BANCA MONTE DEI PASCHI DI SIENA S.p.A.
2009 ANNUAL REPORT
GRUPPO
MONTEPASCHI
BANCA MONTE
DEI PASCHI DI SIENA S.p.A.
PROGETTO
DI BILANCIO CONSOLIDATO
ANNUAL REPORT
31
31 dicembre
December2010
2010
2
Report and Consolidated Financial Statements of the Monte dei Paschi di Siena
Group for 2010
Banca Monte dei Paschi di Siena S.p.a.
Share capital: € 4,502,410,157.20, fully paid in.
Siena Companies' Register no. and tax code: 00884060526
Member of the Italian Interbank Deposit Protection Fund. Banks Register no. 5274
Monte dei Paschi di Siena Banking Group, Registered with the Banking Groups Register .
3
NOTICE OF ORDINARY AND EXTRAORDINARY SHAREHOLDERS‘ MEETING
The shareholders of Banca Monte dei Paschi di Siena S.p.A. are hereby convened to an Ordinary
and Extraordinary Shareholders‘ Meeting to be held on 29 April 2011 at 9:00 a.m. in Siena at
Viale Mazzini no. 23 on first call and on 30 April 2011, at the same time and location on second
call if necessary, to consider and pass resolutions on the following
AGENDA
Ordinary session:
1) Individual and consolidated financial statements as at 31 December 2010;
2) resolutions concerning the purchase and sale of treasury shares pursuant to Articles 2357 and
2357-ter of the Civil Code;
3) engagement of an independent auditing firm to audit the accounts, pursuant to article 13, and
following, of Law Decree no. 39/10, art. 2409-bis of the Civil Code, and art. 30 of the Articles of
Association, for each of the nine fiscal years ending on 31 December from 2011 through 2019;
4) alignment of Banca Monte Dei Paschi di Siena SpA with new supervisory rules for banks on
remuneration and incentive policies for directors, employees and contractors.
Extraordinary session:
1) Amendments to articles 13, 14 and 17 of the Articles of Association.
2) Amendments to articles 33 and 35 of the Articles of Association.
4
CORPORATE OFFICERS, SENIOR MANAGEMENT AND AUDITORS .................................................................. 7
ANNUAL REPORT .......................................................................................................................................... 9
REPORT ON OPERATIONS.......................................................................................................................................11
CONSOLIDATED FINANCIAL STATEMENTS...................................................................................................................99
Balance Sheet.............................................................................................................................................101
Income Statement ......................................................................................................................................103
Statement of Comprehensive Income ..........................................................................................................104
Statement of changes in shareholders’ equity ..............................................................................................105
Consolidated statement of cash flows: indirect method ................................................................................107
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS .............................................................................................109
Part A – Accounting Policies ........................................................................................................................111
Part B – Consolidated Balance Sheet ...........................................................................................................163
Part C – Consolidated Income Statement .....................................................................................................249
Part D – Statement of Consolidated Comprenhensive Income .......................................................................279
Part E – Risks and Hedging Policies .............................................................................................................281
Part F – Consolidated shareholders' equity ..................................................................................................376
Part G – Business combinations ...................................................................................................................388
Part H – Related-party transactions .............................................................................................................390
Part I – Share-based payments ....................................................................................................................397
Part L – Segment reporting .........................................................................................................................399
CONSOLIDATED FINANCIAL STATEMENTS CERTIFICATION PURSUANT TO ARTICLE 81-TER OF CONSOB REGULATION NO. 11971 OF
14 MAY 1999, AS SUBSEQUENTLY AMENDED AND SUPPLEMENTED...............................................................................405
AUDITOR’S REPORT ON THE CONSOLIDATED FINANCIAL STATEMENTS .............................................................................407
ANNEXES ........................................................................................................................................................411
This is an English translation of the Italian original “2010 Bilancio” and has been prepared solely for the
convenience of the reader. The Italian version takes precedence and will be made available to interested
readers upon request to Banca Monte Paschi Siena S.p.a.
5
6
CORPORATE OFFICERS, SENIOR MANAGEMENT AND AUDITORS
BOARD OF DIRECTORS
___
Giuseppe Mussari
Chairman
Francesco Gaetano Caltagirone
Deputy Chairman
Ernesto Rabizzi
Deputy Chairman
Fabio Borghi
Director
Turiddo Campaini
Director
Massimiliano Capece Minutolo
Director
Graziano Costantini
Director
Frederic Marie De Courtois
Director
Lorenzo Gorgoni
Director
Alfredo Monaci
Director
Andrea Pisaneschi
Director
Carlo Querci
Director
BOARDS OF STATUTORY AUDITORS
Tommaso Di Tanno
Marco Turchi
Paola Serpi
Luigi Liaci
Francesco Bonelli
Chairman
Standing Auditor
Standing Auditor (*)
Substitute Auditor
Substitute Auditor (°)
(*) On 16/11/2009 replaced outgoing Standing Auditor Leonardo Pizzich. Confirmed by the Shareholders’
Meeting of 29/3/2010
(°) Appointed by the Shareholders’ Meeting of 29/3/2010
SENIOR MANAGEMENT (*)
Antonio Vigni
General Manager
Fabrizio Rossi
Acting Deputy General Manager
Antonio Marino
Deputy General Manager
Marco Massacesi
Deputy General Manager (as of 12/2/2010)
Giuseppe Menzi
Deputy General Manager
Nicolino Romito
Deputy General Manager
Marco Morelli was Deputy General Manager until 15/3/2010
INDEPENDENT AUDITORS
KPMG S.p.A.
7
8
Relazione consolidata sulla gestione
ANNUAL REPORT
CORPORATE OFFICERS, SENIOR MANAGEMENT AND AUDITORS .................................................................. 7
ANNUAL REPORT .......................................................................................................................................... 9
REPORT ON OPERATIONS.......................................................................................................................................11
2010 GROUP RESULTS IN BRIEF ...................................................................................................................12
PREPARATION CRITERIA FOR THE REPORT ON OPERATIONS ........................................................................13
STRUCTURAL PROFILES OF THE GROUP ........................................................................................................13
CORPORATE GOVERNANCE AND OTHER INFORMATION ..............................................................................19
RECLASSIFIED ACCOUNTS ............................................................................................................................20
NON-FINANCIAL KPIs ..................................................................................................................................27
MACROECONOMIC AND BANKING SCENARIO .............................................................................................28
MAJOR EVENTS IN 2010 ..............................................................................................................................35
THE CUSTOMER BASE AND CUSTOMER SATISFACTION ................................................................................38
CUSTOMER BALANCE SHEET AGGREGATES ...................................................................................................42
SEGMENT REPORTING .................................................................................................................................51
INTEGRATED RISK AND CAPITAL MANAGEMENT .........................................................................................67
ADDITIONAL INFORMATION ON INVESTMENTS CONSIDERED HIGH-RISK BY THE MARKET ..........................71
REGULATORY CAPITAL AND CAPITAL RATIOS ...............................................................................................80
HUMAN RESOURCES, ORGANISATION, PROPERTY AND FACILITY MANAGEMENT ........................................81
THE STOCK MARKET AND INVESTOR RELATIONS .........................................................................................86
SOCIAL AID AND ENVIRONMENTAL PROGRAMMES .....................................................................................89
MATERIAL EVENTS SUBSEQUENT TO YEAR END ...........................................................................................92
OUTLOOK ON OPERATIONS .........................................................................................................................93
ANNEXES ....................................................................................................................................................94
CONSOLIDATED FINANCIAL STATEMENTS...................................................................................................................99
Balance Sheet.............................................................................................................................................101
Income Statement ......................................................................................................................................103
Statement of Comprehensive Income ..........................................................................................................104
Statement of changes in shareholders‘ equity ..............................................................................................105
Consolidated statement of cash flows: indirect method ................................................................................107
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS .............................................................................................109
Part A – Accounting Policies ........................................................................................................................111
Part B – Consolidated Balance Sheet ...........................................................................................................163
Part C – Consolidated Income Statement .....................................................................................................249
Part D – Statement of Consolidated Comprenhensive Income .......................................................................279
Part E – Risks and Hedging Policies .............................................................................................................281
Part F – Consolidated shareholders' equity ..................................................................................................376
Part G – Business combinations ...................................................................................................................388
Part H – Related-party transactions .............................................................................................................390
9
Part I – Share-based payments .................................................................................................................... 397
Part L – Segment reporting ......................................................................................................................... 399
CONSOLIDATED FINANCIAL STATEMENTS CERTIFICATION PURSUANT TO ARTICLE 81-TER OF CONSOB REGULATION NO. 11971 OF
14 MAY 1999, AS SUBSEQUENTLY AMENDED AND SUPPLEMENTED .............................................................................. 405
AUDITOR‘S REPORT ON THE CONSOLIDATED FINANCIAL STATEMENTS ............................................................................. 407
ANNEXES ........................................................................................................................................................ 411
10
Relazione consolidata sulla gestione
REPORT ON OPERATIONS
REPORT ON OPERATIONS.......................................................................................................................................11
2010 GROUP RESULTS IN BRIEF ...................................................................................................................12
PREPARATION CRITERIA FOR THE REPORT ON OPERATIONS ........................................................................13
STRUCTURAL PROFILES OF THE GROUP ........................................................................................................13
CORPORATE GOVERNANCE AND OTHER INFORMATION ..............................................................................19
RECLASSIFIED ACCOUNTS ............................................................................................................................20
NON-FINANCIAL KPIs ..................................................................................................................................27
MACROECONOMIC AND BANKING SCENARIO .............................................................................................28
MAJOR EVENTS IN 2010 ..............................................................................................................................35
THE CUSTOMER BASE AND CUSTOMER SATISFACTION ................................................................................38
CUSTOMER BALANCE SHEET AGGREGATES ...................................................................................................42
INCOME STATEMENT AGGREGATES…………………………………………………………………………………………46
SEGMENT REPORTING .................................................................................................................................51
INTEGRATED RISK AND CAPITAL MANAGEMENT .........................................................................................67
ADDITIONAL INFORMATION ON INVESTMENTS CONSIDERED HIGH-RISK BY THE MARKET ..........................71
REGULATORY CAPITAL AND CAPITAL RATIOS ...............................................................................................80
HUMAN RESOURCES, ORGANISATION, PROPERTY AND FACILITY MANAGEMENT ........................................81
THE STOCK MARKET AND INVESTOR RELATIONS .........................................................................................86
SOCIAL AID AND ENVIRONMENTAL PROGRAMMES .....................................................................................89
MATERIAL EVENTS SUBSEQUENT TO YEAR END ...........................................................................................92
OUTLOOK ON OPERATIONS .........................................................................................................................93
ANNEXES ....................................................................................................................................................94
11
REPORT ON OPERATIONS
2010 GROUP RESULTS IN BRIEF
In a persistently difficult market environment, the Montepaschi Group achieved significant growth in its
capital base, while still centering its funding and lending strategy on the needs of households and
businesses. The initiatives implemented allowed the Group to consolidate its customer base and
improve/consolidate its competitive position in all of its main areas of business. Moreover, the Group
guaranteed continuity to its offer of credit, supporting its customers by taking part in both banking
system initiatives and developing projects independently. More specifically:
 At the end of 2010 total funding for the Group stood at approximately 303 bln, up 6.9% on
the previous year ―on a restated operating basis 1 ‖ (+3.4% on 30/09/2010), with significant
developments for both direct and indirect funding. More specifically, direct funding came to
approx. 158 bln, up about 3. 6% as compared to 31/12/2009 ―on a restated operating basis‖
(+2.5% on 30 September 2010), with the Group's market share rising to 7.88%, up 70 bps YoY
(+26 bps as compared to 30/09/2010). Indirect funding came to approx. 145 bln, up 10.7% as
compared to the previous year ―on a restated operating basis‖ (+4.5% on 30/09/2010) with an
increase in assets under custody (+13.8% YoY) and in assets under management (+5.4% YoY), the
latter being propped up by insurance premium collections and collective asset management.
 With regard to credit management, at the end of 2010 the Group‘s ―Loans and advances to
customers‖ amounted to approx. EUR 156 bln, up 4.1% YoY ―on a restated operating basis 2 ‖
(+2.3% on 30/09/2010), with market share coming to 7.84%. In terms of “active” loans to
customers, the year-end figure stood at approx. EUR 139 bln, an increment of 6.4% against the
previous year, largely owing to the 12.7% rise in mortgage loans (new contracts for the year
came to EUR 15.8 bln, up 11.1% YoY) and the increase in special-purpose Corporate credit, while a
fall was registered for other types of loans following the decline in demand for working capital loans
by companies. New flows on loans issued by the Group through dedicated product
companies totalled EUR 12.8 bln, up by over 25% on the previous year (EUR 3.8 bln issued in
Q4 2010; +35.2% on Q3 2010). Small business and corporate loans, which came to approx
EUR 10 bln (7.6 bln in 2009), registered a step-up in disbursements by both MPS Capital Services
(+18% YoY; +56.7% QoQ) and MPS Leasing & Factoring (+36.9 YoY; +43.3% QoQ), the latter
attributable primarily to Factoring. With regard to consumer loans, total disbursements by
Consumit in 2010 came to approx. EUR 2.7 bln (+4.3% YoY; 638 mln issued in Q4 2010; -0.6%
on Q3 2010), reflective of a falling trend for special-purpose loans on a yearly basis and a pick-up
in personal loans. As for credit quality, non-performing loans accounted for approximately 3.51%
of total loans as at 31 December 2010, while the provisioning rate 3 dropped to 74 bps.
 The Group’s customerbase exceeded 6.2 mln.
In view of the above, the Montepaschi Group's Net Operating Income grew significantly, coming to
approx. 946 mln, more than twice the result achieved at the end of the previous year "on a likefor-like basis4 “. The growth is attributable to basic income, which climbed 1.6% compared to
31/12/2009 “on a like-for-like basis4 “ and 1.8% on Q3 2010, and to the sharp reduction in both
loan loss provisions (-21.2% YoY) and operating expenses (-5.2% YoY). As a consequence, the
cost-income ratio fell to 61.6%4 with a drop of 310 bps as compared to the end of 2009,
confirming the progress made by the Group in improving operational efficiency.
Volumes as at 31/12/2009 were "restated" with historical data that excluded the effects from the branches sold in 2010 (a total of 72 branches of Banca Monte dei
Paschi di Siena sold to the groups CARIGE and Intesa-San Paolo) which, as at 31/12/2009, included total funding of 3.543 mln, of which 2.204 mln in direct funding
and 1.339 mln in indirect funding. Furthermore, the figure was restated on a proforma basis to take account of the assets classified as held for sale in 2010 (MP
Monaco SAM and MPS Venture SpA - an overall impact of 269.7 mln).
1
Volumes as at 31/12/2009 were "restated" with historical data that excluded the effects from the branches sold in 2010 (a total of 72 branches of Banca Monte dei
Paschi di Siena sold to the groups CARIGE and Intesa-San Paolo) which, as at 31/12/2009, included 2.305 mln in lending. Furthermore, the figure was restated on a
proforma basis to take account of the assets classified as held for sale in 2010 (MP Monaco SAM and MPS Venture SpA - an overall impact of 35.4 mln).
2
3
Provisioning rate: ratio between annualised net adjustments due to impairment of loans and customer loans at year end (Account 70 in the Balance Sheet).
2009 quarterly results and 2010 first three quarterly results were restated to take account of the changes brought about to the operating scope subsequent to the
divestiture of business in 2010 (72 branches of Banca Monte dei Paschi di Siena). Moreover, to ensure consistency with previous quarters (2010 and 2009), income
generated by the companies, MP Monaco SAM and MPS Venture SpA classified as held for sale at the end of 2010, was excluded line by line (for further details
please see paragraph ―MPS Group reclassification criteria").
4
12
REPORT ON OPERATIONS
A contribution to net income for the year also came from gains on equity investments of EUR
405.5 mln, arising from the Group's transaction for value creation in real estate and properties used in the
business and from the disposal of the Group's shareholding in Prima SGR to AM Holding following closure
of the agreement (176.9 mln), as well as from gains on disposal of investments amounting to EUR
165.9 mln, attributable to the divestiture of banking business (72 branches of Banca Monte dei Paschi di
Siena).
The Montepaschi Group’s consolidated net profit for the year before Purchase Price Allocation5
(PPA) stood at approx. EUR 1,096.2 mln (as compared to approx. EUR 354.3 mln as at 31
December 2009 ). Considering the net effects of PPA, net profit for the period came to EUR 985.5
mln (vs. 220.1 mln in 2009).
With regard to capital ratios, as at 31 December 2010 the Tier I ratio BIS II was 8.4% (7,5% at the end
of 2009) with a BIS II solvency ratio at 12.9% (11.9% at the end of 2009).
PREPARATION CRITERIA FOR THE REPORT ON OPERATIONS
The Report on Operations has been prepared in accordance with the provisions of Article 2428 of the Civil
Code (as amended by Decree 32/2007) and gives an account of the performance and results of the
Montepaschi Group, both as a whole and in the various business segments into which consolidated
operations are organised.
To allow for a better understanding of how the major factors of value creation (both in the short and long
term) for the Group and for all its stakeholders developed over the reporting period, the report includes
economic and financial aspects with qualitative and extra-accounting components.
These non-financial components particularly include the main activities and results achieved by the Group
in implementing Corporate Social Responsibility (CSR) objectives relating to Customer relations, Personnel
management and the impact of business on Society and the Environment. For additional information on
this topic please refer to the Annual Report on Corporate Social Responsibility which can be found on our
website www.mps.it under "Our Values".
STRUCTURAL PROFILES OF THE GROUP
The Montepaschi Group, whose banking activities date back to 1472 , is one of the leading banking and
credit institutions on the Italian financial scene. The Montepaschi Group operates across Italy and in the
major international markets, with operations ranging from traditional lending (i.e. short-/medium-/longterm loans to retail and corporate customers, leasing, factoring, consumer credit) to asset management
(through its equity interest in AM Holding), private banking, investment banking and corporate finance.
Furthermore, the Group ensures the provision of bancassurance and pension products through its strategic
partnership with AXA.
The Montepaschi Group's mission is structured along the following guidelines:
 to create value for shareholders, in both the short and long term, giving priority to customer
satisfaction, the professional development of resources and to the interest of all stakeholders;
 to be a continuously evolving model of reference in the Italian banking scenario, affirming the
Montepaschi Group's leading position as a domestic Group with a European vocation;
 to strengthen the Corporate sense of belonging among employees, while at the same time
valuing cultural differences and maintaining the strong foothold of each Group company in the
area where it operates.
A distinctive feature of the Montepaschi Group - partially a consequence of the strong local ties of its
banking companies - is to combine the pursuit of growth and value creation objectives, typical of any
market-oriented undertaking, with the system of values expressed by the relevant areas and
communities. To this end, the Group has promoted an innovation strategy in support of development,
characterized by a proactive role that is geared toward stimulating new opportunities for its customers and
the areas in which it operates.
5
Purchase Price Allocation: fair value measurement of main potential assets and liabilities purchased.
13
REPORT ON OPERATIONS
OWNERSHIP
In the Montepaschi Group, the role of Parent Company is assumed by Banca Monte dei Paschi di Siena
SpA (BMPS), a public company listed on the Italian Stock Exchange. As of September 1999, it has been
included in the FTSE MIB Index, the main benchmark index for Italian equity markets.
SUMMARY OF REFERENCE PRICES AND CAPITALISATION
Price (euro)
31/12/10
31/12/09
0,851
1,228
No. ordinary shares
5.569.271.362
5.569.271.362
No. preferred shares
1.131.879.458
1.131.879.458
18.864.340
5.703
18.864.340
8.229
No. savings shares
Capitalisation (ord + pref) (euro mln)
On the basis of reporting to the Italian Securities Commission (Consob) and BMPS pursuant to art. 120
Legislative Decree 58/98, the major shareholders of BMPS were MPS Foundation (majority shareholder
with 45.68% of the ordinary share capital), JP Morgan Chase (5.54%), AXA S.A. (4.56%), Caltagirone
Francesco Gaetano (4.81%) and Unicoop Firenze (3.32%). 70% of the remaining ordinary share capital
is mainly held by Italian retail investors and employees and the remaining 30% by institutional investors
(of which approx. 8% North America, 9% Europe, 5% Italy, 5% UK/Ireland).
THE BRAND
Banca Monte dei Paschi di Siena is a strong brand that stands for tradition, stability and ―Italianness‖, with
positive implications in terms of innovation and customer-orientation developed over recent years. Its
economic value, as estimated by the company Interbrand, is of approximately 5,3 bln 6.
The brand, or corporate image and reputation that it represents, is a key driver in the choices of customers
and in the long-term performance of the Group.
For this reason, the brand is at the very heart of the Group's integrated communication strategy and
supports product marketing. In 2010 specifically :
 a new institutional advert was created, winning several prestigious awards;
 the brand ―1472‖ was launched to highlight one of the Group's distinctive features - its date of
birth - as part of a project to consolidate the bank's local presence and reach out to new
generations;
 a territory-based communications campaign was created with the aim of strengthening the Group's
depth of penetration in all local socio-economic contexts.
The brand's importance and reputation are continuously monitored through both quantitative and
qualitative analyses of the Group's exposure in the press, on television and on the web, so as to intervene
promptly with any protective measures that may be deemed necessary.
The 2010 annual survey, commissioned to Demoskopea, confirmedthe significant market power of the
brand, Banca Monte dei Paschi di Siena, second only to that of Intesa - San Paolo. First among the Italian
banks according to the Reputation Institute (source: Global Reputation Pulse 2010 - Bank Industry).
Organisational structure
As at 31/12/2010 the Montepaschi Group's organisational structure, reflective of the integrated and multimarket approach to financial, credit and insurance activities, included the following setup:
6
Data as at 31 december 2008
14
REPORT ON OPERATIONS
 a central managing and operational coordinating unit , headed by Banca Monte dei Paschi di
Siena which, in addition to its consumer banking activities, in its role as Parent Company is also
responsible for the overall direction, governance and control of the subsidiaries;
 a production unit, consisting of the Group's banks and financial companies which are specifically
dedicated to the development of specialised financial instruments for the market (a.k.a Product
Companies). Among these, particular mention is made of: Consum.it (consumer credit company),
MPS Capital Services Banca per le Imprese (specialised in activities of corporate finance, capital
markets and structured finance ), MPS Leasing&Factoring (specialised in leasing and factoring
services for businesses).
 a distribution structure, mainly composed by the banking networks of Banca Monte dei Paschi di
Siena, Banca Antonveneta and Biverbanca.
 a service unit, made up of the companies in the Group that oversee the IT and telecommunication
systems (MPS Group Operating consortium) and manage non-performing loans (MPS Gestione
Crediti Banca);
 A foreign network that is geographically present in all the major financial centres.
Contribution to Group income from banking and insurance
Other business
11%
Product Companies
14%
Distribution network
75%
GEOGRAPHIC FOOTPRINT AND INTEGRATED MULTI-CHANNELS
The Montepaschi Group operates in a logic of developing and streamlining its distribution channels,
focusing both on growing the traditional network and strengthening the innovative channels (internet
banking, phone banking, ATMs) with a view to making the branch a highly-evolved centre for
customer relations. The table below summarises the Distribution Network of the Montepaschi Group as
at 31 December 2010:
Montepaschi Group distribution network
Distribution channel
Domestic branches
(*)
31.12.2010
2.918
Financial Adv isory Offices
151
Total domestic points of sale
3.069
SME Centres
116
I nstitutional Client Centres
51
Priv ate Client Centres
89
Foreign branches
(**)
41
ATM
3.574
Retail multi-channel contracts
Corporate multi-channel contracts
1.522.528
38.961
(*) as repo rted to the B ank o f Italy. Data no t inclusive o f the specialised units o f 'M P S Capital Services B anca per l'impresa'.
(**) The data include o peratio nal branches, representative o ffices and fo reign banks.
15
REPORT ON OPERATIONS
As at 31 December 2010, the Montepaschi Group totalled 2,918 branches nationwide7 for a market
share of approximately 8.77%, as illustrated in the following breakdown by region, geographical area and
bank of reference:
MONTE PAS C HI G ROUP - DOME S TIC B RANC HE S
Trentino Alto Adige
Lombardy
-
Friuli Venezia Giulia
-
6
73
Valle d'Aosta
11
388
355
Veneto
Piedmont
182
Emilia Romagna
207
38
Liguria
Marche
Toscany
531
99
Umbria
67
Abruzzo
Molise
64
239
Lazio
Apulia
15
181
160
Campania
14
Sardinia
18
Basilicata
64
35
Calabria
206
102
Sicily
BRANCH DISTRIBUTION BY GEOGRAPHICAL AREA AT 31.12.2010(*)
Northern I taly
Central I taly
Southern I taly and islands
TOTAL
N°
I nc. %
1.260
1.015
643
2.918
43,18%
34,78%
22,04%
100,00%
Market Share (**)
3,79%
3,05%
1,93%
8,77%
(* ) as reported to the Bank of Italy's Superv isory Department
(* * ) at 30/09/2010
The Parent Company can
rely on a distribution
network of 2,417
branches.
The bank has been operational
as of 1 January 2009 and is
wholly owned by the Parent
Company. The distribution
network across the Triveneto
area consists in 380 branches.
Number of reports to the Bank of Italy
7
16
Market-leading local bank in the
provinces of Biella and Vercelli,
60.42% owned by Banca Monte
dei Paschi di Siena, with a
distribution network of 121
branches.
REPORT ON OPERATIONS
The Montepaschi Group's traditional distribution network underwent signifcant changes in the period
2008/2010 mainly due to the following events:
 corporate transactions, among which, the acquisition of Banca Antoveneta and Biverbanca and the
merger by absorption of Banca Agricola Mantovana and Banca Toscana into the Parent Company;
 implementation of the asset disposal plan, defined in compliance with the recommendations from
the Antitrust Authority which involved the divestiture of banking business consisting in Banca Monte
dei Paschi di Siena branches;
 optimisation of local footprint with initiatives implemented as of Q3 2010, aimed at increasing
productivity and improving sales and distribution efficiency overall. The project led to the closure of
branches which were particularly overlapping with other points of operation (87 in total). Subsequent
phases will include the completion of optimisation actions and the gradual re-opening of units
previously closed, with the aim of preserving the configuration of the Network overall and in the local
regions.
To complete the transition process already put underway in the terms set out above, at the end of 2010
the Board of Directors of Banca Monte dei Paschi di Siena approved a project for the full
reorganisation of both the sales and distribution network and of the Parent Company's structure.
The project was developed with the aim of: (i) increasing local coverage starting from the central role of
Branches and the enhanced value of the Branch Manager, (ii) regaining an integrated view of the customer
through local units working more closely with the ―Provinces‖ and ―Districts‖ and leveraging appropriate
resources, (iii) shortening business supply chains and (iv) having simpler and leaner organisational units
resulting in structurally higher levels of operational efficiency. The project implementation plan provides
for roll-out at Company level by the end of the first quarter of 2011 and at network level by the end of
the second quarter 2011.
The Montepaschi Group's distribution network is supported by 853 Personal Financial Bankers
nationwide, who carry out their activities through 151 financial offices open to the public.
For what concerns the development of relations and the management of specific customer segments, the
Group has a total of 256 specialised business centres dedicated to Small and Medium Enterprises (116
centres), Institutions (51 centres) and to Private customers ( 89 centres).
Internationally, the Montepaschi Group has a foreign network geographically distributed across all major
Stock markets, as well as in emerging countries with the highest rates of growth and/or key relations with
Italy, for the purpose of:
 providing Italian customers with a wide service network in support of foreign trade and
internationalisation;
 ‗capturing‘ trade finance flows;
 taking part in the economic activities of developed or high-growth markets so as to diversify the
revenue base, using a prudential approach.
The foreign network is structured as follows: 4 operational branches located in London, New York,
Hong Kong and Shanghai, 11 representative offices located in various "target areas‖ (EU, CentralEastern Europe, North Africa, India and China, 3 banks governed by foreign law: MP Monaco SAM8 (1
branch), MP Belgium (8 branches), MPS Banque (17 branches), 2 Italian Desks in Spain and Romania.
The ATM distribution channel continues to develop with the gradual installation of new "cash-in"
machines, aiming to give a sharp boost to the migration of low added value transactions. The traditional
ATMs are mainly located in areas not served by bank branches or in public places having high operational
potential, with a view to expanding the Group's local footprint and offering customers a more widespread
service. To this end, 2010 saw the installation of 134 new machines, 99 of which featuring the ―cash-in‖
option and 35 of which were of the traditional type. Considering the machines decommissioned in the
course of the year (195), mainly following the divestiture of business (a total of 72 branches of Banca
Monte dei Paschi di Siena) and following the launch of the project to optimise the Group's local presence,
Group ATMs totalled 3,574 as at 31 December 2010 (251 of which were Cash-in).
8
The company MP Monaco SAM has been classified as held for sale.
17
REPORT ON OPERATIONS
In addition to its physical presence in the area, the Montepaschi Group makes use of innovative
channels whose development is aimed at bolstering telematic services especially through the promotion of
integrated multi-channels which, within one single package, include Internet Banking, Mobile Banking
and Phone Banking services that undergo continuous fine-tuning. At the end of 2010 the telematic market
consisted in approximately 1,561,000 contracts, of which 927 thousand Integrated multi-channel
contracts, with over 47 thousand new contracts formalised in the fourth quarter. Existing contracts with
Consumer customers stood at approximately 1,522,000 (around 170,000 signed during the year) while
those with Corporate customers totalled almost 39,000 contracts (1,600 signed in 2010).
18
REPORT ON OPERATIONS
CORPORATE GOVERNANCE AND OTHER INFORMATION
Pursuant to art. 2497 of the Civil Code, Banca Monte dei Paschi di Siena directs and coordinates the
activities of its direct and indirect subsidiaries, including companies which, under current regulations, do
not belong to the Banking Group.
The information relating to the transactions and relations between the Bank/Group and related parties can
be found in Part H of the Notes to the Financial Statements.
The information relating to the Corporate Governance system and to the ownership structure of Banca
Monte dei Paschi di Siena – prepared in accordance with art. 123 bis of the Consolidated Law of Finance –
may be referred to in the separate ―Report on Corporate Governance‖ which, following approval by the
Board of Directors, will be published and available on the Bank‘s internet site: www.mps.it under the
section Investor & Ricerca > Corporate Governance.
With regard to Related-party transactions in 2010, the ―Regulations containing provisions relating to
transactions with related parties‖ (the Regulation) was adopted by Consob with Resolution no. 17221 of
12 March 2010 and later amended by Resolution no. 17389 of 23 June 2010.
The new framework combines into a new and comprehensive Regulation all principles regarding prompt
and periodic disclosure obligations pursuant to articles 114 and 154-ter of the Consolidated Law on
Finance and superseding the rules already set out by Consob‘s Issuer Regulations, and principles pursuant
to Article 2391-bis of the Civil Code.
The Regulation goes alongside the primary legislation governed by art. 2391 of the Civil Code – Directors‘
Interests – and by self-regulation, such as article 9 of the self-regulatory code for listed companies –
Directors‘ interest and related party transactions – which establishes criteria for substantial and procedural
correctness in managing transactions with related parties.
Banca Monte dei Paschi di Siena has complied with the new regulations as set forth in the ―Procedures for
Related-party transactions‖, published on the bank's internet site at:
Banca Monte dei Paschi di Siena | Investors & Ricerca | Corporate Governance | Procedura in materia di
operazioni con parti correlate
Under paragraph 26 of Annex B to Legislative Decree of 30 June 2003 no. 196 (Code for the protection
of personal data), it is stated that, in accordance with art. 34, paragraph 1, lett. g) of the Code, the
Security Policy Document (SPD) of Banca Monte dei Paschi di Siena SpA as at 31 December 2010 was
prepared in compliance with paragraph19 of the aforementioned Annex B.
19
REPORT ON OPERATIONS
RECLASSIFIED ACCOUNTS
MPS GROUP RECLASSIFICATION CRITERIA
The following accounting statements illustrate balance-sheet and profit-and-loss accounts reclassified on the basis of
operating criteria. In particular, with regard to the income statement of the two periods under comparison, in
addition to the usual aggregations and reclassifications of accounts, for the purpose of providing a clearer picture of
group performance, 2009 quarterly results, 2010 first two quarterly results and year-end results for 2010 were
restated to take account of the changes brought about to the operating scope subsequent to the divestiture of
business which took place in 2010 (disposal of 72 Banca Monte dei Paschi di Siena branches, 22 of which to the
Carige Group on 31/05/2010 and 50 to the Intesa Sanpaolo Group on 14/06/10). Restated values were obtained by
reclassifying the historical data with the profit and loss figures relating to the branches sold, grouping them together
under one account. The same logic was applied to the expected disposal of the controlling interests in MP
Monaco SAM and MPS Venture SpA (classified as held for sale in 2010) which resulted in the reclassification of
these entities' profit and loss contributions to all quarters of 2010 and 2009 into one reclassified account ―Gains
(losses) after tax from groups of assets held for sale‖ (for further details, see ― Annexes: Montepaschi Group –
Reconciliation of reclassified accounts and accounting tables .
Following are the major changes as at 31 December 2010:
a)
“Net profit/loss from trading/valuation of financial assets" in the reclassified income statement,
includes the items under Account 80 (Net profit/loss from trading), Account 100 (Gains (losses) on
disposals / repurchases of loans, available-for-sale or held-to-maturity financial assets and financial
liabilities) and Account 110 (Net profit/loss on financial assets and liabilities designated at fair value).
The account incorporates values relating to dividends on some securities transactions, inasmuch as
they are closely connected with the trading component (approx. EUR 270 mln as at 31/12/2010).
Furthermore, the aggregate was stripped of losses arising from disposal of loans (approx. EUR 36
mln), which were reclassified out of Account 100 "Gains (losses) on disposal of loans";
b)
“Dividends, similar income and gains (losses) on equity investments” in the reclassified income
statement incorporates account 70 ―Dividends and similar income‖ and a portion of account 240
―Gains (losses) on equity investments‖ (approx. EUR 84 mln as at 31/12/2010) corresponding to the
contribution to profit and loss for the period that is 'guaranteed' by the portion of profit arising from
equity investments in associates (valued at equity). Dividends from some trading transactions, as
outlined under item a) above, have been eliminated from the aggregate;
c)
“Net value adjustments due to impairment of loans” in the reclassified income statement was
determined by excluding charges relating to financial plans (EUR 6 mln), which are more properly
classified under ―Net provisions for risks and charges and other operating income/expenses‖.
Additionally, 36 mln worth of losses arising from disposal of loans were reclassified out of Account
100 a) "Gains/losses on disposal of loans" into this account in a logic of recovery, managing them in
a similar way to loan value adjustments;
d)
“Other administrative expenses” in the reclassified income statement was integrated with the
portion of stamp duty and client expense recovery (approx. EUR 329 mln) posted under Account
220 ―Other operating income/expenses‖. In addition, the aggregate was stripped of approx. 19.5
mln reclassified into ―Integration costs/One-off charges‖ which were incurred within the
framework of the re-organization process set out in the 2008-2011Business Plan;
e)
The account “Net provisions for risks and charges and other operating income/expenses” in
the reclassified income statement incorporates Account 190 ―Net provisions for risks and charges‖
and Account 220 ―Other operating income/expenses". It also includes value adjustments to financial
plans for an amount of EUR 6 mln described under item c) above and excludes stamp duty and client
expense recovery as described under item d) above;
f)
―Integration costs/one-off charges‖ in the reclassified income statement includes the ―One-off
charges" associated with the organizational rearrangement process, once reclassified out of "Other
administrative expenses" (EUR 19.5 mln);
g)
Profit and loss results relating to the branches of Banca Monte dei Paschi di Siena which were sold in
2010 (22 branches to the CARIGE Group and 50 to the Intesa-SanPaolo Group) were reclassified into
one single account ―Profit and loss results of branches sold‖ out of previous accounts (Interest
20
REPORT ON OPERATIONS
Income: approx. EUR 26 mln, Net fees and commissions: approx. EUR 18 mln; Net profit/loss
from trading/valuation of financial assets: EUR 0.1 mln; Administrative expenses: approx. EUR
22 mln).
h)
―Gains (losses) on equity investments‖ is cleared of components reclassified as ―Dividends and
similar income" (see item b);
i)
The effects of Purchase Price Allocation (PPA) were reclassified out of other accounts (in particular
―Interest income" for approx. EUR 77 mln and depreciation/amortisation for approx. EUR 82 mln
(with a related theoretical tax burden of approx. EUR 51 mln which integrates the account) into one
single account named ―Net effects of Purchase Price Allocation‖.
With regard to capital aggregates, for the purpose of providing a clearer picture of performance trends, in
addition to the usual reclassifications carried out on the consolidated balance sheet, “Loans and
advances to customers” and ―Customer accounts and securities ” were also restated to take account of
the divestiture of business (72 Banca Monte dei Paschi di Siena branches sold) and reflect the effects of
assets held for sale at the end of 2010 (MP Monaco SAM e MPS Venture SpA). More specifically, ―Loans
and advances to customers” and ―Customer accounts and securities” were respectively included
under “Other assets‖ and ―Other liabilities” in relation to all periods in 2009 and the first three quaters
of 2010. Reclassification details are as follows:
j)
“Held-for-trading financial assets” on the assets side of the reclassified balance-sheet includes
Account 20 (held-for-trading financial assets), Account 30 (Financial assets designated at fair value )
and Account 40 (available-for-sale financial assets);
k)
“Other assets” on the assets side of the reclassified balance-sheet incorporates Account 80 "Hedging
derivatives", Account 90 "Changes in value of macro-hedged financial assets", Account 140 "Tax
assets", Account 150 "Non-current assets and groups of assets held for sale " and Account 160 "Other
assets";
l)
“Customer accounts and securities” on the liabilities side of the reclassified balance-sheet includes
Account 20 "Customer accounts", Account 30 "Debt securities in issue" and Account 50 "Financial
liabilities designated at fair value";
m) ―Other liabilities‖ on the liabilities side of the reclassified balance-sheet incorporates Account 60
―Hedging derivatives‖, Account 70 ―Changes in value of macro-hedged financial liabilities", Account
80 ―Tax liabilities‖, Account 90 ―Liabilities included in disposal groups held for sale‖ and Account
100 ―Other liabilities‖.
°°°°°°°
The accounting statements and the comparative statements of the reclassified consolidated income
statement and balance-sheet are enclosed with the “Annexes” section.
21
REPORT ON OPERATIONS
C ONS OLIDATE D RE PORT ON OPE RATIONS
Highlights at 31/12/10
g INC OME S T AT E ME NT AND BAL ANC E S HE E T F IG URE S AND KE Y INDIC AT ORS
MPS G ROUP
31/12/10
31/12/09
(1)
(1) (2)
Income from banking activities
5.503,2
5.417,7
1,6%
Income from financial and ins urance activities
5.571,3
5.592,7
-0,4%
Net operating income
945,9
462,2
104,6%
Net profit (los s ) for the year
985,5
220,1
n.s .
31/12/10
31/12/09
% c hg
h INC OME S TATE ME NT F IG URE S (in E UR mln)
h B ALANC E S HE E T F IG URE S AND INDIC ATORS (in E UR mln)
% c hg
(1) (2)
Direct funding
158.486
152.917
3,6%
Indirect funding
144.919
130.878
10,7%
of which: as s ets under management
50.547
47.941
5,4%
of which: as s ets under cus tody
94.372
82.937
13,8%
C us tomer loans
156.238
150.073
4,1%
G roup net equity
17.156
17.175
-0,1%
31/12/10
31/12/09
Net non-performing loans /C us tomer loans
3,51
3,10
Net watchlis t loans /C us tomer loans
2,57
2,50
31/12/10
31/12/09
C os t/Income ratio
61,6
64,7
R.O.E . (on average equity)
5,74
1,46
R.O.E . (on end-of-period equity)
5,74
1,49
Net adjus tments to loans / E nd-of-period inves tments
0,74
0,98
31/12/10
31/12/09
12,9
11,9
8,4
7,5
h INF ORMATION ON B MP S S TOC K
31/12/10
31/12/09
Number of ordinary s hares outs tanding
5.569.271.362
5.569.271.362
Number of preference s hares outs tanding
1.131.879.458
1.131.879.458
18.864.340
18.864.340
(1) (2)
h K E Y LOAN QUALITY RATIOS (%)
(1) (2)
h P ROF ITAB ILITY RATIOS (%)
h C AP ITAL RATIOS (%)
S olvency ratio
Tier 1 ratio
Number of s avings s hares outs tanding
from the 31/12/09 to from the 31/12/08 to
the 31/12/10
the 31/12/09
P rice per ordinary s hare:
average
1,02
1,24
low
0,82
0,77
high
1,33
1,62
h OP E RATING S TRUC TURE
31/12/10
31/12/2009 (1)
Abs . c hg
Total head count - end of period
31.495
31.599
-104
Number of branches in Italy
2.918
3.016
-98
F inancial advis ory branches
151
163
-12
41
41
Number of branches & repres entative offices abroad
(1) F igures were res tated to take ac c ount of the c hanges brought about to the G roup‘s operating s c ope s ubs equent to the dives titure of
bus ines s in 2010 (dis pos al of 72 branc hes of B anc a Monte dei P as c hi di S iena).
(2) F igures were als o c leared of numbers relating to as s ets whic h, in 2010, were rec las s ified as ―held for s ale‖ (MP Monac o S AM and MP S
Venture S pA – s ee s ec tion ―MP S G roup – rec las s ific ation c riteria‖.
(3) R .O.E . on average equity: net profit for the period / average between equity at the end of the previous year (inc lus ive of net
inc ome and valuation res erves ) and equity for the c urrent year.
(4) R .O.E . on end-of-period equity: net profit for the period / equity at the end of the previous year (inc lus ive of valuation
res erves ) purged of s hareholder's payout.
22
REPORT ON OPERATIONS
g REC L AS S IFIED INC OME S TATEMENT (in EUR mln)
31/12/10
31/12/09
R es tated (1)
R es tated (1) (2)
Ins .
%
Net interes t inc ome
3.591,7
3.576,7
15,0
0,4%
Net c ommis s ions
1.911,5
1.841,0
70,5
3,8%
Income from banking activities
MP S G roup
C hange
5.503,2
5.417,7
85,5
1,6%
Dividends , s imilar inc ome and gains (los s es ) on equity
inves tments
91,8
110,3
-18,5
-16,8%
Net profit (los s ) from trading/valuation of financ ial as s ets
-23,1
66,1
-89,2
-134,9%
Net profit (los s ) from hedging
-0,6
-1,5
0,9
-58,5%
Income from financial and insurance activities
5.571,3
5.592,7
-21,4
-0,4%
Net adjus tments for impairment of:
-1.194,3
-1.510,2
315,9
-20,9%
-1.155,6
-1.466,0
310,4
-21,2%
-38,7
-44,1
5,5
-12,4%
Net income from financial and insurance activities
4.377,0
4.082,6
294,5
7,2%
Adminis trative expens es :
-3.255,9
-3.458,1
202,2
-5,8%
a) pers onnel expens es
-2.211,2
-2.299,7
88,4
-3,8%
b) other adminis trative expens es
-1.044,7
-1.158,4
113,7
-9,8%
-175,2
-162,2
-13,0
8,0%
-3.431,1
-3.620,3
189,2
-5,2%
Net operating income
945,9
462,2
483,7
104,6%
Net provis ions for ris ks and c harges and other operating
inc ome/expens es
-193,2
-219,7
26,5
-12,0%
P rofit (los s ) on equity inves tments
551,5
-2,7
554,1
n.s .
Integration c os ts / one-off c harges
-19,5
-86,8
67,3
-77,5%
P &L figures for branc hes s old
21,8
71,8
-50,0
-69,6%
182,4
42,3
140,1
n.s .
P rofit (loss) before tax from continuing operations
1.488,9
267,1
1.221,7
n.s.
Taxes on inc ome from c ontinuing operations
-392,9
-100,3
-292,5
n.s .
P rofit (loss) after tax from continuing operations
1.096,0
166,8
929,2
n.s.
1,7
192,0
-190,4
-99,1%
1.097,6
358,8
738,8
n.s.
-1,5
-4,5
3,0
-67,0%
Net profit (loss) pre P P A
1.096,2
354,3
741,8
n.s.
P P A (P urc has e P ric e Alloc ation)
-110,7
-134,2
23,5
-17,5%
Net profit (loss) for the year
985,5
220,1
765,4
n.s.
a) loans
b) financ ial as s ets
Net adjus tments to tangible and intangible fixed as s ets
Operating expenses
G ains (los s es ) from dis pos al of inves tments
P rofit (los s ) after tax from dis pos al groups held for s ale
Net profit (loss) for the period including minority interests
Net profit (los s ) attributable to minority interes ts
(1) F igures were res tated to take ac c ount of the c hanges brought about to the G roup‘s operating s c ope s ubs equent to the
dives titure of bus ines s in 2010 (dis pos al of 72 branc hes of B anc a Monte dei P as c hi di S iena).
(2) R es ults relating to as s ets whic h, in 2010 were rec las s ified as ―held for s ale‖ (MP Monac o S AM and MP S V enture S pA – s ee
s ec tion ―MP S G roup – rec las s ific ation c riteria‖) were purged ―line by line‖ and pos ted to G ains (los s es ) from as s ets held for s ale‖.
23
REPORT ON OPERATIONS
QUARTE RL Y TRE ND IN RE C L AS S IFIE D INC OME S TATE ME NT (in E UR mln)
2009 (1)
2010 (1)
4th
quarter
3rd
quarter
2nd
quarter
1s t
quarter
4th
quarter
3rd
quarter
2nd
quarter
1s t
quarter
Net interes t income
900,8
906,5
912,7
871,7
874,3
899,3
893,6
909,4
Net commis s ions
489,0
459,1
482,9
480,5
452,8
464,1
456,1
468,0
MPS G roup
Inc ome from banking ac tivities
1.389,8
1.365,7
1.395,6
1.352,1
1.327,1
1.363,4
1.349,8
1.377,4
Dividends , s imilar income and gains (los s es ) on equity
inves tments
32,2
29,5
15,7
14,4
24,1
19,6
45,4
21,2
Net res ult from realis ation/valuation of financial as s ets
-5,7
16,3
-53,4
19,7
-20,9
8,2
31,3
47,5
Net profit (los s ) from hedging
-10,1
-3,5
6,3
6,7
8,1
-10,3
-5,8
6,5
Inc ome from financ ial and ins uranc e ac tivities
1.406,2
1.408,0
1.364,2
1.392,9
1.338,5
1.380,9
1.420,7
1.452,6
Net adjus tments for impairment of:
-296,1
-289,1
-301,3
-307,7
-440,4
-360,0
-405,3
-304,4
-284,1
-281,5
-283,0
-307,0
-428,3
-351,0
-400,1
-286,6
-12,0
-7,6
-18,3
-0,7
-12,2
-9,0
-5,2
-17,8
Net inc ome from financ ial and ins uranc e ac tivities
1.110,1
1.118,9
1.062,9
1.085,2
898,0
1.020,9
1.015,4
1.148,2
Adminis trative expens es :
-868,7
-805,2
-775,9
-806,1
-972,2
-834,0
-810,9
-840,9
a) pers onnel expens es
-597,4
-537,1
-518,7
-558,1
-611,4
-567,8
-541,7
-578,7
b) other adminis trative expens es
-271,4
-268,1
-257,2
-247,9
-360,8
-266,2
-269,2
-262,2
-52,3
-40,8
-42,1
-40,0
-45,6
-39,6
-39,3
-37,8
Operating expens es
-921,1
-846,0
-817,9
-846,1
-1.017,8
-873,6
-850,2
-878,7
Net operating inc ome
189,0
272,9
245,0
239,1
-119,8
147,3
165,3
269,5
Net provis ions for ris ks and charges and other operating
income/expens es
-26,7
-32,8
-92,2
-41,5
-154,0
-30,8
-24,1
-10,8
P rofit (los s ) on equity inves tments
578,8
-7,8
-19,3
-0,2
0,3
0,1
-5,0
1,9
Integration cos ts / one-off charges
-10,7
-6,1
-2,7
-27,6
-4,3
9,2
12,6
16,5
15,8
18,8
20,6
0,5
-2,3
184,2
0,0
-4,6
46,8
0,0
0,0
Profit (los s ) before tax from c ontinuing operations
730,8
223,9
324,1
210,1
-316,3
179,2
127,3
277,0
Taxes on income from current operations
-73,1
-100,8
-176,8
-42,3
167,2
-74,4
-57,7
-135,5
Profit (los s ) after tax from c ontinuing operations
657,7
123,1
147,3
167,9
-149,1
104,8
69,6
141,5
-0,2
-0,5
-0,3
2,6
-0,3
-0,9
0,7
192,5
657,6
122,6
147,0
170,5
-149,4
104,0
70,3
333,9
-1,3
-1,1
1,4
-0,5
-0,9
-1,0
-2,5
-0,1
Net profit (los s ) pre PPA
656,2
121,5
148,5
169,9
-150,3
103,0
67,8
333,9
P P A (P urchas e P rice Allocation)
-27,6
-25,8
-29,6
-27,7
-31,0
-33,6
-36,3
-33,3
Net profit (los s ) for the year
628,6
95,8
118,9
142,2
-181,3
69,3
31,5
300,6
a) loans
b) financial as s ets
Net adjus tments to tangible and intangible fixed as s ets
P &L figures for branches s old
G ains (los s es ) from dis pos al of inves tments
P rofit (los s ) after tax from dis pos al groups held for s ale
Net profit (los s ) for the period inc luding minority
interes ts
Net profit (los s ) attributable to minority interes ts
-54,8
(1) All quarters in 2009 and the firs t two quarters in 2010 were res tated to take ac c ount of the c hanges brought about to the G roup‘s operating s c ope s ubs equent to the dives titure of bus ines s
in 2010 (dis pos al of 72 branc hes of B anc a Monte dei P as c hi di S iena). Morevoer, all 2009 and 2010 quarters were rec alc ulated with the line-by-line exc lus ion of inc ome generated by MP S
Monac o S am and MP S Venture S pa, whic h were res tated as ―held for s ale‖ in 2010 (– s ee s ec tion ―MP S G roup – rec las s ific ation c riteria‖) and rec las s ified under ―G ains (los s es ) from as s ets
held for s ale‖.
24
REPORT ON OPERATIONS
Montepaschi G roup
g REC LAS S IFIED BALANC E S HEET (in EUR mln)
31/12/10
C as h and c as h equivalents
C hange
31/12/09
(*)
AS S ETS
%
abs.
2.411
1.296
1.115
86,1%
156.238
150.073
6.164
4,1%
9.710
10.328
-618
-6,0%
55.973
38.676
17.297
44,7%
Rec eivables :
a) Loans and advanc es to c us tomers
b) Loans and advanc es to banks
F inanc ial as s ets held for trading
F inanc ial as s ets held to maturity
0
0
0
1,0%
908
742
165
22,3%
8.959
10.395
-1.436
-13,8%
E quity inves tments
Tangible and intangible fixed as s ets
of whic h:
6.474
6.619
-146
-2,2%
Other as s ets
10.081
13.305
-3.224
-24,2%
Total assets
244.279
224.815
19.464
8,7%
a) goodwill
31/12/10
C hange
31/12/09
(*)
LIABILITIES
%
abs.
P ayables
a) C us tomer ac c ounts and s ec urities
158.486
152.917
5.568
3,6%
28.334
22.758
5.577
24,5%
30.383
19.481
10.902
56,0%
a) P rovis ions for s taff s everanc e indemnities
287
304
-17
-5,6%
b) P ens ions and other pos t retirement benefit obligations
436
458
-22
-4,8%
c ) Other provis ions
882
911
-29
-3,1%
8.043
10.529
-2.485
-23,6%
17.156
17.175
-18
-0,1%
-146
721
-867
n.s .
c ) E quity ins truments
1.949
1.949
d) Res erves
5.900
5.766
134
2,3%
e) S hare premium
3.990
4.048
-59
-1,5%
f) S hare c apital
4.502
4.502
b) Depos its from banks
F inanc ial liabilities held for trading
P rovis ions for s pec ific us e
Other liabilities
G roup net equity
a) Valuation res erves
b) Redeemable s hares
g) Treas ury s hares (-)
-25
-32
7
-23,3%
h) Net profit (los s ) for the year
985
220
765
n.s .
Minority interes ts
Total Liabilities and S hareholders' Equity
270
281
-12
-4,1%
244.279
224.815
19.464
8,7%
(*) The items “Loans and advances to customers” and “Customer accounts and securities” exclude the volumes pertaining to the branches sold in the
course of 2010 (72 branches of Banca Monte dei Paschi di Siena) and to the companies, MP Monaco SAM and MPS Venture, classified as held for sale
at the end of 2010. The items have been reclassified under “Other assets” and “Other liabilities” respectively (see section “MPS Group – reclassification
criteria”.
25
REPORT ON OPERATIONS
Montepaschi G roup
g REC LAS S IFIED BALANC E S HEET- Quarterly Trend (in EUR mln)
31/12/10
30/09/10
(*)
AS S ETS
C as h and c as h equivalents
30/06/10
(*)
31/03/10
(*)
31/12/09
(*)
30/09/09
(*)
30/06/09
(*)
31/03/09
(*)
2.411
724
853
781
1.296
682
798
860
156.238
152.704
152.850
148.457
150.073
143.866
142.775
142.374
9.710
12.606
13.662
10.474
10.328
13.401
13.017
11.935
55.973
54.691
58.752
47.855
38.676
38.749
32.707
28.946
0
0
0
0
0
0
0
0
908
774
732
759
742
725
721
597
8.959
10.179
10.201
10.374
10.395
10.428
10.468
10.489
Rec eivables :
a) Loans and advanc es to c us tomers
b) Loans and advanc es to banks
F inanc ial as s ets held for trading
F inanc ial as s ets held to maturity
E quity inves tments
Tangible and intangible fixed as s ets
of whic h:
6.474
6.474
6.474
6.619
6.619
6.648
6.670
6.670
Other as s ets
a) goodwill
10.081
10.845
10.518
11.601
13.305
11.210
11.577
12.419
Total assets
244.279
242.522
247.567
230.301
224.815
219.061
212.062
207.621
31/12/10
30/09/10
(*)
LIABILITIES
30/06/10
(*)
31/03/10
(*)
31/12/09
(*)
30/09/09
(*)
30/06/09
(*)
31/03/09
(*)
P ayables
a) C us tomer ac c ounts and s ec urities
158.486
154.673
157.980
152.670
152.917
153.218
145.048
136.748
28.334
29.626
28.593
25.628
22.758
19.294
21.826
23.395
30.383
29.474
33.210
23.188
19.481
20.674
18.710
20.609
a) P rovis ions for s taff s everanc e indemnities
287
293
298
304
304
340
347
504
b) P ens ions and other pos t retirement benefit obligations
436
449
450
459
458
456
441
436
c ) Other provis ions
882
964
962
920
911
888
886
910
8.043
10.377
9.459
9.684
10.529
8.522
9.407
9.720
17.156
16.397
16.345
17.167
17.175
15.391
15.124
15.019
-146
-287
-219
580
721
646
513
303
c ) E quity ins truments
1.949
1.949
1.949
1.949
1.949
52
47
47
d) Res erves
5.900
5.904
5.903
5.986
5.766
5.789
5.768
5.857
e) S hare premium
3.990
3.990
3.996
4.048
4.048
4.041
4.035
4.094
f) S hare c apital
4.502
4.502
4.502
4.502
4.502
4.487
4.487
4.487
g) Treas ury s hares (-)
-25
-18
-49
-40
-32
-25
-57
-70
h) Net profit (los s ) for the year
985
357
261
142
220
401
332
301
b) Depos its from banks
F inanc ial liabilities held for trading
P rovis ions for s pec ific us e
Other liabilities
G roup C ompanies
a) Valuation res erves
b) Redeemable s hares
Minority interes ts
Total Liabilities and S hareholders' Equity
270
267
270
282
281
280
273
279
244.279
242.522
247.567
230.301
224.815
219.061
212.062
207.621
(*) The items ―Loans and advanc es to c us tomers ‖ and ―Cus tomer ac c ounts and s ec urities ‖ exc lude the volumes pertaining to the branc hes s old in the c ours e of 2010 (72 branc hes of Banc a Monte dei Pas c hi di S iena) and to the c ompanies , MP
Monac o S AM and MPS V enture, c las s ified as held for s ale at the end of 2010. The items have been rec las s ified under ―Other as s ets ‖ and ―Other liabilities ‖ res pec tively (s ee s ec tion ―MPS Group – rec las s ific ation c riteria‖.
26
REPORT ON OPERATIONS
NON-FINANCIAL KPIs
To optimise the management of non-financial components - also in terms of corporate social responsibility
- in company activities having significant impact on the Group's sustainable financial performance in both
the mid and long term, 2010 saw the development of a specific system of measurement known as the
"Sustainability Tree", which will gradually be integrated into the core processes of planning, control and
reporting.
Below are some of the key indicators included in the Sustainability Tree that are already subject to
monitoring:
Objectives
Performance indicators
2010
employee perception index (scale 20-100)
HUMAN
RESOURCES
CUSTOMERS
SOCIETY
69,2
65,2
1
turnover (%)
0,36
0,45
absenteeism rate2
3,88
3,95
training per employee (hours)
48,0
36,0
women executives-managers (%)
35,1
33,8
female employees (%)
44,5
44,2
care score index (scale 20-100)
65,9
62,8
retention (%)
95,3
94,1
acquisition (%)
5,7
5,8
microcredits (no.)
711
312
migrant banking (customers %)
5,2
4,7
43,6
46,4
4,9
4,7
1,56
1,63
833
1.198
67
62
3
social aid (EUR mln)
supplier sustainability rating (scale 1-10)
energy consumption (TEP – Ton of Equivalent Petroleum) per capita
4
CO2 emission per capita (kg)
ENVIRONMENT
2009
paper5 per capita (kg)
6
green purchases (%)
financing for energy and environment (millions of euro)
(1) Turno ver: ratio between the number o f vo luntary o utflo ws and to tal headco unt
(2) A bsenteeism rate:days o f absence due to sickness and accidents o ut o f average annual wo rking daysi
(3) So cial aid: includes so cial-purpo se co ntributio ns in the fo rm o f do natio ns and spo nso rships
(4) CO2 Emissio ns: includes greenho use gas emissio ns under “ sco pe 1” and “ sco pe 2” acco rding to the Internatio nal classificatio n,GHG P ro to co l.
(5) P aper co nsumptio n: the figure do es no t include paper used fo r custo mer-co mmunicatio n
(6) Green purchases: percentage o f to tal co sts fo r supplies relating to the pro curement o f pro ducts and services with lo w enviro nmental impact.
27
4
4
1.031
379
REPORT ON OPERATIONS
MACROECONOMIC AND BANKING SCENARIO
MACROECONOMIC TRENDS
2010 was characterised by a general economic recovery for both the mature economies as well as
for the emerging countries, driven by the strong revival of global foreign trade, whose positive trend already seen in the last quarter of 2009- continued in 2010 also. The road to growth, however,
remains uncertain and, as evidenced by IMF's recent World Economic Outlook, while good economic
recovery was registered in 2010, a slowdown in world economic growth is anticipated for 2011,
owing to several critical factors which continue to effect recovery. Nevertheless, the IMF significantly raised
its previous forecasts for GDP in 2011, especially as regards the United States and Germany.
Preliminary data from a detailed study of GDP trends in
different geographical areas worldwide, pointed to an
2009
2010
2011
estimated US growth in 2010 of +2.8% YoY, with a
World
-0,6%
5,0%
4,4%
Advanced Economies
-3,4%
3,0%
2,5%
more pronounced recovery in the second half of the
Germany
-4,7%
3,6%
2,2%
year. Nonetheless, US recovery remains uncertain and
France
-2,5%
1,6%
1,6%
below that estimated by the Chairman of the Federal
Italy
-5,0%
1,0%
1,0%
Eurozone
-4,1%
1,8%
1,5%
Reserve, Mr. Bernanke, as a result of the persisting
Usa
-2,6%
2,8%
3,0%
tension in the job market (the US unemployment rate in
Japan
-6,3%
4,3%
1,6%
2010 climbed to over 9.6%), difficulties in the property
Emerging Economies
2,6%
7,1%
6,5%
sector and federal debt. The IMF has revised upwards
China
9,2%
10,3%
9,6%
India
5,7%
9,7%
8,4%
its projections for US growth in 2011, but has
Source: FMI WEO Update, January 2011
lowered those for 2012. From the viewpoint of
industrial production, after the sharp rise experienced in the first half of the year, the level of industrial
production stabilised in the second half of 2010 and equipment utilisation picked up, returning above the
75% threshold in the second half of the year. Inflation remained under control (the US consumer price
index climbed back to 1.5% YoY).
GROWTH RATES IN THE LEADING ECONOMIES (GDP Y/Y)
Projections
Despite signs of economic improvement for the US in the second half of the year, the FED continued to
keep interest rates unchanged (interest rate on Fed Funds still between 0% and 0.25%)
confirming the use of unconventional monetary policy to stimulate the economy (ie. quantitative
easing, consisting in a massive asset purchase program of $600 bln), at least up to the first half of 2011.
China continues to lead among the emerging countries (with India following suite at a steady pace) with a
growth rate of 10.3% in 2010, driven by exports which, despite a slight slowdown, continue to climb
(Chinese export as at December +17.9%). In addition to the new reforms launched at the start of the year
to stimulate consumption, the Chinese government also granted greater flexibility of the yuan against the
dollar by abandoning its fixed exchange rate policy; this action, however, does not appear to have been
sufficient and pressure is increasing on the Beijing government to devalue the national currency. Chinese
inflation is cause for concern (with CPI rising to +4.6% YoY as at December 2010) and it is possible that
shortly Beijing will decide to tighten interest rates. Monetary authorities have intervened several times to
try and control the surge in prices, both by raising the bank reserve requirement ratio and introducing new
taxes on real estate. Results, however, were poor.
Growth in the Euro area remained steady with IMF confirming a +1.8% climb in GDP for 2010, though,
for the future, it also predicted a "considerably long period" of growth without any particular surges. In
the first eleven months of 2010, industrial production grew by approx. 7% YoY, with new orders
continuing to pick up in the Euro area, increasing by +19.9% YoY. Leading indicators report a positive
outlook for 2011 too; retail sales, however, remained weak. Economic growth continued to be affected
by the delicate situation of the peripheral countries (particularly Portugal, Greece and Ireland) where the
risk premium grew significantly in the latter part of 2010. Unemployment remained high -almost
consistently at 10% in the last 9 months of the year- while in the latter part of 2010, inflation rose to
2.4% YoY owing to the surge in energy prices.
According to the IMF, Italy’s GDP growth for 2010 should stand at around +1% despite the slowdown in
production in the latter part of the year, highlighted by the fall in industrial orders and the lower-thanexpected recovery in industrial production. Nevertheless, leading indicators suggest a certain degree of
stability for 2011 although the service sector continues to suffer (with the Purchasing Managers Index for
services in December back to the 50bp threshold for the first time since July 2010). A mild recovery was
recorded for household spending in the latter part of the year. However, consumer confidence remained
28
REPORT ON OPERATIONS
fragile. Inflation was on the rise with HICP standing at +2.1% YoY as at December, while youth
unemployment rate remained at a persistently high level throughout 2010, striking a record peak of 29%
in December.
Throughout 2010, the ECB continued to reassert the appropriateness of the 1% benchmark
interest rate stating that inflation is in line with mid-term price stability. Although economic recovery
in the Euro area continued, in the second half of 2010, a ―positive moment‖ (owing to the improvement
in global trade), prompted the Chairman of the ECB Mr. Trichet to confirm that the situation continues
to be uncertain, thus monetary policy remains accommodative and non-conventional measures (full
allotment auctions, bond buy-back programmes), though transitional, are to continue as planned. In the
initial months of 2011 attention will focus on the actions by Euroland's Heads of State and Government,
called upon to approve a comprehensive package of measures to prevent sovereign debt crisis (not only is
the implementation of the current European Financial Stability Facility being studied, but also a reform of
Eurozone governance), as well as a new round of bank stress tests. A further destabilising factor at
international level may be the recent crisis in Egypt.
In the money market, at the end of 2010 interest rates on key maturities experienced a slight fall
although the trend since the beginning of the year continued to rise. As for yields, the year saw a shift in
investments towards countries deemed more solvent by the market, a factor which, in the summer
months, drove the German 10-year benchmark yield down to a minimum (2.11%). In contrast, yields
started to rise again in the latter part of the year subsequent to the growing need for funding of the "core"
countries. Pressure on interest rates was felt across all maturities with trends undergoing no significant
changes.
US Benchmark Yield Curve
Euro Benchmarks Yield Curve
5
4
4
3
3
2
2
1
1
0
0
3m
6m
1y
2y
Usa 12/31/10
3y
5y
7y
10y
30y
3m
6m
1y
2y
3y
4y
5y
Euro 12/31/10
Usa 12/31/09
6y
7y
8y
9y
10y
20y
30y
Euro 12/31/09
The major stock markets experienced a significant drop in the first half of 2010 following the rally
at the end of 2009, but showed a decisive upturn in the second half of the year (from 31
December 2009 to the end of 2010 Nikkei -3%, Dow Jones +10%, S&P 500 +11%, Dax over +15%). A
less brilliant performance was recorded for the peripheral European markets, which continued to be
affected by the deterioration in risk indicators as a result of high public deficits, fears that the austerity
plans may undermine global economic recovery and uncertainties regarding the well-being of European
banking institutes which, moreover, will have to come to terms with the new capital requirements
(Basel III). The Italian stock market was affected by this scenario due to the exceptional weight of
the banking segment (FTSE MIB fell 13% in the year). Spreads on government bond yields compared to
the German ten-year benchmark and CDS prices increased for all peripheral countries in the latter part of
2010.
In the currencies market, after the upturn for the dollar in the first half of 2010, the euro regained ground
against the greenback, climbing to $1.33 at the end of the year. Despite the Bank of Japan's attempts to
moderate the Yen, the Japanese currency continued to appreciate against both the euro and the dollar.
Pressure is still being exerted on the Beijing government for it to intervene and devalue the yuan.
BANKING
In 2010, opposing trends were recorded for direct funding and lending, with a gradual loss in
momentum for the former and a rise for the latter. Total deposits were down, reflecting the slow
29
REPORT ON OPERATIONS
improvement in disposable income, the falling saving propensity of households and a negative financial
balance for businesses, all of which translated into an upturn in the demand for credit. Following the
decline in the 1st half of the year, bank rates bounced back slightly in the second although average unit
margins for the year shrunk as compared to 2009; overall profitability for the banking system did not
improve.
The trend in direct funding slumped from +8% for the year at the end of 2009 to +2.8%, mainly
reflecting the performance of bonds whose volumes, after several years of significant growth (+10.7% in
2009), dipped by over 10 bln (-1.5% for the year) partly owing to the high amounts of maturing bonds.
Against this background, other deposits continued to hold firm, though they revealed a sharp decline in
current accounts on the one hand (from +11% at the end of 2009 to -2%) and, on the other, a
considerable increase in repurchase agreements, which almost doubled mainly on the back of transactions
with institutional counterparties. The Montepaschi Group's market share in direct funding confirms the
positive evidence seen, standing at 7.88% as at
December 2010 (from 7.18% at the end of
Banking industry: Loans and direct funding 2009).
annual change (%) at end of period
The slowdown in direct funding was offset by
assets under management (mutual funds,
6
8
retail managed accounts and life insurance
policies): from net inflows of 28 bln in 2009, the
2010 result is estimated at well above 40 bln.
4
6
Despite a slowdown in the final months of 2010,
growth in bancassurance continued as a result of
2
4
the exceptionally bright start to the year.
Moreover, a reversal of the negative trend was
0
2
observed for both funds (1 bln in cumulative net
dec-09
mar-10
jun-10
sept 10
dec 10
funds) and assets under management which, in
addition to positive flows for over 3 bln, saw an increase in inventories that exceeded 8%. A positive
performance was also registered for assets under custody (+8% as at September) where, in addition to
stable equity investments, there was an increase in the purchase of bonds issued by public and private
entities.
8
10
Loans
Direct funding
After a four-year long negative performance, mutual funds finally saw positive net inflows, even
though they came to just over one bln euro. The result is the consequence of a renewed interest in equity,
flexible and balanced products, which recorded flows of almost +10 bln, as well as a shift (with a
negative net effect of over 6 bln) from liquidity funds towards bonds. Assets under management increased
by over 5% for the year, reflecting a positive performance overall, especially for equity investments
(+12.3%). The market share for Group-distributed products (as at September) stood at over 4.8%.
As at November, the new gross production of bancassurance life policies exceeded 47 bln, with an
increase of 15% for the year. The result can be attributed to the upturn in unit-linked products,
driven by the pursuit of higher yields on risk free interest rates, the innovation in product range, and by
the increase in multi-branch products. Premiums on traditional policies remained more or less stable
(amounting to approx. 70% of the market), held back by safe but low returns, while a sharp drop was
experienced for index-linked products, offered by very few market participants, partly as a result of
burdensome regulatory requirements. In 2010, the market share for the new AXA-MPS joint venture
came to 7.5%, in line with the 2009 figure.
The trend in bank lending showed gradual signs of improvement as of the second quarter 2010,
reaching a growth rate of over 4% for the year in the closing quarter (from +2% at the end of 2009).
Growth momentum was more dynamic than in the Euro area where the increase in bank loans stood at
+2.9% (as at November), despite a more distinctive recovery in the real economy. Loans to the
manufacturing sectors (non-financial companies and family-owned businesses) particularly boosted
these developments; after the drop at the start of the year (approx. -3%), they were back on the
road to recovery in the second half of 2010. The rise in demand from businesses was generally due to
liquidity and debt restructuring needs and only partially due to the demand for funds for industrial
investments. Demand for loans from consumer households remained high, driven by home
mortgages (at around a steady 8% in the course of the year), reflecting the signs of recovery for real
estate purchases, low interest rates and the introduction of some recent regulatory actions (such as
30
REPORT ON OPERATIONS
mortgage portability and the suspension of installment repayments) though partly held back by the
decline in demand for consumer credit. The Group’s market share came to approx. 7.8%,
substantially stable compared to figures at the start of the year.
Credit quality continued to be affected by the difficult economic scenario. According to the latest
figures by the Bank of Italy, the rate of impairment in the course of the year showed an upward trend,
standing at levels similar to 2009, ie. approx. 2%, in the third quarter of 2010. A very limited rise was
recorded for non-financial businesses (whose share of temporary bad debt also remained high, at around
5.7% of total loans) whereas there was greater increase for financial businesses. The inventory of NPLs
registered a sharp rise compared to the previous year (+31.6%), though there was some improvement on
the trend seen in 2009 (as at 31/12/2009 +38.2% on 31/12/2008). A further breakdown reveals that
NPLS from consumer households were substantially stable (at around +37% since the end of 2009),
whereas those from non-financial businesses
Retail and Corporate Interest rates - %
experienced a slowdown (from +42.9% to
4,5
1,8
+31.5%). The "net NPLs/total loans" ratio,
Active (left hand scale)
which stood at around 2% at the start of the
Funding (right hand scale)
year, climbed to 2.4% since the stock of NPLS
was significantly greater than that of loans.
4
Given the stability of the policy rate at 1% and
the rise in money market rates, with the 13,5
month Euribor in December standing at higher
levels than those registered at the end of 2009
(0.78% against 0.48%), bank interest rates
(source: Italian Banking Association, ABI)
3
1
dec-09
mar-10
jun-10
sept 10
dec 10
dropped in the first half of the year (combined
with a stable Euribor) though subsequently registered a slight rebound. The average interest rate on
loans closed the year losing 12 bp against the level in December 2009; the decline has benefitted
both businesses and households. A similar fall was also seen for interest rates on direct funding (-11 bp),
mainly the result of the shift in funding mix owing to the decline in its more costly component, ie. that of
bonds. The mark-up (measured on active current accounts and 1-month euribor) dropped below 4%
(from 4.2% at the end of 2009), while the mark-down grew from 0.16% to above 0.4%.
1,4
The income statement primarily reflects falling average margins for the year (approx. -20 bps circa) and
volumes from traditional activities with limited growth. This led to a sharp fall in net interest income (7.6% according to consensus data), accompanied by only limited changes in net revenue and
operating costs. Value adjustments and write-downs on loans were down by over 10%, but accounted
for approximately half of operating income. Improvement in overall profitability is not expected.
31
REPORT ON OPERATIONS
Economic and social trends
Over several years now, a number of important patterns and trends have emerged, impacting not only
the social and economic fabric, but also the operations of banks in terms of organisational structure
and product range adjustment.
In particular, demographics point to a growth in population accompanied by an increase in senior
citizens and foreigners. Indeed, 2010 saw a rise in the population residing in Italy to over 60.6 mln; a
6.5% increase since the beginning of the century. This growth is ascribable to a negative natural balance
and to the decisive contribution by the migration influx; foreign nationals have more than trebled in
absolute terms compared to 2000, accounting for 7.5% of the population (2.4% in 2001). The number of
citizens over the age of 64 has seen an increase from 18.4% to 20.3% in the past ten years, against a
decline in the working-age population (15-64 years) which has fallen from 67.3% to 65.7%. Aging of the
population exerts increasing pressure on public spending with a potentially strong impact on the
balance of pension schemes and social protection in general; this gives growing importance to private
pension funds and personal protection insurance products.
Immigrants contribute 11% to GDP (estimated by the Association of Italian Chambers of Commerce,
Unioncamere) and have a predominant role that complements that of Italian workers. Their contribution
to total employment is increasing (from 6.8% in 2007 to 9.5% in the third quarter of 2010) as is their
absolute value (currently exceeding 2.1 mln individuals). They have also increasingly shifted towards selfemployment and entrepreneurship; in 2010, the new companies set up by them accounted for 21% of
total fledgling companies for the year, while active companies managed by immigrants make up around
4%. The relationship between the immigrants and the banking system has also grown to provide a
comprehensive and easily accessible service accompanied by a wider range of products.
In 2010, the decline in the employment rate registered in the previous year (-1.8%) was not
repeated and employment levels remained more or less stable; the unemployment rate however
grew from 8.4% to 8.6%. The number of hours paid out of the "Cassa Integrazione Guadagni" (temporary
layoff scheme) increased by approximately 30%, despite clear signs of reduction in the second half of the
year; in terms of full-time equivalents and taking account of extraordinary redundancy benefits too, this
saw the involvement of around 350 thousand people. In addition to the reduction in full-time
employment (-3.8%), one of the distinctive features of this recession has also been the decline in
youth employment, a segment in which unemployment has soared to 26%. This, in addition to
highlighting Italy's poor performance when it comes to the financial independence of young people, runs
the risk of depleting society's main source of innovation and vitality.
The job market scenario and the decline in
consumption (-1.7% between 2007 and 2010),
point to the economic hardship of Italian families in
61,0%
4,2
Italy
these years of recession and reflect the sluggish
75,0%
2,9
France
150,0%
2,7
Uk
recovery. In the 2009-2010 period, disposable
91,0%
3,0
Germany
income suffered a loss of over 3% in real terms;
125,0%
3,1
Usa
Source: ABI, Ocse
financial wealth remained more or less stable.
The Housing Affordability Index increased to 6.5% (from 3% in Q3 2008), a level still well below
alarming (30%), with over 2 mln families spending more than 40% of their income on homes. However,
certain elements remain, which keep the sector relatively strong when compared to other countries. The
debt-to-disposable income ratio stood at 61%, below that of other countries (see Table). The financial
assets-liabilities ratio was approximately 4, having declined over the decade (it was over 5 in 2002); the
value of homes owned exceeds that of financial assets by nearly 40%. Against this backdrop and in
consultation with the Government and the Italian Banking Association, various initiatives and products
were launched by the banks to cushion the impact of the economic crisis on the economic and financial
situations of households.
FAMILIES FINANCIAL CONDITION
Debt/Disposable Assets/Liabilities
income
financial
Another significant factor is the development of renewable energy (wind, biomass and photovoltaic),
fuelled by EU resolutions and the increasingly widespread belief that making a contribution to the
environment is important. In Italy, the national energy balance (Ministry of Economy, 2009) is based on
oil (47.4% of total loans), followed by diesel (29.6%) and electrical energy (18.7%); renewable energy
accounts for 2.8% on a stand-alone basis and 3.7% as a sourceof electricity(approx. 20% comes from
renewable sources). This value contributes to the goal set by the EU in terms of renewable energy share of
total energy consumption: 17% by 2020. In order to meet this objective, in 2010 the Ministry of
32
REPORT ON OPERATIONS
Economic Development set out a National Action Plan which focuses on a significant increase in renewable
energy consumption and energy efficiency. The support of banks is crucial to the development of
renewable energy and is provided through traditional credit facilities and innovative corporate finance
products.
The use of new technologies to communicate, receive information and boost work efficiency is
changing the behaviours and habits of day-to-day life. Compared to 2009, the share of households
accessing Internet has increased (59%) as has that of households with broadband connection(49%),
although figures remain below the European average(70% and 61% respectively). The network is used by
approximately 70% of users to communicate, via e-mail, and to read and search for information on goods
and services; the proportion of users who connect to social network sites is also of significance (45%),
while around 30% use on-line banking services. Over a quarter of users purchase goods and services
on-line (16% in 2005), with above average percentages for travel and accommodation and for the
purchase of books and magazines. The role of the internet in the future will ultimately depend on the
resolution of security issues and on whether content is completely free of charge.
THE REGULATORY FRAMEWORK
In 2010, both the government and the banking system continued to promote initiatives aimed at
combating the crisis and relaunching and supporting the economy. At banking system level, one of the
main initiatives for households involved the possibility of suspending payment of mortgage
instalments on the acquisition of a first home in the presence of a “critical” event: job loss,
temporary layoff, death or no self-sufficiency. Following the ―Plan for Households‖, extended to 31 July
2011, mortgage loans suspended by banks amounted to approximately 4.5 bln (outstanding debt) and
involved over 35 thousand households.
As for businesses, the grace period on debt of SMEs was also extended to 31 July 2011 with two
important novelties: with regard to existing loans, for customers who had already used the grace period,
the option to restructure was given with a two to three year extension on the mortgage loan and smaller
installments (under slightly different terms and conditions depending on whether the loan is unsecured or
asset-backed); the possibility of hedging interest rate risk through the use of derivative instruments,
which should allow those companies who have taken out a variable-rate mortgage to switch to a capped
rate mortgage. The number of approvals given to companies exceeded 183,000 for suspended debt
repayments of over 55 bln.
Industrial policy initiatives reasserted the Government focus on the organisational model of ―corporate
networking‖, considering it as a tool that, in times of recovery, may stand out as a major driver. The
context sets the backdrop for the "network contract" regulatory framework introduced in July 2009 (l.
99/2009) and governed by the summer 2010 budget law which led to further progress in the potential of
the instrument through tax incentives and its extension to individual entrepreneurs and partnerships.
Relations between banks and households/businesses also benefitted from the enactment of the provision
issued by the Bank of Italy on 1 January 2010 on ―Transparency in banking and financial services and
transactions and fairness in relationships between intermediaries and customers‖. The new
framework aims to foster competitiveness in the banking and financial markets. The main novelties
introduced include: disclosure and information (through documents publicising the main rights of clients);
the Synthetic Cost Ratio for current accounts (which banks must report in documents for customers), which
is in addition to similar, already-existing indices, for consumer loans and mortgages; regular information
(through statements and periodic summaries); organisational requirements (through customer profiling
and classification); the use of documentation on transparency in the marketing phase of banking products.
Specific transparency standards for the provision of payment services were adopted on 1 March with
Legislative decree 11/2010, which implemented EU directive 2007/64/EC on Payment Services
(PSD) . These involve the single identification code, which the banking system has decided will
correspond to the IBAN, reduction of time needed for payment transactions as well as the immediate
availability of sums transferred; with reference to the latter, the PSD grants an extension to banks
whereby, until 2012, they may lengthen transfer time by up to 3 days (4 in the event of paper-based
transfers). Moreover, as of 1 March 2010 new rules were applied to money transfers and (debit, credit
and pre-paid) card transactions and as of 5 July 2010 the rules were also extended to portfolio and
collection services (cash orders (Ri.Ba), direct debit transactions (RID), payments against notice (MAV),
bank and post payment slips).
33
REPORT ON OPERATIONS
Other measures introduced include legislative decree 141 of 13 August on consumer credit, which
implements the European Directive 2008/48/EC, conceived of to encourage cross-border financial
offers while strengthening information transparency and consumer protection. The legislative decree also
promoted a review of the standards for financial intermediaries, some corrections regarding the portability
of mortgages and more stringent requirements of integrity, solvency and competence for agents and
brokers. The various provisions of the regulatory framework will come into force at different time intervals.
2010 also saw the continuation of the extensive financial regulatory reform process, aimed at
limiting the impact of the crisis and establishing the mechanisms to reduce the likelihood of similar
situations recurring in the future. In December, the review of prudential requirements for banks by the
Basel Committee was completed and, on 1 January 2011, the new structure of financial supervision in
Europe came into effect. At the end of 2010, following completion of the consultation phase, the
Basel Committee published the definitive documents on the new banking regulations (Basel 3).
The new rules include: a qualitative and quantitative increase in minimum capital requirements, the
imposition of liquidity requirements, the introduction of a ceiling on financial leverage, the creation of
anti-cyclical buffers, an increase in capital requirements to cover market risk. The aim of the new capital
requirements and the introduction of new capital buffers, is to ensure that banks are able to withstand
periods of economic and financial stress as well as support economic growth. The new parameters
(proposal to increase Common Equity9 Tier 1 to 4.5%, a capital conservation buffer by a further
2.50%, Tier 1 ratio to 6%, Total Capital - including the capital conservation buffer - to 10.50%)
will be fully operational as of no earlier than 2019. A period of so-called ―grandfathering‖ has also been
set, during which the eligibility of all instruments currently included in Regulatory Capital will be
maintained. Once steady-state has been reached, they will no longer be part of Common Equity and Tier
1/Tier 2 Capital according to the new definitions adopted. The transitional arrangements provided by the
new regulation, effective from 2013 to 2019, will enable banks to gradually meet the new standards
while, at the same time, support economic recovery. The document published by the Basel Committee in
December 2010 more precisely defines, among other things, the elements that make up the three
items of regulatory capital (common equity, tier 1 and tier 2) and confirms the major provisions of
Basel 2, designed to contain the absorption of capital on loans issued to SMEs. The recent changes in
legislation (the Milleproroghe Decree) transforming Deferred Tax Assets (DTAs) – an item considered
deductable from primary quality capital under the new Basel 3 standards – into tax credits, had the aim
of reducing the differences in treatment between the various international systems and drawing a benefit
in terms of future capital ratios for the Italian banking system.
The European banking law was also consolidated further - starting from the supervisory institutional
structures - with the objective of strengthening the practices of coordination and cooperation. The new
European Supervisory framework, effective as of early 2011, is based on two key elements: a European
Systemic Risk Board (ESRB) and a European System for Financial Supervision (ESFS), under which - in
addition to ESRB - are three distinctive supervisory authorities, for banks (European Banking
Authority, EBA), insurance (European Insurance and Occupational Pensions Authority, EIOPA) and
security markets (European Securities and Markets Authority, ESMA) which bring together the
supervisory leaders of the different EU countries for the respective sectors. ESRB is responsible for
analysing the European financial system, reporting any threat to financial stability and providing
recommendations on policies aimed at containing these risks.
The recommendations are not legally binding in nature but can be be made public. National and
European authorities to whom these recommendations are addressed will have to report on any related
actions undertaken according to the “act or explain” principle.
The powers of the new prudential authorities (EBA, EIOPA and ESMA) are particularly extensive:
develop binding technical rules, directly applicable across the European Union; take decisions (similarly
binding) to resolve disputes among national authorities; ask national authorities to adopt measures for
coping with emergency situations threatening financial stability; intervene in cases of incorrect application
of European rules.
Book value of a company‘s equity calculated by excluding capital instruments other than common stock minus Basel 3 deductions
intangibles, etc.).
9
34
(e.g. goodwill, other
REPORT ON OPERATIONS
MAJOR EVENTS IN 2010
Below is a summary of the more significant events of the Montepaschi Group in 2010:
-
on 10 February 2010 AXA and Banca Monte dei Paschi di Siena extended their bancassurance
agreement to the distribution network comprising 1,000 former Banca Antonveneta branches.
-
15 February 2010 saw the early redemption of the securitisation transaction, ―Siena Mortgages 02-3
S.r.l.‖, named after the vehicle company used in the sale of the multi-originator portfolio, consisting in
performing mortgage loans, secured by first mortgages on residential properties.
-
On 16 April 2010 the deed of merger by absorption of Banca Personale SpA into Banca Monte dei
Paschi di Siena SpA was signed with all accounting/fiscal implications effective as of 1 January 2010.
The transaction was in execution of the resolutions of Banca Monte dei Paschi di Siena SpA‘s
Shareholders‘ Meeting of 29 March 2010 and Banca Personale SpA‘s Shareholders‘ Meetings of 26
March 2010.
-
On 28 May 2010 Banca Monte dei Paschi di Siena and the CA.RI.GE. Group signed the final
agreement for divestiture of banking business (22 branches of Banca Monte dei Paschi di Siena) to the
CA.RI.GE. Group with legal effect as of 31 May 2010.
-
In May MPS SIM SPA, Antenore SpA and Theano SpA were merged by absorption by and into Banca
Monte dei Paschi di Siena SpA, with tax and accounting implications effective as of 1 January 2010, in
execution of the resolutions by Shareholders' Meetings of Banca Monte dei Paschi di Siena SpA held
on 29 March 2010.
-
On 11 June 2010 Banca Monte dei Paschi di Siena and the Intesa-San Paolo Group signed the final
agreement for business divestiture (50 branches of Banca Monte dei Paschi di Siena) to the CA.RI.GE.
Group with legal effect as of 14 June 2010.
-
On 22 June 2010 Banca Monte dei Paschi di Siena successfully finalised an inaugural issue of covered
bonds in the Eurobond market as part of the EUR 10 bln programme backed by residential mortgage
loans of the Montepaschi Group. The 5-year fixed rate EUR 1 bln offering is targeted to professional
investors and international intermediaries.
-
In June Ulisse SPA and Siena Mortgages 00-1 SpA were merged by absorption by and into Banca
Monte dei Paschi di Siena SpA, with tax and accounting implications effective as of 1 January 2010, in
execution of the resolutions by Shareholders' Meeting of Banca Monte dei Paschi di Siena SpA held on
29 March 2010.
-
In response to the decision taken by the Italian Banking Association to extend ―Joint Notice" initiatives,
on 14 July 2010 the Montepaschi Group confirmed its "Support package for SMEs" until 31 January
2011 (for details of products in the package, see chapter on ― Segment Reporting‖).
-
On 23 July 2010 the results of the ―Stress Tests‖ were disclosed. The tests were mandated by the
Economic and Financial Affairs Council (ECOFIN) and coordinated by the Committee of European
Banking Supervisors (CEBS) in collaboration with the European Central Bank (ECB), national supervisory
authorities and the European Commission, to assess the resilience of the European banking system and
the banks‘ ability to absorb any further potential credit and market risk shocks, including sovereign
debt risk. The exercise was conducted individually on a sample of 91 EU banks in 20 member states,
representing at least 50% of the total consolidated assets of the national banking sector in each of the
27 member states and using (baseline and adverse) macroeconomic scenarios for 2010 and 2011,
which were developed in close cooperation with the ECB and EU Commission. According to the
Montepaschi Group, the outcome of the ―Stress Test― highlighted that, under the shock conditions
assumed to occur in the adverse scenario, the estimated (consolidated) Tier1 ratio would be 6.8% in
2011, compared to 7.5 as at the end of 2009. An additional sovereign risk scenario would have a
further impact of 0.6 percentage points on the estimated Tier 1 capital ratio, bringing it to 6.2% at the
end of 2011, compared with the CRD regulatory minimum of 4%. The ―Stress Test‖ results determine a
buffer of Tier 1 of EUR 235 mln as against the 6% threshold agreed upon for stress test purposes only.
It is confirmed that the Montepaschi Group passed the stress test exercise even under test conditions
that were detrimental to the Group‘s asset structure, as they were simulated on the basis of a
particularly negative scenario, reflective of the 5.1% GDP decline in 2009. The Bank confirms its
commitment to improving profit from continuing operations, maintaining risk levels under stringent
35
REPORT ON OPERATIONS
control and further rationalising current equity investments, consistently with its business strategy, with
a view to further optimising the capital position achieved.
10
-
On 30 July 2010 Standard & Poor‘s Ratings Services assigned an ABOVE AVERAGE ranking to MPS
Gestione Crediti Banca SpA as special servicer on residential and commercial mortgage loans in Italy.
The outlook is stable.
-
On 18 August 2010 Fitch Ratings raised its rating of MPS Gestione Crediti Banca as Italian special
servicer on residential and commercial mortgage loans as follows:
o Rating for ―Special Servicer on residential mortgage loans in Italy‖: from ‗RSS2-‗ to ‗RSS2‘;
o Rating for ―Special Servicer on commercial mortgage loans in Italy‖: from ‗CSS2-‗ to ‗CSS2‘;
-
On 31 August 2010 the extraordinary shareholders‘ meeting of Biverbanca approved the acquisition
of 13 former Antonveneta branches in the provinces of Novara, Verbania, Turin and Alessandria. The
new Biverbanca-branded branches became operational in October 2010 with an expansion of the
distribution units by approx. 12%, thus providing a more comprehensive service to households and
businesses in Piedmont.
-
On 3 September 2010 Banca Monte dei Paschi di Siena priced a new issue of 10-year, fixed-rate
subordinated liabilities (Subordinated Lower Tier II Notes) for the nominal amount of EUR 500 mln.
MPS Capital Services, Credit Agricole-CIB, Goldman Sachs International and Société Génerale were
mandated as the Lead managers and Joint-bookrunners in the transaction, which was intended to
replace maturing debt in 2010. The notes were assigned a subordinated rating of A2/BBB+/A- by
Moody‘s, S&Poor‘s and Fitch respectively.
-
On 14 September 2010 Banca Monte dei Paschi di Siena successfully completed the issue of covered
bonds targeted to the Euromarket, the second issue as part of the EUR 10 bln programme announced
at the end of June and entirely backed by residential mortgage loans of the Montepaschi Group. The
transaction, for a total of EUR 1.25 bln has a 3-year maturity, pays a fixed-rate coupon and is targeted
at qualified institutional investors and financial intermediaries. The placement of the transaction was
managed by Credit Suisse, Deutsche Bank, MPS Capital Services, RBS and SG CIB as Joint Lead
Managers and Book Runners. The transaction is the second covered bond placement by Banca Monte
dei Paschi di Siena and confirms the bank‘s continued adeptness to place benchmark-sized covered
bond issues.
-
On 21 September 2010, the Fitch Rating Agency revised its long and short-term rating of Banca
Monte dei Paschi di Siena S.p.A. from "A/F1" to "A-/F2". The outlook is confirmed as stable.
-
On 20 October 2010 Moody‘s Investor Services modified its long-term deposit rating of Banca Monte
dei Paschi di Siena SpA from A1 to A2 and the BFSR from C- to D+. The short-term deposit rating (P-1)
was confirmed. The outlook is stable.
-
On 4 November 2010 Consob, the Italian Securities and Exchange Commission, authorised Banca dei
Paschi di Siena to publish the prospectus for the public offer of over EUR 1.5 bln worth of asset-backed
securities for issue on 22 December 2010 by Casaforte S.r.l., a loan securitisation vehicle incorporated
pursuant to Italian Securitisation Law no. 130/99. The securitisation also involves the issuance of two
subordinated classes of securities targeting qualified professional investors. The creditworthiness of
securities offered to the public was examined by Fitch Ratings, which assigned an expected rating - in
line with that of Banca Monte dei Paschi di Siena - of A-.
-
On 3 December 2010 the extraordinary shareholders' meeting of Banca Monte dei Paschi di Siena
S.p.A. approved the mergers by absorption of Paschi Gestioni Immobiliari S.p.A. and MPS Investments
S.p.A. into Banca Monte dei Paschi di Siena S.p.A., as well as the partial demerger of MPS Immobiliare
S.p.A. to Banca Monte dei Paschi di Siena S.p.A. and Banca Antonveneta S.p.A.10.
-
On 30 December 2010 Banca Monte dei Paschi di Siena, Banca Popolare di Milano and Clessidra Sgr,
on behalf of the Clessidra Capital Partners II Fund, (the ―Partners‖) announced the closing of the
transaction, previously announced on 29 October after the parties signed an agreement leading to the
birth of the largest independent player in the asset management sector in Italy, with more than 40
billion assets under management. The Partners settled all details and closed the agreement after
obtaining the approval of the relevant supervisory authorities on Tuesday 28 December. Prima sgr and
Although these companies are related-parties to Banca Monte dei Paschi di Siena, by way of type and amount the transactions do not fall
within the scope of art. 5 of Consob regulation adopted by resolution no. 17221 of 12 March 2010.
36
REPORT ON OPERATIONS
Anima sgr have now passed under the control of AM Holding (standing for Asset Management
Holding), which is the holding company owned by the Partners who will perform the functions of
coordination and strategic direction. The project is a move towards greater operating efficiency through
the exploitation of potential synergies between the two entities and the imminent creation of a single
company by combining Prima sgr and Anima sgr. AM Holding's share capital is held, directly and
indirectly, as follows:
-
by Clessidra sgr on behalf of the Clessidra Capital Partners II Fund, through Lauro
Quarantadue spa;
-
by Banca Monte dei Paschi di Siena
-
by the Bipiemme Group.
Banca Etruria and Banca Finnat Spa also have an interest. The new entity will act as an independent
centre of production of asset management products and services in support of the various distribution
networks, servicing more than 150 market operators (banking networks and networks of financial
consultants), including two banking networks of national importance (BMPS and BPM) with more than
3,800 branches.
-
At the end of 2010, the Group's real estate deal for value creation from part of the properties used in
the business was completed, which led to a capital gain, at consolidated level, of 405.5 mln (for further
details, please see Notes to the Financial Statements – ―Part C – Consolidated Income Statement‖ Section 16 – Gains (losses) on equity investments - Account 240).
37
REPORT ON OPERATIONS
THE CUSTOMER BASE AND CUSTOMER SATISFACTION
The Montepaschi Group carries out its banking activities with over 6.2 million customers 11, approx. 5.9
million of whom are managed by the Distribution Network of Banca Monte dei Paschi di Siena, Banca
Antonveneta and Biverbanca and through the Financial Advisory channel.
Consumer and corporate customers are classified into segments, each with a specific Service Model applied
so as to better meet the needs and demands expressed by clients:
Consumer Customers
Includes over 5.7 million customers, distributed across the country with a stronger presence in the areas
of central Italy. Within this client segment, the largest share (69.3%) is made up by Consumer households
(Family), who mainly apply for loans (consumer credit and mortgages) and investment services for smaller
portfolios. This is followed by clients with larger portfolios (22.9%) who require a more customised
approach (Affluent), Small Business and high-standing customers (Private) who make up 7.2% and
0.7% respectively.
Retail customer base geographic breakdown at 31.12.2010
32,6%
South
Centre
16,4%
North East
0,0%
34,5%
16,5%
North West
5,0%
10,0%
15,0%
20,0%
25,0%
30,0%
35,0%
Retail customer base breakdown at 31.12.2010
Family; 69,3%
Affluent; 22,9%
Small
Business;
7,1%
Private; 0,7%
A closer look at the breakdown of "Consumer" customers by age reveals that the largest represented
group is the range between 41 and 55 years of age, accounting for over 30%. Immigrant clients12 make
up 5.16% of customers at group level with a greater incidence in Banca Antonveneta compared to Parent
Company and Biverbanca.
11
The figure includes customers of Banca Monte dei Paschi di Siena, Banca Antonveneta, Biverbanca and those managed directly by Consumit.
The merger by absorption of Banca Personale into Banca Monte dei Paschi di Siena took place on 16/4/2010 with accounting/tax implications
effective as of 1 January 2010.
12
Customers with a place of birth in Countries having high emigration rates, according to the Italian Banking Association code.
38
REPORT ON OPERATIONS
Corporate customers:
The segment consists in over 78,000 customers, including SMEs (approx. 82%) and Institutions (18%),
mainly concentrated in the regions of Northern Italy (46.5%) but with a significant portion in Central Italy
as well (31.7%).
Corporate customer base geographic breakdown at 31.12.2010
21,8%
South
Centre
23,9%
North East
0,0%
31,7%
22,6%
North West
5,0%
10,0%
15,0%
20,0%
25,0%
30,0%
35,0%
Corporate customer base breakdown at 31.12.2010
SMEs; 81,8%
Institutions –
PA; 4,8%
Institutions –
third sector;
11,6%
Institutions –
Public Utilities
and financial
institutions;
1,8%
As for businesses, the breakdown by sector reflects the Group's stronger footprint in trade, services,
construction and in the more traditional Made in Italy sectors (manufacturing, textile and clothing and
food).
Corporate customers % by business sector at 31.12.2010
Customers (*) Retail (**) Corporate
Retail distribution
19,8
22,0
8,8
Banking, insurance and services
12,1
11,8
13,7
Bulding and construction
11,6
12,0
9,6
Food, clothing, leathers and textiles
9,6
9,0
12,8
Wholesale distribution
8,4
7,7
12,0
Metallurgy and Machanical
7,0
6,2
11,0
Public Administration
6,1
6,6
3,6
Agricolture, hunting and fishing
4,8
5,1
3,1
Trasport and communications
3,4
3,4
3,5
Manufacturing: estraction and chemical
1,8
1,4
3,9
Public utilities
0,5
0,4
1,2
Non classified
14,9
14,5
16,9
100
100
100
Total
(* ) Weighted av erage of incidence rates of indiv idual Consumer and Corporate business segments
(* * ) “Small Business” customers registered as legal entities
39
REPORT ON OPERATIONS
A separate segment is made up by Large Corporate customers (approx. 1,500 units) which primarily
contain the large industrial groups.
Large Corporate customer base breakdown at 31.12.2010
Industrial
groups; 74,7%
Financial
Institutions;
9,5%
Key Clients:
Institutions;
0,3%
Key Clients:
SMEs; 15,5%
Knowing the customer's level of satisfaction and the factors which determine it is fundamental in
developing the Group's business policies. The major indicators monitored are: customer loyalty (length of
relationship), acquisition and retention rates, customer satisfaction and complaints.
In terms of banking seniority it emerged that almost 60% of consumer and corporate customers had a
relationship with the Group for at least 11 years, with the portion of lower seniority (1-3 years) greater for
Corporate than for Consumer, reflecting a higher turnover linked to the company's business cycle.
In terms of products, the current account is the product with highest penetration, although lower than
70% in Consumer where, indeed, 24% of customers hold a savings deposit. It should be highlighted that
16.6% of Consumer customers holds a mid-long term mortgage/loan and 27.6% has a damage insurance
policy.
An analysis of customers gained/lost in 2010 shows the Retention rate holding well (over 95%), going
back to values registered in 2008, while the Acquisition rate continues to be below pre-crisis levels, still
feeling the brunt of the difficult economic climate. It should also be considered, however, that growth of
customerbase was affected by the ―exceptional‖ events concerning the Montepaschi Group in 2010,
namely:
 the merger by absorption of Banca Personale into Banca Monte dei Paschi di Siena, which led to a
"technical" reduction of the customer base due to the portion of customers who were "clients in
common " when the the banks were two separate legal entities;
 the divestiture of business(72 branches of Banca Monte dei Paschi di Siena), which had a "one-off"
effect on the baseline for Retention rate calculation.
40
REPORT ON OPERATIONS
CUSTOMER SATISFACTION
Customer satisfaction levels in relation to quality of products and services provided by the Group are
CONSUMER LAB
monitored through periodic surveys (including
so-called internal clients, ie. branch employees) Consumer Lab is a true and proper bank-consumer interface laboratory.
as well as the analysis of
performance- Founded in 2004, its purpose is to prevent possible states of "finanical
distress" of banking customers. Over the years, activities have been gradually
operational efficiency indicators.
intensified and have focussed on the issues considered most relevant each time
The 2010 analysis points to an improvement in
all indices monitored for retail customers of the
Parent Company. On a scale of 20 to 100:
Customer Perception Index 13 (80.6; +7.5%),
Employee Perception Index 14 (69.2; +6.1%),
Operational Perception Index15 (56.7; +4.7%).
The results for Banca Antonveneta are also in
line.
On the other hand, the level of
perceived by business customers stood
according to the analysis carried out for
time on a sample of 3 thousand of the
SME customers.
quality
at 72.2
the first
Group's
with the proposal of concrete solutions.
In 2010, the focus was mainly on the following activities:
 development of a "charter of rights and duties" to support customers in
their knowledge and understanding of the principles and rules which
characterise relations with banks.
 analysis of criteria for social responsibility, transparency and fairness of
Group operations in relation to ―fifth-of-salary backed loans‖.
In
agreement with the consumer associations, the specific Consum.it product
was subsequently presented in the on-line consumer magazine, Help
Consumatori.
 15 meetings held in the Network between consumer associations, the
Heads of the Local Market Units and branch managers, to exchange
opinions on the more "heated" aspects of bank-client relations and on any
weaknesses-strengths of a specific area.
 Completion of the ―Consumer Lab at home" project through meetings
and debates in 8 Italian cities and the launch of ad-hoc information desks
in the branches. Among the most discussed topics: mortgages, consumer
credit and, on a more general level, the financial problems of consumers
in the current economic climate.
With regard to the management of complaints, 11,141 new complaints were received in 2010 (approx.
-1% YoY); 14,197 were handled in the course of the year. The mean time to resolution was 43 days, with
gradual optimisation of operations in the second half of the year: 26 days during the second half of the
year; 15 in the fourth quarter.
13
Customer Perception Index - quality perceived by customers (through telephone surveys).
Employee Perception Index - quality perceived by "internal" customers (ie. satisfaction of Network employees in relation to work conditions and instruments at
their disposal when serving customers).
14
15
Operational Perception Index - operational performance level of the bank, with impact on customers (flow of complaints, branch turnover, working ATMs, etc.).
41
REPORT ON OPERATIONS
CUSTOMER BALANCE SHEET AGGREGATES
In 2010, in a persistently difficult market environment, the Montepaschi Group achieved a significant growth in its
capital base, while still centering its funding and lending strategy on the needs of households and businesses. The
initiatives implemented allowed the Group to consolidate its customer base and improve/consolidate its
competitive position in all of its main areas of business. Moreover, the Group guaranteed continuity to its offer
of credit supporting its customers by both taking part in banking system initiatives as well as developing projects
independently.
Funding aggregates
At the end of 2010, the Group's total funding volumes 16 stood at approximately EUR 303 bln, up by 6.9%
on the previous year "on a restated operating basis" and by 3.4% compared to 30/09/2010, with
significant growth trends for both direct and indirect funding.
g CUS TOMER FUNDING (in millions of euros )
Direc t c us tomer funding
Indirec t c us tomer funding
as s ets under management
as s ets under cus tody
Total c us tomer funding
31/12/10
Res tated (**)
30/09/10
Res tated (*)
31/12/09
% chg. vs
31/12/09 res tated
% weight
31/12/10
158.486
144.919
154.673
138.631
152.917
130.878
50.547
94.372
50.738
87.893
47.941
82.937
3,6%
10,7%
5,4%
13,8%
52,2%
47,8%
16,7%
31,1%
303.405
293.304
283.795
6,9%
100,0%
(*) V olumes as at 31/12/2009 w ere "res tatedi" w ith his toric al data exc luding the volumes pertaining to the branc hes s old in the c ours e of 2010 (a total of 72 branc hes of
Banc a Monte dei Pas c hi di S iena s old to the Groups , CARIGE and Intes a-S an Paolo) w hic h, at 31/12/2009, c ons is ted in total funding of 3,543 mln, of w hic h 2.204 mln in
direc t funding and 1,339 mln in indirec t funding.
Morevoer, the figure is pro-forma to take ac c ount of as s ets held for s ale(MP Monac o S AM and MPS V enture S pA - impac t of an overall 269.7 mln).
(**) V olumes as at 30/09/2010 w ere res tated exc luding the c ontribution from MP Monac o S AMand MPS V enture S pa (overall EUR 227.4 mln impac t) c las s ified as held for
s ale at the end of 2010.
More specifically:
 Direct funding came to approx. EUR 158 bln, up 3.6% as compared to 31/12/2009 ―on a restated
operating basis‖ and 2.5% on 30 September 2010, with the Group's market share standing at 7.88%,
up 70 bps for the year (+26 bps as compared to 30/09/2010). The trend recorded for the aggregate is
mainly a result of the funding input from institutional clients (approx. +8.8% on the previous year),
through both medium to long term issuances (including EUR 2.2 bln worth of covered bonds), and through
short-term market funding. A significant contribution also came from consumer customers (+1.2% YoY),
with new bond placements for approx. EUR 14 bln. There follows a breakdown of other types of direct
funding by customers:
Direct customer funding (€/mln)
Type of transaction
31/12/10
Current accounts
(*)
31/12/09
Change
Abs.
%
65.774
64.381
1.392
2,2%
3.292
4.588
-1.297
-28,3%
Reverse repurchase agreements
18.741
13.893
4.849
34,9%
Bond
56.550
54.148
2.402
4,4%
Other type of direct customer funding
14.130
15.907
-1.777
-11,2%
158.486
152.917
5.569
3,6%
Time deposits
Total
(*) Vo lumes as at 31/12/2009 were "restated" with histo rical data excluding the vo lumes pertaining to the branches so ld in the co urse o f 2010 (a
to tal o f 72 branches o f B anca M o nte dei P aschi di Siena so ld to the CA RIGE and Intesa-San P ao lo banking gro ups). M o revo er, the figure is pro fo rma to take acco unt o f assets classified as held fo r sale at the end o f 2010 (M P M o naco SA M and M P S Venture SpA ).
Volumes as at 31/12/2009 were "restated" with historical data excluding the volumes pertaining to the branches sold in the course of 2010 (a total of 72 branches
of Banca Monte dei Paschi di Siena sold to the Groups, CARIGE and Intesa-San Paolo) which, at 31/12/2009, consisted in total funding of 3,543 mln, of which 2.204
mln in direct funding and 1,339 mln in indirect funding. Morevoer, the figure is pro-forma to take account of assets held for sale(MP Monaco SAM and MPS Venture
SpA - impact of an overall 269.7 mln).
16
42
REPORT ON OPERATIONS
 Indirect funding at the end of the year came to approx. 145 bln, up 10.7% on the previous year "on a
restated operating basis" (+4.5% on 30/09/2010). The aggregate includes:
o assets under management which grew by 50.5 bln with a 5.4% increase on the end of the previous
year ―on a restated operating basis‖. A further breakdown of volumes – according to a Mifid-based
approach structurally aimed at selecting the best investment solutions for customers (products,
investment lines, Group and Third-party Asset Management Companies) – shows that the prevailing
segment is that of life insurance policies, Funds and Sicavs. With regard to the insurance sector,
technical reserves relating to the Group came to approx. 26 bln, significantly higher than the previous
year(+7.3%) owing to collected premiums of 5.2 bln, consisting mainly in traditional policies (3.1
bln)and unit-linked products (1.3 bln). Individual Managed Accounts came to approx. 6.6 bln, a fall
on the previous year following outflows of approx. 750 mln, while Mutual investment funds/Sicav
came to approx. 18 bln, +5.4% YoY thanks to new net funding of approx. 580 mln. Within this area,
lower risk funds account for more than 68% of the segment(Monetary and Bond funds 56.9%; Flexible
and Balanced Funds 11.5%).
AssetIUnder
Fondi Management
comuni
Breakdown at 31/12/10
Mutual
funds/Sicav
36,1%
Life-insurance
policies 50,8%
Individual
portfolios under
management
13,1%
Mutual Funds
Breakdown of Assets Under Management by Type at 31/12/10
Bonds and
monetary funds
56,9%
Other 2,5%
Equity funds
22,3%
Hedge funds
6,7%
Balanced and
flexible funds
11,5%
o Assets under custody: at the end of December 2010 volumes exceeded 94 bln with a 13.8% increase
on 31/12/2009 ―on a restated operating basis‖ (+7.4% on 30/09/2010), mainly benefitting from the
performance of deposits in the Key Clients segment.
43
REPORT ON OPERATIONS
Lending aggregates
At the end of 2010 “Loans and advances to customers”17 of the Group came to approx. 156 bln, an
increase of 4.1% on the previous year ―on a restated operating basis‖ (+2.3% on 30/09/2010), with a
market share of 7.84% (8.02% as at December 2009).
Loans and receivables with customers (€/mln)
Type of transaction
31/12/10
Loans
(*)
31/12/09
Change
Abs.
%
138.694
130.370
8.324
6,4%
Current account s
15.214
17.104
-1.890
-11,1%
Mort gages
84.383
74.898
9.484
12,7%
Ot her lending
39.098
38.368
730
1,9%
6.163
9.482
-3.319
-35,0%
11.381
10.221
1.159
11,3%
156.238
150.073
6.164
4,1%
Other loans
Impaired loans
Total
(*) Vo lumes as at 31/12/2009 were "restated" with histo rical data excluding the vo lumes pertaining to the branches so ld in the co urse
o f 2010 (a to tal o f 72 branches o f B anca M o nte dei P aschi di Siena so ld to the CA RIGE and Intesa-San P ao lo banking gro ups).
M o revo er, the figure is pro -fo rma to take acco unt o f assets classified as held fo r sale at the end o f 2010 (M P M o naco SA M and
M P S Venture SpA ).
As for active loans and advances to customers, the total at the end of the year came to approx. 139 bln, with an
increase of 6.4% as compared to the previous year owing to a rise of 12.7% in mortgages (new contracts for the
year came to 15.8 bln, up 11.1% YoY) and in special-purpose Corporate loans, while other types of lending showed
a downward trend mainly owing to the decline in demand for working capital funding by businesses.
Special purpose loans and corporate finance
Chg. 4°Q10 vs 3°Q10
EUR mln
31/12/10
4°Q10
3°Q10
2°Q10
1°Q10
31/12/09
Ins.
%
Chg. YoY
Ins.
%
MPS Capital Services (disbursements)
2.068
597
381
699
390
1.752
216
56,7%
316
18,0%
MPS Leasing & Factoring
incl.:
leases negotiated
factoring turnover
8.008
1.399
6.608
2.589
321
2.268
1.807
276
1.531
1.876
448
1.428
1.736
354
1.382
5.847
1.383
4.464
783
45
738
43,3%
16,3%
48,2%
2.160
16
2.144
36,9%
1,2%
48,0%
Consumit (disbursements)
2.721
638
642
742
700
2.608
-4
-0,6%
113
4,3%
12.796
3.824
2.829
3.317
2.826
10.207
995
35,2%
2.589
25,4%
Total
As for special-purpose loans disbursed by the Group through dedicated product companies, new flows
in 2010 came to a total of EUR 12.8 bln, up by over 25% on the previous year with Q4 2010
contributing 3.8 bln (+35.2% QoQ). Small business and corporate loans, which came to approx. 10
bln (7.6 bln in 2009), registered a step-up in disbursements by both MPS Capital Services (+18% YoY;
+56.7% QoQ) and MPS Leasing & Factoring (+36.9 YoY; +43.3% QoQ), the latter attributable primarily
to Factoring. With regard to consumer loans, total disbursements by Consumit in 2010 came to a total of
2.7 bln (+4.3% YoY), of which 638 mln in Q4 2010 (-0.6% on Q3 2010), reflective of a falling trend for
special-purpose loans on a yearly basis and a pick up in personal loans.
Volumes as at 31/12/2009 were "restatedi" with historical data excluding the volumes pertaining to the branches sold in the course of 2010 (a total of 72 branches
of Banca Monte dei Paschi di Siena sold to the Groups, CARIGE and Intesa-San Paolo) whose lending , as at 31/12/2009, came to EUR 2,305 mln. Morevoer, the
figure is pro-forma to take account of assets held for sale(MP Monaco SAM and MPS Venture SpA - impact of an overall 35.4 mln).
17
44
REPORT ON OPERATIONS
CREDIT QUALITY
As at 31 December 2010 the Montepaschi Group's net exposure to impaired loans totalled 11.381 mln,
up by EUR 1,160 mln YoY on a 'restated operating basis', showing a reversal of trends in Q4 2010
when the aggregate was down 1.7% on 30/09/2010, which brought impaired loans back to
account for 7.28% of total customer loans (from 7.58% as at September).
Compared to the
previous quarter, watchlist loans were down (-3.5%) as were past-due positions (-33%) whereas
there was a rise for NPLs (+3.7%) and restructured loans (+5.4%).
With regard to the quality of performing loans, at the end of 2010 the average probability of default
came to 2.21%, down 11 bps on results as at 31/12/2009 (+5 bps on Q3 2010).
g BREAKDOWN OF CUS TOMER LOANS BY RIS K
Risk category - Net book values
31/12/10
30/09/10
30/06/10
31/03/10
31/12/09
Inc. %
Inc. %
Inc. %
Inc. %
Inc. %
31/12/10
30/09/10
30/06/10
31/03/10
31/12/09
(*)
(*)
(*)
(*)
11.381
11.579
11.299
10.596
10.221
7,28
7,58
7,39
7,14
6,81
a1) Non-performing loans
5.485
5.292
5.018
4.908
4.653
3,51
3,47
3,28
3,31
3,10
a2) Watchlist loans
4.015
4.159
4.289
4.004
3.758
2,57
2,72
2,81
2,70
2,50
a3) Restructured loans
1.249
1.184
1.232
793
701
0,80
0,78
0,81
0,53
0,47
632
944
759
892
1.109
0,40
0,62
0,50
0,60
0,74
B) Performing loans
144.857
141.124
141.551
137.861
139.852
92,72
92,42
92,61
92,86
93,19
Total customer loans
156.238
152.704
152.850
148.457
150.073
100,00
100,00
100,00
100,00
100,00
in million EUR
A) Impaired loans
a4) Past due
(*) P erfo rming lo ans figures were cleared o f values attributable to divestiture o f banking business in 2010 (72 branches o f banca M o nte dei paschi di Siena) as well as o f assets classified as held fo r sale at the end o f 2010 (M P M o naco SA M and
M P S Venture SpA ).
As at 31 December 2010 coverage of impaired loans came to 41.8%, growing by approx. 140 bps on
31/12/2009, continuing to be commensurate and in line with the Montepaschi Group's traditional
coverage levels. With a specific regard to NPLs, the percentage of coverage came to 56% (as it was at the
end of 2009), while watchlist loans registered a value of 21.1% (19.6% as at 31/12/2009).
PROVISIONING RATIOS
31/12/10
30/09/10
30/06/10
31/03/10
31/12/09
"provisions for NPLs and watchlist loans" / "gross NPLs +
gross watchlist loans"
41,8%
40,6%
40,1%
40,5%
40,4%
"provisions for watchlist loans"/"gross watchlist loans"
21,1%
19,7%
18,5%
19,1%
19,6%
"provisions for NPLs"/"gross NPLs"
56,0%
56,1%
56,5%
55,8%
56,0%
The table below reports the figures for the major companies of the Group, within which BMPS and BAV
show a provisioning ratio for non-performing loans which, on average, stands at around 59.7%. For an
accurate interpretation of the details contained in the table, it should be noted that NPLs under litigation
are normally written down also by direct amortisation, while mid-long term loans are generally supported
by collaterals thus requiring more limited provisioning. This is particularly evident in MPS Capital Services
(NPL coverage came to 33.2%), whose business is mainly characterised by the disbursement of mortgage
loans:
g BREAKDOWN OF NP L s AND WATC HL IS T L OANS BY BUS INES S UNIT
Risk category - Net values at 31/12/2010
MPS Capital Services
MPS Leasing &
Banca per le Imprese
Factoring
1.398
179
Gruppo
BMPS
BAV
Consum.it
Biverbanca
Non-performing loans
5.485
3.061
598
% weight on customer loans
123
57
3,51%
2,3%
4,4%
8,6%
2,7%
2,0%
2,3%
56,0%
59,8%
59,0%
33,2%
65,3%
73,1%
66,9%
Watchlist loans
4.015
2.577
256
667
285
78
58
% weight on customer loans
2,57%
1,9%
1,9%
4,1%
4,4%
1,3%
2,4%
21,1%
22,4%
17,8%
16,4%
18,4%
37,5%
21,2%
in million EUR
"loan loss provisions"/"gross NPLs"
"loan loss provisions"/"gross watchlist loans"
45
REPORT ON OPERATIONS
With regard to gross performing loans, provisions continued to stand at around 0.56%, substantially in
line with levels as at 31/12/2009.
Finally, it should also be noted that the positive management of the NPL portfolio mandated to MPS
Gestione Crediti Banca translated into collections for a total of 629.7 mln (+13.2% YoY), 172.6 mln of
which were achieved in the fourth quarter (+53.4 % on Q3 2010).
INCOME STATEMENT AGGREGATES18
In 2010, the Montepaschi Group's Net Operating Income grew significantly, coming to approx. 946
mln, more than twice the result achieved at the end of the previous year. The growth is
attributable to basic income, which climbed 1.6% compared to 31/12/2009 and 1.8% on Q3 2010,
and to the sharp reduction in both loan loss provisions (-21.2% YoY) and operating expenses (5.2% YoY). As a consequence, the cost-income ratio fell to 61.6% with a drop of 310 bps as
compared to the end of 2009, confirming the progress made by the Group in improving operational
efficiency.
1) OPERATING INCOME
TRENDS IN OPERATING INCOME: NET INCOME FROM BANKING AND INSURANCE ACTIVITIES
As regards the development of total revenues from banking and other services as at 31 December 2010,
income from banking and insurance activities stood at approx. EUR 5,571 mln (approx. 5,593 mln as at
31 December 2009) with a yield in Q4 of around 1,406 mln, substantially stable on Q3 2010. In the course
of the year, the aggregate was positively affected by the recovery in net commissions though net profit from
trading/valuation of financial assets was penalised by financial market conditions and sovereign debt.
INCOME FROM BANKING AND INSURANCE ACTIVITIES (EUR mln)
31/12/10
4°Q10
3°Q10
2°Q10
1°Q10
31/12/09
Chg. 4°Q10 vs 3°Q10
Abs.
%
Chg. YoY
Abs.
%
Net interest income
3.591,7
900,8
906,5
912,7
871,7
3.576,7
-5,7
-0,6%
15,0
Net commissions
1.911,5
489,0
459,1
482,9
480,5
1.841,0
29,8
6,5%
70,5
3,8%
5.503,2
1.389,8
1.365,7
1.395,6
1.352,1
5.417,7
24,1
1,8%
85,5
1,6%
91,8
32,2
29,5
15,7
14,4
110,3
2,7
9,2%
-18,5
-16,8%
-23,1
-5,7
16,3
-53,4
19,7
66,1
-22,0
n.s.
-89,2
n.s.
-0,6
-10,1
-3,5
6,3
6,7
-1,5
-6,7
n.s.
0,9
-58,5%
5.571,3
1.406,2
1.408,0
1.364,2
1.392,9
5.592,7
-1,9
-0,1%
-21,4
-0,4%
Income from banking activities
Dividends, similar income and gains (losses) on equity
investments
Net profit (loss) from trading/valuation of financial
assets
Net profit (loss) from hedging
Financial and insurance income
0,4%
Income from banking activities: quarterly trend
1.406
1.408
4°Q10
3°Q10
1.364
1.393
1.338
2°Q10
1°Q10
4°Q09
EUR mln
A closer look at the aggregate reveals the following:
2009 quarterly results and 2010 first three quarterly results were restated to take account of the changes brought about to the operating scope subsequent to the
divestiture of business (72 branches of Banca Monte dei Paschi di Siena) which took place in 2010. Moreover, to ensure consistency with previous quarters (2010 and
2009), income generated by the companies, MP Monaco SAM and MPS Venture SpA classified as held for sale at the end of 2010, was excluded line by line (for
further details pleasee see paragraph ―MPS Group reclassification criteria‖).
18
46
REPORT ON OPERATIONS
 basic income at the end of the year stood at approx. EUR 5,503 mln (approx. 5,418 mln at the end of
2009; +1.6%) with Q4 contributing around 1,390 mln, up 1.8% on Q3 2010. More specifically:
 net interest income: approx. EUR 3,592 mln shows a slight improvement on the previous
year(+0.4%) with Q4 contributing over 900 mln, an increase of 3% on Q4 2009, just slightly
below the previous quarter(-0.6%). The aggregate includes a net interest income from funding
and lending activities that was down as compared to the previous year, though there was a slight
improvement owing to the rise in volumes traded and to the recovery in short-term interest rates
which began in the summer period and grew from strength to strength in the final part of the year.
On the other hand, the financial components (banking book, Assets & Liabilities and Management)
registered a YoY rise, benefitting from the opportunity for asset financing at low rates in connection
with the significant uptrend in the short-term yield curve.
 net fees and commissions: stood at approx. 1,912 mln as at 31/12/2010, climbing 3.8% on the
previous year and 6.5% on Q3 2010. A closer look at the aggregate components reveals a growth
on 2009 in: placement/continuing fees on AUM and funding products, fees on foreign currency
transactions and payment services.
 Net profit/loss from trading/valuation of financial assets stood at EUR -23.1 mln at the end of 2010
(66.1 mln as at 31/12/2009) with Q4 2010 contributing - EUR 5.7 mln. More in detail, trading posted a
full year result of - EUR 52.1 mln (+17.6 mln as at 31/12/2009), of which -23.1 mln in Q4 2010, driven
primarily by the sovereign debt crisis which became more severe in the last part of the year owing to
fears over lreland's solvency. Positive results were posted instead by the disposal of loans and
available-for-sale financial assets/liabilities which, at the end of 2010, came to EUR 59.4 mln (70.4
mln as at 31/12/2009), benefitting from disposal of capital-gain generating AFS and L&R securities in
particular. Finally, net profit (loss) on financial assets/liabilities designated at fair value came to 30.4 mln (-21.9 mln as at 31/12/2009), weighted down by the increase in liabilities of BMPS bonds for
the part not completely hedged against risk.
NET RES UL T FROM REAL IS ATION/VAL UTATION OF FINANC IAL AS S ETS (in millions of euros)
31/12/10
Net profit (loss) from trading
4°Q10
3°Q10
2°Q10
1°Q10
31/12/09
Chg. 4°Q10 vs 3°Q10
Abs.
%
Chg. YoY
Abs.
%
-52,1
-23,1
16,1
-67,8
22,6
17,6
-39,2
n.s.
-69,7
n.s.
59,4
9,8
13,3
20,5
15,8
70,4
-3,5
-26,4%
-11,0
-15,6%
Net profit (loss) on financial assets and liabilities
designated at fair value
-30,4
7,5
-13,1
-6,1
-18,7
-21,9
20,6
n.s.
-8,5
38,9%
Net profit (loss) from trading/valuation of financial
assets
-23,1
-5,7
16,3
-53,4
19,7
66,1
-22,0
n.s.
-89,2
n.s.
Gains (losses) on disposal of loans, available for sale
financial assets and financial liabilities
Net income from banking and insurance activities also includes:
Dividends,similar income and gains/losses on equity investments: totalled EUR 91.8 mln (EUR
110.3 mln as at 31/12/2009), with the fourth quarter contributing EUR 32.2 mln (+9.2% QoQ),
primarily attributable to gains from equity investments consolidated at equity. The largest share was
from insurance (AXA-MPS: approx. EUR 52 mln, Antonveneta Vita: approx. EUR 10 mln) and asset
management (ca. EUR 18 mln).
Net profit (loss) from hedging: came to - EUR 0.6 mln (-1.5 mln as at 31/12/2009).
THE COST OF CREDIT: NET VALUE ADJUSTMENTS DUE TO IMPAIRMENT OF LOANS AND FINANCIAL
ASSETS
As a result of income from credit disbursement activities, in 2010 the Group achieved a considerable
reduction in net value adjustments, which fell 21.2% against the end of 2009, coming to approx. EUR
1,156 mln with Q4 contributing approx. 284 mln, substantially in line with values posted in the previous
quarters. The relationship between adjustments for the year and customer loans at year end show a
provisioning rate of 74 bps, down 24 bps on 2009 and 2 bps on the third quarter of 2010, within a
consistently rigorous framework in terms of provisions.
47
REPORT ON OPERATIONS
Net writedowns of impaired loans: quarterly trend
428
284
282
283
4°Q10
3°Q10
2°Q10
307
1°Q10
4°Q09
EUR mln
Net value adjustments due to impairment of financial assets was negative by approx. 38.7 mln (44.1 mln as at 31/12/2009) due to depreciation of AFS stock that became impaired.
As a consequence, income from banking and insurance stood at approx. EUR 4,377 mln (approx.
4,083 mln as at 31/12/2009; +7.2%), with Q4 2010 contributing approx. EUR 1,110 mln (-0.8% on the
previous quarter).
COST OF OPERATIONS: OPERATING EXPENSES
As at 31 December 2010, operating expenses stood at approx. EUR 3,431 mln, down 5.2% on the
previous year, confirming the focus the Montepaschi Group is placing on the structural containment of costs:
OPERATING EXPENSES (EUR mln)
31/12/10
Personnel expenses
Other administrative expenses
Administrative expenses
Net adjustments to tangible and intangible assets
Operating expenses
4°Q10
3°Q10
2°Q10
1°Q10
31/12/09
2.211,2
597,4
537,1
518,7
558,1
2.299,7
1.044,7
271,4
268,1
257,2
247,9
3.255,9
868,7
805,2
775,9
806,1
Chg. 4°Q10 vs 3°Q10
Abs.
%
Chg. YoY
Abs.
%
60,3
11,2%
-88,4
1.158,4
3,2
1,2%
-113,7
-9,8%
3.458,1
63,5
7,9%
-202,2
-5,8%
-3,8%
175,2
52,3
40,8
42,1
40,0
162,2
11,5
28,2%
13,0
8,0%
3.431,1
921,1
846,0
817,9
846,1
3.620,3
75,0
8,9%
-189,2
-5,2%
Operating expenses: quarterly trend
921
4°Q10
1.018
846
818
846
3°Q10
2°Q10
1°Q10
4°Q09
EUR mln
In particular:
A)
Administrative expenses were down 5.8%, due to:
personnel expenses, amounting to approx. EUR 2,211 mln, down 3.8% on 31 December 2009.
Performance in this area benefits from the structural effects of the headcount reduction and
rearrangement processes put underway as of mid 2008;
other administrative expenses (net of stamp duties and customer expense recoveries) totalling
approx. 1,045 mln, down on the previous year (-9.8%) mainly as a result of cost synergies
obtained from the reorganisation processes put in place and the cost management measures
adopted.
48
REPORT ON OPERATIONS
B)
Net value adjustments to tangible and intangible assets stood at approx. EUR 175 mln, up 8% as
compared to 31 December 2009, primarily as a result of the ICT investments made in the past three
years.
As a result of the above, the Net Operating Income came to approximately EUR 946 mln, up by
over 100% on the EUR 462 mln as at 31 December 2009. The cost-income ratio stood at 61.6%, a
significant improvement (+310 bps) on 31/12/2009.
2) NON-OPERATING INCOME, TAX AND NET PROFIT FOR THE YEAR
Net profit also included:
a negative balance for net provisions for risks and charges and other operating income/expenses,
improving by 12% on 31/12/2009 and 18.4% on Q3 2010 to approximately -EUR 193 mln. The
account incorporates approx. -EUR 61 mln in provisions to the fund for risks and charges (covering
primarily legal disputes and claw-back actions) and roughly -EUR 132 mln worth of net operating
expenses (consisting primarily in legal actions, improvement on third-party assets and operating losses on
a non-performing position of a subsidiary);
EUR 552 mln in gains/losses on equity investments primarily attributable to the capital gain arising
from the transaction for value creation from part of the Group‘s real estate and properties used in the
business (EUR 405.5 mln) and from the Group‘s disposal to AM Holding of its shareholding in Prima Sgr
after closing of the agreement (EUR 176.9 mln). The aggregate was also negatively impacted by the
depreciation of Antonveneta Vita SpA. (-EUR 18 mln);
―one-off charges‖ for an amount of EUR -19.5 mln mainly linked to one-off transactions;
Profit/loss from disposal of branches was positive by EUR 21.8 mln and includes the profit and loss
data relevant to the divestiture of business (72 branches of Banca Monte dei Paschi di Siena) in 2010,
eliminated from the accounts: ―Interest income‖, ―Net fees and commissions‖, ―Net income from
trading/valuation of financial assets‖, ―Administrative expenses‖;
Profit/loss from disposal of investments for an amount of EUR 182 mln, of which EUR 165.9 mln (net
of related derecognized goodwill) attributable to the capital gain arising from divestiture of business (72
branches of Banca Monte dei Paschi).
Against this background, operating income before tax stood at approx. 1,489 mln (approx. 267 mln in
2009).
PROFIT (LOSS) BEFORE TAX FROM CONTINUING OPERATIONS (in EUR mln)
31/12/10
Net operating income
4°Q10
3°Q10
2°Q10
1°Q10
31/12/09
Chg. 4°Q10 vs 3°Q10
Abs.
%
Chg. YoY
Abs.
%
945,9
189,0
272,9
245,0
239,1
462,2
-83,9
-30,7%
483,7
n.s.
-193,2
-26,7
-32,8
-92,2
-41,5
-219,7
6,0
-18,4%
26,5
-12,0%
Gains (losses) from equity Investments
551,5
578,8
-7,8
-19,3
-0,2
-2,7
586,6
n.s.
554,1
n.s.
Integration costs
-19,5
-10,7
-6,1
-2,7
-86,8
-4,7
76,9%
67,3
-77,5%
Net provisions to reserves for risks and charges and
other operating income (expense)
Gains (losses) from disposal of investments
21,8
9,2
12,6
71,8
-50,0
-69,6%
Gains (losses) from disposal of investments
182,4
0,5
-2,3
184,2
0,0
42,3
2,8
n.s.
140,1
n.s.
1.488,9
730,8
223,9
324,1
210,1
267,1
507,0
n.s.
1.221,7
n.s.
Gain (loss) from current operations before taxes
Finally, to complete the section on income:
Tax expense (income) on profit (loss) from continuing operations was negative by approximately
EUR 393 mln (approx. -100 mln as at 31 December 2009). The tax rate for the period was approx.
26.4%.
Gains (losses) after tax from groups of assets held for sale, totalled 1.7 mln and essentially included
values from MP Monaco SAM and MPS Venture SpA as compared to 192 mln in 2009 arising from the
disposal of the Asset Management segment.
49
REPORT ON OPERATIONS
The consolidated net profit of the Montepaschi Group before Purchase Price Allocation (PPA) stood
at approx. EUR 1,096.2 mln (EUR 354.3 mln as at 31 December 2009). Considering the net effects
of PPA, net profit for the period came to EUR 985.5 mln (vs. 220.1 mln as at the end of 2009).
*************
Following is a reconciliation between the Parent Company’s and consolidated equity and profit for
the period, in compliance with Consob instructions.
Reconciliation between Parent Company and Consolidated Shareholders' Equity and Net Profit (Loss) for the year
Shareholders' equity
Amount s €/000
Net profit (loss)
Balance as as per Parent Company's Accounts
15.621.429
including Parent Com pany's valuation reserves
-271.483
0
908.273
367.603
Effect of line-by-line consolidation of subsidiaries
Effect of affiliates
340.743
74.661
Rev ersal of div idends from subsidiaries
-66.250
Effect of write off of depreciation/rev aluation of equity inv estments
0
Capital gain on disposal of Prima Holding
Capital gain on deconsolodiation of Consorzio Perimetro Gestioni proprietà immobiliari
Other adjustments
Subsidiaries' v alutation reserv es
Consolidated balance
(*) P o rtio n o f dividends distributed by M P S Ireland
50
52.169
(*)
-334.818
51.140
87.394
87.394
405.455
405.455
140
15.811
125.319
0
17.156.421
985.497
REPORT ON OPERATIONS
SEGMENT REPORTING
In the interest of identifying its reportable operating segments as provided for by IFRS 8, the Montepaschi
Group adopted a business approach that selected the main business sectors into which the Group‘s
business operations are organised (and whose results are periodically reported to the highest decisionmaking levels) as the basis of representation for a breakdown of its income/capital aggregates.
On the basis of this approach, a breakdown of the results achieved by the operating segments of the
Montepaschi Group as at 31 December 2010 is reported in the following table. Data was aggregated
according to the existing organisational setup.
It should be noted that Biverbanca remains allocated to the Corporate Centre since it has not yet
undergone divisionalisation.
SEGMENT REPORTING
(in millions of euro)
December 2010
Consumer
Banking
Corporate
Banking
% chg YoY
% chg YoY
Corporate
Center
Total
Reclassified
Group
% chg YoY
% chg YoY
PROFIT AND LOSS AGGREGATES
3.066,9
-0,9%
1.909,8
-2,8%
594,6
11,8%
5.571,3
-0,4%
433,2
-25,0%
691,3
-19,5%
69,8
n.s.
1.194,3
-20,9%
2.278,4
-3,2%
601,4
-5,5%
551,3
-12,6%
3.431,1
-5,2%
355,2
113,8%
617,1
31,4%
-26,4
n.s
945,9
104,6%
Activ e loans and adv ances to customers
65.175
12,5%
74.949
4,7%
10.629
-33,2%
150.752
3,7%
Customer accounts and securities
82.715
-2,7%
46.988
-2,2%
28.782
45,2%
158.486
3,6%
Indirect funding from customers
71.956
4,7%
43.689
19,2%
29.273
-12,0%
144.919
4,5%
Assets under management
45.216
7,1%
2.129
-13,6%
3.201
-47,2%
50.547
-0,4%
Assets under custody
26.740
1,0%
41.560
21,5%
26.072
-4,2%
94.372
7,4%
Financial and insurance income
Net v alue adjustments due to impairment
of loans and financial assets
Operating expenses
Net operating income
BALANCE SHEET AGGREGATES
PROFITABILITY RATIOS (%)
Cost Income
74,3%
31,5%
Raroc
11,3%
10,5%
61,6%
-
5,7%
For 2010 and 2009 take account of changes to the scope as well as of separation of assets, following
application of IFRS5.
The major business aspects concerning the operating segments in 2010 will be reported in the following
pages.
51
REPORT ON OPERATIONS
CONSUMER BANKING
SALES & DISTRIBUTION AND PRODUCT/SERVICE INNOVATION
As part of its business activities, the Consumer Banking division combined the demands from
households and small businesses, still very much impacted by the effects from the economic and
financial upheaval, with the need to continue on the process of product range innovation that is
crucial to fully seizing the new potential coming from the slight recovery underway. Within this
framework, efforts were steered by the following main guidelines, whose specifications were suitably
adjusted to each customer segment:

