2012 ANNUAL REPORT · 2016-10-03 · 2012 ANNUAL REPORT Credito Valtellinese Società Cooperativa Registered Offices in Piazza Quadrivio 8 — Sondrio, Italy Tax code and Sondrio

2012 ANNUAL REPORT

Credito Valtellinese Società Cooperativa

Registered Offices in Piazza Quadrivio 8 — Sondrio, Italy Tax code and Sondrio Company Registration No. 00043260140 — Register of Banks No. 489 Parent of the Credito Valtellinese Banking Group — Register of Banking Groups No. 5216.7

Website: http://www.creval.it E-mail: [email protected] Data as at 31 December 2012: Share Capital EUR 1,516,698,624.06

Member of the Interbank Guarantee Fund

This is an English translation of the Italian language original “Relazioni e Bilancio 2012” that has been prepared solely for the convenience of the reader. The Italian language original “Relazioni e Bilancio 2012” is available on http://www.creval.it/investorRelations/cvBilanci.html.

Reports and financial statements as at 31 December 2012 GROUP FINANCIAL STATEMENT HIGHLIGHTS AND ALTERNATIVE PERFORMANCE INDICATORS 4 COMPANY OFFICERS OF CREDITO VALTELLINESE 7 NOTICE OF CALL OF SHAREHOLDERS’ MEETING 8 CHAIRMAN’S LETTER 10

Report on Operations 11 FOREWORD 11 MACROECONOMIC REFERENCE CONTEXT 12 ORGANISATIONAL MODEL OF THE CREDITO VALTELLINESE GROUP 20 ANNUAL REPORT ON MUTUAL COOPERATIVE BANKING 22 GROUP MANAGEMENT PERFORMANCE IN THE YEAR 26 THE GROUP’S OPERATIONAL STRUCTURE, THE COMMERCIAL PERFORMANCE INDICATORS AND THE COMPETITIVE POSITIONING 34 THE PERSONNEL 41 MAIN ASPECTS OF COMMERCIAL OPERATIONS 46 ANALYSIS OF THE MAIN STATEMENT OF FINANCIAL POSITION AGGREGATES AND INCOME STATEMENT FIGURES 51 STRATEGIC MANAGEMENT OF GROUP EQUITY INVESTMENTS 68 ANALYSIS OF THE MAIN STATEMENT OF FINANCIAL POSITION AND INCOME STATEMENT AGGREGATES OF THE PARENT 70 SUMMARY NOTES ON THE PERFORMANCE OF OTHER TERRITORIAL BANKS 86 THE PERFORMANCE OF STOCK MARKET QUOTATIONS 88 THE MONITORING OF BANK RISKS AND THE INTERNAL CONTROL SYSTEM OF THE GROUP 91 RELATED PARTY TRANSACTIONS 92 OTHER INFORMATION 94 EVENTS AFTER THE REPORTING PERIOD 96 BUSINESS OUTLOOK 97 THE PROPOSAL TO COVER THE LOSS FOR THE PERIOD 98 CLOSING REMARKS 99

Consolidated financial statements of the Credito Valtellinese Group 100 CONSOLIDATED FINANCIAL STATEMENTS 101

CONSOLIDATED STATEMENT OF FINANCIAL POSITION 102 CONSOLIDATED INCOME STATEMENT 103 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME 104 STATEMENT OF CHANGES IN CONSOLIDATED EQUITY 105 CONSOLIDATED STATEMENT OF CASH FLOWS - DIRECT METHOD 107

CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS 109

PART A - ACCOUNTING POLICIES 110 PART B - INFORMATION ON THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION 141 PART C - INFORMATION ON THE CONSOLIDATED INCOME STATEMENT 187 PART D - CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME 207 PART E - INFORMATION ON RISKS AND HEDGING POLICIES 206 PART F - INFORMATION ON CONSOLIDATED EQUITY 267 PART G - BUSINESS COMBINATIONS 278 PART H - RELATED PARTY TRANSACTIONS 280

PART I - SHARE-BASED PAYMENTS 284 PART L - SEGMENT REPORTING 285

OTHER DOCUMENTS 290

CONSOLIDATED STATEMENT OF THE MANAGER IN CHARGE OF FINANCIAL REPORTING PURSUANT TO ARTICLE 81 – TER OF CONSOB REGULATION NO. 11971 OF 14 MAY 1999, AS AMENDED 291 REPORT OF THE AUDITORS 292

Financial statements of Credito Valtellinese 294 FINANCIAL STATEMENT HIGHLIGHTS AND ALTERNATIVE PERFORMANCE INDICATORS 295

FINANCIAL STATEMENTS 297 STATEMENT OF FINANCIAL POSITION 298 INCOME STATEMENT 299 STATEMENT OF COMPREHENSIVE INCOME 300 STATEMENT OF CHANGES IN EQUITY 301 STATEMENT OF CASH FLOWS - DIRECT METHOD 303

NOTES TO THE FINANCIAL STATEMENTS 305 PART A - ACCOUNTING POLICIES 306 PART B - INFORMATION ON THE STATEMENT OF FINANCIAL POSITION 333 PART C - INFORMATION ON THE INCOME STATEMENT 385 PART D - ANALYTICAL STATEMENT OF COMPREHENSIVE INCOME 402 PART E - INFORMATION ON RISKS AND HEDGING POLICIES 403 PART F - INFORMATION ON EQUITY 460 PART G - BUSINESS COMBINATIONS 468 PART H - RELATED PARTY TRANSACTIONS 471 PART I - SHARE-BASED PAYMENTS 476 PART L - SEGMENT REPORTING 476

OTHER DOCUMENTS 477

REPORT OF THE BOARD OF STATUTORY AUDITORS TO THE SHAREHOLDERS’ MEETING 478 SEPARATE STATEMENT OF THE MANAGER IN CHARGE OF FINANCIAL REPORTING PURSUANT TO ARTICLE 81–TER OF CONSOB REGULATION NO. 11971 OF 14 MAY 1999, AS AMENDED 499 REPORT OF THE AUDITORS 500

ATTACHMENTS 502

STATEMENT OF REVALUATIONS (ARTICLE 10 ITALIAN LAW 72/1983) 503 SCHEDULES OF THE VALUES ASSIGNED TO ASSETS AND LIABILITIES OF THE MERGED BANKS PURSUANT TO ARTICLE 2504 OF THE ITALIAN CIVIL CODE 505 SCHEDULE OF SIGNIFICANT EQUITY INVESTMENTS IN UNLISTED COMPANIES - ARTICLE 126 OF CONSOB REGULATION NO.11971 OF 14 MAY 1999 AS AMENDED AND SUPPLEMENTED 506 STATEMENT OF FEES PAID FOR AUDIT COMPANY SERVICES PURSUANT TO ARTICLE 149-DUODECIES OF CONSOB REGULATION NO. 11971/1999 507 STATEMENT OF INTERNAL PENSION FUNDS OF CREDITO VALTELLINESE 508 LIST OF IAS/IFRS INTERNATIONAL FINANCIAL REPORTING STANDARDS 509

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GROUP FINANCIAL STATEMENT HIGHLIGHTS AND ALTERNATIVE PERFORMANCE INDICATORS STATEMENT OF FINANCIAL POSITION 31/12/2012 31/12/2011 %

change

(in thousands of EUR)

Loans and receivables with customers 22,007,837 22,330,187 -1.44

Financial assets and liabilities 3,653,897 1,857,388 96.72

Equity investments 241,530 219,315 10.13

Total assets 29,896,063 28,411,490 5.23

Direct funding from customers 22,102,650 22,080,601 0.10

Indirect funding from customers 11,200,816 11,566,237 -3.16

of which: - Managed funds 4,937,164 5,013,245 -1.52

Total funding 33,303,466 33,646,838 -1.02

Equity 1,981,874 1,864,466 6.30

SOLVENCY RATIOS 31/12/2012 31/12/2011

Tier 1 Capital/Risk-weighted assets 8.13% 7.28%

Regulatory Capital/Risk-weighted assets 11.49% 10.62%

FINANCIAL STATEMENT RATIOS 31/12/2012 31/12/2011

Indirect funding from customers / Total funding 33.6% 34.4%

Managed funds / Indirect funding from customers 44.1% 43.3%

Direct funding from customers / Total liabilities 73.9 % 77.7%

Customer loans / Direct funding from customers 99.6% 101.1%

Customer loans / Total assets 73.6% 78.6%

CREDIT RISK 31/12/2012 31/12/2011 % change

Net non-performing loans (in thousands of EUR) 614,625 572,722 7.32

Other net doubtful loans (in thousands of EUR) 1,484,625 1,098,488 35.15

Net non-performing loans / Loans and receivables with customers 2.8% 2.6%

Other net doubtful loans / Loans and receivables with customers 6.7% 4.9%

Hedging of non-performing loans 59.7% 56.5%

Hedging of other doubtful loans 13.4% 8.1%

Cost of credit (*) 1.61% 0.75%

(*) Calculated as the ratio between the net impairment losses on loans and year-end loans.

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FIGURES PER EMPLOYEE (thousands of EUR, number of employees at year end) 31/12/2012 31/12/2011 % change

Operating income / Number of employees 186 191 -2.62

Total assets / Number of employees 6,854 6,339 8.12

Personnel expenses / Number of employees 72 72 -

ORGANISATIONAL DATA 31/12/2012 31/12/2011 % change

Number of employees 4,362 4,482 -2.68

Number of branches 544 543 0.18

Banc@perta line users 204,458 184,977 10.53

INCOME STATEMENT DATA 2012 2011 % change

(in thousands of EUR) Net interest income 478,096 525,393 -9.00

Operating income 810,373 858,093 -5.56

Operating costs (533,576) (551,367) -3.23

Operating profit 276,797 306,726 -9.76

Pre-tax profit (loss) from continuing operations (424,619) 28,603 n/a.

Post-tax profit (loss) from continuing operations (344,556) 60,476 n/a.

Profit/(loss) for the year attributable to owners of the parent (322,439) 52,751 n/a

OTHER ECONOMIC INFORMATION 2012 2011

Cost/Income ratio 65.8% 64.3%

With reference to the economic results, the figures for the period of comparison were restated, compared to what was originally published, in compliance with what is provided by IFRS 5 - Non-current Assets Held for Sale and Discontinued Operations, for the transfer of the subsidiaries Aperta SGR S.p.A. and Lussemburgo Gestioni S.A., and recalculated following the retrospective application of the new version of IAS 19 - Employee benefits.

INFORMATION ON SHARES 31/12/2012 31/12/2011

Number of ordinary shares 442,868,742 270,193,897

Listed price at end of the period (EUR) 1.166 1.750

Average listed price for the period (EUR) 1.405 2.750

Average stock-market capitalisation (millions of EUR) 476 698

Group equity per share (*) 4.488 6.927 (*) The calculation does not consider treasury shares in portfolio

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INFORMATION ON THE ASSIGNED RATINGS Fitch Ratings Issuer Default (long term) BB+

Short Term B

Viability Rating BB+

Support 3

Outlook Negative

Moody’s Ratings Long Term Rating Baa3

Short Term Rating P-3

Bank Financial Strength D+

Outlook Negative

DBRS Senior Unsecured Debt & Deposits BBB (low)

Short-Term Debt & Deposits R-2 (low)

Intrinsic Assessment: BBB (low)

Support Assessment: SA-3

Outlook Negative

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COMPANY OFFICERS OF CREDITO VALTELLINESE Board of Directors Chairman • Giovanni De Censi Substitute Deputy Chairman Angelo Maria Palma Deputy Chairman • Aldo Fumagalli Romario Managing Director • Miro Fiordi Directors Mario Anolli Fabio Bresesti • Gabriele Cogliati

Michele Colombo • Paolo De Santis Isabella Bruno Tolomei Frigerio Paolo Stefano Giudici Gian Maria Gros Pietro

• Franco Moro Valter Pasqua

• Alberto Ribolla Paolo Scarallo • Members of the Executive Committee

Board of Statutory Auditors Chairman Angelo Garavaglia Standing Auditors Marco Barassi Alfonso Rapella Substitute Auditors Aldo Cottica Edoardo Della Cagnoletta

Panel of Arbitrators Permanent Arbitrators Emilio Rigamonti Bassano Baroni Francesco Guicciardi

General Management General Manager Miro Fiordi Co-General Manager Luciano Camagni Deputy General Manager Umberto Colli Deputy General Manager Enzo Rocca Deputy General Manager Franco Sala Deputy General Manager Mauro Selvetti Manager in charge of financial reporting Simona Orietti Audit Company KPMG S.p.A.

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NOTICE OF CALL OF SHAREHOLDERS’ MEETING

Call of the ordinary and extraordinary Shareholders’ Meeting

The Shareholders of Credito Valtellinese are called to an ordinary and extraordinary Shareholders’ Meeting on 26 April 2013 at 9.00 a.m., on first call at the registered office of Piazza Quadrivio no. 8 in Sondrio and, if necessary, on

Saturday 27 April 2013 at 9.00 a.m.

on second call, at (i) the Polo Fieristico Provinciale (Provincial Fair-ground) in Morbegno (SO) via Passerini 7/8, as well as, pursuant to Article 25 of the Articles of Association and of Article 2 of the “Regulation of Meetings of Credito Valtellinese”, by means of remote communication systems, at the (ii) Auditorium di MiCo - Milano Congressi in Milano Piazzale Carlo Magno, 1 - GATE 17 and at (iii) the meeting room of the General Management of Credito Siciliano in Acireale (CT) Via Sclafani 40/b, to resolve upon the following agenda:

Ordinary session

1. Appointment of the Board of Directors; proposal to appoint 15 Directors for the 2013-2015 three-year period.

2. Appointment of the Board of Statutory Auditors for the 2013-2015 three-year period.

3. Appointment of the panel of arbitrators for the 2013-2015 three-year period.

4. Reports of the Board of Directors and the Board of Statutory Auditors on the 2012 financial year; presentation of the financial statements as at 31 December 2012. Related resolutions.

5. Coverage of the negative equity items deriving, in pursuance of the adopted accounting standards, from the merger into Credito Valtellinese s.c. of Credito Artigiano S.p.A. through the use of available reserves.

6. Accounting adjustment deriving from the completion of the takeover and exchange bid on Credito Siciliano S.p.A. ordinary shares, as indicated in the Report of the Board of Directors as per Article 2441, paragraph 6, Italian Civil Code of 9 October 2012. Related resolutions.

7. Report on remuneration pursuant to Article 123-ter of Italian Legislative Decree no. 58/1998 Related resolutions.

8. Determining the Directors’ fee.

9. Determining the Statutory Auditors’ fee.

10. Decisions pursuant to Article 12 of the Articles of Association (repurchase of treasury shares). Related resolutions and delegation of powers.

11. Proposed amendments to the Regulation of Meeting of Credito Valtellinese s.c.

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12. Communication pursuant to the Provisions of Prudential Supervision (Bank of Italy Circular no. 263 of 27 December 2006) on internal control matters.

Extraordinary session

1. Articles of Association: proposed amendments to Articles 7, 23, 25, 27, 31, 41, 45 and 55. Related resolutions.

The full text of the notice of call, published in accordance with the law, is available on the website of the bank in the section Investor Relations - Information for Shareholders - Meetings.

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CHAIRMAN’S LETTER Dear Shareholders,

We closed the financial statements of 2012, which will be remembered undoubtedly as

extraordinarily difficult and complex in the bank’s history of more than a hundred years; these

financial statements are affected inevitably by the impact of various critical problems resulting

from the prolonged crisis and from the ongoing uncertainty of the recovery time.

We are sure that this was a year of transition that was affected, from the “outside”, by the

effects of a strong decline in operating margins related to the weakness of the economic cycle

and, from the “inside”, by the effects of the absolutely prudential policy that the Board of

Directors decided to implement both in the assessment and hedging of doubtful loans and in

goodwill enhancement (without which, I must emphasize, the annual results would have

achieved a break-even point).

Besides, the measures gradually undertaken to reduce operating costs, through the

simplification of the structure of the Group laid down by the current Strategic Plan, allowed to

limit the reduction of the result of operations.

What we can say without fear of contradiction is that the Bank continued to do its job, abiding

by its role of support to the real economy that has always characterised its action and, albeit

the capital constraints introduced by European rules, tried to meet the demands of its

customers of choice, households and small and medium-sized enterprises, both on its own and

by joining all the initiatives promoted at the system or local level.

Your bank, as well as the Group, are reliable and are able to react thanks to the actions

undertaken to face up to the complex economic situation. Strengthened by your trust and

maintaining a high sense of responsibility towards all the stakeholders to which our action is

directed, we face the challenge of this 2013 with the willingness to continue the strengthening

and consolidation of the growth process in a context characterised by the beginning of the

hoped-for recovery for the whole country.

Chairman of the Board of Directors

Giovanni De Censi

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REPORT ON OPERATIONS

FOREWORD

The reference regulations for preparation of the Report on operations are mainly Article 2428 of the Italian Civil Code, Article 3 of Italian Legislative Decree 87/1992 on the annual and consolidated reports of banks - both as amended by Italian Legislative Decree no. 32 of 2 February 2007 - and Bank of Italy Circular no. 262 of 22 December 2005 as subsequently amended - Separate and consolidated banking financial statements: formats and guidelines.

Pursuant to Article 3, paragraph 3-bis, Italian Legislative Decree 87/1992, the Report on operations on the separate and consolidated operations may be presented in a single document, where appropriate giving greater weight to matters significant to the Group as a whole.

In this respect, this report was prepared in accordance with the above-mentioned Article 3, paragraph 3-bis, Italian Legislative Decree 87/1992, incorporating the Report on operations on the Group and separate Parent operations into a single document.

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MACROECONOMIC REFERENCE CONTEXT

INTERNATIONAL SCENARIO∗

In 2012, worldwide growth continued to slow compared to 2011, which had appeared to be the year of global recovery. The world GDP growth rate declined from 5.2% in 2010 to 3.9% in 2011, to 3% in 2012, while the rate of growth of international trade slowed even more markedly, from 15.5% in 2010, to 7.2% in 2011, to 2.6% in 2012.

Growth in 2012 was mixed, with Europe (-0.4% of GDP) in recession and the United States growing (+2.3%) along with Japan (+1.9%). Growth rates increase as one moves eastwards and southwards in the EU and in the United States, with China recording the fastest rate, i.e. 7.8%, which nonetheless was slower than the 2011 figure of 9.3%.

We will examine more briefly the major players of the worldwide economy (USA, Latin America, Asia, oil and gas exporter countries) and then concentrate on the EMU and on the EU.

In the US, GDP growth rate improved in 2012 compared to 2011, with economic and monetary policies that remained expansionary. An agreement was found on the federal budget, with higher taxes and spending cuts that should not trigger recessionary effect, barring unknowns on the types of spending cuts still to be decided. In any case, with the federal deficit at 7.9% of GDP and a debt to GDP ratio well above 100%, the public finance situation of the US is worse than the EU’s. However, the housing real estate market, from which the crisis originated, is expected to continue its recovery (with the connected adjustment to households’ financial imbalance). The tax exemption of non-housing investments was extended again.

However, there are persistent uncertainties in the levels of employment and unemployment, although the latter declined to 8.1% (from 8.9% in 2011), with a forecast of 7.5% for 2013. Long-term unemployment, though, still remains severe, along with the social imbalances connected with the distribution of wealth and income.

Many other elements, such as the rise in stock market prices, indicate that the US is out of the crisis of the real economy, partly thanks to the strong wave of innovation connected with the new energy sources (shale gas), which is bringing the US towards full energy self-sufficiency. The US is believed to be on the verge of a new industrialisation phase, quite different from the previous ones but capable of revitalising the real economy. This is not yet apparent in the balance of trade, still negative though showing slight improvement, as well as the current account balance.

In Latin America, growth continued to slow from 4.7% in 2011, which had already declined by two points relative to 2010, to 2.4% in 2012, with a forecast for some, albeit limited, improvement in 2013. The main reasons are the weakness of European, American and Chinese demand and the drop in the price of the commodities exported by various countries. Inflation remained rather high, around 6.5%, though it did slow and it is expected to slow further in 2012. In the area’s foremost economy, Brazil, capital controls were introduced to limit the real’s appreciation, and various internal prices were administered to keep inflation in check. Argentina is going through some challenging times, with implicit inflation at 30%, currency depreciation, slowing growth. Mexico and especially Chile are doing better.In Asia, Japan, China and India have a leading role. However, the other major countries should not be underestimated (i.e., Hong Kong, Indonesia, Philippines, Thailand, South Korea, Malaysia, Singapore).

∗ The figures used mainly albeit not exclusively for the report derive from: Prometeia, Forecast Report, January 2013.

