BANCA
MONTE
DEI PASCHI
DI SIENA
Consolidated
Half-Year Report
as at 30 06 2015
2
1
HALF YEAR CONSOLIDATED REPORT
AS AT 30 JUNE 2015
Banca Monte dei Paschi di Siena S.p.a.
Share capital: € 9,001,756,820.70 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
BANCA MONTE DEI PASCHI DI SIENA
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CONSOLIDATED INTERIM REPORT
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HALF YEAR REPORT CONSOLIDATED REPORT
CONSOLIDATED HALF YEAR REPORT ON OPERATIONS............................................................................ 5
HALF YEAR CONDENSED CONSOLIDATED FINANCIAL STATEMENT ................................................... 79
EXPLANATORY NOTES .................................................................................................................................... 91
DECLARATION OF THE FINANCIAL REPORTING OFFICER ....................................................................223
AUDITORS’ REVIEW REPORT ON THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS ............227
ANNEXES ..........................................................................................................................................................231
BANCA MONTE DEI PASCHI DI SIENA
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CONSOLIDATED INTERIM REPORT
5
Consolidated Half Year Report on Operations
General accounting standards ............................................................................................... 7
Group Profile and business model ........................................................................................ 8
Overview ................................................................................................................................................................................................8
Business model ......................................................................................................................................................................................9
Shareholders ........................................................................................................................................................................................ 10
Governance & Control systems ...................................................................................................................................................... 10
Organisational structure ................................................................................................................................................................... 13
Strategy ................................................................................................................................ 16
Scenario ................................................................................................................................................................................................ 16
Strategy ................................................................................................................................................................................................. 17
Events, actions and performance ........................................................................................ 19
Significant events of the first half of 2015 .................................................................................................................................... 19
Significant events after the first half of 2015................................................................................................................................ 20
Results in brief .................................................................................................................................................................................... 21
Prospects and outlook on operations ............................................................................................................................................ 23
Analysis of the key economic-financial indicators .............................................................. 25
Reclassified accounts ......................................................................................................................................................................... 25
Capital adequacy ................................................................................................................................................................................. 38
Income statement .............................................................................................................................................................................. 39
Results by operating segment .......................................................................................................................................................... 44
Sales & Distribution segments ........................................................................................................................................................ 46
Analysis of the key non-financial capital ............................................................................. 60
Customer base .................................................................................................................................................................................... 60
Human capital..................................................................................................................................................................................... 63
Structural capital ................................................................................................................................................................................. 67
Relationship capital ............................................................................................................................................................................ 69
Reputational capital ........................................................................................................................................................................... 72
BMPS share price ................................................................................................................ 73
Share price and trends ....................................................................................................................................................................... 73
Ratings .................................................................................................................................................................................................. 74
Annexes ............................................................................................................................... 75
Reconciliation between the reclassified income statement and balance sheet and the related statutory accounts ........ 76
BANCA MONTE DEI PASCHI DI SIENA
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CONSOLIDATED INTERIM REPORT
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Half Year Report on Operations
General accounting standards
The Half-Year Report on Operations as at 30 June 2015 provides a description of the activities and
results which largely characterised the Montepaschi Group’s operations in the first half of 2015, both
as a whole and in the various business segments into which consolidated operations are organised.
In particular, the economic and financial indicators, based on accounting data, are those used in the
internal systems of performance management and management reporting and are consistent with the
most commonly used metrics within the banking industry in order to ensure the comparability of
figures presented.
In addition, the Report incorporates non-financial company information providing the details on the
activities, capital, risks and relations that are significant to the Group’s current and future performance.
This document highlights the key developments with respect to the contents of the Report
accompanying the 2014 Financial Statements, to which the reader is referred for a more complete
overview of the topics.
BANCA MONTE DEI PASCHI DI SIENA
Half Year Report on Operations
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Group Profile and business model
Overview
The
Montepaschi
Group
(hereinafter referred to as the
“Group”) is the banking hub led
by Banca Monte dei Paschi di
Siena, which does business
primarily in Italy, mainly
providing traditional retail &
commercial banking services.
Breakdown as at 30/06/2015
Employees
25,742
Branches (Italy)
2,183
Customers
Approx. 5.3 mln
Total assets (mln €)
177,705
9,373
The Group is also active through Shareholders’ equity (mln €)
its
specialised
product
companies in business areas such Total Revenues (mln €)
2,427
as leasing, factoring, corporate
finance and investment banking.
Breakdown of Group revenues by key business area as at 30/06/2015
The insurance-pension sector is covered
by a strategic partnership with AXA
1.2%
while asset management activities are 1.8%
70.4% - Retail and commercial banking
9.1%
2.0%
based on the offer of investment
15.5% - Investment banking and proprietary finance
products of independent third parties.
The Group combines traditional services
offered through the network of branches
and specialised centres with an innovative
self-service and digital services system
enhanced by the skills of the network of
financial advisors through Widiba Bank.
Foreign banking operations are focused
on supporting the internationalisation
processes of corporate clients in all major
foreign financial markets.
2.0% - Corporate finance
15.5%
1.8% - Leasing and factoring
70.4%
1.2% - Foreign banking
9.1% - Other
The chart does not include cancellation of intragroup entries.
Back office activities, administrative, accounting and other services (e.g. accounts payable) are
outsourced to Fruendo (the joint venture between Bassilichi SpA and Accenture Italia).
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Half Year Report on Operations
Business model
The Bank has launched a radical transformation in the “way of banking”, and therefore in its own
business model. The model requires improvement in the capital and financial structure as well as the
application of sound principles of value and corporate governance, which the Bank has reinforced in
response to specific systemic problems of recent years.
The capabilities and skills to guide this change have been deployed, and focus has been placed on the
customer, customer relations, quality, efficiency and all intangible and non-financial capital, the real
drivers of business development, which the Bank intends to pursue by aiming for sustainable growth
for the benefit of all stakeholders.
BUSINESS MODEL
CAPITAL
ACTIVITIES
EXPECTED RESULTS
Financial capital
Business
Income statement and financial results
 Lending and traditional banking
activities, with a focus on advisory
services
 Sustainable profitability
 Adequate capital quality and quantity
 Private banking
 Brokerage of products of qualified
business partners in the bancassurance
(AXA), asset management (Anima) and
consumer credit (Compass) segments
 Digital banking, self-service and financial
advisory services
 Leasing and factoring
Non-financial capital
Processes
Generation of shared value
 Customer base
 Listening, knowing the customer and
focus on services
 Customer satisfaction
 Human capital
(Skills, DNA and values, Diversity)
 Structural capital
(Distribution
network,
Remote
banking channels, Operating apparatus
and processes)
 Relationship capital
(System of relations with stakeholders)
 Human resource development
 Employee motivation, satisfaction and
productivity
 Optimisation of operations
 Moderation and limitation of waste
 Corporate citizenship and solidarity
 Value of the brand and public opinion
 Economic/social
communities
value
in
local
 Reputational capital
(Brand, Reputation)
GOVERNANCE AND VALUES
Governance and control systems, Prudent approach to risk, Long-term vision, Orientation to change, Ethics and legality, Central focus on
customers, Social responsibility
BANCA MONTE DEI PASCHI DI SIENA
Half Year Report on Operations
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Shareholders
As a result of the share capital increase of approx. EUR 3 bn completed on 19 June 2015, Banca
Monte dei Paschi di Siena Spa’s share capital amounts to EUR 8,758,683,020, broken down into
2,814,082,624 ordinary shares (as at 31 December 2014, it was EUR 12,484,206,649, broken down into
5,116,513,875 ordinary shares).
As at 30 June 2015, the Bank’s major shareholders (holding more than 2% of the share capital) held a
total of 12.81% of the share capital (12.27% as at 31 December 2014).
Breakdown of Bmps share capital as at 30th June 2015
Fintech Advisory Inc.* - 4.50%
AXA S.A.** - 3.17%
BTG Pactual Europe LLP - 3.13%
People’s Bank of China - 2.01%
Other shareholders (less than 2%) - 87.19%
* Shareholding through Companies belonging to its Group
** Shareholding on own behalf and through Subsidiaries
In comparison to the share capital breakdown at the end of 2014, Fondazione MPS is no longer part
of the group of major shareholders, while People’s Bank of China has entered the group with 2.01% of
the share capital.
On 1 July 2015, in execution of the resolution passed by the Board of Directors on 21 May 2015,
117,997,241 Shares of the Shares of the Bank, equal to 4.024% of the new share capital, thus increased
to EUR 9,001,756,820 as of 3 July 2015, were issued to the Ministry of Economy and Finance (MEF)
for interest accrued as at 31 December 2014 pursuant to the regulation relating to “New Financial
Instruments” set forth under Decree Law no. 95 of 6 July 2012, as amended.
Governance & Control systems
Corporate Governance
For the Group, the relevance of corporate governance goes beyond its traditional technical meaning,
i.e. a set of coordinated rules and structures governing relations amongst shareholders and between
them and the directors and top management. In line with the Bank’s mission, it is seen as a tool for
relations with all stakeholders.
The overall corporate governance system makes reference to the Corporate Governance Code of listed
companies issued by the Italian Stock Exchange, thereby ensuring: a clear delineation of roles and
responsibilities, the appropriate separation of powers, balanced composition of the corporate bodies,
effective controls, monitoring of all business risks, adequacy of information flows and the company’s
social responsibility.
For a complete description of the structure and operations of the corporate governance system, please
refer to the “Report on Corporate Governance and Ownership Structure”, available on the Bank’s
website. (https://www.mps.it/Investor+Relations/Corporate+Governance/)
During the first half of the year, the Shareholders’ Meeting of 16 April appointed the new Board of
Directors and Board of Statutory Auditors of the Bank.
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Half Year Report on Operations
CORPORATE GOVERNANCE POLICY AND BOARD OF DIRECTORS
Policy: Code of ethics, Related-party transactions, Internal dealing, Board induction, Annual board evaluation, Gender diversity, Maximum
age of directors (75 years), Limit on the number of consecutive offices (3), Limit on the number of offices outside the Group (4).
Operating principles of the Board of Directors: harmony, collaboration and positive working environment, intense and genuine debate,
knowledge and continuous updating of relevant topics, efficient meeting organisation, distribution of information.
Composition of the Board of Directors: directors (14), average age (55 years), non-executive chairman, female directors (7), executive
directors (1), independent directors (8).
Alessandro Profumo (Chairman)
Roberto Isolani * (Deputy Chairman)
Fabrizio Viola (Chief Executive Officer)
Nationality: Italian
Year of Birth: 1957
Years of industry experience: 28
Date of taking office: 16.4.2015
Independent: no
Committees: Executive
Nationality: Italian
Year of Birth: 1964
Years of industry experience: 22
Date of taking office: 16.4.2015
Independent: no
Committees: Appointments Committee
Risk Committee
Béatrice Bernard **
Nationality: Italian
Year of Birth: 1958
Years of industry experience: 28
Date of taking office: 16.4.2015
Independent: no
Committees: Executive
Nationality: Italian
Year of Birth: 1956
Years of industry experience: Date of taking office: 16.4.2015
Independent: yes
Committees: Risk Committee; Committee
on Related Party Transactions
Nationality: French
Year of Birth: 1963
Years of industry experience: 30
Date of taking office: 16.4.2015
Independent: no
Committees: Remuneration Committee
Nationality: Italian
Year of Birth: 1954
Years of industry experience: 7
Date of taking office: 16.4.2015
Independent: no
Committees: -
Daniele Bonvicini
Lucia Calvosa
Maria Elena Cappello
Nationality: Italian
Year of Birth: 1949
Years of industry experience: 16
Date of taking office: 16.4.2015
Independent: yes
Committees: Risk Committee; Committee
on Related Party Transactions
Nationality: Italian
Year of Birth: 1961
Years of industry experience: 3
Date of taking office: 16.4.2015
Independent: yes
Committees: Committee on Related Party
Transactions
Nationality: Italian
Year of Birth: 1968
Years of industry experience: 2
Date of taking office: 16.4.2015
Independent: yes
Committees: Appointments Committee;
Remuneration Committee (Chairperson)
Alessandro Falciai
Fiorella Kostoris
Stefania Truzzoli
Nationality: Italian
Year of Birth: 1961
Years of industry experience: 3
Date of taking office: 16.4.2015
Independent: yes
Committees: Appointments Committee
(Chairman); Remuneration Committee
Nationality: Italian
Year of Birth: 1945
Years of industry experience: 13
Date of taking office: 16.4.2015
Independent: yes
Committees: Committee on Related Party
Transactions (Chairperson); 231 Supervisory
Body
Nationality: Italian
Year of Birth: 1968
Years of industry experience: Date of taking office: 16.4.2015
Independent: yes
Committees: Remuneration Committee
Antonino Turicchi
Christian Whamond ***
Nationality: Italian
Year of Birth: 1965
Years of industry experience: 10
Date of taking office: 16.4.2015
Independent: yes
Committees: Appointments Committee;
Risk Committee (Chairman); Committee on
Related Party Transactions
Nationality: Argentine
Year of Birth: 1973
Years of industry experience: 18
Date of taking office: 16.4.2015
Independent: no
Committees: Remuneration Committee;
Risk Committee
Stefania Bariatti
Fiorella Bianchi
Notes:
* co-opted by the previous Board as of
9 October 2014
** co-opted by the previous Board as
of 24 September 2013
*** co-opted by the previous Board as
of 4 March 2015
BANCA MONTE DEI PASCHI DI SIENA
Half Year Report on Operations
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Risk Management
The Group dedicates the utmost attention to the process of identifying, monitoring, measuring,
controlling and mitigating risks.
The Board of Directors defines risk governance policies and strategies, particularly by establishing the
total risk appetite in line with the annual budget and with reference to the new internal framework
(RAF - Risk Appetite Framework).
Strategies are implemented in line with the business model, Business Plan objectives and regulatory
and legal requirements.
The objective of the RAF, approved by the Board of Directors of BMPS on 29 April 2015, is to ensure
constant alignment between the Group’s actual risk profile and the risk appetite defined in advance by
the Board of Directors, taking into account pre-established risk tolerance levels and in any event within
the maximum admissible limits (risk capacity) deriving from regulatory requirements or other
restrictions imposed by the Supervisory Authorities.
The overall RAF system is broken down in terms of operating limits for the various business areas and
completed by the definition and formalisation of adequate governance policies and robust processes
for management of the various corporate risks.
Planning activities continue, which in 2014 already led to the updating and/or issue of numerous
internal policies and regulations in order to promote and guarantee a continuously greater and more
widespread risk culture at all levels of the organisation. Awareness of risks and the correct knowledge
and application of the internal models governing those risks - especially for those validated for
regulatory purposes - are fundamental requirements for effective, sound and prudent business
management.
In addition, the incorporation of macro risk and risk-adjusted performance indicators within staff
remuneration and incentive policies represents an additional tool to promote awareness of the conduct
of all resources and the cultivation of a healthy risk culture.
Compliance System
Further strengthening continued on the compliance model adopted by the Bank in implementation of
Bank of Italy regulations, through the implementation of an extensive network of specialist monitoring
and the necessary operational support, controls and reporting. In this regard, it is also worth noting the
change in the hierarchical positioning of the Compliance Area, which was removed from the Risk
Division and now directly reports to the Chief Executive Officer.
In addition:

various improvements have been carried out as regards investment services (e.g. policy regarding
the distribution of complex financial products to retail customers);

ICT compliance - after establishing a specifically dedicated organisational structure, the relative
operating scope was defined together and the so-called “inherent risk” was then determined.
For a description of some of the main legal and arbitration proceedings in progress, see Part E of the
Notes to this Report.
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Half Year Report on Operations
Executive Remuneration Policy
The remuneration and incentives policies for “key personnel” are defined by the Board of Directors as
part of the guidelines established annually by the Shareholders’ Meeting for all employees, in
accordance with regulatory measures and current contracts.
The policies prepared for 2015 include the new aspects introduced by the 7th Update to Circular no.
285 (“Supervisory Instructions”) of 17 November 2013 on variable remuneration for “key personnel”.
For further information, reference should be made to the 2015 Remuneration Report, available on the
Bank’s web site (https://www.mps.it/Investor+Relations/Corporate+Governance/)
Organisational structure
Through its Head Office, Banca Monte dei Paschi di Siena performs functions of direction,
coordination and control over the Group’s companies, as part of the more general guidelines set out
by the Board of Directors and in the interest of the Group’s stability.
Organisational chart of the Bank’s Head Offices as at 30.06.2015
BoD
Internal Audit Area
CEO/GM
Staff Regulatory
Relationship
Compliance Area
Credit Deputy GM
Risk
Division
General Secretary
Area
HR, Organization
and Communic .
Division
Legal and Corporate
Affairs Area
Finance
and Operations
Deputy GM
Retail and Network
Division
Corporate
and Investment
Banking Division
Chief Operating
Officer
Division
Chief Financial
Officer
Division
The key initiatives for the Half Year were meant to:

improve the effectiveness of debt collection - lending chain governance methods were
changed, with the introduction of line management hierarchies up to Head Office level for
activities that previously reported to the Regional Areas, in order to improve the speed of
classifying positions and problem loan management effectiveness, mitigating future costs. The
Debt Collection Area was reorganised to focus the department on core positions and on
maximising business recovery logic for positions of lower amounts. The distribution of
regional offices was streamlined.
BANCA MONTE DEI PASCHI DI SIENA
Half Year Report on Operations
14
In addition, a new high-level decision-making body was formed (Large Loans Committee),
which has taken on some of the credit responsibilities previously assigned to the former
Executive Committee; delegations of independence and the profiles and composition of
certain board Committees (Risk Committee, Appointments Committee, Remuneration
Committee, Committee for Related Party Transactions) were also updated.

Boost the impactfulness of the sales presence - the Top Corporate segment has been created,
which includes businesses of high standing that have been identified as such based on
qualitative and quantitative parameters such as: turnover range, rating class, corporate
structure, complexity of financial needs and degree of internationalisation. The new
commercial chain was then established with new dedicated units within the Corporate and
Investment Banking Division as well as in the Network (Top Corporate Centres), while in the
Retail and Network Division, the new Corporate SME and Institutions Area has been
established to guarantee a unitary vision and policy in the management of the reference
markets.
In addition, the incorporation of Consum.it has been completed. Its units and responsibilities
have been integrated within the Retail and Network Division.

Improve unit efficiency - the Internal Audit Department was reorganised and upgraded to
Division level for the purpose of further improving the management of activities in light of
the new sector supervisory structure and the complexity/specificity of priorities for 2015.
A new Staff Regulatory Relationship unit, reporting directly to the CEO, has also been created
to provide smooth interactions with the new sector supervisor.
The Compliance Area has been removed from the Risk Division and now reports directly to
the CEO, also in compliance with the requirements laid out by Bank of Italy Circular 263.
CONSOLIDATED INTERIM REPORT
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Half Year Report on Operations
Main companies of the Group
COMPANY
ACTIVITIES
Banca Monte dei Paschi di Siena and its subsidiaries operate in the different segments of the
banking and financial industry, with activities ranging from traditional banking to special
purpose loans, assets under management, bancassurance, investment banking and consumer
credit. The Bank performs functions of direction, coordination and control over the Group’s
companies, as part of the more general guidelines set out by the Board of Directors in
compliance with the instructions provided by the Bank of Italy in the interest of the Banking
Group’s stability.
Monte Paschi Fiduciaria aims to satisfy the needs of individuals and legal entities wishing to
have their assets managed with the utmost confidentiality. Monte Paschi Fiduciaria may take
on the custody of assets in its capacity as a trustee and act as a protector in trusts.
MPS Capital Services Banca per le Imprese provides customers with solutions to financial and
credit issues, focusing its business on medium-long term credit facilities, special-purpose
loans, corporate finance, capital markets and structured finance.
MPS Leasing & Factoring is the Group bank specialised in developing an offer of integrated
leasing and factoring packages for businesses, artisans and professionals.
Widiba (WIse-DIalog-Banking) is the Group’s direct bank that integrates a self-service offer
with the competencies of MPS’s network of financial advisors.
Consorzio Operativo is the centre for the development and management of ICT and
telecommunication systems.
Monte Paschi Banque SA and Banca Monte Paschi Belgio SA are the Group’s banks that
support commercial trade and investments of Italian companies abroad.
Compared to the situation described in the Interim Report on Operations as at 31 March 2015,
Consum.it has merged into Banca Monte dei Paschi di Siena, effective for accounting purposes as of 1
January 2015.
For a more complete picture of the Group ownership structure, reference should be made to the
Consolidated Financial Statements as at 31 December 2014.
BANCA MONTE DEI PASCHI DI SIENA
Half Year Report on Operations
16
Strategy
Scenario
In the second quarter of 2015, Euro area financial market and share price volatility increased
significantly due to uncertainty regarding the future of Greece after the suspension of negotiations with
creditor institutions and countries for the extension of the bailout programme, as well as the results of
the surprise referendum called by the Greek authorities. At the same time the global economy,
although continued to recover, showed signs of a slowdown triggered by temporary factors in
advanced economies and more long-lasting factors in emerging markets. Continued excess supply in
the oil market has contributed towards limiting crude oil prices to levels just above the minimums seen
at the start of the year, but the global economy continues to suffer from factors of uncertainty such as
the pace of the US interest rate hike and financial instability in China as seen in the brusque drop in the
stock market, which was interrupted only thanks to massive interventions by the local authorities.
In the Euro area, after the agreement of 13 July with Greece and the approval by the Athens
Parliament of a package of strict and detailed measures which will make it possible to begin
negotiations for a third Greek bailout, financial market conditions improved. The increase in risk
premiums on the Eurozone’s government securities was limited on the whole due to progresses
achieved in European governance and reforms enacted by individual EU countries.
After the launch of the Eurosystem’s bond buying programme, the Euro area’s long-term interest rates
declined significantly until mid-April, and then started to rise once again, partly in response to
improved expectations concerning inflation - which became positive in May (+0.3%) for the first time
since the end of last year - and growth induced by the programme. On the whole, financial and
currency market conditions continue to bolster the economic recovery and price movements.
In Italy, an improvement in business and household confidence indexes was accompanied by a
recovery in internal demand, which is contributing once again to growth. Investments rose after an
almost continuous decline since 2008, and initial positive signs were also seen in the building industry.
The return on the ten-year BTP, which in March reached an all-time low of just over 1%, recently rose
to settle at around 2.30%, with the return spread vs. the 10-year Bund rising to 156 bps at the end of
June during the Greek crisis (+51 bps compared to 31/03/15).
Monetary expansion, particularly the widespread recourse of Italian banks to targeted longer-term
refinancing operations and the Eurosystem bond buying programme, is gradually producing ripple
effects in credit terms, and the reduced cost of credit is no longer benefitting only companies with high
credit ratings. However, the high amount of doubtful loans inherited from the long recession
continues to hinder loan disbursements and divert new resources from financing the economy. The
measures approved by the Council of Ministers in June should remove some obstacles deriving from
current regulations, accelerating the tax deductibility of losses on loans and making collection
procedures more efficient.
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Half Year Report on Operations
Strategy
2015-2018 Business Plan
Banca Monte dei Paschi di Siena Board of Directors approved the 2015-2018 Business Plan on 8 May
2015. This Plan is an update of the previous strategy covering the period 2013 to 2017, and provides
greater alignment and consistency with the new reference environment (economic and financial
context, Comprehensive Assessment results, new targets set by the sector Supervisory Authority at the
end of the Supervisory Review Evaluation Process, Asset Quality Review results and the resulting need
to review loan portfolio classification and valuation methods and parameters).
Operational priorities
The Plan is broken down along the following development guidelines:

Increased productivity and efficiency, with growth targets of total income of 4.6% approx. (20142018 CAGR) and a 1.5% decrease in operating expenses (2014-2018 CAGR).
The Plan provides the structural review of the distribution and business models: optimisation of
the Network territorial structure; a new customer service model; multi-channel integration; and
the consolidation of digital channels in terms of transactions and relationships, also to support
activities in the branches. In this regard, a hub & spoke network model will be implemented,
involving the closure of an additional 350 branches and the restructuring of approximately 700.
Sales processes will be made more efficient, which will save time to further improve sales
activities and dedicate more attention to relationships with customers. The Network will be
leaner, with more flexible sales outlets that can better meet the customers’ requirements.
In addition, the focus on the world of businesses will be strengthened by activating and fully
rolling out the new commercial chain dedicated to SMEs of high standing/potential. That chain
will take advantage of an even higher level of manager specialisation, high value-added products
and a more efficient sales process decision-making chain.
The Plan aims to boost organisational efficiency overall, with actions that will therefore involve
Head Office as well as regional coordination units. This will make it possible to identify cost
synergies and best govern the planned headcount reduction plan.
The operational efficiency targets remain confirmed and projects under way will be further
enhanced (e.g. the digitalisation of network business processes; further centralisation of
administrative services; the review of the processes of management of expenses, demand and
property management; the optimisation of the credit and control chains).

Credit quality improvement: the goal of decreasing the cost of credit from 654 bps in 2014 to 106
bps in 2018 through a radical review of credit processes. These initiatives are expected to optimise
the risk/return profile of the loan portfolio, by implementing rigorous credit policies and
selection principles in relation to new loan disbursements. In addition, after the comprehensive
assessment, the Bank identified the major actions to be carried out in order to cope with the
specific areas of concern pointed out by the Regulatory Authorities.
In particular, with respect to impaired loans, a review of the organisation models and management
processes has started for the purpose of significantly increasing the rates of loan collection and
cure (focusing internal units on collections for the most significant positions and outsourcing the
management of the small ticket positions; optimising external legal support with remuneration
procedures that are also linked to performance; portfolio disposals, etc.).

Structural rebalance of liquidity: the commitment to rebalance the Bank’s liquidity position at the
structural level has been confirmed. In particular, the ECB loans are expected to be reduced
within the limits set for all the banks within the TLTRO operations (once the LTRO repayment is
completed).

Capital strengthening: quantitative and qualitative strengthening of capital is planned through:
BANCA MONTE DEI PASCHI DI SIENA
Half Year Report on Operations
18

a share capital increase with rights issue;

capital management and optimisation initiatives of the Risk Weighted Assets (RWA)
at a parity of assets, partly through the selective reduction of the loan portfolio aiming
at increasing quality without decreasing the Bank’s support to the local economy.
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Half Year Report on Operations
Events, actions and performance
Significant events of the first half of 2015
G/C = Governance/Corporate
S = Strategy
R = Rating
January
(G/C)
February
(G/C)
(G/C)
March
(G/C)
(G/C)
April
(G/C)
The ECB asked the Bank to cover the capital deficit deriving from the Comprehensive
Assessment by implementing the Capital Plan submitted in November which - among
the various measures - envisages a share capital increase of EUR 2.5 bn.
The results as at 31 December 2014 were approved on 11 February, the SREP was
completed with a target CET1 ratio of 10.2% and the share capital increase by up to a
maximum EUR 3 bn was approved.
David Manuel Martinez resigned from the Board of Directors of the Bank.
On 4 March, the Board of Directors resolved:
 to call the Shareholders’ Meeting to approve the 2014 Financial Statements, appoint
the new Board of Directors and Board of Statutory Auditors, and increase the share
capital by up to a maximum EUR 3 bn;
 to co-opt Cristian Whamond to the Board of Directors to replace David Martinez;
 on the number of shares to be allocated to the Ministry of the Economy and Finance
as the interest payment on the “Monti Bonds”.
On 21 March the lists were filed for appointment of the Board of Directors and the
Board of Statutory Auditors of the Bank.
On 2 April the Bank’s Board of Directors meeting minutes were filed: decision on the
merger by absorption of Consum.it into Banca Monte dei Paschi di Siena S.p.A.
(G/C)
On 14 April the ordinary and extraordinary Shareholders’ Meeting of the Bank was
called: the quorum for the meeting to be held on first call was not reached.
(S)
On 15 April, an agreement was reached on the sale to Poste Italiane of the Bank’s 10.3%
equity investment in Anima Holding.
(G/C)
On 16 April, Alessandro Profumo and Fabrizio Viola were re-appointed to the Board of
Directors, with Alessandro Profumo as Chairman and Roberto Isolani as Deputy
Chairman.
The following were also appointed to the Board of Directors: Fiorella Kostoris, Fiorella
Bianchi, Lucia Calvosa, Antonio Turicchi, Stefania Truzzoli, Alessandro Falciai, Stefania
Bariatti, Daniele Bonvicini and Maria Elena Cappello. Christian Whamond and Beatrice
Derouvroy Bernard were confirmed.
The Ordinary Shareholders’ Meeting:
 approved the 2014 Financial Statements and the Remuneration Report;
 appointed the Board of Directors and the Board of Statutory Auditors.
The Extraordinary Shareholders’ Meeting:
 approved the share capital decrease due to losses and the non-replenishment of
valuation reserves;
 authorised the share capital increase and reverse split operation;
 approved amendments to the Articles of Association.
(G/C)
On 20 April, Fabrizio Viola was confirmed as Chief Executive Officer.
May
BANCA MONTE DEI PASCHI DI SIENA
Half Year Report on Operations
20
(S)
On 8 May, the new 2015-2018 Business Plan was approved.
(G/C)
On 13 May, the European Central Bank approved the Bank’s EUR 3 bn share capital
increase with rights issue and the resulting repayment of New Financial Instruments for
a nominal value of EUR 1.071 bn.
(R)
On 19 May, Fitch lowered the long-term rating (long-term IDR) of the Issuer from
“BBB” to “B-”, with a stable outlook.
(G/C)
On 21 May, the Board of Directors set the final terms of the share capital increase with
rights issue for a maximum of EUR 3 bn, approved by the Shareholders’ Meeting on 16
April 2015.
(S)
On 21 May, the guarantee contract relating to the share capital increase with rights issue
approved by the Shareholders’ Meeting on 16 April 2015 was signed. The AXA Group
and the Mutuelles AXA committed to subscribing their respective shares.
June
(G/C)
On 12 June, the share capital increase offering period ended.
(G/C)
On 15 June, the Bank fully repaid the remaining nominal value of EUR 1.071 bn of New
Financial Instruments (in exchange for the payment of consideration of roughly EUR
1.116 bn, pursuant to the New Financial Instruments terms and conditions). With that
repayment, which follows the repayment for a nominal value of EUR 3 bn made on 1
July 2014, the Bank completed the return of government aid received in 2013 far ahead
of the final deadline of 2017 set forth as part of the commitments made to the Ministry
of Economy and Finance and the DG for Competition of the European Commission.
(G/C)
On 19 June, the share capital increase with rights issue fully subscribed for a total value
of EUR 2,993,160,608.10 and no new share was subscribed by the underwriting
syndicate.
(S)
On 23 June, a binding agreement was reached for the without recourse sale of a doubtful
loans portfolio consisting of consumer loans, personal loans and credit cards originated
by Consum.it to Banca IFIS S.p.A. and a securitisation vehicle financed by a company
associated with Cerberus Capital Management LP. The portfolio sold consists of nearly
135,000 positions with a gross book value of roughly EUR 1 bn (EUR 1.3 bn including
interest on arrears accrued and/or other charges that are transferred along with the
principal amount).
(S)
On 25 June, a final agreement was reached for the acquisition by Poste Italiane of the
10.3% equity investment held by the Bank in Anima Holding S.p.A., as all conditions
precedent set forth in the preliminary sale agreement were fulfilled. On the date of the
sale, which will take place by 30 June 2015, Poste will take over all of the Bank’s rights
and obligations pursuant to the shareholders’ agreement regarding the shares of Anima
originally signed on 5 March 2014 between MPS and Banca Popolare di Milano.
Significant events after the first half of 2015
July
(G/C)
(G/C)
On 1 July, in execution of the resolution passed by the Board of Directors on 21 May
2015, 117,997,241 ordinary shares, equal to 4% of the share capital, were issued to the
Ministry of Economy and Finance for interest accrued as at 31 December 2014, with a
simultaneous increase in the share capital by EUR 243,073,800.00. On 3 July the relative
certification pursuant to art. 2444 of the Italian Civil Code was filed with the Siena
Register of Companies.
On 24 July, Alessandro Profumo resigned from the positions of Chairman and member
of the Board of Directors of the Bank, as of 6 August 2015, at the end of the Board of
Directors meeting for the approval of the Half-Year Financial Report as at 30 June 2015.
CONSOLIDATED INTERIM REPORT
21
Half Year Report on Operations
Results in brief
CONSOLIDATED REPORT ON OPERATIONS
Highlights at 30/06/2015
INCOME STATEMENT AND BALANCE SHEET FIGURES AND KEY INDICATORS
MPS GROUP
INCOME STATEMENT FIGURES (EUR mln)
30/06/2015
30/06/2014
% chg
Income from banking activities
2,098.9
1,843.0
13.9%
Income from banking and insurance activities
2,426.8
1,936.5
25.3%
Net operating income
133.6
(621.6)
-121.5%
Net profit (loss) for the period
193.6
(353.0)
n.s.
30/06/2015
31/12/2014
% chg
Direct funding
126,238
126,224
0.0%
Indirect funding
108,286
106,140
2.0%
of which: assets under management
54,969
51,519
6.7%
of which: assets under custody
53,317
54,622
-2.4%
117,436
119,676
-1.9%
9,373
5,965
57.1%
30/06/2015
31/12/2014
Abs. chg
Net doubtful loans/Loans to Customers
7.7
7.1
0.6
Net Unlikely to pay/Loans to Customers
10.2
9.7
0.5
2.2
2.6
-0.3
30/06/2015
31/12/2014
Abs. chg
Cost/Income ratio
54.0
65.1
-11.1
Net loan loss provisions / End-of-period loans
1.68
6.54
-4.9
30/06/2015
31/12/2014
Abs. chg
Total Capital ratio
15.4
13.0
2.4
Common Equity Tier 1 (CET1) ratio
11.0
8.7
2.3
Return on Assets (RoA) ratio
0.04
-2.91
2.95
30/06/2015
31/12/2014
2,814,082,624
5,116,513,875
-2,302,431,251
From 31/12/14 to
31/03/15
From 31/12/13 to
31/12/14
% chg
average
2.13
1.19
78.3%
low
1.63
0.46
250.8%
high
2.56
2.56
0.0%
30/06/2015
31/12/2014
Abs. chg
25,742
25,961
(219)
2,183
2,186
(3)
Number of specialised centres
273
279
(6)
Financial advisory branches
115
118
(3)
40
40
-
BALANCE SHEET FIGURES AND INDICATORS (EUR mln)
Loans to customers
Group net equity
KEY CREDIT QUALITY RATIOS (%)
Net NP past due and overdue exposures/Loans to Customers
PROFITABILITY RATIOS (%)
CAPITAL RATIOS (%)
INFORMATION ON BMPS STOCK
Number of ordinary shares outstanding
Price per ordinary share:
OPERATING STRUCTURE
Total head count - end of period
Number of branches in Italy
Number of branches & representative offices abroad
BANCA MONTE DEI PASCHI DI SIENA
Half Year Report on Operations
22
Changes in the key items of the main aggregates of Montepaschi Group for the first half of 2015 are
summarised below:

Total funding as at 30 June 2015 had reached approximately EUR 235 bn (+0.9% compared
to 31/12/2014), recording growth in indirect funding (+2%) and stability in the direct
component;

as at 30 June 2015, loans to customers amounted to roughly EUR 117 bn, down 4.6% with
respect to 31 March 2015 and 1.9% with respect to the end of 2014;

with regard to capital ratios, as at 30 June 2015, the Common Equity Tier 1 Ratio stood at
11% (8.7% at the end of 2014) and the Total Capital Ratio at 15.4%, with respect to the 13%
recorded to the end of December 2014;

the Group earned Revenues of approximately EUR 2,427 mln (+25.3% on the 1st half of
2014) with 2Q15 contributing roughly EUR 1,160 mln, down 8.5% on the previous quarter.
At the end of the half year net interest income stood at EUR 1,172 mln, up 20.6% on the
same period last year, which was impacted, for around EUR 147 mln, by the recalculated
repayment value of the NFIs. Excluding this component, net interest income would have
recorded annual growth of 4.7%. The second quarter contributed around EUR 560 mln, down
by EUR 52 mln compared to the previous quarter (-8.5%), primarily in relation to a decrease
in lending volumes with business customers and the simultaneous reduction in market
parameters, a reduction in the return of the AFS securities portfolio and reduced exposure to
the ECB, which has been gradually replaced with commercial liquidity. Net fee and
commission income, standing at EUR 927 mln, was up 6.4% YoY (EUR +56.1 mln) due to
the increase in income from asset management supported by placements and continuing
operations. The aggregate registered a result of approx. EUR 484 mln in the 2nd quarter,
which was up with respect to the previous quarter (+9.3% QoQ) due to income from asset
management and the increase in other services, for example payment and consumer finance
services. Net profit (loss) from trading-valuation-repurchase of financial
assets/liabilities came to approximately EUR 231 mln, up from the same period of 2014
(approx. EUR +157 mln);

operating expenses totalled approx. EUR 1,311 mln (-1.5% from the same period of the
previous year) with an impact on the 2nd quarter of EUR 657 mln, basically in line with
1Q2015 (+0.6%). More specifically:
 personnel expenses, amounting to approx. EUR 834 mln, were down on an annual
basis (2%) and against the previous quarter (-1.2%), mainly due to headcount reduction
carried out at the end of 2014 and the beginning of 2015, which overall more than offset
increased expenses associated with the 2012 National Collective Labour Agreement;
 other administrative expenses totalled EUR 375 mln at the end of the first half of
2015, down 1.7% compared to the same period last year due to structural cutbacks in
spending, particularly affecting the IT, real estate, outsourcing and sponsorship segments.
Expenses recognised in 2Q15 (EUR 189 mln) increased by 2% on the previous quarter,
partly due to increased costs linked to the provision of certain services (professional
services in particular) commenced late with respect to the start of the year, in part caused
by project-related initiatives;
 net value adjustments to tangible and intangible assets were EUR 102 mln in the
first half of 2015, up 3.3% compared to the same period last year, with 2Q15 contributing
around EUR 54 mln (+11% compared to 1Q15), which is also impacted by greater
amortisation of intangible assets.

net impairment losses on loans recorded during the half totalled around EUR 984 mln,
down 18.5% compared to the same period last year. The contribution of the second quarter,
amounting to roughly EUR 516 mln (+10.2% compared to 1Q15) incorporates statistical
adjustments of EUR 120 mln relating to the recalibration of the Probability of Default (PD)
CONSOLIDATED INTERIM REPORT
23
Half Year Report on Operations
and Loss Given Default (LGD) parameters. The ratio of the discounted impairment losses on
loans YoY for the 1st half of 2015 over total customer loans reflects a provisioning rate of
168 bps, compared to 182 bps in the same period of the previous year;

Considering the net effects of the PPA (approx. EUR -21 mln) and the profit of noncontrolling interests (EUR -0.8 mln), the profit for the 1st half of 2015 amounts to around
EUR 194 mln.
Prospects and outlook on operations
The macroeconomic environment in which the Group operates, though slightly improving, is still
fragile and uncertainties continue to exist about possible future developments:
 the economy showed slight signs of recovery, but in general strong critical elements still persist for
productive activities, especially small and medium enterprises;
 the conditions of the labour market remain difficult with unemployment rates still very high that
penalise consumption and savings;
 the high credit risk on banks’ portfolios has not decreased while loan demand for investments
remains low.
The European Central Bank (ECB) informed the Bank about the results of Supervisory Review and
Evaluation Process (so called SREP), under which the ECB has requested that the Group will achieve,
from the date of completion of the capital increase (and keep in time) a minimum threshold, on
transitional base, the Common Equity Tier 1 ratio of 10.2%, the Total Capital Ratio of 10.9%,
compared to regulatory thresholds, to date in force, respectively of 7.0% and 10.5%.
The capital increase carried out by the Bank in June, which was fully subscribed for a total value of
EUR 2,993,160,608.10, allowed, beside the reinforcement of Group’s equity, also early repayment
before the original deadline of 2017 of the residual amount of the New Financial Instruments (equal to
EUR 1,071 mln).
With respect to the Capital Plan, aside from the completion of the share capital increase (and the
repayment of the remaining amount of the New Financial Instruments) and the sale to Poste Italiane
SPA of the equity investment held by BMPS in Anima Holding, after 30 June 2015 ordinary shares
were issued to the Ministry of Economy and Finance for interest accrued as at 31 December 2014 on
the New Financial Instruments. In addition to these actions, financial advisors are providing support in
the evaluation of strategic options available to BMPS, including a possible business combination with a
strategic or financial partner.
The Bank updated the Group’s multi-year projections, extended to 2018, confirming the recovery of
consolidated profitability through an increase in revenues and the gradual decline in the cost of credit,
and the consolidation of the capital and liquidity position. At the end of 2018, in fact, the ROE is
expected to be around 7%, with a CET1 Ratio of approx. 11.7%. In consideration of this situation, no
elements were found that could lead to going concern uncertainty.
With regard to the dispute brought by some of the Fruendo employees, out of the 70 legal actions
pending, the number of urgent pronouncements made in the Bank’s favour to date is 11, one first
instance judgment in favour by the Court of Rome and one judgment against by the Court of Siena.
The Bank will appeal against the latter.
Pending a broader and final framework, given the various pronouncements and cases still pending, the
most appropriate solutions will be assessed in concert with Fruendo and in line with the Business Plan
objectives. To date, and while the current situation remains unchanged, no economic impact on the
Bank can be forecast.
BANCA MONTE DEI PASCHI DI SIENA
Half Year Report on Operations
24
During 2015 the implementation of Directive 2014/49 (the Deposit Guarantee Schemes Directive DGSD), which establishes a single format for deposit guarantees, and Directive 2014/59 (the Bank
Recovery and Resolution Directive - BRRD), which establishes a single mechanism for settling bank
crises, must be completed. In full continuity with the existing national legal systems, the DGSD aims
to build a harmonised network of guarantee deposit systems. The most innovative profile regards the
new funding mechanism based mainly on ex-ante contributions. The BRRD has not yet been
implemented in Italy. In this regard, on 2 July 2015, the Parliament approved the European delegated
regulation containing the delegation to the government for its transposition. As the legal reference
framework is not yet complete, for the purpose of the preparation of this half-year report the
conditions required in the accounting standards for the recognition of contributions to the two funds
in the income statement are not yet met. Based on information currently available, the economic
impact expected for 2015 can in any event be estimated at approx. EUR 50 mln for both funds (EUR
65 mln from 2016 and until 2024).
CONSOLIDATED INTERIM REPORT
25
Half Year Report on Operations
Analysis of the key economic-financial indicators
Reclassified accounts
Income statement and balance sheet reclassification principles
From the 1st quarter of 2015 the structure of the reclassified consolidated income statement was
amended to introduce the concept of “pre-provision profit” in accordance with practices already
adopted by the major Italian banking groups and the European supervisory authorities. The new
structure of the reclassified income statement with operational criteria differs from that adopted by the
Group until 31 December 2014, as follows:
 inclusion among “Total revenues” (formerly “Income from banking and insurance business”) of
the “Other operating income (expense)” aggregate, until 31 December 2014 included in the item
“Net provisions for risks and charges and Other operating income (expense)”;
 “Net impairment losses on loans and financial receivables” was moved to operating expenses,
thereby introducing the concept of “Gross operating income” as the difference between ordinary
revenue and operating expenses;
 “net operating income” is therefore calculated as the difference between gross operating income
and net impairment losses on loans and financial receivables.
The comparative figures for the periods reported were re-aggregated on the basis of the new
reclassified Income Statement format with operational criteria.
Given the above, the reclassified income statement and balance sheet are provided below in
accordance with operational criteria, describing the reclassification action taken in the 1st half of 2015:
Income Statement
a) “Net profit (loss) from trading/valuation/repurchase of financial assets/liabilities” in the
reclassified income statement includes item 80 “Net profit (loss) from trading”, item 100 “Gains
(losses) on disposal/repurchase of loans, financial assets available for sale or held to maturity and
financial liabilities” and item 110 “Net profit (loss) from financial assets and liabilities designated at
fair value”. The item incorporates dividends earned on securities held in the Group’s securities and
derivatives portfolio (approx. EUR 5.4 mln).
b) “Dividends, similar income and gains (losses) on investments” in the reclassified income
statement incorporates item 70 “Dividends and similar income” and a portion of item 240 “Gains
(losses) on investments” (EUR 58 mln, corresponding to the share of profit and loss for the period
contributed by investments in the associate AXA, consolidated at equity). Dividends earned on
securities held in the securities portfolio, as outlined under the item above, have also been
eliminated from the aggregate.
c) The income statement item “Other operating income/expense” excludes the stamp duty and
customer expense recoveries restated under “Other administrative expenses”.
d) The income statement item “Personnel expenses” was reduced by approx. EUR 0.6 mln in
restructuring costs relating to a number of employment contract terminations. The amount was
reclassified under “Restructuring costs/One-off charges”.
e) “Other administrative expenses” in the reclassified income statement includes the portion of
stamp duty and client expense recovery (approx. EUR 180 mln) posted under item 220 “Other
operating expenses/income”.
f) “Net impairment losses (reversals) on financial assets and other transactions” includes items
130b “Financial assets available for sale”, 130c “Financial assets held to maturity” and 130d “Other
financial transactions”.
BANCA MONTE DEI PASCHI DI SIENA
Half Year Report on Operations
26
g) The income statement item “Restructuring costs/One-off charges” includes one-off charges of
approx. EUR 0.6 mln reclassified out of Personnel Expenses.
h) “Gains (losses) on investments” was cleared of components reclassified as “Dividends and
similar income and gains (losses) on investments”.
i) The effects of Purchase Price Allocation (PPA) posted to this specific account were reclassified out
of other items (in particular “Net interest income” for EUR 18.2 mln and
depreciation/amortisation for EUR 13.8 mln, net of a theoretical tax burden of approx. EUR 10.6 mln that is included in the related item).
Balance Sheet
j) “Tradable financial assets” on the assets side of the reclassified balance sheet includes item 20
“Financial assets held for trading”, item 30 “Financial assets designated at fair value” and item 40
“Financial assets available for sale”.
k) “Other assets” on the assets side of the reclassified balance sheet incorporates item 80 “Hedging
derivatives”, item 90 “Change in value of macro-hedged financial assets”, item 140 “Tax assets”,
item 150 “Non-current assets and groups of assets available for sale and discontinued operations”
and item 160 “Other assets”.
l) “Deposits from customers and debt securities issued” on the liabilities side of the reclassified
balance sheet includes item 20 “Deposits from customers”, item 30 “Debt securities issued” and
item 50 “Financial liabilities designated at fair value”.
m) “Other liabilities” on the liabilities side of the reclassified balance sheet incorporates item 60
“Hedging derivatives”, item 70 “Change in value of macro-hedged financial liabilities”, item 80
“Tax liabilities”, item 90 “Liabilities associated with non-current assets available for sale and
discontinued operations” and item 100 “Other liabilities”.
°°°°°°°
The reconciliation between the statutory accounts and the reclassified consolidated income
statement and balance sheet are enclosed in the “Annexes” section.
CONSOLIDATED INTERIM REPORT
27
Half Year Report on Operations
Reclassified Income Statement (Euro mln)
30/06/2015
30/06/2014
Change
Montepaschi Group
Net interest income
Abs.
%
1,171.7
972.0
199.8
20.6%
Net fee and commission income
927.1
871.0
56.1
6.4%
Income from banking activities
2,098.9
1,843.0
255.9
13.9%
66.3
49.5
16.9
34.1%
Net profit (loss) from trading
230.8
73.7
157.1
n.s.
Net profit (loss) from hedging
18.0
(13.3)
31.3
n.s.
Other operating income (expenses)
12.7
(16.3)
29.0
n.s.
490.2
25.3%
Dividends, similar income and gains (losses) on investments
Income from banking and insurance activities
2,426.8
1,936.5
Administrative expenses:
(1,208.6)
(1,232.4)
23.8
-1.9%
a) personnel expenses
(833.8)
(851.3)
17.4
-2.0%
b) other administrative expenses
(374.8)
(381.1)
6.3
-1.7%
(102.1)
(98.8)
(3.3)
3.3%
Operating expenses
(1,310.7)
(1,331.2)
Pre Provision Profit
1,116.0
Net impairment losses (reversals) on:
(982.4)
(984.0)
Net losses/reversal on impairment on property, plant and equipment / Net
adjustments to (recoveries on) intangible assets
20.5
-1.5%
510.7
84.4%
(1,226.9)
244.5
-19.9%
(1,208.0)
223.9
-18.5%
1.7
(19.0)
20.6
-108.8%
Net operating income
133.6
(621.6)
755.2
-121.5%
Net provisions for risks and charges
(48.6)
(82.0)
33.4
-40.8%
Gains (losses) on investments
125.1
175.3
(50.2)
-28.6%
a) loans
b) financial assets
605.3
Restructuring costs / One-off costs
(0.6)
(3.8)
3.3
Gains (losses) on disposal of investments
1.0
5.1
(4.1)
210.6
(527.0)
737.6
-140.0%
5.2
193.9
(188.7)
-97.3%
Profit (loss) after tax from continuing operations
215.8
(333.1)
549.0
n.s.
Net profit (loss) for the period including non-controlling interests
215.8
(333.1)
549.0
n.s.
(0.8)
(1.1)
0.3
-29.4%
Profit (loss) for the period before PPA , impairment on goodwill and
intangibles
215.0
(334.2)
549.3
n.s.
PPA (Purchase Price Allocation)
(21.4)
(18.8)
(2.6)
14.0%
Net profit (loss) for the period
193.6
(353.0)
546.6
n.s.
Profit (loss) before tax from continuing operations
Tax expense (recovery) on income from continuing operations
Net profit (loss) attributable to non-controlling interests
n.s.
-80.0%
BANCA MONTE DEI PASCHI DI SIENA
Half Year Report on Operations
28
Quarterly trend in reclassified Income Statement (Euro mln)
2015
Montepaschi Group
2Q
2014
1Q
4Q
3Q
2Q
1Q
Net interest income
559.9
611.9
610.9
580.6
526.2
445.8
Net fee and commission income
484.2
443.0
405.2
421.5
425.8
445.2
Income from banking activities
1,044.0
1,054.9
1,016.2
1,002.1
952.0
891.0
Dividends, similar income and gains (losses) on investments
42.0
24.3
38.8
32.6
23.8
25.7
Net profit (loss) from trading
59.1
171.8
41.1
147.3
28.6
45.1
Net profit (loss) from hedging
3.2
14.8
(4.7)
2.2
(8.7)
(4.6)
11.3
1.4
17.9
2.0
(17.7)
1.3
1,159.6
1,267.2
1,109.4
1,186.1
Other operating income (expenses)
Income from banking and insurance activities
978.0
958.6
Administrative expenses:
(603.7)
(604.9)
(658.2)
(623.8)
(620.4)
(611.9)
a) personnel expenses
(414.4)
(419.4)
(430.7)
(427.9)
(421.9)
(429.3)
b) other administrative expenses
(189.2)
(185.5)
(227.5)
(195.9)
(198.5)
(182.6)
(53.7)
(48.4)
(76.3)
(65.6)
(50.2)
(48.6)
Operating expenses
(657.4)
(653.3)
(734.5)
(689.5)
(670.7)
(660.5)
Pre Provision Profit
502.2
613.8
374.9
496.7
307.3
298.0
Net impairment losses (reversals) on:
(528.1)
(454.2)
(5,502.2)
(1,296.1)
(735.2)
(491.7)
(515.8)
(468.2)
(5,357.0)
(1,256.5)
(731.4)
(476.6)
Net losses/reversal on impairment on property, plant and equipment /
Net adjustments to (recoveries on) intangible assets
a) loans
b) financial assets
(12.3)
14.0
(145.2)
(39.6)
(3.8)
(15.2)
Net operating income
(26.0)
159.6
(5,127.3)
(799.4)
(427.9)
(193.7)
Net provisions for risks and charges
(18.8)
(29.8)
(57.2)
(37.3)
(27.5)
(54.5)
Gains (losses) on investments
124.9
0.2
(72.0)
(13.4)
133.4
41.9
(318.2)
Restructuring costs / One-off costs
(0.3)
(0.2)
(53.8)
(2.7)
(1.1)
Gains (losses) on disposal of investments
0.6
0.4
77.9
1.7
0.4
4.7
Profit (loss) before tax from continuing operations
80.5
130.2
(5,232.5)
(1,166.6)
(324.3)
(202.7)
Tax expense (recovery) on income from continuing operations
49.5
(44.3)
1,736.8
374.2
155.4
38.4
Profit (loss) after tax from continuing operations
130.0
85.9
(3,495.7)
(792.4)
(168.9)
(164.3)
Net profit (loss) for the period including non-controlling interests
130.0
85.9
(3,495.7)
(792.4)
(168.9)
(164.3)
0.6
4.9
(0.6)
(0.5)
(3,495.2)
(787.5)
(169.5)
(164.7)
Net profit (loss) attributable to non-controlling interests
Profit (loss) for the period before PPA , impairment on goodwill and
intangibles
PPA (Purchase Price Allocation)
Impairment on goodwill and intangibles
Net profit (loss) for the period
CONSOLIDATED INTERIM REPORT
(0.3)
129.6
(0.5)
85.4
(8.7)
(12.8)
(10.1)
(9.2)
(9.4)
(9.4)
-
-
(687.9)
-
-
-
121.0
72.6
(4,193.2)
(796.7)
(178.9)
(174.1)
29
Half Year Report on Operations
Reclassified balance sheet (Euro mln)
30/06/2015
Chg vs 31/12/14
31/12/2014
ASSETS
Cash and cash equivalents
abs.
%
822
1,007
(185)
-18.3%
117,436
119,676
(2,240)
-1.9%
Receivables :
a) Loans to customers
b) Loans to banks
Financial assets held for trading
8,327
7,723
604
7.8%
36,335
39,776
(3,441)
-8.7%
Financial assets held to maturity
Equity investments
Property, plant and equipment / Intangible assets
-
-
-
908
1,014
(106)
-10.5%
3,122
3,229
(106)
-3.3%
of which:
8
8
Other assets
a) goodwill
10,754
11,019
(265)
-2.4%
Total assets
177,705
183,444
(5,739)
-3.1%
30/06/2015
-
Chg vs 31/12/14
31/12/2014
LIABILITIES
abs.
%
Payables
a) Deposits from customers and securities issued
126,238
126,224
18,831
27,648
(8,817)
-31.9%
13,415
13,702
(287)
-2.1%
246
271
(25)
-9.2%
50
66
(16)
-23.8%
1,106
1,085
21
1.9%
Other liabilities
8,421
8,459
(38)
-0.4%
Group net equity
9,373
5,965
b) Deposits from banks
Financial liabilities held for trading
14
0.0%
Provisions for specific use
a) Provisions for staff severance indemnities
b) Pensions and other post retirement benefit obligations
c) Other provisions
a) Valuation reserves
c) Equity instruments carried at equity
d) Reserves
e) Share premium
f) Share capital
g) Treasury shares (-)
h) Net profit (loss) for the year
Non-controlling interests
Total Liabilities and Shareholders' Equity
(668)
1,085
(685)
3
(496)
4
2
8,759
12,484
3,408
17
(3)
57.1%
-2.5%
-100.0%
1,581
n.s.
2
(3,726)
-29.8%
-
(0)
0
-100.0%
194
(5,343)
5,537
-103.6%
24
24
1
2.9%
177,705
183,444
(5,739)
-3.1%
BANCA MONTE DEI PASCHI DI SIENA
Half Year Report on Operations
30
Reclassified Balance Sheet - Quarterly Trend (Euro mln)
30/06/2015
31/03/2015
31/12/2014
30/09/2014
30/06/2014
31/03/2014
ASSETS
Cash and cash equivalents
822
682
1,007
878
860
823
117,436
123,139
119,676
126,307
132,770
132,677
8,327
7,856
7,723
6,884
8,638
10,204
Financial assets held for trading
36,335
41,236
39,776
41,856
39,863
43,500
Financial assets held to maturity
-
-
-
-
-
-
908
947
1,014
1,001
952
960
3,122
3,139
3,229
3,934
3,971
4,004
Receivables :
a) Loans to customers
b) Loans to banks
Equity investments
Property, plant and equipment / Intangible assets
of which:
8
8
8
670
670
670
Other assets
a) goodwill
10,754
10,526
11,019
9,837
9,474
8,855
Total assets
177,705
187,525
183,444
190,697
196,528
201,022
30/06/2015
31/03/2015
31/12/2014
30/09/2014
30/06/2014
31/03/2014
LIABILITIES
Payables
a) Deposits from customers and securities issued
126,238
131,511
126,224
126,610
130,777
128,859
18,831
22,519
27,648
29,425
31,810
40,991
13,415
16,381
13,702
13,144
11,718
14,630
246
268
271
295
285
273
50
52
66
59
59
60
1,106
1,104
1,085
1,024
991
1,020
Other liabilities
8,421
9,195
8,459
9,777
9,811
8,905
Group net equity
9,373
6,471
5,965
10,340
11,048
6,251
b) Deposits from banks
Financial liabilities held for trading
Provisions for specific use
a) Provisions for staff severance indemnities
b) Pensions and other post retirement benefit obligations
c) Other provisions
a) Valuation reserves
c) Equity instruments carried at equity
d) Reserves
e) Share premium
f) Share capital
g) Treasury shares (-)
h) Net profit (loss) for the period
Non-controlling interests
Total Liabilities and Shareholders' Equity
CONSOLIDATED INTERIM REPORT
(668)
(253)
-
3
1,085
(5,838)
(685)
3
(496)
(549)
3
(451)
(634)
(788)
3
3
4,548
(274)
4
2
2
2
-
-
8,759
12,484
12,484
12,484
7,485
7,485
194
(0)
73
(0)
(0)
(0)
(0)
(5,343)
(1,150)
(353)
(174)
24
24
24
24
29
34
177,705
187,525
183,444
190,697
196,528
201,022
31
Half Year Report on Operations
Balance Sheet
Customer funding
As at 30 June 2015, the Group’s total
funding had reached approximately
EUR 235 bn (+0.9% compared to
31/12/2014), recording growth in
indirect funding (+2%) and stability in
the direct component. In the second
quarter, this aggregate recorded a
decrease in volumes (-3.4%), particularly
in direct funding and in assets under
custody, which was also impacted by
market trends.
Background
Since the start of the year, direct funding has been gradually adjusting, and in
May it reached a total value of EUR 2,054 bn.
The interest rates continued to drop. In particular, in May the interest rate on
bank deposits of households and non-financial companies was 0.67%, down
considerably on the 0.87% of the same period in 2014. The return on bonds was
3.06% (3.34% in 2014).
The net funding balance of asset management was over EUR 95 bn (+70%
compared to the first half of 2014), with overall capital reaching EUR 1,714 bn.
Customer Funding (Euro mln)
Chg % vs
Chg 31/12
%
%
30/06/2015
31/03/2015
31/12/2014
30/06/2014
Direct funding
126,238
131,511
126,224
130,777
-4.0%
0.0%
Indirect funding
108,286
111,175
106,140
107,215
-2.6%
2.0%
54,969
55,300
51,519
48,535
-0.6%
6.7%
25,033
24,424
21,994
20,048
2.5%
13.8%
1.2%
assets under management
Mutual Funds/Sicav
Individual Portfolio under Management
6,305
6,751
6,228
6,194
-6.6%
Insurance Products
23,631
24,125
23,297
22,293
-2.0%
1.4%
53,317
55,874
54,622
58,680
-4.6%
-2.4%
234,524
242,686
232,365
237,991
-3.4%
0.9%
assets under custody
Total funding
More specifically:

Direct funding, totalling EUR 126 bn, was stable compared to the end of 2014 and down 4%
compared to 31 March 2015, with the Group market share1 standing at 4.64% (figure updated as at
March 2015). In the second quarter of 2015, this aggregate posted a reduction in Repurchase
agreements (-16.6%), especially with institutional counterparties, and Bonds (-4.6%), as a result
of maturities reached. On the other hand, consumer and corporate funding were up, with further
recovery seen in Current Accounts (+2.3%, especially with corporate customers) and additional
development in Time deposits (+3.7%), supported by the marketing of the “Italian Deposit
Account” product. “Other forms of direct funding” were down due to the repayment of the New
Financial Instruments issued to the Ministry of Economy and Finance.
Compared to the same period last year, direct funding was substantially stable due to the effect of
the considerable rise in time deposits (+21.5%) and current accounts (+4.1%), which more than
offset the decrease in repurchase agreements with institutional counterparties (-17%).
1 Deposits
and repurchase agreements (excluding repurchase agreements with central counterparties) with customers resident in Italy, and
bonds net of repurchases and New Financial Instruments placed with Italian customers as first borrower - Source: Area Research & Investor
Relations.
BANCA MONTE DEI PASCHI DI SIENA
Half Year Report on Operations
32
The following table shows a breakdown of major types of direct funding from customers:
Direct funding (EUR mln)
Change Q/Q
Type of transaction
31/03/2015
31/12/2014
30/06/2014
Abs.
Change 31.12
%
Abs.
%
Current accounts
55,585
54,311
53,373
58,042
1,274
2.3%
2,213
4.1%
Time deposits
13,122
12,657
10,800
10,406
465
3.7%
2,322
21.5%
Reverse repurchase agreements
17,561
21,069
21,158
14,478
(3,507)
-16.6%
(3,597)
-17.0%
Bonds
31,200
32,690
31,406
36,396
(1,490)
-4.6%
(206)
-0.7%
8,769
10,784
9,487
11,455
(2,015)
-18.7%
(718)
-7.6%
126,238
131,511
126,224
130,777
(5,274)
-4.0%
14
0.0%
Other types of direct funding (**)
Total

30/06/2015
At the end of the half year the Group’s indirect funding volumes amounted to EUR 108 bn, down
2.6% on the balance as at 31 March 2015 (+2% growth on 31/12/2014). More specifically:
- Assets under management closed the first half with volumes totalling approx. EUR 55 bn, at
basically the same levels as at the end of March (-0.6%) and up 6.7% compared to the end of 2014.
A breakdown of the aggregate shows:
 Mutual Investment Funds and UCITS, amounting to approx. EUR 25 bn, up 2.5%
compared to 31/03/2015 (+13.8% over 31/12/2014), due to the net inflows in the quarter of
approx. EUR 1.3 bn, partly offset by a negative market effect.
 Wealth management, totalling approximately EUR 6 bn, down on the end of March 2015 by
6.6% (volumes up 1.2% compared to 31/12/2014);
 the insurance component of approx. EUR 24 bn was down 2% compared to 31/03/2015
(+1.4% over 31/12/2014), due primarily to market dynamics. In the second quarter, insurance
premiums collected totalled around EUR 1.8 bn, supported in particular by Unit Linked
products, remaining in line with results achieved last quarter.
Assets Under Management breakdown
Funds - 45,5%
Individual portfolios under
management - 11,5%
Insurance Products - 43%
- Assets under custody, totalling roughly EUR 53 bn, reduced by 4.6% compared to 31 March 2015
(-2.4% compared to 31/12/2014), especially as a result of the shift of customer investments towards
asset management products and the negative impact of market trends, particularly with regard to
government securities.
CONSOLIDATED INTERIM REPORT
33
Half Year Report on Operations
Loans to customers
As at 30 June 2015, the Group’s loans to
customers amounted to roughly EUR
117 bn, down 4.6% with respect to 31
March 2015 and 1.9% with respect to the
end of 2014.
The reduction in the second quarter was
triggered especially by a decrease of
roughly EUR 3 bn (-39.4% compared to
31/03/2015) in repurchase agreements,
to which temporary cash flows had been
channelled, and of EUR 1.8 bn (-6.5%
QoQ) in other loans.
Background
Positive signs arrive from the new bank loan disbursements: business loans rose
16.2% YoY in the first five months of 2015. Loans disbursed for property
purchases recorded an annual increase of over 29.5%, and the flow of new
consumer credit transactions was up by +14.9% YoY. In May the amounts of
loans to households and businesses, however, still show a YoY change of -1.7%,
recording some improvement compared to previous months. From the end of
2007 - before the start of the crisis - to date, loans to businesses fell from EUR
814 bn to EUR 802 bn while on the other hand loans to households rose by
29.1% during the same period.
The interest rates have continued to drop, also due to the ECB’s expansive
policies. In May, the interest rate on new home purchase loans increased slightly
to 2.65% (2.83% at the end of 2014).
Credit risk remains high, continuing largely to characterise the business loans
segment. In May 2015, gross doubtful loans recorded an increase of EUR 10 bn
compared to December 2014. Also in May, the net doubtful loans/total loans
ratio rose to 10.1% (8.9% one year prior; 3.9% at the end of 2007). Net doubtful
loans, on the other hand, saw an inversion of the upward trend, in the same
month recording a 1.3% decrease on the peak figures of November 2014.
The comparison with 31 December 2014
shows a drop in volumes of EUR 2.2 bn
(-1.9%), especially on other loans (-6.7%
YoY), current accounts (-6.5%) and
mortgages (-1.5%), whilst NPLs increased by 2.4% although they decreased compared to the previous
quarter.
The Group’s market share, calculated net of repurchase agreements with institutional counterparties,
stood at 7.03% (last available figure from March 2015), basically stable compared to December 2014.
Loans to customers (EUR m ln)
Change Q/Q
Type of transaction
Current accounts
30/06/2015 31/03/2015 31/12/2014
30/06/2014
Abs.
Change 31.12
%
Abs.
%
8,179
8,488
8,745
10,906
(309)
-3.6%
(567)
-6.5%
Mortgages
54,511
55,031
55,328
61,212
(521)
-0.9%
(817)
-1.5%
Other forms of lending
25,461
27,219
27,276
29,112
(1,758)
-6.5%
(1,815)
-6.7%
Repurchase agreements
4,649
7,667
4,142
7,664
(3,018)
-39.4%
507
12.2%
938
961
1,042
1,434
(23)
-2.4%
(104)
-9.9%
23,699
23,773
23,143
22,442
(74)
-0.3%
556
2.4%
117,436
123,139
119,676
132,770
(5,703)
-4.6%
(2,240)
-1.9%
Securities lending
Non performing loans
Total
The aggregate was supported during the half by new disbursements in the medium-long term segment,
up by more than 100% (EUR +2.4 bn), which regarded households (EUR +0.9 bn) as well as
businesses (EUR +1.3 bn). This trend made it possible to slow down the decline in lending to
households and businesses, but it was not enough to replace maturing stocks (values that also include
the planned run-off on the merged company Consum.it).
Non-performing loans
The new concept of non-performing loans adopted by the Bank of Italy in the 7th Update to Circular
272 of 20 January 2015 (Accounting Matrix) became applicable from the 1st quarter of 2015, following
implementation of the new definitions for Non-performing Exposures (NPE) introduced by the
implementing technical standards relating to the consolidated and harmonised regulatory statistical
reports, defined by the European Banking Authority and approved by the European Commission on 9
January 2015. Consequently, the non-performing loans were broken down in the categories doubtful
loans, unlikely to pay and non-performing past due exposures, with repeal of the concepts of
substandard and restructured exposures, which are included in the aggregate of unlikely to pay, with
the exception of objective substandard loans, which are categorised as non-performing past due.
As at 30 June 2015, the Group’s net exposure to non-performing loans totalled EUR 24 bn, an
increase of 2.4% compared to 31 December 2014, but down since the end of the first quarter (-0.3%).
BANCA MONTE DEI PASCHI DI SIENA
Half Year Report on Operations
34
Within this aggregate, doubtful loans increased during the quarter (+3.8%), while unlikely to pay and
non-performing past due exposures decreased (by 1.6% and 7.2%, respectively).
Loans to customers
Risk category - Net book values
30/06/2015
31/03/2015 31/12/2014 30/06/2014 weight %
(EUR mln)
A) Non performing loans
weight %
weight %
30/06/2015 31/03/2015 30/06/2014
Change Q/Q
Ass.
%
Change 31.12
Ass.
%
23,699
23,773
23,143
22,442
20.2
19.3
16.9
-73
-0.3%
556
2.4%
a1) Doubtful loans
9,048
8,718
8,445
9,584
7.7
7.1
7.2
330
3.8%
603
7.1%
a2) Unlikely to pay
12,037
12,238
11,644
7,089
10.2
9.9
5.3
-201
-1.6%
392
3.4%
2,614
2,817
3,053
5,770
2.2
2.3
4.3
-203
-7.2%
-439
-14.4%
a3) Net past due and overdue exposures
B) Performing loans
93,737
99,367
96,533
110,328
79.8
80.7
83.1
-5,629
-5.7%
-2,796
-2.9%
Total customer loans
117,436
123,139
119,676
132,770
100.0
100.0
100.0
-5,703
-4.6%
-2,240
-1.9%
During the first few months of 2015, the Supervisory Authority conducted review of the Group’s
credit exposures relating to the Residential Real Estate (EUR 29.8 bn), Institutional (EUR 1.7 bn),
Project Finance (EUR 1.8 bn) and Shipping (EUR 1.3 bn) portfolios, totalling approx. 23% of loans to
customers and 8% of their non-performing total. These portfolios were excluded from the previous
review conducted in 2014. Though the review is essentially complete, the Bank’s management have
been presented only with a preliminary estimate of the impact. The official notification of the final
results will therefore be issued at a later date.
However, in the Half-Year Report as at 30 June 2015 the effects known to date of the Credit File
Review have essentially been included for approx. EUR 41 mln. With regard to the CFR statistical and
collective projections, given the non-accounting nature of the related results, in a manner similar to the
assessment made at the time of the 2014 AQR, the Bank will later assess their significance for
accounting purposes. In any event, based on the information provided informally, these results are of
little relevance.
As at 30 June 2015, coverage of non-performing loans stood at 48.8%, a reduction of 21 bps compared
to 31 March 2015. Within this aggregate, the coverage of doubtful loans totals 64.3%, down 115 bps
compared to the previous quarter. However, this figure has been affected by the sale of the portfolio
of doubtful loans of Consum.it, which was characterised by a high degree of coverage.
With respect to unlikely to pay positions, coverage at the end of the half equals 31.2% (-39 bps
compared to 31/3/2015), while that of non-performing past due exposures rose to 22.8% from 18.1%
at the end of March 2015.
Coverage ratios
Var. Q/Q
Var. 31.12
30/06/2015
31/03/2015
31/12/2014
30/06/2014
Ass.
Ass.
Provisions for Impaired Loans / Gross Impaired Loans
48.8%
49.0%
48.9%
41.6%
-0.21%
-0.19%
Provisions for NPLs / gross NPLs
64.3%
65.5%
65.3%
58.2%
-1.15%
-0.97%
Provisions for Unlikely To Pay Loans / Gross Unlikely To Pay
Loans
31.2%
31.6%
32.3%
23.3%
-0.39%
-1.07%
Provisions for Past Due Positions / Gross Past Due Positions
22.8%
18.1%
19.6%
7.8%
4.69%
3.24%
CONSOLIDATED INTERIM REPORT
35
Half Year Report on Operations
The table below reports the figures for the Group’s major companies, within which the Bank Banca
Monte dei Paschi di Siena shows a provisioning to doubtful loans ratio of 67.5% vs. 50.9% for MPS
Capital Services, which specialises in medium-long term loans directly supported by collateral.
Npls and Net Substandard loans by business unit
Risk category - Net values at 31/03/2015
Group
MPS Capital
Services
BMPS
MPS Leasing &
Factoring
(EUR mln)
Net doubtful loans
9,048
6,314
2,175
516
7.7%
6.2%
20.1%
9.4%
"loan loss provisions" / "gross doubtful loans"
64.3%
67.5%
50.9%
62.4%
Unlikely to pay
% of total customer loans
12,037
8,978
2,451
591
% of total customer loans
10.2%
8.9%
22.7%
10.7%
"Unlikely to pay" / "gross substandard loans"
31.2%
31.7%
26.1%
40.4%
Provisions for Past Due Positions
2,614
2,238
229
122
% of total customer loans
"Provisions for Past Due Positions" / "gross substandard
loans"
2.2%
2.2%
2.1%
2.2%
22.8%
23.2%
16.5%
29.8%
With regard to performing loans, coverage continued to stand at roughly 0.9%, in line with the end of
2014.
The Group’s securities and derivatives portfolio
As at 30 June 2015, the Group’s securities and derivatives portfolio amounts to EUR 31 bn, down
approx. EUR 3 bn compared to 31 March 2015 due to the reduction in the Held-for-Trading portfolio
(EUR -1.5 bn) resulting from activities of the subsidiary MPS Capital Services, and the Available-forSale portfolio (EUR -1.4 bn) due in particular to the market trends of government securities, the effect
of which is partially offset by hedging instrument trends. The bonds portfolio recognised under L&R
remained substantially stable.
Portfolio of treasury securities and derivatives (exact year-end figures in EUR mln)
MONTEPASCHI GROUP
Type of portfolio
30/06/2015
31/03/2015
31/12/2014
30/06/2014
Chg Q/Q
Abs.
%
Chg 31.12
Abs.
%
Held For Trading (HFT) 1
8,748
10,229
8,244
8,578
(1,481)
-14.5%
504
6.1%
Available For Sale (AFS) 2
19,980
21,425
22,848
23,031
(1,445)
-6.7%
(2,868)
-12.6%
Loans & Receivable (L&R) 3
Total
2,073
2,147
2,191
2,459
(74)
-3.4%
(118)
-5.4%
30,801
33,801
33,283
34,067
(3,000)
-8.9%
(2,482)
-7.5%
(1) "Financial assets held for trading" excluding "Loans" and net of the value of derivatives posted to "Financial liabilities held for trading". The aggregate is not
net of uncovered short positions classified under "Financial liabilities held for trading".
(2) "Financial assets held for sale" excluding "Loans" including equity investments.
(3) Securities classified under "Loans & Receivables" posted to "Loans to customers" and "Loans to banks".
The Group’s Regulatory Trading Book
In the first half of 2015, market risks of the Group’s Regulatory Trading Book (RTB) measured as VaR
experienced an increasing trend, especially in the last two months, although they remained at generally
limited levels and, on average, lower than last year. As at 30/06/2015, the VaR came to EUR 7.11 mln,
up by approximately EUR 3.5 mln compared to the end of 2014. VaR trends were especially influenced
by the Interest Rate and Credit Spread segments of the subsidiary MPS Capital Services. The Bank’s
BANCA MONTE DEI PASCHI DI SIENA
Half Year Report on Operations
36
contribution to the total VaR was up in the second quarter of 2015 primarily with respect to the
Interest Rate segment. This increase was caused by the significant rise in interest rates at the end of the
quarter, which was fully reflected in VaR measurements through the daily updating of the internal
historical simulation model parameters.
VaR breakdown
MPS Group: Trading Book
VaR by Bank as at 30 06 2015
MPS Group: Trading Book
VaR by Risk Factor as at 30 06 2015
CS VaR; 34.8%
MPS Capital Services 73.2%
EQ VaR; 32.6%
IR VaR; 28.3%
MPS Bank 26.8%
FX VaR; 2.8%
CO VaR; 1.4%
MPSCS accounted for 73.25% and the Bank for 26.8% of overall risk.
CONSOLIDATED INTERIM REPORT
34.8% of the Group’s portfolio was allocated to risk factors such as Credit Spread
(CS VaR), 32.6% was absorbed by equity risk factors (EQ VaR), 28.3% was
absorbed by interest rate risk factors (IR VaR), 1.4% commodity risk factors
(CO VaR) and the remaining 2.8% by foreign exchange risk factors (FX VaR).
37
Half Year Report on Operations
VaR trendline
During the first half of 2015, the Group’s VaR in the Regulatory Trading Book ranged between a low
of EUR 1.94 mln recorded on 23 January 2015 and a high of EUR 8.03 mln on 22 June 2015, with an
average value registered of EUR 4.28 mln. The Group’s Regulatory Trading Book VaR stood at EUR
7.11 mln as at 30 June 2015.
g MPS G roup: Trading Book
VaR 99% 1 day in EUR/mln
E nd of P eriod
Min
Max
Average
VaR
7.11
1.94
8.03
4.28
Date
30/06/2015
23/01/2015
22/06/2015
Interbank position
As at 30 June 2015, the Group’s net interbank position stood at EUR 10.5 bn in funding, an
improvement of EUR 4.2 bn compared to the net balance as at 31/03/2015 and EUR 9.4 bn with
respect to the end of 2014. In the second quarter of 2015, there was a reduction in the net exposure to
the ECB of EUR 3.3 bn decrease of MRO auctions and increase in the use of Targeted Long Term
Refinancing Operations) due to the share capital increase net of the NFI repayment and an additional
contribution of commercial liquidity during the quarter.
Interbank balances (end-of-period; EUR mln)
Change Q/Q
30/06/2015 31/03/2015 31/12/2014
Loans to banks
Deposits from banks
Net position
8,327
7,856
7,723
30/06/2014
Abs.
Change 31.12
%
8,638
472
Abs.
%
6.0%
604
7.8%
18,831
22,519
27,648
31,810
(3,688)
-16.4%
(8,817)
-31.9%
(10,504)
(14,664)
(19,925)
(23,172)
4,160
-28.4%
9,421
-47.3%
As at 30 June 2015 the operational liquidity position showed an unencumbered Counterbalancing
Capacity of approx. EUR 20 bn, up by approximately EUR 2.4 bn compared to the end of March
2015.
Shareholders’ equity
As at 30 June 2015, the Group’s shareholders’ equity and non-controlling interests came to EUR
9.4 bn (EUR +3.4 bn compared to 31/12/14), an increase of around EUR 3 bn compared to the first
quarter of 2015 due to the share capital increase carried out by Banca Monte dei Paschi di Siena in
June. In particular, the item Share Capital decreased from EUR 12.5 bn at the end of March to the
current EUR 8.8 bn (EUR -3.7 bn) due to the share capital increase noted above (EUR +3 bn) and the
coverage of the loss for the year 2014 and losses carried forward from previous years (totalling around
EUR -7.3 bn) allocated under Reserves until 31 March 2015.
BANCA MONTE DEI PASCHI DI SIENA
Half Year Report on Operations
38
Reclassified Balance Sheet (Euro mln)
30/06/2015
31/03/2015
31/12/2014
Chg Q/Q
30/06/2014
ASSETS
Abs.
Group net equity
a) Valuation reserves
c) Equity instruments carried at equity
d) Reserves (***)
e) Share premium
f) Share capital
g) Treasury shares (-)
h) Net profit (loss) for the period
Non-controlling interests
Total Liabilities and Shareholders' Equity
Chg vs 31/12
%
Abs.
%
9,373
6,471
5,965
11,048
2,902
44.8%
3,408
(668)
(253)
(685)
(634)
(416)
n.s.
17
57.1%
-2.5%
-
3
3
3
(3)
-100.0%
(3)
-100.0%
1,085
(5,838)
(496)
4,548
6,924
-118.6%
1,581
n.s.
4
2
2
-
2
72.7%
2
72.7%
8,759
12,484
12,484
7,485
(3,726)
-29.8%
(3,726)
-29.8%
-
(0)
(0)
(0)
0
-100.0%
0
-100.0%
194
73
(5,343)
(353)
121
n.s.
5,537
-103.6%
24
24
24
29
0
0.9%
1
2.9%
9,397
6,495
5,989
11,077
2,902
44.7%
3,409
56.9%
Capital adequacy
Regulatory capital and requirements
On 10 February 2015 the ECB informed the Bank of the results of the Supervisory Review and
Evaluation Process (SREP), based on which the Montepaschi Group was asked, with effect from
completion of the share capital increase submitted to the extraordinary Shareholders’ Meeting for
approval, to reach and maintain in the long term a minimum limit, based on transitional measures, in
the Common Equity Tier 1 Ratio of 10.2% and a Total Capital Ratio of 10.9%, compared to the
regulatory limits now in force of 7.0% and 10.5%, respectively.
Also with regard to the SREP, it should be remembered that specifically with reference to the
“Alexandria” transaction with the counterparty Nomura, the ECB - as an exception to the
“neutralisation” rule for the AFS reserve of government securities envisaged until endorsement of
IFRS 9 - ordered MPS to include the associated negative AFS reserve in the own funds calculation
already starting from 31 December 2014. For additional details on this transaction, please refer to the
relative paragraph below.
The capital adequacy figures illustrated in this report were all calculated by including the positive effect
of profit for the period.
As at 30 June 2015 the Group’s level of capital was as indicated in the following table:
30/06/2015
31/03/2015
31/12/2014
Abs. Change
vs 31/12/14
% Change
vs 31/12/14
Common Equity Tier 1
8,287
6,217
6,608
1,679
25.4%
Tier 1
8,844
6,687
6,608
2,237
33.9%
Tier 2
2,799
2,935
3,293
-494
-15.0%
Total Capital
11,643
9,622
9,900
1,743
17.6%
Risk Weighted Assets
75,386
76,361
76,220
-834
-1.1%
Common Equity Tier 1 Ratio
11.0%
8.1%
8.7%
2.3%
n.s.
Tier 1 Ratio
11.7%
8.8%
8.7%
3.1%
n.s.
Total Capital Ratio
15.4%
12.6%
13.0%
2.5%
n.s.
Capital Adequacy
(eur million)
The increase of EUR 1,679 mln in the CET1 since 31 December 2014 was due, on the positive side,
primarily to:
- the share capital increase carried out in the second quarter of 2015;
- the profit generated during the period;
- the improvement in the negative AFS reserve associated with the “Alexandria” transaction with the
counterparty Nomura;
and on the negative side to:
- the repayment of the last tranche of the New Financial Instruments;
CONSOLIDATED INTERIM REPORT
39
Half Year Report on Operations
- the increase in deductions linked to DTAs, equity investments and tax losses due to the increased
phasing-in (from 20% in 2014 to 40% in 2015);
The surplus expected loss compared to the impairment losses on loans remains substantially neutral in
terms of deductions from regulatory capital.
Tier2 decreased mainly due to the effect of regulatory amortisation of subordinated securities as
envisaged in Basel 3. Overall, Total Capital was up by around EUR 1,743 mln.
RWA was down on the whole (EUR -834 mln) due to offsetting effects of the increase in credit,
counterparty and market risk and the reduction in transformable DTAs weighted at 100%2.
In light of the above, as at 30 June 2015, the capital ratios are up compared to 31 December 2014 and
have surpassed the minimum thresholds required by the Supervisory Authority as part of the SREP.
Including in the calculation of capital ratios the effects of the issue of ordinary shares to the Ministry
of Economy and Finance (for interest accrued as at 31 December 2014 on the New Financial
Instruments), the pro forma Common Equity Tier 1 ratio would be 11.3%.
As at 30 June 2015, the total exposure to Nomura, net of guarantees received, was EUR 3,185 mln,
lower by an amount of EUR 818 mln compared to 31 December 2014, given the decrease in
counterparty risk on the Long Term Repo transaction and the collateral paid against the derivative and
repurchase agreement operations (EUR -795 mln). That decrease was caused by the performance of
market parameters underlying the transactions in place and the settlement of some of the exposure not
associated with the “Alexandria” transaction (EUR -23 mln). As at 30 June 2015, this reduced exposure
translated into a ratio of 27.36% of Own Funds, significantly lower than 34.68% as at 31 December
2014, although still higher than the regulatory limit of 25%.
As mentioned above, with regard to the position in question, already as at 31 December 2014 MPS
included the negative AFS reserve from the “Alexandria” transaction (EUR -345 mln as at 30 June
2015) in the own funds calculation as the net effect of the gain on the security underlying the repo
transaction and the loss on the hedging asset swap.
In relation to this specific treatment, MPS considers significant the guidance expressed by the EBA,
which in responding to a query as part of the public Q&A recently confirmed (on 6 March 2015) that
the value of exposures must be consistent with the treatment of gains/losses in own funds, stating:
“However, in case filters on unrealised gains or losses in relation to such assets exist...., the exposure value of such assets
will need to be adjusted by the amount of the corresponding unrealised losses or gains which have been filtered in or out
from own funds respectively....” - Single Rulebook Q&A, 2014_716).
Given the prudential treatment requested by the ECB for this exposure and considering the symmetry
rule pronounced by the EBA, it is considered that the underlying exposure must consider a level of fair
value that takes into account all the components that generate the effects included in the regulatory
capital. In view of this, the value of the exposure to Nomura in relation to the Long Term Repo
transaction should reduce by around EUR 986 mln, consistent with the real risk profile of the
transaction.
As a result of this treatment, the exposure to Nomura would drop to approx. EUR 2,200 mln, which is
fully within regulatory limits.
On the forecast effects of the EBA interpretation, MPS has begun specific discussions with the
relevant ECB departments and, pending receipt of the final guidance, has decided at present not to
reflect them in the financial reports and regulatory data as at 30 June 2015.
Considering the share capital increase in favour of the Ministry of Economy and Finance and the
further settlements of Nomura positions not associated with the Alexandria transaction, completed in
July, the pro forma exposure as at 30 June 2015 is 24.33%, i.e. lower than the regulatory limit.
Income statement
2
In April 2015, around EUR -2 bn of transformable DTAs were converted into tax credits.
BANCA MONTE DEI PASCHI DI SIENA
Half Year Report on Operations
40
Trends in revenues
As at 30 June 2015, the Group’s Total Revenues stood at approximately EUR 2,427 mln (+25.3% on
the 1st half of 2014) with 2Q15 contributing roughly EUR 1,160 mln, down 8.5% on the previous
quarter.
Financial and insurance income (EUR mln)
Chg Q/Q
30/06/2015
Net interest income
2Q2015
1Q2015
30/06/2014
Abs.
Chg Y/Y
%
Abs.
%
1,171.7
559.9
611.9
972.0
(52.0)
-8.5%
199.8
20.6%
Net fee and commission income
927.1
484.2
443.0
871.0
41.2
9.3%
56.1
6.4%
Income from banking activities
2,098.9
1,044.0
1,054.9
1,843.0
(10.8)
-1.0%
255.9
13.9%
66.3
42.0
24.3
49.5
17.7
72.8%
16.9
34.1%
Net trading income (loss) / valuation of financial assets
230.8
59.1
171.8
73.7
(112.7)
-65.6%
157.1
n.s.
net profit (loss) from hedging
18.0
3.2
14.8
(13.3)
(11.7)
-78.6%
31.3
n.s.
Other operating income (expenses)
12.7
11.3
1.4
(16.3)
9.9
n.s.
29.0
n.s.
2,426.8
1,159.6
1,267.2
Dividends, similar income and gains (losses) on equity investments
Financial and insurance income
1,936.5
(107.6)
-8.5%
490.2
25.3%
A closer look at the aggregate reveals the following:
 at the end of the half year net interest income stood at EUR 1,172 mln, up 20.6% on the same
period last year, which was impacted, for around EUR 147 mln, by the recalculated repayment
value of the NFIs. Excluding this component, net interest income would have recorded annual
growth of 4.7%. This trend was caused, on the positive side, by the lower average amount of the
NFIs (average stock in the first six months of 2014 was around EUR 4 bn, compared to around
EUR 1 bn in the first half of 2015) and the improvement in the funding/lending spread (positively
impacted by the reduction in the cost of funding), and on the negative side by the drop in average
interest-bearing loans and the declining returns of the securities portfolio due to optimisation
initiatives.
The second quarter contributed around EUR 560 mln, down by EUR 52 mln compared to the
previous quarter (-8.5%), primarily in relation to the following aspects:
 a decrease in lending volumes with business customers and the simultaneous reduction in
market parameters;
 a reduction in the return of the Available for Sale securities portfolio due to sale and repurchase
policies aimed at taking best advantage of market opportunities;
 reduced exposure to the ECB, which has been gradually replaced with commercial liquidity.

net fee and commission income, standing at EUR 927 mln, was up 6.4% YoY (EUR +56.1
mln) due to the increase in income from asset management supported by placements and
continuing operations. The aggregate registered a result of approx. EUR 484 mln in the 2nd
quarter, which was up with respect to the previous quarter (+9.3% QoQ) due to income from
asset management and the increase in other services, for example payment and consumer finance
services.
 net profit (loss) from trading-valuation-repurchase of financial assets/liabilities came to
approximately EUR 231 mln as at 30 June 2015, up from the same period of 2014 (approx. EUR
+157 mln). A closer look at the result reveals that:
 Net profit (loss) from trading showed a positive balance of approx. EUR 116 mln, almost
entirely owing to income from the subsidiary MPS Capital Services, up compared to the
same period of the previous year (EUR +26 mln; +28.8%);
 Disposal/repurchase of loans and available-for-sale financial assets and liabilities
stood at approx. EUR 133 mln, impacted mainly by the disposal of AFS securities and equity
CONSOLIDATED INTERIM REPORT
41
Half Year Report on Operations
investments. In the second quarter, this aggregate was also impacted by the sale of the nonperforming loan portfolio of the merged company Consum.it, totalling around EUR -25 mln;
 Net profit (loss) from financial assets and liabilities designated at fair value showed a
negative balance of EUR 18.1 mln (against EUR -57.3 mln as at 30/06/2014), mainly due to
the higher value of certain bond issues placed with Retail and Institutional customers due to
Banca Monte dei Paschi di Siena’s improved creditworthiness as issuer.
With regard to the quarterly analysis, the aggregate shows a contribution of EUR 59 mln, down by
65.6% on the first quarter of 2015, mainly connected with sales of AFS securities.
Net trading income (loss) / valuation of financial assets (EUR mln)
Chg Q/Q
30/06/2015
2Q2015
1Q2015
30/06/2014
Chg Y/Y
Abs.
%
Abs.
%
Net profit (loss) from trading
116.3
49.5
66.8
90.3
(17.3)
-25.9%
26.0
28.8%
Gains (losses) on disposal/repurchase of loans, financial assets available for sale
and financial liabilities
132.7
10.4
122.2
40.6
(111.8)
-91.5%
92.0
n.s.
Net profit (loss) from financial assets and liabilities designated at fair value
(18.1)
(0.8)
(17.3)
(57.3)
16.4
-95.1%
39.2
-68.4%
Net profit (loss) from trading
230.8
59.1
171.8
73.7
(112.7)
-65.6%
157.1
n.s.
The following items make up the Total Revenue:
 Dividends, similar income and gains (losses) on investments: the result of approx. EUR 66
mln (around EUR 49.5 mln in the first half of 2014), includes the contribution from AXA-MPS
(consolidated using the equity method). The aggregate increased by EUR 17.7 mln QoQ;
 Net profit from hedging: positive balance of EUR 18 mln (negative balance of EUR 13.3 mln as
at 30/06/14).
 Other operating income/expenses (net of recovery expenses reclassified to Other
Administrative Expenses) in the positive amount of EUR 13 mln (EUR -16.3 mln in the first six
months of 2014), with the second quarter contributing around EUR 11 mln, up compared to
1Q2015 especially due to lower legal expenses.
Operating costs: operating expenses
In the first half of 2015, the Group’s operating expenses totalled approx. EUR 1,311 mln (-1.5%
from the same period of the previous year) with an impact by the 2nd quarter of EUR 657 mln,
basically in line with 1Q2015 (+0.6%).
Operating expenses (EUR mln)
Chg Q/Q
30/06/2015
2Q2015
1Q2015
30/06/2014
Abs.
Chg Y/Y
%
Abs.
%
Personnel expenses
833.8
414.4
419.4
851.3
(5.0)
-1.2%
(17.4)
-2.0%
Other administrative expenses
374.8
189.2
185.5
381.1
3.7
2.0%
(6.3)
-1.7%
1,208.6
603.7
604.9
1,232.4
(1.2)
-0.2%
(23.8)
-1.9%
53.7
48.4
98.8
5.3
11.0%
3.3
3.3%
657.4
653.3
1,331.2
4.1
0.6%
(20.5)
-1.5%
Administrative expenses
Net losses/reversal on impairment on property, plant and equipment / Net
adjustments to (recoveries on) intangible assets
Operating expenses
102.1
1,310.7
More specifically:
 administrative expenses were EUR 1,209 mln (-1.9% compared to 30/06/2014) of which EUR
604 mln referring to the 2nd quarter of 2015, which was confirmed at the same level as the
previous quarter (-0.2% QoQ). A breakdown of the aggregate shows:
BANCA MONTE DEI PASCHI DI SIENA
Half Year Report on Operations
42
- personnel expenses, amounting to approx. EUR 834 mln, were down on an annual basis by 2%
and against the previous quarter (-1.2%), mainly due to headcount reduction carried out at the end
of 2014 and the beginning of 2015, which overall more than offset increased expenses associated
with the 2012 National Collective Labour Agreement.
- other administrative expenses totalled EUR 375 mln at the end of the first half of 2015, down
1.7% compared to the same period last year due to structural cutbacks in spending, particularly
affecting the IT, real estate, outsourcing and sponsorship segments. Expenses recognised in 2Q15
(EUR 189 mln) increased by 2% on the previous quarter, partly due to increased costs linked to
the provision of certain services (professional services in particular) commenced late with respect
to the start of the year, in part caused by project-related initiatives.
 net value adjustments to tangible and intangible assets were EUR 102 mln in the first half of
2015, up 3.3% compared to the same period of last year, with 2Q15 contributing around EUR 54
mln (+11% compared to 1Q15), which is also impacted by greater amortisation of intangible assets.
On the back of these factors, the Group’s Gross operating income totalled approximately EUR
1,116 mln (EUR 605.3 mln in the first half of 2014). The cost/income ratio3 was 54% (68.7% in the
first half of 2014).
Cost of credit: net impairment losses (reversals) on loans and financial assets
In the first six months of 2015, the Group recognised Net impairment losses on loans totalling
around EUR 984 mln, down 18.5% compared to the same period last year. The contribution of the
second quarter, amounting to roughly EUR 516 mln (+10.2% compared to 1Q15) incorporates
statistical adjustments of EUR 120 mln relating to the recalibration of the Probability of Default (PD)
and Loss Given Default (LGD) parameters.
The ratio of the discounted impairment losses on loans YoY for the 1st half of 2015 over total
customer loans reflects a provisioning rate of 168 bps, compared to 182 bps in the same period of
the previous year.
Net impairment losses on loans: quarterly trend
5,357
1,256
516
468
2Q15
1Q15
4Q14
3Q14
731
2Q14
EUR mln
The balance of net impairment losses (reversals) on financial assets and other transactions was
positive, at around EUR 1.7 mln (the value was EUR -19 mln in the first half of 2014, inclusive of
the write-down on the equity investment in Istituto per il Credito Sportivo), with a second-quarter
impact of EUR -12.3 mln, inclusive of amounts recognised for unsecured credit exposures and AFS
positions.
3
The cost/income ratio is expressed as the ratio between operating expenses and total revenues. It should be remembered that in the
interim report as at 31 March 2015 the Group adopted a new format for the reclassified income statement, which also includes “Other
operating income/expenses” under Total revenue
CONSOLIDATED INTERIM REPORT
43
Half Year Report on Operations
Consequently, the Group’s net operating income totalled approximately EUR 134 mln (roughly
EUR -622 mln in the first half of 2014).
Non-operating income, tax and net profit for the period
The result for the period included:
 Net provisions for risks and charges in the amount of EUR -49 mln (-40.8% YoY) with the
second quarter accounting for approx. EUR -19 mln, marking an improvement over 1Q15;
 Gains (losses) on investments, amounting to around EUR 125 mln (EUR 175 mln recorded in
the first half of 2014), of which EUR 120.1 mln relating to the result of the sale of the 10.3% equity
investment held in the investee Anima Holding S.p.A. to Poste Italiane S.p.A. in June 2015;
 Restructuring costs/One-off charges of approx. EUR -0.6 mln (of which EUR -0.3 mln
accounted for in the second quarter of 2015) relating to a number of terminated employment
contracts. The balance recognised in the first half of 2014 was associated with revised earlyretirement incentives put in place following trade union agreement of 19 December 2012;
 Gains on disposal of investments showed a positive balance of approx. EUR 1 mln, compared to
EUR 5.1 mln in the first half of 2014, attributable to the capital gain from the disposal of
administrative and back-office activities to Fruendo.
As a result of the above, in the 1st half of 2015 the Group recorded profit before tax from
continuing operations of around EUR 211 mln against EUR -527 mln recorded in the same period
of last year.
Profit (loss) before tax from continuing operations (Eur mln)
Chg Q/Q
30/06/2015
2Q2015
1Q2015
30/06/2014
Abs.
Chg Y/Y
%
Abs.
%
Net operating income
133.6
(26.0)
159.6
(621.6)
(185.6)
n.s.
755.2
n.s.
Net provisions for risks and charges
(48.6)
(18.8)
(29.8)
(82.0)
11.0
-37.0%
33.4
-40.8%
Gains (losses) from Investments
125.1
124.9
0.2
175.3
124.7
n.s.
(50.2)
-28.6%
Restructuring charges / One off charges
(0.6)
(0.3)
(0.2)
(3.8)
(0.1)
54.1%
3.3
-85.1%
Gains (losses) on disposal of investments
1.0
0.6
0.4
5.1
0.3
66.4%
(4.1)
-80.0%
210.6
80.5
130.2
(527.0)
(49.7)
-38.2%
Profit (Loss) before tax from continuing operations
737.6
Tax expense (recovery) on income from continuing operations amounted to a positive balance of
around EUR 5 mln (EUR 194 mln as at 30/06/14), impacted primarily by income of EUR 49.4 mln
relating to the ACE (Support to Economic Growth pursuant to art. 1 of Decree Law 201/2011)
accrued as at 30 June 2015 as well as the effect of the partial tax exemption (95%) of the capital gain
realised by the Bank as a result of the sale of the equity investment held in Anima Holding to Poste
Italiane under the PEX regime. In the comparison between the quarters, it should be recalled that
1Q15 included an extraordinary expense of EUR 22 mln as a result of the negative outcome of an
appeal filed by Banca Monte dei Paschi di Siena against the Italian Revenue Agency pursuant to art. 11,
Italian Law no. 212 of 27 July 2000, the response to which was served on 21 April 2015.
Considering the net effects of the PPA (approx. EUR -21 mln) and the profit of non-controlling
interests (EUR -0.8 mln), the profit for the 1st half of 2015 amounts to around EUR 194 mln,
compared to a loss of around EUR -353 mln in the first six months of 2014. The 2nd quarter
contributed approximately EUR 121 mln (profit of EUR 72.6 mln in 1Q2015).
***
BANCA MONTE DEI PASCHI DI SIENA
n.s.
Half Year Report on Operations
44
In compliance with Consob instructions, below is a reconciliation of the Shareholders’ equity and the
Net profit and loss for the period between the Bank’s and the consolidated values.
Reconciliation between Parent Company and Consolidated Net Equity and Profit (Loss) for the period
EUR Thousands
Shareholders' equity
Balance as per Parent Company's Accounts
Net profit (loss)
8,318,863
including Parent Company's valuation reserves
228,808
(798,541)
-
Impact of line-by-line consolidation of subsidiaries
234,456
40,914
Impact of associates
333,520
Reversal of dividends from subsidiaries
58,704
-
(125,065)
Other adjustments
356,141
(9,751)
Subsidiaries' valuation reserves
130,090
-
9,373,070
193,610
Consolidated balance
including valuation reserves
(668,452)
Results by operating segment
Identification of operating segments
For the purpose of identifying the Operating Segments provided for by IFRS 8, the Group has
adopted the so-called business approach. Consolidated income statement and balance sheet data are
broken down and re-aggregated based on criteria including: business area monitored, operating
structure of reference, relevance and strategic importance of activities carried out, and customer
clusters served.
Effective as of April 2015, the Montepaschi Group launched the new top corporate service model,
which includes around 3,000 SMEs that are offered high-profile consulting featuring new and qualified
services, taking an approach of continuous interaction with credit and product specialists.
This strategic decision aims to base the Group’s commercial offering on quick decision-making,
proximity to the customer and a consulting approach based on advisory services and partnerships with
customers. It was accompanied by a revision of the Head Office organisational structure, involving the
transfer of the management of the new top corporate service to the Corporate and Investment
Banking Division, while the SME and Institutions models are now functionally and hierarchically
located directly under the Retail and Network Division.
Based on the Group organisational structures changed as noted above and in place as at 30 June 2015
and the reporting criteria at the highest decision-making level, the following operating segments were
identified:
 Retail Banking, which includes the sales activities of the Retail, Private and SME and Institutions
Segments and the subsidiary MPS Fiduciaria;
 Corporate Banking, which includes the sales activities for the Top Corporate segment, Key
Clients, Foreign Branches and the subsidiaries MPS Capital Services Banca per le Imprese and MPS
Leasing & Factoring;
 Financial Advisory and Digital Banking, which consists of the new Banca Widiba, the Group’s
newco in the digital banking sector, which was authorised to carry out banking in May, started its
operations in the last quarter of 2014 and includes the business of the Financial Advisory Network
and Digital Banking;
 Corporate Centre, which in addition to cancellations of intragroup entries, incorporates the results
of the following business centres:
- banks under foreign law (MP Banque and MPS Belgio);
- service operations supporting the Group’s business, dedicated in particular to the management
and development of IT systems (MPS Consorzio Operativo di Gruppo);
CONSOLIDATED INTERIM REPORT
45
Half Year Report on Operations
- companies consolidated at equity and held for sale;
- operating units, such as proprietary finance, ALM, Treasury and Capital Management which,
individually, fall below the disclosure requirements for primary reporting.
Please note that the merger of Consum.it SpA (the Group’s consumer lending company) into Banca
Monte dei Paschi di Siena SpA became effective on 1 June 2015. The transaction became effective for
accounting and tax purposes as of 1 January 2015. That company’s results were included in the “Retail
Banking” Operating Segment until 31 March 2015.
Results in brief
From the 1st quarter of 2015 the profit and loss of the Group’s operating segments are illustrated
using the same reclassified income statement used for the consolidated figures. The new format
envisages inclusion in the aggregate “Total revenue” of the balance of the item “Other operating
income/expense”, previously recognised under Net operating income. In addition, the Net operating
income is calculated as the difference between Gross operating income and Net impairment losses on
loans and financial receivables.
The following table reports the main income statement and balance sheet items that characterised the
Group’s Operating Segments as at 30 June 2015.
Business Segments
SEGMENT REPORTING
Primary segment
Retail banking
(EUR mln)
30/06/2015
Corporate banking
Chg %
30/06/2015
Y/Y
Financial Advisory
and Digital banking
Chg %
30/06/2015
Y/Y
Corporate
Center
Total
MPS Group
Chg %
Y/Y
30/06/2015
Chg %
Y/Y
30/06/2015
Chg %
Y/Y
25.3%
PROFIT AND LOSS AGGREGATES
INCOME FROM BANKING AND INSURANCE
2,314.6
-1.7%
398.9
0.9%
17.4
1.0%
(304.1)
-63.3%
2,426.8
(1,167.4)
-2.7%
(104.6)
0.8%
(29.5)
n.s.
(9.3)
-56.9%
(1,310.7)
-1.5%
PRE PROVISION PROFIT
1,147.3
-0.6%
294.3
0.9%
(12.1)
n.s.
(313.4)
-63.2%
1,116.0
84.4%
Net impairment losses (reversals) on loans and
financial assets
(817.5)
-19.5%
(154.9)
-30.0%
(0.1)
53.3%
(9.8)
n.s.
(982.4)
-19.9%
329.7
138.5%
139.4
97.7%
(12.3)
n.s.
(323.2)
-61.6%
133.6
-121.5%
76,387
-6.7%
22,610
-12.0%
54
-55.8%
9,337
-39.7%
108,388
-12.0%
74,985
-7.3%
10,648
0.6%
1,072
61.5%
39,533
2.3%
126,238
-3.5%
69,758
4.4%
17,903
-15.5%
5,279
0.3%
15,346
10.3%
108,286
1.0%
Assets under management
46,841
15.8%
359
-27.0%
4,625
-1.6%
3,145
8.4%
54,969
13.3%
Assets under custody
22,918
-13.2%
17,544
-15.3%
655
16.2%
12,201
10.9%
53,317
-9.1%
Operating expenses
NET OPERATING INCOME
BALANCE SHEET AGGREGATES
Interest-bearing loans to customers
Deposits from customers and debt securities
issued(*)
Indirect funding
(*)Retail Banking and Corporate Banking data refers to the distribution network alone. It is noted that these figures do not include intercompany balances for the legal entities
reporting to their respective business segments (typically intragroup funding).
BANCA MONTE DEI PASCHI DI SIENA
Half Year Report on Operations
46
Sales & Distribution segments
Retail Banking
Areas of business




Funding, lending, the provision of insurance products, financial and non-financial services to Retail customers.
Electronic payment services (issuing and acquiring).
Services and products for high-standing customers in the areas of wealth management, financial planning, consultancy on non-strictly
financial services (tax planning, real estate, art & legal advisory), fiduciary and trust services (through the subsidiary, MPS Fiduciaria).
Consumer credit, through the brokerage of personal loans and salary-backed loans, and the issue of credit cards (option and revolving).
Target customers
Retail customers number approximately 5.2 mln.
Customers: breakdown by type
Retail customers: breakdown by geography
Small Business - 6.6%
Valore Famiglia - 71.5%
Valore Risparmio - 10.4%
Premium - 9.7%
Private - 0.7%
Private Top - 0.04%
SMEs and other companies - 0.9%
Institutions - 0.2%
Corporate Top - 0.05%
Large Corporate - 0.03%
North East - 16.8%
North West - 13.8%
Centre - 34.9%
South - 34.6%
Retail Banking also includes customers managed by the financial advisory network (127,777 customers).
Income statement and balance sheet results
As at 30 June 2015, Total funding from Retail Banking stood at EUR 145 bn, with an increase in
volumes of around EUR 4 bn compared to the end of 2014 (+2.6%) and a decline of around one
billion compared to 31 March 2015. More specifically:
 Direct Funding, which accounts for around EUR 75 bn, increased by EUR 3 bn during the half
(+4.2% compared to 31/12/2014; +1.7% compared to 31/03/2015), especially in the Corporate
market (EUR +2.6 bn) and forms of demand deposits (EUR +1.4 bn) and short-term deposits
(EUR +1.3 bn);
 indirect funding, amounting to EUR 70 bn, instead rose by EUR 1 bn compared to the end of
December (+1%) and decreased by EUR 2 bn compared to 31/03/2015 (-3%), due to the
counterbalancing effects of a decline in assets under custody partially offset by growth in assets
under management and the negative trend resulting from market effects.
Interest-bearing loans stood at EUR 76 bn, down EUR 2 bn on 31/12/2014 (-3% since the end of
the previous year; -2.4% QoQ), attributable to the planned run-off of Consum.it and the difficult
process of replacing exposures falling due with new medium/long-term loans (the latter are up YoY).
CONSOLIDATED INTERIM REPORT
47
Half Year Report on Operations
RETAIL BANKING - BALANCE SHEET AGGREGATES
(Eur mln)
Chg %
Q/Q
Chg %
31/12
30/06/2015
31/03/2015
31/12/2014
Deposits from customers and debt securities issued - Distribution Network
74,985
73,754
71,969
1.7%
4.2%
Assets under management
46,841
46,835
43,450
0.0%
7.8%
Assets under custody
22,918
25,092
25,612
-8.7%
-10.5%
Indirect Funding - Distribution Network
69,758
71,927
69,061
-3.0%
1.0%
Total Funding - Distribution Network
144,743
145,681
141,030
-0.6%
2.6%
Interest-Bearing Loans to Customers
76,387
78,241
78,751
-2.4%
-3.0%
Retail banking - Distribution network
Direct funding breakdown
Retail banking - Distribution network
Indirect funding breakdown
Value - 27%
Premium - 40%
Small Business -7%
Private - 6%
Private Top - 1%
SMEs - 8%
Istitutions - 10%
Retail banking - Distribution network
Interest-bearing loans
Bancassurance - 30,2%
Value - 42%
Premium - 3%
Small Business - 19%
Private - 1%
Private Top - 0%
SMEs - 30%
Istitutions - 5%
Assets under management 8,7%
Mutual investment funds/Sicavs
- 29,6%
Asset under custody - 31,6%
With regard to profit and loss, in the first half of 2015 Retail Banking achieved revenues of approx.
EUR 2,314 mln, down 1.7% with respect to the same period last year. The aggregate includes:
 decrease in net interest income (-8.2% YoY), due largely to the decrease in the Internal Transfer
Rate applied to demand items being greater than the decrease in the rate registered for customers
and, to a lesser extent, also the decline in investment volumes (H1 2015 vs. H1 2014) and the
planned run-off of Consum.it;
 increase in Net fee and commission income (+5.8%), boosted by positive trends in revenues from
assets under management;
 growth in “Other revenue from banking and insurance business” (+21.5%) and “Other operating
income/expenses” of around EUR 12 mln (negative by around EUR 13 mln at 30/06/14).
Considering the impact of Operating expenses, which reduced by 2.7% YoY, in the first half of 2015
Retail Banking achieved Gross operating income of approx. EUR 1,147 mln, substantially at the
same levels as the same period of 2014. Net operating income totalled approx. EUR 330 mln (EUR
138.2 mln in the first six months of 2014) affected by the lower net impairment losses on loans and
financial assets compared to the first half of 2014 (-19.5%). The cost-income ratio of the Operating
Segment is 50.4% (51% in H1 2014).
RETAIL BANKING - PROFIT AND LOSS AGGREGATES
(EUR mln)
Net interest income
Net fee and commission income
30/06/2015
30/06/2014
1,350.7
1,470.9
Chg % Y/Y
-8.2%
917.5
867.2
5.8%
Other income
34.6
28.5
21.5%
Other operating expenses/income
11.9
(12.9)
n.s.
INCOME FROM BANKING AND INSURANCE
2,314.6
2,353.6
-1.7%
Operating expenses
(1,167.4)
(1,199.4)
-2.7%
PRE PROVISION PROFIT
1,147.3
1,154.2
-0.6%
Net impairment losses (reversals) on loans and financial assets
(817.5)
(1,016.0)
-19.5%
NET OPERATING INCOME
329.7
138.2
138.5%
BANCA MONTE DEI PASCHI DI SIENA
Half Year Report on Operations
Consumer banking
Breakdown of revenues
48
Consumer banking - Distribution network
Breakdown of revenues
Distribution network - 95%
Product companies - 5%
Value - 26%
Premium - 18%
Small Business - 25%
Private - 4%
Private Top - 0%
SMEs - 23%
Istitutions - 2%
Retail Banking strategy
The sales strategy has continued to develop along the following lines:

growth in the customer base and balance sheet aggregates – marketing and promotional
initiatives in order to monitor retention, acquire new relationships and develop existing ones;

growth in loans - campaigns for prospects with pre-accepted conditions differentiated by rating
and discount campaigns for existing customers, increasing the flows of advances on receivables
reserved to the Bank;

re-launch of assets under management and focus on bancassurance - also through the
placement of window products that better meet customer needs in terms of risk/return profile;

development of customer services – focus on areas with greatest growth prospects (in
particular, e-money, payments, protection/insurance, consulting on investments) by taking
advantage of partnerships with CartaSI and AXA.
The desire to drive business efficiency has resulted in the introduction of new Service Models for retail
customers belonging to the private segments, the definition of the new sales and distribution
governance model for central and network units and the launch of the initial applications of new
planning and regional sales marketing strategies in order to maximise the specific potential of each
customer and their related socio-economic background across all regional areas.
Marketing initiatives Retail Banking
Marketing activities for the network involved different objectives across the Value, Premium and Small
Business markets, with a particular focus on retention, increasing the customer base, development of
volumes and the share of wallet of existing customers and the issue of Protection.
The main initiatives include:
 “Rimani con noi” (“Stay with us”), dedicated to preventing the outflow of deposits to other
banks and the return of those that have already left;
 “Cresci con Noi” (“Grow with us”) to promote referrals from existing customers for the
acquisition of new accounts, through a reward of the option of investing liquidity in a time deposit
account at particularly advantageous conditions;
 “Uno di Noi 5.0” (“One of Us 5.0”), giving employees of the Group the possibility to provide
“non customers” with vouchers granting them favourable conditions for opening a bank account;
 “Un Monte di Valore” (“A Mountain of Value”), meant to attract new deposits in exchange for
benefits in the form of expense reimbursement, commissions and stamp duties;
 “Un Monte di Fedeltà” (“A Mountain of Loyalty”), directed at loyal customers with value added,
providing them the opportunity to benefit from a free credit card for life;
CONSOLIDATED INTERIM REPORT
49

Half Year Report on Operations
“Il Monte-Premi” (“The Mountain of Rewards”), meant to favour the acquisition of new
volumes from new customers or existing customers by awarding non-banking benefits (Amazon,
Decathlon and MediaWorld gift cards) of varying unit values depending on specific banking
conduct.
Bancassurance
For Savings, actions primarily concentrated on:
 new issues of principal-protected Unit Linked products and partially protected Unit Linked
products (4 new products in the “Axa MPS Valore Performance” class);
 marketing a new Class I revaluable policy, known as “AXA MPS Futuro Dedicato”, designed for
households that want to save for their children’s or grandchildren’s future, which provides special
protection conditions for disabled minors;
 the launch of the new Unit Linked policy belonging to the “Axa MPS Unit Melody Advanced”
product class, featuring a high level of flexibility and dedicated to Private Banking Market
customers, which awards customers an entry bonus of 5%.
The AXA MPS product in the Protection segment (Non-Life, Life and Auto) confirmed the Bank as a
leader in the bancassurance sector. This was emphasised by the various recognitions received at the
start of the year, including the Italy Protection Award as the second best bank in the placement of
protection products, and the Cerchio d’Oro Award with first place in the Non-life products and
services category.
The primary innovations included the following:
 introduction of the disaster recovery services and “earthquake coverage” within the AXA MPS
Protezione Business product, that may be subscribed throughout the country with no exclusions;
 in the life products segment, the AXAMPS Vita Sicura Unico product was marketed to the Small
Business Market, enabling this customer target to take advantage of single-premium decreasing
term life insurance.
Assets under management
The Group’s positioning was further strengthened through enhancements to the product range. In
particular:
 three window coupon funds, known as “Cedola alto potenziale”, “Obiettivo cedola” and
“Selezione Dinamica 2020” were launched; the first two, in addition to a predominant bond
component in European government securities, also invest in UCITS and a derivative component
with the objective of producing additional returns compared to more prudent investments, while
the Selezione Dinamica fund may invest the entire portfolio in harmonised and non-harmonised
UCITS;

4 new window funds known as “Evoluzione” were placed, enabling the subscriber to gradually
increase exposure in the equity markets to products with greater value added, through a time
diversification mechanism.
Investment advisory (MPS Advice)
The “Advice” advanced consulting service played a large role in investment services in the first half. In
particular:

more than 201,500 advanced portfolio consulting proposals were made (+19.7% compared to
the same period of last year);
BANCA MONTE DEI PASCHI DI SIENA
Half Year Report on Operations
50

the volumes subject to advanced advice increased by 3.8% compared to last year (data at end
of May);

for the paid Advice services, 21,300 Silver contracts and 1,400 Gold contracts are active, for a
total volume of EUR 3.53 bn;

the percentage of placement flows transiting through Advice exceeded 48% of the total
amount placed.
Loans
Personal Loans



The sales partnership with Compass continues (EUR 382 mln disbursed during the half).
At the end of May, the pilot phase of the salary-backed loan partnership with Pitagora began.
Consum.it, which was merged in June, disbursed EUR 5.0 mln.
Consumer mortgages

Mortgage loans for approx. EUR 780 mln were signed with consumer households.