economic support to households and small businesses in financial difficulty through, among
other things, the ongoing "Fight the Crisis" plan and the various initiatives sustaining people and
businesses affected by natural disasters;
 promotion and enhancement of the features in MPS Advice, the advanced advisory model, whose
objective it is to raise the level of quality in investment services;
 restyling the product range to reflect innovation while respecting the traditions of the Group, with
the aim of delivering an offer that is in line with the multi-brand strategy and that draws on the
partnerships with Prima Sgr, AXA and Consumit;
 greater transparency in service commitments and easier relations-communications with
customers.
Several initiatives were put in place under these objectives, including:
 the implementation of all initiatives relating to the Italian Banking Association's "Patti Chiari";
 the optimisation of internal adjustments to the MiFID;
 a review of product communication that is client-oriented. A new-style statement of accounts has
already involved 3.3 mln customers;
 the integration of account statements with the appropriate Synthetic Cost Ratios, enabling the
consumer to draw a comparison between the different bank offerings;
 the development of Paschi FACE, a project designed to improve bank-client relations through the
creation of a new platform providing operational support to the Network, and the consequent
simplification of the related organisational aspects and functions;
 as part of the strategic partnership with AXA, the definition of the Charter of Commitments,
which establishes the response times the Insurance Company agrees to give the customer in
relation to policy redemption, payment at maturity, complaints and other possible claims.
There follows a summary of the year's major initiatives involving the various customer segments:
Retail customers

“Family” segment: As part of the commercial guidelines established for 2010 - based
upon a prospect of asset growth and value creation from cross-selling - activities were
implemented in the "Family" segment which particularly focussed on supporting the "core bank".
This largely involved the promotion of the ―mutuo protezione‖ (protection mortgage) and the
synergistic actions carried out on the finance consumer with the support of the consumer credit
company, Consum.it. Asset mangement performance was also positive, boosted by the results on
Multiline policies and accumulation plans in funds as well as the increase in protection
insurance, which was propped up by the bundling of mortgage loans in the first half of the year
and, in the second half of the year, by the launch of a series of actions aimed at promoting
knowledge within the network on how to intercept customer needs when it comes to the issue of
protection. Upon completion of development activities on new products in 2010, a pilot project
was launched for two initiatives that are expected to be fully implemented in 2011: the sale of
protection insurance products in Direct Marketing and the launch of a pilot sales project for P&C
car insurance, ―AXA MPS Guidare Protetti‖, an innovative step taken by the Montepaschi Group
in the bancassurance market. Another strategic move within the Family Market was the reduction
of "cost-to-serve”, by encouraging the gradual migration of the more frequent transactions to
telematic channels. The ―Fight the crisis‖ plan continued, as part of the Family Plan promoted by
the Italian Banking Association, which, until now, has seen the suspension of repayments on over
9 thousand mortgages for a total outstanding debt of approx. EUR 970 million as at 31.12.2010.
52
REPORT ON OPERATIONS
The suspension of mortgage repayments, together with other forms of support to customers in
temporary financial difficulty, was also extended to families struck by natural disasters (in
particular, the earthquake in Abruzzo and the floods in the Regions of Tuscany and Veneto).
Finally, financial inclusion saw the creation of various microcredit solutions (see section ―Social
aid and environmental programmes‖) and a growing focus on immigrant customers, developed
with a specific sales and marketing approach (Paschi without Frontiers) aimed at supporting
"bankification" and increasing remittances from and to the countries of origin.

―Affluent” segment: A number of business initiatives were undertaken across the country
(the Method Campaign) involving 1,700,000 customers. With regard to instruments supporting
customer relations, the start-up phase for the Advisory Platform was completed thanks also to the
strong commitment of the Advisory Specialists who have the twofold role of supporting the
Network units (Regional Areas, Local Headquarters and Branches) and channelling feedback from
the market of reference. As for products, a series of initiatives were put underway in relation to
the AXA-MPS and Consumit catalogue.

“Small Business” segment: initiatives in support of small businesses continued,
encouraging the use of business loans and favouring the disbursement of new credit lines. Business
promotion actions were developed on mid-high potential companies with a view to offering midlong term loans and leases in support of new industrial investments, aimed in particular at quality,
research and innovation. Specific initiatives were put in place to support the sectors of Tourism
and Agriculture with financial offers and services. Promotion of the "Fight the Crisis" plan in favour
of small enterprises in temporary financial distress continued (6,142 loans were suspended since
the launch of the plan with an outstanding debt of approx. 1.137 mln as at 31/12/2010), as did
the " Joint Notice" initiatives between the Italian Banking Association and the Ministry for the
Economy and Finance.
Private Clients
In 2010, operations were characterised through a rigorous scheduling of sales and distribution
initiatives as well as the widespread use of advanced advisory services with a view to improving the
quality and value of customer relations. Within this framework, a crucial role was carried out by the
Private Advisory Specialists who focussed on further developing the advisory model, deploying
technical-commercial training sessions, supporting Private Bankers and optimising the portfolio of
Managed Accounts (GPA). Coordination of the project regarding the 2009/2010 "Tax Shield", which was
designed with a multi-sector approach, also had significant implications in terms of business and
investments.
Family Office customers
This target of customers, which falls under the scope of the Family Office Area (set up in 2010 in
consistency with the strategic guidelines contained in the 2008-2011 Business Plan) specifically involves
the ―direct management‖ of the customer so as to create and consolidate long term relations with
high-worth families while offering a tailored service that covers all of their (financial and non-financial)
assets and provides ―value-protection‖ through careful planning of inter-generational transfers. Sales and
distribution actions are supported by an organisational structure (centres and “light offices”) set up
across the country with resources selected from the network, further specialised and supported by
advisory specialists who are dedicated to analysing the demands of customers and the proposals of
targeted solutions. Two important lines of activity were developed within this area:
 analysis of the need for non-financial advice (fiscal, legal, trusts, succession and inheritance,
real estate, art) and related study of service delivery processes, through providers within the
Group or high-standing externals;
 development of private insurance operations on listed and non-listed assets, through the use,
among other things, of partners and third-party specialised professionals, for the purpose of
protection and intergenerational transition.
In terms of “value proposition”, a distinctive range of offers was created, based upon a highlycustomised advisory approach for potential integration with the complementary services of MPS Fiduciaria
which broaden and complete the offer. With regard to assets managed by the Family Office Area, GPA
53
REPORT ON OPERATIONS
Premium Evolution is the most up-to-date product providing greater flexibility in the management and
transfer of financial instruments.
Product/service innovation
A continuous search for quality and innovation at the heart of the Group's range of offering is confirmed
by the awards received at the 7th edition of the "Cerchio d'Oro dell'Innovazione Finanziaria" promoted by
the Italian Association of Financial Innovation: Banca Monte dei Paschi di Siena was named winner of
the award “Innovative Bank of the Year, 2010” and was also recognised for its innovative productsprojects in the categories of Organisation and Operations (with the Remote Learning – Remedy project),
Marketing (Pricing AVA Based project) and Payment Services(MPS Contozip 19‖).
BMPS's record for its award-winning projects continued, reflecting the importance that the Montepaschi
Group attaches to innovation as a key lever in improving the quality of service offered to the customer
while supporting corporate results at the same time.
The Wealth Management catalogue, an outstanding feature of which is the high possibility of
customisation, was integrated with the new product ―GPA Top‖ (managed accounts with prior consent
highly integrated with the advisory platform MPS Advice) and improved by enriching the existing
products―GPA Premium‖ and ―Alta Gamma‖.
As for Funds and Sicavs, the range of
products offered by Prima Funds
Through financial promotion and the branch networks, the Group offers customers
was further enriched with the release
various investment solutions which combine the more traditional financial management
of new Bond segments with periodic
objectives with
environmental, social-ethical and governance considerations
(Environment, Society, Governance – ESG). Main initiatives implemented in this area in
payment of coupons (Bond 2015
2010 inlcude:
Multicorporate,
Bond
2015
Multicorporate Dinamico, Bond
 The addition of a specific sector, "Sustainable equity" to the product catalogue,
2016
Multicorporate),
two
which currently contains 16 ethical funds/sicavs in centred around the green
economy market.
segments with secured capital at
 The integration of financial disclosure regarding major placed funds/sicavs
maturity (Secure World Equity 3
(approx.‘80% of overall volumes under management) with an ESG indicator that
notifies the Client Manager, and by consequence the customer concerned, of
and Protetto 100 Azionario
products which especially invest in company and government securities with a
Globale) and one segment which
greater focus on environmental and social issues as part of their CSR:
 the collaboration with ANASF and the Forum for Sustainable Finance for the
adopted innovative management
creation of a CSR investment manual for financial advisors and financial product
techniques
falling
within
the
sales managers.
category of ―Newcits‖ (Alpha
 the issuance of the 5 year term bank bond ING Crescita Protetta, which, among
other things, involves payment at maturity of a variable coupon of 50% of the
Strategies). Furthermore, in line with
average value of EURO STOXX Sustainability 40 Price Index. The index includes the
the Group's multibrand positioning,
best 40 European companies in terms of sustainability performance.
intense activities continued to ensure
an offer that remains competitive, innovative and highly qualified with the inclusion of other investment
houses (Arca Sgr, Sicav Parword, managed by BNP Paribas AM, Nextam and M&G).
Sustainable and socially responsible investment products
With regard to the insurance sector, the catalogue of life insurance products was developed to better
capture the investment and protection needs of customers, also in relation to the current economic
scenario. As for ―Property and Casualty (P&C)‖, personal protection insurance products included the
launch of AXA MPS Valore Autonomia, which guarantees a monthly annuity if a customer is no longer
self-sufficient, and AXA MPS Assicura Manager, temporary life insurance for "key executives" in
companies. Moreover, as regards companies, the product catalogue was expanded with the release of new
policies covering the various areas of risk to which a company may be exposed: AXA MPS Azienda
Sicura, which covers the major risks that may affect the day-to-day running of businesses, AXA MPS
Mutuo Sicuro Business, covering the risk of fire and explosion on mortgaged property or on property as
collateral for loans, and AXA MPS Sigillo Corporate, a personal accident insurance for Key executives of
companies.
E-money– payments and collections
19
A modular and dynamic current account "package" for new consumer banking customers. A basic package not only comprising the classic
current account, but also the payment card as an indispensable tool in the use of multichannel services (internet, telephone and mobile),
understood as a channel for bank access, combined with the use of the current account "wherever and whenever" and ” direct debiting of
payments from current accounts. The modular structure of the account offers customers the opportunity to customise their current accounts,
either immediately or over time, by choosing products/services on the basis of their own needs.
54
REPORT ON OPERATIONS
In 2010, priority activities continued aimed at countering fraud on debit cards and reducing related costs
borne by banks through a series of actions. Fraud prevention, initially applied to debit cards alone, was
also extended to include credit cards with an increased monitoring capacity. These activities led to a fall
in the number of fraud-related claims in 2010 by approx. 30% compared to the previous year,
and a reduction in the average amount reimbursed by approx. 50%.
Continuing with the logic of achieving greater
security, July saw the release of the international
debit card, MPSEuroshop – VPAY which, due to its
use with international circuit chip alone, ensures the
highest levels of security. By the same logic, the
multi-function Consumit chip-embedded card was
released.
As at 31 December 2010 circulating payment
cards 20 of the Montepaschi Group totalled
3,298,187 (distributed by Banca Monte dei Paschi
di Siena, Banca Antonveneta and BiverBanca). The
overall growth recorded for the year (+1%) was
mainly due to the performance of pre-paid cards
33%
Debit Cards
Prepaids Cards
Credit Cards
Revolving Cards
47%
Well-established systems of protection for on-line banking services
offered to customers, such as the use of ID credentials (certificate) and
electronic key providing greater security when accessing the internet
banking platform, have gradually been supplemented with other
protection measures, including:
 "Stai al sicuro" ("Be Safe") which involves the free real-time
sending of text messages against transactions considered risky (eg.
money transfers, top-ups on mobile phones and prepaid cards);
 "PaschiAvvisa" which keeps the customer updated on specific events
such as the status of stock market orders or current account
balances, at established intervals;
 "La domanda-risposta segreta" ("Secret question-reply) which
involves recognition of the user against on-line operations carried
out in "unusual" circumstances;
 "SeiOk" ("You're ok) which allows the customer to verify the
security level of his/her computer on-line.
(+9.3%) which benefitted from the sale of the Spider and
Kristal Best cards as well as debit cards (+2%).
17%
3%
Major initiatives to protect on-line customer banking
With regard to the POS system, 2010 registered a fall of
6,661 terminals for BMPS/BAV bringing the total number of
terminals to 129,831. This was mainly owing to two factors:
the current economic crisis, which forced several business
activities in Italy to close down, and the Group's closure of
inactive points of sale.
Initiatives undertaken during the year in relation to payment and collection systems mainly focused on
adjustments for compliance with the new banking rules resulting from the Payment Service Directive
(PSD). Furthermore, activities continued to be developed regarding the Single Euro Payments Area (SEPA)
with a review of procedures for the European collection system, SEPA Direct Debit, which has already been
made available to customers.
OPERATING RESULTS
As at 31 December 2010, Consumer banking posted approx. EUR 155 bln in total funding, slightly higher
than levels in the previous year (+0.6%). Direct funding, approx. EUR 83 bln, was down on 31/12/2009
(-2.7%) and remained concentrated in ―on-demand‖ items and the placement of bonds. Indirect funding
(approx. 72 bln; +4.7% on 31/12/2009) included a climb of 7.1% for assets under management, whose
volumes were in excess of EUR 45 bln thanks to the positive performance of Bancassurance and Mutual
Funds/Sicav.
With regard to credit management, active loans, which stood at EUR 65.2 bln, were up 12.5% due to the
performance of the mid-long term component which was boosted by the Group‘s Retail products in
support of households and small businesses.
As for economic performance, in 2010 the Consumer banking division achieved over EUR 3 billion in
core revenues (-0.9% YoY) due to the positive contribution from net fees and commissions (+3.1% on
31/12/2009), particularly propped up by income from placement/continuing fees on AUM and funding
products. Net interest income, on the other hand, registered a fall of 3.5% on 31/12/2009, mainly
weighted down by interest rates remaining low. As for cost items, with respect to 31/12/2009, a 25% fall
was recorded for net value adjustments due to impairment of loans, which stood at approx. 433
mln, as was a decrease of 3.2% for operating expenses which came to 2,278 mln. Against this
20
Cards distributed by Banca Monte dei Paschi di Siena, Banca Antonveneta and Biverbanca.
55
REPORT ON OPERATIONS
background, the Consumer banking division achieved a Net Operating Income of approx. 355 mln, an
increase of over 100% on the result reached in the previous year. The cost-to-income ratio for the sector
stands at 74.3%.
Consumer banking
31/12/10
% chg yoy
Net interest income
1.724,8
-3,5%
Net fees and commissions
1.319,0
3,1%
23,0
-21,9%
3.066,9
-0,9%
433,2
-25,0%
2.278,4
-3,2%
355,2
113,8%
Activ e loans and adv ances to customers
65.174,6
12,5%
Customer accounts and securities
82.715,4
-2,7%
I ndirect funding from customers
71.956,4
4,7%
Assets under management
45.216,4
7,1%
Assets under custody
26.740,0
1,0%
(EUR mln)
PROFIT AND LOSS AGGREGATES
Financial and insurance income
Net Financial income (loss)
Net v alue adjustments due to impairment of
loans and financial assets
Operating expenses
Net operating income
BALANCE SHEET AGGREGATES
With regard to the activities and performance of the companies falling within the Consumer banking
division, the following should be noted:
-
Consum.it posted a profit for the period of EUR 23.1 mln (6.1 mln as at 31/12/2009);
-
MP Fiduciaria posted a profit for the period of EUR 1.3 mln (0.7 mln as at 31/12/2009);
-
Banca Popolare di Spoleto (26% shareholding consolidated proportionately) posted EUR 9.1 mln in
net income (8 mln as at 31/12/2009).
CORPORATE BANKING
SALES & DISTRIBUTION AND PRODUCT/SERVICE INNOVATION
The initiatives characterising the Corporate banking division in 2010 were implemented with a view to
guaranteeing continuity to the Group's offer of credit, giving appropriate support to the manufacturing
industry which, for some time now, has had to operate within a very difficult economic framework.
Targeted actions by the division, which placed a special focus on the real needs of companies to mitigate
the effects from the economic crisis, were centred around four main guidelines:
 the launch of targeted projects developed by the Group independently;
 the agreement to take part in banking system initiatives;
 agreements with mutual guarantee institutions;
 remodelling/innovation in the Group's product offering so as to make it more consistent with
the changing needs of target customers.
56
REPORT ON OPERATIONS
In addition to joining the Italian Banking Association‘s ―Joint Notice‖ initiative, the Group also offered its
customers an important ―support package for SMEs‖ with the objective of providing immediate and
concrete help to domestic businesses and allowing them, in this way, to better deal with the negative
effects deriving from the economic crisis. The support package, which has been confirmed until 31 January
2011 in response to the Italian Banking Association‘s decision to extend the ―Joint Notice‖ initiatives,
consists in the following products aimed at
In the course of the year, the overall operations of the division were supported
specific target customers: Made in Italy 21 (for
by the Lazio Region Corporate Platform, an across-the-board Group
coordinating structure within the current organisation of both the Parent
Italian companies exporting goods and services),
Company and the Distribution Network, in order to best capitalise on the
Forza 5 and Forza 3 22 (for companies who
regional diversities and specific opportunities at local level. Furthermore, the
show greater protection of their workforce),
platform offers the possibility to strengthen the intragroup interaction
processes among the Retail Banks and the Product Companies with a view to
Prorogatio 23 (or companies suffering from lack
creating a ―corporate financial community‖ across the country that fosters the
of liquidity due to late payments by the Public
development of an innovative, integrated offer with a high cross-selling rate
through a mre advanced commercial tracking of customers. The Platform,
Administration), Insieme Plus24 / Investo Plus25
which launched its commercial activities in the first quarter of 2010, contacted
(for companies whose undercapitalisation
approx. 700 corporate non-customers with satisfactory results in terms of new
credit facilties approved. In addition, it also entered into the following
penalizes their credit worthiness and rating). A
agreements in the course of the year:
grace period for instalment payment of principal
 An agreement was signed with Banca Impresa Lazio which, against the
for a maximum of 12 months on mid/long term,
allocation of regional funds, involves the guarantee of the latter on new
secured or unsecured loans (Time Out)completes
mid-long term loans issued by BMPS to businesses of the Lazio Region
under a ceiling of € 50 mln.
the framework of initiatives launched by the
 An agreement promoted by the City of Rome to facilitate the access to
group, which pioneered an approach which was
credit for local micro-businesses and SMEs, through the release of a firstlater to be adopted at national level through the
demand guarantee by Banca Impresa Lazio. Our bank has thus offered an
―Common Avis‖. As part of the aforementioned
operating ceiling of EUR 25 million, also providing favourable terms and
conditions.
initiatives ("Joint Notice" and "Support Package
for SMEs"), also targeting Small Business
customers, the Group had approved over 19,000 applications for a grace period on residual debt
amounting to a total of approx. EUR 8 bln.
A review of the responsibilities of Cassa Depositi e Prestiti (CDP), put underway in 2010 through specific
legislation, involved, among other things, the possibility for CDP to use part of the funds deriving from
postal deposits and make them available to Italian banks in their granting of credit lines to SMEs in order
to support the economy. On 17 February 2010 CDP and ABI signed an agreement which defined the
general guidelines and principles for loans made available to banks. On 30 June 2010, the Montepaschi
Group, which traditionally has always been close to the SMEs and particularly sensitive to their needs,
joined an initiative with a new ad-hoc instrument called ―CDP loan‖, enabling the Group to make a highly
competitive offer in support of small and medium enterprises strongly benefitting from funding at special
terms. The Group has allocated a credit ceiling of EUR 317 million for such operations.
With regard to activities supporting the internationalisation of companies, it should be noted that in 2010
implementation of the ―Synergies for Export" project – launched in 2009 – continued, which, together
with the Trade Associations, the Chambers of Commerce and local, pre-internationalisation entities, allows
the Group to offer businesses an array of integrated solutions for International Trade Finance that boost
target market penetration of the ―Made in Italy‖ product. As part of the project, collaboration agreements
were signed with the Chambers of Commerce and Industrial Associations (CNA Servizio Estero Reggio
Emilia, Confapi Cuneo, Unione Industriale Asti and Confindustria Alessandria) through which specific
credit ceilings were made available by the Group – amounting to a total of EUR 60 million – for the issue
of loans for promotional, commercial and investment activities undertaken by companies belonging to
these bodies.
A further impetus for operations with foreign countries was given by the renewed agreement with SACE
(Italian export credit insurance agency), which issues guarantees against mid-term loans granted to
Short-term bridge financing which includes a bonus discount of 25% of the spread applied on any account opened with a bank belonging to the Montepaschi
Group if the company shows it has exported to new outlet markets in an amount not falling below 10% of the export turnover achieved in the previous year.
21
A short-term credit facility for up to EUR 1 mln whose aim is to finance investment recovery. Distinctive features include a bonus of up to 200 basis points,
expendable for 12 months and usable for any existing account with the Bank on the condition that, upon maturity, the company shows it has maintained all
employees present at the date the contract was stipulated.
22
Extension, upon request and for up to 6 months, of the maturity of advances on receivables owed to companies by the Public Administration and channelled
through the Bank provided that all valid certification pursuant to current regulations is supplied.
23
24
Mid/long term credit line of up to EUR 2.5 mln with gradual amortisation of capital, aimed at debt work-outs and recapitalisation plans.
25
Mid term credit line for company partners of up to EUR 1 mln with gradual amortisation aimed at company recapitalisation through capital increase.
57
REPORT ON OPERATIONS
SMEs in support of business internationalisation plans(for a total of EUR 60 million), as well as the increase
in guaranteed credit export transactions.
As for remodelling/innovation to the product range offered, the main initiatives developed
independently by the Group in 2010 are as follows:
 Tourinvest: a product marketed in May 2010, following the signing of the Memorandum of
Understanding for the project "Italy and Tourism" aimed at supporting investments of business
regeneration and development in the tourism sector;
 Montepaschi Terramica26: a financial package for the agricultural sector marketed in May to cover
the running and/or equipment costs of a company for investments with low environmental impact;
A total of EUR 130 million has been allocated for this activity.
 AXA-MPS Azienda sicura: a new damage insurance product, marketed in the first half of 2010,
comprising 4 types of coverage: fire, theft and robbery, electronic, P&C;
 Financial Risk Managment: the overall revision of the product range on offer was concluded with
the development of a Derivative Product Catalogue, aimed at simplifying and standardizing the
offer and bringing it into alignment with new regulatory and market needs.
As to Key Clients, business policies were developed through the requalification of credit support granted
to customers and a revision of their relevant economic profiles. In spite of this, the various investment
opportunities were not overlooked and all were considered worth exploring notwithstanding the
particularly negative economic market cycle. Among these, it should be noted that the Group took part in
significant syndicated lending transactions for a total of over Euro 18 bln (BMPS share was approx. 900
mln). As for the implementation of project initiatives, activities continued for the transfer of customer
relations as outlined in the “Project for the Migration of Large Corporates”, which looks to centralise
additional Corporate relations presenting the necessary qualitative and quantitative requirements, in the
aim of guaranteeing a service that is best suited to the demands of high-standing customers.
CORPORATE FINANCE
Activities within the area of Corporate Finance are carried out by the Group's subsidiary MPS Capital
Services Banca per le Imprese (MPSCS) which provides advanced solutions aimed at integrating the
traditional credit offering, paying specific attention to the evaluation of requests for credit lines with the
objective of maintaining a balanced loan portfolio.
In 2010, in addition to the Project Financing initiatives in the infrastructural sector (both Civil and
Health) and Real Estate (regeneration of urban areas and large real estate projects), MPSCS intensified its
activities in the sector of renewable energy sources, implementing important initiatives in the wind
power and photovoltaic sectors. Also of significance were the activities carried out in Acquisition
Financing and Private Equity as well as ―Loan Syndication‖, which saw MPSCS in the role of Mandated
Lead Arranger and Joint Arranger for the placement 21 lending transactions on the market, totalling
approximately 738 million (MPSCS contibuting approx. 289 million).
BUSINESS INITIATIVES FOR FOREIGN TRADE
In the course of 2010, the following business agreements and activities were carried out:
 “One Stop Guarantee Programme” with Standard Chartered Bank, London for the management
of guarantees to be issued by order of Montepaschi group customers to Sub-Saharan Africa and Asia
where Standard Chartered Bank has its own branches or subsidiaries. The agreement offers several
advantages, among which a pre-set pricing by Country.
26
The initiatives contained in the package target the following areas.
Farming: Purchase of non-GMO seed, fertilisers, introduction of agro-environmental schemes, purchase of small farmer market agricultural equipment , as well
as any other investments that are useful to the crop year and that aim to reduce the environmental impact of farming operations.
Machinery and Equipment: Purchase of high-technology, low-environmental impact machinery, tractors and machines for the improvement of occupational
safety.
Breeding: Investments aimed at improving breeding infrastructures (eg. stable floors, ventilation systems, various pieces of equipment) and transport
conditions for animals (eg. purchase of animal transport vehicles fitted with food and water supply systems , ventilation systems etc.).
Company partners: Loans to members of cooperatives intended to strengthen corporate capital.
58
REPORT ON OPERATIONS
 ―Risk sharing‖ with ANZ (Australia) and Banque Misr (Egypt) on the basis of which several
significant transactions were executed in favour of Group customers;
 ―Forfaiting Agreement‖ with various Chinese banks supporting transactions for the discounting of
documentary credit without recourse, effected by our branch in Shanghai.
OPERATING RESULTS
As at 31 December 2010 total funding for the Corporate banking division stood at approx. 91 bln, up
7% on the previous year. The figure includes direct funding, standing at approx. 47 bln, down on
December 2009 (-2.2%) due to the lesser contribution of funding with market counterparties. Direct
funding from corporate customers was up by over 4 bln from the previous year (+20.7%) largely
owing to the increase in short-term and on-demand funding. Indirect funding (approx. 44 bln; +19.2%
YoY), boosted by assets under custody, benefitted above all from the market impact upon deposits from
Large Corporate Customers.
With regard to active loans, at the end of 2010 volumes from the Corporate banking division amounted
to approx. EUR 75 bln, up by 4.7% on the previous year following the increase in mid-long terms loans.
In 2010, the Corporate banking division improved its Net Operating Income by 31.4%, standing at
approx. EUR 617 million at the end of the year. Basic income, at approx. EUR 1.853 million (-1.5%
YoY), was weighted down by the drop in interest income (-5.6%), partially alleviated by the increase in
net commissions (+9.8%) which was especially propped up by income from the placement/continuing of
asset managment products. As far as costs are concerned, there was a reduction in loan adjustments (19.5% YoY) and in operating expenses (-5.5%). The cost-income ratio for the sector stands at 31.5%.
Corporate Banking
31/12/10
(EUR mln)
% chg yoy
PROFIT AND LOSS AGGREGATES
Net interest income
Net fees and commissions
1.305,4
-5,6%
547,6
9,8%
56,9
-31,3%
1.909,8
-2,8%
Net v alue adjustments due to impairment of
loans and financial assets
691,3
-19,5%
Operating expenses
601,4
-5,5%
Net operating income
617,1
31,4%
Activ e loans and adv ances to customers
74.949,3
4,69%
Customer accounts and securities
46.988,3
-2,2%
I ndirect funding from customers
43.689,1
19,2%
Assets under management
2.129,5
-13,6%
Assets under custody
41.559,7
21,5%
Financial and insurance income
Net Financial income (loss)
BALANCE SHEET AGGREGATES
As to performance and results delivered by companies under the Corporate banking division, the following
are highlighted:
-
MPS Capital Services Banca per le Imprese: posted a net profit of approx. EUR 82 mln (approx.
50 mln as at 31 December 2009);
-
Mps Leasing & Factoring and MPS Commerciale Leasing: achieved a net profit of 6.9 mln as at
the end of December 2009 (1.6 mln in 2009);
With regard to the Group‘s banks abroad:
- Monte Paschi Banque: net income from banking activities came to approx. 46 mln, in line with
the result of the previous year(-43.8 mln in net losses for 2010);
- Monte Paschi Belgio: posted revenues for 21 mln (approx. 23 mln as at 31/12/2009), achieving a
net profit for the year of approx. 1.4 mln.
59
REPORT ON OPERATIONS
THE CORPORATE CENTER
The Corporate Center is an aggregation of:
a) operating units which, on an individual basis, are below the benchmarks required for primary
reporting;
b) the Group‘s head office units (including governance and support, proprietary finance, equity
investments and segments of divisionalised entities, which include in particular ALM, Treasury and
Capital Management);
c) service units providing support to Group units, particularly with regard to collection of doubtful loans
(reporting to the Credit Management Area), real estate management, and IT systems management and
development (all reporting to the ―Human Resources, Organisation, Property and Facility
Management).
The Corporate Center also incorporates the results of Biverbanca (not yet reporting to the bank‘s divisions),
the profit & loss of companies consolidated with the equity method and those held for sale, as well as
cancellations of intragroup entries.
GROUP FINANCE
PROPRIETARY FINANCE
As at 31 December 2010, the Group's portolio of Securities and derivatives came to EUR 36.3 bln
with Italian government bonds accounting for 65%, mainly included under accounting category, AFS
(72%), and, to a lesser degree, under HFT (27%)27.
Breakdown of banking book – Italian
Government bonds
Breakdown of banking book by issuer class
72%
Government Domestic
Financial
67%
18%
Financial - Subordinated
Equities
27%
4%
2% 3% 1%
5%
Government
1%
Corporate
Derivates and other
HFT
AFS
LAR
In 2010, developments in the portfolio were in relation to investments, both strategic and shortterm, made by the Group, primarily in Italian government bonds so as to boost Interest income within
a market framework that continues to be characterised by a steep yield curve. Consequently, at the end of
the period, the portfolio registered an increase of EUR 9.5 bln against 31/12/2009 and a fall of
EUR 2.6 bln as compared to June:
The breakdown of the securities and derivatives portfolio was determined by taking into consideration the portfolios of Banca Monte dei Paschi and Mps Capital
Services alone, which account for just under 95% of the Group's securities portolio.
27
60
REPORT ON OPERATIONS
In particular:
HFT Portfolio: +2.3 bln on 31/12/2009 and -6.3 bln on 30/06/2010 due to maturing Italian
government bonds and the disposal of capital gain-generating positions with a simultaneous risk
profile reduction;
AFS Portfolio: +6.9 bln on 31/12/2009 and +3.4 bln on 30/06/2010 following strategic
investments in Italian government bonds covered by interest rate risk through ad-hoc hedgeaccounting policies ―hedge accounting‖ but exposed to counterparty risk.
With regard to the Group's Trading Book, market risk in terms of VaR (Value at Risk)28 came to EUR.
9.41 mln at the end of 2010, in line with levels registered at 31/12/2009. In the second quarter VaR was
affected by the high volatility of credit spreads, with particular reference to Italian sovereign debt linked
to the crisis in Greece, while in the second half of the 2010 it remained below the annual average (16.62
mln) recording a peak in September (which was then reabsorbed) attributable to directional trading
on rate derivatives (interest rate future options) by the subsidiary MPS Capital Services.
A look at the Group‘s legal entities shows that market risk continues to be concentrated in MPS Capital
Services (66% of total risk at the end of December 2010) and Banca Monte dei Paschi di Siena (approx.
31%), with the remaining part attributable to other banks (3%).
Market risk in the Group‘s ―Regulatory Trading Book‖, is operationally monitored using VaR (Value-at-Risk), as further explained in the Notes to the Financial
Statements – Part E – Risks and hedging policies).
28
61
REPORT ON OPERATIONS
MPS Group VaR
Trading Book
VaR Breakdown per Bank: 31.12.2010
MPS Capital
Services
66%
MPS Bank
31%
Other Banks
3%
A breakdown of VaR by risk factors as at 31/12/2010 shows that 40% of the Group‘s portfolio was
allocated to risk factors such as Credit Spread (CS VaR), 28% was absorbed by equity risk factors (EQ VaR),
25% was absorbed by interest rate risk factors (IR VaR) and the remaining 7% by foreign exchange risk
factors (FX VaR).
MPS Group VaR
Trading Book
VaR Breakdown per Risk Factor: 31.12.2010
FX VaR
7%
EQ VaR
28%
CS VaR
40%
IR VaR
25%
During the year, the Group‘s VaR ranged between a low of € 8.84 mln recorded on 27 September and a
high of € 34.44 mln on 12 May. On average, VaR was € 16.62 mln during the year. The exact end-of-year
figure was € 9.41 mln.
g MPS Group: Trading Book
VaR 99% 1 day in EUR/mln
V aR
Date
9,41
31/12/2010
Min
8,84
27/09/2010
Max
34,44
12/05/2010
A verage
16,62
End of Period
THE NET INTERBANK POSITION AND LIQUIDITY MANAGEMENT
In the course of 2010 the Montepaschi Group continued to ensure the required level of liquidity making
the most of all channels at its disposal for the short-term portion of the curve. Within this context, internal
behavioural rules, aimed at an increasingly efficient monitoring of flows from business activities, have led
to a particular focus on liquidity settlement and cash forecasts with the aim of further improving the
management of the Group‘s financial and business flows.
Against this backdrop the net interbank position came to approx. EUR 15 bln as at 31 December
2010, up by 3 bln on December 2009 but down by approx. 400 million as compared to 30/09/2010.
The trend reflects the approach implemented by the Group in the latter part of the year to reduce the
recourse to short-term market funding with banks, in relation to the increase in the cost of funding
following the expected recovery in short-term rates.
62
REPORT ON OPERATIONS
At the end of December 2010 the short-term and structural liquidity position showed a non-committed
counterbalancing capacity of approx. EUR 6.6 bln against EUR 6.4 bln at the end of 2009.
63
REPORT ON OPERATIONS
GROUP EQUITY INVESTMENTS
In line with the guidelines of the 2008-2011 Group business plan, in the course of 2010 the Group
continued the process for the reorganisation of its equity investment portfolio. Following are the main
transactions effected for the period:
New equity investments
More specifically, the Parent Company acquired the following investments:

a 21.75% shareholding (with voting rights of 33.67%) in Casalboccone SpA, a company set up to
manage the development of a real estate area in Rome (Casalboccone);

a 90% shareholding in MPS Covered Bond Srl, a vehicle company that became part of the
Montepaschi Group, acquired for the establishment of a Covered Bond Programme, issued on a
rotational basis, for up to a maximum of EUR 10 bln and guaranteed by a portfolio of residential
and/or commercial mortgages;

a 21.75% shareholding in Sansedoni Siena Spa, a company stemming from the total nonproportional spin-off of Sansedoni Spa (already 15.71% held), which was subsequently dissolved.

a 22.24% shareholding in Asset Management Holding SpA following the disposal of the investment
in Prima Holding SpA. The investment in the share capital of Asset Management Holding SpA is the
result of the new partnership established in the asset management sector with the Anima Group.
Capital raising/reinstatement transactions and equity investment growth
Transactions of this kind effected by the Parent Company, were mainly concentrated in the second half of
the year and involved:

Payment of a further tranche in the share capital of Aeroporto di Siena Spa, subscribed to in April
2008;

Participation in the reinstatement of capital for Crossing Europe GEIE – which became a consortium
with limited liability – maintaining a 9.6% shareholding;

Increasing its shareholding in HOPA SPA from 14.24% to 14.77%, following enforcement of the lien
claimed by Banca Monte Dei Paschi di Siena SpA against the two borrowing companies.

subscription of capital raising for Monte Paschi Banque, 100% controlled by the Parent Company.
Disposal/Sale of equity investments
Since the start of the year the Parent Company completed the following major transactions:

sale of its 0.11% shareholding in Realty Vailog SpA, agreeing to the takeover bid launched by
Industria e Innovazione SpA;

Sale of a part of shares in VISA INC on the NYSE, reducing its shareholding from 0.011% to 0.004%.

divestiture of its 0.17% shareholding in CA.RI.CE.SE.; Srl;

divestiture of its 1.20% shareholding in Centrosim SpA;

disposal of a part of its stake in Siena Mortgages 10 7 Srl, reducing its shareholding from 9.1% to 7%;

divestiture of its 10.39% shareholding in Società di Promozione del Mercato Alternativo del Capitale
SpA.

divestiture of its 40% shareholding in Riscossione Sicilia SpA ;

divestiture of its 40% shareholding in Serit Sicilia SpA;

divestiture of its 30.98% shareholding in Prima Holding SpA;

Sale of a part of shares in Bilanciai International SpA, reducing its shareholding from 3.75% to 3.19%.
Furthermore, the following initiatives were also undertaken by the other Companies of the Montepaschi
Group:
64
REPORT ON OPERATIONS
 MPS Investments29: (i) acquired a 12.08% shareholding in GAL Ponte Lama Scrl; (ii) participated in
the capital raising of GAL Terre dei Messapi Srl, reducings its proportion of share capital from 9.52%
to 4.22%; (iii) sold its 7.55% shareholding in Consorzio per l‘Assistenza Tecnica alle Piccole e Medie
Imprese Scrl, a Consortium providing technical support to SMEs; (iv) sold its 0.34% shareholding in BIC
Umbria SpA; (v) subscribed to investment shares issued by Società Cooperativa Bilanciai di
Campogalliano, acquiring a 5.94% in its share capital; (vi) took part in the setting up of Fondo Italiano
d‘Investimento SGR SpA30, subscribing to a stake of 14.28%; (vii) acquired a 7.10% shareholding in
Realty Vailog SpA following the reverse merger of Industria Innovazione SpA (12.22% shareholding);
subsequent to the transaction, the acquiring company changed its name to Industria e Innovazione
SpA; (viii) subscribed to the reinstatement of capital for Crossing Europe GEIE – which became a
consortium with limited liability – maintaining a 19.20% shareholding; (ix) took part in the set up of
AD Impresa, subscribing to 30% of its share capital; (x) exercised the right of withdrawal from the
Cooperativa Italiana di Ristorazione (8.11% shareholding) and renewed its subscription of investment
shares for a total 5.53% of the share capital in the Cooperativa; (xi) partially divested the shareholding
in AD Impresa SpA, reducing its stake from 30% to 20%; (xii) sold its 49.5% shareholding in Società
Incremento Chianciano Terme SpA as a result of the liquidation and dissolution of the company; (xiii)
acquired a 34.65% shareholding in Terme di Chianciano SpA.
 MPS Capital Services: (i) subscribed to the capital raising of S.T.B. Società Terme del Benessere SpA,
increasing its shareholding from 13.7% to 13.81% (ii) completed the disposal of its investment in
Kerself SpA with the subsequent sale of small packets of shares on the Stock Exchange; (iii) took part in
the setup of RE.GE.IM. Realizzioni e Gestioni Immobili di Qualità SpA with a 40% of share capital.
 Consum.it SpA: joined the "Consorzio Operativo Gruppo Montepaschi" (Montepaschi Group‘s
Operational Consortium) by subscribing to a 0.03% stake in the consortium.
 Banca Antonveneta SpA: increased its shareholding in "Padova 2000 Iniziative Immobiliari Srl" from
45.01% to 100%, since it was the only partner to have taken part in the reinstatement of share capital,
reduced as a result of losses.
 Banca Monte Paschi Belgio SA: took part in the reinstatement of share capital for Crossing Europe
GEIE (which became a consortium with limited liability) maintaining a 3.70% shareholding.
 Cassa di Risparmio di Biella e Vercelli SpA: (i) subscribed to the capital raising of Eurofidi Società
Consortile di Garanzia Collettiva Fidi Scpa, increasing its shareholding from 0.445% to 0.677%; (ii)
sold a part of its investment in Cedacri SpA, taking its shareholding from 5.48% to 2.73%;
The following one-off Group transactions are also reported:
 the merger by absorption of Padova 2000 Iniziative Immobiliari Srl into MPS Immobiliare SpA, with
legal effect as of 31 December 2010, having acquired 100% of the stake from Banca Antonveneta SpA;
 the proportional partial demerger of banking business (13 branches) from Banca Antonveneta SpA to
Cassa di Risparmio di Biella e Vercelli SpA was completed, with legal effect as of 19 October 2010.
Subsequent to the simultaneous increase of paid capital subscribed to by minority shareholders, the
investment in Biverbanca grew from 59% to 60.42%;
 the proportial partial demerger of real estate properties in use and other related assets by MPS
Immobiliare SpA in favour of Banca Monte dei Paschi di Siena SpA and Banca Antonveneta SpA was
completed with legal effect as of 31/12/2010.
Moreover, the mergers by absorption of the following subsidiaries also went ahead in the course of the
year:
 MPS Banca Personale SpA, with legal effect as of 19 April 2010;
The merger by absorption of MPS Investments into Banca Monte dei Paschi di Siena took effect as of 29/12/2010. All accounting and fiscal implications are
effective as of 1/1/2010, hence all transactions carried out by MPS Investments have been accounted for in the Financial Statements of Banca Monte dei Paschi di
Siena.
29
The asset management company (it. SGR) is awaiting authorisation from the Bank of Italy. The company – equally owned by the Ministry for the Economy and
Finance, Cassa Depositi e Prestiti, Intesa Sanpaolo, UniCredit, Confindustria and ABI – will manage a closed-end mutual Securities investment fund focused on small
and medium businesses.
30
65
REPORT ON OPERATIONS
 Antenore Finance SpA, with legal effect as of 4 May 2010;
 Theano Finance SpA, with legal effect as of 4 May 2010;
 MPS SIM SpA, with legal effect as of 17 May 2010;
 Siena Mortgages 00-1 SpA, with legal effect as of 10 June 2010;
 Ulisse SpA under liquidation, with legal effect as of 11 June 2010;
 MPS Investments SpA, with legal effect as of 29 December 2010;
 Paschi Gestioni Immobiliari SpA, with legal effect as of 31 December 2010.
66
REPORT ON OPERATIONS
INTEGRATED RISK AND CAPITAL MANAGEMENT
31
The Risk Management Process
The Montepaschi Group attaches the utmost importance to the process of identifying, monitoring
measuring and controlling risk. The risk management process within the Group has been further enhanced
in recent years with the gradual extension of the advanced models to the various entities within the Group
for operational and reporting purposes.
The fundamental principles of the Montepaschi Group‘s Risk Management process are based on a clear-cut
distinction of the roles and responsibilities of the different functions at first, second and third-levels of
control.
The Board of Directors of the Parent company is responsible for defining strategic guidelines and risk
management policies at least on a yearly basis and setting the overall level of risk appetite for the Group
also quantitatively in terms of Economic Capital. The Board of Statutory Auditors and the Internal Controls
Committee are responsible for evaluating the level of efficiency and adequacy of the Internal Controls
Systems with particular regard to risk control.
Top Management is responsible for ensuring compliance with risk policies and procedures. The Risk
Committee establishes Risk Management policies and ensures overall compliance with the limits defined
for the various operating levels. The Risk Committee of the Parent Company is also responsible for
assessing initiatives for capital allocation and submitting them to the Board of Directors and assessing
(Regulatory and Economic) capital consumption at Group level and for each strategic business area and/or
company of the Group as well as the trends of risk/return performance indicators. The Finance Committee
of the Parent Company has the task of setting the principles of – and providing strategic guidance for –
Proprietary Finance. Furthermore, it deliberates and submits proposals concerning the interest rate and
liquidity risk exposure of the Banking Book and defines Capital Management actions required.
The ‗Internal Controls‘ Area has the task of performing an independent and object "assurance" and
advising activity, aimed both at monitoring the compliance of operations and risk trends (also through onsite inspections) and at assessing the efficiency of the overall internal control system with a view to
improving the effectiveness and efficiency of the organisation.
The Risk Management Area of the Parent Company defines integrated analysis methodologies needed to
measure overall risks so as to guarantee they are accurately measured and constantly monitored. It also
quantifies Economic Capital consumption as well as the minimum amount of capital to be held to cover all
existing risks. The Area produces control reports and ensures compliance with the operational limits set by
the Board of Directors on the basis of internally-developed models. The Risk Management area is also
responsible for measuring, monitoring and controlling risk and performances of investment
services/products offered to or held by the customers.
The Business Control Units which are internal to the business and operating units of the Parent Company
and Group subsidiaries, carry out conformity checks on transactions and are the first level of organisational
supervision of operations within the more general system of Internal Controls.
From an overall organisational and governance point of view with regard to Group risk, it should be noted
that in the first half of 2009, the Risk Management Area was made to report directly to the Genral
Manager while maintaining a functional connection with the Board of Directors and the CFO. The change
was in alignment with regulatory provisions and international best practices and aims at guaranteeing
greater autonomy and forcefulness to risk management actions and to the effectiveness of the entire risk
management and control process. As a consequence of the re-allocation, new risk information flows were
designed for the Group‘s Top Management (Chairman, Chief Executive Officer and Internal Controls
Committee) and for the Board of Directors in addition to the already-existing reporting flows.
Among the types of risk which the Montepaschi Group may incur in its day-to-day operations, the main
ones include:
 credit risk,
For additional details on Risk Management methodologies and models see Notes to Financial Statements – Part E – Information on Risks and Associated Hedging
Policies.
31
67
REPORT ON OPERATIONS
 counterparty risk,
 issuer risk,
 concentration risk,
 market risk (price, interest rate and foreign exchange) in relation to the Trading Book,
 interest rate risk for the Banking Book (Asset & Liability Management - ALM),
 liquidity risk,
 equity investments risk,
 UCITs risk (alternative funds),
 operational risk,
 business risk,
 real-estate risk,
 reputational risk.
Risk inherent in investment products/services for the Group's customers are also monitored, with a view to
protecting the customer and preventing any potential repercussions in terms of reputation.
Basel 2-associated activities
In line with the principles set out in the new Accord on Capital Adequacy (Basel II) in relation to First
Pillar risks, in the first half of 2008 the Montepaschi Group completed its work on the internal models for
credit and operational risks. Pursuant to Circular Letter 263/2006 of the Bank of Italy, on 12 June 2008,
with decree no. 647555, the Montepaschi Group was officially authorised to use the advanced models for
the measurement and management of credit risk (AIRB – Advanced Internal Rating Based) and operational
risk (AMA – Advanced Measurement Approach) as of the first consolidated report at 30/06/2008.
Throughout the year work continued on the completion and extension of these models to those entities
not included in the initial scope of validation, as did the activities aimed at improving the internal market
and counterparty risk models. With a more specific regard to credit risk, the use of the AMA model was
extended to new Banca Antonveneta and to Antonveneta branches merged into Banca MPS, leading to
significant improvements in efficiency in terms of economic and regulatory capital.
Furthermore, activities continued in relation to Second Pillar compliance and to the optimisation of the
Group's Internal Capital Adequacy Assessment Process (ICAAP). As per regulations, a comprehensive ICAAP
report was prepared by the Group and subsequently sent to the Supervisory Authority.
With regard to Pillar III, the Public Disclosure document is a highly-effective summary through which the
Market is provided with all the relevant information as to activities under way, capital adequacy and risk
exposure, as well as a general description of the systems used to identify, measure and manage such risks.
The Montepaschi Group, a class 1 bank under Supervisory classifications, fulfilled the obligation of
quarterly disclosure as instructed in Supervisory regulations. In order to ensure compliance with the
disclosure commitments contained in the regulations, specific planning initiatives were put forth with the
objective of optimising the drafting and timely publication of the document as well as the relevant
organisational processes. The working group, coordinated by the Risk Management Area, under the
responsibility of the manager in charge, saw the collaboration of all of the Parent Company's main units.
The report is published on the Montepaschi Group website (www.mps.it/Investor+Relations) and is
regulary updated on the basis of the current regulatory framework.
68
REPORT ON OPERATIONS
An analysis of the Montepaschi Group’s Economic Capital
The Overall Economic Capital (or Overall Absorbed Capital) is intended as the minimum amount of capital
resources required to cover economic losses resulting from unforeseen events generated by the
simultaneous exposure to different types of risk.
In order to quantify Economic Capital all types of risk come into play with the exception of liquidity and
reputational risk which, instead, are mitigated through organisational policies and processes.
The Risk Management Area of the Parent Company periodically quantifies the Economic Capital for each
type of risk, mainly on the basis of internally-developed models for each risk factor. The methodologies
are largely developed with a Value-at-Risk (VaR) approach and are thus aimed at determining the
maximum loss the Group may incur with a specific holding period and within a pre-set confidence interval.
For certain risk factors and specific portfolio categories (Credit Risk and Operational Risk in particular), the
models were officially validated by the Supervisory Authorities for regulatory purposes. The outputs from
the models developed internally for the different risk factors (validated and operational) constitute the
main tool for the day-to-day control and monitoring of the risk exposures generated in these areas and for
the control of operating limits and delegated powers in accordance with the guidelines given and
approved by the Parent Company.
With regard to credit risk, most of the input for the Credit Portfolio Model – also under continuous
methodological development – originates from the internal models used for reporting purposes which, in
conjunction with additional information and fine-tuning, aim to measure risk from a strictly operational
logic. In terms of Operational Risks, the model‘s output at Group-level is re-allocated on the basis of the
historical loss criteria, the estimate provided by top management as well as the gross income and is used
for operating purposes. Furthermore, the Overall Economic Capital also contains information on the
sensitivity shift in economic value resulting from the internal Asset & Liability model which, in the past
year, was continuously fine-tuned following an improvement in the representation and measurement of
core deposits, behavioural patterns (prepayment risk) and related options. Business risk is currently
measured as a risk factor in relation to the rigidity of the cost structure with respect to the changes in the
business structures caused by external market components and internal strategies opted for. Equity
investment risk is the risk resulting from the volatility of market valuations in relation to the equity
investments held in the portfolio. Real estate risk is the risk of incurring potential losses resulting from
unexpected changes in the real estate portfolio.
As mentioned above, liquidity risk – which saw significant developments in its monitoring procedure – is
not included in the quantification of Economic Capital. Nevertheless, the Montepaschi Group established
operational limits as well as a formal liquidity risk management policy both for situations of business-asusual and those of market stress. More specifically, on the basis of pre-determined tolerance thresholds,
specific contingency plans were set out and formalised, ready to be activated should the need arise.
Specific mitigation policies were defined in relation to other risks which cannot be measured using a
quantitative approach (e.g. reputational risk).
The Economic Capital by risk factor, therefore, results from the corresponding operating metrics of risk
quantification. VaR measurements by risk factor maintain their own ―individual‖ validity in accordance
with current regulations and international best practices and are established with differentiated holding
periods and confidence intervals.
The Overall Economic Capital, therefore, results from the combined measurement of each risk factor listed:
the measurements are standardised both in terms of time horizons (yearly holding period) and selected
confidence interval – in line with the rating assigned to the Montepaschi Group by the official rating
agencies – and are subject to intra-risk and inter-risk diversification processes. The final output shows the
Group‘s Overall Economic Capital or Overall Internal Capital for the different types of risk along with the
weight of inter-risk diversification with respect to the building-block approach which does not involve
quantification.
The total of these micro risk-factors, which directly impact the Group‘s equity, is subject to regular
measurement by the Parent Company‘s Risk Management Area which prepares all the periodical
documentation for the Parent Company‘s Risk Committee and for the Board of Directors.
69
REPORT ON OPERATIONS
Finally, Planning & Control is responsible for reporting results adjusted by risk and determining the specific
value creation in a risk-adjusted logic using metrics of measurement consistent with income and absorbed
economic capital. Moreover, it reformulates the risk measures received from the Risk Management Area
for the Group's individual legal entities and business units. The allocation of capital, in terms of balance,
forecasts and periodical monitoring, is also determined by Planning Area in conjunction with the corporate
bodies of each legal entity, with specific reports prepared according to the individual business lines of the
banks included in the scope of consolidation and submitted to the Parent Company's Risk Committee for
approval.
Diversified Economic Capital
MPS Group - 31.12.2010
Equity Risk
7%
Credit risk
62%
Financial Risk
20%
Real Estate Risk
2%
Business and
Operating Risk
9%
As at 31 December 2010, the Overall Economic
Capital of the Montepaschi Group (excluding
intra-group operations) was broken down as
follows; credit risk (62% including counterparty
risk, issuer risk and concentration risk), equity
investments risk (7%), operational and business
risks (9%). The working capital against financial
risk (mainly consisting in typical trading book
and ALM Banking Book) amounts to approx.
20% of the Overall Economic Capital. Capital
against real estate risk comes to 2%.
Further information on the nature, control and
monitoring of the individual types of risk is
provided in Part E of the Notes to the Financial Statements.
70
REPORT ON OPERATIONS
ADDITIONAL INFORMATION ON INVESTMENTS CONSIDERED HIGH-RISK BY THE
MARKET
Introduction
This section contains additional information on investments which are considered by the market to be
high-risk as a result of the 2007 financial crisis caused by the default of vehicles containing US sub-prime
mortgages.
These same issues were previously analysed in the Financial Stability Forum Report of 7 April 2008 32
which showed how market turbulence had increased the need for financial companies to disclose their
exposures in what the market considered as increasing-risk instruments. The issues were subsequently
considered in the international accounting standards, IAS/IFRS33 and in the two joint documents by the
Bank of Italy, Consob and Isvap34in 2009 and 2010 respectively.
On a general level, two major aggregates may be defined: the first refers to financial positions with direct
exposures to subprime, Alt-A and monoline insurer segments, directly impacted by the crisis, while the
second to all other financial positions of structured credit which may suffer as a result of the general crisis
in the financial markets.
In the first aggregate, positions are substantially irrelevant. As at 31-12-2010:
there are no subprime exposures;
there are no leveraged finance exposures;
there are no exposures or guarantees on conduit loans and SIVs;
the monoline insurer exposure comes to a nominal amount of approx. € 0.65 mln.
With regard to the second aggregate, in particular to third-party structured products held in the portfolio,
as at 31 December 2010, it should be noted that:
current long positions totalled approx. EUR 1,967 mln in terms of book value, slightly higher (approx.
5%) than in December 2009, though slightly lower (approx. 3%) than in June 2010. Approx. 95% of
these exposures were investment grade (vs. 91% in December 2009),
short net exposures in credit derivatives on standardised credit indices came to a nominal EUR -356
mln (book value of approx. EUR -10 mln).
***
The following information is in line with the guidelines set out by Consob in its request no. 8069681 of 23
July 2008. Previously provided information relating to the Consolidated SPEs, Fair Value hierarchy and
derivative transactions with customers, is now reported in the Notes to the Consolidated Financial
Statements.
32
33
Financial Stability Forum, ―Rafforzare la solidità dei mercati e degli intermediari‖, 7 April 2008.
See amendment to IFRS 7 transposed at European level with EC Regulation no. 1165 of 27November 2009 on fair value hierarchy.
Bank of Italy, Consob and Isvap, ―Information to be provided in the financial reports in relation to business continuity, financial risks, checks for the reduction of
assets value and uncertainty in the use of estimates‖, 6 February 2009.
Bank of Italy, Consob and Isvap, ―Disclosure in financial reports on asset impairment tests, financial debt contract clauses, debt restructuring and fair value hierarchy‖,
4 March 2010.
34
71
REPORT ON OPERATIONS
CREDIT STRUCTURED PRODUCTS
Business Model description – objectives and strategies
A portion of the Montepaschi Group‘s capital is allocated to stock market investments, an area in which
the Group pursues a multitude of objectives. In particular, the Group aims to:
attain a risk-adjusted return that is significantly higher than the cost of allocated capital so as to create
value for the shareholders;
achieve diversification with respect to other risks that are typical of its business;
maintain in-depth and up-to-date knowledge of financial market trends which additionally and
inevitably condition the domestic markets in which the Group mainly operates.
In pursuing the above objectives, the Group set up a specifically dedicated unit within the Finance Area of
the Parent Company. The scope of operations within the financial markets tends to be as broad as possible
so as to draw the maximum benefit from risk diversification and reduced exposure to specific sectors of
the stock market. For this purpose, in addition to typical investment activities in government bonds,
securities and forex markets, 2002 also saw the launch of targeted activity on the market of corporate
bonds and credit derivatives.
The specifically dedicated unit followed market pattern developments over time, making investments in
structured bonds as well. These investments are compliant with the above-mentioned process of
diversification. Financial technology has actually made it possible over time to take positions on specific
credit risk components such as correlation and recovery through structured bonds. A specialist desk was
also set up within MPS Capital Services to support this Parent Company structure.
The investment process, for this area too, starts with the specific analyses and evaluations made by the
traders in a bottom-up logic. The process is included in the overall monitoring of portfolio risks. In other
terms, positions are taken following an analysis by traders and within the maximum risk profile of the
portfolios.
All operations in securities markets are subject to risk limits set by the Board of Directors that are
monitored daily by the Business Control Unit and the Parent Bank‘s Central Risk Management Unit. These
are stop-loss and risk limits, including nominal limits for maximum exposure for major issuer categories
broken down by rating.
The information provided below relates to the entire Montepaschi Group. For the purposes of this report,
the category of Structured Credit Products is intended in a broad sense and refers – in keeping with the
instructions initially provided by the Financial Stability Forum (currently the Financial Stability Board) – to
investments in securities issued by special-purpose vehicles outside the Montepaschi Group and not
included in the aforementioned disclosure concerning Consolidated SPEs, and to structured credit
derivatives. For the sake of reporting clarity, an annex provides a brief description of the various types of
investments and acronyms used in this paragraph.
The exposures reported are separated between "long positions" and "short positions"as at 31 December
2010. ―Long positions‖ are mainly taken in the form of cash instruments, while "short positions" are held
through credit derivatives on indices.
Impact on the bank‘s activities
The overall book value of long positions in structured credit products, amounting to EUR 1,967.33 mln,
accounts for approx. 0.8% of consolidated assets.
The definition of structured credit product used in this section does not correspond to the definition of
structured debt security considered for accounting purposes insofar as not all structured credit products
embed credit derivatives, which need to be separated [from their host contract] for IAS/IFRS purposes.
The value of structured products is allocated as follows:
 under account 20 ―held-for-trading financial assets‖ in the amount of EUR 368.12 mln, or 19% of total
long positions;
 under account 40 ―held-for-sale financial assets‖ in the amount of EUR 124.57 mln, or approx. 6% of
total long positions;
72
REPORT ON OPERATIONS
 under account 60 ―Loans and advances to banks‖ and 70 ―Loans and advances to customers‖ in the
amount of EUR 1,474.64 mln, or 75% of total long positions.
The total book value of net short positions in credit derivatives on indices is EUR -10.42 mln.
73
REPORT ON OPERATIONS
Description of long positions
The information provided is divided into macro-categories of structured credit products and includes the
nominal amount, risk exposure and realized and non-realised P&L impact for 2010. More specifically, for
the risk exposure of long positions, the tables report the book value which reflects economic loss in the
event of default with a very conservative estimated recovery of zero. Realised expense and income consist
in losses and profits from trading for the period of reference; devaluations and revaluations with a P&L
effect show the change in book value directly posted to P&L, whereas, in the case of instruments classified
as Available for Sale (AFS), devaluations and revaluations show the change in book value posted under
equity reserve. All amounts are expressed in EUR million.
It should be noted that subsequent to the reclassification of financial assets in the second half of 2008, a
part of these products (previously classified as HFT or AFS) was transferred to L&R, with a consequent
change in their book value recognition (now valued at amortised cost) and corresponding methods for
determining impact on P&L and equity reserves. More specific to this section, the P&L impact of L&R
positions does not take account of the ―latent‖ capital gains/losses which would have been recorded if
there had been continuity in the assessment criteria in addition to AFS reserves relating to financial assets
transferred from the AFS to the L&R portfolio.
Overall, at Group level, long positions in structured products amount to a nominal value of 2,177.51
EUR/mln, equivalent to a book value of approx. 1,967.33 EUR/mln.
With reference to classification for Supervisory purposes, the positions are mainly allocated to the Banking
Book (93% in terms of book value) and, in a smaller degree, to the Trading Book (approx. 7%).
With regard to the Banking Book (book value of approx. 1,826.74 EUR/mln), there is a prevalence in CLNs
which account for approx. 57%, followed by CDOs which come to approx. 34%. The remaining 9% refers
to ABSs and Dynamic Managed Portfolios.
The Trading Book, on the other hand, contains investments for a book value of 140.59 EUR/mln, approx.
90% of which is accounted for by ABSs and 10% by CDOs.
Montepas c hi Group
C redit S truc tured Produc ts : Total E xpos ure
Long pos itions
(EUR/mln of 31.12.2010)
Expos ure
Unrealized
Profit/L os s
Effect on Net
Equity
Ins trument C ategory
Banking Book
ABS
CDO
CLN
Dynamic Managed Portfolio
48,83
768,41
1073,22
100,00
44,27
628,26
1046,61
107,60
-0,26
0,32
0,00
0,00
0,00
16,68
-7,15
3,10
0,98
0,16
8,78
0,00
Banking Book Total
Trading Book
Nominal
Realized
Profit/L os s
C las s ification
1990,46
1826,74
0,06
12,63
9,92
ABS
CDO
136,00
51,05
126,16
14,43
2,12
0,54
2,28
-0,96
0,00
0,00
Trading Book Total
187,05
140,59
2,66
1,32
0,00
2177,51
2165,86
1967,33
1875,59
2,72
13,95
9,92
C redit S tructured Products Total - 31.12.2010
C redit S tructured Products Total - 31.12.2009
Due to the limited significance of the positions in the Trading Book, the analysis reports the details of all
positions without, however, breaking them down by supervisory criteria.
The table below provides a product breakdown of long exposures by type of structure (synthetic or
traditional) and by type of product (ABS, CDO, CLN, other). A traditional structure involves investments in
funded structures which do not embed credit derivatives, whereas a synthetic structure involves unfunded
and funded structures which include credit derivatives. As a whole, traditional structures account for 55%
and synthetic for 45% of the total.
74
REPORT ON OPERATIONS
Following is the breakdown of long positions by rating.
C redit S truc tured Produc ts E xpos ure
(EUR/mln)
Rating
Nominal
Realized
Profit/L os s
Expos ure
Unrealized
Profit/L os s
Effect on Net
Equity
AAA
AA+
AA
AAA+
A
ABBB+
BBB
BB+
BB
BBB+
B
CCC
CCCCC
C
228,36
8,56
412,25
230,39
632,87
352,74
16,72
109,65
68,64
5,67
22,40
2,00
2,00
20,71
6,00
11,50
41,00
6,05
231,50
6,59
367,24
154,81
648,20
337,66
16,74
107,93
65,85
4,06
7,03
1,56
1,65
7,03
1,08
2,99
5,41
0,00
1,75
0,00
0,68
0,21
0,08
-0,28
0,00
0,00
0,01
0,08
0,00
0,00
0,00
0,20
0,02
0,00
0,00
-0,03
3,49
1,90
-0,01
14,27
-7,33
2,22
0,00
1,77
0,00
0,00
0,00
0,00
0,00
-0,15
0,12
-0,39
-1,35
-0,59
0,01
0,15
0,50
0,00
8,78
0,00
0,00
0,00
0,00
-0,35
0,32
0,00
0,00
0,51
0,00
0,00
0,00
0,00
Total
2177,51
1967,33
2,72
13,95
9,92
Overall, 95% of nominal exposures is made up by Investment Grade Securities (with rating up to BBB-)
with Subinvestment Grade securities making up the remaining 5%.
ABS exposures
The following information concerning ABSs is provided in relation to geographical area, segment and
vintage of underlying assets.
ABS E xpos ure
(EUR/mln)
26,56
55,30
25,42
48,29
Realized
Profit/L os0,94
s
0,22
RMBS
102,97
96,72
0,70
2,24
0,49
Total
184,83
170,43
1,86
2,28
0,98
C las s ification
Other ABS
CMBS
Nominal
Expos ure
Unrealized
Effect on Net
Profit/L os0,07
s
Equity 0,01
-0,03
0,48
Overall, 85% of the book value refers to positions with underlying residential and commercial mortgages
which make up 57% and 28% respectively. The remaining 15% includes ABS positions with underlying
assets in other segments.
75
REPORT ON OPERATIONS
ABS Exposure
Montepaschi Group - 31.12.2010
Breakdown of underlying assets by type
Commercial
Mortgages
28%
Residential
Mortgages
57%
Receivables
2%
Equip Lease
3%
Other
Consumer
Loan
1%
Auto Loan
5%
Lease
4%
A geographical breakdown reveals that, in terms of book value, 54% of ABS exposures are allocated to
Italian underlying assets, 23% to Dutch, 19% to British and 3% to German. A residual 2% engages
Spanish and Portuguese underlying assets.
It should be noted that there are no positions with underlying assets originated by US vehicles.
ABS Exposure
Montepaschi Group - 31.12.2010
Breakdown of underlying assets by geographic
area
Italy
54%
Portugal
1%
Netherlands
23%
Germany
3%
Spain
1%
Great
Britain
19%
The following table contains a vintage breakdown of ABS underlying assets.
ABS Exposure
Montepaschi Group - 31.12.2010
Breakdown of underlying assets by vintage
2007
25%
2008
15%
2009
9%
2006
18%
2010
6%
2005
22%
76
2000 - 2004
5%
REPORT ON OPERATIONS
CDO exposures
The information concerning CDOs is reported on the basis of product type and tranche seniority.
C DO E xpos ure
(EUR/mln)
C las s ification
CDO di ABS
CBO
CDO3
CLO
CLO
CLO
LS S
Managed CDO
Managed CDO
S LCDO
S eniority
Nominal
S ENIOR
S ENIOR
S ENIOR
J UNIOR
MEZZANINE
S ENIOR
S ENIOR
S ENIOR
MEZZANINE
S ENIOR
Total
Expos ure
Realized
Profit/L os s
Unrealized
Profit/L os s
Effect on Net
Equity
389,87
58,00
18,71
2,00
42,80
20,03
0,00
47,00
41,05
200,00
368,08
57,15
11,21
1,65
40,27
15,77
0,00
15,30
4,81
128,45
0,00
0,08
0,00
0,00
0,51
0,28
0,02
0,00
-0,03
0,00
0,00
-0,25
2,47
0,00
0,00
0,00
0,00
1,47
-2,24
14,27
0,00
0,00
0,00
0,00
0,00
0,16
0,00
0,00
0,00
0,00
819,46
642,69
0,86
15,72
0,16
On the whole, the main category is represented by ABS CDOs which account for 57% of the total. Next
are the Synthetic Loan CDOs (SLCDO) which account for 20%. With regard to seniority, senior tranches
make up approx. 93% of the entire CDO portfolio, followed by mezzanine tranches which constitute 7%,
while junior tranches are negligible. In terms of geographical breakdown of the portfolios, it should be
noted that that there are no positions with underlying assets originated by US vehicles.
Dynamic Managed Portfolio and SPE CLN exposures
Both types of exposures are only contained in the banking book.
In particular, the portfolio as at 31 December 2010 included investments in a nominal amount of EUR
100 mln with underlying managed portfolios (SPIs) and CLNs issued by SPEs in a nominal amount of EUR
1073,22 mln.
Dynamic Managed Portfolio E xpos ure
(EUR/mln)
C las s ification
Nominal
Expos ure
Realized
Profit/L os s
Unrealized
Profit/L os s
Effect on Net
Equity
S PI
100,00
107,60
0,00
3,10
0,00
Total
100,00
107,60
0,00
3,10
0,00
C L N E xpos ure
(EUR/mln)
C las s ification
SPE CLN
CLN Basket
Total
Nominal
Expos ure
Realized
Profit/L os s
Unrealized
Profit/L os s
Effect on Net
Equity
673,22
400,00
689,90
356,71
0,00
0,00
-7,15
0,00
8,78
0,00
1073,22
1046,61
0,00
-7,15
8,78
US subprime and Alt-A exposures
As at 31 December 2010, the Montepaschi Group has no US subprime and Alt-A exposures.
77
REPORT ON OPERATIONS
Monoline exposures
The Montepaschi Group has no direct, but only limited indirect, exposures to monoline insurers. These
exposures are linked to CDO positions already included in the above tables. The estimated indirect
exposure to monoline insurers within the above-cited CDOs is approx EUR 0.65mln (nominal value).
Description of short positions
Details are provided below on short-positions which, by their very nature and purpose, mitigate the
overall bond portfolio risk (―Long positions‖), since they benefit from the deterioration of creditworthiness
of underlying assets, as represented by the expansion of related credit spreads.
All exposures include derivatives on standardised credit indices and are all attributable to the Trading
Book. More specifically, there are positions on indices such as iTraxx (European market) and CDX (US
market).
Overall, short exposures came to a notional amount of EUR -355.57 mln for a book value of EUR/mln 10.42 as at 31 December 2010. Operations in 2010 generated a positive P&L impact of 12.92 EUR/mln.
C redit Index: S hort Pos ition
(EUR/mln)
Index
Nominal
Expos ure
Profit/L os s
CDX NA IG
iTraxx Europe
iTraxx Europe Cros s over
iTraxx Europe S enior Financ ials
iTraxx Europe S overeign
iTraxx Europe S ubordinated Financ ials
iTraxx High V olatility Europe
iTraxx S overeign Emerging
17,18
-80,41
0,00
-98,00
-168,37
-18,5
0,00
-7,47
-9,23
-11,08
-0,02
1,30
6,62
1,61
0,00
0,38
-6,24
-1,65
9,37
8,45
4,17
-0,76
-0,87
0,45
Total
-355,57
-10,42
12,92
Description of Leveraged Finance exposures
No Leveraged Finance exposures were recorded as at 31 December 2010.
78
REPORT ON OPERATIONS
Appendix: Glossary of terms
Following is a short glossary of the terms used in this paragraph, with the relevant acronyms used in the
tables.
Account
Description
Definition
ABS
Asset Backed Security
AFS
Available For Sale
Security which guarantees reimbursement and coupon flows based on
income generated by a set of financial assets. Typically, they are broken
down into RMBS and CMBS.
IAS category used to classify assets available for sale
CBO
Collateralized Bond Obligation
CDO in which the portfolio of underlying positions primarily consists in bonds.
CDO
Collateralized Debt Obligation
Securities issued in differentiated risk classes with payment in order of
seniority (tranches), subsequent to the securitisation of a portfolio of creditrisk embedding securities. Typically characterised by a certain degree of
financial leverage.
CDO of ABS
CDO of ABS
CDO in which the portfolio of underlying positions primarily consists in ABSs.
CDO2
CDO Squared
CDO3
CDO Cubed
CLN
Credit Linked Note
CLN Basket
Basket Credit Linked Note
CLO
Collateralized Loan Obligation
CDO in which the portfolio of underlying positions primarily consists in loans.
CMBS
Commercial Mortage Backed Securities
CPPI
Constant Proportion Portfolio Insurance
Dynamic Managed Portfolio
HFT
L&R
Dynamic Managed Portfolio
Held For Trading
Loans & Receivables
ABS with underlying commercial mortgages.
Guaranteed capital security that incorporates a dynamic trading strategy in
order to participate in the performance of a certain underlying asset
Products with dynamically managed underlying assets such as CPPI/SPI.
IAS category used to classify assets and liabilities held for trading
IAS category used to classify loans and receivables
LSS
Leveraged Super Senior
Managed CDO
Managed CDO
Monoline insurer
Monoline insurer
Other ABS
Other Asset Backed Security
RMBS
Residential Mortage Backed Securities
SCDO
Synthetic CDO
Seniority
Seniority
SLCDO
Synthetic Loan CDO
SPE
Special Purpose Entity
SPE CLN
SPI
SPE Crediti Linked Note
Synthetic Portfolio Insurance
Vintage
Vintage
CDO in which the portfolio of underlying positions primarily consists in other
CDOs.
CDO in which the portfolio of underlying positions primarily consists in CDO
squared.
Security embedding a credit derivative, typically a credit default swap
(CDS).
a CLN which references a basket of underlying entities (multiple single name
CDSs, or one or multiple basket CDSs)
CDO through which the investor becomes exposed to the entire super senior
tranche through a derivative contract characterised by a leverage effect.
CDO in which the portfolio of underlying positions is managed.
Insurance companies specialised in guaranteeing payment of interests and
notional of bonds in the event of issuer default. They are thus named
because they generally apply to one industrial sector only.
Titolo che garantisce il rimborso e i flussi cedolari sulla base di proventi
generati da un insieme di altre attività: prestiti al consumo e leasing, che
includono solitamente prestiti finalizzati al consumo (ad esempio auto, carte
di credito), prestiti agli studenti, attività di finanziamento per il leasing, ecc.
ABS with underlying residential mortgages.
CDO whose portfolio of underlying positions primarily consists in credit
default swaps (CDS).
Level of subordination in the repayment of securities, generally broken down
into Super Senior, Senior, Mezzanine and Junior.
CDO whose portfolio of underlying positions primarily consists in Synthetic
Loan CDS.
corporate vehicle incorporated to attain specific objectives, primarily to
isolate financial risks. Assets consist in a portfolio whose profits are used for
the servicing of bond loans issued.
CLN issued by a SPE.
Synthetic version of a CPPI, obtained through derivatives.
Commonly understood as the year of origination for the assets underlying a
structured credit product.
79
REPORT ON OPERATIONS
REGULATORY CAPITAL AND CAPITAL RATIOS
Regulatory capital and capital ratios are computed on the basis of profit and loss and balance-sheet values
calculated applying the IAS/IFRS international accounting standards and taking into account regulatory
instructions issued by the Bank of Italy with the 12th update of Circular No. 155/91 ―Instructions for
preparing reports on regulatory capital and prudential ratios‖‖. Capital for regulatory purposes is
calculated as the sum of positive and negative items, based on their capital quality. Positive components
must be fully available to the bank so that they can be used in capital absorption calculations.
As of 2008, prudential requirements are calculated pursuant to the Accord known as Basel 2. In addition,
a notice received in June 2008 authorised the Parent Company – within the scope of its recognised legal
entities and regulatory portfolios - to use internal A-IRB and AMA models in determining the Bank‘s and
the Group‘s capital requirements in relation to credit and operational risks. The application of internal
models is allowed regarding some qualitative and quantitative limits from Supervisory provisions. In
particular, limits (―floors‖) have been set, for which any capital savings achieved through internal models
are subject to ceilings to be benchmarked against the requirements calculated under the previous Basel 1
regulations. Such limitations are expected to be eliminated in the future, taking into account the
continuous fine-tuning and consolidation of the internal models adopted which, in fact, allowed the MPS
Group to lower its floor level on Basel 1 requirements from 90% to 85% in 2010.
That being said, the Consolidated capital for regulatory purposes of the Montepaschi Group amounted to
approx EUR 14,144 million as at 31 December 2010 (see tables and comments in Part F of the Notes to
the Financial Statements).
Regulatory capital (EUR mln)
31/12/10
31/12/09
Chg. %
Tier I capital
9.142
9.093
0,54%
Tier II capital
5.456
5.697
-4,23%
455
410
10,96%
Total regulatory capital (before Tier III)
14.144
14.380
-1,65%
Total regulatory capital
14.144
14.380
-1,65%
Items to be deducted
Tier 1 Ratio
Total Capital Ratio
8,4%
7,5%
12,9%
11,9%
With regard to capital ratios, as at 31 December 2010 the TIER I Ratio BIS II was estimated at 8.4%
(7.5% at the end of 2009) and the total capital ratio at 12.9% (11.9% at the end of 2009).
In particular, Tier I came to approx. EUR 9,142 mln, up on 31.12.09 (when it was 9,093 mln). Changes
to Tier 1 were influenced by the positive effect from the increase in reserves (net of Tremonti Bond coupon
accounting), the capitalisation of profits and a slight reduction in goodwill (following disposal of a number
of branches), and a negative effect from the increase in intangible fixed assets and from deductions (gross
up effect on surplus of expected losses over total value adjustments – Delta EL).
Tier II stood at approx. EUR 5,456 mln, down from the end of 2009 (approx. EUR 5,697 mln) owing
to the increase in deductions. The elements to be deducted from Tier I and Tier II totalled approx. 455
mln (vs. 410 as at 31 December 2009), mainly as a result of the change in value of the insurance
companies invested in.
As a result, total regulatory capital came to approx. 14,144 mln, a fall on EUR 14,380 mln as at
31.12.09, resulting from the above-described factors.
Risk Weighted Assets (RWAs) came to approx. EUR 109,238.2 mln as at 31 December 2010 (approx.
120,899.3 mln as at 31.12.09). The decline is largely due to the effect from Antonveneta's transition to
the A-IRB model in 2010, the implementation of optimisation initiatives for capital ratios and the overall
growing trend in assets.
80
REPORT ON OPERATIONS
HUMAN RESOURCES, ORGANISATION, PROPERTY AND FACILITY MANAGEMENT
Having completed the major objectives set out in the 2008/11 Businss Plan, action plans and activities for
2010 were oriented towards the following priorities:
optimisation of Head Office organisational structure, increasing the levels of internal efficiency and
governance effectiveness, according to the principles of leaner structures, single accountability and
concentration on ‗greater business value‘ activities (dynamic cost-benefit assessment);
innovation of operational “processes”, with priority being given to the Network, for the purpose of
making all market-targeted activities simpler, faster and more transparent, thus improving service
quality along the guidelines of Bank-Customer and Bank-Employee relations. The focal point is the
branch, with specific regard to enhancing the role of the branch manager;
rollout of the new human resources management/development model (―portfolio-based‖
structured HR tracking at regional level) geared towards strengthening the development processes for
the best resouces in conformity with planning logics: industrialisation of knowledge-based processes
and professional career paths aimed at ensuring coverage of the roles with high business impact;
targeted training on behavioural quality, credit and groundwork for the role of the Branch Manager;
strengthening the levels of cost management, by structurally reducing costs (with level of service
being equal), achieving economies of scale/scope, streamlining ―spending‖ oversight and resource
management processes.
According to the guidelines summarised above, on the 27/12/10 the Board of Directors of Banca Monte
dei Paschi di Siena gave its approval to the reorganisation plan, expected to be completed in the first half
of 2011.

HEADCOUNT
As at 31/12/10 the Group headcount in terms of actual "workforce"
35
came to 31,495 units:
With respect to the baseline set out in the Business Plan (31/12/07) the total reduction of resources
36
climbed to -2.693 and -2.221 after the effects from asset diposal , mainly focussed (-2,192) on the
Head Office Structure.
In 2010, management policies were mainly geared towards substantial consolidation, as a
fundamental condition to leverage professional skills and encourage the integration of cultures within the
new organizational structure. Flows since the start of the year included 616 outflows (evenly distributed
37
between the Network and Head Offices ) and 496 new hires, channelled almost entirely to the Branch
Network, partly replacing outflows of personnel occurring at the end of 2009.
Value obtained by deducting from personnel on payroll (31,607) all resources seconded to non-Group companies and those belonging to Professional Area Band I
working short-time (18 cleaning staff).
35
This includes the divestiture of baking business (72 branches of Banca Monte dei Paschi di Siena sold to the Carige Group and Intesa-San Paolo Group respectively,
for a total of 404 resources).
36
37
Parent Company, Head Offices and Local Market Areas of Retail Banks and Product and Service companies.
81
REPORT ON OPERATIONS
38
Over 812 resources have been requalified from Head Office to Network roles (over 100 since the
start of the year), fuelling the process of workforce 'reconversion' from central units and improving the
front office-to-total staff ratio, now standing at almost 68% (from 63% at the start of the Plan).
The table below shows a breakdown of the MPS Group workforce by operational location:
The table below shows a breakdown of the MPS Group workforce by job category:
Personnel with University degrees account for 30.8% of the total, with the highest incidence for Executives
(approx. 47.1%).
The average age within the Group is 43.3 (Banking system 43.5) while the percentage of women comes to
44.5% (System 42.6%).

OPERATIONAL STRATEGIES
DEVELOPMENT OF HUMAN RESOURCES
With regard to the strategic framework described previously, the more significant initiatives for the period
were those concerning:
38
750 resources was the target in the 2008/11 Business Plan.
82
REPORT ON OPERATIONS
the start up of the 2009/10 session for the Review of professional skills (PaschiRisorse), a key
planning and monitoring tool used to define the distinctive skills of each individual role and check
the levels of suitability of an individual employee with respect to a set profile. Furthermore, the tool
supports all the other processes linked to the enhancement and development of personnel;
implementation of professional career paths39, involving approximately 800 resources in total;
increasing use of the self-development “workshop” as part of the resource enhancement plan so as
to gain insight into individual skills with the aim of strengthening employee know-how, direct
professional growth and create a pool of resources from which the future management of the Group
will be generated. So far, approx. 1,300 employees have been identified by the initiative;
development of the new Human Resources IT system (Paschi People) with the objective of creating
a single, integrated system built around the employee and based upon planning logics, thus
guaranteeing the highest level of transparency, traceability and security of data in all connected
processes (increasing the levels of automation, access and reporting) and improved employee
communications.
TRAINING
Activities were developed according to the directions set out in the 2010-12 Training Plan, outlining all
the training initiatives planned for the next three years in terms of guidelines, objectives, timing, content,
target personnel, method (classroom, on-line, structured on-the-job training), financial and organisational
sustainability (estimated man days).
Priority initiatives target the following main areas:
consolidating the professionalisation levels of credit management resources (both in terms of risk
monitoring and in developing business opportunities) through, among other things, the certification of
skills relevant to dedicated Network and Central Unit roles (the ―Credit Academy‖ project);
developing relationship skills of both relationship roles (Affluent, Small Business Managers, etc.) and
managerial roles with a focus on team management and engagement (Branch Managers and other
coordinating roles).
Furthermore, the rollout of initiatives from previous Plans continues, including expansion of training
offer for business-critical roles (Branch Managers and key Network roles) and alignment of “role
qualifying/mandatory” training with statutory provisions (ISVAP, Money Laundering, Leg. Decree 231
on Corporate Liability, Transparency, Privacy, Workplace Safety, Patti Chiari, etc.).
As for innovation, the following initiatives are particularly significant:
the guidance manual for the insurance offer AXA MPS Protezione, which registered over 6,400 hits in
the last quarter alone;
“masters of the trade” involving professional tutorship for new branch managers according to a
gradual ―experiential learning‖ approach;
―Knowledge Experience – training courses for the Parent Company‘s personnel; a first-rate experience
which aims to develop skills and enhance the value of resources in the Banking Group, with priority
given to high-potential young people.
Total hours of training in 2010 came to almost 1.5 mln, with a Group per capita average of around 48
hours.
39
Vertical paths regulate upgrading to target positions up to second-level managers, whereas horizontal paths encourage skill integration in same-level positions.
83
REPORT ON OPERATIONS
ORGANISATION
The main projects coordinated by Organisation (structures and processes) were:
merger by absorption of MPS Banca Personale into Banca Monte dei Paschi di Siena (as of the first
half of the year) with the simultaneous set-up of the Financial Advisory Business Unit within the
consumer banking division;40
merger by absorption of MPS Investments into Banca Monte dei Paschi di Siena (which took place
at year-end) and subsequent set-up of the Equity investments and Mergers & Acquisition Service
within the Area of Administration, Budgeting and Equity Investments, aimed at optimising the control
of the CFO in terms of both administration and horizontal integration of accounting/fiscal/regulatory
skills, planning and development of corporate transactions;
merger by absorption of Paschi Gestioni Immobiliari S.p.A. into Banca Monte dei Paschi di Siena
(at the end of the year) under the Real Estate Management Area which reports to the Parent
Company's Human Resources, Organisation, Property and Facility Management, in line with the
principle objective of streamlining business structures and simplifying/clarifying responsibilities;
organisational restructuring of the Group Finance area with benefits expected in terms of increasing
efficiency of the Group Proprietary Finance governance model; adopting standardised organisational
models and processes for the Parent Company and its subsidiaries; full enhancement of the (riskadjusted) performance review; reinforcement of the internal controls system through an overall revision
of the internal rules and process controls as well as middle-office activities; achieving economies of
scale by centralising and streamlining back-office activities;
reinforcement of the overall credit segment through the set-up of the new Credit Management
division and start-up of the project to fully revise credit processes and, at the same time, the
organisational set-up of the ‗Local Market Areas‘ with a view to better risk monitoring and improved
efficiency levels (eg. faster decision-making, etc.);
rollout of the plan to review the application architecture of the network with the simultaneous
redesigning of all business processes in a logic of in-depth innovation (the Paschi FACE project). The
objective is to create a platform that improves Bank-Customer relations at all stages through simplified
use, integrated functions and rationalisation of tools available to the network units;
design of the new organisational model for the Network and Head Office units of Banca Monte
dei Paschi's sales and distribution supply chain, approved by the BoD on 17 December 2010, to be
implemented in the first half of 2011 (with simplified processes and the centralisation of activities to
the Group's Operating Consortium), with the aim to:

strengthen the bank's footprint throughout the country, starting from the central role of
branches and the enhanced value of the branch manager while ensuring utmost synergy with
Specialised centres and on-line channels, thereby regaining an integrated view of the
customer;

