economic ratios and other Group figures
31/03/2015
31/12/2014
Profitability ratios (%)
Annualized ROE
Annualized Return on asset (ROA)
Financial margin / Operating income
Net fee and commission income / Operating income
Operating expenses / Operating income
10.17%
0.66%
43.21%
44.26%
56.55%
not significant
not significant
48.60%
40.92%
67.02%
Operational productivity figures (000s of euro)
Loans to customers (gross) per employee (**)
Annualized operating income per employee (**)
Annualized operating expenses per employee (**)
5,162.5
222.3
125.7
4,987.8
192.7
129.1
Credit risk ratios (%)
Net bad loans / Loans to customers (net)
Unlikely to pay/ Loans to customers (net)
Net bad loans / Shareholders' equity
7.65%
9.42%
73.46%
7.52%
8.34%
74.40%
11.43%
11.83%
13.89%
4.74%
11.87%
12.26%
14.62%
4.86%
23.16%
2.98%
2.46%
0.51%
3.01%
103.42%
21.28%
2.94%
2.42%
0.52%
2.50%
101.33%
362,179,606
362,179,606
14.56
8.91
12.45
15.78
8.97
12.05
Capitalisation ratios
Common equity tier 1 ratio (CET1 capital ratio)
Tier 1 capital ratio
Total capital ratio
Tier 1 capital ratio / Tangible assets
Other ratios
Financial assets / Total assets
Derivative assets / Total assets
- trading derivatives / total assets
- hedging derivatives / total assets
Net trading derivatives / Total assets
Gross loans/Direct funding
Banco Popolare stock
Number of outstanding shares
Official closing prices of the stock
- Maximum
- Minimum
- Average
(*) The ratios were calculated excluding the economic effect of the FVO.
(**) Arithmetic average calculated on a monthly basis which does not include the Directors and Statutory Auditors of Group companies.
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NOTES TO THE INTERIM REPORT ON OPERATIONS
Structure, principles and content of the Interim report on operations
This Interim report on operations as at 31 March 2015, approved by the Board of Directors of Banco Popolare on 12
May 2015, was prepared pursuant to Article 154-ter of Italian Legislative Decree no. 58 of 24 February 1998 and
subsequent amendments and aims to promptly provide indications of the Group’s general performance based on
rapidly and easily determined economic-financial data.
The statement of financial position and income statement figures illustrated in this document are prepared by applying
the measurement bases already used for the purposes of preparing the consolidated financial statements as at 31
December 2014, which comply with the IAS/IFRS and related IFRIC interpretations, as endorsed by the European
Commission, pursuant to EU Regulation no. 1606 of 19 July 2002. More specifically, the Report reflects the statement
of financial position and income statement situations of Banco Popolare and its subsidiary companies on a
consolidated basis as at 31 March 2015, as described in the section “Scope of consolidation and methods”. In drawing
up this Report, estimation procedures were used different to those normally adopted for the preparation of the annual
accounts. More specifically, with reference to certain commission items as well as administrative expenses, given the
impossibility of determining the entity of the revenues and expenses associated respectively with services provided
and those received but not yet invoiced by means of the usual methods, Group companies have drawn up their
accounting statements using estimated data.
For an illustration of recognition, classification, measurement, derecognition and recognition of income components
relating to financial statement items, please refer to the content of the financial statements as at 31 December 2014
(“Part A - Accounting policies”). The section below “New accounting standards or amendments to accounting standards
validated by the European Commission” illustrates the new accounting standards or amendments to such standards
that became mandatory on 1 January 2015.
The “Report” comprises the following financial statements:
 the statement of financial position as at 31 March 2015, compared with the situation as at 31 December 2014,
relating to the last annual financial statements published;
 the income statement as at 31 March 2015, compared with the results from the corresponding period of the
previous year.
These statements are presented in reclassified format, based on the schedules drawn up in accordance with the
provisions contained in the Bank of Italy Circular no. 262 “Bank financial statements: layouts and rules for preparation”
and are accompanied by several tables providing details of the main reclassified items of the statement of financial
position and income statement and relative comments. The purpose of illustrating the statements in reclassified format
is to provide an immediate picture of the Group’s economic-capital performance, based on operational criteria.
This Interim report on operations is not subject to auditing by the independent auditors.
The amounts in this document are stated, unless otherwise specified, in thousands of euro.
New accounting standards or amendments to accounting standards validated by the European Commission
Starting from financial year 2015 the provisions set out in Regulations 634/2014 and 1361/2014 were applicable,
validating the following, respectively:
 interpretation IFRIC 21 “Levies”;
 the “Annual Improvements - 2011-2013 Cycle”, which introduced, as part of the ordinary rationalisation of
the accounting standards, several insignificant amendments to the standards IFRS 3, IFRS 13 and IAS 40. The
amendments introduced aim to resolve several inconsistencies and/or provide methodological clarifications.
With regard to IFRIC 21, the purpose of the new interpretation is to provide some guidelines on the recognition in the
accounts of several levies that are not covered by standard IAS 12. Specifically, the interpretation identifies the
“obligating event” for the recognition of a liability associated with certain levies, i.e. the important fact/situation that
triggers the payment obligation (e.g. the fact that the entity is operational at a certain future date or that it reaches a
certain minimum threshold of activity).
For a complete illustration of the standards validated by the European Commission for which the Group, where
permitted, did not apply the early adoption option for 2015 and for those issued by the IASB but not yet approved by
the European Commission, and thus not applicable, refer to that set forth in “Part A – Accounting Policies” of the 2014
Financial Statements, as no change occurred up to the date of approval of this report.
Credit quality – new definitions and restatement of figures as at 31 December 2014
On 9 January 2015 the European Commission approved Implementing Regulation 2015/227, published in the Official
Gazette of the European Union on 20 February 2015, which validated the Implementing Technical Standards (ITS) of the
EBA containing the definition of Non-Performing Exposure and Forborne Exposure, for the purpose of ensuring a
standardised classification at European level for the purposes of regulatory supervision.
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13
For the purpose of alignment with EU regulations (ITS), on 20 January 2015, the Bank of Italy published an update to
Circular no. 272, in which the new prudential criteria to apply are defined, for the purpose of classifying credit quality,
as of 1 January 2015.
In detail, the previous four categories of non-performing loans (“bad”, “substandard”, “non-performing past due” and
“restructured” loans) are replaced by three new categories (“bad”, “unlikely to pay” and “past due” loans), whose total
constitutes the aggregate “Non-Performing Esposures” of the ITS issued by the EBA. Disclosure on credit quality in this
Report on Operations is provided based on the new categories of non-performing exposures, established for the
purpose of generating statistical supervisory reports, as they are deemed consistent with the IAS/IFRS. For comparative
purposes, credit exposures classified as at 31 December 2014 in the categories “substandard” and “restructured”
exposures, now repealed, were included in the new category “unlikely to pay”, as it was deemed that the requirement
whereby the debtor is assessed by the Bank “as unlikely to pay its credit obligations in full without realisation of
collateral” was met.
The new regulations also introduced the obligation to indicate “forborne exposures” (forbearance) under both nonperforming exposures and performing exposures. With regard to these latter exposures, on 11 November 2014 a
specific policy was approved - “Forbearance exposures”, which governs the identification and classification principles
and criteria in line with the provisions of the ITS of the EBA for “forborne” exposures, both performing and nonperforming. At the date of drafting this Report, implementation was under way of the organisational processes and IT
procedures required to accurately identify, monitor and manage the evolution of “forborne exposures”. As stated in the
Group Annual Financial Report as at 31 December 2014, to which reference should be made for more details, said
implementations will be completely applied during 2015. In consideration of the development under way illustrated
above, at the date of drafting this Report, the information relating to forborne exposures is incomplete and, thus, is not
shown.
Contributions to deposit guarantee schemes and resolution mechanisms
With Directives 2014/49/EU (Deposit Guarantee Schemes Directive – DGS) of 16 April 2014 and 2014/59/EU (Bank
Recovery and Resolution Directive - BRRD) of 15 May 2014 and the creation of the Single resolution Mechanism (EU
Regulation no. 806/2014 of 15 July 2014), significant changes were made to European law concerning the governance
of banking crises, with the strategic purpose of strengthening the single market and ensuring system-wide stability. As
illustrated in greater detail below, said regulations had a significant impact on the financial statements in terms of the
obligation to set up specific provisions using financial resources which, as of 2015, must be provided through
contributions from credit institutions.
Contribution obligations deriving from the Deposit Guarantee Schemes Directive
Directive 2014/49/EU harmonises the levels of protection offered by national deposit guarantee schemes (DGS) and
their methods of action, in order to eliminate possible competitive inequality in the European market. To that end, the
Directive requires that national DGS (in Italy, the Interbank Deposit Guarantee Fund - IDGF) establish resources
commensurate to the guaranteed deposits, which must be provided through mandatory contributions from credit
institutions. The change for Italian banks is the new mechanism for financing the fund: the system has been changed
from an ex-post contribution system, where funds are requested in the event of need, to a mixed system, where the
funds must be paid in ex ante until a minimum target level of the fund is reached, by ten years from the entry into force
of the Directive (by 3 July 2024), equal to 0.8% of guaranteed deposits. The contributions from each entity are
calculated based on the ratio of the amount of their deposits to the total amount of the country’s guaranteed deposits.
For the purpose of reaching the target level, the financial resources provided by credit institutions may include payment
commitments, in the maximum amount of 30%. These commitments must be backed by collateral comprised of low risk
assets not encumbered by third-party rights, and must be fully available to the national DGS. The EBA shall issue
guidelines on the payment commitments to ensure standardised application of the directive.
Contribution obligations deriving from the Bank Recovery and Resolution Directive
Directive 2014/59/EU defines the new rules for resolution, which shall be applied from 1 January 2015 to all banks in
the European Union which are failing or even likely to fail. According to said rules, in specific situations, the National
Resolution Fund - which must be established by each of the 28 Member States of the EU - can also contribute to
financing the resolution. To that end, the Directive requires that National Resolution Authorities establish financial
resources which must be provided through mandatory contributions from authorised credit institutions. Also in this
case, the financing mechanism is mixed. The funds must be paid in ex ante until a minimum target level is reached by
31 December 2024, equal to 1% of the guaranteed deposits. The contributions from each entity are calculated based
on the ratio of the amount of their liabilities (net of own funds and protected deposits) to the total amount of liabilities
of all authorised credit institutions in the country. Also in this case, for the purpose of reaching the target level, the
financial resources provided by credit institutions may include payment commitments, in the maximum amount of 30%.
The resources collected by the National Resolution Authorities in 2015 will be transferred to the European Single
Resolution Fund (SRF) managed by the new European Single Resolution Board (SRB), whose establishment is set out in
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14
Regulation no. 806/2014, instituting the Single Resolution Mechanism (SRM), which shall enter into force on 1 January
2016.
At the date of drafting this Report, the rules of implementation of the directives had not yet been issued and, also for
this reason, the method for recognising said obligations have not been defined in a standardised manner. In that
context of uncertainty, the Company management had to use its professional judgement in defining the most correct
accounting method to represent this case in drawing up this Report. Below, the interpretation choices made and their
impacts on the income statement for the quarter and on the statement of financial position as at 31 March 2015 are
shown.
Accounting treatment of the contribution obligations deriving from the Bank Recovery and Resolution Directive
The Directive required that Member States implement it into national law by 1 January 2015. At the date of this Report,
the Directive had not yet been implemented by the Italian government.
In the situation of uncertain interpretation described above, it is deemed that the provisions of the interpretation IFRIC
21, recently validated, are widely applicable. It is also deemed that the lack of implementation in national law of the
provisions of the Directive and Delegated Regulation EU 2015/63 of 21 October 2014 (also applicable as of 1 January
2015) is not of substantial importance for assessing whether the legal obligation to pay the annual contribution for
2015 will arise. As a result, it is considered that the event triggering the legal obligation already occurred in the first
quarter of 2015. The contribution owed by Banco Popolare for the entire year 2015 has been estimated, based on the
information currently available, at euro 32.9 million, gross of taxes. This estimate does not consider the effects of the
correction of the share of the contribution based on the relative risk of the various banks obligated to contribute. In
order to determine the portion of the annual contribution to charge to the income statement for the quarter, it was
assumed that 30% of said contribution can be covered by taking on payment commitments backed by collateral of lowrisk assets unencumbered by any third-party rights. In this regard, it was deemed that taking on said commitments
does not result in an obligation to immediately charge the income statement. The charge to be debited to the income
statement for the quarter, under “net provisions for risks and charges” therefore amounts to euro 23 million, gross of
taxes.
Note that the amount of the actual contribution that the National Resolution Authority shall request from Banco
Popolare for 2015 may deviate significantly from the amount charged to the income statement in the first quarter based
on more up-to-date figures concerning the amount of liabilities, own funds and deposits covered, the correction of the
portion of the contribution based on the relative risk of the various banks obligated to contribute, etc. The amount to
charge to the income statement for the year could also significantly change due to any different interpretations
regarding the accounting method for recognition of the case in question.
Accounting treatment of contribution obligations deriving from the Deposit Guarantee Schemes Directive
The Directive requires that Member States implement it into national law by 3 July 2015. At the date of this Report, the
Directive had not yet been implemented by the Italian government.
Article 10 of Directive 2014/49/EU requires that banks pay the contributions at least annually. Through communication
dated 4 March 2015, the IDGF notified its members of its intention to collect only the contribution relating to the
second half, for 2015.
In the situation of uncertain interpretation described above, it is deemed that the provisions of the interpretation IFRIC
21 are widely applicable also to this case. In light of the information formally communicated by the IDGF, it is
nonetheless deemed that the event triggering the legal obligation to pay the annual contribution for 2015 will occur in
the second half of 2015. Thus, no cost was charged to the income statement for the first quarter of the year, and no
liabilities or provisions are posted for such purpose in the statement of financial position as at 31 March 2015.
For the purpose of providing complete disclosure, note that based on the amount of redeemable deposits of Italian
banks as at 30 June 2014 the best estimate of the contribution that the IDGF will presumably require from Banco
Popolare in the second half of 2015, based on the information currently available, amounts to euro 11.7 million, gross
of taxes. This estimate does not consider the effects of the correction of the share of the contribution based on the
relative risk of the various member banks. The estimate also does not consider the option to provide a portion of the
financial resources through payment commitments up to a maximum of 30% of the contribution due.
Note that the amount of the actual contribution that the IDGF shall request from Banco Popolare for 2015 may deviate,
even significantly, from the estimate illustrated above based on more up-to-date figures concerning the amount of
deposits covered, the correction of the portion of the contribution based on the relative risk of the various member
banks, etc. The amount to charge to the income statement for the year could also significantly change due to any
different interpretations regarding the accounting method for recognition of the case in question.
Uncertainties with regard to the use of estimates for drawing up the interim report on operations
The application of certain accounting standards necessarily involves the use of estimates and assumptions which affect
the values of the assets and liabilities recorded in the financial statements, in reports and in interim reports, as well as
the disclosures made on potential assets and liabilities.
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15
The assumptions underlying the estimates made take into account all the information available as of the date of
preparation of this interim report on operations, as well as the assumptions considered reasonable in the light of past
experience and the current state of the financial markets. In this regard, note that the situation caused by the current
economic and financial crisis has made it necessary to make assumptions concerning future performance characterised
by significant uncertainty.
Precisely in consideration of the uncertain situation, it cannot be excluded that the hypotheses adopted, however
reasonable, might not be confirmed by future scenarios in which the Group finds itself operating. The results which will
be achieved in the future could therefore differ from the estimates made for the purpose of drawing up the interim
report on operations and could consequently make adjustments necessary which at present cannot be foreseen or
estimated with respect to the book value of the assets and liabilities recorded in the financial statements.
The financial statement items that require a certain degree of judgment in valuation by the management, which must
use estimates and assumptions, are represented by amounts receivable, investments in associates, intangible assets,
financial assets and financial liabilities designated at fair value through profit and loss, deferred tax assets, provisions
for risks and charges, real estate investments held for investment purposes and obligations relating to employee
benefits. For further details on the valuation processes and accounting policies for the above financial statement items,
reference is made to the content of the 2014 Consolidated financial statements of the Banco Popolare Group. In any
event, it is important to note that, despite the elements of uncertainty that characterise the nature of the items
illustrated, the valuations adopted for the purpose of this report on operations have been formulated on the basis of
the going concern principle, insofar as the directors have not identified any circumstances relating to operations or to
the evolution of the equity and financial situation that could cast doubts as to the ability of Group companies to be able
to continue to operate as usual.
With regard to said valuation processes, an updated is provided below on that set out in the consolidated financial
statements as at 31 December 2014, based on the significant events which occurred in the first quarter.
Estimated impairment losses in relation to intangible assets with an indefinite useful life
Pursuant to IAS 36, all intangible assets with an indefinite useful life must undergo impairment testing at least once a
year to verify the recoverability of their value. In addition, the standard establishes that the annual analytical
calculation may be considered valid for subsequent tests, provided that the probability that the recoverable value is
less than the book value of the intangible assets is considered remote. This opinion may be based on the analysis of
the events which have occurred and the circumstances which have changed subsequent to the most recent annual
impairment test.
On the basis of the provisions of the cited standard, the Group has opted to conduct impairment testing of intangible
assets with an indefinite useful life on 31 December of each year. As at 31 March 2015, the Group’s intangible assets
with an indefinite useful life amounted to euro 1,611 million, euro 1,389 million is represented by goodwill and euro
222 million by trademarks. Euro 838 million of the above intangible assets are allocated to the “Commercial Network”
CGU, euro 697 million to the “Private & Investment Banking” CGU, euro 51 million to the “Bancassurance Protection”
CGU and euro 25 million to the “Bancassurance Life” CGU. During the quarter there were no changes in the CGUs
indicated and, therefore, these represent values in line with the residual values as at 31 December 2014.
For the purpose of this interim report on operations, a review has been carried out to identify the existence of any
further impairment indicators beyond those already considered during the impairment testing conducted as at 31
December 2014, which did not show any impairment indicators. Therefore the estimated recovery value of intangible
assets with an indefinite useful life has not been updated. In the absence of new circumstances which could shed
doubt on the recoverability of the book value of the same, this update will be formally conducted only at the time of
preparation of the financial statements as at 31 December 2015. In this regard, it is important to note that the
parameters and the information used to verify the recoverability of goodwill (particularly the cash flows envisaged for
the various CGUs, as well as the discounting rates used) were heavily influenced by the macroeconomic and market
situation, which could undergo changes that cannot be foreseen at the time of preparation of this interim report on
operations.
Estimating the recoverability of deferred tax assets
The Group has significant deferred tax assets among its statement of financial position assets, mainly deriving from
temporary differences between the income statement recognition date of given business costs and the date when said
costs may be deducted. Those assets are recognised in the amount that is deemed likely to be recovered, to be
assessed based on the ability of the company concerned and the Group, as a result of the “tax consolidation” to
generate taxable income in future years, also taking account of tax regulations, which allow the assets to be
transformed into tax credits, should specific conditions be met, regardless, therefore, of the company/Group’s ability
to generate future profit.
Deferred tax assets as at 31 March 2015 amounted to euro 3,501.6 million, of which euro 3,115 million that can be
transformed into tax credits in accordance with the provisions of Law no. 214 of 22 December 2011.
In this regard, note that in the first quarter deferred tax assets pursuant to the afore-mentioned Law 214/2011
decreased by euro 114.2 million, due to their transformation into tax credits following the approval of the financial
statements of several subsidiaries which closed 2014 with a loss. The approval of the Parent Company’s financial
______________________________________________________________________________________________________________________________________________
16
statements by the Shareholders' Meeting on 11 April 2015, with all other factors being equal, will result in an
additional reduction in said transformable deferred tax assets of euro 689.8 million, which will be recognised in the
accounts in the second quarter of 2015.
Lastly, it is noted that in the first quarter of the year, due to the incorporation of Banca Italease, finalised on 16 March
2015, the conditions set out in IAS 12 were met for the recognition of deferred tax assets relating to the tax losses
recorded by the merged company in previous years, which can be carried forward without time limits. Said deferred tax
assets amount to euro 85.1 million and resulted in a corresponding credit to the income statement for the quarter,
under the item “Taxes on income from continuing operations”.
Estimate of contribution obligations to the deposit guarantee schemes and resolution authorities
Reference should be made to that set out in the paragraph above “Contributions to deposit guarantee schemes and
resolution mechanisms”.
Scope of consolidation and methods
The Interim report on operations includes the statement of financial position and income statement results of the
Parent Company and its direct and indirect subsidiaries, including the structured entities, which are consolidated lineby-line, in compliance with the provisions of IFRS 10.
Companies subject to significant influence (associates) and jointly-controlled companies are also included, and are
consolidated at equity pursuant to the provisions of IAS 28 and IFRS 11.
Specifically, the financial statements of the Parent Company and the fully-controlled companies, companies subject to
significant influence or jointly-controlled used to draw up this Report refer to 31 March 2015. In a few limited cases
and, in any event, in relation to insignificant companies for the Group, lacking accounting statements updated to 31
March 2015, the latest available accounting statement was used. Where necessary, these financial statements were
adjusted to ensure their compliance with the Group’s accounting standards.
For the criteria used to identify the scope of consolidation of exclusively-controlled companies, associates and jointlycontrolled companies, as well as the methods used to consolidate said companies, refer to that set forth in the Annual
Financial Report of the Banco Popolare Group for 2014, as no changes occurred during the period.
Investments in associates and companies subject to joint control held for sale are recorded in compliance with the
reference international accounting standard IFRS 5, which regulates the recording of non-current assets held for sale.
Investments in subsidiary companies exclusively consolidated on a line-by-line basis are listed below.
Company name
Banco Popolare soc. coop.
Type of
Operational
headquarters
Registered office relationship
Verona
Verona
1. Aletti & C. Banca di Investimento Mobiliare S.p.A. Milan
Investment relationship
(1)
Milan
Holder
% held
% of
available
votes (2)
Parent Company
1
Banco Popolare
Holding di Partecipazioni
83.440% 100.000%
16.560%
2. Aletti Fiduciaria S.p.A.
Milan
Milan
1
Banca Aletti & C.
100.000% 100.000%
3. Aletti Gestielle SGR S.p.A.
Milan
Milan
1
Banco Popolare
100.000% 100.000%
4. Arena Broker S.r.l.
Verona
Verona
1
Holding di Partecipazioni
5. Banca Aletti & C. (Suisse) S.A.
CH - Lugano
CH - Lugano
1
BP Luxembourg
100.000% 100.000%
6. Banca Italease Funding LLC
USA - Delaware
USA - Delaware
1
Banco Popolare
100.000% 100.000%
7. Banca Italease Capital Trust
USA - Delaware
USA - Delaware
1
Banca Italease Funding LLC
100.000% 100.000%
8. Banca Popolare di Lodi Capital Company LLC III
USA - Delaware
USA - Delaware
1
100.000% 100.000%
9. Banca Popolare di Lodi Investor Trust III
57.300%
57.300%
USA - Delaware
USA - Delaware
1
10. Banco Popolare Luxembourg S.A.
L - Luxembourg
L - Luxembourg
1
Banco Popolare
B. Pop. di Lodi Cap. Co. LLC
III
Banco Popolare
11. Bipielle Bank (Suisse) S.A. (in liquidation)
CH - Lugano
CH - Lugano
1
Banco Popolare
100.000% 100.000%
12. Bipielle Real Estate S.p.A.
Lodi
Lodi
1
Banco Popolare
100.000% 100.000%
13. BRF Property S.p.A.
Parma
Parma
1
Partecipazioni Italiane
51.114%
51.114%
Banco Popolare
14.314%
14.314%
60.000%
100.000% 100.000%
100.000% 100.000%
14. BP Covered Bond S.r.l.
Milan
Milan
1
Banco Popolare
60.000%
15. BP Property Management Soc. Consortile a r.l.
Verona
Verona
1
Banco Popolare
92.309% 100.000%
Bipielle Real Estate
4.615%
Banca Aletti & C.
1.000%
S.G.S. BP
1.000%
Aletti Gestielle SGR
0.538%
Holding di Partecipazioni
0.538%
______________________________________________________________________________________________________________________________________________
Type of
Investment relationship
17
% of
available
votes (2)
Operational
headquarters
Registered office relationship
16. BP Trading Immobiliare S.r.l.
Lodi
Lodi
1
Bipielle Real Estate
100.000% 100.000%
17. Essegibi Promozioni Immobiliari S.p.A.
Milan
Milan
1
Italease Gestione Beni
100.000% 100.000%
18. FIN.E.R.T. S.p.A. (in liquidation)
Rome
Rome
1
Banco Popolare
19. HCS S.r.l.
Holding di Partecipazioni Finanziarie Banco
20.
Popolare S.p.A.
21. Italease Finance S.p.A.
Milan
Milan
1
Italease Gestione Beni
100.000% 100.000%
Verona
Verona
1
Banco Popolare
100.000% 100.000%
Milan
Milan
1
Banco Popolare
22. Italease Gestione Beni S.p.A.
Milan
Milan
1
Banco Popolare
100.000% 100.000%
23. Liberty S.r.l.
Lodi
S.T. di Gallura
(SS)
Milan
1
Banco Popolare
100.000%
1
Bipielle Real Estate
100.000% 100.000%
25. Manzoni 65 S.r.l.
Lodi
S.T. di Gallura
(SS)
Milan
1
Bipielle Real Estate
100.000% 100.000%
26. Mariner S.r.l.
Lodi
Lodi
1
Bipielle Real Estate
100.000% 100.000%
27. Milano Leasing S.p.A. (in liquidation)
Milan
Milan
1
Banco Popolare
28. Nadir Immobiliare S.r.l.
Lodi
Lodi
1
Bipielle Real Estate
29. Partecipazioni Italiane S.p.A. (in liquidation)
Milan
Milan
1
Banco Popolare
99.966% 100.000%
30. P.M.G. S.r.l. (in liquidation)
Milan
Milan
1
Banco Popolare
84.000%
84.000%
31. Release S.p.A.
Milan
Milan
1
Banco Popolare
80.000%
80.000%
32. Sirio Immobiliare S.r.l.
Lodi
Lodi
1
Bipielle Real Estate
Verona
1
Banco Popolare
88.500% 100.000%
Banca Aletti & C.
10.000%
Company name
24. Lido dei Coralli S.r.l.
33. Società Gestione Servizi BP Soc. Consortile p. az. Verona
(1)
Holder
% held
80.000%
70.000%
99.999%
70.000%
55.000%
99.999%
100.000% 100.000%
100.000% 100.000%
Aletti Gestielle SGR
0.500%
Bipielle Real Estate
0.500%
Holding di Partecipazioni
80.000%
0.500%
34. Sviluppo Comparto 2 S.r.l.
Milan
Milan
1
Bipielle Real Estate
100.000% 100.000%
35. Sviluppo Comparto 6 S.r.l.
Lodi
Lodi
1
Bipielle Real Estate
100.000% 100.000%
36. Sviluppo Comparto 8 S.r.l.
Lodi
Lodi
1
Bipielle Real Estate
100.000% 100.000%
37. Tecmarket Servizi S.p.A.
Verona
Verona
1
Banco Popolare
100.000% 100.000%
38. Terme Ioniche S.r.l.
Milan
Milan
1
Bipielle Real Estate
100.000% 100.000%
39. Tiepolo Finance S.r.l.
Lodi
Lodi
1
Banco Popolare
60.000%
60.000%
40. Tiepolo Finance II S.r.l.
Lodi
Lodi
1
Banco Popolare
60.000%
60.000%
41. TT Toscana Tissue S.r.l.
Lodi
Lodi
1
Banco Popolare
42. Bipitalia Residential S.r.l. (*)
Milan
Milan
4
Banco Popolare
4.000%
43. BP Mortgages S.r.l. (*)
Milan
Conegliano V.
(TV)
Verona
Conegliano V.
(TV)
Milan
Milan
Conegliano V.
(TV)
Verona
Conegliano V.
(TV)
Milan
4
-
0.000%
4
-
0.000%
4
-
0.000%
4
-
0.000%
4
Banco Popolare
44. BPL Mortgages S.r.l. (*)
45. BPV Mortgages S.r.l. (*)
46. Erice Finance S.r.l. (*)
47. Gestielle Hedge High Volatility (**)
48. Gestielle Hedge Low Volatility (**)
Milan
Milan
4
49. Gestielle Hedge Multi-Strategy (**)
Milan
Milan
4
50. Gestielle Hedge Opportunity (**)
Milan
Milan
4
51. Italfortune International Fund Sicav (**)
L - Luxembourg
Conegliano V.
(TV)
Conegliano V.
(TV)
Conegliano V.
(TV)
Milan
L - Luxembourg
Conegliano V.
(TV)
Conegliano V.
(TV)
Conegliano V.
(TV)
Milan
52. Italfinance Securitisation VH 1 S.r.l. (*)
53. Italfinance Securitisation VH 2 S.r.l. (*)
54. Leasimpresa Finance S.r.l. (*)
55. Pami Finance S.r.l. (*)
9.896%
Banco Popolare
49.868%
Banca Aletti & C.
5.017%
Banco Popolare
74.324%
Banca Aletti & C.
12.456%
Banco Popolare
69.159%
4
Banco Popolare
88.032%
4
Banco Popolare
9.900%
4
-
0.000%
4
-
0.000%
4
-
0.000%
1 = majority of voting rights in the ordinary shareholders’ meeting
4 = other forms of control
(2) Availability of votes in the ordinary shareholders’ meeting, distinguishing between actual and potential
(*) Special Purpose Entity for securitisation transactions originated by the Group.
4.000%
60.627%
Banca Aletti & C.
(1) Type of relationship:
(**) UCIT units managed by the Group.
100.000% 100.000%
9.900%
______________________________________________________________________________________________________________________________________________
18
Changes in the scope of consolidation
The changes in the scope of consolidation with respect to the situation as at 31 December 2014 are shown in the table
below:
Companies consolidated line-by-line
Companies no longer consolidated due to mergers
Name of merged company
Name of merging company
Banca Italease S.p.A.
Banco Popolare Soc. Coop.
Companies no longer consolidated due to company liquidation
Verona e Novara (France) S.A. (in liquidation)
Italfinance RMBS S.r.l. (in liquidation)
Companies consolidated at equity
Companies no longer consolidated due to company liquidation
Alfa Iota 2002 S.r.l. (in liquidation)
For further details on the transactions described, please refer to the section that illustrates the significant events that
occurred during the period.
OPERATING PERFORMANCE OF THE GROUP
Economic scenario
The international economy
In the first three months of the year, the performance of the economy gained strength in the United States, Japan and
England. The tone of economic development continued to slow or deteriorate in several newly industrialised
economies. Overall, global growth should have benefited from the reduced cost of energy commodities, which were at
record lows. In this moderately positive economic scenario, there are background factors that could cause turbulence,
both in the economic-financial area, specifically, the difficult situation in Greece, and in the geopolitical area: sharp
hostilities remain in Ukraine, Libya and the Middle East, though they have not yet reflected on the conditions of the
financial markets.
Among industrialised nations, the United States continued along its path to growth. However, the 0.2% annualised
increase in the GDP in the 1st quarter 2015, according to the available estimate, is considerably lower than the 2.2% in
the previous quarter. The significant levelling off reflects the slowdown in the trend in consumer spending, +1.9%
compared to +4.4% in the 4th quarter 2014, and a sharp downturn in non-residential real estate investments, -23.1%
(+5.9% in the previous quarter), which was impacted by the extremely bad weather in the period. Exports also reported
a significant drop: -7.2% (+4.5% in the 4th quarter 2015), reflecting the relative strength of the US dollar. Conversely,
signs that the labour market is gaining strength increased: persons employed in the agricultural sector grew in each of
the first three months, though in March the increase was lower than expected. The unemployment rate, at 5.6% in
December, dropped to 5.5% in March.