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Japan had a year with two growth profiles and with strong economic policy innovations from the new government. Its 1.9% GDP growth stemmed from the impressive performance of the first quarter followed by a correction due to yen appreciation and the collapse of exports to Europe and the US. The country’s foreign position worsened both in terms of trade balance and of current account balance as a percentage of GDP. Unemployment remained low, under 5%, as did inflation (zero). Lastly, public finance remains characterised by a uniquely Japanese feature: the ratio of public debt over GDP is approximately 220% and the deficit is around 10% of GDP. Yet, while these values are out of the ordinary, they have no impact on government bond spreads compared to the benchmark US and German securities. Prime Minister Abe’s new government has launched a series of highly aggressive economic policy measures, with a stimulus of approximately 4% of GDP, half of which funded by the central government for reconstruction and earthquake protection measures, as well as measures for competitiveness, expansionary monetary policy to depreciate the yen, bring price rises to 2%, stimulate growth. This economic policy, dubbed “Abenomics”, is exactly the opposite of the European one.

China grew by 7.8%, down by 1.5 points from 2011 and with a recovery forecast in 2013. The year was rather sharply divided, with marked improvement in the final part for construction, manufacturing and retail sales. With regard to the foreign position, in spite of the slow-down in exports to various regions, such as Europe, both the balance of trade and the current account balance remained at very good levels, around 4% of GDP. Unemployment continues to hover around 4% according to official data. In 2013, marginal improvement is expected, propelled more by domestic demand than by exports. The general consensus is still that, if foreign demand were to contract more markedly, fiscal and monetary stimulus to domestic demand should be expected, since China cannot drop below a certain growth rate for socio-political reasons.

With regard to India, after growing by 9% in 2011 it slowed to 4.1% in 2012 and a rate of 6% is expected in 2013. Its economy has significant fluctuations in its growth rates and its attractiveness for foreign investors is not very well defined, because of its deficient infrastructure and high inflation.

Countries whose economies are mostly based on energy exports (Russia, other CSI Countries, Middle East) continued to benefit from oil prices. Growth rates were between 3.5% and 4.5%, quite stable from 2011 through 2013. In Russia, buoyant market demand propelled imports, whose growth rate exceeds that of exports. However, similarly to Middle East Countries, the trade and current account balances remain high as percentages of GDP, with a positive sign.

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Table 1

Gross Domestic Product (Percentage variation)

Unemployment rate (Percentage of workforce)

Inflation (Percent variation of consumer prices)

2011 2012 2013 2011 2012 2013 2011 2012 2013

United States 1.8 2.3 2.1 8.9 8.1 7.5 3.1 2.3 2.1

Japan -0.6 1.9 1.9 4.5 4.3 4.2 -0.3 0 0.8

Eurozone 1.5 -0.4 -0.2 10.1 10.1 10.7 2.7 2.5 1.6

China 9.3 7.8 8.1 4.1 4.1 4.1 9 3.5 2.7 Source: Prometeia, Forecast Report, January 2013 and IMF for unemployment in China

The EMU and EU Situation

The situation of the EMU and of the Euro, and thus also of the EU, remained the centre of gravity of the crisis and the subject of worldwide financial worries throughout 2012. Specifically, the Eurozone’s true problem is the severe, persistent recession, on which the economic policies of the EU and of the EMU do not seem to focus.

It is worth recalling (as will be specified further on in this report) that the average GDP decline of EMU countries is in fact made up of rather divergent economic situations (government budgets of member States and structural differences) between the various Eurozone countries, but all major countries, i.e. Germany, France, Italy, Spain, are experiencing a slowdown or outright recession. Thus, the crisis has hit “core” countries as well, showing that Germany itself is not immune.

In spite of the general improvement of the situation of financial markets, economic performance was very weak or negative in the second half of 2012. The gap between the improvement in financial markets and the changed macroeconomic outlook for the current year is also due to the budget adjustment process, which is slowing recovery and growth in the short term. According to projections, investments and domestic consumption are expected during the year.

However, 2013 is expected to be yet another year of recession for the EMU, whose GDP is set to change negatively, by -0.2%. Germany’s growth will slow down compared to the previous year, whilst French growth will be essentially nil. For Italy and Spain, and for the EMU as a whole, recovery will begin only in 2014, provided that domestic demand starts driving the recovery in 2014.

The year 2012 was again characterised by a series of meetings of the European Council, of the Ecofin and of the Eurogroup, and Germany continued to play a major role in driving economic policies.

From the institutional viewpoint, there were several innovations in the EMU (and EU). However, many of them were inspired by rigour whilst others were conceived to promote the necessary stability. Growth seems to be almost entirely neglected.

The Fiscal Compact and the multi-year Community Budget are among the policies inspired by rigour.

The so-called Fiscal Compact (formally, the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union) is the agreement approved with an international treaty on 2 March 2012 by 25 of the 27 Countries (with the exception of the United Kingdom and the Czech Republic). It entered into force on 1 January 2013, after a long process of negotiation and ratification.

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On the wake of the six-pack, the agreement requires the contracting countries:

- to include the obligation to balance the budget in the Constitution;

- not to exceed the structural deficit threshold of 0.5% (and 1% for countries with national debt below 60% of GDP);

- significantly to reduce debt at the rate of one twentieth per year, until reaching 60%.

These measures, focused on rigour for the adjustments of government budgets, are accompanied by those aimed at the coordination of economic policies and at convergence and for the governance of the Euro zone. States will be required to disclose their respective plans of the issue of public debt and to ensure that major economic policy reforms are discussed preventively and mutually coordinated, and the 17 leaders of the Countries that adopted the Euro shall hold at least two meetings every year.

Table 2

Public sector deficit (-) GDP %

Public sector debt GDP %

Debt in % of the EMU GDP

2011 2012 2013 2011 2012 2013 2013

Germany 0.8 -0.1 0.1 80.6 81.3 80.2 22.4

France 5.2 4.5 3.6 86 90.9 94.1 20.1

Italy 3.9 2.9 2.2 120.7 127.1 128.2 21.1

Spain 9.4 8 6.4 96.3 86.1 94.3 10.2

EMU 4.1 3.3 2.7 88.1 92.6 94.4 Source: Prometeia, Forecast Report, January 2013.

With regard to the EU budget, after long negotiations that lasted throughout 2012 and ended in February 2013 with a highly unsatisfactory result, the European Parliament rejected, with an overwhelming majority, the EU multi-year budget (2014-17), finding the indications of the European Parliament (and of the Commission, as well) for a Multiannual Financial Framework (MFF) without significant cuts.

Among the initiatives aimed at stability are the ESM Fund and the measures adopted by the ECB.

On 2 February 2012 the Treaty that establishes the European Stability Mechanism Fund (connected and complementary to the Fiscal Compact in many aspects) was signed. The ESM Fund is permanent in nature and it will first complement and then replace the current EFSF (European Financial Stability Facility).

The new State rescue Fund was devised, requiring changes to the Treaty on the Functioning of the European Union (Article 136) as a European financial fund for the financial stability of the Euro area. It is a veritable inter-governmental organisation (modelled after the IMF) and its governance definitely appears sounder and with more powers. As the sovereign debt crisis deepened, the European Council decided to move forward its entry into force, initially planned for mid 2013, to July 2012. However, implementation of the Fund proved challenging, in part because of the decision by Germany’s Constitutional Court on the legitimacy of the Fund with respect to German law. Ultimately, the Fund was activated in October. It has a capital of EUR 700 billion, of which EUR 80 billion are paid-in capital, and a lending capacity (once fully

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established) of EUR 500 billion. It was used to rescue Spanish banks, to which EUR 40 billion has already been lent.

The ECB continued with the important liquidity auctions (LTROs), reaching over EUR 1,000 billion. These transactions were supplemented by non-conventional monetary policy instruments, known as OMTs or Outright Monetary Transactions. OMTs, whose fundamental goal is to safeguard the channel for the transmission of monetary policy, consist of the direct purchase by the ECB of short-term government bonds issued by countries experiencing macroeconomic difficulty. The transactions will be focused on sovereign bonds with maturity between one and three years, without ex ante limits to the total amount of the transactions. However, the transactions are subordinated to the launch of a financial aid programme or of a precautionary programme with the ESM Fund.

Last December, the European Council voted in favour of the creation of a single supervisory authority which represents the fundamental pillar of the future European banking union. The ECB, responsible for the effective global functioning of the mechanism, should assume supervisory duties within the single supervisory mechanism on 1 March 2014 and will exercise direct supervision over the “significant” banks of the Euro area, i.e. those with assets of EUR 30 billion at the consolidated level or which, at the individual level, own assets of at least EUR 5 billion and whose value exceeds 20% of their country’s GDP.

The Italian Situation

The Italian situation should be compared with that of the other two largest Eurozone economies, i.e. Germany and France, mentioning Spain as well.

Examining the Italian situation in detail, the estimates for growth, unemployment and inflation, compared to the same period of last year, were revised and the scenario appears to be quite deteriorated, especially with reference to unemployment, with all too obvious social repercussions.

Table 3

% change of Unemployment Inflation

GDP

2011 2012 2013 2011 2012 2013 2011 2012 2013

Germany 3.1 0.9 0.4 6 5.5 5.8 2.5 2.2 1.5

France 1.7 0.1 0.1 9.6 10.3 10.8 2.3 2.2 1.8

Italy 0.6 -2.1 -0.6 8.4 10.6 11.7 2.9 3.3 1.8

Spain 0.4 -1.4 -1.4 21.7 25.2 27 3.1 2.4 1.5

EMU 1.5 -0.4 -0.2 10.1 11.4 12 2.7 2.5 1.6

Source: Prometeia, Forecast Report, January 2013.

After the very weak growth of 2011 (0.6%), 2012 was a year of severe recession for Italy. GDP shrank, with a growth rate of -2.1% (the forecast rate for 2012 was -1.7%). Among the main countries of the EMU, Italy’s result is definitely the most negative one. But even for the EMU as a whole, as stated, after moderate growth in 2011, the rate of GDP change was -0.4%. This figure is explained by the marked slow-down in the major Eurozone economies. In 2012,

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Germany’s growth rate slowed considerably, reaching a mere 0.9% and, similarly, France’s growth was close to zero. For Spain, 2012 was a recessionary year.

In 2012, unemployment in Italy reached 10.6% and rose by 2.2 percentage points compared to the previous year. This increase propelled Italy to the second-highest unemployment rate among the countries examined here. France, where the rate also rose, stopped at 10.3%. For both these countries the unemployment rate was slightly below the EMU average, which in 2012 reached 11.4% (up by 1.3 percentage points). In Germany, instead, unemployment decreased and ended at far lower levels (5.5%). At the opposite end of the spectrum is Spain, where unemployment rose by 3.5% points and reached 27%.

It is also useful to stress, together with long-term unemployment, a rather severe factor with reference to the potential growth of Italy and of the Eurozone. According to the latest available ISTAT data, in Italy there are 655 thousand young (15-24) unemployed workers, accounting for 10.9% of the population in this age range. The unemployment rate among 15 to 24 year-olds, i.e. the proportion of the unemployed over those employed or searching, amounts to 38.7%, up by 1.6 percentage points compared to the previous months and by 6.4 points in trend comparison terms (the inactivity rate has reached 36.2%).

As to inflation, for Germany and France it remained substantially in line with the previous year, at 2.2% for both; this value is not very different from the EMU average, i.e. 2.5%. Just below the average was Spain (2.4%), where inflation slowed. In Italy, instead, it rose far higher than the average: the inflation rate for 2012 was 3.3%.

However, the most significant concern is growth (or rather, of our country’s way out of the recession). In general, according to the forecasts, the decline in disposable income in the private sector and the contraction in direct public demand will cause the weak signs of economic improvement not to have any significant effects on growth during the first half of 2013. Starting from the second part of the year, instead, domestic demand is expected to join foreign demand. The longest recession after World War 2 should thus end, after 7 consecutive quarters of GDP decline, although the annual GDP growth rate will return to a positive sign only in 2014.

With regard to public finance, in 2012 the debt to GDP ratio reached 127.1%, rising significantly (mostly because of the higher cost of borrowing), in spite of the severe fiscal squeeze, amounting to 6.4 percentage points. It will rise again in 2013, and it will only be reduced from 2014 with the recovery. The public debt to GDP ratio is far higher than the EMU average, which nonetheless has reached 92.6%, growing by 4.5 percentage points. A similar situation took place in France, whereas in Germany (81.3%) it rose only by 0.7 percentage points.

Given the size of our public debt and the amount of resources involved to finance it, a (fast) reduction would be possible only in the presence of a (significant) growth in GDP.

In 2012, the public deficit was rather modest for Italy, at -2.9% (Germany even recorded a surplus of 0.1%). This is a highly satisfactory result, considering that the EMU average was -3.3%. Deficit reduction will continue through the current year (and in the next two years, albeit at a slower pace). In 2013, the deficit to GDP ratio will be 2.2%, with a markedly virtuous performance (compared to Italy’s historical records and to other EMU Countries). Progress is made evident from the primary surplus that in 2013 will be 3.4%1. Tax pressure will reach record highs, approaching 45% of GDP (i.e. 44.8%, up by 2.2 percentage points compared to 2011).

1 However, part of the deficit improvement in 2013 will derive from tax increases. Indirect taxes will bear very heavily: increase in the ordinary VAT rate from 21 to 22% from 1 July onwards, Tobin tax, introduction of the Tares tax.

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The consequences of high unemployment and of the restrictive budget policies had (and will have) a negative impact on the formation of disposable income and on household consumption. The rate of change in disposable income for 2012 contracted markedly (-4.2%), as did investments in machinery, equipment and transport means (-11.3%).

Households are bearing the greatest burden of the adjustment, but businesses are under severe financial stress, and especially small to medium enterprises, which has led to a reduction in investments but also a significant feedback effect on consumptions. Partly for this reason and as a result of the fiscal policies, household spending declined by 4.1% in 2012.

The Italian banking system2

During the year, credit conditions benefited from the gradual removal of the liquidity constraints that bore down on Italian banks, also thanks to the policies implemented by the Eurosystem. The supply of loans, however, is still hampered by the high risk perceived by intermediaries, in relation to the effects of the recession on companies’ financial positions. Impaired loans have grown significantly. The unfavourable economic environment is reflected both in weak demand for credit by businesses and households, and in supply-side tensions connected with the deterioration in credit quality.

However, positive signals do emerge. Retail funding is growing, liquidity conditions have improved, some intermediaries have resumed issuing on wholesale markets. While funding conditions on wholesale markets for Italian intermediaries have not yet been normalised, they have improved slightly, benefiting from the attenuation of tensions on sovereign debt markets. Growth in the deposits of resident customers remains buoyant.

The cost of the most stable funding sources has remained unchanged. The average interest rate applied to the current accounts of businesses and households, the main component of retail funding, was 0.5% in November 2012. The yield paid to households on new deposits with up to one year of duration, which is highly sensitive to tensions on wholesale funding markets, was 2.7%. The yield of new bond issues is declining, both for fixed rate securities (3.3%) and for floating rate securities (3.1%).

Loans to businesses and households continued to decline. Bank loans to the non financial private sector continued to contract; in the three months ending in November, they declined by 2.6% (year on year, net of seasonal factors and of the accounting effect of securitisations). The downturn involved mostly loans to businesses (-4.0%, versus -0.8% for loans to households). Supply conditions are still restrictive and negatively affected by the weakness, now improving, in demand by businesses and households - tied to the unfavourable economic environment and to the decline in the real estate market - and by the persistent tension in supply conditions.

The reduction in the cost of credit for businesses, recorded in the first part of the year, stopped in the summer: between the end of August and the end of November, the average cost of new loans to businesses rose slightly, to 3.6%. The increase involved mostly the rates applied to loans for amounts exceeding Euro one million. The indications provided by banks for the quarterly survey of bank credit suggest that this rise is connected with deteriorating credit quality and with the more severe concerns on borrower risk. The spread between the average cost of loans to Italian businesses and the average value for the Euro area is still wide. The cost of credit to households, instead, continued to decline slightly. The rate on new loans declined (to 3.5%) for floating rate loans, which account for over two thirds of total loans; it remained unchanged (at 4.8%) for fixed rate loans. Although it benefited from the attenuating

2 Bank of Italy Economic Bulletin no. 71 – January 2013 (updated with the figures available on 15 January 2013, unless otherwise indicated).

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tensions on financial markets, the reduction in rates is hampered by the perception of a high credit risk by intermediaries.

Bank business is burdened by the deterioration in credit quality connected with the challenging environment. in the third quarter of 2012, the flow of new doubtful loans in relation to total loans (net of seasonal effects and year on year) rose by 2.2%. The rate of new classifications as doubtful loans remained relatively low for household loans, i.e. 1.4%, the same value as the end of last year. The rate of doubtful loans among business loans reached 3.3% and it is expected to peak by mid-2013 and decline thereafter. Preliminary information indicates that, in the October-November time interval, total exposure to debtors identified for the first time as doubtful grew further. The portion of loans to businesses in temporary difficulty (substandard and restructured loans) increased compared to total loans to the sector and reached 7.9% in October.

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ORGANISATIONAL MODEL OF THE CREDITO VALTELLINESE GROUP

The Credito Valtellinese Banking Group currently consists of territorial banks, specialised companies and special purpose companies for the provision of services - with a view to achieving synergies and economies of scale - to all the companies of the Group. The current group structure is graphically represented below.

Credito Valtellinese Credito Siciliano Carifano

Finanziaria San Giacomo

Creset Servizi Territoriali

Global Assicurazioni (*)

Global Broker (*)

Deltas Bankadati Stelline

(*) Company subject to management and coordination by Credito Valtellinese pursuant to Articles 2497 et seq. of the Italian Civil Code.

Structure of the Credito Valtellinese Group

MARKET

SPECIALISED FINANCE

CORPORATE CENTER

Aperta Fiduciaria

Mediocreval

The Organisational Model of the Group defined as a “network company” model, assigns the reference market share to the territorial banks and the required operating support to the specialised finance and special-purpose companies. Therefore, it is based on the full enhancement of the distinctive skills of each member, with the purpose of achieving the maximum efficiency and competitiveness, on their functional and operational correlation, on the adoption in the corporate process management of the same rules and methods. This allows to overcome size restrictions and fully to benefit from the advantage of proximity with regard to the areas of choice, combining effectively specialisation and flexibility, production and distribution functions.

As at 31 December 2012, the Credito Valtellinese Group is present in Italy with a network of 544 Branches, in eleven regions, through the territorial banks characterising the “Market Segment”:

- Credito Valtellinese S.c., the Parent, present with its own network of 368 branches, most of which - 231 - are in Lombardia, as well as in Valle d’Aosta, Piemonte, Veneto, Trentino Alto Adige, Emilia Romagna, Toscana and Lazio.

- Carifano S.p.A., with a branch network of 40 branches, mainly in the Marche region, as well as in Umbria, Perugia and Orvieto.

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- Credito Siciliano S.p.A. is present in all the provinces of Sicilia with 136 branches and in Roma and Torino with two branches dedicated to loans against pledges.

The following companies characterise the “Specialised Finance Sector”:

- Aperta Fiduciaria S.r.l., a company authorised to perform what is known as “static” fiduciary services, administration of third party assets and fiduciary registration.

- Mediocreval S.p.A., a company specialised in disbursing medium to long-term loans, business finance and leases.

- Finanziaria San Giacomo S.p.A., for the management of non-performing loans mainly of the financial intermediaries of the Group.

- Creset Servizi Territoriali S.p.A., for the management of local tax services, treasury and cash services on behalf of local authorities present in the territories of the Group banks.

- Global Assicurazioni S.p.a.3, a multi-firm insurance agency in the bancassurance sector and, more in general, in the sales network distribution of standard insurance policies.

- Global Broker S.p.A. 4, Company specialised in insurance brokerage in the SME segment.

The companies providing services complementary to banking business characterising the “Production Segment” complete the Group:

- Deltas società consortile per Azioni5 forms the “Corporate centre” of the Group, supports the Parent in defining and governing the overall business plan, coordinates and provides support for administration, planning, human resource management, marketing, auditing, legal affairs, compliance and risk management.

- Bankadati Servizi Informatici società consortile per Azioni is the Group’s centre for ICT management and development, organisation, back office and support processes.

- Stelline Servizi Immobiliari S.p.A. manages the real estate holdings of the Group companies, prepares real estate valuations to support the disbursement of credit by the Territorial Banks and independently develops initiatives in favour of the local communities of reference.

3 Company subject to management and coordination by Credito Valtellinese and therefore included in the scope of consolidation, even if not included in the banking group, pursuant to the supervisory provisions, in that it carries on insurance activities. 4 See previous note. 5 The planned merger of the company into the Parent was approved in January 2013. Indicatively, the transaction will be completed by the first quarter of the current year.