improve the front-to-back office ratio and allow a higher level of operational efficiency
with the ultimate intent of raising the quality of service to customers and reducing structural
costs;
implementation of a new Accounting and Operational IT system (COMETA), to enable the
upgrading of the organisational setup and technological architectures in support of budgeting and
purchasing cycle processes so as to reduce the time allotted to the production of financial statements
(fast closing), systematically and structurally improve data quality, organise the accounting process
effectively and efficiently, increase the representational and control powers of accounting processes by
adopting a flexible (modular) plan for Group accounts and upgrading the current purchasing cycle
operational model so as to achieve far more effective spending management;
new method of collateral management with Bankit (pooling).
40
The ―Financial Advisory‖ channel is currently being fine-tuned with the aim of achieving plan objectives.
84
REPORT ON OPERATIONS
COSTS, LOGISTICS AND REAL ESTATE MANAGEMENT
In 2010, an in-depth organisational and functional cost & space management review was undertaken, with
the aim of ensuring the highest level of operational efficiency and effectiveness, as well as
compliance with current health and safety regulations.
In addition to the activities following the year's mergers by absorption and disposal of properties used in
the business that were previously in the portfolios of MPS Real Estate, Banca Monte dei Paschi di Siena
and Banca Antonveneta, the following initiatives should also be noted:
follow up activities in relation to the Spend Management Platform, ARIBA;
introduction of SISTRI, a Waste Tracking Control System which, under the regulations of the Ministry
for the Environment, Land and Sea, will be in force as of 1 October;
Project for the digitalisation of documents, which includes all activities aimed at making
communications to customers accessible through digital channels;
The Group's corporate social responsibility vendor qualification plan and the launch of a similar
initiative for the purchasing processes of specific products and services;
Extension of guidelines issued by the National Institute for Occupational Safety and Prevention
(ISPESL) on the risk of work-related stress to all companies of the Group (legislative decree no.
81/2008 and following);
the start-up of a Mobility Management work track which concerns the commute of employees
working in the Italian cities where the Group is more strongly present (Siena, Florence, Padua, Milan,
etc.).
In 2010, activities in this area were subject to checks – all positively concluded – by the certifying body
RINA Services S.p.A. regarding the ―Occupational Health and Safety Management System‖ – OHSAS
18001 and the ―Environmental Management System‖ - ISO 14001.
UNION RELATIONS
Ongoing dialogue with the Unions was mainly in relation to the overall reorganisation of the
company's supplementary pension scheme. More specifically, plans were established for the
centralisation of the defined-benefit supplementary pension funds for employees of Banca Toscana, Banca
Agricola Mantovana and Banca Antonveneta to Banca Monte dei Paschi di Siena's company pension
scheme for employees. Plans were also identified for the supplementary pension fund for Banca Toscana
S.p.A. employees‖41, as a "container " of the defined-benefit supplementary pension schemes of the banks
that were merged.
To support organisational change and asset disposal initiatives, pilot phases were implemented for the
reorganisation of credit structures and processes and the Corporate Platform for the Lazio region,
as were the procedures for the reorganisation of the Montepaschi Group's Proprietary Finance area,
mergers (MPS Investments and Paschi Gestioni Immobiliari) and the aforementioned disposal of branches.
With regard to professional development, of significant importance were the internships (AXA –
Consum.it) and resource development plans (professional career paths and internal selection processes).
41
For this purpose, the fundwill have to acquire legal recognition as a Foundation and financial independence from Banca Monte dei Paschi di Siena.
85
REPORT ON OPERATIONS
THE STOCK MARKET AND INVESTOR RELATIONS
BMPS SHARE PRICES
2010 was characterised by a highly volatile stock market that saw major stock market indices registering
haphazard performances. More specifically, positive values were recorded for the US and German indices
as at 31 December 2010 (as compared to the end of 2009) (Dow Jones +11.0%, S&P 500 +12.8%, DAX
+16.1%) while a drop was registered for the peripheral Euroarea as well as for the Italian banking system
(FTSE MIB -13.2%). A more negative trend in general was recorded for both the Italian and European
banking segments(FTSE IT BANKS -31.1%, DJ EURO STOXX BANKS – 26.9%).
Against this backdrop, BMPS stock closed 2010 at EUR 0.851 (-30.7% compared to the end of 2009)
registering the best performance among the major Italian banks and "outperforming" its main Italian
competitors (average downturn of 36.1%) by over 5 percentage points (Unicredit -30.8%, Banco Popolare
-31.8%, UBI -34.8%, Intesa -35.6% and Popolare Milano -47.4%).
BMPS SHARE PRICE (from 31/12/09 to 31/12/10)
Price in in
€ (rx)
Prezzo
€ (asse dx)
Volumes
in milioni
millions
Volumi in
1.4
95
1.3
85
1.2
75
1.1
65
55
1
45
0.9
35
0.8
25
0.7
15
0.6
5
gen-10
0.5
feb-10 mar-10
apr-10
mag-10
giu-10
lug-10
ago-10
set-10
ott-10
nov-10
dic-10
BMPS SHARES PRICE: STATISTICAL SUMMARY (from 31/12/2009 to 31/12/2010)
Average
Lowest
Highest
1,02
0,82
1,33
Volumes
In 2010 the number of BMPS shares traded on a daily basis averaged approx. 20.7 million with a peak of
76.5 million in April and a low of 4.7 million in December.
MONTHLY VOLUMES OF SHARES TRADED
2010 volumes summary (€/mln)
January
302
Febrary
302
March
384
April
524
May
692
June
282
July
406
August
368
September
490
October
368
November
551
December
313
86
REPORT ON OPERATIONS
Ratings
Following are the ratings assigned as at 31 December 2010:
Rating Agencies
Short-term
debt
Long-term
debt
Moody's Investors Service
P-1
A2
Standard & Poor's
A-2
A-
Fitch Ratings
F-2
A-
On 21 September 2010, Fitch Ratings modified its long and short term rating of Banca Monte dei Paschi di
Siena S.p.A. from "A/F1" to "A-/F2". The outlook is confirmed as stable.
On 20 October 2010, Moody's Investors' Service modified its long-term rating of Banca Monte dei Paschi
di Siena S.p.A from "A1" to "A2", with financial strength shifting from "C-" to "D+". The outlook is
confirmed as stable.
On 16 December 2010, the International ratings agency Standard & Poor‘s published the update to its
summary analysis of the MPS Group, leaving previously assigned ratings and stable outlook unchanged (A/Stable/A-2).
Feedback from the sustainable finance operators was positive and, following the favourable outlook also
expressed by the leading ESG rating agencies, BMPS stock:
 was, for the third year running, included among the leading financial indices for sustainability - Dow
Jones Sustainability Stoxx and World, FTSE4Good Europe and Global, Ethibel Pioneer and Excellence;
 was included in a new set of sustainability indices proposed by the FTSE Group and E-Capital Partners
for the Italian market;
 was admitted to the Carbon Disclosure Leadership Index, which informs the financial markets of the
companies that best manage the opportunities and risks relating to climate changes;
 was held in high regard by Socially Responsible Institutional Investors who, as at 31.3.2010, resulted
as holding an overall 2.55% of the Parent Company's floating share capital.
Investor relations in 2010
Following on from 2009, in 2010 the Investor Relation team‘s interaction with the financial community
was highly proactive. Since the start of the year around 90 days of meetings were held between the top
management of the Montepaschi Group and institutional investors from 12 different countries.
Following is a geographical breakdown (in %) of days dedicated to roadshows/marketing up to 31
December 2010:
87
REPORT ON OPERATIONS
Austria
Germany
Spain
Benelux
Ireland
United States
Canada
Italy
Switzerland
1%
11%
5%
7%
2%
France
Scandinavia
UK
6%
8%
1%
19%
1%
8%
31%
Guidance on MPS shares
With regard to guidance on MPS shares, as at 31 December 2010, 80% of analysts covering MPS shares
maintained a neutral/positive outlook with 20% expressing a negative one. This was a sharp improvement
on the situation in the first quarter of the year (31 March 2010) where the proportions were 59% and
41% respectively.
March 2010
December 2010
20%
41%
59%
80%
Neutral/positive
Negative
Neutral/positive
88
Negative
REPORT ON OPERATIONS
SOCIAL AID AND ENVIRONMENTAL PROGRAMMES
SOCIAL AID
Among the initiatives put in place by the Group in 2010, the ones that particularly stand out for their
social purpose, include:
 Financial education projects
 basic information guides on bank services, prepared in conjunction with the 15 leading consumer
associations, were made available through branches, the web and consumer networks (Consumer
Lab - see section ―The customerbase and customer satisfaction ‖). In particular, with the latest
publication developed during the year, the intent of Consumer Lab was to provide savers with a
user-friendly guide on the rights and duties of bank customers;
 The Group joined the new financial education plan, "The Economic footprint", created by the
Italian banking Association's Patti Chiari for Italian secondary school students.
 Expansion of operations in support of microcredit
Overall, 711 transactions were registered during the year and included social loans – for households –
and microcredit for enterprises (+128% YoY). More specifically:
 the
Group's
specialised
company,
Microcredito
di
Solidarietà
Spa,
considerably increased its activities in Siena and in other Tuscan provinces where it is currently
present with 42 advisory centres (29 in 2009); 290 loans were disbursed;
 the banks belonging to the Group operated under the agreement between the Italian Banking
Association and the Italian Bishops Conference, providing a EUR 15 mln ceiling in support of Italian
families facing particular social and economic hardships;
 a "new-born fund" was allocated for legal guardians of children born between 2009 and 2011. 339
loans were disbursed in the course of 2010 for a total of EUR 1.7 mln.
 Contributions made to organisations and projects promoting cultural, sports, scientific and
social initiatives.
The financial commitment totalled an approximate 43.6 mln, including sponsorships, donations and
contributions granted in support of social projects promoted by local institutions. More specifically, 800
sponsorships were approved for a total of EUR 35 mln.
Sponsorship breakdown by sector (n° projects)
Other
13%
Science
2%
Sports
28%
Economy
16%
Social
23%
Culture
19%
 Cultural: of particular significance was the support given to a package of initiatives designed for the
Municipal Administration of Siena, which included la Città Aromatica, the events for Siena Jazz and
the celebrations for New Year's 2011. Other important initiatives included the exhibition
celebrating 125 years of the daily "Il Resto del Carlino‖, the sponsorship of the Biennial Antiques
Exhibition in Siena, the Teatro Povero di Monticchiello, the Documentary Film Festival, the Play Art
Exhibition in Arezzo, and the Frajese Journalist Award. Moreover, in 2010 the bank had the
possibility to collaborate with the Italian Konzert Opera in the creation of a summer programme of
opera performances. Furthermore, the bank contributed to the development of a scientific
89
REPORT ON OPERATIONS
expedition organised by the Universities of Siena and Turin for the on-field analysis of one of the
major meteorite impact craters discovered in recent years.
 Sports: In addition to the long-standing relations with A.C. Siena, Mens Sana Basket, A.C. Arezzo
football club, U.S. Virtus Poggibonsi sporting association, Mantova Calcio, Viadana Calcio, Basket
Bancole and Top Team Volley Mantova, more recent sponsorships include Milan's GEAS female
basketball team, Siena's female football sporting association, the Italian Federation of Canoeing and
Kayaking, Fidal Toscana and Rome's Polo club team. Support was also given to the Italian Golf
Association in Tuscany and the Italian Tennis Association in Tuscany. The bank's long-established
sponsorship of Viadana Rugby evolved this year, subsequent to the expansion of the company
which, together with other companies from the region of Emilia, led to the creation of Aironi Rugby
franchise team. An agreement was reached with the JIR Moto2 Racing team for the sponsorship of
Simone Corsi, a young and promising Italian motorcycle racer. As for events, these included
agreements for Motoraid Guzzi, the Liberazione Grand Prix, the Tour of the Regions bike race, the
Danza in Fiera dance event, the cycling race "Montepaschi Strade bianche professionisti", and the
international horserace, ―La Bagnaia‖.
 Social: the Group sponsored the Santa Caterina d‘Oro Award and the fund-raising initiatives in
favour of the Exodus Association of Italian priest Don Mazzi; it provided significant contributions to
the City of Siena for the organisation of social activities and the restoration and enhancement of
artistic heritage. Moreover the bank continued its support of ―La Fabbrica del Sorriso‖. 2010 saw
the continuation of the fund-raising initiative ―Solidarity makes Christmas shine brighter‖,
supporting14 associations across the country in their development of important social projects.
 Economics: among the numerous initiatives undertaken, of particular importance was the
sponsorship of Promosiena, a special agency of the Chamber of Commerce which is specifically
dedicated to the promotion of local business in the main foreign markets, and the sponsorship of a
project by the Qualivita Foundation, which aims to bring the Italian agro-food industry into the
spotlight at EXPO in 2015. In 2010, the bank also chose to lend its support to the town of Colle in
Val D‘Elsa, by supporting the industrial know-how of crystal design and production in Tuscany.
Some of these activities were also combined with social solidarity fund-raising campaigns (beneficiaries
included: Unicef, Save The Children, the people of Haiti, etc.).
ENVIRONMENTAL PROJECTS
Within an organisational and procedural framework that has conformed to standard ISO 14001 since 2002
(currently covering over 83% of branches in Italy), the environment-protection initiatives implemented by
the Montepaschi Group were mainly focused around the following:
 The management of environmental aspects relating to the internal operating situations
 5.7% energy savings as a result of significant improvements in the efficiency of ICT equipment,
the gradual replacement of heating and air-conditioning systems and the ongoing application of
high eco-compatibility standards upon development/restructuring of the Group's branches;
 increasing the use of renewable energy sources in electrical power supply (97%; 87% in the
previous year);
 an approximate 30% reduction in greenhouse gas emissions largely a result of the above
efficiency measures and energy qualification. In order to further increase the ability to control these
emissions, a new reporting and monitoring system was also implemented, in compliance with the
guidelines set forth by ISO 14064;
 optimising the management of consumables, through the introduction of the e-procurement
platform and related budgeting and tracking system which allows better control of expenses and
quantity of consumables (paper first and foremost) used by each office;
 improvement in the environmental quality of products and services acquired. These products
currently account for approximately 4% of total procurement expenditure and particularly concern
IT equipment and consumables, paper and other office supplies;
90
REPORT ON OPERATIONS
 greater control of the social-environmental impact of the supply chain. To date, 200 of the
Group's leading vendors (the equivalent of approx. 50% of total Procurement expenses) have taken
part in a targeted assessment (average rating of 4.9/10; 4.7 in the previous year) and in the
definition of subsequent improvement plans.
 The development of business in green economy markets
The increasing attention being given to the issues concerning climate change is driving energy efficiency
investments in the construction, civil and industrial fields as well as in the renewable energy sector,
creating new market opportunities for the Group. In 2010, therefore, the Group confirmed its strong
presence in these areas of business, by providing specific financing for approximately EUR 1 bln
(+172% YoY) and further broadening its offer with, for example, the ―TerrAmica‖ package, which
involves a EUR 130 mln ceiling to fund environmentally-friendly projects and processes in agriculture.
91
REPORT ON OPERATIONS
MATERIAL EVENTS SUBSEQUENT TO YEAR END
The following are the more significant events occurring after the closure of the 2010 financial year:
 On 18 January 2011 Banca Monte dei Paschi di Siena S.p.A. communicated its decision to increase
the spread on preferred securities issued by Mps Capital Trust I for an amount of EUR 350,000,000
(ISIN XS0121342827) and Antonveneta Capital Trust I for an amount of EUR 80,000,000 (ISIN
XS0122238115) (the ―Preferred Securities‖), opting not to call these instruments at their first call
dates (respectively, 7 February 2011 and 21 March 2011). The decision was reflective of the
extraordinary circumstances attributable to the utmost uncertainty in the current legal and regulatory
framework, which does not yet provide for clear guidance on new issues of capital instruments eligible
as Tier 1. The issue of instruments at least equivalent in regulatory quality to Preferred Securities, will
be conditioned upon definition -by the relevant European and Italian Authorities- of the qualifying
conditions for hybrid capital instruments to be eligible for inclusion in the banks‘ core capital, based
on guidance contained in the document issued by the Basel Committee on 16 December 2010 ―Basel
III: A global regulatory framework for more resilient banks and banking systems ‖. In this connection it
is noted that, pursuant to the Italian supervisory framework, redemption of Preferred Securities would
be subject to their prior and full replacement with at least equivalent-quality instruments. For an
accurate reflection of market expectations, however, the Bank has in the meantime resolved to
increase the spread applicable to the Preferred Securities. The extent of the spread increase has been
determined with a view to aligning the Preferred Securities‘ maturity payments with the amount that
would ensue from current market conditions applying to instruments similar in features to the
Preferred Securities, on account, inter alia, of their residual maturity. The spread increase will become
effective upon prior adoption of all required resolutions by the issuers‘ governing bodies and upon
execution of all formalities provided for by contractual obligations as well as by the applicable rules
and regulations in force. Even under the extraordinary circumstances underlying its decision not to call
the Preferred Securities at their first call date, the Bank attests its willingness to take investors‘
expectations into the highest account, consistently with its long-standing strategy of proximity and
commitment to the market.
 On 2 February 2011 Banca Monte dei Paschi di Siena successfully completed the issue of covered
bonds targeted to the Euromarket, the third issue as part of the EUR 10 bln programme announced at
the end of June 2010 and entirely backed by residential mortgage loans of the Montepaschi Group.
The 7-year fixed rate EUR 1 bln transaction is targeted at qualified institutional investors and financial
intermediaries. Managing banks in the transaction were Credit Suisse, JP Morgan, Mediobanca, Mps
Capital Services, Natixis and Nomura as Joint Lead Managers and Book Runners. The transaction pays
a 5% annual coupon, yielding 5.056%, equivalent to the 7-year Euro mid-swap rate increased by a
spread of 185 basis points. On the back of the significant interest shown by investors, the order book
exceeded EUR 1.3 billion in a few hours. The bond offering was placed with 89 institutional
investors, mostly from Italy (38 %), Germany and Austria (25%), France (11%), UK(8%), BeNeLux
(6%), and Switzerland (5%), with significant interest shown by almost all Eurozone countries. As for
the type of investors, fund managers accounted for 31% of the total issue, followed by banks (23%),
insurance companies (8%), government agencies (5%) and pension funds (4%). The transaction is the
third covered bond placement by Banca Monte dei Paschi di Siena and confirms the bank‘s continued
adeptness to place benchmark-sized covered bond issues.
92
REPORT ON OPERATIONS
OUTLOOK ON OPERATIONS
Despite a complex macroeconomic and financial scenario which continues to reflect unfavourably on the
banking sector due to the current level of interest rates, uncertain recovery trends and increased sensitivity
to sovereign debt risk, the Montepaschi Group intends to pursue its market penetration and profitrecovery strategies. In this way, it aims to seize any opportunities for development that may emerge,
while better meeting the needs of households and businesses which continue to feel the brunt of the
difficult economic cycle.
The Group's action plan will benefit from the strengthened capital base achieved at the end of 2009
through the issue of the ―Tremonti Bonds‖, on the one hand, and, on the other, from the improved
operational effectiveness and efficiency following a new organisational layout for the distribution
network and head office units, which also incorporates the mergers of Paschi Gestioni Immobiliari SpA and
MPS Investments SpA into the Parent Company in the last part of 2010.
The elements of doubt which subsist in the market, partly as a result of the sovereign debt risk of certain
European countries and the recent political tensions in the North-African countries, justify the current
fragility of future outlooks. Should the current uncertainties gradually be dispelled, the Group's
capacity to achieve better results is confirmed.
With regard to the indications contained in Document no. 2 of 6 February 2009, issued jointly by the
Bank of Italy, Consob and Isvap as later amended, the Group reasonably expects to continue
operating in the foreseeable future and has therefore prepared the consolidated annual report on the
assumption of business continuity since the uncertain climate arising from the current economic
scenario affords no doubt as to the company's ability to continue operating as a going concern.
93
REPORT ON OPERATIONS
ANNEXES
MONTEPASCHI GROUP
Reconciliation between operational Figures and Financial Statements
94
Div idends and similar income
Net profit (loss) from trading
70
80
-322,1
278,1
1.929,1
95
-101,6
-156,0
200 Net adjustments on property and equipment
210 Net adjustments on intangible assets
340 Parent company's net profit (loss) for the year
330 Profit (loss) for the year attributable to minority interests
320 Profit (loss) for the year
985,5
-1,5
987,0
1,7
985,3
300 Profit (loss) after tax from continuing operations
310 Profit (loss) after tax from discontinued operations
-341,8
1.327,2
290 Taxes on income from continuing operations
280 Profit (loss) before tax from continuing operations
270 Profit (loss) on disposal of inv estments
260 Impairment of goodwill
182,4
240 Gains (losses) on equity inv estments
Net result of the tangible and intangible assets carried at fair
v alue
635,3
220 Other operating income/expenses
250
-61,4
203,2
190 Net prov isions for risks and charges
-3.741,9
-1.401,4
b) Other administrative expenses
230 Operating expenses
-2.224,7
a) Personnel expenses
4.251,3
-3.626,2
180 Administrativ e expenses
4.251,3
-10,6
-30,5
-1.125,5
170 Net income from financial and insurance activities
160 Other income/expenses (net) from insurance activ ities
150 Net premiums
140 Net income from banking activities
d) other financial operations
c) held to maturity investments
b) financial assets available for sale
a) loans
-1.166,6
130 Net adjustments for impairment of
-0,6
5.418,0
Net profit (loss) from hedging
-30,4
-20,3
120 Net interest and other banking income
90
Net profit (loss) from financial assets and liabilities designated
110
at fair v alue
d) financial liabilities
c) held to maturity investments
63,1
Net commission income
60
-240,7
2.169,9
-19,6
Commission expense
50
b) financial assets available for sale
Commission income
40
3.540,7
a) loans
Net interest income
30
6.471,7
-2.931,0
23,2
Interest and similar expense
20
31/12/10 Accounting
100 Profit (loss) on disposal of
Interest and similar income
10
Accounts in the Profit and Loss Statement - Montepaschi
Group
21,8
21,9
8,4
13,5
21,9
-43,7
-43,7
-43,7
-0,1
-17,6
-17,6
-26,0
-26,0
36,3
-36,3
-57,6
36,3
36,3
-17,1
53,4
28,8
28,8
24,6
24,6
24,6
24,6
24,6
57,6
57,6
57,6
-27,1
84,7
41,3
41,3
43,4
43,4
43,4
43,4
43,4
-2,5
2,5
2,5
2,5
-1,2
3,7
3,7
3,7
-14,2
14,2
14,2
14,2
-5,7
19,9
8,5
7,5
1,0
11,4
11,4
2,4
2,4
9,0
9,0
1,2
7,8
ECONOMIC EFFECTS
ECONOMIC
ECONOMIC
FROM ALLOCATION
ECONOMIC
EFFECT FROM
EFFECTS FROM
EFFECTS FROM
OF BAV
EFFECTS FROM
DISPOSAL OF
ALLOCATION OF ALLOCATION OF ACQUISITION COSTS ALLOCATION OF
BRANCHES (22
BAV
BAV
TO MPS
BIVERBANCA
CARIGE – 50 INTESA
ACQUISITION
ACQUISITION
IMMOBILIARE (PPA
ACQUISITION
SAN PAOLO)
COSTS TO BMPS
COSTS
EX BAV REAL
COSTS
ESTATE)
270,1
-270,1
DIVIDENDS ON
TRADING OF
SECURITIES
-83,9
83,9
83,9
83,9
83,9
PORTION OF
PROFIT FROM
EQUITY
INVESTMENTS
-36,3
-36,3
36,3
36,3
36,3
LOSS ON
DISPOSAL OF
LOANS
-6,2
-6,2
6,2
6,2
6,2
6,2
COSTS
RELATING TO
FINANCIAL
PLANS
-328,9
328,9
328,9
RECOVERY OF
STAMP DUTY
AND
CUSTOMERS’
EXPENSES
-19,5
19,5
19,5
ONE-OFF
COSTS
Accounts in Reclassified Profit and Loss Statement - Montepaschi
Group
b) financial assets
a) loans
b) Other administrativ e expenses
a) Personnel expenses
Net prov isions for risks and liabilities and Other operating
income/costs
985,5 Net Profit for the year
-110,7 Net economic repercussions of the "purchase price allocation"
1.096,2 Net profit for the year before PPA
-1,5 Profit (loss) for the year attributable to minority interests
1.097,6 Profit (loss) for the year
1,7 Profit (loss) after tax from discontinued operations
1.096,0 Profit (loss) after tax from continuing operations
-392,9 Taxes on income from continuing operations
1.488,9 Profit (loss) before tax from continuing operations
182,4 Profit (loss) on disposal of inv estments
Impairment of goodwill and financial assets
Net result of the tangible and intangible assets carried at fair
v alue
21,8 P&L figures for branches sold
-19,5 One-off charges
551,5 Gains (losses) on equity inv estments
-193,2
945,9 Net operating income
Net adjustments to the v alue of tangible and intangible fixed
-175,2
assets
-3.431,1 Operating expenses
-1.044,7
-2.211,2
-3.255,9 Administrativ e expenses
4.377,0 Net income from financial and insurance activities
-38,7
-1.155,6
-1.194,3 Net adjustments for impairment of
5.571,3 Net Financial income (loss)
-0,6 Net profit (loss) from hedging
-23,1 Net result from realisation/v aluation of financial assets
91,8 Div idends and similar income
5.503,2 Income from banking activities
1.911,5 Net commission income
3.591,7 Net interest income
31/12/2010 Reclassified
Montepaschi Group - Reconciliation between Profit and Loss Statement reclassified as at 31 December 2010 and related accounting tables
REPORT ON OPERATIONS
Net interest income
Commission income
Commission expense
Net commission income
Div idends and similar income
Net profit (loss) from trading
Profit (loss) on disposal of
30
40
50
60
70
80
100
Net interest and other banking income
Net adjustments for impairment of
130
96
Administrativ e expenses
180
3.916,0
-3.881,3
Net adjustments on property and equipment
Net adjustments on intangible assets
Operating expenses
Net prov isions for risks and charges
Other operating income/expenses
Gains (losses) on equity inv estments
Net result of the tangible and intangible assets carried
at fair v alue
Impairment of goodwill
Profit (loss) on disposal of inv estments
Profit (loss) before tax from continuing operations
Taxes on income from continuing operations
Profit (loss) after tax from continuing operations
Profit (loss) after tax from discontinued operations
Profit (loss) for the year
Profit (loss) for the year attributable to minority
interests
Parent company's net profit (loss) for the year
200
210
230
190
220
240
250
260
270
280
290
300
310
320
330
340
220,1
-4,5
224,6
211,7
12,9
-30,5
43,4
42,3
96,1
212,0
-98,9
-4.010,9
-137,0
-105,6
-1.495,4
Net income from financial and insurance activities
170
b) Other administrative expenses
Other income/expenses (net) from insurance activ ities
160
-2.385,9
Net premiums
150
3.916,0
-13,0
-31,2
-1.452,7
-1.496,9
5.412,9
-1,5
-21,9
-11,7
68,1
9,9
66,2
-322,1
322,1
1.695,3
-239,5
1.934,7
3.674,8
-3.422,7
7.097,5
31/12/09 Accounting
a) Personnel expenses
Net income from banking activities
140
d) other financial operations
c) held to maturity investments
b) financial assets available for sale
a) loans
Net profit (loss) from hedging
90
Net profit (loss) from financial assets and liabilities
designated at fair v alue
d) financial liabilities
c) held to maturity investments
b) financial assets available for sale
120
110
Interest and similar expense
20
a) loans
Interest and similar income
10
Accounts in the Profit and Loss Statement Montepaschi Group
-65,6
71,8
34,8
13,3
21,5
34,8
-106,6
-106,6
-106,6
-0,5
-40,5
-40,5
-65,6
-7,3
7,3
7,3
-0,1
0,9
8,7
0,7
0,0
3,2
4,0
7,2
-1,3
-1,3
0,0
0,0
-1,3
-0,4
-0,4
0,3
-5,1
0,4
-5,5
3,9
5,4
-1,5
3,9
-3,9
1,3
-5,2
-0,2
1,5
0,0
0,0
0,9
0,8
1,7
-6,6
-6,6
-6,6
0,0
-6,6
0,0
-6,6
-8,0
8,0
8,0
48,6
-48,6
-73,9
48,6
48,6
-22,9
71,4
28,9
28,9
42,5
42,5
42,5
42,5
42,5
73,9
73,9
73,9
-34,8
108,7
42,1
42,1
66,7
66,7
66,7
66,7
66,7
-11,7
11,7
11,7
11,7
-6,7
18,4
-2,5
6,9
7,5
1,1
0,7
0,7
11,5
11,5
11,5
0,0
0,0
11,5
1,6
10,0
165,1
165,1
-165,1
-165,1
FEES AND
COMMISSIONS
COLLECTED AS
AT 30.06.09
-9,9
-9,9
9,9
9,9
9,9
COMMISSIONS
ADJUSTED TO
WRITE-OFF OF A
LARGE CREDIT
EXPOSURE
-16,2
16,2
-6,8
23,0
23,0
23,0
23,0
23,0
23,6
-0,6
INCOME FROM ASSET
MANAGEMENT (SGR +
AAA) UP TO 31.03.09,
RECLASSIFIED UNDER
GAINS (LOSSES) ON
GROUPS OF ASSETS HELD
FOR SALE
310,4
-310,4
DIVIDENDS ON
COMPLEX
TRADING
TRANSACTIONS
-98,7
98,7
98,7
98,7
98,7
RECLASSIFICATIO
N OF PROFIT
FROM EQUITY
INVESTMENTS
-37,5
-37,5
37,5
37,5
EFFECTS FROM
EXTINGUISHED
SECURITISATION
POSITIONS
-4,6
-4,6
4,6
4,6
4,6
-32,7
-32,7
32,7
32,7
32,7
32,7
-6,0
-6,0
6,0
6,0
6,0
6,0
-292,0
292,0
292,0
-86,8
27,5
59,3
86,8
RECLASSIFIC
RECOVERY OF
RECLASSIFICATIO RECLASSIFICATIO
ATION OF
STAMP DUTY
N OF
N OF COSTS
INTEGRATION
LOSSES FROM
AND
WRITEDOWNS ON
RELATING TO
COSTS
DISPOSAL OF
CUSTOMERS’
JUNIOR NOTES FINANCIAL PLANS
LOANS
EXPENSES
Montepaschi Group - Reconciliation between Profit and Loss Statement reclassified as at 31 December 2009 and related accounting tables
ECONOMIC ECONOMIC
EFFECT FROM
COST OF
ECONOMIC
ESTIMATED
ESTIMATED
EFFECTS FROM
EFFECTS
DISPOSAL OF
LENDING ON
EFFECTS FROM
DISPOSAL OF DISPOSAL OF
ALLOCATION
FROM
BRANCHES (22
COMPLEX
ALLOCATION OF
INVESTMENT IN INVESTMENT IN
OF BAV
ALLOCATION
CARIGE – 50
TRADING
BIVERBANCA
MP MONACO MPS VENTURE
ACQUISITION
OF BAV
INTESA SAN
TRANSACTIO
ACQUISITION
SAM
SPA
COSTS TO
ACQUISITION
PAOLO)
NS
COSTS
BMPS
COSTS
Accounts in Reclassified Profit and Loss Statement - Montepaschi
Group
b) financial assets
a) loans
b) Other administrativ e expenses
a) Personnel expenses
Net prov isions for risks and liabilities and Other operating
income/costs
220,1 Net Profit for the year
-134,2 Net economic repercussions of the "purchase price allocation"
354,3 Net profit for the year before PPA
-4,5 Profit (loss) for the year attributable to minority interests
358,8 Profit (loss) for the year
192,0 Profit (loss) after tax from discontinued operations
166,8 Profit (loss) after tax from continuing operations
-100,3 Taxes on income from continuing operations
267,1 Profit (loss) before tax from continuing operations
42,3 Profit (loss) on disposal of inv estments
Impairment of goodwill and financial assets
Net result of the tangible and intangible assets carried at fair v alue
71,8 P&L figures for branches sold
-86,8 One-off charges
-2,7 Gains (losses) on equity inv estments
-219,7
462,2 Net operating income
Net adjustments to the v alue of tangible and intangible fixed
-162,2
assets
-3.620,3 Operating expenses
-1.158,4
-2.299,7
-3.458,1 Administrativ e expenses
4.082,6 Net income from financial and insurance activities
-44,1
-1.466,0
-1.510,2 Net adjustments for impairment of
5.592,7 Net Financial income (loss)
-1,5 Net profit (loss) from hedging
66,1 Net result from realisation/v aluation of financial assets
110,3 Div idends and similar income
5.417,7 Income from banking activities
1.841,0 Net commission income
3.576,7 Net interest income
31/12/2009 Reclassified
REPORT ON OPERATIONS
REPORT ON OPERATIONS
RECONCILIATION BETWEEN RECLASSIFIED BALANCE SHEETS AS AT 31
DECEMBER 2010 AND 31 DECEMBER 2009 AND RELATED ACCOUNTING
TABLES
97
98
ON OPERATIONS
CONSOLIDATED FINANCIAL STATEMENTS
Balance Sheet.............................................................................................................................................101
Income Statement ......................................................................................................................................103
Statement of Comprehensive Income ..........................................................................................................104
Statement of changes in shareholders‘ equity ..............................................................................................105
Consolidated statement of cash flows: indirect method ................................................................................107
99
100
Consolidated Financial Statements Balance Sheet
Balance Sheet
(in units o f EUR)
31/12/2010
10
Cash and cash equivalents
20
Held-for-trading financial assets
30
Financial assets designated at fair value through profit and loss
40
Available-for-sale financial assets
50
Held-to-maturity financial assets
60
Loans and advances to banks
70
Loans and advances to customers
80
Hedging derivatives
90
Change in value of macro-hedged financial assets (+/-)
31/12/2009
2.411.030.871
1.295.586.779
33.924.199.884
23.506.522.746
247.143.224
260.418.460
21.801.514.587
14.909.189.684
3.145
3.113
9.709.879.900
10.327.520.615
156.237.581.051
152.413.440.750
313.412.270
198.702.637
17.655.459
32.039.046
907.528.633
742.170.498
100
Equity investments
120
Property, plant and equipment
1.407.077.388
2.733.043.104
130
Intangible assets
7.551.613.476
7.661.629.206
of which: goodwill
6.473.778.893
6.619.478.893
Tax assets
4.783.787.667
4.377.044.696
a) current
669.908.700
619.296.168
4.113.878.967
3.757.748.528
161.772.082
129.165.143
4.804.736.576
6.228.501.692
244.278.936.213
224.814.978.169
140
b) deferred
150
Non-current assets and groups of assets held for sale
160
Other assets
Total Assets
101
Consolidated Financial Statements - Balance Sheet
Balance Sheet
(in units o f EUR)
Liabilities and Shareholders' Equity
31/12/2010
31/12/2009
10
Deposits from banks
28.334.436.031
22.757.742.753
20
Customer accounts
97.769.565.012
91.132.820.120
30
Debt securities in issue
35.246.717.364
42.559.083.505
40
Held-for-trading financial liabilities
30.383.499.655
19.481.338.417
50
Financial liabilities designated at fair value through profit and loss
25.469.490.484
21.699.056.443
60
Hedging derivatives
1.736.529.777
931.554.179
80
Tax liabilities
233.879.224
341.425.636
a) current
128.725.497
230.259.485
b) deferred
105.153.727
111.166.151
Liabilities associated with individual assets held for sale
213.399.701
-
5.859.531.209
6.782.237.039
287.475.591
304.496.882
1.318.361.942
1.369.213.566
a) pension fund and similar obligations
435.918.857
458.133.053
b) other provisions
882.443.085
911.080.513
90
100
Other liabilities
110
Provision for employee severance pay
120
Provisions for risks and charges:
140
Valuation reserves
(146.164.752)
720.587.188
160
Equity instruments
1.949.365.486
1.949.365.486
170
Reserves
5.900.424.511
5.766.022.280
180
Share premium account
3.989.501.914
4.048.328.020
190
Share capital
4.502.410.157
4.502.410.157
200
Treasury shares (-)
(24.612.663)
(32.079.360)
210
Minority interests (+/-)
269.628.250
281.261.541
220
Profit (loss) for the year (+/-)
985.497.320
220.114.317
244.278.936.213
224.814.978.169
Total Liabilities and Shareholders' Equity
102
Consolidated Financial Statements – Income Statement
Income Statement
(in units o f EUR)
31/12/2010
31/12/2009
10
Interest income and similar revenues
6.471.674.024
7.097.531.213
20
Interest expense and similar charges
(2.930.980.906)
(3.422.747.419)
30
Net interest income
40
50
60
Net commissions
70
3.540.693.118
3.674.783.794
Fee and commission income
2.169.870.482
1.934.747.004
Fee and commission expense
(240.729.523)
(239.483.499)
1.929.140.959
1.695.263.505
Dividends and similar income
278.053.664
322.053.618
80
Net profit (loss) from trading
(322.116.994)
(322.102.761)
90
Net profit (loss) from hedging
(608.432)
(1.464.978)
100
Gain/losses on disposal/repurchase of:
a) loans and receivables
b) financial assets available for sale
d) financial liabilities
110
Net profit (loss) from financial assets and liabilities designated at fair value
through profit and loss
120
Net interest and other banking income
130
Net impairment losses/reversal on:
23.169.576
66.229.366
(19.617.709)
9.885.876
63.124.584
68.087.208
(20.337.299)
(11.743.718)
(30.379.893)
(21.870.456)
5.417.951.998
a) loans and receivables
b) financial assets available for sale
d) other financial transactions
5.412.892.088
(1.166.615.062)
(1.496.858.383)
(1.125.508.512)
(1.452.709.813)
(30.481.195)
(31.184.498)
(10.625.355)
4.251.336.936
(12.964.072)
140
Net income from banking activities
3.916.033.705
180
Administrative expenses:
(3.626.177.798)
(3.881.334.184)
a) personnel expenses
(2.224.738.245)
(2.385.927.048)
b) other administrative expenses
(1.401.439.553)
(1.495.407.136)
190
Net provisions for risks and charges
(61.390.382)
(98.948.147)
200
Net value adjustments/write-backs on property, plant and equipment
(101.586.182)
(105.646.070)
210
Net value adjustments/write-backs on intangible assets
(155.968.128)
(136.963.255)
220
Other operating income/expenses
230
Operating expenses
240
Gains (losses) on equity investments
635.337.890
96.073.309
270
Gain (losses) on disposal of investments
182.394.197
42.262.769
1.327.180.989
43.434.264
203.234.456
(3.741.888.034)
280
Profit (loss) before tax from continuing operations
290
Taxes expense (income) on profit (loss) from continuing operations
300
Profit (loss) after tax from continuing operations
310
Profit (loss) after tax from groups of assets held for sale
320
Profit (loss) for the period
330
Profit (loss) for the period attributable to minority interests
340
Parent company's net profit (loss) for the period
(341.849.903)
of continuing operations
of groups of assets held for sale
Diluted Earnings per Share (Diluted EPS)
of continuing operations
of groups of assets held for sale
103
(30.508.796)
985.331.086
12.925.468
1.651.705
211.689.217
986.982.791
224.614.685
1.485.471
4.500.368
985.497.320
220.114.317
31/12/10
Basic Earnings per Share (Basic EPS)
211.956.137
(4.010.935.519)
31/12/09
0,122
0,033
0,122
0,001
-
0,032
0,107
0,033
0,107
0,001
-
0,032
Consolidated Accounts – Statement of Comprehensive Income
Statement of Comprehensive Income
(in units o f EUR)
Items
10
31 12 2010
Profit (loss) for the year
31 12 2009
986.982.791
224.614.685
(845.330.261)
345.798.707
Other comprehensive income, net of tax
20
Financial assets available for sale
60
Cash flow hedges
2.750.861
(28.255.613)
70
Exchange differences
2.998.613
(1.007.700)
80
Non-current assets held for sale
100
Share of valuation reserves of equity investments valued at equity
110
201.495
Total other comprehensive income, net of tax
120
Total comprehensive income (Account 10 + 110)
130
Consolidated comprehensive income attributable to minority interests
140
Consolidated comprehensive income attributable to Parent Company
104
-
(37.772.417)
54.657.113
(877.151.709)
371.192.507
109.831.082
595.807.192
(4.172.202)
114.003.284
5.787.188
590.020.004
105
Minority interests came to approx. EUR 12 mln less than in the previous year due to payout of dividend and as a result of the demerger of consortium company 'Consorzio Perimetro Gestione Proprietà
Immobiliari'.
Valuation reserves register an overall negative change amounting to EUR 877.2 mln, of which EUR 883 mln (negative) in valuation reserves of ―available for sale‖ assets following the widening of credit
spreads for debt securities, a positive change of EUR 2.7 mln in valuation reserves for ―cash flow hedges‖, a positive change of EUR 3 mln in ―other‖ valuation reserves primarily accounted for by foreign
exchange differences.
Treasury shares saw a reduction by EUR 7.5 mln; profit/loss from trading is included in the share premium which also incorporates the EUR 52.1 mln fee paid to JPMorgan on account of the dividend
entitlement acquired by the Parent Company on the ordinary shares in 2008.
The overall change in reserves, amounting to 123.7 mln, is primarily accounted for by capitalised profits (EUR 222.0 mln) net of the EUR 80.9 mln coupon paid on the ―Tremonti bond‖ issuance. Revenue
reserves include EUR 24.6 mln in restricted reserves for an amount equal to the total of treasury shares.
Profit for 2009, totalling EUR 224.6 mln of which 220.1 mln for the Group and EUR 4.5 mln for minority shareholders, was paid out as dividends for an amount of EUR 2.6 mln, of which EUR 0.2 mln by
the Parent Company, as per profit distribution approved by the Shareholders‘ Meeting on 27 April 2010 and EUR 1.6 mln in donations by one of the subsidiaries.
As at 31 December 2010, the Group‘s equity including profit for the year came to EUR 17,156 mln, as compared to EUR 17,174.7 mln at the end of 2009.
Consolidated Financial Statements – Statement of changes in shareholders‘ equity
Statement of changes in shareholders’ equity
In 2009, the Group‘s net equity increased by EUR 2,352.9, coming to EUR 17,456 mln. As compared to EUR 15,103.1 mln as at the end of 2008.
The most relevant increase was registered in equity instruments, up by an overall EUR 1,902.5 mln, of which EUR 1,900 mln. in ―Tremonti -Bonds‖ issued by the Parent Company with a view to improving the regulatory capital position of the
Group and supporting lending to the business community, small and medium enterprises in particular. Equity instruments are negatively impacted by the partial conversion of EUR 6.4 mln in Convertible Preferred Securities issued on
30/12/2003 and positively influenced by recognition of deferred taxes in the amount of EUR 8.9 mln in light of the latest legal updates on the matter.
In the course of 2009, 23,319,082 ordinary shares were issued for partial conversion of the Convertible Preferred Securities issued on 30/12/2003. The capital increase arising from the conversion led to an increase in net equity of EUR 61.3
mln, of which 15.6 mln in shareholders‘ equity and EUR 45.7 mln in share premium; the account also saw a EUR 0.4 mln increase in minority interests. At the same time, as stated above, the equity instruments were down by EUR 6.4 mln as
a result of the portion of options exercised.
Treasury shares saw a reduction by EUR 4.8 mln; profit/loss from trading is included in the share premium which also incorporates the yearly fee paid to JPMorgan on account of the dividend entitlement acquired by Parent Company BMPS on
the ordinary shares subscribed by J.P.Morgan following the increase in shareholders‘ equity in 2008.
The profit for 2008, totalling EUR 931.9 mln, of which EUR 922.8 mln for the Group and 8.3 mln for minorities, was distributed for an amount of EUR 108.4 mln, of which EUR 98.6 mln by the Parent Company, as per profit distribution
approved by the Shareholders‘ Meeting on 29 April 2009 and EUR 9.8 mln by Group companies to minorities; the positive difference relating to the reserves, coming to EUR 860.2 mln, is accounted for by profit transferred to capital in the
amount of EUR 824 mln and by the partial conversion of Convertible Preferred Securities issued on 30/12/2003 for an amount of 3.2 mln. The amount is curtailed by EUR 20.9 mln after tax, in contribution to the Guarantee Fund for loans to
small medium enterprises, pursuant to art. 11 of Italian Legislative Decree no. 185/08, concerning the issue of ―Tremonti – Bonds‖.
The positive change in reserves is accounted for by the capital increase without consideration carried out by one of the Group‘s subsidiaries using revaluation reserves as well as by the impact of deconsolidation of a number of subsidiaries
which were disposed of during the year. Revenue reserves include EUR 32.1 mln in restricted reserves for n amount equal to the total of treasury shares.
Valuation reserves register an overall positive change amounting to EUR 322 mln, of which EUR 398 mln in valuation reserves of assets ―available for sale‖ following the recovery in financial markets, a negative change of EUR 28.3 mln in
valuation reserves for ―cashflow hedges‖ (in this connection it should be noted that the Parent Company has pursued an active policy of rate risk hedging using cashflow hedges of long-term ―variable‖ liabilities, the main item of which being
related to Upper Tier II issued upon acquisition of Banca Antonveneta in the nominal amount of EUR 2.16 bln), a negative change of EUR 47.7 mln in ―other‖ valuation reserves primarily accounted for by the capital increase without
consideration carried out by a number of Group subsidiaries using revaluation reserves as well as by the impact of deconsolidation of a number of subsidiaries which were disposed of during the year.
Consolidated Financial Statements – Statement of changes in shareholders‘ equity
106
Consolidated Financial Statements – Consolidated statement of cash flows: indirect method
Consolidated statement of cash flows: indirect method
(in units o f EUR)
A. OPERATING ACTIVITIES
31 12 2010
31 12 2009
1. Cash flow from operations
2.224.458.403
2.284.358.952
986.982.791
224.614.685
(324.515.109)
133.476.202
profit (loss) for the year (+/-)
capital gains/losses on financial assets held for trading and on assets/liabilities
designated at fair value (+/-)
capital gains/losses on hedging transactions (+/-)
608.432
1.464.978
1.302.520.117
1.582.046.386
net value adjustments/write-backs on tangible and intangible assets (+/-)
257.554.310
242.609.325
net provisions for risks and charges and other costs/revenues (+/-)
105.007.772
172.417.446
net premiums to be collected
-
-
other insurance revenues/charges to be collected
-
-
341.849.903
30.508.796
2.585.681
1.246.393
net value adjustments/write-backs due to impairment (+/-)
tax not paid (+)
net value adjustments/write-backs on groups of assets held for sale, after tax (+/-)
other adjustments
2. Cash flow from (used in) financial assets
financial assets held for trading
financial assets designated at fair value
(448.135.494)
(104.025.259)
(24.197.454.097)
(29.816.068.327)
(10.007.051.636)
(18.931.008.887)
13.275.236
financial assets available for sale
(8.159.032.893)
sales/repayment of financial assets held to maturity
-
loans and advances to banks: on demand
loans and advances to banks: other
loans and advances to customers
other assets
3. Cash flow from (used in) financial liabilities
deposits from banks: on demand
(246)
6.791.854.772
-
(8.589.698.134)
-
-
672.792.164
415.197.685
21.828.747.947
25.476.527.750
6.515.704.631
deposits from banks: other
(9.422.033.000)
584.287.879
(7.301.724.847)
hedging derivatives
(80.380.517)
(4.422.710.838)
-
-
customer accounts
8.028.836.224
9.536.425.489
securities in issue
(7.295.111.036)
(4.537.143.269)
financial liabilities held for trading
10.949.087.472
18.096.849.770
3.637.205.375
7.830.335.198
-
-
financial liabilities designated at fair value
hedging derivatives
other liabilities
(6.974.719)
of which technical reserves
-
Net cash flow from (used in) operating activities
(144.247.747)
107
(1.027.228.600)
(2.055.181.625)
Consolidated Financial Statements – Consolidated statement of cash flows: indirect method
B. INVESTMENT ACTIVITIES
1. Cash flow from:
sales of equity investments
dividends collected on equity investments
sales/repayment of financial assets held to maturity
sales of tangible assets
sales of intangible assets
sales of subsidiaries and undertakings
2. Cash flow used in
purchase of equity investments
purchase of financial assets held to maturity
1.802.215.252
795.683.034
154.806.418
45.029.622
52.415.600
9.718.647
-
-
28.914.761
1.525.402
5.050.788
65.952.696
1.561.027.685
673.456.667
(399.814.092)
(271.965.367)
(154.820.017)
(70.290.318)
-
purchase of tangible assets
purchase of intangible assets
purchase of subsidiaries and undertakings
Net cash flow from (used in) investment activities
-
(48.589.652)
(75.024.834)
(196.404.423)
(126.650.215)
-
-
1.402.401.160
523.717.667
7.466.696
9.130.613
-
1.900.000.000
C. FUNDING ACTIVITIES
issue/purchase of treasury shares
issue/purchase of equity instruments
dividend distribution and other
(142.396.271)
issue of new shares
-
Net cash flow from (used in) funding activities
(134.929.575)
NET CASH FLOW FROM (USED IN) OPERATING, INVESTMENT AND
FUNDING ACTIVITIES DURING THE YEAR
1.123.223.838
(108.448.100)
1.800.682.513
269.218.555
Reconciliation
(in units of EUR)
Accounts
31 12 2010
31 12 2009
Cash and cash equivalents at beginning of period
1.295.586.779
1.026.368.224
Net increase (decrease) in cash and cash equivalents
1.123.223.838
269.218.555
-
-
2.418.810.617
1.295.586.779
Cash and cash equivalents: foreign exchange effects
Cash and cash equivalents at end of period
Cash and cash equivalents at end of period”, amounting to EUR 2,418,810,617 includes account 10 of the balance sheet “Cash and cash equivalents”
for an amount of EUR 2,411,030,871
and other cash and cash equivalents for an amount of EUR 7,779,746 , included in line “Other assets” of balance sheet item 150 “Non-current assets
and groups of assets held for sale”.
108
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Part A – Accounting Policies ........................................................................................................................111
Part B – Consolidated Balance Sheet ...........................................................................................................163
Part C – Consolidated income statement .....................................................................................................249
Part D – Statement of Consolidated Comprenhensive Income .......................................................................279
Part E – Risks and Hedging Policies .............................................................................................................281
Part F – Consolidated shareholders' equity ..................................................................................................376
Part G – Business combinations ...................................................................................................................388
Part H – Related-party transactions .............................................................................................................390
Part I – Share-based payments ....................................................................................................................397
Part L – Segment reporting .........................................................................................................................399
109
110
Part A – Accounting Policies
A.1 – General ........................................................................................................................................................ 112
Section 1 – Statement of compliance with the international accounting standards .................................................. 112
Section 2 - Preparation Criteria ........................................................................................................................... 113
Section 3 – Scope and methods of consolidation .................................................................................................. 114
Section 4 – Events after the Balance Sheet Date ................................................................................................... 118
Section 5 – Other Matters ................................................................................................................................... 119
A2 – The main items of the accounts....................................................................................................................... 130
Accounting standards ......................................................................................................................................... 130
1 Held-for-trading Financial assets ...................................................................................................................... 130
2 Available-for-sale financial assets ..................................................................................................................... 130
3 Held-to-maturity investments .......................................................................................................................... 132
4 Loans and receivables ..................................................................................................................................... 132
5 Financial assets measured at fair value ............................................................................................................. 134
6 Hedging transactions....................................................................................................................................... 135
7 Equity investments .......................................................................................................................................... 136
8 Property and equipment ................................................................................................................................. 137
9 Intangible assets ............................................................................................................................................. 138
10 Non-current assets held for sale ..................................................................................................................... 138
11 Current and deferred tax ............................................................................................................................... 139
12 Provisions for risks and charges ...................................................................................................................... 140
13 Liabilities and debt securities in issue ............................................................................................................. 141
14 Held-for-trading financial liabilities ................................................................................................................ 141
15 Financial liabilities designated at fair value ..................................................................................................... 142
16 Foreign-currency transactions ........................................................................................................................ 143
17 Insurance assets and liabilities ........................................................................................................................ 143
18 Other information ......................................................................................................................................... 146
A.3 Information on fair value ................................................................................................................................. 158
A.3.1 Portfolio transfers .................................................................................................................................... 158
A.3.2 Fair Value Hierarchy ................................................................................................................................. 159
A.3.3 Information on "day one profit/loss" .......................................................................................................... 162
111
Consolidated Notes to Financial Statements – Part A – Accounting Policies
A.1 – General
Section 1 – Statement of compliance with the international accounting standards
Pursuant to Legislative Decree no. 38 of 28 February2005, the MPS Group consolidated accounts were prepared in
accordance with the international accounting principles issued by the International Accounting Standards Board
(IASB) including interpretations by the International Financial Reporting Interpretations Committee (IFRIC), as
endorsed by the European Commission, pursuant to EC Regulation no. 1606 of 19 July 2002 which was effective as
at 31 December 2010.
The international accounting standards were applied following the indications set forth in the ―Framework for the
Preparation and Presentation of Financial Statements‖ (the Framework).
Failing a principle or an interpretation specifically applicable to a certain transaction, event or circumstance, the
Bank‘s Management used its own judgment in developing and applying the accounting principles for the purpose of
providing a reporting which is:
relevant for the purpose of economic decision-making by the users;
reliable so that the Financial Statements:
result in a true and fair view of the Group‘s assets, financial position, profit and loss and cash flows;
reflect the economic substance -and not merely the juridical form- of transactions, other events and
circumstances;
are neutral, that is with no prejudice;
are conservative;
are complete in all relevant respects.
In its judgment, the Bank‘s Management made reference to and took account of the enforceability of the following
provisions, listed in a hierarchically decreasing order:
the provisions and implementation guidance contained in the principles and interpretations dealing with
similar or related cases;
the definitions, recognition and measurement criteria for the accounting of assets, liabilities, income and
expenses contained in the Framework.
In delivering its judgment, the Bank‘s Management may also take account of:
the most recent provisions set forth by other entities in charge of establishing the accounting principles
which use a conceptually similar Framework for the purpose of developing the accounting principles;
other accounting literature;
consolidated practices of the banking industry.
In compliance with art. 5 of Legislative Decree no. 38 of 28 February 2005, if – in exceptional cases – the
application of a provision set forth in the international accounting principles proves to be non compliant with a true
and fair view of the Group‘s balance-sheet, financial situation and profit and loss statement, then such provision is
not applied. The reasons for deviation and its impact on the representation of the balance-sheet, financial situation
and profit and loss statement, have been explained in the notes to the financial statements.
In the separate financial statements of each company, any profits arising from this deviation are posted to a reserve
which is only distributable in proportion to the value recovered.
Comparable profit and loss data for 2009 was restated further to the implementation of clarifying instructions
issued by the Bank of Italy with communication of 16 February 2011.
112
Consolidated Notes to Financial Statements – Part A – Accounting Policies
Section 2 - Preparation Criteria
The Balance Sheet has been prepared in accordance with the IAS/IFRS International accounting standards issued by
the International Accounting Standards Board (IASB) including the interpretations issued by the International
Financial Reporting Interpretations Committee (IFRIC), as endorsed by the European Union and mandatorily applied
in the 2010 financial year. The provisions contained in Circular Letter No. 262 issued by the Bank of Italy
concerning the layout and rules for preparing separate and consolidated financial statements for the banks and the
Group were also applied, as amended by the first addendum of 18 November 2009.
The consolidated financial statements consist of the:
Balance-Sheet;
Consolidated Income Statement;
Statement of Consolidated Comprehensive Income;
Statement of Changes in Consolidated Shareholders‘ Equity;
Consolidated Cash Flow Statement;
Notes to the Consolidated Financial Statements.
The Consolidated Financial Statements are integrated with the Directors‘ Report on Group Operations.
The Consolidated Financial Statements are prepared with transparency and provide a true and fair view of the
balance-sheet, financial position and profit and loss statement for the year.
If the information required by the international accounting standards and the provisions contained in ―Circular Letter
no. 262, as amended‖ do not suffice to provide a true and fair, relevant, reliable, comparable and intelligible view
of the Group‘s performance, the notes to the consolidated financial statements provide the necessary supplementary
information.
The balance-sheet, profit and loss statement and statement of consolidated comprehensive income consist of
accounts (marked with numbers), subaccounts (marked with letters) and further details, under ―including‖ in the
accounts and sub-accounts. Accounts, sub-accounts and their details are part of the financial statements.
Each account of the balance-sheet, profit and loss statement and statement of consolidated comprehensive income
also indicates prior year‘s amounts. If the accounts cannot be compared, the accounts in relation to the prior year
are reclassified; non-comparability, reclassification or impossible reclassification are pointed out and commented in
the notes to the financial statements. It is noted that 2009 comparable P&L data was restated further to the
implementation of clarifying instructions issued by the Bank of Italy with communication of 16 February 2011.
Assets and liabilities, expenses and income cannot be mutually offset, unless this is permitted or required by the
international accounting standards or the provisions set forth in Circular no. 262 of the Bank of Italy.
The consolidated balance-sheet, profit and loss statement and statement of consolidated comprehensive income do
not indicate the accounts which do not show any amounts for the year of reference of the financial statements or
prior year. If an item of the assets or liabilities is part of several accounts of the balance-sheet, the notes to the
financial statements indicate – whenever this is necessary for the purpose of intelligibility – that this component may
also be referred to accounts other than the one it is posted to.
Income is posted with no sign in the profit and loss statement and the respective section of the notes, whereas
expenses are indicated in brackets. Negative amounts are indicated in brackets in the statement of comprehensive
income .
In compliance with the provisions of art. 5 of Legislative Decree no. 38 of 28 February 2005, the consolidated
financial statements have been prepared using the Euro as the accounting currency: the tables in the consolidated
financial statements are denominated in units of Euro, while the tables in the consolidated notes are denominated in
thousands of Euro.
The consolidated financial statements have been prepared based on a going concern assumption, according to the
generally accepted principles of accrual accounting, relevance and materiality of information, priority of substance
over form and with a view to encouraging consistency with future statements.
Items of a different nature or with different allocation were recognised separately, unless they were considered
irrelevant. All amounts shown in the consolidated financial statements were adjusted so as to reflect any events
subsequent to the date of closing which, according to IAS 10, make it mandatory to make an adjustment ( adjusting
events). Non-adjusting events reflecting circumstances that occurred after the reporting date should be disclosed as
part of the Notes to the Financial Statements, section 3, if they are of such importance that non-disclosure would
affect the ability of users to make proper evaluations and decisions.
113
Consolidated Notes to Financial Statements – Part A – Accounting Policies
Section 3 – Scope and methods of consolidation
Scope of consolidation
The consolidated financial statements include the balance sheet and income statement results of the Parent
Company and its direct and indirect subsidiaries. In particular, the scope of consolidation, as specifically set out in
the IAS/IFRS, includes all subsidiaries, irrespective of their legal status, of business activity pursued in sectors other
than the Parent Company‘s core business, of them being going concerns or companies under liquidation, or of
whether the equity investment consists in a merchant banking transaction. Similarly, special purpose entities/vehicles
(SPEs/SPVs) are included when the requirement of actual control recurs, even if there is no stake in the company.
Companies are considered subsidiaries when the Parent Company, directly or indirectly, holds more than half of
their voting rights. However, the concept of control goes beyond the percentage interest held in the investee and is
defined as the power to appoint the majority of directors of the company or govern its financial or operating policies
for the purpose of obtaining benefits from its activity.
In assessing whether a company has the power to govern the financial or operating policies of another company,
account is also taken of ―potential‖ rights when they are currently exercisable or convertible in actual voting rights.
In accordance with SIC 12, the consolidation of special purpose entities has the same effect as full consolidation.
Equity interests held by third parties in a special purpose entity consolidated in accordance with SIC 12 are
recognised under minority interests.
Companies are considered as joint ventures, i.e subject to joint control when the voting rights and the control of the
economic activities of the investee are equally shared by the Parent Company, directly or indirectly, and an external
entity. Furthermore, an investment is considered as subject to joint control even when voting rights are not equally
shared if control over the economic activities and the strategies of the investee is shared, based on contractual
agreements, with other entities.
Companies are considered associates, that is subject to significant influence, when the Parent Company, directly or
indirectly, holds at least 20 per cent of their voting rights (including ―potential‖ voting rights as described above)
and has the power to participate in determining their financial and operating policies. Similarly, companies are
considered associates also when the Parent Company – despite a lower percentage of voting rights– has the power of
participating in the determination of the financial and operating policies of the investee on account of specific legal
agreements such as the participation in shareholders‘ agreements.
Minor entities are not included in the scope if their consolidation proves immaterial for the purpose of the
consolidated financial statements.
Methods of consolidation
With reference to the consolidation methods, subsidiaries are consolidated on a line-by-line basis, interests in jointly
controlled companies are recognised using the proportionate consolidation or equity method and investments in
companies subject to the Group‘s ―significant influence‖ are valued with the equity method.
Line-by-line consolidation consists in the line-by-line acquisition of the balance-sheet and profit and loss statement
aggregates of the subsidiaries. After the assignment to third parties, under a separate account, of their portions of
equity and profit/loss, the value of the investment is eliminated against the recognition of the value of the
subsidiary‘s equity.
Intragroup assets, liabilities, income and expenses are eliminated.
The income and expenses of a subsidiary purchased during the period are included in the consolidated financial
statements as of the date of purchase.
On the other hand, the income and expenses of a subsidiary sold are included in the consolidated financial
statements up to the date of disposal, i.e. when the Parent ceases to control the subsidiary. At the date when control
is lost, the controlling entity:
derecognises the assets (including any goodwill) and liabilities of (and non-controlling interests in) the
former subsidiary at their carrying amounts;
recognises the fair value of the consideration received and of any investment retained in the former
subsidiary;
reclassifies to consolidated profit or loss any amounts previously recognised in the subsidiary's statement of
comprehensive income as if the assets or liabilities had been transferred;
recognises any resulting difference in consolidated profit or loss .
114
Consolidated Notes to Financial Statements – Part A – Accounting Policies
Interests in jointly controlled companies are recognised using the proportionate or equity consolidation method.
Those companies over which the Group exercises significant influence (associates), or over which it has the right to
participate in the determination of financial and operating decisions without having control or joint control, are
valued using the equity method.
This method contemplates the initial posting of the investment at cost and its subsequent adjustment on the basis of
the stake held in the shareholders‘ equity of the partially owned company. If an investor‘s share of losses of an
associate equals or exceeds its ―interest in the associate‖, the investor discontinues recognising its share of further
losses unless the investor has incurred specific legal obligations or made payments in favour of the associate.
The investee‘s profit/loss for the year is recognised in account 240 ―Gains (losses) on equity investments‖ of the
consolidated profit and loss statement.
Unrealised profits resulting from upstream (associate to investor) and downstream (investor to associate) transactions
are eliminated to the extent of the Group‘s interest in the associate. Unrealised losses are eliminated as well, unless
the transaction provides evidence of an impairment of the asset transferred.
The financial statements processed for line-by-line and proportionate consolidation include the financial statements
as at 31 December 2010, as approved by the Boards of Directors of the respective companies. The companies
subject to the Group‘s significant influence are valued by applying the equity method on the basis of the latest
financial statements or reports available.
In the course of 2010, the following changes to the scope of consolidation were made:
by the Parent Company:
within the framework of the Covered Bond Programme targeted to the Euromarket, the Parent Company
acquired a 90% stake in the MPS Covered Bond S.r.l. vehicle in May, which has been fully consolidated;
at the end of December, within the frame work of a complex re-organisation of the asset management
segment, the Parent Company sold its associate Prima Holding S.p.a. to the company Asset Management
Holding S.p.a. and at the same time acquired a 22.24% stake in the afore-mentioned entity;
at the end of December, following completion of the widely known real estate deal (illustrated in the
section ―Significant accounting choices made while preparing the financial statements‖ in Part A of the
Notes to the Financial Statements) the consortium company ‗Consorzio Perimetro Gestione Proprietà
Immobiliari S.c.p.a‘ was demerged;
by other Group companies:
at the end of June, Group subsidiary, Banca Antonveneta, increased its shareholding in the company Padova
2000 from 45.01% to 100%, which was merged by absorption by and into the subsidiary MPS Immobiliare
S.p.a at the end of December.
As regards disclosure of business combinations within the Group, reference is made to Part G of the Notes to the
Financial Statements.
115
Consolidated Notes to Financial Statements – Part A – Accounting Policies
Investement in subsidiaries and joint ventures (proportionate consolidation)
116
Consolidated Notes to Financial Statements – Part A – Accounting Policies
(*) Type of relationship:
1 majority of voting rights at ordinary shareholders‘ meetings
2 dominant influence at ordinary shareholders‘ meetings
3 agreements with other shareholders
4 other forms of control
5 unified management under art. 26. 1. of Leg. Decree 87/92
6 unified management under art. 26. 2. of Leg. Decree 87/92
7 joint control
8 significant influence
(**)Voting rights are disclosed only if different from the percentage of ownership.
(1) Assets and liabilities pertaining to the investments in MPS Venture SGR and MONTE PASCHI MONACO S.A.M. have been reclassified to item
150 under disposal groups of assets held for sale.
Any changes to the Group set-up arising from business combinations are reported in part G ―Business combinations‖
of the Notes to the Consolidated Financial Statements.
117
Consolidated Notes to Financial Statements – Part A – Accounting Policies
Section 4 – Events after the Balance Sheet Date
No events are reported pursuant to IAS 10 ―Events after the Balance Sheet Date‖ .
The Consolidated Annual Report was prepared based on a going concern assumption.
With regard to the indications contained in Document no. 4 of 3 March 2010, issued jointly by the Bank of Italy,
Consob and Isvap, and following amendments, the Parent Company reasonably expects to continue operating in the
foreseeable future and has therefore prepared the consolidated annual report based on the assumption of business
continuity since the uncertain climate arising from the current economic scenario does not give rise to any doubts
with regard to the company‘s ability to continue operating as a going concern.
The assessment criteria adopted are consistent with this assumption and reflect the generally accepted principles of
accrual accounting, relevance and materiality of information and priority of economic substance over juridical form.
These criteria did not undergo any amendments with respect to previous financial year report.
More detailed information on the main difficulties and variables of the financial market is disclosed in the Directors‘
Report on Operations.
On 16 February 2011, the Bank of Italy iassued a communication effective as of the annual report at
31.12.2010, containing clarifications and requests for additional information. In particular, it is noted that the
adoption of the provisions set out in the afore-mentioned communication has led to the production of additional
information disclosed in the notes to Table 2 ―Assets used to guarantee own liabilities and commitments‖ in Part
B ―Other Information― and Table A.1.2 ―Breakdown of financial assets by portfolio and credit quality‖ in Part E. The
adoption of these provisions also led to comparative profit and loss data for 2009 being restated as described in
Section 2 of this Part A.
118
Consolidated Notes to Financial Statements – Part A – Accounting Policies
Section 5 – Other Matters
List of key IAS/IFRS international accounting principles and related SIC/IFRIC interpretations for mandatory
application in the 2010 financial statements
Here follows a list of the international IAS/IFRS accounting principles and related SIC/IFRIC interpretations for which
application in the 2010 financial statements is mandatory. The international accounting standards and
interpretations endorsed before October 2008 have been incorporated in a single text, namely Regulation (EC) no.
1126/2008.
The list reports all of the amendments the application of which is mandatory as of 2010. In particular, the column
―Improvements to the International Accounting Principles‖ highlights the most significant amendments introduced
by the IASB as part of its project to improve the accounting principles by means of actions that do not affect their
overall set up.
List of the IAS/IFRS international accounting principles for mandatory application in the 2010 financial statements
Amendments mandatorily effective
as of 2010
Accounting standards
"Improvements
to the
International
Accounting
Standards"
(Reg. SEC no.
IAS 1
IAS 2
IAS 7
Presentation of Financial Statements
Inventories
Statement of Cash Flows
IAS 8
Accounting Policies, Changes in Accounting Estimates and Errors
IAS 10
IAS 11
IAS 12
Events after the Reporting Period
Construction Contracts
Income Taxes
Segment Reporting (IAS 14 was replaced by IFRS 8 on 1
January 2009)
Property, Plant and Equipment
Leases
Revenue
Employee Benefits
Accounting for Government Grants and Disclosure of
Government Assistance
The Effects of Changes in Foreign Exchange Rates
Borrowing Costs
IAS 14
IAS 16
IAS 17
IAS 18
IAS 19
IAS 20
IAS 21
IAS 23
Other
amendments
S
119
Reg. EC 1142/09
S
Consolidated Notes to Financial Statements – Part A – Accounting Policies
Amendments mandatorily effective
as of 2010
"Improvements
Accounting standards
to the
International
Other
Accounting
amendments
Standards"
(Reg. EC no.
243/10)
IAS 24
IAS 26
Related Party Disclosures
Accounting and Reporting by Retirement Benefit Plans
IAS 27
Consolidated and Separate Financial Statements
IAS 28
IAS 29
IAS 31
IAS 32
IAS 33
IAS 34
IAS 36
IAS 37
IAS 38
Investments in Associates
Financial Reporting in Hyperinflationary Economies
Interests in Joint Ventures
Financial Instruments: Presentation
Earnings per Share
Interim Financial Reporting
Impairment of Assets
Provisions, Contingent Liabilities and Contingent Assets
Intangible Assets
IAS 39
Financial Instruments: Recognition and Measurement
IAS 40
IAS 41
Investment Property
Agriculture
Revised Reg. EC
494/09
IFRS 1
First-time Adoption of International Financial Reporting
Standards
IFRS 2
Share-based Payment
IFRS 3
Business Combinations
IFRS 4
Insurance Contracts
S
S
S
S
IFRS 5
Non-current Assets Held for Sale and Discontinued Operations
S
IFRS 6
IFRS 7
IFRS 8
Exploration for and Evaluation of Mineral Resources
Financial Instruments: Disclosures
Operating Segments
S
120
Amendments Reg.
EC 839/09
Revised Reg. EC
1136/09,
amendments Reg. EC
550/10, Reg. EC
1164/09
Amendment Reg. EC
244/10
Revised Reg. EC
495/09
Annual
Improvements 2009
(Reg. EC 70/09); Reg.
EC 1142/09
Consolidated Notes to Financial Statements – Part A – Accounting Policies
Interpretations which must be applied to the 2010 financial statements
Interpretation to be applied in 2010
for the first time
"Improvements to
Accounting standards
the International
Accounting
Standards" (Reg.
Other
Amendments
EC no. 243/10)
SIC 7
Introduction of the Euro
SIC 10
Government Assistance—No Specific Relation to Operating
Activities
SIC 12
Consolidation—Special Purpose Entities
SIC 13
Jointly Controlled Entities—Non-Monetary Contributions by
Venturers
SIC 15
Operating Leases—Incentives
SIC 21
Income Taxes—Recovery of Revalued Non-Depreciable Assets
SIC 25
Income Taxes—Changes in the Tax Status of an Entity or its
Shareholders
SIC 27
Evaluating the Substance of Transactions Involving the Legal
Form of a Lease
SIC 29
Service Concession Arrangements: Disclosures
SIC 31
Revenue—Barter Transactions Involving Advertising Services
SIC 32
Intangible Assets—Web Site Costs
IFRIC 5
Rights to Interests arising from Decommissioning, Restoration and
Environmental Rehabilitation Funds
IFRIC 6
Liabilities arising from Participating in a Specific Market—Waste
Electrical and Electronic Equipment
IFRIC 7
Applying the Restatement Approach under IAS 29 Financial
Reporting in Hyperinflationary Economies
IFRIC 8
Scope of IFRS 2
IFRIC 9
Reassessment of Embedded Derivatives
IFRIC 10
Interim Financial Reporting and Impairment
IFRIC 11
IFRS 2: Group and Treasury Share Transactions
IFRIC 12
Service Concession Arrangements
IFRIC 13
Customer Loyalty Programmes
S
IAS 19—The Limit on a Defined Benefit Asset, Minimum Funding
Requirements and their Interaction
IFRIC 15 Agreements for the Construction of Real Estate
IFRIC 14
IFRIC 16
Hedges of a Net Investment in a Foreign Operation
IFRIC 17
Distributions of Non-cash Assets to Owners
Reg. EC 1142/09
IFRIC 18
Transfers of Assets from Customers
Reg. EC 1164/09
121
S
Consolidated Notes to Financial Statements – Part A – Accounting Policies
The key amendments to the accounting standards and intepretations which are mandatorily effective as of financial
year 2010 include the following:
IAS 39 Financial Instruments: Recognition and Measurement. On 31 July 2008, the IASB issued an amendment
to IAS 39 entitled ―Eligible hedged items‖, on the basis of which clarification was given that inflation risk may only
be hedged under certain conditions and that a purchased option cannot be designated in its entirety (intrinsic and
time value) to hedge a one-sided risk of a forecast transaction because only by designating the intrinsic value of a
purchased option can an effective hedge be generated. The amendment was approved by the European Commission
with Regulation 839/2009.
IFRS 1 First-time adoption of International Financial Reporting Standards. On 24 November 2008, the IASB
issued a new version of IFRS 1 ―First-time adoption of International Financial Reporting Standards‖. The new version
of the standard is a restructured version of the previous version which has been amended on numerous occasions
over the years. The European Commission completed the endorsement process by issuing Regulation no.
1136/2009.
IFRS 1 Additional exemptions for first time adopters. On 24 June 2010 Regulation no. 550/2010 was issued,
amending Regulation no. 1126/2008 adopting certain international accounting standards in accordance with
Regulation no. 1606/2002 on the application of international accounting standards. The amendment addresses
particular situations in which the retrospective application of IFRSs would cause undue cost or effort in the transition
process to first-time adopters. The amendment introduces two exemptions: i) it exempts entities using the full cost
method from retrospective application of IFRSs, in accordance with IFRS 6 ―Exploration for and Evaluation of
Mineral Resources‖, for oil and gas assets; ii) it exempts entities with existing leasing contracts from reassessing the
classification of those contracts at a different date in accordance with IFRIC 4 ―Determining whether an Arrangement
contains a Lease‖, when the application of their national accounting requirements produced the same result.
IFRS 2 Share-based payments. On 18 June 2009, the IASB published amendments to IFRS 2 "Share-based
payments". The amendments to IFRS 2 provide clarification on the accounting of transactions with share-based
payments whereby a supplier of goods or services is paid in cash and the transaction is to be settled by another
entity of the group (Group cash-settled share-based payment transactions). The amendment was endorsed by the
European Commission with Regulation 244/2010.
IFRS 3 Business combinations and IAS 27 Consolidated and separate financial statements. On 10 January
2008, the IASB issued an updated version of IFRS 3 – Business combinations, and amended IAS 27 – Consolidated
and separate financial statements. The main changes to IFRS 3 relate to the removal of the obligation to value
subsidiaries‘ individual assets and liabilities at fair value in any subsequent acquisition, in the event of gradual
acquisitions of subsidiaries. In addition, if a company does not acquire a 100% interest, non-controlling interests‘
shares of equity may either be valued at fair value (full goodwill), or using the method currently provided for by
IFRS 3. The revised version of the standard also provides for all business combination-related costs to be posted to
the profit and loss account and liabilities for contingent payments to be recognised at the acquisition date.
In the amendment to IAS 27, however, the IASB stated that any changes in a stake not resulting in loss of control
should be treated as equity transactions and so have a contra-entry in equity. In addition, when a holding company
sells its controlling interest in a company but still holds a shareholding in the company, it shall value the stake held
at fair value on the balance sheet and post any profits or losses resulting from the loss of control to the profit and
loss statement. Finally, the amendment to IAS 27 requires all losses attributable to non-controlling interests to be
allocated to the non-controlling interests‘ share of equity, including when the losses exceed their capital interest in
the company. The new rules must be applied to business combinations on a prospective basis (for IFRS 3) and
retroactively (for IAS 27) pursuant to Regulations no. 494/2009 and 495/2009 of the European Commission.
“Improvements to international accounting standards”. Within this scope of this project, the IASB issued a set
of amendments to the IFRSs on 22 May 2008, which were endorsed under Regulation 70/2009. The only
amendment for which mandatory application did not previously become effective is mentioned below:
IFRS 5 – Non-current assets held for sale and discontinued operations. The amendment, which the
entity must apply for financial years commencing from 30 June 2009, states that if a company is committed
to a plan to sell a subsidiary that involves loss of control over said subsidiary, all the subsidiary‘s assets and
liabilities should be reclassified as assets held for sale, regardless of whether the company will retain a noncontrolling interest after the sale.
122
Consolidated Notes to Financial Statements – Part A – Accounting Policies
On 27 November 2008, the IFRIC issued interpretation IFRIC 17 Distributions of non-cash assets to owners
which governs the distribution of non-cash dividends (e.g. real estate, companies, equity investments etc.). In
particular, it specifies that in these cases the assets distributed as dividends must be measured at fair value at the
time of distribution and any difference between fair value and book value must be posted to profit and loss. The
interpretation does not apply to asset distributions which a) relate to entities under joint control, b) do not treat
shareholders of the same class equally or c) relate to a stake in a subsidiary where there is no loss of control. If
applicable, the distribution may previously be classified under IFRS 5; in this case IFRS 5 rules shall apply up until
payment of the dividend. The interpretation was endorsed by the European Commission with Regulation
1142/2009.
On 29 January 2009, the IFRIC issued interpretation IFRIC 18 Transfers of assets from customers, which governs
the accounting treatment of property, plant and equipment received from customers and used to connect said
customers to a network and/or to supply goods and services. Assuming that the entity receives an asset that can be
defined as such (i.e. the entity has control over said asset), the entity recognises the property at fair value (IAS 16);
upon recognition of this asset, the entity recognises income in relation to the duration of the services supplied to the
customer. If the agreement does not specify a period for the supply of the services, the revenue is recognised over a
period no longer than the useful life of the transferred asset. When a connection to a network is delivered to the
customer, revenue should be recognised upon connection. The interpretation was endorsed by the European
Commission with Regulation 1164/2009.
“Improvements to the international accounting standards”(2009). Within the scope of this project, the IASB
issued a set of amendments to the IFRSs on 16 April 2009. The amendments indicated by the IASB as involving a
change in the presentation, recognition and measurement of balance sheet items are listed below, leaving aside,
however, those that will only result in terminological or publication changes with minimal effects in terms of
accounting. The amendments were approved by the European Commission with Regulation 243/2010.
IFRS 2 – Share-based payments. The scope of application no longer includes payments in shares arising
from business combinations involving entities under joint control and joint ventures.
IFRS 5 – Non-current assets held for sale and discontinued operations: clarification was given on
mandatory disclosures.
IFRS 8 – Operating segments: the amendment clarified that mandatory reporting of profit and loss and
total assets/liabilities for reportable segments is only required where total assets for segments are regularly
reported to the chief operating decision maker.
IAS 1 – Presentation of financial statements: the amendment clarified the nature of current liabilities to
be included in the statement of financial position.
IAS 7 – Statement of Cash Flows: clarification was given that only expenses recognised as assets in the
statement of financial position are eligible for classification as cash flows arising from investing activities.
IAS 17 – Leases: the standard was amended, stating that land leases should always be classified as
operating leases where the contract does not provide for transfer of ownership at the end of said contract.
Following the amendment, when a lease contract relates to both land and buildings, an entity must verify
classification as an operating or financial lease for both elements separately, taking into consideration the
fact that one major factor is that land normally has an indefinite economic life.
IAS 36 – Impairment of assets: In the definition of a ―cash-generating unit‖ (CGU), clarification was given
that for the purposes of Impairment Testing, a CGU to which goodwill is allocated may not i) be larger than
a business segment as defined in para. 5 of IFRS 8, prior to the business combination and ii) represent the
lowest level within the entity at which the goodwill is monitored for internal management purposes.
IAS 38 - Intangible assets: some clarifications were given on measuring intangible assets in business
combination agreements, in line with the changes made to IFRS 3 under the 2008 review.
IAS 39 Financial Instruments: Recognition and Measurement: changes were made to prepayment
options and cash flow hedging in relation to forward contracts arising from business combination
agreements. As regards forward contracts arising from business combination agreements, paragraph 2 g) of
IAS 39 specified that contracts stipulated between a purchaser and a vendor in a business combination to
buy or sell an acquiree at a later date, would be excluded from the scope of IAS 39. The amendment in
question made it clear that this exemption is limited to forward contracts between a purchaser and a vendor
shareholder to buy/sell an acquiree that result in a business combination and that are settled at a later date
whilst awaiting the necessary authorisations and the completion of legal processes. As regards prepayment
options, it was specified that options whose exercise price does not compensate the lender for lost interest
for the period corresponding to the remaining term of the contract must be separated from the host
123
Consolidated Notes to Financial Statements – Part A – Accounting Policies
contract. As regards cash flow hedging, the wording used to illustrate the criteria for reclassification of gains
and losses on hedging instruments to profit and loss has been changed.
IFRIC 9 – Reassessment of embedded derivatives. Further to revision of IFRS 3, it was necessary to
confirm that the aim of the interpretation is still the same but the amendment clarifies that this standard
does not apply to embedded derivatives in contracts acquired in a business combination, a combination of
entities under joint control or a joint venture. The acquisition of affiliated companies is excluded from the
scope of this interpretation. If the entity avails itself of early application of the revised IFRS 3 then this
interpretation also applies by providing appropriate reporting.
IFRIC 16 – Hedges of a net investment in a foreign operation. In hedges of a net investment in a
foreign operation, the hedging instrument may be owned by one or more companies within a group,
provided that IAS 39 requirements are met.
124
Consolidated Notes to Financial Statements – Part A – Accounting Policies
IAS/IFRS international accounting standards and related SIC/IFRIC interpretations endorsed by the
European Commission, the application of which is mandatory as of 31 December 2010.
Pursuant to IAS 8 paragraphs 30 and 31, please note that up to 18 February 2011 the European Commission
approved some principles and interpretations issued by the IASB, the application of which is required as of 31
December 2010. In these instances the Group did not opt, in any of the applicable cases, for early application. These
principles and interpretations are shown below.
IAS 24 Related Party Disclosures. The revised principle issued by IASB in November 2009 was endorsed by the
European Commission under Regulation no. 632/2010 on 20 July 2010.
The main novelties introduced by the new principle, which supersedes the currently effective one, include:
the principle of ‗symmetrical relationships‘ between each of the related parties‘ financial statements;
same rules applied to natural persons and corporate entities for the purpose of related party transactions;
commitments are required to be included among outstanding balances with related parties;
clarification was given that related parties include an associate‘s subsidiaries and the subsidiaries of a jointly
controlled entity;
the scope of parties related to the Parent Company includes the subsidiaries of the investor that has
significant influence over it;
government-related entities are exempt from certain disclosure requirements.
With a view to guaranteeing consistency between the International accounting principles, the adoption of IAS 24 (as
revised) entails amendments to IFRS 8 Operating Segments. The new principle will be effective for annual periods
beginning on or after 1 January 2011.
IAS 32 Financial Instruments: Presentation In October 2009, the IASB issued an amendment stating that rights
issued on a pro-rata basis to all existing shareholders of the same class for a fixed amount of currency should be
classed as equity, regardless of the currency in which the exercise price is denominated. The amendment, approved
by the European Commission under Regulation 1293/2009 of 23 December 2009, is applicable to financial
statements for financial years beginning on or after 1 February 2010.
IFRS 1 Limited Exemption from Comparative IFRS 7 disclosures for first-time adopters. On 28 January 2010
the IASB issued an amendment to IFRS 1 ―Limited Exemption from Comparative IFRS 7 disclosures for first-time
adopters‖, IFRS first-time adoption companies would be required to restate comparative information under IFRS 7
about fair value measurements and liquidity risk for periods ending 31 December 2009. The amendment to IFRS 1
is intended to prevent the potential use of elements that become known at a later point of time and ensure that
first-time adopters are not disadvantaged as compared with current IFRS preparers, enabling them to use the same
transitional provisions that Amendments to IFRS 7 ―Improving Disclosures about Financial Instruments ― (introduced
in March 2009) provides to current IFRS preparers. The adoption of IFRS 1 entails amendments to IFRS 7 Financial
Instruments - Additional disclosures for the purpose of consistency. Regulation no. 574/2010 of 30 June 2010
requires the entity to apply this amendment as of financial reports beginning on or after 1 July 2010.
On 15 November 2009, the International Financial Reporting Interpretations Committee (IFRIC) published
amendments to IFRIC 14 Prepayments of a Minimum Funding Requirement. The aim of the amendments is to
remove an unintended consequence of IFRIC 14 in cases where an entity subject to a minimum funding requirement
makes an early payment of contributions where under certain circumstances the entity making such a prepayment
would be required to recognise an expense. In the case where a defined benefit plan is subject to a minimum
funding requirement, the amendment to IFRIC 14 prescribes to treat this prepayment, like any other prepayment, as
an asset.
Endorsed by the European Commission under Regulation no. 633/2010 of 19 July 2010, this interpretation will be
effective for annual periods beginning on or after 1 January 2011.
On 26 November 2009, the International Financial Reporting Interpretations Committee (IFRIC) published
interpretation IFRIC 19 - Extinguishing Financial Liabilities with Equity Instruments. The IASB clarified
procedures for measuring transactions in which an entity renegotiates the terms of a debt by totally, or partially,
extinguishing the liability by issuing equity instruments subscribed for by the creditor (these transactions are often
known as ―debt for equity swaps‖). The interpretation does not apply to transactions in which the creditor is a direct
or indirect shareholder of the debtor, in which the creditor and the debtor are controlled by the same company
before and after the transaction or in which the transaction was planned for in the original clauses of the contract.
The interpretation clarifies that equity instruments issued must be measured at fair value and that they represent the
consideration paid to extinguish the liabilities; the difference between the fair value of the equity instruments issued
125
Consolidated Notes to Financial Statements – Part A – Accounting Policies
and the book value of the liability extinguished must be accounted for through profit and loss. The adoption of
IFRIC 19 entails amendments to IFRS 1 First-time adoption of International Financial Reporting Standards for
the purpose of consistency.
Endorsed by the European Commission under Regulation no. 662/2010 of 23 July 2010, this interpretation must be
applied in annual periods beginning on or after 1 July 2010.
“Improvements to the international accounting standards” (2010). Within the scope of this project, the IASB
issued a set of amendments to the IFRSs on 6 May 2010. The amendments indicated by the IASB as involving a
change in the presentation, recognition and measurement of balance sheet items are listed below, leaving aside,
however, those that will only result in terminological or publication changes with minimal effects in terms of
accounting. These amendments were endorsed by the European Commission under Regulation no. 149/2011 of 18
february 2011
IFRS 1 – Changes in accounting policies upon first time adoption of the IFRS. If during the period
covered by its first IFRS financial statements an entity changes its accounting policies or its use of the
exemptions, it shall explain the changes between its first IFRS interim financial report (in accordance with
IAS 34) and its first IFRS financial statements and it shall update the reconciliations between previous
principles and IFRSs. IAS 8‘s requirements about changes in accounting policies do not apply in an entity‘s
first IFRS financial statements.
IFRS 1 – First-time adoption of IFRSs: use of event-driven fair value measurements as deemed cost.
In accordance with IFRS 1, a first-time adopter may use as deemed cost the event-driven fair value
measurements (arising from an event such as an initial public offering) that local regulations admit for
financial statement purposes. The event must occur at or before the date of transition to IFRSs. The
amendment allows for the event-driven fair value measurement to be used as deemed cost even when it
occurs after the date of transition to IFRSs but during the period covered by the first IFRS financial
statements. An entity shall recognise the resulting adjustments to equity.
IFRS 1 – First-time adoption of IFRSs: deemed cost for assets used in operations subject to rate
regulation. For items of property, plant and equipment or intangible assets used in operations subject to
rate regulation, first-time adopters may use the carrying amount determined under previous accounting
principles as deemed cost. The carrying amount shall be tested for impairment in accordance with IAS 36.
An entity applying this option shall disclose it in its financial statements.
IFRS 3 – Business combinations: measurement of non-controlling interests. IFRS 3 sets out that noncontrolling interests may be measured at either fair value or based on the proportionate share in the
recognised amounts of the acquiree‘s identifiable net assets. The amendment modifies the principle by
restricting the option only to non-controlling interests that are "present ownership instruments" and entitle
their holders to a proportionate share of the entity‘s net assets in the event of liquidation.
IFRS 3 – Business combinations: Un-replaced and voluntarily replaced share-based payment awards
The amendment clarifies that the provisions set out for the acquirer's awards exchanged for acquiree's
awards also apply to share-based payments of the acquiree that are not replaced. The amendment specifies
that when share-based payment awards are replaced in a business combination, the requirements set out
for the allocation of market-based measures of replacement awards, between consideration transferred and
post-combination remuneration cost, apply to all replacement awards regardless of whether the acquirer is
obliged to replace awards or not.
IFRS 3 - Business combinations: Contingent consideration The amendment clarifies that IAS 32, IAS 39
and IFRS 7 do not apply to contingent liabilities arising from business combinations with an acquisition date
prior to the application of IFRS 3 (2008).
126
Consolidated Notes to Financial Statements – Part A – Accounting Policies
IFRS 7 Financial Instruments: Disclosures The amendment emphasises the interaction between
quantitative and qualitative disclosures for users to provide a comprehensive overview of the nature and
extent of risks associated with financial instruments. Clarification was also given that the requirement to
provide disclosure of the amount that represents the maximum exposure of financial instruments to credit
risk has been removed for financial assets whose carrying amount best reflects the maximum exposure to
credit risk. Finally, the amendment has removed the requirement to specifically disclose the carrying
amount of financial assets whose terms have been renegotiated to avoid becoming past due or impaired.
IAS 1 – Statement of changes in equity. The amendment clarifies that an entity shall present, for each
component of equity (other comprehensive income ), a reconciliation between the carrying amount at the
beginning and the end of the period in the statement of changes in equity or in the notes.
IAS 27 – Consolidated and Separate Financial Statements: Transition requirements arising as a
result of amendments to IAS 27 (2008). The amendment clarifies that an entity shall apply amendments
to IAS 21, IAS 28 and IAS 31 arising as a result of IAS 27 (2008) prospectively, with the exception of
paragraph 35 of IAS 28 and paragraph 46 of IAS 31 which shall be applied retrospectively.
IAS 34 – Interim Financial Reporting: significant events and transactions. The amendment emphasises
the principle set out in IAS 34 according to which disclosure on significant events and transactions should
include an update on the relevant information presented in the most recent annual financial report. It also
provides guidance on how this principle should be applied with respect to financial instruments and their
fair value.
IFRIC 13 – Customer loyalty programmes: fair value of award credits. The amendment clarifies that the
fair value of the award credits shall take into account, as appropriate: i) the amount of the discounts or
incentives that would otherwise be offered to customers who have not earned award credits from an initial
sale; and ii) the proportion of award credits that are not expected to be redeemed by customers.
127
Consolidated Notes to Financial Statements – Part A – Accounting Policies
Accounting standards, amendments and interpretations issued by the IASB and still awaiting approval from
the European Commission.
The start date for mandatory application of these standards and interpretations which is, in any event, subsequent to
31 December 2010, is not shown as this will be determined on a definitive basis, for companies residing in
European Union countries, by approval regulations.
IFRS 7 – Financial instruments: additional disclosures. The amendment issued by IASB on 7 October 2010
strengthens disclosure requirements for transactions involving transfers of financial assets. The amendments increase
the IFRS 7 disclosure requirements where an asset is transferred but is not derecognised and introduce new
disclosures for assets that are derecognised but the entity continues to have an exposure to the asset after the sale.
The amendment will allow users to better understand the potential risks from transferred financial assets that remain
on the transferor's balance sheet. The former IAS 39 implementation guidance on derecognition of financial assets
remains unaltered.
IFRS 9 – Financial instruments – Replacement Project. In response to requests to simplify accounting standards
applicable to financial instruments from both political organisations and international institutions, the IASB has
launched a project to replace the current IAS 39. The project in question can be broken down into three separate
phases: 1) classification and measurement of financial assets, 2) amortised cost and impairment, 3) hedge
accounting.
With regard to the first phase, on 12 November 2009, the IASB issued the accounting standard IFRS 9 – Financial
instruments, which must be adopted from 1 January 2013. The new accounting standard relates to the classification
and measurement of financial assets. Portfolio categories were reduced to three (amortised cost, fair value with
changes to profit and loss and fair value through other comprehensive income for equity instruments). HTM and AFS
categories were removed. Rules for classifying the three categories in question were changed, including those
relating to the Fair Value Option (FVO). IFRS 9 uses a unique method to determine whether a financial asset should
be measured at amortised cost or at fair value. The method is based on the entity‘s business model and on the
contractual features of the cash flow of the financial assets. The new standard also requires use of a unique
impairment method. The new IFRS has not been approved by the European Commission which has postponed the
process until completion of the other phases.
On 28 October 2010, the International Accounting Standards Board (IASB) completed IFRS 9 with a section on
classification and measurement of financial instruments. The IASB substantially decided to maintain the existing
framework of IAS 39. It therefore maintained the existing requirement for separate accounting of derivatives
embedded in a financial host. For instruments other than derivatives, measurement of all fair value changes
through profit or loss only applies to held-for-trading financial liabilities. For financial liabilities designated under the
fair value option, the amount of change in the fair value that is attributable to changes in the credit risk of the
liability, shall be presented directly in other comprehensive income, unless it creates/increases an accounting
mismatch, in which case the entire change in fair value shall be presented within profit and loss. The amount that is
recognised in other comprehensive income is not transferred from OCI to P&L ("recycled") when the liability is
settled or extinguished.
As regards Project phase 2 "Amortised Cost and Impairment", the IASB published the Exposure Draft 2009/12
"Financial Instruments: amortised cost and impairment" in November 2009. The IASB document proposed that a
model of impairment based on expected losses be introduced into the set of accounting principles. This model only
applies to financial instruments measured at amortised cost under IFRS 9. Under the impairment model proposed in
the ED 2009/12 , expected losses are recognised through profit and loss at amortised cost, calculated using the
effective interest rate based on cash flows which inherently include expected losses. Discussions on this document
revealed that the proposal would result in major operational challenges, with costs being higher than benefits arising
from application of the new method. As a consequence, the Board decided to establish an Expert Advisory Panel
that will assess the operational challenges caused by the application of the expected losses method. In January
2010, the IASB and FASB continued discussion and published a supplementary document to ED 2009/12 "Financial
Instruments: Impairment". While maintaining the basic assumption of ED 2009/12 unaltered (expected losses
method), this new document provides for significant operational simplification, by decoupling measurement of
expected losses from amortised cost . The method for measurement of amortised cost (and effective interest) has
substantially remained the same as provided under IAS 39; expected losses are presented separately from interest,
using a time-proportionate approach for 'performing' assets (good book) and immediate recognition in profit and
loss for impaired assets (bad book). The comment period for this supplement becomes due on 1 April 2011.
128
Consolidated Notes to Financial Statements – Part A – Accounting Policies
The exposure draft 2010/13 "Hedge Accounting" was published by the IASB to address the third phase of the
project to replace IAS 39. The document provides guidance on how to account for individual hedged items or
closed portfolios of hedged items; hedge accounting for open portfolios will be addressed in a subsequent document
which the IASB expects to issue during the first half of 2011.
The new standard is based on a re-definition of the objective of hedge accounting to represent in the financial
statements the effect of an entity‘s riskmanagement activities that use financial instruments to manage exposures
arising from particular risks that could affect profit or loss.
The IASB has published this exposure draft to address some of the challenges caused by the general hedge
accounting requirements in IAS 39; these challenges lie in the fact that the existing accounting requirements are
essentially rule-based, since it consists in a set of rather strict assumptions that do not always allow for the effects of
complex and diversified risk management activities such as those performed by a bank to be properly reflected in
the financial statements. The comment period for this document becomes due on 9 March 2011.
IAS 12 - Income taxes. The International Accounting Standard Board (IASB) has published an amendment for
"Deferred Tax: Recovery of Underlying Assets". Under IAS 12, the measurement of deferred tax assets and liabilities
should be based on the expected manner of recovery of the carrying amount of the underlying asset through use or
sale. It may be difficult and subjective to determine whether the carrying amount will be recovered through use or
sale when the asset is measured at fair value in accordance with IAS 40 "Investment Property". The amendments are
intended to provide a practical approach introducing the presumption that the carrying amount of the underlying
asset will generally be recovered entirely through sale.
As a result of this amendment, SIC-21 "Income Taxes—Recovery of Revalued Non-Depreciable Assets" would no
longer be applicable to investment property measured at fair value.
IFRS 1 First-time adoption of International Financial Reporting Standards. Two amendments to IFRS 1 have
been published by the IASB. The first replaced fixed date references (1 January 2004) with ‗the date of transition to
IFRSs‘, thus exempting first time adopters of IFRSs from having to reconstruct transactions that occurred prior to
their date of transition to IFRSs. The second amendment includes guidance on how an entity should resume
presentation (or presentation for the first time) of financial statements in accordance with IFRSs after a period where
the entity‘s functional currency was subject to severe hyperinflation.
129
Consolidated Notes to Financial Statements – Part A – Accounting Policies
A2 – The main items of the accounts
Accounting standards
This chapter contains the Accounting standards in relation to the main assets and liabilities items of the balance
sheet, which were adopted for the preparation of the consolidated financial statements as at 31 December 2010.
1 Held-for-trading financial assets
a) recognition criteria
Initial recognition of financial assets occurs at settlement date, for debt securities and equities and at trade date for
derivative contracts.
Upon initial recognition, held-for-trading financial assets are recognised at fair value, which usually corresponds to
the amount paid, without considering transaction costs or revenues directly attributable to the instrument, which are
directly posted to the profit and loss statement.
Any embedded derivatives in combined financial instruments not directly connected to the latter and with the
characteristics to meet the definition of a derivative are recorded separately from the host contract at fair value.
The applicable accounting criteria are administered to the primary contract.
b) classification criteria
This category includes debt securities and equities purchased mainly for the purpose of obtaining short-term profits
arising from price changes and the positive value of derivative contracts other than those designated as hedging
instruments. Derivative contracts include those embedded in combined financial instruments which were subject to
separate accounting.
c) measurement criteria
After initial recognition held-for-trading financial assets are recorded at fair value, with value changes recognised in
profit or loss.
For a description of criteria used to determine the fair value of financial instruments, please see section "―A.3.2 Fair
Value Hierarchy‖ of this Part A.
Equity instruments and derivatives indexed to such equity instruments, for which it is not possible to determine a
reliable fair value according to the guidelines listed above, keep being measured at cost less impairment. Such
impairment losses are not reversed.
d) derecognition criteria
Financial assets are derecognised upon maturity of the contractual rights on the cash flows resulting from the assets
or when the financial assets are sold and all related risks/benefits are transferred. Securities received within the scope
of a transaction that contractually provides for subsequent sale are not recorded in the financial statements, and
securities delivered within the scope of a transaction that contractually provides for subsequent buyback are not
derecognised from the financial statements. Consequently, in the case of securities acquired with an agreement for
resale, the amount paid is recorded in the financial statements as loans and advances to customers or banks, while
in the case of securities transferred with an agreement for repurchase, the liability is recorded under deposits from
banks or deposits from customers or under other liabilities.
e) revenue recognition criteria
Profits and losses arising from any changes in the fair value of a financial asset are recognised in profit and loss
under account ―80 Net profit/loss from trading‖, except for gains and losses on receivable derivatives linked with the
fair value option which are classified under account ―110 Net profit/loss on financial assets and liabilities designated
at fair value‖.
2 Available-for-sale financial assets
a) recognition criteria
Financial assets are initially recognised on the date of settlement, with reference to debt or equity instruments, and
on the date of disbursement, with reference to loans and receivables.
130
Consolidated Notes to Financial Statements – Part A – Accounting Policies
On initial recognition, the assets are reported at their fair value which normally corresponds to the price paid,
inclusive of transaction costs or income directly attributable to the instrument. If recognition occurs following the
reclassification from assets held to maturity, the recognition value is the fair value as at the time of transfer. In the
case of debt instruments, any difference between the initial value and the value of repayment is spread out over the
life of the debt instrument in accordance with the method of amortised cost.
b) classification criteria
This category includes non-derivative financial assets which are not classified as loans,financial assets designated at
fair value through profit and loss or held-to-maturity financial assets.
In particular, this category also comprises strategic equity investments which are not managed for trading purposes
and cannot be defined as controlling interest, connection and joint control, and bonds which are not subject to
trading. Such investments may be transferred for any reason, such as liquidity requirements or variations in interest
rates, exchange rates, or stock price.
c) measurement criteria
After initial recognition, financial assets available for sale are measured at fair value, with interest being recognised
in the income statement as resulting from the application of the amortized cost and with appropriation to a specific
equity reserve of the gains or losses arising from changes in fair value net of the related tax effect, except losses due
to impairment. Foreign exchange fluctuations in relation to equity instruments are posted to the specific equity
reserve, whereas changes in loans/receivables and debt instruments are allocated to profit and loss. Equity
instruments, for which it is not possible to determine a reliable fair value, are maintained at cost, adjusted for any
impairment losses.
Financial assets available for sale are reviewed for objective evidence of impairment at each balance sheet and
interim reporting date. Indicators of a likely impairment are, for instance, significant financial difficulty of the issuer,
non-fulfilment or defaults in payments of interest or principal, the possibility that the borrower is declared bankrupt
or submitted to other forms of insolvency proceedings, the disappearance of an active market for the assets. In
particular, as far as equity instruments that have a quoted market price in an active market are concerned, a market
price as at the date of the financial statements lower than the original purchasing cost of at least 30% or a market
value lower than the cost lasting more than 12 months are considered an objective evidence of value reduction. If
further reductions take place in subsequent financial years, these are charged directly to the profit and loss
statement.
The amount of any value adjustment shown following the impairment test is recorded in the profit and loss
statement as an expense for the year. If the reasons for impairment cease to exist, following an event which
occurred after recognition of impairment, writebacks are recognised in equity in the case of equity instruments, and
through profit and loss in the case of debt securities.
d) derecognition criteria
Financial assets are derecognised upon maturity of the contractual rights on the cash flows resulting from the assets
or when the financial assets are sold and all related risks/benefits are transferred.
Securities received within the scope of a transaction that contractually provides for subsequent sale are not
recognised in the financial statements, and securities delivered within the scope of a transaction that contractually
provides for subsequent repurchase are not derecognised from the financial statements. Consequently, in the case of
securities acquired with an agreement for resale, the amount paid is recognised in the financial statements as loans
and advances to customers or banks, while in the case of securities transferred with an agreement for repurchase,
the liability is shown under deposits from customers or deposits from banks or under other liabilities.
e) revenue recognition criteria
Upon disposal, exchange with other financial instruments or measurement of a loss of value following impairment
testing, the fair value results accrued to the reserve for assets available for sale are reversed to profit and loss under:
account ―100 – Gains/Losses on purchase/disposal of: b) financial assets available for sale", in the case of
disposal;
account "130 - Net impairment losses/reversals‖ on: b) financial assets available for sale", in the case of
recognition of impairment.
If the reasons for impairment cease to exist, following an event which occurred after the impairment was recognised,
the impairment loss is appropriately reversed: through profit and loss in the case of loans or debt securities, and
through equity in the case of equity instruments.
131
Consolidated Notes to Financial Statements – Part A – Accounting Policies
3 Held-to-maturity investments
a) recognition criteria
Initial recognition of the financial asset occurs on the settlement date. On initial recognition, the assets are measured
at their fair value which normally corresponds to the price paid, inclusive of transaction costs or income directly
attributable to the instrument.
If inclusion in this category occurs following reclassification from available-for-sale financial assets, the fair value of
the asset as at the date of reclassification is used as the new amortised cost of the asset.
b) classification criteria
This category includes non-derivative financial assets with fixed or determinable payments and fixed maturity, which
the Group has the positive intention and ability to hold to maturity. If it is no longer appropriate to keep an
investment to maturity as a result of a change in the Group‘s intention and ability to hold it as such, the investment
is reclassified among assets available for sale.
Whenever the sales or reclassifications are qualitatively and quantitatively irrelevant, any investment held to residual
maturity shall be reclassified as available for sale.
c) revenue recognition criteria
After initial recognition at its fair value, a held-to-maturity financial asset is measured at amortised cost using the
effective interest method, adjusted so as to take account of the effects resulting from any impairment losses.
The result of the application of this method is posted through profit and loss under account ―10 – Interest income
and similar revenues‖.
Gains or losses from the sale of these assets are recognised in profit or loss under account "100 - Gains (losses) on
disposals or repurchases of: c) held-to-maturity investments".
Assets are tested for impairment at annual and interim reporting dates.
If evidence of an impairment loss exists, the loss is measured as the difference between the carrying value of the
asset and the current value of the estimated future cash flows, discounted at the original effective interest rate. The
loss is recorded in the income statement under account ―130 - Net losses/recoveries on impairment of: c) held-tomaturity investments".
If the reasons for impairment cease to exist following an event occurring after the impairment loss was recognised,
recoveries are posted to the income statement under the same account 130.
d) derecognition criteria
Financial assets are derecognised upon maturity of the contractual rights on the cash flows resulting from the assets
or when the financial assets are sold and all related risks/benefits are transferred.
As at 31 December 2010, in compliance with the guidelines adopted with a specific Framework resolution, the
Group holds a negligible quantity of financial instruments classified in this category.
4 Loans and receivables
a) recognition criteria
Recognition in the financial statements occurs:
for a receivable:
- on the date of disbursement;
- when the creditor acquires the right to payment of the amounts contractually agreed upon;
for a debt security:
- on the date of settlement.
The initial value is determined on the basis of the fair value of the financial instrument (which is normally equal to
the amount disbursed or price of underwriting), inclusive of the expenses/income directly related to the individual
instruments and determinable as of the transaction date, even if such expenses/income are settled at a later date.
132
Consolidated Notes to Financial Statements – Part A – Accounting Policies
This does not include costs which have these characteristics but are subject to repayment by the debtor or which can
be encompassed in ordinary internal administrative expenses.
Swaps and repo contracts under agreement to re-sell are posted as lending transactions. In particular, the latter are
reported as receivables in the sum of the spot amount paid.
b) classification criteria
Receivables include loans to customers and banks, whether disbursed directly or purchased from third parties, with
fixed or determinable payments, which are not quoted in an active market and were not initially classified among
available-for-sale financial assets and financial assets at fair value through profit or loss.
They also incorporate trade receivables, repurchase agreements, receivables arising from financial leasing
transactions and securities purchased in a subscription or private placement, with fixed or determinable payments,
not quoted in active markets. Also included among receivables are junior securities coming from own securitisations
completed prior to first-time adoption.
c) revenue recognition criteria
After initial recognition, receivables are valued at amortised cost, which is the initial recognition amount
decreased/increased by principal repayments, write-downs/write-backs and the amortisation – calculated using the
effective interest rate method – of the difference between the amount disbursed and the amount repayable upon
maturity, typically attributable to the costs/income directly charged to each receivable. The effective interest rate is
the interest rate which makes the current value of future flows of the receivable, in principal and interest, estimated
over the expected life of the receivable, equal to the amount disbursed, inclusive of any costs/income attributable to
the receivable. Therefore, the economic effect of costs and income is spread over the expected residual life of the
receivable.
The amortised cost method is not used for short-term receivables, for which the effect of applying a discounting
logic is negligible. Similar valuation criteria are adopted for receivables with no specific maturity or subject to
revocation.
Impaired exposures (e.g. non-performing, watchlist , restructured and past-due loans) are classified into different
risk categories in accordance with the regulations issued by the Bank of Italy, supplemented with internal provisions
which set automatic criteria and rules for the transfer of receivables between different risk categories.
Watchlist loans include loans that have been past due for over 270 days.
Classification takes place independently, except for loans more than 180 days past due and watchlist loans more
than 270 days past due, which are measured using automated procedures.
In order to determine adjustments to the carrying value of receivables, and taking into account the different
impairment levels, analytical or collective valuation is used, as outlined hereunder.
NPLs, watchlist and restructured loans are subject to analytical valuation; loans more than 180 days past due, loans
subject to country risk and performing loans are subject to collective valuation. In accordance with the Bank of
Italy‘s recent amendment to Circular 262/2005, however, data for loans more than 180 days past due are subject to
analytical valuation in the tables of the notes to the financial statements.
For loans subject to analytical assessment, the amount of value adjustment for each loan is equal to the difference
between the loan book value at the time of valuation (amortised cost) and the current value of estimated future
cash flows, as calculated by applying the original effective interest rate.
Expected cash flows take account of the expected repayment schedule, the expected recovery value of the
collaterals, if any, as well as the costs expected to be incurred for the recovery of the credit exposure.
The value adjustments are booked to the profit and loss statement to Account 130 - Writedowns and write-backs
due to impairment". The adjustment component attributable to the discounting of cash flows is calculated on an
accrual basis in accordance with the effective interest rate method and posted under write-backs.
If the quality of the impaired receivable has improved to such a point that there is reasonable certainty of timely
recovery of the principal and interest, its initial value is recycled in the following years to the extent in which the
reasons determining the adjustment disappear, provided that such valuation can be objectively linked with an event
which occurred after the adjustment. The write-back is posted to the profit and loss statement and may not in any
case exceed the amortised cost that the receivable would have had without prior adjustments.
Receivables with no objective evidence of loss are subject to a collective assessment of impairment. Such assessment,
developed on the basis of a risk management model, is carried out by category, with receivables grouped together
133
Consolidated Notes to Financial Statements – Part A – Accounting Policies
according to credit risk, and the relative loss percentages are estimated taking into account historical series based on
elements observed on the date of assessment which allow the value of latent loss in each category to be estimated.
The model, for this type of valuation, involves the following steps:
Segmentation of the loan portfolio by:
- Client segment (turnover);
- economic sectors of activity;
- Geographical location;
Determination of the loss rate of individual portfolio segments, using the historical experience of the Group as
reference.
Value adjustments determined collectively are posted to the profit and loss statement. Any additional write-downs
or write-backs are recalculated on a differential basis, at year-end or on the dates of interim reports, with reference
to the entire loan portfolio on the same date.
d) derecognition criteria
Any receivables sold are derecognised from the assets on the balance sheet only if their disposal implied the
substantial transfer of all associated risks and benefits. However, if the risks and benefits associated with the
receivables sold have been maintained, they continue to be posted among the assets on the balance sheet, even
though legal ownership has been transferred.
If it is not possible to ascertain a substantial transfer of risks and benefits, the receivables are derecognised when
control of the assets has been surrendered. If such control has been maintained, even partly, the receivables should
continue to be recognised to the extent of residual involvement, as measured by the exposure to the changes in
value of the receivables sold and to the changes in their cash flows.
Finally, receivables sold are derecognised if the contractual rights to receive the cash flows from the assets are
maintained and a contractual obligation to pay only said flows to third parties is simultaneously undertaken.
5 Financial assets designated at fair value through profit and loss
a) recognition criteria
Financial assets are initially recognised on the date of settlement, with reference to debt or equity instruments, and
on the date of disbursement, with reference to loans and receivables.
Upon initial recognition, financial assets are measured at fair value, which usually equals the consideration paid,
without adding directly attributable transaction costs or fees earned, which are posted to profit and loss.
The Fair Value Option (FVO) applies to all financial assets and liabilities which would have caused misrepresentation
on the profit and loss statement and balance sheet had they been otherwise classified, and to all instruments which
are managed and measured using a fair value approach.
b) classification criteria
This category includes the financial assets intended for measurement at fair value through profit or loss (except for
equity instruments with no reliable fair value) when:
1. the designation at fair value eliminates or reduces significant accounting mismatches in the reporting of financial
assets in the profit and loss statement and balance sheet; or
2. the management and/or measurement of a group of financial assets at fair value through profit or loss is
consistent with an investment or risk management strategy documented as such by senior management; or
3. a host instrument embeds a derivative which significantly modifies the cash flows of the host and should
otherwise be accounted for separately.
c) measurement criteria
Subsequent to initial recognition, the assets are measured at fair value.
For a description of criteria used to determine the fair value of financial assets, please see section "―A.3.2 Fair Value
Hierarchy‖ of this Part A.
134
Consolidated Notes to Financial Statements – Part A – Accounting Policies
d) derecognition criteria
Financial assets are derecognised upon maturity of the contractual rights on the cash flows resulting from the assets
or when the financial assets are sold and all related risks/benefits are transferred.
Securities received within the scope of a transaction that contractually provides for subsequent sale are not
recognised in the financial statements, and securities delivered within the scope of a transaction that contractually
provides for subsequent repurchase are not derecognised from the financial statements. Consequently, in the case of
securities acquired with an agreement for resale, the amount paid is recognised in the financial statements as loans
and advances to customers or banks, while in the case of securities transferred with an agreement for repurchase,
the liability is shown under deposits from customers or deposits from banks
At 31 December 2009, the Group only held financial instruments servicing internal pension funds in this category.
e) revenue recognition criteria
Profits and losses resulting from any changes in the fair value of the financial assets are posted under item 110 ―Net
profit/loss from financial assets and liabilities measured at fair value‖ in the profit and loss statement.
Derivative receivables associated with the fair value option are treated similarly, with their impact recorded under
item 110 ―Net profit/loss from financial assets and liabilities measured at fair value‖.
6 Hedging transactions
a) recognition criteria – purposes
Risk-hedging transactions are aimed at offsetting any potential losses on a certain element or group of elements that
may arise from a specific risk, with the profits made on a different element or group of elements, should that
particular risk occur.
b) classification criteria – types of hedging
IAS 39 provides for the following types of hedging:
fair value hedges, which are intended to hedge the exposure to changes in fair value of a recognised asset or
liability, that are attributable to a particular risk;
cash flow hedges, which are intended to hedge the exposure to variability in future cash flows attributable to
particular risks associated with a recognised asset or liability;
hedges of a net investment in a foreign operation, which refers to hedging the risks of an investment in a foreign
operation denominated in a foreign currency.
To conclude the chapter on the accounting principles, a specific section is added to provide further insight into the
application issues and policies adopted by the Group with regard to hedging transactions. These issues are also
addressed in section E of the notes to the financial statements relating to risk management, as well as in sections B
and C relating to the balance sheet and profit and loss statement. The hedging policies adopted by the Group are
explained, with a special focus on the applicability of the―natural hedges‖ provided for by the fair value option as
an alternative to hedge accounting in some major instances. In particular, fair value option and cash flow hedging
were adopted mainly to account for hedges of liabilities , while fair value hedging was adopted mainly to account
for hedges of assets, i.e both micro-hedges on fixed-rate debt securities/mortgages and macro-hedges on fixed-rate
loans.
c) revenue recognition criteria
Hedging derivatives are measured at fair value. In particular:
in the case of fair value hedging, the changes in the fair value of the hedged asset are offset by the changes in
the fair value of the hedging instrument. Offsetting gains and losses are recognised in profit or loss under
Account 90 ―Net profit (loss) from hedging ‖ through recognition of value changes, with reference both to the
hedged item (as regards changes produced by the underlying hedged risk factor) and the hedging instrument.
Any difference, i.e. partial ineffectiveness of the hedging derivatives, reflects their net P&L impact;
135
Consolidated Notes to Financial Statements – Part A – Accounting Policies
in the case of cash flow hedging, the changes in fair value of the derivative are posted to a specific shareholders‘
equity reserve for the effective portion of the hedge, and are posted to the profit and loss statement under item
90 ―Net profit (loss) from hedging ‖ only when when the changes in fair value of the hedging instrument do not
offset the changes in the cash flows of the hedged item;
hedges of foreign currency investments are accounted for similarly to cash flow hedges.
A hedging transaction should be reflective of a pre-determined risk management strategy and consistent with risk
management policies in use. In addition, a derivative is designated as a hedging instrument if the relationship
between the hedged item and the hedging instrument is formally documented, and provided that the hedging
relationship is -and is expected to be- effective both at inception and, prospectively, throughout its life.
Hedge effectiveness depends on the extent to which changes in the fair value or expected cash flows of the hedged
item are offset by corresponding changes in the hedging instrument. Therefore, effectiveness is measured by
comparing said changes, while taking into account the company's intent at hedge inception.
With reference to the hedged risk, the hedging is effective (within the 80% to 125% window) when the changes in
fair value (or in the cash flows) of the hedging instrument neutralise the changes in the hedged item almost entirely.
Effectiveness is assessed at year-end by using:
prospective tests, which justify continuing hedge accounting since they show its expected effectiveness;
retrospective tests, which show how effective the hedging relationship has been in the period under review.
Derivatives which are considered as hedging instruments from an economic viewpoint because they are
operationally linked with financial liabilities measured at fair value (Fair Value Option) are classified among trading
derivatives; the respective positive and negative differentials or margins accrued until the end of the reporting
period are recognised, in accordance with their hedging purpose, as interest income and interest expense, while
valuation gains and losses are posted under Account 110 of the profit and loss statement, ―Net gains (losses) on
financial assets and liabilities designated at fair value‖.
d) derecognition criteria – ineffectiveness
If tests do not confirm hedge effectiveness, both retrospectively and prospectively, hedge accounting is discontinued
and, unless it has expired or has been terminated, the hedging derivative contract is reclassified as a held-for-trading
instrument, whereas the hedged item reverts to the accounting treatment based on its original classification.
If a fair value hedge relationship is discontinued, any positive or negative adjustments made to the carrying amount
of the hedged item until the date of discontinuation are recycled into profit and loss. In particular, if the hedged
item has not been derecognised, transfer to profit or loss is made using the effective interest method over the
remaining life of the hedged instrument; if the hedged debt instrument is derecognised (for example due to early
redemption), any gain or loss shall be entirely reclassified to profit or loss when the hedge relationship ceases.
Any cash flow hedge reserves are recycled to profit or loss using the amortised cost method over the remaining life
of the hedged instrument.
7 Equity investments
a) recognition criteria
The account includes equity investments held in associates and jointly controlled entities; the investments are
initially recognised at purchase cost.
b) classification criteria
Companies with contractual agreements, shareholders‘ pacts or agreements of a different nature for the joint
management of business and the appointment of the directors are considered as jointly controlled entities.
Associates include (i) companies where a share of 20% or higher of voting rights is held, and (ii) companies which –
owing to specific legal ties such as the participation in shareholders‘ pacts – have to be considered as subject to
significant influence.
The classification of investments in associates and jointly controlled entities is made regardless of legal status and the
computation of voting rights includes any potential voting rights currently exercisable.
c) revenue recognition criteria
136
Consolidated Notes to Financial Statements – Part A – Accounting Policies
Equity investments in related enterprises and joint ventures are recognised at cost. The book values are tested for
impairment at each balance-sheet or other interim reporting date.
If evidence of impairment indicates that there may have been a loss in value of an equity investment, then the
recoverable value of the investment (which is the higher of the fair value, less costs to sell, and the value in use)
should be estimated . The value in use is the present value of the future cash flows expected to be derived from the
investment, including those arising from its final disposal.
Should the recoverable value be less than its carrying value, the difference is recognised immediately in profit or
loss under Account "240 - Gains (losses) on equity investments".
Should the reasons for impairment no longer apply as a result of an event occurring after the impairment was
recognised, reversals of impairment losses are credited to the same account in profit and loss.
The profit related to the equity investments is booked to profit and loss of the Parent Company regardless of
whether it was generated by the investee before or after the date of the acquisition. If, after recognition of
dividends, the carrying amount of the investment in the separate financial statements exceeds the carrying amount
in the consolidated financial statements of the investee‘s net assets (including associated goodwill), then the Group is
required to consider whether an indication of impairment exists.
d) derecognition criteria
Financial assets are derecognised upon maturity of the contractual rights on the cash flows resulting from the assets
or when the financial assets are sold and all related risks/benefits are transferred.
If a company is committed to a plan to sell a subsidiary that involves loss of control over said subsidiary, all the
subsidiary‘s assets and liabilities should be reclassified as assets held for sale, regardless of whether the company will
retain a non-controlling interest after the sale.
8 Property, plant and equipment
a) recognition criteria
Property, plant and equipment are originally posted at cost, which includes the purchase price and any additional
charges directly attributable to the purchase and installation of the assets.
Non-recurring expenditures for maintenance which involve an increase in future economic benefits are booked as an
increase in the value of the assets, while expenses for ordinary maintenance are booked to the profit and loss
statement. Financial expenses are recorded in accordance with IAS 23.
b) classification criteria
Fixed assets include land, operating properties, investment properties, systems, furnishings and fixtures, and
equipment of any type.
Operating properties are properties owned by the Group and used in production and in the supply of services or for
administrative purposes, whereas investment properties are those owned by the Group for the purpose of collecting
rents and/or held for appreciation of capital invested.
This item also includes any assets used in financial lease contracts, although their legal ownership rests with the
leasing company, and any improvements and incremental expenses incurred in relation to third-party assets when
they refer to identifiable and separable property, plant and equipment from which future economic benefits are
expected. As regards real estate, components relating to land and buildings are separate assets for accounting
purposes and are measured separately upon acquisition.
c) revenue recognition criteria
Property, plant and equipment, including non-operating real estate, are valued at cost, less any accrued depreciation
and impairment.
They are systematically depreciated over their useful life on a straight-line basis, except for land and works of art
which have an indefinite useful life and cannot be depreciated. The useful life of the fixed assets subject to
depreciation is periodically reviewed, and in the event of any adjustments to the initial estimate, a change is also
made in the related depreciation rate. The depreciation rates and subsequent useful life expected for the main
categories of assets are reported in the specific sections of the notes to the financial statements.
The presence of any signs of impairment, or indications that assets might have lost value, shall be tested at the end
of each reporting period.
137
Consolidated Notes to Financial Statements – Part A – Accounting Policies
Should there be indications of impairment of value, a comparison is made between the book value of the asset and
the asset's recoverable value, i.e. the higher of the fair value, less costs to sell, and the value in use, which is the
present value of the future cash flows generated by the asset. Any adjustments are posted to the profit and loss
statement under item 170 ―Net impairment losses/reversals on property, plant and equipment‖. Periodic
depreciation is reported in the same item.
Where the reasons for impairment cease to exist, a reversal is made, which shall not exceed the carrying amount
that would have been determined (net of depreciation or amortization) had no impairment loss been recognized for
the asset in prior periods.
d) derecognition criteria
Property, plant and equipment are derecognised from the balance sheet upon their disposal or when the assets are
permanently withdrawn from use and no future economic benefits are expected as a result of their disposal.
9 Intangible assets
a) recognition criteria
Intangible assets are identifiable, non-monetary assets without physical substance that are held for use over several
years or indefinitely. They are posted at cost, adjusted by any additional charges only it is probable that the future
economic benefits that are attributable to the asset will flow to the entity and if the cost of the asset can be
measured reliably. The cost of intangible assets is otherwise posted to the profit and loss statement in the reporting
period it was incurred. Goodwill is posted among assets when it results from a business combination transaction in
accordance with the principles of determination indicated by IFRS 3, as a residual surplus between the overall cost
incurred for the transaction and the net fair value of the assets and liabilities purchased (i.e. companies or business
units).
Should the cost incurred be less than the fair value of the assets and liabilities acquired, the difference (badwill) is
directly recognised in profit or loss.
b) revenue recognition criteria
The cost of intangible fixed assets is amortised on a straight-line basis over their useful life. An intangible asset with
an indefinite useful life should not be amortised but assessed for impairment periodically. Intangible assets arising
from an internally developed software purchased from third parties are amortised on a straight-line basis starting
from completion and roll-out of the applications based on their useful life. Where there is evidence of impairment,
the recoverable amount of the assets is estimated at year-end. The amount of the loss recognised in profit and loss is
equal to the difference between the carrying value and the recoverable amount of the assets.
The goodwill recognised is not subject to amortisation, but its book value is tested annually (or more frequently)
when there are signs of impairment. To this end, the cash flow generating units to which goodwill is attributable are
identified.
The amount of the impairment loss is determined by the difference between the book value of goodwill and its
recoverable amount, if lower. Said recoverable amount is the higher of the cash-generating unit's fair value, less
costs to sell, and its value-in-use. Value in use is the present value of future cash flows expected to arise from the
years of operation of the cash-generating unit and its disposal at the end of its useful life. The resulting value
adjustments are posted to the profit and loss statement under item 210 ―Net impairment losses/reversals on
intangible assets‖. Periodic depreciation is reported in the same item. An impairment loss recognised for goodwill
shall not be reversed in a subsequent period.
c) derecognition criteria
Intangible assets are derecognised from the balance sheet upon disposal and when no future economic benefits are
expected.
10 Non-current assets held for sale
a) recognition criteria
Non-current assets and disposal groups held for sale are initially valued at the lower of the book value and the fair
value less costs to sell.
b) classification criteria
138
Consolidated Notes to Financial Statements – Part A – Accounting Policies
This item includes non-current assets and disposal groups held for sale when the book value is to be recovered
mainly through a highly likely sale rather than continuous use.
c) revenue recognition criteria
Following initial recognition, non-current assets and disposal groups held for sale are valued at the lower of the
book value and the fair value net of selling costs. Related income and expenses, net of tax, are shown in the P&L
statement under a separate item if they relate to discontinued operations.
In this specific case, it is also necessary to disclose again the same economic information in a separate item for the
previous periods presented in the financial statements, reclassifying the profit and loss statements as a result.
Amortisation is discontinued at the date the non-current asset is classified as a non-current asset held for sale.
d) derecognition criteria
Non-current assets and disposal groups held for sale are derecognised from the balance sheet upon disposal.
11 Current and deferred tax
a) recognition criteria
The effects of current and deferred taxation calculated in compliance with Italian tax laws are posted on an accrual
basis, in accordance with the measurement methods of the income and expenses which generated them, by
administering the applicable tax rates.
Income taxes are posted to profit and loss, excluding those relating to items directly credited or charged to
shareholders‘ equity.
Income tax provisions are determined on the basis of a prudential forecast of current, prepaid and deferred tax
expense.
Current tax includes the net balance of current tax liabilities for the year and current tax assets with the Financial
Administration, comprising tax advances, tax credit arising from prior tax returns and other withholding tax
receivables. In addition, current tax includes tax credit for which reimbursement has been requested from the
relevant tax authorities. Tax receivables transferred as a guarantee of own debts shall also be recorded within this
scope.
Prepaid and deferred taxes are determined on the basis of the temporary differences – with no time limits –
between the value assigned to the assets or liabilities in accordance with statutory principles and the corresponding
values for tax purposes, applying the so-called balance sheet liability method.
Prepaid tax assets are shown in the balance sheet for the extent to which they are likely to be recovered on the basis
of the capacity of the company involved or all of the participating companies – as a result of exercising the option
concerning ―fiscal consolidation‖ – to generate a positive taxable profit on an ongoing basis. Deferred tax liabilities
are shown in the balance sheet, with the sole exception of reserves subject to tax deferral, since the volume of
available reserves already subjected to taxation reasonably implies that no tax-inducing transactions will be carried
out. Prepaid and deferred taxes are posted to the balance sheet by offsetting each tax for each year, taking account
of the expected repayment schedule.
Prepaid taxes for the years in which deductible temporary differences are higher than taxable temporary differences
are posted to the assets side of the balance sheet, under deferred tax assets. Deferred taxes for the years in which
taxable temporary differences are higher than deductible temporary differences are posted to the liabilities side of
the balance sheet, under deferred tax liabilities.
b) classification and measurement criteria
Prepaid and deferred tax assets and liabilities are systematically measured to take account of any changes in
regulations or tax rates, and of any different subjective situations of Group companies. In addition, the tax reserve is
adjusted to cover the charges which might result from already notified tax assessments or litigation pending with the
tax authorities.
With reference to fiscal consolidation of the parent company and participating subsidiaries, contracts have been
stipulated to regulate offsetting flows in relation to the transfers of tax profits and losses. Such flows are determined
by administering the applicable IRES tax rate to the taxable income of participating companies. The offsetting flow
for companies with fiscal losses – calculated as above – is recognised by the consolidating company to the
consolidated company insofar as the consolidated company, were it not a participant of fiscal consolidation, might
139
Consolidated Notes to Financial Statements – Part A – Accounting Policies
have used the losses within the five-year period established by law. Offsetting flows so determined are posted as
receivables and payables with companies participating in fiscal consolidation, classified under other assets and other
liabilities, offsetting item 290 ―Income tax for the year on continuing operations‖.
c) revenue recognition criteria
Where deferred tax assets and liabilities refer to components which affected the profit and loss statement, they are
offset by income tax. When deferred tax assets and liabilities refer to transactions which directly affected
shareholders‘ equity without impacting on the profit and loss statement (e.g. valuations of available-for-sale
financial instruments or cash flow hedging derivatives), they are posted as a contra entry in shareholders‘ equity,
affecting the special reserves if required.
12 Provisions for risks and charges
Provisions to the reserve for risks and charges are made only when:
there is a current (legal or implicit) obligation resulting from a past event;
an outflow of resources producing economic benefits is likely to be necessary in order to settle the obligation;
and
the amount of the obligation can be estimated reliably
Whenever timing is important, the provisions are discounted back.
Provisions to the reserve are posted to the profit and loss statement, in addition to interest expense accrued on the
reserves which were subject to discounting back.
No provision is shown for contingent and unlikely liabilities, but information is provided in the notes to the financial
statements, except in cases where the probability of an outflow of resources to settle the amount is remote or the
amount is not significant.
Sub-item 120 ―Provisions for risks and charges: pension funds and similar obligations‖ includes appropriations in
compliance with IAS 19 ―Employee benefits‖ for the purpose of settling the technical deficit of defined-benefit
complementary pension funds. Pension plans are either defined-benefit or defined-contribution schemes. The
charges borne by the employer for defined-contribution plans are pre-determined; charges for defined-benefit
schemes are estimated and shall take account of any shortfall in contributions or poor investment performance of
defined-benefit plan assets.
For defined-benefit plans, the actuarial values required by the application of the above principle are determined by
an external actuary in accordance with the Projected Unit Credit Method. In particular, the obligation is calculated as
the sum of the following values:
average current value of pension benefits determined, for employees in service, only on the basis of completed
years of service and taking account of possible future salary increases;
less the current value of any assets servicing the scheme;
less (or plus) any actuarial gains ad losses not recognised in the balance sheet, on the basis of the so-called
―corridor‖ method.
According to the corridor method, the actuarial gains and/or losses – defined as the difference between the book
value of the liabilities and the present value of the Group‘s commitments at the end of the period – shall be
recognised in the balance sheet only when they exceed the higher value between 10% of the average present value
of pension benefit obligations and 10% of the current value of the assets of the pension fund. Any surplus is posted
to the profit and loss statement in line with the average residual working life of active employees, or during the year
in the case of retired employees.
The provision for the year posted to the profit and loss statement equals the sum of annual interest accrued on the
average present value of pension benefit obligations at the beginning of the year, the average current value of
benefits accrued by active employees during the year, and actuarial gains and losses in compliance with the corridor
method, net of the expected annual return on plan assets
Sub-item 120 ―Provisions for risks and charges: pension funds and similar obligations‖ includes any appropriations
to cover expected losses for actions filed against the Bank, including clawback actions, estimated expenses in relation
to customers‘ claims for securities brokerage, and other estimated expenses in relation to legal or implicit obligations
existing at the end of the period. Where the appropriations are valued analytically, the amounts appropriated are
used directly to cover charges actually incurred.
140
Consolidated Notes to Financial Statements – Part A – Accounting Policies
13 Liabilities and debt securities in issue
a) recognition criteria
These financial liabilities are first recognised upon receipt of the sums raised or at the time of issuance of debt
securities.
Liabilities are initially recognised at their fair value, which is generally equal to the amount received or the issue
price, increased by any additional income/expense directly attributable to the funding or issuing transaction and not
reimbursed by the creditors. Internal administrative costs are excluded. The fair value of financial liabilities issued at
conditions other than market conditions is calculated by using a valuation technique [that incorporates all factors
that market participants would consider in setting a price], and the difference with respect to the consideration
received is booked directly to profit and loss, only when the conditions provided by IAS 39 have been met.
b) classification criteria
Deposits from banks and customers, and securities issued, include different types of funding (both interbank and
from customers) and funds raised through certificates of deposit and outstanding bonds, net of any repurchase. Debt
securities in issue include all securities that are not subject to ―natural‖ hedging through derivatives and that are
classified as liabilities measured at fair value.
The item also incorporates payables booked by the lessee in relation to any stipulated financial lease transactions.
c) revenue recognition criteria
Following initial recognition, financial liabilities are valued at amortised cost using the effective interest method.
Short-term liabilities for which time effect is immaterial are an exception, and are recognised at the amount
collected..
Should the requirements provided by IAS 39 be met in the case of structured instruments, the embedded derivative
is separated from the host contract and reported at fair value as a trading asset or liability. In this case, the host
contract is recognised at amortised cost.
d) derecognition criteria
Financial liabilities are derecognised upon maturity or extinction. Derecognition also occurs if previously issued
securities have been repurchased. The difference between the book value of the liabilities and the amount paid to
repurchase them is recorded in the profit and loss statement.
A new placement in the market of own securities after their repurchase is considered as a new issue and posted at
the new price of placement, with no impact on the profit and loss statement.
In compliance with the provisions of IAS 32, any potential commitment to buy treasury shares as a result of the issue
of put options is shown in the balance sheet under financial liabilities, offset by the reduction of shareholders‘ equity
in the amount of the current value of the contractual repayment sum. At the end of 2010, there were no put options
sold on treasury shares of the Parent company.
14 Held-for-trading financial liabilities
a) recognition criteria
Held-for-trading financial liabilities are initially posted on the date of issue for debt securities, and on the date of
subscription for derivatives.
Upon initial recognition, they are measured at fair value, which usually corresponds to the amount collected net of
any transaction costs or income directly attributable to the instrument itself, which are directly posted to the profit
and loss statement. Any embedded derivatives in combined financial instruments not directly connected to the
latter and with the characteristics to meet the definition of a derivative are recognised separately from the host
contract at fair value. The applicable accounting criteria are administered to the primary contract.
b) classification criteria
This category includes debt securities issued mainly for the purpose of obtaining short-term profits and the negative
value of derivative contracts excluding those designated as hedging instruments. Derivative contracts include those
embedded in combined financial instruments which were subject to separate accounting.
The sub-items ―Deposits from banks‖ and ―Deposits from customers‖ also incorporate uncovered short positions on
securities.
141
Consolidated Notes to Financial Statements – Part A – Accounting Policies
c) measurement criteria
Following initial recognition, held-for-trading financial liabilities are measured at fair value, with changes being
posted as a contra entry in the profit and loss statement.
For a description of criteria used to determine the fair value of financial instruments, please see section "―A.3.2 Fair
Value Hierarchy‖ of this Part A.
d) derecognition criteria
Financial liabilities are derecognised upon maturity or extinction. Derecognition also occurs if previously issued
securities have been repurchased. The difference between the book value of the liabilities and the amount paid to
repurchase them is booked in the profit and loss statement.
e) revenue recognition criteria
Profits and losses arising from any changes in the fair value of a financial asset are recognised in profit and loss
under account ―80 Net profit/loss from trading‖, except for gains and losses on derivative payables linked with the
fair value option which are classified under account ―110 Net profit/loss on financial assets and liabilities designated
at fair value‖.
15 Financial liabilities designated at fair value through profit and loss
a) recognition criteria
Financial liabilities measured at fair value are initially posted on the date of issuance for debt securities. Upon initial
recognition, they are measured at fair value, which usually corresponds to the amount collected net of any
transaction costs or income directly attributable to the instrument itself, which are directly posted to the profit and
loss statement.
The Fair Value Option (FVO) applies to all financial assets and liabilities which would have caused misrepresentation
on the profit and loss statement and balance sheet had they been otherwise classified, and to all instruments which
are managed and measured using a fair value approach. In particular, liabilities measured at fair value include fixedrate and structured funding instruments with a market risk subject to systematic hedging through derivative
contracts. The fair value of financial liabilities issued at conditions other than market conditions is calculated by using
a valuation technique [that incorporates all factors that market participants would consider in setting a price], and
the difference with respect to the consideration received is booked directly to profit and loss, only when the
conditions provided by IAS 39 have been met.
b) classification criteria
This category includes financial liabilities intended for measurement at fair value through profit or loss when:
1. the determination of fair value allows for the elimination or reduction of significant misrepresentations of the
financial instruments in the profit and loss statement and balance sheet; or
2. the management and/or measurement of a group of financial instruments at fair value through profit or loss is
consistent with an investment or risk management strategy documented as such by senior management; or
3. a host instrument embeds a derivative which significantly modifies the cash flows of the host and should
otherwise be accounted for separately
In particular, the parent company has classified in this account the financial liabilities that are subject to ―natural
hedging‖ through derivative instruments. These financial liabilities include bonds and structured and fixed-rate
certificates of deposit, for which the market risk is subject to systematic hedging through derivative contracts, with
the exception of securities issued at a floating rate subject to cash flow hedging, which are instead classified under
debt securities issued. In order to further enhance reporting and transparency on how the fair value option is used,
specific detailed tables are provided in the corresponding sections of the notes to the financial statements, both for
the profit and loss statement and the balance sheet, which further illustrate the methods and strategies of use of the
fair value option by the parent company. For item 17 ―Other information‖, a specific section is also included to
provide insight into the technical hedging methods, with a special focus on the use of the fair value option.
c) measurement criteria
Following initial recognition, financial liabilities are measured at fair value.
For a description of criteria used to determine the fair value of financial instruments, please see section "―A.3.2 Fair
Value Hierarchy‖ of this Part A.
142
Consolidated Notes to Financial Statements – Part A – Accounting Policies
d) derecognition criteria
Financial liabilities are derecognised upon maturity or extinction. Derecognition also occurs if previously issued
securities have been repurchased. The difference between the book value of the liabilities and the amount paid to
purchase them is recorded in the profit and loss statement under item 110 ―Net profit/loss on financial assets and
liabilities measured at fair value‖.
e) revenue recognition criteria
Gains and losses arising from any changes in the fair value of a financial asset are recognised in profit and loss under
account ―110 Net profit/loss from trading‖; same treatment applies to derivatives payable linked with the fair value
option which are classified under account ―110 Net profit/loss on financial assets and liabilities designated at fair
value‖.
16 Foreign-currency transactions
a) recognition criteria
Upon initial recognition, foreign-currency transactions are recognised in the currency of account using the foreignexchange rates on the date of the transaction.
b) revenue recognition and derecognition criteria
Financial statement entries denominated in foreign currencies are valued at the end of each reporting period as
follows:
monetary entries are converted using the exchange rate on the closing date;
non-monetary entries valued at historical cost are converted using the exchange rate on the date of the
transaction;
non-monetary entries that are measured at fair value in a foreign currency are translated at the closing date rate.
Any exchange-rate differences resulting from the settlement of monetary elements, or from the conversion of
monetary elements at rates other than those used for initial conversion or conversion in the previous financial
statements, are posted to the profit and loss statement for the period in which they arise.
When a profit or a loss on a non-monetary element is shown under shareholders‘ equity, the exchange-rate
difference in relation to said element is also posted to equity. However, when a profit or a loss is posted to the profit
and loss statement, the relative exchange-rate difference is also posted there.
The accounting position of foreign branches with different operating currencies is converted into Euros by using the
exchange rates at the end of the reporting period.
Any exchange-rate differences attributable to investments in such foreign branches, and those resulting from the
conversion into Euros of their accounting position, are posted in shareholders‘ equity reserves and transferred to the
profit and loss statement only in the year when the investment is disposed of or reduced.
17 Insurance assets and liabilities
Technical reserves / reinsurers
This item includes the reinsurers‘ obligations resulting from reinsurance transactions based on contracts regulated by
IFRS 4. Deposits from reinsurers with ceding undertakings are not included. Reinsurers‘ technical reserves are
determined on the basis of the existing agreements in accordance with the principles concerning actuarial reserves,
subject to different valuation in relation to credit recovery. At 31 December 2010, asset item 110 ―Reinsurers‘
technical reserves‖ was empty following the loss of control of the insurance companies and the switch from full
consolidation to the equity method; these reserves were not present in the 2009 financial statements either.
Life insurance technical reserves
In compliance with the provisions of IFRS 4, any contracts issued are subject to prior analysis for the purpose of
identifying the applicable accounting standard for each of them. To this end, each life insurance policy has been
broken down into its tariff components (so-called ―coverage‖), which have been classified as insurance forms or
investment forms on the basis of the extent of underlying insurance risk borne by the companies.
143
Consolidated Notes to Financial Statements – Part A – Accounting Policies
As a result, the following choices were made:
Insurance products: these include 'first-branch' temporary life insurance policies, life annuity policies and
comprehensive policies pursuant to IFRS 4.2 with guaranteed annuity conversion options upon issue. As stated, for
such products IFRS 4 substantially confirms the applicability of national insurance standards, which, in summary,
provide for:
- the posting of gross premiums to the profit and loss statement under income; they include all amounts accrued
during the year as a result of stipulating insurance contracts, net of cancellations. Similarly, the premiums assigned to
reinsurers are posted as costs for the year;
- with respect to gross-premium income, the amount of the obligations in relation to insured parties – calculated
analytically for each contract using the prospective valuation method on the basis of the demographic/financial
assumptions currently adopted by the market – is appropriated to actuarial reserves.
Separately managed financial products: such products, which include most 'first-branch' life insurance policies and
comprehensive policies as well as 'fifth-branch' capitalisation policies, are characterised by discretional profitsharing. Therefore, they are posted in accordance with the following provisions of IFRS 4:
the products are shown in the financial statements in a manner broadly similar to the presentation prescribed by
local accounting principles. This means that the premiums, payments and changes in technical reserves are posted to
the profit and loss statement.
The products are valued using shadow accounting. This means that the differences between the book value and
market value, with reference to available-for-sale securities, and for the component pertaining to the insured parties,
are allocated to technical reserves. For the component pertaining to insurers, differences are instead posted to
equity. However, if the securities are measured according to the fair value option, the difference between the book
value and the market value is shown in the profit and loss statement with a change in technical reserves for the
portion pertaining to the insured parties.
Financial products not included under separate management, and therefore with no discretionary profit-sharing:
these products, essentially comprising index and unit-linked policies as well as specific asset policies not included
under separate management, are booked pursuant to IAS 39. Any insurance component embedded in index and
unit-linked products is subject to independent valuation (so-called unbundling).
Technical reserves incorporate only the liabilities arising from insurance contracts issued as per point a); financial
instruments as per point b) (financial liabilities with discretional profit-sharing); and the insurance component of
unit- and index-linked contracts. Additional information on the accounting system of the instruments as per point c)
is provided in the section covering financial liabilities measured at fair value.
Insurance contracts and financial contracts with discretional profit-sharing are valued in accordance with existing
practices, pursuant to IFRS 4.25.
The liabilities of associate Axa MPS Vita are determined in accordance with Legislative Decree no. 174 of 17 March
1995 and Legislative Decree no. 173 of 26 May 1997.
Such liabilities are posted including any reinsurance assignments.
The item also includes reserves set aside following the liability adequacy test pursuant to IFRS 4.15, deferred
liabilities with insured parties (IFRS 4.30 and IFRS 4.34: shadow accounting) and reserves for amounts payable.
Actuarial reserves and reserves for operating expenses
Actuarial reserves for pure premiums and reserves for operating expenses, in relation to insurance products and
financial products with discretional profit-sharing, are determined on a contract-by-contract basis in accordance with
the actuarial calculation principles pursuant to Art. 25 of Legislative Decree no. 174/1995 and using the
demographic, financial and charge criteria adopted for the calculation of premiums. Actuarial reserves of pure
premiums include the portions of premium accrued during the year and any revaluations made in enforcement of
contractual clauses.
In any case, the amount of actuarial reserves is not lower than the amount calculated according to the conditions of
guaranteed minimum or at surrender value, if contemplated.
Additional reserves as per Art. 25 par. 12 of Legislative Decree 174/1995 are determined on the basis of ISVAP
Regulation nos. 1380 of 21 December 1999 and 1801 of 21 February 2001.
144
Consolidated Notes to Financial Statements – Part A – Accounting Policies
Additional reserves as per Art. 30, par. 4, of Legislative Decree 174/1995 in relation to the insurance component of
index- and unit-linked contracts (as represented by the additional temporary life insurance, long-term care, dread
disease and disability coverage) are set up on the basis of the actuarial calculation principles pursuant to Art. 25 of
said Decree.
Shadow accounting
The current practice has been modified in accordance with the provisions of IFRS 4.30 for the purpose of taking into
account any capital gains identified but not realised on the assets which directly impact the measurement of
insurance liabilities, by the same standards as those for realised capital gains. The relative adjustments to insurance
liabilities are shown under shareholders‘ equity if unrealised capital gains are posted under shareholders‘ equity; if
not, they are posted to the profit and loss statement under ―amounts paid and changes in technical reserves‖.
Technical reserves are derecognised when the obligation indicated in the contract has been fulfilled, eliminated or
has expired.
Property and casualty insurance technical reserves
In accordance with IFRS 4, property and casualty reserves are determined on the basis of applicable principles,
except for some supplementary reserves and equalisation reserves. From this viewpoint, the principle of ultimate
cost underlying the existing method is broadly compliant with the liability adequacy test (LAT) required by IFRS 4
for the purpose of ensuring the adequacy of reserves.
Property and casualty reserves include premium reserves, claims reserves and other reserves.
Premium reserve
The premium reserve on the risks of direct insurance policies, as per Legislative Decree 173/1997, includes the
portions of premium pertaining to subsequent years, calculated for each contract on an accrual basis in accordance
with posted gross premiums, less acquisition commissions and other directly chargeable acquisition costs pursuant to
Art. 32 of the above Decree.
The premium reserve also incorporates the premium reserve for unexpired risks.
This consists of the amount to be allocated to cover business risks after the end of the year for the purpose of paying
all damages and expenses resulting from insurance contracts stipulated before that date.
Such risks are estimated on a case-by-case basis by class of insurance coverage with reference to the claimspremiums ratio pertaining to the current generation. The reserve is calculated by applying said ratio to the reserve
for portions of premium. The unexpired risks reserve – as contemplated by the empirical method indicated by ISVAP
circular no. 360/D of 21 January 1999 – consists of the difference between the amount so determined and the sum
of the reserve for portions of premium plus the premiums which shall be due in compliance with stipulated contracts
(expiring instalments), net of acquisition commissions and other acquisition expenses, limited to directly chargeable
costs. The surety bond insurance premium reserve is calculated pursuant to Art. 2 par. 1 of ISVAP Regulation no.
1978 G of 4 December 2001.
Claims reserve
Claims reserves are determined in an analytical manner through the examination of all claims existing at the end of
the year, using statistical methods of evaluation for objective elements, so as to enable the amount allocated to the
reserve, as provided for by Art. 33 of Legislative Decree 173/1997, as for the ultimate cost, to meet all future
foreseeable claims expenses, including settlement costs.