Among recently industrialised countries, in China the 1st quarter GDP decelerated once more (7.0% year-over-year),
impacted by the slowdown in foreign demand and the weakness of investments in construction, after growing by 7.3%
in the 4th quarter 2014. In Brazil, due to the negative trend in foreign demand and the drop in investments,
discouraged by monetary tension, the GDP continued to decrease (-0.2% yoy) in the fourth quarter 2014 and the
economic framework worsened further in the initial months of 2015.
In the period in question, oil prices fluctuated around low values, between USD 58.6 and 42.4 per barrel (WTI quality),
depressed by the increase in global supply, driven by US production. In the meantime, non-energy commodities prices
began to drop once again, presumably due to the weakness in demand from emerging economies and the appreciation
of the US dollar. Global inflation remained low. In 2015 it continued to drop in advanced countries: in March it came to 0.1% yoy in the United States, dropped to zero in the United Kingdom and decreased in Japan. In the main emerging
countries, the trend in consumer prices stabilised or continued to grow: in China and India it remained not far from the
end-2014 values (1.4% and 5.2%, respectively, in March).
The economy in Europe and Italy
In the last quarter of 2014 the GDP in the Euro Zone accelerated slightly to 0.3% compared to the previous period
(+0.9% on the 4th quarter 2013), mainly driven by the moderate expansion of private consumer spending (+0.4% qoq)
______________________________________________________________________________________________________________________________________________
19
and net exports (exports +0.8% and imports +0.4%), as well as accelerated growth in gross fixed investments in
various economies in the area (+0.4% qoq overall). In the first quarter of 2015, the signs of cyclical improvement
gained strength, though in a scenario that remains subject to uncertainties: according to the first estimates available,
the GDP for the period allegedly grew by 0.4% qoq and 1.0% yoy, owing to the positive performance of consumer
spending (+0.6% and +1.7%, respectively), as a result of the low price of crude oil, and exports, driven by the
depreciation of the Euro. The easing of credit conditions, the improvement in the outlook for internal demand and the
need to replace obsolete capital most likely led to an improvement in investments: estimated increases of +0.2% qoq
and +0.6% yoy. Consumer inflation in the Euro Zone remained marginally negative, -0.1% yoy in March, reflecting the
aforementioned downwards pressures on commodities prices and the weaker energy prices, but also expectations of
lower core inflation. Lastly, conditions on the employment market improved in March: the unemployment rate came to
11.3% in March, down compared to 11.7% twelve months previously, representing additional support to real
disposable income and, thus, to private consumer spending.
In Italy, after the decrease in the GDP was stopped in the 4th quarter of the previous year, with a zero change qoq
(-0.5% yoy), the estimates available for the first quarter of 2015 increased by 0.1% qoq (-0.2% yoy), driven by a modest
rise in spending of resident households, +0.3% qoq (+0.1% in the previous quarter), and in gross fixed investments,
+0.4% (+0.2% in the previous quarter). The estimates are supported by the significant improvement in household and
business confidence. With regard to the latter, in particular, the Manufacturing PMI index rose to 53.3 in March (from
51.9 in February), also indicating a significant rise (from 51.2 to 54.5) in total orders. On the supply side, Italian
(1)
industrial production is estimated as increasing by 0.1% qoq in March after the +0.6% recorded in February.
Economic activity in Italy should also have benefited from low prices of crude oil: the reduction in energy expenditure
freed up resources that households and businesses may allocated to consumer spending and investments,
respectively.
(2)
In March inflation stood at practically nil levels: the national consumer price index for the entire country (NIC) was at
-0.1% yoy. The modest trend continued to reflect the sharp drop in the energy component, in addition to the continuing
moderation of the core component which, also in March, showed growth of 0.4%, a record low. The relative vitality of
the economic trend has begun to positively reflect on the tone of the employment market, though its performance is
still gaining strength: the unemployment rate, which dropped to 12.7% in the first two months of 2015 (from 13.0% in
the 4th quarter), rose back to 13.0% in March. On 7 March two decrees implementing the Jobs Act also entered into
force (Legislative Decrees no. 22 and 23 of 4 March 2015). The measures mentioned aim to support employment and
should decrease the segmentation of the employment market, pushing for recomposition towards more stable types of
contracts.
Monetary policy and the financial markets
Monetary policies remained generally expansive. In the United States the Federal Reserve kept the federal funds target
rate unchanged (at 0.0%-0.25%) and confirmed the considerably graduated approach it intends to take in normalising
monetary policy. The latter is bound by the performance of inflation, which is still relatively weak, and the employment
market, which is growing and more in line with the targets of the US Federal Reserve.
In the main emerging countries, central banks eased monetary conditions during the quarter. In China the compulsory
reserve coefficient and official rates on loans and bank deposits were lowered of 25 basis points, in India the
benchmark interest rate dropped by 75 basis points. The Central Bank of Russia, following the monetary tightening
implemented in December to defend the ruble, implemented a reduction in interest rates, cutting the official rate by
100 basis points in March (to 14%). However, monetary restriction continued in Brazil, where interest rates rose to
12.75% (from 11.75% in mid-January) to combat the depreciation of the exchange rate and bring inflation to within the
reference range.
In the Euro Zone, on 9 March the ECB enacted the Public Sector Purchase Programme (PSPP), which is the Quantitative
Easing for the Euro Zone. This expansion measure consists of the purchase, on the secondary market, of approximately
euro 1,140 billion in securities, including sovereign bonds, at a pace of euro 60 billion per month at least up to the end
of September 2016 and, in any event, until a lasting adjustment in inflation in the area occurs that is consistent with
the goal of price stability (an inflation rate lower than but near 2% in the medium term). The programme aims to combat
the risks of an extended period of low inflation.
The international financial markets reacted positively to the new quantitative easing plan decided by the ECB and the
resulting expansion of global liquidity. The programme had highly significant effects on the financial and currency
markets and the clearest effects were naturally produced on the markets in the Euro Zone. In the overall Euro Zone, the
decrease in returns on public securities increased its pace: for 10-year maturities, returns of BTP reached a record low,
dropping below 1.14%; those of German Bund dropped to 0.20% at the end of the quarter and decreased further in the
following weeks, to reach 0.07%. The Euro depreciated against the US dollar, reaching a cross-rate of 1.05 in midMarch, a low since 2002, dropping by over 13% compared to the end of 2014, closing the quarter with a slight
recovery. The reaction of the European stock markets was just as strong. Share prices saw a sharp jump: the EURO
STOXX 50 index grew by 17.5% in only three months. The performance of German and Italian share prices was even
more positive: the DAX index rose by 22.0% and the FTSE MIB by 21.8%. The Italian stock market was impacted by the
(1)
(2)
Confindustria, April 2015.
NIC (entire country) index
______________________________________________________________________________________________________________________________________________
20
excellent performance of securities in the banking segment, whose industry index rose by 30%, also due to the
extraordinary performance of securities of cooperative banks, in high demand following the announcement of reform in
the sector.
Premiums for sovereign risk increased only in Greece. Conversely, in the other main advanced economies, long-term
interest rates saw a slight rise on the lows reached at the end of January: in mid-April these came to 1.8% in the United
States, 1.6% in the United Kingdom and 0.4% in Japan.
The Italian banking system
While in the Euro Zone, the trend in credit to the private sector continued to be positive, in Italy the improvement came
to a halt in the quarter in question. The criteria for granting credit to businesses did ease compared to the previous
quarter, owing to the improved liquidity position of the banking industry following the ECB’s operation, greater
competitive pressure on borrowers with good ratings with regard to specific production sectors, and the improvement
in the business outlook. Demand from businesses also began to stabilise, supported by the inventory cycle. The cost of
loans fell slightly once again. However, construction companies continue to have difficulty in accessing credit, as they
are characterised by a greater weight of non-performing items.
In detail, in March 2015 loans to households and non-financial businesses decreased by 1.6% compared to twelve
months prior, to a substantially equivalent extent in all types of short and medium/long-term loans. With regard to
credit quality, in February, the latest figure available, gross bad loans rose by euro 25.2 billion compared to one year
earlier (+15.6%), while net bad loans rose by euro 1.1 billion (+1.4%), recording a significant slowdown in growth. The
ratio of new adjusted bad loans to loans in the 4th quarter, the latest figure available, came to 2.7% (annually, net of
seasonal factors), 20 basis points lower than the two previous quarters. The available information on the first two
months of the year show a year-on-year drop in exposure to debtors reported as holding bad loans for the first time,
which, if confirmed in March, should result in an additional decrease in the decay rates in the 1st quarter of the year.
On the funding side, the considerable liquidity provided by the European Central Bank in the period and the propensity
of customers to purchase banking products with very short-term maturities contributed to reorganisation in favour of
more liquid product types, which has been under way for some time, also reflecting, on the supply side, the careful
selection of less onerous funding sources, to the detriment of the bond segment. All of these factors triggered a
downturn in total direct funding which in March, compared to 12 months prior, dropped by 1.4%, as the net result of an
increase of 3.6% in deposits and a decrease of 13.7% in bonds. Broken down by individual product types comprising
deposits in February - the latest figure available to date - an increase of 10.1% was recorded for current accounts, a
decrease of 4.1% in time deposits - net of those relating to securitisation transactions and, among these, a drop of
13.4% in deposits with fixed maturities.
The trend in interest income and expense rates reflected that of supply and demand. Bank interest income rates,
applied to the aggregate of retail and non-financial corporate customers, recorded 3.56% as at March 2015, against
3.85% in March 2014. Bank interest expense rates for the total funding aggregate fell from 1.80% to 1.38% in the
same period, while total rates on deposits in euros fell from 0.94% to 0.65% at the end of the first quarter of 2015;
lastly, interest rates on bonds dropped from 3.37% to 3.08% during the quarter.
The bank interest spread, calculated as the difference between the average interest rate on loans and the average
interest rate on total funding from retail and non-financial corporate customers, consequently expanded slightly from
2.05% in March 2014 to 2.18% at the end of the first quarter of 2015. The mark-up, calculated as the difference
between the average interest rate on the above loans and the 3-month Euribor rate, decreased slightly to 353 basis
points (354 basis points in March 2014). The mark-down, calculated as the difference between the 3-month Euribor
rate and the interest rate on total funding, tightened by 14 basis points, rising to -135 basis points (-149 basis points
in March 2014). Lastly, during the quarter, the positive performance of the asset management segment continued: at
period-end, total net deposits reached euro 51.9 billion since the beginning of the year, while only Italian and foreign
open-ended mutual funds, together, amounted to more than euro 36.1 billion, posting the best quarter of the last 16
years. Assets invested in open-ended Italian and foreign mutual funds amounted to euro 757.6 billion at the end of
March, against euro 724.6 billion at the end of 2014.
Lastly, it is important to note that in the second ten days of January the government launched a decree reforming the
cooperative bank sector, which was converted into law on 24 March. Based on the new regulations, cooperative banks
with assets exceeding euro 8 billion as at 30 June 2014 must be transformed into joint stock companies within 18
months from the date that the Bank of Italy issues the implementing provisions.
The regulations also provide the banks which transform into joint stock companies with the option of implementing a
clause aimed at stabilising the shareholding structure for a period of 24 months. For banks involved in the reform, per
capita voting - whereby, as is known, each shareholder has only one vote, irrespective of the amount of shares held will no longer apply.
______________________________________________________________________________________________________________________________________________
21
Significant events during the period
The main events which occurred during the first quarter of the year are described below.
Events relating to the process to simplify corporate structure and organisation
Merger of Banca Italease into Banco Popolare
Banca Italease S.p.A and Banco Popolare, in execution of the resolutions of the Extraordinary Shareholders’ Meeting of
Banca Italease S.p.A. and of the Board of Directors of Banco Popolare, signed the deed of merger by incorporation of
the subsidiary Banca Italease S.p.A. into the Parent Company Banco Popolare on 9 March.
The merger, which did not result in any share exchange or issues of new shares by Banco Popolare, took effect as of 16
March 2015 in statutory terms, through the registration of the deed on the relevant company registers; while in
accounting and fiscal terms, the effect of the merger was moved back to 1 January 2015.
Evolution of the network distribution model
In addition to that implemented in 2014, and in line with the timing of the Project to develop the distribution model, in
2015 (effective 12 January) we proceeded with the further reduction of the number of Business Areas, in particular,
cutting the previous 5 areas in Sicily down to 4 and the previous 4 in Rome of the BPN division down to 2.
This rationalisation was possible as a result of the closing of numerous branches in December 2014. Specifically, the
actions in Rome – where, as a result of the merger of Credito Bergamasco into Banco Popolare (September 2014), the
Creberg branches were assigned to the BPN Division - resulted in the correct redistribution of existing branches into
only 2 business areas.
Furthermore, Banco Popolare’s business model was extended to the Creberg Division, identifying, in line with the
features and the potential of the area, dedicated business branches where corporate activities should be concentrated,
in order to reduce the response times and improve service levels.
In February, via notification in December 2014 to all corporate customers involved in the process of transferring
accounts, over 3,200 corporate customers were automatically migrated to the dedicated branches and the number of
corporate branches was consequently reduced from 86 to 30.
Events relating to the management of investments in subsidiaries, associates and joint ventures
Winding-up of Group companies
In March the subsidiary Verona e Novara (France) in liquidation was struck off the Paris Trade and Companies Register
and expunged from the Banco Popolare Banking Group, following completion of the liquidation procedure. On 19
February 2015, the subsidiary’s shareholders’ meeting approved the final liquidation financial statements as at 31
December 2014 along with the voluntary arrangement plan which envisages distribution of net assets to the
shareholders. The portion received by Banco Popolare in relation to shares held amounts to euro 2.9 million.
This operation did not have an impact on the statement of financial position or the income statement for the quarter
insofar as the consolidated book value of the subsidiary was in line with the outcome of the liquidation procedure.
The liquidation of Italfinance RMBS S.r.l. was completed through the strike off of the company from the Trento
Company’s Register on 23 January 2015, following the approval of the final liquidation financial statements on 23
December 2014.
Lastly, in January 2015, the liquidation of the associated company Alfa Iota 2002 S.r.l., in which Banco Popolare held a
35% stake was completed with the cancellation of the same from the Company Register.
These operations also had no impact on the statement of financial position or income statement, as the value of the
shareholdings was already aligned with the pro-rata shareholders’ equity values in the final liquidation financials
statements.
______________________________________________________________________________________________________________________________________________
22
Other events in the period
Banco Popolare fully complies with the minimum capital ratios required by the European Central Bank
On 25 February the European Central Bank (ECB) notified Banco Popolare of its final decision on the minimum capital
ratios to be complied with by the bank on an ongoing basis. The decision is based on Article 16 (2) (a) of EU Regulation
no. 1024 of 15 October 2013, which confers on the ECB the power to require any supervised bank to hold own funds in
excess of the minimum capital requirements laid down by current regulations.
The minimum ratios required by the Regulator are a Common Equity Tier 1 ratio (CET1 ratio) of 9.4% and a Total Capital
Ratio of 10.5%.
The current level of own funds enables Banco Popolare to fully comply with the Regulator’s requirements, both with
respect to the calculation rules currently applicable in the transition period, as well as when the new capital
requirements shall apply in full.
Covered Bond transactions and securitisations
As part of the Residential CB Programme, on 5 March 2015 Banco Popolare issued the Ninth Series of CB with a
nominal value of euro 1 billion, fixed-rate coupon of 0.75% (0.803% only for the first coupon payable as at 31 March
2016), maturity on 31 March 2022, subscribed by institutional investors. Following this last issue, the bonds issued
and outstanding under this Programme as at 31 March 2015 therefore amount to euro 8.45 billion (the securities are
listed on the Luxembourg Stock Exchange, rating assigned by Fitch “BBB+”, while the Moody’s rating is “A3”). The total
residual value of the receivables sold to the Special Purpose Entity was euro 9.8 billion as at 31 March 2015.
During the quarter there were no new issues of Covered Bonds under the Commercial CB Programme. Therefore, the
bonds issued and outstanding as at 31 March 2015 amount to euro 1.7 billion (the securities are listed on the
Luxembourg Stock Exchange, rating assigned by Moody’s “Baa2”, subscribed by Banco Popolare and used as collateral
for refinancing operations with the ECB). The total residual value of the receivables sold to the Special Purpose Entity
was euro 2 billion as at 31 March 2015.
However, as regards securitisation transactions, in support of the transactions “BP Mortgages 1” and “BP Mortgages
2” in order to safeguard the rating of the senior notes issued, pursuant to the resolution of the Board of Directors of 27
January 2015, on 17 March 2015 Banco Popolare repurchased (settled on 24 March) of a part of the non performing
loans, an option envisaged in the contract, so as to transfer the funds needed by the SPE to bring the Cash Reserves of
both operations back up to the target level and to eliminate the shortfall created in the structure of the “BP Mortgages
1” operation.
During the first quarter of 2015, Moody’s upgraded the ratings of several securities of securitisation transactions of the
SPEs BPL Mortgages S.r.l. and BP Mortgages S.r.l. The action taken on the rating reflects the updating of the method
applied to structured finance operations, which specifically implements the improvement in the valuation of country
risk for Italy, announced by Moody’s in January 2015. In particular, Moody’s upgraded the Senior Note of the BPL
Mortgages 5 operation from “A2” to “Aa2”, the Senior Note of the BPL Mortgages 6 operation from “A2” to “A1” and,
with reference to the BPL Mortgages 7 operation, upgraded the rating of the Senior Note from “A2” to “A1” and of the
Mezzanine Note from “Baa2” to “A3”. As regards the BP Mortgages 2 operation, Moody’s upgraded the Class A2 Note
from “A2” to “Aa2”, the Class B Note from a rating of “Baa1” to a rating of “A1” and the Class C Note from a rating of
“Baa3” to a rating of “Baa1”.
Furthermore, for both securitisation operations “BP Mortgages 1” and “BP Mortgages 2”, in February 2015, following
several updates of the criteria used to assign ratings, the agency S&P downgraded the Class B Note from a rating of
“A+” to “A” and upgraded the rating of the Class C Note from “BBB” to “BBB+”.
Lastly, in February 2015, S&P downgraded the Class A Senior Note of the securitisation operation “BPV Mortgages”
from “BBB” to “BBB-”.
Group ratings
The table below provides a brief comparison of the Group’s ratings as at 31 March 2015 with those as at 31 December
2014.
Rating agency
Fitch Ratings
Type of Rating
Rating as at 31/03/2015
Rating as at 31/12/2014
Long term (IDR)
BBB
(Negative outlook)
BBB
(Negative outlook)
Short term (IDR)
F3
F3
______________________________________________________________________________________________________________________________________________
Rating agency
Moody’s
Type of Rating
Long term
Short term
DBRS
Long term
Short term
Rating as at 31/03/2015
Ba3
(Under Review for possible
downgrade)
NP
BBB
(Negative trend)
R-2 High
23
Rating as at 31/12/2014
Ba3
(Negative outlook)
NP
BBB
(Negative trend)
R-2 High
As regards the changes to Banco Popolare’s ratings during the quarter, note that on 17 March 2015 Moody’s Investors
Service (Moody’s):
 confirmed the “standalone” Baseline Credit Assessment (BCA) rating at “b3”, and placed it under review for
possible upgrade (having removed the positive outlook);
 confirmed the Long-Term Unsecured Senior Debt and Deposit rating at “Ba3”, and placed it under review for
possible downgrade (having removed the negative outlook);
 confirmed the Short-Term rating of NP;
 cancelled the Bank Financial Strength Rating, in line with the policy adopted by Moody’s.
With respect to Banco Popolare’s Long-Term rating, Moody’s also indicated that preliminary Review results point to a
confirmation of the current “Ba3” level.
That rating action took place as part of a review of the ratings of numerous banks at global level, following the
publication of Moody’s new methodology for bank ratings on 16 March 2015. Concurrently, Moody’s also decided to
reduce its outlook on government support to European banks, in light of the introduction of the Bank Recovery and
Resolution Directive (BRRD) in the European Union.
Furthermore, following the end of the quarter, specifically on 7 April 2015, Fitch Ratings confirmed the long and shortterm ratings of Banco Popolare and the subsidiary Banca Aletti at “BBB/F3” with a negative outlook and downgraded
the viability rating of Banco Popolare from “bb+” to “bb”.
Exposure to the Sorgenia Group
The restructuring agreement for the total debt of the Sorgenia Group was endorsed in February 2015 and followed the
definitive approach as illustrated in the information on events during the year, in the Annual Financial Report as at 31
December 2014 of Banco Popolare.
During the first quarter of 2015, implementing the provisions of said agreement, Banco Popolare subscribed its portion
of the share capital increase of Nuova Sorgenia Holding S.p.A. (former 8 Marzo 91), as well as the participating
financial instruments of euro 110,000, which were posted under financial assets available for sale at a fair value of
zero. Moreover, Banco Popolare subscribed the “Convertendo” bond loan (Class A bonds) issued by Sorgenia S.p.A. in
a nominal amount of euro 23.1 million by offsetting the amount using receivables of the same amount due from said
company, recording the loan under financial liabilities designated at fair value through profit and loss as at 31 March
2015. The difference between the nominal value of the receivable and the fair value of the instruments acquired was
posted to losses on receivables and covered using provisions for value adjustments previously allocated and, in any
event, with no impacts on the Group’s quarterly income statement.
Lastly, Banco Popolare transferred a portion of the residual payables due to Sorgenia S.p.A. to Nuova Sorgenia Holding
S.p.A. for a total of euro 46.1 million, along with the provisions for value adjustments to ensure net exposure in line
with the fair value of the receivable, as established by the fairness opinion for the restructuring plan.
As at 31 March 2015, the exposure of the Banco Popolare Group to the companies Sorgenia S.p.A. and Nuova Sorgenia
Holding S.p.A. amounted to a total of euro 98.3 million, of which euro 81.7 million in cash and euro 16.6 million
unsecured, with value adjustments of euro 46.2 million and euro 4.2 million, respectively.
Rejection of refund of tax credit
On 22 July 2014, Banco Popolare was notified - by the Tax Authority - Provincial Headquarters of Novara - with 2 refund
rejection notices regarding IRPEG and ILOR credit for which Banca Popolare di Novara s.c.a.r.l. had requested a refund
for 1995, prior to the merger with Banca Popolare di Verona - SGSP s.c.a.r.l. which established Banco Popolare di
Verona e Novara s.c.a.r.l. The credit rejected, recognised in the financial statements as at 31 December 2014, amounts
to a total of euro 86.5 million, euro 52.6 million of which as principal and euro 33.9 million of which is interest accrued.
Retaining that the grounds stated by the Tax Authority are totally illegitimate and groundless, on 5 November 2014, the
company submitted an appeal against said measures before the competent Tax Commission. The hearing to discuss
the disputes before the Provincial Tax Commission was held on 7 April.
With ruling filed on 30 April, the Provincial Tax Commission accepted both (combined) appeals, also ordering the Tax
Authority to pay legal fees.
______________________________________________________________________________________________________________________________________________
24
RESULTS
Introduction
The statement of financial position and income statement schedules shown below have been reclassified, according to
operating criteria, in order to provide clear indications on the Group’s general performance based on the economicfinancial data that can be determined rapidly and easily.
The reclassification criteria for the income statement are unchanged from those as at 31 December 2014.
Disclosures on the business combinations and the reclassifications made to the financial statements envisaged by
Circular no. 262/05, in compliance with the requirements of Consob as per communication no. 6064293 dated 28 July
2006 are shown below:
 dividends on shares classified under financial assets available for sale and assets held for trading (item 70)
have been reclassified under the net financial result;
 the profits and losses on the disposal of loans, not represented by debt securities, (included in item 100)
have been grouped, together with net losses/recoveries on impairment of loans, under item “Net
adjustments on loans to customers”;
 the profits and losses on the disposal of financial assets available for sale, receivables represented by debt
securities and financial liabilities (recognised under item 100) have been stated under the net financial
result. This last aggregate also includes adjustments due to impairment on debt securities classified in the
loans portfolio, which in the financial statements are shown under item 130;
 recoveries on taxes and other costs (included in item 220) have been booked directly against administrative
expenses, where the relative cost has been recognised, rather than being indicated in the reclassified
aggregate “other net operating income”;
 the amortisation of leasehold improvement costs (recorded in item 220) has been stated together with value
adjustments on property and equipment and intangible assets, rather than stated together with other net
operating income;
 the portion of the economic results pertaining to investee companies carried at equity (included in item 240)
has been stated in a specific item which represents, together with the interest margin, the aggregate defined
as the financial margin;
 the aggregate “Losses/recoveries on investments in associates and companies subject to joint control,
goodwill, and other intangible assets” includes all adjustments relating to goodwill and to investments in
associates and companies subject to joint control made following annual impairment testing;
 the impact of the change in creditworthiness on financial liabilities issued by the Bank, designated at fair
value (FVO), recorded under item 110, is shown as a separate item in the reclassified income statement,
together with the relative tax (recognised in item 290 of the income statement).
______________________________________________________________________________________________________________________________________________
25
Reclassified consolidated income statement
Reclassified income statement items
(in thousands of euro)
Interest margin
Profits (losses) on investments in associates and companies subject to joint
control carried at equity
Financial margin
Net fee and commission income
Other net operating income
Net financial result (without FVO)
Other operating income
Operating income
Personnel expenses
Other administrative expenses
Net value adjustments on property and equipment and intangible assets
Operating expenses
Income (loss) from operations
Net adjustments on loans to customers
Net adjustments on receivables due from banks and other assets
Net provisions for risks and charges
Profits (Losses) on disposal of investments in associates and companies subject
to joint control and other investments
Income (loss) before tax from continuing operations
Taxes on income from continuing operations
Income (loss) after tax from discontinued operations
Income (loss) attributable to minority interests
Net income (loss) without FVO
Change in the Bank’s creditworthiness (FVO)
Taxes on the change in creditworthiness (FVO)
FVO Impact
Parent Company’s net income (loss)
Q1 2015
Q1 2014
Change
387,573
372,545
4.0%
24,646
19,358
27.3%
412,219
422,270
28,336
91,172
541,778
953,997
(341,432)
(165,513)
(32,548)
(539,493)
414,504
(181,387)
(3,574)
(43,198)
391,903
371,676
40,632
88,375
500,683
892,586
(344,233)
(161,735)
(48,765)
(554,733)
337,853
(327,987)
(3,481)
(1,493)
5.2%
13.6%
(30.3%)
3.2%
8.2%
6.9%
(0.8%)
2.3%
(33.3%)
(2.7%)
22.7%
(44.7%)
2.7%
not significant
(87)
967
186,258
27,038
3,932
217,228
(12,621)
4,174
(8,447)
208,781
5,859
(5,312)
(60)
672
1,159
(30,051)
9,938
(20,113)
(18,954)
not significant
485.1%
not significant
(58.0%)
(58.0%)
(58.0%)
______________________________________________________________________________________________________________________________________________
26
Reclassified consolidated income statement – Quarterly changes
Reclassified income statement items
(in thousands of euro)
Interest margin
Profits (losses) on investments in associates and companies subject
to joint control carried at equity
Financial margin
Net fee and commission income
Other net operating income
Net financial result (without FVO)
Other operating income
Operating income
Personnel expenses
Other administrative expenses
Net value adjustments on property and equipment and intangible
assets
Operating expenses
Income (loss) from operations
Net adjustments on loans to customers
Net adjustments on receivables due from banks and other assets
Net provisions for risks and charges
Recoveries (Losses) on investments in associates and companies
subject to joint control, goodwill and other intangible assets
Profits (Losses) on disposal of investments in associates and
companies subject to joint control and other investments
Income (loss) before tax from continuing operations
Taxes on income from continuing operations
Income (loss) after tax from
discontinued operations
Income (loss) attributable to minority interests
Income (loss) for the period without FVO
Change in the Bank's creditworthiness (FVO)
Taxes on the change in creditworthiness (FVO)
FVO Impact
Parent Company's net income (loss)
FY 2015
Q1
FY 2014
Q4
387,573
Q3
388,294
Q2
396,556
Q1
398,180
372,545
24,646
24,964
24,900
20,844
19,358
412,219
422,270
28,336
91,172
541,778
953,997
(341,432)
(165,513)
413,258
310,493
26,300
(1,863)
334,930
748,188
(376,095)
(135,530)
421,456
356,008
38,504
23,794
418,306
839,762
(381,999)
(170,855)
419,024
347,270
33,452
105,604
486,326
905,350
(330,004)
(176,974)
391,903
371,676
40,632
88,375
500,683
892,586
(344,233)
(161,735)
(32,548)
(86,843)
(31,043)
(25,252)
(48,765)
(539,493)
414,504
(181,387)
(3,574)
(43,198)
(598,468)
149,720
(2,496,072)
(19,328)
(50,628)
(583,897)
255,865
(445,323)
(8,413)
2,729
(532,230)
373,120
(292,049)
(8,606)
9,937
(554,733)
337,853
(327,987)
(3,481)
(1,493)
-
(239,000)
-
-
-
(87)
207
965
206
967
186,258
27,038
(2,655,101)
804,507
(194,177)
59,355
82,608
(56,308)
5,859
(5,312)
3,932
217,228
(12,621)
4,174
(8,447)
208,781
30,028
(1,820,566)
(5,108)
1,529
(3,579)
(1,824,145)
121
4,632
(130,069)
3,427
(1,118)
2,309
(127,760)
(109)
3,382
29,573
(7,096)
2,491
(4,605)
24,968
(60)
672
1,159
(30,051)
9,938
(20,113)
(18,954)
In compliance with the instructions contained in Consob Communication no. DEM/6064293 of 28 July 2006, the
following paragraphs provide information on the effects that non-recurrent events or transactions had on the
consolidated economic result of the periods compared.
For the purposes of identifying the non-recurrent components, the following approaches are used on the whole:
 the results of disposal transactions relating to all fixed assets (investments in associates and companies
subject to joint control, property and equipment) are considered to be non-recurrent;
 gains and losses on non-current assets held for sale and discontinued operations are considered to be nonrecurrent;
 the income statement components associated with improvements, reorganisations, etc. (e.g. expenses for
use of the redundancy fund, leaving incentives) are considered to be non-recurrent;
 income statement components for a significant amount which are not destined to reoccur frequently (e.g.
fines, impairments of fixed assets, effects associated with legislative changes, exceptional results, etc.) are
considered to be non-recurrent;
 impacts on the income statement, as long as significant, resulting from valuation aspects and/or changes in
parameters in the application of the valuation methods applied on an on-going basis are instead considered
to be recurrent.
In the light of the above criteria, in addition to the amounts already included in items that are per se non-recurrent (e.g.
profit (loss) on assets held for sale), the result for the first quarter of 2015 was penalised by the impact deriving from
the increase in the book value of the financial liabilities issued by the Group, measured at fair value, due to the
improvement of its creditworthiness compared to the end of the previous year (euro -12.6 million before tax); In the
corresponding period of 2014, the income statement for the period recorded a negative impact of euro 30.1 million
before tax.
The income statement as at 31 March 2015 was also influenced by further non-recurrent components as follows:
______________________________________________________________________________________________________________________________________________