Since March, the new mortgage Benvenuto and Sostimutuo Benvenuto (for mortgage transfers)
have been made available to satisfy the needs of customers looking to purchase their primary
residence. Mortgage loans for approx. EUR 271 mln have been signed to date.
Small business loans

Mortgage loans for approx. EUR 711 mln have been signed as of 30 June 2015.

The Prestiquattro loan product launched in 2012 has been confirmed as an instrument capable of
satisfying non-revolving short-term cash requirements. During the half the product recorded new
business of roughly EUR 472 mln, or 99% of total new business relating to short-term loans to
small companies.
“MPS KM ZERO” initiative
To provide businesses with access to lower-cost credit and contribute to the recovery of local economies, three-year bonds (called
Regional Bonds) with fixed-rate coupon payments (2.00% gross per annum) have been placed throughout the regions to fuel the
establishment of funding dedicated to financing small companies operating in the areas providing the funding.
Since July 2014, 3 placement programmes have been completed in 3 different regional groupings, making it possible to provide
companies with funds totalling around EUR 240 mln.
A new Regional Bond is expected to be launched in Sicily and Calabria in July 2015.
E-money, Payments and Collections
The objective of strengthening the product offering and contributing to better/increased marketing of
Bank products was pursued:
 Acquiring – the Mobile POS terminal was released, allowing card payments to be accepted on
devices integrated with smartphones and tablets;
 Issuing – the migration of CartaSì credit cards to the new Issuing platform of the Bank
continued, with the completion of cards registered on the IoSi Loyalty programme.
Private Banking
CONSOLIDATED INTERIM REPORT
51
Half Year Report on Operations
The process of re-launching the Group’s Private Banking continued:
 tools available to private managers were strengthened, enabling them to response increasingly
effectively to customer requests;
 sales process efficiency increased;
 new services and customer relations methods introduced;
 sales planning approach consolidated, designed to boost asset volumes and improve retention and
cross selling;
 initiatives to encourage volume transfers - of liquidity, securities and UCITS - from other banks,
making use of favourable terms;
 further promotion of advisory services, through the Advisory Specialist teams located throughout
our local markets, in support of the Private network and, in particular Silver and Gold services,
which enable customers to take advantage of continuous investment portfolio monitoring;
 new tools and methodologies introduced for enhancing synergies with other business segments,
particularly the SME market, and supporting acquisition processes (e.g. the Private-SME
Community);
 Web Collaboration disseminated to customers (innovative manner for providing customer
investment services online, for more effective, paperless management of advisory proposals and
orders relating to funds and UCITS).
MPS Fiduciaria
Activities were focused on internal communications to increase the support provided to the sales
network by fiduciary services, with the aim of reaching new customer acquisition and existing
relationship consolidation targets.
In addition, specific developments were made in the corporate and foreign markets in areas such as
generational handover of businesses, commercial guarantees and the role of tax withholding agents.
Corporate Banking
Areas of business

Lending and offering financial products and services to businesses, including through strategic partnerships with trade associations and
Confidi credit guarantee consortia, with Guarantee Institutions (including public) and Institutional Entities, through which the Bank
acquires funding at favourable terms.

Offer of integrated leasing and factoring packages for businesses, artisans and professionals (through the subsidiary MPS Leasing &
Factoring).

Corporate finance – medium-long term credit facilities, corporate finance, capital markets and structured finance also through the
subsidiary MPS Capital Services.

Products and services issued by the Bank’s foreign branches to support business expansion and investments by Italian companies abroad.

Custody and deposit services for dairy products on behalf of third parties (through the subsidiary Magazzini Generali Fiduciari di
Mantova S.p.A., which is also authorised to issue documents of title to the merchandise, providing for easier access to bank lending).
BANCA MONTE DEI PASCHI DI SIENA
Half Year Report on Operations
52
Corporate Banking customers number 4,212.
Corporate Customers: breakdown by type
Corporate customers: breakdown by geography
North East - 16.6%
Corporate Top - 66.64%
North West - 27.6%
Centre - 48.9%
Large Corporate - 33.36%
South - 6.8%
Income statement and balance sheet results
As at 30 June 2015, total funding from Corporate Banking stood at approx. EUR 28.5 bn, an
increase from the figure for 31 December 2014 (+2.4%) but a decrease from the end of March 2015 (4.9%). Direct funding, which totalled approx. EUR 11 bn, was down 9.1% on 31 March 2015 as a
result of the decrease in volumes recorded for the quarter, particularly in the Key Clients segment, for
both the demand and short-term components.
Indirect funding, consisting largely of assets under custody, stood at approx. EUR 18 bn as at 30
June 2015 (+3% from 31/12/2014; -2.3% as compared to 31/03/2015), which was considerably
affected by changes in the positions of some of the Group’s Key Clients.
With regard to lending, as at 31 March 2015, Corporate banking interest-bearing loans stood at
approx. EUR 23 bn (-2.4% on 31/12/2014; -3.2% on 31/03/2015), mainly concentrated in mediumlong term loans.
CORPORATE BANKING - BALANCE SHEET AGGREGATES
(EUR mln)
30/06/2015
Deposits form customers and debt securities issued - Distribution Network
31/03/2015
31/12/2014
Chg %
Q/Q
Chg %
31/12
10,648
11,709
10,495
-9.1%
1.5%
359
472
452
-23.9%
-20.5%
Assets under custody
17,544
17,847
16,927
-1.7%
3.6%
Indirect Funding - Distribution Network
17,903
18,319
17,379
-2.3%
3.0%
Total Funding - Distribution Network
28,551
30,027
27,874
-4.9%
2.4%
Interest-Bearing Loans to Customers
22,610
23,347
23,170
-3.2%
-2.4%
Assets under management
Corporate banking - Distribution network
Interest-bearing loans
SMEs Top- 53%
Large Corporate - 47%
Corporate banking - Distribution network
Direct funding breakdown
SMEs Top - 33%
Large Corporate - 67%
For profit and loss aggregates, in the 1st half of 2015 Corporate Banking revenues came to approx.
EUR 399 mln (+0.9% compared to 30/06/14), in which:
CONSOLIDATED INTERIM REPORT
53
Half Year Report on Operations

net interest income grew by around EUR 4 mln compared to H1 2014 (+2.1%), due to the
rapid decline in the cost of funding, partially offset by the reduction in average rates on assets,
also in connection with market parameter performance, and decreasing average volumes;

Net fees and commissions were down by EUR 4 mln compared to last year (-5.5% YoY),
especially due to reduced inflows from lending;

Other Revenue from banking and insurance business was basically stable YoY, in relation to
MPS Capital Services activities;

Other Operating income/expense were negative by EUR 1.8 mln compared to the amount of
EUR -5.9 mln in the first half of 2014.
Net operating income was approx. EUR 139 mln, compared to EUR 70 mln recorded for the 1st
half of 2014, affected by the 30% decrease YoY of impairment losses on loans and financial assets and
the slight increase in operating expenses (+0.8% YoY).
The Corporate Banking cost-income ratio stands at 26.2% (same levels as in the first half of 2014).
CORPORATE BANKING - PROFIT AND LOSS AGGREGATES
(EUR mln)
30/06/2015
Net interest income
Net fee and commission income
Other income
Other operating expenses/income
30/06/2014
Chg % Y/Y
213.5
209.1
2.1%
77.1
81.6
-5.5%
110.0
110.6
-0.6%
(1.8)
(5.9)
-70.4%
INCOME FROM BANKING AND INSURANCE
398.9
395.4
0.9%
Operating expenses
(104.6)
(103.8)
0.8%
PRE PROVISION PROFIT
294.3
291.6
0.9%
Net impairment losses (reversals) on loans and financial assets
(154.9)
(221.1)
-30.0%
NET OPERATING INCOME
139.4
70.5
97.7%
Corporate banking
Breakdown of revenues
Corporate banking - Distribution network
Breakdown of revenues
Distribution network - 35%
Foreign - 4%
SMEs Top - 52%
Product companies - 61%
Large Corporate - 48%
PERFORMANCE OF COMPANIES (net profit/loss for the period)
(EUR mln)
MPS Capital Services
MPS Leasing & Factoring
30/06/2015
30/06/2014
Chg % Y/Y
41.7
42.6
-2.2%
(18.0)
(20.0)
-10.2%
Main Corporate Banking initiatives
SME Market
BANCA MONTE DEI PASCHI DI SIENA
Half Year Report on Operations
54
 Operational launch of the new Corporate TOP segment.
 Increasing commercial targeting by adopting “micro-based analyses” and taking advantage of new
leverage.
 Developing a new consulting service (“PCA Expert System”) in collaboration with Prometeia.
 Developing a new “Coprirate” hedging product line.
 Extending the range of commodities eligible for hedging by customers through customised
derivatives.
 Updating of the “Finanziamento Cassa Depositi e Prestiti Ponderazione Zero” product following
the Bank’s signing of the fifth ABI-CDP agreement.
 New revolving credit facility product designed to meet the cash elasticity needs of corporate
customers.
CONSOLIDATED INTERIM REPORT
55
Half Year Report on Operations
Market for Institutions and Public Administration



Preparation activities for the entry into force of mandatory Electronic invoicing to local Public
Administration.
Activities associated with the introduction of split payments in collections on Public
Administration invoices.
Plan to increase the efficiency of Treasury and Cash service and to reorganise the Institutions
segment.
Foreign market
The main marketing initiatives for SME customers were:



development of exchange rate and commodities hedges, with commodities derivatives and
exchange rate risk hedging products;
extension development for customers with activities abroad, to expand profitability;
development of customers in the Far East, the US and the United Kingdom with their own
subsidiaries, to be supported through the Bank’s foreign branches with loans and highly qualified
services.
MPS Capital Services (MPSCS)
Corporate finance
Project Financing - the main activities were carried out in the infrastructure, renewable energies and
utilities sectors. In particular, two new arrangement mandates were signed in the renewable energies
sector, initiatives were finalised to support the completion of the Milan metropolitan railway’s Line 5
with a pool loan totalling EUR 580 mln and pool financing transactions were carried out for a wind
farm and the construction of a wood biomass fuelled thermo-electric plant.
Real Estate – a new mandate was signed for the structuring of a transaction meant to enhance a large
group of real estate assets, mainly leased to branches of a top national banking group.
Structured & Shipping Finance - activities focused on the infrastructures and utilities sectors.
Syndication - a mandate was obtained for the structuring and syndication of a loan to open a robotic
equipment manufacturing centre.
Acquisition Financing - confirming its competitive positioning in acquisition/leveraged financing in
the Mid Corporate segment, MPSCS continued origination activities and the structuring of acquisition
transactions.
Investment banking
In the bond market, the most significant operation was the 15-year syndicated issue for the Republic of
Italy for a total of EUR 8 bn, for which MPSCS acted as Joint Lead Manager and Joint Bookrunner. In
the stock market, MPSCS acted as Global Coordinator and Bookrunner in a placement on the AIM
market of the Italian Stock Exchange for a corporate customer.
Subsidised financing
Current operations continued relating to services for the main business incentives, based on the
obligations assumed upon entering into the agreements with the Ministry of Economic Development
and the Ministry of Education, Universities and Research: Sustainable Growth Fund, Technological
Innovation Fund, Law 488/92 and Regional Pacts, Research Subsidy Fund, SME Guarantee Fund.
BANCA MONTE DEI PASCHI DI SIENA
Half Year Report on Operations
56
Global Markets
The risk assumed remained at average levels during the half, making it possible to offset lower revenue
from trading in bonds, which was characterised by lower volumes and profitability. Corporate
derivative volumes were up. Revenue from investment products slowed in favour of asset management
products.
MPS Leasing & Factoring




“Speed” project, designed to improve performance in remarketing property and sea-going
vessels originating from lease contracts.
Promotional launch of the “Un Monte di Energia” leasing product for environmentally
friendly vehicles.
Factoring initiative in the agrifood - large-scale retail suppliers sector.
“Un Monte di Factoring” initiative, which made it possible to factor receivables due from the
Group to 39 of its suppliers.
Financial Advisory and Digital Banking
Income statement and balance sheet results
As at 30 June 2015, total funding for the Financial Advisory and Digital Banking segment stood at
approx. EUR 6.4 bn, just under the levels recorded at the end of the first quarter of 2015 (-1.4%), but
an increase of 9.5% compared to 31/12/2014. The direct component increased by 17.7% on the
previous quarter and by more than 80% on the end of 2014 reaching EUR 1.1 bn at the end of June.
Indirect funding, the predominant component of which is Assets under management, decreased by
4.5% QoQ to stand at EUR 5.3 bn, around the levels recorded at the end of 2014.
FINANCIAL ADVISORY AND DIGITAL BANKING - BALANCE SHEET AGGREGATES
(Eur mln)
Chg %
Q/Q
Chg %
31/12
30/06/2015
31/03/2015
31/12/2014
Deposits from customers and debt securities issued - Distribution Network
1,072
911
573
17.7%
86.9%
Assets under management
4,625
4,810
4,613
-3.9%
0.3%
655
718
613
-8.8%
6.8%
Indirect Funding - Distribution Network
5,279
5,528
5,226
-4.5%
1.0%
Total Funding - Distribution Network
6,351
6,439
5,799
-1.4%
9.5%
54
58
64
-6.3%
-15.0%
Assets under custody
Interest-Bearing Loans to Customers
With regard to profit and loss aggregates, in the first half of 2015, this Operating Segment posted
revenues totalling approx. EUR 17 mln, up compared to the same period of last year (+1%), within
which Net interest income (of EUR 9.3 mln) fell by 5.3% YoY whilst Net fee and commission income
improved by 6.9% YoY to reach EUR 7.9 mln.
Operating expenses of EUR 30 mln were significantly higher than last year’s level due to the start-up
phase of the newco Widiba, which began operating in the last part of 2014.
Considering net impairment losses on loans, amounting to EUR 0.1 mln (+53.3% YoY), the
Operating Segment had a negative net operating income of EUR -12.3 mln (positive amount of EUR
10.6 mln in the first half of 2014).
CONSOLIDATED INTERIM REPORT
57
Half Year Report on Operations
Widiba - PROFIT AND LOSS AGGREGATES
(EUR mln)
30/06/2015
30/06/2014
Chg % Y/Y
Net interest income
9.3
9.9
-5.3%
Net fee and commission income
7.9
7.4
6.9%
Other income
0.0
(0.0)
n.s.
Other operating expenses/income
0.1
(0.1)
n.s.
INCOME FROM BANKING AND INSURANCE
17.4
Operating expenses
(29.5)
PRE PROVISION PROFIT
(12.1)
Net impairment losses (reversals) on loans and financial assets
NET OPERATING INCOME
17.2
(6.5)
10.7
(0.1)
(0.1)
(12.3)
10.6
1.0%
n.s.
n.s.
53.3%
n.s.
WIDIBA, the Group’s new On-Line Bank
During the half Banca Widiba’s model became fully operative: with the completion of the financial
advisory integration, the sales offering has been enriched with the consulting component and the bank
presents itself on the market complete with all its components. That model is not only able to appeal
to all customer targets, but can also apply important synergies between the “self” channel and financial
advisory services, as always the underlying strategy of the new bank.
In the value proposition to the market, the digital component of the new platform therefore perfectly
complements the relational component of the financial advisory services in a single model, unique on
the market, with a positioning that enables it to seize upon all opportunities deriving from the radical
change in behaviour and expectations of consumers. In fact, the advisory services are routed through
the platform, not only its product and service components, but also through an innovative tool
allowing the user to choose from among 600 Widiba advisors based on the skills that best match the
user’s needs and make a direct contact request for a financial check-up on their investments.
The commercial offering of Widiba, which since its founding has been developed primarily with
respect to the banking, payments and deposit account product/service components, has been
significantly enhanced, along with the introduction of consulting, with the investment component
consisting of a broader product range, open architecture and a rich series of innovative information
and decision-making support instruments. This package stands out from those of competitors due to
the innovative solutions offered to customers in terms of banking experience and the high degree of
customisation.
During the half, Widiba continued the market communications that had already begun at the end of
2014 with the brand’s launch and the start-up of business operations. Consistent with the aims of the
previous campaigns, the marketing and investment activities in communications focused on three main
strategic lines:

strengthen brand awareness on the market, consolidating its positioning;

accelerate growth of the bank’s customer base, with the implementation of major acquisition
campaigns;

consolidate leadership within the market as a social bank, maintaining a strong bond of
listening and engagement with the reference community.
Today, Widiba has approximately 129,000 customers and has exceeded EUR 6.5 bn in total funding.
BANCA MONTE DEI PASCHI DI SIENA
Half Year Report on Operations
58
The Corporate Centre
Reporting scope
The Corporate Centre includes the results of the activities carried out by:

head office units, particular governance and support functions, proprietary finance, the ‘asset
centre’ of divisionalised entities, which comprises in particular: asset and liability management,
treasury and capital management;

business service and support units, particularly with regard to the development and management
of information systems (Consorzio Operativo di Gruppo), collection of doubtful loans and value
creation from the Group’s real estate (previously carried out by MPS Immobiliare, which was
absorbed into BMPS on 5 December 2014).
The Corporate Centre also includes the results of foreign banks (MP Banque and MPS Belgio), the
results of the companies consolidated at equity and the companies held for sale and the results of
operating units which, on an individual basis, are below the benchmarks required for primary
reporting, as well as cancellations of intragroup entries.
Main initiatives
For a description of key actions in the areas of proprietary finance and NPL management, see the
“Analysis of the key economic-financial indicators - Balance Sheet” section. For actions aimed at
improving the efficiency of the operating model and Group processes as well as developing human
capital, see the “Analysis of the key economic-financial indicators - Structural Capital / Human
Resources” sections.
ALM and Capital Management
Objectives
Structural re-balancing of the liquidity position and implementation of strategic policies for managing
interest rate risk.
Optimal management of liquidity
With a view to maintaining long-term financial balance and strengthening compliance with liquidity
requirements, activities meant to improve the liquidity position and meet short and medium/long-term
cash requirements continued.
In particular, funding activities continued on ABS/covered issues by the Bank, or securities issued by
the bank with government guarantees, carried out through repos and/or collateral swaps and/or sales
in the market, for an amount of around EUR 2.5 bn.
In March 2015 a securitisation of consumer loans of the former subsidiary Consum.it was carried out,
with a positive impact on the liquidity position of around EUR 1.2 bn.
The counterbalancing capacity generated by the Abaco channel (receivables eligible for use in
Eurosystem refinancing transactions) has increased, thanks to optimisations and developments
associated with the new criteria established by the Bank of Italy in the second half of 2014 (in
particular, the eligibility of receivables in pools), with a positive impact of roughly EUR 0.6 bn.
The share capital increase also made a net positive contribution to liquidity of around EUR 1.6 bn.
The maturity of bonds backed by government guarantees (EUR 6.5 bn), which represented the main
maturity of the first half, was basically offset by the sharp improvement in sales trends.
In addition to these actions, the Group’s exposure to the ECB has declined from EUR 17 bn at the
end of 2014 to EUR 7.8 bn. In particular, in the first quarter of 2015, the remaining EUR 7.7 bn of the
CONSOLIDATED INTERIM REPORT
59
Half Year Report on Operations
old LTROs was repaid. As at 30 June 2015, exposure to the ECB consists only of the new TLTRO
auctions, which increased from around EUR 6.3 bn at the end of 2014 to around EUR 7.8 bn due
primarily to participation in the June auction.
The primary liquidity and counterbalancing balances have improved. The total operational liquidity
position, represented by the net balance at 1 month, amounted to approximately EUR 18.9 bn as at 30
June 2015, compared to EUR 15 bn as at 31 December 2014 (EUR +3.9 bn). The unencumbered
counterbalancing capacity stood at approx. EUR 19.8 bn as at 30 June 2015, compared to EUR 15.9
bn as at 31 December 2014 (EUR +3.9 bn).
Interest risk management
ALM (Asset Liability Management) policy focused on corrective actions for managing the position,
especially on the short end of the curve, which aimed to maintain a stable risk profile for the Bank and
to benefit from the continuing low rate levels, while remaining in compliance with operational limits.
Equity investment management
The Group continued to rationalise its equity investment portfolio. The following is a list of the Bank’s
most significant transactions during the first half of the year.
Acquisitions




A 3.496% interest in the share capital of Alitalia Compagnia Aerea Italiana S.p.A. was acquired
through the conversion of loans as part of the restructuring agreement.
A 10% equity investment in Siena Consumer 2015 Srl, a securitisation vehicle, was acquired.
The share capital increase of the subsidiary Montepaschi Luxembourg S.A. was subscribed for
EUR 3.0 mln.
The recapitalisation process of the subsidiaries MPS Capital Services S.p.A. and MPS Leasing &
Factoring S.p.A. was launched and the bank participated in the incorporation of Siena PMI 2015
S.r.l., with a 10% interest. Lastly, full control was acquired over the vehicle Siena SME 11 S.r.l.
Mergers/Absorptions

The merger of Consum.it S.p.A. into Banca Monte dei Paschi di Siena S.p.A. became effective on
1 June 2015. The transaction became effective for accounting and tax purposes as of 1 January
2015.
Disposals


Disposal of the equity investment in Anima Holding S.p.A., equivalent to 10.32% of share capital;
Other disposals of equity investments: Alerion S.p.A. (6.358% of the share capital); Società
Cooperativa Bilanciai Campogalliano (5.88% of the share capital); Patto Territoriale Polis del Sud
Est Barese S.r.l. a s.c. (6.29% of the share capital); Latteria Sociale Mantova S.c.a. (11.85% of the
share capital); Servizi Cimiteriali di Cesano Boscone S.r.l. (3.91% of the share capital); and
Sviluppo Italia Calabria Business Innovation Centre S.c.p.A. (0.42% of the share capital).
On 27 March 2015 the closing of the restructuring of the Sorgenia Group started in the last quarter of
2014 took place; for more details refer to Explanatory Notes (Part H “Related-Party Transactions”).
Following the execution of restructuring agreement approved by the Board of Directors of BMPS in
its meeting of 25.10.2014, the Bank holds a stake of 16.67% of the share capital of Nuova Sorgenia
Holding SpA.
Also note that the investments held in Prima Holding 2 SpA (28.34%), Centro per la Promozione e lo
Sviluppo del Territorio ed Agenzia Locale per la formazione (2.5%) and Mantova Expo S.r.l. (6.62%)
are no longer included in the portfolio following the conclusion of the respective liquidation
procedures.
BANCA MONTE DEI PASCHI DI SIENA
Half Year Report on Operations
60
Analysis of the key non-financial capital
This chapter provides an overview of the levels and trends of some of the most important nonfinancial capital that supports Group performance and value, in line with the expectations of
stakeholders: customer base, human capital, relationship capital, structural capital and reputational
capital
Customer base
Our customers
As at 30 June 2015, the Group had
5,305,163 customers


5,201,766 managed by the Bank’s
sales & distribution network;
103,397 managed exclusively by
Widiba (into which the BMPS
Financial Advisory sales channel
was merged).
Customers
Active remote banking users
30 06 2015
31 12 2014
30 06 2014
5,305,163
5,353,002
5,401,166
920,932
988,137
966,179
Acquisition (%)
Retention (%)
Complaints received
4.2
4.2
4.0
94.8
95.2
94.1
6,111
11,408
5,940
Complaints-average response time (days)
- Simplified procedure
6
5
-
- Accelerated procedure
-
14
14
- Accelerated procedure
14
16
17
- Ordinary procedure
26
27
28
(The figures above do not include the customers of other Group companies).
In particular, Retail & Corporate customers are evenly distributed on average across the country. They
are sub-divided into homogeneous customer clusters, each of which is associated with a specific
service model.
Customers
Retail and Corporate Customers: breakdown by
geography
Distribution Network - 97.7%
North East - 16.8%
North West - 13.8%
Centre - 34.9%
Widiba - 2.3%
South - 34.6%
Customers: breakdown by type
Small Business - 6.6%
Valore Famiglia - 71.5%
Valore Risparmio - 10.4%
Premium - 9.7%
Private - 0.7%
Private Top - 0.04%
SMEs and other companies - 0.9%
Institutions - 0.2%
Corporate Top - 0.05%
Large Corporate - 0.03%
Retention and Acquisition indicator trends are basically in line with average data. Extraordinary
transactions (i.e. Network optimisation projects) surely influenced the trend observed, but there was a
YoY improvement in Retention and a positive result for Acquisition. Customers with current accounts
remained basically unchanged in the second quarter, after the reduction of around 16 thousand in the
first quarter.
CONSOLIDATED INTERIM REPORT
61
Half Year Report on Operations
Customer Care
Management systems
Customer care is monitored and enhanced through a cohesive system of tools and processes that make
up an important framework of reference for sales and organisational functions in implementing their
improvement plans:
 customer relationship management in the branches;
 the Quality Tableau de Bord (Dashboard) – system of KPIs to monitor the effectiveness and
efficiency of customer care activities;
 quality monitoring aimed at detecting, monitoring and improving process and service quality;
 customer Satisfaction Surveys;
 after-sales and contact centre services – relationship managers and customers can receive
clarification and assistance, with provide feedback through dedicated phone lines and e-mail
addresses.
With regard to the latter, a Network Help Desk (Isola della Rete) and Customer Help Desk (Isola della
Clientela) are operational:
Network Help Desk – collects and resolves problems reported by the network, activating the relevant
Bank functions; provides business assistance and advisory to the network; carries out training activities
for the front office; handles requests for information made directly by customers via email, to
info@banca.mps.it.
Customer Help Desk – provides assistance to customers for direct banking services - via telephone, the
technical help desk for Internet banking services (Retail and Corporate via telephone, e-mail and web
ticketing) and other inbound services for captive and prospect customers.
Quality Monitoring
Within the service and process management and monitoring system, aimed at continuously improving
the results/quality balance, a reporting system has been established based on 11 indicators broken
down into two categories: (1) informational indicators, more focused on compliance with regulatory
obligations (Privacy, MiFID, Anti-Money Laundering); (2) indicators used to measure customer
relationship quality (meeting frequency, transactions, use of advanced advisory services).
This reporting is possible at all levels of the sales chain, with additional support from specific systems
providing summaries and analyses developed by Sales and Quality Monitoring.
Customer Satisfaction Surveys
Customer Satisfaction and Experience surveys aim to determine the degree of customer satisfaction
generally and with respect to certain specific aspects at the level of the Bank, regional Market Areas,
local Market Units and Service Models. On a sample basis, the surveys are conducted through the use
of questionnaires. The customer sample size involved in the surveys is proportionate to the target area
of analysis. For each element of analysis, a Customer Perception Index (CPI) is determined as the
weighted average of the following components: Satisfaction (overall quality perceived by the
customer), Loyalty (propensity towards choosing the Bank again), ‘Word of Mouth’ (propensity
towards recommending the Bank to friends and acquaintances) and Price/Quality (the affordability of
the products compared to service quality). The index is expressed on a 20-100 scale.
Survey findings identify any areas of vulnerability that require corrective actions to be adopted to
increase the level of customer service. Prioritising the actions may also indicate opportunities for
further analysis through one or more additional surveys focusing, for example, on a specific customer
segment, product, and geography, or a particularly significant event.
During the half, a customer satisfaction campaign was conducted on customers contacted by their
private bankers during the migration from the Retail management to the Private Market model, in
BANCA MONTE DEI PASCHI DI SIENA
Half Year Report on Operations
62
order to check how the new features of the relationship model initially impacted the customers
concerned.
Contact promoted by Private Bankers revealed a good level of satisfaction with the clarity and
comprehensiveness of the information sent, as well as with the services offered in relation to customer
needs. Customers also reported a high level of satisfaction with the courtesy and availability of the
Private Banker.
In addition, in the second quarter, to survey the experience of customers of the branches whose
opening hours had been changed, which now close in the afternoon (“cash light” branches), a survey
was carried out on the perception of some relevant aspects for the first set of branches involved in the
project. This survey will be carried out again during the year in relation to the subsequent cash light
branches envisaged in the project.
Complaints management
Complaints received and response times
In the first half of the year, 6,111 complaints were received. In addition, customers sent 470
complaints to independent bodies (Ombudsman, Consob, Bank of Italy, Arbitro Bancario Finanziario),
while 1,504 requests were sent for resolution by Alternative Dispute Resolution procedures (around
50% of these resulted from complaints not accepted).
On average, a response was provided to complaints within 25 days (17 business days):
 in 4,530 cases, complaints were resolved within 30 days (73% of the total);
 with the branch procedure (for minor problems and with an impact of up to EUR 5 thousand), the
average response time was 9 days (6 business days);
 with the accelerated procedure (more complex cases and with amounts in the range of EUR 5-10
thousand) it took 21 days (14 business days);
 with the ordinary procedure, 37 days (26 business days).
Complaints resolved
6,192 complaints for a total outlay of EUR 2.4 mln and 1,438 alternative dispute resolution procedures,
with an outlay of around EUR 0.76 million, were settled.
(The data provided above relate to the Bank, while the data from 2014 reported in the table at the start of the paragraph
also include complaints relating to the financial advisory network, subsequently included in Banca Widiba)
CONSOLIDATED INTERIM REPORT
63
Half Year Report on Operations
Human capital
Headcount changes
As at 30 June 2015 the Group had 25,742 employees.
Since the start of the year, there was a decline of 219
employees, while in the YoY comparison, there was a
decrease of 1,551.
From the start of the year, 65 people have taken up
service (63 recruited and 2 reinstatements) and there
were 283 terminations of contract (in particular, 152
accepting the solidarity fund and 83 resignations) and
one out-of-group relocation.
New hires included 6 executives, 18 middle managers
and 39 other professionals. The terminations involved
9 executives, 165 middle managers and 109 other
professionals.
Distribution of the workforce in favour of customer
interface units stands at 76.6% (figure does not include
the international banking division which represents
2% of the total staff) and 21.4% as regards the Head
Office units.
30 06 2015
31 12 2014
30 06 2014
25,742
25,961
27,293
Head Offices
21.4
21.6
21.6
Italy Network
76.6
76.3
76.5
2.0
2.0
1.9
Headcount
Operational location (%)
Foreign Network
Professional/occupational level (%)
Executives
1.3
1.3
1.3
Middle Managers
38.9
38.8
39.0
Other
59.8
59.9
59.7
Other indicators
Training per capita (hours)
15
36
14
Training costs (Millions of euro)
0.9
2.0
0.8
47.8
47.6
46.6
6.2
6.1
5.7
Female staff (%)
Female executives (%)
Rate of absence (%)*
8.10
6.87
7.38
* Days absent in relation to total days worked during the year (excluding leaves and
absences for maternity/paternity permits). Low absence rates are generally linked to a
positive trend in the morale of personnel and productivity.
Personnel management initiatives
The personnel management policies support the reorganisation projects, in line with the business plan
objectives, through mobility plans (geographical and professional) with the aim of seizing opportunities
for the career development for employees according to the logics of transparency and participation. In
particular, the initiatives are supported by:

Professional and Managerial Development plans which, based on managerial renewal logic,
guarantee suitable quality-quantity staff coverage levels;

training programmes to strengthen skills, provide managerial career guidance and support
requalification processes;

engagement and human resource motivation leverage (incentive policies, welfare system and
internal communications plans).
During the half, efforts continued to focus on reaching operational efficiency targets through the
planned absorption of the subsidiary Consum.it. Resource re-assignment initiatives were assessed with
a view to social sustainability, to manage impacts on the employment of the 254 employees concerned,
including by holding meetings with the trade unions. During this process, employee re-assignment was
facilitated, professional skills were leveraged and personal requirements and aspirations were taken into
consideration.
Operational activities resulting from the implementation of the Retail service models continued, which
led to mobility, primarily professional, for approximately 3 thousand resources.
In this context, incentivised mobility initiatives (“Muoversi in Rete”) were launched to favour the
active participation of employees, also with the aim of integrating skills amongst the head office and
sales network units. This initiative made it possible to take action with respect to operating units
identified in advance with seasonal and other staffing requirements.
In the Head Office, certain priorities were redefined in light of the new supervisory structure and the
complex, specialised areas, with a qualitative and quantitative shift of personnel regarding primarily the
BANCA MONTE DEI PASCHI DI SIENA
Half Year Report on Operations
64
Internal Audit department, which became a Division, and the Credit Division to more sharply focus
loan portfolio management.
Human resource development and training
With the objective of favouring prompt and widespread qualitative and quantitative role coverage at all
levels while emphasising individual development, the main initiatives concerned:

the Talent & Performance Management process, aiming to increase productivity and employees’
engagement in the Group’s strategic objectives. In particular, the voluntary self-assessment in
which more than 60% of employees participated and the performance assessment phase for the
year 2014 have been completed, involving Action Plans being filled out for the over 25,000
employees assessed. These activities were also accompanied by ad hoc training sessions and
targeted internal communications activities, and made it possible to identify training and
development needs for each unit;

resource development and engagement processes - the pilot “skills certification” process for bank
roles, promoted by ABI/Fondo Banche Assicurazione; job posting initiatives to cover internal
Human Resources Department positions; the continuation of the private performance building
project, which sets particularly challenging targets for the Private Banking sector, through
diagnostics and capacity development initiatives; the WorkForce Transformation IT project, which
works to define a shared managerial model for IT roles through diagnostics events of managerial
skills and subsequent development and training actions; the definition of job profiles to support
the review of Retail service models.
Training
During the half, an average of 15 hours of training were provided per person (13.5 in the first half of
2014), as part of the MPS ACADEMY 2015 Training Plan. In particular, in the Bank, activities
involved around 83% of employees for a total of 353,457 hours. Training effectiveness was high, with
an average course participant satisfaction index of 5.1 on a scale from 1 to 6.
People
The People training was focused on “managerial development” through initiatives targeting the
managers of Bank departments, segmented by levels with a view to permanent updating (in partnership
with “Studio Ambrosetti”) and targeted training (Manager Coach, for around 300 middle managers,
with individual self-development, classroom and multimedia content initiatives). With particular
attention given to newly qualified officers, the training course contents were updated and enhanced
with an innovative focus on managerial issues (resource management, team coordination, etc.). In
support of the various phases of Talent & Performance Management, dedicated training activities were
implemented (Skill Gym Center with brief training aids, flipbooks, readings) and webinars (around
3200 Branch managers and other unit managers trained). Specialised training particularly focused on
business transformation specialists, organisation roles and internal audit; external specialised seminars
and courses continue (subsequently shared internally via learning circles) along with English language
training.
Business
In the first half of 2015, following on from 2014, qualifying training for central roles was given on
credit disbursement processes throughout the entire chain. In support of the development of Retail
service models, training modules in the classroom and online and mentoring were implemented
(especially dedicated to the Value line with respect to credit, finance and advisory). For the Private
Banking sector, the training orientation test phase was completed and the Private Finance course
commenced, which will gradually involve the relative sales value chain. In the Bancassurance field,
entry training and updating are being carried out for policy placing agents, in compliance with new
CONSOLIDATED INTERIM REPORT
65
Half Year Report on Operations
aspects introduced by the new IVASS Regulation 6/2014. The close partnership with AXA MPS
continues in order to provide the training and offer specialised courses (Campus Expert, Obiettivo
Protezione Titolari and Private).
Compliance & safety
Compliance and Safety training aims to ensure continuous compliance with regulatory provisions
(training for sellers of insurance policies, anti-money laundering, health and safety). During the half,
new Anti-Money Laundering activities were launched (for Network and Head Office employees); 94%
of the Bank’s staff completed training on the administrative liability of entities pursuant to Italian
Legislative Decree 231.
Enhancement of equal opportunities
The percentage of female staff was 47.8% as at 30 June 2015. Other equal opportunity indicators also
show improvement: These included women in managerial positions (around 42.7%) and the
percentage of female executives (6.2%).
To safeguard equal opportunities, personnel management policies are centred on encouraging the
expression of all employees’ professional skills and abilities, not only to cover the roles but also
through access to work-life balance tools (flexible working hours, part-time, including temporarily,
evaluation of transfer requests with a view to best managing personal and family requirements).
In this respect, during the first half of the year: approx. 52% of new managerial roles were assigned to
female employees; 164 part-time contracts were agreed, of which 154 requested by women (as at
30/06/2015 there were around 2000 part-timers of which approx. 95% women); 52% of transfer
requests accepted referred to female employees.
The company pays particular attention to facilitating the return to work of new mothers through a
structured training path that also involves the member of staff’s line manager and the human resources
manager. The initiatives are based on the individual’s profile and requirements and promote
organisational updating as well as the development of capacities that can help to reconcile new needs
(for example, time management and stress management). More than 150 new mothers took advantage
of this initiative in the first half of the year and the more than 440 resources involved in the project
were surveyed to evaluate satisfaction with the initiative and identify areas for improvement.
The Bank ensures full compliance with principles of fairness and equal opportunities, including in
selection and recruitment activities, and rejects all forms of favouritism or clientelism. In carrying out
staff recruitment and selection activities based on the criteria set forth in the “Group Selection and
Hiring Policies”, the Bank guarantees equal opportunities in access to employment, without
discriminating on the basis of gender, nationality, religion, political opinion or personal and social
conditions.
Corporate welfare
The Group’s second-level bargaining with trade unions confirms the central role played by welfare
within the corporate model, with an offer focusing on the needs of employees, pensioners and their
nuclear families.
The model encompasses actions in 6 different areas:




health - with a medical expense coverage programme, that may also be used by family members,
accident policy and other initiatives;
pension plans - through company pension plans to which Group companies allocate 2.5% of pay
taxable for the purposes of staff severance pay, with full coverage of management expenses;
Family - support to parenthood with dedicated leave and training for the return of new mothers to
the workplace, support for children’s studies and household expenses, and other initiatives;
Education - with study leave for working students;
BANCA MONTE DEI PASCHI DI SIENA
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66

Free Time - through CRAL employee social organisations, with the promotion of cultural
activities, sport and hobbies;
 Income support - facilitated conditions for current account expenses, mortgages and subsidies,
payment services, investments and other, in addition to subsidised loans for the acquisition of
durable and semi-durable goods.
The MPS welfare system reaches 5 different “publics”, with very different characteristics in terms of
the social risks to which they are exposed (employees, resources participating in the Solidarity Fund,
pensioners, spouses and children), for a total of approximately 75,000 people.
The goal is to develop the model from simple welfare to “enabling” support, with a new vision of the
company’s objectives and its role in support of individual welfare. This involved:
 the involvement of top management to set the relevant policies within the framework of company
strategies;
 the design of specific training and activation of HR Managers and Unit Heads (around 3 thousand
resources);
 a dedicated communications plan.
In that sense, as regards trade union relations, in the second quarter of 2015 all unions working with
the company signed an agreement whereby the Parties committed to starting a phase of periodic
meetings to discuss and dialogue about topics of interest for staff (particularly the company bonus and
the incentive system, professional and career development and the assessment process) and
establishing a “Welfare Commission” to support dialogue and improve the effectiveness of trade union
participation in social, retirement and welfare matters of collective interest.
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Half Year Report on Operations
Structural capital
Distribution channels
Customers are served through an integrated combination of “physical” and “remote” distribution
channels.
Physical channels
As at 30 June 2015, the Group’s network
in Italy consisted of:
 2,183 branches, as surveyed by the
Supervisory Body (-3 since the start
of the year);
 2,968 ATMs (+47 since the start of
the year, due to the new self-banking
tool distribution plan designed to
improve quality of service to
customers);
 273 Specialised centres (-6 since the
start of the year), of which: 112
dedicated to SME customers, 8 to
Top Corporate customers, 89 to
Private/Top Private customers, and
64 to Institutions. Customers
belonging to the Key Clients
segment are managed through
dedicated resources distributed
across the country;
 12 branches of the subsidiary MPS
Leasing & Factoring
 594 Financial Advisors (-1 since the
start of the year) and 115 regional
offices (-3 since the start of the
year).
30 06 2015 31 12 2014 30 06 2014
Branches in Italy
2,183
2,186
2,333
ATMs
2,968
2,921
3,032
62
114
55
1.700
1.939
2.347
Robberies (no.)
Accident rate*
Accident seriousness ratio*
45.307
51.992
58.411
527,258
894,870
474,908
Electricity (GJoule)
274,394
571,464
275,844
Natural gas (GJoule)
219,213
258,843
168,267
Diesel oil (GJoule)
9,045
16,415
7,081
Diesel cars (GJoule)
24,398
47,292
23,233
Energy consumption (GJoule)**
Gasoline cars (GJoule)
CO2 emissions (T)**
208
855
483
15,129
19,725
11,985
Paper consumption (T)
1,220
2,438
1,189
*Accident rate = (total number of accidents/total number of worked hours) x 200,000;
Accident seriousness ratio = (total work days lost as a result of an accident / total number of
worked hours) x 200,000.
These indicators monitor practices for managing the health and safety of Bank workers. Low
accident rates are generally linked to a positive trend in productivity.
**The indicators/ratios measure the quality and eco-efficiency of operations. In particular,
CO2 Emissions include “scope 1” and “scope 2” greenhouse gas emissions according to the
international GHG Protocol classification.
The foreign network includes:
 4 operational branches (London, New York, Hong Kong and Shanghai);
 10 representative offices located in various “target areas” of the EU, Central-Eastern Europe,
North Africa, India and China;
 2 banks under foreign law - MP Belgio (8 branches in Belgium) and MP Banque (18 branches in
France).
Remote channels
The Bank also directly provides its customers with a continuously updated range of banking services
through remote channels, which are also offered in integrated form: the so-called “integrated multichannel” contracts, which cover internet banking, mobile banking and phone banking services.
Widiba , the Group’s new direct bank that integrates a self-service offer with the competencies of the
network of financial advisors, has been operational since late 2014. As at 30 June 2015, Widiba has
around 129 thousand customers.
As at 30 June 2015, agreements relative to all electronic services totalled 1,937,376 with 1,019,902
active users (up 31,765 since the start of the year). Integrated multichannel and home banking
agreements totalled 1,753,311 with 920,932 active users. There were also 184,065 internet corporate
banking agreements, with 98,970 active users.
BANCA MONTE DEI PASCHI DI SIENA
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68
Operating apparatus and processes
Cost reduction initiatives
In the first half of the year, the cost optimisation plan continued to be implemented (220 initiatives
with the aim of reducing other administrative expenses by more than 30% compared to the actual
figure from 2012), also with a view to environmental sustainability (the specific ISO 14001
certifications were also renewed for 2015).
The main initiatives regarded the optimisation of:



security expenses, with the implementation of the new security management model to reduce the
risk of robberies;
management of ATMs and ICT licensing;
real estate costs, by streamlining the usage of spaces and negotiating rents.
ICT
Initiatives underway involve vendor consolidation as well as continuing optimisation of the software
and hardware architecture.
Real estate
Actions underway seek to optimise the use of office space, both for the Sales Network and for the
Head Office, as well as continued lease negotiation. The project was launched that envisages structural
energy consumption savings, through rapid implementation initiatives and the reorganisation of real
estate maintenance activities.
Space Management
Optimised use of real estate properties through space management measures. In particular, 8
properties rented by third parties were released, 31 property units were categorised as assets for sale
and 3 organic city plans were developed.
Security
The implementation of the Branch Physical Security project continued with total investments of
around EUR 44 mln to improve the level of branch security, reduce the risk of robberies, improve
cash management and custody and reduce operating expenses, mainly through the removal of security
guards at the branches and better management of the valuables transport processes.
Initiatives to improve internal service quality




A range of efficiency projects were launched, through IT and process solutions, on business
support activities (e.g. customer personal data requirements and judicial authority investigations,
logistics processes, Network support services).
A new ATM Manager structure was established to guarantee even more efficient ATM operations.
An organisational unit was formed to handle the administrative and accounting requirements
previously under the responsibility of Consum.it.
The project intended to reinforce possible synergies between securities and cash transaction
services in the domestic and foreign markets also continued, entailing participation in Target2Securities (T2S), the new Eurosystem platform for the centralised settlement of securities
transactions.
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Half Year Report on Operations
Relationship capital
As part of Group value and performance, it is important to develop effective relationships with
stakeholders and succeed in combining the goal of meeting their different expectations with the
delivery of business objectives.
These relationships are managed at head office level by a range of company functions and, in most
cases, are handled at the operational level in the regions.
Stakeholder input and requests regarding issues subject to the Bank’s listening and engagement
initiatives are taken into consideration with various degrees of importance and urgency in company
decisions.
The most well structured and ongoing relationships included in particular: investor relation activities,
industrial relations and collaboration with consumer associations (the so-called ConsumerLab).
Investor relations
In managing relationships with the financial community, Investor Relations diversifies its approach
based on the party involved, with the objective of ensuring that the information provided to rating
agencies, analysts (equity and fixed income), financial operators and institutional and retail investors is
symmetrical and balanced. The communication strategy is based on comprehensive sharing of
information with management and all price-sensitive communications are promptly announced, in
order to create a direct and continual dialogue.
As part of marketing activities, since the beginning of the year top management has met with more
than 150 institutional investors (equity and fixed income) at the offices of the Bank, at road shows
(Italy, UK and the United States) and via conference calls.
The financial community focused its attention on different issues depending on the type of party
involved: retail investors concentrated largely on the capital strengthening transaction, whilst
institutional investors and analysts kept watch on the Group’s new corporate governance structure, the
new guidelines of the Restructuring Plan and the repayment of the New Financial Instruments.
Industrial relations
Communications with trade unions are oriented towards the best possible management of effects on
employees with a view to: protecting employment, developing the professional competencies of
resources and enhancing the corporate welfare system.
In the second quarter of 2015, industrial relations, which had previously been blocked due to the
renewal of the industry National Collective Labour Agreement of 19 January 2012, resumed following
the signing of the draft contract renewal.
In the first half of the year, the Parties met in line with contractual procedures to discuss the impacts
on employees of the company’s reorganisation plans (especially in the credit and sales areas). In
particular, in the second quarter, the contract procedures associated with the company reorganisation
were completed with agreements signed by all trade unions, relating to the distribution network
reorganisation plan (review of the Institutions, Corporate SME and Small Business service models),
with the resulting launch of two pilot phases, the organisational development of the ratings agencies
and the absorption of the subsidiary Consum.it.
A union agreement on training was also signed (2015 Training Plan and Financed Training). In the area
of corporate welfare, an agreement was approved by the Parties to establish a Commission on social,
pension and welfare topics of collective interest.
BANCA MONTE DEI PASCHI DI SIENA
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70
Discussions continued on the various topics concerning human resources, including the incentive
system and the company’s employee performance assessment system, and the company bonus
procedure set forth in the contract was launched. In addition, meetings were held with joint bodies
operating across the business (Security, Corporate Observatory, Environmental Sustainability,
Training, and Equal Opportunities) in order to enhance dialogue and make communications between
the parties about workplace safety, environmental safety and, more generally, business quality
standards more effective.
At national level, after one year of negotiations, on 31 March 2015 the ABI and all industry unions
signed the draft agreement for the renewal of the National Collective Labour Agreement of 19 January
2012. On 16 June, the procedures of the General Meetings of workers called to take a stance on the
draft renewal of the above-mentioned National Collective Labour Agreement were completed with a
positive outcome (with approval by 96.1% and removal of any reservations); the Parties are completing
a joint examination of the relative coordinated text.
ConsumerLab
“BancAscuola”, the financial education programme in operation for several years in partnership with
the consumer associations, involved 8 high schools in just as many Italian cities during the half.
The “Consumer-Lab a Casa Vostra” project was developed through a series of workshops-debates
focusing on banking and consumer issues identified as significant in cooperation with the associations
and local institutions involved. Six workshops were held during the half-year in the same number of
Italian cities on the issues of “Energy and construction requalification of properties”; “Security of
mobile banking and e-commerce services”; and “Financial protection and supplementary pension
services”.
Community and local relationships
Apart from the social function of credit and other typical banking activities, the Group fulfils
corporate citizenship duties through which it contributes to generating social and economic added
value in the community. These actions are carried out in the local areas in collaboration with significant
stakeholders.
Products and services with social and environmental objectives
Relationships with institutions and other local social and economic development players generate the
main product/service/model innovations that the Bank has incorporated into its product offerings in
order to provide customers and local communities with social and environmental benefits exceeding
those that may be produced through standard commercial operations.
Social objectives
The main action areas in the half included:
 measures to combat the effects of the economic crisis on customers, for example by: suspending
mortgages (more than 4 thousand new suspensions for a value of EUR 629 mln) and personal
loans, with no additional administrative costs, providing financial support to SMEs with temporary
cash flow difficulties or which have receivables due from the public administration, and providing
advance payments or derogation of the extraordinary redundancy fund (roughly EUR 1.4 mln
subject to agreements; approximately EUR 14.5 mln since the start of the initiative);
 bank products and services under accessible conditions that meet the needs of the weakest
customer segments. For example: basic current accounts (268 new accounts opened, which bring
the total of this account type to 3,372), support to young people and those with unstable work
situations for education and to purchase first homes, product range for immigrants and non-profit
organisations;
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

Half Year Report on Operations
microcredit, primarily through the operations of the Group company Microcredito di Solidarietà
Spa (93 new loans for a total value of EUR 266 thousand);
measures to support customers suffering from the effects of natural disasters.
Environmental objectives
Activities during the first half of the year in the area of green finance regarded in particular financial
advisory services, asseverations of financial plans and the financing of plants to produce electricity
from renewable energy sources, provided to corporate customers by the subsidiary MPS Capital
Services (5 new transactions for a total of around EUR 52 mln). In addition, amongst the new
promotional offers, the launch of the “Un Monte di Energia” leasing product for environmentally
friendly vehicles is particularly significant.
Contributions to local welfare and community social development
The Group contributes to the activities of public institutions and non-profit organisations for the
protection of basic economic and social rights through:
 sponsorships (116 during the half, for a total of around EUR 577 thousand);
 donations towards research, medical and hospital services, social welfare and humanitarian
programmes and contributions for social projects promoted by the local entities with which the
Bank has commercial relationships (around EUR 257 thousand during the half);
 partnerships with local stakeholders.
In this last regard, the activity was carried out based on a new strategic policy and a model of relations
with institutions and other local stakeholders (named “Banca MPS con i territori” [“Banca MPS with
the community”]), through which the Bank pools its assets (skills, structures, relationship network,
artistic and cultural assets, etc.) to pursue common social goals in areas such as: social assistance and
advancement, training, art and culture, the values of sport.
Key measures implemented in the course of the half-year included:



Social assistance and advancement - collaboration with the National Institute for the Deaf for
the dissemination of sign language, including amongst the Bank’s sales network employees, and the
usual support for social aggregation work carried out by Società di Contrada di Siena.
Training - the agreement with the non-profit organisation Consel-Elis to promote advanced
professional training and support young people in their transition to work. In this context, the
children of Bank employees were also engaged to participate in the “School of good business”
programme.
Art and Culture - continuation of the “Ritorno alla Luce” project, with the restoration and
subsequent public display of 2 additional works of art of the Bank; participation in the Festival of
Creative Culture with the involvement of schools in local didactic workshops; partnership with
activities of the Chigiana Music Academy to promote musical culture and boost the availability of
works of art from the Chigi Saracini collection; collaboration with the Amici del Palio Committee
to contribute to raising awareness of the city’s history and traditions amongst children and young
people in Siena schools; collaboration with the Prefecture and other Siena institutions to create a
documentary film about World War I that will be shown in schools.
BANCA MONTE DEI PASCHI DI SIENA
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72
Reputational capital
In line with the provisions of the Bank’s communications plan, particularly the three drivers of
communications activities for 2015 (1-training and work, 2-culture, 3-social and sport), during the half
image enhancement and protection regarded the Bank’s institutional and commercial activities.
Beyond the protection and monitoring of the brand in printed publications (significant international
publications, national and local newspapers and magazines), in the first half of the year a series of
activities closely correlated with and in support of the sales department were carried out which
triggered an increase in the visibility of and consideration for the brand.
Indeed, along with micro advertising campaigns and sponsorships in the community aiming to favour
brand and product awareness, several events were held to increase consideration for and appreciation
of the brand by the target audience.
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Half Year Report on Operations
BMPS share price
Share price and trends
The half ended with much concern about the financial markets due mainly to the Greek crisis, which
has generated uncertainty. However, in the first six months the stock markets were positive, with the
European exchanges marking considerable performance: the FTSE MIB grew by 18%, the CAC by
12.1% and the DAX by 11.6%; the IBEX had more limited growth (+4.8%), while London closed
down slightly (-0.7%). The United States made marginal progress (S&P500 +0.20%), while Japan
posted double-digit growth (Nikkei +16.0%). The banking segment closed the half up, with the Italian
index FTSE IT Banks at +27% and the DJ Euro Stoxx banks at +11.6%.
BMPS stock closed the half at EUR 1.746, a performance of -8.7% since the beginning of the year.
BMPS SHARE PRICE (from 30/06/2014 to 30/06/2015)
BMPS SHARE PRICE: STATISTICAL SUMMARY (from 12/31/2014 to 06/30/2015)
Average
2.13
Lowest
1.63
Highest
2.56
During the first half of 2015 the number of BMPS shares traded reached 4,724 mln. Specifically, the
average daily number of trades was 37.8 mln, with a minimum of 2.9 mln on 25 May (date on which
the share capital increase transaction began) and a maximum of 157.9 mln on 17 June. Values for the
first quarter of 2015 were recalculated following the share capital increase transaction that started on
25 May and was completed on 12 June 2015.
MONTHLY VOLUMES OF SHARES TRADED
2015 volumes summary (€/mln)
January
555
February
985
March
651
April
315
May
751
June
1,468
BMPS SHARE RATINGS AS AT 30/06/2015
Neutral/Positive
82%
Negative
18%
BANCA MONTE DEI PASCHI DI SIENA
Half Year Report on Operations
74
Ratings
The ratings given by the rating agencies as at 30/06/2015 are provided below:



Rating Agencies
Short-term debt
Moody's Investors Service
NP
DBRS
R-2 (low)
Fitch Ratings
B
Outlook
Under Review
Long-term debt
Outlook
Last update
B3
Negative
22/04/15
BBB (low)
Under Review
20/05/15
B-
Stable
19/05/15
On 18 February 2015, DBRS lowered the issuer’s ratings by one notch, as a result of the
publication of the results for 2014. In particular, it placed the long-term rating at “BBB(low)”
(previously “BBB”) and the short-term rating at “R-2(low)” (previously “R-2(mid)”), keeping them
at investment grade level. The outlook remained “on the watchlist for a possible downgrade”. That
outlook was confirmed on 20 May 2015 following the decision made by the agency with respect to
37 European banks, including the issuer. This decision was justified, also in this case, by recent
legislative, regulatory and political developments undertaken following the approval of the Bank
Recovery and Resolution Directive.
On 22 April 2015, following publication of the new rating criteria and the downgrade of the
systemic support provided to banks of countries involved in the single mechanism for settling
bank crises, Moody’s downgraded the long-term rating from ‘B1’ to ‘B3’, with negative outlook.
The individual rating (Baseline Credit Assessment – BCA) was instead confirmed at “caa2”, due to
the approval of the share capital increase by the extraordinary shareholders’ meeting.
On 19 May 2015, Fitch raised the individual Viability Rating from “ccc” to “b-”, lowered the longterm rating from BBB to B- with a stable outlook and confirmed the short-term rating at “F3”.
The Bank’s ratings were lowered in light of Fitch’s review of the rating criteria and in particular the
assumptions underlying the public support announced in March 2014. In line with the outlooks,
Fitch deems that the legislative, regulatory and political initiatives undertaken following the
approval of the Bank Recovery and Resolution Directive substantially reduced the probability of
receiving systemic support for US, Swiss and European Union banks.
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75
Half Year Report on Operations
Annexes
BANCA MONTE DEI PASCHI DI SIENA
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76
Reconciliation between the reclassified income statement and balance sheet and the
related statutory accounts
Reconciliation between the reclassified income statement as at 30/06/2015 and related
statutory accounts
Accounts in Reclassified Profit and Loss Statement - Montepaschi
Group
Net interest income
Net fee and commission income
Dividends, similar income and gains (losses) on investments
Net profit (loss) from trading
30/06/2015
1,171.7
927.1
Accounts in the Profit and Loss Statement - Montepaschi Group
30/06/2015
Interest income and similar revenues
Voce 10
2,190.9
Interest expense and similar charges
Voce 20
-1,037.4
Fee and commission income
Voce 40
1,104.1
-176.9
Fee and commission expense
Voce 50
66.3
Dividends and similar income
Voce 70
14.2
230.8
Net profit (loss) from trading
Voce 80
110.9
Gains/losses on disposal/repurchase of:
Voce 100
132.7
a) loans
-27.2
b) financial assets available for sale
161.0
Operating Reclassifications
(+)
Economic effects from allocation of BAV acquisition costs to BMPS
(PPA)
(-)
Reclassification of dividends on treasury stock transactions
30/06/2015
18.2
Voce 70 - Parziale
-5.4
(+) Portion of profit from equity investments (Gruppo AXA)
Voce 240 - Parziale
57.6
(+) Reclassification of dividends on treasury stock transactions
Voce 70 - Parziale
5.4
(-)
Voce 220 - Parziale
c) held to maturity investments
d) financial liabilities
Net profit (loss) from hedging
Other operating expenses/income
Income from banking and insurance activities
-1.1
Net profit (loss) from financial assets and liabilities designated at fair value
Voce 110
-18.1
18.0
Net profit (loss) from hedging
Voce 90
18.0
12.7
Other income/expenses (net) from insurance activities
Voce 220
2,426.8
193.0
Recovery of stamp duty and customers’ expenses
2,531.2
Administrative expenses
-1,208.6
Administrative expenses
a) Personnel expenses
-833.8
a) Personnel expenses
Voce 180a
-834.4
b) Other administrative expenses
-374.8
b) Other administrative expenses
Voce 180b
-555.1
-104.5
(+) Restructuring costs (early retirement incentives/provisions)
Voce 180a - Parziale
(-)
Voce 180b - Parziale
Restructuring costs (early retirement incentives/provisions)
(+) Recovery of stamp duty and customers’ expenses
Net losses/reversal on impairment on property, plant and equipment / Net adjustments to
(recoveries on) intangible assets
-102.1
Net losses/reversal on impairment on property, plant and equipment
Voce 200
-60.8
Net adjustments to (recoveries on) intangible assets
Voce 210
-55.1
(+)
(-)
Operating expenses
-1,310.7
Pre Provision Profit
1,116.0
Net impairment losses (reversals) on:
a) loans
b) financial assets
-982.4
-984.0
1.7
Net impairment losses(reversals) on
90.1
a) loans
Voce 130a
-984.0
b) financial assets available for sale
Voce 130b
-3.2
c) held to maturity investments
Voce 130c
d) other financial transactions
Voce 130d
4.8
-48.6
Net provisions for risks and charges
Voce 190
-48.6
Gains (losses) on investments
125.1
Gains (losses) on investments
Voce 240
182.7
Gains (losses) from disposal of investments
Voce 270
1.0
Tax expense (recovery) on income from continuing operations
Voce 290
Profit (loss) after tax from groups of assets held for sale and discontinued
operations
Voce 310
Profit (loss) before tax from continuing operations
Tax expense (recovery) on income from continuing operations
Profit (loss) after tax from continuing operations
210.6
Net profit (loss) attributable to non-controlling interests
215.8
-0.8
Net profit (loss) attributable to non-controlling interests
Voce 330
Profit (loss) for the period before PPA , impairment on goodwill, intangibles and writedown of investment
215.0
in AM Holding
PPA (Purchase Price Allocation)
Parent company's net profit (loss) for the period
CONSOLIDATED INTERIM REPORT
15.8
Voce 240 - Parziale
-57.6
(-)
Restructuring charges
Voce 180b - Parziale
-0.6
(-)
Economic effects from allocation of BAV acquisition costs to BMPS
(PPA)
32.0
Parent company's net profit (loss) for the period
-10.6
21.4
194.4
21.4
-0.8
193.6
21.4
(-)
Impairment on goodwill and intangibles
193.6
Portion of profit from equity investments (Gruppo AXA)
194.4
-21.4
Impairment on goodwill and intangibles
90.1
(-)
178.6
215.8
Profit (loss) after tax from groups of assets held for sale and discontinued operations
Net profit (loss) for the period including non-controlling interests
43.5
-0.6
5.2
13.8
194.6
-982.4
133.6
1.0
Economic effects from allocation of BAV acquisition costs to BMPS
(PPA)
impairment on goodwill
0.6
180.3
1,025.9
Net provisions for risks and charges
Gains (losses) from disposal of investments
Voce 220 - Parziale
-1,505.4
Voce 130
Net income from banking activities
Restructuring costs
-180.3
-1,389.5
Voce 260
(-)
193.6
Economic effects from allocation of BAV acquisition costs to BMPS
(PPA)
impairment on goodwill
Total
-21.4
0.0
77
Half Year Report on Operations
Reconciliation between the reclassified income statement as at 30/06/2014 and related
statutory accounts
Accounts in Reclassified Profit and Loss Statement - Montepaschi
Group
30/06/2014
Net interest income
972.0
Net fee and commission income
871.0
Accounts in the Profit and Loss Statement - Montepaschi Group
30/06/2014
Interest income and similar revenues
Voce 10
2,744.1
Interest expense and similar charges
Voce 20
-1,786.4
Fee and commission income
Voce 40
1,052.9
Fee and commission expense
Voce 50
-181.9
Dividends, similar income and gains (losses) on investments
49.5
Dividends and similar income
Voce 70
28.9
Net profit (loss) from trading
73.7
Net profit (loss) from trading
Voce 80
77.0
Gains/losses on disposal/repurchase of:
Voce 100
40.6
a) loans
Operating Reclassifications
(+)
Economic effects from allocation of BAV acquisition costs to BMPS
(PPA)
(-)
Reclassification of dividends on treasury stock transactions
30/06/2014
14.3
Voce 70 - Parziale
-13.3
(+) Portion of profit from equity investments (Gruppo AXA)
Voce 240 - Parziale
33.9
(+) Reclassification of dividends on treasury stock transactions
Voce 70 - Parziale
13.3
(-)
Voce 220 - Parziale
-13.6
b) financial assets available for sale
54.3
c) held to maturity investments
d) financial liabilities
Net profit (loss) from hedging
Other operating expenses/income
Income from banking and insurance activities
0.0
Net profit (loss) from financial assets and liabilities designated at fair value
Voce 110
-57.3
-13.3
Net profit (loss) from hedging
Voce 90
-13.3
-16.3
Other income/expenses (net) from insurance activities
Voce 220
1,936.5
139.7
Recovery of stamp duty and customers’ expenses
2,044.4
Administrative expenses
-1,232.4
Administrative expenses
a) Personnel expenses
-851.3
a) Personnel expenses
Voce 180a
-855.1
b) Other administrative expenses
-381.1
b) Other administrative expenses
Voce 180b
-537.2
-107.8
(+) Restructuring costs (early retirement incentives/provisions)
Voce 180a - Parziale
(-)
Voce 180b - Parziale
Restructuring costs (early retirement incentives/provisions)
(+) Recovery of stamp duty and customers’ expenses
Net losses/reversal on impairment on property, plant and equipment / Net adjustments to (recoveries on)
-98.8
intangible
Net assets
losses/reversal on impairment on property, plant and equipment
Net adjustments to (recoveries on) intangible assets
Voce 200
Voce 210
Pre Provision Profit
Net impairment losses (reversals) on:
a) loans
b) financial assets
-1,331.2
605.3
-1,226.9
-1,208.0
-19.0
Net impairment losses(reversals) on
-54.1
(+)
65.8
-1,226.9
Voce 130a
-1,208.0
b) financial assets available for sale
Voce 130b
-21.4
c) held to maturity investments
Voce 130c
d) other financial transactions
Voce 130d
2.5
-82.0
Net provisions for risks and charges
Voce 190
-82.0
Gains (losses) on investments
175.3
Gains (losses) on investments
Voce 240
209.2
Gains (losses) from disposal of investments
Voce 270
5.1
Profit (loss) before tax from continuing operations
Tax expense (recovery) on income from continuing operations
Profit (loss) after tax from continuing operations
-527.0
Net profit (loss) attributable to non-controlling interests
Tax expense (recovery) on income from continuing operations
Voce 290
Profit (loss) after tax from groups of assets held for sale and discontinued
operations
Voce 310
-333.1
-1.1
Net profit (loss) attributable to non-controlling interests
Voce 330
Profit (loss) for the period before PPA , impairment on goodwill, intangibles and writedown of investment
-334.2
in AM Holding
PPA (Purchase Price Allocation)
Parent company's net profit (loss) for the period
203.2
Portion of profit from equity investments (Gruppo AXA)
Voce 240 - Parziale
(-)
Restructuring charges
Voce 180b - Parziale
Parent company's net profit (loss) for the period
-33.9
-3.8
28.1
(-)
Economic effects from allocation of BAV acquisition costs to BMPS
(PPA)
-9.3
18.8
-351.9
18.8
-1.1
-353.0
18.8
(-)
Impairment on goodwill and intangibles
-353.0
(-)
-351.9
-18.8
Impairment on goodwill and intangibles
65.8
-555.1
-333.1
Profit (loss) after tax from groups of assets held for sale and discontinued operations
Net profit (loss) for the period including non-controlling interests
-687.4
-3.8
193.9
13.8
539.5
Voce 130
a) loans
-621.6
5.1
Economic effects from allocation of BAV acquisition costs to BMPS
(PPA)
impairment on goodwill
173.7
Net provisions for risks and charges
Gains (losses) from disposal of investments
3.8
156.0
-1,504.9
Net income from banking activities
Restructuring costs
Voce 220 - Parziale
-58.5
(-)
Operating expenses
-156.0
-1,392.3
Voce 260
(-)
-353.0
Economic effects from allocation of BAV acquisition costs to BMPS
(PPA)
impairment on goodwill
Total
-18.8
0.0
BANCA MONTE DEI PASCHI DI SIENA
Half Year Report on Operations
78
Reconciliation between the reclassified balance sheet and related statutory accounts
Balance-sheet Items - Assets
Item 10 − Cash and cash equivalents
Item 70 − Loans to customers
Item 60 − Loans to banks
Item 20 − Financial assets held for trading
Item 30 − Financial assets designated at fair value
Item 40 − Financial assets available for sale
Item 50 − Held to maturity investments
Item 100 − Equity investments
Item 110 − Reinsurers's technical reserves
Item 120 − Property, plant and equipment
Item 130 − Intangible assets
Item
Item
Item
Item
Item
80 − Hedging Derivatives
90 − Change in value of macro-hedged financial assets (+/-)
140 − Tax assets
150 − Non-current assets held for sale and discontinued operations
160 − Other assets
Total Assets
Balance-sheet Items - Liabilities
Item 20 − Deposits from customers
Item 30 − Debt securities issued
Item 50 − Financial liabilities designated at fair value
Item 10 − Deposits from banks
Item 40 − Financial liabilities held for trading
Item 110 − Provision for employee severance pay
Item 120 - Provisions for risks and charges - a) pension and similar obligations
Item 120 - Provisions for risks and charges - b) other provisions
Item
Item
Item
Item
Item
60 − Hedging Derivatives
70 − Change in value of macro-hedged financial liabilities (+/-)
80 − Tax liabilities
90 − Liabilities associated to disposal groups held for sale
100 − Other liabilities
Item 130 − Insurance Reserves
Item
Item
Item
Item
Item
Item
Item
Item
140 − Valuation reserves
150 − Redeemable shares
160 − Equity instruments
170 − Reserves
180 − Share premium reserve
190 − Share Capital
200 − Treasury shares (-)
220 − Profit (loss) for the period (+/-)
Item 210 − Non-controlling interests (+/-)
Total liabilities and shareholders' equity
CONSOLIDATED INTERIM REPORT
30/06/2015
822
822
117,436
117,436
8,327
8,327
36,335
16,355
19,980
908
908
3,122
2,693
429
10,754
470
150
6,974
87
3,073
177,705
30/06/2015
126,238
94,745
29,148
2,344
18,831
18,831
13,415
13,415
246
50
1,106
8,421
3,037
54
5,330
9,373
(668)
1,085
4
8,759
194
24
24
177,705
31/12/2014
1,007
1,007
119,676
119,676
7,723
7,723
39,776
16,929
22,848
1,014
1,014
3,229
2,787
442
11,019
613
179
7,562
22
2,643
183,444
Reclassified balance-sheet items - Assets
Cash and cash equivalents
Loans and receivables
a) Loans to customers
b) Loans to banks
Held to maturity investments
Financial assets held to maturity
Investments
Reinsurers' technical reserves
Property, plant and equipment / Intangible assets
Other assets
Total Assets
31/12/2014
126,224
93,145
30,455
2,624
27,648
27,648
13,702
13,702
271
66
1,085
8,459
4,112
164
4,184
5,965
(685)
3
(496)
2
12,484
(0)
(5,343)
24
24
183,444
Reclassified balance-sheet items - Liabilities
Deposits
a) Deposits from customers and securities issued
b) Deposits from banks
Financial liabilities held for trading
Provisions for specific use
Other liabilities
Insurance reserves
Group portion of shareholders' equity
a) Valuation reserves
b) Redeemable shares
c) Capital instruments
d) Reserves
e) Share premium reserves
f) Share capital
g) Treasury shares (-)
h) Profit (loss) for the period
Non-controlling interests in shareholders' equity
Total liabilities and shareholders' equity
79
Half Year Condensed Consolidated Financial Statement
Consolidated balance sheet ................................................................................................. 81
Consolidated income statement .......................................................................................... 83
Consolidated statement of comprehensive income ............................................................ 84
Consolidated Statement of changes in equity – 30 june 2015 .............................................. 85
Consolidated Statement of changes in equity – 30 june 2014 .............................................. 87
Consolidated cash flow statement indirect method ............................................................ 89
BANCA MONTE DEI PASCHI DI SIENA
80
CONSOLIDATED INTERIM REPORT
81
Half year condensed consolidated financial statements – Consolidated Balance Sheet
Consolidated balance sheet
Assets
30 06 2015
10 Cash and cash equivalents
31 12 2014
822,024
1,006,586
20 Financial assets held for trading
16,355,222
16,928,788
40 Financial assets available for sale
19,980,021
22,847,582
8,327,235
7,722,753
70 Loans to customers
117,436,256
119,676,132
80 Hedging derivatives
470,022
612,957
90 Change in value of macro-hedged financial assets (+/-)
150,001
178,613
907,666
1,013,899
2,693,068
2,787,083
429,329
441,693
7,900
7,900
Tax assets
6,973,833
7,562,419
a) current
3,428,475
1,875,789
b) deferred
3,545,358
5,686,630
2,321,658
4,404,780
86,812
21,805
60 Loans to banks
100
Equity investments
120
Property, plant and equipment
130
Intangible assets
of which: goodwill
140
under Law 214/2011
150
Non-current assets and groups of assets held for sale and
discontinued operations
160
Other assets
3,073,268
2,643,513
Tatal assets
177,704,757
183,443,823
Non-current assets and group of assets held for sale and discontinued operations as at 30 June 2015 refer:
-
to the associate investment Antoniana Veneta Popolare Vita S.p.a.(EUR 10.4 mln),
-
to the investee SAT- Società Autostrada Tirrenica p.A. (EUR 16.9 mln);
-
to some properties of the Parent Company (EUR 59.5 mln).
BANCA MONTE DEI PASCHI DI SIENA
Half year condensed consolidated financial statements – Consolidated Balance Sheet
82
follows: Consolidated balance sheet
Liabilities and Shareholders' Equity
30 06 2015
31 12 2014
10 Deposits from banks
18,830,869
27,647,671
20 Deposits from customers
94,745,441
93,144,981
30 Debt securities issued
29,147,717
30,455,439
40 Financial liabilities held for trading
13,414,777
13,701,789
50 Financial liabilities designated at fair value
2,344,445
2,623,620
60 Hedging derivatives
3,036,586
4,112,108
54,393
163,510
a) current
4,878
97,461
b) deferred
49,515
66,049
5,330,440
4,183,569
246,391
271,434
1,156,313
1,151,049
50,251
65,915
1,106,062
1,085,134
80
Tax liabilities
100
Other liabilities
110
Provision for employee severance pay
120
Provisions for risks and charges:
a) post-employment benefits
b) other provisions
140
Valuation reserves
160
Equity instruments
170
Reserves
180
Share premium
190
Share capital
210
220
(668,452)
(685,460)
-
3,002
1,085,274
(496,120)
3,956
2,291
8,758,683
12,484,207
Non-controlling interests (+/-)
24,314
23,625
Profit (loss) (+/-)
193,610
(5,342,892)
177,704,757
183,443,823
Total Liabilities and Shareholders' Equity
CONSOLIDATED INTERIM REPORT
83
Half year condensed consolidated financial statements – Consolidated income statement
Consolidated income statement
Items
30 06 2015
30 06 2014
10 Interest income and similar revenues
2,190,922
2,744,112
20 Interest expense and similar charges
(1,037,413)
(1,786,431)
30
1,153,509
957,681
40 Fee and commission income
Net interest income
1,104,056
1,052,912
50 Fee and commission expense
(176,912)
(181,913)
60
927,144
870,999
70 Dividends and similar income
Net fee and commission income
14,172
28,899
80 Net profit (loss) from trading
110,880
76,975
90 Net profit (loss) from hedging
18,023
(13,283)
132,657
40,643
a) loans
(27,185)
(13,635)
b) financial assets available for sale
160,970
54,312
(1,128)
(34)
(18,128)
(57,278)
100 Gains/(losses) on disposal/repurchase of:
d) financial liabilities
Net profit (loss) from financial assets and liabilities designated at fair
110
value
120
Net interest and other banking income
130 Net impairment (losses)/reversals on
a) loans
140
2,338,257
1,904,636
(982,387)
(1,226,913)
(984,049)
(1,207,954)
b) financial assets available for sale
(3,182)
(21,432)
d) other financial transactions
4,844
2,473
Net income from banking activities
1,355,870
677,723
(1,389,467)
(1,392,255)
a) personnel expenses
(834,396)
(855,096)
b) other administrative expenses
180 Administrative expenses:
(555,071)
(537,159)
190 Net provisions for risks and charges
(48,581)
(82,006)
200 Net adjustments to/recoveries on property, plant and equipment
(60,758)
(58,515)
210 Net adjustments to/recoveries on intangible assets
(55,144)
(54,083)
220 Other operating expenses/income
192,979
139,737
(1,360,971)
(1,447,122)
182,720
209,216
230
Operating expenses
240 Gains (losses) on investments
270 Gains (losses) on disposal of investments
280
Profit (loss) before tax from continuing operations
290 Tax (expense)/recovery on income from continuing operations
1,023
5,107
178,642
(555,076)
15,750
203,150
300
Profit (loss) after tax from continuing operations
194,392
(351,926)
320
Profit (loss)
194,392
(351,926)
782
1,106
330 Profit (loss) attributable to non-controlling interests
340
Parent company's net profit (loss)
193,610
(353,032)
30 06 2015
30 06 2014
Basic Earnings per Share (Basic EPS)
0.369
(31.097)
of continuing operations
0.369
(31.097)
Diluted Earnings per Share (Diluted EPS)
0.348
(31.097)
of continuing operations
0.348
(31.097)
Basic and diluted earnings per share as at 30 june 2014 include the grouping of the Parent Company’s ordinary shares at a
ratio of 1 new ordinary share to 20 treasury shares that was carried out on 18 May 2015, pursuant to the resolution issued by
the Parent Company’s Extraordinary Shareholders Meeting held on 16 April 2015.
BANCA MONTE DEI PASCHI DI SIENA
Consolidated financial statements – Consolidated statement of comprehensive income
84
Consolidated statement of comprehensive income
Items
10
Profit (loss)
30 06 2015
30 06 2014
194,392
(351,926)
Other comprehensive income after tax not recycled to profit and
loss
15,620
(15,624)
40
Actuarial gains (losses) on defined benefit plans
15,581
(15,531)
60
Share of valuation reserves of equity-accounted investments
39
(93)
Other comprehensive income after tax recycled to profit and loss
46,938
437,308
5,155
565
14,721
(28,154)
80
Exchange differences
90
Cash flow hedges
100
Financial assets available for sale
1,617
364,049
110
Non current assets held for sale
308
(28,786)
120
Share of valuation reserves of equity-accounted investments
25,137
129,634
130
Total other comprehensive income after tax
62,558
421,684
140
Total comprehensive income (Item 10+130)
256,950
69,758
150
Consolidated comprehensive income attributable to non-controlling
interests
782
1,128
160
Consolidated comprehensive income attributable to Parent
Company
256,168
68,630
CONSOLIDATED INTERIM REPORT
Balance as at 31 12 2014
5,988,653
5,965,028
Total equity
Group equity
23,625
(5,347,267)
Net profit (loss)
-
-
-
-
-
-
-
-
-
(3,002)
(45,760)
-
1,422,570
23,625
5,965,028
5,988,653
-
-
-
(5,347,267) 5,347,167
-
3,002
(684,222)
(295,570)
(187,416)
1,422,570
(2,291)
-
-
-
-
-
-
-
-
-
100
-
100
100
Dividends and
other payout
Non-controlling
interests
-
3,002
Equity instruments
Treasury shares
(684,222)
(295,570)
b) other
-
(482,986)
2,506
-
(197)
481
284
-
-
-
210
(459)
535
76
(2)
-
-
-
3,151,394
3,151,394
-
-
-
-
154,277
-
154,277
3,956
-
2,993,161
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
4
-
4
-
-
-
-
-
-
-
-
-
4
4
-
-
-
-
-
-
-
782
256,168
256,950
194,392
-
-
62,558
Total comprehensive
income for 30 06 2015
Valuation reserves
(187,416)
-
-
-
-
Changes in reserves
a) from profits
(482,986)
2,506
Reserves:
Share premium
Change in opening balances
-
Balance as at 01 01 2015
b) other shares
Reserves
12,497,620 (6,718,684)
Issue of new
share
-
Purchase of
treasury shares
-
Extraordinary
distribution of
dividends
2,993,161
Stock options
12,497,620
-
Treasury shares
derivatives
Change in equity
instruments
a) ordinary shares
-
Changes in
equity
investments
12,497,620 (6,718,684)
24,314
9,373,071
9,397,385
194,392
-
-
(667,214)
(141,752)
1,235,689
1,093,937
4,169
-
8,772,101
8,772,101
Total equity as at 30 06 2015
-
X
9,373,071
9,373,071
193,610
-
-
(668,452)
(141,752)
1,227,026
1,085,274
3,956
-
8,758,683
8,758,683
Group equity as at 30 06
2015
12,497,620
Shareolders'equity transactions
Changes during the year
24,314
X
24,314
782
-
-
1,238
-
8,663
8,663
213
-
13,418
13,418
Non-controlling interests as
at 30 06 2015
Share capital:
Allocation of profit
from prior year
Consolidated Statement of changes in equity – 30 june 2015
85
Interim Consolidated financial statements – Consolidated statement of changes in equity – 31 march 2015
BANCA MONTE DEI PASCHI DI SIENA
Interim Consolidated financial statements – Consolidated statement of changes in equity - 31 march 2015
86
As at 30 June 2015 the Group’s net equity, including non-controlling interests and result for the period, amounts to EUR
9,397.4 mln, as compared to EUR 5,988.6 mln as at 31 December 2014, with a total increase of EUR 3,408.8 mln.
The most significant phenomena impacting the net equity, in addition to the EUR 194.4 mln profit for the year, were:
1.
in April 2015, the Ordinary Shareholders’ Meeting of the Parent Company resolved to cover the 2014 loss for the
year and the losses carried forward from previous years, for a total of EUR 7,320.1 mln, as follows:
-
for EUR 601.4 through the use of available reserves;
-
for the remainder of the loss, namely EUR 6,718.7 mln, the Extraordinary Shareholders’ Meeting resolved to
reduce capital, pursuant to article 2446 of the Italian Civil Code.
After covering the losses, the Parent Company’s share capital amounted to EUR 5,765.5 mln.
2.
in June 2015, the share capital increase was completed, for EUR 2,993.2 mln, resulting in:
-
an increase in the “Share capital” item for the same amount;
-
a decrease in the item “Reserves - other” for EUR 88.8 mln, due to costs incurred for the transaction, net of
the relative taxes;
-
an increase in the item “Share premium reserve” for EUR 4.0 mln, relating to the proceeds, net of taxes, on
the sale of 1,054,573 option rights not exercised during the offering period and which were subsequently sold
in the market.
The “Share capital” item of the Parent Company as at 30 June 2015 amounted to EUR 8,758.7 mln following the
two events mentioned above.
3.
as implementation of the resolution adopted by the Board of Directors of the Parent Company on 21 May 2015, an
additional capital increase was completed in July 2015 for EUR 243.1 mln, used exclusively for the payment in
shares of the interest accrued as at 31 December 2014 on the New Financial Instruments, in favour of the Ministry
of Economy and Finance, pursuant to the regulations governing them. In application of IAS 32.11 and considering
that, as at the date of this Condensed consolidated half-year Report, the certification pursuant to article 2444 of the
Italian Civil Code had not yet been filed with the Register of Companies, this amount as at 30 June 2015 was
recognised under “Reserves - other”.
4.
“Valuation reserves” showed a total positive change of EUR 62.6 mln.
Non-controlling interests grew EUR 0.7 mln, largely as a result of comprehensive income for the period.
CONSOLIDATED INTERIM REPORT
Balance as at 31 12 2013
(1,438,923)
6,163,479
6,155,265
Net profit (loss)
Total equity
Group equity
BANCA MONTE DEI PASCHI DI SIENA
(24,532)
3,002
6,180,598
24,981
33,195
(7,862) 6,147,403
17,119
4,727 (1,434,196)
-
-
-
-
-
1,434,297
-
-
-
-
(101)
-
(101)
(101)
-
-
-
-
-
(5,314)
288
(5,025)
-
-
-
-
(83)
-
(83)
(4,943)
-
-
4,831,737
4,831,737
-
24,532
-
-
4,822,172
(14,967)
4,807,205
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Stock options
Treasury shares
derivatives
-
-
-
-
-
-
-
-
-
-
-
-
-
-
163
-
163
-
-
-
-
324
-
324
-
-
(162)
(162)
1,128
68,633
69,760
(351,926)
-
-
421,686
-
-
-
-
-
-
-
29,071
11,048,061
11,077,132
(351,925)
(0)
3,002
(633,005)
4,748,369
(187,415)
4,560,954
216
-
7,497,890
7,497,890
X
11,048,061
11,048,061
(353,032)
(0)
3,002
(634,245)
4,748,369
(200,541)
4,547,828
(0)
-
7,484,508
7,484,508
29,071
X
29,071
1,107
-
-
1,240
-
13,126
13,126
216
-
13,382
13,382
* With respect to published accounts, previous period balances are reflective of changes described in the section “Restatement of previous period accounts and changes in estimates in compliance with IAS 8 (Accounting policies, changes in accounting
estimates and errors)” of the 2014 financial statements to which reference should be made.
Non-controlling
interests
(74,045)
1,261,849 (1,434,297)
- (1,054,691)
-
38
Dividends and
other payout
8,214
(24,532)
3,002
Treasury shares
(1,054,691)
Equity instruments
(74,045)
1,261,811
-
-
-
-
-
Total comprehensive
income for 30 06 2014
Valuation reserves
b) other
a) from profits
-
-
1,187,804 (1,434,297)
5,159
Reserves
38
-
-
-
Changes in reserves
1,187,766
5,159
Share premium
-
-
Issue of new
share
Reserves:
-
Changes in opening balances*
b) other shares
Balance as at 01 01 2014
7,498,052
-
Purchase of
treasury share
12,354
-
Extraordinary
distribution of
dividends
7,485,698
-
Change in
equity
instruments
a) ordinary shares
-
Changes in
equity
investments
7,498,052
Total equity as at 30 06 2014
12,354
Group equity as at 30 06 2014
7,485,698
Shareolders'equity transactions
Changes during the year
Non-controlling interests as at
30 06 2014
Share capital:
Allocation of profit
from prior year
Consolidated Statement of changes in equity – 30 june 2014
87
Interim Consolidated financial statements - Consolidated statement of changes in equity – 31 march 2014
Interim Consolidated financial statements - Consolidated statement of changes in equity – 31 march 2014
88
As at 30 june 2014, the Group’s net equity including non-controlling interests and result for the period amounted to EUR
11,077.1 mln, as compared to EUR 6,180.6 mln as at 31 december 2013.
The change reflecting a EUR 4,896.5 mln increase is primarily due to the rights offering for a maximum amount of EUR 5
bn, in accordance with the resolutions issued by the Extraordinary Shareholders’ Meeting of 21 May 2014. At the closing date
for the rights offering period, which started on 9 June 2014 and ended on 27 June 2014, option rights were exercised with a
subscription of 4,992,056,324 new shares accounting for 99.85% of the new shares offered, for a total of EUR 4,992.0 mln.
This amount, net of the related costs and taxes, was recognised under the “Other reserves” item, in compliance with article
2444, paragraph 2, Italian Civil Code since, as at 30 June, the certification of the completed subscription of the share capital
increase had not yet been filed with the Register of Companies.
The loss for the period amounted to EUR 351.9 mln, which included a negative balance of EUR 353.0 mln for the Group
and a positive balance of EUR 1.1 mln in non-controlling interests.
Treasury shares fell by EUR 24.5 mln; profit (loss) from trading in treasury shares (-EUR 15.0 mln) is included under retained
earnings which, during this reporting period, were also affected by the capitalisation of loss recognised as at 31.12.2013,
amounting to EUR 1,434.2 mln.
Valuation reserves registered an overall increase of EUR 421.7 mln, which included:
-
EUR 364.0 mln positives in valuation reserves of assets “available for sale”;
-
EUR 129.5 mln positives in valuation reserves for Equity investments consolidated at equity method,
-
EUR 15.5 mln negative in valuation reserves for actuarial losses arising from defined benefit plans;
-
EUR 28.2 mln negative in valuation reserves for “cash flow hedges”;
-
EUR 0.6 mln positives in valuation reserves for foreign exchange differences.
Non-controlling interests declined by EUR 4.1 mln due primarily to the purchase by the Parent Company, in April 2014, of
92.1% of the shares, with rights of vote, of Perimetro Gestione Proprietà Immobiliari S.C.p.A. for about EUR 5.1 mln,
partially offset by the total income of the period.
CONSOLIDATED INTERIM REPORT
89
Interim Consolidated financial statements - Consolidated cash flow statement indirect method
Consolidated cash flow statement indirect method
A. OPERATING ACTIVITIES
30 06 2015
30 06 2014
1. Cash flow from operations
763,921
637,778
profit (loss) (+/-)
194,392
(351,926)
capital gains/losses on financial assets held for trading and on assets/liabilities
designated at fair value (+/-)
(289,140)
(168,771)
net profit (loss) from hedging
(18,023)
13,283
net impairment losses/reversals
711,555
1,166,960
net losses/reversal on impairment on property, plant and equipment and on
intangible assets (+/-)
115,902
112,598
net provisions for risks and charges and other costs/revenues (+/-)
56,210
92,763
tax espense (recovery) on income from continuing operations
(49,432)
(203,150)
other adjustments
42,457
(23,979)
2. Cash flow from (used in) financial assets
5,764,540
2,497,754
financial assets held for trading
790,299
2,806,314
financial assets available for sale
3,265,161
2,193,396
(605,435)
1,853,619
1,539,377
(3,320,368)
775,138
(1,035,207)
(9,754,065)
(8,475,294)
deposits from banks: on demand
(8,816,802)
(5,468,583)
depostits from customers
1,600,461
4,035,866
debt securities issued
(1,307,721)
(221,550)
financial liabilities held for trading
(225,752)
(4,823,306)
financial liabilities designated at fair value
(268,027)
(2,972,098)
other liabilities
(736,224)
974,377
(3,225,604)
(5,339,762)
30 06 2015
30 06 2014
201,357
366,002
-
194,597
197,287
162,802
3,829
7,069
241
1,534
(68,532)
(44,985)
(8)
-
-
-
purchase of property, plant and equipment
(25,460)
(14,424)
purchase of intangible assets
(43,064)
(30,561)
Net cash flow from (used in) investment activities
132,825
321,017
loans to banks: on demand
loans to customers
other assets
3. Cash flow from (used in) financial liabilities
Net cash flow from (used in) operating activities
B. INVESTMENT ACTIVITIES
1. Cash flow from
sales of equity investments
dividends collected on equity investments
sales of property, plant and equipment
sales of intangible assets
2. Cash flow used in
purchase of equity investments
purchase of financial assets held to maturity
BANCA MONTE DEI PASCHI DI SIENA
Interim Consolidated financial statements – Consolidated cash flow statement indirect method
90
C. FUNDING ACTIVITIES
issue/purchase of treasury shares
dividend distribution and other
Net cash flow from (used in) funding activities
NET CASH FLOW FROM (USED IN) OPERATING, INVESTMENT
AND FUNDING ACTIVITIES DURING THE YEAR
2,908,318
5,001,621
(101)
(102)
2,908,217
5,001,519
(184,562)
(17,226)
Accounts
30 06 2015
30 06 2014
Cash and cash equivalents at beginning of period
1,006,586
877,275
Net increase (decrease) in cash and cash equivalents
(184,562)
(17,226)
Cash and cash equivalents at end of period
822,024
860,050
Reconciliation
For further information on the net cash flow generated/absorbed during the year, please refer to the section "Liquidity Risk"
in Part E "Information on risks and hedging policies".
CONSOLIDATED INTERIM REPORT
91
Explanatory Notes
Part A – Accounting policies ............................................................................................... 93
Part B – Information on the consolidated balance sheet .................................................. 109
Part C – Information on the consolidated income statement ........................................... 127
Part E – Information on risks and hedging policies ......................................................... 143
Part F – Information on consolidated shareholders’ equity .............................................. 193
Part G – Business combinations ....................................................................................... 199
Part H – Related-party transactions .................................................................................. 203
Part I – Share Based Payments ......................................................................................... 213
Part L – Segment reporting ............................................................................................... 217
BANCA MONTE DEI PASCHI DI SIENA
92
CONSOLIDATED INTERIM REPORT
93
Part A – Accounting policies
A.1 – General ...................................................................................................................................................................................... 94
A.3 Information on portfolio transfers ....................................................................................................................................... 100
A.4 – Information on Fair value ................................................................................................................................................... 101
A.5 Information on "day one profit/loss" .................................................................................................................................. 108
BANCA MONTE DEI PASCHI DI SIENA
Explanatory Notes - Part A – Accounting policies
94
A.1 – General
1. Statement of compliance with international accounting principles
The Monte dei Paschi di Siena Group condensed consolidated half-year Report as at 30 June 2015,
drawn up in accordance with the financial reporting requirements set out in art. 154-ter paragraph 3 of
the Consolidated Law on Finance, was prepared in accordance with the IAS/IFRS international
accounting principles issued by the International Accounting Standards Board (IASB) including
interpretations by the IFRS Interpretations Committee, as endorsed by the European Commission and
effective at the time this half-year report (EC Regulation no. 1606 of 19 July 2002). The international
accounting principles were applied following the indications set forth in the “Framework for the
Preparation and Presentation of Financial Statements” (the Framework).
The Condensed Half-Year Report is drawn up:
- in condensed format in accordance with the IAS 34 ‘Interim Financial Reporting’;
- in accordance with the provisions issued in implementation of art. 9 of Italian Legislative
Decree 38/2005, that confers on the Bank of Italy the binding definition of balance sheet
statements and compilation methods, as well as the contents of the Explanatory Notes;
- using the Euro as the currency of reference.
The Condensed Half-Year Report comprises the Consolidated Balance Sheet, the Consolidated
Income Statement, the Consolidated Statement of Comprehensive Income, the Consolidated
Statement of Changes in Equity, the Consolidated Cash Flow Statement, the Explanatory Notes and
the Annexes.
Unless otherwise indicated, the figures in the tables of the consolidated half-year financial statements
and Explanatory Notes are in thousands of Euro.
With reference to the classification, recognition, valuation and derecognition of the various asset,
liability and equity entries, as well as the methods for recognising revenue and costs, the accounting
principles used for the preparation of this Consolidated Half-Year Report are the same as those used
for preparation of the Consolidated Financial Statements as at 31 December 2014, which should be
referred for more detail, with the exception of the following new accounting principles or
amendments, the application of which is mandatory as of financial year 2015.
The year 2015 should see the first-time application of a collection of amendments made to IFRS as
part of the project “Improvements to international accounting standards, 2011-2013 cycle”,
published by the IASB on 12 December 2013 and relating to four areas, briefly outlined below:
a) IFRS 1 “First-time adoption of IFRS” The amendment clarifies that an entity, in its first IFRS
financial statements, has the choice between applying an existing and currently effective IFRS or
applying early a new or revised IFRS that is not yet mandatorily effective, provided that the new or
revised IFRS permits early application. The entity is required to apply the same version of the
IFRS throughout the periods covered by the first IFRS financial statements.
b) IFRS 3 “Business combinations” The amendment clarifies that IFRS 3 excludes from its scope
the accounting for the formation of a joint arrangement in the financial statements of the joint
arrangement itself.
c) IFRS 13 “Fair value measurement” The amendment clarifies that the scope of the portfolio
exception defined in paragraph 48 of IFRS 13 includes all contracts accounted for within the scope
of IAS 39 or IFRS 9 regardless of whether they meet the definition of financial assets or liabilities
as defined in IAS 32.
d) IAS 40 “Investment property” The amendment clarifies that determining whether a specific
transaction meets the definition of both a business combination as defined in IFRS 3 and
investment property as defined in IAS 40 requires the separate application of both standards
independently of each other.
The document was endorsed by the European Commission with Regulation 1361/2014 on 18
December 2014.
CONSOLIDATED INTERIM REPORT
95
Explanatory Notes – Part A – Accounting policies
In addition, the year 2015 should see the first-time application of the interpretation IFRIC 21 –
“Levies”, published by the IASB in May 2013, which applies to all levies except those outflows of
resources that are within the scope of other standards and fines and penalties that are imposed for
breaches of the legislation.
The interpretation, endorsed by the European Commission on 13 June 2014 by means of Regulation
no. 634/2014, deals with accounting for a liability to pay a levy if the liability is subject to IAS 37 as
well as accounting for a liability to pay a levy the amount and timing of which are uncertain.
In particular, IFRIC 21 clarifies that:



an entity recognises a liability for a levy when the event triggering payment, as identified by the
legislation, takes place;
a liability to pay a levy is recognised progressively only if the obligating event occurs over a period
of time;
if an obligation to pay a levy is triggered when a minimum threshold is reached, no liability is
recognised before such minimum threshold is reached.
The application of the abovementioned new accounting rules did not produce any significant impacts
on this Condensed consolidated half-year Report.
Lastly, it should be noted that, with respect to the 2014 financial statements, the new concept of
impaired assets adopted by the Bank of Italy in the 7th update of 20 January 2015 of Circular no. 272
“Accounting Matrix” applies, following the acknowledgement of the new definitions of nonperforming exposures (NPE) and forborne exposures introduced by the implementing technical
standards relating to the harmonised, consolidated supervisory statistical reporting defined by the
European Banking Authority, approved by the European Commission on 9 January 2015 (hereinafter
ITS).
Impaired financial assets are broken down into the following categories: default, unlikely to pay and
overdue and/or past due non-performing exposures; this set of categories corresponds to the nonperforming exposures aggregate pursuant to ITS. The category of exposures subject to concessions
(forborne exposures) was also introduced, which applies across the board to the three aforementioned
categories into which impaired financial assets are subdivided, as well as to performing financial assets.
The notions of substandard and restructured exposures are repealed. The following fall under the
scope of the new categories of impaired financial assets: cash assets (loans and debt securities) and
“off-balance sheet” assets (guarantees issued, irrevocable and revocable commitments to disburse
funds), other than financial instruments allocated to the accounting portfolio “financial assets held for
trading” and derivative contracts.
BANCA MONTE DEI PASCHI DI SIENA
Explanatory Notes - Part A – Accounting policies
96
2. Scope and methods of consolidation
Investments in subsidiaries
Name
A
A.0
A.1
A.2
A.3
A.4
A.5
A.6
A.7
A.8
A.9
A.10
Headquarters
Companies
BANCA MONTE DEI PASCHI DI SIENA S.p.A.
Siena
Siena
A.1 Companies consolidated on a line-by-line
MPS CAPITAL SERVICES BANCA PER LE IMPRESE S.p.a.
Florence
Florence
MPS LEASING E FACTORING BANCA PER I SERVIZI
Siena
Siena
FINANZIARI ALLE IMPRESE S.p.a.
MONTE PASCHI FIDUCIARIA S.p.a.
Siena
Siena
WISE DIALOG BANK S.p.a. - WIDIBA
Milan
Milan
MPS TENIMENTI POGGIO BONELLI E CHIGI SARACINI
Castelnuovo
Castelnuovo
SOCIETA' AGRICOLA S.p.a.
Berardenga (SI) Berardenga (SI)
G.IMM ASTOR S.r.l.
Lecce
Lecce
AIACE REOCO S.r.l.
Siena
Siena
ENEA REOCO S.r.l.
Siena
Siena
CONSORZIO OPERATIVO GRUPPO MONTEPASCHI
Siena
Siena
PERIMETRO GESTIONI PROPRIETA' IMMOBILIARI
S.c.p.a.
Siena
MAGAZZINI GENERALI FIDUCIARI DI MANTOVA S.p.a.
CO.E.M. COSTRUZIONI ECOLOGICHE MODERNE S.p.a.
BANCA MONTE PASCHI BELGIO S.A.
A.14
A.15
A.16
A.17
A.18
MPS PREFERRED CAPITAL I LLC
MPS PREFERRED CAPITAL II LLC
MPS CAPITAL TRUST I
MPS CAPITAL TRUST II
MONTE PASCHI BANQUE S.A.
18.1 MONTE PASCHI CONSEIL FRANCE SOCIETE PAR
18.2 IMMOBILIERE VICTOR HUGO S.C.I.
A.19
MONTEPASCHI LUXEMBOURG S.A.
A.20
A.21
A.22
A.23
A.24
A.25
A.26
A.27
A.28
A.29
A.30
A.31
A.32
A.33
A.34
A.35
A.36
A.37
A.38
ANTONVENETA CAPITAL L.L.C. I
ANTONVENETA CAPITAL L.L.C. II
ANTONVENETA CAPITAL TRUST I
ANTONVENETA CAPITAL TRUST II
MPS COVERED BOND S.r.l.
MPS COVERED BOND 2 S.r.l.
CIRENE FINANCE S.r.l.
MANTEGNA FINANCE II S.r.l. (in liquidazione)
CONSUM.IT SECURITISATION S.r.l.
SIENA MORTGAGES 07-5 S.p.a.
SIENA MORTGAGES 09-6 S.r.l.
SIENA MORTGAGES 10-7 S.r.l.
SIENA SME 11-1 S.r.l.
SIENA LEASE 11-1 S.r.l.
SIENA CONSUMER S.r.l.
SIENA CONSUMER 2015 S.r.l.
SIENA PMI 2015 S.r.l.
CASAFORTE S.r.l.
PATAGONIA FINANCE S.A.
CONSOLIDATED INTERIM REPORT
Mantua
Rome
Bruxelles
A.0
99.921
-
1
A.0
100.000
-
1
1
A.0
A.0
100.000
100.000
-
1
A.0
100.000
-
1
1
1
1
A.0
A.0
A.0
A.0
A.1
A.2
A.4
52.000
100.000
100.000
99.790
0.060
0.030
0.030
99.910
-
1
A.0
98.914
98.716
A.1
A.2
A.3
A.9
A.0
A.0
A.0
A.1
0.120
0.049
0.012
0.905
100.000
40.197
99.900
0.100
100.000
100.000
100.000
100.000
100.000
100.000
99.200
0.800
100.000
100.000
100.000
100.000
100.000
90.000
90.000
60.000
100.000
100.000
7.000
7.000
7.000
100.000
100.000
10.000
10.000
10.000
-
0.142
0.057
0.014
1.072
-
-
Mantua
Rome
Bruxelles
1
4
1
-
-
-
Delaware
Delaware
Delaware
Delaware
Paris
Paris
Paris
Luxembourg
-
New York
New York
New York
New York
Paris
Paris
Paris
Luxembourg
New York
New York
New York
New York
Conegliano
Conegliano
Conegliano
Conegliano
Conegliano
Conegliano
Conegliano
Conegliano
Conegliano
Conegliano
Conegliano
Conegliano
Milan
Rome
Luxembourg
-
1
-
Siena
-
A.11
A.12
A.13
Type of Ownershp Relationship Available
relationship
votes %
Held by
Shareholding % (**)
(*)
Registered
Office
Delaware
Delaware
Delaware
Delaware
Conegliano
Conegliano
Conegliano
Conegliano
Conegliano
Conegliano
Conegliano
Conegliano
Conegliano
Conegliano
Conegliano
Conegliano
Milan
Rome
Luxembourg
1
1
4
4
1
1
1
1
1
1
1
1
1
1
1
4
4
4
1
1
4
4
4
4
4
A.0
A.0
A.0
A.18
A.18
A.0
A.18
A.0
A.0
A.0
A.0
A.0
A.0
A.0
A.0
A.0
A.0
A.0
A.0
A.0
A.0
A.0
A.0
A.0
A.0
A.0
97
Explanatory Notes – 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
(**) Votes available in the ordinary shareholders' meeting, distinguishing between actual and potential
The condensed consolidated half-year Report includes 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 their
being going concerns or wound-up companies, or of whether the equity investment consists of a
merchant banking transaction.
The scope of consolidation includes all types of entities, regardless of nature, for which the new
concept of control introduced by IFRS 10 applies.
Structured entities are also consolidated when the requirement of actual control recurs, even if there is
no stake in the entity.
For further information on the methods of consolidation, reference should be made to the Notes to
the Full-Year 2014 Consolidated Financial Statements, Part A “Accounting Policies”.
During the first half of 2015, the following changes were made to the scope of consolidation:


the company Consum.it S.p.A. left the scope of consolidation, following the merger by
incorporation into the Parent Company, with no impact on the consolidated balance sheet and
income statement;
the companies Siena Consumer 2015 S.r.l. and Siena PMI 2015 S.r.l. were included to the
scope of consolidation.
BANCA MONTE DEI PASCHI DI SIENA
Explanatory Notes - Part A – Accounting policies
98
3. Going concern
This Condensed consolidated half-year 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 IVASS, and subsequent amendments, the Group reasonably expects to
continue operating in the foreseeable future and has therefore prepared the condensed consolidated
half-year Report based on the assumption of business continuity. In this respect, even the results of the
Comprehensive Assessment afford no doubt as to the company’s ability to continue operating as a
going concern.
In particular, the results of the Comprehensive Assessment conducted by the ECB in 2014 highlighted
a capital shortfall of EUR 2.1 bn, which was offset through capital management measures, as well as
with the capital increase of EUR 3 bn completed in June 2015. Having made up the shortfall, the
Group is required to satisfy the Total Capital and Common Equity Tier 1 target ratios of 10.9% and
10.2%, respectively. The target ratios required by the ECB must be complied with at all times when the
Authority’s Decision is in force; similarly, during those times the Bank may not distribute dividends.
In addition to the capital strengthening measures, additional planned managerial actions will be taken
to improve the effectiveness of the Restructuring Plan, with particular reference to the improvement of
asset quality and productivity in order to accelerate the Parent Company’s return to profitability. These
measures will include specific initiatives such as further de-risking in the financial statements and proactive management of doubtful loans (portfolio sales, reorganisation of processes and internal teams,
commercial agreements/joint ventures with specialised platforms or operators).
In terms of handling doubtful loans, in June 2015 the Bank sold a doubtful loans portfolio without
recourse, for a gross book value of approximately EUR 1.3 bn, consisting of consumer loans, personal
loans and credit cards to Banca IFIS S.p.A. and to a securitisation vehicle financed by a company
associated with Cerberus Capital Management, L.P. The sale did not have a significant impact on the
Group’s financial statements, while the administrative and management benefits from the deal are
significant in light of the number of positions sold.
Note also that in June 2015, the 10.3% stake in Anima Holding S.p.A. was sold to Poste Italiane SpA.
The total value amounts to EUR 210 mln and, as at the date of approval of this condensed
consolidated half-year Report, the terms of the disposal price adjustment mechanism in favour of
Poste Italiane SpA have expired, without any effects.
Finally it should be noted that on 16 April 2015, due to the loss for the year 2014, the Shareholders’
Meeting approved a share capital decrease, on the basis of the provisions of art. 2446 of the Italian
Civil Code. As a result of this resolution and of the capital increase, the share capital as at 30 June 2015
amounted to EUR 8,758,683,020.70. This amount does not include the additional capital increase of
EUR 243,073,800.00 completed on 1 July 2015, used exclusively for the payment in shares of the
interest accrued as at 31 December 2014 on the New Financial Instruments, in favour of the Ministry
of Economy and Finance, pursuant to the regulations governing them.
4. Risks and uncertainties relating to the use of estimates and significant accounting choices
In accordance with the IFRSs, management is required to formulate assessments, estimates and
forecasts which may have an influence on the application of the accounting principles as well as on
the amounts of assets/liabilities and costs/revenues recognised in the financial statements. Estimates
and related forecasts are based on past experience or other factors deemed reasonable in the specific
circumstances and were made to estimate the carrying value of assets and liabilities that cannot be
easily inferred from other sources. In particular, estimates were used in support of the carrying
amounts for the most significant items posted in the Condensed consolidated half-year Report as at 30
June 2015, in accordance with the aforementioned accounting principles and regulatory provisions.
Production of these estimates involves the use of available information and adoption of subjective
assessments. 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 actual amounts stated in
the accounts may differ, even to a significant extent, as a result of changes in subjective assessments
CONSOLIDATED INTERIM REPORT
99
Explanatory Notes – Part A – Accounting policies
made. These estimates and valuations are thus difficult and bring about inevitable elements of
uncertainty, even in stable macroeconomic conditions.
As regards “structured long-term repo” transactions the adoption of the new accounting policy on the
classification and valuation of receivables please refer to the 2014 Financial Statements.
Attached to this Condensed consolidated half-year Report are the pro-forma statements as at 30 June
2015, reporting the estimated effects that would have been determined if the Parent Company had
classified the “long-term structured repos” as synthetic derivatives.
5. Events after the reporting period
Please refer to the appropriate section in the Half-Year Report on Operations
BANCA MONTE DEI PASCHI DI SIENA
Explanatory Notes - Part A – Accounting policies
100
A.3 Information on portfolio transfers
A.3.1 Reclassified financial assets: book value, fair value and effects on comprehensive income
Type of financial
instrument
(1)
Portfolio prior
to transfer
(2)
Portfolio after
transfer
(3)
UCITS
Trading
Available for sale
Debt Securities
Trading
Debt Securities
Income components Income components
Book
Fair
in the absence of
reported for the
value
value
transfers (before tax) period (before tax)
at
at
30 06 2015 30 06 2015
ValueValueOther
Other
(4)
(5)
relevance
relevance
(7)
(9)
(6)
(8)
986
986
47
-
47
-
Loans to banks
40,809
37,955
(2,129)
662
6
505
Trading
Loans to customers
141,135
132,932
(128)
2,507
329
1,397
Debt Securities
Available for
sale
Loans to banks
664,758
516,301
10,503
25,455
515
25,597
Debt Securities
Available for
sale
Loans to customers
208,897
189,803
(3,191)
1,933
570
1,834
1,056,585
877,977
5,102
30,557
1,467
29,333
Total
.
CONSOLIDATED INTERIM REPORT
X
9,796,094
X
X
-
-
-
-
-
-
-
-
-
X
611,667
X
-
124,765
77,128
409,774
X
470,022
-
470,022
X
X
X
X
X
Hedging
deivatives
10,236,700
X
266,602
1,210,330
X
X
X
-
4,100,827
-
X
X
X
1,210,330
4,644,536
-
Financial
liabilities
designated
at fair value
1,224,735
X
X
X
Financial
liabilities
held for
trading
Fair value 30 06 2015
Financial
Financial
assets
assets
designated available for
at fair value
sale
3,036,586
X
Market price*
Market price*
Spot-Forward
Credit Index
Discounted Cash Flow
Option Pricing Model
Plain Rate
Cdo tranche
Option Pricing Model
Equity Multiname Exotic
Discounted Cash Flow
Option Pricing Model
Option Pricing Model
Forex Multiname
Equity Multiname Plain
Option Pricing Model
Forex Singlename Exotic
Option Pricing Model
Option Pricing Model
Forex Singlename Plain
Equity Singlename Exotic
Discounted Cash Flow
Equity swaps
Option Pricing Model
Discounted Cash Flow
Total return swaps
Equity Singlename Plain
Discounted Cash Flow
IR/Asset/Currency Swaps
from customers
from banks
Discontinued Cash flow
Repo Trade
Inputs used
Explanatory Notes - Part A – Accounting policies
Interest rate curve
Market price*
Fair value asset
Share price, beta sector, free risk rate
Market price*, recent transactions, appraisals, manager reports
Interest rate curve, CDS curve, Basi(yield), Inflatio n Curves + inputs necessary to measure
optional component
Market price*
Interest rate curve, CDS curve, Basi(yield), Inflation Curves
BANCA MONTE DEI PASCHI DI SIENA
Market price*, Basis, CDS curves, Base Correlation, interest rate curve
CDS curves, Interest rate curve
Market price*
Interest rate curve, share price, foreign exchange rates, Equity volatility (surface), Model
inputs
Interest rate curve, share price, foreign exchange rates, Equity volatility, Quanto
Correlation, Equity/Equity correlation
Interest rate curve, share price, foreign exchange rates, Equity volatility (surface),Model
inputs,Quanto correlation,
Interest rate curve, inflation curves,bond prices,foreign exchange rates, Rate volatility, rate
correlations
Market price*, Swap Point
Interest rate curve, share price, foreign exchange rates, Equity volatility
Interest rate curve, Foreing exchange rates, Forex volatility, Correlation
Interest rate curve, Foreing exchange rates, Forex volatility (Surface)
Interest rate curve, Foreing exchange rates, Forex volatility
Share price, Interest rate curve, Foreing exchange rates
Interest rate curve, CDS Curve, Basi(yield), Inflation Curve, Foreign exchange rates and
correlation
Bond price, Interest rate curve, Foreign exchange rates
Esternal Pricing/other methodsPeriodic repricing
Market price*
Funds/PE
Net asset adjusted
Equity Instruments
Market price*
Share/Equity Instruments
Discount cash flow
Market price*
Bonds
Equity Instruments
Discounted Cash Flow
Discounted Cash Flow
Valuation technique(s)
Structured bonds
Bonds
Type
- Default swaps
3,036,586
X
X
X
X
X
Hedging
derivativies
*prices for identical financial instruments listed in not active markets (IFRS 13 par. 82 lett. b)
Total liabilities
Total assets
279,797
5,910,174
Financial
Derivatives
Credit derivatives
X
3,235,096
Loans/Deposits
Deposits
14,662
26
356,339
Units of UCITS
Equity
instruments
Debt securities
Items
Financial
assets held
for trading
A.4.1.a Fair value level 2: measurement techniques and inputs used
Qualitative information
A.4 – Information on Fair value
101
X
CONSOLIDATED INTERIM REPORT
Total liabilities
Total assets
Units of UCITS
487
-
487
-
Equity
instruments
Financial
derivatives
-
Financial
assets held
for trading
Debt securities
Items
X
306,376
10,605
X
255,139
40,632
X
X
3,760
Side Pocket
3,760 Equity Exotic
External Pricing
Option Pricing Model
Cost/Net Equity
Equity Instruments
Discounted Cash Flow
Valuation technique(s)
Discounted Cash Flow
Type
Equity Instruments
- Bonds
Financial
Financial
assets
liabilities held
available for
for trading
sale
Fair value 30 06 2015
A.4.1.b Fair value level 3: measurement techniques and inputs used
Explanatory Notes - Part A – Accounting policies
NAV
Risk Model - Smile dynamics
Fair value asset
Liquidity base/Equity Risk Premium/Beta
Liquidity base
Unobservable inputs
0-5,5 Eur/mln
No dynamic/stochastic evolution
0 - 12,5 Eur/mln
20%/>8%/>0.4
3.2 multiplying factor; benchmark base
Range
(weighted average)
102
103
A.4.2 Measurement processes and sensitivity
The category “Debt securities”, with non-observable inputs represented by Cash Flow Bases, includes
the Impregilo security (EUR 39.5 mln); the sensitivity of the position with respect to the nonobservable parameter range is around EUR 0.2 mln.
Equity securities measured using the Discounted Cash Flow model mainly include the Bank of Italy
shareholding (EUR 187.5 mln). This equity investment was measured on the basis of an internal model
similar to that used in 2013 by the Bank of Italy’s Committee of Experts in the document “Revaluation
of shareholdings in the Bank of Italy”. This document not only details the valuation techniques
adopted to reach the end result, but identified in the market beta of the equity risk premium and in the
cash flow base to be used for cash flow discounting the parameters on which to make entity specific
assumptions. During valuation, the intervals of the possible values that can be assigned to these
parameters cause the following changes in value: roughly EUR -10 mln for every 50 bps increase in the
equity risk premium, around EUR -40 mln for every 10% increase in the market beta and roughly EUR
-25 mln for every 10% increase in the cash flow base.
Equity securities valued at cost/net equity include all investments designated at fair value that could
not be measured according to a market-based model. These positions amount to approx. EUR 67.5
mln.
The units of UCITS measured with External Pricing are Hedge Fund side pockets, whose price quotes
by the asset management companies are deemed non-verifiable. For this reason, the sensitivity of these
positions is considered to be equal to their entire book value (approx. EUR 10.5 mln).
The category of “Financial derivatives” includes derivatives whose market value depends on
unobservable inputs, particularly the volatility smile. Remeasuring these positions using models which
treat the input differently, from “no volatility” (Black & Scholes) to “stochastic volatility” (Heston
Model), results in a change in market value of EUR 0.1 mln.
A.4.3 Fair value hierarchy
The fair value hierarchy was introduced by the IASB through the amendment to IFRS 7 “Additional
disclosures” issued in March 2009 and subsequently adopted in the new IFRS 13 “Fair value
measurement”, issued in 2011 and subject to mandatory application as of 2013 Financial Statements.
IFRS 13 defines fair value as the price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants at the measurement date under current
market conditions.
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.
IFRS 13 defines an active market as a market in which transactions take place with sufficient frequency
and volume to provide information on an ongoing basis. A financial instrument is quoted in a financial
market when:
BANCA MONTE DEI PASCHI DI SIENA
104