The claims presumed to have occurred during the year and not registered by the end of the reporting period are
charged to the claims reserve in compliance with the provisions of Art. 26 of Legislative Decree 175/1995 and Art.
5 of ISVAP Regulation no. 1059/G of 4 December 1998.
Profits and losses resulting from any changes in the value of technical reserves are shown in the profit and loss
statement under ―balance of other insurance income and charges‖.
Liability Adequacy Test
145
Consolidated Notes to Financial Statements – Part A – Accounting Policies
Pursuant to IAS/IFRS, the adequacy of insurance liabilities is tested using current estimates of future cash flows
arising from insurance contracts and financial instruments as per IFRS 4.2. If these tests show that the book value of
insurance liabilities is inadequate, the entire shortfall is posted to the profit and loss statement under ―balance of
other insurance income and charges‖ as per IFRS 4.15.
At 31 December 2010, insurance equity investments were valued using the equity method.
18 Other information
a) Other significant items
Other significant items from the Group‘s financial statements are described below.
Cash and cash equivalents
This item includes currencies that are legal tender, including foreign banknotes and coins and demand deposits with
the central bank of the country or countries in which the Group operates with its own branches.
The item is posted at face value. For foreign currencies, the face value is converted into Euros at year-end exchange
rate.
Value adjustment of macrohedged financial assets and liabilities
These items show, respectively, the balance, whether positive or negative, of the changes in value of the
macrohedged assets and the balance, whether positive or negative, of the changes in value of liabilities
macrohedged against interest-rate risk, pursuant to IAS 39, paragraph 89.
Other assets
This item shows assets not attributable to the other items on the asset side of the balance sheet. It may include, for
example:
gold, silver and precious metals;
accrued income other than that which is capitalised to the related financial assets;
any inventories according to the definition of IAS 2;
improvements and incremental expenses incurred on third-party real estate other than those attributable to
property, plant and equipment and therefore not independently identifiable and separable.
The costs in the latter bullet point are posted to other assets, since the user company exercises control of the assets
for the purpose of the tenancy agreement and can obtain future economic benefits from them. Said costs are posted
to Item 220 ―Other operating income/expenses‖ on the profit and loss statement according to the shorter of the
period in which the improvements and expenses can be used and the remaining term of the contract.
Severance pay
Employee severance pay is a defined-benefit allowance subsequent to the employment relationship; therefore its
actuarial value must be estimated for purposes of the financial statements. This estimate is carried out using the
projected unit credit method, which predicts future disbursements on the basis of statistical historical analysis and
the demographic curve, and the financial discounting of such flows according to market interest rates.
The costs accrued during the year for servicing the plan are posted to the profit and loss statement under Item 180
a) ―Personnel expenses‖ as the net amount of contributions paid, non-posted contributions pertaining to previous
years, expected income from plan assets , financial charges and actuarial profits/losses. Actuarial profits and losses –
the difference between the balance-sheet value of the liabilities and the present value of the obligation at the end of
the year – are computed using the ―corridor‖ method, which means the excess of accrued actuarial profits/losses at
the end of the previous year compared with the higher of 10% of the present value of the benefits generated by
the plan and 10% of the fair value of the assets servicing the plan. Such excess is also compared to the expected
average working life of the participants in the plan. After the reform of supplementary pension funds as per
Legislative Decree No. 252 of 5 December 2005, severance pay quotas accrued to 31 December 2006 remain with
each company of the Group, while severance pay quotas accrued after 1 January 2007, at the discretion of the
146
Consolidated Notes to Financial Statements – Part A – Accounting Policies
employee, are assigned to supplementary pension funds or are maintained at the individual companies, which will
provide for their transfer to the Treasury Fund managed by the Italian National Social Security Institute, INPS.
Other liabilities
This item shows liabilities not attributable to other items on the liability side of the balance sheet.
It includes, for example:
a)
b)
c)
payment agreements that must be classified as debit entries according to IFRS 2;
debit entries connected with payment for provision of goods and services;
accrued liabilities other than those to be capitalised to the respective financial liabilities.
b) Other significant accounting practices
Details on significant accounting criteria for purposes of understanding the financial statements are shown below.
Treasury shares
Any shares held by Parent Bank Banca Monte dei Paschi di Siena S.p.A. are recorded in their own item and
deducted directly from shareholders‘ equity. No profits or losses are posted to the profit and loss statement upon
the purchase, sale, issue or cancellation of the Parent Bank‘s equity instruments. Any amount paid or received is
posted directly to shareholders‘ equity.
Share-based payments
The existing stock-granting plan contemplates the purchase and allocation to employees of a certain number of
shares of Gruppo Monte dei Paschi di Siena S.p.A. on an annual basis, for a value corresponding to the amount
recognised as part of the company‘s bonus structure.
Such value is posted as personnel expenses on an accrual basis.
Dividends and income/cost recognition
Revenues are recognised upon attainment, or: in the case of selling goods or products, when it is likely that future
benefits will be received and said benefits can be reliably quantified; in the case of services, when these are
provided.
In particular:
interest is booked pro rata temporis on the basis of contractual interest rate or the effective interest rate in the
event of application of the amortized cost;
interest on arrears is posted to the profit and loss statement only upon actual collection;
dividends are shown in the profit and loss statement upon resolution of their distribution, i.e. when their
payment is due;
commissions for service income are posted in the period when said services were rendered, on the basis of
existing contractual agreements;
revenues from trading or from issuance of financial instruments, as determined by the difference between the
transaction price and the fair value of the instrument, are booked to the profit and loss statement upon the
reporting of the transaction if the fair value can be determined with reference to parameters or recent
transactions observable on the same market in which the instrument is traded; otherwise, they are distributed
over time, taking into account the duration and the nature of the instrument.
portfolio management fees are recognised based on the duration of service;
Expenditures are booked to profit and loss during the periods in which the related revenues are booked.
Expenditures that cannot be associated with income are booked immediately to the profit and loss statement.
Business combinations
147
Consolidated Notes to Financial Statements – Part A – Accounting Policies
A business combination is defined as the transfer of control of a company (or of a group of assets and integrated
goods, conducted and managed as a unit). For this purpose, control is considered to have been transferred, either
when more than half of the voting rights are acquired, or in the event that, even without acquiring more than half of
the voting rights of another entity, control of the latter is obtained, since, as a result of the combination, power is
held:
1. over more than half of the voting rights of the other entity by virtue of agreements with other investors;
2. to make the management and financial decisions of the entity by virtue of articles of association or an
agreement;
3. to appoint or remove the majority of executive board members;
4. to obtain the majority of voting rights at executive board meetings.
A business combination may give rise to an investment link between the acquiring parent company and the acquired
subsidiary. In these cases, the acquirer applies IFRS 3 to the consolidated financial statements while posting the
acquired interest to its separate financial statements as an equity interest in a subsidiary, consequently applying IAS
27 ―Consolidated and separate financial statements‖.
A business combination may also provide for the acquisition of the net assets of another entity, including any
goodwill, or the acquisition of the share capital of another entity (for example mergers, splits, acquisitions of
business units). Such a business combination is not an investment link like the one between a parent company and
subsidiary, and therefore in these cases IFRS 3 is also applied to the individual financial statements.
Based on the provisions of IFRS 3, an acquirer must be specified for all combination transactions. It is identified as
the subject that obtains control over another entity or group of assets.
The acquisition must be posted to the accounts on the date when the acquirer effectively obtains control over the
entity or assets acquired.
The cost of a business combination must be determined as the sum of:
1. the fair value, on the date of exchange, of the assets sold, of the liabilities incurred or assumed, and of the
equity instruments issued by the acquirer in exchange for control;
2. any ancillary expense directly attributable to the business combination.
In cash transactions (or when payment is provided for using cash-equivalent financial instruments), the price is what
is agreed on accordingly, possibly discounted in the event of a medium- or long-term instalment plan; in the event
that payment occurs by means of an instrument other than cash, thus by means of issuing equity instruments, the
price is equal to the fair value of the means of payment net of costs directly attributable to the equity issue.
Included in the price of the business combination on the date of acquisition are adjustments subject to future events,
if provided for by the agreements and only in the event that they are probable, determinable in a reliable manner
and realised within 12 months of the date of acquisition of control.
Business combination transactions are recorded using the ―acquisition method‖, which provides for posting to the
financial statements:
the assets, liabilities and contingent liabilities of the acquired entity at their respective fair values on the date of
acquisition, including any identifiable intangible assets not already posted to the financial statements of the
acquired entity;
the goodwill determined as the difference between the cost of the business combination and the net fair value
of the assets, liabilities and identifiable contingent liabilities; any positive surplus between the net fair value of
the assets, liabilities and contingent liabilities acquired and the cost of the business combination is posted to the
profit and loss statement.
In addition, if a company does not acquire a 100% interest, non-controlling interests‘ shares of equity may be
valued at fair value (full goodwill).
The fair value of the assets, liabilities and contingent liabilities of the acquired entity may be determined
provisionally by the end of the first reporting period in which the combination occurs and must be completed within
twelve months of the date of acquisition. The obligation to measure the controlled entity's individual assets and
liabilities at fair value upon each subsequent step acquisition was recently eliminated for business combinations that
are achieved in stages ('step acquisitions').
148
Consolidated Notes to Financial Statements – Part A – Accounting Policies
Business combinations do not include transactions aimed at control of one or more entities that do not constitute a
business activity, or aimed at temporary control, or finally, if the business combination is realised for restructuring
purposes, thus among two or more entities or business activities already part of the MPS Group, and not involving
changes to the control structures regardless of the percentage of rights of third parties before and after the
transaction (so-called business combinations of entities under common control).
Business combinations under common control
Business combinations between entities under common control do not fall under IFRS 3. In the absence of a
standard of reference, as indicated in Section 1 ―Declaration of conformity with international accounting standards‖,
these transactions are posted to the accounts by making reference to preliminary guidance from the Italian
Association of Auditors (Orientamenti Preliminari, OPI no. 1 "Accounting treatment of "business combinations of
entities under common control‖ in separate and consolidated financial statements" and OPI no. 2 "Accounting
treatment of mergers in financial statements"). These guidelines consider the economic significance of business
combinations on the basis of cash flow impact on the Group. With regard to these considerations, the following
cases can thus be identified:
a)
b)
transactions with no significant influence on future cash flows: these are recognised using the pooling of
interest method. Therefore, in the financial statements of the seller, the difference between the sale price and
the book value is posted as an increase/decrease in shareholders‘ equity. Exclusively in the event of acquisition
or transfer of a controlling interest, the equity investment is posted at acquisition cost in the
acquirer/transferee‘s financial statements for the year;
transactions with significant influence on future cash flows: these are measured at fair value, i.e. the amount
exchanged. Any difference between the transaction price and the book value is posted to the profit and loss
statement.
Amortised cost
The amortised cost of financial assets or liabilities is the value at which it was measured at initial valuation, net of
principal repayments, plus or minus overall amortisation calculated using the effective interest method, on the
differences between the initial value and that at maturity and net of any permanent impairment.
The effective interest rate is the rate which makes the present value of future contractual payment or collection cash
flows, until maturity or a subsequent price recalculation date, equal to the net book value of the financial assets or
liabilities. To calculate the current value, the effective interest rate is applied to estimated future collection or
payment flows over the entire useful life of the financial assets or liabilities – or for a shorter period if certain
conditions are met (for example, a change to market rates).
The effective interest rate shall be redetermined where the financial assets or liabilities have been subject to fair
value hedging that has ceased to exist.
In cases in which it is not possible to estimate the cash flows or expected life in a reliable manner, the Company uses
the cash flows contractually envisaged for the entire contractual term.
Following the initial valuation, the amortised cost makes it possible to allocate income and costs reducing or
increasing the instrument over its entire expected life by means of the amortisation process. The determination of
the amortised cost is different depending on whether the financial assets/liabilities are subject to valuation at a fixed
or variable rate.
For fixed-rate instruments, future cash flows are quantified based on the known interest rate during the term of the
financing. For floating-rate financial assets/liabilities, whose variability is not known beforehand (because, for
example, it is tied to an index), the determination of cash flows is performed on the basis of the last known rate. At
every rate review date, the amortisation schedule and the actual rate of return over the entire useful life of the
instrument, i.e. until maturity, are recalculated. The adjustment is recognised as cost or income in the profit and loss
statement.
Valuation at amortised cost is applied to receivables, held-to-maturity financial assets, available-for-sale financial
assets, liabilities and debt securities in issue.
Financial assets and liabilities traded at market conditions are initially recognised at their fair value, which normally
corresponds to the amount disbursed or paid inclusive -in the case of instruments valued at amortized cost- of
transaction costs and commissions directly attributable to the assets and liabilities (such as fees and commissions
149
Consolidated Notes to Financial Statements – Part A – Accounting Policies
paid to agents, consultants, intermediaries and dealers), as well as contributions withheld by regulatory bodies and
securities exchanges, taxes, and transfer charges. These expenses, which must be directly attributable to the
individual financial assets or liabilities, impact the original actual return and make the effective interest rate
associated with the transaction different from the contractual interest rate. Calculation of the amortised cost does not
include costs that the Group must incur regardless of the transaction (for example, administrative, stationery and
advertising costs), which, even though they are specifically attributable to the transaction, occur in the normal
practice of managing loans (for example, activities aimed at disbursement).
With particular reference to receivables, lump-sum reimbursements of expenses incurred by the Group for the
provision of a service must not be attributed in a way that lowers the cost of disbursing the loan, but since they may
be considered as other operating income, the related costs must be posted to a separate account in the profit and
loss statement.
Guarantees issued
Adjustments due to any deterioration in the guarantees issued are posted to Item 100 ―Other liabilities‖. Impairment
losses are posted to Item 130 d) ―Net impairment losses/reversals on other financial transactions‖ in the profit and
loss statement.
c) Significant accounting choices made while preparing the financial statements (with particular reference
to the provisions of IAS 1, paragraph 122, and document nos. 4 of 3 March 2010 and 2 of 6 February
2009, issued jointly by the Bank of Italy/Consob/Isvap).
Decisions by senior management having a significant effect on amounts in the financial statements, other than those
relating to estimates, made when applying accounting principles, are shown below.
Transaction for value creation from part of the Group's real estate properties used in the business (the Transaction)
In July 2009, the Group launched the Transaction aimed at creating value from part of its real estate used in the
business, reorganise and rationalise production and industrial processes related to properties used in the business
and, at the same time, strengthen its capital structure while maintaining the properties for the use of bank branches
through 24-year lease contracts with the purchaser.
The Transaction was structured into 4 phases:
a)
disbursement by the Parent Company to MPS Immobiliare S.p.A. (―MPS Immobiliare‖ or ―MPS RE‖), a real
estate company of the Group, of a mortgage loan on MPS Immobiliare owned properties leased to Group
companies;
b)
incorporation of consortium joint-stock company
Perimetro Gestione Proprietà Immobiliari
S.C.p.A.(―Consorzio‖ or ―PGPI‖) pursuant to art. 2615-ter of the Italian civil code and definition of its
ownership and governance structure;
c)
transfer to the Consortium of the Group's real estate business, consisting in:
1) the real estate portfolio, including 683 buildings used in the banking business (61% of total real estate
assets), concentrated in the subsidiary, MPS Immobiliare, and valued at EUR 1,718 mln;
2) the EUR 1,673 mln mortgage loan granted by the Parent to MPS Immobiliare on 7 July 2009;
3) the buildings' lease contracts by and between MPS Immobiliare and the companies of the Group for a
period of 24 years and adjusted to fair market values as at Transaction date.
d)
subsequent securitisation of the mortgage loan existing between the Parent Company and the Consortium to
the securitisation vehicle Casaforte S.r.l. (―Casaforte‖).
In consideration of the complexity of the transaction, an analysis of its accounting aspects starts from an assessment
of how it qualifies in its substance so as to later identify the applicable IAS/IFRSs .
Firstly, it is noted that on 20 July 2010, the Parent Company requested Consob to express an opinion with regard to
the accounting requirements for the Transaction. On 23 December, Consob replied to the Bank's request with a
note containing the guidelines for the Transaction accounting 'qualification' and, consequently, the identification of
the applicable International Accounting standards.
In particular, the essential point in the request for Consob's opinion lied in asking the Authority whether , in its
judgment, the conditions were in place for considering the Transaction as "true sale", that is actual disposal of
Group real estate transferred to the Consortium, thus making it possible to recognise -also
in the 2010
150
Consolidated Notes to Financial Statements – Part A – Accounting Policies
Consolidated Annual Report- the capital gain arising from the transfer of the real estate business to the Consortium,
which had only been recognised in MPS Immobiliare's separate report in 2009.
It should be pointed out that the accounting capital gain recognised in MPS Immobiliare's separate report was
written off from the Group's consolidated annual report for 2009 and the three 2010 interim reports, insofar as the
Parent Company exercises control over the Consortium under SIC 12 - Consolidation - Special Purpose Entities
(vehicles) ("SIC 12").
In particular, for the purpose of assessing whether the Transaction may, as a whole, be considered as a "true sale"
Consob gained insight in the three qualifying profiles of the transaction, namely:
1) whether the lease agreements entered into by the Consortium with the companies of the Group are
operating or finance leases under IAS 17, Leasing (―IAS 17‖);
2) whether control by the Group over the real estate acquiring Consortium may be presumed, that is to say
whether the conditions are in place in this case for the Consortium to be 'deconsolidated' pursuant to the
relevant international accounting standards (IAS 27, Consolidated and Separate Financial Statements; "IAS
27" and SIC 12);
3) whether the requirements for derecognition of the securitised mortgage loan are met pursuant to IAS 39,
Financial Instruments: Recognition and Measurement ("IAS 39").
It should be emphasised that Consob considered an assessment of the afore-mentioned requirements necessary
though not sufficient to qualify the Transaction as a "true sale" of the Group's real estate transferred to the
Consortium.
Having regard to the provisions set out in par. 3 of SIC 27, Consob recalled the principle whereby ― A series of
transactions that involve the legal form of a lease is linked, and therefore should be accounted for as one
transaction, when the overall economic effect cannot be understood without reference to the series of transactions as
a whole. This is the case, for example, when the series of transactions are closely interrelated, negotiated as a single
transaction, and takes place concurrently or in a continuous sequence ‖.
Which, in Consob's scope of interpretation of the International Accounting Standards, means that, after having
evaluated, in substance: compliance of condition 1) with the provisions of IAS 17 on operating leases; compliance of
condition 2) with the principles for 'deconsolidation' under IAS 27 and SIC 12; and compliance of condition 3) with
the criteria for derecognition under IAS 39, the Parent Company's Directors need to "carefully consider all
circumstances and forward-looking elements that may influence the occurrence or non-occurrence of the aforementioned conditions, disclosing in the notes to the financial statements all information necessary for a thorough
assessment of the transactions at issue".
Having said this, the Parent Company's Board of Directors proceeded with an assessment of whether the
conditions were in place for the Transaction to be considered as a "true sale" of the Group's real estate transferred
to the Consortium. To this end, the Parent Company's Board of Directors, assisted by an external expert, verified
whether -from an accounting-technical standpoint- the conditions as at 31 December 2010 were in place for the
assumptions under 1), 2) and 3) above to be deemed individually applicable in terms of compliance with the
International Accounting Standards of reference.
Considering that the Transaction was structured into the four previously described phases, the assessment was
completed on the basis of the following international accounting standards:
IAS 18, Revenue (―IAS 18‖), on the accounting treatment of revenue arising from the transfer/disposal of
assets to third parties;
IAS 17 and SIC 27, on leases;
IAS 27 and SIC 12 on the accounting treatment ('deconsolidation') of equity investments;
IAS 39 on recognition and measurement of financial instruments.
In particular, IAS 18, IAS 17 and SIC 27 were relevant for the purpose of ascertaining the applicability of condition
1), i.e. the operating nature of lease agreements entered into by and between Group Companies and the
Consortium; IAS 27 and SIC 12 were relevant for the purpose of ascertaining the applicability of condition 2), i.e.
'deconsolidation' of the interest in the Consortium; IAS 39 was relevant for the purpose of ascertaining the
applicability of condition 3), i.e. the derecognition of the securitised mortgage loan.
The assessment by the Parent Company's Board of Directors highlighted that the conditions of the Transaction's
individual phases that qualify the Transaction as a "true sale" (as per the definition contained in Consob note of 23
December 2010) were met prior to closing date (31 December 2010) and no events occurred after 31 December
151
Consolidated Notes to Financial Statements – Part A – Accounting Policies
2010 and prior to the approval of the Group's consolidated financial statements that may have changed the
conditions existing at closing date. For all intents and purposes:
a) the real estate sale and lease back transaction bewteen the Group and the Consortium qualifies as operating
sale & lease-back having regard to the requirements set forth in IAS17; and hence the derecognition of
properties from the Group's consolidated financial statements;
b) ownership of Consortium class A shares as at 31 December 2010 to an extent of less than 8% of capital is
an essential condition to assume that Group control over the Consortium ceased to exist as at the closing
date of the fiscal year. An interest of less than 8% does not enable the Group to appoint any members to
the BoD and exert any influence on the company's financial and operating policies.
Since,
for accounting purposes, the Consortium qualifies as a special purpose entity (SIC 12),
deconsolidation may not apply if the Group still retains -by virtue of other contractual relationships- the
risks and benefits arising from properties transferred and, specifically, from ownership of the majority of
the participating shares issued by the Consortium 42 . On this connection, the Group held no participating
shares in the books of its companies as at 31 December 2010. Consequently, it may be affirmed that the
risks/benefits arising from properties were transferred to the owners of the participating shares;
c)
Following the securitisation, conditions are in place to believe that the Parent Company may derecognise
from its balance sheet the amount receivable from the Consortium as a consequence of the fact that this
receivable was transferred to the securitisation vehicle Casaforte. In effect, the Group held no class B and Z
notes issued by Casaforte as at the end of the year. As regards class A senior notes, a residual amount of
EUR 7 mln was owned by the Group as at 31 December 2010 (0.45% of the EUR 1,536.6 mln nominal
value of total notes issued), partly attributable to liquidity support ensured by MPS Capital Services S.p.a..
Liquidity support in relation to class A notes issued by Casaforte, for which MPS Capital Services committed to
repurchasing 100% of class A notes keeping the spread at issuance unaltered, entails the retention of a risk
associated with repurchase of the transferred loan. For this reason, it was necessary to evaluate whether the majority
of risks and rewards arising from the transferred loan had been transferred substantially pursuant to par. 22 of IAS
39. The assessment was made by quantifying the exposure to variability in net cash flows before and after the
transfer, taking account of the possibility of option exercise by class A note holders. An assessment was also made
on the basis of both historical data for comparable issuances and forward looking estimates that consider future
developments in the issuer's creditworthiness based on different scenarios of financial market volatility. The value of
the commitment undertaken, namely the options substantially issued to class-A ABS holders, duly posted to the
balance sheet for an amount of EUR 6.3 mln, proved to be substantially negligible with respect to the overall value
of risks and rewards associated with the securitisation. The ratio of exposure to variability in the present value of net
future cash flows after transfer and exposure before transfer is approximately 6%. An assessment of whether control
over the securitised loan was retained or not was also carried out pursuant to par. 20c) of IAS 39, which revealed
that no contractual or regulatory restriction or limitation exists in terms of the loan being fully available to the
transferee by the Parent Company (transferor).
The assessment of the Transaction as a whole and of its closely inter-related individual phases by the Parent
Company's Board of Directors, corroborates that, from a substantial standpoint, the "true sale" of the Group's real
estate is deemed met as at 31 December 2010.
In any case, although all afore-mentioned conditions are met, it is noted that, having regard to the characteristics of
the Transaction and as indicated by Consob in its note of 23 December 2010, the decision regarding the
derecognition of properties transferred to the Consortium is motivated by the explicit will of the Parent Company's
Board of Directors to ensure conditions are maintained and kept stable over time and the related capital gain is
accounted for.
The Parent Company's Directors carefully considered all circumstances and forward looking elements that may have
an influence on the Transaction's conditions being maintained and kept stable, and reported in these Notes to the
Financial statements the most relevant information necessary for a thorough assessment of the various transactions
carried out with a view to completing the Transaction.
The Consortium's Articles of Association provided for the possibility to issue participating shares pursuant to art. 2346 of the Italian civil code, which were issued
on 22 December 2010 against consideration. These instruments were entirely subscribed for by institutional investors for a total amount of EUR 69.9 mln. These
participating shares entitle holders certain rights, including the right to participate in the net profits arising from disposal of PGPI properties . The real estate risk
associated with the deal for value creation from rproperties transferred to the Consortium is limited to the holders of participating shares alone.
42
152
Consolidated Notes to Financial Statements – Part A – Accounting Policies
Based on the above-described assessments, the Parent Company's Directors maintain that conditions are in place for
the Transaction to be considered as a "true sale" of the Group's real estate transferred to the Consortium, thus
making it possible to proceed with Consortium's 'deconsolidation' and recognise the capital gain arising from the
Transaction (EUR 405.5 mln) also in the Group's 2010 consolidated financial statements (item 240 ―Gains (losses)
on equity investments‖ of the profit and loss account).
Securitisations
Securitised loans completed prior to the first-time adoption (FTA) of international accounting standards are not
reported in the financial statements inasmuch as the Group has made use of the optional exemption provided for by
IFRS 1, which permits not re-posting financial assets/liabilities sold or derecognised prior to 1 January 2004. The
relative junior securities underwritten have been classified among receivables.
For transactions completed later than this date, where receivables were sold to vehicle companies and in which even with formal transfer of legal ownership of the receivables - control is maintained over the cashflows deriving
therefrom and over most risks and rewards, the loans that are the object of the transaction are not eliminated.
Therefore, the receivables sold are maintained in the financial statements as a payable with the vehicle company net
of the securities issued by the company itself and repurchased by the seller. The profit and loss statement also
reflects the same accounting criteria.
Substitute tax and recognition of tax value of goodwill
Goodwill is an asset that, if posted in the financial statements as a result of merger, transfer or spin-off transactions,
is not recognised for tax purposes. Given the residual nature of goodwill, IFRS 3 ―Business Combinations‖ expressly
forbids the posting of deferred tax liabilities against the difference between the book value and the tax value of
goodwill upon initial recognition. This said, Legislative Decree 185/2008 provides for recognising goodwill for tax
purposes by paying a substitute tax at a rate of 16%. Payment of the substitute tax reconciles the tax value to the
book value and allows for tax amortisation of goodwill over nine years. International accounting standards do not
explicitly cover this issue. Therefore, as indicated in Section 1 ―Statement of compliance with the international
accounting standards‖, senior management had to define an accounting policy in accordance with the criteria
established and essentially aimed at ensuring substantial representation of the effects of the transaction.
Upon conclusion of this process, the Parent Company recorded the substitute tax (cost) and the tax deduction
(revenue) as a one-off payment in the profit and loss statement for 2008. The balance-sheet revenue contra-entry is
an asset subsequently amortised through profit or loss, thereby eliminating any interference with the tax rate
recorded in the financial statements. The accounting criteria adopted takes into account analysis from evaluations
conducted by the banking industry body (ABI) and the Italian standard-setter (OIC).
During 2009, the subsidiary Banca Antonveneta S.p.A. resolved to partially deduct the goodwill posted following the
transfer of banking business by the Parent Company on 1 January 2009. This transaction, which was accounted for
using the method described above, produced an overall net impact of EUR 109.1mln on the 2009 consolidated
profit and loss account. In the course of 2010, Banca Antonveneta completed goodwill deduction, with an overall
net impact of EUR 113.4mln on the 2010 consolidated profit and loss account.
In the course of 2010, no tax deduction of goodwill was recognised by the Parent Company. However, the relief
occurring in 2008 still had some effects in 2010 and will continue to reverberate on future financial periods.
Accounting for hedge transactions – adoption of the fair value option
In its financial risk management policy, relating to financial instruments included in the banking book, the Bank has
preferred to used the fair value option accounting technique with respect to the alternative methods of hedging
provided for by IAS 39, particularly fair value hedging and cash flow hedging. This decision is strictly linked to the
actual methods with which the Group implements its own hedging policies, tending to do so by assets, managing the
overall exposure to the market.
More specifically, the fair value option was adopted to represent operational hedges realised by trading derivative
financial instruments to hedge fixed-rate certificates of deposit and fixed-rate or structured bonds, both on an
individual and consolidated basis (accounting mismatch). In fact, the operations of the Group provide for the issuing
companies of the MPS Group to stipulate microhedging derivative contracts for issued funding instruments with
subsidiary MPS Capital Services S.p.A., which in turn manages by assets the Group‘s overall exposure to the market.
153
Consolidated Notes to Financial Statements – Part A – Accounting Policies
This approach does not enable a direct relationship to be maintained between the derivative stipulated between
Group companies and that traded to the market. This management can be faithfully represented in the financial
statements by adopting the fair value option introduced by the new international accounting standards, designating
a group of financial assets or financial liabilities managed at fair value through profit or loss.
The scope of application of the fair value option, for the most part, concerns three types of financial debt
instruments:
plain vanilla issues represented by bonds and fixed-rate certificates of deposit;
structured issues represented by bonds whose payoff is tied to an equity component;
structured issues represented by bonds whose payoff is determined by interest rate- or inflation-linked
derivatives.
The use of the fair value option, while best representing the hedge activities performed by the Group, has
introduced certain elements of greater complexity compared with the other forms of hedging provided for by IAS
39, such as the need to manage the creditworthiness of the issuer and to define and specify methodologies for
determining the fair value of the issued securities.
In accordance with IAS 39, adopting the fair value option necessitates the liabilities being measured at fair value
while also taking into account changes in own creditworthiness. This element is considered in the valuation process;
to this end, the portfolio of financial instruments designated for the purpose of the fair value option has been
determined using methods consistent with those adopted for all other financial instruments owned by the Group
and measured at fair value, as described in detail in the following paragraph.
From the perspective of prudential supervision, the fair value option was subject to attention from supervisory
bodies, oriented towards controlling the potentially distorting effects deriving from posting to the profit and loss
statement changes in the issuer‘s own creditworthiness and, consequently, in the quality of equity. These reflections
led the Supervisory Authorities to identify and isolate the effects deriving from changes in own creditworthiness,
which are expressly excluded from the calculation of regulatory capital. Consequently, the Group shall ensure that
its own regulatory capital is cleansed of effects deriving from changes in own creditworthiness, in compliance with
the instructions provided by the Bank of Italy regarding prudential filters.
IAS 39 provides for financial instruments to be irrevocably posted among assets or liabilities measured at fair value
upon initial recognition. The fair value option cannot therefore be used for hedges on funding instruments issued
prior to the decision that the hedge be undertaken; hedge accounting must be used in these cases.
There are, moreover, portfolios and asset classes for which using the fair value option would make it harder to
manage and measure the items, for example in relation to the hedging of assets. With reference to these cases,
therefore, the Group considered it more appropriate and consistent to adopt formal hedge accounting relations than
use the fair value option. In particular the Grouphas used the technique of Micro Fair Value Hedging to hedge
quotas of commercial assets valued at amortised cost (loans, mortgages) and the (available for sale) securities
portfolio, while using Macro Fair Value Hedging for certain hedges of commercial assets and Cash Flow Hedging to
hedge a limited portion of variable-rate funding instruments. The fair value option on the asset side of the balance
sheet was therefore only marginally adopted with respect to the securities portfolio of the defined-contribution
internal pension fund of the former Banca Toscana, which was merged by the Parent Bank in the first half of 2009.
Within the framework of the Operating Guide no. 4 on accounting management of reserves and profit distribution
pursuant to Legislative Decree no. 38 of 28 February 2005 issued by the Italian standard setter (OIC), the
supervisory authorities (Banca d‘Italia/Consob/Isvap) also identify as non-distributable capital gains those that are
posted to the profit and loss statement using the fair value option and not yet realised. Group companies have
followed this rule to the letter, considering only capital gains and not capital losses, underlining that all the Group‘s
liability operations are exclusively for the purposes of hedging.
d) Using estimates and assumptions when preparing financial statements. Main causes of uncertainty
(with particular reference to the provisions of IAS 1, paragraph 125, and document nos. 4 of 3 March
2010 and 2 of 6 February 2009, issued jointly by Banca d’Italia/Consob/Isvap).
The financial crisis which has gradually set in to further compound the economic crisis has had many consequences
for the company, notably on its financial planning (i.e. on the business plans for its loans). The huge volatility on the
still-active financial markets, the reduction in transactions on inactive financial markets and the lack of future
prospects created specific conditions that influenced the preparation of financial statements, especially in relation to
estimates required by accounting standards that can have a significant impact on the balance sheet and profit and
154
Consolidated Notes to Financial Statements – Part A – Accounting Policies
loss statement, as well as on disclosure of contingent assets and liabilities reported in the financial statements. The
production of these estimates involves using available information and making subjective valuations. By their nature,
the estimates and assumptions utilised may vary from one period to another and, therefore, it cannot be ruled out
that in subsequent periods the present values entered in the accounts may differ, even to a significant extent, as a
result of changes in subjective assessments made. These estimates and valuations are thus difficult and bring about
inevitable elements of uncertainty, even in stable macroeconomic conditions.
The main cases in which subjective valuations are mostly opted for by Management include:
a) the use of valuation models to measure the fair value of financial instruments not listed in active markets;
b) the quantification of impairment losses on loans and, more generally, other financial assets;
c) the assessment of the fairness of the value of equity investments, goodwill, other intangible assets and
property, plant and equipment.
For a description of item a), please see section "―A.3.2 Fair Value Hierarchy‖; in relation to items b) and c), the
most important qualitative issues subject to elements of discretion are described below. The actual technical and
conceptual solutions used by the group are analysed in more detail in the individual sections of the notes to the
balance sheet and the profit and loss statement, where the contents of each item in the financial statements are
described.
Methods for determining impairment losses on loans and, more generally, other financial assets
At the end of every reporting period, the financial assets not classified as held-for-trading financial assets or assets at
fair value are evaluated to check whether there is objective evidence of impairment that might render the book
value of these assets not entirely recoverable.
A financial asset has suffered a reduction in value and the impairment losses must be posted to the financial
statements if, and only if, there is objective evidence of a reduction in future cash flows compared with those
originally estimated as a result of one or more specific events that have occurred after initial recognition; the loss
should be determined reliably and in relation with recent events.
The reduction in value may also be caused not by a single separate event but by the combined effect of several
events.
The objective evidence that a financial asset or group of financial assets has suffered a reduction in value includes
measurable data that arise from the following events:
(a)
significant financial difficulty of the issuer or debtor;
(b)
breach of contract, for example non-fulfilment or failure to pay interest or principal;
(c)
granting to the beneficiary of a facility that the Group has taken into consideration primarily for economic
or legal reasons related to the former‘s financial difficulties and that would not have been granted
otherwise;
(d)
a reasonable probability that the beneficiary will declare bankruptcy or other financial restructuring
procedures;
(e)
disappearance of an active market for that financial asset due to financial difficulties. Nevertheless, the
disappearance of an active market due to the fact that the financial instruments of the company are no
longer publicly traded is not evidence of a reduction in value;
(f)
measurable data which indicate the existence of a significant drop in the estimated future cash flows for a
group of financial assets from the time of their initial recognition, even though the reduction cannot yet be
matched to the individual financial assets of the Group, including:
-
unfavourable changes in the status of payments of the beneficiaries within the group; or
-
local or national economic conditions that are associated with non-fulfilment related to internal
Group assets
Objective evidence of reduction in value for an investment in an equity instrument includes information regarding
important changes with an adverse effect that have occurred in the technological, market, economic or legal
environment in which the issuer operates and indicates that the cost of the investment may not be recovered.
The impairment test is performed on an analytical basis with respect to financial assets that show objective evidence
of impairment and on a collective basis with respect to financial assets for which such objective evidence does not
155
Consolidated Notes to Financial Statements – Part A – Accounting Policies
exist or for which the individual analytical valuation did not give rise to a valuation adjustment. Collective valuation
is based on identifying homogenous risk classes of financial assets with reference to the characteristics of the
debtor/issuer, economic sector, geographic area, presence of any guarantees and other relevant factors.
Loans and advances to customers and banks are individually analyzed whenever they are classified as
nonperforming, watchlist or restructured receivables as per the Bank of Italy definitions. The amount of the loss is
equal to the difference between the book value of the receivable upon valuation (amortised cost) and the current
value of expected future cash flows, calculated using the original effective interest rate; expected cash flows take into
account expected recovery times, presumable salvage value of any guarantees as well as costs likely to be incurred
for the recovery of credit exposure. The amount of the loss is indicated in the profit and loss statement under Item
130 a) ―Net impairment losses/reversals on loans‖.
The individual valuation of the aforementioned impaired loans requires defining repayment schedules for each
position, in order to determine the cash flows deemed to be recoverable. In this respect, with the valuation process
adopted by the Company, thresholds have been identified in terms of amounts of receivables, under which plans
for recovering the exposures are defined on an automated basis. Such thresholds are set in accordance with bands
characterised by limited exposure in relation to the total and by a large number of positions.
Receivables with no individually identified objective evidence of impairment loss are subject to collective valuation.
This valuation occurs by credit-risk homogenous categories of receivables, indicative of the debtor's ability to repay
sums contractually owed. The segmentation drivers used for this purpose consist of: Economic sector, geographic
location and customer segments (billing); on the basis of the latter indicator, the main segments of the portfolio are
differentiated as follows:
Retail;
Small and Medium Enterprises - Retail;
Small and Medium Enterprises - Corporate
Corporate;
Large Corporate;
Banks;
Other.
The rate of loss is determined for each portfolio segment by identifying the largest possible synergies (as allowed by
various regulations) using the supervisory approach of the Basel II ―New capital accord‖. In particular, the
impairment for the year of each loan belonging to a particular category is given by the difference between the book
value and the recoverable amount on the date of valuation, with the latter being determined by using the
parameters of the calculation method provided for by the new supervisory provisions, represented by PD
(probability of default) and LGD (loss given default).
If, in a subsequent year, the impairment loss decreases and the reduction can be objectively linked to an event that
occurred after the impairment was recognised (such as an improvement in the financial solvency of the debtor), the
previously recognised impairment loss will be reversed. The amount of the reversal is indicated in the profit and loss
statement under Item 130 ―Net impairment losses/reversals‖.
With reference to loans which have been restructured by partial or full conversion into equity stakes of beneficiary
companies, in accordance with joint document no. 4 issued by Banca d‘Italia/Consob/Isvap on 3 March 2010, it is
noted that the fair value of quotas received was factored into the valuation. In particular, in the case of impaired
exposure, such classification was maintained for converted financial instruments received and, in the case of
classification in the available-for-sale (AFS) category, capital losses recognised after conversion were posted directly
to the profit and loss statement.
Impairment of available-for-sale financial assets is posted to the profit and loss statement when a reduction in fair
value has been directly recognised in shareholders‘ equity and the aforementioned objective evidence exists In such
cases, the cumulative loss recognised directly in shareholders‘ equity shall be reversed and posted to profit and loss ,
even if the financial asset has not been derecognised. The overall loss transferred from shareholders‘ equity to profit
and loss is the difference between the acquisition cost (net of any repayment of principal and amortisation) and the
current fair value, less any impairment loss on the financial asset previously posted to profit and loss. Impaired
losses posted to profit and loss for investment in an available-for-sale equity instrument do not have to be reversed
with an impact on said statement.
156
Consolidated Notes to Financial Statements – Part A – Accounting Policies
If the fair value of an available-for-sale debt instrument subsequently increases, and the increase can be objectively
linked to an event that took place after the impairment loss was posted to the profit and loss statement, the
impairment loss must be derecognised and reversed to profit and loss.
However, the existence of a negative reserve is not in itself sufficient to determine a write-down in the profit and
loss statement.
The nature and number of assumptions used to identify impairment factors and determine losses and reversals are
elements of uncertainty in estimation. For equity instruments listed in active markets, objective evidence of
impairment occurs when the market price at the end of the reporting period is at least 30% lower than the original
acquisition cost or when market value is lower than the cost for a period of more than 12 months. If further
reductions take place in subsequent financial years, these are charged directly to the profit and loss statement.
Methods for determining impairment losses on equity investments, goodwill and, more generally, other intangible
assets
Equity investments
The impairment process entails computation of the recoverable amount, which is the greater of the fair value less
costs to sell, and the value in use. The value in use is the present value of the cash flows arising from the impaired
asset; it reflects the estimate of the cash flows expected from the asset, the estimate of possible changes in the
amount and/or in the timing of the cash flows, the financial value over time, the price for remunerating the risk on
the asset and other factors that can influence the pricing, on the part of market dealers, of the cash flows expected
from the asset. Numerous assumptions are therefore required to estimate the fairness of the recognition value of
equity investments.
Goodwill
Goodwill posted following acquisitions is subjected to an impairment test at least once a year and whenever there
are signs of impairment. For testing purposes, once goodwill has been allocated to cash-generating units (CGUs), the
book value is compared with the recoverable value of said units pursuant to paragraph 9 ―Intangible assets‖. The
discounted cash flow (DCF) method is normally used to determine the recoverable value of the CGUs. To this end,
senior management has estimated CGU cash flows; these are dependent on several factors, including cost and
revenue growth rates, which in turn depend on changes in the real economy, customer behaviour, competition and
other factors. Numerous assumptions are therefore required to estimate the fairness of the recognition value of
goodwill; it follows that the result of this verification inevitably entails some degree of uncertainty. Disclosure in
Section 12 of the ―Assets‖ in the notes to the financial statements provides more details on this subject.
Other property, plant and equipment and intangible assets
The tangible and intangible assets with limited useful life are tested for impairment in the presence of any indication
that the book value of the asset may not be recovered. The recoverable value is computed with reference to (i) the
fair value of the fixed or intangible asset, net of the charges for disposal or (ii) the value in use if determinable and if
it is above fair value.
The fair value of immovables is predominantly determined on the basis of an appraisal. This expert valuation will be
repeated periodically whenever a change in the trend of the real estate market is ascertained that causes previously
determined estimates to appear invalid. The loss in value is reported only if the fair value less costs to sell, or the
value-in-use, is less than the book value. For other property, plant and equipment and intangible fixed assets (other
than goodwill), it is assumed that the book value normally corresponds to the value-in-use, inasmuch as it is
determined by an amortisation process estimated on the basis of the actual contribution of the asset to the
production process, and inasmuch as the determination of fair value is extremely arbitrary. The two values will
diverge, giving rise to impairment, in the event of damage, removal from the production process or other similar
non-recurring circumstances.
The nature and number of assumptions are elements of uncertainty also for these values and for subsequent
verifications. More information on the possible assumptions can be found in Sections 12 and 13 of the ―Assets‖ in
the notes to the financial statements.
157
Consolidated Notes to Financial Statements – Part A – Accounting Policies
A.3 Information on fair value
A.3.1 Portfolio transfers
A.3.1.1 Reclassified financial assets: book value, fair value and effect on comprehensive income
(in tho usands o f EUR)
Type of
financial
instrument
(1)
Portfolio prior
Portfolio after
to transfer
transfer
(2)
(3)
Book value
at 31 12
2010
Fair value at
31 12 2010
(5)
(4)
Income components
Income components
in the absence of
reported for the period
transfers (before tax)
(before tax)
Valuerelevance
Other
(7)
(6)
Debt
Securities
Trading
Debt
Securities
Trading
Debt
Securities
Available for
sale
Debt
Securities
Loan and
advances to
customers
Loan and
advances to
banks
Valuerelevance
(8)
Other
(9)
609.473
518.760
(10.299)
22.331
433
29.729
167.705
163.286
6.724
4.386
83
4.709
Crediti verso
clientela
1.541.644
1.374.633
(86.577)
50.446
409
59.330
Available for
sale
Loan and
advances to
banks
544.421
539.860
1.298
2.272
719
9.385
Debt
Securities
Trading
Available for
sale
5.711
5.711
UCITS
Trading
Available for
sale
387.272
387.272
3.256.226
2.989.522
Total
(137)
50
22.507
(66.484)
(141)
360
22.507
79.845
24.010
74
(8.331)
94.896
In the course of 2008, the Group applied the amendment ―Reclassification of financial assets‖, which was issued by the IASB to amend IAS 39
and IFRS 7 in October 2008 introducing the possibility of reclassifying portfolios in unusual circumstances such as the crisis that emerged in the
markets in the second half of 2008.
On the basis of this amendment, some Group companies transferred the following securities portfolios in the second half of 2008, shown below
at their historical transfer values:
1)
debt securities in the amount of € 810.9 mln from the AFS portfolio to loans and advances to banks;
2)
debt securities in the amount of € 1,611.1 mln from the AFS portfolio to loans and advances to customers;
3)
debt securities in the amount of € 180.9 mln from the trading portfolio to loans and advances to banks;
4)
debt securities in the amount of € 826.8 mln from the trading portfolio to loans and advances to customers;
5)
units of UCITS in the amount of € 481.4 mln from the trading portfolio to the AFS portfolio.
In addition to illustrating the book values and fair values of financial instruments reclassified in 2008 as at 31.12.2010, the table also reports
(columns 6 and 7) financial results in terms of ―value relevance‖ and ―other‖ (realised profit/loss and interest), which the same financial
instruments would have produced for the Group in 2010 had they not been transferred in 2008. Columns 8 and 9, on the other hand, contain
the financial results in terms of ―value relevance‖ and "other" (realised profit/loss and interest) which the Group actually posted for these
instruments in the course of 2010.
The hypothetical net capital losses (column 6) of € 66.5 mln are higher than those actually recorded for 2010 (€ 24 mln in capital gains, see
column 8) by an overall amount of € 90.5 mln. This potential negative outcome in 2010 arises from the fact that, if reclassification had not taken
place in 2008, fair value measurement of these securities at the end of 2010 would have brought about capital losses vs. the capital gains actually
recognised as a result of the reclassification. The negative impact would have been posted to equity for an amount of € 86.4 mln (in reserves of
AFS financial instruments) and to profit and loss for an amount of € 4.1 mln as lower trading income.
By way of completeness, on the back of the reclassification in 2008 of bonds originally classified as AFS financial instruments, the relative
negative reserve, for an amount of € 228.4 mln, existing on the date of reclassification, was accounted for pursuant to the provisions set out in
par. 50F of IAS 39.
In particular, the negative AFS reserve was gradually phased out over a timeframe reflecting the residual life of the underlying securities,
measured as a direct reduction of interest income. This negative impact on net interest income was offset by the positive effect of the amortised
cost mechanism on securities, which gradually brings the maturity value in line with the nominal value. The residual reserve at the end of 2010
was € 104.1 mln.
158
Consolidated Notes to Financial Statements – Part A – Accounting Policies
A.3.1.2 Reclassified financial assets: effects on comprehensive income prior to transfer
A.3.1.3 Transfer of held-for-trading financial assets
A.3.1.4 Effective interest rate and expected cash flows from reclassified financial assets
Tables A.3.1.2, A.3.1.3 and A.3.1.4 were left blank because no financial assets were reclassified during the year.
A.3.2 Fair Value Hierarchy
The fair value hierarchy, introduced by the IASB through IFRS 7 amendment ―Additional disclosures‖ of March
2009, must be applied to all financial instruments measured at fair value in the balance sheet.
IAS 39 defines fair value as the amount for which an asset could be exchanged, or a liability settled, between
knowledgeable, willing parties in an arm‘s length transaction.
The fair value of financial instruments listed in active markets is determined by using quoted market prices; quoted
market prices for similar instruments or internal valuation models are used for other financial instruments.
Financial instruments are classified in three different levels according to the reliability of the inputs used during
measurement.
The methods for classifying financial instruments in the three-level fair value hierarchy are shown below.
Level 1
This level shall include financial instruments measured using unadjusted quoted prices in active markets for identical
instruments.
IAS 39 defines a financial instrument as quoted in an active market when:
a) the quoted prices are readily and regularly available from an exchange, dealer, broker, industry group,
pricing service, authorised body or regulatory agency;
b) the quoted prices represent actual and regularly occurring market transactions on an arm‘s length basis.
If the quoted prices meet these criteria, they represent the best estimation of fair value and must be used to measure
the financial instrument.
From the definition set out in IAS 39 it is inferred that the active market concept is particular to the individual
financial instrument being measured and not to the market on which it is listed; the fact that a financial instrument is
quoted in a regulated market is therefore not in itself sufficient for said instrument to be defined as listed in an
active market.
Level 2 and 3
Financial instruments not listed in an active market must be classified in level 2 or 3.
Classification in level 2 rather than level 3 is determined on the basis of market observability of the significant inputs
used to determine fair value. A financial instrument must be fully classified in a single level; if inputs belonging to
different levels are used for the purpose of measuring an instrument, said instrument is classified based on the
lowest level of input that is significant to the fair value measurement.
An instrument is classified in level 2 if all significant inputs are directly or indirectly observable on the market. An
input is observable if it reflects the same assumptions used by market participants, based on independent market
data.
Level 2 inputs are as follows:
quoted prices on active markets for similar assets or liabilities;
quoted prices for the instrument in question or for similar instruments on non-active markets, i.e. markets
where:
- there are few transactions;
- the prices are not current or they vary substantially over time and between the difference market
makers or
- little information is made public;
159
Consolidated Notes to Financial Statements – Part A – Accounting Policies
observable market inputs (e.g.:interest rates or yield curves observable in different buckets, volatility, credit
curves, etc.);
inputs that derive primarily from observable market data, the reporting of which is confirmed by
parameters such as correlation.
A financial instrument is classified in level 3 if the measurement techniques adopted use non-observable market
inputs and their contribution to estimating fair value is deemed significant.
All financial instruments not listed in active markets are classified in level 3 where:
despite having observable data available, significant adjustments based on non-observable data are
required;
The estimate is based on assumptions internal to the Parent Bank on future cash flows and risk adjustment of the
discount curve.
A.3.2.1 Accounting portfolios: breakdown by fair value levels
(in tho usands o f EUR)
31 12 2010
Level1
1. Financial assets held
for trading
2. Financial assets
designated at fair value
3. Financial assets
available for sale
4. Hedging derivatives
Total
1. Financial liabilities
held for trading
2. Financial liabilities
designated at fair value
3. Hedging derivatives
Total
Level 2
31 12 2009
Level 3
Total
Level1
Level 2
Level 3
Total
8.141.387
25.459.314
323.499
33.924.200
6.464.507
16.732.052
309.964
23.506.523
235.194
11.949
-
247.143
249.687
10.731
-
260.418
19.312.242
2.240.741
248.532
21.801.515
12.171.326
2.516.217
221.647
14.909.190
-
313.412
-
313.412
-
198.703
-
198.703
2 7 .6 8 8 .8 2 3
2 8 .0 2 5 .4 16
5 7 2 .0 3 1
5 6 .2 8 6 .2 7 0
18 .8 8 5 .5 2 0
19 .4 5 7 .7 0 3
5 3 1.6 11
3 8 .8 7 4 .8 3 4
821.380
29.464.268
97.852
30.383.500
1.631.801
17.757.665
91.872
19.481.338
-
25.469.490
-
25.469.490
-
21.699.056
-
21.699.056
-
1.736.530
-
1.736.530
-
931.554
-
931.554
8 2 1.3 8 0
5 6 .6 7 0 .2 8 8
9 7 .8 5 2
5 7 .5 8 9 .5 2 0
1.6 3 1.8 0 1
4 0 .3 8 8 .2 7 5
9 1.8 7 2
4 2 .111.9 4 8
The financial instruments measured at fair value and classified in level 3 of the hierarchy consist of instruments not listed in active markets, valued
using the mark-to-model approach, for which input data include, inter alia, non-observable market data significant for measurement purposes or
observable market data that requires significant adjustment based on non-observable data, or that requires internal assumptions and estimations
of future cash flows. In addition, the Group deemed it right and prudential to have Level 3 include -regardless of the observability of market data
for necessary inputs- any instruments not listed in active markets which are complex by their financial structure or because of the unavailability of
a clear measurement method recognised as standard in the market and adjustable based on observable prices of comparable structures.
This applies, for example, to assets in the structured credit category not listed in an active market. Although, in some cases, this category could
avail itself of appropriate measurement models that make use of observable market inputs (e.g. credit default swap curves) or quotations by
primary counterparties, the lack of a liquid market on correlations in the wake of the financial crisis made it necessary to use subjective estimates.
Given the complexity of these structures, the Group decided to classify these instruments in level 3, in the absence of an active market, regardless
of the observability of input parameters significant for their mark-to-model measurement.
Another category of financial instruments classified in level 3 comprises some types of exotic options, mainly multi-asset, path-dependent options
on equity instruments. Subjectivity in measuring these instruments lies mainly in selecting an appropriate pricing model rather than in the
availability of input parameters often inductively inferable from the quotations of comparable instruments. For example, these instruments
depend significantly on estimates regarding the future development of certain market parameters, such as the volatility surface of underlying
securities. Essentially, in consideration of the type of payoff, it is believed that the estimation of the fair value of these instruments should not
only factor in current market conditions (often observable) but also speculations on future market developments that are implicit in the model
used.
Additional information on level 3 financial instruments can be found in the comments under the tables for the individual balance sheet items
concerned.
160
Consolidated Notes to Financial Statements – Part A – Accounting Policies
A.3.2.2 Annual changes of financial assets measured at fair value (level 3)
3112 2010
FINANCIAL ASSETS
1. Opening balance
held for
designated at
available
Hedging
trading
fair value
for sale
derivatives
309.964
-
221.647
-
88.843
-
48.009
-
2.1 Purchases
56.298
-
37.500
-
2.2 Profits posted to:
21.275
-
9.041
-
2.2.1 Profit and Loss
21.275
-
258
-
14.510
-
-
-
8.783
-
2. Increases
- of which capital gains
2.2.2 Net equity
X
X
2.3 Transfers from other levels
-
-
-
-
11.270
-
1.468
-
75.308
-
20.846
-
663
-
-
-
3.2 Redemptions
53.858
-
472
-
3.3 Losses posted to:
20.787
-
18.839
-
3.3.1 Profit and Loss
20.787
-
665
-
2.4. Other increases
3. Decreases
3.1 Sales
- of which capital losses
3.3.2 Net equity
16.964
X
X
-
-
18.174
-
3.4 Transfers from other levels
-
-
1.535
-
3.5. Other decreases
-
-
-
-
-
-
323.499
-
IFRS 5 "Discontinuing operations"
4. Closing balance
161
(278)
248.532
-
Consolidated Notes to Financial Statements – Part A – Accounting Policies
A.3.2.3 Annual changes of financial liabilities measured at fair value (level 3)
3112 2010
FINANCIAL ASSETS
held for
designated at
trading
fair value
available for sale
1. Opening balance
91.872
-
-
2. Increases
57.418
-
-
-
-
-
2.2 Losses posted to:
23.568
-
-
2.2.1 Profit and Loss
23.568
-
-
17.824
-
-
2.1 Issues
- of which capital gains
2.2.2 Net equity
X
2.3 Transfers from other levels
X
-
-
-
-
33.850
-
-
51.438
-
-
3.1 Redemptions
4.400
-
-
3.2 Repurchases
-
-
-
3.3 Profits posted to:
47.038
-
-
3.3.1 Profit and Loss
47.038
-
-
14.681
-
-
2.4. Other increases
3. Decreases
- of which capital losses
3.3.2 Net equity
X
X
-
3.4 Transfers from other levels
-
-
-
3.5. Other decreases
-
-
-
97.852
-
-
4. Closing balance
A.3.3 Information on "day one profit/loss"
The Group did not generate day one profit/loss from financial instruments pursuant to paragraph 28 of IFRS 7 and
other related IAS/IFRS paragraphs.
162
Nota integrativa consolidata Parte B – Informazioni sullo stato patrimoniale consolidato
Part B – Consolidated Balance Sheet
Assets
Section 1 – Cash and cash equivalents – Item 10 ............................................................................................................. 164
Section 2 – Held-for-trading financial assets – Item 20..................................................................................................... 165
Section 3 – Financial assets designated at fair value through profit and loss – Item 30 ....................................................... 169
Section 4 - Available-for-sale financial assets – Item 40.................................................................................................... 172
Section 5 – Held-to-maturity financial assets – Item 50 .................................................................................................... 178
Section 6 – Loans and advances to banks – Item 60......................................................................................................... 180
Section 7 – Loans and advances to customers – Item 70 .................................................................................................. 182
Section 8 – Hedging derivatives – Item 80 ...................................................................................................................... 185
Section 9 – Change in value of macro-hedged financial assets – Item 90 ........................................................................... 188
Section 10 – Equity investments – Item 100.................................................................................................................... 189
Section 11 – Reinsurers‘ technical reserves – Item 110..................................................................................................... 194
Section 12 – Property, plant and equipment - Account 120 ............................................................................................. 195
Section 13 – Intangible assets – Item 130 ....................................................................................................................... 200
Section 14 – Tax Assets and Liabilities – Item 140 (Assets) and Item 80 (Liabilities) ........................................................... 208
Section 15 – Non-current assets and disposal groups held for sale and associated liabilities – Item 150 (assets) and 90
(liabilities) .................................................................................................................................................................... 214
Liabilities
Section 1 – Deposits from banks – Item 10 ..................................................................................................................... 217
Section 2 – Customer accounts– Item 20......................................................................................................................... 218
Section 3 – Debt securities in issue – Item 30 .................................................................................................................. 220
Section 4 – Held-for- trading financial liabilities – Item 40 .............................................................................................. 223
Section 5 – Financial liabilities designated at fair value through profit and loss – Item 50................................................... 226
Section 6 – Hedging derivatives – Item 60 ...................................................................................................................... 229
Section 7 – Changes in value of macro-hedged financial liabilities – Item 70 ..................................................................... 231
Section 8 – Tax liabilities – Item 80 ................................................................................................................................ 231
Section 9 – Liabilities associated with individual assets held for sale – Item 90 .................................................................. 231
Section 10 – Other liabilities – Item 100 ......................................................................................................................... 232
Section 11 – Provision for employee severance pay – Item 110........................................................................................ 232
Section 12 – Provisions for risks and charges – Item 120 .................................................................................................. 233
Section 13 – Insurance reserves – Item 130..................................................................................................................... 240
Section 14 – Redeemable shares – Item 150 ................................................................................................................... 240
Section 15 – Group shareholders‘ equity – Items 140, 160, 170, 180, 190, 200 and 220 .................................................. 241
Section 16 – Minority interests - Item 210 ...................................................................................................................... 244
Other information ......................................................................................................................................................... 245
163
Notes to the consolidated financial statements - Part B – Consolidated balance sheet
Section 1 – Cash and cash equivalents – Item 10
1.1 Cash and cash equivalents: breakdown
(in tho usands o f EUR)
Total
31 12 2010
a) Cash
b) Demand deposits with central banks
Total
Total
31 12 2009
774.763
764.175
1.636.268
531.412
2.411.031
1.295.587
The line ―demand deposits with central banks‖ does not include the compulsory reserve, which is shown in asset Item 60 ―Loans and advances to
banks‖.
The increase in "demand deposits with central banks" is due to a temporary use of liquidity in the form of deposits with central banks by the Parent
Company.
164
Notes to the consolidated financial statements - Part B – Consolidated balance sheet
Section 2 – Held-for-trading financial assets – Item 20
2.1 Held-for-trading financial assets: breakdown
(in thousands of EUR)
Total 31 12 2010
Items/Amounts
Level 1
Level 2
Total 31 12 2009
Level 3
Total
Level 1
Level 2
Level 3
Total
A. Balance sheet assets
1. Debt securities
1.1 Structured securities
1.2 Other debt securities
2. Equity instruments
3. Units in UCITS
4. Loans
4.1 Reverse repurchase
agreements
4.2 Other
Total (A)
7.656.436
826.871
313.181
8.796.488
5.690.215
1.299.463
286.802
7.276.480
50.916
114.064
124.151
289.131
5.127
193.655
246.978
445.760
7.605.520
712.807
189.030
8.507.357
5.685.088
1.105.808
39.824
6.830.720
104
255.989
198.846
4.573
110
203.529
85.985
38.228
-
124.213
255.885
-
90.516
327.254
-
417.770
-
12.823.231
-
12.823.231
-
6.281.189
-
6.281.189
-
8.896.057
-
8.896.057
-
3.358.518
-
3.358.518
-
3.927.174
-
3.927.174
-
2.922.671
-
2.922.671
8 .0 0 2 .8 3 7
13 .9 7 7 .3 5 6
3 13 .2 8 5 2 2 .2 9 3 .4 7 8
5 .9 7 5 .0 4 6
7 .6 2 3 .4 5 3
2 8 6 .9 12
13 .8 8 5 .4 11
1. Financial derivatives:
138.550
10.396.409
10.194
10.545.153
489.461
8.712.711
22.879
9.225.051
1.1 held for trading
138.550
10.347.864
10.194
10.496.608
489.461
8.633.293
22.879
9.145.633
1.2 fair value option
-
48.545
-
48.545
-
79.418
-
79.418
1.3 other
-
-
-
-
-
-
-
-
B. Derivatives
2. Credit derivatives:
-
1.085.549
20
1.085.569
-
395.888
173
396.061
2.1 held for trading
-
1.085.549
20
1.085.569
-
395.888
173
396.061
2.2 fair value option
-
-
-
-
-
-
-
-
2.3 other
-
-
-
-
-
-
-
-
Total (B)
Total (A+B)
13 8 .5 5 0
11.4 8 1.9 5 8
8 .14 1.3 8 7
2 5 .4 5 9 .3 14
10 .2 14
11.6 3 0 .7 2 2
4 8 9 .4 6 1
9 .10 8 .5 9 9
3 2 3 .4 9 9 3 3 .9 2 4 .2 0 0
6 .4 6 4 .5 0 7
16 .7 3 2 .0 5 2
2 3 .0 5 2
9 .6 2 1.112
3 0 9 .9 6 4 2 3 .5 0 6 .5 2 3
Item 20 ―Held-for-trading financial assets‖ includes:
a) on-balance-sheet assets acquired mainly for short-term gains;
b) financial assets deriving from derivative contracts other than those formally designated as hedging instruments.
The criteria adopted for the classification of financial instruments in the three levels of the ―fair value hierarchy‖ are indicated in Section A.3,
―Information on fair value‖ of Part A, ―Accounting policies‖ of the notes to the financial statements.
As a result of the provisions set out in IAS 39 with regard to the derecognition of financial assets, lines 1.1 and 1.2 also include debt securities
committed in repurchase agreements carried out for securities recognized as held-for-trading financial assets..
As for "on-balance-sheet assets" an overall increase by EUR 8,408 mln (60.6%) was registered with respect to 2009: debt securities were up by EUR
1,520 mln, equity securities by EUR 52.5 mln , UCITS by EUR 293.6 mln and loans by EUR 6,542 mln.
The increase, primarily attributable to debt securities and loans, is related to deposits from banks and customers in liabilities table 4.1 ―Held-for-trading
financial liabilities‖ and refers to a rise in repo transactions carried out by subsidiary MPS Capital Services – Banca per le Imprese S.p.A.
"Debt securities" include level 3 securities in the amount of € 313 mln, mainly comprising structured credit products (see table 2.1.a for further
details).
Derivatives connected with fair value option instruments are also included in the trading portfolio: these cover the risks of funding designated at fair
value arising from possible interest rate fluctuations and from any embedded options in the structured securities issued. The fair value of such
derivatives is shown in line "B.1.2 - Fair value option‖ if carried out directly with external counterparties, while it is shown as a share of trading
derivatives (line 1.1) where hedging of the FVO initially carried out with subsidiary MPS Capital Services made risk externalisation necessary.
For FVO derivatives arranged by Group companies with the subsidiary MPS Capital Services, it is worth noting that the relevant internal units
responsible for risk management perform appropriate tests at consolidated level in order to periodically test the strength of the hedge applied from the
perspective of a 'natural hedge'.
Overall, and taking into account the contracts signed with MPS Capital Services, the total amount of FVO derivatives established within the Group is €
1,010.6 mln.
165
Notes to the consolidated financial statements - Part B – Consolidated balance sheet
2.1.a Breakdown of debt securities: structured securities
(in tho usands o f EUR)
Structured debt securities
Total
Total
31 12 2010
31 12 2009
Index Linked
5.698
30.347
-
6.791
96.407
242.600
103.365
75.536
2.901
2.201
Target redemption note
-
754
Cap Floater
1
-
24
22
Commodity
20.774
12.098
Fund Linked
27.759
35.022
395
2.141
Convertible
Credit linked notes
Equity Linked
Step - up, Step down
Reverse Floater
Inflat
Other
31.807
38.248
Total
289.131
445.760
2.1.b Derivative receivables - Fair Value Option method
(in tho usands o f EUR)
31 12 2010
Financial asset
Items/Amounts
Other types of
Natural hedges
accounting
mismatches
portfolios
managed
internally on
the basis of fair
value
Financial derivatives
Credit derivatives
Total
48.545
x
-
-
x
-
48.545
x
-
This is a breakdown of previous table 2.1 and shows the book value (fair value) of hedging derivatives of the fair value option instruments, by method
of use, between Group companies and external counterparties.
Both at the end of 2010 and the end of 2009, all fair value option derivatives posted to the trading portfolio were attributable to the natural and
systematic hedging of fixed-rate and structured bonds issued by the Group.
(in tho usands o f EUR)
31 12 2009
Items/Amounts
Other types of
Natural hedges
accounting
mismatches
Financial derivatives
Credit derivatives
Total
166
Financial asset
portfolios
managed
internally on
79.418
x
the basis of fair-
-
x
-
79.418
x
-
Notes to the consolidated financial statements - Part B – Consolidated balance sheet
2.2 Held-for-trading financial assets: breakdown by borrower/issuer
(in tho usands o f EUR)
Items/Amounts
Total
Total
31 12 2010
31 12 2009
A. Balance sheet assets
1. Debt securities
8.796.488
7.276.480
a) Governments and Central banks
6.297.917
4.275.657
34.754
49.694
c) Banks
1.457.930
1.985.155
d) Other issuers
1.005.887
965.974
255.989
203.529
9.122
8.724
246.867
194.805
360
17.263
18.764
8.819
227.743
168.723
-
-
417.770
124.213
12.823.231
6.281.189
a) Governments and Central banks
-
-
b) Other public entities
-
-
5.501.559
1.117.518
b) Other public entities
2. Equity instruments
a) Banks
b) Other issuers:
- insurance companies
- financial companies
- non-financial companies
- other
3. Units in UCITS
4. Loans
c) Banks
d) Other entities
7.321.672
5.163.671
22.293.478
13.885.411
9.608.088
7.602.158
-
-
2.022.634
2.018.954
-
-
Total (B)
11.630.722
9.621.112
Total (A+B)
33.924.200
23.506.523
Total (A)
B. Derivatives
a) Banks
- fair value
b) Customers
- fair value
The breakdown by borrower/issuer was carried out in accordance with criteria of classification by economic activity group and sector laid down by the
Bank of Italy.
As far as on-balance-sheet assets are concerned, increases were registered in: debt securities issued by Central Banks and Governments (mainly Italian
government bonds) up by EUR 2,022.3 mln; UCITS up by EUR 293.6 mln and loans up by 6,542 mln, as against a decrease by EUR 527.2 mln in debt
securities issued by banks.
With regard to derivative instruments, derivatives with banks were up by EUR 2,005.9 mln.
167
Notes to the consolidated financial statements - Part B – Consolidated balance sheet
2.2.a Units in UCITS: Breakdown by main categories
(in tho usands o f EUR)
Categories/Amounts
Total
Total
31 12 2010
31 12 2009
Equity
29.183
10.580
Bonds
36.134
13.102
262.137
45.852
Flexible
77.925
38.228
Other
12.391
16.451
Balanced
Total
417.770
124.213
The table adds details to line "A.3. Units in UCITS" of table 2.2. An overall increase by 293.6 mln is noted, which was primarily contributed to by
balanced funds, flexible funds and bond funds.
2.3 HFT on-balance-sheet financial assets: annual changes
3112 2010
(in tho usands o f EUR)
Changes/Underlying assets
Debt securities
Equity
Units in UCITS
instruments
Loans
Total
A. Opening balance
7.276.480
203.529
124.213
6.281.189
13.885.411
B. Increases
109.982.730
10.062.479
458.155
269.881.403
390.384.767
B1. Purchases
108.866.457
9.957.139
437.513
269.831.661
389.092.770
-
-
-
-
-
-
-
-
-
-
54.204
13.788
13.778
3.046
84.816
of which
Business combinations
B2. Positive changes in fair value
B3. Other increases
C. Decreases
C1. Sales
C2. Redemptions
C3. Negative changes in fair value
C4. Transfers to other portfolios
C5. Other increases
IFRS 5 "discontinuing operations"
D. Closing balance
1.062.069
91.552
6.864
46.696
1.207.181
108.462.722
10.010.019
164.598
263.339.361
381.976.700
101.036.788
9.267.778
155.719
263.085.677
373.545.962
6.157.004
-
530
210.431
6.367.965
84.545
10.177
3.178
-
97.900
-
-
-
-
-
1.184.385
732.064
5.171
43.253
1.964.873
-
-
-
-
-
8.796.488
255.989
417.770
12.823.231
22.293.478
Increases and decreases are reflective of an increase in financial assets referable to "loans" and "units of UCITS" as commented in the notes to table
2.1. above.
Lines B3 and C5 include profit and loss from trading, accruals on issue discounts and on coupon interest, effects of exchange-rate fluctuations and any
initial (C5) and final (B3) uncovered short positions.
168
Notes to the consolidated financial statements - Part B – Consolidated balance sheet
Section 3 – Financial assets designated at fair value through profit and loss – Item 30
3.1 Financial assets designated at fair value through profit and loss: breakdown by type
(in tho usands o f EUR)
Items/Amounts
1. Debt securities
31 12 2010
Level 1
Level 2
31 12 2009
Level 3
Total
Level 1
Level 2
Level 3
Total
27.551
11.949
-
39.500
28.832
10.731
-
39.563
1.1 Structured securities
-
-
-
-
-
-
-
-
1.2 Other debt securities
27.551
11.949
-
39.500
28.832
10.731
-
39.563
-
-
-
-
-
-
-
-
2. Equity instruments
of which valued at cost
-
-
-
-
-
-
-
-
207.643
-
-
207.643
220.855
-
-
220.855
-
-
-
-
-
-
-
-
4.1 structured
-
-
-
-
-
-
-
-
4.2 Other
-
-
-
-
-
-
-
-
Total
235.194
11.949
-
247.143
249.687
10.731
-
260.418
Cost
234.855
11.675
-
246.530
249.344
10.457
-
259.801
3. Units in UCITS
4. Loans
The item exclusively includes securities and units in UCITS underlying the internal pension funds of former subsidiaries Gruppo Banca Toscana S.p.a.
and Banca Antonveneta S.p.a..
169
Notes to the consolidated financial statements - Part B – Consolidated balance sheet
3.2 Financial assets designated at fair value through profit and loss: breakdown by borrower/issuer
(in tho usands o f EUR)
Items/Amounts
1. Debt securities
Total
Total
31 12 2010
31 12 2009
39.500
39.563
27.551
28.832
-
-
11.949
10.731
d) Other issuers
-
-
2. Equity instruments
-
-
a) Banks
-
-
b) Other issuers:
-
-
- insurance companies
-
-
- financial companies
-
-
- non-financial companies
-
-
- other
-
-
207.643
220.855
4. Loans
-
-
a) Governments and Central banks
b) Other public entities
c) Banks
3. Units in UCITS
a) Governments and Central banks
-
-
b) Other public entities
-
-
c) Banks
-
-
d) Other entities
-
-
247.143
260.418
Total
The breakdown by borrower/issuer was carried out in accordance with criteria for classification by economic activity group and sector laid down by the
Bank of Italy.
3.2.a Units in UCITS: Breakdown by main categories
(in tho usands o f EUR)
Items/Amounts
Total
Total
31 12 2010
31 12 2009
Equity
76.023
72.472
Bonds
120.088
134.265
11.532
14.118
Balanced
Total
207.643
220.855
The table adds detail to what is shown in table 3.2 and shows the main types of investments in UCITS, held in the portfolio of assets measured at fair
value.
170
Notes to the consolidated financial statements - Part B – Consolidated balance sheet
3.3 Financial assets designated at fair value through profit and loss: annual changes
3112 2010
(in tho usands o f EUR)
A. Opening balance
B. Increases
B1. Purchases
B2. Positive changes in fair value
B3. Other increases
C. Decreases
C1. Sales
C2. Redemptions
C3. Negative changes in fair value
C4. Other increases
D. Closing balance
Debt
Equity
Units in
securities
instruments
UCITS
Total
Loans
39.563
-
220.855
-
260.418
1.224
-
93.244
-
94.468
-
-
78.000
-
78.000
1.218
-
12.246
-
13.464
6
-
2.998
-
3.004
1.287
-
106.456
-
107.743
411
-
105.736
-
106.147
-
-
-
-
-
869
-
637
-
1.506
7
-
83
-
90
39.500
-
207.643
-
247.143
171
Notes to the consolidated financial statements - Part B – Consolidated balance sheet
Section 4 - Available-for-sale financial assets – Item 40
4.1 Available-for-sale financial assets: breakdown by type
(in tho usands o f EUR)
Items/Amounts
1. Debt securities
31 12 2010
Level 1
Level 2
31 12 2009
Level 3
Total
Level 1
Level 2
Level 3
Total
18.991.480
235.898
248.532
19.475.910
11.850.129
456.245
15.932
24.468
-
40.400
26.541
15.074
18.975.548
211.430
248.532
19.435.510
11.823.588
441.171
2. Equity instruments
318.093
1.257.388
-
1.575.481
248.977
1.289.940
-
1.538.917
2.1 Designated at
fair value
318.093
1.245.400
-
1.563.493
248.977
1.279.508
-
1.528.485
-
11.988
-
11.988
10.432
-
10.432
2.669
747.455
-
750.124
770.032
700
-
-
-
-
-
-
-
-
19.312.242
2.240.741
248.532
21.801.515
12.171.326
2.516.217
221.647
14.909.190
1.1 Structured securities
1.2 Other debt securities
2.2. Carried at cost
3. Units in UCITS
4. Loans
Total
72.220
220.947
12.527.321
-
41.615
220.947
12.485.706
842.952
The portfolio of available-for-sale financial assets includes:
a) bonds and UCITS not held for trading;
b) equity investments whose shareholding is lower than the controlling or associate interests.
As a result of the provisions set out in IAS 39 with regard to the derecognition of financial assets, lines 1.1 and 1.2 also include debt securities
committed in reverse repos carried out for own securities posted to the available-for-sale portfolio.
The significant increase in debt securities was almost entirely due to asset swaps on Italian government securities; the government securities involved in
these swaps were subjected to fair value hedging, as shown below in table 4.3 of this section.
The overall amount in the equity portfolio at the end of the year, after the recognition of impairment losses of € 25.8 mln booked to Item 130 in the
profit and loss statement ―Net impairment losses (reversals)‖ was € 1,575.5 mln, of which € 1,354.9 mln related to equity investments and € 220.6
mln to other equity instruments.
4.1.a Breakdown of debt securities: structured securities
(in tho usands o f EUR)
Structured debt securities
Inflation
Total
Total
31 12 2010
31 12 2009
5.883
7.329
Other
34.517
34.286
Total
40.400
41.615
172
Notes to the consolidated financial statements - Part B – Consolidated balance sheet
4.1.b Available-for-sale financial assets - Breakdown of equity securities
(in tho usands o f EUR)
31 12 2010
Name
% ownership
31 12 2009
Book value
% ownership
Book value
Acque Blu Arno Basso S.p.A.
8,00
2.528
8,00
Acque Blu Fiorentine S.p.A.
8,00
5.298
8,00
5.155
Aeroporto di Firenze S.p.A.
4,89
4.951
4,89
6.357
Alerion Industries S.p.A.
6,23
14.540
7,95
21.961
Armorlite S.p.A.
3,47
560
3,47
560
Banca d'Italia
4,60
794.969
4,60
794.969
Bassilichi S.p.A.
11,74
3.734
11,74
3.734
Cantine Cooperative riunite soc. coop. Agr.
11,33
1.498
12,12
1.498
Cedacri S.p.A.
2,74
2.657
5,48
7.176
Centro Affari e Convegni Arezzo S.r.l.
5,42
1.979
6,93
2.328
Compagnia Investimenti e Sviluppo C.I.S. S.p.A.
4,16
3.938
4,16
3.993
Consorzio Etruria S.c.a.r.l.
14,75
1.807
14,75
1.795
Consorzio Granterre Caseifici e allevam. società coop. Agricola
10,13
1.500
9,96
1.500
Consorzio Latterie Soc. Mantov.Virgilio soc. agricola coop.
24,14
3.000
34,29
3.000
Consorzio Perimetro Gest. Prop. Imm. S.c.p.a. (Classe A)
7,90
Consorzio Perimetro Gest. Prop. Imm. S.c.p.a. (Classe B)
100,00
2.285
437
-
-
49.509
-
-
Cooperativa Italiana di Ristorazione
5,53
750
8,94
1.290
Firenze Parcheggi S.p.A.
16,46
4.939
16,46
4.939
Finanziaria Regionale Friuli Venezia Giulia
1,61
7.080
1,61
7.079
Fin.ser S.p.A.
15,00
1.802
15,00
2.381
Hopa S.p.A.
14,78
20.419
14,25
19.685
Immobiliare Novoli S.p.A.
8,33
7.899
8,33
7.898
Industria e Innovazione S.p.A.
0,00
-
5,26
5.000
Iniziative Immobiliari S.r.l.
13,87
1.153
13,87
1.404
Istituto Centrale delle Banche Popol. Italiane S.p.A.
0,08
40
0,08
40
Istituto per il Credito Sportivo
10,81
80.434
10,81
79.981
Kerself S.p.A.
0,00
-
1,02
1.561
LSE London Stock Exchange (ex Borsa Italiana)
0,34
9.107
0,34
7.428
Marina di Stabia S.p.A.
16,31
6.606
16,31
6.606
Ombrone S.p.A.
14,99
1.481
14,99
1.260
Palladio Finanziaria S.p.A.
0,47
2.160
0,47
27
Porto Industriale di Livorno S.p.A.
15,96
3.271
15,96
3.262
Reno De Medici S.p.A.
0,78
713
0,78
720
Riscossione Sicilia S.p.A.
0,00
-
40,00
6.400
Sansedoni S.p.A.
0,00
-
15,70
51.538
S.S.B. S.p.A.
5,78
17.874
5,78
21.410
Serit Sicilia S.p.A.
0,00
-
40,00
4.160
SITEBA Sistemi Telematici Bancari S.p.A.
6,16
1.355
6,16
1.355
SNIA S.p.A.
2,16
-
2,16
369
Società Italiana per le Imprese all'Estero Simest S.p.A.
1,05
2.752
1,05
2.682
Società Aeroporto toscano Galileo Galilei S.p.A.
3,97
3.995
3,97
4.151
Sofinco S.p.A.
3,33
2.700
3,57
2.691
Sorgenia S.p.A.
1,17
47.736
1,17
47.736
Sorin S.p.A.
7,31
59.182
7,31
45.935
S.T.A. S.p.A.
15,00
4.337
15,00
4.337
S.T.B. Società delle Terme e del Benessere S.p.A.
13,82
5.029
13,70
4.617
Telecom Italia S.p.A.
0,11
13.829
0,10
15.559
Trixia S.r.l.
15,00
136
15,00
1.185
Unipeg Soc. Coop. Agricola
18,03
2.800
17,28
2.800
Veneto Sviluppo S.p.A.
8,62
5.307
8,62
5.406
Visa Inc.
0,00
1.351
0,10
3.752
Other minor investments
N/A
145.784
N/A
130.828
Finance portfolio
N/A
220.555
N/A
Total
1.575.481
173
175.134
1.538.917
Notes to the consolidated financial statements - Part B – Consolidated balance sheet
The table shows the main equity investments classified in the portfolio of available-for-sale financial assets.Voting rights at companies incorporated as
limited liability co-operatives (it.: s.c.a.r.l.) are per capita, so there is no associate relationship.
174
Notes to the consolidated financial statements - Part B – Consolidated balance sheet
4.2 Available-for-sale financial assets: breakdown by borrower/issuer
(in tho usands o f EUR)
Items/Amounts
1. Debt securities
Total
Total
31 12 2010
31 12 2009
19.475.910
12.527.321
18.449.773
11.627.942
22.254
78
c) Banks
646.239
599.303
d) Other issuers
357.644
299.998
1.575.481
1.538.917
a) Banks
883.734
883.566
b) Other issuers:
691.747
655.351
a) Governments and Central banks
b) Other public entities
2. Equity instruments
- insurance companies
8.952
-
- financial companies
174.310
124.994
- non-financial companies
447.502
504.971
60.983
25.386
750.124
842.952
4. Loans
-
-
- other
3. Units in UCITS
a) Governments and Central banks
-
-
b) Other public entities
-
-
c) Banks
-
-
d) Other entities
-
-
21.801.515
14.909.190
Total
The breakdown by borrower/issuer was carried out in accordance with criteria for classification by economic activity group and sector laid down by the
Bank of Italy.
The balance of debt securities issued by governments and central banks, equal to € 18,449.8 mln, consists primarily of Italian government securities.
4.2.a Units in UCITS: Breakdown by main categories
(in tho usands o f EUR)
Categories/Amounts
Total
Total
31 12 2010
31 12 2009
Equity
231.818
238.776
Bonds
8.532
7.298
302.648
286.580
Balanced
Flexible
-
91.433
Reserved
-
700
Speculative
93.135
95.786
Real estate
30.028
45.584
Other
83.963
76.795
Total
750.124
175
842.952
Notes to the consolidated financial statements - Part B – Consolidated balance sheet
4.3 Micro-hedged available-for-sale financial assets:
(in tho usands o f EUR)
Items/Amounts
Total
Total
31 12 2010
31 12 2009
1. Financial assets subject to
micro-hedging of fair value
12.366.815
8.360.945
a) interest rate risk
12.277.587
8.149.578
b) price risk
-
-
c) foreign exchange risk
-
-
d) credit risk
71.394
82.021
e) multiple risks
17.834
129.346
2. Financial assets subject to micro-hedging of cash flows
-
-
a) interest rate risk
-
-
b) foreign exchange risk
-
-
c) other
-
-
12.366.815
8.360.945
Total
The table shows the share of the available-for-sale portfolio which, at year-end, was subjected to micro-hedging.
In 2010, there was a rise in fair value micro-hedge transactions.
176
Notes to the consolidated financial statements - Part B – Consolidated balance sheet
4.4 Available-for-sale financial assets: annual changes
3112 2010
(in tho usands o f EUR)
Items/Amounts
Debt
Equity
Units in
securities
instruments
UCITS
Loans
Total
A. Opening balance
12.527.321
1.538.917
842.952
-
14.909.190
B. Increases
10.386.700
597.672
122.897
-
11.107.269
10.234.414
437.840
28.263
-
10.700.517
16.812
44.830
50.371
-
112.013
665
25.924
4.953
-
31.542
-
-
-
-
-
665
25.924
4.953
-
31.542
-
-
-
-
-
134.809
89.078
39.310
-
263.197
3.438.111
561.108
215.447
-
4.214.666
2.291.032
457.907
172.610
-
2.921.549
30.878
-
2.450
-
33.328
1.043.019
39.658
33.900
-
1.116.577
665
25.835
3.934
-
30.434
665
25.835
3.934
-
30.434
-
-
-
-
-
-
-
-
-
-
72.517
37.708
2.553
-
112.778
-
-
(278)
-
(278)
19.475.910
1.575.481
750.124
-
21.801.515
B1. Purchases
B2. Increases in fair value
B3. Write-backs
- posted to profit and loss
- posted to net equity
B4. Transfers from other portfolios
B5. Other decreases
C. Decreases
C1. Sales
C2. Redemptions
C3. Decreases in fair value
C4. Write-downs due to impairment
- posted to profit and loss
- posted to net equity
C5. Transfers to other portfolios
C6. Other decreases
IFRS 5 "discontinuing operations"
D. Closing balance
Line "B1 Purchases" features, in the "Debt securities" column, primarily purchases of Italian government securities.
Line B.3 ―Write-backs – posted to equity‖ includes the reversal of negative equity reserves of impaired securities; in terms of profit and loss, the value
adjustments for the same amount are posted to line C.4 ―Write-downs due to impairment‖ of the table.
Line "C.1 Sales‖ features, in the ―Debt securities‖ column, mainly sales of Italian government securities.
Line ―C6. ― Other decreases‖ includes negative exchange-rate differences and losses on disposals.
177
Notes to the consolidated financial statements - Part B – Consolidated balance sheet
Section 5 – Held-to-maturity financial assets – Item 50
5.1 Held-to-maturity financial assets: breakdown by type
(in tho usands o f EUR)
31 12 2010
FV
VB
1. Debt securities
31 12 2009
Level 1
Level 2
Level 3
FV
VB
Total
Level 1
Level 2
Level 3
Total
3
3
-
-
3
3
3
-
-
3
1.1 Structured securities
-
-
-
-
-
-
-
-
-
-
1.2 Other debt securities
3
3
-
-
3
3
3
-
-
3
2. Loans
-
-
-
-
-
-
-
-
-
-
Total
3
3
-
-
3
3
3
-
-
3
Key
FV = fair value
BV = book value
5.2 Held-to-maturity financial assets: breakdown by borrower/issuer
(in tho usands o f EUR)
Type of transaction / Amount
Total
Total
31 12 2010
31 12 2009
1. Debt securities
3
3
a) Governments and Central banks
3
3
b) Other public entities
-
-
c) Banks
-
-
d) Other issuers
-
-
2. Loans
-
-
a) Governments and Central banks
-
-
b) Other public entities
-
-
c) Banks
-
-
d) Other entities
-
-
Total
3
3
Total fair value
3
3
The breakdown by borrower/issuer was carried out in accordance with criteria for classification by economic activity group and sector laid down by the
Bank of Italy.
5.3 Micro-hedged held-to-maturity financial assets
There are no figures available because there were no micro-hedged held-to-maturity financial assets to report, either in
the year under review or the previous year.
178
Notes to the consolidated financial statements - Part B – Consolidated balance sheet
5.4 Held-to-maturity financial assets: annual changes
(in tho usands o f EUR)
Debt securities
Loans
Total
A. Opening balance
3
-
3
B. Increases
-
-
-
B1 Purchases
-
-
-
B2 Write-backs
-
-
-
B3 Transfers from other portfolios
-
-
-
B4 Other changes
-
-
-
C. Decreases
-
-
-
C1 Sales
-
-
-
C2 Redemptions
-
-
-
C3 Write-downs
-
-
-
C4 Transfers to other portfolios
-
-
-
C5 Other changes
-
-
-
D. Closing balance
3
-
3
179
Notes to the consolidated financial statements - Part B – Consolidated balance sheet
Section 6 – Loans and advances to banks – Item 60
6.1 Loans and advances to banks: breakdown by type
(in tho usands o f EUR)
Type of transaction / Amount
A. Loans and advances to central banks
1. Time deposits
2. Compulsory reserve
Total
Total
31 12 2010
31 12 2009
261.103
1.349.986
16.000
16.000
233.793
1.329.167
-
-
3. Reverse repurchase agreements
4. Other
11.310
4.819
9.448.777
8.977.535
1. Current accounts and demand deposits
669.933
747.809
2. Time deposits
230.675
625.167
6.662.353
5.724.651
1.038.678
207.416
-
-
5.623.675
5.517.235
1.885.816
1.879.908
4.1 Structured securities
-
-
4.2 Other debt securities
1.885.816
1.879.908
Total (book value)
9.709.880
10.327.521
Total (fair value)
9.756.063
10.468.479
B. Loans and advances to banks
3. Other loans:
3.1 Reverse repurchase agreements
3.2 Finance leases
3.3 Other
4. Debt securities
Loans and advances to banks
31 12 2010
Impaired assets
14.338
31 12 2009
23.538
The portfolio of "Loans and advances to banks" includes loans and deposits, other than the unrestricted part of the compulsory reserve with the Bank of
Italy, which, at year-end, amounted to € 233.8 mln. In accordance with regulations on average maintenance levels, the end-of-period balance of the
compulsory reserve may be subject to changes.
'Banks' also includes international entities of a banking nature subjected to zero weighting in accordance with prudential supervisory regulations on the
standardised approach to counterparty and credit risk.
The collective write-down was also posted to the 'Debt securities' portfolio as it was applied to other loans and advances to banks that were
performing at the end of 2010.
180
Notes to the consolidated financial statements - Part B – Consolidated balance sheet
6.2 Loans and advances to banks: micro-hedged assets
(in tho usands o f EUR)
Type of transaction / Amount
1. Loans subject to micro-hedging of fair value
Total
Total
31 12 2010
31 12 2009
365.751
132.866
326.143
89.104
-
-
39.608
43.762
-
-
-
-
a) interest rate risk
-
-
b) foreign exchange risk
-
-
c) other
-
-
365.751
132.866
a) interest rate risk
b) exchange risk
c) credit risk
d) multiple risks
2. Loans subject to micro-hedging of cash flows
Total
6.3 Finance leases
The Group had no finance leases to report for the period under review or in the previous year.
181
Notes to the consolidated financial statements - Part B – Consolidated balance sheet
Section 7 – Loans and advances to customers – Item 70
7.1 Loans and advances to customers: breakdown by type
(in tho usands o f EUR)
Type of transaction / Amount
1. Current accounts
31 12 2010
Performing
31 12 2009
Impaired
Total
Performing
Impaired
Total
15.213.770
2.360.668
17.574.438
17.360.774
2.130.924
19.491.698
1.786.053
1.180
1.787.233
5.435.151
1.967
5.437.118
84.382.703
5.702.932
90.085.635
76.322.069
5.189.319
81.511.388
4. Credit cards, personal loans
and fifth-of-salary backed loans
3.108.863
144.230
3.253.093
2.954.861
114.434
3.069.295
5. Financial leasing
4.333.134
598.994
4.932.128
4.196.048
469.285
4.665.333
6. Factoring
1.598.115
125.290
1.723.405
1.310.037
80.364
1.390.401
30.057.533
2.446.081
32.503.614
30.566.482
2.233.678
32.800.160
4.376.754
1.281
4.378.035
4.046.778
1.270
4.048.048
8.1 Structured securities
662.398
-
662.398
623.032
-
623.032
8.2 Other debt securities
3.714.356
1.281
3.715.637
3.423.746
1.270
3.425.016
Total (book value)
144.856.925
11.380.656
156.237.581
142.192.200
10.221.241
152.413.441
Total (fair value)
146.133.046
11.380.656
157.513.702
143.996.820
10.221.241
154.218.061
2. Reverse repurchase agreements
3. Mortgages
7. Other transactions
8. Debt securities
The portfolio of 'Loans and advances to customers' includes all loans to ordinary customers and part of the banking book securities portfolio.
Loans and advances to customers also includes operating receivables other than those connected with the payment for the supply of goods and
services, which are posted to "Other assets" in account 160 of the Assets.
The securities portfolio also includes underwritten ABS arising from own securitisations and other bonds issued by regional public bodies, e.g. municipal
bonds (it.: buoni ordinari comunali, BOC).
The collective write-down was also posted to the debt securities portfolio (for which no specific impairment losses were identified), as it was applied to
the other loans and advances to customers which were performing at the end of 2010.
According to the Bank of Italy's definitions, the ―Impaired‖ column includes non-performing, watchlist and restructured loans, as well as exposures
more than 180 days past due, net of impairment losses. Details of these exposures can be found in the section on credit quality in Part E of the notes to
the financial statements.
182
Notes to the consolidated financial statements - Part B – Consolidated balance sheet
7.2 Loans and advances to customers: breakdown by borrower/issuer
(in tho usands o f EUR)
Type of transaction / Amount
1. Debt securities:
31 12 2010
Performing
Impaired
31 12 2009
Total
Performing
Impaired
Total
4.376.754
1.281
4.378.035
4.046.778
1.270
4.048.048
a) Governments
226.609
-
226.609
212.055
-
212.055
b) Other public entities
254.771
-
254.771
241.292
-
241.292
3.895.374
1.281
3.896.655
3.593.431
1.270
3.594.701
171.205
1.281
172.486
189.968
1.270
191.238
3.170.004
-
3.170.004
2.822.252
-
2.822.252
554.033
-
554.033
581.211
-
581.211
132
-
132
-
-
-
140.480.171
11.379.375
151.859.546
138.145.422
10.219.971
148.365.393
a) Governments
1.269.183
20
1.269.203
1.358.821
12
1.358.833
b) Other public entities
3.872.007
491
3.872.498
3.542.861
450
3.543.311
135.338.981
11.378.864
146.717.845
133.243.740
10.219.509
143.463.249
82.124.500
9.545.658
91.670.158
81.476.111
8.386.010
89.862.121
7.124.113
100.567
7.224.680
8.836.033
52.831
8.888.864
47.921
146
48.067
108.879
24
108.903
46.042.447
1.732.493
47.774.940
42.822.717
1.780.644
44.603.361
144.856.925
11.380.656
156.237.581
142.192.200
10.221.241
152.413.441
c) Other issuers
- non-financial companies
- financial companies
- insurance companies
- other
2. Loans to:
c) Other entities
- non-financial companies
- financial companies
- insurance companies
- other
Total
The breakdown by borrower/issuer was carried out in accordance with criteria for classification by economic activity group and sector laid down by the
Bank of Italy.
183
Notes to the consolidated financial statements - Part B – Consolidated balance sheet
7.3 Loans and advances to banks: micro-hedged assets
(in tho usands o f EUR)
Type of transaction/Amount
Totale
Totale
31 12 2010
31 12 2009
1. Loans subject to micro-hedging of fair value
1.408.938
1.500.655
a) interest rate risk
777.375
825.849
b) exchange risk
489.092
453.710
c) credit risk
73.160
159.532
d) multiple risks
69.311
61.564
100.387
-
100.387
-
b) foreign exchange risk
-
-
c) other
-
-
1.509.325
1.500.655
2. Loans subject to micro-hedging of cash flows
a) interest rate risk
Total
7.4 Finance leases
7.4.a Loans and advances to customers: reconciliation of future minimum lease payments receivable
(in tho usands o f EUR)
Items/Amounts
Total
Total
31 12 2010
31 12 2009
Future
Present value
Future
minimum
of future
minimum
of future
lease
minimum
lease
minimum
lease
payments
payments
Up to 1 year
1.796.293
payments
1.544.383
From 1 to 5 years
2.147.101
1.732.703
Over 5 years
Present value
lease
1.080.835
payments
879.928
2.153.463
1.740.199
1.983.091
1.609.771
2.491.882
1.987.256
Total
5.926.485
4.886.857
5.726.180
4.607.383
Deferred financial income
(1.039.628)
Loan loss reserve
Loans and advances in the balance sheet
(95.632)
4.791.225
(95.632)
4.791.225
(1.118.797)
(149.670)
4.457.713
(149.670)
4.457.713
7.4.b Loans and advances to customers: unguaranteed residual values of assets leased under finance leases
(in tho usands o f EUR)
Total
Items/Amounts
31 12 2010
Unguaranteed residual value of assets leased under finance leases
746.347
184
31 12 2009
726.721
Notes to the consolidated financial statements - Part B – Consolidated balance sheet
Section 8 – Hedging derivatives – Item 80
8.1 Hedging derivatives: breakdown by type of contract and underlying asset
(in tho usands o f EUR)
Fair Value 31 12 2010
Level 1
A. Financial derivatives
Level 2
Level 3
Fair Value 31 12 2009
NV
Total
31 12 2010
Level 1
Level 2
Level 3
NV
Total
31 12 2009
-
304.641
-
304.641
12.145.899
-
192.429
-
192.429
9.906.076
1) Fair value
-
303.475
-
303.475
12.045.899
-
192.429
-
192.429
9.906.076
2) Cash flows
-
1.166
-
1.166
100.000
-
-
-
-
-
3) Foreign investments
-
-
-
-
-
-
-
-
-
-
-
8.771
-
8.771
170.500
-
6.274
-
6.274
185.860
1) Fair value
-
8.771
-
8.771
170.500
-
6.274
-
6.274
185.860
2) Cash flows
-
-
-
-
-
-
-
-
-
-
-
313.412
-
313.412
12.316.399
-
198.703
-
198.703
10.091.936
B. Credit derivatives
Total
Key
NV = Nominal or Notional Value
The table displays the positive book value (fair value) of hedging derivatives for hedges carried out through hedge accounting. Hedge accounting is
used for the accounting of hedges of financial instruments posted in balance sheet items which do not provide for fair value measurement to offset
profit and loss: in particular, hedges of all financial assets and liabilities other than those represented by securities are managed through hedge
accounting.
Hedges of financial liabilities consisting in securities are normally managed through the fair value option. The fair value option has systematically been
adopted for fixed-rate and structured debt securities issued by the Group, for which the risk of fair value changes was hedged by derivatives upon
issue, with the aim of maintaining the hedge for the contractual duration of the hedged securities; derivatives used as part of the fair value option are
classified in the trading portfolio.
Hedge accounting is used for securities issued by the Group for which the decision to hedge was taken after issuance or for which there is no intention
to maintain the hedge for the contractual duration of the securities.
Information on the underlying strategies and objectives of hedge transactions can be found in Section 2 ―Market risks‖ of Part E ―Risks and hedging
policies‖.
185
Notes to the consolidated financial statements - Part B – Consolidated balance sheet
8.2 Hedging derivatives: breakdown by hedged portfolio and type of hedging (book value)
3112 2010
(in tho usands o f EUR)
1. Financial assets available for sale
32.199
-
1.868
2. Loans and receivables
6.708
19.047
6.903
3. Financial assets held to maturity
x
-
-
4. Portfolio
x
5. Other transactions
Total assets
1. Financial liabilities
2. Portfolio
Total liabilities
x
x
38.907
19.047
236.353
x
236.353
34.067
x
-
x
1.166
x
x
33.824
x
-
x
-
x
x
-
x
9.168
x
-
x
9.168
-
-
9.168
-
x
x
-
-
-
-
x
1.166
-
-
77.059
-
x
x
236.353
x
-
x
x
x
x
x
x
x
x
-
-
-
9.168
x
-
-
x
8.771
-
x
x
19.047
x
x
2. Financial assets and liabilities
portfolio
275.260
Foreign
x
1. Expected transactions
Total
Investments
x
-
-
Micro-hedge
-
8.771
-
Risks
x
-
x
Total
-
-
x
-
x
-
Multiple
Risk Price
Risk
Credit
Risk
Exchange
Risk Rate
Micro-hedge
Transaction/Type of hedge
Macro-hedge
Cash flow hedge
Macro-hedge
Fair Value
-
-
-
x
x
x
1.166
x
-
-
236.353
-
-
313.412
The table shows the positive fair values of hedging derivatives, classified by hedged assets or liabilities and the type of hedging implemented.
In particular, fair value micro-hedging was used to hedge against interest-rate risk on fixed-rate mortgages and bonds classified in the available-for-sale
portfolio or among receivables, in order to protect them from unfavourable interest rate changes. The exchange risk column shows the positive fair
value of cross currency swaps used to hedge foreign-exchange risk on unlisted bonds classified among loans and receivables.
Fair value micro-hedging was also applied to the credit risk of bonds classified in the available-for-sale portfolio or among receivables; these hedges
were performed by acquiring protection through credit default swaps.
Fair value micro-hedging of the interest-rate risk on financial liabilities refers primarily to hedges of liabilities consisting in securities for which the
decision to hedge was taken after issuance or for which there is no intention to maintain the hedge for the contractual duration of the securities.
Cash flow hedges were implemented in the case of some specific floating-rate bond issues, for the purpose of stabilising their flows through interest
rate swaps.
Prospective and retrospective tests performed in 2010 in accordance with IAS 39 confirmed the effectiveness of hedging relationships.
More information on hedged assets and liabilities can be found in the tables in Part B of the notes for each section of the accounts to which hedges are
posted.
186
Notes to the consolidated financial statements - Part B – Consolidated balance sheet
3112 2009
(in tho usands o f EUR)
1. Financial assets available for sale
2. Loans and receivables
4.720
x
4. Portfolio
x
1. Financial liabilities
128.882
Foreign
Macro-hedge
x
-
x
x
282
-
x
-
x
x
64.462
-
-
x
-
x
-
x
x
-
x
-
x
x
x
-
53.692
-
6.274
-
-
-
-
x
x
-
x
x
x
x
2. Financial assets and liabilities
portfolio
x
x
x
x
x
133.660
53.692
6.274
187
-
-
5.077
-
-
64.744
x
x
-
x
-
-
-
5.077
x
-
-
133.959
133.959
x
x
-
-
5.077
x
x
-
x
-
-
x
-
-
-
x
x
x
x
x
-
-
-
x
x
1. Expected transactions
Total
Micro-hedge
Multiple
Risk Price
Risk
Risks
-
x
x
128.882
-
6.050
-
4.778
Total liabilities
224
Total
53.692
-
Total assets
2. Portfolio
-
Credit
Risk
58
3. Financial assets held to maturity
5. Other transactions
Exchange
Risk Rate
Micro-hedge
Transaction/Type of hedge
Investments
Cash flow hedge
Macro-hedge
Fair Value
198.703
Notes to the consolidated financial statements - Part B – Consolidated balance sheet
Section 9 – Change in value of macro-hedged financial assets – Item 90
9.1 Change in value of hedged assets: breakdown by hedged portfolio
(in tho usands o f EUR)
Changes in value of hedged assets / Group components
1. Positive changes
Total
Total
31 12 2010
31 12 2009
28.034
32.232
1.1 of specific portfolios:
28.034
32.232
a) loans and receivables
28.034
32.232
b) financial assets available for sale
-
-
1.2 overall
-
-
10.379
193
2.1 of specific portfolios:
10.379
(574)
a) loans and receivables
10.379
(574)
2. Negative changes
b) financial assets available for sale
-
2.2 overall
Total
-
-
767
17.655
32.039
The value adjustment concerns a fixed and capped floating rate mortgage portfolio that was fair value macro-hedged with derivatives to protect it from
possible fluctuations associated with interest-rate risk. As this is a macrohedge, any gain or loss on the hedged item attributable to the risk hedged may
not directly adjust the value of said item (unlike in microhedging), but must be presented in this separate line item of the assets. The amounts in this
item must be removed from the balance sheet when the relevant assets or liabilities are derecognised.
The fair value of the corresponding hedging derivatives is shown respectively in Table 8.2 (assets) or Table 6.2 (liabilities), both entitled ―Hedging
derivatives: breakdown by hedged portfolio and type of hedging‖, in the ―Macro-hedging‖ column.
9.2 Assets subject to macro-hedging of interest-rate risk
(in tho usands o f EUR)
Hedged assets
1. Loans and receivables
Total
Total
31 12 2010
31 12 2009
949.815
361.028
2. Assets available for sale
-
-
3. Portfolio
-
-
949.815
361.028
Total
The table shows the book value (amortised cost) of fixed-rate and capped floating rate mortgages included in Item 70 ―Loans and advances to
customers‖, which was macro-hedged against interest-rate risk as per Table 9.1 above.
The sum of this amount and the one shown in Table 9.1 expresses the book value of these receivables, adjusted for profit or loss attributable to the risk
hedged.
188
Notes to the consolidated financial statements - Part B – Consolidated balance sheet
Section 10 – Equity investments – Item 100
10.1 Equity investments in entities subject to joint control (valued at equity) and under significant
influence: information on shareholders' equity
* Type of relationship: 8 Companies under significant influence
189
Notes to the consolidated financial statements - Part B – Consolidated balance sheet
In June, Sansedoni S.p.a. underwent a total non-proportional spin-off which led to the incorporation of two new entities, one for real estate
development and the other, i.e. Sansedoni Siena S.p.a., focusing on asset development management and invested in by the Parent Company (21.75%
shareholding).
Realizzazioni e Bonifiche Arezzo S.p.a. in liquidation is the new company name for former company Uno A Erre Italia S.p.a..
The interest in Industria e Innovazione was included among investments in companies under significant influence because the Parent Company, which
held 7.11%, entered into a shareholders' agreement requiring majority (and not unanimous) resolution approval, obtaining 58.13% of voting rights.
Pursuant to art. 2361 of the Civil Code, it is noted that the Parent Company holds a 28.8% shareholding (32.5% at Group level) in Crossing Europe
EEIG, a European Economic Interest Group whose members are jointly and severally liable without limitation for the Group's liabilities. The EEIG is
intended to facilitate its members' activity, both in their respective countries and internationally (particularly in Eastern European and Mediterranean
countries), through the development of an offering of services for SMEs, and participation in major financial projects sponspored by EU programmes.
For further details on changes, see comments to table "10.3 - Equity investments: annual changes".
190
Notes to the consolidated financial statements - Part B – Consolidated balance sheet
10.2 Equity investments in entities subject to joint control (valued at equity) and under significant
influence: accounting information
(in tho usands o f EUR)
Company Name
Total
Total
Profit
assets
revenues
(Loss)
Net Equity
Consolidated Value
3112 2010
Fair
Value
3112 2009
A. Companies valued at net equity
A.1 Companies valued at net equity - jointly
controlled
-
-
-
-
-
-
-
A.2 Companies valued at net equity - under
significant influence
AD.Impresa S.p.a.
x
x
(115)
300
37
-
-
Aereoporto di Siena S.p.a.
x
x
(3.563)
20.018
3.518
4.280
-
Agricola Merse S.r.l.
x
x
(3.690)
31.588
5.580
3.825
-
Antonveneta Assicurazioni S.p.a.
x
x
1.050
12.057
6.353
6.357
-
107.475
-
Antonveneta Vita S.p.a.
x
x
13.731
126.218
81.301
Asset Management Holding S.p.a.
x
x
-
485.148
154.820
-
-
Axa Mps Assicurazioni Danni S.p.a.
x
x
11.756
45.466
30.927
32.006
-
286
-
Beta Prima S.r.l.
x
x
(37)
706
274
BioFund S.p.a.
x
x
(296)
5.072
653
694
-
Casalboccone Roma S.p.A.
x
x
-
120
26
-
-
CO.E.M. Costruzioni Ecologiche Moderne S.p.a.
x
x
(8.707)
18.313
25.142
28.642
-
Crossing Europe GEIE
x
x
(40)
86
36
22
-
7.000
-
EDI.B. S.p.a.
x
x
(2.353)
22.369
6.732
Fabrica Immobiliare SGR S.p.a.
x
x
3.109
7.740
6.135
3.483
-
Fidi Toscana S.p.a.
x
x
(4.218)
112.644
31.745
32.976
-
Gruppo Axa Mps Assicurazioni Vita S.p.a.
x
x
88.508
657.483
454.235
409.482
-
Immobiliare Centro Milano S.p.a.
x
x
(6.036)
6.356
107
302
-
Industria e Innovazione S.p.a.
x
x
-
52.035
3.700
-
3.913
Intermonte SIM S.p.a.
x
x
14.730
51.748
12.979
12.430
-
Interporto Toscano A.Vespucci S.p.a. LivornoGuasticce
x
x
(2.191)
20.474
9.930
10.725
-
J.P.P. Euro Securities Inc.
x
x
58
1.991
410
370
-
Le Robinie S.p.A.
x
x
-
4.005
801
801
-
Marinella S.p.a.
x
x
-
40.011
10.003
10.003
-
Microcredito di Solidarietà S.p.A.
x
x
10
1.413
569
565
-
4.648
2.174
2.278
-
-
-
81
-
NewColle S.r.l.
x
x
Padova 2000 Iniziative Immobiliari S.p.a.
x
x
Prima Holding 2 S.p.a.
x
x
(63)
12.951
3.522
-
-
Quadrifoglio Vita S.p.a.
Re.Ge.Im. Realizzazione e Gestione Immobili di
Qualità S.p.a.
x
x
-
-
-
62.082
-
x
x
-
9.200
3.680
-
-
Realizzazioni e Bonifiche Arezzo S.p.a.
x
x
-
-
-
1.597
-
S.I.C.I. Sviluppo Imprese Centro Italia SGR S.p.a.
x
x
600
7.661
2.523
2.602
-
S.I.T. - Finanz.di Sviluppo per l'Innovaz.
Tecnologica S.p.A.
x
x
-
652
138
138
-
Sansedoni Siena S.p.A.
x
x
-
191.440
47.912
-
-
x
x
-
-
-
1.578
-
x
x
-
696
90
90
-
-
3.576
1.477
-
-
Società Incremento Chianciano
Terme S.p.a.
Società Italiana di Monitoraggio S.p.a.
Terme di Chianciano S.p.a.
x
x
(211)
-
B. P roportionately consolidated companies
Banca Popolare di Spoleto S.p.a.
Integra S.p.a.
Total
3.029.554,00
183.818,00
9.104
204.330
x
x
14.919,00
1.726,00
11
1.760
x
x
9 0 7 .5 2 9
7 4 2 .17 0
3.044.473
185.544
111.147
2.160.275
3.913
The company Quadrifoglio Vita was merged by and into AXA MPS Assicurazioni Vita in November 2010 and the company Padova 2000 Iniziative
Immobiliari was merged into the subsidiary MPS Immobiliare at the end of December 2010.
191
Notes to the consolidated financial statements - Part B – Consolidated balance sheet
10.3 Equity investments: annual changes
(in tho usands o f EUR)
Total
Total
31 12 2010
31 12 2009
A. Opening balance
742.170
583.028
B. Increases
436.844
177.326
B.1 Purchases
161.296
-
B.2 Write-backs
-
-
B.3 Revaluations
-
-
275.548
177.326
(271.485)
(18.184)
B.4 Other increases
C. Decreases
C.1 Sales
(154.820)
-
C.2 Write-downs
(18.000)
(14.024)
C.4 Other changes
(98.665)
(4.160)
D. Closing balance
907.529
742.170
E. Total revaluation
-
-
F. Total write-downs
-
-
Changes relate to associates or companies subject to significant influence valued at equity. Increases and decreases also include profits and losses arising
from this measurement.
Line "B1 Purchases" also features the purchase of an interest in Asset Management Holding S.p.a. (EUR 154.8 mln)
The amount in line C.1 ―Sales‖ is attributable to the disposal of the company Prima Holding.
Line "C.2 Write-downs" concerns the partial depreciation of Antoniana Veneta Popolare Vita.
The other decreases also include the amount of dividends paid out by the equity investments.
The valuation of afore-mentioned investments in associates includes the value of goodwill, in accordance with IAS 28. The main embedded goodwill,
shown below, refers to insurance associates Axa MPS Assicurazioni Vita, Axa MPS Assicurazioni Danni, Asset Management Holding S.p.a and Antoniana
Veneta Popolare Vita S.p.A.
Embedded goodwill
31 12 2010
31 12 2009
Antoniana Veneta Popolare Vita S.p.A.
21.651
39.651
Axa Mps Assicurazioni Vita S.p.A.
46.796
46.796
Axa Mps Assicurazioni Danni S.p.A.
2.316
2.316
Asset Management Holding S.p.A.
41.116
-
Others
13.634
6.411
Totale
125.513
95.174
In accordance with IAS 28 ―Investments in associates‖ and IAS 36 (to which IAS 28 refers), impairment tests were carried out on the main insurance
associates of the Group in consideration of the size of these assets and of a global context which, after the 2008-2009 crisis, continues to be uncertain
and unpredictable. The following equity investments were tested for impairment:
AXA MPS Assicurazioni Danni S.p.A. (AXA MPS Danni);
AXA MPS Assicurazioni Vita S.p.A. (AXA MPS Vita);
Antoniana Veneta Popolare Assicurazioni S.p.A. (Antonveneta Assicurazioni);
Antoniana Veneta Popolare Vita S.p.A. (Antonveneta Vita);
Asset Management Holding S.p.a..
192
Notes to the consolidated financial statements - Part B – Consolidated balance sheet
With reference to how impairment losses on investments in associates are determined, IAS 28 states that impairment is verified, pursuant to IAS 36, by
comparing the recoverable value with the carrying value of the equity investment.
Carrying value of equity investments - consolidated
31/12/10
(in EUR/mln, amounts rounded off)
AXA MPS Assicurazioni Danni S.p.a.
31
AXA MPS Assicurazioni Vita S.p.a.
454(*)
Antoniana Veneta Popolare Assicurazioni S.p.a.
6
Antoniana Veneta Popolare Vita S.p.a.
99
Asset Management Holding S.p.a.
(*)
155
Includes AXA MPS Vita and AXA MPS Financial Limited.
The recoverable value of equity investments in insurance associates was determined with the assistance of a leading consultancy firm (hereinafter the
Consultant).
The recoverable value for AXA MPS Danni was determined by discounting distributable cash flows (for a description of the approach, see section on
goodwill impairment testing).
The recoverable value was determined on the basis of economic and financial projections provided by the Parent Company and following parameters
agreed upon with the Consultant:
a target solvency ratio of 150%;
a cost of equity of 8.7%, estimated using a risk-free rate of return of 4.1%, a premium for market risk of 5% and beta of 0.92 calculated
using a panel of listed European companies operating exclusively in the field of P&C insurance (source: Bloomberg);
a long-term growth rate of 2%.
For AXA MPS Vita, the appraisal value method was used, which estimates the value of an insurance company as the sum of its Embedded Value
(amount of adjusted shareholders‘ equity and of outstanding insurance policies) and its New Business Value (present value of future life insurance
business). In accordance with professional measurement practices and regulations, this method is applied for the appraisal of life insurance companies.
The appraisal value method was applied on the basis of parameters that enable the representation of the company‘s risk/return level. In particular, the
following were considered:
a cost of equity of 9.1%, estimated using a risk-free rate of return of 4.1%, a premium for market risk of 5% and beta of 0.99 calculated
using a panel of listed European companies operating exclusively in the field of life insurance (source: Bloomberg);
a long-term growth rate of 2%, on the basis of inflation forecasts from the leading econometric analysis institutes (ERC, IMF, Prometeia). The
growth rate is thus not in excess of the market rate.
In order to best appraise the sensitivity of results from impairment tests conducted on both AXA MPS Danni and AXA MPS Vita, with respect to changes
in the base assumptions, several sensitivity tests were performed by changing the discount rate, the long-term growth rate and some underlying
assumptions for the insurance company‘s economic and financial forecasts.
In light of termination of the distribution agreement between Allianz and former Banca Antonveneta, equity was considered as the recoverable value
for Antonveneta Assicurazioni.
In light of termination of the distribution agreement between Allianz and former Banca Antonveneta, only the embedded value was considered for
Antonveneta Vita. A value adjustment of EUR 18 mln was accounted for as at 31 December 2010.
With regard to the investment in Asset Management Holding, it is noted that the investment was purchased on 30 December 2010 at a market price
assessed as fair by a major consultant with a fair market value opinion issued to the Parent Company. Considering that the carrying value of the
investment is equal to the value of a recent market transaction and that the company's business plan, used for the appraisal of the purchase price, has
not been reviewed, the value of the investment is deemed confirmed.
The results of the impairment test showed that the recoverable values of the equity investments analysed were not lower than their respective carrying
values, except for Antonveneta Vita, as indicated above.
193
Notes to the consolidated financial statements - Part B – Consolidated balance sheet
Section 11 – Reinsurers’ technical reserves – Item 110
This section is not applicable because the insurance equity investments of the Group are associates.
194
Notes to the consolidated financial statements - Part B – Consolidated balance sheet
Section 12 – Property, plant and equipment - Account 120
12.1 Property, plant and equipment: breakdown of assets valued at cost
(in tho usands o f EUR)
Asset / Amount
Total
Total
31 12 2010
31 12 2009
A. Assets used in the business
1.1 owned
1.197.577
2.549.401
a) land
437.031
1.042.549
b) buildings
463.438
1.206.348
c) furniture and furnishings
69.104
75.430
d) electronic systems
21.196
25.827
206.808
199.247
1.2 Leased
-
-
a) land
-
-
b) buildings
-
-
c) furniture and furnishings
-
-
d) electronic systems
-
-
e) other
-
-
1.197.577
2.549.401
-
-
2.1 owned
209.500
183.642
a) land
110.300
94.481
b) buildings
99.200
89.161
2.2 Leased
-
-
a) land
-
-
b) buildings
-
-
e) other
Total A
B. Assets held for investment
Total B
209.500
183.642
Total (A+B)
1.407.077
2.733.043
All of the Group‘s property, plant and equipment is measured at cost; the line "land" expresses the value of land separately from the value of
buildings. In compliance with guidance provided by IAS 36 "Impairment of Assets" and recommendations contained in document no. 4 of 3 March
2010 issued jointly by the Bank of Italy, Consob and Isvap, an overall property appraisal was made with a view to determining any impairment losses
to be posted to profit and loss for the year.
The comparison between fair value and carrying amount led to an impairment loss of EUR 975,000 being recognised at 31/12/2010, while showing
EUR 95.4 mln worth of total gains on buildings used in the business and EUR 52.3 mln worth of buildings held for investment. These capital gains were
not recognised in the financial statements. Regarding property and equipment used in the business other than buildings, based on a going concern
assumption, no extraordinary negative market factors were thought to exist such as might result in a need to recognise impairment losses.
195
Notes to the consolidated financial statements - Part B – Consolidated balance sheet
12.1.a Property, plant and equipment: leased property held for investment
(in tho usands o f EUR)
Items/Amounts
Leased property held for investment
Total
Total
31 12 2010
31 12 2009
6.822
386
12.2 Property, plant and equipment: breakdown of assets measured at fair value or revalued
The Group does not own property and equipment measured at fair value or revalued in accordance with IAS 40.
196
Notes to the consolidated financial statements - Part B – Consolidated balance sheet
12.3 Property, plant and equipment used in the business: annual changes
(in tho usands o f EUR)
Land
A. Gross opening balance
A.1 Total net decreases
A.2 Net opening balance
B. Increases
B.1 Purchases
- Business combinations
Buildings
Furniture
Electronic
systems
Other
Total
Total
31 12 2010
31 12 2009
1.044.290
1.351.392
419.632
478.495
532.761
3.826.570
4.040.053
1.741
145.044
344.202
452.668
333.514
1.277.169
1.377.273
1.042.549
1.206.348
75.430
25.827
199.247
2.549.401
2.662.780
187
2.342
12.799
9.153
25.876
50.357
146.767
-
1.562
12.798
9.090
24.438
47.888
67.392
-
-
-
-
-
-
-
B.2 Capitalized expenditure on
improvements
-
582
-
-
-
582
1.565
B.3 Write-backs
-
-
-
-
-
-
-
B.4 Increases in fair value
booked to:
-
-
-
-
-
-
-
a) shareholders' equity
-
-
-
-
-
-
-
b) profit and loss
-
-
-
-
-
-
-
B.5 Positive exchange differences
187
119
-
58
-
364
514
B.6 Transfers from properties
held for investment
-
-
-
-
-
-
10.674
B.7 Other increases
-
79
1
5
1.438
1.523
66.622
605.705
745.252
19.036
13.765
18.303
1.402.061
237.183
15
20
58
9
97
199
1.657
-
48.923
18.127
12.996
16.841
96.887
100.904
842
129
-
-
-
971
475
-
-
-
-
-
-
-
842
129
-
-
-
971
475
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
128
29.909
20.144
-
-
-
50.053
92.759
29.909
20.144
-
-
-
50.053
92.759
-
-
-
-
-
-
-
574.939
676.036
851
760
1.365
1.253.951
41.260
-
-
(89)
(19)
D. Net closing balance
437.031
463.438
69.104
21.196
206.808
1.197.577
2.549.401
D.1 Total net decreases
2.583
118.965
353.661
438.207
343.477
1.256.893
1.277.169
439.614
582.403
422.765
459.403
550.285
2.454.470
3.826.570
-
-
-
-
-
-
-
C. Decreases
C.1 Sales
C.2 Depreciation
C.3 Impairment losses booked to:
a) shareholders' equity
b) profit and loss
C.4 Decreases in fair value
booked to:
a) shareholders' equity
b) profit and loss
C.5 Negative exchange
differences
C.6 Transfers to:
a) tangible assets held
for investment
b) assets held for sale
C.7 Other decreases
IFRS5 "Discontinuing operations"
D.2 Gross closing balance
E. Carried at cost
(12)
(120)
(22.963)
The table illustrates the Group‘s property assets used in the business. Buildings are measured at cost and depreciated based on their expected useful
life.
The decrease in the Group's property assets used in the business, included in line C.7 "Other decreases" is the result of the demerger of consortium
company 'Consorzio Perimetro Gestione Proprietà Immobiliari S.c.p.a' within the framework of the overall real estate deal of the MPS Group. This deal
is described in Part A, which is referenced for further information.
The comparison between fair value and carrying amount led to an impairment loss of € 971 being recognised at 31/12/2010.
Lines A.1 and D.1 – "Total net decreases" include amounts relating to total depreciation booked.
Line E – "Carried at cost" was left blank, as per the Bank of Italy's instructions, since it only needs to be completed for assets accounted for at fair value.
197
Notes to the consolidated financial statements - Part B – Consolidated balance sheet
12.4 Property, plant and equipment held for investment: annual changes
(in tho usands o f EUR)
Total 31/12/2010
Land
Total 31/12/2009
Buildings
Land
Buildings
A. Opening balance
94.481
89.161
65.838
63.962
B. Increases
35.818
24.050
53.326
46.537
-
119
3.908
2.158
-
-
-
-
B.2 Capitalised expenditure on improvements
-
-
-
-
B.3 Increases in fair value
-
-
-
-
B.4 Write-backs
-
-
-
-
B.5 Positive exchange differences
-
-
-
-
29.909
20.144
48.888
43.871
5.909
3.787
530
508
19.999
14.011
24.683
21.338
19.995
10.231
11
18
C.2 Depreciation
-
3.780
-
4.121
C.3 Decreases in fair value
-
-
-
-
C.4 Impairment losses
4
-
-
146
C.5 Negative exchange differences
-
-
-
-
C.6 Transfers to other asset portfolios
-
-
24.374
15.802
a) properties used in the business
-
-
6.816
3.858
b) non-current assets held for sale
-
-
17.558
11.944
C.7 Other decreases
-
-
298
1.251
IFRS5 "Discontinuing operations"
-
-
-
-
110.300
99.200
94.481
89.161
4
27.481
-
16.906
110.304
126.681
94.481
106.067
128.053
133.735
108.916
116.024
B.1 Purchases
Business combinations
B.6 Transfers from property used in the business
B.7 Other increases
C. Decreases
C.1 Sales
D. Closing balance
D.1 Total net
decreases
D.2 Gross closing balance
E. Designated at fair value
The table illustrates the Group‘s property assets held for investment. Buildings are measured at cost and depreciated based on their expected useful life.
The comparison between fair value and carrying amount led to an impairment loss of € 4 mln being recognised at 31/12/2010.
198
Notes to the consolidated financial statements - Part B – Consolidated balance sheet
12.5 Commitments to purchase property, plant and equipment
(in tho usands o f EUR)
Items/Amounts
Total
Total
31 12 2010
31 12 2009
Commitments to purchase tangible assets
529
125
12.6 Property, plant and equipment: depreciation rates
Main categories of tangible assets
%
Land and works of art
0%
Buildings
2,87-3,03%
Furniture and furnishings
10-20%
Alarm and video systems
20-33%
Electronic and ordinary office equipment
20-25%
Electronic data processing equipment
20-50%
The table shows the depreciation rates used for the main categories of property, plant and equipment.
Land and works of art are not depreciated since they have an indefinite useful life.
199
Notes to the consolidated financial statements - Part B – Consolidated balance sheet
Section 13 – Intangible assets – Item 130
13.1 Intangible assets: breakdown by type of asset
(in tho usands o f EUR)
Asset / Amount
Finite Life
Total
Total
31 12 2010
31 12 2009
Indefinite
Life
Total
Finite Life
Indefinite
Life
Total
A.1 Goodwill
x
6.473.779
6.473.779
x
6.619.479
6.619.479
A.1.1 group
x
6.473.779
6.473.779
x
6.619.479
6.619.479
A.1.2 minorities
x
-
-
x
-
-
1.077.834
-
1.077.834
1.042.150
-
1.042.150
1.077.834
-
1.077.834
1.042.150
-
1.042.150
-
-
-
681
-
681
1.077.834
-
1.077.834
1.041.469
-
1.041.469
-
-
-
-
-
-
a) Internally generated
intangible assets
-
-
-
-
-
-
b) other assets
-
-
-
-
-
-
1.077.834
6.473.779
7.551.613
1.042.150
6.619.479
7.661.629
A.2 Other intangible assets
A.2.1 Assets carried at cost:
a) Internally generated
intangible assets
b) other assets
A.2.2 Assets valued at fair value:
Total
All of the Group‘s intangible assets are measured at cost and, in addition to goodwill, relate to intangible assets resulting from the merger of former
Banca Antonveneta S.p.A. and the subsidiary Biverbanca. All intangible assets recognised in the financial statements have a finite useful life.
Goodwill posted to assets and totalling € 6,473.8 mln is not systematically amortised but is tested for impairment at year-end. For details of changes in
this account, see ― Table 13.2 Intangible assets: annual changes‖ in this section.
During preparation of the 2010 financial statements, goodwill recognised was tested for recoverability and impairment. In accordance with Document
4 jointly published by Bank of Italy/CONSOB/ISVAP on 3 March 2010 and provisions set out in IAS 36, ―Impairment of Assets‖, a special chapter has
been inserted below describing the procedure followed to test the recoverability of goodwill.
Impairment test on the Group‘s goodwill
Foreword
IAS 36 sets out the principles for the recognition and reporting of impairment of certain types of assets, including goodwill, illustrating the principles
that an enterprise must follow in order to ensure that the carrying amount of its assets is not higher than their recoverable amount.
IAS 36 defines recoverable amount as the higher of:
fair value less costs to sell - the amount obtainable from the sale of an asset or cash-generating unit in an arm‘s length transaction between
knowledgeable, willing parties, less the costs of disposal;
value in use - the present value of estimated future cash flows expected to arise from the continuing use of an asset or from a cash-generating
unit.
IAS 36 requires the carrying amount of goodwill to be compared with the recoverable amount whenever there is an indication that the asset may have
been impaired and in any case at least once a year at the balance sheet date (impairment test).
The recoverable amount of goodwill is estimated with reference to the cash-generating unit (CGU), since goodwill is not able to generate cash flows
independently from an asset.
A cash-generating unit is the smallest identifiable group of assets that generates cash inflows from continuing use which are largely independent of the
cash inflows from other assets or groups of assets, which the Group is able to recognise separately in its management reporting system.
For the 2010 financial statements, the impairment test was again carried out in a complex environment characterised by continuing uncertainty and
unpredictable future developments in the global scenario.
Share prices have now bounced back from the lows seen in March 2009, but are still far from pre-crisis levels. In this context, MPS shares are around
50% higher than the low reached on 9 March 2009, with market prospects of further growth (by approx. 20%) in the medium-term (12 months) with
respect to current stock market prices (83% of analysts covering BMPS shares maintain a buy/neutral outlook). However, in the current market
scenario, banking stocks in general are suffering from continuing macroeconomic uncertainty, a number of factors which will significantly impact the
banking business over the next few years (including transition to Basel III) and a persistently low level of spreads in lending. In this environment,
200
Notes to the consolidated financial statements - Part B – Consolidated balance sheet
market prices and the multipliers which derive from them cannot fully reflect the value of listed companies based on future growth opportunities and
the ability to create sustainable value over the medium term.
In a market such as this it is also important to make a distinction between impairment losses which are essentially endogenous and affect only a few
business sectors, and impairment losses that are primarily exogenous (and so generated by the current financial crisis) and tend to affect all business
sectors.
As part of the impairment test process, the Group's economic and financial projections were made for 2011-2015. The new projections were prepared
over a five-year forecasting period, as provided for by IAS 36, taking into account the circumstances of the new macroeconomic scenario and
'industrial' actions , already approved and being implemented by the Group.
The impairment test was therefore carried out taking into account the 2011-2015 economic and financial projections previously approved by the
parent company‘s Board of Directors.
In accordance with IAS 36 and considering the aforementioned considerations, the impairment test carried out on goodwill as shown in the Group‘s
consolidated financial statements at 31 December 2010 made provision for the following:
1.
2.
3.
4.
5.
Identification of goodwill.
Identification of cash-generating units and allocation of goodwill to the cash-generating units identified.
Determination of the recoverable amount of cash-generating units.
Sensitivity analysis of the results of the impairment test compared with changes in the underlying assumptions.
Conclusions.
1. Identification of goodwill
The impairment test was carried out on goodwill reported in the financial statements of the MPS Group at 31 December 2010, equivalent to € 6,473.8
mln, considering that no other intangible assets with an indefinite useful life were present.
Compared with 2009, goodwill has been reduced by around EUR 145.7 mln, due to disposal of banking business to the Carige Group and Cassa di
Risparmio di Firenze in 2010.
2. Identification of cash-generating units and allocation of goodwill to the cash-generating units identified
According to IAS 36, each unit or group of units to which goodwill is allocated represents the lowest level within the entity at which the goodwill is
monitored for internal management purposes and should not be larger than an operating segment as defined by IFRS 8 (―Operating Segments‖).
As for the impairment test at 31 December 2009, the Group‘s goodwill was tested by identifying those units into which the Group‘s operations can be
separated and analysing the cash flows that these will be able to generate in future years, based on an approach consistent with segment reporting at
the balance sheet date, which in turn reflects management reporting.
For the purpose of primary reporting of income/balance-sheet data, the Group has adopted a business approach opting for results to be broken down
by the business sectors in which the Group operates: Consumer Banking (Retail and Private Customers), Corporate Banking (Corporate Customers) and
the Corporate Centre (residual central operations). The Group‘s performance and planning development are monitored based on a model that splits the
business into these various operating segments.
Accordingly, five cash-generating units have been identified in a line of continuity and consistency with the achievements ofthe previous financial year:
1.
“CGU - MPS Consumer Banking”, composed of:
retail customers from BMPS branches, Consum.it and Banca Popolare di Spoleto;
typically private customers of BMPS branches and other private clients from other Group entities;
2.
“CGU - MPS Corporate Banking”, composed of typically corporate clients of BMPS branches, foreign branches, Key Clients, MPS Leasing &
Factoring, MPS Capital Services, MP Belgium and MP Banque.
3.
“CGU - BAV Consumer Banking”, composed of:
retail customers from 378 BAV branches;
customers from 7 BAV private banking centres.
4.
“CGU - BAV Corporate Banking”, composed of clients from 23 BAV corporate banking centres.
5.
“CGU - Cassa di Risparmio di Biella e Vercelli (―Biverbanca‖)”, composed of Biverbanca.
201
Notes to the consolidated financial statements - Part B – Consolidated balance sheet
The process of allocating goodwill to individual cash-generating units was carried out in 2008 taking into account the effects of the acquisition of Banca
Antonveneta and synergies arising from business combinations.
Goodwill tested for impairment in consolidated financial statements: 6,474
(in EUR/mln, amounts rounded off)
Goodwill related to MPS CGUs: 4,850
1. CGU Consumer Banking
2. CGU Corporate Banking
Goodwill allocated: 4,845
Goodwill allocated: 5 (*)
Goodwill related to BAV CGUs: 1,383
(**)
3. BAV Consumer Banking
4. BAV Corporate Banking
Goodwill allocated: 1,027
Goodwill allocated: 356
5. CGU Biverbanca
Goodwill allocated: 241 (***)
(*)
The goodwill of CGU Corporate Banking is relatively insignificant since it incurred an impairment loss of € 150 mln in 2008.
(**)
Reduction in goodwill with respect to 31 December 2009 (Euro 34 mln) due to the spin-off of banking business from BAV a Biverbanca.
(**)
Increase in goodwill with respect to 31 December 2009 (Euro 34 mln) due to the spin-off of banking business from BAV a Biverbanca.
To establish whether corporate assets which cannot be allocated on a reasonable and consistent basis to the cash-generating units identified have been
impaired, an estimate has been made of the recoverable amount of the Group as a whole. IAS 36 in fact states that if a corporate asset cannot be
allocated on a reasonable and consistent basis to the cash-generating unit identified, it must be tested by identifying the smallest group of cashgenerating units – a sort of ―higher‖ cash-generating unit – to which it can be allocated. In this case, the higher cash-generating unit has been identified
as the Group as a whole.
3. Determination of the recoverable amount of the cash-generating units
The Group‘s goodwill at 31 December 2010 was tested for impairment by identifying the recoverable amount of the individual cash-generating units as
the value in use. The recoverable amount of the MPS Group and cash-generating units was determined partly with the support of a leading consultant.
The recoverable value of the CGUs was estimated by discounting future distributable cash flows.
In order to test corporate assets, an estimate was made of the recoverable amount of the Group as a whole (identified as the value in use) through the
discounting of future distributable cash flows, considering that in the current market, penalised by non-structural factors and the high level of
forecasting uncertainty, fair value does not fully reflect the structural profitability and benefits of the industrial measures implemented.
To determine the recoverable amount, reference is made to the Group‘s 2011-2015 economic and financial projections (and the CGUs identified). 43.
These projections were prepared on a like-for-like basis considering 2010 preliminary results, 2011 budgeting data and the new market scenario for
the period up to 2015 drawn up in February 2011 on the basis of internal and external sources, including forecasts by leading econometric analysis
institutes (ERC, IMF, Prometeia, Bank of Italy) and actions already approved and being implemented by the Group.
For the purpose of determining the recoverable amount, account was taken of the effects of the Purchase Price Allocation in relationwith the acquisition of Banca
Antonveneta and Biverbanca as well as of the capital contribution allocated to individual cash-generaing units.
43
202
Notes to the consolidated financial statements - Part B – Consolidated balance sheet
The main underlying assumptions of the Group‘s 2011-2015 economic and financial projections are shown in the table below:
Turnover and income trends
CAGR 2011- 2015
Total lending to customers
+4.9%
Total funding
+5.3%
Assets under management
+9.0%
Net operating income
+23.7%
Profitability indicators
2011B(*)
2015F(**)
Euribor
1.1%
3.5%
Mark down
0.57%
1.20%
Mark up
1.63%
1.61%
Cost / Income
57.9%
44.7%
(*) Budget
(**) Forecast
The 2011-2015 economic and financial projections of the CGUs identified were based on assumptions consistent with the 2011-2015 economic and
financial projections of the MPS Group.
CGUs
The recoverable amount of the cash-generating units and of the Group was determined by discounting future distributable cash flows, based on the
following formula:
W
Ft
n
t 1 (1
i) t
VTa
where:
Ft = cash flows potentially distributable to shareholders over the selected time horizon based on the economic and financial projections made,
maintaining a satisfactory level of capitalisation.
i = discounting rate represented by the cost of risk capital (ke).
VTa = present terminal value (―Terminal Value‖) calculated as the value of a perpetual yield estimated based on an economically sustainable
normalised cash flow consistent with the long-term growth rate (―g‖).
For an estimate of distributable cash flows, reference was made to the Group‘s 2011-2015 economic and financial projections (and the CGUs
identified).
To discount cash flows distributable to shareholders the cost of risk capital was used, equivalent to the return on equity required by
investors/shareholders for investments with similar risk characteristics. This rate was estimated using the Capital Asset Pricing Model (―CAPM‖), based
on the following formula:
ke = Rf + Beta * (Rm-Rf)
where:
Rf = the risk-free rate, equivalent to the return on risk-free investments identified as the average yield of 10-year Treasury bonds issued by the Italian
government, or around 4.1% (source: Bloomberg).
Beta = correlation factor between effective share performance and total performance of the reference market (measurement of the volatility of a stock
relative to the market), equivalent to 0.98 (for BMPS beta, source: Bloomberg)
Rm - Rf = risk premium required by the market, usually considered to be 5.0%.
The Terminal Value was determined based on the following formula:
VT = normalised distributable cash flow / (ke – g)
where g is the long-term growth rate.
The recoverable value was determined based on the parameters identified together with the consultant and which represented the actual level of
risk/return for the individual cash-generating unit. Specifically, the valuation parameters used were based on the following assumptions:
capital ratio: for the test to determine the recoverable amount of the entire Group, an objective supervisory ratio was used (Common Equity/Core
Tier 1) in line with the temporary requirements set forth by the new supervisory regulations of Basel 3 (from 6.5% in 2010 to 7.0% in 2019).
For Biverbanca, in view of the fact that the CGU is a consolidated legal entity within a banking group, a 25% reduction in RWAs was considered
while maintaining the objective supervisory ratio in line with the temporary requirements set forth by the new supervisory regulations of Basel 3
(from 8% in 2010 to 10.5% in 2019)44.
For other cash-generating units, a target capital coverage ratio of 8% was used in order to meet the entire capital needs of the CGU.
44
Having no supplementary instruments, Biverbanca's Core Tier 1/Common Equity coincides with its Total Capital ratio.
203
Notes to the consolidated financial statements - Part B – Consolidated balance sheet
Cost of capital (ke): for the test to determine the recoverable amount of the entire Group, a ratio was used of 9.0%. When testing the recoverable
amount of individual cash-generating units at consolidated level, the ratios were determined using estimates that reflect their specific risk.
To discount cash flows distributable to shareholders a cost of risk capital of 8.7% was used, estimated on the basis of the beta factor of a sample
of comparabl small-medium sized banks listed on the the Italian Market
Long-term growth rate (g): it was estimated at 2% based on forecasts of leading econometric institutions (ERC, IMF, Prometeia).
The main parameters used to determine the recoverable amount of cash-generating units are shown below.
CGU
Measurement criteria
In EUR/mln (amounts rounded off)
ke
g
Capital ratio
MPS Consumer
9.0%
2.0%
8.0%
MPS Corporate
10.0%
2.0%
8.0%
BAV Consumer
9.0%
2.0%
8.0%
BAV Corporate
10.0%
2.0%
8.0%
Biverbanca (60.4%)
8.7%
2.0%
8.0%-10.5%
4. Sensitivity analysis of the results of the impairment test compared with changes in the underlying assumptions.
In order to better assess the sensitivity of impairment test results in relation to changes in the underlying assumptions, certain sensitivity analyses were
carried out based on the following:
for cash-generating units and for the Group, a more negative macroeconomic scenario than the one illustrated in the 2011-2015
economic/financial projections;
for CGUs and the Group, a change in the discount rate (+0.3%).
The following table shows the results of the sensitivity analysis of cash-generating units, expressed in terms of the difference between the recoverable
amount and the carrying amount in absolute terms and in percentage terms.
Sensitivity analysis
Change in recoverable value vs. carrying value (consolidated)
In EUR/mln (amounts rounded off)
Scenario analysis
Discount rate
Absolute value
%
Absolute value
%
CGU - MPS Consumer
2,322
29.9%
3,121
40.2%
CGU - MPS Corporate
1,869
40.5%
2,210
47.9%
CGU - BAV Consumer
27
2.0%
141
10.4%
CGU - BAV Corporate
23
2.6%
35
4.0%
CGU - Biverbanca (60.4%)
-29
-6.5%
-3
-0.7%
At Group level, the valuation and sensitivity analysis carried out show that the Group‘s recoverable amounts are not less than the carrying amount.
204
Notes to the consolidated financial statements - Part B – Consolidated balance sheet
Finally, an analysis was carried out of the threshold level of Ke for tests on individual cash-generating units, the results of which are summarised in the
following table:
Threshold discount rate
CGU - MPS Consumer
11.8%
CGU - MPS Corporate
13.8%
CGU - BAV Consumer
10.0%
CGU - BAV Corporate
10.6%
CGU - Biverbanca (59%)
9.0%
5. Conclusions
Impairment test results show that the recoverable amounts of the cash-generating units identified are not less than the corresponding carrying amounts.
Taking into account the analyses and evidence described above, no value adjustment was made to consolidated goodwill.
For assessment purposes, it should be noted that, as was previously pointed out, the market price of BMPS was not considered since, under current
market conditions (affected as they are by non-structural factors and by the high level of forecasting uncertainty), the price does not fully reflect the
structural profitability profile and benefits of the industrial measures implemented. In the current market scenario, banking stocks in general are
suffering from continuing macroeconomic uncertainty, a number of factors which will significantly impact the banking business over the next few years
(including transition to Basel III) and a persistently low level of spreads in lending. In this environment, market prices and the multipliers which derive
from them cannot fully reflect the value of listed companies based on future growth opportunities and the ability to create sustainable value over the
medium term.
205
Notes to the consolidated financial statements - Part B – Consolidated balance sheet
13.2 Intangible assets: annual changes
(in tho usands o f EUR)
Other intangible assets:
generated internally
Other intangible assets:
other
Total
Total
31 12 2010
31 12 2009
Goodwill
indefinite
life
finite life
A
Opening balance
A.1
Total net decreases
A.2
Net opening balance
B.
Increases
indefinite
life
finite life
6.769.479
5.224
-
1.706.834
-
8.481.537
8.473.989
150.000
4.543
-
665.365
-
819.908
708.057
6.619.479
681
-
1.041.469
-
7.661.629
7.765.932
-
202.136
-
202.136
131.964
-
B.1 Purchases
- Business combinations
-
-
-
-
196.404
-
196.404
126.650
-
-
-
-
-
-
-
B.2 Increases in internally generated
intangible assets
x
-
-
-
-
-
-
B.3 Write-backs
x
-
-
-
-
-
-
-
-
-
-
-
-
B.4 Increases in fair value
-
- to net equity
x
-
-
-
-
-
-
- to profit and loss
x
-
-
-
-
-
-
B.5 Positive exchange differences
-
-
-
45
-
45
-
B.6 Other increases
-
-
-
5.687
-
5.687
5.314
145.700
681
-
165.083
-
311.464
236.267
145.700
-
-
8.333
-
154.033
65.953
145.700
-
-
3.282
-
148.982
-
-
-
-
156.384
-
156.384
136.963
-
-
155.950
-
155.950
135.605
-
-
434
-
434
1.358
-
-
-
-
-
-
-
-
-
434
-
434
-
-
-
-
-
-
-
-
C. Decreases
C.1 Sales
- Disposals and one-off transactions
C.2 Write-downs
- Depreciation
x
- Write-downs
+ net equity
x
+ profit and loss
C.3 Decreases in fair value
- to net equity
x
-
-
-
-
-
-
- to profit and loss
x
-
-
-
-
-
-
C.4 Transfers to non-current assets held
for sale
-
-
-
-
-
-
-
C.5 Negative exchange differences
-
-
-
-
-
-
-
C.6 Other decreases
-
681
-
366
-
1.047
33.351
IFRS5 "Discontinuing operations"
-
-
-
(688)
-
(688)
-
6.473.779
-
-
1.077.834
-
7.551.613
7.661.629
150.000
-
-
809.525
-
959.525
819.908
6.623.779
-
-
1.887.359
-
8.511.138
8.481.537
-
-
-
-
-
-
-
D.
Net closing balance
D.1
Total net value adjustments
E.
Gross closing balance
F.
Carried at cost
Line A.1, "Total net decreases", and line D.1, "Total net value adjustments", show the opening and closing balances for total amortisation recorded for
intangible assets with a finite life.
Line "C.1 Sales‖ features, in the ―Goodwill‖ column, derecognition following the disposal of banking business to the Carige Group (22 branches,
goodwill derecognised for an amount of EUR 55.3 mln) and Cassa di Risparmio di Firenze (50 branches, goodwill derecognised for an amount of EUR
90.4 mln).
Line C.2 "Write-downs" in the ―Other intangible assets: other – finite life‖ column, mainly consists of the depreciation charge for the period relating to
intangibles recognised following the acquisition of Banca Antonveneta S.p.A. and subsidiary Biverbanca.
Line F - "Carried at cost" has been left blank, as per Bank of Italy's instructions, as this only needs to be completed for assets accounted for at fair value.
206
Notes to the consolidated financial statements - Part B – Consolidated balance sheet
13.3 Intangible assets: depreciation rates
residual
Main categories of intangible assets
%
depreciation
period
Software
20% - 50%
Concessions and other licenses
10% - 20%
Banca Antonveneta S.p.a. trademark
10,00%
7
Core deposits - current accounts
8,33% - 9,10%
8-9
Core deposits - deposits
6,70% - 7,14%
11 - 12
Core overdrafts
8,33% - 9,10%
8-9
11,10%
6
Assets under management
Intangible assets recognised during the purchase price allocation of Banca Antonveneta S.p.A. and Biverbanca S.p.a. are all finite-life and therefore
depreciated based on their expected useful life.
At 31 December 2010, there were no:
revalued intangible fixed assets;
intangible fixed assets acquired through government concessions (IAS, par. 44);
intangible fixed assets offered as loan collaterals;
commitments to purchase intangible assets.
207
Notes to the consolidated financial statements - Part B – Consolidated balance sheet
Section 14 – Tax Assets and Liabilities – Item 140 (Assets) and Item 80 (Liabilities)
14.1 Deferred tax assets: breakdown
(in tho usands o f EUR)
Items/Amounts
Receivables (including securitisations)
Total
Total
31 12 2010
31 12 2009
908.109
833.732
42.970
79.962
2.133.006
2.112.937
Multi-annual costs
13.579
13.647
Tangible and intangible assets
16.944
14.893
132
352
Personnel expenses
30.155
38.423
Tax losses
25.904
10.658
Other
632.882
662.753
Financial instruments - valuation reserves
479.383
138.082
4.283.064
3.905.439
169.185
147.690
4.113.879
3.757.749
Other financial instruments
Goodwill
Corporate entertainment expenses
Deferred tax assets (gross)
Offsetting with deferred tax liabilities
Deferred tax assets (net)
Deferred tax assets in the ―Receivables‖ line include tax assets for value adjustments which were not deducted in prior years since they exceeded the
limit indicated in Article 106 of the Income Tax Act (TUIR). Such adjustments will be deductible in subsequent periods on the basis of the straight-line
(1/18th) method.
―Goodwill‖ includes tax assets recognised following tax deduction, pursuant to article 15 of Legislative Decree No 185/2008, for goodwill from the
Parent Company's mergers by absorption of Banca Agricola Mantovana S.p.A. and Banca Antonveneta S.p.A. in 2008, and the transfer of banking
business from the parent company to Nuova Banca Antonveneta, completed on 1 January 2009. Compared with the 2009 balance, this item registered
an increase which was mainly due to tax deduction of the residual portion (50%) of goodwill originated by the afore-mentioned transaction in 2009,
net of deduction of the first ninth of goodwill amortisation recognised by the Parent Company in the transaction of 2008.
The line ―Financial instruments – valuation reserves‖ includes tax assets relating to cash flow hedge derivatives, financial instruments classified in
portfolios of available-for-sale financial assets and those originally in the portfolio of available-for-sale financial assets and reclassified in 2008 in the
portfolio of 'loans and advances to customers' and 'loans and advances to banks'. The increase as compared with the 2009 balance is mainly
attributable to negative fair value changes in debt securities (government securities), classified in the portfolio of 'available for sale assets' posted to net
equity.
The line ―Other‖ includes tax assets relating to other cases, such as those recognised on provisions for risks and charges in respect of deductible costs.
14.2 Deferred tax liabilities: breakdown
(in tho usands o f EUR)
Items/Amounts
Capital gains to be divided into installments
Total
Total
31 12 2010
31 12 2009
80.998
282
397
4.848
Tangible and intangible assets
39.788
40.595
Financial instruments
25.308
27.471
5.254
5.885
Other
35.990
32.843
Financial instruments - valuation reserves
86.604
146.932
274.339
258.856
169.185
147.690
105.154
111.166
Goodwill
Personnel expenses
Deferred tax liabilities (gross)
Offsetting with deferred tax assets
Deferred tax liabilities (net)
208
Notes to the consolidated financial statements - Part B – Consolidated balance sheet
The increase in taxes for "Capital gains to be divided into installments" is primarily associated to the effect of the option set out in art. 86, par. 4 of the
Income Tax Act (TUIR) which provides for payment in installments of the capital gains arising from the banking business disposed of by the Parent
Company in the first half of 2010.
The line ―Financial instruments – valuation reserves‖ includes the tax liability relating to financial instruments classified in the portfolio of 'available-forsale financial assets' and cash flow hedge derivatives.
14.3 Deferred tax assets: annual changes (with offsetting entry to profit and loss)
(in tho usands o f EUR)
1. Opening balance
Total
Total
31 12 2010
31 12 2009
3.732.468
3.463.748
570.059
592.446
434.145
539.237
a) relating to previous years
-
1.124
b) due to changes in accounting principles
-
-
c) write-backs
-
-
434.145
538.113
-
5.460
135.914
47.749
512.764
323.726
-
-
395.473
170.905
395.473
169.322
b) write-downs of non-recoverable items
-
-
c) changes in accounting principles
-
-
d) other
-
1.583
-
-
117.291
152.821
(1)
-
2. Increases
2.1 Deferred tax assets arising during the year
d) other
2.2 New taxes or increases in tax rates
2.3) Other increases
3. Decreases
Disposals and one-off transactions
3.1 Deferred tax assets derecognised during the year
a) reversals
3.2 Reduction in tax rates
3.3 Other decreases
IFRS5 "Discontinuing operations"
4. Closing balance
3.789.762
3.732.468
The table illustrates the tax assets that will be absorbed in subsequent periods with an offsetting entry to profit and loss.
Among the main 'Deferred tax assets arising during the year' € 226.7 mln relates to the partial deduction of goodwill recognised by Banca
Antonveneta following the transfer of banking business by the parent company in 2009. The remainder is mainly due to taxes arising from the writedown of loans exceeding the deductible threshold for the period and taxed provisions to the reseve for risks and charges made during the year.
"Deferred tax assets derecognised during the year" include
EUR 203.9 mln arising from amortisation of goodwill recognised in relation to the mergers by absorption of former Banca Agricola
Mantovana S.p.a. and former Banca Antonveneta S.p.a. by the Parent Company in 2008;
the use in 2010 of funds taxed in previous years and
the write-down of loans (in eighteenths) carried over from previous periods, for the portion deductible in 2010.
"Other decreases" in line 3.3 includes derecognition of tax positions in relation to the disposal of banking business to the Carige group and Cassa di
Risparmio di Firenze.
209
Notes to the consolidated financial statements - Part B – Consolidated balance sheet
14.4 Deferred tax liabilities: annual changes (with offsetting entry to profit and loss)
(in tho usands o f EUR)
1. Opening balance
Total
Total
31 12 2010
31 12 2009
109.906
104.163
94.580
24.094
-
-
75.623
10.954
a) relating to previous years
-
273
b) due to changes in accounting principles
-
-
75.623
10.681
-
-
18.957
13.140
16.884
18.351
-
-
10.471
12.857
10.471
10.877
b) due to changes in accounting principles
-
-
c) other
-
1.980
-
-
6.413
5.494
-
-
187.602
109.906
2. Increases
Business combinations
2.1 Deferred tax liabilities arising during the year
c) other
2.2 New taxes or increases in tax rates
2.3 Other increases
3. Decreases
Disposals and one-off transactions
3.1 Deferred taxes derecognised during the year
a) reversals
3.2 Reduction in tax rates
3.3 Other decreases
IFRS5 "Discontinuing operations"
4. Closing balance
This table illustrates the tax liabilities which will be absorbed in subsequent years with an offsetting entry to profit and loss.
"Deferred tax liabilities arising during the year‖, mainly relates to capital gains arising from the banking business disposed of by the Parent Company to
the Carige Group and Cassa di Risparmio di Firenze in 2010, in respect of which payment of taxes in five installments will be opted for at the time of
tax return preparation.
"Other increases" in line 2.3 includes the appropriation for tax liabilities in relation to the capital gain arising from the disposal of banking business by
the Parent Company in 2009, in respect of which payment of taxes in five installments was opted for at the time of tax return preparation in 2009.
210
Notes to the consolidated financial statements - Part B – Consolidated balance sheet
14.5 Deferred tax assets: annual changes (with offsetting entry to equity)
(in tho usands o f EUR)
Total
Total
31 12 2010
31 12 2009
1. Opening balance
172.970
185.793
2. Increases
361.723
59.918
-
-
351.876
33.872
a) relating to previous years
-
1.263
b) due to changes in accounting principles
-
-
351.876
32.609
-
-
9.847
26.046
41.391
72.741
34.535
48.459
34.535
48.252
b) write-downs of non-recoverable items
-
-
c) due to changes in accounting principles
-
-
d) other
-
207
-
-
3.3 Other decreases
6.856
24.282
4. Closing balance
493.302
172.970
Business combinations
2.1 Deferred tax assets arising during the year
c) other
2.2 New taxes or increases in tax rates
2.3 Other increases
3. Decreases
3.1 Deferred tax assets derecognised during the year
a) reversals
3.2 Reduction in tax rates
Changes mainly relate to taxes recognised on the change in equity reserves relating to financial instruments classified in portfolios of 'available-for-sale
financial assets', in addition to cash flow hedge derivatives.
Deferred tax assets arising during the year mainly refers to negative fair value changes posted to the reserve for bonds (Government securities) classified
in portfolios of 'available-for-sale financial assets'.
211
Notes to the consolidated financial statements - Part B – Consolidated balance sheet
14.6 Deferred tax liabilities: annual changes (with offsetting entry to equity)
(in tho usands o f EUR)
1. Opening balance
Total
Total
31 12 2010
31 12 2009
148.951
84.994
28.149
113.455
-
-
20.284
92.284
a) relating to previous years
-
-
b) due to changes in accounting principles
-
-
20.284
92.284
-
-
7.865
21.171
90.287
49.498
87.268
6.343
87.268
6.251
b) due to changes in accounting principles
-
-
c) other
-
92
2. Increases
Business combinations
2.1 Deferred tax liabilities arising during the year
c) other
2.2 New taxes or increases in tax rates
2.3 Other increases
3. Decreases
3.1 Deferred tax liabilities derecognised during the year
a) reversals
3.2 Reduction in tax rates
3.3 Other decreases
IFRS5 discontinuing operations
-
-
3.019
43.155
(76)
4. Closing balance
86.737
148.951
Changes mainly relate to taxes recognised on the change in equity reserves relating to financial instruments classified in portfolios of 'available-for-sale
financial assets', in addition to cash flow hedge derivatives.
Derecognised tax liabilities for the year mainly relates to bonds classified in portfolios of 'available-for-sale financial assets'.
212
Notes to the consolidated financial statements - Part B – Consolidated balance sheet
14.7. Other information
Current tax assets
(in tho usands o f EUR)
Items/Amounts
Total
Total
31 12 2010
31 12 2009
Prepayments of corporate income tax (IRES and IRAP)
130.808
154.903
Other tax credits and withholdings
677.288
742.118
808.096
897.021
138.187
277.725
669.909
619.296
Gross current tax assets
Offsetting with current tax liabilities
Net current tax assets
Current tax liabilities
(in tho usands o f EUR)
31 12 2010
Items/Amounts
Corporate income tax (IRES) payables
Other current income tax payables
Gross current tax payables
Offsetting with current tax assets
Net current tax payables
Booked to
Booled to
net equity
profit & loss
(764)
(764)
362
(1.126)
31 12 2009
Booked
Total
equity
258.273
257.509
9.403
9.403
267.676
266.912
137.825
138.187
129.851
128.725
213
to net
Booled to
profit & loss
Total
(2.441)
367.992
365.551
1.304
141.129
142.433
509.121
507.984
273.732
277.725
235.389
230.259
(1.137)
3.993
(5.130)
Notes to the consolidated financial statements - Part B – Consolidated balance sheet
Section 15 – Non-current assets and disposal groups held for sale and associated liabilities –
Item 150 (assets) and 90 (liabilities)
15.1 Non-current assets and disposal groups held for sale: breakdown by type of asset
(in tho usands o f EUR)
Total
Total
31 12 2010
31 12 2009
A. Individual assets
A.1 Financial assets
-
-
A.2 Equity investments
-
-
A.3 Tangible assets
95.997
129.165
A.4 Intangible assets
-
-
A.5 Other non-current assets
-
-
Total A
95.997
129.165
B. Asset groups (discontinued operations)
B.1
Financial assets held for trading
-
-
B.2 Financial assets designated at fair value
-
-
B.3 Financial assets held for sale
278
-
B.4 Financial assets held to maturity
-
-
B.5 Loans and advances to banks
10.414
-
B.6 Loans and advances to customers
41.456
-
B.7 Equity investments
-
-
B.8 Tangible assets
120
-
B.9 Intangible assets
688
-
12.819
-
B.10 Other assets
Total B
65.775
-
C. Liabilities associated with individual assets held for sale
C.1 Payables
-
-
C.2 Securities
-
-
C.3 Other liabilities
-
-
Total C
-
-
D. Liabilities included in disposal groups held for sale
D.1 Deposits from banks
D.2 Customer accounts
19
-
207.547
-
D.3 Securities in issue
-
-
D.4 Financial liabilities held for trading
-
-
D.5 Financial liabilities designated at fair value
-
-
D.6 Provisions
1.922
-
D.7 Other liabilities
3.912
-
Total D
213.400
-
Individual assets held for sale include buildings owned by the subsidiary MPS Immobiliare worth € 96 mln. The carrying amount is less than the
estimated realisable value.
Following transactions under way as at 31.12.2010 which will lead to the 100% disposal of subsidiary Monte Paschi Monaco S.A.M.and loss of control
of MPS Venture SGR S.p.a., the latter entities were considered as disposal groups held for sale. As a result, data referring to assets and liabilities, net of
intragroup relations, were considered as held for sale at 31/12/2010.
Line B10 "Other assets" includes EUR 7.8 mln in "Cash and cash equivalents at end of period".
214
Notes to the consolidated financial statements - Part B – Consolidated balance sheet
15.2. Other information
At 31 December 2010 asset groups pertaining to subsidiaries MPS Venture SGR S.p.a. and Monte Paschi Monaco S.A.M.
were reclassified as―Non-current assets and disposal groups held for sale".
15.2.1 Operations with external counterparties not classified under IFRS5 in 2009
Disposal of bank branches – rules set forth by the Italian Antitrust authority
The acquisition of Antonveneta was approved by the Italian Antitrust Authority with regulation no. 18327 of 7 may
2008 on condition that certain branches be disposed of in areas with footprint exceeding the limits set out in current
legislation on competition-related issues.
With a provision set forth on 29 January 2009, the terms of disposal were amended in the wake of the financial crisis
which slowed down the asset disposal process compared to the original schedule.
Disclosure is now given of developments in the disposal of banking business represented by bank branches.
On 31 May and 14 June 2010, the Parent Company made effective the final agreements with Gruppo Carige and Cassa
di Risparmio di Firenze S.p.a. for the disposal of banking business respectively consisting in 22 and 50 branches located
in Tuscany (69) and Lazio (3). This disposal led to a gross capital gain of EUR 166 mln, net of EUR 145.7 mln of
reduction in goodwill for these branches.
Disposal of the investment in Prima Holding S.p.A.
On 30 December 2010, after having obtained the approval of the relevant supervisory authorities,the Parent Company
finalised a deal for asset management reorganisation, consisting in the disposal to Asset Management Holding S.p.a. of
the associate interest previously held by the Bank in Prima Holding S.p.a. and the purchase of a 22.24% share in the
acquiring entity by the Parent Company.
The transaction, involving Banca Popolare di Milano and Clessidra SGR in addition to the Parent Company, has resulted
in the creation of the largest independent asset management player in Italy, with over EUR 40 bln worth of assets
managed. The company Asset Management Holding S.p.a. has 100% control over Prima SGR and Anima SGR; the
company's capital is held directly and indirectly through Prima Holding 2 S.p.a. by the Parent Company (23.44%), the
Banca Popolare di Milano Group (36.30%), Clessidra SGR (38.11%) and Banca Etruria S.p.a. and Banca Finnat S.p.a.
(minority holdings).
The project is a move towards greater operating efficiency by taking full advantage of potential synergies between the
two entities and the imminent creation of a single company by combining Prima SGR and Anima SGR.
The new entity will act as an independent centre of production of asset management products and services in support of
the various distribution networks, servicing more than 150 market operators (banking networks and networks of financial
consultants), including two banking networks of national importance (BMPS and BPM) with more than 3,800 branches.
15.3 Details of investments in companies subject to significant influence not valued at equity
This table has not been completed since the Group has no investments in companies subject to significant influence not
valued at equity either for the current year or for the previous year.
215
Notes to the consolidated financial statements - Part B – Consolidated balance sheet
Section 16 – Other assets – Item 160
16.1 Other assets: breakdown
(in tho usands o f EUR)
Total
Total
31 12 2010
31 12 2009
Tax credits from the Revenue and other tax levying authorities
410.106
536.590
Third party cheques held at the cashier's for collection
338.478
392.926
5.032
13.596
Cheques drawn on the Company held at the cashier's for collection
Gold, silver and precious metals
76
251
35.112
27.135
Items in transit between branches
203.783
265.581
Items in processing
957.504
1.912.218
Receivables associated with the provision of goods and services
49.389
38.092
Improvements and incremental costs on third party assets other than those included
under tangible assets
17.872
6.177
409.453
517.860
3.780
4.568
Property inventory
Prepaid expenses and accrued income not attributable to a separate account
Biological assets
Other
2.374.152
2.513.508
Total
4.804.737
6.228.502
The lines ―Items in processing‖ and ―Other‖ include transactions which were completed in early 2010.
216
Notes to the consolidated financial statements - Part B – Consolidated balance sheet
LIABILITIES
Section 1 – Deposits from banks – Item 10
1.1 Deposits from banks: breakdown
(in tho usands o f EUR)
Type of transaction / Group item
Total
Total
31 12 2010
31 12 2009
1. Deposits from central banks
14.330.704
9.002.458
2. Deposits from banks
14.003.732
13.755.285
2.1 Current accounts and demand deposits
3.749.944
3.292.504
2.2 Time deposits
1.509.950
3.910.433
2.3 Loans
8.341.402
6.131.372
2.3.1. Repurchase agreements
5.353.242
4.465.255
2.3.2 Other
2.988.160
1.666.117
-
-
402.436
420.976
Total
28.334.436
22.757.743
Fair Value
28.335.819
22.763.658
2.4 Liabilities for commitments to repurchase own equity instruments
2.5 Other liabilities
Deposits from central banks at 31/12/2010 mainly consist of:
lending transactions for an amount of EUR 11,506.1 mln with the Bank of Italy in the context of the Eurosystem, backed by a pool of
securities pledged by the Bank .
advances from central foreign banks for an amount of EUR 2,390 mln.
The line ―Repurchase agreements‖ contains the financial liabilities arising from repurchase transactions with banks on securities recognized as financial
assets and on securities made available through reverse repurchase transactions.
1.2 Detail of Account 10 "Deposits from banks": subordinated liabilities
(in tho usands o f EUR)
Type/Item
ABN AMRO Bank Subordinated Loan A.
Issue Date
10/10/06
Maturity
Date
Currency
10/10/16 Eur
Rate
Balance
Balance
31 12 2010
31 12 2009
variabile
Total
403.388
403.789
403.388
403.789
For prudential purposes this borrowing, as an innovative capital instrument, counts as supplementary capital (see Section 2, Capital requirements and
capital ratios in Part F of these notes to the financial statements).
1.3 Detail of Account 10 "Deposits from banks": structured liabilities
This table has not been completed since the Group has no liabilities of this kind either for the current year or for the
previous year.
1.4 Deposits from banks: liabilities subject to micro-hedging
This table has not been completed since the Group has no liabilities of this kind either for the current year or for the
previous year.
1.5 Amounts payable under finance leases
This table has not been completed since the Group has no liabilities of this kind either for the current year or for the
previous year.
217
Notes to the consolidated financial statements - Part B – Consolidated balance sheet
Section 2 – Customer accounts– Item 20
2.1 Customer accounts: breakdown
(in tho usands o f EUR)
Type of transaction / Group item
Total
Total
31 12 2010
31 12 2009
1. Current accounts and demand deposits
65.773.530
65.700.647
3.291.639
4.588.331
26.899.153
18.346.674
18.741.067
13.892.500
8.158.086
4.454.174
-
-
1.805.243
2.497.168
Total
97.769.565
91.132.820
Fair Value
97.769.565
91.132.820
2. Time deposits
3. Loans
3.1 Repurchase agreements
3.2 Other
4. Liabilities for commitments to repurchase own equity instruments
5. Other liabilities
Customer accounts are valued at cost or at amortised cost, except for liabilities subject to micro-hedges as indicated in Table 2.4 of this section.
The line ―Repurchase agreements‖ contains the financial liabilities arising from repurchase transactions with customers on securities recognized as
financial assets and on securities made available through reverse repurchase transactions.
2.2 Detail of Account 20 "Customer accounts": subordinated liabilities
This table has not been completed since the Group has no liabilities of this kind either for the current year or for the
previous year.
2.3 Detail of Account 20 "Customer accounts": structured liabilities
This table has not been completed since the Group has no liabilities of this kind either for the current year or for the
previous year.
2.4 Detail of Account 20 “Customer accounts”: liabilities subject to micro-hedging
(in tho usands o f EUR)
Type of transaction / Amount
1. Liabilities subject to micro-hedging of fair value:
Total
Total
31 12 2010
31 12 2009
72.844
69.088
72.844
69.088
b) exchange risk
-
-
c) multiple risks
-
-
-
-
a) interest rate risk
-