27
the recognition of value adjustments on property and equipment of euro 3.8 million, gross, due to several
properties being classified as investments in order to bring their book value in line with the recoverable value
estimated on the basis of the most recent appraisals. As at 31 March 2014, those adjustments came to euro
17.6 million. The income statement for the first quarter of the previous year also benefited, with regard to
value adjustments on property and equipment and intangible assets, from lower amortisation of around euro
6.7 million relating to the longer useful life of applications software to align the same more closely to the
actual period for which the assets are used;
recognition of provisions for risks and charges of euro 17.7 million as a result of the unfavourable outcome of
a tax dispute dating back to 2006 relating to a subsidiary;
posting, under taxes on income from continuing operations, the tax assets deriving from the prior tax losses of
the subsidiary Banca Italease, merged by incorporation in the first quarter of 2015, for a total of euro 85.1
million. In the income statement for the corresponding period of the previous year, this item was negatively
impacted by the change in the IRAP tax rate for banks and financial companies (by euro 15.4 million) and the
adjustment of taxes recognised on the capital gain earned by the Group in the previous year following the
change in the stakes held in the capital of the Bank of Italy (by euro 14.5 million).
In addition to the effects illustrated above, the income statement for the first quarter of the previous year was also
influenced by the positive impact of the recognition of out-of-period income generated by the non-existence of several
debts amounting to euro 6.9 million before tax.
The main income statement items as at 31 March 2015 are illustrated below, compared with the figures for the
corresponding period of the previous year.
Operating income
Interest margin
Q1 2015
Q1 2014
Absolute
change
34,685
81,934
34,497
5,660
478,123
13,174
2,378
(147,468)
(3,606)
(111,814)
56,909
91,050
30,853
(11,922)
539,382
28,232
798
(195,372)
(44)
(167,341)
(22,224)
(9,116)
3,644
17,582
(61,259)
(15,058)
1,580
(47,904)
3,562
(55,527)
(11.4%)
(53.3%)
198.0%
(24.5%)
not significant
(33.2%)
387,573
372,545
15,028
4.0%
(in thousands of euro)
Financial assets held for trading
Financial assets available for sale
Investments held to maturity
Net interest due to banks
Net interest due to customers
Hedging derivatives (net balance)
Net interest on other assets/liabilities
Debt securities issued
Financial liabilities held for trading
Financial liabilities designated at fair value through profit and loss
Total
Interest margin
600
(millions of euro)
500
400
372.5
398.2
396.6
388.3
387.6
Q. 2 14
Q. 3 14
Q. 4 14
Q. 1 15
300
200
100
0
Q. 1 14
% change
(39.1%)
(10.0%)
11.8%
______________________________________________________________________________________________________________________________________________
28
The interest margin amounted to euro 387.6 million, up 4.0% on the corresponding period of the previous year (euro
372.5 million), and is substantially in line with the contribution of the fourth quarter 2014 (euro 388.3 million) despite
the different time frame of the two quarters (-2 days). Compared to the last quarter of 2014, the trend in this item was
characterised by decreasing average volumes of loans and funding, which were more than offset, however, by the
recovery of the average total customer spread (+5 basis points). In greater detail, the average spread benefited from
the ongoing improvement in the cost of funding (mark down increasing by 7 basis points), which offset the decrease in
the mark up (-2 basis points).
(in thousands of euro)
Commercial Network
Investment Banking, Private Banking, Asset Management
Leasing
Total business areas
Corporate Centre and Other
PPA
Total interest margin
10.9%
Q1 2015
Q1 2014
Absolute
change
% change
361,520
45,546
9,217
416,283
(28,710)
387,573
390,202
30,858
8,570
429,630
(56,659)
(426)
372,545
(28,682)
14,688
647
(13,347)
27,949
426
15,028
(7.4%)
47.6%
7.5%
(3.1%)
49.3%
100.0%
4.0%
2.2%
Commercial
Network
Inv./Priv.Bank, AM
Leasing
86.9%
The Commercial Network, which represents around 90% of the item’s results, reported net interest down by 7.4%. The
Commercial Network made a lower contribution to the interest margin in the first three months of 2015 compared to
that of the corresponding period of the previous year by virtue of the fall in the average volume of loans and the
decrease of the average customer spread.
The interest margin of Investment Banking and Asset Management rose against the corresponding period of the
previous year, due to the higher contribution of interest resulting from the larger securities portfolio held by the
subsidiary Banca Aletti, where the liquidity received by the company for the issue of certificates is invested. The sharp
reduction in the cost of funding and the additional expansion in the contribution from the flow of interest from the
lending securities portfolio of Banco Popolare resulted in an improvement in the performance of the Corporate Centre
and, therefore, provided the Group with a growing quarterly interest margin.
Profits (losses) on investments in associates and companies subject to joint control carried at equity
Profits (losses) on investments in associates and companies subject to joint control carried at equity amounted
to euro 24.6 million, compared to euro 19.4 million recorded in the corresponding period of the previous year. The
positive contribution to the result for the first three months of 2015 is mainly due to the equity investments held in
Popolare Vita (euro 6.3 million against euro 13.4 million in the first quarter of 2014), Agos Ducato (euro 13.6 million
compared to euro 2.9 in the first three months of 2014), and in Avipop Assicurazioni (euro 4.2 million compared to euro
4.1 million in the corresponding period of the previous year).
______________________________________________________________________________________________________________________________________________
29
Net fee and commission income
(in thousands of euro)
MANAGEMENT, BROKERAGE AND ADVISORY SERVICES
Distribution of savings products
- Placement of securities
- Asset management
- Bancassurance
Consumer credit
Credit cards
Custodian bank
Trading securities, currencies and acceptance of orders
Other
CURRENT ACCOUNT MANAGEMENT AND LOANS TO CUSTOMERS
COLLECTION AND PAYMENT SERVICES
GUARANTEES GIVEN
OTHER SERVICES
Total
Q1 2015
Q1 2014
Absolute
change
% change
246,383
197,078
49,305
25.0%
199,528
1,018
164,167
34,343
8,663
6,756
4,457
18,819
8,160
158,209
380
115,096
42,733
7,208
7,919
3,633
15,730
4,379
41,319
638
49,071
(8,390)
1,455
(1,163)
824
3,089
3,781
26.1%
167.9%
42.6%
(19.6%)
20.2%
(14.7%)
22.7%
19.6%
86.3%
121,031
29,659
13,187
12,010
127,510
30,779
4,071
12,238
(6,479)
(1,120)
9,116
(228)
(5.1%)
(3.6%)
223.9%
(1.9%)
422,270
371,676
50,594
13.6%
Net fee ancd commission income
500
422.3
400
371.7
347.3
356.0
310.5
(millions of euro)
300
200
100
0
Q. 1 14
Q. 2 14
Q. 3 14
Q. 4 14
Q. 1 15
Net fee and commission income amounted to euro 422.3 million, up 13.6% compared to the euro 371.7 million
recorded in the first quarter of 2014 (euro 310.5 million in the fourth quarter of 2014). The contribution of the current
quarter is the Group’s best quarterly performance, which was achieved due to growth in income from management,
brokerage and advisory services, equivalent to euro 246.4 million, up 25.0% compared to euro 197.1 million in the first
quarter of 2014. The segment was driven by the distribution of investment products and, specifically, by the high levels
of placements of fund units to meet the growing demand from customers.
(in thousands of euro)
Commercial Network
Investment Banking, Private Banking, Asset Management
Corporate Centre and Other
Total business areas
Leasing
Total net fee and commission income
Q1 2015
Q1 2014
Absolute
change
398,094
21,787
2,637
422,518
(248)
422,270
365,114
7,562
(627)
372,049
(373)
371,676
32,980
14,225
3,264
50,469
(125)
50,594
% change
9.0%
188.1%
13.6%
(33.5%)
13.6%
______________________________________________________________________________________________________________________________________________
5.2%
30
0.6%
Commercial
Network
Inv./Priv.Bank, AM
94.2%
Corporate Center
and Other
As with the interest margin, the Commercial Network represents by far the largest source of fee and commission
income, up by 9% compared to the corresponding period of the previous year due to the higher volumes of investment
products (funds and SICAVs) placed with customers, whose demand increased during the period. The Investment
Banking & Asset Management service recorded a sharp increase due to the fact that in the first three months of 2015
up-front income on funds placed by Aletti Gestielle SGR grew compared to those in the corresponding period of last
year.
Other net operating income
Q1 2015
Q1 2014
Absolute
change
% change
Income on current accounts and loans
Rents receivable
Maintenance on property and leased assets
Other income and charges
16,947
13,609
(3,978)
7,716
31,002
13,202
(1,269)
5,136
(14,055)
407
2,709
2,580
(45.3%)
3.1%
213.5%
50.2%
Subtotal
Client relationship (PPA)
34,294
(5,958)
48,071
(7,439)
(13,777)
(1,481)
(28.7%)
(19.9%)
28,336
40,632
(12,296)
(30.3%)
(in thousands of euro)
Total
Other net operating income
60
50
40.6
38.5
40
(millions of euro)
33.5
30
26.3
28.3
20
10
0
Q. 1 14
Q. 2 14
Q. 3 14
Q. 4 14
Q. 1 15
Other net operating income was euro 28.3 million, a sharp drop compared to the euro 40.6 million recorded in the
first quarter of the previous year (contribution of the fourth quarter 2014 of euro 26.3 million). This fall was due to the
reduction in the amount of “commissioni di istruttoria veloce” charged to customers.
______________________________________________________________________________________________________________________________________________
(in thousands of euro)
Q1 2015
Q1 2014
Absolute
change
16,924
4,615
12,767
34,306
(12)
(5,958)
28,336
31,037
6,962
9,860
47,859
212
(7,439)
40,632
(14,113)
(2,347)
2,907
(13,553)
(224)
(1,481)
(12,296)
Commercial Network
Leasing
Corporate Centre and Other
Total business areas
Investment Banking, Private Banking, Asset Management
PPA
Total other net operating income
31
% change
(45.5%)
(33.7%)
29.5%
(28.3%)
(19.9%)
(30.3%)
Commercial Network
37.2%
49.3%
Leasing
Corporate Center and Other
13.5%
As regards the Commercial Network, the result for the first three months of 2015 is mainly linked to “commissioni di
istruttoria veloce”, which were down in any event compared to the figure recorded in the corresponding period of the
previous year. The contribution of Leasing to the consolidated result, down compared to that of the first three months
of 2014, is related to income from the rental of properties resulting from credit collection, net of charges relating to the
maintenance of the same. Instead, the result of the Corporate Centre is due to amounts received from renting the
properties of other Group real estate companies to third parties, as well as income from Tecmarket, the latter recording
additional growth compared to the corresponding period of the previous year.
Net financial result
(in thousands of euro)
Dividends and similar income on financial assets
Fair value adjustments in hedge accounting
Banca Aletti
Securities portfolio and Parent Company derivatives
Total net of FVO
Change in creditworthiness (FVO)
Total
Q1 2015
Q1 2014
Absolute
change
677
(903)
46,868
44,530
599
3,787
47,144
36,845
78
(4,690)
(276)
7,685
(0.6%)
20.9%
91,172
(12,621)
88,375
(30,051)
2,797
17,430
3.2%
(58.0%)
78,551
58,324
20,227
34.7%
% change
13.0%
______________________________________________________________________________________________________________________________________________
32
Net Financial result (without FVO)
140
(millions of euro)
105.6
90
91.2
88.4
40
23.8
-1.9
-10
Q. 1 14
Q. 2 14
Q. 3 14
Q. 4 14
Q. 1 15
The net financial result without FVO was a profit of euro 91.2 million, compared with euro 88.4 million in the first
quarter of 2014 (euro -1.9 million in the fourth quarter of 2014). The subsidiary Banca Aletti contributed euro 46.9
million to this result, substantially in line with the results in the corresponding period of the previous year (+47.1
million). As regards management of the securities portfolio and treasury of the Parent Company, the contribution for
the first quarter was euro 44.1 million, and thus, up on the contribution in the first quarter of 2014. This mainly derives
from the positive performance of trading and the securities portfolio in general.
The impact of the change in the creditworthiness of liabilities issued designated at fair value (FVO),shown as a
separate item on the reclassified income statement, due to the improvement in the creditworthiness of Banco Popolare,
was negative during the current period for euro -12.6 million (euro -8.4 million after tax). The impact of the FVO in the
first quarter of 2014 was negative for euro 30.1 million (euro -20.1 million after tax).
(in thousands of euro)
Commercial Network
Investment Banking, Private Banking, Asset Management
Corporate Centre and Other
Leasing
Total business areas
PPA & FVO
Total net financial result
Q1 2015
Q1 2014
Absolute
change
3,307
46,702
41,153
10
91,172
(12,621)
78,551
1,809
47,021
39,765
(220)
88,375
(30,051)
58,324
1,498
(319)
1,388
230
2,797
17,430
20,227
% change
82.8%
(0.7%)
3.5%
3.2%
(58.0%)
34.7%
3.6%
Inv./Priv.Bank, AM
51.2%
Corporate Center and Other
45.2%
Commercial Network
The contribution of the Investment Banking segment to the consolidated net financial result, net of the change in
creditworthiness of its own liabilities issued, is mostly due to the result of the subsidiary Banca Aletti, which was euro
46.9 million (euro 47.1 as at 31 March 2014). Given sales volumes of structured products and trading derivatives that
were down slightly (euro -241 million) compared to the corresponding period of the previous year, the contribution
remained steady due to the improvement in trading in derivatives.
The contribution of the Corporate Centre to the net financial result increased on the corresponding period of the
previous year due to the profits earned (approximately euro 25 million) from the sale of financial assets available for
sale, as well as latent gains on the securities trading portfolio, which, however, were not driven by gains on
______________________________________________________________________________________________________________________________________________
33
government bonds, which generated a contribution of approximately euro 9 million, lower than that of the first quarter
of 2014.
Core Banking Business
1200
784.8
838.2
(millions of euro)
1000
40.6
800
600
371.7
28.3
422.3
400
200
372.5
387.6
Q. 1 14
Q. 1 15
0
interest margin
net fee and commission income
other net operating income
Taking only the revenues of the “core banking business” into account, represented by the sum of the aggregates
relating to the interest margin, net fee and commission income and other net income, the first quarter of 2015 proceeds
showed an increase of 6.8% compared to the figure for the corresponding period of the previous year.
Operating expenses
Despite the contractual rise in salaries envisaged by the previous national collective labour agreement, personnel
expenses, equal to euro 341.4 million, decreased by 0.8% compared to the euro 344.2 million as at 31 March 2014
(contribution of euro 376.1 million in the fourth quarter of 2014 which, however, included extraordinary charges
relating to the agreements to reduce the redundant workforce). The reduction in expenses thus derives from the
reduction in the average workforce (-509 FTE on an annual basis). As at 31 March 2015, the total number of employees
was 17,166 “full time equivalents” against 17,179 resources employed on 31 December 2014 and 17,685 as at 31
March 2014.
Careful cost control measures were also implemented for other administrative expenses, which amounted to euro
165.5 million as at 31 March 2015, up 2.3% compared to euro 161.7 million recorded in the first quarter of 2014,
which also benefited from an extraordinary component of euro 6.9 million. On a like-for-like basis, this expense
component also decreased by 1.9%.
Net value adjustments on property and equipment and intangible assets for the period amounted to euro 32.5
million, compared to euro 48.8 million recorded as at 31 March 2014. The sharp decline is due to the fact that the
figure as at 31 March 2014 included extraordinary value adjustments recorded (euro -17.6 million) in order to bring the
book value of several properties classified as investments in line with the recoverable value estimated on the basis of
the most recent appraisals. The same extraordinary components included in the figure as at 31 March 2015 were
limited to euro 3.8 million. Net of the extraordinary components, the value adjustments in question showed a decrease
of 7.7% on the first quarter of 2014.
Operating expenses thus amounted to euro 539.5 million, down by 2.7% compared to euro 554.7 million recorded in
the first quarter of 2014. Excluding the extraordinary components illustrated above from the two quarters being
compared, the aggregate shows a reduction of 1.6%. The cost/income ratio for the period, calculated as the ratio of
total operating expenses, net of extraordinary components, to total income net of the impact of the change in
creditworthiness, was 56.2% (61% as at 31 March 2014).
Income (loss) from operations
The income (loss) from operations therefore amounted to euro 414.5 million, up by 22.7% compared to euro 337.9
million in the first quarter of 2014. Also net of non-recurring components included in operating expenses, the
aggregate confirms it positive performance (+19% compared to the first quarter of 2014).
______________________________________________________________________________________________________________________________________________
34
Adjustments and provisions
(in thousands of euro)
Non performing loans
- Bad loans
- Unlikely to pay
- Past due
Performing loans
Total
Q1 2015
Q1 2014
Absolute
change
% change
182,806
66,153
101,425
15,228
(1,419)
344,127
194,210
132,227
17,690
(16,140)
(161,321)
(128,057)
(30,802)
(2,462)
(14,721)
(46.9%)
(65.9%)
(23.3%)
(13.9%)
(91.2%)
181,387
327,987
(146,600)
(44.7%)
Net adjustments on loans to customers
2,496.1
2,500
(millions of euro)
2,000
1,500
1,000
500
328.0
445.3
292.0
181.4
0
Q. 1 14
Q. 2 14
Q. 3 14
Q. 4 14
Q. 1 15
Net adjustments on impairment of loans to customers were euro 181.4 million compared to euro 328.0 million in
the first quarter of 2014, due to the reduction in net flows of new non performing loans, which dropped in the first
quarter of 2015 to euro 206 million from euro 869 million recorded in the first quarter of 2014. The component referring
to the “Leasing” sector (represented by the Leasing Division of Banco Popolare and the subsidiary Release) amounted
to euro 24.7 million (euro 19.2 million in the first quarter of 2014). The cost of credit, measured by the ratio of net value
adjustments on loans to gross loans, was 82 basis points yoy, compared with 144 basis points recorded in the
corresponding period of last year.
In addition, the income statement for the period included net adjustments for impairment of other assets for euro
3.6 million (euro 3.5 million in the first quarter of 2014). The adjustments regard debt instruments related to
securitisation transactions included in the customer loan portfolio for euro 2.7 million and the adjustment of losses on
impairment of financial assets in the available for sale portfolio for euro 0.8 million.
Net provisions for risks and charges amounted to a total of euro 43.2 million compared to euro 1.5 million in the first
quarter of 2014. These include the allocation of the best estimate of the charge for contribution to the National
Resolution Authority (euro 23.0 million) and the allocation of liabilities arising from the unexpected unfavourable ruling
of the Court of Cassation which overturned the favourable rulings in the previous instances with regard to a tax dispute
of a subsidiary dating back to 2006 (euro 17.7 million).
During the period losses on disposal of investments in associates and companies subject to joint control and
other investments of euro 0.1 million were recorded, deriving from the disposal of owned property (compared to gains
of euro 1.0 million recorded as at 31 March 2014).
Income (loss) before tax from continuing operations amounted to euro 186.3 million compared to euro 5.9 million in
the first quarter of 2014.
Other revenue and cost items
Taxes on income from continuing operations as at 31 March 2015 were a positive euro 27.0 million (euro -5.3 million
as at 31 March 2014), as they included the positive effect of the recording of deferred tax assets attributable to prior
tax losses of the merged company Banca Italease, which could be carried forward with no time limits (euro 85.1
______________________________________________________________________________________________________________________________________________
35
million). The recognition is motivated by the Banco Popolare’s different capacity to generate taxable income as
compared to the subsidiary.
Considering the share of losses pertaining to minority interest of euro 3.9 million and the FVO impact already
illustrated (euro -8.4 million net of taxes), the first quarter of 2015 closed with income for the period of euro 208.8
million, compared to the loss of euro 19.0 million in the first quarter of 2014.
Consolidated statement of financial position figures
The reclassified statement of financial position represents a simple aggregation of the items envisaged in the layout of
the statement of financial position as per the Bank of Italy circular No. 262 dated 22 December 2005.
The main aggregations regarding the statement of financial position are as follows:
 the asset item “Financial assets and hedging derivatives” encompasses the financial instruments shown in
the portfolios relating to “Financial assets held for trading”, “Financial assets designated at fair value
through profit and loss”, “Financial assets available for sale”, “Investments held to maturity” and “Hedging
derivatives” shown under assets items 20, 30, 40, 50 and 80 in the Bank of Italy schedule;
 the residual asset item “Other assets” aggregates the “Fair value change of financial assets in macro fair
value hedge portfolios”, “Tax assets” and “Other assets” (respectively asset items 90, 140 and 160);
 the grouping of the amount due to customers (item 20) and securities issued (classified under items 30 and
50, as a function of the application or otherwise of the fair value option) into a single item;
 the inclusion of the financial instruments recognised in the financial statements in portfolios relating to
“Financial liabilities held for trading” and “Hedging derivatives” (respectively liability items 40 and 60) as a
single aggregate;
 the grouping of the “Liability provisions” for “Employee termination indemnities” (item 110) and “Provisions
for risks and charges” (item 120) into a single item;
 the residual liability item “Other liabilities” includes the “Fair value change of financial liabilities in macro fair
value hedge portfolios”, “Tax liabilities” and “Other liabilities” (respectively liability items 70, 80 and 100);
 the indication of “capital and reserves” as an aggregate, net of any treasury shares held (financial statement
items 140, 160, 170, 180, 190 and 200).
Reclassified asset items
(in thousands of euro)
Cash and cash equivalents
Financial assets and hedging derivatives
Due from banks
Loans to customers