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ANNUAL REPORT ON MUTUAL COOPERATIVE BANKING In compliance with the provisions of Article 2545 of the Italian Civil Code for cooperative companies, this part of the Report shall describe the criteria applied in the management of the company to pursue the cooperative purpose of the bank and of the Group.

For cooperative banks - which are recognised by the Lawmaker of corporate reform and by EU Lawmakers as cooperative entities by full rights even if their cooperative nature is not prevalent - the cooperative nature is coupled with the creation of value added, to the advantage of the Shareholders and of the communities where the banks are active. Cooperative banks, in other words, do not merely pursue the obtainment of economic benefits but also social benefits and therefore the legitimate aspiration to capital remuneration coexists with the welfare purpose, in constant compliance with the cooperative model of governance, inspired by the principle of corporate democracy represented by the one share, one vote system.

Consistently with the cooperative nature of the Group, the management of the banks of the conglomerate does not only pursue the goal of making profits, but it is rather oriented at creating sustainable value in the long term in favour of the communities and territories of reference.

Before illustrating the cooperative initiatives carried out in 2012 under the dual “internal” and “external” profile, some quantitative data relating to the shareholding structure of Credito Valtellinese are illustrated; these data are broadly representative of the importance attached to Shareholders by the Bank.

At the end of 2012, there were 152,646 shareholders, markedly more than 125,413 at the end of 2011 also in relation to the merger of Credito Artigiano and to the takeover and exchange bid for the shares of Credito Siciliano, completed during the year. 119,795 owners are recorded in the Shareholder Register.

During 2012, the Board of Directors approved 22,096 new requests for admission as Shareholder. More than 93% of the Shareholders of Credito Valtellinese are also Customers of the bank or of other banks of the Group.

“Internal” cooperation, i.e. management of the service in the Members’ favour, is well represented by specific advantages which Credito Valtellinese reserves for Members in terms of banking products and services provided at particularly favourable conditions, such as - merely by way of non comprehensive example - the dedicated Accounts of “Linea Armonia” and the “SpecialSocio” Account.

The former provide significant discounts for holders who own Creval shares, in proportion to the number of shares owned, which may be up to 100% of the fee. The line is characterised by four different versions:

BASIC: a zero cost current account, with 100 free transactions per year, home-banking and post@inlinea to read bank correspondence online.

YOUNG: a structured account for young people between the ages of 18 and 27; available on-line, it offers adequate remuneration, unlimited transactions without any fee and an international rechargeable pre-paid card that also allows on-line purchases.

LIGHT: low-fee account, with pre-paid card, free ATM card and basic services included.

SILVER and GOLD: current accounts of the range, ideal for the completeness of the included services and products, which offer higher remuneration for deposits.

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The range of offers of Linea Armonia is the target of constant attention and updates, to meet the Members’ ever new and multifarious requirements.

SpecialSocio instead is the zero-fee account reserved for Members and targeted for customers who own at least 3,000 Credito Valtellinese shares; owners of at least 500 shares may in any case obtain the many benefits provided with a monthly fee of just 5 Euro.

SpecialSocio also allows freeor preferential access to a range of products and services such as the Cart@perta Gold prepaid card, the V PAY ATM card, the CartaSi Gold credit card and securities deposit, in addition to the Banc@perta home banking Service and the Post@inlinea service for on-line transmission of banking correspondence. Shareholders also benefit from particularly advantageous conditions on current account interest rates, e.g. the guarantee of a minimum interest on deposits of 1% on the Creval Time Deposit and Creval Crescendo current account deposit formulas, and on the quarterly management fees applied to the asset management lines. Members who own at least 500 shares and are also holders of a SpecialSocio account also benefit from favourable rates on the Fido Famiglia personal loan and on “Mutuo Flessibile” mortgage loans, as well as from the possibility of requesting a Fido Studio Figli loan for children’s education, i.e. a loan of up to EUR 5,000 issued at the Euribor rate, without added spread and without loan setup fees.

Naturally, Members are entitled to capital rights and in particular to the right to collect dividends in accordance with Article 55 of the Articles of Association “Profit, after deduction of the transfer to legal reserve and the amount not available in compliance with laws, shall be allocated in accordance with decision of the Shareholders’ Meeting to distribution of dividend to the Shareholders on the basis of the shares owned”.

In terms of corporate communications and operating rules, to Shareholders are particularly - albeit not exclusively - addressed information tools such as:

- the Social Report (now in its 17th edition), an annual report addressed to all stakeholders - to Shareholders first and foremost - on “social value added” produced by the Group to the benefit of the community;

- the company website, with special sections dedicated to information specifically meant for Shareholders;

- the Group magazine “Pleiadi”, issued every four months.

A great deal of attention has always been dedicated to compliance with the provisions of the law and of the Articles of Association with regard to the procedure to admit a Shareholder and to check over compliance with the maximum shareholding limit per Article 30, Par. 2 of the Consolidated Law on Banking.

In this regard, it should be recalled that Law no. 221 of 17 December 2012 converting Law Decree no. 179 of 18 October 2012 (“Growth Decree”) made some changes to the regulations for cooperative banks, with particular reference to the shareholding limit, which was raised to 1%, to the possibility of subordinating admission as a shareholder, in addition to subjective requirements, to possession of a minimum number of shares, to the determination of the maximum number of proxies which may be given to a shareholder, subject to the maximum limit of 10, set by Article 2539, Paragraph 1 of the Italian Civil Code.

Cooperative companies with shares listed on regulated markets, additionally, are allowed to prescribe in their articles of association the percentage of share capital necessary to exercise specific rights (addition to the agenda of the Shareholders’ Meeting, election of the Board of

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Directors with voting list) also waiving the provisions of Article 135 of the Consolidated Law on Finance, which require, for listed cooperative entities, that the percentages of capital identified in the Italian Civil Code and in the Consolidated Law on Finance be in proportion to the total number of shareholders.

The changes made do not modify but rather are aimed at safeguarding the specific features of the cooperative model, whilst pursuing greater openness of the shareholder and managerial structure compared to the current situation

To promote Shareholders’ actual participation in the life of the bank, Credito Valtellinese was among the first listed cooperative banks to introduce voting lists for the appointment of members of the corporate bodies.

Similarly, Credito Valtellinese has always promoted the Shareholders’ broadest and most informed participation in Shareholders’ Meetings, introducing on several occasions provisions in the Articles of Association to pursue this goal, among them the provision that each Shareholder may represent five Shareholders by proxy, and the possibility of holding the meeting by videoconference at several locations simultaneously.

At the conclusion of a major design effort expended during the year, by the first quarter of 2013 the SocioIncreval programme will be launched; its purpose is to enhance the value of Shareholders’ sense of belonging, offering them, in addition to the aforementioned preferential benefits on the bank’s products and services, a series of discounts agreed with primary commercial and cultural partners. In preparing this Report for 2013, due account of these initiatives will be provided.

In terms of “outside” cooperation, i.e. service to local communities, constant attention was paid to sustainable value creation in the medium and long term, stressing the Shareholders’ preeminent role in providing customer satisfaction, in the socio-economic development of the communities where the Group is active, to the enhancement of relationships and to the employees’ professional growth.

This is the mission of the Group whose work, as stated, is not just aimed at pursuing solely economic values, but rather “social” values as well, and therefore to benefit Shareholders also through initiatives supporting and enhancing the economic, social and cultural fabric of the communities where it operates.

By virtue of its local focus, the Bank intends to maintain a symbiotic relationship with the real economy of its communities, because it lives by it.

With regard to “outside” cooperation, the Group carried out many initiatives during the year, mostly through the work of its Foundation to which it allocates a portion of the profits for the period, in accordance with Article 55, Paragraph 2 of the Articles of Association.

The manifold initiatives of the Foundation - comprehensively described with the yearly Mission Report and, briefly, in the specifically dedicated chapter in the pages that follow - have traditionally been addressed at the social, cultural and charity spheres, at orienting and training youth and at exhibitions and publishing events.

Confirming the value of the effort it has expended, the Foundation has obtained the certification of the Social Responsibility System for its work in promoting and supporting initiatives aimed at cultural, scientific, social, socio-economic and moral advancement in accordance with the standard SA8000:2008.

Lastly, it is worth recalling two specific offers conceived by the Group to provide close support to “social” issues:

Creval Accanto a Te - advantageous product line reserved for differently abled persons, which offers a current account at zero expenses, competitive interest rates, prepaid card Cart@perta

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Gold, international ATM card and free securities deposit together with a preferential loan for the purchase of means of transport and assistance.

ContoNonProfit - a current account reserved for NPOs, Social promotion Associations and Foundations that are active in the fields of healthcare, cultural promotion, amateur sports and the protection of civil rights. It is at zero cost and it provides special discounts for bank transfers, an attractive and guaranteed interest rate and no account fees. Moreover, the Conto Armonia Line offers no charges for 6 months to all those who work in these associations.

The activity of Fondazione Gruppo Credito Valtellinese

The strongly felt need to contribute in the promotion of geographic areas of interest, consistently with the principles of the social responsibility of enterprises, finds a major response in Fondazione Gruppo Credito Valtellinese, established fourteen years ago with the goal of supporting initiatives for the cultural, scientific, social, socio-economic advancement of the local communities where the Group’s banks operate.

The initiatives carried out in terms of charity, cultural, solidarity and support activities is adequately illustrated in the Social Report, accompanied for the first time last year by the Mission Report and by the institutional leaflet which presents, with short text descriptions, the Foundation and its manifold activities and initiatives.

In the year in question, the companies belonging to the Credito Valtellinese banking group allocated a total amount of EUR 2.9 million to the Foundation; of this amount, over EUR 2 million was donated to social activities and to charity, 72% of which in Lombardia.

Of the amounts allocated, 45% were reserved to associations and local initiatives, 30% to welfare and social education associations, 15% to church-related organisations and, lastly, to support international solidarity initiatives and missionary activities in developing countries.

In the social welfare field, the initiatives were in favour of the most vulnerable parts of the populations - abandoned children, addicts, the elderly, the disabled, victims’ help centres - or of victims of natural calamities, like the earthquake that hit Emilia Romagna hard in May 2012.

In the current challenging economic environment, equally important is orientation and education work, in collaboration with qualified operators and at the Centri Quadrivio (Crossroads Centres) of Sondrio and Acireale. Work is prevalently focused on the young, through professional orientation and fostering their transition into the working world, and through the assignment of scholarships.

Lastly, work in the fields of culture and the arts takes place through the exhibitions at the Group’s Art Galleries, and through publishing initiatives, respectively focused on contemporary art exhibitions and publications of an economic-social nature.

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GROUP MANAGEMENT PERFORMANCE IN THE YEAR

In 2012, the implementation of the Group’s structural reorganisation plan continued, in a particularly complex economic environment. The economy’s constant loss of vigour, the consequences of the financial tensions that impacted certain countries in the Euro area during the year, and the effects of the necessary consolidation of public finances, have led to a downward revision of growth estimates. At the end of 2012, the global economy still remained weak, whilst the expansion in worldwide GDP is now forecast for 2014. In spite of an improvement in the conditions of the financial markets, whose deterioration was a hindrance to cyclical recovery in the Euro area, our country is still not showing any improvement in domestic demand, while GDP growth was negative in the fourth quarter of 2012 and it still remains weak.

The Italian economy thus experienced a recessionary phase that persisted throughout 2012. A hoped-for reversal of the cycle could be enabled by the recovery of demand in the Euro area, together with a gradual recovery in investments, and by the rebalancing of lending conditions.

However, there are persistent hardships that hamper the attainment of the expected breakthrough and undermine the improvement in the climate of confidence required for a recovery. The more intensive use of cassa integrazione guadagni (temporary redundancy indemnity) and the rise in the number of job seekers have led to an increase in the unemployment rate, especially among young workers. The hardship experienced by households, whose economic well-being has significantly deteriorated, has entailed a progressive decline in consumption and a greater propensity to curtail expenses.

Italian banks, which were more robust in relative terms when the crisis blew up, now have to confront a recession that has brought the current level of GDP approximately seven percentage points below its 2007 figure. Therefore, banks’ operating performance and results are still linked to trends in financial variables and the most recent industry data published by Bank of Italy and ABI are further evidence of the depressed economic scenario, which will persist for at least a few more months. Focus on the 2011 - 2014 strategic plan

The constant worsening in the outlook for economic growth, in particular for our country, and the profound changes undergone by the forecast scenario underlying the plan as originally defined, have induced the Bank - which nonetheless did benefit from the overall effects of the transactions carried out within the scope of the 2011 - 2014 Strategic Plan approved in February 2011 - to take new, significant decisions.

The assessment of strategic decisions by the Administrative Bodies of Credito Valtellinese has always been carried out in compliance with the guidelines dictated by the Articles of Association and constantly keeping in mind the economic environment and the forecast growth of the bank and of the system, with the priority goal of combining efficiency and profitability in the medium-long term with social responsibility and sustainable growth.

The decisions made through the years, aimed at the progressive development of the business and at fostering a strong relationship with shareholders and with customers, led at first to the Bank’s commitment to the gradual expansion of the Group, supported by system-wide growth. Faced with a significantly different economic environment, the Board of Directors has consequently deemed it necessary to proceed with the simplification of the corporate and organisational structure, prioritising the optimisation of capital allocation and economic

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efficiency. For these reasons, in the first months of the year in question the Administrative Bodies reached the decision to upgrade the 2011 - 2014 strategic Plan, identifying further actions to reconfigure the corporate structure, in continuity with the originally defined efficiency, competitiveness and profitability targets.

The set of actions undertaken strengthens, through a more efficient configuration, the model of a bank that is close to local communities, businesses and households, and is loyal to its identity as a Co-operative Bank. The crisis that has now persisted for four years has required an increasingly intensive effort to safeguard both the company’s efficiency and its identity, whereby shareholders and customers are the centre of attention of the Bank, that is close not only to Shareholders, but also to all Stakeholders, not the least of which are the Employees. Upgrades to the Plan

In March 2012, the Board of Directors thus approved a comprehensive capital enhancement project, consistently with the efficiency, competitiveness and profitability targets defined by the 2011 - 2014 Strategic Plan approved in its original version by the Board of Directors in February 2011. The guidelines of the plan were fully confirmed, as was the set of the underlying strategic actions aimed at the creation of long term sustainable value for all stakeholders.

In detail, said capital enhancement project entailed:

- The full early redemption, with conversion into shares, of the 2009/2013 Credito Valtellinese fixed-rate convertible bond loan with the right of redemption in shares issued by the bank on 29 December 2009 (the “POC”),

- The merger of the subsidiary Credito Artigiano into the Parent,

- The conferral of a power of attorney to the Board of Directors for a capital increase with the exclusion of the option right in support of a wilful public takeover and exchange bid on shares of the subsidiary Credito Siciliano (hereafter also the “OPASc”).

On 7 May 2012, the first transaction was completed with the early redemption of the POC. The transaction led to a capital increase of approximately EUR 106 million, with a positive effect of approximately 50 basis points on Core Tier 1 capital. The company restructuring project and the reorganisation of the distribution model

The merger of Credito Artigiano into the Parent Credito Valtellinese, authorised by the Bank of Italy on 8 May 2012 and approved by the extraordinary Shareholders’ Meeting of the involved banks, respectively on 15 and 16 June 2012, was completed on 29 August 2012 with the execution of the deed of merger, with the related legal effects in force from 10 September 2012.

The share exchange ratio was set at 0.7 Credito Valtellinese newly issued ordinary shares for each Credito Artigiano ordinary share. Equita SIM S.p.A. and Mediobanca - Banca di Credito Finanziario S.p.A. issued to the Board of Directors of Credito Valtellinese and Credito Artigiano, respectively, fairness opinions attesting to the fairness, from a financial point of view, of the share exchange ratio.

Those shareholders of Credito Artigiano who did not concur with the merger decision were given the right to withdraw, in accordance with Article 2437 of the Italian Civil Code, as a consequence of the change in the type of company and of the changes to the voting rights; said right was exercised with respect to 14,747,395 ordinary shares, representing 3.8% of the share capital of Credito Artigiano, for a total liquidation value of EUR 13,420,129.45.

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On 10 September 2012, therefore, in view of the share exchange ratio, 51,386,642 new ordinary shares of Credito Valtellinese, without any indication of par value, were issued in accordance with the resolutions of the extraordinary Shareholders’ Meeting of 28 April 2012 - to be assigned to Credito Artigiano shareholders, with the consequent increase in share capital from EUR 1,316,656,659.50 to EUR 1,496,509,906.50.

The merger of the subsidiary Credito Artigiano yielded significant benefits and the achievement of immediate results, both in terms of shortening and simplifying the network direction, control and coordination processes and in terms of structural reduction of administrative and coordination costs with the Parent. The two Banks’ shared best commercial and credit practices enabled attainment to significant commercial and operating synergies, promoting the realignment of the branches’ profitability margins on loans and funding. Additionally, the enhancement of the Credito Artigiano brand was not neglected, maintaining its name in its historical areas of operation and associating it with the Group in the new identity as a Network branch of Credito Valtellinese.

The third transaction called for by the upgrade of the 2011 - 2014 Strategic Plan - the OPASc on Credito Siciliano shares - was successfully completed in December 2012, with the offer accepted for 1,799,351 Credito Siciliano shares, corresponding to 90.15% of the total shares of the subsidiary subject to the OPASc and representing 18.78% of the share capital of Credito Siciliano.

The transaction, approved by the Board of Directors of the Parent on 9 October 2012, entailed a wilful public takeover and exchange bid in accordance with Article 102 of the Consolidated Law on Finance on 1,955,906 Credito Siciliano shares, corresponding to 20.83% of the share capital and representing all the subsidiaries’ shares not already held by Credito Valtellinese. For each share to be sold in acceptance of the offer, the unit price paid consisted of a component of 8.50 newly issued ordinary shares of Credito Valtellinese and a monetary component amounting to EUR 4.00.

The offer was promoted as a result of the resolution of the extraordinary Shareholders’ Meeting of Credito Valtellinese of 16 June 2012, which empowered the Board of Directors, in accordance with Article 2443 of the Italian Civil Code, to increase the share capital up to the maximum nominal amount of EUR 70,000,000 plus premium, per Article 2441, Paragraph 6, of the Italian Civil Code, in support of the Offer.

By virtue of said empowerment, the Board of Directors of Creval, on 6 November 2012, resolved to increase divisible paid up capital, with the exclusion of the option right, for a maximum amount of EUR 22,394,065.32, to be carried out by issuing a maximum number of 16,965,201 ordinary shares, to be assigned, as partial price, to the Credito Siciliano shareholders who accepted the Offer.

Therefore, at the expiration of the period of validity of the offer, on 12 December 1012, 15,294,483 new Creval shares were issued, without any indication of nominal value, with the consequent share capital increase from EUR 1,496,509,906.50 to EUR 1,516,698,624.06. At the end of the transaction, therefore, the equity investment of Credito Valtellinese in the Sicilian subsidiary reached 97.95%.

The initiatives carried out were outlined for the achievement of a significant improvement in operating efficiency indicators (cost/income ratio), both by effect of cost and revenue synergies, deriving in particular from the merger of Credito Artigiano into Credito Valtellinese, and as a result of stringent cost-saving actions. The aforesaid transactions will also have a positive effect on Core Tier 1 capital in view of Basel 3 rules.

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Other measures of implementation of the Strategic Plan

Simultaneously with the implementation of the aforesaid initiatives for the reorganisation of the company structure, local banks intensively continued to carry out the broad range of activities - progressively planned during the year - to improve the efficiency of the organisations and to contain costs.

The merger of Credito Artigiano into the Parent led to the further reduction to three of the number of legal entities that are active in the market area, and the consequent revision of the regional organisation of Credito Valtellinese with the establishment of two new Regional Areas - Milano and Centre - comprising the “former Credito Artigiano” Branches.

The current configuration of the distribution structure of territorial banks is described below.

CREDITO VALTELLINESE

- Sondrio, Brescia and Bergamo Regional Area, with headquarters in Sondrio, which controls the Branches in the provinces of Bergamo, Brescia and Sondrio;

- Alps Regional Area, with headquarters in Como, which controls the Branches in the provinces of Como, Lecco and Varese;

- Milano Regional Area, with headquarters in Milano, which controls the Branches in the provinces of Cremona, Lodi, Milano, Monza and Brianza and Pavia;

- North-eastern Regional Area, with headquarters in Vicenza, which consists of the Branches in Veneto and Trentino Alto Adige;

- Piemonte Regional Area, with headquarters in Torino, which controls the Branches in the regions of Piemonte and Valle d’Aosta;

- Centre Regional Area, with headquarters in Roma, which consists of the Branches in Emilia Romagna, Toscana and Lazio.

CARIFANO:

- Marche and Umbria Regional Area, with headquarters in Fano, which controls all Carifano Branches.