-
b) exchange risk
-
-
a) interest rate risk
2. Liabilities subject to micro-hedging of cash flows:
c) other
Total
-
-
72.844
69.088
This table contains a breakdown of Table 2.1 and shows the carrying amount of two borrowings subject to a fair value hedge on the interest-rate risk.
The carrying amount corresponds to the amortised cost adjusted by changes in fair value for the specific risk hedged.
218
Notes to the consolidated financial statements - Part B – Consolidated balance sheet
2.5 Amounts payable under finance leases
This table has not been completed since the Group has no liabilities of this kind either for the current year or for the
previous year.
219
Notes to the consolidated financial statements - Part B – Consolidated balance sheet
Section 3 – Debt securities in issue – Item 30
3.1 Debt securities in issue: product breakdown
(in thousands of EUR)
Type of
Securities/
Amounts
Total
Total
31 12 2010
31 12 2009
Fair Value
Level 1
Level 2
Level 3
Fair Value
Book
value
Book value
Total
Level 1
Level 2
Level 3
Total
A . Lis t e d
s e c urit ie s
1. B o nds
1.1Structured
1.2 Others
2, Other securities
2.1Structured
2.2 Others
T o tal
31.080.108
14.957.878
16.301.806
-
31.259.684
33.603.175
11.430.463
22.771.093
-
34.201.556
37.219
-
37.109
-
37.109
29.637
-
29.637
-
29.637
31.042.889
14.957.878
16.264.697
-
31.222.575
33.573.538
11.430.463
22.741.456
-
34.171.919
4.166.609
-
4.208.386
-
4.208.386
8.955.909
-
9.039.478
-
9.039.478
-
-
-
-
-
-
-
-
-
-
4.166.609
-
4.208.386
-
4.208.386
8.955.909
-
9.039.478
-
9.039.478
3 5 .2 4 6 .7 17
14 .9 5 7 .8 7 8
2 0 .5 10 .19 2
-
3 5 .4 6 8 .0 7 0
4 2 .5 5 9 .0 8 4
11.4 3 0 .4 6 3
3 1.8 10 .5 7 1
-
4 3 .2 4 1.0 3 4
The table shows the funding represented by securities, which includes not only bonds but outstanding certificates of deposit and expired CDs to be
repaid.
Liabilities do not include bonds and repurchased CDs.
The fair value column indicates the theoretical market value of the financial instruments at the balance sheet date.
3.1.a Debt securities in issue: details of structured liabilities
(in tho usands o f EUR)
Item/Amount
Total
Total
31 12 2010
31 12 2009
Index Linked
19.742
29.637
Inflation
16.148
-
Other
1.329
-
Total
37.219
29.637
Table 3.1 is a breakdown of all structured securities, in which the derivative was separated and valued independently, by major types of securities
issued.
3.1.b Fair value of derivatives embedded in structured securities in issue
(in tho usands o f EUR)
Items/Amounts
Fair value of derivatives embedded in structured securities in issue
Total
Total
31 12 2010
31 12 2009
387
734
The table shows the fair value of derivatives embedded in structured securities which were separated from the host instrument and classified in the
trading portfolio measured at fair value. For regulatory purposes, such derivatives are considered as part of the banking book and are not included in
the trading portfolio for regulatory purposes, except where they are actually held for trading.
220
Notes to the consolidated financial statements - Part B – Consolidated balance sheet
3.2 Details of Account 30 "Debt securities in issue": subordinated securities
Book value
Currency
Type
Interest
rate
A) Tier I
Capital Preferred Securities I^ Tr.
21/12/00
(a)
EUR
floating
79.295
79.944
A) Tier I
Capital Preferred Securities II^ Tr.
27/06/01
(a)
EUR
floating
215.697
213.548
A) Tier I
F.R.E.S.H. (Floating Rate Equitylinked Subordinated Hybrid)
30/12/03
(b)
EUR
floating
442.417
438.306
737.409
731.798
Name
Regulatory
Issue date
Maturity
date
Total A) Tier I
31 12 2010
31 12 2009
B) Tier II Upper
BMPS 4.875 SUB 2016
31/05/06
31/05/16
EUR
fixed
772.304
764.385
B) Tier II Upper
BMPS 5.75 SUB 2016
31/05/06
30/09/16
GBP
fixed
231.007
226.741
B) Tier II Upper
PASCHI SUB TV 08/18
15/05/08
15/05/18
EUR
floating
2.161.657
2.163.447
3.164.968
3.154.573
C) Tier II Lower
BC ANTONVE SUB TV 18
30/04/08
30/04/18
EUR
floating
1.964
1.687
C) Tier II Lower
BCA ANTONVE 02-12 TV
01/11/02
01/11/12
EUR
floating
28.001
43.035
C) Tier II Lower
BMPS TV 05/15
30/06/05
30/06/15
EUR
floating
-
344.640
C) Tier II Lower
BMPS 7,44 08/16
30/06/08
30/12/16
EUR
fixed
247.945
247.748
C) Tier II Lower
BMPS SUB 7 09/19
04/03/09
04/03/19
EUR
fixed
544.122
527.208
C) Tier II Lower
BMPS TV 05/17
30/11/05
30/11/17
EUR
floating
498.822
498.442
C) Tier II Lower
BMPS TV SUB 08/18
31/10/08
31/10/18
EUR
floating
125.464
109.958
C) Tier II Lower
BMPS/BAM 17 SUB TV
29/06/07
29/06/17
EUR
floating
5
4
C) Tier II Lower
BMPSBAM 17STCLSB S43
14/12/07
14/12/17
EUR
floating
56
50
C) Tier II Lower
MPS 03/15 4,50
24/09/03
24/09/15
EUR
fixed
C) Tier II Lower
MPS TV 05/18
20/12/05
15/01/18
EUR
floating
137.338
C) Tier II Lower
MPS 04/2020 FX 5 LT2 EUR
21/04/10
21/04/20
EUR
fixed
506.384
-
C) Tier II Lower
MPS 09/2020 FX 5,6 EUR
09/09/10
09/09/20
EUR
fixed
468.848
-
C) Tier II Lower
MPS Capital Services
30/09/03
30/09/13
EUR
floating
4.216
5.620
C) Tier II Lower
MPS Capital Services
30/09/03
30/09/13
EUR
floating
207
263
C) Tier II Lower
MPS Capital Services
22/12/03
22/12/13
EUR
floating
16
20
C) Tier II Lower
MPS Capital Services
30/06/05
30/06/15
EUR
floating
1
2
C) Tier II Lower
Banca Popolare di Spoleto
07/12/05
07/12/15
EUR
floating
7.807
7.798
C) Tier II Lower
Banca Popolare di Spoleto
15/04/08
15/04/18
EUR
floating
2.128
2.140
C) Tier II Lower
Banca Popolare di Spoleto
18/04/08
18/04/18
EUR
floating
2.823
2.834
2.576.147
2.526.464
Total B) Tier II Upper
Total C) Tier II Lower
Total D) Tier III
Total
-
592.754
6.478.524
142.261
6.412.835
a) Securities are unredeemable. Only the parent company has the option of the total or partial redemption of notes. The option may respectively be
exercised from 21 March 2011 and 27 September 2011.
b) The amount relates to funding through the issue of the innovative equity instrument 'Floating Rate Equity-linked Subordinated Hybrid' (F.R.E.S.H.)
by the vehicle ―MPS Preferred Capital II LLC‖. . The amount is reported net of the embedded derivative component, posted to own equity instruments,
which has been classified under balance sheet liabilities in account 50, ―Equity instruments‖. For prudential purposes this issue, as an innovative capital
instrument, counts as Tier 1 capital (see Section 2, Capital requirements and capital ratios in Part F of these notes to the financial statements).
221
Notes to the consolidated financial statements - Part B – Consolidated balance sheet
3.3 Details of Item 30 "Debt securities in issue": securities subject to micro-hedging
(in tho usands o f EUR)
Type of transaction / Amount
1. Securities subject to micro-hedging of fair value:
a) interest rate risk
Total
Total
31 12 2010
31 12 2009
11.680.889
9.554.677
11.680.889
9.554.677
b) exchange risk
-
-
c) multiple risks
-
-
2.400.532
2.391.864
2.165.529
2.164.177
235.003
227.687
2. Securities subject to micro-hedging of cash flows:
a) interest rate risk
b) exchange risk
c) other
Total
-
-
14.081.421
11.946.541
The table shows outstanding securities which are subject to micro-hedging.
As a result of cash flow hedging, the fair value of derivative contracts is posted to a specific equity reserve.
222
-
-
-
-
-
3.1.1Structured
3.1.2 Other
3.2 Other securities
3.2.1Structured
3.2.2 Other
223
X
1.3 Other
-
X
1.2 Fair value option (FVO)
X
X
X
X
2.3 Other
Total B
Total (A+B)
821.380
143.601
-
-
-
-
-
29.464.268
10.727.487
-
-
1.106.091
1.106.091
388
3.406
9.617.602
9.621.396
18.736.781
-
-
-
-
-
-
-
16.893.321
1.843.460
Livello 2
FV
-
-
-
-
-
-
-
-
-
-
97.852
97.852
68.014
-
-
68.014
-
-
29.838
29.838
Livello 3
30.383.500
10.968.940
68.014
NV = nominal or notional value
-
1.106.091
1.174.105
388
3.406
9.791.041
9.794.835
19.414.560
-
-
-
-
-
-
-
17.130.109
2.284.451
Total
FV* = fair value calculated excluding value adjustments due to changes in credit rating of the issuer as of the date of issue.
FV = fair value
X
2.1Trading
2.2 Fair value option (FVO)
2. Credit derivatives
143.601
-
143.601
X
1.1Trading
677.779
-
-
-
-
-
-
-
236.788
440.991
Livello 1
1. Financial derivatives
B. Derivatives
19.411.759
-
3.1Bonds
Total A
-
3. Debt securities
2.284.451
17.127.308
2. Customer accounts
NV
1. Deposits from banks
A. Balance-sheet liabilities
Group item
Type of transaction/
Total 31/ 12/ 2010
4.1. Held-for-trading financial liabilities: breakdown
Section 4 – Held-for- trading financial liabilities – Item 40
-
-
X
X
X
X
X
X
X
X
-
-
19.414.560
X
X
X
X
-
17.130.109
2.284.451
FV*
X
X
X
X
X
X
X
X
-
10.101.201
22.686
-
22.686
-
-
-
22.686
8.977.972
1.100.543
NV
1.631.801
481.211
-
-
-
-
-
-
481.211
481.211
1.150.590
22.686
-
22.686
-
-
-
22.686
1.107.034
20.870
Livello 1
17.757.665
8.806.869
-
-
426.951
426.951
734
1.636
8.377.548
8.379.918
8.950.796
-
-
-
-
-
-
-
7.871.123
1.079.673
Livello 2
FV
Total 31/ 12/ 2009
-
-
-
-
-
-
-
-
-
-
91.872
91.872
81.764
-
-
81.764
-
-
10.108
10.108
Livello 3
19.481.338
9.379.952
81.764
0
426.951
508.715
734
1.636
8.868.867
8.871.237
10.101.386
22.686
-
22.686
-
-
-
22.686
8.978.157
1.100.543
Total
-
X
X
X
X
X
X
X
X
-
-
10.090.571
X
X
22.686
X
X
22.686
8.967.342
1.100.543
FV*
(in thousands of EUR)
Notes to the consolidated financial statements - Part B – Consolidated balance sheet
In the ―Level 3‖ column, line B.2.3, ―Credit derivatives – other‖ includes two protection agreements embedded in bonds classified in the loan portfolio, reported separately and recognised at fair value in the
trading portfolio.
Overall, and taking into account the contracts signed with MPS Capital Services, the total amount of FVO derivatives established within the Group is € 107.5 mln.
For FVO derivatives arranged by Group companies with the subsidiary MPS Capital Services, it is worth noting that the relevant internal structures responsible for risk management perform suitable tests at
consolidated level in order to periodically test the effectiveness of the hedge established from the perspective of a 'natural hedge'.
Derivatives connected with fair value option instruments are also included in the trading portfolio: these cover the risks of funding designated at fair value arising from possible interest rate fluctuations and
from any embedded options in structured securities issued. The fair value of these derivatives is shown in the table in line "B1.2 - Fair value option‖, if made directly with Group‘s external counterparties, but
is represented by a portion of the held-for-trading derivatives (line 1.1) whenever the FVO hedge originally carried out with the subsidiary MPS Capital Services requires risk externalisation.
The increase in ―Deposits from banks‖ and ―Deposits from customers‖ relates to that of ―Debt securities‖ and ―Loans‖ in Table 2.1, ―Held-for-trading financial assets‖, and relates to the increase in repurchase
transactions by the subsidiary MPS Capital Services – Banca per le Imprese S.p.A.
Criteria adopted for classification of financial instruments in the three levels of the ―fair value hierarchy‖ are indicated in Section A.3, ―Information on fair value‖ of Part A, ―Accounting policies‖ of the notes
to the financial statements.
b) financial liabilities which originate from derivatives other than those formally designated as hedges.
a) balance-sheet liabilities mainly issued for short-term profit;
Item 40, ―Held- for-trading financial liabilities‖, includes:
Notes to the consolidated financial statements - Part B – Consolidated balance sheet
224
Notes to the consolidated financial statements – Part B – Consolidated balance sheet
4.2 Details of Item 40 "Held-for-trading financial liabilities": structured liabilities
The Group has not issued subordinated liabilities classified in the trading portfolio.
4.3 Details of item 40 " Held-for-trading financial liabilities": structured liabilities
The Group has not issued structured liabilities classified in the trading portfolio.
4.4 Balance-sheet financial liabilities (excluding "technical overdrafts") held for trading: annual
changes
(in tho usands o f EUR)
A. Opening balance
B. Increases
Deposits from
Deposits from
banks
customers
Securities issued
Total
31 12 2010
1.052.609
7.879.872
22.686
8.955.167
30.321.638
1.058.790.537
-
1.089.112.175
B.1 Issues
-
-
-
-
B.2 Sales
30.315.147
1.058.760.760
-
1.089.075.907
-
-
-
-
6.491
29.777
-
36.268
C. Decreases
29.531.930
1.049.777.088
22.686
1.079.331.704
C.1 Purchases
29.526.097
1.049.754.881
22.686
1.079.303.664
C.2 Redemptions
-
-
-
-
C.3 Decreases in fair value
-
-
-
-
C.4 Other decreases
5.833
22.207
-
28.040
D. Closing balance
1.842.317
16.893.321
-
18.735.638
B.3 Increases in fair value
B.4 Other increases
For the ―Deposits from banks‖ and ―Deposits from customers‖ columns, the change in the item does not include technical overdrafts.
4.4.a Derivatives payable - Fair Value Option method
(in tho usands o f EUR)
31 12 2010
31 12 2009
Financial asset
Items/Amounts
Other types of
Natural Hedges
accounting
Other types of
managed
Natural Hedges
internally on
mismatches
Financial asset
portfolios
accounting
the basis of fair
value
Financial derivatives
Credit derivatives
Total
managed
internally on
mismatches
the basis of fair
portfolios
value
3.406
-
-
1.636
-
-
-
-
-
-
-
-
3.406
-
-
1.636
-
-
This is a breakdown of table 4.1 above and shows the carrying amount (fair value) of hedging derivatives which have adopted the fair value
option, distinguishing between the various modes of use.
Asat 31 December 2010, all fair value option derivatives recognised in the trading portfolio are attributable to the natural and systematic hedging
of fixed-rate structured bonds issued by the Group.
By convention, such derivatives are classified in the trading portfolio. However, in terms of their representation in the profit and loss statement,
they comply with rules similar to the rules applicable to hedging derivatives: positive and negative spreads or margins settled or accrued until the
balance sheet date are recorded under interest income and expense, while valuation profits and losses are posted under item 110 of the profit
and loss statement, ―Net profit (loss) on financial assets and liabilities designated at fair value‖, in compliance with representations used for
funding instruments which adopted the fair value option.
225
-
1.2 Other
2. Customer accounts
1.1 Structured
1.2 Other
226
2 5 .4 4 1.9 2 0
24.837.341
604.579
-
-
-
-
-
-
-
2 5 .4 6 9 .4 9 0
24.831.316
638.174
25.469.490
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2 5 .4 6 9 .4 9 0
24.831.316
638.174
25.469.490
Total
2 5 .4 7 8 .6 0 4
X
X
-
-
-
-
-
-
2 1.9 7 4 .3 9 1
21.467.020
507.371
21.974.391
NV
Level 1
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2 1.6 9 9 .0 5 6
21.174.279
524.777
21.699.056
Level 2
Level 3
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2 1.6 9 9 .0 5 6
21.174.279
524.777
21.699.056
Total
X
X
-
-
2 1.6 6 0 .10 9
X
X
21.660.109
X
X
FV*
(in tho usands o f EUR)
Positive and negative spreads or margins in relation to derivative contracts settled or accrued until the balance sheet date are recorded in the profit and loss statement under interest
income and expense, while valuation profits and losses are posted under Item 110, ―Net profit (loss) on financial assets and liabilities designated at fair value‖, in compliance with
reporting used for funding instruments for which the fair value option was used.
Funding subject to hedging with derivative instruments is thus designated at fair value, in accordance with all the relative hedging derivatives which have been classified, for the
purposes of the financial statements, under specific detail accounts of the trading portfolio.
The fair value option has been adopted systematically for fixed-rate and structured debt securities issued by the Parent Company, for which the risk of fair value changes has been
hedged by derivatives upon issue, with the aim of maintaining the hedge for the contractual duration of the hedged securities; derivatives used as part of the fair value option are
classified in the trading portfolio. Hedge accounting is used for securities issued by the Parent Company for which the decision to hedge was taken after issuance or for which there
is no intention to maintain the hedge for the contractual duration of the securities.
The table shows the financial liabilities represented by fixed-rate and structured bonds which have been classified at fair value and are systematically subject to hedging. Hedging
occurs through derivative contracts and is used to cover the risk of interest rate fluctuations and the risk resulting from embedded options.
VN = nominal or notional value
-
-
25.478.604
X
X
X
X
FV*
FV
Level 3
FV
Level 2
FV* = fair value calculated excluding value adjustments due to variations in the credit rating of the issuer since the date of issue.
FV = fair value
Total
3.2 Other
3.1 Structured
25.441.920
-
1.1 Structured
3. Debt securities
-
-
-
Level 1
-
NV
1. Deposits from banks
Amount
Type of transaction /
Total 31/12/2009
Total 31/12/2010
5.1 Financial liabilities designated at fair value through profit and loss: breakdown
Section 5 – Financial liabilities designated at fair value through profit and loss – Item 50
Notes to the consolidated financial statements - Part B – Consolidated Balance Sheet
Notes to the consolidated financial statements - Part B – Consolidated balance sheet
5.1.a Financial liabilities designated at fair value through profit and loss: the Fair Value Option
method
(in tho usands o f EUR)
31 12 2010
Items/Amounts
31 12 2009
Deposits
Deposits
from banks
from
customers
Deposits
Debt
Deposits
securities
from banks
Debt
from
securities
customers
Natural hedges through derivatives
-
-
25.469.490
-
-
21.699.056
Natural hedges through other
financial instruments
-
-
-
-
-
-
Other types of accounting mismatches
-
-
-
-
-
-
Financial asset portfolios managed
internally on the basis of fair value
-
-
-
-
-
-
Structured financial instruments
-
-
-
-
-
-
Total
-
-
25.469.490
-
-
21.699.056
This table adds details to table 5.1 above and shows the carrying amount (fair value) of liabilities for which the fair value option was adopted,
breaking them down by modes of use.
5.2 Details of Account 50 "Financial liabilities designated at fair value through profit and loss":
subordinated liabilities
(in tho usands o f EUR)
Type
Regulatory
A) Tier I
Name
PASCHI 01/31 7,59 SUB
Issue date
07/02/01
Maturity
date
07/02/31
Currency
EUR
Rate
fixed
Total A) Tier I Lower
C) Tier II Lower
PASCHI 22/2015 INDEX
07/07/00
07/07/15
C) Tier II Lower
PASCHI 00/15 IND.
20/07/00
20/07/15
EUR
floating
EUR
floating
Total C) Tier II Lower
Book value
31 12 2010
31 12 2009
367.617
351.439
367.617
351.439
38.120
37.215
34.407
28.694
72.527
65.909
440.144
417.348
The table shows subordinated financial liabilities designated at fair value, with their main characteristics. For the purpose of quantifying
regulatory capital, subordinated liabilities are not designated at fair value, but on the basis of the amount which was actually collected (see Part F,
Section 2, ―Regulatory capital‖). In 2010 new issues were finalised as part of the portfolio of financial liabilities designated at fair value.
227
Notes to the consolidated financial statements - Part B – Consolidated Balance Sheet
5.3 Financial liabilities designated at fair value through profit and loss: annual changes
(in tho usands o f EUR)
Deposits from
Deposits from
banks
customers
Total
Securities issued
31 12 2010
A. Opening balance
-
-
21.699.056
21.699.056
B. Increases
-
-
8.272.470
8.272.470
B.1 Issues
-
-
7.539.272
7.539.272
B.2 Sales
-
-
-
-
B.3 Increases in fair value
-
-
209.614
209.614
B.4 Other increases
-
-
523.584
523.584
C. Decreases
-
-
4.502.036
4.502.036
C.1 Purchases
-
-
1.467.900
1.467.900
C.2 Redemptions
-
-
2.438.820
2.438.820
C.3 Decreases in fair value
-
-
58.471
58.471
C.4 Other decreases
-
-
536.845
536.845
D. Closing balance
-
-
25.469.490
25.469.490
The table shows changes in the main types of liabilities of the fair-valued portfolio during the year.
Line B3, ―Increases in fair value‖, shows the increase in liabilities, resulting in the recognition of a corresponding capital loss in the profit and loss
statement (Section 7, Table 7.1 of the profit and loss statement). Line C3, ―Decreases in fair value‖, shows a decrease in liabilities, and thus the
recognition of a corresponding capital gain in the profit and loss statement (Section 7, Table 7.1 of the profit and loss statement).
Lines B4 and C4 include gains and losses from repurchase, in addition to accruals on issue discounts and coupon interest and the effects of
exchange rate fluctuations.
5.3.a Financial liabilities designated at fair value through profit and loss: structured liabilities
(in tho usands o f EUR)
Item/Amount
Unit Linked
Total
Total
31 12 2010
31 12 2009
279.524
-
Credit linked notes
30.991
-
Fund Linked
49.401
59.652
Commodity
21.877
78.564
Commodities linked
71.754
93.712
Inflat
183.126
283.261
Other
1.501
9.588
Total
638.174
524.777
The table indicates the main types of structured bonds issued by the Group and measured at fair value. Since bonds are measured at fair value,
embedded derivatives are not reported separately.
228
Notes to the consolidated financial statements - Part B – Consolidated balance sheet
Section 6 – Hedging derivatives – Item 60
6.1 Hedging derivatives: breakdown by type of contract and underlying asset
(in tho usands o f EUR)
Fair Value
NV
31 12 2010
Level 1
A . F ina nc ia l de riv a t iv e s
-
Level 2
Level 3
1.7 3 4 .8 5 6
Fair Value
-
Total
Level 1
Level 2
Level 3
2 1.7 8 2 .7 9 1
-
9 2 5 .17 8
-
9 2 5 .17 8
15 .4 11.8 9 3
3 1 12 2 0 10
1.7 3 4 .8 5 6
NV
31 12 2009
Total
3 1 12 2 0 0 9
1) Fair value
-
1.351.161
-
1.351.161
17.977.762
-
591.693
-
591.693
12.706.864
2) Cash flo ws
-
383.695
-
383.695
3.805.029
-
333.485
-
333.485
2.705.029
3) Fo reign investments
-
-
-
-
-
-
-
-
-
-
B . C re dit de riv a t iv e s
-
1.6 7 4
-
1.6 7 4
7 9 .3 2 3
-
6 .3 7 6
-
6 .3 7 6
16 1.7 5 0
1) Fair value
-
1.674
-
1.674
79.323
-
6.376
-
6.376
161.750
2) Cash flo ws
-
-
-
-
-
-
-
-
-
-
-
1.7 3 6 .5 3 0
-
1.7 3 6 .5 3 0
2 1.8 6 2 .114
-
9 3 1.5 5 4
-
9 3 1.5 5 4
15 .5 7 3 .6 4 3
T o tal
Key
NV = Nominal or Notional Value
The table displays the negative book value (fair value) of hedging derivatives for hedges carried out through hedge accounting. Hedge accounting
is used for the accounting of hedges of financial instruments posted in balance sheet items which do not provide for measurement at fair value
offsetting the profit and loss statement: in particular, hedges of all financial assets and liabilities other than those represented by securities are
managed through hedge accounting.
Hedges of financial liabilities represented by securities are normally managed through the fair value option.
Information on the underlying strategies and objectives of hedge transactions can be found in Section 2 ―Market risks‖ of Part E ―Risks and
hedging policies‖.
229
Notes to the consolidated financial statements - Part B – Consolidated Balance Sheet
6.2 Hedging derivatives: breakdown by hedged portfolio and type of hedging
(in tho usands o f EUR)
-
x
-
x
x
1.076.250
x
5.315
x
-
x
x
195.899
x
-
x
-
x
x
-
-
x
36.501
x
-
-
1. Financial assets available
for sale
2. Loans and receivables
-
374
189.285
-
1.299
-
-
x
4. Portfolio
x
5. Other transactions
x
-
1.2 6 5 .16 1
1. Financial liabilities
74.524
2. Portfolio
x
Total liabilities
7 4 .5 2 4
x
-
-
-
x
-
x
-
36.501
-
1.6 7 3
-
5 .3 15
-
x
-
x
x
x
x
-
-
-
-
1. Expected transactions
x
x
x
x
x
2. Financial assets and
liabilities portfolio
x
x
x
x
x
1.3 3 9 .6 8 5
-
1.6 7 3
-
5 .3 15
Total
Micro-hedge
multiple
risks
price risk
credit risk
1.075.876
3. Financial assets held
to maturity
Total assets
exchange
risk
Transaction/Type of hedge
interest
rate risk
Micro Hedge
Macro-hedge
Foreign investments
Cash flow hedge
Macro-hedge
Fair Value
x
x
-
3 6 .5 0 1
x
-
-
-
1.3 0 8 .6 5 0
353.356
x
x
427.880
-
x
x
x
-
3 6 .5 0 1
3112 2010
-
3 5 3 .3 5 6
-
Total
-
-
x
x
-
-
-
-
x
3 5 3 .3 5 6
-
-
-
4 2 7 .8 8 0
1.7 3 6 .5 3 0
The table shows the negative fair values of hedging derivatives, classified by hedged assets or liabilities and type of hedging implemented.
In particular, on the assets side, fair value micro-hedging was used to hedge against interest-rate risk on fixed-rate mortgages and bonds classified
in the available-for-sale portfolio or among receivables, in order to protect them from unfavourable interest rate changes.
Fair value micro-hedging was also applied to the credit risk of bonds classified in the available-for-sale portfolio or among receivables; these
hedges were performed by acquiring protection through credit default swaps.
Th "Multiple risks" column reports the negative fair values of derivative contracts on interest rates, exchange rates or loans included in 'multi-risk'
hedge relations.
Fair value micro-hedging of the interest-rate risk on financial liabilities refers primarily to hedges of liabilities represented by securities for which
the decision to hedge was taken after issuance or for which there is no intention to maintain the hedge for the contractual duration of the
securities.
Fair value macro-hedging was applied to fixed-rate mortgage portfolios.
Cash flow hedges were implemented in the case of some specific floating-rate bond issues, for the purpose of stabilising their flows through
interest rate swaps.
Prospective and retrospective tests performed in 2010 in accordance with IAS 39 confirmed the effectiveness of hedging relationships.
More information on hedged assets and liabilities can be found in the tables in Part B of the notes for each section of the balance-sheet accounts
to which hedged items are posted.
230
Notes to the consolidated financial statements - Part B – Consolidated balance sheet
(in tho usands o f EUR)
1. Financial assets available
for sale
354.929
-
1.019
2. Loans and receivables
142.814
-
5.357
3. Financial assets held
to maturity
x
-
-
4. Portfolio
x
5. Other transactions
Total assets
x
-
4 9 7 .7 4 3
1. Financial liabilities
69.764
2. Portfolio
x
Total liabilities
6 9 .7 6 4
x
-
-
-
x
-
x
x
361.516
x
2.372
x
-
x
x
150.543
x
-
x
-
x
x
-
x
-
x
16.246
-
-
6 .3 7 6
-
7 .9 4 0
-
x
-
x
x
x
x
-
-
-
-
1. Expected transactions
x
x
x
x
x
2. Financial assets and
liabilities portfolio
x
x
x
x
x
-
6 .3 7 6
-
7 .9 4 0
Total
5 6 7 .5 0 7
Total
3112 2009
5.568
-
-
Micro-hedge
Macro-hedge
multiple
risks
price risk
credit risk
exchange
risk
Transaction/Type of hedge
interest
rate risk
Micro-hedge
Foreign
investments
Cash flow hedge
Macro-hedge
Fair Value
16.246
x
-
x
-
16 .2 4 6
x
-
-
-
5 2 8 .3 0 5
x
x
403.249
x
-
x
3 3 3 .4 8 5
-
-
x
x
-
-
-
-
x
3 3 3 .4 8 5
-
-
This item was left blank since no macro-hedges have been established on financial liabilities.
Section 8 – Tax liabilities – Item 80
See Section 14 of Assets.
Section 9 – Liabilities associated with individual assets held for sale – Item 90
231
4 0 3 .2 4 9
Section 7 – Changes in value of macro-hedged financial liabilities – Item 70
See Section 15 of Assets.
-
-
-
16 .2 4 6
-
333.485
x
-
x
9 3 1.5 5 4
Notes to the consolidated financial statements - Part B – Consolidated Balance Sheet
Section 10 – Other liabilities – Item 100
10.1 Other liabilities: breakdown
(in tho usands o f EUR)
Total
Total
31 12 2010
31 12 2009
Due to the Revenue and other tax levying authorities
238.294
Due to social security authorities
197.767
Amounts available to customers
321.341
Liabilities related to share-based payments
299.735
266.290
281.787
951
18.407
Other amounts due to employees
48.691
57.441
Items in transit between branches
96.259
143.726
Items undergoing processing
1.904.214
1.637.908
Payables in relation to the payment of supplies of goods and services
616.714
454.936
Irrevocable commitments to disburse funds
54.175
55.052
Accrued expenses and unearned revenues not attributable to a separate account
343.915
504.606
Other
2.037.210
3.062.349
Total
5.859.531
6.782.237
The sub-accounts ―Items in processing‖ and ―Other‖ include transactions which were completed in early 2010.
Section 11 – Provision for employee severance pay – Item 110
11.1 Provision for employee severance pay: annual changes
(in tho usands o f EUR)
A. Opening balance
Total
Total
31 12 2010
31 12 2009
304.497
539.823
8.970
17.016
B.1 Provision for the year
6.895
15.900
B.2 Other increases
2.075
1.116
25.569
252.342
18.722
249.679
6.847
2.663
B. Increases
C. Decreases
C.1 Severance payments
C.2 Other decreases
IFRS5 "Discontinuing operations"
(422)
D. Closing balance
287.476
304.497
While staff severance pay is considered as a defined benefit fund for the purpose of international accounting standards, any changes in relation to
actuarial valuations are detailed under Section 12.3 of the liabilities side, in addition to the changes in relation to the Group‘s defined benefit
pension funds.
The provision for the year, as clarified by the Bank of Italy, does not include amounts which, as a result of the reform introduced by Legislative
Decree No 252 of 5 December 2005, are paid directly by the Group, depending on the various employee options, to complementary pension
schemes or to the treasury fund managed directly by the INPS. These items are recognised in personnel expenses, ―contributions to external
pension funds: defined contribution".
Line C.2 "Other decreases" includes EUR 5 mln in severance payments arising from disposal of banking business consisting in 22 branches sold to
the Carige Group and 50 branches to Cassa di Risparmio di Firenze.
232
Notes to the consolidated financial statements - Part B – Consolidated balance sheet
Section 12 – Provisions for risks and charges – Item 120
12.1 Provisions for risks and charges: breakdown
(in tho usands o f EUR)
Item/Amount
Total
Total
31 12 2010
31 12 2009
1. Pensions and other post retirement benefit obligations
435.919
458.133
2. Other provisions for risks and charges
882.443
911.081
346.786
333.801
35.614
27.265
500.043
550.015
1.318.362
1.369.214
2.1 legal disputes
2.2 personnel expenses
2.3 other
Total
12.2 Provisions for risks and charges: annual changes
(in tho usands o f EUR)
Total 31/12/2010
Item/Amount
Pensions
Pensions
and other
and other
post
Other
retirement provisions
A. Opening balance
Business combinations
B. Increases
B.1 Provision for the year
B.2 Changes due to the time value of money
B.3 Changes due to discount rate changes
B.4 Other increases
C. Decreases
C.1 Use during the year
C.2 Changes due to discount rate changes
C.3 Other decreases
IFRS5 "Discontinuing operations"
D. Closing balance
Total 31/12/2009
post
Total
Other
retirement provisions
benefit
benefit
obligations
obligations
458.133
911.081
1.369.214
-
-
-
44.147
97.558
141.705
19.244
77.940
7.490
-
-
1.352.022
-
124.807
97.184
19.234
102.991
122.225
9.262
16.752
8.000
17.419
25.419
6.659
6.659
-
3.841
3.841
17.413
3.697
21.110
124.696
191.057
64.562
92.365
1.389
410
435.919
-
922.202
66.817
66.361
-
429.820
Total
556
40.139
38.504
135.928
174.432
156.927
37.717
110.626
148.343
725
2.114
787
-
787
31.606
32.016
-
25.302
25.302
(1.500)
(1.500)
-
-
-
458.133
911.081
1.369.214
882.443
1.318.362
39.583
191.624
Under increases, in Item B2, ―Changes due to the time value of money‖, the ―Other provisions‖ column shows the amount of ―time value‖
accrued during the year due to the expected imminent maturity of the estimated liability (€ 9.3 mln).
Under decreases, in Item C.1, ―Use during the year‖, the ―Other provisions‖ column shows the direct use of provisions for risks and charges (EUR
92.4 mln) for agreements and settlements made during the period. Use during the year mainly covers outflows for legal disputes and claw-back
actions.
Item C.3, ―Other decreases‖, in the ―Other provisions‖ column, includes write-backs due to surplus provisions in relation to charges actually
incurred.
Again with reference to the ―Other provisions‖ column, the net provision for the year recorded in Item 190 of the profit and loss statement
corresponds to the combined totals for B1, B2, B3, C2 and C3, shown in the table, net of amounts posted to item 310 "Gains (losses) after tax
from groups of assets held for sale". Item C1 does not affect the provision for the year since it consists in direct use of the fund for amounts paid.
233
Notes to the consolidated financial statements - Part B – Consolidated Balance Sheet
12.3 Defined benefit pension and other post retirement plans
12.3.1 Introduction to the funds
The sections below report the disclosure required by IAS 19 for defined benefit plans, in which the Group
substantially assumes the actuarial and investment risks, including those relating to staff severance pay provisions.
For complementary defined benefit pension funds, the actuarial values required by IAS 19, ―Employee Benefits‖, are
determined by an independent actuary using the Projected Unit Credit Method as described in detail in ―Part A –
Accounting Policies‖ of the notes to the financial statements.
The defined benefit funds in which the Group has a joint and several obligation are either internal funds or external
complementary pension funds.
Internal funds
-
Complementary pension provision for staff in the former tax collection division of Banca Monte dei Paschi di
Siena S.p.A. This is a complementary pension fund designed to provide staff in retirement with
complementary pension in the form of a defined benefit (annuity). Banca Monte dei Paschi S.p.A.
contributes to the fund for staff who are members of the defined benefit plan.
-
National insurance (INPS) for ex-Banca Operaia di Bologna staff. The fund is intended to supplement and
replace benefits paid out under compulsory pension schemes for ex-employees – active and retired – of
former Banca Operaia di Bologna. The fund regulations allow INPS benefits to be supplemented based on a
percentage of the final salary, calculated using specific rates for each grade.
-
Pension provision for employees of former Banca di Credito Popolare e Cooperativo di Reggio Emilia. The
sole aim of the fund is to supplement compulsory schemes in order to guarantee higher levels of insurance
coverage for ex-employees of former Banca di Credito Popolare and Cooperativo di Reggio Emilia, as the
direct beneficiaries of a life annuity or as the surviving spouse of a former employee.
-
Pension provision for employees of former Banca Popolare Veneta. The fund is intended to supplement
INPS pensions for employees already in retirement as of 7 December 1989 and their beneficiaries, in
accordance with the legislation and agreements of 4 February 1956 and 1 January 1982 (for management
personnel). The fund, to which only the parent company contributes, provides comprehensive coverage for
retired personnel indexed to the ―current‖ salary of an employee of the same grade.
-
Pension provision for eployees of former Banca Nazionale Agricoltura. This is an accumulation fund
designed to supplement the INPS pension for employees already in retirement as of 1 October 2000, the
date on which BNA merged with Antonveneta, or who will retire after that time, not having exercised their
right, under the agreements of 12 September 2000, to transfer their contributions to Banca Antonveneta's
corporate pension scheme.
-
Complementary pension provision for employees of former Banca Toscana. This is a complementary or
additional defined benefit pension fund reserved for personnel already in retirement as of 01/01/1999 and
for active employees hired before 27/04/1993 who have expressed an interest in remaining with this plan.
The Parent company‘s contribution is determined based on the mathematical reserve calculated by an
independent actuary at the end of each financial year.
-
Complementary pension provision for employees of former Mediocredito Toscano and former Istituto
Nazionale di Credito Agrario (now included in MPS Capital Services Banca per le Imprese S.p.a.). This is a
complementary or additional defined-benefit pension fund reserved for personnel in retirement as of
01/01/1999 and for active employees hired before 27/04/1993 who have expressed an interest in
remaining with this plan. The company‘s contribution is determined based on the mathematical reserve
calculated by an independent actuary at the end of each financial year.
-
Supplementary pension scheme for personnel of former MPS Capital Services Banca per l‘imprese S.p.A.
This is a defined-benefit pension fund having separate assets but not an independent legal status.
-
Supplementary pension scheme for personnel of former Cassa di risparmio di Biella e Vercelli S.p.A. The
pension fund was set up for commitments made towards retired employees who are entitled to periodic
benefits as part of a complementary pension scheme as the direct beneficiaries of a life annuity or as the
surviving spouse of a former employee. The fund is fully funded by the parent company and is invested
together with the company‘s assets.
234
Notes to the consolidated financial statements - Part B – Consolidated balance sheet
Based on the mathematical reserve calculated by an independent actuary, the value of the afore-mentioned funds
was proved adequate for ensuring payments to fund members.
External funds
-
―Cassa di Previdenza Aziendale per il Personale del Monte dei Paschi di Siena‖ (the company pension
scheme for employees of Monte dei Paschi di Siena), an independent legal entity with separate assets and
asset management. The fund, reserved for current and retired employees of the Parent Bank hired prior to
31/12/1990, is divided into two separate and independent plans: a defined contribution and a defined
benefit plan. Information about the defined benefit plan can be found in the tables below.
-
Pension Fund for personnel of former Banca Agricola Mantovana S.p.A. -Defined-benefit complementary
pension fund. The sole aim of the fund is to supplement compulsory schemes in order to guarantee higher
levels of insurance coverage to fund members. The fund value is consistent with the mathematical reserve
calculated by the independent actuary, necessary to cover the present value of future obligations towards
pensioners who have remained with the defined benefit scheme.
The internal fund statements can be found in the annexes to the financial statements, as required by the Bank of
Italy.
235
Notes to the consolidated financial statements - Part B – Consolidated Balance Sheet
12.3.2 Changes in pension funds and employee severance pay provisions during the year
(in thousands of EUR)
Total 31 12 2010
Defined-benefit
Items/Amounts
Opening balance
Increases
Business combinations
Current service cost
Financial charges
Participants' contributions to plan
Actuarial losses
Negative exchange differences
Past service cost
Other increases
Decreases
company pension
funds
Internal
External
pension
pension
plan
plan
207.860
9.073
444.611
23.564
-
-
Total 31 12 2009
Defined-benefit
Provision
Provision for company pension funds
for
staff
staff
Internal
External
severance
severance
pension
pension
pay
pay
plan
plan
347.184
226.533
444.478
553.930
27.183
12.509
35.559
47.567
-
-
-
-
214
2.426
1.320
231
2.568
2.147
7.490
18.973
5.552
8.000
19.550
13.743
-
-
-
3.985
13.441
19.149
-
-
1.274
15.875
-
-
-
-
-
-
55
-
-
256
-
-
4.436
37
-
12.528
40
2.165
21.628
39.451
26.694
31.182
35.426
254.313
19.632
35.206
19.957
20.549
35.426
226.983
-
-
-
-
-
-
1.996
4.245
-
1.653
-
-
Positive exchange differences
-
-
-
-
-
-
Effect of any plan curtailments
-
-
-
-
-
-
Effect of any plan settlements
-
-
-
-
-
-
Other decreases
-
-
6.737
8.980
-
27.330
IFRS5 "Discontinuing operations"
-
-
(422)
-
-
-
428.724
347.251
207.860
444.611
347.184
Benefits paid
Past service cost
Actuarial gains
Closing balance
195.305
The table shows the movements for the year with reference to internal funds, external funds and staff severance pay provisions which, according
to international accounting standards, come under the heading of defined contribution funds. The closing balance represents the theoretical gross
liabilities in relation to the fund, taking account of actuarial profits and losses which have not been accounted for due to the application of the
―corridor‖ method.
236
Notes to the consolidated financial statements - Part B – Consolidated balance sheet
12.3.2a Defined-benefit obligations: breakdown
(in tho usands o f EUR)
31 12 2010
Items/Amounts
Internal
External
Provision for
pension plans
pension plans
staff severance
69.198
-
pay
347.251
126.107
428.724
-
195.305
428.724
347.251
a) Unfunded plans
b) Funded plans
Total
(in tho usands o f EUR)
31 12 2009
Items/Amounts
External
Provision for
pension plans
pension plans
staff severance
74.272
-
pay
347.184
133.588
444.611
-
207.860
444.611
347.184
Internal
a) Unfunded plans
b) Funded plans
Total
The table highlights the distinction made by defined benefit plans between funded and unfunded plans.
Plans are funded when separate assets exist to cover liabilities.
12.3.3 Changes to plan assets during the year and other information
(in tho usands o f EUR)
Items/Amounts
31 12 2010
31 12 2009
Defined-benefit company pension
funds
Defined-benefit company pension
funds
Internal pension
plans
External pension
plans
Internal pension
plans
External pension
plans
142.567
457.373
-
452.183
7.433
21.448
155.973
54.057
Expected return of plan-servicing assets
6.203
20.124
6.690
Actuarial gains
1.498
Opening balance
Increases
19.846
-
1.230
1.110
Positive exchange differences
-
-
Group contributions to plan
-
214
Participants' contributions to plan
-
-
Other decreases
-
-
13.978
35.206
13.406
1.031
-
-
-
-
-
12.947
35.206
Effect of any plan settlements
-
-
-
-
Other decreases
-
-
-
-
136.022
443.615
142.567
457.373
Decreases
Actuarial losses
Negative exchange differences
Benefits paid
Closing balance
-
-
143
268
-
-
147.642
13.406
33.943
48.867
13.441
35.426
The table illustrates the total assets servicing funded defined benefit plans and movements during the year. These mainly consist of assets relating
to the pension fund for employees of former Banca Agricola Mantovana S.p.A., the pension fund for employees of former Banca Toscana S.p.A.,
the pension fund for employees of former Banca Antonveneta and the company pension scheme for employees of Monte dei Paschi di Siena
(defined benefit plan), which on the whole are surplus in relation to obligations at year-end.
237
Notes to the consolidated financial statements - Part B – Consolidated Balance Sheet
12.3.3.a Fair value of plan assets: breakdown
(in tho usands o f EUR)
31 12 2010
Items/Amounts
Equity instruments
of which: own instruments
Debt instruments
of which: own instruments
Property
of which: immovables used by
the Group
Insurance management
accounts
of which: own instruments
Other assets
of which: other assets used by
the Group
Total
of which:
own instruments/assets used
by the Group
31 12 2009
Internal pension
External pension
Internal pension
External pension
plans
plans
plans
plans
Own
financial
instruments
/Assets used
by the
Group
Overall
Own
financial
instruments
/Assets used
by the
Group
Overall
Own
financial
instruments
/Assets used
by the
Group
Overall
Own
financial
instruments
/Assets used
by the
Group
Overall
-
-
-
1.509
-
-
-
4.887
-
-
1.324
-
-
-
4.703
-
-
39.500
-
-
39.564
-
-
-
16.198
-
-
-
13.454
-
-
-
-
72.741
-
-
-
77.906
-
-
-
-
-
-
-
-
-
-
-
724
-
-
-
-
-
-
-
-
-
-
-
-
-
96.522
-
89.925
-
96.522
-
6.154
-
96.522
136.022
-
278.716
-
443.615
23.676
-
103.003
103.003
103.003
142.567
-
22.536
40.693
237.878
136.702
457.373
-
This table provides a detailed illustration of plan assets at year-end, and thus of the assets of the funds indicated in Table 12.3.3, by major asset
classes (financial and non-financial). Other assets mainly consist of investments in mutual funds and open-end collective investment schemes
(Sicavs).
238
Notes to the consolidated financial statements - Part B – Consolidated balance sheet
12.3.4 Reconciliation of present value of staff pension and severance pay provisions to present
value of plan assets and to assets and liabilities recognised in the balance sheet
(in tho usands o f EUR)
Total 31 12 2010
Defined-benefit pension and
Items/Amounts
Provision for
other post retirement plans
Present value of defined-benefit obligations (+)
External
pension plans
pension plans
428.724
(136.022)
Fund status
pay
Internal
195.305
Fair value of plan assets (-)
staff severance
347.251
(443.615)
59.283 -
14.891,00
347.251
Unrecognised cumulative actuarial gains/losses (+/-)
-
-
(59.775)
Unrecognised past service cost (-)
-
-
-
9.915
14.891
-
Effect of asset ceiling
Fair value of assets refundable by third parties (-)
(136.022)
-
Assets recognised in the Balance Sheet
205.220
-
Liabilities recognised in the Balance Sheet
136.022
-
287.476
-
This table enables a reconciliation between the present value of the funds, as per the independent actuary‘s estimate, and the present value of
liabilities recognised in the financial statements. As a result of the application of the ―corridor‖ method, actuarial gains and losses are posted to
the balance sheet only when they exceed the higher of 10% of the present value of the defined benefit obligation and 10% of the fair value of
any assets servicing the plan.
With reference to internal and external pension funds, actuarial gains and losses are recognised immediately, as these funds are almost exclusively
intended for retired staff, with an insignificant number of active employees.
For internal plans in particular, the line ―Fair value of plan assets‖ shows assets relating to the pension fund for employees of former Banca
Agricola Mantovana S.p.A. and the fund for employees of former Banca Toscana S.p.A..
(in tho usands o f EUR)
Total 31 12 2009
Defined-benefit pension and
Items/Amounts
Provision for
other post retirement plans
Present value of defined-benefit obligations (+)
Fair value of plan assets (-)
Fund status
Unrecognised cumulative actuarial gains/losses (+/-)
staff severance
pay
Internal
External
pension plans
pension plans
207.860
444.611
(142.567)
(457.373)
-
65.293
(12.762)
347.184
347.184
8.979
-
(42.687)
Unrecognised past service cost (-)
-
-
-
Effect of asset ceiling
-
12.762
-
Fair value of assets refundable by third parties (-)
(142.567)
-
-
Assets recognised in the Balance Sheet
216.839
-
304.497
Liabilities recognised in the Balance Sheet
142.567
-
-
239
Notes to the consolidated financial statements - Part B – Consolidated Balance Sheet
12.3.5 Main actuarial assumptions used
Total 31 12 2010
Defined-benefit pension
Main actuarial assumptions
and other post
/ Discount rates
retirement plans
Discount rates
Expected return on plan-servicing assets
Expected remuneration increase rate
Internal
External
pension
pension
plans
4,40-4,50%
4,40%
1,80-2,00%
plans
4,40%
Total 31 12 2009
Provision
for staff
severance
pay
2,31-3,83%
4,40%
2,60%
x
Defined-benefit pension
and other post
retirement plans
Provision
for staff
severance
Internal
External
pension
pension
plans
4,40%
plans
4,40%
3,43 - 4,20%
4,40%
4,40%
x
1,00%
2,50%
pay
12.4 - Provisions for risks and charges - Other provisions
No other funds are present.
Section 13 – Insurance reserves – Item 130
The tables in this section have not been completed as no data is present for the current year or for the previous year.
Section 14 – Redeemable shares – Item 150
The tables in this section have not been completed as no data is present for the current year or for the previous year.
240
Notes to the consolidated financial statements - Part B – Consolidated balance sheet
Section 15 – Group shareholders’ equity – Items 140, 160, 170, 180, 190, 200 and 220
15.1 “Share capital” and “Treasury shares”: breakdown
15.1.a “Share capital”: breakdown
(in tho usands o f EUR)
31 12 2010
Items/Amounts
Par value of
fully paid
shares
Par value
per share
31 12 2009
Par value of not
fully paid shares
Paid
Par value
per share
Not Paid
Par value of not
fully paid shares
Par value of
fully paid
shares
Paid
Not Paid
Ordinary shares
0,67
3.731.411.812
-
-
0,67
3.731.411.812
-
-
Preferred shares
0,67
758.359.237
-
-
0,67
758.359.237
-
-
Savings shares
0,67
12.639.108
-
-
0,67
12.639.108
-
-
4.502.410.157
-
-
4.502.410.157
-
-
Total share capital
Ordinary and preferred shares are registered and indivisible. Each share entitles to one vote. Preferred shares do not allow holders to vote at
ordinary meetings. Savings shares are indivisible and may be registered or bearer shares, according to the shareholder‘s preference. Savings
shares have no voting rights, and are preferred shares in relation to profit distribution and capital repayment.
Information on the number of fully paid-up shares can be found in the notes to Table 15.2, ―Share capital – number of shares: annual changes".
15.1.b Treasury shares: breakdown
(in tho usands o f EUR)
31 12 2010
Items/Amounts
Par Value
31 12 2009
Book Balance
Valore
nominale
Saldo contabile
Ordinary shares
14.624
(24.613)
16.097
Preferred shares
-
-
-
-
Savings shares
-
-
-
-
Total share capital
14.624
(24.613)
16.097
(32.079)
(32.079)
Under international accounting standards, any repurchase of treasury shares is treated as capital repayment. For this reason, the consideration
paid for share repurchase is ideally deducted directly from equity.
241
Notes to the consolidated financial statements - Part B – Consolidated Balance Sheet
15.2 Share capital - Parent company's number of shares: annual changes
31 12 2010
Item/Type
Ordinary
A.
Shares outstanding as at the
beginning of the year
- fully paid
- not fully paid
A.1
Treasury shares (-)
A.2
Shares outstanding: opening
balance
31 12 2009
P referred
Savings
Ordinary
P referred
Savings
5.569.271.362
1.131.879.458
18.864.340
5.545.952.280
1.131.879.458
18.864.340
5.569.271.362
1.131.879.458
18.864.340
5.545.952.280
1.131.879.458
18.864.340
-
-
-
-
-
-
24.131.264
-
-
24.476.588
-
-
5 .5 4 5 .14 0 .0 9 8
1.13 1.8 7 9 .4 5 8
18 .8 6 4 .3 4 0
5 .5 2 1.4 7 5 .6 9 2
1.13 1.8 7 9 .4 5 8
18 .8 6 4 .3 4 0
33.015.934
-
-
101.886.919
-
-
B.
Increases
B.1
New issues
-
-
-
23.319.082
-
-
- against payment:
-
-
-
23.319.082
-
-
- business combinations
-
-
-
-
-
-
- bonds converted
-
-
-
23.319.082
-
-
- warrants exercised
-
-
-
-
-
-
- other
-
-
-
-
-
-
- without payment:
-
-
-
-
-
-
- to employees
-
-
-
-
-
-
- to directors
-
-
-
-
-
-
- other
-
-
-
-
-
-
33.015.934
-
-
78.567.837
-
-
-
-
-
-
-
-
3 0 .7 9 6 .14 4
-
-
7 8 .2 2 2 .5 13
-
-
-
-
-
-
-
-
30.796.144
-
-
78.222.513
-
-
-
-
-
-
-
-
-
-
-
-
-
-
5 .5 4 7 .3 5 9 .8 8 8
1.13 1.8 7 9 .4 5 8
18 .8 6 4 .3 4 0
5 .5 4 5 .14 0 .0 9 8
1.13 1.8 7 9 .4 5 8
18 .8 6 4 .3 4 0
21.911.474
-
-
24.131.264
-
-
5.569.271.362
1.131.879.458
18.864.340
5.569.271.362
1.131.879.458
18.864.340
5.569.271.362
1.131.879.458
18.864.340
5.569.271.362
1.131.879.458
18.864.340
-
-
-
-
-
-
B.2
Sale of treasury shares
B.3
Other increases
C.
Decreases
C.1
Cancellation
C.2
Purchase of treasury shares
C.3
Business transferred
C.4 Other decreases
D.
Shares outstanding: closing
balance
D.1
Treasury shares (+)
D.2 Shares outstanding as at the end of
the year
- fully paid
- not fully paid
The Parent Bank‘s share capital consists of 5,569,271,362 ordinary shares with a par value of EUR 0.67 each, 1,131,879,458 preferred shares
with a par value of EUR 0.67 each and 18,864,340 savings shares with a par value of EUR 0.67 each.
Pursuant to Article 2357 of the Italian Civil Code, the Ordinary Shareholders‘ meeting of 27 April 2010 renewed the authorisation to purchase
treasury shares subject to a maximum amount of EUR 70 mln.
242
Notes to the consolidated financial statements - Part B – Consolidated balance sheet
15.3 Share capital - other information
Of the 295,236,070 ordinary shares representing a total nominal value of € 197,808,166.90, a restriction exists on
the payout of dividends since the Parent Bank has acquired usufruct in these shares.
15.3.a Equity instruments: breakdown and annual changes
(in tho usands o f EUR)
Total 31 12 2010
Total 31 12 2009
Equity
Equity
component
component
Other equity
of
instruments
convertible
instruments
convertible
bonds
A. Opening balance
Other equity
of
bonds
49.365
1.900.000
46.871
-
B. Increases
-
-
8.928
1.900.000
B.1 New issues
-
-
-
1.900.000
B.2 Sales
-
-
-
-
B.3 Other increases
-
-
8.928
-
C. Decreases
-
-
6.434
-
C.1 Redemptions
-
-
-
-
C.2 Repurchases
-
-
-
-
C.3 Other decreases
-
-
6.434
-
D. Closing balance
49.365
1.900.000
49.365
1.900.000
The Item ―Equity instruments‖ includes, in the ―Equity component of convertible bonds‖ column, the equity component of bonds issued and
convertible into treasury shares. This mainly concerns the value determined upon issue of the Convertible Preferred Securities in relation to the
embedded option which, according to IAS 32, must be separated from the bond instrument since it is considered as an equity instrument.
The column "Other equity instruments" includes EUR 1,900 mln worth of Tremonti bonds issued in 2009. these instruments are aimed at
improving the Bank's supervisory capital and sustaining economic growth with a special focus on small-medium sized companies..
15.4 Retained earnings: other information
See Section F, ―Information on consolidated equity‖ of these notes to the financial statements.
15.5. Other information
See Section F, ―Information on consolidated equity‖ of these notes to the financial statements.
243
Notes to the consolidated financial statements - Part B – Consolidated Balance Sheet
Section 16 – Minority interests - Item 210
16.1 Minority interests: breakdown
(in tho usands o f EUR)
Items/Amounts
Total
Total
31 12 2010
31 12 2009
1) Share capital
50.804
51.364
2) Share premium reserve
13.406
343
3) Reserves
76.023
86.747
-
-
5) Valuation reserves
127.910
138.308
6) Equity instruments
-
-
1.485
4.500
269.628
281.262
4) (Treasury shares)
7) Profit (loss) for the year - Minority interests
Total
Minority interests came to EUR 11.7 mln less than in 2009 due to payout of dividend on 2009 profit and as a result of the demerger of
consortium company 'Consorzio Perimetro Gestione Proprietà Immobiliari'.
244
Notes to the consolidated financial statements - Part B – Consolidated balance sheet
Other information
1 Guarantees given and commitments
(in tho usands o f EUR)
Transactions
1)
Financial guarantees given to
31 12 2010
31 12 2009
4.495.166
807.440
651.347
3.558.825
3.843.819
6.081.830
5.815.860
299.814
308.883
5.782.016
5.506.977
9.934.010
10.488.756
252.750
1.075.962
225.666
966.055
27.084
109.907
9.681.260
9.412.794
i) usage certain
2.330.592
3.054.528
ii) usage uncertain
7.350.668
6.358.266
28.344.509
13.183.674
b) Customers
Commercial guarantees given to
a) Banks
b) Customers
3)
Amount
4.366.265
a) Banks
2)
Amount
Irrevocable commitments to disburse funds
a) Banks
i) usage certain
ii) usage uncertain
b) Customers
4)
Underlying commitments on credit derivatives:
sales of protection
5)
Assets pledged as collateral for third-party commitments
153.615
25.246
6)
Other commitments
626.663
525.453
49.506.892
34.534.155
Total
2 Assets used to guarantee own liabilities and commitments
(in tho usands o f EUR)
Portfolios
31 12 2010
1. Financial assets held for trading
2. Financial assets designated at fair value
3. Financial assets available for sale
4. Financial assets held to maturity
5. Loans and advances to banks
6. Loans and advances to customers
7. Tangible assets
31 12 2009
6.834.261
4.982.105
-
-
17.921.314
5.610.589
-
-
1.049.302
6.033.148
15.601.913
2.032.748
-
-
The table shows the assets pledged as a guarantee for own liabilities, primarily consisting in repurchase agreements.
245
Notes to the consolidated financial statements - Part B – Consolidated Balance Sheet
Pursuant to Bank of Italy's requirements set out in its communication of 16 February 2011, the following table reports assets that are not
recognised in the balance sheet according to IAS 39, which the Bank has pledged as a guarantee for its liabilities and commitments.
(in tho usands o f EUR)
Origin of securities
Type of collateralised funding
Reverse
Securities from
repurchase
in-house
agreements
securitisations
Securities
Total as at
borrowing
31 12 2010
Repurchase agreements
9.840.057
363.448
2.824.782
13.028.287
Eurosystem credit transactions
1.452.953
11.489.106
-
12.942.059
-
1.709.185
-
1.709.185
Collateralised Interbank Market transactions
Securities lending
178.958
-
1.150.372
1.329.330
Other collateralised funding transactions
288.478
110.382
-
398.860
11.760.446
13.672.121
3.975.154
29.407.721
Total
3 Operating leases
3.1 Future minimum operating lease payments
(in tho usands o f EUR)
Items/Amounts
31 12 2010
Up to 1 year
102.052
From 1 to 5 years
406.232
Over 5 years
1.773.625
2.281.909
Future minimum lease payments due
Non-cancellable future minimum lease payments receivable
28.994
4 Investments in unit-linked and index-linked policies: breakdown
There is no data in the current financial statements or in those for the previous period.
246
Notes to the consolidated financial statements - Part B – Consolidated balance sheet
5 Asset management and trading on behalf of third parties
(in tho usands o f EUR)
Type of services
1.
31 12 2009
22.431.994
14.564.806
1. Settled
22.221.694
14.465.884
210.300
98.922
b) Sales
22.429.681
14.438.629
1. Settled
22.219.381
14.339.707
210.300
98.922
a) individual
5.437.490
6.197.666
b) collective
1.166.661
1.130.784
22.791
451.217
Asset management accounts
Custody and administration of securities
a) third party securities on deposit associated with custodian bank transactions
(excluding asset management)
1. Securities issued by companies included in consolidation
-
2. Other securities
-
22.791
451.217
104.411.288
127.786.601
1. Securities issued by companies included in consolidation
35.109.868
41.003.142
2. Other securities
69.301.420
86.783.459
c) third party securities deposited with third parties
97.876.511
100.089.961
d) own securities deposited with third parties
78.780.565
45.417.877
14.773.278
15.497.630
56.984
66.531
12.812.909
13.333.615
155
25
b) Other third party securities on deposit (excluding asset management)
4.
31 12 2010
a) Purchases
2. Unsettled
3.
Amounts
Trading of financial instruments on behalf of third parties
2. Unsettled
2.
Amounts
Other transactions
4.1 Credit collection on behalf of third parties: debit and credit adjustments
a) Debit adjustments
1. current accounts
2. banking book
3. cash
4. other accounts
b) Credit adjustments
1. current accounts
2. transfer of bills and notes
1.903.230
2.097.459
14.923.910
15.696.100
181.400
238.846
14.742.510
15.457.254
2.017.740
2.062.751
586.033
416.718
4.2 Other transactions
a) Third party portfolios for collection
b) Other
247
Notes to the consolidated financial statements - Part B – Consolidated Balance Sheet
248
Notes to the consolidated financial statements -
Part C – Consolidated Income Statement
Section 1 – Interest income/expense and similar revenues/charges – items 10 and 20 ................................................ 250
Section 2 – Fee and commission income/expense – Items 40 and 50......................................................................... 254
Section 3 – Dividends and similar income – Item 70 ................................................................................................ 256
Section 4 – Net profit (loss) from trading – Item 80 ................................................................................................. 257
Section 5 – Net profit (loss) from hedging – Item 90 ................................................................................................ 258
Section 6 - Gains (losses) on disposals/repurchases – Item 100 .................................................................................. 259
Section 7 – Net profit (loss) on financial assets and liabilities designated at fair value – Item 110 ............................... 260
Section 8 – Net impairment losses/reversals – Item 130 ........................................................................................... 262
Section 9 – Net premiums – Item 150 ..................................................................................................................... 264
Section 10 – Other net insurance income/expense – Item 160 .................................................................................. 264
Section 11 – Administrative expenses – Item 180 .................................................................................................... 265
Section 12 – Net provisions for risks and charges – Item 190 .................................................................................... 268
Section 13 – Net value adjustments/write-backs on property, plant and equipment – Item 200 .................................. 269
Section 14 – Net value adjustments/write-backs on intangible assets – Item 210 ........................................................ 269
Section 15 – Other operating income / expenses – Item 220..................................................................................... 270
Section 16 – Gains (losses) on equity investments – Item 240 ................................................................................... 271
Section 17 – Net gains (losses) on tangible and intangible assets measured at fair value – Item 250 ........................... 273
Section 18 – Impairment of goodwill – Item 260 ..................................................................................................... 273
Section 19 – Gains (losses) on disposal of investments – Item 270 ............................................................................ 273
Section 20 – Tax expense (income) on profit (loss) from continuing operations – Item 290 ........................................ 274
Section 21 – Profit (loss) after tax from groups of assets held for sale – Item 310 ....................................................... 275
Section 22 – Profit (loss) for the year: minority interests – Item 330.......................................................................... 276
Section 23 – Other................................................................................................................................................. 276
Section 24 – Earnings per Share (EPS) ..................................................................................................................... 276
249
Notes to the consolidated financial statements - Part C – Consolidated income statement
Section 1 – Interest income/expense and similar revenues/charges – items 10 and 20
1.1 Interest income and similar revenues: breakdown
(in tho usand o f EUR
Debt
Item/Type
Loans
securities
1. Financial assets held for trading
Other
Total
Total
transactions
31 12 2010
31 12 2009
276.211
66.679
398.044
740.934
522.383
-
-
26.398
26.398
-
534.159
-
-
534.159
253.980
-
-
-
-
-
55.167
65.613
1.138
121.918
206.942
6. Loans and advances to customers
128.146
4.882.806
24.042
5.034.994
6.094.022
7. Hedging derivatives
x
x
-
-
-
8. Other assets
x
x
13.271
13.271
20.204
462.893
6.471.674
7.097.531
2. Financial assets designate at fair value
3. Financial assets available for sale
4. Financial assets held to maturity
5. Loans and advances to banks
Total
993.683
5.015.098
Line ―1. Held-for-trading financial assets‖, in the ―Other transactions‖ column, includes the positive net total of spreads relating to derivatives
connected with financial liabilities designated at fair value (fair value option), equivalent to € 398 mln.
Lines 5 and 6, ―Loans and advances to banks‖ and ―Loans and advances to customers‖, in the ―Debt securities‖ column, include interest income
on own securities not listed in active markets and classified in these portfolios.
In line ―7. Hedging derivatives‖, ―Other transactions‖ column, the amount indicated is zero because the difference between positive and negative
spreads concerning derivatives classified as hedging derivatives according to hedge accounting rules is negative. Therefore, this difference was
accounted for in Table 1.4, ―Interest expense and similar charges: breakdown‖, with details given in Table 1.5, ―Interest expense and similar
charges‖: spreads on hedging transactions‖ on page 253 of this section.
Liine ―8. ―Other assets‖, in the ―Other transactions‖ column, shows interest accrued on tax credits and other residual assets.
Interest other than that recognised in item 130 ―Write-backs‖ and accrued during the year for positions that are classified as ―impaired‖ totalled €
406.9 mln. This interest is calculated for financial assets measured at amortised cost according to the effective interest rate method and is entered
in different columns based on their original 'technical form'. Interest on arrears accrued during the year is posted under interest income only with
respect to the portion actually recovered. The portion of interest on arrears not recovered is written down and deducted directly from interest
accrued. Any amounts recovered in subsequent years are treated as a write-back on receivables and recognised in Item 130 of the profit and loss
statement, ―Net value adjustments due to impairment of loans‖.
250
Notes to the consolidated financial statements - Part C – Consolidated Income Statement
1.1.a Interest income and similar revenues: spreads on hedging derivatives associated with use
of fair value option
(in tho usands o f EUR)
Items
Total
Total
31 12 2010
31 12 2009
Spreads
398.044
281.024
1.2 Interest income and similar revenues: spreads on hedging transactions
Information on spreads relating to hedging transactions is illustrated in Table 1.5.
1.3 Interest income and similar revenues: other information
1.3.1 Interest income from financial assets denominated in foreign currency
(in tho usands o f EUR)
Items/Amounts
Interest income from financial assets denominated in foreign currency
Total
Total
31 12 2010
31 12 2009
80.320
109.994
1.3.2 Interest income from finance leases
(in tho usands o f EUR)
Items/Amounts
Interest income from financial leasing transactions
Total
Total
31 12 2010
31 12 2009
140.952
251
143.429
Notes to the consolidated financial statements - Part C – Consolidated income statement
1.4 Interest expense and similar charges: breakdown
(in tho usands o f EUR)
Item/Type
1. Deposits from central banks
Deposits
Securities
(90.256)
x
2. Deposits from banks
(220.489)
x
3. Customer accounts
(390.380)
x
4. Securities in issue
x
5. Financial liabilities held for trading
(73.995)
6. Financial liabilities designated at fair value
Total
Total
transactions
31 12 2010
31 12 2009
-
(90.256)
(94.448)
(225.843)
(400.471)
(390.380)
(542.792)
(322)
(1.175.537)
(1.605.291)
(9.719)
(83.714)
(67.740)
(683.909)
(565.238)
(5.354)
-
(1.175.215)
-
-
Other
(683.909)
-
7. Other liabilities
x
x
(10.369)
(10.369)
(7.085)
8. Hedging derivatives
x
x
(270.973)
(270.973)
(139.682)
(296.737)
(2.930.981)
(3.422.747)
Total
(775.120)
(1.859.124)
Lines 2, ―Deposits from banks‖ and 3, ―Deposits from customers‖, in the ―Deposits‖ column, also include:
interest on liabilities for repurchase transactions realised on securities recognized as financial assets:
the expense relating to liabilities arising from the assignment of tax credits not derecognised in accordance with IAS 39 on
derecognition of financial assets;
the expense relating to liabilities arising from repurchase transactions carried out on securities obtained through reverse repurchase
transactions.
Line 4, ―Securities in issue‖, indicates the interest expense accrued during the year on bonds and certificates of deposit valued at amortised cost.
Line 5, ―Held-for-trading financial liabilities‖, in the ―Other transactions‖ column, includes the negative net balance of EUR 9.5 mln, relating to:
1)
positive and negative spreads and margins on derivative contracts associated with interest-bearing financial assets and liabilities,
classified in the trading book;
2)
margins between the forward exchange rate established in the outright contracts and the spot exchange rate current on execution of
the contracts.
In case 1) this mainly consists of interest-rate swaps linked to fixed-rate debt securities classified in the trading portfolio, and in case 2) of outright
and forex swaps. Total spreads relating to hedging contracts on financial liabilities designated at fair value (fair value option), negative in the
current year, have been posted to interest expense.
In line 6. ―Financial liabilities designated at fair value‖, includes interest expense accrued on structured fixed-rate bonds issued and systematically
hedged by derivative contracts.
1.4.a Interest expense and similar charges: spreads on hedging derivatives associated with use
of fair value option
Information on spreads on hedging derivatives associated with use of the fair value option is provided
in table 1.1.a.
252
Notes to the consolidated financial statements - Part C – Consolidated Income Statement
1.5 Interest expense and similar charges: spreads on hedging transactions
(in tho usands o f EUR)
Items
Total
31 12 2010
A. Positive spreads on hedging transactions
Total
31 12 2009
824.079
564.075
B. Negative spreads on hedging transactions
(1.095.052)
(703.757)
C. Balance (A+B)
(270.973)
(139.682)
Total net spreads at 31/12/2010 were EUR -271 mln, compared with € 139.7 mln in 2009.
In line with its hedging objectives and consequent minimisation of risks in the banking book, the Group establishes both fair value hedges and
cash flow hedges.
1.6 Interest expense and similar charges: other information
1.6.1 Interest expense on liabilities denominated in foreign currency
(in tho usands o f EUR)
Item/Amount
Interest expense on financial liabilities denominated in foreign currency
Total
Total
31 12 2010
31 12 2009
105.640
139.947
1.6.2 Interest expense on liabilities from finance leases
This table has not been completed since no data is present either for the current year or for the previous year.
253
Notes to the consolidated financial statements - Part C – Consolidated income statement
Section 2 – Fee and commission income/expense – Items 40 and 50
2.1 Fee and commission income: breakdown
(in tho usands o f EUR)
Type of service / Amount
a) guarantees issued
Total
Total
31 12 2010
31 12 2009
77.287
65.437
-
-
854.712
720.397
1. trading of financial instruments
10.994
10.977
2. currency trading
44.321
40.285
3. asset management
51.327
50.416
51.327
50.416
-
-
12.443
17.433
1.953
3.892
123.579
24.273
7. client instructions
56.372
62.273
8. advisory on
11.662
7.090
1.229
1.781
10.433
5.309
542.061
503.758
2.831
-
2.831
-
-
-
9.2 insurance products
179.521
169.913
9.3 other products
359.709
333.845
186.007
188.131
6.239
26.924
19.428
17.660
g) tax collection services
-
-
h) management of multilateral trade systems
-
-
724.831
675.221
b) credit derivatives
c) management, brokerage and advisory services:
3.1 individual accounts
3.2. collective investment schemes
4. custody and administration of securities
5. custodian bank
6. placement of securities
8.1 investments
8.2 financial structure
9. distribution of third-party services
9.1. asset management
9.1.1 individual accounts
9.1.2 collective investment schemes
d) collection and payment services
e) servicing of securitisations
f) factoring transaction services
i) current account keeping
j) other services
Total
301.366
240.977
2.169.870
1.934.747
Line i), ―current-account keeping‖, contains the 'fee on the credit line granted' introduced pursuant to Article 2 bis of Legislative Decree
29.11.2008 no. 185 transposed, as amended, into law no. 2 of 28.01.2009.
254
Notes to the consolidated financial statements - Part C – Consolidated Income Statement
2.2 Fee and commission expense: breakdown
(in tho usands o f EUR)
Type of service / Amount
a) guarantees received
Total
Total
31 12 2010
31 12 2009
(734)
b) credit derivatives
-
c) management, brokerage and advisory services:
(1.054)
-
(80.896)
(76.000)
(19.528)
(20.400)
(324)
(267)
(1.689)
(1.792)
(2)
(8)
(1.687)
(1.784)
4. custody and administration of securities
(9.646)
(11.442)
5. placement of financial instruments
(2.252)
(2.257)
(47.457)
(39.842)
(22.269)
(23.464)
1. trading of financial instruments
2. currency trading
3. asset management:
3.1 own portfolio
3.2 third-party portfolios
6. off-site marketing of financial instruments, products and services
d) collection and payment services
e) other services
Total
255
(136.831)
(138.965)
(240.730)
(239.483)
Notes to the consolidated financial statements - Part C – Consolidated income statement
Section 3 – Dividends and similar income – Item 70
3.1 Dividends and similar income: breakdown
(in tho usands o f EUR)
31 12 2010
Item/Income
31 12 2009
Income
Dividends
Income
from units
Total
Dividends
in UCITS
from units
Total
in UCITS
A. Financial assets held for trading
256.845
297
257.142
304.585
3
304.588
B. Financial assets available for sale
20.129
783
20.912
15.696
1.770
17.466
-
-
-
-
-
-
-
-
1.080
278.054
320.281
1.773
322.054
C. Financial assets designated at fair value
D. Investments
Total
276.974
x
x
-
The table shows the amount of dividends received on shares traded within the trading book and on minority holdings classified in the portfolio of
available-for-sale assets.
Conversely, dividends relating to the Group‘s subsidiaries and associates, consolidated fully or under the equity method, are excluded.
256
Notes to the consolidated financial statements - Part C – Consolidated Income Statement
Section 4 – Net profit (loss) from trading – Item 80
4.1 Net profit (loss) from trading: breakdown
(in tho usands o f EUR)
Transactions / P&L items
1. Financial assets held for trading
Capital
Gains (A)
Trading
Profit (B)
Capital
Losses ( C)
Trading
Losses (D)
Net Profit
(Loss)
Net Profit
(Loss)
(A + B )-(C + D)
(A + B )-(C + D)
31 12 2010
31 12 2009
7 7 .5 6 2
3 0 0 .9 0 1
( 10 4 .2 9 0 )
( 8 5 5 .5 6 9 )
( 5 8 1.3 9 6 )
13 8 .8 2 7
1.1 Debt securities
47.786
217.405
(91.029)
(228.917)
(54.755)
75.256
1.2 Equity instruments
12.952
73.745
(10.083)
(624.195)
(547.581)
47.821
1.3 Units of UCITS
13.778
6.212
(3.178)
(185)
16.627
16.237
1.4 Loans
3.046
407
-
3.453
3.233
1.5 Other
-
3.132
-
(2.272)
860
(3.720)
2 9 .2 11
2 3 .3 15
(679)
( 10 5 .3 2 0 )
( 5 3 .4 7 3 )
( 2 5 .6 7 6 )
28.375
23.039
(585)
(21.104)
29.725
(1.806)
-
-
836
276
2. Financial liabilities held for trading
2.1 Debt securities
2.2 Deposits
2.3 Other
3. Other financial assets and liabilities:
exchange differences
4. Derivatives
x
x
(94)
x
2 .6 8 5 .2 0 3
12 .4 9 3 .8 8 3
2.170.119
12.217.637
(1.799.238)
1.967.514
9.879.212
- on equity instruments and stock indices
146.469
2.133.251
- on currency and gold
x
4.1 Financial derivatives:
- on debt securities and interest rates
- other
4.2 Credit derivatives
Total
-
(84.216)
x
( 2 .3 2 2 .6 0 7 ) ( 12 .5 4 6 .3 8 7 )
(83.198)
2 3 .5 6 0
(23.870)
3 7 .5 3 9
2 8 9 .19 2
( 4 7 2 .7 9 3 )
(12.292.644)
274.974
(415.907)
(1.571.858)
(10.356.962)
(82.094)
(54.916)
(159.230)
(1.746.229)
374.261
(350.564)
(20.900)
(19.798)
x
x
x
56.136
205.174
(68.150)
(189.453)
3.707
9.371
515.084
276.246
(523.369)
(253.743)
14.218
(56.886)
2 .7 9 1.9 7 6
12 .8 18 .0 9 9
( 3 2 2 .117 )
( 3 2 2 .10 3 )
( 2 .4 2 7 .5 7 6 ) ( 13 .5 0 7 .2 7 6 )
The table shows the profit and loss attributable to the portfolio of held-for-trading financial assets and liabilities, except for derivative contracts
used to hedge financial instruments which adopted the fair value option, for which the valuation results are indicated in Part C, Section 7, ―Net
profit (loss) on financial assets and liabilities designated at fair value – Account 110‖ on page 260 of these notes to the financial statements.
In line ―3. Other financial assets: exchange differences‖, the positive or negative balance of any changes in value of financial assets and liabilities
denominated in currencies other than the trading currencies has been indicated in accordance with standard practice. For trading instruments, the
effect resulting from any changes due to foreign exchange is not reported separately.
257
Notes to the consolidated financial statements - Part C – Consolidated income statement
Section 5 – Net profit (loss) from hedging – Item 90
5.1 Net profit (loss) from hedging: breakdown
(in tho usands o f EUR)
P&L items/Values
A. Gains on:
A.1 Fair value hedging instruments
Total
Total
31 12 2010
31 12 2009
489.117
195.847
410.206
222.224
3.786
17.350
A.4 Cash-flow hedging derivatives
-
-
A.5 Assets and liabilities denominated in foreign currency
-
-
903.109
435.421
(812.934)
(320.132)
B.2 Hedged financial assets (fair value)
(66.508)
(109.099)
B.3 Hedged financial liabilities (fair value)
(24.017)
(7.655)
(258)
-
-
-
A.2 Hedged financial assets (fair value)
A.3 Hedged financial liabilities (fair value)
Total gains on hedging activities (A)
B. Losses on:
B.1 Fair value hedging instruments
B.4 Cash-flow hedging derivatives
B.5 Assets and liabilities denominated in foreign currency
Total losses on hedging activities (B)
C. Net profit (loss) from hedging activities (A - B)
(903.717)
(436.886)
(608)
(1.465)
The table shows the net profit/loss from hedging. It therefore includes the realised P&L components posted to the profit and loss statement
resulting from both the valuation of assets and liabilities subject to hedging, and the relative hedging derivative contracts, including any foreign
exchange differences. During the year, other hedging transactions were carried out against adverse changes in interest rate risk, exchange risk and
credit risk, mainly for bonds classified in the available-for-sale portfolio and debt securities issued by the Group and posted to Item 30 of the
Liabilities, ―Securities in issue‖.
For information on hedging derivatives, the gains and losses on which are indicated in lines A.1 and B.1 of this table, see Section 8, ―Hedging
derivatives – Item 80‖ of the Assets (p.185) and Section 6, ―Hedging derivatives – item 60‖ of the Liabilities (p.229) in Part B of the notes to the
financial statements.
More information on hedged assets and liabilities can be found in the tables in Part B of the notes for each section of the accounts to which
hedges are posted.
258
Notes to the consolidated financial statements - Part C – Consolidated Income Statement
Section 6 - Gains (losses) on disposals/repurchases – Item 100
6.1 Gains (losses) on disposals/repurchases: breakdown
(in tho usands o f EUR)
Total 31/12/2010
Items / P&L items
Gains
Total 31/12/2009
Net Profit
Losses
Gains
(Loss)
Net Profit
Losses
(Loss)
1. Financial assets
1. Loans and advances to banks
11.149
(7.978)
3.171
1.570
2. Loans and advances to customers
23.137
(45.926)
(22.789)
13.955
(5.639)
8.316
3. Financial assets available for sale
88.986
(25.861)
63.125
153.117
(85.030)
68.087
3.1 Debt securities
27.677
(4.959)
22.718
92.231
(70.918)
21.313
3.2 Equity instruments
47.939
(6.580)
41.359
54.995
(11.142)
43.853
3.3 Units of UCITS
13.370
(14.322)
5.891
(2.970)
2.921
(952)
-
1.570
3.4 Loans
-
-
-
-
-
-
4. Financial assets
held to maturity
-
-
-
-
-
-
43.507
168.642
-
-
Total assets
123.272
(79.765)
(90.669)
77.973
1. Financial liabilities
1. Deposits from banks
2. Customer accounts
-
3. Securities in issue
Total liabilities
-
-
-
-
-
4.672
(25.009)
(20.337)
8.929
(20.673)
(11.744)
4.672
(25.009)
(20.337)
8.929
(20.673)
(11.744)
The table shows the net profit/loss arising from the disposal of financial assets other than those held for trading and those designated at fair value,
and the net profit/loss arising from the repurchase of own financial liabilities.
With regard to financial liabilities, the repurchase of own liabilities is treated as advance repayment with derecognition of the financial instrument
and subsequent realisation of gains or losses on repurchase.
259
Notes to the consolidated financial statements - Part C – Consolidated income statement
Section 7 – Net profit (loss) on financial assets and liabilities designated at fair value –
Item 110
7.1 Net change in financial assets and liabilities designated at fair value: breakdown
(in tho usands o f EUR)
Transactions / P&L items
Capital Gains
(A)
Gains
Losses
Capital
following
disposal (B)
Losses (C )
Net P rofit (Loss) Net P rofit (Loss)
following
disposal (D)
(A+B) - (C+D)
(A+B) - (C+D)
31 12 2010
31 12 2009
1. Financial assets
-
-
-
-
-
-
1.1 Debt securities
-
-
-
-
-
-
1.2 Equity instruments
-
-
-
-
-
-
1.3 Units of UCITS
-
-
-
-
-
-
1.4 Loans
-
-
-
-
-
-
58.471
37.396
(191.699)
(20.155)
(115.987)
(141.684)
58.471
37.396
(191.699)
(20.155)
(115.987)
(141.684)
2.2. Deposits from banks
-
-
-
-
-
-
2.3. Customer accounts
-
-
-
-
-
-
-
119.814
2. Financial liabilities
2.1 Debt securities
3. Financial assets and liabilities
denominated in foreign
4. Credit and financial derivatives
Total
x
x
x
x
154.484
155.599
(61.141)
(163.335)
85.607
212.955
192.995
(252.840)
(183.490)
(30.380)
(21.870)
This item includes capital gains and losses originating from the fair-value measurement of financial liabilities classified in the fair value option
portfolio and the related hedging derivative contracts.
With reference to the amount of capital gains recognised under financial liabilities in column A, line 2.1, ―Debt securities‖, equivalent to EUR
58.5 mln, Group companies -by applying the interpretation published by the Italian accounting standards board (OIC) in Operating Guidance No.
4 ―Operating guidance for the accounting treatment of rules on the distribution of profits and reserves pursuant to Legislative Decree No 38 of 28
February 2005‖, endorsed by the Supervisory Authority- will arrange, when distributing profits, to set this amount aside, after tax, in a nondistributable reserve pursuant to Article 6 of Legislative Decree No 38 of 28 February 2005.
7.1.a Net profit (loss) on financial assets designated at fair value - depreciation or trading losses
due to deterioration of debtor creditworthiness
The portfolio posted to balance sheet assets for an amount of EUR 247.1 mln is exclusively attributable to pension
plan assets.
260
Notes to the consolidated financial statements - Part C – Consolidated Income Statement
7.1.b Net profit (loss) on financial assets and liabilities designated at fair value using the fair
value option
Capital
Type/Item
Gains
following
disposal
Net Profit (Loss)
Losses
Losses
Capita Gains
(in tho usands o f EUR)
following
disposal
3 1 12 2 0 10
3 1 12 2 0 0 9
Assets
-
-
-
-
-
-
Natural hedges through derivatives
-
-
-
-
-
-
Natural hedges through other financial
instruments
-
-
-
-
-
-
Other types of accounting mismatches
-
-
-
-
-
-
Financial asset portfolios managed internally
on a fair value basis
-
-
-
-
-
-
Structured financial instruments
-
-
-
-
-
-
58.471
37.396
(191.699)
58.471
37.396
(191.699)
Natural hedges through other financial
instruments
-
-
-
-
-
-
Other types of accounting mismatches
-
-
-
-
-
-
Financial asset portfolios managed internally
on a fair value basis
-
-
-
-
-
-
Structured financial instruments
-
-
-
-
-
-
154.484
155.599
85.607
119.814
154.484
155.599
85.607
119.814
Other types of accounting mismatches
-
-
-
-
-
-
Financial asset portfolios managed internally
on a fair value basis
-
-
-
-
-
-
Credit derivatives
-
-
-
-
-
-
Natural hedges
-
-
-
-
-
-
Other types of accounting mismatches
-
-
-
-
-
-
Financial asset portfolios managed internally
on a fair value basis
-
-
-
-
-
-
212.955
192.995
Liabilities
Natural hedges through derivatives
Financial derivatives
Natural hedges
Total
(20.155) (115.987) (141.684)
(20.155)
(61.141) (163.335)
(61.141)
(163.335)
(252.840) (183.490)
(115.987)
(30.380)
(141.684)
(21.870)
7.1.c Changes in fair value of fair valued financial liabilities due to changes in own creditworthiness
3112 2010
(in tho usands o f EUR)
In the year
Type/Item
Changes in fair value of fair valued
financial liabilities due to changes in
own credit risk
Capital Lo sses
Capital Gains
-
4.800
Cumulative
Net P ro fit
(Lo ss)
4.800
Capital Lo sses
Capital Gains
-
9.114
Net P ro fit
(Lo ss)
9.114
Changes in fair value of liabilities issued due to changes in own creditworthiness are 'immunized' for the purpose of regulatory capital
quantification.
261
Notes to the consolidated financial statements - Part C – Consolidated income statement
Section 8 – Net impairment losses/reversals – Item 130
8.1 Net impairment losses/reversals on loans: breakdown
(in tho usands o f EUR)
Value adjustments
Write-back
A . Lo ans and advances to
banks
- Lo ans
- Debt securities
B . Lo ans and advances to
custo mers
- Lo ans
- Debt securities
C . T o tal
Specific
Portfolio
Others
P&L items
Write-o ff
Specific
Transactions /
A
Portfolio
B
A
B
Total
Total
31 12 2010
31 12 2009
(368)
(10.214)
(4.189)
173
4.167
-
1.353
(9.078)
(8.924)
(368)
(5.862)
(3.886)
173
4.167
-
1.353
(4.423)
(100)
(4.352)
(303)
-
-
-
-
(4.655)
(8.824)
(51.501)
(1.806.239)
(75.228)
292.800
374.274
21
149.442
(1.116.431)
(1.443.786)
(51.501)
(1.806.037)
(74.633)
292.800
374.274
21
60.739
(1.204.337)
(1.411.766)
(202)
(595)
-
-
-
88.703
87.906
(32.020)
( 5 1.8 6 9 ) ( 1.8 16 .4 5 3 )
( 7 9 .4 17 )
2 9 2 .9 7 3
3 7 8 .4 4 1
21
15 0 .7 9 5
( 1.12 5 .5 0 9 )
( 1.4 5 2 .7 10 )
-
-
Key
A = From interest
B = Other reversals
This item includes losses and reversals recognised for the impairment of financial instruments allocated to the portfolios of loans and advances to
customers and loans and advances to banks. In particular, the ―Write-offs‖ column shows losses recorded in relation to the derecognition of financial
instruments, whereas the ―Other‖ column includes specific write-downs on impaired loans subject to analytical valuation. Portfolio value adjustments
are quantified with reference to performing financial instruments.
Column A (specific write-backs) incorporates the write-backs represented by interest released on impaired positions valued at amortised cost and
interest on arrears recovered and written down in the year in which it was accrued.
For further information on loans and advances to banks and customers, see Section 1, ―Credit risk‖, of Part E of the notes to the financial statements.
262
Notes to the consolidated financial statements - Part C – Consolidated income statement
8.2 Net impairment losses/reversals on available-for-sale financial assets: breakdown
(in tho usands o f EUR)
Value Adjustments
Specific
Transactions /
P&L items
Write-backs
Write-offs
Specific
Others
A
Total
Total
31 12 2010
31 12 2009
B
A. Debt securities
-
(665)
-
-
B. Equity instruments
-
(25.882)
x
C. Units in UCITS
-
(3.934)
x
D. Loans to banks
-
-
-
-
-
-
E. Loans to customers
-
-
-
-
-
-
F. Total
-
-
-
x
-
(30.481)
(665)
(413)
(25.882)
(25.884)
(3.934)
(4.887)
(30.481)
(31.184)
Key
A = From interest
B = Other write-backs
8.3 Net impairment losses/reversals on held-to-maturity financial assets: breakdown
No figures are present for the current year or for the previous year.
8.4 Net impairment losses/reversals on other financial transactions: breakdown
(in tho usands o f EUR)
Value adjustments
Write-backs
Specific
Portfolio
P&L items
Others
Transactions /
Write-offs
Specific
A
A. Guarantees issued
-
(6.706) (5.683)
B. Credit derivatives
-
C. Commitments to disburse funds
-
D. Other transactions
-
E. Total
- (8.568) (7.067)
-
-
(172) (1.384)
(1.690)
-
Portfolio
B
A
Total
Total
31 12 2010
31 12 2009
B
-
3.299
-
1.411
(7.679)
-
-
-
-
-
-
-
-
(1.556)
-
300
-
-
(1.390)
-
3.599
-
1.411
(10.625)
-
(15.492)
(298)
2.826
(12.964)
This item shows impairment losses/reversals relating to guarantees issued, in order to cover the expected loss in the event that these are executed.
263
Notes to the consolidated financial statements - Part C – Consolidated income statement
Section 9 – Net premiums – Item 150
The tables in this section have not been completed since the Group has no net premiums either for the current year
or for the previous year.
Section 10 – Other net insurance income/expense – Item 160
The tables in this section have not been completed since the Group has no insurance management activities either
for the current year or for the previous year.
264
Notes to the consolidated financial statements - Part C – Consolidated income statement
Section 11 – Administrative expenses – Item 180
11.1 Personnel expenses: breakdown
(in tho usands o f EUR)
Type of Expense / Area
1. Employees
Total
Total
31 12 2010
31 12 2009
(2.206.385)
(2.364.267)
(1.554.606)
(1.568.429)
b) social-welfare charges
(406.862)
(401.405)
c) severance pay
(106.011)
(102.619)
(19)
(15)
(6.895)
(15.901)
(7.602)
(9.138)
- defined contribution
(6.031)
(6.507)
- defined benefit
(1.571)
(2.631)
(34.692)
(50.254)
(34.478)
(49.985)
a) wages and salaries
d) social security expenses
e) provision for staff severance pay
f) pension fund and similar obligations:
g) contributions to external pension funds:
- defined contribution
- defined benefit
h) costs related to share-based payments
(214)
-
i) other employee benefits
(269)
(23.482)
(89.698)
(193.024)
2. Other staff
(9.083)
(12.039)
3. Directors and Statutory Auditors
(9.029)
(9.621)
4. Retired personnel
(241)
Total
(2.224.738)
(2.385.927)
Further to clarifying instructions issued by the Bank of Italy with communication of 16 February 2011, expenses incurred for employee insurance
policies were classified as "Personnel expenses", line 1 i) "other employee benefits"; consequently, a reclassification for an amount of EUR 35.69
mln was made for 2009 from "Other administrative expenses - Insurance" to "Personnel expenses" line 1 i) "Other employee benefits".
The line ―pension and similar obligations‖ includes amounts set aside for internal funds, while the line ―contributions to external pension funds‖
includes contributions paid and adjustments made to external pension funds.
The line ―Other employee benefits‖ includes early retirement benefits for an amount of EUR 16.1 mln.
265
Notes to the consolidated financial statements - Part C – Consolidated income statement
11.2 Average number of employees by category
Category / Average Number
31 12 2010
31 12 2009
31.775
32.384
535
560
b) middle managers
11.637
11.291
c) remaining staff
19.603
20.533
Employees:
a) executives
Other personnel
Total
105
91
31.880
32.475
11.3 Defined-benefit pension funds: total cost
(in tho usands o f EUR)
31 12 2010
Defined-benefit
Defined-benefit
company pension
company pension
Provision
funds
Items/Amounts
Current service cost (+)
31 12 2009
Internal
External
pension
pension
plans
plans
severance
pay
Provision
funds
for staff
for staff
Piani
Piani
interni
esterni
severance
pay
(214)
(2.426)
(1.320)
(231)
(2.567)
(2.147)
(7.490)
(18.973)
(5.552)
(8.000)
(19.550)
(13.743)
6.203
20.124
-
6.690
19.846
-
-
-
-
-
-
-
Actuarial gains and losses (±)
921
5.355
Social security cost in relation to past
employment service (+)
(55)
Financial charges (+)
Expected return on plan assets (-)
Third party reimbursements (-)
(23)
-
-
(834)
(256)
(13.441)
(9)
-
-
Effect of any plan curtailments (±)
-
-
-
-
-
-
Effect of any plan settlements (±)
-
-
-
-
-
-
(936)
-
-
-
-
-
(1.571)
4.080
Effect of recognition of assets (+)
Total
11.4 Other employee benefits
The Group has no other employee benefits.
266
(6.895)
(2.631)
(15.712)
(15.899)
Notes to the consolidated financial statements - Part C – Consolidated income statement
11.5 Other administrative expenses: breakdown
(in tho usands o f EUR)
Items/Amounts
31 12 2010
Stamp duties
Indirect taxes and duties
31 12 2009
(174.051)
(179.691)
(74.611)
(83.854)
Municipal immovable property tax
(9.164)
(9.290)
Subscription and purchase of publications
(1.670)
(1.853)
(165.084)
(159.769)
Cleaning service contracts
(22.540)
(27.628)
Insurance
(59.050)
(53.084)
Rentals
(46.911)
(51.266)
(137.922)
(128.660)
Third-party data processing
(78.015)
(69.038)
Title searches and land registry surveys
(10.716)
(11.222)
Lease of equipment
(44.365)
(54.634)
Utilities
(46.173)
(45.116)
Maintenance of movable and immovable properties (used in the business )
(48.660)
(73.783)
Data transmission rental
(40.158)
(47.390)
Postage
(58.337)
(64.639)
Advertising
(66.105)
(57.483)
(7.483)
(8.920)
Reimbursement of employee car and travel expenses
(27.160)
(28.824)
Security services
(38.640)
(38.296)
Software
(93.399)
(101.662)
Property rentals
Remuneration of external professionals
Membership dues
Expenses for services supplied by MPS Group companies and entities
-
Corporate entertainment expenses
(2.893)
(8.951)
(6.352)
(301)
(1.124)
Printing and stationery
(12.684)
(13.148)
Telephone, telefax and telegraph
(18.162)
(22.585)
Transportation
(40.627)
(51.226)
Sundry occupancy expenses and refunds for release of immovable property used in the business
(13.431)
(21.613)
Expenses for non-rented investment real estate
Integration costs
-
(27.494)
Other
(57.070)
(52.870)
Total
(1.401.440)
(1.495.407)
Further to clarifying instructions issued by the Bank of Italy with communication of 16 February 2011, expenses incurred for employee insurance
policies were classified as "Personnel expenses", line 1 i) "other employee benefits"; consequently, a reclassification for an amount of EUR 35.69
mln was made for 2009 from "Other administrative expenses - Insurance" to "Personnel expenses" line 1 i) "Other employee benefits".
11.5.a Information on operating leases
(in tho usands o f EUR)
Items/Amounts
31 12 2010
31 12 2009
Minimum lease payments
-
Contingent lease payments recognised as expense in the period
-
-
Rent from subleases
-
-
Total
-
267
(142)
(142)
Notes to the consolidated financial statements - Part C – Consolidated income statement
Section 12 – Net provisions for risks and charges – Item 190
12.1 Net provisions for risks and charges: breakdown
(in tho usands o f EUR)
31 12 2010
Items/Amounts
Provisions for the year
Write-backs
Total
Personnel
Legal
costs
disputes
(56.832)
14.435
(42.397)
(8.389)
(8.389)
31 12 2009
Personnel
Legal
costs
disputes
Others
Total
(28.475)
(93.696)
(77.424)
(1.625)
(45.201)
17.871
32.306
7.081
2.237
15.984
25.302
(10.604)
(61.390)
612
(29.217)
(98.948)
(70.343)
Others
Total
(124.250)
The item "Provisions for risks and charges" for the year is negative by EUR 61.4 mln; of this, EUR 56.8 mln relates to legal disputes.
Changes due to the time value of money are included in "Provisions for the year" and show the amount of ―time value‖ accrued during the year
due to the expected imminent maturity of the estimated liability.
268
Notes to the consolidated financial statements - Part C – Consolidated income statement
Section 13 – Net value adjustments/write-backs on property, plant and equipment – Item
200
13.1 Net value adjustments on property, plant and equipment: breakdown
Assets / P&L items
Amortization
(a)
Impairment
losses (b)
Net Profit (loss) Net Profit (loss)
(a+b-c)
(a+b-c)
Write-backs
(c )
31 12 2010
31 12 2009
Tangible assets
A.1 Owned
(100.611)
(975)
-
(101.586)
(105.646)
- used in the business
(96.831)
(971)
-
(97.802)
(101.379)
- held for investment
(3.780)
(4)
-
(3.784)
(4.267)
-
-
-
-
-
- used in the business
-
-
-
-
-
- held for investment
-
-
-
-
-
A.2 Leased
Total
(100.611)
(975)
-
(101.586)
(105.646)
Property, plant and equipment with a finite life is tested for impairment.
Section 14 – Net value adjustments/write-backs on intangible assets – Item 210
14.1 Net value adjustments on intangible assets: breakdown
Assets / P&L items
Impairment
Amortization
Write-backs
losses
( a)
(c)
( b)
Net profit
Net profit
(loss)
(loss)
(a+b-c)
(a +b-c)
31 12 2010
31 12 2009
Intangible assets
A.1 Owned
- generated internally by the company
- other
A.2 Leased
Total
(155.534)
(434)
-
-
(155.534)
(434)
-
-
(155.534)
(434)
-
(155.968)
(155.968)
(155.968)
(136.963)
(572)
(136.391)
(136.963)
This item mainly relates to the amortisation of software held by the MPS Group Operating Consortium and to the amortisation of finite-life
intangible assets identified during the PPA process for the subsidiaries Biverbanca (€ 7.5 mln) and Banca Antonveneta S.p.A. (€ 71 mln).
269
Notes to the consolidated financial statements - Part C – Consolidated income statement
Section 15 – Other operating income / expenses – Item 220
15.1 Other operating expenses: breakdown
(in tho usands o f EUR)
Items/Amounts
Total
Total
31 12 2010
31 12 2009
Exceptional write-downs of assets not attributable to a separate account
Contingent liabilities not attributable to a separate account
(126)
(895)
(32.153)
(14.787)
(576)
(2.770)
(9.648)
(6.149)
(29.121)
(27.381)
Passive lawsuits
Cost of robberies
Write-downs on improvements of third-party goods recognized as "Other Assets"
Expenses on rental property held for investment
(75)
Other real estate inventory/management costs
-
-
Cost of financial lease transactions
-
(12.586)
(9.170)
Other
(102.929)
(103.314)
Total
(187.214)
(164.466)
15.2 Other operating income: breakdown
(in tho usands o f EUR)
Total
Items/Amounts
Total
31 12 2010
31 12 2009
45
107
17.957
30.289
25
49
9
6
Rents from real estate used in the business
757
2.342
Other revenues from real estate inventory/management
893
441
203.932
193.327
Recovery of insurance premiums
52.252
39.590
Proventi relativi ad operazioni di locazione finanziaria
10.221
7.535
5.920
6.089
Other
98.437
96.647
Total
390.448
376.422
Exceptional write-downs of liabilities not attributable to a separate account
Contingent assets not attributable to a separate account
Insurance reimbursements
Rents from investment real estate
Recovery of taxes
Other third-party charges
"Tax recoveries" were mainly related to the stamp duty on current accounts and securities deposited and to the substitute tax on medium-term
loans.
270
Notes to the consolidated financial statements - Part C – Consolidated income statement
Section 16 – Gains (losses) on equity investments – Item 240
16.1 Gains (losses) on equity investments: breakdown
(in tho usands o f EUR)
P&L items/Sectors
Total
Total
31 12 2010
31 12 2009
1) Jointly owned companies
A. Income
-
-
1. Revaluations
-
-
2. Gains on disposal
-
-
3. Write-backs
-
-
4. Other income
-
-
-
-
1. Write-downs
-
-
2. Impairment losses
-
-
3. Losses on disposal
-
-
4. Other expenses
-
-
-
-
260.866
131.835
82.790
115.412
176.926
16.423
-
-
1.150
-
B. Expense
Net Profit (Loss)
2) Companies subject to significant influence
A. Income
1. Revaluations
2. Gains on disposal
3. Write-backs
4. Other income
B. Expense
(30.983)
(18.184)
1. Write-downs
(12.621)
(4.160)
2. Impairment losses
(18.000)
(14.024)
3. Losses on disposal
(48)
-
(314)
-
4. Other expenses
Net Profit (Loss)
229.883
113.651
405.455
84
-
-
405.455
4
3. Write-backs
-
80
4. Other income
-
-
3) Subsidiaries
A. Income
1. Revaluations
2. Gains on disposal
B. Expense
-
(17.662)
1. Write-downs
-
-
2. Impairment losses
-
-
3. Losses on disposal
-
4. Other expenses
-
(17.662)
-
Net Profit (Loss)
405.455
(17.578)
Total
635.338
96.073
Gains on disposal of companies subject to significant influence, totalling EUR 176.9 mln before the tax impact of EUR 1.9 mln, refer to the
disposal of the affiliate Prima Holding S.p.A.
Under "Income" and "Expense", the lines "Revaluations" and "Write-downs" respectively refer to gains and losses arising from valuation at equity
of entities subject to significant influence.
271
Notes to the consolidated financial statements - Part C – Consolidated income statement
Gains on disposal of subsidiaries is the result of the demerger of consortium company 'Consorzio Perimetro Gestione Proprietà Immobiliari
S.c.p.a' within the framework of the overall real estate deal of the MPS Group. This deal was described in Part A "Acounting Policies - Significant
accounting choices made while preparing the financial statements", which is referenced for further information.
272
Notes to the consolidated financial statements - Part C – Consolidated income statement
Section 17 – Net gains (losses) on tangible and intangible assets measured at fair value –
Item 250
The tables for this section were not presented since for the current year and the year for comparison, there were no
tangible and intangible assets carried at fair value.
Section 18 – Impairment of goodwill – Item 260
18.1 Impairment of goodwill: breakdown
Being an asset with an indefinite or unlimited useful life, goodwill is tested at the end of each year to asses whether
the amount posted to the financial statements is available or recoverable. The test performed did not result in any
impairment being reported for goodwill allocated to the various CGUs (cash generating units). For additional
information concerning the methods for conducting ―impairment tests‖, see the appropriate section in Part B of the
Notes to the Financial Statements – Information on the Balance Sheet – Section 13 of Assets – Intangible Assets:
breakdown by type of asset.
Section 19 – Gains (losses) on disposal of investments – Item 270
19.1 Gains (losses) on disposals of investments: breakdown
(in tho usands o f EUR)
P&L items/Sectors
A. Property
Total
Total
31 12 2010
31 12 2009
16.403
46
- Gains on disposal
16.403
46
- Losses on disposal
-
-
165.991
42.217
165.998
42.249
B. Other assets
- Gains on disposal
- Losses on disposal
(7)
Net Profit (Loss)
182.394
(32)
42.263
The EUR 166 mln in net profit generated in 2010 concerns the disposal of banking business to the Carige Group (22 branches) and Cassa di
Risparmio di Firenze (50 branches).
It is noted that the disposal falls within the plan drawn up following regulation no. 18327 of 7 May 2008 set forth by the Italian Antitrust
Authority to authorise the acquisition of Banca Antonveneta on condition that certain branches be disposed of in areas with footprint exceeding
the limits set out in current legislation on competition-related issues.
273
Notes to the consolidated financial statements - Part C – Consolidated income statement
Section 20 – Tax expense (income) on profit (loss) from continuing operations – Item 290
20.1 Tax expense (income) on profit (loss) from continuing operations: breakdown
(in tho usands o f EUR)
P&L items/Sectors
Total
Total
31 12 2010
31 12 2009
1. Current tax (-)
(327.683)
2. Adjustments to current tax of prior years (+/-)
(3.881)
3. Reduction of current tax for the year (+)
(458.313)
140.911
1.412
11
4. Changes in prepaid taxes (+/-)
64.382
277.532
5. Changes in deferred taxes (+/-)
(76.080)
6. Tax expense for the year (-) (-1+/-2 +3+/-4+/-5)
(341.850)
9.350
(30.509)
The overall balance of item 290 ―Tax expense (income) on profit (loss) from continuing operations‖ was affected not only by ordinary charges in
relation to the corporate income tax (IRES) and regional productivity tax (IRAP) but also by Banca Antonveneta's deduction of a residual portion
of goodwill (50%) recognised in 2009, which had a negative impact of EUR 113,3 mln on item ―1. Current tax assets/liabilities‖, due to payment
of the substitute tax and a positive EUR 226.7 mln impact on item ―4. Changes in deferred tax assets" due to recognition of deferred tax assets,
with an overall positive impact of EUR 113.4 mln on this item.
20.2 Reconciliation of theoretical tax charge to actual tax charge
(in tho usands o f EUR)
Items/Amounts
31 12 2010
(A) Pre-tax profit (loss) from continuing operations
(B) Pre-tax profit (loss) from groups of assets held for sale
(A+B) Pre-tax profit (loss)
Current rate of corporate income tax (IRES)
Theoretical tax rate
31 12 2009
1.327.181
43.434
3.620
226.283
1.330.801
269.717
27,5
27,5
(365.970)
(74.172)
Permanent differences
(49.826)
149.840
Other
174.584
(13.142)
(102.606)
(107.628)
(343.818)
(45.102)
(341.850)
(30.508)
(1.968)
(14.594)
Regional tax on productivity (IRAP) - ordinary rate
Income taxes for the year
of which:
Taxes on income from continuing operations
Taxes on the income of groups of assets held for sale
The line ―Permanent differences‖ reflects the effect of changes made to the profit reported in the profit and loss statement to determine profit
subject to IRES taxation. With respect to decreases, the amount was related mainly to the disposal of existing equity investments under the
participation exemption, PEX (Art. 87 of the Consolidated Act on Income Tax); with respect to increases, the amount was related to total nondeductible interest expense (Art. 96 of the Consolidated Act on Income Tax) and losses from disposal or valuation of PEX equity investments.
274
Notes to the consolidated financial statements - Part C – Consolidated income statement
Section 21 – Profit (loss) after tax from groups of assets held for sale – Item 310
21.1 Profit (loss) after tax from groups of assets/liabilities held for sale: breakdown
(in tho usands o f EUR)
P&L items/Sectors
Total
Total
31 12 2010
31 12 2009
1. Income
15.520
47.942
2. Expense
(10.184)
(23.686)
(477)
(580)
3. Profit (loss) from valuation of groups of assets and related liabilities
4. Profit (loss) from disposal
(1.239)
202.607
5. Taxes and duties
(1.968)
(14.594)
Profit (Loss)
1.652
211.689
Following transactions under way as at 31.12.2010 which will lead to the 100% disposal of subsidiary Monte Paschi Monaco S.A.M.and loss of
control of MPS Venture SGR S.p.a., the latter entities were considered as disposal groups held for sale. As a result, profit and loss data, net of
intragroup relations, were reclassified to item 310 of the profit and loss "Gains (losses) after tax on groups of assets held for sale".
Measurement of individual assets and groups of assets held for sale at the lower of their carrying amount and fair value less costs to sell does not
entail any depreciation.
21.2 Breakdown of income taxes on groups of assets/liabilities held for sale
(in tho usands o f EUR)
1. Current taxes (-)
Total
Total
31 12 2010
31 12 2009
(1.966)
(14.594)
2. Changes in prepaid taxes (+/-)
(2)
-
3. Changes in deferred taxes (+/-)
-
-
4. Income taxes for the period (-1 +/-2 +/-3)
(1.968)
The amount shown in the table corresponds to the tax impact from afore-mentioned discontinued operations.
275
(14.594)
Notes to the consolidated financial statements - Part C – Consolidated income statement
Section 22 – Profit (loss) for the year: minority interests – Item 330
The tables for this section were not presented since for the current year and the year for comparison, there was no
profit (loss) for the year attributable to minority interests for the Group.
Section 23 – Other
No additional disclosure to that presented in accordance with the international accounting standards and Circular
letter no. 262 of the Bank of Italy is required.
Section 24 – Earnings per Share (EPS)
24.1 Reconciliation of weighted average number of ordinary shares outstanding
(No . o f shares)
Items/Amounts
31 12 2010
31 12 2009
5.541.170.406
5.518.511.838
-
-
932.643
14.994.767
Dilutive effect from convertible liabilities (+)
2.090.562.823
-
Dilutive effect from convertible liabilities (+)
-
-
7.632.665.872
5.533.506.605
Weighted average number of ordinary shares outstanding (+)
Dilutive effect from put options sold (+)
Dilutive effect from ordinary shares to be assigned as a result of treasury share-based
payments (+)
Weighted average number of ordinary shares outstanding by diluted earnings per share
24.2.a Reconciliation of net profit (loss) for the year – numerator for basic earnings per share
(in tho usands o f EUR)
Item/Amount
Net Profit (Loss)
Profit (loss) attributable to other types of shares
Net profit (loss) attributable to ordinary shares numerator for basic earnings per share
31 12 2010
31 12 2009
Relating to Relating to
continuing discontinue
d
operations
Relating to Relating to
continuing discontinue
d
operations
Total
Total
operations pertaining to
and
the Parent
operations
pertaining to
and
pertaining
and
the Parent
pertaining
to the
pertaining
Company
to the
pertaining
Parent
to the
Parent
to the
Company
Parent
Company
Parent
and
823.433
Company
122
(147.394)
(22)
676.039
100
276
823.555
8.425
(147.416)
(1.476)
676.139
6.949
Company
211.689
(37.074)
174.615
Company
220.114
(38.550)
181.564
Notes to the consolidated financial statements - Part C – Consolidated income statement
24.2.b Reconciliation of net profit (loss) for the year – numerator for diluted earnings per share
(in tho usands o f EUR)
31 12 2010
31 12 2009
Relating to Relating to
Relating to Relating to
continuing discontinued
continuing discontinued
Total
Total
operations
operations
operations
operations
pertaining to
pertaining to
and
and
and
and
the Parent
the Parent
pertaining to pertaining to
pertaining to pertaining to
Company
Company
the Parent
the Parent
the Parent
the Parent
Company
Company
Company
Company
Item/Amount
Net Profit (Loss)
823.433
122
823.555
8.425
211.689
220.114
Dilutive effect from convertible liabilities
140.644
-
140.644
-
-
-
Profit (loss) attributable to other types of shares
(147.394)
(22)
(147.416)
(1.475)
(37.074)
(38.549)
Dilutive effect from convertible liabilities
-
-
-
-
-
-
Interest expenses on convertible instruments (+)
-
-
-
-
-
-
Other (+/-)
-
-
-
-
-
-
816.683
100
816.783
6.950
174.615
181.565
Net profit (loss) attributable to ordinary shares numerator for diluted earnings per share
24.2.c Basic and diluted earnings per share
(in EUR)
31 12 2010
Item/Amount
Relating to
Relating to
continuing
discontinued
operations
operations
and
and
pertaining to pertaining to
the Parent
the Parent
Company
Company
31 12 2009
Total
pertaining to
the Parent
Company
Relating to
Relating to
continuing
discontinued
operations
operations
and
and
pertaining to pertaining to
the Parent
the Parent
Company
Company
Total
pertaining to
the Parent
Company
Basic Earnings per Share
0,122
-
0,122
0,001
0,032
0,033
Diluted Earnings per Share
0,107
-
0,107
0,001
0,032
0,033
277
Notes to the consolidated financial statements - Part C – Consolidated income statement
278
Nota integrativa consolidata -
Part D – Statement of Consolidated Comprenhensive Income
279
Notes to the consolidated financial statements - Part D – Statement of Consolidated Comprenhensive Income
STATEMENT OF CONSOLIDATED COMPREHENSIVE INCOME
(in tho usands o f EUR)
Items
10
Gross
Profit (loss) for the year
Income Tax
Net
1.330.801
343.818
986.983
(1.222.337)
(377.007)
(845.330)
(1.264.126)
(389.100)
(875.026)
Other income components
20
Financial assets available for sale:
a) changes in fair value
b) reversal to profit and loss
48.282
10.775
37.507
- impairment provisions
30.474
3.917
26.557
- realised net gains/losses
17.808
6.858
10.950
(6.493)
1.318
(7.811)
c) other changes
30
Tangible assets
-
-
-
40
Intangible assets
-
-
-
50
Hedges of foreign investments:
-
-
-
a) changes in fair value
-
-
-
b) reversal to profit and loss
-
-
-
c) other changes
-
-
-
Cash flow hedges:
2.034
(717)
2.751
2.578
(649)
3.227
60
a) changes in fair value
b) reversal to profit and loss
-
c) other changes
70
(544)
Exchange differences:
(476)
1.322
2.999
a) changes in fair value
-
-
-
b) reversal to profit and loss
-
-
-
4.321
1.322
2.999
276
76
200
-
-
-
Non-current assets classified as held for sale
a) changes in fair value
b) reversal to profit and loss
c) other changes
90
Actuarial gains (losses) on defined benefit plans
100
Share of valuation reserves of equity investments valued at equity:
a) changes in fair value
b) reversal to profit and loss
-
-
-
276
76
200
-
-
-
(27.071)
10.701
(37.772)
(21.818)
9.654
(31.472)
-
-
-
- impairment provisions
-
-
-
- realised net gains/losses
-
-
-
c) other changes
(5.253)
110
Other income components
120
Total comprehensive income (Account 10 + 110)
130
Consolidated comprehensive income attributable to minority
interests
140
(68)
-
4.321
c) other changes
80
-
(1.242.777)
Consolidated comprehensive income attributable to Parent
Company
280
1.047
(365.625)
88.024
(21.807)
10.437
14.609
77.587
(36.416)
(6.300)
(877.152)
109.831
(4.172)
114.003
Nota integrativa consolidata -
Part E – Risks and Hedging Policies
Section 1 – Credit risk ............................................................................................................................................ 282
Section 2 – Market risks ......................................................................................................................................... 327
Section 3 - Liquidity Risk ........................................................................................................................................ 359
Section 4 - Operational risk .................................................................................................................................... 368
As required by law (BoI Circular No. 263 of 27 December 2006, Title IV), it is noted that the public disclosure, Pillar
3 of Basel 2, will be published on the Montepaschi Group‘s website www.mps.it/Investor+Relations.
281
Notes to the consolidated financial statements - Part E – Risks and Hedging Policies
Section 1 – Credit risk
Qualitative Information
1. General aspects
Within the guidelines of the Business Plan approved by the Board of Directors of the Parent Company, the Group's
top priority continues to be that of improving the quality of the loan portfolio and consequently reducing credit
costs.
More specifically, through Credit Policies and Planning, Credit Governance sets out the strategic guidelines for the
loan portfolio, both at Group level and for each individual subsidiary. The Group's credit activity is managed with a
view to monitoring risk and enhancing growth opportunities, through the development of credit policies and systems
aimed at making the most of trend data in connection with individual borrowers, against a background of in-depth
knowledge and strategic management of positions (credit culture)
2. Credit risk management policies
2.1 Organisational aspects
Within the framework of the Parent Company's reorganisation, the Credit Governance area was established during
the year with a view to further optimising the Group's internal organisational processes, bringing them up to speed
with external developments. It was in fact deemed appropriate to strengthen the credit department by centralising
the supervision of credit policies and control of lending quality into the Credit Governance Area, in light of the
increasingly strategic role credit governance has been playing in the last few years against a still-uncertain
macroeconomic background.
Credit Governance is organised into the following units:
Model and Credit System Validation (staff unit)
Credit performance monitoring (a staff unit which used to be a "service" in the previous organisation),
charged with monitoring credit quality, occurring events, as well as timeliness and effectiveness of
initiatives promoted by the distribution networks and group companies;
Credit Policies and Planning Area, including the "Special-purpose Loans and Securitisations service" , the
"Credit Policies and Quality service" and the "Loan Lab Coordination service" (reported to by the local Loan
Lab departments);
Group Risk and Restructuring Area, including the "Foreign Counterparties and Financial Institutions Credit
service", "Groups Monitoring service" and "Loan Restructuring service".
Significantly, the previous Credit Policies and Control Area has been subdivided into two highly specialised Areas
whose tasks are set out within the framework of existing credit policies. In particular, the Group Risk and
Restructuring Area was set up in response to the need for greater emphasis on corporate customers experiencing
financial difficulties (a problem which, in 2010, was further exacerbated across the system as compared to the
already high levels of 2009 ). The organisation of this Area includes a specific Loan Restructuring "service". At the
same time, Credit Policies and Planning continued to update the customer loan disbursement and monitoring
processes. More specifically, several activities were put in place to:
•
•
•
•
•
•
•
•
•
improve operating procedures for the advance review of assigned process ratings whenever there are
symptoms of a possible deterioration in the customer risk profile;
optimise systems to obtain information from external databases (Italian Central Credit Register and
Company Accounts Data service);
produce quality-assessment questionnaires, especially for Large Corporate customers, with the aim of
obtaining and assessing corporate information for the current period and eliminating redundant
information generated by the introduction of new rating models;
update the pricing model used to determine the RAROC of each individual transaction;
update and fine-tune the prospect rating model, so as to adopt new rating models and simulation
functions and achieve a more accurate management of collaterals;
review the methodology for the processing of expired or invalid internal ratings;
redefine adjustments to credit processes with a view to reducing land registry survey costs (cadastral
surveys reporting adverse judicial information and unfulfilled obligations registered with the real estate
archives; information from the Central Credit Register on borrowers ' track record);
update main internal regulations on credit processes;
update the Consumer clients' assessment logics.
282
Notes to the consolidated financial statements - Part E – Risks and Hedging Policies
Performance verification of loan disbursement processes confirmed the validity of approaches used. At the same
time, measures were taken to refine the post-disbursement monitoring process, which was increasingly focused on
intercepting early signs of any critical situations and promptly reassessing risks.
All units involved, within their areas of competence as defined on the basis of customer segmentation and customer
risk profiles, are called to grant/manage credit and monitor credit risk, using appropriate procedures (based on the
internal rating system) to determine the borrower's creditworthiness, file the credit facility application, follow up on
changes in the account over time and predict any emerging non-performing situations.
Credit quality, which is determined in accordance with Supervisory guidance, is constantly monitored by central and
outer units. In addition to existing regular units, the branch network organisation already includes a Loan and
Market Quality Manager who is responsible for guaranteeing loan quality and ensuring that problem loans are
properly managed in local areas.
Among other things, Credit Governance oversees the process for the definition, updating and usage of nonperforming loan assessment criteria, availing itself of the Credit Performance Monitoring staff unit set up in 2010 (a
former "service"). Within its area of competence, the Staff ensures appropriate implementation of the operating
rules and processes of assessment; it operationally coordinates the Functions involved in the various steps of the
process, verifies and organises data and information received, defines and validates the criteria to be used on a
yearly basis and monitors the economic impact monthly.
The management and recovery of doubtful loans are assigned by the banks to the Group Company specialising in
this area (MPS Gestione Crediti Banca S.p.A.).
For the purpose of defining the entire assessment process and making the methodology and criteria objectively
consistent throughout the Group, a Group Directive on non-performing loan assessment was issued in 2010, which
regulates the overall assessment process in line with the IAS/IFRS international accounting principles.
In the course of 2010, the Credit Performance Monitoring staff unit, assisted by a leading consultant and in
collaboration with MPS Gestione Crediti Banca S.p.A. and other Group Functions, completed the "Non-Performing
Loans Assessment Project" which is intended to revise the methodologies for assessing the Group's non-performing
loans and define new operating rules, processes and accountabilities. In particular, with regard to non-performing
loans, current organisational and information flows with MPS Gestione Crediti Banca S.p.A. were analysed, statistical
adjustment and automated assessment models reviewed and new procedures/controls implemented.
2.2. Management, measurement and control systems
Starting in 2008, statistical models aimed at creating the Internal Rating Model and rating assignment processes
were authorised by the Supervisory Authority for the calculation of capital requirements using the Advanced IRB
approach (AIRB).
Basel 2 requires the Group to adopt the following credit risk measures needed to calculate regulatory capital (AIRB
approach): Probability of Default (PD), Loss Given Default (LGD), and Exposure At Default (EAD). The new
methodology with the greatest impact on risk measurements is "Probability of Default‖, which is a reflection of the
borrower‘s rating, meaning its ability to meet obligations assumed over a time horizon of one year. Thus, a rating is
a probability-based approach to risk assessment, and represents a projection of portfolio quality that forms a part of
daily processes of credit facility assessment, loan management and pricing, as well as of the procedures used to
determine loan loss provisions and reports used by management.
The statutory adoption of risk criteria has made it possible to obtain significant operational advantages, both in
terms of a higher accuracy in credit budgeting forecasts and in terms of a more effective monitoring of credit
aggregates: based on the risk criteria, the Group sets the process for the yearly budgeting of credit items and makes
accurate and sustainable forecasts in relation to the loan portfolio, watchlist and non-performing loan flows and
loan-loss provisions.
Forecast sustainability is ensured by the definition of concrete loan portfolio actions which are communicated to the
outlying networks through an internal regulatory document as well as by amending the credit disbursement and
management processes and criteria.
All credit processes use the borrower rating as a decision-making driver, and they are conceived on the bsis of the
specific nature of various customer segments in order to optimise the use of resources employed in loan
management/monitoring and to achieve the right balance between the push for sales and an effective loan
management system. The internal rating system, which affects the Corporate and Retail portfolios, is based on the
development of several statistical models specialised by customer type with the aim of assigning a rating for
283
Notes to the consolidated financial statements - Part E – Risks and Hedging Policies
prospective borrowers (first-time lending models based on financial and demographic information taken from
outside databases) and for existing borrowers (for which behavioural models have also been used, which
incorporate internal performance data).
2.2.1 Credit policies
In 2010 there were further refinements in the process of determining credit policies which began in 2008 and was
based on analytical portfolio estimates.
In fact, only after adopting the advanced approach to new supervisory regulations was it possible to use this
methodology in an operational context including, most notably, the establishment of guidelines for assuming credit
risks.
In 2010, activities focusing on the development of a model for the definition of credit policies for businesses
continued with the purpose of providing more in-depth information during the forthcoming budgeting processes
from a geo-sectoral perspective/classification,. In particular, the following is assessed for each area of business:
•
•
•
the level of "attractiveness" based on the growth and risk prospects estimated from system data, which
are then used to determine allocation of expected net growth flows to the various business sectors (as
defined during the budgeting process for each individual business unit);
the "positioning" of the Group in terms of market risk and market shares with respect to the banking
system; on this basis, the operating practices are set out which are needed to obtain the expected
growth level (re-qualification required, internal or external development);
the geographical breakdown of prospective customers, for risk levels to be in line with the credit policies
put in place to support lending.
The loan portfolio growth for 2011 (both as "trend" and "target") was estimated and submitted to the BoD. Based
on this estimate, the Operational Planning Area has set the credit quality objectives to be assigned to the network
(NPL , watchlist and past due loan flows, average PD of performing loan portfolio). These estimates are the result of
a well-established model which is subject to regular methodological fine-tuning and upgrading cycles and is
organised into the following phases:
A. Analysis of the current portfolio, which has the aim of singling out the main factors that contribute to risk
and identifying the most effective measures to contain expected loss; In addition, the portfolio's "degree of
rigidity" is assessed; this is affected by the level of medium and long-term exposure and the existence of
sector concentrations which could affect portfolio quality.
B. Estimate of the loan portfolio trend and cost of credit for 2011 given certain sales and risk targets in the
absence of credit policies.
C. Definition of credit policy measures deemed necessary to contain cost of credit and future risk; thus, the
determination of credit policy actions is guided by the need to reconcile the portfolio‘s projected risk trends
with the restrictions of Economic Capital and Expected Loss assigned to credit risk as a part of the Capital
Allocation process. In operational terms, for the allocation of new disbursements and the management of
existing credit facilities, guidance is formulated on the basis of the assigned rating, customer segment,
business sector, geographical area and type of facility.
2.2.2 Disbursement processes
Loan disbursement processes are aimed at improving the effectiveness, efficiency and level of service in loan
management with the goal of:
•
•
•
•
standardising and automating loan proposals and risk assessment to the extent possible;
adapting processes to the branch network‘s organisational and operating requirements;
assessing creditworthiness, also through the assignment of internal ratings to individual borrowers;
improving customer response time.
The procedure available to the branch network and the Head Office for managing all phases of the loan
disbursement process, consists in the Electronic Loan File (it. Pratica Elettronica di Fido or P.E.F.). This tool is
continually optimised with the aim of improving both response time and the selection of acceptable risk.
The assessment and approval methods implemented in the P.E.F. reflect the principles and rules of the internal
rating system. Thus, methods differ depending on whether the customer is an individual/consumer (retail) or a
business (a corporation with revenues under € 2.5 million, or a corporation with revenues over € 2.5 million) and
on whether the customer is a prospect or existing customer.
284
Notes to the consolidated financial statements - Part E – Risks and Hedging Policies
In keeping with the regulatory provisions issued by the Supervisory Authority, the P.E.F. was designed to use one
single rating when borrowers have relationships with several MPS Group banks. In terms of activities aimed at
complying with AIRB requirements, the assignment of decision-making powers in the loan disbursement process
based on risk-based approaches is one of the key elements in meeting the expertise requirements mandated by the
Bank of Italy. These approaches, which escalate to decision-making bodies having higher levels of power in the
event of higher levels of risk underlying the credit facility, made it possible to achieve regulatory and operational
advantages.
In 2010, the P.E.F. was further enhanced with the possibility to intervene on specific details of the loan application
and approval process in relation to initiatives in support of households and businesses as a result of the economic
crisis (mainly ―fight the crisis‖ and ―joint notices‖);
Activities were put in place for the revision of credit processes: new decision-making powers are being considered
for both the Group's outer units and local areas (from Area Managers to individual decision-makers) and credit
assessment "sectors" are being set up within the local head offices. For test purposes, a pilot project was launched in
the Northern Tuscany Area.
2.2.3 Monitoring processes
As to post-disbursement management and monitoring of the credit portfolio, the ―Loan Performance Management‖
process continues to be used by the branch network which, on the basis of the forecasting features of rating models,
makes it possible to monitor changes in the Bank‘s loan portfolio over time, while focusing the attention of
relationship managers only on customers who statistically have a medium to high likelihood of default within one
year.
―Trend Management‖ is based on an early warning system leveraging four subprocesses:
•
•
•
•
―System Surveillance‖, which focuses and directs monitoring activities on major risk positions; with this
process, the bank uses forecasts to safeguard the performing loan portfolio with the aim of diagnosing
problems in advance using measures to upgrade the portfolio;
―Operational Management‖ which makes it possible to monitor the loan portfolio daily so as to identify
any abnormal internal and external events indicative of potential risk with a view to anticipating
deterioration occurring within a month that has not been reflected in the rating. The process uses an IT
application that flags irregularities for operators and points them in the direction of operational
measures that differ according to problem severity;
―Default Loan Management‖ is the process that identifies for the branch network all situations where
credit limits have been exceeded. For certain positions of a relatively low amount without sales targets,
it is possible to manage the recovery process externally by mandating a specialised credit collection
bureau;
―Simplified Renewals‖ (for positions with limited risk) are aimed at automatically extending existing
loans from year to year for internal purposes.
In 2010 measures were taken to refine the post-disbursement monitoring process, which has increasingly focused on
intercepting early signs of critical situations and promptly reassessing risks. In the fourth quarter, the new credit
monitoring process -which entailed the scrutiny of some of the original assumptions on account of results obtained
from the review of the credit monitoring process (‗lending performance management system‘)- was brought to
completion, with a view to improving the post-disbursement quality of the credit portfolio. Within this framework,
together with the Knowledge Management and Training Service, the training plan " ―Credit Monitoring: Basic
Principles" has been rolled out. Under this plan, over 5,000 employees will receive classroom training in the first six
months of 2011.
The production of daily and monthly reports for the Top Management continued to carefully track both the
incoming and existing credit flows, with a special focus on credit quality and more detailed insight into its
components. In particular, the procedure for the daily reporting of watchlist and non-performing flows was further
finetuned. Finally, support was granted -as is the common practice- to the auditing firm and to the "Financial
Statements and Accounting" department (service) for the purpose of financial statement auditing , as well as to
Investor Relations for the preparation of reports requested by the Top Management for meetings with analysts and
rating companies.
In conclusion, as indicated in the paragraph concerning the organisational setup, the overall tracking of positions
undergoing restructuring was centralised - as per the debt crisis solution tools set out by the Bankruptcy Act (art. 67
3rd par., lett. d, art. 182 bis)- into the "Group Risk and Restructuring Area", staffed with highly qualified resources.
Centralised management is mandatory when exposure at Banking Group level exceeds € 5 mln. Numerous
285
Notes to the consolidated financial statements - Part E – Risks and Hedging Policies
agreements have been signed and a high number of files are being tracked, in line with the trend recorded for the
industry in general which is not showing any signs of slowing down.
Quantitative Information
A. CREDIT QUALITY
A.1 Impaired and performing loans: amounts, value adjustments, movements, breakdown by business
sector and geographical area
A.1.1 Breakdown of financial assets by portfolio and credit quality (book values)
(in tho usands o f EUR)
Other
Total
Other
Impaired
Other assets
companies
Past-due
Restructured
loans
Watchlist
loans
Non-
Portfolio/quality
performing
Banking Group
1. Financial assets held for
trading
7.440
16.125
13.664
1.895
33.211.317
-
-
33.250.441
2. Financial assets
available for sale
4.589
761
-
-
19.470.560
-
-
19.475.910
3. Financial assets held to
maturity
-
-
-
-
3
-
-
3
4. Loans and advances to
banks
4.824
10.662
-
103
9.694.291
-
-
9.709.880
5. Loans and advances to
customers
5.485.087
4.014.586
1.248.738
632.244
144.856.926
-
-
156.237.581
6. Financial assets
designated at fair value
-
-
-
-
39.500
-
-
39.500
7. Financial assets held for
sale
-
-
-
-
51.870
-
-
51.870
8. Hedging derivatives
-
-
-
-
313.412
-
-
313.412
Total 31 12 2010
5.501.940
4.042.134
1.262.402
634.242
207.637.879
-
-
219.078.597
Total 31 12 2009
4.672.113
3.774.654
702.858
1.108.750
188.426.959
-
-
198.685.334
With regard to the various portfolios of financial assets, the table provides a breakdown by credit quality using the definition of impaired
exposure set out by the Bank of Italy and adopted for the purposes of the financial statements.
Since the entire portfolio of financial assets is subject to classification by credit quality, it should be noted that the items ―Loans and advances to
banks‖ and ―Loans and advances to customers‖ include not only loans but also other types of assets (securities, etc.). All amounts are book values,
and thus, net of any related doubtful amounts.
286
Notes to the consolidated financial statements - Part E – Risks and Hedging Policies
A.1.2 Breakdown of credit exposures by portfolio and credit quality (gross and net values)
19.475.910
3
-
3
3
15.589
9.709.564
15.273
9.694.291
9.709.880
8.182.443
11.380.655
145.674.964
818.038
144.856.926
156.237.581
-
-
-
39.500
39.500
7. Financial assets held for sale
-
-
-
51.870
51.870
8. Hedging derivatives
-
-
-
313.412
313.412
19.711.850
8.271.132
11.440.718
207.637.879
219.078.597
1. Financial assets held for
trading
-
-
-
-
-
2. Financial assets available for
sale
-
-
-
-
-
-
-
3. Financial assets held to
maturity
-
-
-
-
-
-
-
4. Loans and advances to banks
-
-
-
-
-
-
-
5. Loans and advances to
customers
-
-
-
-
-
-
-
6. Financial assets designated at
fair value
-
-
-
-
-
7. Financial assets held for sale
-
-
-
-
-
-
Portfolio
Total
Net exposure
19.470.560
Gross
-
exposure
33.250.441
downs
33.211.317
Gross
x
Portfolio/quality
exposure
adjustments
Performing
Net exposure
Specific write-
Impaired assets
(net exposure)
(in tho usands o f EUR)
A. Banking Group
1. Financial assets held for
trading
43.058
3.934
39.124
2. Financial assets available for
sale
24.596
19.246
5.350
19.470.560
-
-
-
81.098
65.509
19.563.098
6. Financial assets designated
at fair value
3. Financial assets held to
maturity
4. Loans and advances to banks
5. Loans and advances to
customers
Total A
x
x
x
51.874
x
4
x
174.906.965
833.315
B. Other consolidated
companies
8. Hedging derivatives
x
x
x
x
-
-
-
-
-
-
Total B
-
-
-
x
-
x
-
-
-
Total 31 12 2010
19 .7 11.8 5 0
8 .2 7 1.13 2
11.4 4 0 .7 18
17 4 .9 0 6 .9 6 5
8 3 3 .3 15
2 0 7 .6 3 7 .8 7 9
2 19 .0 7 8 .5 9 7
Total 31 12 2009
17 .2 6 6 .5 5 9
7 .0 0 8 .18 4
10 .2 5 8 .3 7 5
16 5 .8 4 1.9 7 6
8 2 4 .7 8 7
18 8 .4 2 6 .9 5 9
19 8 .6 8 5 .3 3 4
With regard to the various portfolios of financial assets, the table provides a breakdown by credit quality using the definition of impaired
exposure set out by the Bank of Italy and adopted for the purposes of the financial statements.
Since the entire portfolio of financial assets is subject to classification by credit quality, it should be noted that the items ―Loans and advances to
banks‖ and ―Loans and advances to customers‖ include not only loans but also other types of assets (securities, etc.).
All amounts are book values, before and after any doubtful amounts.
287
Notes to the consolidated financial statements - Part E – Risks and Hedging Policies
Pursuant to Bank of Italy's requirements set out in its communication of 16 February 2011, the following table reports performing loans and
advances to customers (line 5 of previous table, "performing" column), broken down into exposures whose terms were renegotiated in collective
agreements and other exposures. For both groups, past-due positions are broken down by ―past due days‖ behind schedule (the amounts of past
due loans to be repaid in instalments includes both the amount past due and the amount due and payable).
(in tho usands o f EUR)
Performing loans and advances to customers
Portfolio/quality
Portfoglio
Gross exposure
Net exposure
adjustments
Exposures under renegotiation
a) performing
2.466.225
24.319
2.441.906
b) past due:
-
-
-
1/90 days
239.499
4.835
234.664
17.159
166
16.993
256.658
5.001
251.657
2.722.883
29.320
2.693.563
-
-
-
135.545.703
689.205
134.856.498
b) past due:
-
-
-
1/90 days
6.860.224
94.170
6.766.054
546.154
5.343
540.811
7.406.378
99.513
7.306.865
Total other exposures
142.952.081
788.718
142.163.363
Total performing exposures to customers
145.674.964
818.038
144.856.926
91/180 days
Total past due
Total exposures under renegotiation
Other exposures
a) performing
91/180 days
Total past due
A.1.3 Banking Group - Balance sheet and off-balance sheet exposure to banks: gross and net values
3112 2010
(in tho usands o f EUR)
Type of exposure/ Amount
Gross
Specific write-
Portfolio
exposure
downs
adjustments
Net exposure
A. Balance-sheet exposure
a) Non-performing loans
47.934
41.889
x
6.045
b) Watchlist loans
40.770
29.347
x
11.423
-
-
x
-
133
30
x
103
c) Restructured loans
d) Past due
e) Other assets
17.336.044
Total A
x
17.424.881
71.266
2.882
163
15.277
17.320.767
15.277
17.338.338
B. Off-balance-sheet exposure
a) Impaired
b) other
10.700.636
x
x
2.719
819
10.699.817
Total B
10.703.518
163
819
10.702.536
Total (A+B)
28.128.399
71.429
16.096
28.040.874
With regard to dealings with banks, the table provides a breakdown by credit quality using the definition of impaired exposures set out by the
Bank of Italy and adopted for the purposes of the financial statements.
Thus, all balance-sheet exposure amounts are stated at book values, before and after any doubtful amounts. In particular, balance-sheet
exposures encompass all financial assets related to banks arising from financial statement Item 20 ―Held-for-trading financial assets,‖ Item 30
―Financial assets measured at fair value,‖ Item 40 ―Available-for-sale financial assets and Item 60 ―Loans and advances to banks‖ with the
exception of derivative contracts which are considered as off-balance-sheet in this section.
288
Notes to the consolidated financial statements - Part E – Risks and Hedging Policies
Off-balance-sheet exposures include all financial transactions other than balance-sheet transactions (guarantees issued, commitments and
derivatives, including those used for hedging purposes) involving the assumption of credit risk and valued using the measurement criteria set
forth by the Bank of Italy.
289
Notes to the consolidated financial statements - Part E – Risks and Hedging Policies
A.1.4 Banking Group - Balance-sheet exposure to banks: changes in gross impaired loans
3112 2010
(in tho usands o f EUR)
NonSource / Categories
performing
loans
A. Gross exposure, opening balance
Watchlist
Restructured
loans
loans
Past-due
54.144
37.448
-
21
-
-
-
-
3.186
4.483
-
112
3.006
2.955
-
-
-
-
-
-
180
1.528
-
112
9.396
1.161
-
-
C.1 transfers to performing loans
-
-
-
-
C.2 write-offs
-
368
-
-
8.923
793
-
-
- of which: sold but not derecognised
B. Increases
B.1 transfers from performing loans
B.2 transfers from other
impaired loans
B.3 other increases
C. Other decreases
C.3 collections
473
-
-
-
C.5 transfers to other categories
of impaired exposure
C.4 amounts realised upon disposal of positions
-
-
-
-
C.6 other decreases
-
-
-
-
47.934
40.770
-
133
-
-
-
-
D. Gross exposure, closing balance
- of which: sold but not derecognised
With regard to balance-sheet exposures to banks, the table shows changes in impaired exposure that was subject to country risk during the year.
Since the entire portfolio of financial assets is subject to classification by credit quality, it should be noted that exposure includes not only loans
but also other types of assets (securities, etc.). Balance-sheet exposures are expressed at book value.
290
Notes to the consolidated financial statements - Part E – Risks and Hedging Policies
A.1.5 Banking Group - Balance-sheet exposure to banks: changes in overall value adjustments
3112 2010
(in tho usands o f EUR)
NonSource / Categories
performing
loans
A. Opening balance of overall adjustments
Watchlist
Restructured
loans
loans
Past-due
42.070
22.928
-
1
-
-
-
-
3.709
7.236
-
29
3.630
7.236
-
29
-
-
-
-
79
-
-
-
3.890
817
-
-
C.1 write-backs from valuation
271
449
-
-
C.2 write-backs from collection
3.619
-
-
-
-
368
-
-
-
-
-
-
-
-
-
-
41.889
29.347
-
30
-
-
-
-
- of which: sold but not derecognised
B. Increases
B.1 value adjustments
B.2 transfers from other categories of
impaired exposures
B.3 other increases
C. Other decreases
C.3 write-offs
C.4 transfers to other categories
of impaired exposure
C.5 other decreases
D. Closing balance of overall adjustments
- of which: sold but not derecognised
With regard to balance-sheet exposures to banks, the table shows changes in overall value adjustments on impaired exposure during the year.
Since the entire portfolio of financial assets is subject to classification by credit quality, it should be noted that value adjustments shown refer not
only to loans but also to other types of assets (securities, etc.). Balance-sheet value adjustments are expressed at book value.
291
Notes to the consolidated financial statements - Part E – Risks and Hedging Policies
A.1.6 Banking Group - Balance sheet and off-balance sheet exposure to customers: gross and net amounts
3112 2010
(in tho usands o f EUR)
Type of exposure/ Amount
Gross
Specific write-
Portfolio
exposure
downs
adjustments
Net exposure
A. Balance-sheet exposure
a) Non-performing loans
12.478.231
6.984.381
x
5.493.850
b) Watchlist loans
5.087.549
1.072.963
x
4.014.586
c) Restructured loans
1.343.841
95.103
x
1.248.738
675.729
43.485
x
632.244
d) Past due
e) Other assets
179.224.822
Total A
x
198.810.172
8.195.932
224.619
31.439
818.038
178.406.784
818.038
189.796.202
B. Off-balance-sheet exposure
a) impaired
b) other
40.211.591
x
x
193.180
35.550
40.176.041
Total B
40.436.210
31.439
35.550
40.369.221
Total (A+B)
239.246.382
8.227.371
853.588
230.165.423
The table provides a breakdown by credit quality using the definition of impaired exposure set forth by the Bank of Italy and adopted for the
purposes of the financial statements.
Please see the report on operations for quantification of and reporting on capital ratios for coverage of lending relationships.
Thus, all balance-sheet exposures are stated at book values, before and after any doubtful amounts. In particular, balance-sheet exposure
summarises all financial assets related to customers arising from financial statement Item 20 ―Held-for-trading financial assets,‖ Item 30 ―Financial
assets measured at fair value,‖ Item 40 ―Available-for-sale financial assets" and Item 70 ―Loans and advances to customers‖ with the exception of
derivative contracts which are considered as off-balance-sheet in this section.
Off-balance-sheet exposures include all financial transactions other than balance-sheet transactions (guarantees issued, commitments and
derivatives, including those used for hedging purposes) involving the assumption of credit risk and valued using the measurement criteria set
forth by the Bank of Italy.
Balance-sheet exposure also includes loans sold but not derecognised in relation to performing and non-performing securitisation transactions.
Off-balance-sheet exposures include all financial transactions other than balance-sheet transactions (guarantees issued, commitments and
derivatives, including those used for hedging purposes) involving the assumption of credit risk and valued using the measurement criteria set
forth by the Bank of Italy.
292
Notes to the consolidated financial statements - Part E – Risks and Hedging Policies
A.1.7 Banking Group - Balance-sheet exposure to customers: changes in gross impaired loans
3112 2010
(in tho usands o f EUR)
NonSource / Categories
performing
loans
A. Gross exposure, opening balance
Watchlist
Restructured
loans
loans
Past-due
10.598.327
4.672.434
726.042
1.176.634
-
-
-
-
2.893.958
2.844.719
824.904
643.089
956.294
1.968.461
585.356
539.509
1.266.643
494.531
168.970
33.330
671.021
381.727
70.578
70.250
1.014.054
2.429.604
207.105
1.143.994
5.670
540.385
80.027
340.618
C.2 write-offs
154.974
35.124
1.204
5.498
C.3 collections
623.644
532.762
57.942
186.083
C.4 amounts realised upon disposal of positions
- of which: sold but not derecognised
B. Increases
B.1 transfers from performing loans
B.2 transfers from other
impaired loans
B.3 other increases
C. Other decreases
C.1 transfers to performing loans
190.435
30.026
-
10.845
C.5 transfers to other categories
of impaired exposure
16.536
1.283.361
67.932
595.645
C.6 other decreases
22.795
7.946
-
5.305
D. Gross exposure, closing balance
12.478.231
5.087.549
1.343.841
675.729
- of which: sold but not derecognised
-
314
-
1.219
With regard to balance-sheet exposures to customers, the table shows changes in impaired exposures during the year. In particular, write-offs
include reductions due to loan redemptions. Since the entire portfolio of financial assets is subject to classification by credit quality, it should be
noted that exposure includes not only loans but also other types of assets (securities, etc.). Balance-sheet exposures are expressed at book value.
Item C.2 ―Write-offs‖ also includes write-offs of positions that have been completely amortised.
293
Notes to the consolidated financial statements - Part E – Risks and Hedging Policies
A.1.8 Banking Group - Balance-sheet exposure to customers: changes in overall value adjustments
3112 2010
(in tho usands o f EUR)
NonSource / Categories
performing
loans
A. Opening balance of overall adjustments
Watchlist
Restructured
loans
loans
Past-due
5.938.301
914.279
24.695
67.909
-
-
-
-
1.855.644
617.763
82.385
47.322
1.433.028
588.970
70.576
39.546
B.2 transfers from other categories of
impaired exposures
215.502
7.161
6.707
550
B.3 other increases
207.114
21.632
5.102
7.226
C. Other decreases
809.564
459.079
11.977
71.746
C.1 write-backs from valuation
388.918
163.768
7.521
44.658
C.2 write-backs from collection
85.881
35.431
609
10.364
154.960
35.103
1.204
5.498
2.008
216.754
2.313
8.845
177.797
8.023
330
2.381
6.984.381
1.072.963
95.103
43.485
-
20
-
60
- of which: sold but not derecognised
B. Increases
B.1 value adjustments
C.3 write-offs
C.4 transfers to other categories
of impaired exposures
C.5 other decreases
D. Closing balance of overall adjustments
- of which: sold but not derecognised
With regard to customer dealings, the table shows changes in overall value adjustments on deteriorated exposure subject to country risk during
the year.
Item C.2 ―Write-offs‖ also includes write-offs of positions that have been completely amortised.
294
295
40.598.384
6.874.681
1.029.509
5.845.172
128.285
1.259.550
32.335.868
class 1
51.476.166
7.996.199
216.851
7.779.348
1.196.664
303.903
41.979.400
class 2
7.011.222
4.654.243
35.452
4.618.791
344.366
29.813
1.982.800
class 3
1.019.907
864.854
28
864.826
13.282
1.678
140.093
class 4
External rating classes
326.376
238.193
17.392
220.801
27.931
624
59.628
class 5
2.033.252
114.696
85.199
29.497
265.033
1.448.182
205.341
class 6
155.740.990
10.116.405
1.592.513
8.523.892
8.384.415
6.808.759
130.431.411
No rating
258.206.297
30.859.271
2.976.944
27.882.327
10.359.976
9.852.509
207.134.541
Total
From a combined analysis of internal ratings (thus, limited only to portfolios that are subject to possible validation) and external ratings, it was shown that about 87% of total exposures are
covered by an external rating or a rating from an internal model, while the remaining 13% is not rated.
External ratings cover about 40% of total exposures. 90% of exposure covered by external ratings is with customers having a credit rating equivalent to S&P classes between AAA and A-.
External rating categories used to complete the table are those used by Standard & Poor‘s. The exposures shown are those reported in Table A.1.3 (exposures to banks) and A.1.6 (exposures to
customers) above. If more than one external rating is assigned, the criteria used to select the rating are those set out by the Bank of Italy (if two ratings are available, the lower of the two is
used, and if three or more ratings are assigned, the second highest rating is selected). To ensure relevance of information, internal cross-reference tables were used to convert classification by
various rating agencies into classification by Standard & Poor‘s.
class 6=lower than B-
class 5=B+/B-
class 4=BB+/BB-
class 3=BBB+/BBB-
class 2=A+/A-
class 1=AAA/AA-
Total
B. Derivatives
B.1 Financial derivatives
B.2 Credit derivatives
C. Guarantees issued
D. Commitments to disburse funds
A. Balance-sheet exposure
Exposures
3112 2010
(in tho usands o f EUR)
Notes to the consolidated financial statements - Part E – Risks and Hedging Policies
A.2 Classification of exposure by external and internal ratings
A.2.1 Banking group - Breakdown of balance sheet and off-balance sheet exposure by external ratings (book values)
19.083.184
629.713
289.480
45.328
244.152
1.755.266
16.408.725
H igh qua lit y
38.151.423
1.315.086
470.471
121.935
348.536
3.113.396
33.252.470
A v e ra ge
qua lit y
46.153.293
2.822.377
382.590
272.533
110.057
2.298.881
40.649.445
F a ir qua lit y
16.360.853
1.148.202
117.951
117.951
701.869
14.392.831
M e dio c re
qua lit y
3.886.325
104.473
25.789
25.789
145.390
3.610.673
P o o r qua lit y
9.418.937
32.796
33.086
33.086
108.314
9.244.741
D e f a ult
1.550.248
58.942
5.904
5.904
42.822
1.442.580
G ro up
a dm inis t ra t iv e
de f a ult
123.602.034
3.740.920
29.534.000
2.354.418
27.179.582
2.194.038
88.133.076
N o ra t ing
258.206.297
9.852.509
30.859.271
2.976.944
27.882.327
10.359.976
207.134.541
T o tal
296
UNRATED exposures totalled approx. EUR 124 mln, or 47.9 % of the total portfolio amount.
The table shows that 7.39% of exposures rated internally come from High Quality customers (Master Scale categories AAA and A1), 14.78% from Medium Quality Customers (Master Scale categories A2,
A3 and B1), 17.87% from Fair Quality customers (Master Scale categories B2, B3, C1 and C2), 6.34% from Mediocre Quality customer (Master Scale categories C3, D1, D2 and D3) and 3% from Poor
Quality customers (Master Scale categories E1, E2 and E3). Customers rated as Investment Grade (Master Scale categories AAA-B1) accounted for 22.7% of total internally rated exposures.
The table provides a breakdown of customers of the MPS Group by risk categories assigned on the basis of ratings arising from internal models. For this purpose, account is given only of exposures
(borrowers) for which an internal rating is periodically recorded for models/legal entities/portfolios which have been subject to a validation process with the regulatory authorities without any crossreference from official ratings to internal ratings especially with regard to the following customer segments: ―Banks,‖ ―Non-banking financial institutions,‖ and ―Governments and Public Administrations‖.
Thus, based on this proviso, exposures related to the latter segments, even if covered by official ratings, were reported as ―unrated‖ in the internal rating models.
Total
D. Commitments to disburse funds
B. Derivatives
B.1 Financial derivatives
B.2 Credit derivatives
C. Guarantees issued
A. Balance-sheet exposure
Exposures
Internal rating classes
3112 2010
(in tho usands o f EUR)
Notes to the consolidated financial statements - Part E – Risks and Hedging Policies
A.2.2 Banking group - breakdown of balance sheet and off-balance sheet exposure by internal ratings (book values)
297
Amount of Net
Exposure
-
305.843
-
601.480
907.323
-
5.094.661
-
1.178.004
6.272.665
-
-
-
-
-
-
-
-
-
-
Securities
-
8.208
-
429
8.637
-
4.974.089
-
915.548
5.889.637
collaterals
Other
-
225.169
-
602.943
828.112
-
-
-
235.000
235.000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Other public entities
Property
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
O t he r de riv a t iv e s
Banks
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Uns e c ure d s igna t ure lo a ns
-
101
-
73
174
-
-
-
23.743
23.743
-
-
-
43
43
-
105
-
397
502
-
233.478
-
603.488
836.966
-
4.974.194
-
1.174.688
6.148.882
Total 31 12 2010 (1) + (2)
Other entities
Governments and
Other entities
Governments and
CLN
The fair value of collaterals estimated as at balance sheet date is shown in the column "Real guarantees" and "Personal guarantees"; if such information is not available, the contractual value is
reported.
The table shows the amount of balance-sheet exposures to banks that are partially or fully secured. Thus, the table does not correspond to total balance-sheet exposures since it excludes the
unsecured portion. As in the tables above, balance-sheet exposures to banks include not only loans but all financial assets, except for derivative contracts. As regards personal guarantees, the
economic segments to which guarantors and sellers of protection belong (in the case of unsecured loans and credit derivatives, respectively) are identified making reference to the classification
criteria provided for in the brochure ―classification of customers by segments and groups of economic activity‖ published by the Bank of Italy. The column "Amount of exposure" posts the amount
of net exposure. The exposure amount includes performing and non-performing securitisation transactions, the loans of which have not been derecognised.
- of which impaired
2.2 partially secured
- of which impaired
2.1 totally secured
sheet exposures:
2. Secured off-balance
- of which impaired
1.2 partially secured
- of which impaired
1.1 totally secured
exposures:
1. Secured balance-sheet
central banks
C re dit de riv a t iv e s
Other public entities
Real guarantees (1)
central banks
Personal guarantees (2)
Banks
(in tho usands o f EUR)
Notes to the consolidated financial statements - Part E – Risks and Hedging Policies
A.3 Breakdown of secured exposure by type of collateral
A.3.1 Banking group - Secured exposures to banks
298
Amount of Net
Exposure
143
-
7.535
1.734
29.009
29.152
84.659
194.961
5.413.777
72.884.667
73.079.628
Property
728.897
37.836
2.316.373
3.045.270
851.141
11.227.750
7.224.116
97.957.197
109.184.947
813
45.129
4.636
157.213
202.342
216.124
7.407.529
98.373
5.084.024
12.491.553
Other
collaterals
549
22.403
985
85.241
107.644
4.713
71.065
10.346
245.638
316.703
-
-
-
-
-
-
-
-
-
-
Governments
and central
banks
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Governments
and central
banks
-
102
-
-
102
40
479
1.009
1.132
1.611
-
30
-
3.924
3.954
710
19.965
1.990
116.356
136.321
536
56.394
-
63.500
119.894
17.109
28.043
14.066
340.909
368.952
4.308
245.410
32.635
1.981.763
2.227.173
318.721
1.530.687
1.671.746
18.681.716
20.212.403
Other entities
Other entities
CLN
(in tho usands o f EUR)
6.206
369.611
39.990
2.320.650
2.690.261
642.076
9.252.729
7.211.307
97.354.442
106.607.171
Total 31 12 2010 (1) + (2)
The fair value of collaterals estimated as at balance sheet date is shown in the column "Real guarantees" and "Personal guarantees"; if such information is not available, the contractual value is
reported.
The column "Amount of exposure" posts the amount of net exposure.
The table shows the amount of off-balance-sheet exposures to customers, including derivative contracts, which are fully or partially secured. As regards personal guarantees, the economic segments
to which guarantors and sellers of protection belong (in the case of unsecured loans and credit derivatives, respectively) are identified making reference to the classification criteria provided for in
the brochure ―classification of customers by segments and groups of economic activity‖ published by the Bank of Italy.
- of which impaired
2.2 partially secured
- of which impaired
2.1 totally secured
sheet exposures:
2. Secured off-balance
- of which impaired
1.2 partially secured
- of which impaired
1.1 totally secured
exposures:
1. Secured balance-sheet
Securities
Other derivatives
Other public
entities
Unsecured signature loans
Other public
entities
Credit derivatives
Banks
Real guarantees
(1)
Banks
Personal guarantees (2)
Notes to the consolidated financial statements - Part E – Risks and Hedging Policies
A.3.2 Banking group - Secured exposures to customers
299
The business segments to which collateral providers and originators of protection belong are identified making reference to the classification criteria provided for in the brochure
―classification of customers by segments and groups of economic activity‖ published by the Bank of Italy.
Balance-sheet exposures reported in the table below are the same as those reported in the financial statements, while off-balance-sheet transactions include all financial transactions other
than balance-sheet transactions (guarantees issued, commitments and derivatives) involving the assumption of credit risk and valued using the measurement criteria set forth by the Bank of
Italy.
Notes to the consolidated financial statements - Part E – Risks and Hedging Policies
B. BREAKDOWN AND CONCENTRATION OF CREDIT EXPOSURE
B.1 Banking group - Breakdown of balance sheet and off-balance sheet exposure to customers by business
sector (book values)
1.241.621
A.3 Restructured loans
A.5 Other exposures
72.121
B.3 Other impaired assets
300
199.352.105
163.975.931
Total (A+B) 31 12 2009
17.790.315
Total (A+B) 31 12 2010
Total B
17.598.895
46.887
B.4 Other exposures
72.412
B.2 Watchlist loans
7.655.486
8.914.527
62.923
33.276
2.361
5.803
21.483
-
-
809.055
43.440
94.726
1.036.903
8.851.604
170.318.237
adjustments
6.867.480
Overall value
181.561.790
exposures
B.1 Non-performing loans
B. Off-balance-sheet
Total A
631.399
3.928.761
A.4 Past due
5.441.772
A.2 Watchlist loans
Net exposure
A.1 Non performing loans
A. Balance-sheet exposure
Areas
Exposure / Geographic
ITALY
Net exposure
35.409.718
26.805.304
20.151.309
20.150.015
375
919
-
-
6.653.995
6.518.978
804
7.117
84.523
42.573
adjustments
Overall value
120.392
126.319
2.373
690
-
1.683
-
-
123.946
6.084
44
377
35.394
82.047
Net exposure
2.345.928
2.831.034
2.080.351
2.079.885
-
32
434
-
750.683
740.223
19
-
1.253
9.188
adjustments
Overall value
33.255
34.134
1.604
1.495
-
-
109
-
32.530
1.807
1
-
63
30.659
Net exposure
189.574
251.930
107.268
107.268
-
-
-
-
144.662
144.532
7
-
27
96
ASIA
adjustments
3.900
4.118
47
47
-
-
-
-
4.071
678
-
-
601
2.792
766.956
925.050
239.978
239.978
-
-
-
-
685.072
684.814
15
-
22
221
REST OF THE WORLD
Net exposure
AMERICA
1.653
1.861
42
42
-
-
-
-
1.819
414
-
-
2
1.403
adjustments
COUNTRIES
Overall value
(in thousands of EUR)
Overall value
OTHER EUROPEAN
Notes to the consolidated financial statements - Part E – Risks and Hedging Policies
B.2 Banking group - Breakdown of balance sheet and off-balance sheet exposure to customers by
geographic area (book values)
103
-
2.392
-
301
137
8.645.014
Total (A+B) 31 12 2009
adjustments
Overall value
15.780
15.813
75
68
7
-
-
15.738
9.044
30
-
664
6.000
Net exposure
11.381.554
10.753.165
6.731.589
6.731.589
-
-
-
4.021.576
4.010.623
-
-
7.475
3.478
COUNTRIES
adjustments
Overall value
37.200
42.367
451
451
-
-
-
41.916
1.682
-
-
28.473
11.761
Net exposure
911.333
1.138.609
580.882
580.882
-
-
-
557.727
555.252
-
-
-
2.475
adjustments
Overall value
24.068
28.247
6
6
-
-
-
28.241
4.255
-
-
-
23.986
Net exposure
481.793
277.065
61.849
59.770
-
2.079
-
215.216
213.660
-
-
1.556
-
ASIA
1.193
696
252
96
-
156
-
444
234
-
-
210
-
508.953
273.296
174.096
174.096
-
-
-
99.200
99.108
-
-
-
92
REST OF THE WORLD
Net exposure
AMERICA
Overall value
OTHER EUROPEAN
62
-
-
-
142
280
402
198
198
-
-
-
204
adjustments
Overall value
Exposures are broken down geographically by the country of residence of the borrower.
Amounts are stated before and after any doubtful amounts.
Balance-sheet exposures reported in the table below are the same as those reported in the financial statements, while off-balance-sheet transactions include all financial transactions other than
balance-sheet transactions (guarantees issued, commitments and derivatives) involving the assumption of credit risk and valued using the measurement criteria set forth by the Bank of Italy.
15.598.739
3.154.120
Total (A+B) 31 12 2010
Total B
3.153.480
B.3 Other impaired assets
B.4 Other exposures
503
-
12.444.619
12.442.124
Net exposure
B.2 Watchlist loans
B.1 Non-performing loans
exposures
B. Off-balance-sheet
Total A
A.5 Other exposures
A.4 Past due
A.3 Restructured loans
A.2 Watchlist loans
A.1 Non performing loans
A. Balance-sheet exposure
Areas
Exposure / Geographic
ITALY
adjustments
(in thousands of EUR)
Notes to the consolidated financial statements - Part E – Risks and Hedging Policies
B.3 Banking group - Breakdown of balance sheet and off-balance sheet exposure to banks by geographic
area (book values)
Notes to the consolidated financial statements - Part E – Risks and Hedging Policies
B.4 Large exposures
Item/Amount
31 12 2010
a) Amount
b) Weighted value
c) Number
31 12 2009
72.685.460
-
4.565.119
-
9
-
Reporting criteria for "large exposures" were amended by the 6th update to Bank of Italy's Circular no. 263; the new regulations provide for
positions to be defined as "large exposures" by making reference to credit-risk unweighted exposures, unlike previous regulations which made
reference to weighted exposures. On an equal risk-assumption basis, this determines a different representation of 'large exposures' with respect to
the past, although in continuation from the level of risk assumed.
Pursuant to Bank of Italy's requirements set out in its communication of 28 February 2011, the above table reports the number of "large
exposures", as well as their weighted value and book value, i.e. the unweighted exposure based on which the position was defined as a "large
exposure".
An exposure is deemed as a "large exposure" when its amount is equal to or greater than 10% of bank's regulatory capital.
Pursuant to the afore-mentioned regulations, government securities were also accounted for.
302
Notes to the consolidated financial statements - Part E – Risks and Hedging Policies
C. ASSET SECURITISATION AND DISPOSAL TRANSACTIONS
C.1 Securitisation transactions
Qualitative Information
Structures, processes and goals
In keeping with the organisational model established at Group level for the governance and management of risks,
securitisation risk is governed by a specific Group directive.
The Parent company‘s Group Balance Sheet Management Service establishes general practices and coordinates
activities in relation to securitisation transactions. The criteria and rules for managing securitisation transactions are
instead determined by the Parent Company‘s Credit Policies and Planning Area. More specifically, the Specialpurpose Loans and Securitisations service within this Area is responsible for establishing operational guidelines and
general practices for the securitisation of performing loans. For this purpose, it looks after related aspects and
obligations associated with servicing activities and monitors the performance of existing transactions through
monthly and quarterly reports on collections of remaining principal, positions in arrears and disputed positions
arising from securitisation transactions.
In coordination with other originator banks, the Parent company‘s Special-purpose Loans and Securitisations service
prepares summary reports on portfolios sold (―total reports‖) and follow-up reports on multi-originator transactions.
In addition, as a part of critical situation management, this service notifies cases that may pose potential risks for
noteholders to the relevant functions in the organisation.
For the purpose of financial statement preparation, the 'Financial Statement and Accounting' service provides
support in identifying any impairment on the Group‘s securities resulting from securitisation transactions.
In its capacity as third-level control body, the Internal Controls Area uses sampling procedures to periodically
validate:
whether the degree of recoverability of loans sold is accurate and, as a result, whether the fair value of
securities issued is appropriate;
whether line checks assigned to the various units have been carried out and roles and responsibilities
properly identified;
the compliance of reporting/accounting procedures with current regulations with the collaboration of other
units, as necessary;
the existence of any conflicts of interest with respect to noteholders; and compliance, on a sampling basis,
with the obligations of Law 197/91, as amended.
Non-performing securitisations are managed by a specific unit of the subsidiary MPS Gestione Crediti S.p.A.,
whereas securitisations of consumer loans are taken care of by the subsidiary Consum.it S.p.a.
Furthermore, a dedicated Group Directive requires a half-yearly report to be submitted to the Top Management
showing performance of transactions executed by the Banking Group over time.
Securitisation transactions of performing assets were structured with the aim of deriving economic advantages from
the optimisation of credit portfolio management, diversification of funding sources, reduction in funding costs and
matching the maturities of assets and liabilities.
Securitisations remained stable, an opinion also shared by the rating agencies who did not readjust the ratings
originally assigned to the classes of notes issued.
The portfolio securitised through the Siena Mortgages S.r.l. vehicles comprises real estate-backed loans issued by
both the Parent Company and by other banks within the Group.
Mantegna Finance S.r.l. and Mantegna Finance II S.r.l. were originated by Banca Agricola Mantovana S.p.A. (now
merged into the Parent company), and Spoleto Mortgages S.r.l. was originated by Banca Popolare di Spoleto S.p.A.
Subsequent to the merger by absorption of Banca Antonveneta S.p.a. in December 2008, the Parent Company took
over from Banca Antonveneta as the Servicer of 2 securitisations, namely Giotto Finance S.p.a. and Giotto Finance 2
S.p.a (redeemed).
Redemption of securitisation transactions
In 2010 four securitisation transactions were redeemed in advance.
303
Notes to the consolidated financial statements - Part E – Risks and Hedging Policies
1) In January 2010, the Segesta Finance S.r.l. securitisation of assets sold and derecognised was redeemed
with no impact on the Parent Company's financial statements.
2) On 15 February 2010, the Siena Mortgages 02-3 S.p.a securitisation was redeemed, with subsequent
repurchase of residual receivables consisting in real estate-backed loans issued by both the Parent Company
and by other banks within the Group.
3) On 20 April 2010, the Giotto Finance 2 S.p.a securitisation was redeemed, with subsequent repurchase of
residual receivables consisting in performing real estate-backed loans taken over from Banca Antonveneta
S.p.a after its merger in 2008.
4) On 5 November 2010, the Ulisse 2 S.p.a.securitisation was redeemed, with subsequent repurchase of
residual receivables consisting in non performing, short-term, unsecured loans originated by the Parent
Bank. The portfolio had been sold in August 2001. The repurchase transaction contributed EUR 79.2 mln
profit to the Parent Company's financial results.
Securitisations originated in previous financial years, outstanding as at 31.12.2010
Following is an outline of the Group‘s performing securitisation transactions originated in previous financial years,
outstanding as at 31.12.2010, all of which qualifiying for derecognition of the underlying assets:
Siena Mortgages 03-4 S.r.l.
The portfolio securitised through the Siena Mortgages 03-4 S.p.a. special-purpose vehicle comprises real estatebacked loans issued by both the Parent Company and by other banks within the Group.
Siena Mortgages 03-4 S.p.A. was established in 2003 and has a remaining debt balance of € 487 mln; 57% of
mortgages have been repaid.
Mantegna Finance S.r.l.
Mantegna Finance II S.r.l.
Other securitisation transactions involving residential mortgages are Mantegna Finance S.r.l. and Mantegna Finance
II S.r.l., which were originated by Banca Agricola Mantovana S.p.A., which has now merged into the Group's parent
Company.
Mantegna Finance S.r.l. dates back to 2001 and has a remaining debt balance of € 69.7 mln. Mantegna Finance II
S.r.l. is a transaction that was completed in 2002 and has a remaining debt balance of EUR 56.9 mln.
Gonzaga Finance S.r.l.
In addition, Banca Agricola Mantovana S.p.A. originated the Gonzaga Finance S.r.l. securitisation of securities in
2000, which has a remaining debt balance of EUR 15 mln .
Spoleto Mortgages S.r.l.
Ulisse 4
Finally, the Ulisse 4 and Spoleto Mortgages securitisations were carried out by Banca Popolare di Spoleto, a bank
jointly controlled by the Parent Company and proportionately consolidated at 26.005%.
Ulisse 4 is a securitisation of non-performing loans that originated in 2001 and has a remaining debt balance of EUR
13.6 mln as at 31.12.2010. The senior notes were fully redeeemed.
Spoleto Mortgages S.r.l. is a securitisation of performing loans that originated in 2003; its remaining debt balance is
EUR 50.8 mln. As at 31/12/2010 the special-purpose vehicle had repaid 81.28% of the senior notes.
304
Notes to the consolidated financial statements - Part E – Risks and Hedging Policies
Securitisation transactions completed in 2010
Following the crisis on the international markets in 2008, which triggered a more conservative approach by rating
agencies as well as initiatives to improve the overall transparency of transactions, the European ABS market saw a
significant reopening of activities and on-going improvements with investors starting to approach the market again.
For the purpose of achieving economic benefits from the management of reserve assets, two new securitisations,
Siena Mortgages 10–7 S.r.l. and Casaforte S.r.l. were launched in the course of 2010, in addition to the Covered
Bonds Issuance Programme (see details in section C.3):
Siena Mortgages 10-7 S.r.l.
On 30 September 2010, the first of the two securitisation transactions for the year was carried out. Its portfolio
contained 34,971 BMPS performing, real-estate backed loans with instalments regularly paid as at the date of
valuation of the disposed portfolio and a remaining debt balance of EUR 3,479 mln. Siena Mortgages 02 -3 S.r.l.
was used again as the transferee of the transaction underlying assets and it was renamed Siena Mortgages 10–7 S.r.l.
The special-purpose vehicle is 93% owned by Stichting Canova, a foundation incorporated under Dutch law, and the
remaining part is owned by the Parent company. The vehicle structure ensures its independence.
On 22 November 2010, Siena Mortgages 10-7 financed purchasing of the portfolio by issuing
Mortgages Backed Floating Rate Securities of the following classes:
Residential
Class A1 Senior notes rated AAA by Moody‘s and Aaa by Fitch, third-party owned, for an amount of EUR
595 mln;
Class A2 Senior notes rated AAA by Moody‘s and Aaa by Fitch, third-party owned, for an amount of EUR
400 mln;
Class A3 Senior notes rated AAA by Moody‘s and Aaa by Fitch, owned by the Bank, for an amount of EUR
1,666.9 mln;
Class B Mezzanine notes rated Caa1 by Moody‘s and NR by Fitch, owned by the Bank, for an amount of
EUR 817.6 mln;
Class C Junior notes rated NR by Moody‘s and NR by Fitch, owned by the Bank, for an amount of EUR
106.6 mln;
Classes A1 and A2 were placed with market investors, whereas the remaining classes of notes issued by the vehicle
were underwritten by the Parent Company; the deal has de facto re-opened Southern Europe‘s securitisation market
.
Market placement of classes A1 and A2 did not entail the derecognition of the underlying assets from the balance
sheet of the Parent Company (transferor), which has substantially retained all risks and benefits associated with the
property of the assets sold. Consequently, an offsetting entry for the cashflows arising from the disposal of tranche
A1 and A2 was posted on the liabilities side of the balance sheet.
Casaforte S.r.l.
With a view to enhancing part of the Group's properties used in the business, the Parent Company formalised an
additional securitisation transaction for an amount of EUR 1,670 mln on 21 September 2010.
The deal consisted in the transfer to vehicle Casaforte S.r.l of a pool of receivables arising from a mortgage loan
granted to the consortium company, Perimetro Gestione Proprietà Immobiliari.
On 22 December, the vehicle company Casaforte S.r.l (with shareholders' capital entirely held by Stichting
Perimetro and registered offices in Amsterdam) issued asset backed securities of the following classes :
Class A notes rated A- by Fitch, for an amount of EUR 1.536,6 mln;
Class B notes, for an amount of EUR 130 mln;
Class Z notes, for an amount of EUR 3 mln;
Class B and Z notes were not offered to the public. They were placed with professional and/or qualified investors.
305
Wit h o wn
unde rlying
assets:
Wit h t hird- pa rt y
unde rlying
assets:
667.090
57.237
7 2 4 .3 2 7
356.596
-
3 5 6 .5 9 6
Gross
exposure
663.341
57.104
7 2 0 .4 4 5
356.643
-
3 5 6 .6 4 3
Net exposure
S e nio r
51.868
594
5 2 .4 6 2
2.496.122
-
2 .4 9 6 .12 2
Gross
exposure
52.437
4
5 2 .4 4 1
2.516.516
-
2 .5 16 .5 16
Net exposure
M e zza nine
B a la nc e - s he e t e xpo s ure
12.639
-
12 .6 3 9
217.224
5.183
2 2 2 .4 0 7
Gross
exposure
6.656
-
6 .6 5 6
217.221
4.252
2 2 1.4 7 3
Net exposure
J unio r
-
-
-
-
-
-
Gross
exposure
-
-
-
-
-
-
Net
exposure
S e nio r
-
-
-
-
-
-
Gross
exposure
-
-
-
-
-
-
Net
exposure
M e zza nine
G ua ra nt e e s is s ue d
-
-
-
-
-
-
Gross
exposure
-
-
-
-
-
-
Net
exposure
J unio r
-
-
-
-
-
-
Gross
exposure
-
-
-
-
-
-
Net
exposure
S e nio r
-
-
-
-
-
-
Gross
exposure
-
-
-
-
-
-
Net
exposure
M e zza nine
Line s o f c re dit
-
-
-
-
-
-
Gross
exposure
-
-
-
-
-
-
Net
exposure
J unio r
306
‗Third-party‘ securitised exposures exclusively include balance-sheet exposures and consist in securities issued by third parties' vehicles
As regards in-house securitisations carried out in 2010, the Siena 10-7 securitisation of performing loans was completed. Its Residential Mortgages Backed Floating Rate Securities (RMBSs) were
partly placed on the market (classes A1 and A2 Senior for a nominal amount of EUR 995 mln) and partly subscribed to by the Parent Company (classes A3, B Mezzanine and C Junior). Loans
sold were not derecognised from the Group's balance sheet, since all risks and benefits associated with legal ownership were substantially retained by the Bank after the partial transfer to third
parties of notes issued; for this reason, notes subscribed to were not recognised.
The table indicates balance-sheet exposures assumed by the Group in relation to in-house and third-party securitisation transactions, with and without guarantees, and other forms of 'credit
enhancement'.
b) Other
a) Impaired
B.
b) Other
a) Impaired
A.
Q ua lit y o f
unde rlying
assets/
E xpo s ure s
3112 2010
(in tho usands o f EUR)
Notes to the consolidated financial statements - Part E – Risks and Hedging Policies
Quantitative information
C.1.1 Banking Group - Exposures arising from securitisation transactions broken down by quality of underlying assets
-
-
-
1.819
-
22.540
-
-
-
A.2 Mantegna Finance II
A.7 Gonzaga Finance
- bonds and credit derivatives
A.8 Spoleto Mortgages
307
(16)
-
301.923
-
-
2.505.089
5.125
-
-
-
-
-
-
-
-
-
-
-
(194)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
150.826
5.815
-
-
-
4.252
-
1.086
-
4.040
-
37.603
-
7.832
-
10.019
Book
value
-
-
-
(210)
-
-
-
(202)
-
201
-
-
-
200
-
(862)
-
869
Writedo wns/
writebacks
Junio r
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Net
expo sure
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Writedo wns/
writebacks
Senio r
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Net
expo sure
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Writedo wns/
writebacks
M ezzanine
Guarantees issued
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Net
expo sure
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Writedo wns/
writebacks
Junio r
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Net
expo sure
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Writedo wns/
writebacks
Senio r
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Net
expo sure
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Writedo wns/
writebacks
M ezzanine
Lines o f credit
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Net
expo sure
Writedo wns/
writebacks
Junio r
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3112 2010
As reported in table C.1.1 above, the Siena Mortgages 10-7 securitisation included subscription of RMBS securities issued by the vehilce (classes: A3 Senior for an amount of EUR 1,666.9 mln,
B Mezzanine for a total amount of EUR 817.6 mls, C Junior for an amount of EUR 106.6 mln).
Line A. ―Fully derecognised‖ includes in-house securitisation transactions put in place before 1 January 2004 for which the Bank has taken advantage of the exemption from the requirements to
comply with IAS/IFRS, as permitted by IFRS 1 upon first time adoption. As a result of this exemption, financial assets and liabilities sold and derecognised in relation to these transactions were
allowed to be derecognised from the balance sheet, based on previous national accounting standards, provided such derecognition did not meet the requirements set out by IAS 39.
The table indicates the exposures assumed by the Group in relation to each of the in-house securitisation transactions, and also reports the contractual types of assets sold. The column ―Writedowns/write-backs‖ indicates the amount of any write-downs or write-backs during the year as well as depreciations and revaluations posted to profit and loss or directly to a shareholders‘
equity reserve.
- residential mortgages
A.13 SIENA MORTGAGES 10-7
B. P artially derecognised
- residential mortgages
A.12 SIENA MTGE 04/38 TV
142
(105)
6.756
21.724
-
-
A.11 CASAFORTE
-
-
-
- non-performing loans
-
-
-
A.9 Ulisse 4
- residential mortgages
25
-
-
-
-
-
6.302
Book
value
Writedo wns/
writebacks
M ezzanine
B alance-sheet expo sure
1.881
- landed mortgage loans secured by
1st mortgage
- residential mortgages
A.3 Siena Mortgages 03-4
- residential mortgages
-
-
- residential mortgages
Book
value
Writedo wns/
writebacks
A.1Mantegna Finance
A. Fully derecognised
T ype o f s e c urit is e d a s s e t / E xpo s ure
Senio r
(in thousands of EUR
Notes to the consolidated financial statements - Part E – Risks and Hedging Policies
C.1.2 Banking group - Exposures arising from major 'proprietary' securitisation transactions broken down by type of
securitised asset and by type of exposure
-
-
-
-
-
-
-14
-
34
-
-20
-
215
-
-
-
4.503
-
-
-
1.473
-
5.022
-
10.481
-
1.528
-
A.3 Amstel Corporate Loan Offering B
V
A.4 AQUA 2B 12 TV
- Consumer loans
A.5 ARENAA1 TV NO41
308
-
-4
-
-21
-
414
-
-120
-
300
-
35.917
-
3.916
-
2.842
-
14.741
-
603
A.12 BCC M T TV SE19
- residential mortgages
- residential mortgages
A.15 CLOVERIE TVSE14
-Bond
A.14 CCS TV JN43
- residential mortgages
A.13 BPM O TV JL44
-Bond
A.11 AyT CEDULAS CAJAS GLOBAL
-
8.572
-Auto Leases/IT
A.10 AUTOABS TV OC20
- residential mortgages
A.9 ATLAN TV JA36
- non residential mortgages
A.8 ATLAF 1A JA18
- residential mortgages
A.6 ARENAA2 TV NO41
- residential mortgages
- residential mortgages
-
-
Writedowns/
write-backs
- residential mortgages
Book
value
A.2 AIREM TV SE66
Type of securitised asset/Exposure
Senior
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
17.171
-
678
Book
value
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-32
-
-149
-
Writedowns/
write-backs
M ezzanine
Balance-sheet exposure
Book
value
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Writedowns/
write-backs
Junior
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Net
exposure
Writedowns/
writebacks
Senior
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Net
exposure
Writedowns/
writebacks
M ezzanine
Guarantees issued
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Net
exposure
Writedowns/
writebacks
Junior
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Net
exposure
Writedowns/
writebacks
Senior
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Net
exposure
Writedowns/
writebacks
M ezzanine
Lines of credit
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Net
exposure
Writedowns/
writebacks
Junior
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3112 2010
Notes to the consolidated financial statements - Part E – Risks and Hedging Policies