Investments in associates and companies subject to joint control
Property and equipment
Intangible assets
Non-current assets held for sale and discontinued operations
Other assets
Total
Reclassified liabilities and shareholders' equity
(in thousands of euro)
Due to banks
Due to customers, debt securities issued and
financial liabilities designated at fair value through profit and loss
Financial liabilities and hedging derivatives
Liability provisions
Other liabilities
Minority interests
Shareholders' equity
- Capital and reserves
- Net income (loss) for the period
Total
31/03/2015
31/12/2014
Changes
524,126
29,120,427
3,852,918
80,834,608
1,086,237
2,116,485
2,049,414
104,036
6,057,392
619,529
26,190,599
5,058,816
79,823,603
1,061,412
2,139,962
2,049,912
94,308
6,043,545
(95,403)
2,929,828
(1,205,898)
1,011,005
24,825
(23,477)
(498)
9,728
13,847
(15.4%)
11.2%
(23.8%)
1.3%
2.3%
(1.1%)
(0.0%)
10.3%
0.2%
125,745,643
123,081,686
2,663,957
2.2%
31/03/2015
31/12/2014
Changes
18,536,295
17,383,317
1,152,978
6.6%
85,701,335
7,749,725
1,294,114
3,977,523
67,936
86,513,468
6,650,235
1,281,459
3,176,858
12,130
(812,133)
1,099,490
12,655
800,665
55,806
(0.9%)
16.5%
1.0%
25.2%
460.1%
8,418,715
8,209,934
208,781
8,064,219
10,010,110
(1,945,891)
354,496
(1,800,176)
2,154,672
4.4%
(18.0%)
125,745,643
123,081,686
2,663,957
2.2%
The trends in the main items of the statement of financial position as at 31 March 2015 are illustrated below, compared
with the figures as at 31 December of the previous year.
______________________________________________________________________________________________________________________________________________
36
Note that, in order to understand the contribution of the former Banca Italease, incorporated into the Parent Company
on 1 January 2015, and its subsidiaries, the analysis of the loans component as at 31 March 2015 is also shown in a
version that separates the contribution of the “Leasing” Divsion from that of the rest of the Banco Popolare Group.
Loan brokering activities
Direct funding
(in thousands of euro)
Absolute
% change
change
31/03/2015
% impact
31/12/2014
% impact
Due to customers
Deposits and current accounts
- current accounts and demand deposits
- time deposits
Repurchase agreements
Loans and other payables
Securities
Bonds and other securities
Certificates of deposit
55,442,655
42,901,367
39,245,035
3,656,332
10,601,688
1,939,600
30,258,680
28,639,217
1,619,463
64.7%
50.1%
45.8%
4.3%
12.4%
2.3%
35.3%
33.4%
1.9%
54,778,714
44,537,835
40,806,181
3,731,654
8,672,112
1,568,767
31,734,754
29,669,773
2,064,981
63.3%
51.5%
47.2%
4.3%
10.0%
1.8%
36.7%
34.3%
2.4%
663,941
(1,636,468)
(1,561,146)
(75,322)
1,929,576
370,833
(1,476,074)
(1,030,556)
(445,518)
1.2%
( 3.7%)
( 3.8%)
( 2.0%)
22.3%
23.6%
( 4.7%)
( 3.5%)
( 21.6%)
Total direct funding
85,701,335
100.0%
86,513,468
100.0%
(812,133)
(0.9%)
As at 31 March 2015, direct funding totalled euro 85.7 billion, a decrease of 0.9% compared to euro 86.5 billion as at
31 December 2014, and of 3.7% compared to euro 89.0 billion recorded as at 31 March 2014. The decrease over the
year, linked to a corresponding decrease in asset volumes, is attributable to the decline in bond funding (mainly retail),
as part of the strategy that aims to reduce the overall cost of funding. The reduction in this component was partially
offset by growth in the less onerous forms of funding, represented by current accounts and deposits (+2.4%), as well as
growth in repurchase agreement and securities lending transactions. Furthermore, the decline in direct funding was
largely offset by the stable funding guaranteed by the stock of certificates, issued by the Group, equivalent to over euro
4 billion in nominal value as at 31 March 2015.
As regards the securities segment, the decrease recorded in the first quarter of 2015 is attributable to redemptions of
further bonds maturing, not offset by new issues, and to the approach of customers pursuing more favourable returns,
identified in asset management products.
Indirect funding
(in thousands of euro)
Managed assets
- mutual funds and SICAVs
- securities and fund management
- insurance policies
of which: Lawrence Life policies
31/03/2015
% impact
31/12/2014 (*)
% impact
35,206,518
19,790,656
4,651,048
10,764,814
48.0%
27.0%
6.3%
14.7%
34,153,477
17,140,262
6,716,079
10,297,136
51.4%
25.8%
10.1%
15.5%
Absolute
% change
change
1,053,041
2,650,394
(2,065,031)
467,678
3.1%
15.5%
(30.7%)
4.5%
3,209,409
4.4%
3,070,044
4.6%
139,365
4.5%
Administered assets
38,199,042
52.0%
32,322,526
48.6%
5,876,516
18.2%
Total indirect funding
73,405,560
100.0%
66,476,003
100.0%
6,929,557
10.4%
(*) The figures relating to the previous year have been restated to provide a like-for-like comparison.
In line with the commercial policy followed in the first quarter of 2015, indirect funding, amounting to euro 73.4 billion,
increased by 10.4% compared to euro 66.5 billion at the beginning of the year, and by 9.8% compared to euro 66.8
billion as at 31 March 2014.
The increase yoy (calculated on a like-for-like basis) is attributable to both managed assets, amounting to euro 35.2
billion as at 31 March 2015 (+9.5%) and administered assets, amounting to euro 38.2 billion (+10.1%). The increase in
managed assets is substantially due to significant growth in funds and SICAVs (+26.1%) and of insurance policies
(+9.6%).
The growth recorded in the first quarter of 2015 (+10.4%) was mainly attributable to administered assets which, on a
like-for-like basis, rose sharply as a result of the increase in the amounts of financial assets held by customers as a
result of the positive performance of the market. Managed assets also recorded an increase (+3.1%) as a result of the
volumes of funds and SICAVs placed.
______________________________________________________________________________________________________________________________________________
37
Loans to customers
(in thousands of euro)
31/03/2015
% impact 31/12/2014
% impact
Absolute
change
% change
Current accounts
Repurchase agreements
Mortgage loans
Credit cards, personal loans and salary-backed
loans
Financial leases
Factoring
Other loans
Debt securities
11,616,546
6,966,027
39,422,430
14.4%
8.6%
48.8%
11,580,020
7,203,588
38,353,328
14.5%
9.0%
48.0%
36,526
(237,561)
1,069,102
0.3%
(3.3%)
2.8%
279,515
0.3%
272,321
0.3%
7,194
2.6%
3,699,695
10,957
18,310,109
529,329
4.6%
0.0%
22.7%
0.7%
3,868,955
12,529
17,980,188
552,674
4.8%
0.0%
22.5%
0.7%
(169,260)
(1,572)
329,921
(23,345)
(4.4%)
(12.5%)
1.8%
(4.2%)
Total net loans to customers
80,834,608
100.0%
79,823,603
100.0%
1,011,005
1.3%
As at 31 March 2015, total net loans were euro 80,834.6 million, up 1.3% compared to euro 79,823.6 million recorded
as at 31 December 2014.
Gross of value adjustments, Group loans amounted to euro 88.6 billion as at 31 March 2015, down by 2.6% compared
to euro 91.0 billion as at 31 March 2014, but up by 1.1% compared to euro 87.7 billion as at 31 December 2014. The
increase during the quarter is mainly concentrated on mortgage loans. The component regarding “Leasing” segment
loans amounted to euro 6.6 billion as at 31 March 2015, down compared to euro 6.7 billion at the end of 2014 and to
euro 7.4 billion as at 31 March 2014. The growth in loans net of leasing is due to the sharp recovery in disbursements
of loans recorded during the quarter, involving all segments (in greater detail, yoy growth was 44% for “private”
customers, 82% for small business and 134% for mid corporates).
Credit quality
Banco Popolare Group
(in thousands of euro)
31/03/2015
31/12/2014 (*)
Net exposure
% impact
Net exposure
% impact
Absolute
change
% change
Bad loans
Unlikely to pay
Past due
Non performing loans
Performing loans
6,184,696
7,611,343
325,579
14,121,618
66,712,990
7.7%
9.4%
0.4%
17.5%
82.5%
5,999,977
7,905,884
344,365
14,250,226
65,573,377
7.5%
9.9%
0.4%
17.9%
82.1%
184,719
(294,541)
(18,786)
(128,608)
1,139,613
3.1%
(3.7%)
(5.5%)
(0.9%)
1.7%
Total loans to customers
80,834,608
100.0%
79,823,603
100.0%
1,011,005
1.3%
(*) Adjusted figures to enable a like-for-like comparison, as described in the paragraph "Structure, principles and content of the Interim report on operations".
______________________________________________________________________________________________________________________________________________
(in thousands of euro)
a) Bad loans before derecognition of receivables
relating to insolvency proceedings
b) Bad loans relating to insolvency proceedings
derecognised
31/03/2015
Gross
total
Net
exposure adjustments
exposure
14,958,314 (8,773,618)
6,184,696
4,207,158 (4,207,158)
-
Bad loans after derecognition of receivables relating
10,751,156 (4,566,460) 6,184,696
to insolvency proceedings (a-b)
Unlikely to pay
10,360,098 (2,748,755) 7,611,343
Past due
388,429
(62,850)
325,579
Non performing loans
21,499,683 (7,378,065) 14,121,618
Performing loans
67,135,668
(422,678) 66,712,990
Total loans to customers
88,635,351 (7,800,743) 80,834,608
Coverage
58.65%
38
31/12/2014 (*)
Gross
total
Net
exposure adjustments
exposure
58.83%
383,340
2.6%
198,621
5,999,977
43.00%
224,397
2.1%
39,678
26.53% 10,723,104 (2,817,220)
7,905,884
16.18%
414,834
(70,469)
344,365
34.32% 21,664,697 (7,414,471) 14,250,226
0.63% 65,996,500
(423,123) 65,573,377
26.27%
16.99%
34.22%
0.64%
(363,006)
(26,405)
(165,014)
1,139,168
(3.4%)
(6.4%)
(0.8%)
1.7%
(68,465)
(7,619)
(36,406)
(445)
8.80% 87,661,197 (7,837,594) 79,823,603
8.94%
974,154
1.1%
(36,851)
42.47%
14,574,974
(8,574,997)
5,999,977
4,048,215
(4,048,215)
-
10,526,759
(4,526,782)
Coverage
Change in
Change in
Change in
gross
gross
total
exposure exposure % adjustments
(*) Adjusted figures to enable a like-for-like comparison, as described in the paragraph "Structure, principles and content of the Interim report on operations".
______________________________________________________________________________________________________________________________________________
39
Bad loans relating to debtors subject to insolvency proceedings
The Bank of Italy Circular no. 272 dated 30 July 2008 (IV update dated 18 December 2012) envisages the option to
derecognise the portion of bad loans deemed unrecoverable from the accounts. The cited regulation includes the
decision made by competent corporate bodies which, by means of a specific resolution, have acknowledged the nonrecoverability of all or part of the loan or have ceased collection proceedings for economic reasons, as a circumstance
for derecognition. Group banks exercised this option in the current year and in previous years. The derecognition
regarded the part deemed non-recoverable of all receivables due from debtors, who, during the year, were subject to
insolvency proceedings (bankruptcy, administrative compulsory liquidation, arrangement with creditors, extraordinary
receivership of large companies in difficulty), even though the banks were regularly admitted as creditors in the
insolvency proceedings for the entire amount of the receivable in question.
More specifically, in the first quarter of 2015, bad loans (to the extent of the part retained non-recoverable) amounting
to euro 227.3 million were derecognised. At the time of derecognition, specific adjusting entries were in place for
around euro 206.7 million, following value adjustments on loans already charged to the income statement. Therefore,
the derecognition resulted in charges to the income statement of around euro 20.6 million.
In the first quarter of 2015, insolvency proceedings involving receivables totalling euro 68.4 million that had already
been derecognised in previous years were finalised.
As a result of the above changes, as at 31 March 2015, bad loans derecognised relating to insolvency proceedings that
were still under way amounted to euro 4,207.2 million.
In order to calculate the effective level of coverage of bad loans, the amount of the above-mentioned derecognised
receivables must also be taken into account. The effective level of coverage of Group bad loans as at 31 March 2015
was 58.7% (58.8% as at 31 December 2015) as shown in line a) “bad loans before derecognition of receivables relating
to insolvency proceedings” in the table above.
Non performing loans (bad loans, unlikely to pay and past due), net of value adjustments, amounted to euro 14,121.6
million as at 31 March 2015 and recorded a 0.9% drop with respect to euro 14,250.2 million recorded at the beginning
of the year. The related trend shows net non performing loans representing a lower percentage of total net loans to
customers, dropping from 17.9% at the end of 2014 to 17.5% at the end of March 2015; a similar trend was recorded
for the percentage represented by the same before value adjustments, falling to 24.3% from the 24.7% at the end of
2014. Including the receivables to be derecognised, the rate of coverage of non performing loans was 45.1%, an
increase from 44.6% recorded as at 31 December 2014.
More specifically, bad loans before and after value adjustments amounted to euro 10,751.2 million and euro 6,184.7
million respectively (+2.1% and +3.1% respectively compared to 31 December 2014), while the percentage
represented by the same of total loans to customers before and after value adjustments, was 12.1% and 7.7%
respectively (against 12.0% and 7.5% respectively as at 31 December 2014). Taking into account receivables for bad
loans relating to debtors undergoing legal proceedings, which as at 31 March were still in progress, but had already
been derecognised from the accounts, the rate of coverage was 58.7%, substantially in line with that of 31 December
2014, corresponding to 58.8%.
Unlikely to pay before and after value adjustments amounted to euro 10,360.1 million and euro 7,611.3 million
respectively (-3.4% and -3.7% respectively compared to 31 December 2014), while the percentage represented by the
same of total loans to customers before and after value adjustments, was 11.7% and 9.4% respectively (against 12.2%
and 9.9% respectively at the end of last year). The rate of coverage was 26.5%, up from 26.3% recorded at the end of
last year.
Past due loans before and after value adjustments amounted to euro 388.4 million and 325.6 million respectively, and
were down 6.4% and 5.5%, respectively, compared to the end of 2014. The rate of coverage was 16.2% (17% at the
end of 2014).
The rate of coverage of performing loans was 0.63%, substantially stable with respect to 31 December 2014.
______________________________________________________________________________________________________________________________________________
40
Leasing Division
(in thousands of euro)
31/03/2015
Net exposure
31/12/2014 (*)
% impact Net exposure
% impact
Absolute
change
% change
Bad loans
Unlikely to pay
Past due
Non performing loans
Performing loans
1,193,455
1,395,412
32,894
2,621,761
2,657,585
22.6%
26.4%
0.6%
49.7%
50.3%
1,179,621
1,426,333
20,103
2,626,057
2,752,408
21.9%
26.5%
0.4%
48.8%
51.2%
13,834
(30,921)
12,791
(4,296)
(94,823)
1.2%
(2.2%)
63.6%
(0.2%)
(3.4%)
Total loans to customers
5,279,346
100.0%
5,378,465
100.0%
(99,119)
(1.8%)
(*) Adjusted figures to enable a like-for-like comparison, as described in the paragraph "Structure, principles and content of the Interim report on operations".
(in thousands of euro)
31/03/2015
Gross
total
Net exposure
exposure adjustments
Coverage
31/12/2014 (*)
Gross
total
Net exposure
exposure adjustments
Coverage
Change in
gross
exposure
Change in
Change in
gross
total
exposure % adjustments
Bad loans
Unlikely to pay
Past due
Non performing loans
Performing loans
2,078,728
1,803,598
35,292
3,917,618
2,706,195
(885,273)
(408,186)
(2,398)
(1,295,857)
(48,610)
1,193,455
1,395,412
32,894
2,621,761
2,657,585
42.59%
22.63%
6.79%
33.08%
1.80%
2,073,578
1,850,533
21,386
3,945,497
2,802,992
(893,957)
(424,200)
(1,283)
(1,319,440)
(50,584)
1,179,621
1,426,333
20,103
2,626,057
2,752,408
43.11%
22.92%
6.00%
33.44%
1.80%
5,150
(46,935)
13,906
(27,879)
(96,797)
0.2%
(2.5%)
65.0%
(0.7%)
(3.5%)
(8,684)
(16,014)
1,115
(23,583)
(1,974)
Total loans to customers
6,623,813
(1,344,467)
5,279,346
20.30%
6,748,489
(1,370,024)
5,378,465
20.30%
(124,676)
(1.8%)
(25,557)
(*) Adjusted figures to enable a like-for-like comparison, as described in the paragraph "Structure, principles and content of the Interim report on operations".
______________________________________________________________________________________________________________________________________________
41
As regards the Leasing Division, gross non performing loans (comprised of bad loans, unlikely to pay and past due), net
of value adjustments, amounted to euro 2,621.8 million as at 31 March 2015, decreasing slightly on euro 2,626.1
million recorded at the beginning of the year. Considering that the performing loans portfolio is in substantial run-off
and therefore continuously falling, the percentage represented by non performing loans net of adjustments out of total
net loans to customers rose from 48.8% at year end to 49.7% as at 31 March 2015 (a similar increase was recorded for
the percentage represented by the same before value adjustments, rising to 59.1% from the previous 58.5%). The rate
of coverage of non performing loans was 33.1%, compared to 33.4% at the end of 2014.
More specifically, bad loans before and after value adjustments amounted to euro 2,078.7 million and euro 1,193.5
million respectively (+0.2% and +1.2% respectively compared to 31 December 2014), while the percentage
represented by the same of total loans to customers before and after value adjustments, was 31.4% (30.7% as at 31
December 2014) and 22.6% (21.9% at the end of the previous year). The rate of coverage was 42.6%, down with
respect to the previous year, when it was 43.1%. If properties used as collateral are taken into consideration, the rate
of coverage of bad loans exceeds 100% of gross exposures.
Unlikely to pay before and after value adjustments amounted to euro 1,803.6 million and euro 1,395.4 million
respectively (down by 2.5% and 2.2% respectively compared to 31 December 2014), while the percentage represented
by the same of total loans to customers before and after value adjustments, was 27.2% and 26.4% respectively (27.4%
and 26.5% respectively for the previous year). The rate of coverage was 22.6%, compared to 22.9% last year. If
properties used as collateral are taken into consideration, the rate of coverage of unlikely to pay is close to 100%.
Past due loans before and after value adjustments amounted to euro 35.3 million and 32.9 million respectively. The
rate of coverage was 6.8%, compared to 6.0% last year.
The rate of coverage of performing loans was 1.80%, unchanged with respect to 31 December 2014.
Financial assets
(in thousands of euro)
31/03/2015 % impact
4,094,962
15.6%
% change
1,013,267
24.7%
21,399
0.1%
5,653
0.0%
15,746
278.5%
14,980,822
5,268,931
51.4%
18.1%
13,518,168
4,948,433
51.6%
18.9%
1,462,654
320,498
10.8%
6.5%
Total securities portfolio
25,379,381
87.2%
22,567,216
86.2%
2,812,165
12.5%
3,741,046
12.8%
3,623,383
13.8%
117,663
3.2%
29,120,427
100.0%
26,190,599
100.0%
2,929,828
11.2%
31/03/2015 % impact
31/12/2014
% impact
Absolute
change
% change
Total financial assets
17.5%
Absolute
change
Financial assets held for trading
Financial assets designated at fair value through profit
and loss
Financial assets available for sale
Investments held to maturity
Derivative trading and hedging instruments
5,108,229
31/12/2014 % impact
The breakdown by type of assets is as follows:
(in thousands of euro)
Debt securities
Equity instruments
UCIT units
23,396,136
1,095,732
887,513
80.3%
3.8%
3.0%
20,685,517
1,051,037
830,662
79.0%
4.0%
3.2%
2,710,619
44,695
56,851
13.1%
4.3%
6.8%
Total securities portfolio
25,379,381
87.2%
22,567,216
86.2%
2,812,165
12.5%
Derivative trading and hedging instruments
Total financial assets
3,741,046
12.8%
3,623,383
13.8%
117,663
3.2%
29,120,427
100.0%
26,190,599
100.0%
2,929,828
11.2%
The Group’s financial assets as at 31 March 2015 amounted to euro 29,120.4 million, up on the figure of euro 26,190.6
million recorded as at 31 December 2014 (+11.2%); an increase can be seen mainly in the portfolio of financial assets
available for sale, which recorded a rise of euro 1,462.7 million, and in the portfolio of financial assets held for trading
(+24.7% against the end of 2014). An analysis by asset type indicates that this increase regards almost exclusively
debt securities, which as at 31 March 2015, represented over 80% of the portfolio (in line with the figure as at 31
December 2014).
______________________________________________________________________________________________________________________________________________
42
Financial assets held for trading
(in thousands of euro)
31/03/2015 % impact
31/12/2014
% impact
Absolute
change
% change
Debt securities
Equity instruments
UCIT units
4,354,886
473,279
280,064
53.1%
5.8%
3.4%
3,378,725
445,064
271,173
47.7%
6.3%
3.8%
976,161
28,215
8,891
28.9%
6.3%
3.3%
Total securities portfolio
5,108,229
62.2%
4,094,962
57.9%
1,013,267
24.7%
Financial and lending derivatives
3,099,568
37.8%
2,983,024
42.1%
116,544
3.9%
Total
8,207,797
100.0%
7,077,986
100.0%
1,129,811
16.0%
As regards the debt securities component of financial assets held for trading, euro 2,308.6 million is represented by
Italian Government securities, while the remainder is comprised by corporate securities issued mainly by Italian and
foreign banks.
The equity trading portfolio instead mainly regards securities relating to leading Italian and foreign companies, mostly
corporate customers.
Financial assets designated at fair value through profit and loss
31/03/2015
% impact
31/12/2014
% impact
Absolute
change
Debt securities
Equity instruments
UCIT units
16,201
1,095
4,103
75.7%
5.1%
19.2%
1,092
4,561
0.0%
19.3%
80.7%
16,201
3
(458)
0.3%
(10.0%)
Total
21,399
100.0%
5,653
100.0%
15,746
278.5%
(in thousands of euro)
% change
Financial assets designated at fair value through profit and loss include investments in UCIT units (Undertakings for
collective investment in transferable securities), mostly comprised by shares of hedge funds managed by the
subsidiary company Aletti Gestielle SGR.
Equity instruments exclusively relate to the value of the insurance policy subscribed by Banco Popolare to cover the
liabilities of the S.I.PRE. paid to some executives.
Financial assets available for sale
(in thousands of euro)
31/03/2015 % impact
31/12/2014
% impact
Absolute
change
% change
Debt securities
Equity instruments
UCIT units
13,756,118
621,358
603,346
91.8%
4.1%
4.0%
12,358,359
604,881
554,928
91.4%
4.5%
4.1%
1,397,759
16,477
48,418
11.3%
2.7%
8.7%
Total
14,980,822
100.0%
13,518,168
100.0%
1,462,654
10.8%
As at 31 March 2015, the portfolio of debt securities was comprised of Italian Government securities with a total book
value of euro 11,236 million; the increase recorded in the period also mostly refers to Government securities.
The portfolio of debt securities also includes a security of a European Union Member State with a total book value of
euro 51.5 million, represented by a Spanish security (nominal amount of euro 50 million) maturing in 2015. The
remainder of the debt securities portfolio is comprised of securities issued by international organisations (EIB, IBRD
etc.) and by corporate securities mainly represented by Italian and foreign banks.
UCIT units mainly include real estate funds of euro 36.7 million, share funds of euro 137.5 million, bond funds of euro
169.9 million and flexible funds of euro 246.3 million.
The portfolio of equity instruments is represented by investments whose value is less than 20% of the share capital of
said companies, which is not considered a strategic investment by the Banco Popolare Group. The main investments in
shareholdings of this nature refer to Dexia Crediop, amounting to euro 55.4 million, the Istituto Centrale delle Banche