the quoted prices are readily and regularly available from an exchange, dealer, broker, industry
group, pricing service, authorised body or regulatory agency;
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 of active market set out in IFRS 13 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 aforementioned instrument to be defined as listed in an active market. Conversely, a
financial instrument that is not traded in a regulated market may present sufficient frequency and
volumes for it to be classified in level 1 of the fair value hierarchy.
Levels 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,
aforementioned 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:
a) quoted prices on active markets for similar assets or liabilities;
b) 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 differet
market makers or
- little information is made public;
c) observable market inputs other than quoted prices (e.g. interest rates or yield curves
observable in different buckets, volatility, credit curves, etc.);
d) 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 nonobservable 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 internal assumptions on future cash flows and risk adjustment of the
discount curve.
It should also be noted that regardless of whether measurement techniques adopted use nonobservable market inputs- the Group deemed it appropriate and conservative to include in Level 3 of
the Fair Value hierarchy any instruments not listed in active markets which are complex by their
financial structure or for which there is no clear measurement method recognised as standard in the
market and adjustable based on observable prices of comparable structures.
CONSOLIDATED INTERIM REPORT
105
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.
The processes used to measure level 3 instruments are based on a shared analysis of the types of
instruments and underlying risk parameters by the Group's Business functions and Risk Management.
The analysis is completed with the formulation of a pricing model and/or a model for determination
of non-observable market inputs which is subject to final validation by Risk Management. At different
time intervals depending on the type of instruments (though commonly on a monthly basis) on the
back of directly observable market inputs, the Group's Business functions proceed with determining
the non-observable market inputs and measuring instruments of level 3. The Risk Management
function, based on a shared methodological approach, proceeds with the final validation of fair value.
In support of this activity and with a view to ensuring an adequate level of auditability, assessment data
sheets have been introduced and are updated on a six-monthly basis for individual instruments
classified in level 3, which contain a brief description of the instrument, pricing methods adopted and
details about inputs used for fair value measurement.
As for fair value transfers between different levels, it is noted that the Group has set some rules to
determine whether a financial instrument is level 1 or 3; level 2 is determined by difference. When an
instrument no longer meets the conditions for classification in level 1 or 3, a new level is determined.
A.4.4 Other information
With reference to para. 93 lett. (i) of IFRS 13, the Group does not hold any non-financial assets
designated at fair value on a recurring and non-recurring basis.
With reference to para. 96 of IFRS 13, the Group does not apply the portfolio exception provided for
in para. 48 of IFRS 13.
BANCA MONTE DEI PASCHI DI SIENA
106
Quantitative Information
A.4.5 Fair value hierarchy
A.4.5.1 Assets and liabilities designed at fair value on a recurring basis: breakdown by fair value
level.
Asset and liabilities
measured at fair value
30 06 2015
31 12 2014
Level 1
Level 2
Level 1
Level 2
1. Financial assets held
for trading
6,558,641
9,796,094
487
16,355,222
5,890,827
11,037,478
483
16,928,788
2. Financial assets
designated at fair value
-
-
-
-
-
-
-
-
19,061,978
611,667
306,376
19,980,021
21,808,377
677,308
361,897
22,847,582
4. Hedging derivative
-
470,022
-
470,022
-
612,957
-
612,957
5. Property, plant and
equipment
-
-
-
-
-
-
-
-
6.Intangible assets
-
-
-
-
25,620,619
10,877,783
306,863
36,805,265
27,699,204
12,327,743
362,380
40,389,327
1. Financial liabilities
held for trading
3,174,317
10,236,700
3,760
13,414,777
3,525,270
10,172,867
3,652
13,701,789
2. Financial liabilities
designated at fair value
1,134,114
1,210,330
-
2,344,444
798,367
1,825,253
-
2,623,620
-
3,036,586
-
3,036,586
-
4,112,108
-
4,112,108
4,308,431
14,483,616
3,760
18,795,807
4,323,637
16,110,228
3,652
20,437,517
3. Financial assets
available for sale
Total
3. Hedging derivative
Total
Level 3
Total
Level 3
Total
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 require significant adjustment based on non-observable
data, or that require internal assumptions and estimations of future cash flows.
During the first half of 2015, some financial assets and liabilities registered a deterioration from fair value level 1 to fair value
level 2; the variation in the fair value level was generally due to the deterioration in the liquidity conditions in the market for
aforementioned securities. In terms of financial assets, this phenomenon concerned the bond securities of the subsidiary MPS
Capital Services S.p.A. for a total of EUR 5.1 mln; as regards financial liabilities the trend is instead linked to the bond
securities issued by the Parent Company totalling EUR 49.3 mln, and by subsidiary MPS Capital Services S.p.A. for EUR 0.2
mln.
On the other hand, it should be noted the transfer of some financial assets from fair value level 2 to fair value level 1,
amounting to a total of EUR 179.9 mln in bond securities of the Parent Company (EUR 170.1 mln) and of subsidiary MPS
Capital Services S.p.A. (EUR 9.8 mln). The same trend in financial liabilities concerned the bond securities issued by the
Parent Company, totalling EUR 385.4 mln. The change in the fair value level in the first half of 2015 is essentially linked to
the improvement in the securities’ liquidity conditions (measured in terms of bid-ask spread of the listed price) which allowed
this level transfer in accordance with the Group’s policy on the valuation of financial instruments.
As for OTC derivatives, in compliance with IFRS 13 the Group calculates adjustments to values, obtained through valuation
models using risk-free interest rates, to take account of the creditworthiness of the individual counterparties. This adjustment,
known as Credit Value Adjustment (CVA), is estimated for all positions in OTC derivatives with non-collateralized
institutional and commercial counterparties and with counterparties having a Credit Support Annex (CSA) not in line with
market standards.
The methodology is based on the calculation of expected operational loss linked to counterparty rating and estimated on a
position’s duration. The exposure includes future credit variations represented by add-ons.
Market-consistent probability measurements are employed in the calculation of CVAs in order to gauge market expectations
resulting from CDS prices without, however, losing the historical information available within the Group.
As at 30 June 2015 the CVA had a negative balance of approx. EUR 166.6 mln.
The MPS Group calculates the value adjustment of OTC derivatives in a mirror image fashion and on the same perimeter to
take into account its creditworthiness, Debit Value Adjustment (DVA). At 30 June 2015 the DVA is positive and amounts to
a total of EUR 7.3 mln.
CONSOLIDATED INTERIM REPORT
107
A.4.5.2 Annual changes of financial assets designated at fair value on a recurring basis (level 3)
30 06 2015
Financial
Financial
assets
assets held for
designated at
trading
fair value
1. Opening balance
Financial
assets
available for
sale
Property,
plants and
equipments
Hedging
derivatives
Intangible
assets
483
-
361,897
-
-
-
32
-
14,039
-
-
-
-
-
1,003
-
-
-
2.2 Profit posted to:
32
-
854
-
-
-
2.2.1 Profit and Loss
32
-
-
-
-
-
32
-
-
-
-
-
2. Increases
2.1 Issuances
- of which capital gains
2.2.2 Equity
X
X
854
-
-
-
2.3 Transfers from other
levels
-
-
829
-
-
-
2.4 Other increases
-
-
11,353
-
-
-
28
-
69,560
-
-
-
26
-
1,535
-
-
-
3.2 Redemptions
-
-
44
-
-
-
3.3 Losses posted to:
2
-
1,453
-
-
-
3.3.1 Profit and Loss
2
-
231
-
-
-
2
-
231
-
-
-
X
X
1,222
-
-
-
3.4 Transfers to other levels
-
-
-
-
-
-
3.5 Other decreases
-
-
66,528
-
-
-
487
-
306,376
-
-
-
3. Decreases
3.1 Sales
- of which capital losses
3.3.2 Equity
4. Closing balance
Amounts shown in the column “Financial assets held for trading” under items “2.4 Other increases” and “3.5 Other
decreases”, respectively amounting to EUR 11.3 mln and EUR 66.5 mln, are predominantly attributable to unwinding by the
Parent Company of the fully subscribed series no. 54 of the entity Anthracyte (EUR 64.5 mln) and to the simultaneous
assumption of the underlying financial instruments (EUR 7.7 mln) represented by hedge fund side pockets.
BANCA MONTE DEI PASCHI DI SIENA
108
A.4.5.3 Annual changes of financial liabilities designated at fair value on a recurring basis (level 3)
30 06 2015
Financial liabilities
designated at fair
value
Hedging derivatives
3,652
-
-
301
-
-
-
-
-
2.2 Losses posted to:
301
-
-
2.2.1 Profit and Loss
301
-
-
284
-
-
X
X
-
-
-
-
Financial liabilities
held for trading
1. Opening balance
2. Increases
2.1 Issues
- of which capital losses
2.2.2 Equity
2.3 Transfers from othe levels
2.4 Other increases
-
-
-
193
-
-
3.1 Redemptions
-
-
-
3.2 Repurchases
-
-
-
3.3 Profits posted to:
193
-
-
3.3.1 Profit and Loss
193
-
-
93
-
-
X
X
-
-
-
-
3. Decreases
- of which capital gains
3.3.2 Equity
3.4 Transfers to other levels
3.5. Other decreases
4. Closing balance
-
-
-
3,760
-
-
A.5 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.
CONSOLIDATED INTERIM REPORT
109
Part B – Information on the consolidated balance sheet
ASSETS
Section 2 – Financial assets held for trading – Item 20............................................................................................................ 111
Section 4 - Financial assets available for sale – Item 40 ........................................................................................................... 112
Section 6 – Loans to banks – Item 60 ......................................................................................................................................... 113
Section 7 – Loans to customers – Item 70 ................................................................................................................................. 114
Section 10 – Equity investments – Item 100.............................................................................................................................. 115
Section 12 - Property, plant and equipment - Item 120 ........................................................................................................... 116
Section 13 – Intangible assets – Item 130 ................................................................................................................................... 117
LIABILITIES
Section 1 – Deposits from banks – Item 10............................................................................................................................... 118
Section 2 – Deposits from customers – Item 20 ....................................................................................................................... 119
Section 3 – Debt securities issued – Item 30.............................................................................................................................. 120
Section 4 – Financial liabilities held for trading – Item 40 ...................................................................................................... 121
Section 5 – Financial liabilities designated at fair value – Item 50 ......................................................................................... 122
Section 12 – Provisions for risks and charges – Item 120 ....................................................................................................... 123
Section 15 – Group equity – Items 140,160,170,180,190,200 and 220 ................................................................................. 124
Section 16 – Non-controlling interests - Item 210.................................................................................................................... 125
BANCA MONTE DEI PASCHI DI SIENA
110
CONSOLIDATED INTERIM REPORT
111
Explanatory Notes - Part B – Information on the consolidated balance sheet
ASSETS
Section 2 – Financial assets held for trading – Item 20
2.1 Financial assets held for trading: breakdown
Items/Amounts
Total 30 06 2015
Level 1
Level 2
Total 31 12 2014
Level 3
Total
Level 1
Level 2
Level 3
Total
A.Balance sheet assets
1. Debt securities
2. Equity instruments
3.Units of UCITS
6,331,749
356,339
-
6,688,088
5,681,567
369,022
-
6,050,589
51,404
26
-
51,430
57,778
24
-
57,802
3,645
14,662
-
18,307
1,343
3,788
26
5,157
-
3,235,096
-
3,235,096
-
3,722,187
-
3,722,187
6,386,798
3,606,123
-
9,992,921
5,740,688
4,095,021
26
9,835,735
171,843
5,910,174
487
6,082,504
150,139
6,416,227
457
6,566,823
4. Loans
Total (A)
B. Derivatives
1. Financial derivatives:
2. Credit derivatives:
Total (B)
Total (A+B)
-
279,797
-
279,797
-
526,230
-
526,230
171,843
6,189,971
487
6,362,301
150,139
6,942,457
457
7,093,053
6,558,641
9,796,094
487
16,355,222
5,890,827
11,037,478
483
16,928,788
BANCA MONTE DEI PASCHI DI SIENA
Explanatory Notes -- Part B – Information on the consolidated balance sheet
112
Section 4 - Financial assets available for sale – Item 40
4.1 Financial assets available for sale: breakdown
Items/Amounts
1. Debt securities
Total 30 06 2015
Level 1
Level 3
Total
Level 1
Level 2
Level 3
Total
19,040,517
409,774
40,632
19,490,923
21,792,524
503,570
20,069
77,128
255,139
352,336
15,493
53,970
255,553
325,016
1,392
124,765
10,605
136,762
360
119,768
3,133
123,261
-
-
-
-
-
-
-
-
19,061,978
611,667
306,376
19,980,021
21,808,377
677,308
2. Equity instruments
3. Units of UCITS
4. Loans
Total
Level 2
Total 31 12 2014
CONSOLIDATED INTERIM REPORT
103,211 22,399,305
361,897 22,847,582
113
Explanatory Notes - Part B – Information on the consolidated balance sheet
Section 6 – Loans to banks – Item 60
6.1 Loans to banks: breakdown
Type of transaction/Amount
A. Loans to central banks
1. Time deposits
Total
30 06 2015
Fair Value
Book value
Total
2,191,406
2,191,406
Total
31 12 2014
Fair Value
Book value
Total
2,212,259
2,212,259
17,000
x
17,000
x
2,174,400
x
2,195,257
x
3. Reverse repurchase agreements
-
x
-
x
4. Others
6
x
2
x
2. Compulsory reserve
B. Loans to banks
6,135,829
5,987,117
5,510,494
5,327,959
1. Loans
5,002,573
5,002,519
4,362,229
4,383,909
2,624,243
x
1,611,156
x
113,362
x
172,267
x
2,264,968
x
2,578,806
x
163,115
x
235,620
x
-
x
-
x
2,101,853
x
2,343,186
x
1.1 Current accounts and demand deposits
1.2 Time deposits
1.3 Other loans:
- Reverse repurchase agreements
- Finance leases
- Others
2. Debt securities
1,133,256
984,598
1,148,265
944,050
Total
8,327,235
8,178,523
7,722,753
7,540,218
Loans to banks include non-performing assets for a book value of EUR 26.0 mln; as at 31 December 2014 the same item
amounted to EUR 24.9 mln.
The portfolio of "Loans to banks" includes loans and deposits, in addition to the unrestricted part of the compulsory legal
reserve with the Bank of Italy which, as at 30 June 2015, amounted to EUR 2,174.4 mln. In accordance with regulations on
average maintenance levels, the end-of-period balance of the compulsory reserve may be subject to substantial changes in
relation to the Group’s contingent cash flow requirements.
BANCA MONTE DEI PASCHI DI SIENA
Explanatory Notes -- Part B – Information on the consolidated balance sheet
114
Section 7 – Loans to customers – Item 70
7.1 Loans to customers: breakdown
30 06 2015
Book value
Type of transaction/Amount
Performing
Loans
Fair value
Non-performing
Purchased
Total
Others
Total
92,799,067
23,299
23,674,009
116,496,375
1. Current accounts
8,178,623
5,342
3,967,620
12,151,585
x
2. Repurchase agreements
4,648,956
-
-
4,648,956
x
54,510,645
11,685
14,253,724
68,776,054
x
4. Credit cards, personal loans and fifth-ofsalary backed loans
2,128,222
-
134,697
2,262,919
x
5. Finance lease
3,350,020
-
1,053,796
4,403,816
x
753,960
-
132,642
886,602
x
19,228,641
6,272
4,131,530
23,366,443
x
of which: leased assets under construction
177,475
-
32,058
209,533
x
Debt securities
938,194
-
1,687
939,881
961,209
8. Structured securities
-
-
-
-
x
9. Other debt securities
938,194
-
1,687
939,881
x
93,737,261
23,299
23,675,696
117,436,256
3. Mortgages
6. Factoring
7. Other transactions
Total
118,806,916
119,768,125
With regard to the Nomura/Alexandria transaction, line 2 “Repurchase agreements” includes the repo facility for an amount
of EUR 1,967.4 mln and line 7 “Other transactions” includes EUR 1,964.4 mln in cash collateral pledged, as part of the same
transaction, for the interest rate swap and long term repo.
31 12 2014
Book value
Type of transaction/Amount
Performing
Loans
Fair value
Non-performing
Purchased
Total
Others
Total
95,491,272
5,108
23,137,296
118,633,676
1. Current accounts
8,745,368
444
3,878,539
12,624,351
x
2. Reverse agreements
4,142,181
-
-
4,142,181
x
3. Mortgages
122,767,190
55,327,874
4,561
13,896,953
69,229,388
x
4. Credit cards, personal loans and fifth-ofsalary backed loans
2,026,735
-
202,106
2,228,841
x
5. Finance lease
3,521,485
-
1,030,701
4,552,186
x
792,524
-
146,392
938,916
x
20,935,105
103
3,982,605
24,917,813
x
6. Factoring
7. Other transactions
of which: leased assets under construction
Debt securities
Total
CONSOLIDATED INTERIM REPORT
184,006
-
43,507
227,513
1,041,822
-
634
1,042,456
1,065,214
x
96,533,094
5,108
23,137,930
119,676,132
123,832,404
115
Explanatory Notes - Part B – Information on the consolidated balance sheet
Section 10 – Equity investments – Item 100
10.1 Equity investments: information on shareholding
Company Name
Headquarters
Registered
Office
Type of
relationship
Ownership Relationship
Held by
Shareholding %
Avail. %
votes
A. Companies under joint control
Immobiliare Novoli S.p.a.
Integra S.p.a.
Marinella S.p.a.
Florence
Florence
2
Banca Monte dei Paschi di Siena
50.000
-
Calenzano (FI)
Calenzano (FI)
2
Banca Monte dei Paschi di Siena
50.000
-
Marinella di
Sarzana (SP)
Marinella di
Sarzana (SP)
2
Banca Monte dei Paschi di Siena
25.000
-
B. Companies under significant influence
Aereoporto di Siena S.p.a. (in liquidazione)
Siena
Siena
1
Banca Monte dei Paschi di Siena
21.380
-
Antoniana Veneta Popolare Vita S.p.a.*
Trieste
Trieste
1
Banca Monte dei Paschi di Siena
50.000
-
Axa Mps Assicurazioni Danni S.p.a.
Rome
Rome
1
Banca Monte dei Paschi di Siena
50.000
-
Axa Mps Assicurazioni Vita S.p.a.
Rome
Rome
1
Banca Monte dei Paschi di Siena
50.000
-
Casalboccone Roma S.p.a. (in liquidazione)
Siena
Siena
1
Banca Monte dei Paschi di Siena
21.750
33.675
Gubbio (PG)
Gubbio (PG)
1
Banca Monte dei Paschi di Siena
18.052
-
Rome
Rome
1
Banca Monte dei Paschi di Siena
49.990
-
Calenzano (FI)
Calenzano (FI)
1
Banca Monte dei Paschi di Siena
4.156
-
1
MPS Capital Services S.p.a.
16.383
-
EDI.B. S.p.a. (in liquidazione)
Fabrica Immobiliare SGR S.p.a.
Fenice Holding S.p.a.
Fidi Toscana S.p.a.
Florence
Florence
1
Banca Monte dei Paschi di Siena
27.460
-
Rome
Rome
1
Banca Monte dei Paschi di Siena
48.000
-
Conegliano (TV)
Conegliano (TV)
1
Banca Monte dei Paschi di Siena
77.820
-
Fondo Socrate
Rome
Roma
1
Banca Monte dei Paschi di Siena
23.140
-
Industria e Innovazione S.p.a.
Milan
Milan
1
Banca Monte dei Paschi di Siena
7.107
-
Intermonte SIM S.p.a.
Milan
Milan
1
Banca Monte dei Paschi di Siena
17.410
-
Collesalvetti (LI)
Collesalvetti (LI)
1
Banca Monte dei Paschi di Siena
21.819
-
1
MPS Capital Services S.p.a.
19.002
-
Fondo Etrusco distrib.
Fondo Minibond PMI Italia
Interporto Toscano A.Vespucci S.p.a.
Le Robinie S.p.a.
Reggio Emilia
Reggio Emilia
1
Banca Monte dei Paschi di Siena
20.000
Microcredito di Solidarietà S.p.a.
Siena
Siena
1
Banca Monte dei Paschi di Siena
40.000
-
Nuova Sorgenia Holding S.p.a.
Milan
Milan
1
Banca Monte dei Paschi di Siena
16.670
22.240
Colle V.Elsa (SI)
Colle V.Elsa (SI)
1
Banca Monte dei Paschi di Siena
49.002
-
Arezzo
Arezzo
1
Banca Monte dei Paschi di Siena
19.584
-
Sansedoni Siena S.p.a.
Siena
Siena
1
Banca Monte dei Paschi di Siena
21.754
33.674
S.I.T. - Finanz.di Sviluppo per l'Inn.
Tecnologica S.p.a.
Rome
Rome
1
Banca Monte dei Paschi di Siena
19.969
-
Milan
Milan
1
Banca Monte dei Paschi di Siena
15.000
-
1
Banca Monte dei Paschi di Siena
19.704
-
1
MPS Capital Services S.p.a.
28.072
-
NewColle S.r.l.
Realizzazioni e Bonifiche Arezzo S.p.a. (in
liquidazione)
Trixia Srl
Terme di Chianciano S.p.a.
Immobiliare Centro Milano S.p.a.
S.I.C.I. Sviluppo Imprese Centro Italia SGR
S.p.a.
Chianciano T. (SI) Chianciano T. (SI)
Milan
Milan
1
MPS Capital Services S.p.a.
33.333
-
Florence
Florence
1
MPS Capital Services S.p.a.
15.000
-
(*) Type of relationship:
1= significant influence
2= joint control
*As at 30 June.2015, the investment in Antoniana Veneta Popolare Vita S.p.a. was classified under non-current assets and group of assets held
for sale and discontinued operations.
Equity investments in jointly controlled companies and companies under significant influence are valued at equity method.
The column indicating the percentage of votes available is valued only in cases where the actual percentage of the votes that
can be exercised at the ordinary shareholders' meetings does not correspond to the actual percentage of capital held in each
company.
BANCA MONTE DEI PASCHI DI SIENA
Explanatory Notes -- Part B – Information on the consolidated balance sheet
116
Section 12 - Property, plant and equipment - Item 120
12.1 Property, plant and equipment used in the business: breakdown of assets valued at cost
Asset/Amount
1. Assets owned
Total
30 06 2015
31 12 2014
2,306,325
2,347,154
814,685
822,625
1,200,433
1,218,460
160,377
162,643
d) electronic systems
72,824
87,661
e) other
58,006
55,765
2. Assets leased
-
-
a) land
-
-
b) buildings
-
-
c) furniture and furnishings
-
-
d) electronic systems
-
-
e) other
-
-
2,306,325
2,347,154
a) land
b) buildings
c) furniture and furnishings
Total
12.2 Property, plant and equipment held for investment: breakdown of assets valued at cost
Asset/Amount
Total 30 06 2015
Total 31 12 2014
Book value
Book value
1. Assets owned
386,743
439,929
a) land
156,319
188,368
b) buildings
230,424
251,561
2. Assets leased
-
-
a) land
-
-
b) buildings
-
-
386,743
439,929
Total
CONSOLIDATED INTERIM REPORT
117
Explanatory Notes - Part B – Information on the consolidated balance sheet
Section 13 – Intangible assets – Item 130
13.1 Intangible assets: breakdown by type
30 06 2015
Asset / Amount
Finite Life
31 12 2014
Indefinite
Life
Total
Finite Life
Indefinite
Life
Total
A.1 Goodwill
x
7,900
7,900
x
7,900
7,900
A.1.1 group
x
7,900
7,900
x
7,900
7,900
A.1.2 minorities
x
-
-
x
-
-
A.2 Other intangible assets
421,429
-
421,429
433,793
-
433,793
A.2.1 Assets carried ad cost
421,429
-
421,429
433,793
-
433,793
a) internally generated
intangible assets
78,150
-
78,150
82,092
-
82,092
343,279
-
343,279
351,701
-
351,701
-
-
-
-
-
-
a) internally generated
intangible assets
-
-
-
-
-
-
b) other assets
-
-
-
-
-
-
421,429
7,900
429,329
433,793
7,900
441,693
b) other assets
A.2.2 Assets valued at fair value:
Total
All of the Group's intangible assets are valued at cost. All intangible assets recognised in the financial statements have a finite
useful life, except for goodwill.
As at 30 June 2015, key qualitative and quantitative impairment indicators, based on both external and internal factors, were
monitored to determine whether there were any indications of goodwill impairment. The test, which took account of
developments in the macro-economic scenario, discount rates, measures contained in the Group Business Plan as well as
financial projections, did not reveal any signs of potential losses in the value of goodwill.
BANCA MONTE DEI PASCHI DI SIENA
Explanatory Notes -- Part B – Information on the consolidated balance sheet
118
LIABILITIES
Section 1 – Deposits from banks – Item 10
1.1 Deposits from banks: breakdown
Items/accounts
Total
Total
30 06 2015
31 12 2014
1. Deposits from central banks
7,918,962
19,237,185
2. Deposits from banks
10,911,907
8,410,486
2.1 Current accounts and demand deposits
836,573
1,211,262
2.2 Time deposits
169,081
58,386
8,279,164
4,913,424
2.3.1 Repurchase agreements
6,246,623
3,174,441
2.3.2 Other
2,032,541
1,738,983
-
-
1,627,089
2,227,414
Total
18,830,869
27,647,671
Total fair value
18,846,545
27,669,943
2.3 Loans
2.4 Liabilities for commitments to repurchase own equity instruments
2.5 Other liabilities
The line "Deposits from central banks” includes EUR 7.8 bn for refinancing operations carried out as part of Eurosystem
financing, guaranteed by securities pledged by the Parent Company using the pooling mechanism.
CONSOLIDATED INTERIM REPORT
119
Explanatory Notes - Part B – Information on the consolidated balance sheet
Section 2 – Deposits from customers – Item 20
2.1 Deposits from customers: breakdown
Type of transaction/Amount
Total
Total
30 06 2015
31 12 2014
1. Current accounts and demand deposits
55,585,325
53,372,526
2. Time deposits
13,122,302
10,800,072
3. Loans
25,075,419
28,134,928
17,561,379
21,158,341
7,514,040
6,976,587
-
-
962,395
837,455
94,745,441
93,144,981
94,752,908
93,233,633
3.1 Repurchase agreements
3.2 Other
4. Liabilities for commitments to repurchase own equity instruments
5. Other liabilities
Total
Total fair value
The line “Repurchase agreements” contains the financial liabilities arising from repo transactions with customers on both
treasury securities and securities made available through repurchase agreements or securities lending transactions. The item
includes the long-term repo transaction in the amount of EUR 3,347.0 mln (EUR 3,353.6 mln as at 31 December 2014)
relating to the "Nomura/Alexandria" transaction.
Note that as at 30 June 2015, the item included EUR 42.2 mln in interest accrued during the first half of 2015 on the New
Financial Instruments, to be paid on 1 July 2016.
BANCA MONTE DEI PASCHI DI SIENA
Explanatory Notes -- Part B – Information on the consolidated balance sheet
120
Section 3 – Debt securities issued – Item 30
3.1 Debt securities issued: breakdown
Type of Securities/ Amounts
Total
Total
30 06 2015
31 12 2014
Book value
Fair value
Total
Book value
Fair value
Total
A. Listed securities
1. Bonds
2. Other securities
Total
28,855,544
28,841,664
28,782,395
28,767,860
292,173
333,960
1,673,044
1,714,830
29,147,717
29,175,624
30,455,439
30,482,690
The significant decrease in line 2 “Other securities” is due to the following events:
-
full repayment on 15 June 2015 of the nominal residual amount of EUR 1.071 bn in New Financial Instruments issued
by the Parent Company and subscribed by the Ministry of Economy and Finance (MEF) on 28 February 2013, upon
payment of approximately EUR 1,116.0 bn, pursuant to the provisions of the Term-Sheet of the NFIs upon issue;
-
reclassification as at 30 June 2015 from debt securities issued to equity reserve of the amount of EUR 243.1 mln for
interest accrued on the New Financial Instruments as at 31 December 2014. As at the date of this condensed
consolidated half-year report, this amount complies with the definition of equity instrument and not with that of
financial liability (IAS 32.11), as the conditions that confirm the conversion into a certain number of shares have
occurred. In fact, the Shareholders’ Meeting of 16 April 2015 approved the financial statements of the Parent Company
and the loss for the year 2014, along with setting the number of shares to be issued by the Board of Directors’ meeting
of 21 May 2015. At the beginning of July, this amount was recognised under share capital, as 117,997,241 ordinary
shares were issued in favour of the Ministry of Economy and Finance (MEF), amounting to 4% of the share capital.
CONSOLIDATED INTERIM REPORT
-
3.2 Other securities
X
Total B
3,174,317
1,020
-
1,020
3,173,297
-
-
-
1,193,226
1,980,071
Level 1
10,236,700
4,367,429
266,602
4,100,827
5,869,271
-
-
-
4,644,536
1,224,735
Level 2
-
-
-
-
-
-
3,760
3,760
-
3,760
Level 3
Fair value
30 06 2015
13,414,777
4,372,209
266,602
4,105,607
9,042,568
-
-
-
5,837,762
3,204,806
Total
FV'
9,042,568
X
X
X
9,042,568
-
-
-
5,837,762
3,204,806
8,155,094
X
X
X
8,155,094
-
-
-
5,432,324
2,722,770
NV
3,525,270
10,494
-
10,494
3,514,776
-
-
-
1,879,940
1,634,836
Level 1
10,172,867
4,948,136
489,481
4,458,655
5,224,731
-
-
-
3,885,978
1,338,753
Level 2
-
-
-
-
-
-
3,652
3,652
-
3,652
Level 3
Fair value
31 12 2014
13,701,789
4,962,282
489,481
4,472,801
8,739,507
-
-
-
5,765,918
2,973,589
Total
8,739,506
X
X
X
8,739,506
-
-
-
5,765,917
2,973,589
FV'
The amount of EUR 4,100.8 mln, recognised in line B.1 Financial derivatives, column “Level 2”, includes EUR 214.1 mln for interest rate swaps under the Alexandria/Nomura deal and transferred
(for a notional amount of EUR 495 mln over a total of EUR 3,050 mln) in May of the current year from the Hedging derivatives portfolio to the Trading portfolio, with a consequent prospective
interruption of hedge accounting
FV* = Fair value calculated excluding value adjustments due to variations in the credit rating of the issuer since the date of issue
NV = Nominal or Notional Value
Legend
8,575,679
X
2. Credit derivatives
Total (A+B)
X
1. Financial derivatives
B. Derivatives
8,575,679
-
3.1 Bonds
Total A
-
5,690,051
2. Deposits from customers
3. Debt securities issued
2,885,628
NV
1. Deposits from banks
A. Balance-sheet liabilities
Type of transaction/Group item
4.1 Financial liabilities held for trading: breakdown
Section 4 – Financial liabilities held for trading – Item 40
121
Explanatory Notes - Part B – Information on the consolidated balance sheet
BANCA MONTE DEI PASCHI DI SIENA
Explanatory Notes -- Part B – Information on the consolidated balance sheet
122
Section 5 – Financial liabilities designated at fair value – Item 50
5.1 Financial liabilities designated at fair value: breakdown
Total 30 06 2015
Type of transaction / Amount
FV
NV
Level 1
Level 2
Level 3
FV*
Total
1. Deposits from banks
-
-
-
-
-
-
2. Deposits from customers
-
-
-
-
-
-
3. Debt securities issued
2,279,340
1,134,114
1,210,330
-
2,344,444
2,434,095
Total
2,279,340
1,134,114
1,210,330
2,344,444
2,434,095
-
Total 31 12 2014
Type of transaction / Amount
FV
NV
Level 1
Level 2
Level 3
FV*
Total
1. Deposits from banks
-
-
-
-
-
-
2. Deposits from customers
-
-
-
-
-
-
3. Debt securities issued
2,537,775
798,367
1,825,253
-
2,623,620
2,737,137
Total
2,537,775
798,367
1,825,253
2,623,620
2,737,137
Legend:
-
FV* = Fair value calculated excluding value adjustments due to variations in the credit rating of the issuer since the date of issue
NV = Nominal or Notional Value
CONSOLIDATED INTERIM REPORT
123
Explanatory Notes - Part B – Information on the consolidated balance sheet
Section 12 – Provisions for risks and charges – Item 120
12.1 Provisions for risks and charges: breakdown
Item/Amount
1. Pensions and other post retirement benefit obligations
2. Other provisions for risks and charges
2.1 legal disputes
2.2 personnel charges
2.3 other
Total
Total
Total
30 06 2015
31 12 2014
50,251
65,915
1,106,062
1,085,134
464,631
424,495
47,650
56,247
593,781
604,392
1,156,313
1,151,049
BANCA MONTE DEI PASCHI DI SIENA
Explanatory Notes -- Part B – Information on the consolidated balance sheet
124
Section 15 – Group equity – Items 140,160,170,180,190,200 and 220
15.2 Share capital - Parent company's number of shares: annual changes
Item/Type
A.
30 06 2015
31 12 2014
Ordinary
Ordinary
Shares outstanding as at the beginning of the year
5,116,513,875
11,627,044,328
- fully paid
5,116,513,875
11,627,044,328
- not fully paid
-
-
A.1
Treasury shares (-)
9
54,495,378
A.2
Shares outstanding: opening balance
5,116,513,866
11,572,548,950
B.
Increases
2,558,256,930
5,000,243,422
B.1
New issuances
2,558,256,930
4,999,698,478
- Against payment:
2,558,256,930
4,999,698,478
- Business combinations
-
-
- Bond converted
-
-
- warrants exercised
-
-
2,558,256,930
4,999,698,478
- without payment:
-
-
- to employees
-
-
- to directors
-
-
- other
-
-
- other
B.2
Sale of treasury shares
-
544,944
B.3
Other increases
9
-
C.
Decreases
4,860,688,182
11,456,278,506
C.1
Cancellation
-
-
C.2
Purchase of treasury shares
-
-
C.3
Business transferred
-
-
C.4
Other decreases
4,860,688,182
11,456,278,506
2,814,082,614
5,116,513,866
-
9
D.
Shares outstanding: closing balance
D.1
Treasury shares (+)
D.2
Shares outstanding as at the end of the year
2,814,082,623
5,116,513,875
- fully paid
2,814,082,623
5,116,513,875
-
-
- not fully paid
Line B.1 “New issues” for the first half of 2015 refers to the new shares subscribed upon execution of the share capital
increase resolved by the Extraordinary Shareholders’ Meeting of 16 April 2015, and for the year 2014 to the new shares
subscribed upon execution of the share capital increase resolved by the Extraordinary Shareholders’ Meeting of 21 May 2014.
Line C.4 “Decreases” for the first half of 2015 includes the effect of recalculation of the Parent Company’s ordinary shares at
a ratio of 1 new ordinary shares to every 20 ordinary shares held (upon annulment of 15 ordinary shares, of which 9 ordinary
shares held by the Parent Company and 6 ordinary shares provided by Intermonte S.p.A.), on 18 May 2015, in
implementation of the resolution by the Extraordinary Shareholders’ Meeting of Banca Monte dei Paschi di Siena S.p.A., held
on 16 April 2015. The same line for the year 2014 includes the effect of recalculation of the Parent Company’s ordinary
shares at a ratio of 1 new ordinary share to every 100 ordinary shares held, on 5 May 2014, in implementation of the
resolution by the Extraordinary Shareholders’ Meeting of the Parent Company, held on 28 December 2013.
Share capital consists of 2,814,082,623 ordinary shares.
CONSOLIDATED INTERIM REPORT
125
Explanatory Notes - Part B – Information on the consolidated balance sheet
Section 16 – Non-controlling interests - Item 210
16.1 Details of item 210 “Non-controlling interests”
Company name
Equity investments in consolidated companies with significant noncontrolling interests
30 06 2015
31 12 2014
-
-
Other equity investments
24,314
23,625
Total
24,314
23,625
BANCA MONTE DEI PASCHI DI SIENA
Explanatory Notes -- Part B – Information on the consolidated balance sheet
CONSOLIDATED INTERIM REPORT
126
127
Part C – Information on the consolidated income statement
Section 1 – Interest income/expense and similar revenues/charges – Items 10 and 20 .................................................. 129
Section 2 – Fee and commission income/expense – Items 40 and 50 ................................................................................. 130
Section 3 – Dividends and similar income – Item 70............................................................................................................... 132
Section 4 – Net profit (loss) from trading – Item 80................................................................................................................ 133
Section 6 - Gains (losses) on disposal/repurchase - Item 100................................................................................................ 134
Section 7 – Net profit (loss) from financial assets and liabilities designated at fair value – Item 110 ............................ 135
Section 8 – Net impairment losses (reversals) – Item 130 ...................................................................................................... 136
Section 11 – Administrative expenses – Item 180 .................................................................................................................... 137
Section 12 – Net provisions for risks and charges – Item 190 ............................................................................................... 139
Section 15 – Other operating expenses (income) – Item 220................................................................................................. 140
Section 20 – Tax expense (recovery) on income from continuing operations – Item 290 ............................................... 141
BANCA MONTE DEI PASCHI DI SIENA
128
CONSOLIDATED INTERIM REPORT
129
Explanatory Notes - Part C – Information on the consolidated income statement
Section 1 – Interest income/expense and similar revenues/charges – Items 10 and 20
1.1 Interest income and similar revenues: breakdown
Item/Type
Debt
securities
1. Financial assets held for trading
Other
transactions
Loans
Total
Total
30 06 2015
30 06 2014
34,418
(1,424)
22,093
55,087
99,702
-
-
-
-
-
3. Financial assets available for sale
231,768
-
-
231,768
334,316
4. Financial assets held to maturity
-
-
-
-
-
5. Loans to banks
11,516
8,270
-
19,786
24,109
6. Loans to customers
22,116
1,856,863
-
1,878,979
2,281,884
2. Financial assets designate at fair value
7. Hedging derivatives
X
X
-
-
-
8. Other assets
X
X
5,302
5,302
4,101
Total
299,818
1,863,709
27,395
2,190,922
2,744,112
Item 1 ‘Financial assets held for trading’ under the Loans column includes deposits with negative interest rates.
For a trend analysis of the concerned items, reference should be made to the Half Year Report on Operations.
1.4 Interest expense and similar charges: breakdown
Item/Type
1.
Deposits from central banks
2
Deposits from banks
3.
Deposits
Other
transactions
Secuties
Total
Total
30 06 2015
30 06 2014
(6,503)
X
-
(6,503)
(28,925)
(59,125)
X
-
(59,125)
(82,417)
Deposits from customers
(286,763)
X
-
(286,763)
(459,938)
4.
Debt securities issued
X
(561,310)
-
(561,310)
(923,464)
5.
Financial liabilities held for trading
(270)
-
(1,183)
(1,453)
(8,981)
6.
Financial liabilities designated at fair value
-
(36,305)
-
(36,305)
(93,324)
7.
Other liabilities
X
X
(799)
(799)
(2,855)
8.
Hedging derivatives
X
X
(85,155)
(85,155)
(186,527)
Total
(352,661)
(597,615)
(87,137)
(1,037,413)
(1,786,431)
The significant reduction in item 4 “Debt securities issued” is linked to the refund made on 1 July 2014 by the Parent
Company for the nominal amount of EUR 3 bn in New Financial Instruments, as well as the presence as at 30 June 2014 of
EUR 147.1 mln, relative to the change in the estimate due to the application of a clause in the Term-Sheet following partial
disposal of the investment held in the Parent Company by Fondazione Monte dei Paschi di Siena and regarding further
outlays connected to reimbursement of the New Financial Instruments.
For a trend analysis of the concerned items, reference should be made to the Half-Year Report on Operations.
BANCA MONTE DEI PASCHI DI SIENA
Explanatory Notes - Part C – Information on the consolidated income statement
130
Section 2 – Fee and commission income/expense – Items 40 and 50
2.1 Fee and commission income: breakdown
Type of service / Amount
Total
Total
30 06 2015
30 06 2014
a) guarantees issued
42,872
43,283
b) credit derivatives
-
-
497,339
452,005
18,170
8,598
2. currency trading
2,321
3,061
3. asset management
28,558
25,439
28,558
25,439
-
-
4,698
4,325
-
-
2,959
13,981
29,962
31,887
2,001
1,347
2,001
1,347
-
-
408,670
363,367
c) management, brokerage and advisory services:
1. trading of financial instruments
3.1 individual accounts
3.2. collective investment schemes
4. custody and administration of securities
5. custodian bank
6. placement of securities
7. client instructions
8. advisory on
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
-
-
9.2 insurance products
120,055
121,222
9.3 other products
288,615
242,145
125,908
118,887
72
291
5,605
7,425
g) tax collection services
-
-
h) management of multilateral trade systems
-
-
i) current account keeping
267,571
289,140
j) other services
164,689
141,881
1,104,056
1,052,912
d) collection and payment services
e) servicing of securitisations
f) factoring transaction services
Total
CONSOLIDATED INTERIM REPORT
131
Explanatory Notes - Part C – Information on the consolidated income statement
2.2 Fee and commission expense: breakdown
Type of service / Amount
a) guarantees received
Total
Total
30 06 2015
30 06 2014
(26,685)
(51,863)
-
-
(51,104)
(52,200)
(11,271)
(11,016)
(28)
(31)
(309)
(326)
(9)
(5)
(300)
(321)
4. custody an administration of securities
(3,932)
(4,921)
5. placement of financial instruments
(1,114)
(1)
(34,450)
(35,905)
d) collection and payment services
(45,101)
(40,864)
e) other services
(54,022)
(36,986)
(176,912)
(181,913)
b) credit derivatives
c) management, brokerage and advisory services:
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
Total
Line “a) guarantees received” includes EUR 25.5 mln of fees and commissions paid by the Parent Company for the guarantee
pledged by the Italian Government on certain bond issuances and simultaneously repurchased to be used in financing
transactions as part of Eurosystem financing.
For a trend analysis of the concerned items, reference should be made to the Half-Year Report on Operations.
BANCA MONTE DEI PASCHI DI SIENA
Explanatory Notes - Part C – Information on the consolidated income statement
132
Section 3 – Dividends and similar income – Item 70
3.1 Dividends and similar income: breakdown
30 06 2015
Item/Income
Dividends
30 06 2014
Income
from units of
UCITS
Total
Dividends
Income
from units of
UCITS
Total
A. Financial assets held for trading
2,083
2
2,085
2,150
11
2,161
B. Financial assets available for sale
8,807
3,280
12,087
17,577
9,161
26,738
C. Financial assets designated at fair
value
-
-
-
-
-
-
D. Investments
-
-
-
-
-
-
10,890
3,282
14,172
19,727
9,172
28,899
Total
CONSOLIDATED INTERIM REPORT
133
Explanatory Notes - Part C – Information on the consolidated income statement
Section 4 – Net profit (loss) from trading – Item 80
4.1 Net profit (loss) from trading: breakdown
Transactions / P&L items
Unrealized
Profits (A)
Trading
Profits (B)
Unrealized
Losses ( C)
30 06 2015
30 06 2014
Trading
Net
Profit
(Loss)
Net
Profit (Loss)
Losses (D)
(A + B)-(C + D)
1. Financial assets held for trading
18,553
96,325
(122,827)
(45,132)
(53,081)
303,086
2. Financial liabilities held for
trading
65,471
38,805
(4,211)
(31,296)
68,769
(157,448)
X
X
18,966
12,354
3. Other financial assets and
liabilities: exchange differences
X
X
4. Derivatives
1,333,320
4,416,911
(982,928)
(4,719,472)
76,226
(81,017)
Total
1,417,344
4,552,041
(1,109,966)
(4,795,900)
110,880
76,975
BANCA MONTE DEI PASCHI DI SIENA
Explanatory Notes - Part C – Information on the consolidated income statement
134
Section 6 - Gains (losses) on disposal/repurchase - Item 100
6.1 Gains (losses) on disposal / repurchase: breakdown
Total 30 06 2015
Items / P&L items
Gains
Total 30 06 2014
Net Profit
(Loss)
Losses
Gains
Net Profit
(Loss)
Losses
Financial assets
1. Loans to banks
-
(66)
(66)
838
(865)
(27)
699
(27,817)
(27,118)
7,079
(20,687)
(13,608)
180,218
(19,248)
160,970
150,481
(96,170)
54,311
179,630
(19,247)
160,383
91,755
(94,834)
(3,079)
575
(1)
574
56,164
(6)
56,158
13
-
13
2,562
(1,330)
1,232
-
-
-
-
-
-
-
-
-
-
-
-
180,917
(47,131)
133,786
158,398
(117,722)
40,676
1. Deposits from banks
-
-
-
-
-
-
2. Deposits from customers
-
-
-
-
-
-
1,611
(2,739)
(1,128)
2,093
(2,127)
(34)
1,611
(2,739)
(1,128)
2,093
(2,127)
(34)
2. Loans to customers
3. Financial assets available for sale
3.1 Debt securities issued
3.2 Equity instruments
3.3 Units of UCITS
3.4 Loans
4. Financial assets
held to maturity
Total assets
Financial liabilities
3. Debt securities issued
Total liabilities
The amount of EUR 27.8 mln recognised in line 2 “Loans to customers” - “Losses” column includes EUR 25.0 mln from the
disposal without recourse of a doubtful loans portfolio, for a gross book value of approximately EUR 1.3 bn, consisting of
consumer loans, personal loans and credit cards, to Banca IFIS S.p.A. and to a securitisation vehicle financed by a company
associated with Cerberus Capital Management, L.P., completed in June 2015.
For a trend analysis of the concerned items, reference should be made to the Half-Year Report on Operations.
CONSOLIDATED INTERIM REPORT
135
Explanatory Notes - Part C – Information on the consolidated income statement
Section 7 – Net profit (loss) from financial assets and liabilities designated at fair value
– Item 110
7.1 Net changes in financial assets and liabilities designated at fair value: breakdown
Transaction/P&L items
1. Financial assets
Unrealized
profits (A)
Unrealized
Losses
(C)
Realized
profits (B)
Realized
losses (D)
30 06 2015
30 06 2014
Net Profit
Net Profit
(A+B)-(C+D) (A+B)-(C+D)
-
-
-
-
-
41,496
2,636
(30,348)
(3,167)
10,617
(72,974)
X
X
X
X
-
-
4. Credit and financial derivatives
16,961
44,176
(46,345)
(43,537)
(28,745)
15,696
Total
58,457
46,812
(76,693)
(46,704)
(18,128)
(57,278)
2. Financial liabilities
3. Financial assets and liabilities
For a trend analysis of the concerned items, reference should be made to the Half-Year Report on Operations.
BANCA MONTE DEI PASCHI DI SIENA
Explanatory Notes - Part C – Information on the consolidated income statement
136
Section 8 – Net impairment losses (reversals) – Item 130
8.1 Net impairment losses (reversals) on loans: breakdown
A. Loans to banks
- Loans
- Debt securities
Write - backs
Specific
Portfolio
Portfolio
Others
Transaction/P&L items
Write-off
Value Adjustments
Specific
A
B
A
Total
30 06 2015
B
Total
30 06 2014
-
(558)
(1,680)
23
335
-
927
(953)
6,308
-
(558)
(1,680)
23
335
-
760
(1,120)
(2,402)
-
-
-
-
-
-
167
167
8,710
(10,278)
(2,276,885)
(5,246)
355,927
825,998
14
127,373
(983,096)
(1,214,262)
-
(63)
101
23
-
61
(666)
- Loans
-
(63)
X
101
23
-
X
61
(666)
- Debt securities
-
-
X
-
-
-
X
-
-
Other receivables
(10,278)
(2,276,822)
(5,246)
355,826
825,975
14
127,373
(983,157)
(1,213,596)
(10,278)
(2,276,822)
(4,577)
355,826
825,975
14
127,373
(982,488)
(1,216,424)
-
-
(669)
-
-
-
-
(669)
2,828
(10,278) (2,277,443)
(6,926)
355,950
826,333
14
128,300
(984,049)
(1,207,954)
B. Loans to customers
Non performing loans purchased
- Loans
- Debt securities
C. Total
Legend
A = From interest
B= Other reversals
For a trend analysis of the concerned items, reference should be made to the Report on Operation
CONSOLIDATED INTERIM REPORT
137
Explanatory Notes - Part C – Information on the consolidated income statement
Section 11 – Administrative expenses – Item 180
11.1 Personnel expenses: breakdown
Type of Expense / Area
1. Employees
Total
Total
30 06 2015
30 06 2014
(826,385)
(847,912)
a) wages and salaries
(602,898)
(612,314)
b) social-welfare charges
(166,541)
(167,549)
(21,434)
(21,406)
-
-
(1,907)
(4,395)
(394)
(609)
- defined contribution
(184)
(178)
- defined benefit
(210)
(431)
(7,953)
(8,865)
(7,769)
(7,948)
(184)
(917)
-
-
(25,258)
(32,774)
(752)
(673)
3. Directors and Statutory Auditors
(1,994)
(2,422)
4. Retired personnel
(5,266)
(4,088)
(834,396)
(855,095)
c) severance pay
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
i) other employee benefits
2. Other staff
Total
For a trend analysis of the concerned items, reference should be made to the Half-Year Report on Operation
BANCA MONTE DEI PASCHI DI SIENA
Explanatory Notes - Part C – Information on the consolidated income statement
138
11.5 Other administrative expenses: breakdown
Items/Amounts
Stamp duties
30 06 2015
30 06 2014
(120,632)
(108,064)
Indirect taxes and duties
(21,278)
(18,348)
Municipal real estate property tax
(11,215)
(12,213)
(215)
(264)
(52,775)
(56,203)
(8,238)
(8,553)
Insurance
(12,035)
(8,317)
Rentals
(54,380)
(49,200)
Remuneration of external professionals
(67,676)
(50,795)
Third-party data processing
(32,449)
(26,546)
(723)
(2,099)
Lease of equipment
(20,321)
(30,185)
Utilities
(19,891)
(21,312)
Maintenance of movable and immovable properties (used in the business )
(14,912)
(13,532)
(9,347)
(12,020)
(15,583)
(19,371)
Advertising, sponsorships and promotions
(6,621)
(4,326)
Membership dues
(3,975)
(2,865)
Reimbursement of employee car and travel expenses
(5,429)
(5,363)
Security services
(9,420)
(15,251)
(27,591)
(25,787)
(1,336)
(838)
(49)
(296)
Printing and stationery
(5,098)
(3,815)
Telephone, telefax and telegraph
(2,379)
(2,983)
(16,309)
(15,265)
(3,244)
(3,851)
(11,950)
(19,497)
(555,071)
(537,159)
Subscription and purchase of publications
Property rentals
Cleaning service contracts
Title searches and land registry surveys
Data transmission rental
Postage
Software
Corporate entertainment expenses
Expenses for non-rented investment real estate
Transportation
Sundry occupancy expenses and refunds for release of immovable
property used in the business
Others
Total
For a trend analysis of the concerned items, reference should be made to the Half-Year Report on Operation
CONSOLIDATED INTERIM REPORT
139
Explanatory Notes - Part C – Information on the consolidated income statement
Section 12 – Net provisions for risks and charges – Item 190
12.1 Net provisions for risks and charges: breakdown
30 06 2015
Items/Amounts
Legal
disputes
Personnel
costs
30 06 2014
Others
Total
Legal
disputes
Personnel
costs
Others
Total
Provisions for the year
(53,499)
(3,607)
(62,254)
(119,360)
(56,256)
(7,248)
(71,575)
(135,079)
Write-backs
17,849
6,593
46,337
70,779
12,927
6,382
33,764
53,073
(35,650)
2,986
(15,917)
(48,581)
(43,329)
(866)
(37,811)
(82,006)
Total
BANCA MONTE DEI PASCHI DI SIENA
Explanatory Notes - Part C – Information on the consolidated income statement
140
Section 15 – Other operating expenses (income) – Item 220
15.1 Other operating expenses
Items/Amounts
Total
Total
30 06 2015
30 06 2014
Costs of robberies
(2,961)
(2,538)
Write-downs on improvements of third-party goods recognized as "Other
Assets"
(5,369)
(5,753)
(11)
(224)
(4,731)
(6,432)
-
-
Other
(28,530)
(77,243)
Total
(41,602)
(92,190)
Other expenses on real estate (real estate inventory)
Cost of financial lease transactions
Expenses from reassessment of market rental value "Chianti transaction"
The decrease of the item ‘Others’ is maimly due to the lower costs for charges for legal proceedings and penalties.
15.2 Other operating income: breakdown
Items/Amounts
Rents from investment real estate
Total
Total
30 06 2015
30 06 2014
11,975
14,021
1,438
519
125,292
107,839
Recovery of insurance premiums
5,048
3,500
Income from financial lease transaction
1,719
3,604
Other
89,109
102,444
Total
234,581
231,927
Other revenues from real estate (real estate inventory)
Recovery of taxes
CONSOLIDATED INTERIM REPORT
141
Explanatory Notes - Part C – Information on the consolidated income statement
Section 16 – Gains (losses) on investments – Item 240
16.1 Gains (losses) on investments: breakdown
P&L items/Sectors
Total
Total
30 06 2015
30 06 2014
1) Jointly owned companies
A. Income
1. Revaluations
27
4
27
4
2. Gains on disposal
-
-
3. Write-backs
-
-
4. Other income
-
-
(1,010)
-
B. Expense
1. Write-downs
(1,010)
-
2. Impairment losses
-
-
3. Losses on disposal
-
-
4. Other expenses
-
-
(983)
4
188,359
185,495
62,728
53,147
120,124
83,626
5,507
23,711
-
25,011
(4,656)
(33,283)
(3,026)
(16,917)
2. Impairment losses
(23)
(16,352)
3. Losses on disposal
(1,607)
(14)
-
-
183,703
152,212
-
57,000
1. Revaluations
-
-
2. Gains on disposal
-
-
3. Write-backs
-
-
4. Other income
-
57,000
-
-
1. Write-downs
-
-
2. Impairment losses
-
-
3. Losses on disposal
-
-
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
1. Write-downs
4. Other expenses
Net Profit (Loss)
3) Subsidiaries
A. Income
B. Expense
4. Other expenses
Net Profit (Loss)
Total
-
-
-
57,000
182,720
209,216
With regard to the figures posted in line “2) Companies subject to significant influence”, note that line “A.2 Gains on
disposal”, amounting to EUR 120.1 mln, entirely comprises the gain on disposal of 10.3% of the stake held in Anima Holding
S.p.A. following the sale, completed in June 2015, to Poste Italiane S.p.A.
BANCA MONTE DEI PASCHI DI SIENA
Explanatory Notes - Part C – Information on the consolidated income statement
142
Section 20 – Tax expense (recovery) on income from continuing operations – Item 290
20.1 Tax expense (recovery) on income from continuing operations: breakdown
Total
P&L items/Sectors
30 06 2015
30 06 2014
1. Current tax (-)
(24,011)
(113,178)
2. Adjustments to current tax of prior years (+/-)
(14,036)
(14,383)
-
-
3.bis “Reduction in current tax for the period due to tax credits under Law
214/2011
1,934,103
752,831
4. Changes in prepaid taxes (+/-)
(1,943,562)
(429,039)
5. Changes in deferred taxes (+/-)
63,256
6,919
6. Tax expense for the year (-) (-1+/-2+3+3bis+/-4+/-5)
15,750
203,150
3. Reduction of current tax for the year (+)
Item 290 “Tax expense on income for the year” includes income of EUR 49.4 mln from ACE (Aiuto alla Crescita Economica Support to economic growth, pursuant to art. 1 of Italian Legislative Decree no. 201/2011) accrued as at 30 June 2015.
Also note an extraordinary charge of EUR 22 mln due to the unsuccessful outcome of an appeal application submitted by the
Parent Company to the Revenue Agency pursuant to art. 11, Italian Law no. 212 of 27/07/2000. The appeal application,
notified on 21 April 2015, concerned the deductibility of certain costs relating to the 2008 tax period, presented by the Parent
Company in its financial statements as at 31 December 2013 as a correction of accounting errors, in compliance with IAS 8,
using the procedure set forth in Circular no. 31/E of 24/09/2013 of the Revenue Agency for the deduction of costs
pertaining to previous years. The Revenue Agency’s response, notified to the Bank on 21/4/2015, recognised the applicability
of the procedure set out in Ministerial Circular no. 31/E of 2013 only to tax periods for which the ordinary assessment
deadline has not expired.
Lastly, note that the balance as at 30 June 2015 of item 290 “Tax expense on income for the year” also discounts the effect of
the partial tax exemption (95%) of the gain achieved by the Parent Company on the disposal, under the Participation
Exemption (PEX) regime, of the stake held in Anima Holding to Poste Italiane.
CONSOLIDATED INTERIM REPORT
143
Part E – Information on risks and hedging policies
Section 1 – Risks of the banking group ....................................................................................................................................... 149
1.1 - Credit risk ................................................................................................................................................................................. 149
1.2 – Market risks ............................................................................................................................................................................. 166
1.3 – Banking group – Liquidity risk .......................................................................................................................................... 180
1.4 – Operational risk ...................................................................................................................................................................... 181
Note: Public Disclosure (Basel III Pillar) is published on the Group's website:
www.mps.it/Investor+Relations.
DRAFT
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Explanatory Notes - Part E – Information on risks and hedging policies
Foreword
A summary of the organisation of the Montepaschi Group's risk governance and the related processes
and key functions is described below. An estimate of the Overall Internal Capital and a description of
the relative assessment models are also provided.
For more detailed information on the bank's Risk Governance and risk culture, please refer to the
content of the Section “Group profile and business model – Governance and control systems” of the
Half-Year Report on Operations.
Risk governance system
The risk governance system adopted by the Group is characterised by a clear-cut distinction of roles
and responsibilities of the different functions at first, second and third level of control.
Policies relating to the assumption, management, coverage, monitoring and control of risks are defined
by the statutory bodies of the Parent Company. In particular:
-
The Parent Company’s Board of Directors defines and approves strategic guidelines and risk
management policies and, at least once a year, quantitatively expresses the Group’s overall risk
appetite in terms of economic capital;
-
The Board of Statutory Auditors and the Risk Management Committe evaluate the level of
efficiency and adequacy of the internal control system, with particular regard to risk control;
-
The CEO/General Management is responsible for ensuring compliance with risk policies and
procedures;
-
The Director in charge of the internal control and risk management system, appointed in
compliance with the Corporate Governance Code for listed companies, is responsible for creating
and maintaining an effective system of internal control and risk management.
Specific Management Committees responsible for risk issues have been established in order to
promote efficiency and flexibility in the decision-making process and facilitate interactions between the
various company departments involved:
-
the Risk Management Committee establishes Risk Management policies and ensures overall
compliance with the limits defined for the various operating levels; proposes the allocation of
capital to be submitted to the Board of Directors for approval; evaluates the risk profile reached
and therefore the capital consumption (Regulatory and Economic) at both Group level and for
each individual company of the Group; it analyses risk-return performance indicators;
-
the Finance and Liquidity Committee formulates the principles and strategic guidelines relating to
proprietary finance; it resolves upon and submits proposals regarding exposures to interest rate
and liquidity risk in the banking book and defines capital management actions;
-
the Credit and Credit Policies Committee formulates policies in relation to credit processes and
formulates an opinion, at least once per year, on credit policies by verifying their commercial
sustainability and consistency with risk appetite levels. It also approves, at least annually, company
policies pertaining to ‘credit assessment’.
As part of the Internal Control System, third-level controls are carried out by the Internal Audit Area,
second-level controls by the Risk Division and Compliance Area, and first-level controls by the
Business Control Units (BCUs).
-
The Internal Audit Area performs an independent and objective “assurance” and advising activity,
aimed both at monitoring operations compliance and risk trends (including through on-site audits)
as well as assessing the efficiency of the overall internal control system in order to improve the
effectiveness and efficiency of the organisation.
-
The Risk Division, which reports directly to the CEO, includes a risk management department, an
anti-money laundering department and an internal approval department. This Division therefore
has the following tasks:
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o
o
o
o
o
146
to guarantee the overall functioning of the risk management system;
to verify capital adequacy as part of the ICAAP process and the Risk Appetite Framework
(RAF), as well as ensure that significant transactions are consistent with the RAF;
to define strategic policies for the loan portfolio;
to perform the anti-money laundering duties envisaged by Law;
to ensures the necessary reporting flows to the Group’s Top Management and
Governance bodies.
Specifically, within the Risk Division:
o
o
the Risk Management Area defines the integrated methods of risk measurement/analysis
and ensures they are constantly monitored. It develops the internal risk models used for
regulatory management purposes and monitors compliance with the operational limits
established by the Board of Directors;
the Validation, Monitoring and Risk Reporting Area verifies the continuous reliability of
the results of the risk measurement system and the maintenance of their consistency with
regulatory instructions. It validates the models, including those not used for regulatory
purposes. This Area also prepares the mandatory disclosures and management reporting
on risks.
-
The Compliance Area performs the function of control of compliance with regulations for the
Parent Company. The department is directly responsible for managing risks relating to the
violation of the most significant rules in bank-customer relations and it periodically reports to the
company’s top management and supervisory authorities regarding the overall state of compliance
of the Bank’s systems and operations. In compliance with the supervisory provisions, the
Compliance function has been incorporated under the Risk Division and reports directly to the
CEO.
-
The outlying BCUs operating within the subsidiaries or main business areas, carry out compliance
checks on the transactions which they are responsible for and are the first level of organisational
supervision of transactions within the broader internal control system.
During the first half of 2015, the Staff Regulatory Relationship was also established, reporting directly
to the CEO, for centralised oversight of management of relationships and assessments by the
Supervisory Authorities, with involvement by the relative company functions in question, coordinating
and monitoring planning of the commitments made.
Requirements of autonomy and independence of the Risk Division
Autonomy and independence are ensured by mechanisms facilitating relations and functional links
with the Corporate Bodies having strategic supervision, management and control functions.
In particular, the Board of Directors appoints and removes the Head of the Parent Company's Risk
Division, upon proposal by the Risk Management Committe, with the assistance of the Appointments
Committee, having consulted the Board of Statutory Auditors.
The remuneration of the Head of the Parent Company's Risk Division is determined and approved by
the Board of Directors upon proposal by the Remuneration Committee, having heard the opinion of
the Risk Management Committe, having consulted the Board of Statutory Auditors.
Activities relating to the international Regulatory framework
-
Pillar 1: since 2008, the Group has used internal models validated by the Bank of Italy for the
measurement and management of credit risk (AIRB - Advanced Internal Rating Based) and
operational risk (AMA - Advanced Measurement Approach). Over time, and in collaboration with
the Supervisory Authorities, these models have been further enhanced and their scope of
application extended to Group entities not originally included in the initial validation scope.
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Pillar 2: efforts to ensure compliance with the new framework Supervisory Review and Evaluation
Process (SREP) and to further improve the Group’s Internal Capital Adequacy Assessment
Process (ICAAP) continued during the year, with the mandatory reporting provided to
Supervisors.
-
Pillar 3: public disclosure is provided on a quarterly basis through the Group’s internet site
www.mps.it/Investor+Relations and is continuously updated in accordance with regulatory
developments.
An analysis of the Group’s Internal Capital
The Overall Internal Capital (or Overall Absorbed Capital) is the minimum amount of capital
resources required to cover economic losses resulting from unforeseen events caused by the
simultaneous exposure to different types of risk.
The main types of risks incurred by the Montepaschi Group in its day-to-day operations can be
summarily described as follows:










credit risk;
market risk (Trading book + AFS);
operational risk;
banking book interest rate risk;
counterparty risk;
real estate risk;
issuer risk;
concentration; Equity investment portfolio risk;
strategic risk;
liquidity risk; reputational risk.
Risks inherent in investment products/services for the Group’s customers are also monitored, to
protect the customer and preventing any potential repercussions in terms of reputation.
All of the types of risk mentioned above are involved in quantifying the Overall Internal Capital, with
the exception of liquidity and reputational risk that, instead, are mitigated through organisational
policies and processes.
Risk assessment models
The Risk Management Area regularly quantifies the Group’s Internal Capital for each type of risk and
periodically reports these to the Risk Management Committee and to the Governing Bodies as part of
the reporting flows prepared by the Risk Division.
In the first half of 2015, some significant changes were introduced to the estimating’s methods of
Internal Capital. The main one consists of the move from a Pillar 2 approach to one known in the
literature as “Pillar 1 Plus”. In essence, the Pillar 1 requirements for Credit and Counterparty Risk and
for Operational Risk, which already include the requirements relating to Issuer Risk on the Banking
Portfolio (BP), Investment Risk and Real Estate Risk, are increased by the requirements from internal
models relating to Market Risks, Banking Book Interest Rate Risk, Concentration Risk and Strategic
Risk.
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Overall Internal Capital is calculated without considering the inter-risk diversification, by directly
adding together the contributions of the individual risks. This approach tends to incorporate the
indications in the SREP (Supervisory Review and Evaluation Process) Guidelines document published
by the EBA in December 2014.
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Explanatory Notes - Part E – Information on risks and hedging policies
Section 1 – Risks of the banking group
1.1 - Credit risk
Qualitative information
1.1.1 General aspects
Within the guidelines of the Business Plan approved by the Board of Directors of the Parent
Company, and in line with the evolution of the supervisory regulatory framework, the Group pursues
the priority objective of improving the quality of the managed loan book and consequently reducing
the cost of credit.
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.
1.1.2 Credit risk management policies
Organisational aspects
As its distinctive mission, the Credit Division performs activities of credit risk taking and operational
monitoring of credit quality, giving guidance and support to the network in credit activities, monitoring
trends in the cost of credit and ensuring coverage of the Group's major risks and financial
restructuring transactions. It also supervises the overall non-performing portfolio, defining and
implementing its management policies and optimizing its performance (time, costs and results) in
terms of collection of doubtful loans and loans in arrears.
More specifically, the organisational model aims at improving the level of service provided by the
Division to the sales & distribution network and product companies, by:
-
improving risk assumption activities, which are first and foremost in the monitoring of credit
quality;
reducing response times to support Network activities with a view to optimising costs;
monitoring the full roll-out of particularly complex operations such as corporate restructuring
plans, with the use of appropriate professional skills;
maximising debt collection activities on insolvent customers by leveraging on innovative methods;
providing a services unit to support the division and all Head Office structures.
In the first half of 2015, the contents of the restructuring of the Credit Division resolved by the Board
of Directors at the end of 2014 were rolled out to the Bank's structures. The objective of this initiative
is to improve supervision by the general management of the most problematic loans, for a more
effective and efficient management and collection of these debts.
The reorganisation resulted in a different allocation of activities among the 4 areas of the Credit
Division; conversely, the responsibilities of the Staff that provides administrative support to the
Deputy General Manager, Head of Credit, and facilitates the handling of cross-divisional matters,
remain unchanged.
The Loan Disbursement Area is responsible for loan disbursement, monitors significant loan risks and
manages country risk.
The Restructured Loans Area manages problematic loans that require the implementation of
restructuring actions. Particular focus was given to the operational consequences of the new debt crisis
solution tools for companies introduced by recent bankruptcy law amendments. The Restructured
Loans Area directly manages the Group’s restructuring transactions underway and completed,
including those for small amounts.
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The Distressed Credit Risk and Debt Collection Area directly manages doubtful loans and substandard
loans. Its “mission” is to maximise results from debt collection activities using both traditional debt
collection methodologies (legal action and external companies for mass debt collection on small-ticket
receivables) and more advanced methods connected with portfolio disposals or using companies
specialised in debt collection.
The Area is the reference point for debt collection in any phase of the exposure's life cycle, regardless
of the classification of the position.
The Specialised Credit Services Area provides services to the credit supply chain to ensure operational
continuity. Responsibilities for supervising the quality of the Bank’s loan portfolio have been
transferred to this Area during the half-year. In particular, as a part of the new classification process
which was designed to acknowledge developments in supervisory legislation (update dated 20 January
of Bank of Italy Circular “272 Accounting Matrix’, the Area has the job of verifying the proper
implementation of the process and, subsequently, the prompt classification of counterparties.
Credit quality, which is determined in accordance with Supervisory guidance, is constantly monitored
by central and outer units.
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).
The prudential regulation ‘Basel 2’ requires the Parent Company 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 for the Bank 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 book, substandard and doubtful loan flows and loan-loss provisions.
Forecast sustainability is ensured by the definition of concrete loan book actions which are
communicated to the outlying networks through behavioural guidelines described in the Bank’s
regulations, the contents of which are updated yearly, and through modification of the processes and
parameters for credit disbursement and management.
All credit processes use the borrower rating as a decision-making driver, and they are conceived as a
function 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 solvency rating for 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).
In order to increase efficiency levels in managing internal ratings, the locally situated Rating Agencies
have become the single point of reference for all units on rating issues. The new role of the Rating
Agencies will allow for a closer interaction with the Network to make assistance more effective,
generate more synergies and enable a more efficient transfer of knowledge.
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In line with the Business Plan, the organisation of the Rating Agencies has been modified in order to
encourage the financing of structures more directly linked to credit quality monitoring (or recovery)
across the entire portfolio, without affecting the level of service in the network.
This development has been achieved through:


streamlining of the offices, from 12 to 8, one for each Regional Area;
modification of the scope for counterparties subject to process rating, bringing the invoicing
threshold from 5 to 10 mln and consequently reducing the number of clients assessed by the
specific analyst.
At the start of the year, the Group commenced a process of in-depth review of the loans classification
and valuation model, with the objective of making it consistent with the new supervisory regulations
by the end of the first half-year. Policies governing loan classification and valuation were issued in
April, introducing the following changes:




identification of default detection parameters in order to promptly identify impaired positions.
The identification is linked to a series of events symptomatic of the deterioration of the credit
quality of the counterparty. When these are verified, the Bank takes action.
introduction of the concept of Forborne: exposures subject to contractual changes or
refinancing to debtors which find themselves in financial difficulty are classified as forborne.
The term forborne encapsulates, under a single definition, all used and known concepts, for
example, “restructuring”, “late payments”, “repayment plans”, “rescheduling”, “refinancing”
provided to entities in difficulty;
evolution of loan valuation methods attributable to these two types of measurement to be
used to calculated the provision for impairment:
o valuation of cash flows: applicable to business customers (in the presence of a set of
financial statements, business plan) in the event in which the debtor continues to
generate operating cash flows able to repay the debt.
o valuation of the guarantees and/or balance sheet assets of the counterparty: applicable
to all customers, in the event in which the debt must be extinguished principally
through the enforcement of guarantees and/or the monetization of the assets or
equity of the counterparty. This approach will also be utilised where the determination
of cash flows is difficult to apply and/or insufficient.
introduction of more conservative review rules for the valuation of loans to ensure the
adjustments are promptly brought into line with the effective risk of the exposure.
The regulation outlining the participants and responsibilities in monitoring the bank’s classification
process was issued the subsequent month: while the policy dictates the rules to classify the loans, the
new regulation outlines the rules and management behaviours to apply in order to correctly classify
them. Pending integration of the new classification processes into the group procedures, contingency
processes were implemented in order to immediately guarantee application of the new regulations in
the credit disbursement and management processes.
Aware of the high impact of aforementioned innovations on the network’s modus operandi, the
Group has launched a training plan impacting all roles involved in credit management. The key roles at
Head Offices and at the regional areas involved in the credit management process have already been
trained; intensive training of the network operators is envisaged starting in September.
Credit risk is analysed in-house for management purposes 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, both management (intra-risk diversified with a
representative period of one year and a confidence interval calibrated to the target rating assigned to
the Group) and regulatory. Several inputs are considered: Probability of default (PD), obtained through
validated and non-validated models, LGD rates (management and regulatory), number and types of
guarantees supporting the individual credit facilities, regulatory and management CCF on the basis of
which the regulatory and management EAD are estimated respectively.
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The internal PD, LGD and EAD models for risk measurement are one of the main elements of
assessment for all Group units involved in the credit industry, both at Head Office level (Risk
Management, Credit Division, Chief Financial Officer, General Management, Risk Management
Committee, Board of Directors) and at branch level (Rating agencies and Relationship Managers). The
Group is currently authorised to use the Advanced Internal Rating Based (AIRB) models to determine
capital requirements against credit risk on the portfolios of "exposures to businesses" and "retail
exposures" of Banca Monte dei Paschi di Siena, MPS Capital Services and MPS Leasing & Factoring,
and is awaiting validation of the EAD parameter and roll-out of the domestic NBFI portfolio for these
counterparties.
The development of the internal rating systems involved the adoption of strict and advanced statistical
methodologies in compliance with the requirements set out in the regulations; at the same time,
models were selected in such a way as to make results consistent with the historical experience of the
bank in credit management. Lastly, in order to optimise the proper use of these new instruments, the
rating models were shared with a top-down approach – from Risk Management down to individual
client managers. Estimation of the LGD model was based on internal data relative to capital flows,
recoveries and expenses actually incurred on positions transferred to the doubtful loans portfolio.
Results obtained from model application were then compared with data recorded by the Distressed
Credit Risk and Debt Collection Area which, within the Credit Division, is dedicated to the
management and recovery of non-performing loans.
The main characteristics of the advanced rating systems are as follows:








for all validated regulatory portfolios, the rating is calculated with a counterparty-based
approach for each individual borrower, in line with the accepted management practice
which provides for the assessment of credit risk, both in the disbursement and
monitoring phases;
ratings are based upon a Group logic: each individual counterparty is assigned a single
rating at banking Group level, based on the set of information pertaining to all lending
banks within the AIRB scope; the LGD is different for each company given the diversity
of products issued and the type of customers to whom they are offered;
the rating model segmentation is defined in such a way as to make the individual model
clusters consistent with commercial objectives, credit processes and regulatory portfolios
set out in the regulations;
the calculation of the final rating is differentiated by type of counterparty. The credit
process envisages a level of in-depth analysis proportional to counterparty risk: the
assessment of loan disbursements is based on a complex multi-level structure for mediumlarge corporate counterparties (SME and Large Corporate (LC) segments), whose
exposure and concentration risks are higher, and a simplified structure for Small Business
and Retail clients;
in line with this process, the final rating for SMEs and LC is the result of a number of
different factors: statistical rating, qualitative rating, overrides and valuation of the
‘economic group’ which businesses belong to; for SB and Retail counterparties the rating
is calculated only on the basis of statistical factors;
the rating has a 12-month internal validity period and is usually reviewed on a yearly basis,
except for rating reviews following well-structured codified practices or that are brought
forward on client managers’ request or following serious counterparty deterioration;
LGD reflects the economic (and not only the accounting) loss incurred; for this reason,
LGD estimates must also include the costs incurred for the recovery process and a time
factor;
loss given default is differentiated by type of loans and a LGD value is assigned at the
level of each individual transaction; it is differentiated by geographical area since historical
and current recovery rates are different among Northern Italy, Central and Southern Italy
and Islands;
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
loss on defaulted positions other than doubtful loans is estimated with a Cure Rate
approach. With regard to counterparties whose exposures are administratively classified as
Substandard, Restructured and Past Due, the percentage of exposures reverting back to a
performing status was calculated and used to adjust the estimated LGD, starting from
doubtful loans.
The Montepaschi Group has adopted a single Master Scale for all types of exposures; this enables all
units involved in credit management to immediately compare the risk level associated with different
counterparties or portfolios; furthermore, the probabilities of default of internal rating classes were
mapped against Standard&Poor’s external rating scale so as to make internal risk measurements
comparable to those available on the financial market.
The development and monitoring of rating systems has been functionally assigned to Risk
Management and is subject to control by the Internal Validation and Internal Audit Functions.
The Montepaschi Group has used PD, LGD and EAD parameters, estimated for regulatory purposes
to calculate Risk Weighted Assets, also for operational and internal management purposes. These
provide the basis of calculation for different systems of measurement and monitoring, and specifically
for the:





measurement of economic capital for credit risk;
calculation of risk-adjusted performance and measurement of value creation;
risk-adjusted pricing processes;
credit direction processes
across all credit processes (disbursement, review, management and follow-up) which are
fully "engineered" in the Electronic Loan File application (it. Pratica Elettronica di Fido or
PEF), under which the borrower's rating is the result of a process which evaluates - in a
transparent, structured and consistent manner - all the economic-financial, behavioural
and qualitative information regarding customers with whom the bank has credit risk
exposures.
In compliance with the guidelines set forth by the Basel Committee and Best Practices, new prudential
supervisory provisions for banks require credit institutions to carry out adequate stress testing
exercises.
The Montepaschi Group regularly conducts stress tests on all risk factors. The stress tests are used to
assess the bank's capacity to absorb large potential losses in extreme but plausible 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: assumptions are made of shocks that are due to a combination of
risk factors which were historically observed in the past and whose recurrence and
plausibility retain a certain degree of likelihood;
discretionary scenarios: assumptions are made of shocks that are due to a combination of
risk factors which may emerge in the near future, depending on the foreseeable
environmental, social and economic developments. Simple discretionary scenarios are
currently being developed (variation of a single risk factor) as are multiple ones (variation
of several risk factors simultaneously). Simple discretionary scenarios are calibrated to
independently deal with one category of risk factors at a time, assuming shocks do not
spread to the other factors. Multiple discretionary scenarios, on the other hand, aim to
assess the impact of global shocks that simultaneously affect all types of risk factors.
The Montepaschi Group’s methodological approach to stress-testing is based upon the identification
of main risk factors whose objective is to select events or combinations of events (scenarios) which
reveal specific vulnerabilities at Group-level. To this end, specific stress plans have been put in place
on Pillar I risks (credit, market and operational) which were then made to converge – together with
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stress events designed ad hoc on other risk factors – into an overall Pillar II stress test plan, aimed at
determining the potential impact on the Group within the ICAAP process.
With regard to Credit risk in particular, the Montepaschi Group has defined a macro-economic
regression model to estimate the variations in the Probability of Default as a function of changes in the
main credit drivers. Credit drivers which significantly describe PD variations are identified beforehand.
On the basis of the regression model, credit driver disturbances are then estimated according to the
current and prospective economic situation. The shock applied to the credit drivers determines the
change in credit portfolio PD, triggering the simulation of a hypothetical counterparty downgrading,
with consequent risk variations in terms of Expected Loss, Unexpected Loss and input from new
Defaults.
The results from the stress test are submitted to the Top Management and Board of Directors. They
are formally examined by the Board of Directors as part of the ICAAP Annual Report approval
process, with a view to providing a self-assessment of the current and prospective capital adequacy of
the Montepaschi Group.
2.2.1 Credit policies
Since 2008 the credit policy definition process, fed with data input from the metrics described above,
has been based on analytical portfolio estimates and has continuously been optimised and fine-tuned.
The model adopted, which is integrated in the Group's budgeting process, is aimed at identifying credit
development and management processes that will meet business targets within the limits of the
financial and regulatory capital that the Group identifies as maximum acceptable risk, by setting out
criteria for customer selection and approaches for the identification of portfolios to be re-qualified/run
off in different ways depending on customer segment, business sector, geographic area, quality of
counterparties, form of lending and collateral pledged.
The process starts out from the Montepaschi Group's strategic objectives regarding credit and any
existing structural constraints and, taking into account the expected macroeconomic scenario, develops
and defines the strategic guidelines within three main areas:

Analysis of attractiveness: Classification of “attractiveness” of portfolio clusters (Customer
Segment, Economic Sector and Regional Area, Counterparty Quality) on the basis of
risk/return and scenario; sub-division of loan book into Areas of Focus (Development and
Requalification) characterised by diversified lending strategies;

Allocation of credit production: Formulation of loan development objectives based on the
level of attractiveness and concentrated in the Area of Development;

Requalification actions: Short-term loan downsizing strategies on riskier clusters (Area of
Requalification), aimed at improving the quality of the performing loans. Management
activities and organisational actions to reduce defaults and improve recovery of the nonperforming loans portfolio.
The process culminates in the approval of the credit policy guidelines by the Board of Directors,
consequent review of the internal regulatory framework of reference and transmission of guidelines
and quantitative objectives to the regional structures and individual operating units.
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 operational requirements;
assessing creditworthiness, also through the assignment of internal ratings to individual borrowers;
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- 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 EUR 10 mln, or a
corporation with revenues over EUR 10 mln) and on whether the customer is a prospect or existing
customer.
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 authorities
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.
2.2.3 Monitoring processes
The Credit Monitoring process introduced in 2012 as a single tool for the management of postdisbursement activities is an effective aid to obtain credit cost reduction by leveraging two main
factors:
-
identification of high insolvency risk positions ('screening');
customer-type differentiated treatment of positions (dedicated 'routing').
Identification of high insolvency risk positions
Ordinary-risk positions are scanned by a 'screening' engine which selects the highest-risk positions on
a weekly basis, so as to identify the counterparties bound to become insolvent at a sufficiently early
stage. Screening is based on a 'performance risk indicator' (it.: "indicatore di rischio andamentale",
IRA) which summarises a set of critical elements including the worsening of leading indicators, ratings,
information on related counterparties and days past due (with thresholds differentiated by customer
segments and amounts used). "Customised" parameters make it possible to diversify the screening
criteria for risk positions by type of customer with respect to the criteria used by the "Loan
Performance Management" system.
'Customer-type differentiated' treatment of positions
This choice was based on the need for differentiating the treatment of positions by customer segments,
in the conviction that a corporate client cannot be treated in the same way as a retail client and that
specific client management needs should be met with 'ad hoc' processes. Ordinary-risk positions,
reported as higher risk by the 'screening' engine, are routed to specific processing queues depending on
the type of customer and credit facility involved:
1. a 'Mass Retail' procedure for 'Retail Family' clients;
2. a 'Standard Retail' procedure for Retail, Affluent and Private customers, as well as small-sized
businesses with limited exposure;
3. a dedicated Corporate procedure for corporate customers.
Two measures were completed over the course of the half-year, with the objective of increasing credit
quality monitoring through containment of the overdraft phenomenon.
BANCA MONTE DEI PASCHI DI SIENA
Explanatory Notes - Part E – Information on risks and hedging policies
156
A new authorisation process for debits on overdrawn accounts was introduced in June. The process
requires debits to be authorised by parties with the power to approve a credit line equal to the amount
of the exposure. In fact, authorisation of the overdraft is viewed as granting the counterparty a new
loan. In the same month, another process was implemented to manage the expiry of advances for
which customers have not provided adequate coverage. Upon expiry of a tolerance period of
approximately 3 weeks, the advance becomes insolvent, blocking the available balance in the
customer’s current account.
Credit risk mitigation techniques
With reference to the retail and corporate loan portfolio, the Montepaschi Group does not apply any
netting processes to the credit risk exposures with on- or off-balance sheet items with opposite sign.
The Montepaschi Group adopts policies to reduce counterparty risk with institutional counterparties,
by entering into netting agreements according to the international ISDA and ISMA standards and
related collateral agreements for both derivatives and repos (repurchase agreements).
The main forms of real guarantees for credit protection used by the Montepaschi Group include
pledges, mortgages and other collateral (insurance, guarantee funds).
As at today, the pledge of sums or the pledge of securities and mutual funds deposited with the Bank
and mortgages on properties account for over 98% of the nominal amount of collaterals received and
ensure full compliance with regulatory/legal/organisational requirements set out by the New
Supervisory Regulations for the enforcement of credit risk mitigation standards.
The Montepaschi Group has developed one single process for the acquisition of collaterals which is at
the same time a working instrument and the expression of the Group’s management policies. The
management of collateral is activated after loan disbursement is approved and its process is organised
into a number of different stages:




acquisition (including multiple acquisition): the controls of (formal and amount) consistency
with the guarantees proposed during the authorisation phase are performed in this stage;
adjustment/change/amendment: useful to amend the characteristics of a guarantee without
interrupting loan protection;
query: gives information about the present data and the historical trend of guarantees received;
repayment/cancellation.
If the measures for monitoring collaterals on loans show operational irregularities during the
acquisition phase or any inadequacies/losses of the values received as a pledge, events falling within
the scope of credit monitoring policies are put in place, which trigger operational obligations of credit
risk assessment.
The Montepaschi Group accepts different instruments to protect loans which can be summarised in
the following categories:












Guarantees (including omnibus guarantees and personal guarantees issued by third parties);
Endorsement;
Guarantee policy;
Credit mandate;
Strong/binding patronage letter;
Negotiable instruments;
Performance bond agreement;
Debt delegation;
Expromission;
Assumption of debt;
Personal Collateral governed by foreign law;
Credit derivatives:
CONSOLIDATED INTERIM REPORT
157
Explanatory Notes - Part E – Information on risks and hedging policies
-
credit default swaps;
total return swaps;
credit linked notes.
The main parties issuing the above credit-protection instruments are:






Sovereign governments and central banks,
Public sector and local agencies,
Multilateral development banks,
Regulated intermediaries,
Guarantee institutions (Confidi),
Companies and individuals.
Over 95% of personal guarantees are traceable to companies and individuals as guarantors. Only to a
limited portion of these customers can an internal rating be assigned, since these guarantors are not
borrowers of Group companies.
The main concentration of collaterals is linked with retail mortgage loans. However, it cannot be
referred to as risk concentration by virtue of the principle of risk fragmentation which is implicit in this
type of customers. The value of properties underlying real estate guarantees is updated through the
measurement of the average values of the real estate market. Any information on the evaluations is
provided, on a half-yearly basis, by specialised industry operators (extraordinary updates may be
generated by significant variations in the very short period).
The disbursement of loans secured by collaterals is subject to specific control measures, differentiated
by type of guarantee pledged, which are applied during the phase of disbursement and monitoring.
The general requirements for ensuring the legal certainty and enforceability of guarantees are verified
by checking compliance with the following relevant conditions:




binding nature of the legal obligation entered into by the parties and enforceability in the event
of legal proceedings;
documented evidence and enforceability of the instrument against third parties in all relevant
jurisdictions for the purpose of its exercise and execution;
timely liquidation in case of non-fulfilment;
compliance with organisational requirements.
With reference to compliance with organisational requirements, mitigation of risk is ensured by:


the presence of an IT system in support of the life cycle phases of the guarantees (acquisition,
valuation, management, re-valuation and enforcement);
the existence of regulated policies for the management of guarantees (principles, practices,
processes), available to all users.
Non-performing financial assets
The Credit Division, in consultation with the Risk Division for non-performing financial assets
assessed on a collective basis, oversees the process for the updating and usage of non-performing loan
assessment criteria, availing itself of the Credit Assessment Staff within the Specialised Credit Services
Area. 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.
BANCA MONTE DEI PASCHI DI SIENA
Explanatory Notes - Part E – Information on risks and hedging policies
158
Quantitative Information
A. Credit quality
A.1 Non-performing and performing loans: amounts, value adjustments, changes, breakdown by
business sector and geographical area
A.1.1 Breakdown of financial assets by portfolio and credit quality (book values)
30 06 2015
1. Financial assets held for
trading
X
X
2. Financial assets available
for sale
X
Other
Impaired
Other assets
X
Total
Other entities
Past-due not
impaired
Past-due
Portfolio/quality
Unlikely to pay
Doubtful loans
Banking Group
16,285,484
-
-
16,285,484
132
2,656
-
-
19,488,135
-
-
19,490,923
-
-
-
-
-
-
-
-
912
25,036
78
1,362
8,299,847
-
-
8,327,235
9,047,853
12,036,807
2,614,402
3,665,352
90,081,818
-
-
117,446,232
6. Financial assets
designated at fair value
-
-
-
-
-
-
-
-
7. Financial assets held
for sale
-
-
-
-
-
-
-
-
470,022
-
-
470,022
3. Financial assets held to
maturity
4. Loans to banks
5. Loans to customers
8. Hedging derivatives
X
X
X
X
Total 30 06 2015
9,048,897
12,064,499
2,614,480
3,666,714
134,625,306
-
-
162,019,896
Total 31 12 2014
8,446,691
11,670,653
3,053,313
4,461,646
139,656,279
-
-
167,288,582
The data as at 31 December 2014 are presented, solely for disclosure purposes, in accordance with the new definition of
impaired assets adopted by the Bank of Italy in the 7th update of 20 January 2015 of Circular 272 “Accounting Matrix", in
force from 1 January 2015. Impaired financial assets are broken down into the following categories: default, unlikely to pay
and overdue and/or past due non-performing exposures and include cash assets (loans and debt securities) and "off-balance
sheet" (guarantees issued, irrevocable and revocable“Financial assets held for trading” and “Hedging derivatives”. The credit
exposures belonging to these last two accounting portfolios have been included among other assets.
The notions of substandard and restructured exposures were therefore repealed and included in the unlikely to pay aggregate,
with the exception of objective substandard (EUR 1,360.7 mln as at 31 December 2014) inserted in past due non-performing
exposures.
Note that as at 30 June 2015, the financial assets indicated in the above table include performing forborne exposures for EUR
3,203.1 mln and non-performing forborne exposures for EUR 5,902.9 mln.
CONSOLIDATED INTERIM REPORT
159
Explanatory Notes - Part E – Information on risks and hedging policies
A.1.2 Breakdown of credit exposures by portfolio and credit quality (gross and net values)
30 06 2015
Gross exposure
Portfolio
adjustments
X
X
X
X
Total
(Net exposure)
Net exposure
X
Net exposure
Specific writedowns
Portfolio/quality
Performing
Gross exposure
Non perfoming assets
A. Banking Group
1. Financial assets held for
trading
2. Financial assets available
for sale
16,285,484
16,285,484
5,803
3,015
2,788
19,488,135
-
19,488,135
19,490,923
-
-
-
-
-
-
-
72,759
46,732
26,027
8,309,191
7,982
8,301,209
8,327,236
46,245,723
22,546,661
23,699,062
94,546,815
799,645
93,747,170
117,446,232
6. Financial assets
designated at fair value
-
-
-
-
-
7. Financial assets held
for sale
-
-
-
-
-
470,022
470,022
138,292,020
162,019,897
-
-
3. Financial assets held to
maturity
4. Loans to banks
5. Loans to customers
8. Hedging derivatives
Total A
X
X
-
X
X
X
X
46,324,285
22,596,408
23,727,877
122,344,141
X
X
X
X
X
807,627
B. Other consolidated
companies
1. Financial assets held for
trading
X
2. Financial assets available
for sale
-
-
-
-
-
-
-
3. Financial assets held to
maturity
-
-
-
-
-
-
-
4. Loans to banks
-
-
-
-
-
-
-
5. Loans to customers
-
-
-
-
-
-
-
6. Financial assets
designated at fair value
-
-
-
-
-
7. Financial assets held
for sale
-
-
-
-
-
8. Hedging derivatives
-
-
-
-
-
Total B
-
-
-
-
-
-
-
Total 30 06 2015
46,324,285
22,596,408
23,727,877
122,344,141
807,627
138,292,020
162,019,897
Total 31 12 2014
45,413,496
22,242,839
23,170,657
127,549,851
910,711
144,117,925
167,288,582
X
X
-
X
X
The data as at 31 December 2014 are presented, solely for disclosure purposes, in accordance with the new definition of
impaired assets adopted by the Bank of Italy in the 7th update of 20 January 2015 of Circular 272 “Accounting Matrix", in
force from 1 January 2015
BANCA MONTE DEI PASCHI DI SIENA
Explanatory Notes - Part E – Information on risks and hedging policies
160
A1.3 Banking Group - Balance sheet exposure to banks: gross and net amounts
30 06 2015
Type of exposure/ Amount
Gross exposure
Specific writedowns
Portfolio
adjustments
Net exposure
A. Balance-sheet exposure
a) Doubtful loans
32,601
31,556
X
1,044
b) Unlikely to pay
45,081
17,929
X
27,151
154
76
X
78
c) Past due
e) Other assets
9,740,566
Total A
9,818,402
X
49,561
7,982
9,732,584
7,982
9,760,857
A1.6 Banking Group - Balance sheet exposure to customers: gross and net amounts
30 06 2015
Type of exposure/ Amount
Gross exposure
Specific writedowns
Portfolio
adjustments
Net exposure
A. Balance-sheet exposure
a) Doubtful loans
25,357,590
16,309,738
X
9,047,853
b) Unlikely to pay
17,500,719
5,463,371
X
12,037,348
3,387,954
773,552
X
2,614,402
c) Past due
e) Other assets
Total A
CONSOLIDATED INTERIM REPORT
122,700,417
X
804,598
121,895,819
168,946,680
22,546,661
804,598
145,595,422
161
Explanatory Notes - Part E – Information on risks and hedging policies
Exposure to sovereign debt risk
Below is a breakdown of the Group's exposure to sovereign debt risk in government bonds, loans and
credit derivatives as at 30 June 2015.
The exposures are broken down by accounting categories. For securities classified as 'Loans and
Receivables (L&R)' and "Loans", the book value (amortised cost) is also reported.
LOANS
C R EDIT
DER IVATIVES
L&R
L&R
F ina nc ia l
a s s e ts HF T
B o o k va lue
B o o k va lue
No m ina l
DEB T S EC UR ITIES
F ina nc ia l a s s e ts he ld fo r tra ding
F ina nc ia le a s s e ts a va ila ble fo r s a le
C OUNTR Y
F a ir va lue =bo o k
va lue
No m ina l
Arge ntina
F a ir va lue =bo o k
va lue
No m ina l
8.54
7.54
-
-
-
-
-
Aus tria
(11.94)
(12.33)
-
-
-
-
-
B e lgium
(11.92)
(12.71)
61.37
66.34
-
-
-
B o s nia
0.01
0.01
-
-
-
-
-
B ra zil
1.04
1.56
-
-
-
-
C hina
-
-
28.82
28.82
-
-
C ro a tia
0.10
0.10
-
-
-
-
F ilippine
0.00
0.01
-
-
-
-
F ra nc e
(8.96)
(9.23)
4.16
-
-
(0.89)
Ge rm a ny
(61.16)
3.50
-
3.89
-
(57.41)
-
-
-
-
17.87
Gre e c e
0.03
0.01
-
-
-
-
-
Ire la nd
0.00
0.00
-
-
-
-
2,838.73
2,977.90
144.00
925.14
Ita ly
Litua nia
-
18,963.25
9.00
1,954.12
10.25
-
-
-
M e xic o
0.24
0.29
-
-
-
-
-
Ho lla nd
0.08
0.09
-
-
-
-
P o la nd
0.36
0.41
10.00
10.70
-
-
P o rtuga l
-
16,736.86
-
-
-
15.00
15.50
-
-
Unite d Kingdo m
0.07
0.08
-
-
-
-
-
R o m a nia
(0.11)
(0.11)
-
-
-
-
-
(0.47)
(0.77)
-
1.51
40.00
47.49
R us s ia
-
4.59
2.69
-
-
-
-
(10.72)
S pa in
1.43
Unite d S ta te s
0.10
0.12
-
-
-
-
-
Turke y
0.61
0.72
-
-
-
-
-
Unghe ria
0.07
0.07
-
-
-
-
-
(0.22)
(0.10)
-
-
-
-
-
1.00
0.98
-
-
-
-
T o t a l 3 0 0 6 2 0 15
2 ,7 5 7 .6 4
2 ,8 9 8 .7 3
16 ,9 0 4 .5 5
19 ,14 6 .5 2
14 8 .5 9
9 2 5 .14
1,9 5 9 .18
T o t a l 3 1 12 2 0 14
1,8 2 0 .4 2
1,8 6 2 .0 9
18 ,9 9 2 .8 6
2 2 ,10 0 .3 6
4 6 5 .5 8
3 ,2 5 2 .10
6 9 0 .0 3
Ve ne zue la
Othe r C o untrie s
-
BANCA MONTE DEI PASCHI DI SIENA
Explanatory Notes - Part E – Information on risks and hedging policies
162
Details on the Group’s exposure is presented taking into consideration that, according to instructions
from the European Securities and Markets Authority (ESMA), “sovereign debt” is defined as bonds
issued by central and local Governments and by government Entities, as well as loans disbursed to
aforementioned entities.
These financial instruments were measured according to the standards applicable to the category to
which they belong.
The overall exposure consists almost entirely in Italian debt and is concentrated under the AFS
accounting category. This AFS exposure is nearly exclusively towards level 1 of the fair value hierarchy,
with the exception of EUR 326 mln in government bonds.
Following are the details of Italian AFS reserves and credit derivatives (in EUR/mln):
AFS securities: Italy
Book value
30 06 2015
31 12 2014
18,963.2
21,805.1
AFS reserve (after tax)
(548.9)
(564.1)
of which: hedging effect (after tax)
(797.1)
(2,301.8)
Credit derivatives - Italy
30 06 2015
31 12 2014
Purchase of protection
Nominal
(2,182.0)
(3,791.3)
Positive fair value
152.5
285.6
Negative fair value
(0.1)
0.1
4,136.1
4,292.4
Sale of protection
Nominal
-
Positive fair value
0.1
0.2
Negative fair value
(210.5)
357.4
CONSOLIDATED INTERIM REPORT
163
Explanatory Notes - Part E – Information on risks and hedging policies
D. Banking group - Credit risk measurement models
The chart below provides a credit quality breakdown of the Montepaschi Group portfolio as at 30 June
2015 by Exposure to Regulatory Risk (EAD REG) and Regulatory Capital (CAP REG). The following
graph shows that about 48% of risk exposure is to high and good quality customers (positions in
financial assets are excluded). 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.
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). As at 30 June 2015, high or good quality exposure accounted for approximately 41% of
total exposure:
With reference to Risk Exposure, the Parent Company covers 88.7% of the Group’s total, having
incorporated consumer credit company Consum.it, while MPS Capital Services, MPS L&F and Widiba
jointly cover the remaining 11.3%.
The Regulatory Capital for credit risk is absorbed mainly by the Parent Company (79.8%), followed by
MPS Capital Services (13.1%) and MPS Leasing e Factoring (7.1%).
BANCA MONTE DEI PASCHI DI SIENA
Explanatory Notes - Part E – Information on risks and hedging policies
164
An analysis conducted at the end of the first half of 2015 shows that the Group's risk exposure is
mainly toward “Manufacturing Companies” (57.2% of total loans disbursed) and “Households”
(33.1%). The remaining portion is broken down between "Government and Public Administration"
and "Banks and Financial Institutions", respectively at 6% and 3.7 %.
In terms of Regulatory Capital, 82.5% is absorbed by the “Manufacturing Companies” customer
segment. The “Households” segment stands at 11.9%; followed by "Banks and Financial Institutions”
and “Government and Public Administration” both at 2.8%
An analysis of the geographical breakdown of Group customers shows that exposure to risk is
primarily concentrated in Italy’s Central regions (36.3%), followed by the North East and North West
(both at 18.8%), Southern Italy (14.1%), Foreign Countries (7.3%) and Italy's Islands (4.7%):
Regulatory Capital absorption is also higher in Central Italy (30.7%) in North West Italy (22.7%) and
North East Italy (22.3%) due to the greater concentration of loans in those areas. These are followed
by Southern Italy (13.2%), the Italy’s Islands (6.8%) and Foreign Countries (4.3%).
CONSOLIDATED INTERIM REPORT
165
Explanatory Notes - Part E – Information on risks and hedging policies
Lastly, the following graphs show, solely for Italian corporate customers, the percentage breakdown of
Default Exposure by individual Geographic Area and Regulatory Capital absorption by Business
Sector.
The largest share of Risk Exposure for businesses in all Geographic Areas is accounted for by the
"Services" sector. Out of the Group's total exposure, the share of Services accounts for 50% and is
followed by Industry (30%), Building (13%) and Agriculture (7%).
Italian Corporate customers – performing loan book as at 30 06 2015
EAD REG by geography and business segment
Also as regards Regulatory Capital (CAP), the greater concentration relates to the Services sector in all
Geographic Areas.
Italian Corporate customers – performing loan book as at 30 06 2015
CAP REG by geography and business segment
The comparison between expected loss and actual loss is performed on an annual basis by the internal
control function as part of PD and LGD backtesting procedures.
BANCA MONTE DEI PASCHI DI SIENA
Explanatory Notes - Part E – Information on risks and hedging policies
166
1.2 – Market risks
1.2.1 Interest rate and price risk – regulatory trading book
Market risks relating to the Trading Book
The Group’s Regulatory Trading Portfolio (RTP), or Trading Book, is made up of all the Regulatory
Trading Books managed by the Parent Bank (BMPS) and MPS Capital Services (MPSCS). The Trading
Portfolios of the other subsidiaries are immune to market risk. Trading in derivatives, which are
brokered on behalf of customers, calls for risk to be centralised at, and managed by, MPSCS.
The market risks in the trading book of both the Parent Company and the other Group entities (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 and Liquidity 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 Group's 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 risk measurement model implemented
by the Risk Management function in keeping with international best practices. 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 the Parent
Company, are expressed by level of delegated authority in terms of VaR, which is diversified by risk
factors and portfolios, monthly and annual stop losses and Stress. Furthermore, 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 class.
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 management reporting flow on market risks is periodically transmitted to the Risk Management
Committee, the Group's Top Management and the Board of Directors of the Parent Company in a
Risk Management Report, which keeps Executive Management and governing bodies up to date on the
overall risk profile of the Group.
The macro-categories of risk factors covered by the Internal Market Risk Model are IR, EQ, CO, FX
and CS as described below:
-
IR: interest rates on all relevant curves, inflation curves and related volatilities;
EQ: share prices, indexes, baskets and relative volatilities;
CO: commodity prices, indexes and baskets;
FX: exchange rates and related 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.
CONSOLIDATED INTERIM REPORT
167
Explanatory Notes - Part E – Information on 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 events characterising the portfolios.
In particular, with reference to risk factors the following are identified: Interest Rate VaR (IR VaR),
Equity VaR (EQ VaR), Commodity VaR (CO VaR), Forex VaR (FX VaR) and Credit Spread VaR (CS
VaR). The algebraic sum of these items gives the so-called Gross VaR (or non-diversified VaR), which,
when compared with diversified VaR, makes it possible to quantify the benefit of diversifying risk
factors resulting from holding portfolios on 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 the entire 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 previously-registered real situations of market disruption. Such
scenarios are identified based on a time frame in which risk factors were subjected to stress. No
particular assumptions are required with regard to the correlation among risk factors since trend-based
data for the stress period identified has been measured.
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 occurrence in the past.
Simple discretionary scenarios are currently being developed (variation of a single risk factor) as are
multiple ones (variation of several risk factors simultaneously). Simple discretionary scenarios are
calibrated to independently deal with one category of risk factors at a time, assuming shocks do not
spread to the other factors. Multiple discretionary scenarios, on the other hand, aim to assess the
impact of global shocks that simultaneously affect all types of risk factors.
It should be noted that the VaR methodology described above is, for operational purposes, also
applied to the portion of the Banking Book consisting of financial instruments that are similar to
trading instruments (e.g. AFS bonds/Equity instruments). The measurements and charts below refer to
the Regulatory Trading Portfolio only.
****
During the first half of 2015, the market risk in the Group’s Regulatory Trading Portfolio in terms of
VaR showed a growing trend, particularly over the last two months, although remaining at generally
limited levels and lower than the prior year on average. VaR amounted to EUR 7.11 mln as at 30 June
2015, up by approximately EUR 3.5 mln compared to the end of 2014. The trend in VaR was mainly
impacted by the IR and CS segments of subsidiary MPS CS. The Parent Company’s contribution to
total VaR was up during the second quarter of 2015, mainly in the IR segment. The increase is due to
the significant hike in interest rates during the last quarter, fully reflected in the VaR measurements
through daily updating of the parameters of the internal historical simulation model.
BANCA MONTE DEI PASCHI DI SIENA
Explanatory Notes - Part E – Information on risks and hedging policies
168
With regard to legal entities, the Group’s market
risks are concentrated on MPSCS (73.2%),
followed by the Parent Company (26.8%).
A breakdown of VaR by risk factors as at 30 June
2015 shows that approx. 34.8% of the Group’s
portfolio was allocated to risk factors such as
Credit Spread (CS VaR), 32.6% was absorbed by
equity risk factors (EQ VaR), 28.3% was absorbed
by interest rate risk factors (IR VaR) 1.4 % by
commodity risk factors (CO VaR) e and the
remaining 2.8% by foreign exchange risk factors
(FX VaR).
g MPS G roup: Trading Book
VaR 99% 1 day in EUR/mln
E nd of P eriod
Min
Max
Average
CONSOLIDATED INTERIM REPORT
VaR
7.11
1.94
8.03
4.28
Date
30/06/2015
23/01/2015
22/06/2015
During the first half of 2015, the Group's VaR in
the Regulatory Trading Book ranged between a
low of EUR 1.94 mln recorded on 23.01.2015 and
a high of EUR 8.03 mln on 22.06.2015 with an
average value registered of EUR 4.28 mln. VaR
PNV as at 30 June 2015 amount to EUR 7.11
mln.
169
Explanatory Notes - Part E – Information on risks and hedging policies
VaR model backtesting
The Group has implemented a backtesting procedure compliant with current regulations governing
Market Risk as part of its own risk management system.
Backtesting refers to a series of tests conducted on VaR model results against day-to-day changes in
the trading book value, with a view on assessing the model’s forecasting capacity as regards the
accuracy of risk metrics generated. If the model is robust, by periodically comparing the estimated daily
VaR against daily trading losses from the previous day, the result should be that actual losses greater
than the VaR occur with a frequency consistent with that defined by the confidence level.
Based on supervisory instructions (Bank of Italy Circular 263/06, as amended), the Risk Management
Area considered it appropriate to apply the theoretical and actual backtesting methods and integrate
these into the Group’s management reporting system.
The first type of test (theoretical backtesting) has a stronger statistical significance in reference to
measuring the accuracy of the VaR model (“uncontaminated test”).
The second type of test (actual backtesting) meets the need for verifying the VaR model’s forecasting
reliability in reference to actual Bank operations (daily trading P&L) less the effect of any interest
accrued between trading days t-1 and t on the securities and less the effect of fees and commissions.
These “clean” P&L results (the “actual P&L”) are compared with the previous trading day VaR. If the
losses are greater than those forecast by the model an “exception” is recorded.
The chart below shows the Actual Backtesting results of the internal Market Risks model in relation to
the Group’s Regulatory Trading Book, both for 2014 and for the first half of 2015;
The backtesting shows two exceptions during the second quarter of the year on the Group trading
book, details of which are as follows:
-
14 April 2015: negative day for the market (negative shift in the market parameters, amplified
by the exposure in equity options on the S&P MIB index and interest rate future options on
CBOT US 6%) with a significant effect on the portfolio of subsidiary MPS Capital Services;
5 May 2015: negative day for the market (negative shift in the market parameters, particularly
due to expansion of the Italy credit spread) with a significant impact on the portfolio of
subsidiary MPS Capital Services.
Qualitative information
A. General
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.
BANCA MONTE DEI PASCHI DI SIENA
Explanatory Notes - Part E – Information on risks and hedging policies
170
A.1 Interest rate risk
With reference specifically to the Parent Company, the Finance, Treasury & Capital Management Area
(FTCMA) within the CFO division is the Business Area in charge of trading. The Global Markets
Division carries out trading activities for MPSCS.
The FTCMA 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 delegated limits of monthly and
yearly VaR and Stop Loss.
In particular, the FTCMA operates in the short-term portion of the main interest rate curves, mostly
through bonds and listed derivatives.
With regard to credit risk in the trading book, the equity positions are generally managed through the
purchase or sale of bonds issued by companies or by creating synthetic positions in derivatives. The
activity is oriented to achieve a long or short position on individual issuers, or a long or short exposure
on specific commodities. 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
FTCMA which manages a proprietary portfolio and takes trading positions on equities, Stock
Exchange indexes and commodities. In general, positions on equity securities are taken both through
the purchase/sale of equities and through the positions created in listed derivatives (e.g. futures) and
OTC (e.g. options). Trading is carried out exclusively on the Bank’s own behalf, with objectives of
absolute return, in compliance with the delegated limits of monthly and yearly VaR and Stop Loss.
Similarly, the Global Markets Division carries out trading activities for MPSCS.
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 “Market risk management
model for the trading book”.
Quantitative Information
1 Regulatory trading book: breakdown of balance sheet assets/liabilities and financial
derivatives by residual life (repricing date)
This table has not been prepared since an analysis of the regulatory trading 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 regulatory trading book's sensitivity to interest
rate risk and price risk is produced based on internal models.
3. Regulatory trading book: internal models and other sensitivity analysis methods
The rate and price risk of the Trading Book is monitored in terms of VaR and scenario analysis.
CONSOLIDATED INTERIM REPORT
171
Explanatory Notes - Part E – Information on risks and hedging policies
3.1 Interest rate risk
Each business unit within the Group operates independently on the basis of the objectives and powers
it has been assigned. 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 on
risk factors that are not perfectly correlated. The VaR by risk factor (specifically, Interest Rate VaR)
has operational relevance for the purpose of risk management analyses, even though it is the global
VaR diversified among risk factors and portfolios that is used by the operating units. Below is
information on the Group’s diversified Interest Rate VaR:
The trend in Interest Rate VaR during the first half of 2015 was influenced by the trading activities of
the subsidiary MPSCS, primarily in bonds and in long futures and interest rate future options, and by
the significant increase in rates recorded during the period.
.
g MPS G roup: Trading Book
VaR Interest Rate 99% 1 day in EUR/mln
E nd of P eriod
Min
Max
Average
VaR
4.89
1.30
6.35
3.01
Date
30/06/2015
23/01/2015
25/06/2015
Simulations include the following interest rate risk scenarios:
- +100 bps parallel shift for all interest rate and inflation curves,
- -100 bps parallel shift for all interest rate and inflation curves,
- +1% parallel shift for all surfaces of volatility of all interest rate curves.
All positions related to the Trading Book are classified as HFT for accounting purposes, with changes
in market value posted directly to profit and loss. Below is the overall effect of the scenario analyses.
g MPS G roup: Trading Book
EUR/mln
Ris k Family
S c enario
Interes t Rate
+100bp all Interes t Rate Curves
Global Effec t
53,98
Interes t Rate
-100bp all Interes t Rate Curves
(28,54)
Interes t Rate
+1% all Interes t Rate V olatility
0,09
The asymmetry in the interest rate scenarios +100 bps and -100 bps is mainly due to the effect of the
floor applied to the curves.
BANCA MONTE DEI PASCHI DI SIENA
Explanatory Notes - Part E – Information on risks and hedging policies
172
To complete the interest rate risk analysis, details are also provided on the credit spread risk of the
Group’s Trading Book associated with the volatility of issuers' credit spreads. The VaR by risk factor
(specifically, Credit Spread VaR) has operational relevance for the purpose of risk management
analyses, even though it is the overall VaR diversified among all risk factors and portfolios that is used
by the operating units.
The trend in Interest Rate VaR during the first half of 2015 was influenced by the trading activities of
the subsidiary MPSCS, primarily in bonds and in long futures and interest rate future options, and by
the significant increase in rates recorded during the period.
g MPS G roup: Trading Book
VaR C redit S pread 99% 1 day in EUR/mln
E nd of P eriod
Min
Max
Average
VaR
6.00
1.18
6.00
2.48
Date
30/06/2015
26/01/2015
30/06/2015
For the purposes of sensitivity analysis, the simulation scenario is as follows:
- +1 bp parallel shift for all credit spreads.
All positions related to the Trading Book are classified as HFT for accounting purposes, with changes
in market value posted directly to profit and loss. Below is the overall effect of the scenario analyses.
g MPS G roup: Trading Book
EUR/mln
Ris k Family
Credit S pread
S c enario
+1bp all Curves
Global Effec t
(0,81)
3.2 Price risk
Each business unit within the Group operates independently on the basis of the objectives and powers
it has been assigned. The positions are managed by special desks provided with specific operational
limits. Each desk adopts an integrated risk management approach (with scope exceeding price risk,
when allowed) in order to benefit from the natural hedge resulting from simultaneously holding
positions 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 it is the
global VaR diversified among risk factors and portfolios that is used by the operating units.
CONSOLIDATED INTERIM REPORT
173
Explanatory Notes - Part E – Information on risks and hedging policies
Below is information on the Group’s diversified Equity VaR.
In the first half of 2015 the Equity VaR was influenced by activities related to the structuring and
coverage of policies and other structured products of the subsidiary MPSCS, and by the trading
activity, also of MPSCS, mostly on options and futures with key market indexes as underlying
(significant effect on the risk measurement’s volatility).
.
g MPS G roup: Trading Book
VaR Equity 99% 1 day in EUR/mln
E nd of P eriod
Min
Max
Average
VaR
5.64
1.29
5.64
2.50
Date
30/06/2015
13/01/2015
30/06/2015
The simulated price scenarios are as follows:
- +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.
All positions related to the Trading Book are classified as HFT for accounting purposes, with changes
in market value posted directly to profit and loss. Below is the overall effect of the scenario analyses.
g MPS G roup: Trading Book
EUR/mln
Ris k Family
S c enario
Equity
+1% Equity Pric es (pric es , indic es )
Global Effec t
(1,70)
Equity
-1% Equity Pric es (pric es , indic es )
2,04
Equity
+1% Equity V olatility
0,17
BANCA MONTE DEI PASCHI DI SIENA
Explanatory Notes - Part E – Information on risks and hedging policies
174
As regards the exposure to commodity risk, the Commodity VaR, introduced in the fourth quarter of
2014, stands at EUR 0.25 mln as at 30 June 2015, down in absolute terms compared to the end of first
quarter of 2015.
g MPS G roup
VaR PNV Commodity 99% 1 day in EUR/mln
VaR
Data
E nd of P eriod
0.25 30/06/2015
Min
0.08 14/01/2015
Max
0.76 18/03/2015
Average
0.36
Below is the overall effect of the scenario analyses.
The simulated price scenarios are as follows:
- +1% of each commodity price,
- -1% of each commodity price,
- +1% of all volatility surfaces of all commodity risk factors.
g MPS G roup: Trading Book
EUR/mln
Ris k Family
Commodity
Commodity
Commodity
CONSOLIDATED INTERIM REPORT
S c enario
+1% Commodity Pric es
-1% Commodity Pric es
+1% Commodity V olatility
Global Effec t
(0,06)
0,06
0,00
175
Explanatory Notes - Part E – Information on risks and hedging policies
2.2 Interest rate risk and price risk - banking book
Qualitative information
A. General aspects, management processes 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 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 and the ALM centralisation process are set out in a resolution by the
Board of Directors of the Parent Company in compliance with the framework described in the
regulatory provisions (Bank of Italy Circ. 285). The framework sets the rules for the centralisation of
Asset & Liability Management under the Parent Company's Finance, Treasury and Capital
Management Area (FTCMA) and the definition and monitoring of operating limits for interest rate risk
in the Group's Banking Book. The Banking Book also includes bond receivables held for investment
purposes, classified as either AFS or L&R.
The operational and strategic choices for the Banking Book, adopted by the Finance and Liquidity
Committee and monitored by the Risk Management 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 25 bps, 100 bps and 200 bps, the latter in accordance with
the requirements set out in the “second pillar” of the Basel Accord.
Risk metrics for the Group's retail banks are calculated 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 an extensive 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).
A method update was introduced in January 2015, aimed at sterilising the origination of the cash flows
of the components not directly relating to interest rate risk.
The Montepaschi Group is committed to the continual updating of risk measurement methodologies
by gradually fine-tuning the estimation models so as to include all major factors that progressively
modify the interest rate risk profile of the banking book.
The Group adopts an interest 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 verifying 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 policies for managing the Group's 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.
The Group Companies included in the scope of application are responsible for abiding by the rate risk
policies and limits defined by the Parent Bank and the capital requirements set by the relevant
Supervisory Authorities.
BANCA MONTE DEI PASCHI DI SIENA
Explanatory Notes - Part E – Information on risks and hedging policies
176
Within the model defined, the Finance, Treasury and Capital Management Area of the Parent
Company is responsible for the operational management of the Group’s overall rate and liquidity risk.
Specifically, within the FTCM Area, the Group Treasury Service manages the short-term rate risk and
liquidity risk for the Group. In addition, the Area carries out hedge monitoring and management
activities consistent with accounting policies, involving centralised oversight for definition of the
network's internal rates (BMPS and other Group companies) for Euro and foreign currency
transactions with maturities beyond the short term.
The Group - and within it therefore the Parent Company - uses IAS compliant hedges for interest rate
risk management. The main types of hedging used include:
-
Micro Fair Value Hedges: hedging of non-trading assets (loans/mortgage loans), securities and
bonds held;
Macro Fair Value Hedges: hedging of non-trading assets (loans/mortgage loans);
Micro Cash Flow Hedges: hedging of floating-rate deposits.
In addition to the above, the Group, and within it therefore the Parent Company, uses the Fair Value
Option for some types of business activities. In particular, the Fair Value Option was used for
(structured and fixed rate) debt securities having the following characteristics:
-
the risk of fair value changes has been hedged upon issuance, with the intention of
maintaining the hedge for the contractual duration and entire amount of the hedged position;
normally for issuances in which the Group has committed to buyback at issuance spread.
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) and AFS securities. Trading in UCITS
is carried out exclusively through the direct purchase of the funds/SICAVs, with no use being made of
derivative contracts.
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 time frame of one quarter (holding period), considering a confidence interval of 99%. The VaR
model used (unlike the one used for the Trading Book) is a simulation model which uses the Monte
Carlo approach, based on series of market yields for listed companies and time series of sector-based
indices for unlisted ones.
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.
Stress tests are conducted regularly as part of price risk governance strategies for the banking book.
Stress tests consist in generating Monte Carlo scenarios in order to assess the Group's ability to absorb
potential losses resulting from extreme events.
With reference to the alternative funds component, the internal measurement system uses one of the
metrics from the Supervisory approach for the determination of the Internal Capital.
The internal measurement system is independently developed by the Risk Management Area of the
Parent Company, which periodically reports on the extent of portfolio risks and their changes over
time. The results are regularly brought to the attention of the Parent Company’s Risk Management
Committe and governing bodies.
CONSOLIDATED INTERIM REPORT
177
Explanatory Notes - Part E – Information on risks and hedging policies
B. Fair value hedging
C. Cash-flow hedging
The Montepaschi Group - and within it therefore Banca MPS- uses IAS compliant hedges for interest
rate risk management. The main types of hedging used include:



Micro Fair Value Hedges: hedging of non-trading assets (loans/mortgage loans), securities and
bonds held;
Macro Fair Value Hedges: hedging of non-trading assets (loans/mortgage loans);
Micro Cash Flow Hedges: hedging of floating-rate deposits.
In addition to the above, the Montepaschi Group and within it therefore Banca MPS, uses the Fair
Value Option for some types of business activities. In particular, the Fair Value Option was used for
(structured and fixed rate) debt securities having the following characteristics:


the risk of fair value changes has been hedged upon issuance, with the intention of
maintaining the hedge for the contractual duration and entire amount of the hedged position;
normally for issuances in which the Group has committed to buyback at issuance spread.
Quantitative Information
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. Banking book: internal models and other sensitivity analysis methods
2.1 Interest rate risk
The sensitivity of the Group, at the end of June 2015, features a profile of risk exposure due to a rate
hike. The amount of economic value at risk in the event of a +100 bps parallel shift of the rate curve
came to EUR -414.36 mln at the end of June 2015 (vs. EUR 448.16 mln for a shift of -100 bps).
However, if benchmarked against Capital, these values are below the level considered as the attention
threshold by the Bank of Italy.
The internal measurement system is independently developed by the Risk Management Area of the
Parent Company, which periodically reports on the extent of portfolio risks and their changes over
time. The results are regularly brought to the attention of the Parent Company’s Risk Management
Committe and governing bodies.
2.2 Price risk
The Group's equity investment portfolio includes approximately 197 equity investments in companies
outside the Group, i.e., companies that are not consolidated either fully or proportionally.
Approximately 90% of its value is concentrated in 10 investments, while the unit value of the
remaining investments is rather limited (approximately 160 equity investments, valued at less than
EUR 1 mln and accounting for around 2% of the overall portfolio).
The VaR of the Group's equity investment portfolio (99% and a holding period of first quarter)
amounted to approximately 20% of the portfolio Fair Value at the end of the first half of 2015, with
risk concentrated in the 5 most significant investments.
Shown below is a scenario analysis which includes all equity investments, hedge funds and other
directional positions assumed, based on instructions by the Board of Directors or including those that
operationally fall under the Banking Book of the Parent Bank‘s Finance, Treasury and Capital
BANCA MONTE DEI PASCHI DI SIENA
Explanatory Notes - Part E – Information on risks and hedging policies
178
Management Area (e.g. AFS securities) and which are not included in the previously-reported scenario
analyses for price risk in the Trading Book.
g MPS G roup: Banking Book
EUR/mln
Ris k Family
S c enario
Equity
Equity
Equity
+1% Equity Pric es (pric es , indic es , bas ket)
-1% Equity Pric es (pric es , indic es , bas ket)
+1% Equity V olatility
Global Effec t
11,21
(11,21)
0,00
The impact of the equity investments portfolio on the scenario analysis total is approximately 76%.
1.2.3 Foreign exchange risk
Qualitative information
A. General information, operational processes and measurement methods
Foreign exchange operations are mainly based on short-term trading, with the systematic balance of
the transactions originated by the franchise and the retail banks which automatically feed into the
Group’s position.
Trading is mainly carried out by the Group Treasury Service of the Finance, Treasury & Capital
Management Area of the Parent Company; trading in the FX options segment is carried out by
MPSCS, with active management of foreign exchange risk. The foreign branches of the Parent
Company maintained modest forex positions exclusively originated by funds available for commercial
purposes. The turnover in cash allocated to Group portfolios and OTC derivatives for MPSCS
remained stable in terms of risk, with ongoing and careful use of delegated powers. Foreign currency
equity investments are typically financed by funds denominated in the same currency, with no
assumption of foreign exchange risk.
For a description of stress tests used in the risk governance strategy on exchange rates and the model
applied, please refer to the section “Market risk management model for the Trading Book”.
B. Hedging of exchange rate risk
Foreign exchange operations are mainly based on short-term trading, with the systematic balance of
the transactions originated by the franchise and the retail banks which automatically feed into the
Group’s position.
Trading is mainly carried out by the Group Treasury Service of the Finance, Treasury & Capital
Management Area of the Parent Company; trading in the FX options segment is carried out by
MPSCS, with active management of foreign exchange risk. The foreign branches of the Parent
Company maintained modest forex positions exclusively originated by funds available for commercial
purposes. The turnover in cash allocated to Group portfolios and OTC derivatives for MPSCS
remained stable in terms of risk, with ongoing and careful use of delegated powers. Foreign currency
equity investments are typically financed by funds denominated in the same currency, with no
assumption of foreign exchange risk.
For a description of stress tests used in the risk governance strategy on exchange rates and the model
applied, please refer to the section “Market risk management model for the Trading Book”.
CONSOLIDATED INTERIM REPORT
179
Explanatory Notes - Part E – Information on risks and hedging policies
2 Internal models and other sensitivity analysis methods
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 information
concerning the Group’s diversified Forex VaR.
g MPS G roup
VaR Forex 99% 1 day in EUR/mln
VaR
Date
E nd of P eriod
2.10 30/06/2015
Min
0.72 13/01/2015
Max
3.14 16/03/2015
Average
2.12
The following scenarios were used for foreign exchange rate simulations:
- +1% for all foreign exchange rates to the Euro,
- -1% for all foreign exchange rates to the Euro,
- +1% for all volatility surfaces of all foreign exchange rates.
The impact on total banking income and profit/loss for the year was estimated taking account only of
HFT positions, with market value changes posted directly to Profit and Loss. The effect on equity,
instead, is estimated with reference to all positions classified as AFS and related Fair Value Hedges
(FVH). The total effect is the result of the algebraic sum of the two components. Below is a summary
of the scenario analyses.
g MPS G roup
EUR/mln
Impac t on net interes t
Impac t on
and other banking
s hareholders
inc ome and net profit
' equity
Ris k Family
S c enario
Forex
Forex
Forex
+1% Exc hange rate agains t EUR0.00
-1% Exc hange rate agains t EUR(0,04)
+1% Forex V olatility
(0,02)
0.00
0.00
0.00
Global
Effect
0.10
(0,04)
(0,02)
BANCA MONTE DEI PASCHI DI SIENA
Explanatory Notes - Part E – Information on risks and hedging policies
180
1.3 – Banking group – Liquidity risk
Qualitative information
A. Liquidity risk: general information, operational processes and measurement methods
As part of the regular revision process of models and processes, the Group has revised its approach
for the identification, measurement and management of Liquidity Risk (Group Liquidity Risk
Framework).
The Group's Liquidity Risk Framework is intended as the set of tools, methodologies,
organisational and governance setups which ensures both compliance with national and international
regulations and adequate liquidity risk governance in the short and medium/long term, under business
as usual and stress conditions.
Management of the Group's Operating Liquidity is intended to ensure the Group is in a position to
meet cash payment obligations in the short term. The essential condition for a normal course of
business in banking is the maintenance of a sustainable imbalance between cash inflows and outflows
in the short term. The benchmark metric in this respect is the difference between net cumulative cash
flows and Counterbalancing Capacity, i.e. reserve of liquidity in response to stress conditions over a
short time horizon.
Management of the Group's Structural Liquidity is intended to ensure the structural financial balance
by maturity buckets over a time horizon of more than one year, both at Group and individual company
level. Maintenance of an adequate dynamic ratio between medium/long term assets and liabilities is
aimed at preventing current and prospective short-term funding sources from being under pressure.
The benchmark metrics, mitigated by specific internal operating limits set by the Board of Directors,
include gap ratios which measure both the ratio of total loans over more-than-1-year and more-than-5year maturity deposits and the ratio of loans to retail/corporate deposits regardless of their maturities.
The liquidity position is monitored under both business-as-usual conditions and under specific and/or
system-wide stress scenarios. The exercises have the twofold objective of timely reporting the Bank's
major vulnerabilities in exposure to liquidity risk and allowing for prudential determination of the
required levels of Counterbalancing Capacity (liquidity buffer).
The Contingency Funding Plan, drafted by the Finance, Treasury & Capital Management Area, is
the document which describes the set of tools, policies and processes to be enforced under stress or
liquidity crisis conditions.
Liquidity limits
As part of the overall budgeting process and particularly within the scope of Risk Appetite, the
Liquidity Risk Framework identifies the tolerance thresholds for liquidity risk, that is to say the
maximum risk exposure deemed sustainable in a business-as-usual scenario and under stress
conditions. The short/medium and long-term liquidity risk limits derive from the setting of these risk
appetite thresholds.
The short-term limit system is organised into three different levels that provide for a timely reporting
of proximity to the operating limits, i.e. the maximum liquidity risk appetite set within the annual Risk
Tolerance process.
In order to immediately identify the emergence of vulnerabilities in the Bank's position, the Group has
developed a range of Early Warnings, classified as generic or specific depending on whether the
individual indicator is designed to detect potential vulnerabilities in the overall economic context of
reference or in the Group structure. The triggering of one or more early warning indicators is a first
level of alert and contributes to the overall assessment of the Group's short-term level of liquidity
position.
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Explanatory Notes - Part E – Information on risks and hedging policies
1.4 – Operational risk
Qualitative information
A. 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 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 banks 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 on the operational risk management
system;
5. ensure over time that the system is actually made use of in the usual course of business (use test).
For this purpose, the Group has adopted an integrated system for operational risk management, i.e. an
internal framework built around a governance model that involves all companies included 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 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 collection, analysis and
statistical modelling of internal and external time series of loss data (the latter supplied by 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
area are involved in the: identification of the processes and risks to be assessed; assessment of risks by
process managers in charge; identification of possible mitigation plans; discussion of priorities and
technical-economic feasibility of mitigating actions with Head Office functions.
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 decision-making 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.
The Advanced Measurement Approach (AMA) is applied to all domestic financial and banking entities,
while the foundation model is used for remaining components and foreign companies. As at 30 June
2015 internal model coverage in terms of total banking income exceeded 95%.
ORM has also set up a reporting system which ensures timely information on operational risks for the
Top Management, which transposes the strategic principles of the management system into specific
operating policies. Reports are regularly submitted to the Risk Management Committee and governing
bodies.
Over time, the adoption of the AMA model has ensured better-informed management of operational
risk, guaranteeing a material progressive reduction of the Group's operational risk.
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Quantitative Information
The percentage breakdown of the number of events and operational losses recognised in the first half
of 2015 is reported below, divided into various risk classes.
As at 30 June 2015, the number of operational risk events and the total amount were down compared
prior half-year and to the same period in 2014.
The types of event with the greatest impact on the income statement remain attributable to nonfulfilment of professional obligations with customers (under "Customers, products and operating
practices": 61.7% of the total) and operational and process management shortfalls (under "Process
management, execution and delivery": 16.7% of the total).
With regard to "non-fulfilment of professional obligations with customers”, risk events are mainly
associated with claims due to the application of compound interest.
By contrast, the graph below shows the breakdown of regulatory requirements by risk class:
The Regulatory Requirements as at 30 June 2015 were essentially stable compared to December 2014.
The breakdown of losses recognised in the period clearly differs from the breakdown of the capital in
that the latter is calculated using a 5-year time series and the incidence of the unexpected loss
component prevails.
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Explanatory Notes - Part E – Information on risks and hedging policies
Main types of legal action
The risks associated with or connected to legal disputes – i.e. disputes brought before judicial
authorities and arbitrators – are kept under specific and careful review by the Group.
In case of disputes for which the disbursement of financial resources to perform the underlying legal
obligation is believed to be “likely” and the relevant amount can be reliably estimated, allocations are
made to the Reserve for Risks and Charges using statistical or analytical criteria.
The key characteristics of significant cases, by macro-category or individually, are described below:
A) Significant cases by macro-category
The cases brought against the Group belonging to sufficiently homogeneous types for which the risk
has been estimated using analytical and/or statistical criteria can be grouped for the most part into
macro-categories, characterised individually by a common denominator represented by alleged critical
elements of products, operations, services or relationships for which or in which the companies played
the role of disbursement or placement entities.
The main macro-categories are related to situations concerning:
1) compound interest and in general the application of interest and conditions;
2) bankruptcy rescindments;
3) the placement of bonds issued by Countries or Companies that subsequently defaulted, and
financial plans.
The table below presents the data of the main macro-categories at 30 June 2015:
Type of dispute
Interest compounding
Claw-backs of payments
received from defaulted
entities
Defaulting obligations and
financial plans
No. of cases
3,831
Petitum (EUR mln)
430.4
Funds (EUR mln)
192.3
494
579.2
113.2
1,225
75.1
22.7
1) Disputes concerning compound interest, interest and conditions
Following the change in orientation by the Supreme Court of Cassation (Corte di Cassazione) on the
legitimacy of the practice of capitalising on a quarterly basis the interest payable accrued on current
accounts, as of 1999 there has been a progressive increase in claims for the return of interest expense
resulting from quarterly compound interest. In these lawsuits, the plaintiffs also contest the legitimacy
of the interest rate and the methods to determine the commissions applied to the accounts. In this
regard, the interpretation introduced since 2010 by the Supreme Court on usury - according to which
overlimit fees (Commissioni di Massimo Scoperto, CMS), even before Italian Law no. 2/2009 was
enforced, should have been calculated on the basis of the effective global rate (Tasso Effettivo Globale
- TEG), contrary to Bank of Italy guidelines - is frequently the pretext for the actions brought by
customers. The plaintiffs most often claim irregularities in current account balances; however, claims
concerning compound interest are also increasingly frequent: these cases are based on the alleged
illegitimacy of the so-called “French-style amortisation” in mortgage loans, and violation of Italian Law
no. 108/1996 on usury in term loans. Aware that the jurisprudential interpretation is often
disadvantageous (although not univocal), at least with respect to certain issues, the Bank is committed
to maximzing the arguments in its defence - which do exist, particularly concerning the statute of
limitations - identifiable in the regulatory and interpretative framework. Thinking in terms of macrocategories, the total provisions estimated for this type of disputes appear to be adequate relative to the
risk.
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2) Disputes concerning bankruptcy rescindments
The reform implemented from 2005 has reduced and limited the scope of bankruptcy rescindments,
particularly those relating to current account remittances. For those that can still be filed, or already
pending at the effective date of the reform, the Bank is giving maximum emphasis to all the arguments
available in defence.
3) Disputes concerning bonds issued by Countries or Companies that subsequently defaulted, and financial plans.
The considerable defensive efforts made in this type of lawsuit resulted in the emergence of some
favourable jurisprudential orientations, at least with respect to certain specific cases, which are allowing
balanced risk control.
B) Individually significant cases
Banca Monte dei Paschi di Siena S.p.A. vs. Extraordinary Administrators of SNIA S.p.A
The action, taken by the Extraordinary Administrators of SNIA S.p.A. against the former Directors,
Statutory Auditors and (direct and indirect) Shareholders of the same company (including BMPS),
seeks the assessment of the defendants’ liabilities for damages, originally not quantified, allegedly
caused to the company. The action is grounded on intricate and complex corporate matters which saw
the involvement of the company from 1999 to 2009 and which, as far as the Parent Company and
other appearing parties are concerned, pivot around the company’s demerger in 2003. The relief
sought against the Parent Company and other defendants, which originally could not be determined,
was (partially) specified during the claim quantification stage and amounts to EUR 572.0 mln plus
additional alleged damages, still undetermined.
No preliminary activities were carried out during the course of the dispute and the Judge, upon hearing
the closing arguments of the parties, referred the decision to the Board, first of all, on the preliminary
issues formulated by the parties and with regard to the claims submitted predominantly by the plaintiff.
Banca Monte dei Paschi di Siena S.p.A. vs. Extraordinary Administrators of Antonio Merloni S.p.A.
The extraordinary administration procedure of Antonio Merloni S.p.A. brought an action against the
Directors and Statutory Auditors of the company, together with the pool of lenders and the companies
that audited the financial statements, claiming that they are jointly responsible for causing the
company's financial difficulties.
The Parent Company's defence aims to demonstrate the total groundlessness of the claim, the
extraordinary administrators' lack the interest and legitimacy to bring the action, and that the cause of
action is past the statute of limitations.
The proceeding was declared suspended at the hearing of 30 June 2015, due to the passing of one of
the defendants.
The claim appears to be ungrounded and the risk of losing the case is merely possible, but cannot be
estimated in practice.
Banca Monte dei Paschi di Siena S.p.A. vs. Antonio Merloni S.p.A.
In October 2011, the extraordinary administration procedure of the company Antonio Merloni S.p.A.
brought a legal action against the Parent Company before the Court of Ancona requesting the return,
as part of a bankruptcy rescindment, of EUR 53.8 mln as to the primary claim and EUR 17.8 mln as a
secondary claim, for remittances occurred on the company's current accounts during the suspected
period.
The Judge rejected the petition of the opposite party's expert witness and revoked the order to admit
the expert witness's appraisal, which had been previously issued by the Judge to whom the case was
originally assigned.
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Explanatory Notes - Part E – Information on risks and hedging policies
The judge issued a first instance ruling, rejecting the plaintiff’s claim and sentencing the latter to repay
legal expenses.
The plaintiff filed an appeal.
Banca Monte dei Paschi di Siena S.p.A. vs. Fatrotek
The action was brought by the company Fatrotek against the Parent Company (and other credit
institutions); the plaintiff asks the Court to recognise the alleged unlawfulness by BMPS and the other
banks of reporting doubtful loans to the Central Credit Bureau, and claim monetary and non-monetary
damages suffered by the company.
The plaintiff also asks that the defendant banks be found jointly liable, each proportionately to the
seriousness of its behaviour. The Parent Company's defence was based on the fact that the company's
extremely severe financial situation fully justified the Bank's initiatives.
The proceeding is under preliminary investigation and the next hearing is set for 17 december 2015.
Banca Monte dei Paschi di Siena S.p.A. vs. Fallimento Medeghini Spa in liquidazione
In 2012, the Fallimento Medeghini SpA in liquidazione served a complaint on the parent Company
charging it with alleged unlawful behaviour, in contract and in tort, in relation to accounting
movements between the company, which subsequently went bankrupt, and other companies
(controlled by the Medeghini family), at the time of a capital increase by Medeghini Spa.
The Bank's defence was based on various considerations in fact and in law, and was aimed at
demonstrating the absolute groundlessness of the claims brought by the bankruptcy procedure due to
total lack of a causal link between management acts that led to the default and the Parent Company's
conduct.
During the technical appraisal ordered by the Court, the opposite party's demands that a link of
causality be recognised between the capital increase and the subsequent transactions that worsened the
company's financial difficulties - in which the Bank acted as a mere executor - were repeatedly and
effectively rebutted by the BMP's expert witness.
During the appraisal, the Court-appointed expert witness accepted almost entirely the arguments of the
defendant Parent Company, and in any case the plaintiff's claim, as formulated, appears to be
groundless in terms of damages to be awarded, as no damage has been suffered.
The case was deferred to 2/2/2017 for the clarification of pleadings.
Former Banca Antoniana Popolare Veneta S.p.A. vs Elipso Finance s.r.l.
The dispute was originated by 3 loan assignment transactions identifiable in bulk in accordance with
Italian Law no. 130 of 30/4/1999, carried out or mediated by former BAV, following which since
2008 the assignee Elipso Finance s.r.l. has submitted complaints, invoking the guarantees given by the
assignors, mainly concerning the lack of documentary evidence supporting the credit.
Specifically, the 3 assignments were carried out by former BAV, Antenore Finance S.p.A. and Theano
Finance S.p.A. (both of which are 98% owned by former BAV, originator of the relevant loans, and
subsequently merged into BMPS).
As a settlement could not be reached, in compliance with the arbitration clause contained in the
contracts Elipso initiated the arbitration procedure at the Arbitration Chamber of Milan.
The Parent Company's defence aims to demonstrate that, in accordance with contractual provisions,
even if the claim should be accepted, damages can only be awarded for positions for which Elipso can
actually prove that damage has been suffered.
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The Arbitration Board ordered an expert appraisal, currently underway, in order to verify respect by
Elipso of the contractual provisions in terms of the activation methods and times with regard to the
guarantee.
Banca Monte dei Paschi di Siena S.p.A. vs. CHI. DEM srl and the other companies of the De Masi Group
The action was brought by the company CHI. DEM srl and by the other companies of the De Masi
Group.
Co-defendants with the Parent Company are two other credit institutions and Bank of Italy. The
plaintiff seeks relief for alleged damage suffered by the Group as a result of the aforesaid banks having
exceeded threshold rates (with the joint liability of Bank of Italy for failure to supervise) following
decision no. 46669/2011 by the Criminal Division of the Court of Cassation, which has ascertained
that in certain periods the threshold rate was actually exceeded.
BMPS' defence is essentially based on lack of evidence of the monetary and non-monetary damages
claimed by the plaintiff, as well as lack of any link of causality.
Beyond the difficulty of demonstrating the existence of the damage, an element in favour of the Parent
Company is the dismissal of a first request for a Court order, which the plaintiffs applied for as a
precautionary measure under article 700 of the Italian Code of Civil Procedure (the dismissal was
confirmed during the claim proceeding), as well as the dismissal, on 9 July 2014, of a second request
for Court order which the plaintiffs again submitted.
Another element in favour of the Bank is the fact that some accounts were the subject of a criminal
proceeding ended with judgement no. 46669/2011 were also discussed in a civil proceeding before the
Court of Palmi: the judgement issued on 13 May 2013 at the end of this proceeding dismissed the
other party's claim, and for these accounts the Bank invoked the plea of res judicata.
The proceeding is under preliminary investigation and the next hearing is set for 20 October 2015.
Banca Monte dei Paschi di Siena S.p.A. vs. Codacons and the Italian Association of Users of Financial, Banking and
Insurance Services
In January 2013, Codacons and the Italian Association of Users of Financial, Banking and Insurance
Services brought an action - which was notified, among others, to the Ministry of Economy and
Finance, the Bank of Italy, CONSOB, the President of the Court of Auditors, and two auditing firm before the Administrative Court of Lazio (TAR) requesting the cancellation of the documents related
to the procedure for the issue of the New Financial Instruments (Montibond), as well as damages in
the same amount.
The Parent Company's defence was based on various considerations in fact and in law, and was aimed
at demonstrating not only the total groundlessness, but also the inadmissibility of the claims brought
by the plaintiffs.
At the hearings before a single judge and a Court, held in February and March 2013 before the TAR
and the Council of State all of the plaintiffs' requests for precautionary measures, aimed at blocking the
procedure for the issue of the New Financial Instruments, were rejected and, during the hearing of 3
April 2013, the TAR adjourned the discussion of the case to a date to be determined.
As the matter stands, therefore, the Codacons’ initiative appears to have been essentially superseded,
since the procedure for the issue of the New Financial Instruments was fully completed, including all
of the administrative stages. The initiative was also concluded and finalised with full reimbursement of
said instruments, through: a) EUR 3 bn on 1 July 2014 and b) EUR 1.071 bn on 15 June 2015, as the
subject of the dispute has ceased to exist, without getting into the technical intricacies. Moreover, the
dispute itself is entirely groundless in terms of damages/compensation, as there is no way of proving
the existence of any damage suffered by consumers, whose interests the Association protects, nor by
what right the latter is legitimated to act.
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Explanatory Notes - Part E – Information on risks and hedging policies
According to this reasoning, therefore, the Codacons’ initiative before the Administrative Court is of
no financial consequence.
The risk of losing the case appears unlikely, and the circumstance is mentioned in this report only
because of the importance and extensive media coverage that it involves.
Banca Monte dei Paschi di Siena S.p.A. vs. receivership estate of Antonio Amato & C. Molini e Pastifici in Salerno
S.p.A. in liquidazione
The receivership estate of ‘Antonio Amato & C. Molini e Pastifici in Salerno S.p.A. in liquidazione’
brought an action against the Parent Company, with the former Directors of the Company in bonis
and other Creditor Banks as co-defendants, before the Court of Naples, requesting that the Court
ascertain and recognise the joint liability of the defendants for their unlawful conduct. According to the
plaintiff, they formed a pool that granted a loan to the company, thus worsening its state of financial
distress and causing severe damage to its business and its equity and financial integrity; they therefore
asked the Court to order the defendants to pay damages to the receivership estate in the amount of
EUR 90 mln, i.e. the presumable difference between the estate's liabilities and assets, or a different
amount that the Court should deem suitable to award upon completion of the investigative phase; as a
secondary claim, the receivership estate asks that each of the defendants be found liable for the part
attributable to them for the damage suffered by the company, amounting to EUR 90 mln, equal to the
presumable difference between the estate's liabilities and assets.
The Parent Company rose preliminary objections and filed a motion to dismiss the case for lack of
venue jurisdiction and of active legitimation; in the merits, the Bank asked the Court to dismiss the
plaintiff's claims as inadmissible and/or groundless or, as a secondary request, to reduce the amount of
compensation awarded in consideration of the different degree of guilt in causing the damage, in
accordance with art. 2055, paragraph 2 of the Italian Civil Code.
The case is under preliminary investigation and the next hearing will be held on 16 November 2015.
Banca Monte dei Paschi di Siena S.p.A. vs. Extraordinary Administrators of Coopcostruttori s.c.a.r.l.
The Extraordinary Administration of Coopcostruttori s.c.a.r.l. brought a legal action against Banca
Antoniana Popolare Veneta (hereinafter, BAV) before the Court of Ferrara requesting, in accordance
with paragraph 2, article 67 of the Bankruptcy Law (old version) the revocation, by declaration of their
ineffectiveness with respect to the administration and subject to prior investigation of the Bank's
scientia decoctionis in the suspected period, of the remittances made in the year preceding the
declaration of insolvency on the current accounts held by Coopcostruttori in bonis at BAV's Padua
branch (amounting to EUR 51.4 mln) and the Argenta (FE) branch (amounting to EUR 0.4 mln); the
plaintiff asks the Court to order that the defendant reimburse a total of EUR 51.8 mln, plus interest,
revaluation and legal expenses.
BAV argued against the existence of the objective cause of action (as the plaintiff erroneously
identified remittances that were revocable in abstract, did not take into account loans granted, wrongly
reconstructed the available balance and the nature of the revocable remittances, etc.) as well as the
subjective cause of action (due to failure by the extraordinary administration to fulfil the burden of
proof in connection with the “scientia decoctionis”) and asking the Court, in the conclusions, to
dismiss the plaintiff's claim as groundless in fact and in law, and as a secondary request - should the
Court believe that a subjective cause of action does exist - to revoke only the remittances whose nature
is actually that of payments.
The preliminary investigation phase of the proceeding has been completed, the Court ordered appraisal
has been performed, and subsequent additions and requests for clarifications from the Court
appointed expert have been filed. Upon completion of the preliminary phase and once the conclusions
were filed, the case was submitted for judgement.
In the judgement entered 22/4 - 28/5/2014, the Court of Ferrara, partly admitting the plaintiff's claim,
ordered the Bank, as successor of BAV after the latter's merger, to reimburse the amount of the
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remittances considered revocable, for a total amount of EUR 8.1 mln, plus interest at the legal rate
from the date of filing of the claim to the date of payment, with partial compensation (2/3) of legal
expenses and full compensation of expert witness fees.
The amount awarded was determined by the Court assuming that the Bank was aware of the
insolvency for the entire one-year suspected period and taking into account the findings of the Court
appointed expert, as subsequently clarified by the latter following the remarks submitted by our expert.
By means of a notice served on 29/01/2015, the plaintiff submitted an appeal, requesting the
revocation of further remittances, with respect to those already subject to the first instance sentence,
for a total of EUR 21.9 mln. The first hearing was held on 03/06/2015. The Parent Company duly
appeared, filing an incidental appeal against the first degree ruling of partial sentence.
The case was deferred to the hearing of 22/09/2015 in order to allow acquisition of the official firstdegree files from the Court of Ferrara.
Out-of-court claims for the repayment of sums and/or compensation for damages by Shareholders and Investors of Banca
Monte dei Paschi di Siena S.p.A in relation to the 2008 and/or 2011 share capital increases
For the sake of disclosure completeness it is pointed out that, in relation to the share capital increases
of 2008 and/or 2011, the Parent Company received a total of 462 requests, for a total of EUR 117.8
mln demanded where quantified, targeted at obtaining the repayment of sums invested and/or
compensation of damages, monetary and non-monetary, as a result of alleged losses suffered.
These claims – brought individually or collectively, through professionals or consumer associations –
although as regards their heterogeneity, are mostly justified by generic references to the Parent
Company’s alleged violation of the industry legislation governing information provided at the time of
the aforementioned share capital increases, and were rejected as they were considered generic,
unfounded, not backed by the suitable documentary evidence and in certain cases, prescribed.
Information is provided on this matter in the event that the claims in question, as things currently
stand, all rejected, are brought before a Court of law through the filing of proceedings in which the
Bank's risk of being the losing party can, at the moment, be assessed to be merely possible.
Banca Monte dei Paschi di Siena S.p.A. vs Nomura concerning Alexandria transaction.
The Parent Company is assessing an increase in its civil claim for damages, currently at approx. EUR 1
bn, and is evaluating the potential impact from recent evidence that has emerged following the
completion of preliminary investigations by the Public Prosecutor of Milan, alleging the criminal
wrongdoing of some of Nomura's senior managers for having paid out sums to executives against
allegedly corrupt episodes.
Given the above, the Bank has reserved the right to carry out a thorough assessment into the early
closure of the transaction. This will be evaluated in the light of other available alternatives, any legal
impediments arising from ongoing proceedings, instructions by the ECB as well as any further legal
actions needed to protect its interests against possible speculations regarding this matter.
In view of the ongoing investigations by the Prosecutor of Milan, CONSOB is currently analysing the
accounting methods for long-term structured repo transactions.
$$$$$$$$$$$$
Lastly, it should be noted that, in relation to the communications received from Anima and BPM, that
the Parent Company is conducting in-depth preliminary evaluations regarding the contractual
guarantees issued in due course at the time of the equity investment disposal. Once this aspect has
been defined, the tax nature of Guardia di Finanza’s claim will be, if necessary, examined in depth,
based on the prior acquisition, by the audited company, of all elements not known to date, on which
aforementioned claim is based.
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Explanatory Notes - Part E – Information on risks and hedging policies
Risks from tax disputes
The Parent Company and the major Group companies have tax disputes pending; the amount of each
dispute is not significant. In addition, are underway investigations for which has not been raised any
objection or claim: in particular, the following should be noted: the audit relating to direct taxes, VAT
and withholding taxes for the 2013 tax period, opened by the Guardia di Finanza of Siena against MPS
Leasing & Factoring and the general audit of the 2012 tax period, subsequently extended to 2011 and
2013, opened by the Revenue Agency against MPS Capital Services.
The risks from tax disputes decreased considerably over the last two years as a result of some
important settlements reached with the Revenue Agency, concerning the tax disputes involving the
most significant amounts: lastly, worthy of note is the settlement of the Chianti Classico operation,
reported in the disclosure relating to the financial statements for the year ended as at 31 December
2014.
Among the cases associated with tax disputes, those in which the risk of losing is considered likely are
limited in number and adequate provisions have been made to the Reserve for risks and charges, each
for non-material amounts.
With reference to the Parent Company, mention is made of the investigation performed under court
order by the Guardia di Finanza with regard to a real estate transaction performed by MPS
Immobiliare in 2011 and consisting of the contribution of a property complex located in Rome to a
closed-end real estate fund and the subsequent disposal of units held in that same fund. In relation to
that transaction, as mentioned in previous reports, on 16 September 2013 the Guardia di Finanza
served an official tax audit report challenging MPS Immobiliare’s ability to use the tax regime applied
to the contribution in question and subsequent failure to pay VAT of around EUR 27 mln and direct
taxes of approximately EUR 4 mln. The Italian Revenue Agency has not yet served any assessment
notice but has formally invited the company to provide clarifications, believing that the transactions
put in place are on the whole elusive: as mentioned in prior reports, the company, assisted by its
advisors, has prepared and filed its own observations. The risk of losing associated with these issues is
considered unlikely.
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Financial risks of investment services
Foreword
The following section on financial risks of investment services was written as part of "Section 4 Operational Risk” in line with the compulsory framework for preparation of the Notes to the Financial
Statements, even though this subject presents specific characteristics and involves organisational levels
of authority that are not directly traceable to operational risk management.
Wealth risk management process and methods
The risks associated with investment services are directly or indirectly reflective of the risks incurred by
customers in the area of order placement, execution, receipt and transmission services, proprietary
trading, portfolio management and investment consulting.
Consequently, governance of these risks is aimed at protecting customers and, simultaneously,
preventing any potential negative impacts on the Group in terms of operational and reputational risk.
Organisational responsibility at Group level for supervising financial risk measurement, monitoring
and control activities and for mapping investment products/services for the purposes of MiFID
adequacy is an integral part of the Group's integrated risk management responsibilities. This is to
ensure centralised governance of the direct and indirect risks which the Group incurs during the course
of its operations. Within the Risk Management Area of Banca MPS' Risk Division, this task is allocated
group wide to the Wealth Risk Management Service.
"Wealth risk management" focuses on the overall set of operational and management processes as well
as measurement and monitoring tools/methods used to ensure overall consistency between customers'
risk profiles and the risk of investment products and portfolios offered to -or in any case held bycustomers.
The main regulatory framework consists of the European MiFID and the relative implementation
regulations (in particular, the Consob Regulation on Intermediaries no. 16190/2007). With regard to
the third-level regulatory framework, Consob Communication no. 9019104/2009 (Level 3 - Illiquid
financial products) plays an important role, along with the 2009 Inter-Association Guidelines on
illiquid financial products, and Consob Communication no. 97966/2014 on the distribution of
complex financial products to retail customers.
The investment products (of the Group and of third parties), whether or not included in the overall
offering to the Group's customers, are mapped for risk on the basis of quantitative measurements of
market and credit risk factors; liquidity and complexity assessments are also conducted on these
products. Product mapping is one of the guiding criteria for carrying out investment adequacy checks
as part of the consulting service offered.
For the sake of simplicity, investment product risk mapping, performed with reference to individual
risk macro-factors, is grouped under specific risk categories.
A special focus is given by the Bank to the monitoring and prevention of potential financial and
reputational risks which investment services, particularly in a context of financial crisis such as the one
experienced over the last few years, may generate as a consequence of increased market volatility. The
fast-moving and not always predictable market trends may result in rapid changes in product risks and
generate potential financial losses, as well as prompting a changing attitude by customers towards their
own financial investments.
As part of the initiatives aimed at protection of customer investments, the list of highest-risk
issuers/entities (a.k.a. Money Laundering List or MLR) has the objective of identifying companies
undergoing a temporary critical phase, associated primarily with specific macroeconomic, corporate
and/or sector-related situations or a lack of sufficient market information. Inclusion in the MLR list
makes the financial instruments issued by these issuers/entities inappropriate and impossible to be
offered on an advisory basis.
CONSOLIDATED INTERIM REPORT
191
Explanatory Notes - Part E – Information on risks and hedging policies
Advisory services on offer, customer risk profile and risk of investment products/portfolios
The strategic choice of the Banca MPS is to combine the placement of financial products with advisory
so as to ensure the highest level of protection for the investor and, at the same time, enhance the role
played by relationship managers. Again, with a view to protecting customers, the obligation to verify
appropriateness has also been extended to the trading activities on the secondary market of the
certificates issued by the Group.
Banca MPS offers two types of advisory services. “Basic” transactional advisory is aimed at verifying
the suitability of the individual investments recommended in relation to the risk of the customer's
investment portfolio as a whole. “Advanced” advisory is instead aimed at verifying the suitability of the
overall set of transactions, advising on them based on their impact on a suggested investment portfolio
of the customer in order to obtain optimum asset allocation and maximised prospective returns over a
certain time horizon, given the customer's risk profile.
With reference to the “basic” advisory service, the new transactional adequacy model was rolled out in
early 2015 and essentially adopts a multivariate control logic on the individual risk factors, based on the
customer’s portfolio risk, including the investment product that is being recommended.
The wealth risk management activities cover the entire distribution scope of the branch network of
Banca MPS and investment services operated by Banca Widiba, which began its activities in the last
part of 2014, also following the transfer of customers managed by Financial Promoters. They also
cover MPS Capital Services for the role played in the chain products process.
The results of questionnaires filled out by Group customers confirm a moderate conservative
approach to financial investments. Approximately 37% of Group customers in the “Retail” macrosegment, namely retail customers which represent almost the entire customer base of the Group, and
which hold investment products, declared, at the end of the first half of 2015, a "moderate" risk
investment objective and mainly medium to long-term investment horizons. The investment objective
emerged from the responses provided to the MiFID profiling questionnaire, as a part of the more
general risk profile which also includes information on the customer’s knowledge, experience and time
horizon.
At the end of June 2015, the portfolios held by Consumer/Retail customers on the basis of formalised
“advanced” advisory proposals to obtain optimum asset allocation, were mainly distributed into the
recommended medium and especially long-term Asset Allocation (AA) macro-classes. This testifies to
the interest of customers who turn to this type of advisory service for stable and long-lasting
investments.
BANCA MONTE DEI PASCHI DI SIENA
Explanatory Notes - Part E – Information on risks and hedging policies
192
In terms of mapping of the risk of investment products, in the first half of 2015, the Eurozone’s equity
markets benefitted from the improved expectations brought about by the ECB’s securities purchase
programme (quantitative easing) approved in January and implemented at the start of March, reversing
the downward trend recorded in the second part of the previous year in particular, as a result of a still
weak economic recovery, despite the nervousness generated on the markets by the uncertainty of the
Greek crisis.
The scenario in the first half of the year was also characterised by the uncertain signals from the bond
segment. In fact, rates on the long part of the curve have increased in both America as well as,
unexpectedly, in the Eurozone, generating significant increases in yields. This leads to a different
reference framework for the bond investor, used to positive trends over the last few years. The recent
upward movements involving Euro yields in particular are a first step in the rates increase process
which, in all likelihood, will accompany the markets over the next few half-years.
Consequently, investor sentiment in the Eurozone is moving, within this scenario of uncertainty and
volatility of the macro-risk factors, impacting the overall risk of investment products held by
customers.
The experience in recent years, however, requires greater caution when interpreting market signs and
investor behaviours. In the current circumstances, rapid changes in monetary policy, the perception of
sound financial systems and investor behaviour can have violent repercussions on risk factors and on
the investments of customers.
In line with the market trends and consequent impacts on macro risk factors, the investment products
held by “Consumer” customers showed, at the end of June, a distribution concentrated on average for
market risk on medium-low levels of 1 day VaR 99%. Also as regards credit risk (issuer risk), the
relative majority of domestic government and Euro area securities and of financial and corporate issues
showed a risk mainly distributed on the lowest and medium risk classes.
Customers have regularly been informed of changes in the risk of financial instruments held, so as to
ensure timely informational transparency and facilitate possible decisions aimed at rebalancing the risk
profile of their investments.
CONSOLIDATED INTERIM REPORT
193
Part F – Information on consolidated shareholders’ equity
Section 1 - Consolidated shareholders' equity ............................................................................................................................ 195
Section 2 – Regulatory banking capital and ratios ..................................................................................................................... 196
BANCA MONTE DEI PASCHI DI SIENA
194
CONSOLIDATED INTERIM REPORT
195
Explanatory Notes - Part F – Information on consolidated shareholders’ equity
Section 1 - Consolidated shareholders' equity
B. Quantitative Information
B.1 Consolidated shareholders’ equity: breakdown by business areas
30 06 2015
Net equity items
Shareholders' equity
Banking
group
Insurance
companies
Consolidation
cancellations
and adjustments
Other
companies
Total
8,772,101
315,317
239,439
(554,756)
8,772,101
4,169
-
53,379
(53,379)
4,169
1,093,937
201,674
68,779
(270,453)
1,093,937
Equity instruments
-
-
-
-
-
Treasury shares (-)
-
-
-
-
-
Valuation reserves
(667,214)
125,520
6,554
(132,074)
(667,214)
- Financial assets available for sale
Share premium
Reserves
(530,984)
-
-
-
(530,984)
- Tangible assets
-
-
-
-
-
- Intangible assets
-
-
-
-
-
- Hedges of foreign investments
-
-
-
-
-
(168,144)
-
-
-
(168,144)
- Exchange difference
6,306
-
-
-
6,306
- Non-current assets held for sale
2,072
-
-
-
2,072
- Actuarial gains (losses) on defined
benefit plans
(110,774)
-
(28)
28
(110,774)
- Share of valuation reserves of
equity investments valued at
equity
121,573
121,634
(27)
(121,607)
121,573
12,737
3,886
6,610
(10,496)
12,737
194,392
54,678
5,228
(59,906)
194,392
9,397,385
697,189
373,379
(1,070,568)
9,397,385
- Cash flow hedges
- Special revaluation laws
Profit (loss) for the year - Group and
minority interests
Net equity
BANCA MONTE DEI PASCHI DI SIENA
Explanatory Notes - Part F – Information on consolidated shareholders’ equity
196
Section 2 – Regulatory banking capital and ratios
2.1 Own Funds
A. Qualitative information
For qualitative information on the breakdown of own funds, see Part F Section 2 of the Consolidated
Financial Statements as at 31 December 2014.
With regard to events in the first half of 2015, in the month of June the Parent Company completed a
share capital increase to be offered for a total of EUR 3 bn. Costs incurred for the share capital
increase and posted directly to equity amount to EUR 89 mln, after tax. The sale of unsubscribed
rights involved recognition in the share premium reserve of a net amount of EUR 4 mln.
Due to this capital increase and to the authorisations received by the Bank of Italy and the Ministry of
Economy and Finance, the Parent Company redeemed a nominal value of EUR 1,071 mln of New
Financial Instruments for EUR 1,116 mln, which includes the effects from the terms and conditions of
the prospectus following the sale of shares by Fondazione Monte dei Paschi di Siena.
Moreover, on 1 July, 117,997,241 ordinary shares, equal to 4% of the share capital, were issued in
favour of the Ministry of Economy and Finance (MEF) for interest accrued as at 31 December 2014,
pursuant to the regulations on NFIs, with a simultaneous increase in share capital of EUR 243 mln.
In conclusion, as at 30 June 2015, CET 1 takes into account the effects of the EUR 3 bn share capital
increase, the net proceeds from the sale of unsubscribed rights and the direct costs of the transaction.
At the same date, as a result of the last redemption, the NFIs are no longer included in the CET 1
calculation. Lastly, note that the share capital increase in favour of the MEF was not included in the
CET 1 calculation as at 30 June 2015 either.
CONSOLIDATED INTERIM REPORT
197
Explanatory Notes - Part F – Information on consolidated shareholders’ equity
B. Quantitative Information
30 06 2015
A. Tier 1 before prudential filters
of which CET1 instruments subject to transitional provisions
31 12 2014
9,292,876
7,266,990
-
1,071,000
43,031
(1,183)
C. Tier I capital gross of items to be deducted (A+B)
9,335,907
7,265,807
D. Items to be deducted from Tier I
1,731,363
1,743,282
682,516
1,084,984
8,287,060
6,607,509
G. Additional Tier 1 (AT1) gross of items to be deducted and transitional
regime effects
606,806
538,420
of which AT1 instruments subject to transitional provisions
396,906
321,347
-
-
(49,420)
(538,420)
B. Tier I prudential filters
E. Transitional regime - Impact on CET1 (+/-)
F. Total Common Equity Tier 1 (CET1) (C - D +/- E)
H. Items to be deducted from AT1
I. Transitional regime - Impact on AT1 (+/-)
L. Total additional Tier 1 (AT1) - (G - H +/- I)
557,386
-
2,863,239
3,351,208
-
-
65,576
68,516
890
9,916
P. Total Tier 2 (T2) (M - N +/- O)
2,798,553
3,292,608
Q. Total capital (F + L + P)
11,642,999
9,900,117
M. Tier2 (T2) gross of items to be deducted and transitional regime effects
of which T2 instruments subject to transitional provisions
N. Items to be deducted from T2
O. Transitional regime - Impact on T2 (+/-)
BANCA MONTE DEI PASCHI DI SIENA
Explanatory Notes - Part F – Information on consolidated shareholders’ equity
198
2.3 Capital adequacy
A. Qualitative information
The Comprehensive Assessment highlighted a shortfall of EUR 2.1 bn for the MPS Group, offset
through a capital increase, as well as with other capital management measures. Having made up the
shortfall, the Group is required to satisfy the Total Capital and Common Equity Tier 1 target ratios of
10.9% and 10.2%, respectively. The target ratios required by the ECB must be complied with at all
times when the Authority’s Decision is in force; similarly, at those times the Bank may not distribute
dividends.
B. Quantitative Information
Categories/Amounts
Non-Weighted amounts
30 06 2015
Weighted amounts/requirements
31 12 2014
30 06 2015
31 12 2014
A. RISK ASSETS
A.1 Credit and couterparty risk (*)
1. Standardized Approach
2. Internal rating-based (IRB) approach
2.1 Foundation
2.2 Advanced
3. Securitisations
192,731,326
197,772,204
61,196,997
62,520,495
72,419,817
79,985,932
27,870,207
33,216,331
120,307,912
117,732,184
33,281,828
29,140,499
-
-
-
-
120,307,912
117,732,184
33,281,828
29,140,499
3,597
54,088
44,962
163,665
4,895,760
5,001,640
70,109
98,579
-
-
363,699
289,142
355,685
286,106
8,014
3,036
701,342
708,267
18,587
20,212
-
-
B. REGULATORY CAPITAL REQUIREMENTS
B.1 Credit and counterparty risk
B.2 Credit valuation adjustment risk
B.3 Settlement risk
B.4 Market risk
1. Standardized Approach
2. Internal models
3. Concentration risk
B.5 Operational risk
1. Foundation
2.Standardized approach
682,755
688,055
B.6 Other prudential requirements
3. Advanced
-
-
B.7 Other calculation elements
-
-
6,030,910
6,097,628
B.8 Total prudential requirements
C. RISK ASSETS AND CAPITAL RATIOS
-
-
75,386,375
76,220,350
C.2 CET1 capital/Risk-weighted assets (CET1 capital ratio)
10.99%
8.67%
C.3 Tier 1 capital/Risk-weighted assets (Tier1 capital ratio)
11.73%
8.67%
C.4 Total capital/Risk-weighted assets (Total capital ratio)
15.44%
12.99%
C.1 Risk-weighted assets
CONSOLIDATED INTERIM REPORT
199
Part G – Business combinations
Section 1 – Business combinations during the period.............................................................................................................. 201
Section 2 - Business combinations completed after the period .............................................................................................. 201
Section 3 – Retrospective adjustments ........................................................................................................................................ 201
BANCA MONTE DEI PASCHI DI SIENA
200
CONSOLIDATED INTERIM REPORT
201
Explanatory Notes - Part G –Business Combinations
Section 1 – Business combinations during the period
1.1 Business combinations
1.1.1 Transactions included in the scope of application of the international accounting standard
IFRS 3 “Business combinations”
There are no transactions to report.
1.1.2 Business combinations between entities under common control
Among business combinations between entities under common control, note that Consum.it was
merged by incorporation into the Parent Company in June.
Section 2 - Business combinations completed after the period
There are no transactions to report.
Section 3 – Retrospective adjustments
No retrospective adjustments are reported.
BANCA MONTE DEI PASCHI DI SIENA
202
CONSOLIDATED INTERIM REPORT
203
Part H – Related-party transactions
1 Compensation of key management personnel ........................................................................................................................ 205
2. Related-party transactions .......................................................................................................................................................... 206
BANCA MONTE DEI PASCHI DI SIENA
204
CONSOLIDATED INTERIM REPORT
205
Explanatory Notes - Part H – Related- party transactions
1 Compensation of key management personnel
Items/Amounts
Short-term benefits
Total
Total
30 06 2015
30 06 2014
3,971
2,468
Post-retirement benefits
-
-
Other long-term benefits
-
-
Termination benefits
-
-
Share-based payments
-
-
Other compensation
-
-
3,971
2,468
Total
Considering instructions provided by accounting standard IAS 24 and in light of the current organisational structure, the
Group has opted for the disclosure scope to include not only Directors, Statutory Auditors, the General Manager and Deputy
General Managers, but also other Key Management Personnel.
For detailed information regarding remuneration policies, pursuant to art. 123 ter of the Consolidated Law on Finance, please
refer to the document “Report on Corporate Governance and Ownership Structure – Remuneration Report” which contains
data reported in the past financial statements, including:
-
a detailed breakdown of compensation paid to the Governing and Control bodies, General Management and, in
aggregate form, to Key Management Personnel, as well as stock option plans reserved for members of the
Governing and Control bodies, the General Management and Key Management Personnel;
-
details and developments regarding stock option plans for Key Management Personnel;
-
the shares of the Parent Company and its subsidiaries held by members of the Governing and Control bodies,
General Management, Key Management Personnel and other related parties.
BANCA MONTE DEI PASCHI DI SIENA
Explanatory Notes. - Part H – Related- party transactions
206
2 Related-party transactions
“Regulations containing provisions relating to transactions with related parties” was adopted by
Consob with Resolution no. 17221 of 12 March 2010 and later amended by Resolution no. 17389 of
23 June 2010.
In its meeting of 10 November 2010, the Board of Directors established the Parent Company's
Committee of Independent Directors which, as of 18 July 2013, has been renamed “Committee on
Related-Party Transactions”; as at today, the Committee is composed solely of independent directors
pursuant to the principles and criteria of the Corporate Governance Code of listed companies, which
BMPS adhered to, and the Consolidated Law on Finance.
On 25 November 2010, the Board of Directors of the Parent Company resolved to approve "The
Group Directive on related-party transactions", which sets out the model for related-party transactions
establishing roles and responsibilities of internal relevant functions and related implementing
processes. The Directive was subsequently updated and renamed "Group Directive on BMPS Related
Parties and Group Associated Parties”, with reference to “Associated Parties” as governed by the Bank
of Italy in its 9th update of Circular no. 263/2006. The update was in implementation of art. 53 of the
Consolidated Law on Banking and in compliance with resolution no. 277 of the Interministerial
Committee for Credit and Savings (ICRC) of 29 July 2008, to govern regulations concerning risk assets
and conflicts of interest in relation to the Associated Parties of the Group.
Through a resolution dated 12 November 2014, the Parent Company's Board of Directors approved –
in accordance with regulatory provisions and having obtained the prior favourable opinions of the
Committee on Related Party Transactions and of the Board of Statutory Auditors, the “Global Policy
on transactions with related parties and associated parties, obligations of the Banking entities”
(hereinafter the “Global Policy”), which includes in a single document the Group's provisions on
conflicts of interest in transactions with related parties in accordance with the above referenced
Consob Regulation no. 17221/10 and with Associated Parties in accordance with Bank of Italy
Circular no. 263/06, Title V- Section 5, as well as those on the obligations of banking entities, in
accordance with art. 136 of the Consolidated Law on Banking (TUB), and also contains rules for
subsidiaries.
The Global Policy dictates the principles and rules to be adhered to in order to control the risk arising
from situations of possible conflict of interest with certain entities close to the Bank's decision-making
centres, and supersedes the “Procedure for Related Party Transactions” - adopted on 25 November
2010 and updated on 24 June 2012 - and the “Deliberative Procedures governing transactions with
Associated Parties” – adopted on 24 June 2012.
The Global Policy was published on the Parent Company's website and is therefore available in fulltext version at the following links:
https://www.mps.it/Investor+Relations/Corporate+Governance/Global+Policy.htm
CONSOLIDATED INTERIM REPORT
207
Explanatory Notes - Part H – Related- party transactions
Information is provided below regarding related-party transactions carried out by the MPS Group in
the first half of 2015, which deserve specific mention and were conducted based on reciprocal
assessments of economic advantages.
January 2015