C.1.3 Banking Group - Exposures arising from major 'third-party' securitisation transactions broken down by type of
securitised asset and type of exposure
-31
252
-246
-1
-59
-130
-
-
3.247
-
3.682
-
7.240
-
9.865
-
358
-
3.905
-
9.889
A.17 CORDUS TV M R17
- residential mortgages
A.22 DUTCH A1 M R42
- residential mortgages
A.23 DUTCH A2 M R42
- residential mortgages
309
-381
-11
4
-20
-
920
-
49.914
-
26.362
-
5.016
-
3.974
-
-
-
-
- residential mortgages
A.29 GRANITE TV JN11
- residential mortgages
A.30 GRANITE TV M R44
- residential mortgages
A.28 GRANITE M ASTER ISSUER P.l.
- non residential mortgages
A.27 FOSSM TM OC54
- non residential mortgages
A.26 FIPFD TV JL 14
- non performing loans
A.25 ENTASI Srl
-Bond
-
-
A.24 EM PYR TV AP13
-Leasing
A.21 DOLOM TV DE17
-Residential M ortgages/NL
A.20 DELPH 1A TVSE96
-Bond
A.19 CREDF3 A1 TVM R15
- residential mortgages
A.18 CORDUSIO TVDE23
-
-
Writedowns/
write-backs
- residential mortgages
Book
value
Senior
A.16 COLOM BO Srl
Type of securitised asset/Exposure
-
3.514
-
-
-
823
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
16.744
Book
value
1.786
-
-
-
-1
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Writedowns/
write-backs
M ezzanine
Balance-sheet exposure
Book
value
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Writedowns/
write-backs
Junior
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Net
exposure
Writedowns/
writebacks
Senior
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Net
exposure
Writedowns/
writebacks
M ezzanine
Guarantees issued
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Net
exposure
Writedowns/
writebacks
Junior
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Net
exposure
Writedowns/
writebacks
Senior
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Net
exposure
Writedowns/
writebacks
M ezzanine
Lines of credit
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Net
exposure
Writedowns/
writebacks
Junior
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Notes to the consolidated financial statements - Part E – Risks and Hedging Policies
-
1
-1
-201
-29
-
-
-
3.897
-
-
-
3.788
-
2.794
-
368.069
-
79.623
A.32 HIPO TV JN06
-Leasing
A.34 ITALFIN TV JA26
A.35 KENM ORE TV AP14
-bond
A.36 LAM BDA FINANCE B.V.
- residential mortgages
A.39 PATAG ZC DE16
310
-60
63
-3.579
-65
-10
-
-
4.963
-
7.517
-
7.478
-
2.279
-
4.325
-bond
A.41 PERM 2A2 TV JL42
- residential mortgages
A.42 PHARM TV OC32
-commercial loans
A.49 QUALITY PARKING B.V.
- non residential mortgages
A.47 PTRM O1A TV DE12
-loans SM E
A.43 PREP2TVDE14
-Leasing
-
-
A.40 PATAGONIA FINANCE s.a.
-bond
A.38 M ONTE 2008 B.V.
- residential mortgages
A.37 LUDGATE FUNDING P.l.c.
- residential mortgages
-Equipment Leases/IT
-bond
A.31 GREYL TV M R14
-148
Writedowns/
write-backs
-
Book
value
Senior
3.607
Type of securitised asset/Exposure
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
4.503
-
4
-
-
-
389
Book
value
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-6
-
-590
-
-
-
-85
-
-
-
Writedowns/
write-backs
M ezzanine
Balance-sheet exposure
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3.445
-
-
-
-
-
-
-
1.652
Book
value
-
-
-
-
-
-
-
-
-
-
89
-
-
-
-
-
-
-
-30
-
-
-
-
-
-
-
-
-
Writedowns/
write-backs
Junior
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Net
exposure
Writedowns/
writebacks
Senior
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Net
exposure
Writedowns/
writebacks
M ezzanine
Guarantees issued
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Net
exposure
Writedowns/
writebacks
Junior
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Net
exposure
Writedowns/
writebacks
Senior
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Net
exposure
Writedowns/
writebacks
M ezzanine
Lines of credit
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Net
exposure
Writedowns/
writebacks
Junior
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Notes to the consolidated financial statements - Part E – Risks and Hedging Policies
-
-
-31
-
-
4.969
-
-
- residential mortgages
A.54 SCCI10 TV JL19
4
-3
-
-12
-
-
-
2.195
-
977
-
-
-
- residential mortgages
A.56 SHAM R TV JN12
- residential mortgages
A.58 SPLIT2CLA OC18
311
-
-87
-
-
-
4.915
- residential mortgages
A.61 STORM BV TV M R52
-
-
-
-
-
A.63 TITAN TV AP17
- non residential mortgages
-
-
-
-
-
1.092
-
699
-
-
-
3.879
-
-
-
1.854
-
-
-
-
-
-
-
1.091
Book
value
-659
-
-
-
-
-
-4
-
-
-
-2
-
-
-
-
-
-
-
-277
-
-
-
-
-
Writedowns/
write-backs
M ezzanine
Balance-sheet exposure
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1.559
Book
value
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-17
-
-
-
-
-
-
-
-
-
Writedowns/
write-backs
Junior
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Net
exposure
Writedowns/
writebacks
Senior
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Net
exposure
Writedowns/
writebacks
M ezzanine
Guarantees issued
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Net
exposure
Writedowns/
writebacks
Junior
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Net
exposure
Writedowns/
writebacks
Senior
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Net
exposure
Writedowns/
writebacks
M ezzanine
Lines of credit
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Net
exposure
Writedowns/
writebacks
Junior
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
The table indicates the exposures assumed by the Group in relation to each of the third-party securitisation transactions, and also reports the contractual type of assets sold. The column ―Write-downs/Writebacks‖ indicates the amount of any write-downs or write-backs during the year as well as depreciations and revaluations posted to profit and loss or directly to shareholders‘ equity reserves, in the case of
AFS securities
A.62 TDA 28 FONDO DE TITULIZACI
- residential mortgages
- residential mortgages
A.60 STICHING M EM PHIS 2006-I
-
701
-Real Estate Lease/IT
A.57 SM ILE 2005 SYNTHETIC B.V.
-bond
A.55 Semper Finance 2007-1 G.M .B.H
-loans
3.294
A.52 SANTANDER FINANCIACION 1
- residential mortgages
A.51 SAEC TV SE92
-bond
A.50 RUTLNDRY TV JN13
121
Writedowns/
write-backs
-
Book
value
1.084
Type of securitised asset/Exposure
Senior
Notes to the consolidated financial statements - Part E – Risks and Hedging Policies
Notes to the consolidated financial statements - Part E – Risks and Hedging Policies
C.1.4 Banking group - Exposures arising from securitisation transactions broken down by portfolio and type
(in tho usands o f EUR)
Financial
Exposure/portfolio
assets held
for trading
1. Balance-sheet
Financial
Financial
assets
assets
Financial
designated at available for
fair value
assets held to
Loans
maturity
sale
Total
Total
31 12 2010
31 12 2009
279.023
-
11.714
-
625.599
916.336
923.049
247.704
-
8.912
-
518.549
775.165
685.188
8.000
-
2.802
-
53.066
63.868
70.654
23.319
-
-
-
53.984
77.303
167.207
-
-
-
-
-
-
-
- Senior
-
-
-
-
-
-
-
- Mezzanine
-
-
-
-
-
-
-
- Junior
-
-
-
-
-
-
-
exposure
- Senior
- Mezzanine
- Junior
2. Off-balance-sheet
exposures
The table indicates the Group‘s exposures in relation to each of its in-house and third-party securitisation transactions, and also reports balance-sheet
portfolios to which these assets were allocated.
312
Notes to the consolidated financial statements - Part E – Risks and Hedging Policies
C.1.5 Banking group - Total amount of securitised assets underlying junior securities or other forms of credit
enhancement
3112 2010
Asset / Amount
A. With own underlying assets:
A.1 Fully derecognised
Traditional
Synthetic
securitisations
secularisations
4.050.404
-
634.057
-
1. Non-performing loans
27.541
x
2. Watchlist loans
12.541
x
3. Restructured loans
-
x
4. Past-due
-
x
593.975
x
5. Other assets
A.2 Partially derecognised
-
1. Non-performing loans
-
x
2. Watchlist loans
-
x
3. Restructured loans
-
x
4. Past-due
-
x
-
x
5. Other assets
A.3 Not derecognised
-
3.416.347
-
-
-
294
-
-
-
1.159
-
5. Other assets
3.414.894
-
B. With third-party underlying assets:
403.595
-
B.1 Non-performing loans
3.260
-
B.2 Watchlist loans
1.408
-
-
-
398
-
398.529
-
1. Non-performing loans
2. Watchlist loans
3. Restructured loans
4. Past-due
B.3 Restructured loans
B.4 Past due
B.5 Other assets
The table indicates, in terms of junior securities and other forms of credit enhancement held, the amount of the existing portfolio of securitised assets
on reporting date broken down as a function of quality of securitised assets and their origin (Group or third-party assets).
313
Notes to the consolidated financial statements - Part E – Risks and Hedging Policies
C.1.6 Banking group - Stakes in special purpose vehicles
Name
Registered Office
Stake %
Siena Mortgages 03-4 S.p.A.
Roma - Via E.Duse n. 53
10%
Siena Mortgages 10-7 S.r.l.
Conegliano (TV) - Via V. Alfieri n.1
7%
Mantegna Finance I Srl
Mantova - Corso V. Emanuele 2
7%
Mantegna Finance II Srl
Mantova - Corso V. Emanuele 2
7%
This table shows the stakes held in special purpose vehicles. All of the above are stakes in in-house securitisation vehicles. Stakes in vehicles that have
no pools of securitised assets are not shown in the table.
.
314
Mantegna I Srl
Mantegna II Srl
Casaforte Srl
BMPS
BMPS
BMPS
315
301.872
Total 31/12/2009
14.896.845
5.611.981
15.000
1.605.205
51.381
67.414
3.414.894
458.087
Performing
59.258
13.352
-
-
2.842
815
-
9.695
Impaired
2.617.280
325.145
131
66.420
18.205
27.053
78.538
134.798
Performing
loans
assets
100,00%
0,00%
80,84%
87,22%
0,00%
71,08%
Performing
Impaired
Senior
assets
Impaired
0,00%
0,00%
0,00%
0,00%
0,00%
0,00%
loans
Performing
Mezzanine
(year-end data)
assets
57,81%
0,00%
0,00%
0,00%
0,00%
0,00%
loans
Performing
Junior
Impaired
Percentage of securities redeemed
3112 2010
(in tho usands o f EUR)
A summary of the Group's securitisation transactions is provided in the section on qualitative information.
C.1.8 Banking Group - Special purpose vehicles controlled by the Banking Group
The table shows in-house securitisations where the Parent Bank plays the role of servicer. With reference to multi-originator securitisation transactions, the originating banks act as servicers in relation to
the portion of loans sold.
37.992
-
-
5.293
2.244
1.453
29.002
Impaired
year
(year-end data)
Total 31/12/2010
Gonzaga Finance Srl
Siena Mortgages 10-07 S.r.l.
BMPS
BMPS
Siena Mortgages 03-4 S.r.l.
Special Purpose Vehicle
BMPS
Servicer
Loans collected during the
Securitised assets
C.1.7 Banking Group - Servicer activities - Collections of securitised loans and redemptions of securities issued by special purpose vehicles
Notes to the consolidated financial statements - Part E – Risks and Hedging Policies
316
Key
4.600.518
-
T o t a l 3 1/ 12 / 2 0 0 9
o f which impaired
B
-
-
-
-
-
-
-
-
-
-
C
-
-
-
-
-
-
-
-
-
-
Financial assets
x
A
x
-
-
-
-
-
-
-
-
-
x
C
-
-
-
-
-
-
-
-
-
-
5.909.017
-
18.107.881
x
-
-
-
18.107.881
18.107.881
A
x
B
-
-
-
-
-
-
-
-
-
x
C
available for sale
Financial assets
-
-
-
-
-
-
-
-
-
x
x
x
A
-
-
-
-
-
-
-
x
x
x
B
-
-
-
-
-
-
-
x
x
x
C
held to maturity
Financial assets
-
-
-
-
-
-
-
-
-
54.417
-
376.508
x
x
x
376.508
376.508
A
-
x
x
x
B
-
-
-
-
-
-
to banks
-
x
x
x
C
-
-
-
-
-
-
Loans and advances
85.077
13.617.950
-
4.349.263
x
3.416.348
x
x
932.915
4.349.263
A
x
x
x
B
-
-
-
-
-
-
-
customers
x
x
x
C
-
-
-
-
-
-
-
Loans and advances to
-
-
-
28.994.998
-
3.416.348
-
5.695
25.572.955
28.994.998
3112 2010
85.077
24.181.902
85.077
24.181.902
-
13.507.437
-
252
10.674.213
24.181.902
3112 2009
Total
(in tho usands o f EUR)
The table reports the book value of financial assets sold but not derecognised, and still partially or fully reported in balance sheet assets. In line ―1. Debt securities" exclusively include securities sold in
sale and repurchase agreements (liabilities); the amount in line "4. Loans" refers to performing loans included in securitisation transaction without derecognition Siena 10-7 which was completed
during the year.
-
-
-
-
-
-
-
-
-
B
value
designated at fair
A = Financial assets so ld and fully reco gnised (bo o k value)
B = Financial assets so ld and partially reco gnised (bo o k value)
C = Financial assets so ld and partially reco gnised (full value)
-
o f which impaired
-
B . D e riv a t iv e s
6.161.346
-
4. Lo ans
T o t a l 3 1/ 12 / 2 0 10
-
3. UCITS
5.695
6.155.651
1. Debt securities
2. Equity instruments
6.161.346
A
for trading
A . B a la nc e - s he e t
assets
Type/portfolio
Financial assets held
C.2.1 Banking group - Financial assets sold and not derecognized
C.2 Sales transactions
Notes to the consolidated financial statements - Part E – Risks and Hedging Policies
Notes to the consolidated financial statements - Part E – Risks and Hedging Policies
C.2.1.a - Transfers of financial assets not derecognised
(in tho usands o f EUR)
Item/Amount
Reverse repurchase agreements
Total
Total
31 12 2010
31 12 2009
25.578.650
10.674.465
3.416.348
13.507.437
Securities lending
-
-
Transfers
-
-
28.994.998
24.181.902
Securisations
Total
The table shows assets sold and not derecognised, broken down by type of sales transaction.
317
318
-
-
-
-
-
-
-
-
-
-
5.046.037
17.872.478
-
-
-
-
3.477.634
3.477.634
-
14.394.844
14.394.844
sale
fair value
-
available for
designated at
Financial assets Financial assets
-
-
-
-
-
-
-
-
-
-
-
held to maturity
Financial assets
Loans and
62.410
138.792
-
-
-
-
58.405
58.405
-
80.387
80.387
banks
advances to
Loans and
12.193.663
1.298.700
-
-
-
-
81.236
81.236
-
1.217.464
1.217.464
customers
advances to
19.533.848
21.687.269
-
-
-
-
4.231.491
4.231.491
-
17.455.778
17.455.778
Total
(in tho usands o f EUR)
The table indicates the book value of financial liabilities posted as offsetting entries to financial assets sold and not fully or partially derecognised from balance sheet assets. This category only
involves liabilities reported in relation to sale and repurchase agreements.
2.231.738
-
b) relating to partially recognised assets
Total 31/12/2009
-
a) relating to fully recognised assets
2.377.299
-
3. Securities in issue
Total 31/12/2010
-
614.216
614.216
-
1.763.083
1.763.083
held for trading
Financial assets
b) relating to partially recognised assets
a) relating to fully recognised assets
2. Deposits from banks
b) relating to partially recognised assets
a) relating to fully recognised assets
1. Customer accounts
Liabilities/Asset Portfolios
C.2.2 Banking group - Financial liabilities relating to financial assets sold and not derecognized
Notes to the consolidated financial statements - Part E – Risks and Hedging Policies
Notes to the consolidated financial statements - Part E – Risks and Hedging Policies
C.3 Banking Group – Covered bond transactions
Characteristics of the Covered Bond Issuance Programme
In the course of 2010, the Parent Company launched a programme for the issuance of Covered Bonds for an amount
of EUR 10,000 mln. The programme is intended to place an innovative product on the market, offering covered
bonds as a privileged instrument for financial profile improvement in the mid to long term. In light of the
developments in the financial markets, the programme should be considered within a wider strategy, aimed at:
curbing the costs of funding: covered bonds are widely preferred, inasmuch as they are issued directly by the
Bank and their repayment is guaranteed by a segregated pool of assets (in this case, residential mortgage
loans); in the event of issuer bankruptcy, covered bond holders enjoy a right of recourse on a portfolio of
segregated high-quality assets and are, therefore, willing to accept a lower yield than the one offered by
similar uncovered bonds;
diversifying the Bank's funding sources on the international market;
lengthening its average debt maturity profile;
meeting risk-averting investors' needs.
The deal is structured into the following stages:
a) the Parent Company transfers, without recourse, a pool of assets having certain characteristics to the vehicle,
MPS Covered Bond S.r.l., thus forming a segregated Cover Pool;
b) the Parent Company grants a subordinated loan to the vehicle, for the purpose of financing payment of the
assets' purchase price by the vehicle;
c) the Parent Company issues covered bonds secured by an autonomous, irrevocable and unconditional firstdemand guarantee issued by the vehicle for the only benefit of the bond-holding investors and hedging
counterparties involved in the transaction; the guarantee involves limited recourse to the assets of the Cover
Pool owned by the vehicle (guarantor).
The structure of the deal is such that the Parent Company is the transferor (a), lender (b) and issuer (c) in the
transaction.
Financial Statement Recognition
Pursuant to IAS 39, the derecognition of a financial instrument from the balance sheet of the transferor is determined
on the basis of the substance of the contract, not its legal form.
Having said this, the deal is recognised as follows:
transferred loans continue to be reported in the Parent Company's balance sheet under sub-item "Loans" of
item 70 "Loans and advances to customers" on the asset side, inasmuch as the Parent Company retains the
risks and rewards of ownership of the loans transferred;
the loan disbursed by the Parent to the Vehicle is not classified as a separate item in the balance sheet, since
it is offset with the amount due to the Vehicle in which the initial transfer price was recognised. The loan,
therefore, is not subject to credit risk assessment, because this risk is entirely reflected in the assessment of
transferred loans, which continue to be reported in the Parent Company's balance sheet;
loans are subject to movements based on own events (figures and assessment); instalments collected by the
Parent (which also acts as a servicer) are reallocated daily to the Vehicle's "Collection Account" and accounted
for by the Parent as follows:
collection of principal from borrower is recognised as an offsetting entry to the reduction in the loan to the
borrower;
reallocation of principal to the Vehicle is recognised as an offsetting entry to the recognition of a loan to the
Vehicle;
this loan is paid off upon repayment of the subordinated loan;
interest from borrower is recognised as an offsetting entry to Account 10 "Interest income: Loans and
advances to customers" (interest on loans continues to be recognised on an accrual basis);
reallocation of interest to the Vehicle is recognised as an offsetting entry to the recognition of a loan to the
Vehicle;
this loan is paid off upon collection of the receive leg of the Cover Pool Swap;
the Vehicle ―MPS Covered Bond S.r.l.‖ is invested in by the Parent Company for a control stake of 90%,
recognised under Account 100 ―Equity Investments‖ and included in the Group's consolidated financial
statements under the comprehensive approach;
319
Notes to the consolidated financial statements - Part E – Risks and Hedging Policies
bonds issued are posted to Account 30 "Debt securities in issue" on the liabilities side, and related interest
expense is recognised on an accrual basis.
In consideration of the characteristics and accounting treatment of the deal, the swaps associated to the transaction
are not recognised in the balance sheet, since their recognition would entail, pursuant to par. AG49 of IAS 39, a
duplication of rights and obligations already recognised due to loans sold being maintained on the balance sheet.
Risks and Control Measures
In order to allow the transferee to meet the obligations of the collateral pledged, the Parent Company uses
appropriate Asset & Liability Management techniques to secure a trend of substantial balance between the
maturities of cash flows arising from the assets sold and maturities of payments due in relation to the covered bonds
issued and other costs of the transaction.
The Programme was structured in compliance with applicable rules and regulations which authorise the issuance of
covered bonds only if the transfering and issuing banks meet certain capital requirements .
The structure of the debt issuance programme of the Parent Company (transferor and servicer) is subject to stringent
regulatory requirements and calls for continuous actions by the Credit, Treasury & Capital Management and Risk
Management Areas, as well as of supervision by an external auditor (Deloitte & Touche) acting as an Asset Monitor. In
particular, the following actions are included:
assessment of capital requirements mandated by Supervisory Instructions when it comes to covered bond
issuance programmes;
assessment of the quality and integrity of the assets sold with regard, in particular, to the estimated value of
properties, both residential and non-residential, on which a mortgage in relation with the asset-backed loans
is placed; this assessment may result in repurchases, integrations and additional transfers of supplemental
assets;
assessment of an appropriate ratio being maintained between bonds issued and assets sold as collateral
(Cover Pool - mortgage and residential assets);
assessment of transfer limits and integration practices;
assessment on whether risks are effectively and adequately hedged by derivative contracts in relation to the
transaction.
320
Notes to the consolidated financial statements - Part E – Risks and Hedging Policies
Description of individual issuances
In 2010, as part of the Debt Issuance Programme, the Parent Company completed three issuances targeting the Euro
market, one of which (for a nominal amount of EUR 1,000 mln) was entirely repurchased by the Group Company,
Monte dei Paschi Ireland Ltd, and used in funding for repo transactions. The latter issuance was, therefore, not
recognised as such in the liabilities of the consolidated financial statement . It was rather the funding transaction that
was recognised.
Here follows a summary of the main characteristics of transfers:
Cover Pool transfer date
Type of securitised assets
25 05 2010
19 11 2010
Residential mortgage loans
Residential mortgage loans
4.413.282.560,82
2.400.343.584,94
36.711
19.058
Amount of transferred assets
Number of transferred mortgage loans
Breakdown of transferred debtors by economic business sectors
100% natural persons
and issuances:
Covered Bond Issuing Programme
Name:
Issued amount (EUR)
Re-Offer Price
Date of issue / Covered Bond maturity
IT0004618226
IT0004640881
1.000.000.000
1.250.000.000
99,71
99,68
30.06.2010 - 30.06.2015
23.09.2010 - 23.09.2013
Coupon interest
annual fixed rate of 3.125%
annual fixed rate of 2.500%
Rating Agencies
Moody‘s: Aaa - Fitch: AAA
Moody‘s: Aaa - Fitch: AAA
Book value as at 31.12.2010
996.961.240
1.252.715.660
321
100% natural persons
Notes to the consolidated financial statements - Part E – Risks and Hedging Policies
D.CREDIT RISK MEASUREMENT MODELS
Credit risk is analysed using the Credit Portfolio Model, which was developed internally by the Parent Company and
produces detailed outputs in the form of traditional risk measures such as Expected Loss, Unexpected Loss and inter-risk
diversified Economic Capital with a representative period of one year and a confidence interval calibrated to the official
rating assigned to the Group. There are numerous inputs: Probability of Default (PD), Loss Given Default (LGD) rates,
number and types of guarantees supporting the credit facility, internal operational Exposure at Default (EAD).
The Credit Portfolio Model developed within the Montepaschi Group uses a Merton approach to represent the insolvency
of each counterparty in the portfolio. According to this approach, a counterparty becomes insolvent when a synthetic
variable expressing its creditworthiness falls below a pre-determined threshold value for a representative period
(normally one year). The synthetic variable expressing the creditworthiness of the counterparty is known as the Credit
Worthiness Index (CWI) and consists in both the risk that is specific to a counterparty and the systemic risk. Each
counterparty‘s creditworthiness sensitivity to changes in macroeconomic factors is estimated using an econometric model
of multivariate regression between the counterparty‘s probability of default (PD) variable and selected credit drivers.
The breakdown of losses is estimated with suitable statistical functions which approximate the breakdown of losses by
counterparty through the use of conditioned default probabilities.
The portfolio model output provides detailed measures for individual positions as well as the absorbed operating capital
component and indicates the impact of diversification as compared to a building-block approach.
The model evidences the change in credit risk over time based on various combinations of the variables under analysis,
by legal entity, customer type, geographic area, economic sector, rating class and continental area. Other information
derived from the Credit Portfolio Model concerns ―what-if‖ analyses produced for certain discriminating variables such as
probability of default, LGD rates, changes in the value of collaterals and in margins available on credit lines, in order to
quantify the levels of Expected Loss and Economic Capital if the underlying (discretionary or trend-based) assumptions
prove to be true.
In accordance with the provisions of the Second Pillar of Basel 2, the Montepaschi Group is committed to the continuous
development of methodologies and models in order to assess the impact on the loan portfolio of stress conditions
produced using sensitivity analyses with respect to individual risk factors or through scenario analyses.
The chart below provides a distribution of the credit quality of the Montepaschi Group portfolio (excluding financial asset
positions). The description below shows that about 49% of risk exposure is to high and good quality customers. It
should be noted that the ranking below also includes exposure to banks, government agencies and non-regulated
financial and banking institutions, which are not included in the AIRB approaches. As borrowers, these entities are
nevertheless subject to a credit standing assessment using official ratings, if any, or appropriate benchmark values that
have been determined internally.
- Credit loan portafolio -
Quality distribution on 31.12.2010
50%
40%
30%
20%
10%
0%
Highest Quality (IG)
Good Quality
Quality (IG)
Fair Quality (SG)
% EAD
% PA
322
Speculative Quality
(SG)
% CAP
Hight Default
Quality (W)
Notes to the consolidated financial statements - Part E – Risks and Hedging Policies
On the other hand, the following chart provides a breakdown of credit quality only for Corporate and Retail portfolios
(which are largely validated by regulatory authorities for the use of internal PD and LGD models). It should be noted that
as at 31 December 2010, high or good quality exposure accounted for approximately 43% of total exposure.
- Credit loan portafolio Corporate & Retail
Quality distribution on 31.12.2010
50%
40%
30%
20%
10%
0%
Highest Quality (IG)
Good Quality
Quality (IG)
Fair Quality (SG)
% EAD
% PA
Speculative Quality
(SG)
Hight Default
Quality (W)
% CAP
The following chart shows that the three retail banks (Banca MPS, Banca Antonveneta and BiverBanca) contribute to
approximately 83% of the total Montepaschi Group‘s exposure to risk, whereas the companies MPS L&F, MPS Capital
Services and Consum.it account for the remaining 17%.
Risk Exposure
Montepaschi Group - 31.12.2010
MPS L&F
3,9%
Biver
1,6%
MPS Bank
72,5%
MPS Capital
Services
9,6%
Consumit
3,3%
BAV
9,1%
With regard to risk measures, the highest percentage of expected loss is attributable to the Parent Bank at 72.7%
followed by Banca Antonveneta with 10.1% and MPS Capital Services and Consum.it (7.1% and 5.5% respectively),
while the remainder (4.6%) is assigned to cover the risks of MPS Leasing & Factoring and BiverBanca. Most of the overall
amount of economic capital to cover credit risk is absorbed by the Parent Bank (about 72.3%), followed by the
remaining retail banks, Banca Antonveneta and BiverBanca (10.8%) with the remainder (16.9%) absorbed by the other
legal entities.
323
Notes to the consolidated financial statements - Part E – Risks and Hedging Policies
Expected Loss
Economic Capital
Montepaschi Group - 31.12.2010
Montepaschi Group - 31.12.2010
MPS L&F
3,4%
MPS L&F
3,0%
Biver
1,6%
MPS Bank
72,7%
Biver
1,2%
MPS Bank
72,3%
MPS Capital
Services
7,1%
Consumit
5,5%
BAV
10,1%
MPS Capital
Services
7,4%
Consumit
6,0%
BAV
9,6%
An analysis conducted at the end of 2010 shows that the risk exposure of the Montepaschi Group is mainly toward
―Manufacturing Companies‖ (64% of total loans disbursed) and ―Households‖ (28.1%). The remaining portion is broken
down between "Government and Public Administration", which makes up 5% and "Banks and Financial Institutions" for
2.9%.
Risk Exposure
Montepaschi Group - 31.12.2010
Banks and
Financial
Instit.
2,9%
Consumers
28,1%
Manufacturing
Companies
64,0%
Governments
and Public
Admin.
5,0%
In terms of risk measures, it should be noted that Manufacturing Companies account for 88% of the Expected Loss and
83.6% of the Economic Capital. The portion for ―Households‖ comes to 11.2% for Expected Loss and 15.3% for
Economic Capital respectively. The remaining client segments ("Government and Public Administration" and "Banks and
Financial Institutions") absorb 0.8% of the Expected Loss and 1.1% of Economic Capital.
Expected Loss
Economic Capital
Montepaschi Group - 31.12.2010
Montepaschi Group - 31.12.2010
Banks and
Financial
Instit.
0,9%
Banks and
Financial
Instit.
0,6%
Manufacturing
Companies
88,0%
Consumers
11,2%
Governments
and Public
Admin.
0,2%
Manufacturing
Companies
83,6%
324
Consumers
15,3%
Governments
and Public
Admin.
0,2%
Notes to the consolidated financial statements - Part E – Risks and Hedging Policies
An analysis of the geographic breakdown of customers of the Montepaschi Group shows that exposure to risk is primarily
concentrated in Italy‘s Northern regions (41.4%) followed by Central Italy and Sardinia (19.9%), Tuscany and Umbria
(17.6%), Southern Italy and Sicily (17.4%). The remainder (3.7%) is from abroad.
Risk Exposure
Montepaschi Group - 31.12.2010
South and
Sicily
17,4%
Tuscany and
Umbria
17,6%
Center and
Sardinia
19,9%
North
41,4%
Foreign
3,7%
Overall risk measures (expected loss + economic capital) are also higher (39.9%) in northern Italy due to the greater
concentration of loans in that area. Next in the ranking are Tuscany and Umbria (19.4%), Southern Italy including Sicily
and Central Italy including Sardinia (both at 19.1%), while the remainder (2.6%) comes from foreign customers.
Expected Loss + Economic Capital
Montepaschi Group - 31.12.2010
South and
Sicily
19,1%
Tuscany and
Umbria
19,4%
Center and
Sardinia
19,1%
Foreign
2,6%
North
39,9%
325
Notes to the consolidated financial statements - Part E – Risks and Hedging Policies
Lastly, a breakdown of exposure of the top 10 business sectors, based on the Bank of Italy ranking – which account for
83.6% of overall lending to corporate customers – shows that ―Other Retail Services‖, ―Trade Services‖ and ―Building and
Public Works‖ absorb most risk measures (26.3%, 22.6% and 12.6%, respectively) and together account for 61.5% of
total risk measures. These are followed by ―Hotels, Restaurants and Catering‖, ―Agriculture, forestry and fishing‖, ―Food,
beverage and tobacco‖ which together make up 11.4% of total Expected Loss and Economic Capital.
% Risk measures (Expected Loss + Economic Capital)
31.12.2010
26,3%
Other Sales Services
22,6%
Retailing services
12,6%
Building Trade & utility's infrast.
Hotels & public utilities
Agriculture, forestry & fishing prod.
Food, beverage and tobacco prod.
Inland Transport Services
Metalworking products
4,5%
3,5%
3,4%
2,9%
2,8%
Energetic products
2,6%
Textile & leather prod.
2,6%
326
Notes to the consolidated financial statements - Part E – Risks and Hedging Policies
Section 2 – Market risks
2.1 Interest rate and price risk – regulatory trading book
Market risks affecting the trading book
Market risk management model concerning the Trading Book
The Montepaschi Group‘s Regulatory Trading Portfolio (RTP), or Trading Book, is made up of all the Regulatory Trading
Portfolios managed by the Parent Bank (BMPS), MPS Capital Services (MPSCS) and, to a smaller extent, by BiverBanca
and the Irish subsidiary Monte Paschi Ireland. The addition of Banca Antonveneta to the Group in 2008 had no effect on
this area since the management approach in use called for centralising all market risks at BMPS and MPSCS. The
portfolios of the other retail subsidiaries are immune to market risk since they only contain their own bonds held to
service retail customers. Operations involving derivatives, which are brokered on behalf of the same customers, also call
for risk to be centralised at -and managed by- MPSCS.
The market risks of the trading book of both the Parent Company and the other Group companies (which are relevant as
independent market risk taking centres), are monitored in terms of Value-at-Risk (VaR) for operational purposes. The
Group‘s Finance Committee is responsible for directing and coordinating the overall process of managing the Group‘s
proprietary finance thereby ensuring that the management strategies of the various business units are consistent.
The Montepaschi Group Trading Book is subject to daily monitoring and reporting by the Risk Management Area of the
Parent Company on the basis of proprietary systems. VaR for management purposes is calculated separately from the
operating units, using the internal model of risk measurement implemented by the Risk Management Unit in keeping
with international principles of best practice. However, the Group uses the standardised methodology in the area of
market risks solely for reporting purposes.
Operating limits to trading activities, which are established by the Board of Directors of BMPS, are expressed by level of
delegated authority in terms of VaR, which is diversified by risk factors and portfolios and monthly and annual stop
losses. In particular, the trading book‘s credit risk in addition to being included in VaR computations and in the
respective limits for the credit spread risk component, is also subject to specific operating limits for issuer and bond
concentration risk which specify maximum notional amounts by type of guarantor and rating category
VaR is calculated with a 99% confidence interval and a holding period of 1 business day. The Group adopts the method
of historical simulation with daily full revaluation of all basic positions, out of 500 historical entries of risk factors
(lookback period) with daily scrolling. The VaR calculated in this manner takes account of all diversification effects of risk
factors, portfolios and types of instruments traded. It is not necessary to assume, a priori, any functional form in the
distribution of asset returns, and the correlations of different financial instruments are implicitly captured by the VaR
model on the basis of the combined time trend of risk factors. The daily management reporting flow on market risks is
periodically transmitted to the Risk Committee, the Chairman and to the Board of Directors of the Parent Bank within the
Risk Management Report, which keeps Top Management and other senior management areas up to date on the overall
risk profile of the Montepaschi Group.
The large categories of risk factors covered by the Internal Market Risk Model are IR, EQ, FX and CS as described below:
IR: interest rates on all relevant curves and relative volatilities;
EQ: share prices, indexes, baskets and relative volatilities;
FX: exchange rates and relative volatilities;
CS: credit spread levels.
VaR (or diversified or net VaR) is calculated and broken down daily for internal management purposes, even with respect
to other dimensions of analysis:
organisational/management analysis of portfolios,
analysis by financial instrument,
analysis by risk family.
327
Notes to the consolidated financial statements - Part E – Risks and Hedging Policies
It is then possible to assess VaR along each combination of these dimensions in order to facilitate highly detailed analyses
of phenomena involving the portfolios.
With particular reference to risk factors the following are identified: VaR Interest Rate (IR VaR), VaR Equity (EQ VaR),
VaR Forex (FX VaR) and VaR Credit Spread (CS VaR). The algebraic sum of these items gives the Gross VaR (or nondiversified VaR), which, when compared with diversified VaR makes it possible to quantify the benefit of diversifying risk
factors resulting from holding portfolios with asset class and risk factor allocations which are not perfectly correlated.
This information can also be analysed along all the dimensions referenced above.
The model enables the production of diversified VaR metrics for essentially the entire Montepaschi Group in order to get
an integrated overview of all the effects of diversification that can be generated among the various banks on account of
the specific joint positioning of the various business units.
Moreover, scenario and stress-test analyses are regularly conducted on various risk factors with different degrees of
granularity across the entire tree structure of the Group's portfolios and for all categories of instruments analysed.
Stress tests are used to assess the bank's capacity to absorb large potential losses in extreme market situations, so as to
identify the measures necessary to reduce the risk profile and preserve assets.
Stress tests are developed on the basis of discretionary and trend-based scenarios.
Trend-based scenarios are defined on the basis of real situations of market disruption previously recorded . Such
scenarios are identified based on a timeframe in which risk factors were subjected to stress. No particular scenarios are
required with regard to the correlation among risk factors since trend-based data for the period identified is used.
Stress tests based upon discretionary scenarios assume extreme changes occurring to certain market parameters (interest
rates, exchange rates, stock indices, credit spreads and volatility) and measure the corresponding impact on the value of
portfolios, regardless of their actual development in the past. Simple discretionary scenarios are currently being
developed (variation to a single risk factor) as are multiple ones (variation to several risk factors simultaneously). Simple
discretionary scenarios are calibrated to independently deal with one category of risk factors at a time, assuming the
shocks do not spread to the other factors. Multiple discretionary scenarios, on the other hand, aim to assess the impact of
several shocks that simultaneously affect all types of risk factors.
***
In 2010, market risk in the Regulatory Trading Book in terms of VaR stood at an average of € 16.62 mln. It should be
noted that risks in the second quarter were marked by the high volatility of credit spreads, with particular reference to
Italian sovereign debt linked to the Greek crisis. In the second half of the year, VaR remained at levels below the 2010
average. The peak recorded in September was attributable to the directional trading on rate derivatives (interest rate
future options) by the subsidiary MPS Capital Services, which was subsequently reabsorbed. The Group‘s VaR came to
EUR 9.41 mln as at 31 December 2010.
328
Notes to the consolidated financial statements - Part E – Risks and Hedging Policies
With regard to legal entities, the Group‘s market risks continue to be concentrated on MPS Capital Services and Banca
MPS.
MPS Group VaR
Trading Book
VaR Breakdown per Bank: 31.12.2010
MPS Capital
Services
66%
MPS Bank
31%
Other Banks
3%
At the end of December 2010, MPS Capital Services accounted for 66% of overall risk, the Parent Company approx.
31% while the remaining 3% was attributable to other banks.
MPS Group VaR
Trading Book
VaR Breakdown per Risk Factor: 31.12.2010
FX VaR
7%
EQ VaR
28%
CS VaR
40%
IR VaR
25%
329
Notes to the consolidated financial statements - Part E – Risks and Hedging Policies
A breakdown of VaR by risk factors as at 31-12-2010 shows that 40% of the Group‘s portfolio was allocated to risk
factors such as Credit Spread (CS VaR), 28% was absorbed by equity risk factors (EQ VaR), 25% was absorbed by interest
rate risk factors (IR VaR) and the remaining 7% by foreign exchange risk factors (FX VaR).
g MPS Group: Trading Book
VaR 99% 1 day in EUR/mln
VaR
Date
End of Period
9,41
31/12/2010
Min
8,84
27/09/2010
Max
34,44
12/05/2010
Average
16,62
During the year, the Group‘s VaR ranged between a low of € 9.84 mln recorded on 30 December and a high of € 50.56
mln on 16 October. On average, VaR was € 21.18 mln during the year. The exact end-of-2009 figure was € 10.08 mln.
330
Notes to the consolidated financial statements - Part E – Risks and Hedging Policies
Qualitative Information
A. General aspects
Each bank of the MPS Group which is relevant as a market risk-taking centre contributes to the generation of interest rate
risk and price risk in the overall Trading Book.
A.1 Interest rate risk
With reference specifically to the Parent Bank, the Finance Area and the Treasury and Capital Management Area are the
Business Areas in charge of trading for the Parent Bank. The Global Markets Area carries out trading activities for MPS
Capital Services.
The Finance Area manages a proprietary portfolio which takes trading positions on interest rates and credit. In general,
interest rate positions are taken by purchasing or selling bonds, and by creating positions in listed derivatives (futures)
and OTCs (IRS, swaptions). Trading is carried out exclusively on the Bank‘s own behalf, with objectives of absolute
return, in compliance with the limits delegated in terms of monthly and yearly VaR and Stop Loss.
The management of interest rate risk in the Trading Book is supplemented by the activity of the Centralised Treasury Unit
of the Treasury and Capital Management Area, which operates in the short-term portion of the main interest rate curves,
mostly through bonds and listed derivatives.
With regard to credit risk existing in the trading book, the equity positions are generally managed through the purchase
or sale of bonds issued by companies and by creating synthetic positions in derivatives. The activity is oriented to
achieving a long or short position on each issuer, or a long or short exposure in specific product sectors. The activity is
carried out solely on the Bank‘s own behalf with objectives of absolute return and in compliance with other specific
issuer and concentration risk limits approved by the Board of Directors.
A.2 Price risk
The Business Area in charge of the Parent Bank‘s trading activity with respect to price risk is the Finance Area which
manages a proprietary portfolio and takes trading positions on equities, Stock Exchange indexes and commodities. In
general, positions on capital securities are taken both through the purchase/sale of equities and through the positions
created in listed derivatives (futures) and OTC (options). Trading is carried out exclusively on the Bank‘s own behalf, with
objectives of absolute return, in compliance with the limits delegated for monthly and yearly VaR and Stop Loss.
Similarly, the Global Markets Area carries out trading activities for MPS Capital Services.
B. Interest rate and price risk: operational procedures and measurement methods
With regard to the market risk management process concerning the management and methods for measuring interest
rate and price risk, see the above paragraph entitled ―The model for managing market risks affecting the trading book‖.
331
Notes to the consolidated financial statements - Part E – Risks and Hedging Policies
Quantitative information
1.
Regulatory trading book: breakdown of balance sheet assets/liabilities and
residual life (repricing date)
financial derivatives by
This table has not been prepared since an analysis of the banking book‘s sensitivity to interest-rate risk and price risk is
produced based on internal models.
2.
Regulatory trading book: breakdown of exposures in equity instruments and stock indices by major
countries of the listing market
This table has not been prepared since an analysis of the banking book‘s sensitivity to interest-rate risk and price risk is
produced based on internal models.
3.
Regulatory trading book: internal models and other methodologies for sensitivity analysis
The rate and price risk of the Trading Book is monitored in terms of VaR and scenario analysis.
3.1 Interest rate risk
Each business unit within the MPS Group operates independently on the basis of the objectives and authorities assigned
to it. The positions are managed by special desks provided with specific operational limits. Each desk adopts an
integrated risk management approach (covering more than rate risk, when allowed) in order to benefit from the natural
hedge resulting from simultaneously holding positions based on risk factors that are not perfectly correlated. The VaR by
risk factor (specifically, Interest Rate VaR) has management relevance for the purpose of risk management analyses, even
though the global VaR diversified among risk factors and portfolios is used by the operating units. Below is information
on the Group‘s diversified Interest Rate VaR.
g MPS Group: Trading Book
VaR Interest Rate 99% 1 day in EUR/mln
VaR
Data
5,24
31/12/2010
Min
3,05
24/08/2010
Max
11,56
23/09/2010
Average
6,21
End of Period
Simulations include four interest rate risk scenarios:
332
Notes to the consolidated financial statements - Part E – Risks and Hedging Policies
Parallel shift of +100 bp in relation to all interest rate curves,
Parallel shift of +100 bp in relation to all interest rate curves,
Parallel shift of +1% in relation to all surfaces of volatility of all interest rate curves.
The positions related to the Trading Book are all classified as HFT for accounting purposes, with changes in market value
posted directly to the profit and loss statement. Below is the overall effect of the scenario analyses.
g MPS Group: Trading Book
EUR/mln
Risk Family
Interest Rate
Interest Rate
Scenario
+100bp all Interest Rate Curves
-100bp all Interest Rate Curves
Global Effect
-43,52
102,46
Interest Rate
+1% all Interest Rate Volatility
-0,42
The mismatch between the +100bp e -100bp scenarios is due to portfolios with non-linear positions on the rates of the
subsidiary, MPS Capital Services, primarily options on futures and, to a lesser degree, caps and floors.
To complete the interest rate risk analysis, details are also provided on the credit spread risk of the Montepaschi Group‘s
Trading Book tied to the volatility of the credit spreads of issuers. The VaR by risk factor (specifically, Credit Spread VaR )
has management relevance for the purpose of risk management analyses, even though the global VaR diversified among
all risk factors and portfolios is used by the operating units.
g MPS Group: Trading Book
VaR Credit Spread 99% 1 day in EUR/mln
VaR
Data
End of Period
8,37
31/12/2010
Min
4,86
04/01/2010
Max
21,13
28/05/2010
Average
10,87
333
Notes to the consolidated financial statements - Part E – Risks and Hedging Policies
For the purposes of sensitivity analysis, the simulation scenario is as follows:
parallel shift of +1 bp in all credit spreads.
The positions related to the Trading Book are all classified as HFT for accounting purposes, with changes in market value
posted directly to the profit and loss statement. Below is the overall effect of the scenario analyses.
g MPS Group: Trading Book
EUR/mln
Risk Family
Credit Spread
Scenario
+1bp all Curves
Global Effect
-1,11
334
Notes to the consolidated financial statements - Part E – Risks and Hedging Policies
3.2 Price risk
Each business unit within the MPS Group operates independently on the basis of the objectives and authorities assigned
to it. The positions are managed by special desks provided with specific operational limits. Each desk adopts an
integrated risk management approach (covering more than price risk, when allowed) in order to benefit from the natural
hedge resulting from simultaneously holding positions based on risk factors that are not perfectly correlated. The VaR by
risk factor (specifically, Equity VaR) has management relevance for the purpose of risk management analyses, even
though the global VaR diversified among risk factor and portfolios is used by the operating units. Below is information on
the
Group‘s
diversified
Equity VaR.
g MPS Group: Trading Book
VaR Equity 99% 1 day in EUR/mln
VaR
Data
End of Period
5,75
31/12/2010
Min
1,74
06/08/2010
Max
13,78
02/06/2010
Average
6,80
There are three simulated price scenarios:
+1% of each equity, commodity, index or basket price,
-1% of each equity, commodity, index or basket price,
+1% of all volatility surfaces of all equity and commodity risk factors.
The positions related to the Trading Book are all classified as HFT for accounting purposes, with changes in market value
posted directly to the profit and loss statement. Below is the overall effect of the scenario analyses.
g MPS Group: Trading Book
EUR/mln
Risk Family
Equity
Equity
Equity
Scenario
+1% Equity Prices (prices, indices, basket)
-1% Equity Prices (prices, indices, basket)
+1% Equity Volatility
335
Global Effect
1,44
-1,26
-0,29
Notes to the consolidated financial statements - Part E – Risks and Hedging Policies
336
Notes to the consolidated financial statements - Part E – Risks and Hedging Policies
2.2 Interest rate risk and price risk on the consolidated banking book
Qualitative Information
A. General aspects, management procedures and measurement methods for interest rate risk and price risk
A.1 Interest rate risk
In accordance with international best practices, the Banking Book refers to all of the commercial operations of the Parent
Bank in relation to the transformation of maturities with respect to balance-sheet assets and liabilities, Treasury, foreign
branches, and hedging derivatives of reference. The definition of the scope of the Banking Book (in line with that for the
regulatory book) and the ALM centralisation process are contained in a resolution by the Board of Directors of the Parent
Bank - approved in September 2007 and updated in October 2009 - to adjust the overall framework to the changed
corporate structure and develop the approach in compliance with the guidelines set forth in the regulatory provisions.
(Bank of Italy Circ. 263). The resolution sets the rules for the centralisation of Asset & Liability Management under the
parent company's Treasury and Capital Management and the definition and monitoring of operating limits against
interest rate risk in the Montepaschi Group's Banking Book.
The operational and strategic choices for the Banking Book, adopted by the Finance Committee and monitored by the
Risk Committee of the Parent Company, are based first on exposure to interest rate risk for a variation in the economic
value of the assets and liabilities of the Banking Book by applying a parallel shift of 25bp, 100bp and 200bp, the latter
in accordance with the requirements set out in the ―second pillar‖ of Basel 2.
The risk measurements of the retail banks in the Montepaschi Group are prepared by using, among other things, a model
for the valuation of demand items or core deposits, whose characteristics of stability and partial insensitivity to interest
rate changes are described in the systems with a statistical/predictive model (replicating portfolio), which takes into
consideration a significant time series of past customer behaviours. In addition, the Montepaschi Group‘s ALM model
includes, within rate risk measurements, a behavioural model which takes into account the aspect of mortgage
prepayment (so-called prepayment risk). Loan prepayment rates and, in particular, home mortgage prepayment rates
have become potentially more unstable due to a series of concomitant factors, such as the greater volatility of the rate
curve due to the recent crisis.
The Montepaschi Group is committed to the continual updating of risk measurement methodologies by gradually finetuning estimation models so as to include all major factors that progressively modify the interest rate risk profile of the
banking book. Notably, significant developments in the risk profile characteristics can be observed at this stage owing to
recent regulatory changes, growing number of contractual options, operating practices adopted and changes in
behavioural patterns, all of which make the risk profile more dependent on market performance and especially interest
rates and their volatility. In 2010, the Group carefully monitored the various cases, particularly in relation to the growing
popularity of products with contractual options such as capped mortgages.
The Group adopts a rate risk governance and management system which, in accordance with the provisions of the
Supervisory Authority, avails itself of:
a quantitative model, which provides the basis for calculation of risk indicators for the interest rate risk
exposure of the Group and Group companies/entities;
risk monitoring processes, aimed at ongoing verification of compliance with the operational limits assigned to
the Group overall and to the individual business units;
risk control and management processes, geared toward bringing about adequate initiatives for optimising the
risk profile and activating any necessary corrective actions.
Within the above system, the following responsibilities are centralised in the Parent Bank:
definition of the policy for managing the Group Banking Book and controlling its interest rate risk;
coordination of Group policies' implementation by the companies included in the scope;
governance of the Group‘s short-, medium- and long-term rate risk position, both overall and at individual
company level, through centralised operational management.
In its governance function, the Parent Bank therefore defines criteria, policies, responsibilities, processes, limits and
instruments for rate risk management.
337
Notes to the consolidated financial statements - Part E – Risks and Hedging Policies
The Group Companies included in the scope of application are responsible for abiding by the liquidity policies and limits
defined by the Parent Bank and the capital requirements set by the relevant Regulatory Authorities.
Within the model defined, the Treasury and Capital Management Area is responsible for the operational management of
the Group‘s overall rate and liquidity risk.
Specifically, within this Area, the Centralised Treasury Service manages short-term rate risk and liquidity risk for the
Group. In particular, the Group Balance Sheet Management Service manages structural rate risk and maturity
transformation risk (structural liquidity) for the Group. In addition, the Area carries out hedge monitoring and
management activities consistent with accounting policies, involving individual oversight for definition of the internal
rates of the ―network‖ (BMPS and other Group companies) for Euro and foreign currency transactions with maturities
beyond the short term, proposing economic terms and conditions for accessing funds by Group companies to the Finance
Committee . It also manages the Group‘s funding needs, proposing new bond issues and centralising the administrative
tasks for Group bond issues.
The Montepaschi Group, and within it therefore Banca MPS, manages interest rate risk by portfolio. Hedging derivatives
are underwritten within the Group with MPS Capital Services Banca per le Imprese, which in turn manages the overall
exposure to the market by aggregation. This approach, however, does not enable a directrelationship to be maintained
between the underwritten derivative of each individual Group company and the market.
Such management can be faithfully represented by the adoption of the Fair Value Option (introduced by the new
international accounting standards – IAS 39) designating a group of financial assets or of financial liabilities at fair value
which have an impact on the profit and loss statement. This approach is adopted by Banca MPS for the financial
liabilities hedged at fair-value for standardised portfolios. The Fair Value Option used concerns the accounting mismatch
between an item measured at Fair Value and an item measured according to other accounting criteria.
Portfolios and asset classes exist for which the use of the Fair Value Option increases the complexity in the management
or in the assessment of the items, in particular for hedging asset items. Should such a case occur, the Montepsachi Group
and, by extension Banca MPS, adopts formal IAS-compliant hedging relationships.
In particular, the main types of IAS-compliant hedging are as follows:
Micro Fair Value Hedge: hedging of non-trading assets (loans/mortgage loans classified as Loans and
Receivables) of Banca MPS and its Foreign Branches and the securities portfolio of Banca MPS and its Foreign
Branches (classified as Loans and Receivables and Available for Sale, respectively);
Macro Fair Value Hege: hedging of non-trading assets (loans/mortgage loans classified as Loans and
Receivables);
Micro Cash Flow Hedge: hedging of a limited portion of variable-rate deposits.
A.2 Price risk
The price risk in the MPS Group's Banking Book is measured in relation to equity positions mostly held for strategic or
institutional/instrumental purposes. For such purposes, the portfolio is primarily made up of equity investments,
alternative funds (hedge funds), AFS securities and, to a smaller extent, derivatives.
The MPS Group equity investment portfolio includes approximately 300 equity investments in companies outside the
Group, with approximately 70% of the amount being concentrated in 7 investments. The unit value of the remaining
investments is rather limited (approximately 200 equity investments, in fact, are valued at less than EUR 1 mln,
accounting for 1.5% of the overall portfolio). There are approximately 20 equity investments relative to the portfolio of
MPS Capital Services Banca per le Imprese; these account for 2% of the overall value of the portfolio.
Trading in UCITs is carried out exclusively through the direct purchase of the funds/SICAVs, with no derivative contracts.
338
Notes to the consolidated financial statements - Part E – Risks and Hedging Policies
Quantitative information
2.2.1 Banking book: breakdown of financial assets and liabilities by residual life (repricing date)
This table has not been prepared since an analysis of the banking book‘s sensitivity to interest-rate risk and price risk is
produced based on internal models.
2.2.2. Banking book: internal models and other sensitivity analysis methods
2.1 Interest rate risk
The sensitivity of the Montepaschi Group, at the end of 2010, is indicative of exposure to rate hike risk. The amount of
economic value at risk in the event of a +100 bp parallel shift of the rate curve came to - EUR 1,266 mln (1,282
EUR/mln for a shift of -100bp). However, if benchmarked against the Regulatory Capital, these values are below the level
considered as the attention threshold by the Bank of Italy.
2.2 Price risk
The instrument used to measure the price risk of the equity investments portfolio is Value-at-Risk (VaR), which represents
the loss that the portfolio in question, valued at Fair Value, could experience in the timeframe of one quarter (holding
period), considering a confidence interval of 99%. The VaR model used (contrary to the one used for the Trading Book)
is a parametric model based on the traditional approach of the variance-covariance matrix. To estimate price volatility,
the time series of market yields for listed companies and the time series of sector-based indices for unlisted ones are
used. It is noted that the portfolio taken into consideration by the analyses includes all the equity investments held by all
companies in the Montepaschi Group in external companies, or in companies which do no consolidate either fully or
proportionately. The VaR of the equity investment portfolio (99% and a holding period of 1 quarter) amounted at yearend to approximately 22% of the Fair Value of the portfolio, with the risk concentrated in the seven most significant
investments.
Moreover, the above-mentioned model makes it possible to measure the marginal risk contribution of each equity
investment and to disaggregate the measurement made from the Group‘s perspective with respect to the investment
stakes held by each Legal Entity.
The internal measurement system is developed by the Risk Management Area, which periodically reports on the extent
of the risks of the equity investments portfolio and their changes over time. The results are brought to the attention of
the Parent Bank‘s Risk Committee regularly.
With reference to the alternative funds component, the internal measurement system uses a measurement based on the
regulatory approach for the determination of Economic Capital.
In addition, shown below is a scenario analysis which includes all the equity investments, hedge funds and other
directional positions assumed, based on instructions by the Board of Directors, including those that operationally fall
under the Banking Book of the Parent Bank‘s Finance Area (e.g. AFS securities) but are not included in the previouslyreported scenario analyses for price risk in the Trading Book.
g MPS Group: Banking Book
EUR/mln
Risk Family
Scenario
Equity
Equity
Equity
+1% Equity Prices (prices, indices, basket)
-1% Equity Prices (prices, indices, basket)
+1% Equity Volatility
Global Effect
30,22
-30,22
0,00
The impact of the equity investments portfolio on the scenario analysis total is approximately 60%.
339
Notes to the consolidated financial statements - Part E – Risks and Hedging Policies
2.3 Foreign exchange risk
Qualitative Information
A. Exchange rate risk: general information, operational procedures and measurement methods
Foreign exchange operations are mainly based on short-term trading, with the systematic balance of the transactions
originated by the retail banks which automatically feeds into the Group‘s position.
Trading activities in the FX options segment are mainly carried out by the Centralised Treasury Serviceof the Treasury &
Capital Management Area. The foreign branches maintained modest forex positions exclusively originated by funds
available for commercial purposes. In terms of risk, the notable turnover on cash and OTC derivatives remained in a
straight line with ongoing and careful use of delegation powers. Foreign currency equity investments are typically
financed by funds raised, denominated in the same currency, with no foreign exchange risk.
Quantitative information
2.3.1 Breakdown by currency of assets, liabilities and derivatives
3112 2010
(in tho usands o f EUR)
Currencies
Items
A. Financial assets
Pound
US dollar
Yen
sterling
Swiss franc
H.K. Dollar
Other
currencies
4.533.989
362.051
300.310
138.853
44.842
112.370
1.202.426
112.940
61.795
-
-
7
679.241
99.311
25.958
2.717
2.123
8.966
A.3 Loans to banks
1.226.096
110.865
108.669
69.441
7.624
89.071
A.4 Loans to customers
1.426.226
38.935
103.888
66.695
35.095
14.326
-
-
-
-
-
-
81.689
5.789
1.160
4.429
1.324
2.777
5.205.529
799.182
341.902
109.802
56.359
125.071
3.683.394
248.487
337.346
41.626
5.080
90.485
C.2 Customer accounts
901.187
53.664
4.556
8.214
51.279
34.586
C.3 Debt securities
620.948
497.031
-
59.962
-
-
-
-
-
-
-
-
98.865
66.363
424
34
2.274
56
1.010.203
665.203
58.623
12.120
19.436
-
-
-
-
-
A.1 Debt securities
A.2 Equity securities
A.5 Other financial assets
B. Other assets
C. Financial liabilities
C.1 Deposits from banks
C.4 Other financial liabilities
D. Other liabilities
E. Financial derivatives
- Options
(11.168)
(28.544)
+ Long positions
543.249
44.633
9.904
12.036
1.005
99.946
+ Short positions
554.417
44.633
9.904
12.036
1.005
99.946
1.021.371
665.203
58.623
(28.544)
12.120
19.436
+ Long positions
4.494.721
1.722.305
903.254
553.837
12.132
1.245.198
+ Short positions
3.473.350
1.057.102
844.631
582.381
12
1.225.762
Total assets
9.653.648
2.134.778
1.214.628
709.155
59.303
1.460.291
Total liabilities
9.332.161
1.967.280
1.196.861
704.253
59.650
1.450.835
321.487
167.498
17.767
4.902
- Other
Difference (+/-)
340
(347)
9.456
Notes to the consolidated financial statements - Part E – Risks and Hedging Policies
2.3.2 Internal models and other methodologies for sensitivity analysis
Exchange risk is monitored in terms of VaR and scenario analysis (for the methodology see the paragraph ―Market Risk
Management Model for the Trading Book‖). Shown below is the information relative to the Group‘s diversified Forex
VaR.
g MPS Group
VaR Forex 99% 1 day in EUR/mln
VaR
Data
1,44
31/12/2010
Min
1,16
22/09/2010
Max
12,37
10/05/2010
Average
4,86
End of Period
The following are scenarios simulated in relation to foreign exchange rates:
+1% for all foreign exchange rates with respect to EUR
-1% for all foreign exchange rates with respect to EUR
+1% for all volatility surfaces of all foreign exchange rates
The impact on net operating income and profit/loss for the year was estimated taking account only of HFT positions,
which post Market Value changes directly to Profit and Loss. The effect on shareholders‘ equity, instead, is estimated with
reference to all other positions. The total effect results from the algebraic sum of the two components. Below is a
summary of the scenario analyses.
g MPS Group
EUR/mln
Risk Family
Global Effect
Scenario
Forex
Forex
+1% Exchange rate against EUR
-1% Exchange rate against EUR
0,34
-0,19
-1,05
1,05
-0,71
0,86
Forex
+1% Forex Volatility
0,17
0,00
0,17
341
Notes to the consolidated financial statements - Part E – Risks and Hedging Policies
2.4 Derivatives
A. Financial derivatives
In the following tables, a distinction is drawn between derivatives classified in the regulatory trading book and
derivatives included in the banking book, in accordance with Bank of Italy regulations for Prudential Supervision. This
differs from an IAS-based classification for financial statement purposes, which distinguishes between trading derivatives
and hedge accounting derivatives.
Regulatory Classification is fundamental in order to more accurately discern between instruments intended for trading and thus for generating absorption of capital for market risk - and those intended for other purposes which fall within the
framework of credit risk absorption.
For Banca Monte dei Paschi, the derivatives included in the Regulatory trading book correspond to those present in the
regular trading book, with the exception of derivatives connected to instruments for which the fair value option has been
adopted, which are instruments for hedging market risks on deposits valued at fair value and derivatives spun off from or
operationally connected to other financial instruments in the banking book.
Among these contracts, we must also mention the presence of credit derivatives (credit default swaps), classified in the
regular trading book for financial statement purposes but which, from an operational standpoint, are intended to hedge
a loan portfolio against insolvency risk and are therefore considered part of the banking book.
As with other technical forms, OTC derivatives, including those traded with customers, are subject to collective
assessment in terms of credit. This assessment is developed by categories of similar exposures in terms of credit risk. The
relative percentages of loss are estimated taking into account time series (based on observable elements at the valuation
date) which allow for the estimation of the expected loss value for each category. In particular, the risk parameters used
in the overall valuation are Probability of Default (PD) and Loss Given Default (LGD). With regard to corporate and retail
counterparties, internally estimated PD and LGD are used as provided for by Bank of Italy‘s circular letter 263/2006. The
PD obtained from the external rating assigned by the rating agencies and the LGD of the Foundation method (45%) are
used for other counterparties.
342
Notes to the consolidated financial statements - Part E – Risks and Hedging Policies
A.1 Regulatory trading book: end of period and interim notional amounts
(in thousands of EUR)
Total 31/12/2010
Underlying asset/Type of derivative
1. Debt securities and interest rate
a) Options
Total 31/12/2009
Over the
Central
Over the
Central
counter
counterparties
counter
counterparties
257.416.844
191.830.701
348.331.322
152.265.702
86.858.924
40.827.781
90.711.478
144.511.401
163.824.794
145.066.912
257.522.297
-
6.733.126
-
454
-
d) Futures
-
5.936.008
-
7.754.301
e) Other
-
-
97.093
-
21.509.233
7.089.396
21.267.478
4.247.226
21.253.184
6.858.137
20.977.358
3.997.899
256.000
-
290.120
-
49
-
-
2.615
d) Futures
-
231.259
-
246.712
e) Other
-
-
-
-
12.614.202
-
29.596.108
-
a) Options
2.567.169
-
12.993.849
-
b) Swaps
1.638.457
-
1.688.485
-
c) Forward
8.408.576
-
14.805.378
-
d) Futures
-
-
-
-
e) Other
-
-
108.396
-
-
-
-
-
398.499
175.674
320.810
277.218
Total
291.938.778
199.095.771
399.515.718
156.790.146
Average amounts
493.670.482
256.391.953
543.257.015
120.910.455
b) Swaps
c) Forward
2. Equity securities and stock indices
a) Options
b) Swaps
c) Forward
3. Exchange rates and gold
4. Commodities
5. Other underlying
343
Notes to the consolidated financial statements - Part E – Risks and Hedging Policies
A.2 Banking book: end of period and interim notional amounts
A.2.1 Hedging derivatives
(in tho usands o f EUR)
Total 31 12 2010
Underlying asset/Type of derivative
1. Debt securities and interest rate
Total 31 12 2009
Over the
Central
Over the
Central
counter
counterparties
counter
counterparties
28.023.859
-
21.901.009
-
582.091
-
32.562
-
27.441.768
-
21.868.447
-
c) Forward
-
-
-
-
d) Futures
-
-
-
-
e) Other
-
-
-
-
-
-
-
-
a) Options
-
-
-
-
b) Swaps
-
-
-
-
c) Forward
-
-
-
-
d) Futures
-
-
-
-
e) Other
-
-
-
-
805.358
-
805.358
-
a) Options
-
-
-
-
b) Swaps
-
-
-
-
c) Forward
-
-
-
-
d) Futures
-
-
-
-
805.358
-
805.358
-
4. Commodities
-
-
-
-
5. Other underlying
-
-
-
-
Total
28.829.217
-
22.706.367
-
Average amounts
41.245.206
-
12.578.345
-
a) Options
b) Swaps
2. Equity securities and stock indices
3. Exchange rates and gold
e) CCS
344
Notes to the consolidated financial statements - Part E – Risks and Hedging Policies
A.2.2 Other derivatives
(in tho usands o f EUR)
Total 31 12 2010
Underlying asset/Type of derivative
1. Debt securities and interest rate
a) Options
Total 31 12 2009
Over the
Central
Over the
Central
counter
counterparties
counter
counterparties
5.593.453
-
10.994.885
-
170.000
-
251.645
-
5.423.453
-
10.705.113
-
c) Forward
-
-
-
-
d) Futures
-
-
-
-
e) Other
-
-
38.127
-
594.371
-
575.660
-
568.337
-
575.660
-
26.034
-
-
-
c) Forward
-
-
-
-
d) Futures
-
-
-
-
e) Other
-
-
-
-
-
-
-
-
a) Options
-
-
-
-
b) Swaps
-
-
-
-
c) Forward
-
-
-
-
d) Futures
-
-
-
-
e) Other
b) Swaps
2. Equity securities and stock indices
a) Options
b) Swaps
3. Exchange rates and gold
-
-
-
-
4. Commodities
-
-
-
-
5. Other underlying
-
-
-
-
6.187.824
-
11.570.545
-
39.553.166
-
33.583.137
-
Total
Average amounts
345
Notes to the consolidated financial statements - Part E – Risks and Hedging Policies
A.3 Financial derivatives: gross positive fair value - breakdown by products
(in tho usands o f EUR)
Positive Fair Value
Total 31 12 2010
Portfolios/Types of derivatives
A. Regulatory trading book
Total 31 12 2009
Over the
Central
Over the
Central
counter
counterparties
counter
counterparties
6.761.316
3.610.685
8.549.339
483.432
a) Options
1.123.802
135.757
1.071.911
187.565
b) Interest rate swaps
5.356.691
3.472.560
7.351.050
-
c) Cross currency swaps
99.773
-
106.072
-
d) Equity swaps
16.735
-
12.586
-
164.142
-
7.016
266.038
-
2.368
-
29.829
173
-
704
-
286.410
-
187.351
-
90
-
116
-
267.273
-
133.504
-
19.047
-
53.731
-
d) Equity swaps
-
-
-
-
e) Forward
-
-
-
-
d) Futures
-
-
-
-
g) Other
-
-
-
-
190.800
-
195.444
-
9.390
-
12.359
-
168.318
-
179.846
-
-
-
-
-
13.092
-
-
-
e) Forward
-
-
-
-
d) Futures
-
-
-
-
g) Other
-
-
3.239
-
7.238.526
3.610.685
8.932.134
483.432
e) Forward
d) Futures
g) Other
B. Banking book - Hedging
a) Options
b) Interest rate swaps
c) Cross currency swaps
C. Banking book - Other derivatives
a) Options
b) Interest rate swaps
c) Cross currency swaps
d) Equity swaps
Total
346
Notes to the consolidated financial statements - Part E – Risks and Hedging Policies
A.4
Financial derivatives: gross negative fair value - breakdown by products
(in tho usands o f EUR)
Positive Fair Value
Total 31 12 2010
Portfolios/Types of derivatives
A. Regulatory trading book
Total 31 12 2009
Over the
Central
Over the
Central
counter
counterparties
counter
counterparties
6.524.897
3.334.938
8.467.750
475.273
a) Options
1.575.004
137.131
1.375.307
245.045
b) Interest rate swaps
4.565.108
3.195.066
6.946.936
-
109.726
-
81.271
-
60.455
-
57.277
-
214.505
-
6.959
210.505
-
2.741
-
19.723
99
-
-
-
1.517.036
-
724.786
-
3.205
-
2.305
-
1.443.432
-
642.693
-
70.399
-
79.788
-
d) Equity swaps
-
-
-
-
e) Forward
-
-
-
-
d) Futures
-
-
-
-
g) Other
-
-
-
-
150.918
-
126.444
-
7.706
-
8.643
-
143.212
-
117.801
-
c) Cross currency swaps
-
-
-
-
d) Equity swaps
-
-
-
-
e) Forward
-
-
-
-
d) Futures
-
-
-
-
g) Other
-
-
-
-
8.192.851
3.334.938
9.318.980
475.273
c) Cross currency swaps
d) Equity swaps
e) Forward
d) Futures
g) Other
B. Banking book - Hedging
a) Options
b) Interest rate swaps
c) Cross currency swaps
C. Banking book - Other derivatives
a) Options
b) Interest rate swaps
Total
347
Notes to the consolidated financial statements - Part E – Risks and Hedging Policies
A.5 OTC financial derivatives: regulatory trading book - notional amounts, gross positive and negative fair value by
counterparties - contracts not subject to netting agreements
Other entities
companies
Non-financial
Insurance
companies
companies
Financial
Banks
entities
Other public
and
netting agreements
central banks
Contracts not subject to
Governments
3112 2010
(in tho usands o f EUR)
1. Debt securities and interest
rate
- notional value
-
999.803
1.144.148
16.353.861
64.741
19.071.151
4.081.374
- positive fair value
-
20.926
28.965
63.896
-
581.473
6.658
- negative fair value
-
2.622
9.034
19.820
-
108.089
12.135
- future exposure
-
10.880
3.598
54.541
323
142.568
56.145
indices
- notional value
-
-
342.347
96.049
3.783.634
79.512
-
- positive fair value
-
-
543
-
98
13.241
-
- negative fair value
-
-
6.445
866
12.469
27.380
-
- future exposure
-
-
27.480
7.680
277.207
4.778
-
- notional value
-
-
5.811.880
388.289
-
2.718.739
22.974
- positive fair value
-
-
133.995
1.243
-
48.891
371
- negative fair value
-
-
175.897
8.484
-
48.656
336
- future exposure
-
-
65.998
3.845
-
37.568
228
- notional value
-
-
-
-
-
-
-
- positive fair value
-
-
-
-
-
-
-
- negative fair value
-
-
-
-
-
-
-
- future exposure
-
-
-
-
-
-
-
2. Equity securities and stock
3. Exchange rates and gold
4. Other underlying
348
Notes to the consolidated financial statements - Part E – Risks and Hedging Policies
A.6 OTC financial derivatives: regulatory trading book - notional amounts, gross positive and negative fair value by
counterparties - contracts subject to netting agreements
Other entities
companies
Non-financial
Insurance
companies
Financial
companies
Banks
entities
Other public
netting agreements
central banks
Contracts subject to
Governments and
3112 2010
(in tho usands o f EUR)
1. Debt securities and interest
rate
- notional value
-
-
198.723.904
15.841.818
1.609.967
-
-
- positive fair value
-
-
4.613.166
539.972
180.670
-
-
- negative fair value
-
-
4.510.750
744.032
3.688
-
-
- notional value
-
-
10.460.748
4.094.691
2.982.970
-
-
- positive fair value
-
-
229.973
96.936
25.671
-
-
- negative fair value
-
-
305.682
146.736
210.860
-
-
- notional value
-
-
3.262.623
423.285
-
-
-
- positive fair value
-
-
166.552
4.475
-
-
-
- negative fair value
-
-
161.762
7.666
-
-
-
- notional value
-
-
149.583
97.263
-
-
-
- positive fair value
-
-
3.011
591
-
-
-
- negative fair value
-
-
10.922
453
-
-
-
2. Equity securities and stock
indices
3. Exchange rates and gold
4. Other underlying
349
Notes to the consolidated financial statements - Part E – Risks and Hedging Policies
A.7 OTC financial derivatives: banking book - notional amounts, gross positive and negative fair value by counterparties
- contracts not subject to netting agreements
Other entities
companies
Non-financial
Insurance
companies
companies
Financial
Banks
entities
Other public
and
netting agreements
central banks
Contracts not subject to
Governments
3112 2010
(in tho usands o f EUR)
1. Debt securities and interest
rate
- notional value
-
-
268.996
-
2.677
-
-
- positive fair value
-
-
11.977
-
-
-
-
- negative fair value
-
-
5.935
-
826
-
-
- future exposure
-
-
842
-
40
-
-
indices
- notional value
-
-
-
-
96.274
-
-
- positive fair value
-
-
-
-
-
-
-
- negative fair value
-
-
-
-
-
-
-
- future exposure
-
-
-
-
9.627
-
-
- notional value
-
-
-
-
-
-
-
- positive fair value
-
-
-
-
-
-
-
- negative fair value
-
-
-
-
-
-
-
- future exposure
-
-
-
-
-
-
-
- notional value
-
-
-
-
-
-
-
- positive fair value
-
-
-
-
-
-
-
- negative fair value
-
-
-
-
-
-
-
- future exposure
-
-
-
-
-
-
-
2. Equity securities and stock
3. Exchange rates and gold
4. Other underlying
350
Notes to the consolidated financial statements - Part E – Risks and Hedging Policies
A.8 OTC financial derivatives: banking book - notional amounts, gross positive and negative fair value by counterparties
- contracts subject to netting agreements
Other entities
companies
Non-financial
Insurance
companies
companies
Financial
Banks
entities
Other public
and
central banks
Contracts subject to
netting agreements
Governments
3112 2010
(in tho usands o f EUR)
1) Debt securities and interest
rate
- notional amount
-
-
28.886.917
5.734.755
-
-
-
- positive fair value
-
-
438.613
3.682
-
-
-
- negative fair value
-
-
1.142.567
434.428
-
-
-
- notional amount
-
-
472.064
-
-
-
-
- positive fair value
-
-
3.890
-
-
-
-
- negative fair value
-
-
3.912
-
-
-
-
- notional amount
-
-
805.358
-
-
-
-
- positive fair value
-
-
19.047
-
-
-
-
- negative fair value
-
-
70.399
-
-
-
-
- notional amount
-
-
-
-
-
-
-
- positive fair value
-
-
-
-
-
-
-
- negative fair value
-
-
-
-
-
-
-
2) Equity securities and stock
indices
3) Exchange rates and gold
4) Other amounts
351
Notes to the consolidated financial statements - Part E – Risks and Hedging Policies
A.9 OTC financial derivatives - residual life: notional amounts
(in tho usands o f EUR)
Underlying asset/residual life
A. Regulatory trading book
Up to
1 to 5
Over 5
1 year
years
years
Total
85.464.821
126.375.788
80.764.745
292.605.354
68.056.655
112.261.600
78.185.131
258.503.386
A.2 Financial derivatives on equity securities and stock indices
7.394.407
12.587.477
2.042.287
22.024.171
A.3 Financial derivatives on exchange rates and gold
9.893.604
1.520.288
537.327
11.951.219
120.155
6.423
-
126.578
9.599.838
10.397.021
16.270.182
36.267.041
8.794.480
10.397.021
15.701.844
34.893.345
-
-
568.338
568.338
805.358
-
-
805.358
-
-
-
-
Total 31 12 2010
95.064.659
136.772.809
97.034.927
328.872.395
Total 31 12 2009
118.511.799
204.990.645
110.272.687
433.775.131
A.1 Financial derivatives on debt securities and interest rates
A.4 Financial derivatives on other underlying assets
B. Banking book
B.1 Financial derivatives on debt securities and interest rates
B.2 Financial derivatives on equity securities and stock indices
B.3 Financial derivatives on exchange rates and gold
B.4 Financial derivatives on other underlying assets
The table shows the residual life of financial derivatives determined on the basis of their contractual maturity.
A.10 OTC financial derivatives: counterparty risk/financial risk - internal models
As at today, EPE models are not used for either internal operational or reporting purposes.
A.11 OTC derivatives traded with customers for hedging purposes
The Montepaschi Group‘s trading in OTC derivatives is exclusively intended to meet customers' hedging needs and is
targeted at the Group's corporate customers classified as Retail clients or Professional/Qualified investors under the MiFID
directive. Trading operations involving Public Institutions and Local Institutions are currently on hold, pending
completion of the regulatory framework of reference.
In addition to being included in the afore-mentioned categories, target customers must qualify as having the required
qualitative and quantitative standing in terms of business carried out, corporate structure, assets and creditworthiness.
The catalogue of OTC products on offer has recently been subject to an overall review, which was completed in
December, and includes, as at today, a range of approximately 100 products and strategies.
These products may be broken down into two main classes:
new hedges
debt-rescheduling hedges.
Each class is in turn subdivided into three sub-classes depending on the type of underlying assets:
interest rate hedges
foreign exchange hedges
commodity hedges
Each sub-class is then broken down into different types.
Among these products, the Parent Company's Risk Management function has identified a set of products classifiable as
"plain vanilla" on account of their basic structure, sensitivity to one risk factor and easy understandability. "Plain vanilla"
products have been identified as the only type eligible for inclusion in the offer for Retail customers.
352
Notes to the consolidated financial statements - Part E – Risks and Hedging Policies
The residual class of Non Plain Vanilla products generally includes mixed, structured strategies showing more or less
complex exotic features (e.g. digital payment profiles, barriers, etc.) or resulting from the combination of multiple basic
financial components.
This class of products is for Professional/Qualified investors.
Group trading in OTC derivatives is regulated according to the following main guidelines:
- trading in derivatives by customers is conditional upon ascertaining and monitoring that they are only used for
hedging purposes. Three types of hedging relationships are possible:
 micro-hedges, i.e. hedging of individual, well-defined items in the customer's assets and/or liabilities held
with the Group or other intermediaries;
 macro-hedges, i.e. hedging of a portfolio of assets and/or liabilities, or a part of it, held with the Group or
other intermediaries;
 forward transaction hedges, i.e. by way of example, hedging through OTC derivatives in which the
underlying is an exchange rate against future settlement of specific business transactions;
- customer trading shall not in any case have a leverage effect on hedged positions;
- trading must occur in compliance with the requirement of appropriateness (to ensure the highest level of customer
protection) and adequate financial advice;
- trading under the appropriateness regime is only allowed as a marginal option for participation in tenders, for a
subset of Corporate clients with proven high level of financial culture and for Financial Institutions. The execution of
transactions qualifying as inappropriate is in any case prevented.
Trading in OTC derivatives involves, first of all, the assumption of market risk by the Group, defined as exposure in terms
of potential loss that may be recorded on positions held subsequent to unfavourable variations in specific market
parameters (ie. risk factors). The main risk factors this type of trading is subject to include: interest rate, foreign
exchange, market index, commodities and related volatility and correlations. At the same time, the Bank also takes on
the risk that the counterparty of a derivative-based transaction is in default prior to settlement (counterparty risk).
Trading in derivatives with customers involves the centralisation of the product factory and market risk monitoring in
MPS Capital Services, whereas the allocation, management and monitoring of counterparty risk with customers lie with
the Group‘s Retail Banks.
The estimation of Counterparty Risk on Over the Counter (OTC) derivatives with customers is based on fair value
determination.
OTC derivatives are comprised in level 2 of the Fair Value Hierarchy on the basis of which fair value is calculated through
proprietary valuation methods and assessment models fed with parameters available on the market. The models used are
discussed among the Operating Units and specialised Risk Management and Quantitative Analysis functions and
submitted for validation to the Financial instruments Inter-functional Technical Body chaired by the Parent Company's
Risk Management function. These models are subject to periodic review so as to guarantee constant alignment between
the model approach adopted and prevailing domestic and international best practices. Furthermore, the pricing models
for OTC derivatives with customers are consistent with the methodological criteria used by the MPS Group for the
valuation of its own positions.
Montepaschi Group customers holding positions in OTC derivatives numbered almost 7,900 as at 31 December 2010.
The following table reports the fair value of positions in OTC derivatives for the Montepaschi Group, by type of products
("Plain Vanilla" / "Non Plain Vanilla").
g OTC Derivatives with customers: hedging operations
Montepaschi Group - EUR/mln of 31.12.2010
Product
Net Fair
Value
Plain Vanilla
Not Plain Vanilla
313,73
431,62
-117,89
192,60
217,64
-25,04
Total
506,33
649,26
-142,93
353
Positive
Fair Value
of which
Negative
Fair Value
Notes to the consolidated financial statements - Part E – Risks and Hedging Policies
B. Credit derivatives
B1. Credit derivatives: end of period and interim notional amounts
(in tho usands o f EUR)
Regulatory trading book
Transaction categories
Banking book
with multiple
with one
counterparties
counterparty
(basket)
with multiple
with one
counterparties
counterparty
(basket)
1. Purchases of protection
-
-
-
-
a) Credit default products
9.413.193
18.860.707
249.823
-
b) Credit spread products
-
-
-
-
c) Total rate of return swap
-
-
-
-
d) Altri
-
-
-
-
Total 31 12 2010
9.413.193
18.860.707
249.823
-
Average amounts 31 12 2010
19.455.592
2.075.024
120.760
-
Total 31 12 2009
3.988.944
2. Sales of protection
9.509.001
347.610
-
-
-
-
-
a) Credit default products
9.721.948
18.622.561
833
-
b) Credit spread products
-
-
-
-
c) Total rate of return swap
-
-
-
-
d) Altri
-
-
-
-
Total 31 12 2010
9.721.948
18.622.561
833
-
Average amounts 31/12/2010
19.084.752
1.976.604
41.781
583.219
Total 31 12 2009
4.068.510
9.115.165
-
-
B2. OTC credit derivatives: gross positive fair value - breakdown by products
(in tho usands o f EUR)
Positive Fair Value
Portfolios/Types of derivatives
A. Regulatory trading book
Total
Total
31/12/2010
31/12/2009
1.085.569
396.062
a) Credit default products
1.085.569
396.062
b) Credit spread products
-
-
c) Total rate of return swap
-
-
d) Other
-
-
8.771
6.274
a) Credit default products
8.771
6.274
b) Credit spread products
-
-
c) Total rate of return swap
-
-
d) Other
-
-
1.094.340
402.336
B. Banking book
Total
354
Notes to the consolidated financial statements - Part E – Risks and Hedging Policies
B3. OTC credit derivatives: gross negative fair value - breakdown by products
(in tho usands o f EUR)
Negative Fair Value
Portfolios/Types of derivatives
A. Regulatory trading book
Total
Total
31/12/2010
31/12/2009
1.174.105
508.715
a) Credit default products
1.106.091
426.951
b) Credit spread products
-
-
c) Total rate of return swap
-
-
68.014
81.764
1.674
6.376
a) Credit default products
1.674
6.376
b) Credit spread products
-
-
c) Total rate of return swap
-
-
d) Other
-
-
1.175.779
515.091
d) Other
B. Banking book
Total
B.4 OTC credit derivatives: gross (positive and negative) fair value / counterparty risk - contracts not subject to netting
agreements
Other entities
companies
Non-financial
Insurance
companies
Financial
companies
Banks
entities
Other public
netting agreements
central banks
Contracts not subject to
Governments and
3112 2010
(in tho usands o f EUR)
Regulatory trading
1) Purchases of protection
- notional amount
-
-
-
-
-
-
-
- positive fair value
-
-
-
-
-
-
-
- negative fair value
-
-
-
-
-
-
-
- future exposure
-
-
-
-
-
-
-
- notional amount
-
-
-
-
-
-
500.000
- positive fair value
-
-
-
-
-
-
-
- negative fair value
-
-
-
-
-
-
26.900
- future exposure
-
-
-
-
-
-
7.500
- notional amount
-
-
-
-
-
-
-
- positive fair value
-
-
-
-
-
-
-
- negative fair value
-
-
-
-
-
-
-
- notional amount
-
-
-
-
-
-
-
- positive fair value
-
-
-
-
-
-
-
- negative fair value
-
-
-
-
-
-
-
2) Sales of protection
Banking book
1) Purchases of protection
2) Sales of protection
355
Notes to the consolidated financial statements - Part E – Risks and Hedging Policies
B.5 OTC credit derivatives: gross (positive and negative) fair value / counterparty risk - contracts subject to netting
agreements
Other entities
companies
Non-financial
companies
Insurance
companies
Financial
Banks
entities
Other public
netting agreements
central banks
Contracts not subject to
Governments and
3112 2010
(in tho usands o f EUR)
Regulatory trading
1) Purchases of protection
- notional amount
-
-
22.598.922
5.101.514
573.465
-
-
- fair value positivo
-
-
626.067
178.128
74.273
-
-
- fair value negativo
-
-
172.386
47.981
-
-
-
- notional amount
-
-
21.558.420
5.712.624
573.465
-
-
- fair value positivo
-
-
162.112
44.989
-
-
-
- fair value negativo
-
-
658.582
191.453
76.804
-
-
- notional amount
-
-
238.596
11.225
-
-
-
- fair value positivo
-
-
8.771
-
-
-
-
- fair value negativo
-
-
1.238
435
-
-
-
2) Sales of protection
-
-
-
-
-
-
-
- notional amount
-
-
-
-
-
-
-
- fair value positivo
-
-
-
-
-
-
-
- fair value negativo
-
-
-
-
-
-
-
2) Sales of protection
Banking book
1) Purchases of protection
356
Notes to the consolidated financial statements - Part E – Risks and Hedging Policies
B6. Credit derivatives - residual life: notional amounts
(in tho usands o f EUR)
Underlying asset/residual life
A.
Regulatory trading book
1 to 5
Over 5
years
years
Total
3.159.545
46.000.449
7.458.415
56.618.409
2.196.827
35.599.100
6.527.657
44.323.584
962.718
10.401.349
930.758
12.294.825
12.000
165.577
72.245
249.822
12.000
96.400
72.245
180.645
-
69.177
-
69.177
Total 31 12 2010
3.171.545
46.166.026
7.530.660
56.868.231
Total 31 12 2009
893.118
22.430.711
3.705.401
27.029.230
A.1 Credit derivatives with qualified reference obligation
A.2 Credit derivatives with non-qualified reference
obligation
B.
Up to
1 year
Banking book
B.1 Credit derivatives with qualified reference obligation
B.2 Credit derivatives with non-qualified reference
obligation
B.7 Credit derivatives: counterparty risk/financial risk - internal models
As at today, EPE models are not used for either internal operational or reporting purposes.
357
Notes to the consolidated financial statements - Part E – Risks and Hedging Policies
C. Financial and credit derivatives
C.1 OTC financial and credit derivatives: net fair value and future exposure - counterparty risk
31/12/10
Other entities
companies
Non-financial
Insurance companies
Financial companies
Banks
Other public entities
central banks
Governments and
(in tho usands o f EUR)
1) Financial derivatives,
bilateral agreements
- fair value positivo
-
-
-
-
-
-
-
- fair value negativo
-
-
-
-
-
-
-
- future exposure
-
-
-
-
-
-
-
- net counterparty risk
-
-
-
-
-
-
-
- fair value positivo
-
-
-
-
-
-
-
- fair value negativo
-
-
-
-
-
-
-
- future exposure
-
-
-
-
-
-
-
- net counterparty risk
-
-
-
-
-
-
-
- fair value positivo
-
-
841.089
8.870
-
-
-
- fair value negativo
-
-
1.608.084
713.280
10.739
-
-
- future exposure
-
-
2.199.729
453.613
138.301
-
-
- net counterparty risk
-
-
2.639.266
453.130
138.301
-
-
2) Credit derivatives, bilateral
agreements
3) "Cross product" agreements
358
Notes to the consolidated financial statements - Part E – Risks and Hedging Policies
Section 3 - Liquidity Risk
Qualitative Information
A Liquidity risk: general information, operational procedures and measurement methods
The Group adopts a liquidity risk governance and management system which, in accordance with the provisions of the
Supervisory Authority, pursues the following objectives:
ensure the solvency of the Group and all its subsidiaries, both under the normal course of business, as well as in
crisis conditions;
optimise the cost of funding in relation to current and future market conditions;
adopt and maintain risk mitigation instruments.
Within the above system, the following responsibilities are centralised in the Parent Bank:
definition of Group policies for liquidity management and liquidity risk control;
coordination of Group policies' implementation by the companies included in the scope;
governance of the Group‘s short-, mid- and long-term liquidity position, both overall and at individual company
level, through centralised operational management;
short- and long-term governance and management of liquidity risk, guaranteeing, as ultimate lender for all
subsidiaries, the solvency of the latter.
In its governance function, the Parent Bank therefore defines criteria, policies, responsibilities, processes, limits and
instruments for managing liquidity risk, both under the normal course of business, as well as in liquidity stress and/or
crisis conditions, formalising the Group‘s Liquidity Policy and Liquidity Contingency Plan.
The Group Companies included in the scope of application, to the extent that they exhibit a liquidity risk deemed
significant, are responsible for abiding by the liquidity policies and limits defined by the Parent Bank and the capital
requirements set by the relevant Supervisory Authorities.
The overall structural liquidity profile is monitored by quantifying the mismatches of cash flows coming due, by maturity
date. Items of an optional nature have representative models consistent with those used for interest rate risk.
The planning of the funding policy Group-wide (funding plan) is coordinated and steered by the Treasury and Capital
Management Area (in cooperation with the Planning Area), which:
submits the plan of the initiatives to be taken in the financial markets to the Finance Committee for approval,
with a view to achieving the objectives set by the business plan and in accordance with capital management
requirements;
coordinates access to domestic and International long- and short-term capital markets for all the banks belonging
to the Group, as well as access to the European Central Bank re-financing transactions and centralised
management of statutory reserves;
makes projections on future liquidity on the basis of different market scenarios.
.
359
360
178.267
-
- sho rt po sitio ns
412
- sho rt po sitio ns
C.5 Financial guarantees given
640.897
6.463.952
- lo ng po sitio ns
C.4 Irrevo cable co mmitments
to disburse funds
400.460
- lo ng po sitio ns
C.3 Depo sits and bo rro wings
to be received
262.399
-
5.088
1.645
-
-
57.377
65.847
1.064.745
134.505
- sho rt po sitio ns
678.618
9.283.191
292.285
536.777
26.129
562.906
10.138.382
2.362.220
1.059.607
3.421.827
-
72.007
792.134
4.285.968
1 to
7 da ys
141.246
- lo ng po sitio ns
C.2 Financial derivatives
witho ut exchange o f principal
- sho rt po sitio ns
- lo ng po sitio ns
C.1 Financial derivatives
with exchange o f principal
O f f - ba la nc e - s he e t t ra ns a c t io ns
175.612
9.673.876
B .3 Other liabilities
64.452.559
B .2 Debt securities
- Custo mers
3.364.056
67.816.615
B .1 Depo sits and current acco unts
- B anks
77.666.103
B a la nc e - s he e t lia bilit ie s
25.992.226
4.630.187
- Custo mers
- B anks
1.083.268
30.622.413
A .4 Lo ans
A .3 Units in UCITS
576.194
3
A .2 Other debt securities
32.281.878
B a la nc e - s he e t a s s e t s
O n de m a nd
A .1 Go vernment securities
A c c o unt / M a t urit y
2
-
4.420
305
305
77.251
77.501
-
-
8.708.349
286.127
658.198
246.050
904.248
9.898.724
2.220.478
542.629
2.763.107
-
96.297
718.887
3.578.291
7 to
15 da ys
9
200.000
216.949
400.460
-
141.546
237.063
66.144
130.577
10.377.570
308.339
1.022.118
193.683
1.215.801
11.901.710
5.632.893
2.234.338
7.867.231
-
197.189
1.414.736
9.479.156
15 da ys
t o 1 m o nt h
28
217.500
309.787
-
-
878.040
942.530
187.592
31.933
16.503.829
2.497.018
440.165
416.269
856.434
19.857.281
9.233.169
449.827
9.682.996
-
838.615
2.206.067
12.727.678
1 to
3 m o nt hs
413
534.555
739.361
-
-
1.033.829
1.102.302
388.146
793.966
5.127.810
4.916.826
13.503
9.817
23.320
10.067.956
12.048.161
875.944
12.924.105
-
573.358
684.461
14.181.924
3 to 6
m o nt hs
75
506.082
770.471
-
-
2.181.322
2.159.463
331.587
218.346
1.038.174
4.832.046
180.794
64.011
244.805
6.115.025
9.749.398
800.299
10.549.697
-
726.001
608.961
11.884.659
6 m o nt hs
t o 1 ye a r
1.417
18.051.115
18.631.383
-
-
6.933.571
7.128.871
1.299.719
1.289.669
278.679
37.943.810
119.983
430.518
550.501
38.772.990
34.167.444
119.857
34.287.301
3.274
3.049.831
7.865.625
45.206.031
1 to 5
ye a rs
1. Time breakdown by contractual residual maturity of financial assets and liabilities – currency denomination EUR
Quantitative information
1.121
2.937.629
7.601.006
-
-
4.543.326
5.415.874
1.096.528
367.080
753.192
7.230.166
151.229
540.065
691.294
8.674.652
52.807.003
12.317
52.819.320
14.442
2.821.663
10.059.066
65.714.491
o v e r 5 ye a rs
31/12/2010
58.010
82.728
478.901
-
-
-
-
-
-
-
-
-
-
1.115.587
-
-
-
1.115.587
760.458
12.609
773.067
-
8.682
-
781.749
Uns pe c if ie d
m a t urit y
(in tho usands o f EUR)
Notes to the consolidated financial statements - Part E – Risks and Hedging Policies
361
3.521
-
- sho rt po sitio ns
-
919.217
- sho rt po sitio ns
C.5 Financial guarantees given
477.799
- lo ng po sitio ns
C.4 Irrevo cable co mmitments
to disburse funds
23.200
- lo ng po sitio ns
C.3 Depo sits and bo rro wings
to be received
80.402
-
-
304
-
-
393.046
760.866
1.349.656
42.872
- sho rt po sitio ns
1.350.213
42.872
- lo ng po sitio ns
C.2 Financial derivatives
witho ut exchange o f principal
- sho rt po sitio ns
- lo ng po sitio ns
-
-
279
2.456
2.456
66.477
225.463
104.372
100.778
-
-
4.510
14.968
-
107.723
10.481
1.332.320
1.501.080
-
22.452
158.498
67
67
358.356
248.395
2.928.912
3.066.199
142.294
208.329
56.663
1.258.196
1.314.859
1.665.482
487.725
30.903
518.628
-
144.701
750
664.079
1 to
3 m o nt hs
-
-
75.679
8.232
-
189.928
333.804
403.313
395.527
42.217
38.019
22.865
603.567
626.432
706.668
100.761
38.676
139.437
-
20.180
-
159.617
3 to 6
m o nt hs
-
310.582
416.940
166
166
385.270
264.892
340.027
350.199
116.349
7.132
8.912
11.703
20.615
144.096
86.372
38.228
124.600
-
114.320
-
238.920
6 m o nt hs
t o 1 ye a r
-
4.825.039
4.853.696
-
-
255.465
217.370
476.293
493.410
13.561
71.488
2.531
-
2.531
87.580
278.446
108.651
387.097
-
212.264
-
599.361
1 to 5
ye a rs
-
939.555
1.029.140
-
-
110.514
79.703
-
35
335
-
1.856
891
2.747
3.082
150.885
-
150.885
-
530.993
101.816
783.694
o v e r 5 ye a rs
-
-
-
-
-
-
6
-
6
-
221
-
227
Uns pe c if ie d
m a t urit y
501
121
121
-
-
-
-
-
-
-
7.271
7.271
-
1.027
47.133
39.343
423.215
462.558
510.718
145.126
27.507
172.633
-
166
-
172.799
15 da ys
t o 1 m o nt h
-
102
18.710
5.126
261.563
266.689
285.501
31.382
6.571
37.953
-
1.134
757
39.844
7 to
15 da ys
O f f - ba la nc e - s he e t t ra ns a c t io ns
34
205.045
63.258
235.895
299.153
504.232
103.667
4.677
108.344
-
50
2
108.396
1 to
7 da ys
(in tho usands o f EUR) 31/12/2010
C.1 Financial derivatives
with exchange o f principal
31.328
B .3 Other liabilities
626.847
44.161
B .2 Debt securities
- Custo mers
- B anks
671.008
- Custo mers
B .1 Depo sits and current acco unts
159.150
273.007
- B anks
702.336
432.157
A .4 Lo ans
B a la nc e - s he e t lia bilit ie s
265.777
A .3 Units in UCITS
359
-
A .2 Other debt securities
698.293
B a la nc e - s he e t a s s e t s
O n de m a nd
A .1 Go vernment securities
A c c o unt / M a t urit y
1. Time breakdown by contractual residual maturity of financial assets and liabilities – currency denomination USD
Notes to the consolidated financial statements - Part E – Risks and Hedging Policies
-
A .2 Other debt securities
362
-
-
- sho rt po sitio ns
-
5.397
- sho rt po sitio ns
C.5 Financial guarantees given
4.966
- lo ng po sitio ns
C.4 Irrevo cable co mmitments
to disburse funds
5.816
- lo ng po sitio ns
C.3 Depo sits and bo rro wings
to be received
-
-
-
-
-
-
290.448
422.331
323.410
17
- sho rt po sitio ns
323.278
17
- lo ng po sitio ns
C.2 Financial derivatives
witho ut exchange o f principal
- sho rt po sitio ns
- lo ng po sitio ns
-
-
-
5.816
-
-
-
6.758
6.757
-
-
13
-
-
6
280
367.484
341.112
-
153.355
-
-
16
-
-
615.379
52.384
124.625
123.332
-
-
2.370
-
2.370
2.370
2.588
-
2.588
-
53
-
2.641
1 to
3 m o nt hs
-
-
-
-
-
165
110
22.582
35.800
-
-
304
-
304
304
833
-
833
-
476
-
1.309
3 to 6
m o nt hs
-
-
325
-
-
543
474.777
317.920
318.013
-
18.588
5.013
-
5.013
23.601
797
-
797
-
37.373
-
38.170
6 m o nt hs
t o 1 ye a r
-
-
47
-
-
802
324
76.515
68.405
31
-
-
-
-
31
4.610
7.121
11.731
-
28.034
-
39.765
1 to 5
ye a rs
-
-
29
-
-
385
-
8
-
20
231.007
56
-
56
231.083
732
-
732
-
38.229
-
38.961
o v e r 5 ye a rs
-
-
-
-
-
-
-
-
-
-
-
-
-
Uns pe c if ie d
m a t urit y
-
-
-
-
-
-
-
-
-
-
-
-
-
-
34.644
503
34.853
35.356
188.711
5.441
-
5.441
-
16
-
5.457
15 da ys
t o 1 m o nt h
-
-
58.089
-
-
-
34.644
8.588
-
8.588
-
-
-
8.588
7 to
15 da ys
O f f - ba la nc e - s he e t t ra ns a c t io ns
-
74
168.720
168.794
226.883
2.606
-
2.606
-
-
-
2.606
1 to
7 da ys
31/12/2010
C.1 Financial derivatives
with exchange o f principal
-
B .3 Other liabilities
52.117
B .2 Debt securities
- Custo mers
2.540
54.657
- B anks
B .1 Depo sits and current acco unts
2.869
- Custo mers
54.657
13.029
- B anks
B a la nc e - s he e t lia bilit ie s
15.898
A .4 Lo ans
5.913
-
A .3 Units in UCITS
21.811
B a la nc e - s he e t a s s e t s
O n de m a nd
A .1 Go vernment securities
A c c o unt / M a t urit y
(in tho usands o f EUR)
1. Time breakdown by contractual residual maturity of financial assets and liabilities – currency denomination Pound sterling
Notes to the consolidated financial statements - Part E – Risks and Hedging Policies
-
A .2 Other debt securities
363
-
- sho rt po sitio ns
-
- sho rt po sitio ns
C.5 Financial guarantees given
942
2.350
- lo ng po sitio ns
C.4 Irrevo cable co mmitments
to disburse funds
-
- lo ng po sitio ns
C.3 Depo sits and bo rro wings
to be received
75.922
-
-
-
-
-
117.961
490
22.637
73.631
- sho rt po sitio ns
22.697
73.631
- lo ng po sitio ns
C.2 Financial derivatives
witho ut exchange o f principal
- sho rt po sitio ns
- lo ng po sitio ns
-
-
844
-
-
639
2
2.306
14.399
-
-
-
-
-
89.452
120
3.599
3.598
-
-
9
-
-
135.860
463.149
354.827
400.808
-
-
-
202.485
202.485
202.485
30.716
916
31.632
-
18.376
-
50.008
1 to
3 m o nt hs
-
-
428
-
-
228.323
13.178
53.917
62.022
-
-
-
92.038
92.038
92.038
20.440
-
20.440
-
3
-
20.443
3 to 6
m o nt hs
-
-
127
-
-
194.493
6.843
120.712
296.996
-
-
-
-
-
-
1.596
-
1.596
-
-
-
1.596
6 m o nt hs
t o 1 ye a r
-
-
-
-
-
6.807
6.524
231.042
147.031
-
-
-
-
-
-
13.347
-
13.347
-
26.940
-
40.287
1 to 5
ye a rs
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
19.717
-
19.717
o v e r 5 ye a rs
-
-
-
-
-
-
3
-
3
-
-
-
3
Uns pe c if ie d
m a t urit y
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
9.422
-
9.422
-
-
-
9.422
15 da ys
t o 1 m o nt h
-
-
-
-
-
-
-
15.634
-
15.634
-
-
-
15.634
7 to
15 da ys
O f f - ba la nc e - s he e t t ra ns a c t io ns
-
-
-
778
778
778
2.410
2.213
4.623
-
-
-
4.623
1 to
7 da ys
(in tho usands o f EUR) 31/12/2010
C.1 Financial derivatives
with exchange o f principal
11.813
B .3 Other liabilities
4.355
B .2 Debt securities
- Custo mers
77
4.432
- B anks
B .1 Depo sits and current acco unts
14.325
- Custo mers
16.245
12.842
- B anks
B a la nc e - s he e t lia bilit ie s
27.167
A .4 Lo ans
1.019
-
A .3 Units in UCITS
28.186
B a la nc e - s he e t a s s e t s
O n de m a nd
A .1 Go vernment securities
A c c o unt / M a t urit y
1. Time breakdown by contractual residual maturity of financial assets and liabilities – currency denomination Yen
Notes to the consolidated financial statements - Part E – Risks and Hedging Policies
-
A .2 Other debt securities
364
-
-
- sho rt po sitio ns
-
86.914
- sho rt po sitio ns
C.5 Financial guarantees given
41.053
- lo ng po sitio ns
C.4 Irrevo cable co mmitments
to disburse funds
-
- lo ng po sitio ns
C.3 Depo sits and bo rro wings
to be received
733
-
-
6
-
-
496.813
100.941
139.180
-
- sho rt po sitio ns
139.832
-
- lo ng po sitio ns
C.2 Financial derivatives
witho ut exchange o f principal
- sho rt po sitio ns
- lo ng po sitio ns
-
-
-
-
-
230.473
76.127
94.845
97.711
-
-
973
-
-
45
189.171
137.140
152.314
-
59.962
-
-
197
-
-
268.942
634.184
605.128
638.568
-
-
2.500
-
2.500
2.500
19.849
2.089
21.938
-
5.233
-
27.171
1 to
3 m o nt hs
-
-
3.618
-
-
323.675
384.631
10.019
12.943
-
-
22
-
22
22
27.872
938
28.810
-
364
-
29.174
3 to 6
m o nt hs
-
-
40.463
-
-
317.579
120.782
49.449
55.261
-
-
2.464
-
2.464
2.464
134
571
705
-
-
-
705
6 m o nt hs
t o 1 ye a r
-
-
603
-
-
10.766
11.450
48.757
55.181
-
-
403
-
403
403
33.079
-
33.079
-
-
-
33.079
1 to 5
ye a rs
-
-
-
-
-
9.766
9.392
7.559
7.581
-
-
-
960
960
960
16.982
-
16.982
-
-
7
16.989
o v e r 5 ye a rs
-
-
-
-
-
-
10
-
10
-
-
-
10
Uns pe c if ie d
m a t urit y
556
-
-
-
-
-
-
-
-
-
27
27
-
-
-
3.735
-
3.735
63.697
21.518
985
22.503
-
452
-
22.955
15 da ys
t o 1 m o nt h
-
-
-
37.128
15.995
53.123
53.123
1.335
4.962
6.297
-
-
-
6.297
7 to
15 da ys
O f f - ba la nc e - s he e t t ra ns a c t io ns
-
11.123
46.182
57.305
57.305
6.583
7.250
13.833
-
665
-
14.498
1 to
7 da ys
(in tho usands o f EUR) 31/12/2010
C.1 Financial derivatives
with exchange o f principal
-
B .3 Other liabilities
41.131
B .2 Debt securities
- Custo mers
2.286
43.417
B .1 Depo sits and current acco unts
- B anks
43.417
B a la nc e - s he e t lia bilit ie s
9.382
25.094
- B anks
- Custo mers
34.476
A .4 Lo ans
2.123
-
A .3 Units in UCITS
36.599
B a la nc e - s he e t a s s e t s
O n de m a nd
A .1 Go vernment securities
A c c o unt / M a t urit y
Time breakdown by contractual residual maturity of financial assets and liabilities – currency denomination Other
Notes to the consolidated financial statements - Part E – Risks and Hedging Policies
Consolidated Notes to Financial Statements - Part E – Risks and Hedging Policies
2. Self-securitisations
The securitisation transactions whereby the Group underwrites securities issued by vehicle companies (selfsecuritisations) were not shown in the tables of Part E of the Consolidated Notes to the Financial Statements, section
C "Asset securitisation and disposal transactions", pursuant to the provisions of Circ. 262 of the Bank of Italy.
Securitisation transactions of performing assets were structured with the aim of improving liquidity risk management
and were centred around optimising credit portfolio management, diversifying lending sources, reducing related
costs and matching maturities of assets and liabilities.
Although the Group's direct and full underwriting of the notes issued by the vehicle did not generate any direct cash
flows from the market, it still provided the Group with securities that could be used for ECB refinancing and repo
transactions, thereby improving the Group's safety margin and liquidity risk position. In fact, securities that can be
allocated with an AAA rating represent the Group‘s main core for covering short-term obligations using instruments
that can be readily liquidated.
These sale transactions had no economic impact on the financial statements: loans continue to be reported under
Account 70 ―Loans and advances to customers‖ on the assets side, while notes underwritten are not reported.
This category includes four self-securitisations of mortgage loans put in place in December 2007, (Siena Mortgages
07-5), March 2008 (Siena Mortgages 07-5 2nd tranche), February and June 2009 (Siena Mortgages 09-6 and Siena
Mortgages 09-6 2nd tranche). n line with the same objective of improving the Group's liquidity position, consumer
loans originated by the subsidiary Consum.it were self-securitised in August 2010 (the Consum.it Securitisation).
Siena Mortgages 07-5, 1st tranche
On 21 December 2007 the Parent Bank finalised a securitisation of performing loans consisting in a portfolio of
57,968 residential mortgages for a total of EUR 5,162 mln, of which a balance of EUR 3,453.5 mln outstanding as
at 31/12/2010.
The Siena Mortgages 07-5 S.p.a. special-purpose vehicle is 93% owned by Stichting Giglio S.p.A. and 7% owned by
the Parent Bank. This structure makes it possible to ensure the vehicle‘s independence.
Residential mortgage-backed floating-rate securities (RMBS) were issued to fund the acquisition in the following
tranches:
Class A notes (rating AAA), for an amount of EUR 4,765.9 mln, of which EUR 1,764.7 mln redeemed;
Class B notes (rating A), for an amount of EUR 157.4 mln;
Class C notes (rating BBB), for an amount of EUR 239 mln;
Class D notes (not rated), for an amount of EUR 124 mln;
A cash reserve was set up for an amount of EUR 123.9 mln, corresponding to the issuance of class D junior notes,
which was posted to Account 70 "Loans and advances to customers" in the consolidated financial statements.
Siena Mortgages 07-5, 2nd tranche
On 31 March 2008, the Parent Bank finalised the securitisation of performing loans consisting of a portfolio of
41,888 residential mortgages for a total of € 3,461 mln and a residual life of about 20 years in the context of
diversifying and enhancing available funding and capital management instruments. In geographic terms, 46% of the
mortgages are concentrated in central Italy, while northern and southern Italy each make up 27% of the total.
As at 31/12/2010, loans were outstanding for a balance of EUR 2,422 mln.
For these loans, the existing special-purpose vehicle, Siena Mortgages 07-5 S.p.A. was used; it had already been
used for the securitisation of performing residential mortgages which was completed in December 2007.
Residential mortgage-backed floating-rate securities (RMBS) were issued to fund the acquisition in the following
tranches:
Class A notes (rating AAA), for an amount of EUR 3,129.4 mln, of which EUR 2,095 mln outstanding;
Class B notes (rating A), for an amount of EUR 108.3 mln;
Class C notes (rating BBB), for an amount of EUR 178.3 mln;
Class D notes (not rated), for an amount of EUR 82 mln;
365
Consolidated Notes to Financial Statements - Part E – Risks and Hedging Policies
A cash reserve was set up for an amount of EUR 82 mln, corresponding to the issuance of class D junior notes, which
was posted to Account 70 "Loans and advances to customers" in the consolidated financial statements.
Siena Mortgages 09-6, 2nd tranche
In order to increase available eligible assets, in 2009 the Group completed two securitisation transactions through
the special-purpose vehicle Siena Mortgages 09-6 S.r.l
The special-purpose vehicle Siena Mortgages 09–6 S.r.l. is 93% owned by Stichting Giglio, a foundation under Dutch
law, and the remaining 7% is owned by the Parent Bank. This structure makes it possible to ensure the vehicle‘s
independence.
The first tranche was finalised on 20 February 2009 through the sale of a portfolio of performing mortgages in real
estate and building for a total of EUR 4.400 mln, of which a balance of EUR 3,681 mln outstanding as at
31/12/2010.
Residential mortgage-backed floating-rate securities (RMBS) were issued to fund the acquisition in the following
tranches:
Class A1 notes (rating AAA), for an amount of EUR 3,851.3 mln, of which EUR 786.7 mln redeemed;
Class B notes (rating A), for an amount of EUR 403.7 mln;
Class C notes (rating BBB-), for an amount of EUR 181.4 mln;
Class D notes (not rated), for an amount of EUR 106.7 mln;
The first tranche was followed by an additional securitisation, Siena Mortgages 09-6 S.r.l., on 26 June 2009. The
second tranche amounted to EUR 4,101 mln, of which 2,788.8 mln outstanding as at 31.12.10.
The portfolio consisted of 44,148 performing mortgages of the Parent Bank (including positions from the former
branches of Banca Agricola Mantovana S.p.A., Banca Antonveneta S.p.A. and Banca Toscana S.p.A., which have now
been merged), again in the real estate and building areas, with all instalments regularly paid as at the date of
valuation of the portfolio sold (broken down as follows: 14,755 mixed-rate, 13,791 floating rate and 15,602 fixed
rate loans.
To fund the acquisition, the special purpose vehicle (Siena Mortgages 09 – 6 S.r.l.) issued residential mortgagebacked floating-rate securities (RMBS) in the following classes:
Class A1 notes (rating AAA), for an amount of EUR 3,466 mln;
Class B notes (rating A), for an amount of EUR 447.1 mln;
Class C notes (rating BBB-), for an amount of EUR 188.6 mln;
Class D notes (not rated), for an amount of EUR 103.5 mln;
366
Consolidated Notes to Financial Statements - Part E – Risks and Hedging Policies
Consum.it Securitisation
The Consum.it Securitisation was finalised on 6 July 2010 through the sale of a portfolio of 341,309 performing
consumer loans originated by Consum.it S.p.a., with all instalments regularly paid as at the date of valuation of the
portfolio sold for an amount of approximately EUR 3,000 mln. MPS Asset Securitation S.p.a., later named
"Consum.it Securitisation S.r.l" was used as the transferee of the transaction-underlying assets. The vehicle is 90%
owned by Stichting Giglio S.p.A. and 10% owned by the Parent Bank. This structure makes it possible to ensure the
vehicle‘s independence.
On 30 June 2010, ―Consum.it Securitisation S.r.l.‖ financed purchasing of the portfolio by issuing Asset-Backed
Fixed-Rate Securities in the following tranches:
Class A notes (rated "Aaa" by Moody's and "AAA" by Fitch), for an amount of EUR 1,710 mln
Class B notes (rated "Aa3" by Moody's and "A-" by Fitch), for an amount of EUR 540 mln;
Class C notes (rated "Caa2" by Moody's), for an amount of EUR 750 mln;
Class D notes (not rated), for an amount of EUR 132.3 mln;
A cash reserve was set up for an amount of EUR 132.3 mln, corresponding to the issuance of class D junior notes,
which was posted to Account 70 "Loans and advances to customers" in the consolidated financial statements.
367
Consolidated Notes to Financial Statements - Part E – Risks and Hedging Policies
Section 4 - Operational risk
Qualitative Information
Operational risk: general information, operational procedures and measurement methods
General information and Framework structure
By an administrative ruling dated 12 June 2008, the Bank of Italy authorised the Montepaschi Group to use internal
models for the determination of capital requirements for credit and operational risks.
The adoption of the advanced model (AMA) calls for a major organizational and cultural mindset change for banks,
which are necessarily required to:
1. adopt an internal organisation which defines the roles of the corporate bodies and functions involved in
the operational risk management process;
2. establish a control function for data gathering and storing, capital requirement calculation, risk profile
assessment and reporting;
3. perform ongoing checks on the quality of the management system and its compliance with regulatory
provisions;
4. delegate the internal auditing body to perform periodic audits of the management system for Operating
Risks;
5. make sure over time that the system is actually used in the usual course of business (use test).
For this purpose, the Montepaschi Group has adopted an integrated system for operational risk management, i.e. an
internal framework built around a governance model that involves all companiesincluded in the AMA model scope
of application. The approach defines the standards, methods and instruments that make it possible to measure risk
exposure and the effects of mitigation by business area.
The advanced approach is designed so as to integrate all major qualitative and quantitative (LDA-Scenario mixed
model) information sources (information or data).
The quantitative Loss Distribution Approach component is based on the statistical collection, analysis and modelling
of internal and external historical loss data (from the Italian Database of Operational Losses, DIPO).
The qualitative component focuses on the evaluation of the risk profile of each unit and is based on the
identification of relevant scenarios. In this framework, the companies included in the AMA scope are involved in
process and risk identification, risk evaluation by process managers, identification of possible mitigation plans,
discussion (in scenario-sharing sessions) of priorities and technical-economic feasibility of mitigation actions.
Next is a phase for monitoring progress on the implementation of actions scheduled and compliance with objectives
and deadlines.
The Framework identifies Group Operational Risk Management (ORM) as the operational risk control function
(within Parent Bank Risk Management).
The Parent Bank‘s ORM calculates the capital required to hedge operational risks by the use of different components
of the model (internal data, external data, contextual and control factors, qualitative analyses), supports decisionmaking by Top Management from the standpoint of creating value by containment, mitigation and transfer of the
risks detected, and as it does for other companies included in the scope, it gathers internal loss data and identifies
the risks to be evaluated in qualitative analyses.
ORM has also set up a reporting system which ensures timely information on operational risks for Top Management,
which transposes the strategic principles of the management system into special operating policies. Reports are
submitted regularly to the Risks Committee.
Over time, the adoption of the AMA model has ensured better-informed management of operational risk,
guaranteeing a material progressive reduction of the Company‘s operational risk.
368
Consolidated Notes to Financial Statements - Part E – Risks and Hedging Policies
Major changes in the last year
Compared to the previous financial year, novelties in 2010 included completion of initiatives aimed at extending the
advanced model for operational risk measurement and management to Biverbanca. An additional novelty was the
merger by absorption of Paschi Gestione Immobiliare by and into the Group, whereby the Group's property
management area started to undergo reorganisation.
Quantitative information
The percentage breakdown of operational losses, recorded in 2010, is reported, divided into the following risk
classes:
Internal Fraud: Losses arising from unauthorised activities, fraud, embezzlement or violation of laws, regulations or
corporate directives that involve at least one internal resource of the Group;
External Fraud: Losses due to fraud, embezzlement or violation of laws by subjects external to the Group;
Employment Relationships and Occupational Safety: Losses arising from actions in breach of employment,
occupational health and safety laws and agreements, payment of compensation for personal injury or episodes of
discrimination or failure to apply equal treatment;
Customers, products and operating practices: Losses arising from non-fulfilment of professional obligations with
customers or from the nature and characteristics of the product or service provided;
Property damage: Losses arising from external events, including natural disasters, acts of terrorism or vandalism;
Business disruptions and system failures: Losses due to business disruption or system failures or interruption;
Process management, execution and delivery: Losses arising from operational and process management
shortfalls, as well from transactions with business counterparties, vendors and suppliers.
Operating Loss Breakdown
Montepaschi Group - 31.12.2010
External Fraud
Employment
20%
Practices and
Workplace
safety
10%
Internal Fraud
20%
Execution,
Delivery &
Process
Management
12%
Business
disruption and
system failures
2%
Damage to
Physical Assets
0%
369
Clients,
Products &
Business
Practices
36%
Consolidated Notes to Financial Statements - Part E – Risks and Hedging Policies
With respect to 2009, a decrease was recorded for operational risk events, confirming the positive trend already
observed in previous years.
The type of event with the greatest impact on the profit and loss statement remains the one attributable to ―nonfulfilment of professional obligations with customers‖, which accounts for 36% of the entire amount of losses.
External Fraud and Internal Fraud come next in the list, each accounting for approximately 20% of losses.
With regard to non-fulfilment of professional obligations with customers‖, the risk is primarily associated with
consumer litigation on the following issues:
1. Application of compound interest;
2. Sales of Financial Plans, Bonds (Argentina, Cirio, Parmalat) and structured products;
With regard to "External Fraud", mitigation activities continued, aimed at containing credit fraud, which has taken
on a significant weight even at Banking system level. Among these, the following are noted: review of the third-party
intermediary agreement process, centralisation of selection and control activities and development of IT
management and monitoring systems. These activities will also allow for effective control of the quality of credit
disbursed through this channel.
Main types of legal action
The suits brought against Banca Monte Paschi for the most part can be grouped into sub-categories, individually
characterised by a common denominator consisting in alleged critical elements of products, operations, services or
relationships for which or in which the Bank acted as a disbursement or placement entity.
The main sub-categories (in order of relevance) refer to claims regarding:
1. compound interest;
2. placement of bonds issued by countries or companies later in default;
3. placement of financial plans;
These three subcategories account for the largest share of total loss from legal actions. In dealing with these cases,
the Group continues to be pursuing dispute settlement solutions.
Other pending litigation
Pending cases regarding the application of anti-money laundering provisions As at 31.12.2010, several
administrative proceedings were pending against the Group concerning the application of anti-money laundering
regulations.
Civil lawsuit brought before the Court in Florence. The lawsuit concerns a claim for compensation for alleged
damages due to contractual liability brought by the plaintiff against the Bank jointly with other credit institutions.
Civil lawsuit brought before the Court in Salerno. This case, where BMPS is sued together with other credit
institutions and companies, seeks the assessment of alleged damage suffered by the plaintiff, as a result of an
alleged unlawful report filed with the Italian Central Credit Register.
Civil lawsuit brought before the Court in Turin. The case involves a dispute relative to inclusion in the register of
protested bills and the resulting claim for damages. The Court of Turin rejected the claim, ordering the plaintiffs to
pay the defendant Group court costs. Likewise, the appeal filed by the opposing party was denied, ordering it to pay
costs. The case is currently pending before the Court of Cassation.
Actions brought by trustees in bankruptcy of plaintiff companies. In 1999, the Trustee of the plaintiff companies in
question brought several cases, directed both against B.N.A. (later Antonveneta, now BMPS), as well as against
BMPS, aimed at obtaining compensation for damages due to the alleged wrongful granting of credit, quantified in
an amount equal to the non-bank receivables included in liabilities in the bankruptcy proceedings. These claims
were rejected due to the trustee‘s lack of legal standing, i.e. the proceedings ascertained his waiver of continuing
370
Consolidated Notes to Financial Statements - Part E – Risks and Hedging Policies
with the action. At the same time, the Trustee of the same companies also filed actions for revocation pursuant to
Art. 67 II Bankruptcy Act concerning remittances for settlement. These disputes underwent complicated proceedings
in relation to some pre-trial matters and are currently at different stages of development. In particular, to date, the
cases relative to the positions against B.N.A., after the respective decisions by the Court of Cassation, are being
resumed before the Court of Appeal of Bari, while the position against BMPS is still pending a decision by the
Supreme Court.
Civil lawsuit brought before the Court in Rome. This case, where BMPS is sued together with other credit institutions
and companies, seeks the assessment of alleged damage suffered by the plaintiff, as a result of foreign-currency
advanced receivables transactions.
Action for liability against the directors and statutory auditors of a Credit Institution merged by BMPS . This case
formerly brought by the plaintiff and then continued by BMPS as the merging bank concerns an action for liability
against former directors and statutory auditors of the plaintiff bank. A settlement agreement was reached with some
of the appearing parties. The Court then ruled that the proceedings should continue against the remaining parties.
Other pending litigation
Note is given of civil suits for compensation for damage due to alleged unlawful reports filed with the Italian Central
Credit Register.
Financial risks inherent in investment services (wealth risk management)
Wealth risk management process and methods
The term "investment services" refers to operations with customers in the area of placement services; order
execution, receipt and transmission; proprietary trading; portfolio management; investment advice.
The risks associated with this type of operations are directly or indirectly reflective of the risks incurred by customers
and may potentially materialise into operational and reputational risks. Controlling these risks is the main way to
prevent the occurrence of potential operational and/or reputational risks (identifiable in the deterioration of the
relationship of trust between Bank and customers), which, in turn, may have repercussions on the regulatory capital
or economic capital consumption.
Organisationally, the Montepaschi Group opted for a centralised model which identifies under "wealth risk
management" the overall set of activities for the measurement and monitoring of both operational and reputational
risks, as well as of risks inherent in investment services/products offered to -or in any case held by- its customers and
uses the term "wealth risk management" to identify the organisational unit responsible for this area of business
within the Parent Company.
Wealth risk management activities particularly concern the operational processes, tools and methods aimed at
ensuring overall consistency between the customer‘s risk profile and risk/return expectations with the risk profile of
the products, managed accounts and portfolios held in order to prevent and minimize reputational impact.
Within the Parent Bank, the organisational responsibility for overseeing Group-wide measurement, monitoring and
control activities relative to the financial risks inherent in investment services/products is an integral part of the scope
of responsibility of Group integrated Risk Management. This is to ensure single governance of the direct and indirect
risks which the Group incurs during the course of its operations. Within the Risk Management Area, this task is
allocated to the Wealth Risk Management service.
All investment products (both Group and third-party), included in the catalogue of products offered to Group
customers are subject, within a codified production-distribution supply-chain management process, to a specific
multivariate quali-quantitative risk assessment, including, market, credit and liquidity risk factors. The same
quantitative evaluation is also made for financial instruments purchased directly by customers and managed in
portfolios under custody.
The risk assessments are pegged to specific risk classes identified with explanatory keys, which are available to
customers within information brochures regarding securities being placed and which therefore represent one of the
guiding criteria on the basis of which the verifications of appropriateness and compliance provided for by the
371
Consolidated Notes to Financial Statements - Part E – Risks and Hedging Policies
European MiFID regulations and by Consob Regulation 16190 are made. The same quantitative evaluation is also
made for financial instruments purchased directly by customers and managed in portfolios under custody. Group
customers are regularly informed of changes in the risk of the financial instruments held, so as to ensure timely
informational transparency and facilitate possible decisions aimed at rebalancing the risk profile of the investments
held.
The activities described cover the entire scope of the MPS Group, (Banca MPS, Banca Antonveneta, Biverbanca and
MPS Banca Personale until date of merger, in addition to MPS Capital Services for the role it plays in the supplychain process).
The inter-functional technical body, ―Customer Protection‖ operates, under the responsibility of the Wealth
Management Function, with the objective of identifying companies undergoing a temporary critical phase,
associated primarily with specific macroeconomic, corporate and/or sector-related situations or by a lack of sufficient
market information, in order to assign a maximum level of risk to the financial instruments issued by them, which
makes it impossible to offer them on an advisory basis and makes them inappropriate in terms of suitability.
Customer risk profile: suitability and risk of investment products
The wealth risk management function is mandated to set out and monitor role descriptions concerning
appropriateness and suitability analyses for trading in individual financial instruments and investment portfolios
through the "advanced" advice platform.
In particular, the wealth management function supervises both the operating practices used to measure the
information available through the MiFID questionnaire from the customer account (i.e. customer's knowledge and
expertise, investment objectives, time horizon and financial situation) against the risk of the product/service the
customer is purchasing, as well as the criteria to determine the suitability of transactions.
A breakdown of Group customers by the different risk profiles, as determined on the basis of evidence emerging
from questionnaires collected as of the MiFID effective date (2 November 2007) reveals, as at the end of 2010, that
concentration is more on medium-low risk profiles. In particular, approximately 86% of customers whose profile
was entered through the questionnaire can be broken down into "minimal", "limited" and "moderate" risk profiles,
thus confirming the conservative behaviour of Group customers in financial investment.
Montepaschi Group Customer's Risk Profile
31.12.2010
high
10%
medium
37%
very hight
4%
very low
11%
low
38%
In line with the customers' risk profile, Group offerings to customers show a similar breakdown of products. In terms
of risk, products offered to Group customers -and therefore validated within a supply-chain process- in 2010
(including bonds, policies and assets under management), fall within lower-risk classes (from "minimal" to
"moderate) and account for 78% of total.
372
Consolidated Notes to Financial Statements - Part E – Risks and Hedging Policies
Investment Services / Products Offered to Customers
Montepaschi Group - 2010
Breakdown by Risk Classes
very low risk
classes
33%
very hight risk
classes
16%
low risk classes
28%
high risk classes
6%
medium risk
classes
17%
For each class of risk, products are considered suitable when offered to customers whose profile is at least the same
as (but no lower than) that of product.
The graph above does not include funds and sicavs because, in light of the open architecture adopted by the Group,
selection is based more on asset management companies than individual areas of business. The assignment of risk
classes covers the entire range of funds from the selected asset management companies even though, in keeping
with customer risk profiles, the catalogue on offer follows business opportunity criteria that do not necessarily
involve all of the investment areas considered.
Reputational risks in operations inherent in investment services/products
Reputational risk is identified in general terms as the possibility that one or more given events may negatively alter
the consideration, esteem or image and therefore the reputation which a party has within the economic or social
system in which it operates, primarily with those who hold some form of interest in it. Reputation therefore
becomes particularly relevant in the case of banks, for which a relationship of trust is an integral part of the end
products and services provided to their customers. Evidently, reputation and risks related thereto, is objectively
difficult to estimate in quantitative terms.
As far as operations relative to the production and sale of investment products and services to customers are
concerned, the category of events associated with innovative business scenarios or situations not typically
corroborated by a sufficiently broad record of data to describe both the distribution of probability and the average
impact in terms of damage takes on special importance. This is a direct consequence of the high level of innovation
this business is characterised by, aimed as it is at offering customers new investment opportunities while keeping
with their risk profiles, through both proprietary and captive products, as well as through access to third-party
products in an open architecture environment.
Factors such as: mis-selling; risk inappropriateness of portfolios or individual products to the customer‘s sociobehavioural profile; the overall financial risk borne by the customer; complexity of -or defective contracts forinvestment products and services, are some of the causes which potentially lie at the origin of reputational risks that
call for monitoring and management.
Identification and monitoring of these risks through dedicated management reports for the Top Management and
the use of specific key risk indicators lays the foundation for the prevention of reputational events and, at the same
time, favours a culture of pro-active and informed risk management that goes beyond mere mitigation and
prudential provisioning.
The organisational decision to centralise within the Parent Company's Risk Management Function the overall control
and governance of both operational and reputational risks, together with risks inherent in investment
373
Consolidated Notes to Financial Statements - Part E – Risks and Hedging Policies
services/products, is therefore aimed at encouraging awareness and promoting an integrated management of the
processes which may potentially generate reputational risks for the Group.
374
Consolidated Notes to Financial Statements - Part E – Risks and Hedging Policies
Risks from tax disputes
For tax purposes, Monte dei Paschi di Siena falls into the category of ―large taxpayers‖ and is thus subject to more
stringent checks by the tax authorities. Against this backdrop, Monte dei Paschi was subjected to audits by the
Regional Tax Directorate responsible for some below-described transactions completed in the 2002-2007 period,
which resulted in the notification of some official tax audit reports in relation to which the Monte dei Paschi has
received some notice of assessment.
The notifications were issued to the Monte dei Paschi di Siena both individually and in its capacity as the merging
company of Banca Toscana, Banca Agricola Mantovana and ―old" Banca Antonveneta, among others.
In particular, disputed transactions refer to the trading of securities in periods straddling dividend payout dates and
repurchase agreements in foreign bonds. Specifically, undue tax benefits are claimed, although they were obtained
by legitimate application of existing rules and regulations (so-called "abuse of right‖).
The tax amount claimed in the notices of assessment in relation to trading in securities and repo transactions totals
approx. EUR 377 mln, in addition to sanctions for about EUR 575 mln and interest. The official tax audit reports not
yet leading to notices of assessment refer to similar transactions which are alleged to have resulted in EUR 130
mln worth of tax savings. The notices of assessment have been duly impeached. Monte dei Paschi di Siena,
corroborated by the opinion of authoritative consultants, believes that the behaviour was correct as to its substance
and deems the risk of losing remote. In consideration of the complexity of the subject, it was considered appropriate
to provide disclosure of this information.
375
Nota integrativa consolidata - Parte G – Operazioni di aggregazione riguardanti imprese o rami d’azienda
Part F – Consolidated shareholders' equity
Section 1 - Consolidated shareholders' equity .......................................................................................................... 377
A. Qualitative Information .................................................................................................................................. 377
B. Quantitative Informations ............................................................................................................................... 378
Section 2 - Shareholders' equity and regulatory capital ratios .................................................................................... 382
2.1 The regulatory framework - scope of application ............................................................................................ 382
2.2 Regulatory capital ........................................................................................................................................ 382
2.3 Capital adequacy .......................................................................................................................................... 387
376
Consolidated Notes to Financial Statements - Part F – Consolidated shareholders' equity
Section 1 - Consolidated shareholders' equity
A. Qualitative Information
The capital management activity involves all the policies and choices necessary to define the amount of capital and
the optimum combination between different alternative capital instruments, so as to ensure that the amount of
capital and the correlated ratios are consistent with the risk profile assumed and compliant with regulatory
requirements. From this standpoint, group-wide capital management has become increasingly more fundamental
and strategic, taking into account that the quality and sizing of capital resources of Group companies are defined
within the more general objectives of the Group itself.
The Group is subject to the capital adequacy requirements set out by the Basel Committee in accordance with the
rules defined by the Bank of Italy (―New prudential supervisory instructions for banks,‖ Circular 263 of 27
December 2006 and ―Instructions for preparing reports on regulatory capital and prudential ratios‖, 13th update of
Circular No. 155/91). In Circular no. 263, the Bank of Italy underlines that supervisory instructions are primarily for
consolidated reports; based on such rules, the ratio between regulatory capital and risk weighted assets must be at
least 8% on a consolidated level; compliance with the requirement on a consolidated basis is verified every six
months by the Bank of Italy.
Along with the observance of mandatory minimum capital ratios (―pillar one‖), the regulations require the use of
internal methodologies intended for determining current and future capital adequacy (―pillar two‖). The existence,
along with the mandatory minimum ratios, of ―pillar two‖ requirements in fact expands the concept of capital
adequacy, which takes on a more global connotation aimed at the overall verification of capital needs and sources
actually available, in line with the Group's strategic and developmental objectives.
To ensure the ongoing and effective assessment of aspects relating to capital adequacy, the Group's Capital
Adequacy function plays a direct role of coordination in monitoring the Group's capital adequacy. Among its
various activities , the Capital Adequacy function in 2010 took care of the following:
drafting of the ICAAP Report -with support from the relevant functions - with a view to assessing the
Group's capital adequacy based on the rules set out by the afore-mentioned Circular no. 263. Since ICAAP
also requires an assessment of prospective capital adequacy, the Group has implemented a structured
capital simulation process, whereby it estimates future capital requirements and associated regulatory
capital ratios, the overall internal capital and future Available Financial Resources (AFRs). In addition, the
outputs produced are redetermined by subjecting the input variables to stress conditions, on the basis of a
recessive scenario assumed by the relevant functions, so as to determine the overall impact on capital ratios
and evaluate the sustainability of the correlated contingency plans;
interpreting, analysing and estimating the impact of Basel III, by developing multi-year forecasting models
aimed at highlighting the impact of individual items being reviewed and by participating in the Banking
system's initiatives on the subject;
continuing the "Value Creation" programme introduced last year to analyse the different levels (legal entity,
type of product, ...) of Added Value generated by the business so as to identify positions unable to create
value based on risk-adjusted metrics, report them to the relevant operating functions in charge of making
disbursements "capital efficient", thereby optimising regulatory and operating capital absorption and, more
generally, asset portfolio performance;
developing a Risk Appetite, Capital Allocation and Risk-Adjusted Budget for 2011;
supporting the goodwill impairment testing process.
377
Consolidated Notes to Financial Statements - Part F – Consolidated shareholders' equity
B. Quantitative Informations
For details on the Group's shareholders' equity, see Section 15 - Liabilities in the notes.
B.1 Consolidated shareholders' equity: breakdown by business areas
Total
adjustments
Consolidation
cancellations and
Other
companies
Insurance
companies
group
Net equity items
Banking
3112 2010
(in tho usands o f EUR)
Shareholders' equity
4.553.214
319.017
283.735
(602.752)
4.553.214
Share premium
4.002.908
-
2.670
(2.670)
4.002.908
Reserves
5.976.448
193.702
10.711
(204.413)
5.976.448
Equity instruments
1.949.365
-
-
-
1.949.365
Treasury shares (-)
(24.613)
-
-
Valuation reserves
(18.255)
26.295
7.927
- Financial assets available for sale
108.585
-
-
-
108.585
- Tangible assets
-
-
-
-
-
- Intangible assets
-
-
-
-
-
- Hedges of foreign investments
-
-
-
-
-
(204.637)
-
-
-
(204.637)
(2.730)
-
-
-
(2.730)
201
-
-
-
201
- Actuarial gains (losses) on defined
benefit plans
-
-
-
-
-
- Share of valuation reserves of
equity investments valued at equity
22.409
22.409
-
(22.409)
22.409
- Special revaluation laws
57.917
3.886
7.927
(11.813)
57.917
986.983
60.904
(9.840)
(51.064)
986.983
17.426.050
599.918
- Cash flow hedges
- Exchange difference
- Non-current assets held for sale
Profit (loss) for the year - Group and
minority interests
Net equity
378
295.203
(34.222)
(24.613)
(18.255)
(895.121) 17.426.050
reserve
379
1.191.972
Total 31/12/2009
Negative
reserve
(177.875)
(856.884)
-
(35.787)
(16.278)
(804.819)
Insurance companies
Positive
reserve
70.494
29.978
-
-
9
29.969
reserve
Negative
(10.312)
(7.569)
-
-
(7.086)
(483)
reserve
2.490
-
-
-
-
-
Other companies
reserve
(140)
-
-
-
-
-
adjustments
Positive
reserve
(72.984)
(29.978)
-
-
(9)
(29.969)
10.452
7.569
-
-
7.086
483
reserve
Positive
cancellations and
Positive
reserve
1.191.972
987.878
-
39.717
907.940
40.221
-
(35.787)
(16.278)
(804.819)
reserve
(177.875)
(856.884)
TOTAL
Negative
The negative reserves for debt securities include reserves in the amount of EUR 68.3 mln for securities reclassified, in accordance with IASB amendment to accounting standards IAS 39 and IFRS
7, from the AFS to the loan portfolio. The balance of these reserves was frozen on the date of reclassification and is subject to recognition through profit and loss, decreasing interest income, on
the basis of the residual life of reclassified securities.
The breakdown of reserves by class of financial instrument is particularly relevant for quantification of regulatory capital filters. All the amounts indicated are after tax, if applicable.
With reference to net valuation reserves for the portfolio available for sale, the table shows the gap with distinction between capital gains and capital losses for debt securities, equities and units
in UCITS.
987.878
-
39.717
907.940
40.221
Positive
Total 31/12/2010
4. Loans
3. Units in UCITS
2. Equity instruments
1. Debt securities
Asset / Amount
Banking Group
Negative
Consolidation
Negative
B.2 Valuation reserves for financial assets available for sale: breakdown
Consolidated Notes to Financial Statements - Part F – Consolidated shareholders' equity
Consolidated Notes to Financial Statements - Part F – Consolidated shareholders' equity
B.3 Valuation reserves for financial assets available for sale: annual changes
3112 2010
(in tho usands o f EUR)
Debt
Equity
Units in
securities
securities
UCITS
1. Opening balance
130.661
898.374
2. Increases
116.013
2.1 Increases in fair value
2.2 Reversal to profit and loss of negative reserves
Loans
(14.938)
-
77.570
56.247
-
82.782
49.149
35.143
-
23.212
25.222
12.065
-
665
22.659
3.232
-
22.547
2.563
8.833
-
10.019
3.199
9.039
-
1.011.272
84.282
37.178
-
1.001.506
44.102
27.965
-
-
-
-
-
3.3 Reversal to profit and loss of positive reserves: following disposal
4.547
11.938
6.507
-
3.4 Other changes
5.219
28.242
2.706
-
-
-
201
-
891.662
3.930
-
- due to impairment
- following disposal
2.3 Other changes
3. Decreases
3.1 Decreases in fair value
3.2 impairment provisions
IFRS5 "discontinuing operations"
4. Closing balance
(764.598)
The amounts indicated in this table are after tax, if applicable.
Line 2.1 ―Increases in fair value‖ includes, under the column ―Debt securities‖, the revaluation mainly of Italian sovereign bonds belonging to the
Banking Group and insurance companies.
Line 2.2 ―Reversal to profit and loss of negative reserves ‖, sub-item ―due to impairment‖, shows the after-tax amount of impairment losses
entered, before tax, in the profit and loss statement under Item 130 b) ―Impairment losses on available-for-sale financial assets‖.
In line 3.1 ―Decreases in fair value‖, the amount of EUR 1,001.5 mln indicated in the column ―Equity securities‖ is made up almost entirely of
decreases in fair value, recognised at equity, of government securities issued by central governments of the European Union. Since the Parent
Company opted for symmetrical treatment under the measures regarding "Prudential filters for regulatory capital" set forth by the Bank of Italy
on 18 May 2010, the impact of positive and negative reserves for these debt securities has been sterilised for regulatory capital purposes as of 1
January 2010.
Table B.4 below reports in detail the annual changes relative to the equity securities column with evidence of changes in the valuation reserves
for major equity investments held.
380
381
29.595
SORIN S.p.a.
898.374
22.659
-
10.617
12.042
-
-
-
-
-
-
-
2.563
138
2.152
273
-
-
-
-
-
-
-
-
disposal
impairment
-
following
due to
-
7.942
-
812
2.374
-
-
-
-
-
-
4.756
Other
49.149
121
10.046
23.353
-
12.548
-
-
-
429
-
2.652
increases
Fair value
-
-
-
(11.938)
-
(4.572)
(2.054)
-
-
-
-
(5.312)
disposal
following
(44.102)
(344)
(13.149)
(24.772)
-
-
-
(3.349)
(2.488)
-
-
-
reductions
Fair value
Reductions
(32.985)
(4.744)
(9.906)
(3.487)
-
(1.473)
(81)
(73)
-
(372)
(3.024)
(9.825)
Other
891.662
132.138
6.097
28.422
-
40.670
10.954
9.701
-
49.892
608.617
5.171
31 12 2010
(in tho usands o f EUR)
* In June, Sansedoni S.p.a. underwent a total non-proportional spin-off which led to the incorporation of two new entities, one for real estate development and the other, i.e. Sansedoni Siena S.p.a.,
focusing on asset development management and invested in by the Parent Company (21.75% shareholding).
Total
136.967
10.097
Equity securities - Finance
Equity securities - third
parties
20.693
Other Group companies
-
11.035
Sorgenia S.p.A.
Spoleto Cr.Serv.Ragg.
13.123
7.800
49.835
606.885
12.344
01/01/10
S.S.B. S.p.a.
Sansedoni S.p.A. *
Istituto per il Credito Sportivo
Banca d'Italia
Alerion Industries
items/Amounts
Increases
B.4 Valuation reserves for financial assets available for sale: annual changes in equity securities
Consolidated Notes to Financial Statements - Part F – Consolidated shareholders' equity
Consolidated Notes to Financial Statements - Part F – Consolidated shareholders' equity
Section 2 - Shareholders' equity and regulatory capital ratios
2.1 The regulatory framework - scope of application
Regulatory capital is determined based on supervisory instructions issued by the Bank of Italy (―New prudential
supervisory instructions for banks‖, Circular no. 263 of 27 December 2006 and ―Instructions for preparing reports
on regulatory capital and prudential ratios‖, 13th update of Circular No. 155/91).
The ―New prudential supervisory instructions for banks‖ allow banks and banking groups -upon prior authorisation
by the Bank of Italy- to determine capital requirements by adopting internal measurement models.
In June 2008, the Montepaschi Group was authorised to use advanced internal rating-based (AIRB) approaches for
the determination of capital requirements for credit risk in relation to retail and corporate portfolios and Advanced
Measurement Approaches (AMA) for operational risks.
2.2 Regulatory capital
A. Qualitative Information
The regulatory capital differs from net accounting equity as determined on the basis of IAS/IFRS international
accounting principles, since Supervisory regulations are aimed at safeguarding capital quality and reducing potential
volatility induced by the application of the IAS/IFRS principles.
The items that make up regulatory capital must therefore be fully available to the Group, so they may be used
without limitation to hedge risks and corporate losses. These components need to be stable and their amount is
stripped of any tax charges.
Regulatory capital is made up of core capital and supplementary capital. Both core (Tier 1) and supplementary (Tier
2) capital are determined by the algebraic sum of their positive and negative items, upon prior consideration of the
so-called ―prudential filters‖. This expression is understood as all those positive and negative items adjusting
regulatory capital, introduced by supervisory authorities with the express purpose of reducing potential capital
volatility. The deductible items, determined as will be explained below, must be deducted from core and
supplementary capital (50% from Tier 1 and 50% from Tier 2).
The following table illustrates the constituents of Tier 1 and Tier 2, with a focus on the Group‘s most relevant
aspects.
With regard to Tier 1, its positive items include paid up capital, share premium, profit and capital reserves,
innovative and non-innovative capital instruments and retained earnings; added to these items are the positive
prudential filters represented by the issuance of so-called ―Tremonti bonds‖. In fact, the Parent Company has
participated in the initiative put in place by the Ministry of Economy and Finance, aimed at ensuring an adequate
flow of financing to the economy and an adequate level of capitalisation to the banking system. Pursuant to Art. 12
of Legislative Decree No. 185 of 28 November 2008, transposed, as amended, into Law no. 2 of 28 January 2009
(―Legislative Decree No. 185‖), on 30 December 2009 the Parent Company issued ―Convertible financial
instruments‖ (―Tremonti bonds‖) subscribed by the Ministry of Economy and Finance (MEF). The process for the
issuance of the Tremonti bonds involved the Group in a number of activities aimed at fulfilling the commitments
undertaken upon signing of the ―Memorandum of understanding.‖ In short, by signing the Memorandum of
Understanding the Parent Company undertook to:
make EUR 10 bln in financial resources available to small- and mid-sized companies over the next three
years;
start up activities in support of small- and mid-sized enterprises and families through specific products (new
or existing);
have a code of ethics governing the compensation of corporate top managers and market traders;
provide adequate disclosure to customers of the initiatives undertaken to implement the commitments
signed.
The negative items in Tier 1, on the other hand, include treasury shares in the portfolio, intangible assets (including
goodwill), any losses posted in previous years and in the current one, and the negative balance of the reserves for
AFS assets. As far as regulatory capital treatment of AFS reserves is concerned, 'early offset' of balances, calculated
net of tax where applicable, from reserves for debt securities on the one hand and reserves for equity securities and
units in UCITS on the other. Each of the two net balances calculated as above is in fact fully deducted, if negative,
382
Consolidated Notes to Financial Statements - Part F – Consolidated shareholders' equity
from Tier 1, whereas it is 50% included, if positive, in Tier 2. This 'asymmetric' treatment was the only approach
applicable by Italian banks to AFS reserves until 2009. In 2010, the Bank of Italy with the "Prudential filters for
regulatory capital" set forth on 18 May 2010, introduced - in exclusive respect of debt securities issued by EU
central governments- the possibility to opt for the alternative approach (so-called 'symmetrical' treatment) provided
for by CEBS in its guidelines which includes full neutralisation of AFS reserves for regulatory capital purposes. The
possibility for Italian banks to opt for the symmetrical approach entails the 'sterilisation' of the impact of negative
and positive AFS reserves built up as of 2010 for debt securities issued by EU central governments. The Montepaschi
Group opted for 'symmetrical' treatment.
Among the negative prudential filters noted in Tier 1, the following are worth mentioning:
the 50% decrease in net profits, already computed entirely in Tier 1, recognised in profit and loss as a result
of the accounting treatment of substitute tax due to tax deduction of goodwill (regulations provide for these
filters to be reduced by 1/8 per year in the years after tax deduction is made);
the net accrued capital gain (write-down of liabilities), after tax, relative to hybrid capitalisation instruments
and subordinated debt issued by the Group, classified among financial liabilities valued at fair value and
computed in Tier 2.
The overall Tier 1 capital is made up of the difference between the algebraic sum of the positive and negative items
and the items to be deducted, the criteria for the determination of which is indicated below:
equity investments and other items (innovative capital instruments, hybrid capitalisation instruments and
subordinate debt) issued by banks and financial firms not fully or proportionately consolidated are
deducted 50% from Tier 1 capital and 50% from Tier 2 capital. The regulations previously in force
provided, instead, for deduction of the aggregate from the sum of Tier 1 and Tier 2 capital;
the use of internal models for the determination of capital requirements in view of credit risks entails
identifying in the regulatory capital the difference between expected loss and net impairment losses; if
expected loss exceeds impairment losses, the difference is deducted 50% from Tier 1 and 50% from Tier 2
capital; if the expected loss is lower than net impairment losses, the difference is computed in Tier 2 within
the limit of 0.6% of credit risk weighted assets;
the equity investments held in insurance companies and the subordinate debt issued by such companies are
deducted 50 % from Tier 1 and 50% from Tier 2 if they were acquired after 20/07/2006; on the other
hand, if they were acquired prior to that date, they continue to be deducted from the sum of core and
supplementary capital until 31/12/2012.
As far as supplementary (Tier 2) capital is concerned, the positive items it is made up of include valuation reserves,
hybrid capitalisation instruments, subordinated debt and the positive net balance of reserves for AFS assets.
Negative items include the negative prudential filter proportionately at 50% of the positive balance of the AFS
reserve computed among the positive items of supplementary capital; in fact, these reserves are computed 50% in
supplementary capital.
The overall supplementary capital is made up of the difference between the algebraic sum of the positive and
negative items and the items to be deducted, determined according to the criteria described above.
As far as prudential filters are concerned, the following is also worth mentioning:
for hedging transactions, profits and losses not realised on cash flow hedges, recognised in the appropriate
reserve under shareholders‘ equity, are not computed in regulatory capital;
as for fair-value-option liabilities of natural hedges, both unrealised capital gains and capital losses recorded
in profit and loss are fully relevant except for the component arising from changes in creditworthiness;
the equity investment in Banca d‘Italia is not considered for the purpose of quantifying capital. As a
consequence, the respective capital gain deriving from valuation at fair value is not computed in the
reserves for AFS instruments .
The following tables report the main contractual features of innovative and non-innovative instruments which are
included in the computation of Tier 1 capital, together with capital and reserves, as well as the hybrid capitalisation
instruments and subordinated debt which are included in Tier 2 capital.
383
Consolidated Notes to Financial Statements - Part F – Consolidated shareholders' equity
1. Tier I Capital
The following table reports the main characteristics of the instruments included in Tier 1 comprising, in particular,
the innovative equity instruments issued by the Parent Bank.
Preferred Capital I LLC
"Tremonti bond"
as of 27/9/2011 Euribor
3m + 465 bps.
7,99% fix as of 7/2/11
Euribor 3m+ 390 bps.
8,50%
Currency
Capital Preferred Securities II^
tranche
Euribor 3m + 375 bps.;
as of 21/3/2011 Euribor
3m +3m
562,5
bps.bps.;
Euribor
+ 310
Early redemption as of
Capital Preferred Securities I^
tranche
Euribor 3m + 88 bps.
Maturity Date
F.R.E.S.H. (Floating Rate EquityLinked Subordinated Hybrid)
Issue Date
instruments
step up
Features of subordinated
interest rate
3112 2010
(in tho usands o f EUR)
NO
30/12/03
N.A.
(a)
EUR
700.000.000
470.596
YES 21/12/00
N.A.
(b)
EUR
80.000.000
80.000
YES 27/06/01
N.A.
(b)
EUR
220.000.000
220.000
YES 07/02/01
N.A.
(c)
EUR
350.000.000
350.000
YES 30/12/09
N.A.
(d)
EUR
1.900.000.000
1.900.000
Total Preference share and equity instruments (Tier I)
a)
Original
amount in
currency units
Contribution
to
regulatory
capital
(EUR/000)
3.020.596
The innovative capital instrument F.R.E.S.H. (Floating Rate Equity-linked Subordinated Hybrid notes) issued by the vehicle ―MPS
Preferred Capital II LLC‖, at an original nominal value of € 700 mln, is a perpetual instrument and as such contains no redemption or
step-up clauses but is convertible into shares. In September of each year from 2004 through 2009 and at any time as of 1 September
2010, the instruments are convertible upon the investor‘s initiative.
In addition, an automatic conversion clause is provided for in the event that, after the seventh year from date of issue, the reference
price of the ordinary shares should exceed a set amount. Payment is not cumulative and the option of non-payment exists if in the
previous financial year the Parent Company did not have any distributable profits and/or did not pay out any dividends to the
shareholders. Any unpaid consideration shall be considered as forfeited. The rights of the note holders are guaranteed on a
subordinated basis. In the event of liquidation of the Parent Bank, the rights of the investors will be subordinated to all of the Parent
Bank‘s creditors who are not equally subordinated, including holders of securities coming under Tier 2 capital and will override the
rights of Parent Bank‘s shareholders. In virtue of these characteristics, these instruments are eligible for inclusion in core Tier. Within the
overall structure, a limited liability company and a business trust were set up, which have respectively issued convertible preferred and
convertible trust securities. The Bank has underwritten an on-lending contract in the form of a subordinated deposit agreement. The
conditions of the on-lending contract are substantially the same as the conditions of the convertible preferred securities.
No conversion occurred in the course of 2010.
b)
Capital Preferred Securities are unredeemable securities. Only the issuer has the right to full or partial redemption of the notes, and this
right may be exercised after 21/03/2011 and 27/09/2011, respectively. As was communicated to the market on 18 January 2011, the
Parent Company decided not to exercise this right on the 1st tranche as at 21.03.2011 and increase to 630 bps the spread which was
originally set at 562.5 bps.
c)
The Preferred Capital Shares I LLC, nominally valued at EUR 350 mln, are unredeemable. As was communicated to the market on 18
January 2011, the Parent Company decided not to exercise the call option on these instruments and increase to 630 bps the spread
which was originally set at 390 bps.
d)
The so-called ―Tremonti Bonds‖ are ―Convertible financial instruments‖ issued by the Parent Bank pursuant to Art. 12 of Legislative
Decree No. 185 of 28 November 2008, converted, with amendments, by Law No. 2 of 28 January 2009 (―Legislative Decree No.
185‖) on 30 December 2009 and subscribed by the Ministry of Economy and Finance (MEF). Interest is paid annually on the basis of a
fixed 8.5% rate until 2012.
These instruments are designed to strengthen the Group‘s regulatory capital position and support economic development with a particular focus
on small-medium enterprises.
384
Consolidated Notes to Financial Statements - Part F – Consolidated shareholders' equity
2. Tier II capital
Original
amount in
currency
units
Contributi
on to
regulatory
capital
(EUR/000)
step up
Early
Maturity
redemptio
Date
n as of
Currency
The following tables report the main contractual features of instruments included in the calculation of Tier II capital,
with a special focus on hybrid capital instruments and subordinated liabilities.
Issue
Date
Subo rdinate bo ard lo an
4,875% fixed rate
NO
3105 2006
3105 2016
N.A .
EUR
750.000.000
750.000
Subo rdinate bo ard lo an
5,750% fixed rate
NO
3105 2006
30 09 2016
N.A .
GB P
200.000.000
290.162
Subo rdinate bo ard lo an
Euribo r 6m+2,50%
NO
15 05 2008
15 05 2018
N.A .
EUR
2.160.558.000
2.151.293
Features of subordinated
instruments
interest rate
T o t a l hybrid ins t rum e nt s ( Uppe r T ie r II)
3 .19 1.4 5 5
Subo rdinate bo ard lo an
CM S Co nvexity No tes
NO
07 07 2000
07 07 2015
N.A .
EUR
30.000.000
30.000
Subo rdinate bo ard lo an
CM S Vo latility No tes
NO
20 07 2000
20 07 2015
N.A .
EUR
25.000.000
25.000
Subo rdinate bo ard lo an
5,6% fixed rate
NO
09 09 2010
09 09 2020
N.A .
EUR
500.000.000
493.399
Subo rdinate bo ard lo an
Euribo r 3m+0,40 % up to
30/11/2012, then Euribo r 3m+1%
YES
30 112005
30 112017
30 112012
EUR
500.000.000
498.207
Subo rdinate bo ard lo an
Euribo r 3m+0,40% up to 15/01/13,
then Euribo r 3m+1%
YES
20 12 2005
15 012018
15 012013
EUR
150.000.000
136.894
Subo rdinate bo ard lo an
7,44% fixed rate
NO
30 06 2008
30 12 2016
N.A .
EUR
250.000.000
247.895
Subo rdinate bo ard lo an
3m Euribo r +0.60% up to 1/11/07;
then 3m Euribo r +0,90%
YES
01112002
01112012
01112007
EUR
75.000.000
27.903
Subo rdinate bo ard lo an
Euribo r 3m+1,40% up to
30 04 2008
30/04/2013, then Euribo r 3m+2% YES
30 04 2018
30 04 2013
EUR
450.000.000
45
Subo rdinate bo ard lo an
6,4% up to 31/10/2013, then
Euribo r 3m + 3%
YES
3110 2008
3110 2018
3110 2013
EUR
100.000.000
108.620
Subo rdinate bo ard lo an
7% fixed rate
NO
04 03 2009
04 03 2019
N.A .
EUR
500.000.000
498.284
Subo rdinate bo ard lo an
5% fixed rate
NO
2104 2010
2104 2020
N.A .
EUR
500.000.000
491.397
Subo rdinate bo ard lo an
flo ating rate
NO
30 09 2003
30 09 2013
30 09 2008
EUR
7.000.000
4.200
B o ard lo an
Euribo r 6m+0,60%
NO
07 12 2005
07 12 2015
N.A .
EUR
7.801.500
6.242
B o ard lo an
Euribo r 6m+0,60%
15 04 2008
15 04 2018
15 04 2013
EUR
3.900.750
2.126
B o ard lo an
Euribo r 6m+0,60%
18 04 2008
18 04 2018
18 04 2013
EUR
11.702.250
2.822
A B N A M RO subo rdinated lo an
Euribo r 3m+2,8%
10 10 2006
10 10 2016
10 10 2011
EUR
400.000.000
400.000
YES
YES
NO
T o t a l hybrid ins t rum e nt s ( Uppe r T ie r II)
2 .9 7 3 .0 3 4
T o tal
6 .16 4 .4 8 9
3. Tier III
At the end of 2010, there were no instruments eligible for inclusion in Tier 3.
385
Consolidated Notes to Financial Statements - Part F – Consolidated shareholders' equity
B. Quantitative Information
(in tho usands o f EUR)
3112 2010
A. Tier I before prudential filters
3112 2009
8.558.137
8.231.299
B. Tier I prudential filters
1.444.962
1.430.361
B1 - Positive IAS/IFRS prudential filters
1.907.123
1.900.000
B2 - Negative IAS/IFRS prudential filters
(462.161)
C. Tier I capital gross of items to be deducted (A+B)
(469.639)
10.003.099
D. Items to be deducted from Tier I
9.661.660
(860.698)
E. Total TIER 1 (C - D)
F. Tier II before prudential filters
G. Tier II prudential filters
(568.233)
9.142.401
9.093.427
6.401.585
6.343.974
(85.049)
G1. - Positive IAS/IFRS prudential filters
(78.923)
-
G1. - Negative IAS/IFRS prudential filters
-
(85.049)
H. Tier 2 gross of items to be deducted (F + G)
(78.923)
6.316.536
I. Items to be deducted from Tier II
6.265.051
(860.698)
L. Total TIER 2 (H - I)
(568.233)
5.455.838
M. Items to be deducted from Tier I and Tier II
5.696.818
(454.700)
N. Capital for regulatory purposes (E+L - M)
O. Tier III capital (TIER 3)
P. Regulatory capital inclusive of TIER III (N+O)
(409.818)
14.143.539
14.380.427
-
-
14.143.539
14.380.427
The Group's regulatory capital has been calculated taking account of the effects arising from the application of IAS/IFRS international accounting
standards, based on the provisions of the 13th update of Bank of Italy's Circular No. 155 ―Instructions for the preparation of reports on
regulatory capital and prudential ratios‖.
In 2010, Tier 1 increased by EUR 49 mln, totalling EUR 9,142.4 mln, compared to EUR 9,093.4 mln at the end of 2009.
The increase was positively influenced by the capitalisation of the profit for the year and the reduction in goodwill as a result of the disposal
banking business (branches); by contrast, it was negatively influenced by the annual fee paid to J.P.Morgan on account of the acquisition by the
Parent Bank BMPS of the right of usufruct of the ordinary shares subscribed by J.P. Morgan following the increase in share capital launched in
2008 and fixed rate interest on the ―Tremonti bonds‖ (8.5% until 2010), in addition to the greater difference between "expected loss" and net
value adjustments. The capital gain arising from the demerger of the consortium Perimetro Gestione Proprietà Immobiliari, amounting to EUR
405.5 mln, is not eligible for inclusion in consolidated capital and was not included in regulatory capital as at 31/12/2010 because not all
conditions required had materialised yet.
In 2010, Tier II capital decreased by EUR 241 mln, totalling EUR 5,455.8 mln against EUR 5,696.8 mln at the end of 2009; the decrease is
primarily attributable to a greater difference between "expected loss" and net value adjustments and the increase in items to be deducted
following the acquisition of a stake in the entity "Asset management Holding".
Under the measures set forth by the Bank of Italy on 18 May 2010 regarding prudential filters for regulatory capital, the Group opted for the
symmetrical treatment of revaluation reserves relating to debt securities issued by Central Governments of EU countries held in the ―Available for
Sale‖ portfolio. Consequently, with regard to these securities, the impact of changes in AFS reserves upon regulatory capital as of 1 January 2010,
amounting to approximately EUR 854.8 mln, has been completed sterilized.
As at 31 December 2010, there were no Tier III subordinated Securities.
386
Consolidated Notes to Financial Statements - Part F – Consolidated shareholders' equity
2.3 Capital adequacy
A. Qualitative Information
The qualitative information regarding the Group‘s capital adequacy evaluation process is included in Section 1 of this
Part F.
B. Quantitative information
Categories/Amounts
Non-Weighted amounts
Weighted amounts/requirements
31 12 2010
31 12 2009
31 12 2010
31 12 2009
300.029.128
279.114.766
105.803.977
117.649.606
1. Standardized Approach
173.092.717
190.530.757
55.518.127
80.200.737
2. 2 Internal rating-based (IRB) approach
126.375.236
88.054.170
49.780.979
36.977.136
-
-
-
-
126.375.236
88.054.170
49.780.979
36.977.136
561.175
529.839
504.871
471.733
8.464.318
9.411.968
504.848
580.144
504.848
580.144
2. Internal models
-
-
3. Concentration risk
-
-
B.3 Operational Risk
693.017
702.258
52.016
53.714
-
-
641.001
648.544
-
-
A. RISK ASSETS
A.1 Credit and counterparty risk (*)
2.1.Foundation
2.2 Advanced
3. Securitisations
B. REGULATORY CAPITAL REQUIREMENTS
B.1 Credit and counterparty risk
B.2 Market risk
1. Standardized Approach
1. Foundation
2. Standardized Approach
3. Advanced
B.4 Other prudential requirements
B.5 Other calculation elements
(923.127)
of which impaired
-
of which intra-group adjustments
(923.127)
B.6 Total prudential requirements (3)
49.961
(1.072.389)
8.739.056
9.671.942
-
-
109.238.200
120.899.275
C. RISK ASSETS AND CAPITAL RATIOS
C.1 Risk-weighted assets
(1.022.428)
C.2 Tier 1 capital / Risk-weighted assets
(Tier 1 capital ratio)
8,37%
7,52%
C.3 Capital for regulatory purposes including Tier III / risk-weighted assets
(Total capital ratio)
12,95%
11,89%
Total risk-weighted assets as at 31 December 2010 amounted to EUR 109,238 mln. The amount reflects a 10 percentage point contraction with
respect to the end of 2009 although in the presence of risk assets showing an opposite sign. This contraction is the result of multiple efficiency
drivers in the risk weighting of the MPS Group's exposures. These include: authorization for use of the advanced approach to the exposures of
former Banca Antonveneta; a shift in the allocation of risk assets to lower risk and or more collateralised assets; Increased alignment with the
trends for the period, as far as the risk measures underlying regulatory models are concerned; lending models that increasingly factor in stricter
regulatory requirements in their traditional target functions. The amount of risk weighted assets as at 31 December includes the assets of the
consortium Perimetro Gestione Proprietà Immobiliari, in line with the approach followed for the computation of regulatory capital because not all
conditions required for prudential recognition had materialised as at that date.
At the end of 2010, the Tier 1 capital ratio was 8.37%, while the total capital ratio was 12.95%. The floor (i.e. threshold limit under which the
ratio of total capital to risk weighted assets must not fall) is now set at 85% of the risk weighted assets calculated on the basis of the previous
regulatory framework (Basel 1), which will continue to be the benchmark for 2011.
387
Nota integrativa consolidata- Parte F – Informazioni sul patrimonio consolidato
Part G – Business combinations
Part G – Business combinations ................................................................................................................... 388
Section 1 – Business combinations during the year ................................................................................................... 389
1.1. Business combinations ................................................................................................................................ 389
Section 2 – Business combinations completed after 31 December 2010 ..................................................................... 389
388
Consolidated Notes to Financial Statements - Part G – Business combinations
Section 1 – Business combinations during the year
1.1. Business combinations
Transactions included under the scope of application of the international accounting
standard IFRS 3 “Business combinations”.
Incorporation of vehicle company MPS Covered Bond S.r.l.
within the framework of the Covered Bond Programme targeted to the Euromarket, the Parent Company acquired a
90% stake in the MPS Covered Bond Srl vehicle in May, which has been fully consolidated. More information can
be found in Part E - Section C.3 "Covered bond transactions".
Acquisition of 100% control of Padova 2000
At the end of June, Group subsidiary, Banca Antonveneta, increased its shareholding in the company 'Padova 2000'
from 45.01% to 100%.
Transactions within the Group (business combinations of entities under common control)
Intragroup extraordinary transactions, which are not within the scope of IFRS 3, were carried out as well. They
entailed the transfer of banking business or legal entities between Group companies and the Parent.
Following is a list of major transactions occurring in 2010:
Transactions carried out by the Parent Bank:
the merger by absorption of Banca Personale S.p.a. into the Parent Company in April;
the merger by absorption of MPS SIM S.p.a., ANTENORE S.p.a. and THEANO S.p.a. into the Parent
Company in May;
the merger by absorption of ULISSE S.p.a. and SIENA MORTGAGES 00–01 S.p.a. into the Parent Company
in June.
in July, following the repurchase of receivables sold to the securitisation vehicle, GIOTTO FINANCE 2 S.p.a.,
the parent company increased its shareholding in this vehicle to 100%;
in December, the merger by absorption of subsidiries MPS Investments S.p.a and PGI S.p.a. , the acquisition
of banking business consisting in buildings used in the Parent Company's business arising from the
subsidiary MPS Immobiliare S.p.a. through the partial demerger and takeover of banking business (1
branch) acquired from the subsidiary Biverbanca.
Transactions carried out by other Group companies:
in October, demerger of banking business (13 branches) by Banca Antonveneta S.p.a. to the subsidiary
Cassa di Risparmio di Biella e Vercelli S.p.a;
in December, acquisition of banking business by Banca Antonveneta S.p.a., consisting in buildings used in
the business arising from the subsidiary, MPS Immobiliare S.p.a., as a result of partial demerger;
at the end of December, disposal of the company, Padova 2000, by Banca Antonveneta S.p.a. to MPS
Immobiliare S.p.a;
again in December, merger by absorption of Padova 2000 into MPS Immobiliare S.p.a..
Section 2 – Business combinations completed after 31 December 2010
For a description of the business combinations in question, please refer to the Directors' Report in the Consolidated
Financial Statements in the Chapter ―Material events subsequent to year end‖.
389
Nota integrativa consolidata
Part H – Related-party transactions
1 Compensation of directors, auditors, executives and managers with strategic responsibility ...................................... 391
2. Related-party transactions .................................................................................................................................. 392
2.a Associated companies .................................................................................................................................. 396
2.b Transactions involving managers with strategic responsibility and other related parties ..................................... 396
390
Consolidated Notes to Financial Statements – Part H – Related-party transactions
1 Compensation of directors, auditors, executives and managers with strategic
responsibility
(in tho usands o f EUR)
items/Amounts
Short-term benefits
Totale
Totale
31 12 2010
31 12 2009
9.226
11.429
Post-retirement benefits
-
-
Other long-term benefits
-
-
Termination benefits
-
-
Share-based payments
-
-
219
238
9.445
11.667
Other compensation
Total compensation paid to key management personnel
Considering the instructions provided by accounting standard IAS 24 and in light of the current organisational structure, the Parent Company has
decided to include in the disclosure scope not only Directors, Statutory Auditors, the General Manager and Deputy General Managers, but also
Managers with strategic responsibility.
391
Consolidated Notes to Financial Statements - Part H – Related-party transactions
2. Related-party transactions
“Regulations containing provisions relating to transactions with related parties” (the Regulations) was
adopted by Consob with Resolution no. 17221 of 12 March 2010 and later amended by Resolution no. 17389 of
23 June 2010.
The new framework combines into a new and comprehensive Regulation all principles regarding prompt and
periodic disclosure obligations pursuant to articles 114 and 154-ter of the Consolidated Law on Finance and
superseding the rules already set out by Consob‘s Issuer Regulations, and principles pursuant to Article 2391-bis of
the Civil Code.
The Regulations goes alongside the 'primary legislation' governed by art. 2391 of the Civil Code – Directors‘ Interest
– and by self-regulation, such as article 9 of the self-regulatory code for listed companies – Directors‘ interest and
related party transactions – which establishes criteria for substantial and procedural correctness in managing
transactions with related parties.
The subject is also governed by more bank-specific regulations such as art. 53 of the Consolidated Law on Banking
(it. Testo unico Bancario, TUB), which sets out the terms and conditions for the assumption of risks in relation to
those who, either directly or indirectly, may exercise influence over the bank‘s or the banking group‘s operations or
over any persons related to these, as well as art. 136 also of the Consolidated Law on Banking pertaining to the
obligations of bank representatives.
During its meeting on 10 November 2010, the Board of Directors reviewed the procedures for related-party
transactions laid down in the Regulations.
On occasion of the same meeting, the Board set up a Committee of Parent Company's Independent Directors (the
Comittee), appointing three members in the person of directors Mr. Carlo Querci, Mr. Graziano Costantini and Mr.
Massimiliano Capece Minutolo, qualifying as independent pursuant to the principles and criteria of the Corporate
Governance Code of listed companies.
On 25 November 2010, the Parent Company's Board of Directors resolved to approve:
"Group Directive on related-party transactions" (the Directive), which sets out the model for related-party
transactions establishing roles and responsibilities of internal relevant functions and related implementing
processes:
the ―Procedure for related-party transactions‖ (the Procedure), which, translating the contents of the
Directive into practice, illustrates the organisational choices and solutions identified by the Group for
alignment with Consob regulations.
The Procedure was published on the Parent Company's website and is therefore available in full-text version at the
following link:
www.mps.it/Investor+Relations/Corporate+Governance/Procedura+in+materia+di+operazioni+con+parti+corr
elate.htm
The Directive and Procedure became effective on 1 January 2011, without prejudice for disclosure obligations
applicable to major transactions as of 1 December 2010.
On this connection, it is noted that in December 2010, the Parent Company did not carry out any major
transactions. For this reason, it was not necessary to fulfill any disclosure obligation (filing for public consultation
with the Company's registered office of the Disclosure Document reported in Annex 4 to the Regulations, together
with the Committee's opinion, by no later than 7 days from transaction approval.
In the course of 2010, the Montepaschi Group did not conduct any transactions which by nature, consideration,
mode or time of implementation might have effects on the safeguarding of corporate assets or the completeness and
accuracy of information, including accounting information, relating to the Parent Company and to the MPS Group
and therefore involving obligations of market disclosure pursuant to art. 71 bis of Consob Regulation no. 11971
(although repealed as of 1 December 2010 with Consob Resolution no. 17221 of 12 March 2010).
Information is provided below regarding certain transactions effected by the Montepaschi Group over the same
period which deserve specific mention.
All transactions approved by the Board of Directors of the Parent Company or of other Group companies, were
conducted on the basis of assessments of mutual economic benefit.
392
Consolidated Notes to Financial Statements – Part H – Related-party transactions
January 2010