CREDITO SICILIANO:

- East Sicilia Regional Area, with headquarters in Acireale, which controls the Branches in the provinces of Catania, Ragusa and Siracusa.

- West Sicilia Regional Area, with headquarters in Palermo, which consists of the Branches in the provinces of Caltanisetta, Messina, Palermo and Trapani.

The nine structures report directly to the General Management of the respective territorial banks, providing continuity and proximity in relationships with local institutions, with major customers and with the local communities. The responsibility assigned to Regional Areas relates mainly to the bank development plan and to the achievement of the statement of financial position and income targets defined for the Branches of the pertinent area, by exercising adequate decision-making autonomy to manage the conditions applied to customers and in issuing loans.

In support of these activities, implementation work continued on relevant projects for the achievement of the objectives defined by the Strategic Plan that involve all the Group’s operational and management areas, with particular attention to commercial coordination,

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credit process revision and development of the rating system, management control, capital management and extraordinary transactions, ICT and optimisation of the corporate centre, cost management and personnel quality development.

With regard to commercial coordination, the commercial organisation was redesigned, establishing a Group Sales Department and assigning it the specific objective of strengthening the risk governance model, streamlining the structure and enhancing the sales organisation.

Additionally, with regard to CRM policies and techniques (CRM = Customer Relationship Management), the customer segmentation model was completely revised (family, affluent, private, businesses) with a thorough and comprehensive analysis of customers through models and statistical instruments for the segmentation and profiling of the customer base and the consequent analysis of focused marketing actions. To the various profiles are reserved specific service models, with dedicated professionals, the FAMILY, AFFLUENT, BUSINESS AND CENTRAL PRIVATE consultants for an optimal match of the level of advice and to improve the quality perceived by the customer.

Lastly, during the year structured projects were started with Eurofidi and NSA SpA, primary partners in financial solutions for specific investment needs of small-medium enterprises, aimed at strengthening the level of guarantees in the Bank’s favour and obtaining consequent, correlated impacts in terms of capital saving.

Support to Regional Areas was also assured through the Revision of the credit process and the development of the rating system, which allowed a greater degree of autonomy for territorial organisations, albeit within the scope of strict risk control. The rating system was further strengthened to manage credit in all steps of loan issuance: acceptance, decision, observation and price definition, also through predictive monitoring models on performing customers. This model allows to improve proactivity in credit management, by identifying positions that are currently performing but potentially at risk, as indicated by analyses carried out on customers’ characteristics and operations. These methods also allow the Network to carry out specific actions in advance, such as renegotiations, duration, change in technical forms, to avoid the potential impairment of the loan, and they also enable to track and monitor the performance of actions already taken or ongoing.

Additionally, new instruments were activated for the management of irregular loans, accompanied by the development of models to estimate LGD (Loss Given Default) and of differentiated strategies by type of customers and by the level of risk of the positions. Each strategy entails a specific set of structured actions within defined time intervals. The model for the outsourced management of irregular loans was also expanded; where it has been introduced, it is already yielding positive results, on the Private and Small Business customer segments. Additionally, structures and competencies were redefined in the internal management of SME and Corporate customers.

The activities connected to Management control involved mainly the implementation of a more effective model for the assessment and monitoring of the branches through nine performance indicators referred to profitability, productivity, liquidity and risk. This process enables the consequent identification of less performing branches and the simultaneous launch of structured processes to restore productivity indicators.

Similarly, new procedures were implemented for intragroup liquidity pricing and its related impact on the pricing policies for the services rendered, introducing Risk Adjusted parameters for the assessment of performance at the customer and branch level.

Another significant strategic driver of the Plan consists of the set of actions to enhance Cost Management structures and initiatives. The activities, already started in 2011 in order to boost production efficiency, assuring the pursuit of cost/asset ratio targets, have led to the full

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operating capability of the new Group Cost Management Department, dedicated to the centralised and unified management of the steps for the negotiation and management of the Group’s purchases; strengthening the control structures involves mainly the revision of the criteria for allocating costs to the network within an “activity based costing” logic, with the goal of more effective widespread adoption of cost saving practices at all levels of operations.

Particularly painstaking care was dedicated to Human Resources, strongly committed to the successful completion of the progressive steps for the implementation of the Strategic Plan and of the consequent corporate and organisational redesign, always assuring dedication, professionalism and teamwork. Personnel was assisted with the application of Change Management logic, instruments and paths aimed at promoting understanding and support for change. Network personnel was aided through the enhancement of sales roles within the regional areas and participation in specifically structured training programmes, which were particularly significant in relation to changes to the branch infrastructure and to the connected new commercial relationship methods.

Incentive systems were then introduced according to the “MBO - Management by Objectives” model, based on Risk Adjusted logic for the top management and the branch network.

ICT Information and communication technology strategies entail the comprehensive revision of the structure of the Group’s Operating Machine, inherent in the dedicated company Bankadati ScpA.

Structured Demand Management processes were developed to eliminate delays and improve project completion times, with considerable cost savings. Completion of the ABC - Active Bank Creval project, i.e. the new branch application infrastructure, was followed by an outsourcing project for the development of non core applications, whilst a new logic was applied to the design of internal company processes for the revision of back office activities. Bankadati continues its constant control of the individual applications of the network and its continuous monitoring of the quality of the services rendered to the entire Group.

The progressive strengthening of the control structures - Risk Management, Internal Auditing, Compliance, Strategic Planning - supported the bank’s activity in the profound transformation of its organisational set-up, assuring constant and punctual control over the bank’s operations, in compliance with regulations. Structured processes for defining and monitoring the Group’s Risk Appetite, and its maintenance, were also introduced.

The strategic alliance in asset management with Asset Management Holding

On 9 August 2012, a Framework Agreement was signed with Asset Management Holding S.p.A., a company that controls Anima SGR, and independent leading asset management operator in Italy, for the development of a strategic alliance in the asset management sector which provides for the implementation of a preferential long term commercial relationship between the Creval Group and the AMH Group.

Within the scope of said agreement, on 27 December 2012, the sale of the entire share capital of Aperta SGR to AMH was completed, for a total price of EUR 27 million, along with the sale of the share capital of Lussemburgo Gestioni S.A. for a total amount of EUR 6 million. The Creval Group simultaneously subscribed and freed a capital increase reserved for AMH for a total amount of EUR 16 million, thereby acquiring an equity investment of approximately 2.8% of the capital of AMH.

Since 1 January 2013, the Banks of the Creval Group therefore assumed the role of “placement agents” of the asset management service of Aperta SGR S.p.A., to which customer relations were transferred, thus maintaining the direct relationship with customers.

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Capital management actions and the new regulatory requirements

The capital management structural actions initiated in 2011 continued in 2012 as well, progressively approaching the new capital and liquidity requirements set out by Basel 3, according to the implementation process originally prescribed by the regulatory framework, through the identification of specific actions aimed at the full adoption of all prescribed capital requirements.

As is well known, the rules currently undergoing final approval in Europe, prescribe higher and better quality capital requirements, better risk hedging instruments and the introduction of a leverage ratio. Moreover, the new regulatory framework requires the introduction of two liquidity standards, the Liquidity Coverage Ratio or “LCR” for the establishment of a liquidity buffer - aimed at improving the short-term resilience of banks’ liquidity risk profile by assuring that they have sufficient high quality liquid assets to overcome an acute stress situation lasting one month - and the Net Stable Funding Ratio or “NSFR” oriented to foster resilience over a longer term (one year) providing banks with greater incentives to fund their business by drawing upon more stable sources and guaranteeing a sustainable structure by maturity of assets and liabilities.

Concerning the entry into force of the new prudential provisions, which have to be endorsed preliminarily in Europe and subsequently incorporated in the individual national laws, the Basel Committee identified a gradual enforcement over a time span initially set as 2013 - 2018.

The decisions of the Basel Committee on banking supervision, made at the start of 2013, allowed banks a longer time span to set up their liquidity reserves. The entry into force of the new liquidity rules imposed by Basel 3 is expected for 1 January 2015, limited to a 60% coverage of the resources necessary to overcome a possible 30-day period of stress on the funding market, which will progressively grow until reaching full coverage by 1 January 2019. Moreover, credit institutions, contrary to what is prescribed by the markedly more stringent criteria of the first version of the regulations, may include in the aforementioned liquidity buffer also shares and debt instruments guaranteed by a pool of mortgage loans (mortgage-backed securities).

This gradual approach enables Banks progressively to comply with regulatory provisions, in order not to interfere with the financing of economic activities, thus facilitating support to the real economy and consequently loosening the credit crunch.

During the year and in view of the upcoming new regulatory framework, the following capital management actions were planned and/or completed:

- the full early redemption of the 2009/2013 Credito Valtellinese fixed-rate convertible bond issue with the right of redemption in shares, which led to an increase of approximately EUR 106 million in Tier 1 capital;

- the implementation of activities for the optimisation of the RWA (Risk Weighted Assets), also through the use of Credit Risk Mitigation policies and techniques - by strengthening levels of guarantee in the Bank’s favour through specific projects with specialised partners - and capital saving logic within the scope of the lending and commercial processes;

- the merger of Credito Artigiano and the increase, up to 97.95% of share capital, of the equity investment held in Credito Siciliano, by effect of the OPASC completed in December 2012.

33

Moreover, during the year, a solid project was started, with the aim of completing the validation of advanced internal models for measuring and managing credit risk (AIRB), expected to be adopted by 2014.

34

THE GROUP’S OPERATIONAL STRUCTURE, COMMERCIAL PERFORMANCE INDICATORS AND COMPETITIVE POSITIONING

The branch network

At 31 December 2012, the territorial network of the Credito Valtellinese Group consisted of 544 branches, compared to 543 at the end of December 2011.

In the first part of 2012, a plan of the rationalisation of the territorial network of the bank and of Credito Artigiano, subsequently absorbed, was approved; the plan called for the closure of certain branches and the simultaneous use of their licenses for new branches.

During the year, a branch was thus opened in Aosta, whereby the Group extended its activity in a new region. Conversely, Branch 1 of Credito Artigiano in Seregno was closed.

After the completion of the merger by absorption of Credito Artigiano into Credito Valtellinese, in November 2012 the branches of Varese Branch 2, Bergamo Branch 1, Busto Arsizio Branch 1, Atina (Frosinone) and Rome via Castro Pretorio were closed. In December, three of the freed licenses were used to open the new branches in Casatenovo (LC), Castel San Giovanni (PC) and Parma while two more were used to transform the Treasury offices of Poggiridenti and Gordona, both in the province of Sondrio, into fully operational bank branches.

In 2012, within the scope of the reorganisation of the Credito Siciliano branch network, the Grammichele branch was closed, while a new branch dedicated to lending against pledges was opened in Torino.

231 BRANCHES (CREVAL) 11 BRANCHES (CREVAL)

29 BRANCHESCREVAL 28CR. SICILIANO 1

14 BRANCHES (CREVAL)

52 BRANCHESCREVAL 51CR. SICILIANO 1

134 BRANCHES (CR. SICILIANO)

37 BRANCHES (CARIFANO)

3 BRANCHES (CARIFANO)

9 BRANCHES (CREVAL)

CREDITO VALTELLINESE 368

CREDITO SICILIANO 136

CARIFANO 40

CREVAL GROUP 544

23 BRANCHES (CREVAL)1 BRANCH (CREVAL)

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The other sales channels

The operating network consisting of “traditional” branches is complemented by the progressive and constant expansion of Internet banking applications, which are an alternative, multi-channel model for the distribution of products and services. The Group’s commitment to the development of simple and efficient online banking services was confirmed in the growing number of users and orders arranged online, with an increasingly numerous and loyal customer base.

As at the end of 2012, “active” Internet users in the Creval Group - customers who have performed at least one transaction in the last six months - total 204,458, compared to 190,461 at the end of the previous year, with an increase of 7.3%.

Regarding the POS service, the number of installations increased by 6.2%, with 21,950 terminals active as at the end of 2012.

At the end of 2012, the total number of ATMs, use of which is increasing constantly, as is the use of available services, was 651, slightly less than at the end of 2011, when they were 657.

At the end of the year, there were 16,099 contracts for interbank corporate banking applications (“CrevalCBI”), set up in collaboration with the ICBPI Group, up by 3.2% from the previous year.

Alternative products and distribution channels

DISTRIBUTION CHANNELS 31.12.2012 31.12.2011 % change

Number of ATMs 651 657 -0,9%

Number of Internet users (active) 204,458 190,461 7.3%

Number of POS 21,950 20,667 6.2%

Interbank Corporate Banking contracts 16,099 15,602 3.2%

Customer base and commercial performance indicators

Customer relations, which form part of the broader concept of “relational capital” - a relationship of trust with shareholders, customers, suppliers, local communities, institutions and, more in general, all the stakeholders - contribute significantly to the consolidation and increase in the value of the Bank. The intrinsic value of the retail business lies in the trust-based relationship with customers, on which the corporate approach to generating long-term wealth is founded.

As at 31 December 2012, the Group’s customers numbered 926,887, up by 2.9% compared to the end of 2011, confirming the Group’s ability to maintain its customer base in its territories of origin.

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Development of the Group’s customer base

Customer distribution among the Group’s territorial banks is as follows: Credito Valtellinese (61%), Credito Siciliano (32%), Carifano (7%).

Breakdown of the Group’s customers as at 31 December 2012 by bank

In line with the traditional Creval Group approach to the market, retail customers are mainly private (87%), whereas businesses account for 10%.

900,647

926,887

31.12.2011 31.12.2012

+ 2.9%

CREDITO VALTELLINESE

61%

CREDITO SICILIANO 32%

CARIFANO 7%

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Breakdown of Group customers as at 31 December 2012 by segment

As confirmation of the territorial origins that distinguish Creval Group operations, the retention rate - i.e. the percentage of active customers at the start of the year still holding accounts with the bank at year-end - is close to 93%, a clear sign of the trusting, long-term relationship with customers.

The cross selling figures, calculated by the “ABI method”, stood at 4.25 products on average per customer at the end of 2012.

Competitive positioning

Based on the most recent available figures (Bank of Italy BASTRA1 database at 30 June 2012), at the nationwide level the Group reached a market share of 1.63% in terms of number of branches, 1.57% in deposits and 1.18% in loans and receivables with customers.

Regional market shares are higher in the areas where the Bank has traditionally been active. The most representative ones are in Lombardia, where they reach 3.54% in terms of number of branches, 2.81% and 1.88% respectively for deposits and loans and receivables with customers, but they are still more significant in the areas of operation of Credito Siciliano, with overall market share in Sicily at 7.8% by number of branches and respectively at 7.37% and 7.23% for deposits and loans and receivables with customers, and of Carifano which in the Marche region has reached an overall market share of 3.11% by number of branches, 4.63% and 3.57% respectively in terms of deposits and loans and receivables with customers.

The following figures provide a graphic representation of the bank’s positioning in terms of branches, deposits and loans in the individual regions characterised by a more significant territorial presence.

Authorities and Other 3% Companies 10%

Private 87%

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Market Shares as at June 2012

2.63%2.82%

2.96%2.85%

3.01% 3.02%2.83% 2.81%

1.95%2.14% 2.14%

2.02% 2.04% 2.06%1.85% 1.88%

3.29% 3.34% 3.40% 3.47% 3.49% 3.50% 3.50% 3.54%

Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 Jun-11 Dec-11 Jun-12

DEPOSITS LOANS BRANCHES

Branches 221 224 228 230 231 231 231 230

Market Shares as at 30.06.2012 - Lombardia

Market Shares as at June 2012

6.52%

7.03%

7.17%

7.02% 7.00%7.09%

7.02%

7.23%

6.84%

7.12%

7.11%

6.91%

6.74%

6.77%

7.23%

7.37%7.48% 7.51% 7.48%

7.60%7.67% 7.71% 7.76% 7.79%

Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 Jun-11 Dec-11 Jun-12

DEPOSITS LOANS BRANCHES

Branches 136 136 135 135 135 135 135 135

Market Shares as at 30.06.2012 - Sicilia

Market Shares as at June 2012

3.35%

4.12%

4.40% 4.32%

4.04% 3.96%

4.63%

2.93%

3.08% 3.14%3.36%

3.53% 3.63% 3.57%

3.00% 3.07% 3.07% 3.10% 3.10% 3.11%

Jun-09 Dec-09 Jun-10 Dec-10 Jun-11 Dec-11 Jun-12

DEPOSITS LOANS BRANCHES

Branches 36 36 37 37 37 37 37

Market Shares as at 30.06.2012 – Marche

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Market Shares as at June 2012

0.63%0.81%

0.71%

1.26% 1.19%

1.68%

1.10%

1.39%

0.46% 0.52% 0.58%0.75% 0.79%

0.88% 0.86% 0.92%

0.93% 1.00%

1.33%

1.88% 1.91% 1.92% 1.95% 1.96%

Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 Jun-11 Dec-11 Jun-12

DEPOSITS LOANS BRANCHES

Branches 26 28 37 52 52 53 54 54

Market Shares as at 30.06.2012 - Lazio

The analysis by individual province identified highly significant market share in Lombardia in the province of Sondrio, where the share of the number of branches is 35.77%, the share of deposits is 32.15% and the share of loans is 28.15%, but also in the provinces of Lecco, where, with 6.67% of branches, the share of loans is 14.59% and the share of deposits is 10.02%, and of Como, where the share of branches is 5.98% and the share of loans and deposits, respectively, is 9.66% and 8.14%.

In Sicily, significant percentages are in the province of Catania, where the market share in terms of branches is 14.6%, the share of deposits is 15.8% and the share of loans is 12.3%. In the Marche region, the province of Pesaro & Urbino reached shares of 9.5% of branches, over 15% of deposits and over 10% of loans.

A key factor for the success of the Creval Group is represented by its consolidated ability to establish and maintain a relationship of trust with its customers over time; this aptitude plays a central role in defining the business organisation. In line with the Group’s vocation as a “local bank”, the company management and the everyday operations of all the Employees are constantly focused on maintaining solid relationships based on the following principles:

- transparency in information on conditions, costs and contract clauses regulating the Group’s services, in line with legal provisions and voluntary initiatives launched by the banking system (PattiChiari) in which the Creval Group has participated since its inception;

- operational agility, flexibility and rapid responses to customers, especially in relation to applications for credit;

- customisation and attention to the proper management of the “risk profile” of customers, within investment services;

- constant disclosure also through Internet banking channels, which allow a complete, 24-hour view of all the customer’s relations with the Bank.

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In the framework of the above profiles, the operations of the auditing departments - responsible for handling any complaints - help to preserve relations with the customers.

Careful evaluation of each complaint and the attention paid to examining the reasons underlying customer complaints have allowed for the timely identification of the appropriate corrective measures, with the close cooperation of all Group structures, and the decision of how to best direct the departments responsible for operations in the retail market.

The total number of complaints received during the year - i.e. 473 at the Group level - shows a low number of legal cases with customers, slightly above the figure of the previous year.

Quality, environment, security policy - certifications

In 1995, Credito Valtellinese was the first financial intermediary in Italy to obtain the ISO 9001 quality certification in credit management. Between 1995 and today, the Group’s banks and companies have progressively obtained the quality certifications issued by RINA, which in 2012, as a result of the accurate audits carried out, were fully confirmed in accordance with the ISO 9001:2008 standard. Bankadati also confirmed its own certification in the field of information security - ISO/IEC 27001:2007 standard - and Stelline confirmed environmental protection compliance, ISO 14001:2004 standard. The audits were carried out with particular attention to advanced rating issues pertaining to loans, risk management, foreign products and services, process governance and compliance with rules. The analyses carried out ascertained the full compliance with the provision of the reference standards, emphasising some strong points compared to the defined focus points.

Global Broker, audited for the first time on the quality standard, has also obtained the ISO 9001 certification.

PattiChiari

The Consortium further confirmed its role of “sector vehicle” for the production, management and external dissemination of instruments based on simplicity, clarity, comparability and mobility of customers, and of collective financial education programs. This commitment was carried out with the further consolidation of the “Quality Commitments” to improve customer relations, considered as essential tools to achieve the goal of a fully efficient and competitive banking market. The aforesaid initiatives involve the following four areas:

1. comparison of current accounts;

2. portability of services;

3. credit assistance;

4. online banking and payment card security.

The Group’s Banks participate in the proposed initiatives and periodically provide the PattiChiari Consortium with the data required to power the Integrated Monitoring Model.

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THE PERSONNEL In 2012, personnel policies were focused even more closely on enhancing professionalism within the Group, on sustainable value creation and on the development of the ability to handle change, i.e. the awareness of the new scenario in the workplace and in the economy at large.

The priorities defined in the human resource management area follow these guidelines:

- more efficient definition of professional development paths;

- upgrade the skills and competencies of branch personnel according to new trends in the banking business;

- implementation of managerial and training instruments functional to Group and personal needs.