Popolari Italiane for euro 139.6 million, Palladio Finanziaria for euro 35.9 million, the investment in the Bank of Italy for
euro 91.7 million, A4 Holding for euro 19.1 million, Autostrade del Brennero for euro 18.4 million, Arca SGR for euro
75.3 million, Earchimede for 11.6 million, Factorit for euro 19.8 million, S.A.C.B.O. for euro 30.9 million, SIA for euro
14.8 million, Seief for euro 10.3 million, Archimede 1 for euro 8.8 million, Veneto Sviluppo for euro 6.9 million,
Risanamento for euro 5.5 million and lastly Banca Nuova Terra for euro 5.7 million.
______________________________________________________________________________________________________________________________________________
43
Investments held to maturity
31/03/2015
% impact
31/12/2014
% impact
Absolute
change
% change
Debt securities
5,268,931
100.0%
4,948,433
100.0%
320,498
6.5%
Total
5,268,931
100.0%
4,948,433
100.0%
320,498
6.5%
(in thousands of euro)
This item is almost entirely represented by Italian Government debt securities and as at 31 March 2015, latent gains
were around euro 330 million.
Exposure to sovereign risk
In the first quarter of the year, with the exception of Greece, the positive trend that characterised sovereign debt prices
of peripheral European countries starting in September 2012 gained further strength. Despite certain difficulties in
implementing policies to restore public finances, and also due to the improving economic situation, supported by
economies in the export area and driven by the depreciation of the Euro, sovereign yields continued to converge
towards the Eurozone benchmark - represented by German government bonds. The closing of spreads for peripheral
countries was not stopped even by the heating up of the Greek crisis, following the collapse of the Greek government at
the end of last year and the subsequent general elections which brought an anti-austerity coalition to power. The new
administration immediately placed in doubt the agreements with the European Union to realise the macroeconomic
adjustment programme to rebalance public finances, which is a prerequisite for the disbursement of the last tranche of
aid from the European Financial Stability Facility and the transfer of profits on Greek securities realised by the
Eurosystem in 2014 as part of the Securities Markets Programme. The request made by the Greek government for an
additional extension - up to 30 June - to complete said programme was accepted by the Eurogroup on 20 February.
Conversely, negotiations to revise the terms of the programme have been under way for more than two months, with an
uncertain outlook for the outcome. Declaring its intention to comply with the commitments undertaken with its
creditors and preserve the sustainability of public debt, the Greek government has committed to propose a list of
structural reforms. Nonetheless, to date, the versions submitted have not met the requirements set out by the
European authorities and, more generally, no agreements have been reached with creditors. In this deadlock phase,
the Eurogroup has thus suspended the disbursement of the new tranche of aid. The performance of the spread of Greek
securities was also worsened due to its exclusion from the QE launched by the ECB, which involves the purchase of only
investment grade securities, thus excluding Greek until the derogation on Greek bonds is restored.
Specifically concerning performance of the markets, in the initial months of 2015 the yield spreads on 10-year
government bonds of the peripheral countries mentioned above compared to the corresponding German bonds
decreased almost similarly in Portugal, Italy and Ireland (by 69, 24 and 16 basis points, respectively), while they
remained almost unchanged in Spain. However, in Greek, the 10-year spread rose by 188 basis points. More
specifically, following slight tensions at the beginning of the year, with the spread between 10-year BTP and Bund with
the same maturity reaching 192 basis points, this spread decreased to a minimum of 113 basis points on 11 March,
then recovering several basis points to close at 129 basis points at the end of March. The volatility of the spreads, for
the peripheral countries, but specifically for Italy and Portugal, spiked at times concurrent with the crucial deadlines for
negotiations under way with Greece, both at the time of full payment of tranches of debt and during important phases
of the negotiations.
The Group’s total exposure in sovereign debt securities as at 31 March 2015 was euro 19,051.4 million, and is
provided below, broken down by country (in thousands of euro):
Countries
Italy
Spain
Austria
Other EU countries
Total EU Countries
USA
Argentina
Total other countries
Total
Debt securities
Loans
Total
18,796,168
51,489
1,596
1,879
18,851,132
33,265
68
33,333
18,884,465
166,905
166,905
-
18,963,073
51,489
1,596
1,879
19,018,037
33,265
68
33,333
19,051,370
166,905
More specifically, the exposure is represented by:
 loans granted to the Italian State of euro 166.9 million;
 debt securities issued by central and local governments of euro 18,884.5 million, euro 18,851.1 million of
which was issued by EU Member States. This position is mostly held by the Parent Company Banco Popolare
______________________________________________________________________________________________________________________________________________
44
which, as at 31 March, held a total of euro 17,100.1 million, euro 17,048.5 million of which related to Italian
Government securities.
The tables below provide more detailed information on the breakdown of the exposure in debt securities to EU nations,
which represented 99.8% of total exposure, by accounting portfolio, residual life brackets and fair value hierarchy.
______________________________________________________________________________________________________________________________________________
45
Financial assets held for trading
Matures by
2015
Matures between
2016 and 2020
Matures between
2021 and 2025
Matures
beyond 2025
Total fair value
as at
31/03/15
Italy
Spain
416,698
-
1,854,205
37,634
12
-
2,308,549
-
Total
416,698
1,854,205
37,634
12
2,308,549
Country
Total fair value by hierarchy
LEVEL 1
2,308,547
LEVEL 2
-
LEVEL 3
2
-
2,308,547
-
2
Financial assets available for sale
Country
Matures by
2015
Matures between
2016 and 2020
Matures between
2021 and 2025
Matures
beyond 2025
Total fair value
as at
31/03/15
Net AFS
Reserve
Italy
Spain
Total
2,017,111
51,489
2,068,600
5,866,590
5,866,590
2,283,503
2,283,503
1,068,674
1,068,674
11,235,878
51,489
11,287,367
199,813
7
199,820
LEVEL 1
- 11,197,253
51,489
- 11,248,742
Total fair value by hierarchy
Value
adjustments
Total fair value by hierarchy
LEVEL 2
38,625
38,625
LEVEL 3
-
Investments held to maturity
Country
Italy
Other EU countries
Total
Matures by
2015
Matures between
2016 and 2020
Matures between
2021 and 2025
Matures
beyond
2025
Total book
value as at
31/03/15
Total fair value
-
4,396,477
3,475
4,399,952
855,263
855,263
-
5,251,740
3,475
5,255,215
5,581,781
3,475
5,585,256
LEVEL 1
5,581,781
3,475
5,585,256
LEVEL 2
-
LEVEL 3
-
Investments in sovereign debt securities of EU Member States, in terms of book value, represent 77.3% of the Group’s total portfolio invested in debt securities, 99.7% of which
regards investment in securities issued by the Italian Government. Around 12.2% of said investments have been allocated to the trading portfolio and 59.9% to the financial assets
available for sale portfolio, while 27.9% has been classified as investments held to maturity.
Around 77% of total exposure is represented by debt securities that mature before 2020.
______________________________________________________________________________________________________________________________________________
46
Net Interbank Position
Due from banks
(in thousands of euro)
31/03/2015
% impact
31/12/2014
% impact
303,841
3,549,077
802,550
1,552,768
791,023
123,156
279,580
3,852,918
7.9%
92.1%
20.8%
40.3%
20.5%
3.2%
7.3%
100%
689,123
4,369,693
1,175,160
1,520,630
1,329,019
123,209
221,675
5,058,816
13.6%
86.4%
23.2%
30.1%
26.3%
2.4%
4.4%
100%
31/03/2015
% impact
31/12/2014
% impact
Due to central banks
12,751,054
LTRO and TLTRO
11,251,054
Other payables (overnight deposits)
1,500,000
Due to other banks
5,785,241
Current accounts and demand deposits
578,610
Time deposits
1,861,031
Repurchase agreements
1,716,644
Other payables
1,628,956
Total payables (B)
18,536,295
Mismatch loans/payables (A) - (B)
(14,683,377)
Due to central banks: LTRO and TLTRO
(11,251,054)
Interbank balance (excl. LTRO and TLTRO)
(3,432,323)
Mismatch towards central banks (excl. LTRO
(1,196,159)
and TLTRO)
Interbank balance towards other banks
(2,236,164)
68.8%
60.7%
8.1%
31.2%
3.1%
10.0%
9.3%
8.8%
100%
12,870,424
12,029,844
840,580
4,512,893
1,105,356
1,154,834
723,733
1,528,970
17,383,317
(12,324,501)
(12,029,844)
(294,657)
74.0%
69.2%
4.8%
26.0%
6.4%
6.6%
4.2%
8.8%
100%
Due from central banks
Due from other banks
Current accounts and demand deposits
Time deposits
Repurchase agreements
Debt securities
Other loans
Total loans (A)
Absolute
change
(385,282)
(820,616)
(372,610)
32,138
(537,996)
(53)
57,905
(1,205,898)
% change
( 55.9%)
( 18.8%)
( 31.7%)
2.1%
( 40.5%)
( 0.0%)
26.1%
( 23.8%)
Due to banks
(in thousands of euro)
Absolute
% change
change
(119,370)
( 0.9%)
(778,790)
( 6.5%)
659,420
78.4%
1,272,348
28.2%
(526,746)
( 47.7%)
706,197
61.2%
992,911
137.2%
99,986
6.5%
1,152,978
6.6%
2,358,876
19.1%
(778,790)
( 6.5%)
3,137,666 not significant
(151,457)
1,044,702 not significant
(143,200)
2,092,964 not significant
Net interbank exposure as at 31 March 2015 amounted to 14,683.4 million, compared to the balance of 12,324.5
million at the end of last year. The exposure to the ECB amounted to euro 11,251.1 million (euro 12,029.8 million as at
31 December 2014).
If net exposures towards central banks are not considered (in reality linked to the mandatory reserve), the net interbank
balance towards other banks is negative, and amounts to euro -2,236.2 million, up compared to euro -143.2 million as
at 31 December of last year.
The Group confirms an excellent liquidity profile as at 31 March 2015. At the same date, the Group holds eligible assets
with the ECB, to date unused, which after haircuts amount to euro 14.7 billion (euro 14.2 billion as at 31 December
2014), represented almost exclusively by a risk-free portfolio of Italian Government bonds.
The Liquidity Coverage Ratio (LCR) was in line with the targets required by Basel 3. The NSFR (Net Stable Funding Ratio)
calculated in accordance with the most recent rules set by the Quantitative Impact Study amounts to approximately
95%.
Shareholders’ equity and solvency ratios
Consolidated shareholders’ equity
(millions of euro)
10,000
8,000
8,064.2
8,418.7
31/12/2014
31/03/2015
6,000
4,000
2,000
0
______________________________________________________________________________________________________________________________________________
47
The Group’s consolidated shareholders’ equity as at 31 March 2015, including valuation reserves and net income for
the period, amounted to euro 8,418.7 million, compared to the figure at the end of 2014 of euro 8,064.2 million.
The change observed in the quarter, equal to euro 354.5 million, is mostly due to the comprehensive income recorded
during the period, for the share attributable to the Group of a positive euro 345.8 million. The latter includes the
income for the period of euro 208.8 million, and the increase of valuation reserves of euro 137 million.
The following table shows the breakdown of valuation reserves and the changes over the period:
(in thousands of euro)
Initial balance
Increases
Decreases
Final balance
Financial
assets Property and
available for Equipment
sale
275,500
244,142
(107,975)
411,667
217
217
Cash flow
hedges
(3,858)
826
(272)
(3,304)
Investments in
Actuarial
associates and
Special gains/(losses)
companies
revaluation
on defined
subject to joint
laws
benefit
control carried
pension plans
at equity
2,314
(75,089)
(14,456)
541
(264)
2,314
(75,089)
(14,179)
Total
184,628
245,509
(108,511)
321,626
The change in the reserve of financial assets available for sale with respect to last year is mainly due to debt securities,
particularly those of the Italian Government.
The following table provides a reconciliation between the Parent Company’s shareholders’ equity and net income (loss)
for the period with the corresponding consolidated balances.
(in thousands of euro)
Balance as at 31/03/2015 as per the Parent Company's financial statements
Impact of the consolidation of subsidiaries
Impact of the valuation at net equity of associated companies
Cancellation of the dividends received during the year from subsidiaries and
associates
Other consolidation adjustments
Balance as at 31/03/2015 as per the consolidated financial statements
Shareholders' equity
Net income (loss) for the
period
6,790,083
1,375,599
111,781
161,917
23,845
24,696
-
(344)
141,252
8,418,715
(1,333)
208,781
Capital ratios
From 1 January 2014, the new harmonised regulations for banks and investment companies contained in (EU)
Regulation no. 575/2013 (“CRR”) and in directive no. 2013/36/EU (CRD IV”) dated 26 June 2013 came into force. These
transpose the standards defined by the Basel Committee for banking supervision (so-called Basel 3 framework) to the
European Union.
The Regulations and the relative technical standards are directly applicable to national legislation and constitute the
so-called “Single Rulebook”.
As part of an overall process of revising and simplifying the supervisory regulations for banks, the Bank of Italy
published the new circular 285 (“Supervisory Provisions for Banks”) and also regulated prudential supervision
reporting on an individual and consolidated basis for banks and asset management companies, by virtue of circular
286 (“Instructions for preparing prudential reports for banks and asset management companies”). More specifically,
Circular 286 sets out reporting formats regarding:
1.
2.
harmonised reports: own funds, credit and counterparty risk (including securitisations, Credit Valuation
Adjustment and Central Counterparties (CCP)), market risk, operating risk, large exposures, recognition of
mortgage losses, overall equity position, liquidity monitoring and financial leverage;
non-harmonised reports: related parties.
Note that the new regulations contained in the Single Rulebook envisage a period of transition for the gradual
introduction of several new rules (so-called “phase-in”). In other words, during the Basel 3 transition period, several
items will be calculated or deducted at different percentages for each year. Generally, a share is attributed to Common
Equity Tier 1 (CET1), while the remainder of the aggregate is split between Additional Tier 1 (AT1) and Tier 2 (T2) capital,
or attributed to RWA.
A gradual process of elimination (phase-out over a period of time extended to 2021 under the “grandfathering” system)
is also envisaged for equity instruments that do not fully meet the calculation requirements of the new regulations.
______________________________________________________________________________________________________________________________________________
48
The estimates of capital ratios that the Group is assumed to have at the end of the transition period are called “Basel 3
Fully Phased”.
Note that the minimum capital requirements for 2015 resulting from regulations that are currently in force are:
– a minimum common equity tier 1 ratio (Common Equity Tier 1 capital ratio: “CET1 ratio”) of: 4.5% + 2.5%
Capital Conservation Buffer: “CCB”;
– a minimum Tier 1 capital ratio of: 5.5% + 2.5% of CCB;
– minimum total capital ratio of: 8% + 2.5% of CCB.
On 25 February the European Central Bank (ECB) notified Banco Popolare of its final decision on the minimum capital
ratios to be complied with by the bank on an ongoing basis. The decision is based on Article 16 (2) (a) of EU Regulation
no. 1024 of 15 October 2013, which confers on the ECB the power to require any supervised bank to hold own funds in
excess of the minimum capital requirements laid down by current regulations.
The minimum ratios required by the Regulator are a Common Equity Tier 1 ratio (CET1 ratio) of 9.4% and a Total Capital
Ratio of 10.5%.
The capital ratios as at 31 March 2015 calculated according to the new regulations including the income for the
(4)
quarter are as follows:
 Common Equity Tier1 (CET1) Ratio of 11.9% substantially unchanged on the end of December 2014;
 Tier 1 Capital Ratio of 12.3%, also unchanged on the end of last year;
 Total Capital Ratio of 14.4% (compared to 14.6% as at 31 December 2014).
The current level of own funds enables Banco Popolare to fully comply with the Regulator’s requirements, both with
respect to the calculation rules currently applicable in the transition period, as well as when the new capital
requirements shall apply in full.
The pro-forma CET1 ratio calculated on the basis of rules that will take effect at the end of the transition period (socalled CET1 Ratio fully phased) will be 11.6%.
As regards liquidity, the Liquidity Coverage Ratio (LCR) was in line with the targets required by Basel 3. The NSFR (Net
Stable Funding Ratio) calculated in accordance with the most recent rules set by the Quantitative Impact Study amounts
to approximately 95%. To date the latter indicator is not a binding requirement, as the regulations that shall govern it
will be issued by the EBA by 31 December 2015.
Finally, note that the Leverage Ratio was 5.0% as at 31 March 2015, calculated including the profit for the quarter,
while the level at full implementation is estimated at 4.8%.
Note that this ratio is currently not mandatory until 2016. The Basel Committee proposed a minimum level of 3%.
Communication regarding the prudential filters of the “Assets available for sale” portfolio
With effect from 30 June 2010, the Group had adopted the approach envisaged by the Bank of Italy Provision dated 18
May 2010, which allows the share of valuation reserves relating to debt securities issued by the central government
authorities of countries belonging to the European Union, held in the “Financial assets available for sale” portfolio to
be excluded from the calculation of the regulatory capital.
More specifically, in alternative to the “asymmetrical” approach (complete deduction of net losses from Tier 1 capital
and partial inclusion for the 50% of net gains in Tier 2 capital) already envisaged by Italian legislation, the abovementioned Provision had acknowledged the possibility of fully neutralising the gains and losses recorded in
revaluation reserves (“symmetrical” approach). This option could be exercised only if the option was extended to all the
securities of the type held in the aforementioned portfolio, applied consistently by the Group and maintained constant
over time.
In this regard, we announce that, pursuant to the issue note for the new Circular no. 285 of the Bank of Italy, the Banco
Popolare Group has confirmed the exercise of this option. This option shall remain in force until the European
Commission adopts new regulations approving the application of IFRS 9 in substitution of IAS 39.
As at 31 March 2015, the change in the reserves of the securities issued by Central Government authorities of countries
belonging to the European Union was a positive euro 189 million; if this approach had not been adopted, said change
would have resulted in an increase of around euro 76 million in CET1, which could be calculated for only 40% according
to the transition regime introduced by (EU) Regulation no. 575/2013 of the European Parliament and Council (“CRR”)
and implemented with the Bank of Italy circular no. 285 of 17 December 2013, and approximately euro 113 million in
“Tier 2 Capital” for the remaining 60%.
(4)
Based on the provisions of Article 26, paragraph 2 of EU Regulation no. 575/2013 of 26 June 2013 (CRR), the inclusion of interim or year-end profits in
Common Equity Tier 1 Capital (CET1) is subject to the prior permission of the competent authorities, which shall grant such permission only where the profits
have been verified by the independent auditors. The Interim report on operations as at 31 March 2015 was not subject to auditing and, thus, the own funds to
be reported to the ECB do not include the profit for the period. Excluding the profit recorded in the first quarter from the calculation, the CET 1 Ratio as at 31
March 2015 amounted to 11.4%, the Tier 1 Capital Ratio came to 11.8% and the Total Capital Ratio at 13.9%.
______________________________________________________________________________________________________________________________________________
49
RISK MANAGEMENT
General principles
The Banco Popolare Group implements processes for the selection, undertaking, governance and mitigation of the risks
originated by banking and financial activities to pursue stable and sustainable growth objectives over time, in line with
the general policies established by the Board of Directors and disciplined, inter alia, by the “Group Risk Regulations”.
The entire process to manage and control the risks that the Group is exposed to is coordinated by Banco Popolare, in
its dual capacity as Parent Company and entity in which all the functions of mutual interest to the Group are located.
This process operates at different levels of the organisational structure.
The Board of Directors of the Parent Company has a fundamental role in the management and control of risk, at Group
level, as it decides the strategic direction, approves risk management policies and assesses the level of efficiency and
adequacy of the system of internal controls, also with the support of specific Committees, including the Risks
Committee, established within its ranks and, with specific tasks relating to the processes of taking, managing,
measuring and controlling risks, the Risk Control Committee, the Finance and ALM Committee and the Committee for
Product Innovation.
The risk management function is carried out by the Risks Department through the Risk Management Service located at
the Parent Company Banco Popolare, which has direct access to the corporate bodies. The Risks Department, the
organisational unit that reports directly to Banco Popolare’s Managing Director, oversees, at Group level and in an
integrated way, risk management, measurement and control processes, compliance risk, the process of validating
internal risk measurement models and the legal support and advisory process for the Parent Company and for Group
Companies.
At least on a quarterly basis, the Group assesses its capital adequacy using management-type risk measurement tools,
primarily based on statistical-quantitative methodologies related to the VaR (Value at Risk) technique. The same
techniques are used, both for current analyses and for forecasts, to produce the ICAAP (Internal Capital Adequacy
Assessment Process) Report, sent annually to the Bank of Italy.
With reference to the Third Pillar Disclosure to the public, from 1 January 2014, the prudential supervision provisions
applicable to banks are stated in Circular 285 of 17 December 2013, the issue of which is dependent on the start of
application of European Union legislation (CRR Regulation EU no. 575/2013 and CRD IV Directive 2013/36/EU) which
contain the reforms of the Basel Committee agreements (“Basel 3”).
The Public Disclosure documents (Third Pillar) are made available on the website www.bancopopolare.it in the investor
relations section.
The Internal Project
Over time, the Banco Popolare Group has launched numerous projects to improve its risk measurement, management
and control system. Specifically, to date the Group has been authorised to use its internal models to calculate
regulatory capital absorption with regard to the following Pillar I risks:

credit risk (starting from the recording of 30 June 2012) the scope regards the advanced internal rating
models (PD, for both monitoring and acceptance, and LGD) regarding loans to corporate and retail customers
of Banco Popolare and the former subsidiary Credito Bergamasco;

market risk (starting from the recording of 30 June 2012) The scope is the generic and specific risk of equity
instruments, the generic risk of debt securities and the risk relating to UCIT units for the trading portfolio of
Banca Aletti and Banco Popolare;

operating risk (starting from the recording of 30 June 2014) adoption of the AMA (Advanced Measurement
Approach) for Banco Popolare companies (including the former subsidiary Credito Bergamasco), Banca Aletti,
SGS BP and BP Property Management.
For more information on the outcome of the projects, refer to that set forth in Part E of the Notes to the financial
statements of the Annual Financial Statements 2014 and the annual public disclosure for 2014 (Pillar 3).
Group Risk Appetite Framework
During 2014, as part of the efforts to comply with new Prudential Supervisory Provisions for banks (15th update dated
2 July 2013 of Bank of Italy Circular no. 263/2006), the Group identified the measures to adopt and the relative
timeframe to ensure full compliance with legislative requirements regarding RAF (Risk Appetite Framework). The
planning of activities was submitted to the corporate bodies through the Gap Analysis. The guidelines and reference
framework for the RAF were also defined, and the related management process was formalised.
In the first few months of 2015, the Group fine-tuned the overall structure of the Group Risk Appetite Framework, i.e.
the framework comprising the risk appetite of the Group, the tolerance thresholds, risk limits, risk governance policies
and reference processes required to define and implement them.
Through the Risk Appetite Framework, the Banco Popolare Group:
______________________________________________________________________________________________________________________________________________
50