During the ordinary review of loans to the Group headed by Mr. Francesco Gaetano Caltagirone, Deputy
Chairman of Banca Monte dei Paschi di Siena S.p.A., an extension of the different forms of ordinary credit
lines was approved for the amount of approx. EUR 198 mln.

Extension of lines of credit amounting to EUR 9.5 mln, in favour of Sansedoni S.p.A.. It should be noted
that Sansedoni S.p.A. is an indirect related party of the Parent Company insofar as it is a company over
which the MPS Foundation – in turn a related party of the Parent Company, insofar as it has a holding in the
Parent Company sufficient to exercise significant influence over it- exerts significant influence (48%) and
one in which the Parent Company itself has a significant interest (16%).
February 2010

renewal of ordinary line of credit for EUR 75 mln in favour of Banca Popolare di Spoleto S.p.A.. Banca
Popolare di Spoleto is a related party of the Parent Company insofar as it is under the joint control of the
Parent Company and Spoleto Crediti e Servizi S.c.a.r.L..

mortgage loan for EUR 5.0 mln in favour of Agricola Merse S.p.A. by the subsidiary MPS Capital Services
S.p.A.. Agricola Merse is a related party of the Parent Company insofar as it is a company in which MPS
Capital Services S.p.A exercises significant influence (20% holding).