Organisational model for human resource management of the Group

The definition of management policies, operational methods, training and selection of personnel, the provision of specialised and consultancy services pertaining to personnel management, including management of the personnel’s integrated information system, are carried out by specific functions at the Group level.

The specific activities of human resource management are carried out at the premises of each company, in close coordination with the corresponding group structures. This configuration ensures both the definition and development of resources in accordance with Group models and the closeness and ability to listen to resources within the overall enterprise plan.

Recruitment policy

The recruitment and hiring process originates from the identification of annual staffing needs, formulated at the budget definition stage at both company and Group level. Based on this, recruitment activity is defined and implemented on a geographic basis. In line with the Credito Valtellinese Group’s strong localisation principles, the selection and recruitment of professionals deemed to be qualified begins first of all in the local area in which the individual companies operate.

Number of CVs, interviews and recruitments in the 2007-2012 period 2008 2009 2010 2011 2012 No. OF CVs RECEIVED 17,303 18,294 14,652 10,369 8,931 No. OF INTERVIEWS HELD 1,997 1,349 1,150 874 67 No. RECRUITED 438 196 161 116 *65 * total number of new hires net of intragroup transfers

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Employment policies

In 2012, the employment and welfare policies area was involved in the activities related to the business combinations carried out within the scope of the upgrades to the Strategic Plan. In particular, at the conclusion of the negotiation with the Social Partners, on 4 July 2012, a labour agreement was signed pertaining to the merger of Credito Artigiano into the Parent Credito Valtellinese and the consequent new configuration of the organisational structure.

Moreover, on 3 August 2012, an additional labour agreement was signed which, in order to enable the structural, permanent containment of personnel expenses, provides for the application of multiple regulatory instruments and the activation of legislative - contractual levers, including a plan of incentives for voluntary redundancies intended for personnel fulfilling pension requirements, a plan of mandatory redundancies intended for personnel who, while fulfilling pension requirements, had opted out of the voluntary redundancy plan and, lastly, voluntary access to the “Solidarity Fund” for the lending industry. Additionally, the definitive stabilisation was planned for at least 70% of Employees originally hired by the Group’s Companies with temporary or training contracts.

Group workforce

At the end of December, the workforce of the companies included in the scope of consolidation of the Group consisted of 4,362 workers. 27 more workers are employed by companies or entities outside the Group, among them Fondazione Gruppo Credito Valtellinese, Global Assistance and the Pension Fund for the Employees of the Credito Valtellinese Group. The figure for the end of 2011 was 4,482.

During the year, 65 persons were hired and 165 workers ended their employment (gross total number of hires and terminations net of intragroup transfers).

In terms of professional categories, the Group’s total workforce of 4,362 can be broken down as follows:

- 62 executives;

- 1,550 middle managers;

- 2,750 workers in other professional categories.

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Workforce by contract category as at 31 December 2012

Group workforce trend

Of 4,362 workers, 4,323 were employed on permanent contracts (i.e. 99.1% of the total), and 39 on temporary contracts (0.9%) of which 10 on training contract. Out of 4,323 workers on permanent contracts, 34 (i.e. 0.8%) were hired with the new contractual form called L.R.I. (Livello Retributivo Ingresso, Entry Level Compensation).

EXECUTIVES 1.4%

MIDDLE MANAGERS 35.6%

PROFESSIONAL CATEGORIES

63.0%

DIRIGENTI

QUADRI DIRETTIVI

AREE PROFESSIONALI

EXECUTIVES

PROFESSIONAL CATEGORIES

MIDDLE MANAGERS

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Part-time contracts involve 331 employees and they account for 7.6% of the Group’s total workforce.

Permanent and temporary workforce as at 31 December 2012

Full and part-time workforce as at 31 December 2012

TEMPORARY 0.9 %

PERMANENT 99.1 %

TEMPORARY

PERMANENT

PART TIME 7.6%

FULL TIME 92.4%

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Training

Professional training programs were implemented during the year consistently with the priorities identified in the Training Plan, which identifies training needs and defines the evolution of training curricula.

During 2012, 140,442 hours of training were provided compared to 144,549 in the previous year - of which 98,102 traditional classroom training and 42,340 through remote training, with lessons in virtual classrooms and use of self-teaching courses.

86.6% of staff participated in training programs in 2012.

During the year, moreover, specific training was administered for the new organisational roles, in addition to training the sales, regulatory, credit, finance, management and human resources areas.

During the year, personnel training activities pertaining to Anti-money laundering were intensified in the classroom and with remote training. The total number of hours dedicated to compliance with Anti-money laundering regulations was 7,527 classroom hours and 2,678 remote training hours, involving respectively 887 and 1,072 workers.

A specific structure for auditing training quality and effectiveness was redesigned and applied to the training courses, included in a catalogue and occasional, analysing the three types of replies prescribed in a training initiative to be used by trainees to qualify satisfaction, learning and effectiveness and providing specific auditing methods for each. The initiative to enhance, integrate and develop the Group’s own instructors continued, with periodic actions already planned in 2013.

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MAIN ASPECTS OF COMMERCIAL OPERATIONS Customers of the Credito Valtellinese Group are offered a wide range of products, capable of meeting every financing, investment and transfer need, through specialist organisations within the Group or through associated companies within the consolidated “networked” company business model.

The offer of the Group is also characterised by a wide range of on-line services, through banc@perta, which allow customers to carry out transactions autonomously and reducing costs in managing their banking operations.

The main product and service innovations that characterised the Group’s commercial offer during the year are described below.

Transfer products

The offer for newly acquired customers was renewed with Conto Invito 2%, the current account reserved for consumer customers and distinguished by particularly favourable conditions, such as preferential rate for one year and free debit cards and securities deposit.

Within the scope of the initiatives undertaken by the Government to curtail the use of cash and promote more efficient payment instruments, the new Conto di Base (Basic Account) was made available; it is a current account product meant for socially disadvantaged customer segments.

To meet capital accumulation needs, two new products have been readied, called Creval Crescendo and Creval Deposito Protetto (Protected Deposit): they are current account deposit instruments that enable to invest small capitals - respectively through a monthly automatic allocation and by a one-off deposit - at an attractive rate of return and for a defined time span. Additionally, the Creval Time Deposit offer was further expanded with new product versions characterised by particular offers intended for specific customer targets.

During the year, ContoinCreval - ContoDeposito was launched; it is an offer - available solely online - of a time deposit in current account at a competitive rate, aimed at the acquisition of new customers, especially in areas where the Group is not yet present with its own branches.

Lastly, the service called Prestito Titoli di Durata (Time-limited securities loan), which enables customers temporarily to transfer to the Bank the ownership of a given quantity of Securities. The Bank takes on the obligation to return them at a date agreed with the Customer, whose remuneration will be commensurate to the value of the loaned securities, without prejudice to all other rights.

Lending products

Consistently with the Group’s focus on social issues, in July the new instalment loan Finanziamento 5x1000 was released; it is meant for Non-Profit associations. Through the new product, the bank advances to associations up to 80% of the contributions to which they are entitled as a result of taxpayers’ option to donate 0.5% of their taxes, expressed in their tax return.

Also readied were Fido Famiglia and Multifido Emergenza, new types of instalment loans at preferential conditions, meant for customers affected by the exceptional snowfalls that impacted the regions of Emilia-Romagna, Marche and Lazio.

47

A new line of lending products was created, called Creval Enti, with the aim to meet Public Agencies’ borrowing requirements and to foster participation in tenders for the award of treasury services, if they include the offer of mortgage loans. The line comprises fixed and floating rate mortgage and unsecured loans.

Since October 2012, a new version of the product called Anticipo fatture e documenti (Advances on invoices and documents) has been available; this service regulates cash advances in relation to receivables claimed from third parties and it is meant for customers who already hold an ordinary current account and have signed a credit line framework agreement. Compared to its previous structure, the product was significantly improved, with the expansion of the range of documents usable to obtain advances, the revision of the advance payment procedures and a more punctual management of the underlying credit risk.

In November 2012, a new convention was signed with the Italian Inland Revenue, and consequently a new instalment lending product was released, called Finanziamento Credito I.V.A. (VAT Credit Loan), which enables companies to have available in advance up to 90% of the VAT credit claimed from the Inland Revenue, whose existence has been confirmed.

Agreements supporting the local economy

Even in the challenging economic environment, the Bank continues to honour its socially responsible commitment in favour of the real economy of the areas where it operates, by participating in numerous initiatives promoted, also at the system level. The main interventions carried out during the year are indicated below.

- New measures for credit to SMEs. On 28 February 2012, the Group joined the agreement “New measures for credit to SMEs”, which assures the availability of adequate financial resources for those entities which, while undergoing stress, nonetheless have a positive economic outlook. In detail, the agreement provides for the suspension of the principal portion of the instalments and the extension of the amortisation plan for medium/long term loans, the extension to 270 days of short term loan maturities, the extension to 120 days of operating farm loans and the offer of a loan intended for the capital strengthening of applying SMEs.

- ABI - Cassa Depositi e Prestiti Agreement, initially signed in August 2009. After expiration of the term for the use of the three tranches to finance medium-long term projects of SMEs, the Group also joined the fourth convention that makes available, at the system level, from 15 March 2012 to 31 December 2013, a maximum amount of EUR 10 billion for financing expenditures for investments to be carried out and/or being carried out and needs to increase the working capital of enterprises (SME-Investments) and for the acquisitions, by Banks, of receivables claimed by SMEs from the Public Administration (SME-Receivables from the Public Administration).

- Household Plan. The Group agreed to the extension to 31 January 2013 of the “Household Plan”, which enables customers to request to suspend for 12 months the payment of the principal portion of the instalments for mortgage loans for their first home, if the requirements of the original project are fulfilled.

- ABI - Household Policy Department Agreement for the disbursement of loans to families with children born or adopted in 2012, 2013 or 2014.

- Extension of the agreements for Cash advances on CIG payments, signed with public bodies and representatives of companies and workers.

48

-In view of the many natural calamities that occurred in 2012, the Group offered the possibility of requesting the suspension of the mortgage instalments for residents of the municipalities in the Italian provinces hit by floods or earthquakes.

- Fund for access to first homes in favour of young couples. In November 2012, the Bank joined the Protocol of Understanding promoted by the Lombardia Region and the Lombardia Regional Commission of ABI, through Finlombarda S.p.A., which provides for the disbursement of an interest contribution to be drawn from the “Fund for access to first homes” in favour of young couples, meeting certain requirements, who entered into a mortgage loan agreement to purchase their first home.

- Kyoto Fund (Ministry of the Environment and of Economic Development - Cassa Depositi e Prestiti). In March 2012, the Group joined the Kyoto Fund, an innovative plan devised to promote investments aimed at reducing polluting emissions in accordance with the provisions of the Kyoto Protocol, the international treaty that set the guidelines for the reduction of greenhouse gas emissions.

- Fondo Fiducia Valtellina (Valtellina Confidence Fund). With the goal of supporting the production system and promoting the access to credit of the SMEs of the Sondrio Province, in September 2012 an agreement was signed with the Province of Sondrio and the local Confidi (credit guarantee consortia) for the activation of the Valtellina Confidence Fund, intended to supplement the Confidi’s risk provisions and the issue of loans at preferential conditions, reserved to investments and to meet the liquidity needs of the local companies.

- Credito Adesso (Credit Now), an initiative by Finlombarda-BEI, calling for a preferential action aimed at financing the working capital connected with the commercial expansion of the SMEs of Lombardia. The preferential treatment consists of the granting of a co-loan, comprising a portion issued by Finlombarda and a portion issued by the bank, and an interest contribution.

Bancassurance products

In 2012, the regulations for the activities of banks and insurance brokers underwent some significant changes, with consequent considerable impacts in terms of procedures and operations in policy placement activities. It thus became necessary to revise many contracts included in the catalogue of life and damage insurance products.

Many regulatory actions pertained to the placement of auto accident insurance policies, a segment where the Group strengthened its presence during the year, thanks to the partnership with Genertel, a Company of the Generali Group. The option of stipulating the policy directly at the branch completed the range of insurance coverage meant for the protection of the Group customers’ assets and household, provided in collaboration with Global Assicurazioni.

Investment products

In 2012, a new model was introduced for the investment advising service already rendered by the Bank. In the innovation process, aimed at assuring the service with a view to a portfolio and according to a multi-varied adequacy model, the Group has adopted the Personal Financial Planning platform (PFTPro), capable of supporting the network in Customer relationships, in full compliance with the MiFID Directive.

Work continued on revising the offer of collective asset management products within the Creval Multimanager - Fondi&Sicav line, to make sure that the offer is constantly upgraded in view of customer needs. New products offered by the promoting companies were introduced

49

(Anima SGR, Aletti Gestielle SGR, Eurizon Capital SGR, JP Morgan A.M.) and the offer of the Julius Bär Sicavs was further expanded with a new class of stocks and new asset classes.

As a result of the agreement executed with Asset Management Holding, since 31 December 2012 the asset management activities of the Group’s banks were transferred to Aperta Sgr S.p.A., formerly their delegated manager, which joined the Asset Management Holding Group. Therefore, since 1 January 2013 the Group’s Bank will distribute the asset management products of Aperta SGR, Group AMH. This operation consequently led to a comprehensive revision of the asset management products offered by Aperta SGR.

With regard to direct deposit products, during the year a bond called “Titolo di Risparmio per l’Economia Meridionale” (Savings bond for the Southern Italian economy) was issued; the bond is regulated by the decree of the Ministry of the Economy and Finance of 1 December 2011. The resources collected through these new instruments, having the characteristics of “plain vanilla” bonds intended solely for natural persons not performing enterprise activities, will be used by the Bank to finance the investment projects of small and medium enterprises in Sicily.

Money products

The year was characterised both by the launch of new services and by initiatives aimed at expanding and improving the products already offered by the Group.

In May 2012, with a convention signed with the Central Institute of Italian Co-operative Banks, the Group adopted the new INPS Voucher Service, which provides for the issue and payment of INPS Vouchers throughout Italy. The service is intended both for individual customers and for businesses. Vouchers are a payment system that employers can use to remunerate ancillary services rendered occasionally.

In June, the new OLI - On line to Issuer - Feature was implemented on Maestro and V Pay international ATM cards: it enables real time checking of the current account balance, before authorising withdrawals and payments.

During the years, moreover, the list of credit card products under the CartaSi brand, meant for individual customers, was expanded. In particular, in addition to the Classic and Gold products, the Platinum and Black cards were added; they are respectively dedicated to Affluent and to Private customers, and they provide exclusive features in terms of usability and accessory services.

To enhance competitiveness and in line with market needs, particular care was given to the expansion of Physical POS services - for example, to enable management of tips, tax free, hotel pre-authorisations, car rentals - and Virtual POS services.

For shopkeepers wishing to exploit new sale channels, the Group provides e-commerce services, such as: • Qui Pago (“I Pay Here”), which allows management of remote sales, enabling to collect on

transactions with payment cards in secure mode; • Qui Pago POS Virtuale (“Virtual POS I Pay Here”), intended for those who have an e-

commerce Website of any size (virtual stores, service companies, transport); • Qui Pago MO.TO. (Mail Order Telephone Order), intended for mail-order sellers lacking a

Website, who simply enter the customer’s card data on a secure cash register page.

Within the Virtual Bank services, the functions at the disposal of the banc@perta customers continued to expand. Of particular note:

50

• The new “Airline Ticketing Office” function, enabling to purchase electronic airline tickets at the best IATA official rates, with direct debiting to the current account;

• The Creval App application to manage mobile banking and geolocation services, now also available for smartphones and tablets with the Android operating system.

International products

In 2012, the funding limit for the Internationalisation Guarantee product was renewed in collaboration with SACE S.p.A. In June 2011, the Group had signed a convention with SACE for the issue of loans in support of SME’s internationalisation initiatives. The first funding limit of EUR 20 million was fully subscribed. The convention was renewed for a further two-year time interval until 30 June 2014, and a new provisional limit of EUR 7 million was granted; it will be consolidated by the end of February with a further EUR 13 million.

The Finanziamento fiere (Tradeshow loan) product was released; it provides SMEs with the option between two types of preferential loans for support and participation in international tradeshows: “Multifido fiere”, for companies that are partners in the Group for transactions from EUR 1,000 to 25,000, and “Finanziamento per l’internazionalizzazione” for transactions from EUR 50,000 to 2,000,000 with fixed preferential spread.

The Group, thanks to its collaboration with UCIMU (Federmacchine/Confindustria), participated in the trade show “BIMU/Sfortec 2012” with a stand dedicated to international products and lease offers. The Group also participated in the trade show “VIII CH Matching 2012” to promote international products for businesses.

During the year, an intense series of meetings were held with representatives of Foreign Banks that are currently not counterparties, to expand correspondence and promote the bank’s opening to new markets.

51

ANALYSIS OF THE MAIN CONSOLIDATED STATEMENT OF FINANCIAL POSITION AGGREGATES AND INCOME STATEMENT FIGURES

Analysis of the main statement of financial position aggregates

The analysis of the financial position of the year, represented below, uses summary and reclassified statements. The aggregates and reclassifications regarding items of the Statement of Financial Position prescribed by Bank of Italy Circular no. 262/05 are detailed in the Notes to the Financial Statements.

ASSETS 31/12/2012 31/12/2011 % change

Cash and cash equivalents 227,330 181,775 25.06

Financial assets held for trading 106,628 106,414 0.20

Available-for-sale financial assets 3,489,800 1,412,554 147.06

Held to maturity investments 304,326 507,555 -40.04

Loans and receivables with banks 1,630,744 1,618,517 0.76

Loans and receivables with customers 22,007,837 22,330,187 -1.44

Equity investments 241,530 219,315 10.13

Property, equipment and investment property and intangible assets (1) 829,117 1,134,998 -26.95

Other assets (2) 1,058,751 900,175 17.62

Total assets 29,896,063 28,411,490 5.23

(1) Includes financial statement position items “120. Property, equipment and investment property” and

“130. Intangible assets”. (2) Includes items “140. Tax assets” and “160. Other assets”.

LIABILITIES AND EQUITY 31/12/2012 31/12/2011 % change

Due to banks 4,545,536 3,171,929 43.31

Direct funding from customers (1) 22,102,650 22,080,601 0.10

Financial liabilities held for trading 15,671 9,527 64.49

Hedging derivatives 231,186 159,608 44.85

Other liabilities 755,964 601,554 25.67

Provisions for specific purpose (2) 257,981 252,765 2.06

Equity attributable to non-controlling interests 5,201 271,040 -98.08

Equity (3) 1,981,874 1,864,466 6.30

Total liabilities and equity 29,896,063 28,411,490 5.23

(1) Includes items “20. Due to customers” and “30. Securities issued”. (2) Includes items “80. Tax liabilities”, “110. Post-employment benefits” and “120. Provisions for risks

and charges”. (3) Includes items “140. Valuation reserves”, “160. Equity instruments”, “170. Reserves”, “180. Share

premium reserve”, “190. Share Capital”, “200. Treasury shares” and “220. Profit (Loss) for the year”.

52

Lending activities Funding policies

During the year, liquidity conditions improved. While funding conditions on wholesale markets for Italian intermediaries have not yet been normalised, they have benefited from the attenuation of tensions on sovereign debt markets.

Nevertheless, funding on international markets was limited because conditions were still not favourable. In 2012, there was only one issue, meant solely for institutional investors of high standing (private placement) and amounting to EUR 50 million, within the Euro Medium Term Note (EMTN) Program.

The primary objective of the funding policies remains the diversification of funding sources, with respect to technical form, counterparties and markets. The branch network continues to represent a stable and effective driver for the achievement of the funding objectives. During the year, total retail bond issue placement’s amounted to over EUR 1.4 billion whilst maturing bonds amounted to EUR 1 billion.

MANAGEMENT DATA

In June 2012, the EMTN update was signed, allowing the issue of financial instruments meant for international institutional investors up to a maximum amount of EUR 5 billion, versus EUR 3 billion provided previously, providing the Group with more room to manoeuvre in a more stable financial market environment.

In early 2013, thanks to a further improvement in market conditions for our country’s banking system, it was possible to launch on the Euromarket a new fixed rate senior issue with a two and a half year maturity, in the amount of EUR 400 million.

Accounts on sight 50.1%

Deposit accounts 2.8%

Time deposits 15.0%

Repurchase agreements

1.3%

Other 4.1%

Retail instruments 18.3%

Wholesale instruments

8.4%

Direct funding: breakdown

53

During the year, the bank participated in the ECB’s second extraordinary refinancing operation. The amount of ECB funds in the two 3-year extraordinary refinancing operations (Long Term Refinancing Operations, “LTRO”), in December 2011 and February 2012 respectively, totalled EUR 3,250 million.