steers its strategy and risk management policies, focused on sound and prudent company operations;
sets its risk objectives and verifies their correct application, in line with its business model, the company
strategies pursued, the maximum risk that may be assumed, budget processes and self-assessment of capital
adequacy, company organisation and Internal Control System;

verifies the consistency of the objectives of capital adequacy, risk capital, liquidity and risk-adjusted
performance, which are used as the basis of the strategic and operational planning processes, ICAAP,
determining and managing risk limits and the other related company processes;

structures risk objectives into an organised system of indicators, which it manages according to principles of
proportionality;

defines the procedures for operational measures to activate if it is necessary to restore risk levels to within
the preset objectives or limits;

indicates the types of risk that it intends to assume and the methods used to control and monitor risk, over
the short and long-term, under ordinary and stressed conditions;

ensures that the corporate bodies of Group Companies, in line with their responsibilities, act in compliance
with the risk objectives set for the Group.
Specifically, the Group Risk Appetite Framework defines the following “components” which, in some cases, formally
constitute elements that were already present in the system of risk limits/objectives previously in force:

roles and responsibilities of the bodies (Board of Directors, MD, Board of Statutory Auditors) and corporate
functions, operating methods and information flows to the governance bodies and control functions;

the definition of the scope of application of the overall framework, the risks included in the RAF model and the
areas of application (regulatory and operating capital adequacy, liquidity and financial leverage, performance
and risk-adjusted income);

the risk indicators that constitute the system of indicators for the above areas according to a specific
breakdown by differing levels of granularity (primary, complementary and operational);

measurement and periodic monitoring of the indicators with the related reporting to corporate bodies;

the process of identifying and managing compliance with the size of the defined risk limits/objectives.
Supplementing the RAF, the Group has applied, among others, a system of limits for propensity to risk, relating to its
risk exposure towards Related Parties (company representatives, subsidiaries or companies subject to significant
influence, relative related parties).
Credit risk
The Banco Popolare Group pursues lending policy objectives that seek to:

support the growth of the business activities operating in its market territories, with a strong customer
relationship focus on small and medium sized companies, as well as on retail customers;

diversify its portfolio, limiting loan concentration on single counterparties/groups, on single sectors of
economic activity or geographical areas;

adopt a uniform credit management model based on rules, methods, processes, IT procedures and internal
regulations harmonized and standardised for all Group banks and companies.
With the aim of optimising credit quality and minimising the global credit risk cost for both the Group and the single
companies, under the organisational model the Parent Company’s Loans Department is in charge of loan policy
guidelines for both the banks and companies of the Group.
The credit portfolio monitoring, carried out by the afore-mentioned Department, is focused on the performance analysis
of risk profile of economic sectors, geographical areas, customer segments and types of granted credit lines, as well as
on other analysed spheres of action, allowing the definition of possible corrective actions at central level.
Guidelines have also been set at Group level, defining how to behave with respect to credit risk-taking, to avoid
excessive concentrations, limit potential losses and guarantee credit quality. In particular, in the loan approval phase,
the Parent Company exercises the role of management, direction and support for the Group.
The role of the Risk Management Service within the Risks Department is to provide support to Top Management in the
planning and control of risk exposure and capital absorption, with a view to maintaining the stability of the Group,
checking capital adequacy forecasts and compliance with the Group’s risk limits and propensity to risk. More
specifically, the Risk Management Service’s task is to develop, manage and optimise internal rating models (First
Pillar), the loans portfolio model (Second Pillar) over time, and to supervise - as part of second level controls - the
calculation of weighted risk assets using advanced methods.
Portfolio risk monitoring is based on a default model that is applied on a monthly basis mainly to credit exposures of
the Banco Popolare Group, with regard to performing loans, cash loans and endorsement credits, of resident
customers.
Credit quality
The Banco Popolare Group makes use of an elaborate set of instruments to monitor credit portfolio quality. Internal
ratings are an important part of this. Their calculation is based on models that are differentiated and estimated
______________________________________________________________________________________________________________________________________________
51
specifically for each customer segment (large corporate, mid corporate plus, mid corporate, small business and private
customers).
Rating plays a key role in loan granting, monitoring and management processes. In particular, it plays a role in deciding
which the competent bodies to approve loans are, as well as on the mechanism for the automatic renewal of
uncommitted credit facilities, and it contributes to guiding the decisions of loan managers when classifying positions
based on their performance.
Special dedicated units within the Group are in charge of managing non performing loans, which operate by means of
predefined management and recovery method that differ depending on the type of loan by amount and risk profile.
Non performing loans are classified according to specific criteria, based on prudence, and objective risk parameters. In
general, non performing loans include loans that give rise to a severely abnormal evolution of the business relations
between the customer and the Group banks, serious irregularities found in the reports to the Central Credit Register, a
worrying situation of financial accounts, the onset of adverse events that may restrict the creditworthiness, decrease
the value of the guarantees or impair the loan.
Value adjustments are measured on an individual basis for each single position, they are based on the criteria of
prudence in relation to the possibilities of actual recovery, also related to the existence of any collateral and they are
regularly verified.
In the first quarter of 2015, the regulatory framework regarding the classification of non performing loans was revised,
to implement the updates to Circular 272 of the Bank of Italy. The current formulation of credit quality involves the
transfer to three classes in default (unlikely to pay, bad loans and past due) with the concurrent elimination of the non
performing class relating to restructured and objective substandard loans.
The situation of the Group’s non performing loans as at 31 March 2015 has already been illustrated in the previous
section, which commented on the Results for the period.
In line with the goal of simplifying the Group structure, the merger of the former Banca Italease was completed in
March. The merger and transfer of the bank to a specific business division will result in better management of the
portfolio of loans, reducing risk and focusing particularly on those of a high amount (so-called large risks).
Outcome of backtesting of rating systems
In order to calculate capital requirements against Credit Risk (AIRB system), the Banco Popolare Group adopts internal
estimates of Probability of Default (PD) and of Loss Given Default (LGD) for Corporate and Private Customer portfolios.
The comparison between estimates and empirical data is made separately for PD on a six-monthly basis at least, for
LGD on an annual basis, by means of backtesting conducted by the Internal Validation service.
With regard to PD models, the Banco Popolare Group adopts performance measures to verify the discriminatory range
of the estimates (accuracy ratio-AR) and calibration tests (“classic” binomial tests and binomial tests “adjusted” to
take into account the cyclical nature of the macroeconomic scenario in question) to compare default rates (DR) over an
annual time horizon with estimated PD values.
As regards the Corporate segments, the latest backtesting exercise showed a good discriminatory range of models,
both in terms of single modules and final ratings, which produced values comparable and at times superior to those
obtained in development.
With regard to the calibration, satisfactory values were found for the Large Corporate model. In the “classic” binomial
test, the Mid Corporate, Mid Corporate Plus and Small Business segments show a number of non calibrated classes
substantially in line with that found in the bracket for the previous year, while in the “adjusted” binomial test, they
showed a slight deterioration which can mainly be attributed to the severity of the current economic cycle.
As regards the Private customer segment, the model performed well overall. For a number of modules a better
discriminatory range than obtained during development was recorded; on the contrary, a deterioration in performance
for the acceptance function (which, however, involves a small number of counterparties out of the total portfolio) was
recorded. As regards the calibration tests, the results were satisfactory and in line with that observed in the previous
backtesting exercise, if the average PD for the class and the default rates observed are compared, and if the effects of
the current economic crisis are incorporated in the estimates.
As regards LGD models, the backtesting analyses were conducted by updating, where possible, and with the most
recent years, the database used in developing the “Corporate” and “Retail” LGD models, and, for the parameters
considered the most significant (Probability of Non-Performance, Performing/Closure Loss Given Default, Loss Given
Non-Performance), by comparing the estimated values obtained with those deriving from said update, to highlight any
deviations.
The updated values of the parameter “Probability of Non-Performance” for the “Corporate” segment are in line with or
higher than those calculated in the development phase, while for the “Retail” segment, they are in line with or lower
than those in the validated model.
The “Performing/Closure LGD” increased, not only due to the updating of the dataset with the figures for the last few
years, but also on a like-for-like basis of the area estimated, with the addition of only the “resolved” default cycles
beyond the observation period of the area of development (i.e., beyond 30 April 2011).
As regards “Loss Given Non-Performance”, there was an increase linked to the period of serious recession. However,
the drivers of the LGN estimate remained substantially stable in the backtesting sample.
______________________________________________________________________________________________________________________________________________
52
Counterparty Risk
Counterparty risk is defined as the risk that the counterparty in a transaction defaults before the final settlement of the
cash flows of said transaction (EU Regulation no. 575/2013). As regards this type of risk, for operating purposes and to
provide support for capital adequacy assessment processes (ICAAP process), the Group uses internal methods to
estimate exposures to the risk of possible default of counterparties in OTC derivative transactions.
These methods are mostly based on statistical-quantitative approaches, partially linked to the techniques used for VaR
(Value at Risk) estimates, which assesses the impact that market and credit risk factors may have in terms of
unexpected losses on the positive future market value of the overall portfolio of positions in derivatives.
The estimate of exposure to counterparty risk, with regard to existing positions with counterparties with whom a
“collateral agreement” has been signed (Credit Support Annex – CSA) is carried out using the Shortcut Method. The
expected exposure is assessed on the basis of possible changes of the Mark to Market of the individual contracts
underlying the same reference CSA, on a time horizon given by the “risk margin period” that characterises each
contract.
The measurement is implemented also in the lending process chain, with a daily monitoring and reporting system.
The indirect membership (through Clearing Brokers) of a Clearing House for operations in OTC plain vanilla derivatives
traded by Banca Aletti, enabled the following objectives to be achieved:
 the mitigation of counterparty risk through netting mechanisms, leading to a reduction of credit facilities to
market counterparties with regard to the plain vanilla swaps transferred into LCH;
 the reduction of capital requirements;
 compliance with the European Directive - European Market Infrastructure Regulation (EMIR);
 mitigation of operating risk.
In accordance with the Basel 3 Framework Regulation, additional capital requirements regarding the following are to be
calculated:
 own funds for the Credit Valuation Adjustment (CVA) through the adoption of the standardised method, as
envisaged by (EU) Regulation no. 575/13 for banks that are not authorised to use the IMM method for
counterparty risk and the internal model method for Incremental Risk Charge (IRC);
 exposures relating to operations with Qualified Central Counterparties (QCCP) by adopting the Alternative
Method envisaged by art. 310 of EU Regulation no. 575/2013.
In calculating exposure to counterparty risk, for Supervisory Reporting, the Group uses the standardised approach on
the entire scope of reference (derivatives, repurchase agreements, securities lending and medium and long term
loans).
Financial risks
Trading portfolio
The organisational model adopted by the Banco Popolare Group for the trading portfolios exposed to interest rate risk
and price risk requires the centralisation:
 of the management of Treasury and of Proprietary Portfolio positions in Group Finance;
 in the subsidiary Banca Aletti of the risk positions and the operating flows associated with securities,
currency, OTC derivative trading and other financial assets. In addition to this, there are the main interest rate
risk exposures from the trading portfolio of Banca Aletti relating to operations both on money markets, and
the associated listed or plain vanilla derivatives (covered by the Trading & Brokerage Service), both on the
markets of listed and OTC derivatives, and OTC structured products (covered by the Structured Products
Service).
The function in charge of controlling the financial risk management for all the Banks of the Group with the aim of
identifying the type of risks, define the methods to measure risks, control limits at strategic level and verify the
consistency between trade limits and the risk/return targets assigned is centralised in the Parent Company under the
responsibility of the Risk Management Service for all Group banks.
Risk analyses of the Trading portfolio are carried out by means of indicators, both deterministic, such as the sensitivity
to market risk factors, and probabilistic, such as VaR (Value at Risk), which measures the maximum potential loss of
the portfolio over a certain time horizon and with a given level of confidence.
Risk capital estimates under the VaR approach are made using the historical simulation method and considering a time
horizon of one working day and a statistical confidence interval of 99%. A VaR is calculated both by applying a Lambda
coefficient (decay factor) of 0.99, so as to render the estimate more reactive to the most recent changes in market
parameters, and by equi-weighting historic observations. If the latter is higher than the VaR calculated with the above
decay factor, it is used for risk estimates.
The risk depends mainly on the specific component (issuer risk), relating, in particular to Italian Government bonds,
which also justifies performance in the period.
______________________________________________________________________________________________________________________________________________
Regulatory trading portfolio
53
Q1 2015
(in millions of euro)
31 March
1.739
0.933
1.653
0.429
4.753
-2.073
2.680
6.130
6.090
Interest rate risk
Exchange rate risk
Equity risk
Dividends and Correlations
Total uncorrelated
Diversification effect
Total Generic Risk
Specific Risk Debt Securities
Combined Risk
average
1.873
0.460
1.539
0.474
maximum
2.456
1.204
2.231
0.692
minimum
1.076
0.162
1.153
0.196
2.426
6.060
6.114
3.332
8.918
9.336
1.880
4.412
4.641
Daily VaR and VaR by risk factor
BANCO POPOLARE GROUP: Regulatory trading portfolio
Total VaR
Interest Rate VaR
Equity VaR
Forex VaR
Specific VaR
10,000,000
9,000,000
8,000,000
7,000,000
6,000,000
5,000,000
4,000,000
3,000,000
2,000,000
1,000,000
ar
31
-M
ar
23
-M
ar
15
-M
ar
07
-M
eb
27
-F
eb
19
-F
eb
11
-F
eb
03
-F
n
26
-J a
n
18
-J a
n
10
-J a
02
-J a
n
0
Following the validation of the internal model for the calculation of the capital requirement relating to market risks,
backtesting is conducted on a daily basis, with a view to verifying the solidity of the VaR model adopted. These tests
are conducted on the regulatory trading portfolio of Banco Popolare and of Banca Aletti.
The graphs below show the backtesting exercise of Banco Popolare relating to the VaR method, calculated on the
generic risk of debt securities, generic and specific equity risk, interest rate risk and exchange rate risk. For backtesting
purposes, as envisaged by supervisory regulations in force, we used the equally-weighted VaR measurement instead of
using a decay factor used in operational approaches.
______________________________________________________________________________________________________________________________________________
54
Backtesting of Banco Popolare
1,500,000
Actual P&L Backtesting
Theoretical P&L Backtesting
VAR
1,000,000
500,000
0
-500,000
-1,000,000
-1,500,000
-1
5
M
ar
-1
5
Fe
b
Ja
n15
De
c14
v14
No
Oc
t- 1
4
-1
4
Se
p
Au
g14
Ju
l- 1
4
Ju
n14
-1
4
M
ay
Ap
r- 1
4
-2,000,000
Banking portfolio
The interest rate risk relating to the banking portfolio is eminently associated with the core activity performed by the
bank acting as an intermediary in the process of transformation of maturities. In particular, the issue of fixed rate
bonds, the granting of fixed rate commercial loans and mortgages and funding from demand current accounts
represent a fair value interest rate risk, while floating rate financial assets and liabilities represent a cash flow interest
rate risk.
The structure in charge of managing interest rate risk is the ALM, part of the Group Finance Service of the Parent
Company, which carries out said task also on behalf of the banks and subsidiary financial companies, and pursues the
maximisation of the economic return from the bank’s commercial activity in compliance with the set interest rate risk
exposure limits.
The Interest Rate and Liquidity Risk unit of the Parent Company’s Risk Management Service is in charge of monitoring
and controlling the interest rate risk of the banking portfolio, and it performs this activity also on behalf of the banks
and financial subsidiaries. This activity is performed on a monthly basis to verify that the limits in terms of changes in
interest margin or equity or the economic value of the banking portfolio are complied with, as regards regulatory
capital.
Interest rate risk is monitored using Sensitivity Analyses and the parametric Value at Risk method.
As at 31 March, the short term indicator, represented by the margin at risk, as well as the medium-long term indicator,
represented by the economic value at risk, showed a sensitivity to negative changes in interest rates substantially in
line with the same period of the previous year, confirming, in any event, a very low level of risk.
Risk ratios (%)
For shift of + 100 bp
Financial margin at risk /
Financial margin
Economic value at risk /
Economic value of capital
For shift of - 100 bp
Financial margin at risk /
Financial margin
Economic value at risk /
Economic value of capital
31 March
FY 2015 (first quarter)
average
maximum
minimum
FY 2014 (first quarter)
31 March
average
3.7%
2.8%
3.7%
2.3%
0.2%
0.1%
0.4%
-0.6%
0.4%
-1.4%
-0.2%
-0.1%
-0.3%
-0.2%
-0.2%
-0.3%
-0.2%
-0.1%
-0.9%
-1.1%
-0.9%
-1.3%
-0.2%
-0.3%
With regard to the banking portfolio, the Group also evaluates its exposure to the risk of default and to the migration of
the rating class of debt securities, based on IAS standards, classified as AFS, L&R and HTM. Measurement is carried out
using the Credit Spread VaR method for migration risk and the IRC approach for default risk. Instead, positions
classified as CFV are measured using the Value at Risk (VaR) method, using historic simulations.
______________________________________________________________________________________________________________________________________________
55
Operating Risk
Operating risk is the risk of suffering losses caused by inadequacy or failure attributable to procedures, human
resources and internal systems, or caused by external events. Losses resulting from fraud, human error, interruption of
operations, non-availability of systems, contractual breaches and natural disasters are included in this type of risk.
Operating risk also encompasses legal risk, while strategic and reputational risk are not included.
As regards this type of risk, the Group adopted the standardized regulatory approach envisaged by supervisory
provisions (combined with the basic method for companies not significant in size) to calculate capital requirements
against operating risk up until the report as at 31 March 2014. On 05 August 2014, the Bank of Italy approved the use
of advanced supervisory methods (AMA – Advanced Measurement Approach), from the Supervisory Report dated 30
June 2014 for Banco Popolare companies, Banca Aletti, SGS BP and BP Property Management. The other Group
companies will adopt the BIA (Basic indicator approach) method for reporting, in line with the adoption of the combined
use of AMA/BIA, which envisages for the latter, if they do not surpass established materiality thresholds, the
permanent use of the basic method (PPU, partial permanent use). In this regard, the Group has agreed with the Bank of
Italy to extend the use of AMA methods (roll-out plan) to Aletti Gestielle S.g.r. and Banca Italease, based on a gradual
extension plan, which is expected to be completed in December 2015.
The AMA capital requirement is determined by combining the risk measurement obtained by the model based on
previous operating losses, both internal and external, with that obtained on the basis of the model that uses elements
of scenario analyses. Both of the models adopt a modelling approach know as the Loss Distribution Approach, which is
based on the modelling of aggregate annual loss, defined as the sum of loss amounts (severity) associated to each loss
event that occurs over one year (frequency). The risk is estimated by measuring the Value at Risk with a confidence
interval of 99.9% and a time horizon of one year. The capital requirement relating to the AMA scope takes into account
any benefits from diversifying exposure to the different types of operating risk and envisages the deduction of
provisions transferred to the income statement to the extent of the expected loss.
Liquidity Risk
Liquidity risk is generated by the time mismatch between expected cash in- and out-flows even in a very short time
horizon. In addition to the difficulty/impossibility of hedging such mismatches, the liquidity risk can also entail an
interest rate risk caused by the need to raise/lend funds at unknown rates that could be potentially unfavourable.
The Parent Company’s Group Finance Service is in charge of monitoring liquidity risk limits, according to the
supervisory measurement system, as a first-level control; the Parent Company’s Risk Management Service is in charge
of second-level controls, as well as monitoring mismatches of operating liquidity through the Asset & Liability
Management procedure, also used to measure the interest rate risk of the banking portfolio.
As regards liquidity risk, at aggregate level, the Group applies a monitoring system which also entails the use of
models to estimate behavioural and/or optional parameters. This system is flanked by internal operating thresholds
based on stringent levels, monitored on a daily (“quick ratio”) and ten-day (operating) basis.
In the first three months of 2015, the Group’s liquidity profile showed substantial adequacy in the short and longer
term.
During the quarter, the Banco Popolare Group continued to make the periodic measurements of the liquidity profile,
using the indicators envisaged by the provisions of Basel 3, LCR (Liquidity Coverage ratio) and SF (Stable Funding Ratio)
as well as part of monthly Supervisory Reporting, in addition to the NSFR (Net Stable Funding Ratio) required by the
Bank of Italy and the ECB.
Note that the phase-in for the entry into force of the LCR threshold, a short-term indicator, envisages a threshold
reduced to 60% from October 2015; this is expected to be increased by 10% each year until it reaches 100% in 2018,
equivalent to the medium-term indicator NSFR.
Other risk factors
Risks associated with pending legal proceedings
The Banco Popolare Group is involved in numerous legal proceedings associated with the natural unfolding of the
business activities. As at 31 March 2015, provisions for legal disputes underway and clawbacks amounted to euro
160.6 million, compared to euro 168.2 million recorded as at 31 December last year.
As regards the main risk positions at Group level relating to Clawback actions and Pending lawsuits, during the quarter
there were no changes in the situation illustrated with reference to 31 December last year. Please refer to section 12 Provisions for risks and charges in Part B of the Notes to the Consolidated Financial Statements as at 31 December
2014 for more details.
Risks associated with current disputes with the Tax Authority
Banco Popolare, the companies that merged to form the same, the incorporated subsidiary companies and the
______________________________________________________________________________________________________________________________________________
56
subsidiary companies underwent various inspections by the Tax Authority in 2015 and in previous years. These
activities concerned the taxable income declared for the purpose of income tax, VAT, registration tax, and more
generally the manner in which the tax legislation in force at the time was applied. As a consequence of said
inspections, the Banco Popolare Group is involved in numerous legal proceedings.
The potential liabilities relating to tax disputes underway that involve Banco Popolare and its subsidiaries amounted as
at 31 March 2015 to euro 407.0 million, of which euro 391.3 million relate to notices of assessment, tax demands and
payment notices and euro 15.7 million relate to formal reports on findings served. In this regard, note that the estimate
of said potential liabilities relating to the notices of assessment does not usually consider any interest, while the
estimate of potential liabilities relating to formal reports on findings does not usually include interest or fines, insofar
as they are not indicated in the latter document.
As at 31 December 2014, the claims of the Tax Authority resulting from the notices of assessment and the formal
reports on findings served amounted to euro 483.7 million.
Developments in the first quarter of the year
The following paragraphs provide an illustration of the disputes that arose during the first part of the year.
New disputes that emerged in the period and/or developments of existing disputes following formal reports on findings
served
During the period, no new potential liabilities arose.
Disputes concluded and/or settled during the period
During the quarter outstanding disputes decreased by a total of euro 76.7 million, comprising euro 73.1 million due to
the write-off of potential liabilities relating to the alleged non-deductibility of costs relating to facts or actions that are
considered offences (it regards offence of false corporate reporting, obstacles to supervision and market turbulence
alleged to have been committed by Banca Italease with regard to the incorrect recognition of counterparty risk in
derivative contract transactions performed in 2007), contained in the report on findings of 30 November 2012.
The decision to consider said potential liabilities as no longer existing results from the reading of the deed of
certification of pending charges of Banca Italease issued on 2 March 2015 by the Milan Regional Headquarters of the
Tax Authority. Different from the previous deeds, this deed no longer mentions the report on findings of 30 November
2012. As illustrated in the Annual Financial Report 2014, the assessment notices served in December 2014 did not
include said findings. In light of this situation, we reasonably believe that the Tax Authority considered the
observations stated in the brief submitted by Banco Popolare following receipt of the formal report on findings, and
abandoned the findings. In relation to the claim, no provisions were recorded, as losing the dispute was deemed only
possible.
Euro 3.5 million in the additional reductions in potential liabilities derive from the termination of the dispute against
the former Banco Popolare di Novara Spa and the former Banca Italease concerning the alleged failure to pay
registration tax on finalised deeds related to the operation to restructure the debt of an Italian industrial group. The
claim was no longer valid due to the cancellation following an internal review of the payment notices previously issued.
In relation to the claim, no provisions were recorded, as losing the dispute was deemed only possible.
For details on disputes still pending as at 31 March 2015 refer to the paragraph “Risks associated with current
disputes with the Tax Authority” in the Notes to the Consolidated Financial Statements as at 31 December 2014.
In addition to the developments illustrated, during and following the quarter numerous hearings were held in which the
appeals submitted by Banco Popolare or the opponent were discussed. Below, the main disputes under discussion are
summarised:



on 24 February 2015, the dispute regarding Banco Popolare (formerly Banca Italease) was discussed before
the Provincial Tax Commission. This dispute regards the applicability of withholding to interest paid in 2008 to
the subsidiary SPE resident in Delaware for amounts deriving from the placement of financial instruments
calculated as part of regulatory capital (preference shares). The Commission partially rejected Banco’s appeal,
ordering it to pay the withholding, but cancelling the application of fines. The ruling had no impacts on the
income statement for the quarter, as the amount of withholding had already been allocated on drawing up the
financial statements as at 31 December 2014;
on 17 March 2015, several of the disputes of Banco Popolare (formerly Banca Popolare di Verona e Novara)
regarding the applicability of the regional increase in the IRAP tax rate for the years 2003, 2004 and 2005
were discussed before the Supreme Court. As illustrated in more detail in the section regarding the significant
events after the end of the quarter, the Supreme Court fully confirmed the decisions of the Regional Tax
Commission, compensating legal fees;
also on 17 March 2015, the Banco Popolare (formerly Banca Popolare Italiana) dispute regarding the
______________________________________________________________________________________________________________________________________________


57
registration tax applicable to the disposal of a business segment finalised in 2004 between Banca Eurosistemi
and Banca Popolare di Lodi was discussed before the Supreme Court. As illustrated in more detail in the
section regarding the significant events after the end of the quarter, the Supreme Court fully confirmed the
decisions of the Regional Tax Commission, ordering the bank to pay legal fees;
also on 17 March 2015, the dispute involving the subsidiary Bipielle Real Estate regarding the registration tax
applied to the reclassification of the contribution of a business segment, where Reti Bancarie Holding was the
counterparty, was discussed before the Supreme Court. As illustrated in more detail in the section regarding
the significant events after the end of the quarter, the Supreme Court quashed the ruling of the Regional Tax
Commission, accepting the appeal filed by the Tax Authority and sending all proceedings back to the Regional
Tax Commission;
on 20 April 2015, the dispute regarding Banco Popolare (formerly Banca Italease) was discussed before the
Provincial Tax Commission. This dispute regards the applicability of withholding to interest paid in 2007 to the
subsidiary SPE resident in Delaware for amounts deriving from the placement of financial instruments
calculated as part of regulatory capital (preference shares). At the date of drawing up this Report, the ruling
had not been issued.
In addition to the disputes illustrated above, on 22 July 2014, Banco Popolare was notified - by the Tax Authority Provincial Headquarters of Novara - with 2 refund rejection notices regarding IRPEG and ILOR credit for which Banca
Popolare di Novara s.c.a.r.l. had requested a refund for 1995, prior to the merger with Banca Popolare di Verona - SGSP
s.c.a.r.l. which established Banco Popolare di Verona e Novara s.c.a.r.l. The credit rejected, recognised in the financial
statements as at 31 December 2014, amounts to a total of euro 86.5 million, euro 52.6 million of which as principal
and euro 33.9 million of which is interest accrued. Retaining that the grounds stated by the Tax Authority are totally
illegitimate and groundless, on 5 November 2014, the company submitted an appeal against said measures before the
competent Tax Commission. The hearing to discuss the disputes before the Provincial Tax Commission was held on 7
April. The Provincial Tax Commission accepted both combined appeals, also ordering the Tax Authority to pay legal
fees.
Classification and valuation of potential liabilities in accordance with the provisions of accounting standard IAS 37
In the light of the successful outcomes in the courts of first instance and/or the existence of valid grounds on which to
challenge the claims made by the Tax Authority with regard to proceedings underway and also considering the specific
opinions issued by authoritative external firms, the potential liabilities classified as possible but unlikely amount to a
total of euro 369.4 million.
The potential liabilities classified as probable amount in total to euro 37.6 million and were fully debited from the
income statement when the tax demands received were paid or are entirely covered by provisions allocated to the item
“other provisions for risks and charges - other.”
Lastly, with regard to all of the disputes illustrated above, we would like to state that as at 31 March 2015, tax credit
amounting to euro 58.9 million was due from the Tax Authority, following payments made provisionally for the
assessment notices served. In this regard, we must emphasise that said payments are not retained such as to impact
the risk of losing the disputes, which have been valued on the basis of the provisions of IAS 37: in fact, these amounts
are paid as part of an automatic mechanism, which is unrelated to the groundlessness or otherwise of the related tax
claims.
Inspections underway as at 31 March 2015
As at 31 March 2015, no inspections were in progress against Banco Popolare or its subsidiaries.
Related risks and inspections
Following an inspection, with note dated 6 November 2014, Consob informed the Issuer that it had detected possible
irregularities in relation to the provision of investment services, with specific regard to the management of conflicts of
interest and the adequacy assessment. In January 2015, the Issuer submitted to Consob its counter arguments for each
of the presumed irregularities. At the date of this Report, the procedure is still under way.
During the first quarter, the Supervisory Authorities concluded and/or launched several inspections of the Issuer. One
inspection concerning the remuneration and incentive systems was concluded. On conclusion thereof, the Bank of Italy
formulated several findings and observations, for which the Issuer provided its own considerations in April 2015.
On 31 January 2015 the ECB initiated an inspection on risk management and the risk monitoring system, understood as
relating to interest rate risk on the banking book and liquidity risk of the Issuer. This inspection is still under way.
On 29 January 2015, the Bank of Italy launched a different inspection concerning aspects of compliance in relation to
transparency of the Issuer, which is currently under way.
______________________________________________________________________________________________________________________________________________
58
OTHER INFORMATION
Disclosure on earnings per share
Basic EPS
Diluted EPS
31 March 2015
Annualised
Weighted average of
attributable result
ordinary shares
(euro)
835,123,652
362,179,606
835,123,652
362,179,606
EPS
(euro)
2.306
2.306
31 March 2014
Weighted average
of ordinary shares
(*)
176,373,087
176,373,087
Annualised
attributable result
(euro)
(75,816,466)
(75,816,466)
EPS
(euro)
(0.430)
(0.430)
(*) the figures of the weighted average of ordinary shares have been restated to provide a like-for-like comparison.
Note that as at 31 March 2015, Basic EPS coincides with Diluted EPS as there were no financial instruments with
potential dilutive effects.
KEY FINANCIAL HIGHLIGHTS OF THE MAIN GROUP COMPANIES
A summary of the main investments in Group companies is presented below, with an indication of the most significant
statement of financial position, income statement and operating balances as at 31 March 2015.
(in millions of euro)
Total
assets
Shareholders'
equity (*)
Direct
Funding
Direct
Funding
Net
loans
Income
(Loss)
118.2
101.3
1,584.9
16,893.4
17.2
49.9
75.3
876.8
95.0
6.3
1,386.0
806.7
308.9
4,922.0
17,383.3
25.5
9.9
160.2
1,630.9
(1.5)
0.2
40.2
268.7
11.3
3,000.3
5.2
176.4
7.7
330.3
0.1
1.1
21.5
5.0
13,780.0
1,369.0
-
16.4
2.6
2,075.0
-
19.0
(19.6)
-
293.5
561.8
1,138.4
20.5
115.1
105.6
558.6
1,107.6
13.7
58.9
-
-
0.9
62.5
8.4
0.5
6.4
1.0
1.6
Banks
Banca Aletti & C. (Suisse)
Bipielle Bank (Suisse)
Banco Popolare Luxembourg
Banca Aletti & C.
Financial companies
Aletti Gestielle SGR
Aletti Fiduciaria
Release
Italease Finance
Other companies
Società Gestione Servizi - BP
Holding di Partecipazioni Finanziarie Banco Popolare
Bipielle Real Estate
Tecmarket Servizi
Italease Gestione Beni
(*) amount inclusive of the income (loss) for the period.
SIGNIFICANT EVENTS AFTER THE END OF THE PERIOD
Development of disputes underway with the Government Tax Authorities
In the first few days of May, all the rulings concerning the disputes heard before the Supreme Court on 17 March and
relating to the following disputes were filed:

Banco Popolare (formerly Banca Popolare di Verona e Novara) - tax demands regarding IRAP tax paid to the
Regional headquarters for Veneto in tax years 2003, 2004 and 2005.
The Supreme Court fully confirmed the decisions of the Regional Tax Commission, declaring the legal fees
compensated.
The liability arising from the Court’s decision amounts to approximately euro 10 million and has already been
charged to the income statement in previous years. Therefore, there was no impact on the income statement
for the current year.
______________________________________________________________________________________________________________________________________________

59
Banco Popolare (formerly Banca Popolare Italiana) - notice of correction regarding the registration tax
applicable to the disposal of a business segment in 2004 between Banca Eurosistemi S.p.A. (later
incorporated into Banca Popolare Italiana Soc. Coop.) and Banca Popolare di Lodi Soc. Coop.
The Supreme Court fully confirmed the ruling of the Regional Tax Commission that was unfavourable to the
Bank, and ordered the Company to pay the legal fees.
The related potential liability of euro 7.4 million, as it was classified as probable, has already been charged to
the income statement in previous years. Therefore, there was no impact on the income statement for the
current year.

Bipielle Real Estate S.p.A. - Settlement notice for registration tax regarding the reclassification of a business
segment conferral involving Reti Bancarie Holding as counterparty (later incorporated into Banca Popolare
Italiana Soc. Coop.).
Overturning the outcome of the previous instances, the Supreme Court accepted the appeal submitted by the
Tax Authority, endorsing the approach according to which Article 20 of the Consolidated Law on registration
tax allows for an investigation of the “real reason” for the operation in light of the interests pursued by the
parties, as this must prevail over that shown in the files/formally in the deeds filed by the parties.
On this basis, the Supreme Court quashed the ruling of the Regional Tax Commission, assigning the
examination of the reasons for the appeal, which had not been discussed at the time (as they were absorbed
in the quashed decision) and the determination of legal fees to another section of said Commission.
In consideration of the favourable outcomes in the previous instances, no provisions had been allocated for
this dispute. Following the decision of the Supreme Court illustrated above, a specific allocation of euro 17.7
million was made to provisions for risks and charges, charging them to the income statement of the first
quarter of 2015. The provision covers the amount of taxes due and the estimate of the related interest
accrued. No fines were imposed.
Tax credits of the former Banca Popolare di Novara s.c.a r.l.
With regard to the dispute initiated by Banco Popolare against the refund rejection notice for the IRPEG and ILOR credit
for 1995, notified on 22 July 2014 by the Tax Authority - Provincial Headquarters of Novara in relation to the requests
submitted at the time by Banca Popolare di Novara s.c.a r.l., on 7 April a hearing was held before the Provincial Tax
Commission of Novara to discuss the appeals submitted by Banco Popolare. With ruling filed on 30 April, the
Commission accepted both appeals, also ordering the Tax Authority to pay legal fees.
The credit subject to the dispute is recognised in the financial statements as at 31 March 2015 for a total of euro 86.5
million, euro 52.6 million of which as principal and euro 33.9 million of which is interest accrued.
Agreements relating to employees
Following the Agreement on the Renewal of the National Labour Agreement of 31 March 2015 between the Banking
Association and the national trade unions, negotiations were immediately started up again in the Group, and an
agreement was already entered into on 3 April 2015, concerning the Solidarity Fund for managing redundant staff.
This agreement specifically resulted in the acceptance of 74 voluntary requests for access to extraordinary benefits, in
addition to the maximum number of 200 participants established with the previous agreement of 26 November 2014.
With regard to the total exits planned primarily during 2015, in confirming the plan for hiring/stabilising 100 young
resources, previously defined with the agreement of 26 November 2014, the agreement of 3 April 2015 also set out, for
the portion exceeding 200 terminations, the inclusion in the company workforce of additional young people, which can
be quantified as a termination/hiring ratio of 3 to 1. This aims at ensuring the necessary generational turnover, also in
relation to production areas lacking resources, to favour homogenous distribution of employees in the local areas
where the company is located.
Securitisation transactions
In April 2015, following several changes to the rating method applied as illustrated above, Moody’s upgraded both
Class A2 and Class B Notes of the securitisation transaction “Bipitalia Residential”, from “A2” to “A1” and increased
the rating of Class C Notes from “Baa1” to “A3”.
On 10 April 2015 several amendments were made to the contractual documentation for the “BP Mortgages 1” and “BP
Mortgages 2” transactions, to keep the counterparty Bank of New York (Luxembourg) S.A., Italian Branch (“BONY”) in
the role of custodian bank, among others, following the downgrading by S&P in December 2014. Specifically, S&P
decreased the minimum rating required by the documentation to act as custodian bank from “A1+” to “A1”. Following
this amendment, S&P confirmed the rating of the securities issued.
______________________________________________________________________________________________________________________________________________
60
OUTLOOK FOR BUSINESS OPERATIONS
In the first quarter of 2015, the generally positive climate of the European financial markets strengthened, also
following some positive signs of the consolidation of the international economic scenario and the introduction of QE by
the ECB. The latest forecasts issued at the end of the quarter by various research agencies report a consolidation of
growth prospects in Europe and Italy, though to a slight extent. For the year under way, the GDP in the first case is
expected to grow by 1.4%, while for the domestic economy, the GDP is expected to grow by 0.7%.
In general, the development of the macroeconomic scenario shows greater vivacity in the disbursement of credit,
especially in the case where, should foreign demand remain steady, the underlying improvement seen in several
production sectors should spread to the entire economy, providing greater stimulation to investments of companies.
On the supply side, as mentioned, due to the effect of the ECB’s unconventional policies, conditions have begun to
ease, while on the demand side, signs of life are being supported, in specific cases, by the improvement in
creditworthiness.
In this framework, the continuing improvement in economic conditions should be the driver capable of triggering
growth in the demand for short-term loans to finance working capital and medium/long-term loans for investments of
companies: overall, loans to households and businesses in the industry are expected to grow during 2015.
Concurrently, a dampening of the trend in rates of bad loans of companies could trigger a further easing of
disbursement conditions on the part of the banking industry, facilitated by significant liquidity provided by the ECB.
However, in the short-term, the quality of loans in bank portfolios will not stop deteriorating: the flow of new bad loans,
although slightly improved compared to the recent past, will continue to grow for some time.
Overall, however, the current and future situations begin to show indications that are more favourable for the banking
industry. In the remainder of the year, money management margins are expected to grow, though gradually, due to the
slow, but positive, evolution of assets and the recomposition towards less costly components of funding. This
expansion will be limited by the drop in unit margins on loans, compressed by increasing competitive tensions on
customers with the best standing. This will provide benefits for margins from customers, while the decrease in interest
from securities will only result in a slight improvement in the interest margin. The gradual increase in net fee and
commission income along with the positive development of the interest margin will ensure growth (though fractional) in
net interest and other banking income.
Banking profitability will therefore still depend on strict risk management, above all of credit risk and on containing
operating costs. With regard to the latter, note the growing burden deriving from the proliferation of banking regulation
at European level, an element which is weighing down bank income statements, making organisation and management
even more complex. The forecast reduction in adjustments on loans and provisions will contribute to the achievement
of a positive - though modest - income statement result and ROE for the banking industry.
Based on the results of the first quarter, and believing that the highly anticipated economic recovery could actually take
shape, it is reasonable to forecast that operations could continue to report positive income.
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61
DECLARATION OF THE MANAGER RESPONSIBLE
FOR PREPARING THE COMPANY’S
FINANCIAL REPORTS
The Manager responsible for preparing the Company’s financial reports, Gianpietro Val, hereby states, pursuant to the
provisions of the second paragraph of art. 154 bis of the “Consolidated Law on Finance”, that the accounting
disclosures contained in this Interim Report on operations as at 31 March 2015 of the Banco Popolare Group match the
information reported on the company’s documents, books and accounting records.
Verona, 12 May 2015
Signed by
Manager responsible for preparing
the Company’s financial reports
Gianpietro Val