New real estate mortgage loan disbursements in the amount of EUR 30.06 mln in favour of Immobiliare
Caltagirone S.p.A. This company is part of the Group headed by Mr. Francesco Gaetano Caltagirone Deputy
Chairman of the Parent Company.
March 2010

real-estate mortgage loan granted to Sansedoni S.p.A. together with a line of credit to cover interest rate risk
in the amount of EUR 5.3 mln. With regard to the nature of the related party transaction, the
aforementioned considerations on Sansedoni S.p.A. shall apply.

real-estate mortgage loan for EUR 36.5 mln granted to Fabrica Immobiliare SGR S.p.A. in its capacity as
manager of the real estate closed-end fund Seneca. Fabrica Immobiliare SGR S.p.A. is an indirect related
party of the Parent Company, insofar as the Parent Company exercises a significant influence over this
company via MPS Investments S.p.A. which owns 49.99% of Fabrica Immobiliare‘s capital. It is noted that
the Deputy Chairman of the Board of Directors of the Parent Company, Mr. Francesco Gaetano Caltagirone,
indirectly controls Fincal 2000 S.p.A., a company which holds 50.01% of Fabrica Immobiliare.
April 2010

With regard to the decision taken in the second half of 2009 concerning the sale of certain properties
located in Rome, with disbursement of mortgage loans, to specific companies of the Group headed by Mr.
Francesco Gaetano Caltagirone, Deputy Chairman of the Parent Company – re: Notes to the Financial
Statements in the Annual Report 2009, Part H, Related-Party transactions – the Board of the Parent
Company (subsequent to amendments regarding the possibility that transfer of ownership and disbursement
of loans may be subject to counterparties being identified on a case-by-case basis) renewed its decision for
MPS Immobiliare S.p.A. to proceed with the above-mentioned disposal. The majority of deeds and
concessions required were completed in the first half of the year.
393
Consolidated Notes to Financial Statements - Part H – Related-party transactions
May 2010

increase of ordinary credit lines to be used in various technical forms in the amount of EUR 175 mln in
favour of Acea S.p.A.. This listed company is held to the extent of 13% by companies belonging to the
group headed by Mr. Francesco Gaetano Caltagirone, Deputy Chairman of the Parent Company.

new credit line in favour of the company, Aceaelectrabel Trading S.p.A. in the amount of EUR 15 mln. The
company is an indirect subsidiary of Acea S.p.A., for which the aforementioned considerations shall apply.

loan disbursements granted in the amount of EUR 16.5 mln in favour of the asset management company
Fabrica Immobiliare SGR S.p.A. and Fondo Seneca managed by the AM company itself. With regard to the
nature of the related party transaction, the aforementioned considerations on Fabrica Immobiliare SGR
S.p.A. shall apply.
June 2010

increase of credit line for EUR 45 mln and EUR 90 mln in favour of Axa MPS Financial Ltd. approved by the
subsidiary, MPS Capital Services S.p.A.. Axa Mps Financial Ltd is a related party of the Parent Company
insofar as it is entirely owned by AXA MPS Assicurazioni Vita S.p.A., a company on which the Parent
Company exercises significant influence.

Setup of a consortium for placements by the subsidiary MPS Capital Services S.p.A. for subscription of the
Socrate Fund managed by Fabrica Immobiliare SGR S.p.A.. With regard to the nature of the related party
transaction, the aforementioned considerations on Fabrica Immobiliare SGR S.p.A. shall apply.
October 2010

Term extension of existing loans and new credit line for a total amount of EUR 8.3 mln in favour of
Interporto Toscano ―Amerigo Vespucci‖ S.p.A. from Livorno, a party indirectly related to the Parent
Company, insofar as the subsidiary MPS Capital Services S.p.A exercises significant influence on Interporto
Toscano, by virtue of a 36.3% shareholding.
November 2010

Term extension of existing loans for a total amount of EUR 15.8 mln in favour of Integra S.p.A., which is
50% owned by the subsidiary Consum.it S.p.A. and, as such, indirectly related to the Parent Company.

new credit lines for a total amount of EUR 3.9 mln in favour of New Colle S.p.A.. The subsidiary MPS
Investments (then merged by absorption by and into the Parent Company on 28 December 2010, with
accounting and tax effects applicable as of 1 January 2010) used to hold a 49% stake in this company.
Pursuant to regulations on related-party transactions, this percentage was relevant for defining New Colle
S.p.A. as a Related Party.

renewal of reduced lines of credit for a total of EUR 507.057 mln to Intermonte Sim S.p.A. Intermonte Sim
is a party indirectly related to the Parent Company, insofar as the Parent Company holds a 20% stake in
Intermonte Sim, arising from the afore-mentioned merger by absorption of MPS Investments S.p.A into
Banca MPS.

within the framework of the Group's asset disposal plan, The Parent Company's Board of Directors
expressed itself favourably in November 2010 as regards the definition of the buying and selling price (EUR
5.5 mln) for a property which will be disposed of by the subsidiary MPS Immobiliare S.p.A. to the real
estate company Caltagirone S.p.A., or any other entity of the Group indicated by the counterparty upon
394
Consolidated Notes to Financial Statements – Part H – Related-party transactions
signing of the agreement. The real estate company Caltagirone S.p.A. is a party related to BMPS, insofar as
the Deputy Chairman of BMPS, engineer Francesco Gaetano Caltagirone, controls it indirectly.
December 2010







renewal, for the same amount and terms, of credit lines granted to Banca Popolare di Spoleto S.p.A. for a
total amount of EUR 90.49 mln. With regard to the nature of the related party transaction, the
aforementioned considerations on Popolare di Spoleto shall apply.
new credit lines in favour of Siena Biotech S.p.A., for a total amount of EUR 31.9 mln, of which EUR 13.9
mln in loans and EUR 18 mln in novation of a loan previously granted to Sansedoni S.p.A.. Siena Biotech
S.p.A. is an indirect related party of the Parent Company insofar as it is 95% controlled by the MPS
Foundation, which is in turn a related party of the Parent Company, since its shareholding is sufficient to
exercise significant influence over the Parent Company itself. The remaining 5% is owned by Sansedoni
Siena S.p.A. 45, for which the considerations reported at the beginning of this section shall apply.
renewal of increased credit lines of various types granted to the entity Terme di Chianciano S.p.A for a total
amount of EUR 2.9 mln. The company is a related party of the Parent Company insofar as the laatter
exercises significant influence over it, by virtue of a 34.65% shareholding.
the Parent Company's Board of Directors resolves that EUR 1.3 mln -out of EUR 6 mln- be underwritten in
relation to a 10-year floating rate debenture loan issued by the merchant bank, Finanziaria Senese di
Sviluppo S.p.A., (FI.SE.S.). FI.SE.S. is a related party of the Parent Company, insofar as the MPS Foundation
holds the controlling interest in the entity.
The extraordinary sharehoders' meetings of the Parent Company on 29 March 2010 and 3 December 2010
approved the merger by absorption of companies Antenore Finance S.p.A., Theano Finance S.p.A., MPS Banca
Personale S.p.A., MPS Sim S.p.A., Siena Mortgages 00 1 S.p.A. and Ulisse S.p.A. in liquidation by and into the
Parent Company (29 March), as well as the mergers by absorption of companies Paschi Gestioni Immobiliari S.p.A.
and MPS Investments S.p.A. by and into the Parent Company and the partial demerger of MPS Immobiliare S.p.A. in
favour of Banca Antonveneta S.p.A. (3 December). All respective deeds of merger by absorption and partial
demerger were entered into in the course of 2010. All merged and partially demerged companies were 100%
controlled by the Parent Company and, for this reason, parties related to it.
45
In June, Sansedoni S.p.a. underwent a total non-proportional spin-off which led to the incorporation of two new entities, one for real estate
development and the other, i.e. Sansedoni Siena S.p.a., focusing on asset development management and invested in by the Parent Company
(21.75% shareholding).
395
Consolidated Notes to Financial Statements - Part H – Related-party transactions
2.a Associated companies
3112 2010
(in tho usands o f EUR)
items/Amounts
% on
Amounts
Total financial assets
Total other assets
Total financial liabilities
Total other liabilities
Consolidated
1.320.821
0,59%
27.166
0,57%
1.476.527
0,67%
31.763
0,54%
Guaranties issue
130.333
1,25%
Guaranties riceived
603.462
0,00%
2.b Transactions involving managers with strategic responsibility and other related parties
3112 2010
(in tho usands o f EUR)
Executives with
items/Amounts
strategic
responsibility
Other related
% on
parties
consolidated
Total financial assets
2.085
343.270
0,16%
Total financial liabilities
3.680
612.743
0,28%
Total functioning costs
9.445
-
0,00%
7
324.194
3,10%
1.331
237.025
0,00%
Guarantees issued
Guarantees received
396
–
Part I – Share-based payments
397
Consolidated Notes to Financial Statements – Part I – Share-based payments
There are no Group payment agreements based on equity instruments according to the technical definition provided
by the international accounting standard IFRS2 ―Share-based payment‖. For the sake of completeness of disclosure,
in line with balance sheets for previous financial years, a brief description is, however, given below of the main
characteristics of the plan to assign ordinary Banca Monte dei Paschi di Siena S.p.A. shares, free of charge, to
employees by means of stock granting.
STOCK GRANTING
As regards the plan to assign ordinary Banca Monte dei Paschi di Siena S.p.A. shares, free of charge, to employees
by means of stock granting, the Supplementary Corporate Labour Agreements of the Parent Company and some
subsidiaries provide for a portion of the corporate bonus for employees to be related to the achievement of Budget
objectives and disbursed by stock granting, with free-of-charge assignment of BMPS ordinary shares, differentiated
by job category, in the following year.
For 2010, the Parent Company did not reach the "minimum value" set out in the afore-mentioned Supplementary
Corporate Labour Agreement as regards the achievement of Budget objectives, so no stock granting cost is incurred.
As far as subsidiaries are concerned, approx. EUR 1 mln in costs is prudentially recorded in total, the actual
disbursement of which will in any case be defined in a logic of consistency with the Group overall, in 2011 .
398
Allegati
Part L – Segment reporting
Montepaschi Group operations by business segment ................................................................................................ 400
CONSUMER BANKING ....................................................................................................................................... 401
CORPORATE BANKING....................................................................................................................................... 401
CORPORATE CENTER ......................................................................................................................................... 401
Profit and loss statement criteria by business segment .......................................................................................... 401
Basic criteria for the statement of capital aggregates by business segment .............................................................. 402
Transactions between business segments ............................................................................................................. 402
Preparation criteria ................................................................................................................................................ 403
399
Consolidated Notes to Financial Statements – Part L – Segment reporting
This section of the Notes to the Financial Statements is prepared in accordance with the IAS/IFRS international
accounting principles, with particular reference to IFRS 8 ―Operating Segments‖.
The aforementioned accounting standard, applied as of 1 January 2009 to replace IAS 14 ―Segment reporting‖ and
the adoption of which has no effect on the valuation of balance sheet items, requires reports to be drafted in
relation to operating segments on the basis of the internal reporting actually used by management to take decisions
on the allocation of resources to various segments and to conduct performance analyses.
Montepaschi Group operations by business segment
The Montepaschi Group operates all over Italy and in the major international markets, with operations ranging from
traditional lending (i.e. short-/medium-/long-term loans to retail and corporate customers, leasing, factoring,
consumer credit) to asset management (through equity interest in AM Holding), private banking, investment
banking and corporate finance. Furthermore, the Group ensures the provision of bancassurance and social security
products through its strategic partnership with AXA. As of 2001 the MONTEPASCHI Group introduced and gradually
implemented Value Based management control instruments, with the objective of monitoring profitability by
business areas and units. The Value Based Management system adopted by the Group proved appropriate to
manage the criteria for the identification of business segments and the review of segment reporting principles set
out by existing regulations, as well as to meet regulatory requirements for the reconciliation of internal management
reporting with data used for external reporting.
Within this context, for the purpose of identifying the operating segments provided for by the new IFRS 8, the
Montepaschi Group adopted the business approach, selecting the main business segments of consolidated
operations as the primary reporting basis for the breakdown of income/capital data, the results of which are
periodically reported at the highest decision-making level. This breakdown results from logical aggregations of data
from different legal entities;
“divisionalised” (Banca Monte dei Paschi di Siena and Banca Antonveneta);
“non-divisionalised” (product companies and other banks);
“service units” which provide services and support within the Group.
As at 31/12/2010 the Montepaschi Group can be broken down into the following business segments:
Consumer banking;
Corporate Banking;
Credit Management;
Human Resources, Organisation, Property and Logistics.
Consequently, the segments identified for the purpose of the operating representation of the Group‘s results, also
defined on the basis of criteria of business 'representativeness' / 'predominance', are as follows: Consumer
banking, Corporate banking and the Corporate Centre which includes, among other things, “Credit
managment” and “Human resources, Organization, Property and Logistics”.
The business segments include segmentation of divisionalised Bank customers (Retail, Private, Family Office,
Financial Advisory, Corporate and Key Clients) and figures from non-segmented legal entities (product
companies and other banks), reflecting internal reporting, based on the Group‘s rules of governance (in line with
the functional and hierarchical relations resulting from the Group‘s organisational structure as at 31/12/2010).
In particular:
400
Consolidated Notes to Financial Statements – Part L – Segment reporting
CONSUMER BANKING
Consumer Banking is responsible for:
attracting funds and supplying financial and non-financial services (also through the management of
electronic payment instruments) to Retail customers of divisionalised entities (including small businesses)
and those of non-divisionalised companies dealing with consumer credit, as well as the pro-rata interests of
the Banca Popolare di Spoleto;
the supply of a customised and exclusive range of products/services to Private customers, in order to meet
their most sophisticated requirements in terms of asset management and financial planning, including
advice on non-strictly financial services (i.e. tax planning, real estate, art & legal advisory) and financial
promotion.
CORPORATE BANKING
Corporate Banking is responsible for managing operations with Corporate and Key Clients of the divisionalised
entities and the product companies operating in the areas of short-/medium-/long-term corporate loans, corporate
finance, leasing and factoring, investment banking and financial engineering, equity capital markets and brokerage.
This operating segment also covers operations carried out by foreign subsidiaries and foreign banks, apart from the
entity governed by Monegasque law which, specialising in Private client management, comes under the Consumer
Banking segment.
CORPORATE CENTER
The Corporate Centre is an aggregation of:
operating units which, on an individual basis, are below the benchmarks required for primary reporting;
the Group‘s head office units (including governance and support, proprietary finance, equity investments
and segments of divisionalised entities, which include in particular ALM, Treasury and Capital
Management);
service units providing support to Group units, particularly with regard to collection of doubtful loans
(reporting to the Credit Management Area), real estate management, and IT systems management and
development (all reporting to the ―Human Resources, Organisation, Property and Facility Management).
The Corporate Centre also incorporates the results of Biverbanca, the profit & loss of companies consolidated at
equity and those held for sale, as well as cancellations of intragroup entries. The aggregate also includes the P&L
figures generated by the branches sold and reported up to the date of sale (31 May 2010: sale of 22 branches to
the CARIGE group; 14 June 2010: sale of 50 branches to the Intesa-SanPaolo Group), previously under the
Consumer banking division.
Profit and loss statement criteria by business segment
The net operating income by business segment was constructed based on the following criteria:
Net interest income, in relation to segments of divisionalised entities, is calculated by contribution on the
basis of internal transfer rates by product and maturity. With reference to other Group entities, net interest
income is represented by the difference between ―interest income and similar revenues‖ and ―interest
expense and similar charges‖.
Net fees and commissions are determined by direct allocation of real commissions to the business
segments.
Net impairment losses/reversals on loans, are allocated to the business segments which originated them.
The balance sheet aggregate is allocated on the basis of provisioning percentages applied to analytical
operational flows of performing loans transitioning to non-performing or watchlist.
Operating expenses include administrative expenses (after recovery of expenses) and net value
adjustments to tangible and intangible assets. As regards non-divisionalised entities (mono-segments), total
operating expenses converge to the corresponding business segments. As regards, however, divisionalised
companies (Banca Monte dei Paschi di Siena and Banca Antonveneta) a cost allocation model is adopted.
This model, with reference to ―other administrative expenses and net value adjustments to tangible and
intangible assets‖, reverses costs to business centres on the basis of a set of pre-identified services, allocating
to the Corporate Centre those costs which cannot reasonably be attributed to business centres. With
401
Consolidated Notes to Financial Statements – Part L – Segment reporting
reference, however, to personnel costs, the model allocates cost to business centres on the basis of the
functional position of the resources, or, if this is not possible, in relation to specific criteria relating to the
operations performed.
Basic criteria for the statement of capital aggregates by business segment
Capital aggregates are represented by using the internal reporting system as a starting point in order to identify the
accounts directly attributable to the segments. Such accounts are related to income/expenses allocated to each
segment. In particular:
'Active' loans and advances to customers are the assets used for the operations of a business segment, which are
directly attributable to the segment itself;
Customer accounts and debt securities in issue are the liabilities arising from the operations of a business
segment, which are directly attributable to the segment itself.
Transactions between business segments
Income and the results of each segment include transfers between business segments. These transfers are reported in
accordance with the best practices accepted by the market (i.e. the method of fair value or the method of cost
increased by a proper margin) both with respect to commercial and financial transactions.
The income of each business segment is determined before intragroup balances and intragroup transactions are
eliminated during the process of consolidation. If intragroup transactions are executed between entities belonging to
the same business segment, the respective balances are eliminated within such segment. The balances of intragroup
transactions are not shown separately, in line with the internal reporting system used by the Montepaschi Group.
402
Consolidated Notes to Financial Statements – Part L – Segment reporting
Preparation criteria
In accordance with the recommendations of IFRS 8, for the purposes of consistent disclosure of information, account
was taken of the above-described changes to the Group‘s organisational structure as at 31/12/2010, as well as of the
criteria adopted for the allocation of ―Net impairment losses/reversals on loans‖ to the business segments on the
basis of provisioning percentages applied to the analytical operational flows of performing loans transitioning to
non-performing or watchlist.
Below is a breakdown of the MPS Group‘s P&L/capital aggregates as at 31/12/2010, on the basis of the
aforementioned business segments:
The table below shows historical data as at 31/12/2009 (see Financial Report as at 31 December 2009):
For a like-for-like comparison of operations in 2009/2010 please refer to the Report on Operations in the section
―Segment reporting‖.
403
404
CONSOLIDATED FINANCIAL STATEMENTS CERTIFICATION PURSUANT TO
ARTICLE 81-TER OF CONSOB REGULATION NO. 11971 OF 14 MAY 1999, AS
SUBSEQUENTLY AMENDED AND SUPPLEMENTED
405
406
AUDITOR’S REPORT ON THE CONSOLIDATED FINANCIAL STATEMENTS
407
408
409
410
Nota integrativa - Allegati di Nota Integrativa
ANNEXES
Disclosure of audit firm fees ................................................................................................................................... 412
PENSION FUNDS – defined benefit sections free of plan-servicing assets ................................................................... 413
Significant interests in unlisted companies as at 31/12/2010 held by Banca Monte dei Paschi di Siena S.p.A. direct and/or
via Group companies pursuant to art. 120, paragraph three of Legislative Decree No. 58 of 24/02/98 and articles 125 and
126 of CONSOB resolution No. 11971 of 14/05/99 ................................................................................................. 424
411
Consolidated Notes to Financial Statements – Annexes
Disclosure of audit firm fees
With the aim of making reporting on the Parent Company‘s relations with its own Auditors more transparent,
CONSOB, with its resolutions No. 15915 of 3 May 2007 and No. 15960 of 30 May 2007, implemented the
delegation of authority contained in art.160 of the Consolidated Law on Finance (Incompatibility), introducing Part
III, Section VI, of the Issuers‘ Regulation, Part I-bis (Incompatibility) which contains articles from 149-bis to 149duodecies.
With this amendment CONSOB chose to include this disclosure in the documents accompanying the financial
statements with a mandatory requirement to disclose payments received for auditing and other services supplied by
the Auditors or by entities forming part of their network.
The table below shows all payments made to the Auditors and to others forming part of its network, broken down
by type of service.
Disclosure of fees for independent Audit firms and other entities relating thereto (pursuant to art.149 duodecies of
CONSOB resolution No. 15915 of 3 May 2007)
3112 2010
Type of services
Service provider
Total
Auditing
KPMG S.p.A.
Auditing
KPMG Luxembourg
Auditing
KPMG Belgium CVBA/SC SCRL
Auditing
KPMG Dublin S.p.A.
58
Auditing
KPMG LLP - USA
24
Certification
KPMG S.p.A.
Tax advisory services (*)
KPMG
67
Tax advisory services
K Studio Associato
79
Tax advisory services (*)
KPMG Dublin S.p.A.
22
Tax advisory services
Studio assoc. Consul. Legale e
Tributaria S.p.A.
44
Other services
KPMG S.p.A.
332
Other services
KPMG Advisory S.p.A.
399
Other services
KPMG Dublin S.p.A.
24
Other services
K Studio Associato
19
1.998
8
101
547
3.722
Fees are net of VAT and ancillary expenses.
(*): services carried out for the Parent Company's foreign branches by local KPMG offices.
412
Consolidated Notes to Financial Statements – Annexes
PENSION FUNDS – defined benefit sections free of plan-servicing assets
Pension Fund “Complementary pension provision for ex-Tax Collection Concessions staff”
Accounting statement as at 31/12/2010
Opening balances as at 01/01/2010
24.362.621
Increases
980.962
- provisions for the year
980.962
- Other variations
-
Decreases
2.099.978
- Benefit paid
2.099.978
Closing balances as at 31/12/2010
23.243.605
Pension Fund “ Complementary pension provision for ex-Banca Operaia di Bologna staff”
Accounting statement as at 31/12/2010
Opening balances as at 01/01/2010
7.584.285
Increases
897.765
- provisions for the year
857.406
- Other increases
40.359
Decreases
595.193
- Benefit paid
595.193
- other decreases
-
Closing balances as at 31/12/2010
7.886.857
Pension Fund “Complementary pension provision for ex-Banca di Credito Popolare e Cooperativo
of Reggio Emilia staff”
Accounting statement as at 31/12/2010
Opening balances as at 01/01/2010
581.188
Increases
46.771
- provisions for the year
46.771
- Other increases
-
Decreases
38.739
- Benefit paid
38.739
- other decreases
-
Closing balances as at 31/12/2010
589.220
Pension Fund “ Complementary pension provision for ex-Banca Popolare Veneta staff”
Accounting statement as at 31/12/2010
Opening balances as at 01/01/2010
1.781.977
Increases
37.108
- provisions for the year
37.108
- Other increases
-
Decreases
243.837
- Benefit paid
243.837
Closing balances as at 31/12/2010
1.575.248
413
Consolidated Notes to Financial Statements – Annexes
Pension Fund “Complementary pension provision for ex-MPS Capital Services Banca per l’imprese
S.p.A. staff”
Accounting statement as at 31/12/2010
Opening balances as at 01/01/2010
6.708.918
Increases
54.819
- provisions for the year
54.819
Decreases
605.760
- Benefit paid
605.760
Closing balances as at 31/12/2010
6.157.977
Pension Fund “Complementary pension provision for ex-Cassa di risparmio di Biella e Vercelli
S.p.A. staff”
Accounting statement as at 31/12/2010
Opening balances as at 01/01/2010
28.035.310
Increases
-
- provisions for the year
-
- Other increases
-
Decreases
3.325.022
- Benefit paid
2.650.041
- other decreases
674.981
Closing balances as at 31/12/2010
24.710.288
414
Consolidated Notes to Financial Statements – Annexes
PENSION FUNDS - Defined benefit and defined contribution company pension funds with
plan assets
"Supplementary pension plan in favour of the personnel of former BNA"
BALANCE SHEET
Assets
10
Direct investments
31 12 2010
31 12 2009
Changes
27.839.656
29.305.869
(1.466.213)
288.628
473.610
(184.982)
a) Deposits
b) Receivables from repo transactions
c) Securities issued by Governments and other
international institutions
-
-
-
-
27.212.278
d) Listed debt securities
28.489.075
(1.276.797)
e) Listed equity securities
-
-
f) Unlisted debt securities
-
-
g) Unlisted equity securities
-
-
h) Units of UCITS
-
-
i) Options purchased
-
-
338.750
l) Accrued income and prepayments
343.184
(4.434)
m) Profit guarantees released to pension fund
-
-
n) Other assets from financial activities
-
-
o) Accrued income not yet received
-
-
20
Managed investments
-
-
30
Profit guarantees on individual accounts
-
-
40
Assets from administrative activities
-
-
50
Tax receivables
-
-
27.839.656
TOTAL ASSETS
Liabilities
31 12 2010
29.305.869
31 12 2009
(1.466.213)
Changes
10
Liabilities from social security
-
0
-
20
Liabilities from financial activities
-
0
-
30
Profit guarantees on individual accounts
-
0
-
40
Liabilities from administrative activities
-
0
-
50
Tax payables
28.657
261.861
28.657
261.861
(233.204)
27.810.999
29.044.008
(1.233.009)
TOTAL LIABILITIES
100 Net assets available for payment of benefits
Net assets available for payment of benefits in previous
year
Changes in net assets available for payment of
benefits
(233.204)
29.044.008
(1.233.009)
415
28.560.365
483.643
483.643
(1.716.652)
Consolidated Notes to Financial Statements – Annexes
INCOME STATEMENT
31 12 2010
10 Balance of social security management
31 12 2009
(1.464.867)
Changes
(1.513.870)
49.003
a) Contributions for benefits
-
-
-
b) Advances
-
-
-
c) Transfers and redemptions
-
-
-
d) Transfers to annuities
-
-
-
e) Payments in capital
-
-
-
f ) Premiums for additional benefits
-
-
-
(1.464.867)
(1.513.870)
49.003
-
-
-
260.515
2.380.554
(2.120.039)
1.130.372
1.156.642
(26.270)
g) Payments in annuities
h) Other payments
20 Profit (loss) from direct financial activities
a) Interest and profit on bonds and government securities
b) Interest on cash equivalents
51.044
(49.106)
(871.795)
1.938
1.172.868
(2.044.663)
d) Interest (expense) from repo transactions
-
-
-
e) Pension fund profit guarantee difference
-
-
-
d) Contingent assets
-
-
-
g) Forfeitures charged to the participants
-
-
-
h) Kickbacks from UCITS
-
-
-
i) Commission expense
-
-
-
30 Profit (loss) from indirect financial activities
-
-
-
40 Operating expenses
-
-
-
a) Management companies
-
-
-
b) Custodian bank
-
-
-
c) insurance policy
-
-
-
d) 'State supervision' contribution
-
-
-
260.515
2.380.554
(2.120.039)
-
-
-
-
-
-
c) Profits and losses from financial transactions
50 Financial and insurance income (loss) (20 +30 + 40)
60 Balance from administrative activities
a) General and administrative expenses
70
Changes in net assets available for payment of benefits before
substitute tax (10+50+60)
80 Substitute tax
(1.204.352)
(28.657)
Changes in net assets available for payment of benefits
(1.233.009)
(70+80)
416
866.684
(383.041)
483.643
(2.071.036)
354.384
-
Consolidated Notes to Financial Statements – Annexes
"Supplementary pension plan in favour of the personnel of Banca Toscana" - defined-benefit
BALANCE SHEET
Assets
10
Direct investments
31 12 2010
31 12 2009
Changes
108.211.000
113.522.875
(5.311.875)
96.261.784
102.791.407
(6.529.623)
a) Deposits
b) Receivables from repo transactions
-
-
-
c) Securities issued by Governments and other international institutions
-
-
-
d) Listed debt securities
-
-
-
e) Listed equity securities
-
-
-
f) Unlisted debt securities
11.674.876
10.457.128
1.217.748
g) Unlisted equity securities
-
-
-
h) Units of UCITS
-
-
-
i) Options purchased
-
-
-
l) Accrued income and prepayments
274.340
274.340
-
m) Profit guarantees released to pension fund
-
-
-
n) Other assets from financial activities
-
-
-
o) Accrued income not yet received
-
-
-
20
Managed investments
-
-
-
30
Profit guarantees on individual accounts
-
-
-
40
Assets from administrative activities
-
-
-
50
Tax receivables
-
-
-
108.211.000
113.522.875
(5.311.875)
31 12 2010
31 12 2009
Changes
TOTAL ASSETS
Liabilities
10
Liabilities from social security
-
-
-
20
Liabilities from financial activities
-
-
-
30
Profit guarantees on individual accounts
-
-
-
40
Liabilities from administrative activities
-
-
-
50
Tax payables
-
-
-
TOTAL LIABILITIES
-
-
-
108.211.000
113.522.875
(5.311.875)
100 Net assets available for payment of benefits
Net assets available for payment of benefits in previous year
113.522.875
119.081.948
(5.559.073)
Changes in net assets available for payment of benefits
(5.311.875)
(5.559.073)
247.198
417
Consolidated Notes to Financial Statements – Annexes
INCOME STATEMENT
31 12 2010
10 Balance of social security management
(11.482.480)
Changes
(11.749.666)
267.186
a) Contributions for benefits
-
142.476
(142.476)
b) Advances
-
-
-
c) Transfers and redemptions
-
-
-
d) Transfers to annuities
-
-
-
e) Payments in capital
-
-
-
f ) Premiums for additional benefits
-
-
-
(11.482.480)
(11.892.142)
409.662
-
-
-
6.170.675
6.191.695
(21.020)
a) Dividends and interest
4.952.927
5.446.627
(493.700)
b) Profits and losses from financial transactions
1.217.748
745.068
472.680
c) Fees and commissions on stock lending
-
-
-
d) Proits and losses rom repo transactions
-
-
-
e) Pension fund profit guarantee difference
-
-
-
d) Contingent assets
-
-
-
g) Forfeitures charged to the participants
-
-
-
h) Kickbacks from UCITS
-
-
-
i) Commission expense
-
-
-
-
-
-
g) Payments in annuities
h) Other payments
20 Profit (loss) from direct financial activities
30 Profit (loss) from indirect financial activities
40 Operating expenses
(71)
(1.102)
1.031
a) Management companies
-
-
-
b) Custodian bank
-
-
-
c) insurance policy
-
-
-
(71)
(1.102)
1.031
d) 'State supervision' contribution
50 Financial and insurance income (loss) (20 +30 + 40)
6.170.604
6.190.593
-
-
-
-
-
-
60 Balance from administrative activities
a) General and administrative expenses
70
31 12 2009
Changes in net assets available for payment of
benefits before substitute tax (10+50+60)
(5.311.876)
80 Substitute tax
Changes in net assets available for payment of
benefits (70+80)
(5.311.876)
418
(19.989)
(5.559.073)
247.197
-
-
(5.559.073)
247.197
Consolidated Notes to Financial Statements – Annexes
"Supplementary pension plan in favour of the personnel of Banca Toscana" - defined
contribution
BALANCE SHEET
Assets
10
31 12 2010
31 12 2009
Changes
230.155.565
239.558.259
(9.402.694)
21.229.235
17.683.995
3.545.240
b) Receivables from repo transactions
-
-
-
c) Securities issued by Governments and other international institutions
-
-
-
d) Listed debt securities
-
-
-
e) Listed equity securities
-
-
-
f) Unlisted debt securities
-
-
-
g) Unlisted equity securities
-
-
-
207.642.979
220.854.733
(13.211.754)
i) Options purchased
-
-
-
l) Accrued income and prepayments
-
-
-
m) Profit guarantees released to pension fund
-
-
-
n) Other assets from financial activities
-
-
-
o) Accrued income not yet received
-
-
-
1.283.351
1.019.531
263.820
Direct investments
a) Deposits
h) Units of UCITS
p) Secured insurance policy
20
Managed investments
-
-
-
30
Profit guarantees on individual accounts
-
-
-
40
Assets from administrative activities
-
-
-
a) Cash and bank deposits
-
-
-
b) Intangible fixed assets
-
-
-
c) Tangible fixed assets
-
-
-
d) Other assets from administrative activities
-
-
-
542.851
1.735.445
(1.192.594)
230.698.416
241.293.704
(10.595.288)
31 12 2010
31 12 2009
50
Tax receivables
TOTAL ASSETS
Liabilities
Changes
10
Liabilities from social security
-
-
-
20
Liabilities from financial activities
-
-
-
30
Profit guarantees on individual accounts
-
-
-
40
Liabilities from administrative activities
-
-
-
50
Tax payables
-
-
-
TOTAL LIABILITIES
-
-
-
230.698.416
241.293.704
100 Net assets available for payment of benefits
Net assets available for payment of benefits in previous year
241.293.704
Changes in net assets available for payment of benefits
(10.595.288)
419
203.287.097
38.006.607
(10.595.288)
38.006.607
(48.601.895)
Consolidated Notes to Financial Statements – Annexes
INCOME STATEMENT
31 12 2010
31 12 2009
(24.971.375)
Changes
5.402.571
(30.373.946)
a) Contributions for benefits
19.239.974
20.799.533
(1.559.559)
b) Advances
(4.473.247)
(3.894.795)
(578.452)
(32.531.841)
(4.210.542)
(28.321.299)
-
-
-
(7.141.226)
(7.291.625)
150.399
(65.035)
-
(65.035)
g) Payments in annuities
-
-
-
h) Other decreases
-
-
-
16.155.267
36.644.500
(20.489.233)
99.529
190.292
(90.763)
14.559.574
33.324.848
(18.765.274)
c) Fees and commissions on stock lending
-
-
-
d) Proits and losses rom repo transactions
-
-
-
e) Pension fund profit guarantee difference
-
-
-
d) Contingent assets
-
-
-
g) Forfeitures charged to the participants
-
-
-
h) Kickbacks from UCITS
986.031
906.437
79.594
i) Commission expense
(66.054)
(29.340)
(36.714)
l) Tax receivables on revenues from mutual funds
576.187
2.252.263
(1.676.076)
-
-
-
10 Balance of social security management
c) Transfers and redemptions
d) Transfers to annuities
e) Payments in capital
f ) Premiums for additional benefits
20 Profit (loss) from direct financial activities
a) Dividends and interest
b) Profits and losses from financial transactions
30 Profit (loss) from indirect financial activities
(10.398)
40 Operating expenses
(10.752)
354
a) Management companies
-
-
-
b) Custodian bank
-
-
-
c) insurance policy
-
-
-
(10.398)
(10.752)
354
d) 'State supervision' contribution
50 Financial and insurance income (loss) (20 +30 + 40)
60 Balance from administrative activities
a) General and administrative expenses
16.144.869
36.633.748
(20.488.879)
-
-
-
-
-
-
(8.826.506) 42.036.319
70 Changes in net assets available for payment of benefits before substitute tax (10+50+60)
(1.768.782)
80 Substitute tax
Changes in net assets available for payment of benefits (70+80) (10.595.288)
420
(4.029.712)
38.006.607
(50.862.825)
2.260.930
(48.601.895)
A GRICOLA M ERSE S.R.L.
4
5
421
21
22
20
18
19
17
16
15
11
12
13
14
10
9
7
8
6
A GRIFORM SOCIETA '
COOP ERA TIVA A GRICOLA
A GRISVILUP P O S.P .A .
A LEXA SP A IN LIQUIDA ZIONE
A NTONIA NA VENETA P OP OLA RE
A SSICURA ZIONI S.P .A .
A NTONIA NA VENETA P OP OLA RE
VITA S.P .A .
A NTONVENETA CA P ITA L L.L.C. I
A NTONVENETA CA P ITA L L.L.C. II
A NTONVENETA CA P ITA L TRUST I
A NTONVENETA CA P ITA L TRUST
A SSET M A NA GEM ENT HOLDING
S.P .A
A XA M P S A SSICURA ZIONI DA NNI
SOCIETA ' P ER A ZIONI
A XA M P S A SSICURA ZIONI VITA
SOCIETA ' P ER A ZIONI
A Z S.P .A .
B A NCA A NTONVENETA S.P .A .
B A NCA M ONTE P A SCHI B ELGIO
S.A .
B A SSILICHI S.P .A .
B ELL S.A .R.L. IN LIQUIDA ZIONE
A EROP ORTO DI SIENA SP A
A GENZIA P ER LA
TRA SFORM A ZIONE
TERRITORIA LE IN VENETO S.P .A .
A GRICOLA FA VA SRL
3
A D. IM P RESA SP A
1
2
Investee
SCHIO
P A DOVA
1040 B RUXELLES
B ELGIQUE
M ONTERIGGIONI
LUXEM B OURG
ROM A
ROM A
M ILA NO
STA TI UNITI D'A M ERICO
STA TI UNITI D'A M ERICA
STA TI UNITI D'A M ERICA
STA TI UNITI D'A M ERICA
TRIESTE
TRIESTE
M A NTOVA
FIRENZE
SOM M A CA M P A GNA
A SSA GO
M ILA NO
B A GNOLI DI SOP RA
SOVICILLE
M ILA NO
Registered Office
SI
VI
PD
RM
RM
MI
TS
TS
MN
FI
VR
MI
MI
PD
SI
MI
City
B anca M o nte dei P aschi di Siena S.p.a.
B anca M o nte dei P aschi di Siena S.p.a.
B anca M o nte dei P aschi di Siena S.p.a.
B A NCA A NTONVENETA S.P .A .
B anca M o nte dei P aschi di Siena S.p.a.
B anca M o nte dei P aschi di Siena S.p.a.
B anca M o nte dei P aschi di Siena S.p.a.
B anca M o nte dei P aschi di Siena S.p.a.
B anca M o nte dei P aschi di Siena S.p.a.
B anca M o nte dei P aschi di Siena S.p.a.
B anca M o nte dei P aschi di Siena S.p.a.
B anca M o nte dei P aschi di Siena S.p.a.
B anca M o nte dei P aschi di Siena S.p.a.
B anca M o nte dei P aschi di Siena S.p.a.
B anca M o nte dei P aschi di Siena S.p.a.
B anca M o nte dei P aschi di Siena S.p.a.
A GRISVILUP P O S.P .A .
B anca M o nte dei P aschi di Siena S.p.a.
M P S CA P ITA L SERVICES B A NCA P ER
LE IM P RESE S.P .A .
B A NCA A NTONVENETA S.P .A .
B anca M o nte dei P aschi di Siena S.p.a.
B anca M o nte dei P aschi di Siena S.p.a.
Investo r
92.660
201.741
307.914
1.006.300.000
24.950.000
1.250.000
1.246.817
10
10
5
5
50.000.000
6.700.000
66.871
1.430.000
2.000
5.000.000
360.133
11.974.581
200.000
no
shares/shake
11,74
17,94
100,00
100,00
50,00
50,00
22,24
100,00
100,00
100,00
100,00
50,00
50,00
99,07
11,00
14,23
20,00
10,01
21,38
20,00
11,74
17,94
100,00
100,00
50,00
50,00
22,24
100,00
100,00
100,00
100,00
50,00
50,00
99,07
11,00
12,00
20,00
10,01
21,38
20,00
%of
Shareho vo ting
lding (%) rights
Ownership
735.000
1
49,00
50,00
92.660
201.741
307.914
735.000
1.006.300.000
24.950.000
1.250.000
1.246.817
10
10
5
5
50.000.000
6.700.000
66.871
1.430.000
2.000
5.000.000
1
360.133
11.974.581
11,74
17,94
100,00
49,00
100,00
50,00
50,00
22,24
100,00
100,00
100,00
100,00
50,00
50,00
99,07
11,00
14,23
20,00
50,00
10,01
21,38
20,00
11,74
17,94
100,00
49,00
100,00
50,00
50,00
22,24
100,00
100,00
100,00
100,00
50,00
50,00
99,07
11,00
12,00
20,00
50,00
10,01
21,38
20,00
%of
Shareho vo ting
lding (%) rights
To tal
200.000
no
no
shares/sh Shareho
shares/shake
ake
lding (%)
P ledge
Significant interests in unlisted companies as at 31/12/2010 held by Banca Monte dei Paschi di Siena S.p.A. direct and/or
via Group companies pursuant to art. 120, paragraph three of Legislative Decree No. 58 of 24/02/98 and articles 125
and 126 of CONSOB resolution No. 11971 of 14/05/99
Consolidated Notes to Financial Statements – Annexes
422
42
41
40
39
34
35
36
37
38
33
32
31
30
29
28
27
23
24
25
26
CIRENE FINA NCE SRL
CISFI SP A
CO.E.M . COSTRUZIONI
COLLE P ROM OZIONE S.P .A .
COM M ERFIN SOCIETA '
CONSORZIO A GRA RIO DI SIENA
SOCIETA ' COOP ERA TIVA A
RESP ONSA B ILITA ' LIM ITA TA
CONSORZIO A GRA RIO
LOM B A RDO VENETO SOC. COOP .
A R.L.
CONSORZIO ETRURIA SOCIETA '
COOP ERA TIVA A R.L.
CONSORZIO GRA NTERRE
CA SEIFICI E A LLEVA M ENTI
SOCIETA ' COOP ERA TIVA
A GRICOLA
B ETA P RIM A S.R.L.
B IO P A LA CE SRL
B IOFUND S.P .A .
CA M P OVERDE S.P .A . A GRICOLA
CA NTINA SOCIA LE DI A RCETO
SOCIETA ' COOP ERA TIVA
A GRICOLA
CA NTINE RIUNITE & CIV SOCIETA '
COOP ERA TIVA A GRICOLA
CA SA LB OCCONE ROM A S.P .A .
CA SEIFICIO SOCIA LE DEL P A RCO
SOCIETA ' COOP ERA TIVA
CA SSA DI RISP A RM IO DI B IELLA
E VERCELLI S.P .A .
CE.M I. 91SRL
CENTRO SP ORTIVO P ETRA RCA
IM P IA NTI RUGB Y P A DOVA S.P .A .
Investee
MO
FI
M ONTELUP O
FIORENTINO
M ODENA
VR
SI
TV
NA
RM
SI
RM
PD
RM
BI
RE
SI
RE
RE
SI
PD
SI
CS
City
VERONA
SIENA
CONEGLIA NO
NA P OLI
ROM A
COLLE DI VA L D ELSA
ROM A
P A DOVA
ROM A
B IELLA
RA M ISETO
SIENA
CA M P EGINE
SCA NDIA NO
SIENA
P A DOVA
SIENA
CA STROVILLA RI
Registered Office
A GRISVILUP P O S.P .A .
B anca M o nte dei P aschi di Siena S.p.a.
A GRISVILUP P O S.P .A .
B anca M o nte dei P aschi di Siena S.p.a.
B anca M o nte dei P aschi di Siena S.p.a.
B anca M o nte dei P aschi di Siena S.p.a.
B anca M o nte dei P aschi di Siena S.p.a.
B anca M o nte dei P aschi di Siena S.p.a.
B anca M o nte dei P aschi di Siena S.p.a.
B A NCA A NTONVENETA S.P .A .
B anca M o nte dei P aschi di Siena S.p.a.
B anca M o nte dei P aschi di Siena S.p.a.
A GRISVILUP P O S.P .A .
B anca M o nte dei P aschi di Siena S.p.a.
A GRISVILUP P O S.P .A .
A GRISVILUP P O S.P .A .
B anca M o nte dei P aschi di Siena S.p.a.
B A NCA A NTONVENETA S.P .A .
B anca M o nte dei P aschi di Siena S.p.a.
B anca M o nte dei P aschi di Siena S.p.a.
Investo r
3.120
1.675.495
200
1.427
6.000
3.934.011
8.304.093
2.400
303.798
1.020
75.258.793
400
26.100
2.996
12.000
800.000
10,13
14,76
11,57
18,43
60,00
8,91
40,20
12,00
15,00
12,18
60,42
29,49
33,67
11,33
10,63
13,68
1,35
0,00
0,02
0,05
60,00
8,91
40,20
12,00
15,00
12,18
60,42
3,03
33,67
0,19
0,93
13,68
%of
Shareho vo ting
lding (%) rights
360.487 34,07
34,07
no
shares/shake
Ownership
To tal
674.035
10.494.939
10.000
1,53
50,80
100,00
3.120
1.675.495
200
1.427
6.000
4.608.046
18.799.032
2.400
303.798
1.020
10.000
75.258.793
400
26.100
2.996
12.000
10,13
14,76
11,57
49,99
60,00
10,44
91,00
12,00
15,00
12,18
100,00
60,42
29,49
33,67
11,33
10,63
1,35
0,00
0,02
0,15
60,00
10,44
91,00
12,00
15,00
12,18
100,00
60,42
3,03
33,67
0,19
0,93
no
%of
no
shares/sh Shareho
Shareho vo ting
shares/shake
ake
lding (%)
lding (%) rights
220.534
20,84
581.021 54,91
54,91
91.800
100,00
91.800 100,00
100,00
800.000 13,68
13,68
5.200.000
27,44
5.200.000 27,44
27,44
P ledge
Consolidated Notes to Financial Statements – Annexes
423
60
59
58
54
55
56
57
53
52
49
50
51
48
46
47
45
44
43
G B S GROUP S.P .A .
G.A .L. M ONTA GNE B IELLESI
SOCIETA ' CONSORTILE A RESP .
LIM ITA TA
CONSORZIO TRIVENETO SP A
CONSUM .IT S.P .A .
DOCUTEL COM M UNICA TION
SERVICES SP A
ECO P ISA NA SRL
EDI.B . SP A
EUROB IC TOSCA NA SUD S.P .A .
EUROP ROGETTI & FINA NZA
S.P .A . IN LIQUIDA ZIONE
FA B RICA IM M OB ILIA RE
SOCIETA ' DI GESTIONE DEL
RISP A RM IO S.P .A .
FIDI TOSCA NA S.P .A .
FIN.SER. S.P .A .
FINVETRO SRL
FIRENZE P A RCHEGGI S.P .A .
FONDO ITA LIA NO
D'INVESTIM ENTO SGR SP A
CONSORZIO OP ERA TIVO
GRUP P O M ONTEP A SCHI
CONSORZIO INTERREGIONA LE
ORTOFRUTTICOLI SOC. COOP . A
R.L.
CONSORZIO LA TTERIE SOCIA LI
M A NTOVA NE VIRGILIO SOCIETA '
A GRICOLA COOP ERA TIVA
Investee
CA SA P INTA
P A DOVA
M ILA NO
FIRENZE
P A DOVA
M ONSELICE
FIRENZE
ROM A
ROM A
ROM A
GUB B IO
P OGGIB ONSI
SIENA
P A DOVA
SIENA
SIENA
M A NTOVA
P A RM A
Registered Office
BI
PD
MI
FI
PD
PD
FI
RM
RM
RM
PG
SI
SI
PD
SI
SI
MN
PR
City
CA SSA DI RISP A RM IO DI B IELLA E
VERCELLI S.P .A .
B A NCA A NTONVENETA S.P .A .
B anca M o nte dei P aschi di Siena S.p.a.
B anca M o nte dei P aschi di Siena S.p.a.
B A NCA A NTONVENETA S.P .A .
B A NCA A NTONVENETA S.P .A .
B anca M o nte dei P aschi di Siena S.p.a.
B anca M o nte dei P aschi di Siena S.p.a.
B anca M o nte dei P aschi di Siena S.p.a.
B anca M o nte dei P aschi di Siena S.p.a.
B anca M o nte dei P aschi di Siena S.p.a.
B anca M o nte dei P aschi di Siena S.p.a.
B anca M o nte dei P aschi di Siena S.p.a.
B A NCA A NTONVENETA S.P .A .
B anca M o nte dei P aschi di Siena S.p.a.
CA SSA DI RISP A RM IO DI B IELLA E
VERCELLI S.P .A .
CONSUM .IT S.P .A .
M ONTE DEI P A SCHI DI SIENA LEA SING
& FA CTORING B A NCA P ER I SERVIZI
FINA NZIA RI A LLE IM P RESE S.P .A
M P S CA P ITA L SERVICES B A NCA P ER
LE IM P RESE S.P .A .
M P S GESTIONE CREDITI B A NCA S.P .A .
B anca M o nte dei P aschi di Siena S.p.a.
B anca M o nte dei P aschi di Siena S.p.a.
A GRISVILUP P O S.P .A .
A GRISVILUP P O S.P .A .
Investo r
3.000
10,34
14,29
16,46
81.568
500.000
29,18
15,00
49,99
10,11
18,05
18,49
553.990
1.500
35.993
1.900.000
268.576
278.293
15,00
0,03
10,13
100,00
3.902.209
218.400
357.000.000
75.000
0,06
7.804.418
0,03
3.902.209
0,03
0,03
3.902.209
3.902.209
0,03
99,79
24,14
16,67
10,34
14,29
16,46
29,18
15,00
49,99
10,11
18,05
18,49
15,00
0,03
10,13
100,00
0,06
0,03
0,03
0,03
0,03
99,79
2,77
13,04
%of
Shareho vo ting
lding (%) rights
3.902.209
12.971.477.114
120.000
1.000
no
shares/shake
Ownership
5.120.000
19.531
10.000
51,20
100,00
100,00
49,99
10,11
100,00
18,05
18,49
15,00
10,13
100,00
100,00
24,14
3.000
5.120.000
500.000
10,34
51,20
14,29
553.990 29,18
1.500 15,00
19.531 100,00
81.568 16,46
35.993
1.900.000
10.000
268.576
278.293
75.000
218.400
357.000.000
12.998.792.577
120.000
16,67
10,34
51,20
14,29
29,18
15,00
100,00
16,46
49,99
10,11
100,00
18,05
18,49
15,00
10,13
100,00
100,00
2,77
13,04
%of
Shareho vo ting
lding (%) rights
To tal
1.000
no
no
shares/sh Shareho
shares/shake
ake
lding (%)
P ledge
Consolidated Notes to Financial Statements – Annexes
424
85
84
83
82
81
79
80
78
76
77
75
74
72
73
71
69
70
68
66
67
65
62
63
64
61
P A RM A
M ILA NO
CORTINA D'A M P EZZO
M ilano
B RESCIA
CA SUM A RO
GROSSETO
P A DOVA
LECCE
M ONTECOSA RO
P OGGIB ONSI
B ISCEGLIE
Registered Office
LE ROB INIE SP A
IM P IA NTI S.R.L.
INDUSTRIA ELETTRICA INDEL
SOCIETA ' P ER A ZIONI IN
LIQUIDA ZIONE
INDUXIA S.R.L. IN LIQUIDA ZIONE
INIZIA TIVE IM M OB ILIA RI SRL
INSEDIA M ENTI P RODUTTIVI
P IEM ONTE SETTENTRIONA LE
S.P .A . SIGLA B ILE NORDIND S.P .A .
INTEGRA SP A
INTERM ONTE SIM S.P .A .
INTERP ORTO TOSCA NO A .
VESP UCCI
ITA LCA RNI SOCIETA '
COOP ERA TIVA A GRICOLA
K 7 SRL
LA TTERIA SOCIA LE M A NTOVA
SOCIETA ' A GRICOLA
COOP ERA TIVA
REGGIO NELL'EM ILIA
P ORTO M A NTOVA NO
M ILA NO
CA RP I
COLLESA LVETTI
FIRENZE
M ILA NO
VERCELLI
M ILA NO
M ILA NO
M ILA NO
M ILA NO
IM M OB ILIERE VICTOR HUGO S.C.I. 75009 P A RIS FRA NCE
G.A .L. P ONTE LA M A SOCIETA '
CONSORTILE A
RESP ONSA B ILITA ' LIM ITA TA
G.IM M .A STOR S.R.L.
G.P . M ORRO SRL
GE.CO.ER SRL
GIOTTO FINA NCE 2 SOCIETA ' DI
CA RTOLA RIZZA ZIONE SRL
GOVONI SIM B IA NCA SP A
GROSSETO SVILUP P O S.P .A .
HOP A SOCIETA P ER A ZIONI
HOLDING DI P A RTECIP A ZIONI
A ZIENDA LI IN SIGLA HOP A S.P .A .
HOTEL A M B RA SRL
I.CA SA SRL
IM M OB ILIA RE CENTRO M ILA NO
S.P .A .
IM M OB ILIA RE P A RM A SRL
Investee
RE
MN
MI
MO
LI
FI
MI
VC
MI
MI
MI
MI
PR
MI
BL
MI
BS
FE
GR
PD
LE
MC
SI
BA
City
B anca M o nte dei P aschi di Siena S.p.a.
A GRISVILUP P O S.P .A .
B anca M o nte dei P aschi di Siena S.p.a.
A GRISVILUP P O S.P .A .
CONSUM .IT S.P .A .
B anca M o nte dei P aschi di Siena S.p.a.
M P S CA P ITA L SERVICES B A NCA P ER
LE IM P RESE S.P .A .
CA SSA DI RISP A RM IO DI B IELLA E
VERCELLI S.P .A .
B anca M o nte dei P aschi di Siena S.p.a.
B anca M o nte dei P aschi di Siena S.p.a.
B anca M o nte dei P aschi di Siena S.p.a.
B A NCA A NTONVENETA S.P .A .
B anca M o nte dei P aschi di Siena S.p.a.
M P S CA P ITA L SERVICES B A NCA P ER
LE IM P RESE S.P .A .
B anca M o nte dei P aschi di Siena S.p.a.
M ONTE P A SCHI B A NQUE S.A .
M ONTE P A SCHI CONSEIL FRA NCE
SOCIETE P A R A CTIONS SIM P LIFIEE
B anca M o nte dei P aschi di Siena S.p.a.
B anca M o nte dei P aschi di Siena S.p.a.
B anca M o nte dei P aschi di Siena S.p.a.
B anca M o nte dei P aschi di Siena S.p.a.
B anca M o nte dei P aschi di Siena S.p.a.
B anca M o nte dei P aschi di Siena S.p.a.
B anca M o nte dei P aschi di Siena S.p.a.
B anca M o nte dei P aschi di Siena S.p.a.
B anca M o nte dei P aschi di Siena S.p.a.
Investo r
830.000
20.000
2.000
8.264
10.000
8.000.000
2.280
6.000
693.463
2.616.000
17.189
1
99
40.000
204.189.972
19.580
100
988.000
18.000
no
shares/shake
20,00
17,48
11,85
36,30
50,00
20,00
12,76
15,00
13,87
14,95
18,49
1,00
99,00
33,33
14,78
15,62
100,00
52,00
12,08
Shareho
lding (%)
Ownership
20,00
1,14
1,98
36,30
50,00
20,00
12,76
15,00
13,87
14,95
18,49
1,00
99,00
33,33
14,78
15,62
100,00
52,00
12,08
%of
vo ting
rights
118.000
3.000
30.500
90.000
595.700
10.400
90.000
100,00
15,00
50,00
100,00
11,91
100,00
100,00
830.000
20.000
118.000
2.000
8.264
10.000
8.000.000
2.280
6.000
693.463
2.616.000
17.189
100
3.000
40.000
30.500
90.000
204.189.972
595.700
19.580
100
988.000
10.400
90.000
20,00
17,48
100,0