Funding from customers

Direct funding from customers totalled EUR 22,103 million, versus EUR 22,081 million at 31 December of the previous year. Analysis of the individual technical forms shows an accelerated growth in term deposits: during the year, the more stable forms, i.e. time deposits, with a set time span, continued to be popular, and at the end of the year they accounted for 15% of total funding, versus 5.8% in December 2011. On the contrary, current accounts contracted (-3.6%) as did, to an ever greater extent, repurchase agreements (-54%), whereas bond issues, included among securities issued, decreased by 9.2%. The decrease reflected the maturity of the wholesale bonds as well as the early redemption of the Convertible Bonds during the first half year. The overall aggregate also includes subordinated bond issues for a total of EUR 1,205 million, that contributed to determine Tier II capital by EUR 748 million.

21,664 22,081

22,103

20.000

21.000

22.000

23.000

2010 2011 2012

Mill

ions

of EU

R

Performance of direct funding

54

31.12.2012 31.12.2011 Change Current accounts and deposit accounts 11,765 12,203 -3.6%

Repurchase agreements 772 1,694 -54.4%

Term deposits 3,403 1,334 155.1%

Other 115 188 -39.0%

Due to customers 16,055 15,419 4.1%

Securities issued 6,048 6,662 -9.2%

Total direct funding 22,103 22,081 0.1%

The trend in indirect funding is dependent on financial market volatility. The aggregate amount was EUR 11,201 million, down by 3.2% from EUR 11,566 million at the end of 2011. The component referred to “Managed funds”, amounting to EUR 4,937 million versus EUR 5,013 million, was substantially stable, whilst the administered component declined by 4.4%.

More specifically, there was a decrease in asset management products, which amounted to EUR 2,110 million, similarly to the insurance component, which totalled EUR 1,599 million, whilst mutual funds management increased by over 10%, amounting to a total of EUR 1,228 million.

(figures in millions of EUR) 31.12.2012 31.12.2011 Change Asset under administration 6,264 6,553 -4.4%

Asset management 2,110 2,233 -5.5%

Mutual funds 1,228 1,099 11.7%

Insurance funds 1,599 1,681 -4.9%

Managed funds 4,937 5,013 -1.5%

Total indirect funding 11,201 11,566 -3.2%

Total funding 33,304 33,647 -1.0%

12,609

11,566

11,201

10.000

10.500

11.000

11.500

12.000

12.500

13.000

2010 2011 2012

Mill

ions

of

EUR

Performance of indirect funding

55

Total funding, including both direct and indirect components, reached EUR 33,304 million and contracted by 1% compared to EUR 33,647 million in December 2011. Loans and receivables with customers

At the end of the year, loans and receivables with customers amounted to EUR 22,008 million, down by 1.4% compared to EUR 22,330 million at the end of December of 2011. Loans reached EUR 9,690 million, down by 0.4% year-on-year, while current accounts declined by 11.2% and amounted to EUR 5,914 million.

Loans and Receivables (figures in millions of EUR) 31.12.2012 31.12.2011 % change

Current accounts 5,914 6,660 -11.2%

Mortgages 9,690 9,732 -0.4%

Credit cards, personal loans and salary-backed loans 382 470 -18.7%

Finance leases 1,196 1,235 -3.2%

Other transactions 2,715 2,550 6.5%

Debt instruments 12 12 -0.7%

Impaired assets 2,099 1,671 25.6%

Total net loans and receivables 22,008 22,330 -1.4%

20,370

22,330 22,008

19.000

19.500

20.000

20.500

21.000

21.500

22.000

22.500

2010 2011 2012

Mill

ions

of EU

R

Performance of loans and receivables with customers

56

The breakdown of loans and receivable by business segment, according to Bank of Italy classifications, demonstrates that lending is mainly focused on non-financial companies and family businesses, representing the Group Territorial Banks’ main customer base, to which approximately 77.8% of total loans are disbursed. Loans disbursed to consumer households also account for an important portion, representing almost 17.8% of total loans and receivables with customers.

Non-financial companies

71.3%

Financial companies

2.5%

Family businesses

6.5%

Consumer households

17.8%

Other 2.0%

Breakdown of loans and receivables by segment

MANAGEMENT DATA

57

With respect to geographic distribution, the most prevalent region remains Lombardia with 57.4% of total exposure and 46.4% of the number of customers.

The degree of concentration of loans, measured as the ratio among the top 20 - 50 - 100 positions and total loans and receivables with customers, remained limited and amounted respectively to 5.4%, 9.6% and 14.4%.

The Group’s exposure to associated parties remained modest. Weighted exposures, as a proportion of regulatory capital as at 31 December 2012, did not exceed the limits of the risk assets to the individual associated parties or to the set of risk assets to all associated parties, or the respective warning thresholds. At 31 December 2012, receivables from associated parties are completely represented by performing loans. Credit quality

Credit quality reflects the ongoing weakness of the economic cycle. At system level, a growing number of businesses is having problems in repaying loans. The portion of loans to businesses experiencing temporary hardship (substandard and restructured loans) is rising constantly, whereas household loans impairment remains modest.

Impaired loans, net of impairment losses, total EUR 2,099 million, up by 25.6% compared to EUR 1,671 million at the end of December 2011. In detail, net non-performing loans amounted to EUR 615 million compared to EUR 573 million in 2011, up by 7.3%, and they account for 2.8% of the loans portfolio, as opposed to 2.6% at the end of 2011. The other doubtful loans amounted to EUR 1,484 million, versus EUR 1,098 million the previous year and represent 6.7% of the loans portfolio, compared to 4.9% at the end of 2011. Of these, EUR 798 million - versus EUR 633 million of the previous year - refer to substandard loans, i.e. EUR 179 million - versus EUR 122 million in December 2011 - consist of restructured exposures, whereas EUR 507 million are past due loans, compared to EUR 343 million the previous year. The increase is

Lombardia 57.4%

Sicilia 12.8%

Lazio 8.1%

Marche 6.6%

Piemonte 4.1%

Other 10.9%

Breakdown of loans and receivables by region

MANAGEMENT DATA

58

also related to the different classification, from 1 January 2012 onwards, of exposures past due for more than 90 and up to 180 days.

Impairment losses on non-performing loans amounted to EUR 910 million compared to EUR 743 million of the previous year, whilst the other doubtful loans total EUR 229 million versus EUR 97 million in December 2011.

The level of hedging of non-performing loans thus amounts to 59.7% compared to 56.5% of the previous year, to 18.4% for loans classified as substandard and to 14.8% for restructured positions, which also improved compared to approximately 10% for both categories in December 2011.

The total amount of impairment losses, within the scope of rigorous control of credit risk in a persistent recession and uncertain likelihood of recovery, is deemed adequate to confront the risk inherent in extent positions, also taking into account the outcome of the audit recently carried out by the Bank of Italy on the adequacy of impairments onnon-performing, substandard and restructured loans.

Impaired loans/loans and receivables with customers

Gross amount

Impairment losses

Net exposure

% hedging

Gross amount

Impairment losses

Net exposure

% hedging

(Figures in millions of EUR) as at 31.12.2012 as at 31.12.2011

Non-performing loans 1,525 910 615 59.7 1,316 743 573 56.5

Substandard loans 978 180 798 18.4 704 71 633 10.1

Restructured exposures 210 31 179 14.8 137 15 122 10.9

Past due exposures 525 18 507 3.4 354 11 343 3.1

A. Impaired loans 3,238 1,139 2,099 35.2 2,511 840 1,671 33.5

B. Performing loans 20,021 112 19,909 0.56 20,781 122 20,659 0.59

Total 23,259 1,251 22,008 23,292 962 22,330

Financial assets and liabilities

Financial assets/liabilities held for trading, available-for-sale financial assets and held to maturity investments Financial instruments (Figures in millions of EUR) 31.12.2012 31.12.2011 % change

Financial assets and liabilities held for trading

Debt instruments 97.8 95.2 2.7

Equity instruments and OEIC units 8.0 8.0 0.0

Derivative financial instruments with positive fair value 0.8 3.2 -75.0

Total assets held for trading 106.6 106.4 0.2

Derivative financial instruments with negative fair value -15.7 -9.5 65.3

Total assets and liabilities held for trading 90.9 96.9 -6.2

Available-for-sale financial assets

Debt instruments 3,431.1 1,341.7 155.7

Equity instruments and OEIC units 58.7 70.9 -17.2

Total available-for-sale financial assets 3,489.8 1,412.60 147.0

Held to maturity investments

Debt instruments 304.3 507.6 -40.1

Total held to maturity investments 304.3 507.6 -40.1

59

At 31 December 2012, financial assets amounted to EUR 3,901 million compared to EUR 2,027 million of the previous year and account for approximately 13% of total assets. The increase is due to the purchase of Italian government bonds that rose from EUR 1.3 billion to EUR 3.4 billion. In 2012, portfolio management allowed a positive contribution to net interest income and a significant financial result.

In detail, financial assets held for trading amounted to EUR 107 million and they are nearly unchanged from the previous year. The portfolio consists mainly of debt instruments, represented by securities issued by the State and by other public agencies and securities issued by banks. The risk profile, therefore, it limited in terms of market risk factors (interest rate, price and currency risk).

Available-for-sale financial assets amounted to EUR 3,490 million, compared to EUR 1,413 million in December 2011 and they are mainly represented by debt instruments (Italian Government bonds), in addition to OEIC units and equity instruments that do not constitute control, joint control or affiliation. The increase is, as stressed above, mainly due to the purchases of Government bonds carried out during the year, and to the subscription of the capital increase of AMH for EUR 16 million within the scope of the strategic agreement as previously represented herein. These increases are only partly offset by the impairments made during the year.

In view of the exposure to interest rate risk generated by the fixed-rate Italian Government bonds held, for a total nominal value of EUR 600 million, hedging derivatives (IRS) were stipulated with counterparties of high standing.

The negative Reserve tied to available-for-sale financial assets, represented among equity items, amounts to EUR 120 million, an improvement from the negative value of EUR 244 million of 31 December 2011.

Concerning instead impairment of available-for-sale financial assets, the accounting policies adopted by the Group prescribe the activation of the impairment process in the presence of indicators that the original carrying amount of the investment can no longer be recovered, such as the present or future profitability of the evaluated company, significant deviations from targets or forecasts of the multi-year plans disclosed to the market, downgrades by outside rating agencies and announcements of corporate restructuring plans. For equity instruments and OEIC units, there are certain quantitative indicators that represent estimates of significant and prolonged fair value decreases to below the initial carrying amount of the financial asset. The quantitative and duration thresholds beyond which the decrease in fair value of the equity instruments immediately results in the posting of an impairment loss in the income statement refer to market quotations or valuations lower than the initial carrying amount for an amount higher than 30%; or the recognition of quotations or valuations that are lower than carrying amount for a period of more than 18 months.

Enforcement of the accounting policies outlined above entailed the recognition, in 2012, of impairment losses mainly on the securities of Banca Tercas (EUR 29.5 million) and A2A (EUR 2.7 million).

Held to maturity investments amounted to EUR 304 million compared to EUR 508 million at the end of 2011 and are represented by Government bonds and by bonds issued by banks.

Exposure to sovereign debt risk

The Group’s exposure to bonds issued by Central and local governments and government entities as well as loans granted to them substantially referred to exposures to the Italian government.

60

The table below shows the carrying amount of the exposures to sovereign debt risk, broken down by portfolio (AFS - Available-for-sale financial assets, HFT - Financial assets held for trading, HTM - Held to maturity investments, L&R - Loans and receivables with banks and Loans and receivables with customers).

Figures are expressed in thousands of EUR.

Countries AFS HFT HTM L&R Total AFS reserve (*)

Italy 3,419,595 26,684 13,239 4,620 3,464,138 -119,647

Other - 10 -

- 10 -

(*) After the tax effect

Additionally, loans and receivables with customers referred to loans granted to central and local public administrations totalling EUR 85,311 thousand.

The following table provides information on the expiry of exposures in securities issued in Italy.

Portfolio By 2013 By 2015 By

2017 By 2022 By 2031 Over Total

AFS 444,062 1,484,069 734,777 94,026 662,663 - 3,419,595

HFT 19,891 5,835 2 924 31 - 26,684

HTM 13,239 - - - - - 13,239

L&R - - - - - 4,620 4,620

As at 31 December 2012, securities issued by the Government were measured referring to prices inferred from markets (Level 1 fair value).

Equity investments

The portfolio as at 31 December 2012 represents only equity investments in companies subject to joint control and to significant influence - companies in which Credito Valtellinese has a direct or indirect holding of at least 20% of voting rights, “potential” voting rights or, albeit with a lower percentage, it has the power to influence financial and management policies through specific legal ties.

The total value of such equity-accounted investments as at 31 December 2012 was EUR 242 million versus EUR 219 million at the end of December 2011.

The main equity investments held in associates are shown below.

(figures in thousands of EUR) % Equity

investment

Carrying amount 31.12.2012 31.12.2011

Istituto Centrale delle Banche Popolari Italiane S.p.A. 20.4 158,423 135,086 Banca di Cividale S.p.A. 20 73,795 74,419 Global Assistance S.p.A. 40 3,504 2,994 Other - 5,808 6,816 Total 241,530 219,315

Changes from 2011 essentially refer to the equity measurement of the equity investments.

61

Property, equipment and investment property and intangible assets

Property, equipment and investment property and intangible assets amounted to EUR 829 million compared to EUR 1,135 million in the previous year.

In particular, intangible assets recorded in the financial statements as at 31 December 2012 amounted to EUR 355 million compared to EUR 664 million as at 31 December 2011. The change is mainly due to goodwill, which decreased from EUR 609 million to EUR 305 million due to the posting of an impairment loss in the income statement.

The results of the impairment test carried out on the goodwill recorded in the consolidated financial statements showed the need to impair the goodwill by EUR 85 million with regard to the Carifano market CGU and by EUR 217 million with regard to the Credito Valtellinese market CGU. The decision to proceed with the impairment is mainly due to the further worsening of the macroeconomic and industry environment and to the actual outlook for a recovery of the economic cycle, all factors that negatively impact the main forecast variables underlying the economic-financial projections referred to this area. For detailed information, please refer to Part B of the Notes to the Financial Statements.

Equity

The Group’s equity, including the net loss for the year, totalled EUR 1,982 million, compared to EUR 1,864 million as at 31 December 2011.

The main changes are the consequence of the full early redemption, with payment in shares, of the 2009/2013 Credito Valtellinese fixed-rate convertible bonds with the right of redemption in shares, completed in May 2012, which led to a capital increase of approximately EUR 106 million, of the acquisition of non-controlling interests in Credito Artigiano (intragroup merger of Credito Artigiano S.p.A. into Credito Valtellinese S.c.) and to Credito Siciliano (wilful public takeover and exchange bid on shares of the subsidiary Credito Siciliano), as described previously in this Report in relation to the corporate restructuring project and to the reorganisation of the distribution model, as well as of the change in valuation reserves which at 31 December 2012 were negative and amounted to EUR 89 million, compared to EUR 211

1,864

1,982

1.500

1.600

1.700

1.800

1.900

2.000

2.100

2011 2012

Mill

ions

of EU

R

Equity performance

62

million at the end of 2011. The change refers mainly to the Reserve connected to securities classified

in the portfolio of available-for-sale financial assets as represented previously.

Changes in equity are detailed in the specific financial statements.

The reconciliation of Parent equity and profit for the year, as recorded in the financial statements

as at 31 December 2012, and the corresponding values resulting from the consolidated financial

statements on the same date, are illustrated below.

RECONCILIATION BETWEEN PARENT EQUITY AND PROFIT AND GROUP EQUITY AND PROFIT

31/12/2012 31/12/2011

Equity of which:

loss Equity of which:

profit

Parent financial statements 1,944,781

(316,605) 1,900,166 42,359

Investee results as per separate financial statements:

- consolidated on a line-by-line basis

5,694

5,694

45,782

45,782

- equity investment impairment reversal and goodwill impairment recognition

(8,475)

(8,475)

-

-

- equity-accounted

17,013

17,013

16,271

16,271

Amortisation of positive differences:

- current year

-

-

-

-

- past years

(43,015)

-

(116,554)

-

Differences compared to carrying amounts for:

- companies consolidated on a line-by-line basis

(15,778)

-

(58,580)

-

- equity-accounted companies

101,848

-

79,901

(1,236)

Adjustments to dividends collected during the year:

- on retained earnings

-

(20,078)

-

(44,649)

- on current year profit

-

-

-

-

Other consolidation adjustments:

- elimination of intragroup profit and loss (17,989)

(1,457)

1,154

(5,344)

- other adjustments (2,205)

1,469

(3,674)

(432)

Consolidated financial statements 1,981,874

(322,439) 1,864,466 52,751

Regulatory capital and solvency ratios as at 31 December 2012 were calculated according to Bank

of Italy provisions in accordance with the “Basel II Accord”. Among the options regarding methods

used under the new regulations, the “standard method” was adopted for credit risk and market

risk, whilst for operational risk the change was made from the “basic method” to the “Traditional

Standardised Approach”.

The regulatory capital as at 31 December 2012, a detailed breakdown of which is provided in Part

F of the Notes to the Financial Statements, together with other Equity information - amounted to

EUR 2,284 million, whereas risk weighted assets amounted to EUR 19,885 million.

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Regulatory capital and solvency ratios (Figures in millions of EUR) 31.12.2012 31.12.2011 Tier 1 capital 1,617 1,548 Tier 2 capital 672 715 Deductible elements 5 5 Regulatory capital 2,284 2,258 Tier 3 capital - - Regulatory capital including TIER 3 2,284 2,258 Credit risk 1,472 1,572 Market risk 6 8 Operational risk 113 121 Prudential requirements 1,591 1,701 Risk-weighted assets 19,885 21,268 Solvency ratios Tier 1 capital/Risk-weighted assets (core capital ratio) 8.13% 7.28% Regulatory Capital/Risk-weighted assets (Total capital ratio) 11.49% 10.62%

As at 31 December 2012, the core capital ratio was 8.1% compared to 7.3% as at 31 December 2011, whilst the total capital ratio was 11.5%, compared to 10.6% at the end of December 2011.

Analysis of income statement figures

The results for the year are illustrated below in summary format, reclassified according to the presentation criteria considered most appropriate to present a fair view of the Group’s operating performance. The aggregates and reclassifications regarding items of the financial statements as prescribed in Bank of Italy Circular no. 262/05 are detailed in the Notes to the Financial Statements.

The 2011 corresponding figures were restated, with respect to what was originally published, in accordance with the provisions of IFRS 5, as a result of the sale of the subsidiaries Aperta SGR S.p.A. and Lussemburgo Gestioni S.A., and re-determined as a result of the retrospective application of IAS 19 - Employee Benefits.

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ITEMS 2012 2011

Net interest income 478,096 525,393

Net fee and commission income 265,590 288,195

Dividends and similar income 299 1,647

Net gains on equity-accounted investments (1) 17,316 15,956

Net trading and hedging income and profit on sales/repurchases 32,044 9,419

Other operating net income (4) 17,028 17,483

Operating income 810,373 858,093

Personnel expenses (321,225) (333,694)

Other administrative expenses (2) (172,222) (177,370)

Depreciation/amortisation and net impairment losses on property, equipment and investment property and intangible assets (3) (40,129) (40,303)

Operating costs (533,576) (551,367)

Operating profit 276,797 306,726

Net impairment losses on loans and receivables and other financial assets (391,249) (171,929)

Net accruals to provisions for risks and charges (6,838) (6,225)

Goodwill impairment losses (302,570) (102,190)

Net gains (losses) on sales of investments (759) 2,221

Pre-tax profit (loss) from continuing operations (424,619) 28,603

Income taxes 80,063 31,873

Post-tax profit (loss) from continuing operations (344,556) 60,476

Profit from discontinued operations 26,430 4,784

Profit for the period attributable to non-controlling interests (4,313) (12,509)

Profit (Loss) for the year attributable to owners of the parent (322,439) 52,751

(1) Net gains on equity-accounted investments include the amount of item 240 “Net gains on investments”. The residual amount of that item is included in gains on sales of investments, together with item 270 “Net gains (losses) on sales of investments”;

(2) Other administrative expenses include recoveries of taxes and other recoveries recognised in item 220 “Other operating net income” (EUR 55,246 thousand in 2012 and EUR 52,829 thousand in 2011);

(3) Depreciation/amortisation and net impairment losses on property, equipment and investment property and intangible assets include items 200 “Depreciation and net impairment losses on property, equipment and investment property”, 210 “Amortisation and net impairment losses on intangible assets” and the accumulated depreciation of costs incurred for leasehold improvements, under item 220 “Other operating net income” (EUR 6,163 thousand in 2012 and EUR 6,032 thousand in 2011).

(4) Other income and costs correspond to item 220 “Other operating net income” net of the above reclassifications.