On 12 January.2015, the Credit Committee authorised the issuing of a Comfort Letter to LE
ROBINIE SPA, regarding the Bank’s willingness to sign a debt restructuring agreement in
accordance with art.182 bis of Italian Royal Decree no. 267 of 16 March 1942 (Bankruptcy
Law), to be drafted on the basis of a restructuring plan which is currently being prepared by
aforementioned company, which makes provision, among other things, for the Bank’s
willingness to disburse new financing also aimed at paying the receivable due to the
Municipality of Mantua, the recipient of the Comfort Letter. The company is exposed to
BMPS for a total of EUR 19.968 mln. This relates to a transaction of minor importance,
concluded at arm’s length or under standards applicable, at the present time, to similar
transactions in terms of their nature, size or risk in respect of similar customer types, which
falls within the field of application of Consob Regulation no. 17221/2010, given that the
Company is subject to a significant influence by BMPS based on a 20% stake.
March 2015




On 3 March 2015, the Credit Committee approved the classification in the non-performing
category of the all receivables due from NEW COLLE SRL amounting to EUR 22.610 mln,
also as a result of the non-admission by the Court of Siena of the request for a pre-insolvency
creditor arrangement pursuant to art. 161, paragraph 6, no267 (Bankruptcy Law). This relates
to a transaction of minor importance, subject to the regulation of related parties pursuant to
Consob Regulation no. 17221/2010, given that the Company is subject to a significant
influence by BMPS which holds a direct stake of 49% in the Company, as a result of the
recognition of the shareholding held previously by MPS Capital Services S.p.A..
On 5 march 2015, the Credit Committee authorised, in favour of SIENA BIOTECH SPA
SOCIETA’ IN LIQUIDAZIONE – for which the Court of Siena declared the bankruptcy
proceedings on 27 March 2015 - the granting of an extension: (i) until 31.07.2015 of a
transitional credit line for the issuing of a surety of EUR 1.925 mln – in respect of a
community grant for the Farmaci Innovativi contro le Malattie Neurodegenerative (Innovative
Drugs for treating Neurodegenerative Diseases) project – issued in 2011 in favour of Azienda
Regionale Artea, in order to allow the latter to perform the administrative controls envisaged
and (ii) until 31.12.2015 of a credit line relating to a surety already issued to the Revenue
Agency for EUR 4.197 mln, in order to technically adjust the expiry of the surety to
31.12.2015 with the credit facility. These are transactions of minor relevance conducted under
the proper conditions from a substantive perspective, which fall within the field of application
of Consob Regulation no. 17221/2010, insofar as the Company is wholly owned by
Fondazione Monte dei Paschi di Siena, which is a related party of the Bank as it owns 2.5% of
Banca MPS.
On 12 March 2015, the Area Grandi Gruppi (Major Groups Area) authorised, in favour of
FABRICA IMMOBILIARE SGR S.P.A., the confirmation of a credit line of EUR 14 mln,
which can be utilised until revoked, for the issuing of sureties related to the participation in
calls for tender for the selection of the Asset Management Company and/or for other
purposes also related to company operations. This is an ordinary transaction of minor
relevance conducted at arm's length or standard conditions, subject to the regulation of related
parties pursuant to Consob Regulation no. 17221/2010, given that the Company is subject to
a significant influence by BMPS which holds a direct stake of 49.99% in the Company.
On 12.03.2015, the Area Grandi Gruppi (Major Groups Area) authorised, in favour of A.
MENARINI INDUSTRIE FARMACEUTICHE RIUNITE SRL, the extension, with a
reduction from EUR 25 mln to EUR 15 mln of ordinary credit lines in place, as well as the
BANCA MONTE DEI PASCHI DI SIENA
Explanatory Notes. - Part H – Related- party transactions


208
cancellation of some other credit lines currently in place pertaining to related parties totalling
EUR 13.950 mln, as not necessary. This is an ordinary transaction of minor importance
conducted at arm's length or standard conditions, which falls within the field of application of
Consob Regulation no. 17221/2010, given that the company is, as of today, indirectly related
to the Director Alberto Giovanni Aleotti, in office until the expiry of the mandate on 16 April
2015.
On 27 March 2015, as a result of the definitive nature of the decree from the Court of Milan
approving the restructuring agreement in accordance with art.182 bis of Italian Royal Decree
no. 267 of 16 March 1942 (Bankruptcy Law), the restructuring transaction was closed with the
SORGENIA GROUP. The transaction involved, among other things: (i) the rescheduling of
the debt and modification of the economic conditions for around EUR 56 mln in relation to
SORGENIA SPA, roughly EUR 318 mln in relation to SORGENIA POWER SPA and
approximately EUR 36 mln in relation to SORGENIA PUGLIA SPA.; (ii) the transfer to
NUOVA SORGENIA HOLDING S.P.A. of part of the credit exposures of the lending
banks to SORGENIA SPA in order release a share capital increase of aforementioned
SORGENIA SPA for offsetting (the receivable of BMPS transferred totals around EUR 88.4
mln with the “ex nunc” commitment to convert said receivable to equity instruments (SFP)
when certain conditions are met); (iii) the confirmation of cash and unsecured loans of
SORGENIA SPA; (iv) the granting of new financing to SORGENIA SPA of around EUR
16.8 mln in cash, EUR 20.4 mln in unsecured loans and EUR 1 mln as a mixed facility; and (v)
the subscription (through the conversion of part of the credit exposure to SORGENIA SPA)
of a bond loan with mandatory conversion to SORGENIA SPA shares for a portion of
around EUR 44.2 mln. BMPS’ total exposure to the SORGENIA GROUP amounts to
around EUR 665.0 mln, as at the date of resolution of the transaction on 25 October 2014.
On closing of the transaction at the end of March 2015, the company Nuova Sorgenia
Holding SpA (and its subsidiaries) therefore became a related party of BMPS which, due to the
execution of the restructuring agreement resolved by the Board of Directors on 25.10.2014,
holds a stake of 16.67% in Nuova Sorgenia Holding S.p.A. as of 20.03.2015.
On 27 March 2015, the Board of Directors authorised the granting of a credit line of EUR 54
mln targeted at the disbursement of a loan granted to the vehicle company SIENA
CONSUMER 2015 Srl, as part of a programme for the securitisation of loans originated by
CONSUM.IT SPA. This is a transaction subject to the regulation of related parties pursuant
to Consob Regulation no. 17221/2010, given that SIENA CONSUMER 2015 Srl is a related
party of BMPS, which holds a stake of 10% in the latter and exercises de facto control over it.
April 2015

On 8 April 2015, the Credit Committee authorised, in favour of INTEGRA SPA, annual
renewal of the existing credit facilities, reducing the financial credit line to a total of EUR 8
mln. This was an ordinary transaction of minor relevance conducted at arm’s length, falling
within the scope of application of Consob Regulation no. 17221/2010, insofar as the company
is subject to direct joint control by BMPS, which holds a 50% stake in it.

On 22 April 2015, reduction of the credit lines in favour of SORGENIA SPA was authorised,
respectively from EUR 10.9 mln to EUR 8.1 mln and from EUR 44.9 mln to EUR 33.3 mln
since, as envisaged by the Restructuring Agreement endorsed by the Court of Milan in March
2015, part of the proceeds from the sale of the Sorgenia Green asset were designated to
prepayment of the pool transactions. This was a technical resolution falling within the scope
of application of Consob Regulation no. 17221/2010, given the significant influence exercised
by the Bank over NUOVA SORGENIA HOLDING SPA (through a 16.67% stake in the
share capital and appointment of two Directors, including the Chairman), which directly
controls SORGENIA SPA with a 99% stake.
CONSOLIDATED INTERIM REPORT
209
Explanatory Notes - Part H – Related- party transactions
May 2015

On 25 May 2015, the Loan Disbursement Area authorised, with regard to FONDAZIONE
MONTE DEI PASCHI DI SIENA, extension of a credit line for EUR 10.329 mln. This is an
ordinary transaction of minor importance, conducted at arm’s length, which falls within the
field of application of Consob Regulation no. 17221/2010, given that as at the date of the
transaction, Fondazione MPS was a significant shareholder of the Bank, given its 2.5% stake in
the share capital, pursuant to the “Global Policy” adopted by BMPS.
June 2015

On 17 June 2015, the Board of Directors approved, in favour of TRIXIA SRL, rescheduling
of the terms and conditions of the mortgage-based credit facilities from the original EUR 88.4
mln to a total of EUR 80.738 mln. This transaction falls within the scope of application of
Consob Regulation no. 17221/2010, in consideration of the Bank’s significant influence due
to its 15% stake in the share capital and its appointment of one member of the Board of
Directors and Board of Statutory Auditors.

On 22 June 2015, rescheduling of the EUR 1 mln credit line of SORGENIA SPA was
authorised, in addition to revocation of the counter-guarantee of EUR 13.5 mln, in line with
the provisions in the aforementioned Restructuring Agreement. This was a technical
resolution falling within the scope of application of Consob Resolution no. 17221/2010, given
the significant influence exercised by the Bank over NUOVA SORGENIA HOLDING SPA,
which directly controls SORGENIA SPA. Moreover, on 17 June 2015, the Board of Directors
resolved to approve the debt restructuring agreement pursuant to art. 182-bis of the
Bankruptcy Law in favour of TIRRENO POWER SPA, which envisages, among other things
- subject to the definitive approval of the relative decree - conversion of the loan into equity
instruments, rescheduling of loans and granting of a new loan for a total of EUR 91.617 mln.
TIRRENO POWER is not a related party of BMPS from a formal standpoint; however, in
virtue of the principle of priority of substance over form, often referred to by Consob, the
transaction was not determined to be exempt from application of the authorisation
requirements envisaged for transactions with related parties, considering the conversion of
loans into equity instruments by BMPS and the capital increase envisaged by the plan, which
will be implemented by SORGENIA SPA, related party of BMPS and shareholder of
TIRRENO POWER, through its 78% stake in Energia Italiana SpA, which in turn holds 50%
of TIRRENO POWER.
Pursuant to art.14, paragraph 2 of CONSOB Regulation no. 17221/2010 and to Chapter 6, Section II
of the Global Policy adopted by the Parent Company on transactions with related parties, associated
parties and obligations of banking entities, it should be noted that in the first half of 2015 the Board of
Directors of Banca MPS approved the following transactions with subsidiaries:

On 06 February 2015, it authorised a recapitalisation initiative in favour of MPS CAPITAL
SERVICES BANCA PER LE IMPRESE SPA, 99.92% owned, and MPS LEASING &
FACTORING SPA and MONTEPASCHI LUXEMBOURG S.A., both wholly-owned by
Banca MPS, for EUR 900 mln, EUR 500 mln and EUR 3 mln respectively (all approximate
figure).

On 19 March 2015 the merger by incorporation into BMPS of CONSUM.IT S.p.A. was
resolved, as the former already wholly owned the latter; the deed of merger was completed on
11 May 2015.
BANCA MONTE DEI PASCHI DI SIENA
Explanatory Notes. - Part H – Related- party transactions
210
§*§*§*§
The following tables summarise the Group’s relationships with its Associates and other related parties
as at 30 June 2015, as well as the profit and loss effects of operations during the year. In calculating the
shares of total, note that:




financial assets had the total of items 10 to 80 on the Assets side of the Balance Sheet
(balance-sheet financial assets) as their denominator;
financial liabilities had the total of items 10 to 60 on the Liabilities side of the Balance Sheet
(balance-sheet financial liabilities) as their denominator;
for other assets and liabilities, the denominator reflected the items "Other assets" and "Other
liabilities" in the Balance Sheet;
for revenues and costs, the denominator is represented by the Group’s “Pre-tax profit (loss)
from current operations”.
CONSOLIDATED INTERIM REPORT
211
Explanatory Notes - Part H – Related- party transactions
2.a Transactions with associates
30 06 2015
Items
Amounts
Total financial assets
Total other assets
Total financial liabilities
Total other liabilities
Guaranties issued
% on Consolidated
994,864
0.61%
958
0.03%
675,358
0.42%
750
0.01%
123,762
Guaranties received
1,162,584
2.b Transactions involving Key Management Personnel and other related parties
30 06 2015
Items/Amounts
Total financial assets
Executives with
strategic
responsibility
Other related
parties
%
on consolidated
947
10,247
0.01%
Total financial liabilities
1,394
42,307
0.03%
Total functioning costs
3,971
-
-
2,278
2,136
1,275
Guarantees issued
Guarantees received
BANCA MONTE DEI PASCHI DI SIENA
212
CONSOLIDATED INTERIM REPORT
213
Part I – Share Based Payments
BANCA MONTE DEI PASCHI DI SIENA
214
CONSOLIDATED INTERIM REPORT
215
Explanatory Notes – Part I – Share based payments
Qualitative Information
Description of share-based payment agreements
The remuneration and incentive policies adopted by the Group – as approved by the Parent
Company's Shareholders meeting in April 2011 – provide that the variable component of
compensation for all employees whose professional activity has or may have considerable impact on
the company's risk profiles (a.k.a. “key employees”) should meet the prescribed requirements in terms
of maximum potential value as a percentage of fixed compensation (Gross Annual Salary),
disbursement timing (at least 50% of the bonus should be paid after three years), disbursement
methods (at least 50% of both the up-front and the deferred portions should be awarded in Bank
shares). The remuneration policies also establish a bonus threshold of EUR 40,000, below which every
payment is made entirely in cash/up front; this threshold is applied only where the amount of the
bonus to be disbursed does not exceed 50% of the Gross Annual Salary received by the “identified
staff member”.
In March, the Parent Company approved the Group incentive system for all Group resources with the
exception of Top Management, first-level management reporting directly to the CEO and second-level
management (Area Managers of the Parent Company, Regional Area Managers, General Manager and
Deputy General Manager). Recipients therefore include a number of “key employees”, to whom part
of any bonus that may be accrued by them must be paid in financial instruments (shares of the Bank or
related instruments).
BANCA MONTE DEI PASCHI DI SIENA
216
CONSOLIDATED INTERIM REPORT
217
Part L – Segment reporting
BANCA MONTE DEI PASCHI DI SIENA
218
CONSOLIDATED INTERIM REPORT
219
Explanatory Notes - Part L – Segment reporting
This section of the Notes to the Consolidated Financial Statements is prepared in accordance with the
IAS/IFRS international accounting principles, with particular reference to IFRS 8 “Operating
Segments”.
This accounting standard 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 in the following areas of business:
-
Retail and commercial banking: includes lending activities, traditional banking services, the offering of
banking and insurance products through the strategic partnership with AXA, financial advisory
services, wealth management and investment products;
Leasing and Factoring: includes the offering of leasing and factoring packages for businesses, artisans
and professionals; Consumer credit: brokerage of personal loans and fifth-of-salary backed loans,
and credit cards (option and revolving);
Corporate finance: mid- and long-term lending, corporate finance, capital markets and structured
finance;
Investment banking: trading and global markets;
Foreign banking: products and services in support of market expansion and investments of Italian
companies abroad.
Operations in the business areas are conducted by the following operating units of the Group:
- sales & distribution network, comprising the branches and specialised centres of Banca Monte dei
Paschi di Siena;
- product factories4, i.e. Group banks and companies expressly dedicated to developing specialised
financial instruments to be offered to the market, particularly including: MPS Capital Services
(specialised in corporate finance, capital markets and structured finance), MPS Leasing &
Factoring (specialising in the provision of leasing and factoring services to businesses);
- foreign network, geographically present in all major financial and economic markets as well as in
emerging countries with the highest rates of growth and/or key relations with Italy. It includes the
foreign units of Banca Monte dei Paschi di Siena (4 operational branches, 10 representative
offices) and 2 banks under foreign law (MP Belgio: 8 branches; MPS Banque: 18 branches).
The Group also includes service operations dedicated to the management of IT and
telecommunications (Consorzio Operativo di Gruppo).
For the purpose of identifying the Operating Segments provided for by IFRS 8, the Montepaschi
Group has adopted the business approach. Income statement/balance sheet data are then aggregated
based on criteria including business area and operating unit of reference, relevance and strategic
importance of operations involved, and cluster of clients served.
Effective from April 2015, the Montepaschi Group launched the new “Corporate Top” service model,
which includes 3,000 small and medium-sized enterprises to which a high-profile service with new and
qualified services is offered, with a view to constant interaction with credit and with product specialists.
This strategic choice, aimed at based the Group’s commercial offer on fast decision-making, proximity
to customers and a consulting approach based on customer advisory principles and partnership with
customers, was accompanied by a revision of the organisational structure of Head Office, assigning the
management of the new Corporate Top service model to Head Office and Investment Banking, while
the SME and Institutions models were moved to functionally and hierarchically report to the Retail
and Network Division.
4
Note that on 01/06/2015, the merger by incorporation of Consum.it SpA (Group consumer credit company) into Banca Monte dei Paschi
di Siena SpA became effective, the accounting and tax effects of which are applicable as of 1 January 2015.
BANCA MONTE DEI PASCHI DI SIENA
Explanatory Notes - Part L – Segment reporting
220
The aforementioned aggregation criteria, into which reporting for the highest decision-making levels
is organised, enabled the identification of the following operating segments as at 30 June 2015:
-
-
-
-
Retail Banking: includes income statement and balance sheet results pertaining to clusters of Small
Business, Value, Premium, Small and Medium-Sized Enterprises, Institutions and Public
Administration, and Private customers of Banca Monte dei Paschi di Siena, and the results of
fiduciary management by the company MPS Fiduciaria;
Financial Advisory and Digital Banking: through the new Banca Widiba, the Group’s newco in the
digital banking sector that was authorised to carry out banking in May and launched its
operations in the last quarter of 2014, encompassing the Financial Advisory Network and Digital
Banking business;
Corporate Banking: includes income statement and balance sheet results pertaining to clusters of
SME Top and Major Groups of Banca Monte dei Paschi di Siena, the results of activities by MPS
Capital Services and those provided by MPS Leasing & Factoring. The results of Banca Monte
dei Paschi di Siena’s foreign branches are also included in this Operating Segment;
Corporate Center: in addition to cancellations of intragroup entries, this Operating Segment
incorporates the results of the following business centres:
o banks under foreign law (MP Banque and MPS Belgio);
o service operations supporting the Group's business, dedicated in particular to the
management and development of IT systems (MPS Consorzio Operativo di Gruppo);
o companies consolidated at equity and held for sale;
o operating units, such as proprietary finance, ALM, Treasury and Capital Management
which, individually, fall below the disclosure requirements for primary reporting.
In 2001 the Montepaschi Group introduced and gradually implemented Value Based operational
management instruments, with the objective of monitoring profitability by business areas and units.
The Value Based Management system adopted by the Group has proven to be 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.
DRAFT
Income statement criteria by operating segment
Starting from the 1 January 2015, the income statement results of the Group’s Operating Segments are
represented with a new reclassified layout which includes, in the revenues aggregate, also the balance of
the item “Other Operating Income/Expenses”, previously reported under Net Operating Income. The
new representation also highlights the Gross Operating Income of each Operating Segment, obtained
by excluding the impact of the net adjustments/recoveries due to impairment of receivables and
financial assets.
The net operating income by operating segments was constructed based on the following criteria:
-
Net interest income: in relation to the business centres of Banca Monte dei Paschi di Siena, it is
calculated by way of contribution on the basis of internal transfer rates broken down by products
and maturities. With reference to non-divisionalised entities, net interest income is the difference
between “interest income and similar revenues” and “interest expense and similar charges”.
-
Net fee and commission income: net fee and commission income is determined by direct
allocation of commissions to the operating segments.
-
Operating expenses: the aggregate includes Administrative Expenses (after recovery of expenses)
and net value adjustments to tangible and intangible assets. The operating expenses of nondivisionalised entities (mono-segments) are directly allocated to their corresponding Operating
Segments while, for Banca Monte dei Paschi di Siena, they are allocated to their respective
Segments of reference by using a “cost allocation” model. With regard to Other administrative
expenses and Net value adjustments to tangible and intangible assets, the model allocates external
and intragroup cost components to the business centres either directly or by means of specific
drivers, starting from a set of previously identified and priced services. With reference, however, to
CONSOLIDATED INTERIM REPORT
221
Explanatory Notes - Part L – Segment reporting
"Personnel costs", the model allocates costs to Business Centres on the basis of the unique
functional position of the resources, or, if this is not possible, according to specific criteria relating
to the operations performed.
-
Net impairment losses/reversals on loans: are allocated to the operating segments which
generated them.
Balance-sheet criteria by operating segment
Balance-sheet aggregates were defined 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 the
income/expenses allocated to each segment. In particular:

Interest-bearing loans to customers are the assets used for the operations of a business
segment, which are directly attributable to the segment itself;

Deposits from customers and debt securities issued are the liabilities arising from the
operations of an operating segment, which are directly attributable to the segment itself.
Transactions between operating segments
Each segment's income and results include transfers between operating segments. These transfers are
reported in accordance with the best practices accepted by the market (i.e. the fair value method or
cost method increased by a proper margin) both with respect to commercial and financial transactions.
The income of each operating segment is determined before intragroup balances and intragroup
transactions are eliminated during the process of consolidation. If intragroup transactions are made
between entities belonging to the same operating segment, the respective balances are eliminated
within such segment. In line with the internal reporting system used by the Montepaschi Group,
balances of intragroup transactions are not shown separately.
Basis of preparation
In accordance with the recommendations of IFRS 8, the table below presents the Group’s income
statement and balance sheet results as at 30 June 2015, developed according to the Operating Segments
defined above:
BANCA MONTE DEI PASCHI DI SIENA
Explanatory Notes - Part L – Segment reporting
222
Business segments
SEGMENT REPORTING
Primary segment
Retail banking
Corporate
banking
Financial
advisory and
digital banking
Corporate
Center
Total
MPS Group
(million of Euro)
30/06/2015
30/06/2015
30/06/2015
30/06/2015
30/06/2015
PROFIT AND LOSS AGGREGATES
INCOME FROM BANKING AND INSURANCE
2,314.6
398.9
17.4
(304.1)
2,426.8
Operating expenses
(1,167.4)
(104.6)
(29.5)
(9.3)
(1,310.7)
PRE PROVISION PROFIT
1,147.3
294.3
(12.1)
(313.4)
1,116.0
Net impairment losses (reversals) on loans and financial
assets
(817.5)
(154.9)
(0.1)
(9.8)
(982.4)
NET OPERATING INCOME
329.7
139.4
(12.3)
(323.2)
133.6
Interest-bearing loans to customers
76,387
22,610
54
9,337
108,388
Deposits from customers and debt securities issued
74,985
11,995
1,072
38,186
126,238
BALANCE SHEET AGGREGATES
The table below shows the data as at 30 June 2014 (see Consolidated Half-Year Report as at 30 June
2014) according to the new layout of the reclassified Group Income Statement, which includes, in the
revenues aggregate, also the balance of the item “Other Operating Income/Expenses” and introduces
“Net Operating Income”, as the difference between the Gross Operating Income and net
adjustments/recoveries due to impairment of receivables and financial assets:
DRAFT
SEGMENT REPORTING
Retail & Corporate Banking division
Primary segment
Retail banking
Corporate
banking
Promozione
Finanziaria e
Digital banking
Corporate
Center
Total
MPS Group
(million of Euro)
30/06/14
30/06/14
30/06/14
30/06/14
30/06/14
PROFIT AND LOSS AGGREGATES
INCOME FROM BANKING AND INSURANCE
1,850.1
898.9
17.1
(829.6)
1,936.5
Operating expenses
(1,012.2)
(291.6)
(6.5)
(21.0)
(1,331.2)
PRE PROVISION PROFIT
837.9
607.3
10.7
(850.6)
605.3
Net impairment losses (reversals) on loans and financial
assets
(396.1)
(841.0)
(0.1)
10.3
(1,226.9)
NET OPERATING INCOME
441.8
(233.7)
10.6
(840.3)
(621.6)
Interest-bearing loans to customers
52,881
54,711
123
15,473
123,187
Deposits from customers and debt securities issued
65,934
27,626
664
36,995
130,777
BALANCE SHEET AGGREGATES
For a like-for-like comparison of operations between the first half of 2015 and the first half of 2014,
see the section “Segment Reporting” of the Half-Year Report on Operations as at 30 June 2015.
CONSOLIDATED INTERIM REPORT
223
Declaration of the Financial Reporting Officer
BANCA MONTE DEI PASCHI DI SIENA
224
CONSOLIDATED INTERIM REPORT
225
Certification of the half-year condensed consolidated financial statements
pursuant to Article 81-ter of Consob Regulation no. 11971 of 14 May 1999, as
subsequently amended and supplemented
1.
The undersigned, Alessandro Profumo, as Chairman of the Board of Directors, and Arturo
Betunio, as Financial Reporting Officer, of Banca Monte dei Paschi di Siena S.p.A., having regard
to Article 154-bis, paragraphs 3 and 4 of Italian Legislative Decree no. 58 of 24 February 1998, do
hereby certify the:
- appropriateness with respect to the company’s profile, and
- factual application of administrative and accounting procedures for preparation of the
condensed consolidated financial statements for the first half of 2015.
2.
The verification of the adequacy and effective application of administrative and accounting
procedures for the preparation of the half-year condensed consolidated financial statements as at
30 June 2015 was based on methods defined by the MPS Group in line with the COSO model,
and for the IT component, COBIT, which constitute the reference framework for the internal
control system generally accepted internationally.
3.
It is also certified that:
3.1 the half-year condensed consolidated financial statements as at 30 June 2015:
- were prepared in accordance with the international accounting standards recognised by the
European Union pursuant to European Parliament and Council Regulation No.
1606/2002/EC of 19 July 2002;
- are consistent with the underlying documentary evidence and accounting records;
- are suitable to provide a true and fair representation of the capital, economic and financial
situation of the issuer and group of companies included within the scope of consolidation.
3.2
the half-year report on operations includes a reliable analysis of the significant events in the
first six months of the financial year and their impact on the half-year condensed
consolidated financial statements, as well as a description of major risks and uncertainties
for the remaining six months of the year. The half-year report on operations also includes a
reliable analysis of information regarding related party transactions of major relevance.
Siena, 6 August 2015
On behalf of the Board of Directors
The Financial Reporting Officer
Signed by
Signed by
The Chairman
Alessandro Profumo
Arturo Betunio
BANCA MONTE DEI PASCHI DI SIENA
226
CONSOLIDATED INTERIM REPORT
227
Auditors’ review report on the interim consolidated financial statements
BANCA MONTE DEI PASCHI DI SIENA
228
CONSOLIDATED INTERIM REPORT
230
CONSOLIDATED INTERIM REPORT
231
Annexes
BANCA MONTE DEI PASCHI DI SIENA
Explanatory Notes - Annexes
232
Pro-forma statements for the accounting treatment of major long-term
structured repos as synthetic derivatives
Foreword
Below are the pro-forma balance sheet, income statement and statement of comprehensive income
(the “Pro-forma statements") as at 30 June 2015 and 31 December 2014, which report the estimated
accounting effects had the Parent Company classified the "long-term structured repos" (the
"Transactions") as synthetic derivatives.
As at the date of this condensed consolidated half-year report, the only existing transaction of this type
if the Alexandria/Nomura transaction.
The pro-forma statements have been prepared on the basis of the financial statements for the year
ended 31 December 2014 and the condensed consolidated half-year financial statements as at 30 June
2015 and 30 June 2014, by applying estimated pro-forma adjustments to the representation of
transactions, should they qualify as synthetic derivatives, as required by the Bank of
Italy/Consob/IVASS document no. 6 of 8 March 2013 - Bank of Italy/Consob/IVASS Coordination
forum on the application of IAS/IFRS - Accounting treatment of “long-term structured repos” (the
“Document”).
The Document provides that, in the case of Transactions for significant amounts, preparers of
financial statements should carefully consider the need for an adequate description, including the
preparation of pro-forma statements, of the effects on financial statements that would arise from a reclassification of Transactions as synthetic derivatives, after tax, as compared with previous year
accounts.
The following statements summarise the balance sheet and profit and loss impacts that would result
from a potential recognition of the long-term repo “Alexandria” as credit default swaps.
The pro-forma statements are presented using the balance-sheet at 31 December 2014 and at 30 June
2015 and income statement and statement of comprehensive income at 30 June 2015 and 30 june
2014.
Pro-forma figures were determined by making appropriate pro-forma adjustments to the historical
values in the 2014 financial statements and to the condensed consolidated half year financial
statements as at 30 June 2015 and 30 June 2014, in order to retroactively reflect the effects of
recognising the Transactions as synthetic derivatives, as well as the estimated balance-sheet and profit
and loss impacts arising therefrom.
Reported in the pro-forma statements below are:



in the first column (“31 12 2014” and “30 06 2015”): balance sheet at 31 December 2014 and at 30
June 2015, income statement and statement of comprehensive income as at 30 June 2014 and 30
June 2015;
in the second column (“pro-forma adjustments of LTR classified as CDS”): pro-forma
adjustments estimated to be made to the accounts, had the Parent Company classified the
Transactions as synthetic derivatives;
in the third and final column (“31 12 2014 pro-forma” and “30 06 2015 pro-forma”): estimated
pro-forma balance sheet at 31 December 2014 and at 30 June 2015 pro-forma income statement
and statement of comprehensive income as at 30 June 2015 and 30 June 2014.
In light of the above, for an accurate interpretation of the information underlying the pro-forma
figures, the following aspects should be considered:


the accounting representations are based on assumptions; therefore, pro-forma figures do not
necessarily coincide with those that would have ensued, had the Transactions (and related income
statement and balance sheet effects) in fact been entered into as at the dates considered for
preparation of the pro-forma accounts;
pro-forma data was prepared in such a way as to only represent an estimate of the identifiable and
objectively measurable effects of the Transactions.
CONSOLIDATED INTERIM REPORT
233
Explanatory Notes - Annexes
.
In the pro-forma accounting treatment as a synthetic derivative, the purchase of securities and its
financing through a long term repo agreement are represented as a Credit Default Swap (sale of
protection on the risk of the Italian government, i.e. issuer of the bonds).
In the event of issuer default, the Parent Company would incur a loss equal to the difference between
the amounts to be returned to the repo counterparty and the value of the defaulted securities to be
delivered to the Parent Company by the counterparty. Against this risk, the Parent Company earns a
variable premium consisting in the difference between the coupons of bonds held and the interest rate
paid on the repo entered into to finance the transaction.
For the purpose of pro-forma accounting, the Transactions were thus assessed in a similar way to
Credit Default Swaps, using the same market parameters.
In particular, accounting treatment as a synthetic derivative determines the following pro-forma
adjustments and reclassifications:

balance sheet:
- recognition of the CDS at Fair Value under “Financial assets held for trading”(if the fair value
is positive) or “Financial liabilities held for trading” (if the fair value is negative) instead of:
o securities classified as “Financial assets available for sale” and corresponding valuation
reserves, gross of the hedge accounting component;
o “Deposits from banks” and “Deposits from customers” which represent the liabilities
associated with the long term repos;
- reclassification of interest rate swaps from “Hedging derivatives” to “Financial liabilities held
for trading” (for IRSs designated as hedging instruments as at the date of this condensed
consolidated half-year report);
- ensuing tax effects.

income statement:
- elimination from “Interest income and similar revenues” and “Interest expense and similar
charges” respectively of: interest income from government bonds classified as “Assets
available for sale” and interest expense on long term repos classified as “Deposits from banks”
and “Deposits from customers”, both posted by using the actual interest rate method;
- elimination from “Interest income and similar revenues” and “Interest expense and similar
charges” of amounts accrued on interest rate swaps designated as hedging instruments;
- elimination from “Net profit (loss) from hedging” of: fair value changes attributable to the
interest rate risk of hedged government bonds, accounted for against the valuation reserve of
assets available for sale; and fair value changes in the interest rate swaps, net of any accrued
income, designated as hedging instruments;
- recognition under “Net profit (loss) from trading" of: cash flows (coupons and floating
spreads) paid on government bonds and long term repos and fair value changes in IRSs
designated as hedging instruments and CDSs;
- ensuing tax effects;

statement of comprehensive income:
- recognition of changes in “Financial assets available for sale” following adjustment to
valuation reserves.
In brief, an estimate of transactions treated as synthetic derivatives produces significantly different
impacts on the income statement by reason of changes in the fair value of Credit Default Swaps and
reclassification of Interest Rate Swaps to trading.
It should be noted that, by reason of the different accounting classification of individual items, the
Transactions' accounting treatment as CDSs entails a modification to the scope of the two regulatory
portfolios (trading book and banking book), with resulting differences, essentially of an offsetting
nature, in the VAR of the individual portfolios. As a result, this different representation does not
generate any differential impacts on the Group's overall VaR.
BANCA MONTE DEI PASCHI DI SIENA
Explanatory Notes - Annexes
234
As far as the Alexandria/Nomura transaction is concerned, the only existing transaction of this type,
note that in May of the current year, a part (EUR 495 mln over a total of EUR 3,050 mln in notional
value) of the IRSs designated as hedging instruments against interest rate risk of the BTPs was
transferred into the trading book, with a consequent prospective interruption of hedge accounting for
the portion of hedges interrupted.
Pro-forma consolidated balance sheet
As s ets
10
Cas h and cas h eq uivalents
20
3 1 12 2 0 14
Pro -fo rma
ad jus tments o f
LTR clas s ified
as CDS
3 1 12 2 0 14
p ro -fo rma
3 0 0 6 2 0 15
Pro -fo rma
ad jus tments o f
LTR clas s ified
as CDS
3 0 0 6 2 0 15
p ro -fo rma
1,0 0 6 ,58 6
-
1,0 0 6 ,58 6
8 2 2 ,0 2 4
-
8 2 2 ,0 2 4
Financial as s ets held fo r trad ing
16 ,9 2 8 ,78 8
6 3 4 ,3 0 0
17,56 3 ,0 8 8
16 ,3 55,2 2 2
6 0 4 ,0 0 0
16 ,9 59 ,2 2 2
40
Financial as s ets availab le fo r s ale
2 2 ,8 4 7,58 2
(4 ,0 71,54 5)
18 ,776 ,0 3 7
19 ,9 8 0 ,0 2 1
(3 ,9 4 9 ,6 9 0 )
16 ,0 3 0 ,3 3 1
60
Lo ans to b anks
70
7,72 2 ,753
-
7,72 2 ,753
8 ,3 2 7,2 3 5
-
8 ,3 2 7,2 3 5
Lo ans to cus to mers
119 ,6 76 ,13 2
-
119 ,6 76 ,13 2
117,4 3 6 ,2 56
-
117,4 3 6 ,2 56
80
Hed g ing d eviratives
6 12 ,9 57
-
6 12 ,9 57
4 70 ,0 2 2
-
4 70 ,0 2 2
90
Chang e in value o f macro -hed g ed financial
as s ets (+/-)
178 ,6 13
-
178 ,6 13
150 ,0 0 1
-
150 ,0 0 1
10 0
Eq uity inves tments
1,0 13 ,8 9 9
-
1,0 13 ,8 9 9
9 0 7,6 6 6
-
9 0 7,6 6 6
12 0
Pro p erty, p lant and eq uip ment
2 ,78 7,0 8 3
-
2 ,78 7,0 8 3
2 ,6 9 3 ,0 6 8
-
2 ,6 9 3 ,0 6 8
13 0
Intang ib le as s ets
4 4 1,6 9 3
-
4 4 1,6 9 3
4 2 9 ,3 2 9
-
4 2 9 ,3 2 9
7,9 0 0
-
7,9 0 0
7,9 0 0
-
7,9 0 0
7,56 2 ,4 19
(13 ,3 3 3 )
7,54 9 ,0 8 6
6 ,9 73 ,8 3 3
(4 3 ,4 0 9 )
6 ,9 3 0 ,4 2 4
2 1,8 0 5
-
2 1,8 0 5
8 6 ,8 12
-
8 6 ,8 12
-
2 ,6 4 3 ,513
3 ,0 73 ,2 6 8
-
3 ,0 73 ,2 6 8
179 ,9 9 3 ,2 4 5
177,70 4 ,757
o f wich: g o o d will
14 0
Tax as s ets
150
No n-current as s ets and g ro up s o f as s ets
held fo r s ale and d is co ntinued o p eratio ns
16 0
Other as s ets
2 ,6 4 3 ,513
To tal As s ets
18 3 ,4 4 3 ,8 2 3
CONSOLIDATED INTERIM REPORT
(3 ,4 50 ,578 )
(3 ,3 8 9 ,0 9 9 )
174 ,3 15,6 58
235
Explanatory Notes - Annexes
.
Liab ilities and Shareho ld ers ' Eq uity
Pro -fo rma
ad jus tment o f
LTR clas s ified
as CDS
3 1 12 2 0 14
3 1 12 2 0 14
p ro -fo rma
Pro -fo rma
ad jus tment o f
LTR clas s ified
as CDS
3 0 0 6 2 0 15
-
3 0 0 6 2 0 15
p ro -fo rma
10
Dep o s its fro m b anks
2 7,6 4 7,6 71
-
2 7,6 4 7,6 71
18 ,8 3 0 ,8 6 9
20
Dep o s its fro m cus to mers
9 3 ,14 4 ,9 8 1
(3 ,3 53 ,59 9 )
8 9 ,79 1,3 8 2
9 4 ,74 5,4 4 1
30
Deb t s ecurities is s ued
3 0 ,4 55,4 3 9
-
3 0 ,4 55,4 3 9
2 9 ,14 7,717
-
2 9 ,14 7,717
40
Financial liab ilities held fo r trad ing
13 ,70 1,78 9
1,6 0 4 ,9 9 9
15,3 0 6 ,78 8
13 ,4 14 ,777
1,119 ,0 0 4
14 ,53 3 ,78 1
50
Financial liab ilities d es ig nated at fair
value
2 ,6 2 3 ,6 2 0
-
2 ,6 2 3 ,6 2 0
2 ,3 4 4 ,4 4 5
-
2 ,3 4 4 ,4 4 5
60
Hed g ing d erivatives
4 ,112 ,10 8
(1,6 0 4 ,9 9 9 )
2 ,50 7,10 9
3 ,0 3 6 ,58 6
(1,119 ,0 0 4 )
1,9 17,58 2
80
Tax liab ilities
16 3 ,510
(15,13 8 )
14 8 ,3 72
54 ,3 9 3
(17,2 9 7)
3 7,0 9 6
90
Liab ilities as s o ciated with no n-current
as s ets held fo r s ale and d is co ntinued
o p eratio ns
10 0
Other liab ilities
110
(3 ,3 4 7,0 2 8 )
18 ,8 3 0 ,8 6 9
9 1,3 9 8 ,4 13
-
-
-
-
-
-
4 ,18 3 ,56 9
-
4 ,18 3 ,56 9
5,3 3 0 ,4 4 0
-
5,3 3 0 ,4 4 0
Pro vis io n fo r emp lo yee s everance p ay
2 71,4 3 4
-
2 71,4 3 4
2 4 6 ,3 9 1
-
2 4 6 ,3 9 1
12 0
Pro vis io ns fo r ris ks and charg es
1,151,0 4 9
-
1,151,0 4 9
1,156 ,3 13
-
1,156 ,3 13
14 0
Valuatio n res erves
(6 8 5,4 6 0 )
4 2 3 ,12 2
(2 6 2 ,3 3 8 )
(6 6 8 ,4 52 )
3 4 4 ,8 6 3
(3 2 3 ,58 9 )
16 0
Eq uity ins truments carried at eq uity
3 ,0 0 2
-
3 ,0 0 2
-
-
-
170
Res erves
(9 4 6 ,4 78 )
1,0 8 5,2 74
(50 4 ,9 6 3 )
58 0 ,3 11
18 0
Share p remium
19 0
Share Cap ital
200
Treas ury s hares (-)
2 10
No n-co ntro lling interes ts (+/-)
220
Pro fit (lo s s ) (+/-)
To tal liab ilities and Shareho ld ers '
Eq uity
(4 9 6 ,12 0 )
(4 50 ,3 58 )
2 ,2 9 1
-
2 ,2 9 1
3 ,9 56
-
3 ,9 56
12 ,4 8 4 ,2 0 7
-
12 ,4 8 4 ,2 0 7
8 ,758 ,6 8 3
-
8 ,758 ,6 8 3
-
-
-
-
-
-
2 3 ,6 2 5
-
2 3 ,6 2 5
2 4 ,3 14
-
2 4 ,3 14
(5,3 4 2 ,8 9 2 )
(54 ,6 0 5)
(5,3 9 7,4 9 7)
19 3 ,6 10
13 5,3 2 6
3 2 8 ,9 3 6
18 3 ,4 4 3 ,8 2 3
(3 ,4 50 ,578 )
179 ,9 9 3 ,2 4 5
177,70 4 ,757
(3 ,3 8 9 ,0 9 9 )
174 ,3 15,6 58
BANCA MONTE DEI PASCHI DI SIENA
Explanatory Notes - Annexes
236
Pro-forma consolidated income statement
Items
Pro -fo rma
ad jus tment o f
LTR clas s ified
as CDS
3 0 0 6 2 0 14
3 0 0 6 2 0 14
p ro -fo rma
Pro -fo rma
ad jus tment o f
LTR clas s ified
as CDS
3 0 0 6 2 0 15
10
Interes t inco me and s imilar revenues
2 ,74 4 ,112
(74 ,4 4 9 )
20
Interes t exp ens e and s imilar charg es
(1,78 6 ,4 3 1)
30
Net interes t inco me
40
Fee and co mmis s io n inco me
50
Fee and co mmis s io n exp ens e
(18 1,9 13 )
-
(18 1,9 13 )
(176 ,9 12 )
-
(176 ,9 12 )
60
Net fee and co mmis s io n inco me
8 70 ,9 9 9
-
8 70 ,9 9 9
9 2 7,14 4
-
9 2 7,14 4
70
Divid end s and s imilar inco me
2 8 ,8 9 9
-
2 8 ,8 9 9
14 ,172
-
14 ,172
80
Net p ro fit (lo s s ) fro m trad ing
76 ,9 75
2 14 ,4 3 6
3 2 5,3 16
90
Net p ro fit (lo s s ) fro m hed g ing
(13 ,2 8 3 )
10 0
Gains /lo s s es o n d is p o s al/rep urchas e
4 0 ,6 4 3
110
Net p ro fit (lo s s ) fro m financial as s ets and
liab ilities d es ig nated at fair value
(57,2 78 )
12 0
Net interes t and o ther b anking inco me
1,9 0 4 ,6 3 6
13 0
Net imp airment lo s s es (revers als )
(1,2 2 6 ,9 13 )
14 0
Net inco me fro m b anking activities
18 0
Ad iminis trative exp ens es
19 0
Net p ro vis io ns fo r ris ks and charg es
200
9 57,6 8 1
1,0 52 ,9 12
6 77,72 3
2 ,6 6 9 ,6 6 3
2 ,19 0 ,9 2 2
(73 ,3 16 )
6 4 ,174
(1,72 2 ,2 57)
(1,0 3 7,4 13 )
6 2 ,3 0 6
(10 ,2 75)
9 4 7,4 0 6
1,153 ,50 9
1,0 52 ,9 12
1,10 4 ,0 56
3 0 0 6 2 0 15
p ro -fo rma
-
(11,0 10 )
-
2 ,117,6 0 6
(9 75,10 7)
1,14 2 ,4 9 9
1,10 4 ,0 56
(8 3 ,157)
(6 ,18 2 )
110 ,8 8 0
58 1
(12 ,70 2 )
18 ,0 2 3
-
4 0 ,6 4 3
13 2 ,6 57
-
13 2 ,6 57
-
(57,2 78 )
(18 ,12 8 )
-
(18 ,12 8 )
(9 2 ,8 51)
(9 2 ,8 51)
1,8 11,78 5
2 ,3 3 8 ,2 57
(1,2 2 6 ,9 13 )
(9 8 2 ,3 8 7)
58 4 ,8 72
1,3 55,8 70
(1,8 9 9 )
2 0 1,52 7
2 0 1,52 7
16 ,12 4
2 ,53 9 ,78 4
(9 8 2 ,3 8 7)
1,557,3 9 7
(1,3 9 2 ,2 55)
-
(1,3 9 2 ,2 55)
(1,3 8 9 ,4 6 7)
-
(1,3 8 9 ,4 6 7)
(8 2 ,0 0 6 )
-
(8 2 ,0 0 6 )
(4 8 ,58 1)
-
(4 8 ,58 1)
Net ad jus tments to (reco veries o n)
p ro p erty, p lant and eq uip ment
(58 ,515)
-
(58 ,515)
(6 0 ,758 )
-
(6 0 ,758 )
2 10
Net ad jus tments to (reco veries o n)
intang ib le as s ets
(54 ,0 8 3 )
-
(54 ,0 8 3 )
(55,14 4 )
-
(55,14 4 )
220
Other o p erating exp ens es /inco me
13 9 ,73 7
-
13 9 ,73 7
230
Op erating exp ens es
240
Gains (lo s s es ) o n inves tments
260
Imp airment o n g o o d will
2 70
Gains (lo s s es ) o n d is p o s al o f inves tments
280
Pro fit (lo s s ) b efo re tax fro m co ntinuing
o p eratio ns
(555,0 76 )
(9 2 ,8 51)
290
Tax exp ens e (reco very) o n inco me fro m
co ntinuing o p eratio ns
2 0 3 ,150
300
Pro fit (lo s s ) after tax fro m co ntinuing
o p eratio ns
3 10
Pro fit (lo s s ) after tax fro m g ro up s o f
as s ets held fo r s ale and d is co ntinued
o p eratio ns
320
Pro fit (lo s s )
330
Pro fit (lo s s ) fo r the p erio d attrib utab le to
no n -co ntro lling interes ts
340
Parent co mp any's net p ro fit (lo s s )
CONSOLIDATED INTERIM REPORT
19 2 ,9 79
-
19 2 ,9 79
(1,4 4 7,12 2 )
-
(1,4 4 7,12 2 )
(1,3 6 0 ,9 71)
-
(1,3 6 0 ,9 71)
2 0 9 ,2 16
-
2 0 9 ,2 16
18 2 ,72 0
-
18 2 ,72 0
-
-
-
-
-
-
5,10 7
-
5,10 7
1,0 2 3
-
1,0 2 3
(6 4 7,9 2 7)
178 ,6 4 2
2 0 1,52 7
3 8 0 ,16 9
3 0 ,50 1
2 3 3 ,6 51
15,750
(6 6 ,2 0 1)
(6 2 ,3 50 )
(4 14 ,2 76 )
19 4 ,3 9 2
13 5,3 2 6
3 2 9 ,718
-
-
-
19 4 ,3 9 2
13 5,3 2 6
3 2 9 ,718
78 2
-
78 2
19 3 ,6 10
13 5,3 2 6
3 2 8 ,9 3 6
(3 51,9 2 6 )
(3 51,9 2 6 )
1,10 6
(3 53 ,0 3 2 )
(6 2 ,3 50 )
-
(6 2 ,3 50 )
(4 14 ,2 76 )
1,10 6
(4 15,3 8 2 )
(50 ,4 51)
237
Explanatory Notes - Annexes
.
Pro-forma consolidated statement of comprehensive income
Items
10
Pro fi (lo s s )
3 0 0 6 2 0 14
(3 51,9 2 6 )
Pro -fo rma
ad jus tment o f
LTR clas s ified
as CDS
(6 2 ,3 50 )
3 0 0 6 2 0 14
p ro -fo rma
3 0 0 6 2 0 15
Pro -fo rma
ad jus tment o f
LTR clas s ified
as CDS
3 0 0 6 2 0 15
p ro -fo rma
(4 14 ,2 76 )
19 4 ,3 9 2
13 5,3 2 6
3 2 9 ,718
Other co mp rehens ive inco me after tax no t
recycled to p ro fit and lo s s
(15,6 2 4 )
-
(15,6 2 4 )
15,6 2 0
-
15,6 2 0
40
Actuarial g ains (lo s s es ) o n d efined b enefit
p lans
(15,53 1)
-
(15,53 1)
15,58 1
-
15,58 1
60
Share o f valuatio n res erves o f eq uityacco unted inves tments
(9 3 )
-
(9 3 )
39
-
39
Other co mp rehens ive inco me after tax
recycled to p ro fit and lo s s
4 3 7,3 0 8
56 5
(6 4 ,8 3 5)
80
Exchang e d ifferences
90
Cas h flo w hed g es
10 0
Financial as s etes availab le fo r s ale
110
No n-current as s ets held fo r s ale
(2 8 ,78 6 )
12 0
Share o f valuatio n res erves o f eq uityacco unted inves tments
12 9 ,6 3 4
13 0
To tal o ther co mp rehens ive ico me after tax
4 2 1,6 8 4
(6 4 ,8 3 5)
14 0
To tal co mp rehens ive inco me (Item 10 +13 0 )
6 9 ,758
(12 7,18 5)
150
Co ns o lid ated co mp rehens ive inco me
attrib utab le to no n-co ntro lling interes ts
16 0
Co ns o lid ated co mp rehens ive inco me
attrib utab le to Parent Co mp any
(2 8 ,154 )
3 6 4 ,0 4 9
1,12 8
6 8 ,6 3 0
-
-
(6 4 ,8 3 5)
3 72 ,4 73
4 6 ,9 3 8
56 5
5,155
-
5,155
14 ,72 1
-
14 ,72 1
(2 8 ,154 )
(78 ,2 59 )
2 9 9 ,2 14
1,6 17
-
(2 8 ,78 6 )
308
-
308
-
12 9 ,6 3 4
2 5,13 7
-
2 5,13 7
3 56 ,8 4 9
6 2 ,558
-
(12 7,18 5)
(57,4 2 7)
1,12 8
(58 ,555)
(78 ,2 59 )
(3 1,3 2 1)
(78 ,2 59 )
(76 ,6 4 2 )
(15,70 1)
2 56 ,9 50
57,0 6 7
3 14 ,0 17
78 2
-
78 2
2 56 ,16 8
57,0 6 7
3 13 ,2 3 5
BANCA MONTE DEI PASCHI DI SIENA