The persistent weakness of the general economic environment, the drastic decline in short-term interest rates and the contraction in trade volumes significantly affected the operating profit, whose decline from the previous year was nonetheless limited, thanks to the performance of the finance area and of the positive effects of the actions undertaken for repricing and for the structural reduction of operating costs.

The net interest income amounted to EUR 478 million compared to EUR 525 million, down by 9% year-on-year, under the combined impact of the drop in short-term interest rates and of the performance of loans and receivables with customer, as well as the rise in funding cost, related also to the recomposition of on-sight funding in favour of the more expensive time deposits.

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The aggregate contributes to operating income approximately 59%, compared to 61.2% last year, whilst net fee and commission income contributes 32.8% compared to 33.6%.

MANAGEMENT DATA

Net fee and commission income totalled EUR 266 million, showing a 7.8% decrease year-on-year, which is also affected by the amount of the commission for liabilities guaranteed by the State, used as collateral for financing operations with the ECB, i.e. EUR 15 million and classified under fee and commission expense. In detail, commissions from management, trading and consulting services declined (-15.7% y-o-y) as they continued to be affected by the persisting volatility of the markets; commissions on lending transactions and others also declined (-1.2% y-o-y, after the commission expense for the state guarantee), whilst commissions for managing current accounts rose by 3.4% and commissions for collections and payments increased even more markedly (+6.2% y-o-y).

Net interest income 59.0%

Other operating net income 2.1%

Profit of equity-accounted investees

and dividends 2.1%

Net trading income, net hedging

expense, profit (loss) on sales and

repurchases 4.0%

Net fee and commission income

32.8%

Breakdown of operating income

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MANAGEMENT DATA

Net gains on equity-accounted investments amounted to EUR 17.3 million versus EUR 16 million in2011, whereas profit from trading, sales/repurchases of AFS and hedging transactions grew significantly to EUR 32 million from EUR 9.4 million of the previous year.

The Other operating net income - rent receivable and various expense recoveries - amounted to EUR 17 million and also include the new Fast Application Commission, applied in accordance with the MEF Decree of 30 June 2012.

The operating income thus totalled EUR 810 million, down by 5.6% compared to EUR 858 million of the period of comparison.

Operating costs, totaling EUR 534 million versus EUR 551 million at December 2011, decreased by 3.2% year on year, as a result of strict cost saving actions aimed at structural cost containment. More marked, at 3.7%, was the reduction in personnel expenses, which amounted to EUR 321 million, of which EUR 7.4 million for provisions to the “Solidarity Fund” as a consequence of the agreement signed last August with the trade unions. The other administrative expenses amounted to EUR 172 million, down by 2.9% compared to EUR 177 million in 2011.

Depreciation/amortisation and net impairment losses on property, equipment and investment property and intangible assets, at EUR 40 million, were substantially stable compared to the previous year.

The “cost-income ratio” was 65.8%, compared to 64.3% in 2011.

The operating profit reached EUR 277 million, down by 9.8% from EUR 307 million in 2011.

management, trading and

consulting services 23.4%

payment and collection services

19.0% on current accounts

and deposits 24.6%

on loan transactions and other

33.0%

Breakdown of net fee and commission income

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Net impairment losses on loans and receivables and other financial assets totalled EUR 391 million versus EUR 172 million for the previous year, whereas accruals to provisions for risks and charges amounted to EUR 6.8 million.

In detail, impairment losses on loans and receivables amounted to EUR 354 million, with “cost of credit”, expressed as a percentage of total loans and receivables with customers, of 161 basis points, versus 75 basis points in 2011. The increase is due not only to the significant further worsening of the economic cycle and the consequent increase in doubtful loans, but also to the adoption of extremely prudent standards for assessing the recoverability of irregular loans with the goal of significantly improving the levels of coverage of total impaired loans, in line with the guidelines of the Supervisory Authority, also within the scope of the audits carried out on the main Italian banks on the adequacy of impairments on non-performing, substandard and restructured loans.

Net impairment losses on other financial assets totalled EUR 37 million, mainly attributable to equity instruments included as available-for-sale financial assets, mostly referred to the equity investment in Banca Tercas.

Accruals to provisions for risk and charges amounted to EUR 6.8 million, up in comparison to EUR 6.2 million of the previous year.

The pre-tax loss from continuing operations was also affected by goodwill impairment losses, amounting to EUR 303 million and referred to the impairment of the goodwill previously recognised in the consolidated financial statements of EUR 609 million, as a result of the impairment test carried out on the carrying amount of the Credito Valtellinese Market CGU and the Carifano Market CGU.

The pre-tax loss from continuing operations thus amounted to EUR 425 million.

Income taxes for the year were positive at EUR 80 million and they include: a) the positive economic effect of exemption for tax purposes of the higher values recorded by way of goodwill in accordance with Article 15, Paragraph 10, of Italian Law Decree no. 185 of 29 November 2008, and of Article 176, paragraph 2-ter, of the Consolidated Act on Income Tax, amounting to EUR 27.9 million; b) the deductibility from the IRES of the IRAP portions related to personnel expenses not deducted for the tax periods from 2007 onwards, pursuant to the Italian Law Decrees no. 201/2011 and no. 16/2012, amounting to approximately EUR 14.5 million; c) the taxes related to goodwill impairment, i.e. EUR 38.5 million.

The sale of the subsidiaries Aperta SGR and Lussemburgo Gestioni SA entailed the recognition of profit from discontinued operations amounting to EUR 26 million.

Hence, the Group’s share of the loss - after subtracting non-controlling interests - amounted to EUR 322 million.

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STRATEGIC MANAGEMENT OF GROUP EQUITY INVESTMENTS

The equity investment acquisition and management policy is aimed first of all at expanding the operating size of the “Creval Network”, sharing platforms for the provision of banking and financial services with “third parties”. This enables the Group to expand the range of products offered to customers, progressively reducing costs thanks to the achievement of significant synergies and economies of scale, as well as to obtain positive effects on profitability thanks to generated profits and collected dividends. Istituto Centrale delle Banche Popolari Italiane

The Parent has a 20.4% interest in ICBPI S.p.A. share capital. This equity investment is strictly functional to the use of services - to obtain economies of scale with reduced costs of services for customers - particularly in the finance, payment systems and IT areas.

2012 was characterised by the regular performance of operations and the approval of the 2012-2015 Business Plan of the ICBPI Group, followed by the rapid launch of the initiatives aimed at its implementation and the completion of certain acquisitions started in the previous year.

2012 also marked the completion of the “2009-2012 Integration Plan of the CartaSi Group”, approved by the Board of Directors of ICBPI in 2009 and aimed in particular at redefining the industrial structure and the monetary strategies of the ICBPI Group as a result of the acquisition of control over Si Holding (Parent of the CartaSi Group). The Plan called for a significant business and corporate reorganisation of the Group, to enable the achievement of a growing operating profit, in spite of an expected reduction in revenue connected to the outflow of the “seller banks” (IntesaSanpaolo, Unicredit, Monte dei Paschi di Siena). The intense corporate rationalisation and simplification activity has led to the reduction from 16 to 6 legal entities in the scope of consolidation, whereas the number of entities within the scope of the Group decreased from 11 to 4.

In the first half of 2012, the process of acquiring control over Siteba S.p.A. was completed; it had been started at the end of the previous year through an offer, addressed to all Siteba shareholders, for the purchase of all shares held by them.

Lastly, in May, in accordance with the binding offer made in late 2011, ICBPI stipulated, with Banca Popolare dell’Emilia Romagna Soc. Coop, Banco di Sardegna S.p.A., Banca Popolare di Vicenza S.c.p.A., Banca Popolare di Sondrio S.c.p.A. and Banco Popolare Soc. Coop., the agreement for the acquisition of the assets and conventions as custodian bank referred to funds managed and/or promoted by Arca Sgr S.p.A. and, in some cases, also related to funds of the aforementioned banks’ customers. The acquisition of the assets was successfully completed in mid July.

The ICBPI Group closed 2012 with a consolidated profit of approximately EUR 90 million, compared to EUR 77 million in 2011 (+16.9%) whilst the profit of the Parent totalled approximately EUR 75 million, up by EUR 12.7 million compared to 2011.

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Organisation chart of ICBPI

Banca di Cividale

The business cooperation project with the Banca Popolare di Cividale Group was launched in 2004 with the acquisition of a non-controlling interest in the share capital of Banca di Cividale S.p.A., the operations centre for the Friuli-based group which operates with a commercial network of 71 branches in Veneto and in Friuli Venezia Giulia.

The partnership was then strengthened in 2005 with an increase of the equity investment to 25%, and in 2007 with the Cividale Group’s adoption of the IT system and technological structures of the Creval Group, and in 2009, by setting up, in joint-management with the Creval Group, Lussemburgo Gestioni SA - specialising in the management and administration of OEIC, with the purpose of widening the range of financial products offered to the customers and of contributing to the development of new business areas.

Within the company reorganisation project carried out in 2010, which led, among other things, to the transformation of Bankadati Servizi Informatici into a joint stock consortium company, the companies belonging to the Banca Popolare di Cividale Group joined the company structure with minority shares.

Within the reorganisation of the structure of the Creval Group carried out during 2011, an agreement aimed at amending in part the strategic cooperation agreements signed in May 2004 was entered into by Credito Valtellinese and Banca Popolare di Cividale.

Based on these new agreements, Credito Valtellinese sold to Banca Popolare di Cividale 5% of the share capital of Banca di Cividale S.p.A. As a result of this operation, the investment held by the Creval Group in Banca di Cividale currently stands at 20% of the share capital of the latter.

Banca di Cividale S.p.A. ended 2012 with a loss of approximately EUR 7.2 million.

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ANALYSIS OF THE MAIN STATEMENT OF FINANCIAL POSITION AND INCOME STATEMENT AGGREGATES OF THE PARENT The analysis of the financial position of the year, represented below, uses summary and reclassified statements. The aggregates and reclassifications regarding items of the Statement of Financial Position prescribed by Bank of Italy Circular no. 262/05 are detailed in the Notes to the Financial Statements.

Within the scope of the corporate reorganisation and simplification project outlined by the 2011-2014 Strategic Plan of the Creval Group, already described in the above sections, in 2012 Credito Valtellinese merged with the subsidiary Credito Artigiano S.p.A. with legal effect from 10 September 2012. The Group opted for the accounting backdating of the costs and revenue of the merged companies that were recorded in the financial statements of Credito Valtellinese as from 1 January 2012. For the notes to the data, it was decided to also present the comparative figures, restated to include the company merged in the period.

Before the merger, with legal effect from 1 January 2012, the merger into Credito Artigiano of Carifano - Cassa di Risparmio di Fano S.p.A. was carried out with subsequent immediate assignment of the branch network present in the Marche and Umbria regions into a newly incorporated bank, also called Cassa di Risparmio di Fano. Additionally, with effect from 24 October 2011, Banca Cattolica and Credito del Lazio was merged into Credito Artigiano. The effects of these transactions were considered in the restatement of the figures as at 31 December 2011.

ASSETS 31/12/2012 31/12/2011 restated % change 31/12/2011

Cash and cash equivalents 156,195 124,340 25.62 71,836

Financial assets held for trading 102,617 116,428 -11.86 106,188

Available-for-sale financial assets 3,489,445 1,412,460 147.05 1,389,497

Held to maturity investments 304,325 507,554 -40.04 494,302

Loans and receivables with banks 4,202,065 4,298,167 -2.24 4,365,950

Loans and receivables with customers 15,422,640 15,459,927 -0.24 8,071,176

Equity investments 835,821 887,894 -5.86 1,505,109 Property, equipment and investment property and intangible assets (1) 501,291 725,739 -30.93 325,197

Other assets (2) 793,162 672,023 18.03 471,307

Total assets 25,807,561 24,204,532 6.62 16,800,562

(1) Includes items 110 “Property, equipment and investment property” and 120 “Intangible assets”. (2) Includes items 130 “Tax assets” and 150 “Other assets”.

71

LIABILITIES AND EQUITY 31/12/2012 31/12/2011 restated % change 31/12/2011

Due to banks 5,097,170 3,370,391 51.23 3,783,461

Direct funding from customers (1) 17,826,345 18,007,988 -1.01 10,628,325

Financial liabilities held for trading 20,452 29,051 -29.60 29,004

Hedging derivatives 231,186 159,608 44.85 159,608

Other liabilities 530,564 412,660 28.57 209,659

Provisions for specific purpose (2) 157,063 155,577 0.96 90,339

Equity (3) 1,944,781 2,069,257 -6.02 1,900,166

Total liabilities and equity 25,807,561 24,204,532 6.62 16,800,562

(1) Includes items 20 “Due to customers” and 30 “Securities issued” (2) Includes items 80 “Tax liabilities”, 110 “Post-employment benefits” and 120 “Provisions for risks and charges” (3) Includes items 130 “Valuation reserves”, 140 “Redeemable shares”, 150 “Equity instruments”, 160 “Reserves”, 170 “Share premium reserve”, 180 “Share capital”, 190 “Treasury shares” and 200 “Profit (Loss) for the year”. Statement of financial position aggregates

Direct funding reached EUR 17,826 million, down by 1% year on year. Indirect funding amounted to EUR 9.8 billion, down by 2.9% compared to EUR 10.1 billion at the end of 2011 (restated figure), mainly as a result of the negative performance of financial markets. The component referred to “Managed funds”, i.e. EUR 4.2 billion compared to EUR 4.4 billion, declined by 4.7%, while the administered component decreased by 1.5%. Total funding amounted to EUR 27.6 billion, with a decline of approximately 1.7% compared to 31 December 2011 (restated figure).

Loans and receivables with customers and credit quality

Loans and receivables with customers amounted to EUR 15,423 million (-0.2% compared with the restated figure at the end of 2011). The following table shows the breakdown of loans and receivables with customers.

Loans 31.12.2012

Current accounts 4,826

Mortgages 6,850

Credit cards, personal loans and salary-backed loans 150

Finance leases 43

Other transactions 2,149

Debt instruments 12

Impaired assets 1,393

Total net loans and receivables 15,423

Impaired loans, net of impairment losses, total EUR 1,393 million, up by 27.9% compared to EUR 1,089 million at December 2011 (restated figure). In detail, net non-performing loans amounted to EUR 385 million versus EUR 371 million, up by 3.7%, and they account for 2.5% of the loans and receivables portfolio. Other doubtful loans amounted to EUR 1,008 million,

72

compared to EUR 718 million of the previous year, and accounted for 6.5% of the loans portfolio. Of these, EUR 513 million - compared to EUR 418 million of the previous year (restated figure) - refer to substandard loans, EUR 123 million - versus EUR 76 million at December 2011 (restated figure) - consist of restructured loans, whilst EUR 372 million are past due loans, compared to EUR 224 million the previous year (restated figure). The increase is also related to the different classification, from 1 January 2012 onwards, of exposures past due for more than 90 and up to 180 days.

Impairment losses on doubtful loans amounted to EUR 557 million compared to EUR 420 million of the previous year, whilst the other doubtful loans total EUR 160 million versus EUR 62 million in December 2011 (restated figure).

The level of hedging of non-performing loans thus amounts to 59.1% compared to 53.1% of the previous year, to 19.4% for loans classified as substandard and to 15.5% for restructured positions, which also improved compared respectively to 9.8% and 10.8% at 31 December 2011 (restated figure).

The total amount of impairment losses, in a persistent recession and uncertain likelihood of recovery, is deemed adequate to confront the risk inherent in existent positions, also taking into account the outcome of the audit recently carried out by the Bank of Italy on the adequacy of impairments on non-performing, substandard and restructured loans.

The table that follows summarises the information on impaired exposures.

Impaired loans/loans and receivables with customers

Gross amount

Impairment losses

Net exposure

% hedging

Gross amount

Impairment losses

Net exposure

% hedging

as at 31.12.2012 31.12.2011 restated

Non-performing loans 942 557 385 59.1 791 420 371 53.1

Substandard loans 636 123 513 19.4 463 45 418 9.8

Restructured loans 146 23 123 15.5 85 9 76 10.8

Past due loans 386 14 372 3.5 232 8 224 3.4

Impaired loans 2,110 717 1,393 34.0 1,571 482 1,089 30.7 Financial assets and liabilities

Concerning financial assets / liabilities held for trading, available-for-sale and held-to- maturity and for exposures to bonds issued by central and local governments and by government agencies, please refer to the analysis of the consolidated statement of financial position aggregates.

The Group’s exposure to bonds issued by Central and local governments and government agencies as well as loans granted to them substantially refers to exposures to the Italian Government. With reference to loans granted to central and local public administrations, the separate financial statements include exposures totalling EUR 20,953 thousand.

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Equity investments

The item consists of the equity investments of Credito Valtellinese S.c. in subsidiaries, in companies subject to joint control and in companies subject to significant influence.

Company name % Equity

investment 31.12.2012

Carrying amount

31.12.2012

Carrying amount

31.12.2011

A. Subsidiaries

Credito Siciliano S.p.A. - Palermo 97.95% 302,295 121,046

CARIFANO S.p.A. - Fano 100.00% 199,404 465,134

MEDIOCREVAL S.p.A. - Sondrio 76.58% 139,347 84,821

GLOBAL ASSICURAZIONI S.p.A. - Milano 60.00% 40,108 41,543

STELLINE SERVIZI IMMOBILIARI S.p.A. - Sondrio 100.00% 25,152 10,066

CRESET S.p.A. - Sondrio 100.00% 5,433 5,433

BANKADATI SERVIZI INFORMATICI Soc. Cons. p. A. - Sondrio 81.00% 2,897 1,429

DELTAS Soc. Cons. p. A. - Sondrio 85.00% 279 108

GLOBAL BROKER S.p.A. - Milano 51.00% 255 255

APERTA FIDUCIARIA S.r.l. - Milano 100.00% 50 50

CREDITO ARTIGIANO S.p.A. - Milano - - 649,176

APERTA SGR S.p.A. - Milano - - 4,966

LUSSEMBURGO GESTIONI S.A.- Luxembourg - - 152

B. Companies subject to joint control

RAJNA IMMOBILIARE S.r.l. - Sondrio 50.00% 265 265

C. Companies subject to significant influence

Banca di Cividale S.p.A. - Cividale of the Friuli 20.00% 71,281 71,281

I.C.B.P.I. S.p.A. - Milano 20.39% 43,216 43,212

GLOBAL ASSISTANCE S.p.A. - Milano 40.00% 3,033 3,033

ISTIFID S.p.A. - Milano 28.66% 1,500 1,500

VALTELLINA GOLF CLUB S.p.A. - Sondrio 36.71% 1,287 1,287

POLITEC - Polo dell’Innovazione della Valtellina Soc. Cop. - Sondrio 8.59% 19 50

APERTA GESTIONI PATRIMONIALI S.A. - Lugano - - 302

Total 835,821 1,505,109

The total value of the equity investments held as at 31 December 2012 was EUR 836 million compared to the previous year’s EUR 1,505 million.

The main changes are due to:

- merger into Credito Artigiano of Carifano - Cassa di Risparmio di Fano S.p.A., carried out with legal effect from 1 January 2012, with subsequent immediate assignment of the branch network present in the Marche and Umbria regions to a newly incorporated bank, also called Cassa di Risparmio di Fano;

- merger of Credito Artigiano into Credito Valtellinese completed on 10 September 2012 which entailed the derecognition of the equity investment in Credito Artigiano and the recognition of the equity investments held by Credito Artigiano in the other companies of the Group;

- purchase of 1,799,351 shares of Credito Siciliano provided in acceptance of the swap offer for the subsidiary Credito Siciliano - transaction that is discussed in greater detail else where in

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this report - for a price of EUR 7.3 million di EUR in cash and the swap of newly issued Credito Valtellinese shares for EUR 16.8 million;

- subscription of the capital increase of Stelline S.I. amounting to EUR 12.5 million;

- sale of the equity investments in Aperta SGR, Lussemburgo Gestioni S.A. and Aperta Gestioni Patrimoniali S.A. for EUR 32 million, completed during the year;

- impairment losses on the equity investment in Carifano S.p.A. in relation to the outcome of the impairment test carried out on the carrying amount of the equity investment in the portfolio, amounting to EUR 77 million. PROPERTY, EQUIPMENT AND INVESTMENT PROPERTY AND INTANGIBLE ASSETS

Property, equipment and investment property and intangible assets amounted to EUR 501 million compared to EUR 726 million in the previous year, restated.

In particular, property, equipment and investment property amounted to EUR 339 million and consist mostly of functional property or property held for investment purposes. The details are as follows.

Property and equipment 31.12.2012 31.12.2011 restated 31.12.2011

A. Assets used in the business 266,652 279,754 193,677 - land and buildings 240,319 250,695 173,667 - furniture 19,875 22,327 16,632 - electronic systems 7 13 0 - other 6,451 6,719 3,378 B. Investment property 72,559 63,610 29,709 - land 13,087 14,265 5,248 - buildings 59,472 49,345 24,461 Overall total 339,211 343,364 223,386

Intangible assets recorded at 31 December 2012 amount to EUR 162 million and refer mainly to goodwill recognised as a result of the non- recurring transactions completed. As a result of the impairment test carried out on the recognised goodwill, taking into account the combined effects of the current prolonged recession and of the uncertainty on the outlook for an economic recession, the carrying amount of goodwill was adjusted with an offsetting entry in the income statement of EUR 217 million. For detailed information, please refer to Part B of the Notes to the Financial Statements.

With regard to bank-owned properties, an annex to the financial statements provides the statement of revaluations pursuant to Article 10 of Italian Law no. 72/1983.

EQUITY

As at 31 December 2012, share capital - consisting solely of ordinary shares - amounts to EUR 1,516,698,624.06, divided into 442,868,742 ordinary shares without par value. On 28 April 2012, the extraordinary Shareholders’ Meeting approved the amendment to the first paragraph of Article 7 of the Articles of Association, eliminating the indication of the par value of the shares.

With reference to the changes to share capital during the year, on 7 May 2012 the early redemption of the 2009/2013 Credito Valtellinese fixed-rate convertible bond issue with the

75

right of redemption in shares was completed, which led to an increase in the share capital from EUR 945,678,639.50 to EUR 1,316,656,659.50 through the issue of 105,993,720 ordinary shares. At the end of the recognition period, the Market Value of Creval Shares, discounted by 15%, amounted to EUR 1.02. At the date of redemption, it was thus defined that Credito Valtellinese would hand to bondholders 14 newly issued Creval Shares and a cash amount of EUR 35.72. The official price of Creval Shares recognised at the end of the meeting of 7 May was EUR 0.99697. Therefore, bearers of POC bonds were paid an additional cash amount of EUR 0.32 per bond. The capital increase thus realised therefore amounted to EUR 105,690,880.80. The difference between the realised increase in share capital (carried out at the value of EUR 3.5 per share) and the share capital was debited to the share premium reserve by an amount of EUR 265,287,139.20.

The other transactions during the year, which contributed to the current composition of the share capital as described above, are:

- on 10 September 2012, the merger of Credito Artigiano S.p.A. into Credito Valtellinese, which determined the issue of 51,386,642 new shares and the consequent share capital increase to EUR 1,496,509,906.50 divided into 427,574,239 shares;

- on 12 December 2012, the conclusion of the takeover and exchange bid launched by Credito Valtellinese S.c. on the ordinary shares of Credito Siciliano S.p.A. led to the issue by Credito Valtellinese, in favour of those who accepted the OPASc, of 15,294,483 new Creval shares which, added to the 427,574,259 that previously made up the share capital, constitute the current share capital.

The group’s equity, including the loss for theyear, totalled EUR 1,945 million.

In addition to the aforesaid changes in share capital, this amount was determined by:

- the recognition for accounting purposes of the merger of Credito Artigiano, a transaction under common control which entailed the recognition of a negative equity item of negative amount of EUR 49.9 million (after the reconstitutions of reserves eligible for tax relief by an amount of EUR 20 million);

- the recognition for accounting purposes of the takeover and exchange bid launched by Credito Valtellinese S.c. on the ordinary shares of Credito Siciliano S.p.A. which generated a negative change in equity of EUR 3.3 million deriving from the change in the fair value of Credito Valtellinese shares between the date of definition of the capital increase and the date of issue of the swapped shares;

- the change in the Valuation Reserve of Available-for-sale financial assets- mainly Italian government bonds - which, after tax effects, at 31 December 2012 was negative by EUR 120 million compared to EUR 243.2 million in December 2011;

- the recognition of actuarial losses related to defined benefit pension plan, for a negative amount of EUR 6.8 million as a result of the application of the revised IAS 19 - Employee Benefits.

Changes in equity are detailed in the specific statement.

The regulatory capital as at 31 December 2012, a detailed breakdown of which is provided in Part F of the Notes to the Financial Statements, together with other Equity information - amounted to EUR 2,386 million, with risk weighted assets of EUR 11,287 million.

The Tier 1 capital ratio (tier 1 capital over risk-weighted assets) was 16%, compared to 26.5% as at 31 December 2011. The total capital ratio (regulatory capital over risk weighted assets) was 21.1% against 32.5% at the end of December 2011.

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All the information provided by the prudential supervisory provisions is issued by the Group, as established by the regulations within the “Third pillar” of Basel II.

INCOME STATEMENT

The results for the year are illustrated below in summary format, reclassified according to the presentation criteria considered most appropriate to present a fair view of the Bank’s operating performance. The aggregates and reclassifications regarding items of the financial statements as prescribed in Bank of Italy Circular no. 262/05 are detailed in the Notes to the Financial Statements.

Within the scope of the corporate reorganisation and simplification project outlined by the 2011-2014 Strategic Plan of the Creval Group, already described in the above sections, in 2012 Credito Valtellinese merged the subsidiary Credito Artigiano S.p.A. with legal effect from 10 September 2012. The Group opted for the accounting backdating of the costs and revenues of the merged companies that were recorded in the financial statements of Credito Valtellinese as from 1 January 2012. For the notes to the data, it was decided to also present the comparative figures, restated to include the company merged in the period.

Before the merger, with legal effect from 1 January 2012, the merger into Credito Artigiano of Carifano - Cassa di Risparmio di Fano S.p.A. was carried out with subsequent immediate assignment of the branch network present in the Marche and Umbria regions into a newly incorporated bank, also called Cassa di Risparmio di Fano. Additionally, with effect from 24 October 2011, Banca Cattolica and Credito del Lazio were merged into Credito Artigiano. The effects of these transactions were considered in the restatement of the figures as at 31 December 2011.

The corresponding prior year figures were restated, with respect to what was originally published, in accordance with the provisions of IFRS 5, also as a result of the sale of the subsidiaries Aperta SGR S.p.A. and Lussemburgo Gestioni S.A., and redetermined as a result of the retrospective application of IAS 19 - Employee Benefits and to represent the inclusion of Credito Artigiano.

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The analysis that follows, therefore, refers to these restated figures. RECLASSIFIED INCOME STATEMENT 2012 2011

restated %

change 2011

(in thousands of EUR) Net interest income 335,591 364,411 -7.9 185,351 Net fee and commission income 182,855 201,460 -9.2 106,693

Dividends and similar income 16,000 29,742 -46.2 36,850 Net trading and hedging income (expense) and profit (loss) on sales/repurchases 30,410 8,695 249.7 5,936

Other operating net income (3) 13,625 6,672 104.2 4,973

Operating income 578,481 610,981 -5.3 339,803 Personnel expenses (83,644) (192,043) -4.4 -102,053

Other administrative expenses (1) (159,807) (165,638) -3.5 -91,091 Depreciation/amortisation and net impairment losses on property, equipment and investment property and intangible assets (2) (22,835) (22,599) 1 -13,793

Operating costs (366,286) (380,280) -3.7 -206,937 Operating profit 212,195 230,701 -8.0 132,866 Net impairment losses on loans and receivables and other financial assets (317,579) (132,614) 139.5 -61,920

Net accruals to provisions for risks and charges (5,566) (4,747) 17.2 -1,494

Goodwill impairment losses (217,200) (102,190) 112.6 -102,190

Net gains (losses) on sales of investments (76,681) 3,159 n/a 1,586

Pre-tax loss from continuing operations (404,831) (5,691) n/a -31,153 Income taxes 69,202 59,368 16,6 72,326

Post-tax profit (loss) from continuing operations (335,629) 53,677 n/a 41,173 Profit from discontinued operations 19,024 1,732 n/a 1,186

Profit (Loss) for the year (316,605) 55,409 n/a 42,359

(1) Other administrative expenses include recoveries of taxes and other recoveries recognised in item 190 “Other operating net income” (EUR 37,451 thousand in 2012, EUR 34,458 thousand in 2011 compared to restated figures and EUR 17,021 thousand in 2011);

(2) Depreciation/amortisation and net impairment losses on property, equipment and investment property and intangible assets include items 170 “Depreciation and net impairment losses on property, equipment and investment property”, 180 “Amortisation and net impairment losses on intangible assets” and the accumulated depreciation of costs incurred for leasehold improvements, under item 190 “Other operating net income” (EUR 5,089 thousand in 2012, EUR 4,928 thousand compared to the 2011 restated figures and EUR 2,425 thousand in 2011);

(3) Other income and expenses correspond to item 190 “Other operating net income” after the above reclassifications.

The Parent’s performance was substantially not unlike consolidated performance, reflecting the persistent weakness of the general economic environment, the drastic reduction in short-term interest rates and the contraction in trade volumes. However, these negative effects were partly offset thanks to the results of the finance area, effective repricing actions and the structural reduction in operating costs.

Net interest income amounted to EUR 336 million versus EUR 364 million, down by 7.9% year on year (restated figures).

Net fee and commission income totalled EUR 183 million, decreasing by 9.2% year-on-year; it is still affected by the amount of the commission for liabilities guaranteed by the Government, amounting approximately EUR 5 million.

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Income from trading, sales/repurchases of AFS investments and hedging, amounting to EUR 30 million compared to EUR 9 million of the previous year.

The Other operating net income - rent and recoveries of various expenses - amounted to EUR 13.6 million and included also the new Fast Application Commission applied in accordance with the MEF decree of 30 June 2012. The item includes the gains, i.e. EUR 7.4 million, realised with the sale to Aperta Sgr S.p.A. of the asset management contracts within the scope of the agreement executed with Asset Management Holding.

The operating income thus totalled EUR 578 million, down by 5.3% compared to EUR 611 million for 2011 (restated figures).

The operating costs, totally EUR 366 million compared to EUR 380 million in 2011, declined by 3.7% year on year, as a result of effective cost-saving initiatives aimed at structural costs containment. In detail, personnel expenses, amounting to EUR 184 million, declined by 4.4%, even taking into account the non-recurring expenses for the provisions to the “Solidarity Fund” consequent to the agreement signed with the Unions (i.e. EUR 5.9 million); other administrative expenses, amounting to EUR 160 million, decreased by 3.5% from2011.

The operating profit thus reached EUR 212 million, down by 8% compared to EUR 231 million.

Net impairment losses on loans and receivables and other financial assets totalled EUR 318 million, compared to EUR 133 million last year, whilst accruals to provisions for risks and charges amounted to EUR 5.6 million.

In detail, impairment losses on loans and receivables reached EUR 281 million with a “cost of credit”, expressed as a percentage of total loans and receivables with customers, of 182 basis points. The increase is due not only to the significant further worsening of the economic cycle and the consequent increase in doubtful loans, but also to the adoption of extremely prudent standards for assessing the recoverability of irregular loans with the goal of significantly improving the levels of coverage of total impaired loans, in line with the guidelines of the Supervisory Authority.

management, trading and consulting services 24.6%

payment and collection services 19.8%

on current accounts and

depositis 23.7%

on loan transactions and

other 31.9%

Breakdown of net fee and commission income

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Net impairment losses on other financial assets totalled EUR 34 million, mainly attributable to the impairment of equity instruments included as Available-for-sale financial assets, mainly Banca Tercas and A2A.

As a result of the impairment test carried out on the goodwill recognised in the separate financial statements, goodwill was written down by EUR 217.2 million. Similarly, the impairment test carried out on the value of the subsidiary Carifano S.p.A. entailed the recognition of further impairment losses by EUR 77 million, thereby determining a pre-tax loss from continuing operations of EUR 405 million.

Income taxes for the year were positive by EUR 69 million and they include:

- the positive economic effect of the exemption for tax purposes by payment of the substitute tax of the higher values recognised as goodwill, in accordance with Article 15, Paragraph 10, of Law Decree no. 185/2008, and with Article 176, Paragraph 2-ter of the Consolidated Act on Income Tax, by EUR 16 million (EUR 30.8 million of IRES, IRAP tax assets and recognition of a substitute tax of EUR 14.8 million);

- the deductibility from the IRES of the IRAP portions related to personnel expenses not deducted for the tax periods from 2007 onwards, pursuant to the Italian Law Decrees no. 201/2011 and no. 16/2012, amounting to approximately EUR 9.9 million;

- the change in deferred tax assets and liabilities relating to Goodwill impairment losses of EUR 38.5 million.

Lastly, considering the profit from discontinued operations of EUR 19 million, referred to the sale of the equity investments held in Aperta SGR and Lussemburgo Gestioni, a loss of EUR 316.6 million was recorded for the year.

The Territorial Network

At 31 December 2012, the territorial network of Credito Valtellinese consisted of 368 branches, i.e. 175 more than at the end of the previous year, mainly as a result of the merger of Credito Artigiano.

The Parent is present in Lombardia, Piemonte, Valle d’Aosta, Trentino Alto Adige, Veneto, and, by effect of the aforesaid merger, in Emilia Romagna, Toscana and Lazio.

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LOMBARDY 231

CREDITO VALTELLINESE BRANCH NETWORK

45

17 162217

14

Province Branches

SONDRIO 45

COMO 22

VARESE 17

BERGAMO 16

BRESCIA 14

LECCO 17

MILAN 57

MONZA E BRIANZA 25

PAVIA 14

CREMONA 2

LODI 2

LOMBARDY 23157

25

142

2

368 BRANCHES

PIEDMONT 28

Province Branches

TURIN 19

ALESSANDRIA 4

NOVARA 3

VERBANO C.O. 1

ASTI 1

PIEDMONT 28

19

1

3

41

VALLE D’ AOSTA 1

1

Province Branches

AOSTA 1

VALLE D’AOSTA 1

81

TRENTINO ALTO ADIGE 11

10

Province Branches

TRENTO 10

BOLZANO 1

TRENTINO ALTO ADIGE 11

1

8

Province Branches

VICENZA 10

VERONA 8

PADOVA 5

VENETO 23

10

5

VENETO 23

EMILIA ROMAGNA 9

2

TUSCANY 14

LAZIO 51

2

811

2

Province Branches

FIRENZE 8

PISA 2

PRATO 2

LUCCA 1

PISTOIA 1

TUSCANY 14

Province Branches

FROSINONE 12

LATINA 1

ROME 30

VITERBO 8

LAZIO 51

8

12

30

1

Province Branches

RIMINI 5

PIACENZA 2

PARMA 1

FORLÌ-CESENA 1

EMILIA ROMAGNA 9

15

1

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Bank Workforce Changes in the number of employees

As at the end of December 2012, the Bank’s workforce totalled 2,666 staff. This number includes 282 employees seconded to other Group companies and foreign companies, whilst 37 employees were seconded to Credito Valtellinese by other group companies. Hence, there were 2,421 employees working at the bank’s offices.

During the year, 13 persons were hired and 80 workers ended their employment (total number of hires and terminations, net of re-hires carried out during the year).

In terms of professional categories, the Bank’s workforce can be broken down as follows:

- 28 executives;

- 905 middle managers;

- 1,488 resources in other professional categories. Workforce by contract category as at 31 December 2012

With regard to the forms of employment contract, 2,402 staff - amounting to approximately 99.2% - were employed on permanent contracts, whilst 19 staff were employed on temporary contracts, of which 5 with training contracts, accounting for 0.8% of the total workforce.

Part-time contracts, regarding 187 employees, involve 7.7% of the total workforce, including 185 workers employed on permanent contracts and 2 on temporary contracts.

The breakdown by gender shows a percentage of female workers equal to 38% of the total.

EXECUTIVES 1.1%

MIDDLE MANAGERS

37.4%

PROFESSIONAL CATEGORIES

61.5%

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Permanent and temporary workforce as at 31 December 2012

* Temporary contracts plus training contracts Full and part-time workforce as at 31 December 2012

The average age of the total workforce is 41.6 years old, whilst the length of service is on average 12.5 years. In terms of education, approximately 40.50% of personnel have a degree, whilst approximately 56.3% has a high school diploma.

TEMPORARY * 0.8%

PERMANENT 99.2%

0

PART TIME 7.7%

FULL TIME 92.3%

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Workforce by educational background as at 31 December 2012

During 2012, the professional growth rate - corresponding to professional advancement out of the average number of employees - is 9.8%, whilst the mobility index - which expresses role changes compared to the average number of employees - is 24.8%. Training

Training needs, in terms of quantity and quality, are identified through annual performance assessment, skills monitoring and individual career development plans.

Training for the employees of Credito Valtellinese in 2012 consisted of 41,230 hours of traditional classroom time, of which 3,635 at the premises of external companies and 37,595 at the Group’s educational facilities, in addition to 21,538 hours in self-teaching courses.

73.5% of staff participated in training programs in 2012.

The proposed initiatives were directed to the achievement of a appropriate technical and professional skills and compliance with internal and external regulations, as well as to promote up-to-date knowledge of the products and services offered to customers, the acquisition of specific competencies, the appropriate use of the procedures supporting operations.

The results of the training and educational activities regarding anti-money laundering regulations are also subject to specific annual evaluation by the Board of Directors.

Also in the field of sales, and with regard to ISVAP rules (ISVAP regulation no. 5 of 16 October 2006), training activities and subsequent updates on insurance were carried out. In particular, in 2012, 18,457 hours were dedicated to traditional classroom training and 17,460 hours to self-teaching.

DEGREE 40.8%

HIGH SCHOOL CERTIFICATE

56.0%

ITALIAN MIDDLE SCHOOL CERT.

3.2%

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With regard to the PattiChiari Consortium, promoted by ABI, during 2012 the sensitisation of the Banks of the Group continued, to implement “Commitments for Quality” in order to improve the relations between banks and customers, through simplicity, clarity and transparency. It should be stressed that from the training viewpoint the Group continued, in 2012, to maintain the initiatives subdivided, through remote training, in three paths: transfers, loans and investments, intended for Group employees according to their specific areas of operation.

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SUMMARY NOTES ON THE PERFORMANCE OF THE OTHER TERRITORIAL BANKS The operating performance of the other territorial banks - Credito Siciliano and Carifano—substantially reflects that of the group as a whole, with operating results affected by the persistent weakness of the economic environment and by the significant reduction in short-term interest rates, whose negative effects were, however, countered by significant actions aimed at structural containment of operating costs.

For the subsidiary banks, too, the persistence of the current recession and the uncertainty as to the actual outlook for a recovery made it necessary to adopt extremely prudent standards for evaluating the probability of recovering irregular loans and determining the consequent impairment losses, also in line with the indications of the Supervisory Authority, with the goal of a significant increase in the levels of coverage of overall impaired loans, with significant effects on the results for the year, which are negative.

Carifano’s loss was also significantly affected by the impairment losses on goodwill as a result of the impairment test, as more extensively discussed in the previous sections of this report.

In terms of statement of financial position aggregates, albeit in an extremely complex operating environment, there was a positive trend in loans and receivables with customers, which grew moderately for both companies, and in direct funding from customers, which also exhibited improvements.

The highlights of the operating performance and results of the other territorial banks belonging to the Group are provided below.

Credito Siciliano

STATEMENT OF FINANCIAL POSITION 31/12/2012 31/12/2011 % change

(in thousands of EUR)

Loans and receivables with customers 3,064,855 3,025,399 1.30

Other financial assets and liabilities 12,968 7,883 64.51

Equity investments 41,774 44,211 -5.51

Total assets 4,289,642 3,927,235 9.23

Direct funding from customers 3,421,619 3,338,603 2.49

Indirect funding from customers 951,517 1,017,726 -6.51

- of which Managed funds 512,235 566,936 -9.65

Total funding 4,373,136 4,356,329 0.39

Equity 192,955 209,326 -7.82

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INCOME STATEMENT DATA 2012 2011 % change

(in thousands of EUR) -

Net interest income 83,476 96,666 -13.64

Net fee and commission income 57,112 56,929 0.32

Operating income 143,833 159,520 -9.83

Operating costs (108,224) (111,130) -2.61

Operating profit 35,609 48,390 -26.41

Net impairment losses on loans and receivables and other financial assets (40,878) (27,435) 49.00

Pre-tax profit (loss) from continuing operations (5,811) 20,293 -128.64

Profit (Loss) for the year (5,756) 10,373 -155.49

Carifano

STATEMENT OF FINANCIAL POSITION 31/12/2012

(in thousands of EUR) Loans and receivables with customers 1,640,188

Other financial assets and liabilities 4,527

Equity investments 148

Total assets 2,095,692

Direct funding from customers 1,351,499

Indirect funding from customers 882,330

- of which Managed funds 211,105

Total funding 2,233,829

Equity 198,664

INCOME STATEMENT 2012 (in thousands of EUR)

Net interest income 31,140

Net fee and commission income 15,695

Operating income 47,262

Operating costs (36,166)

Operating profit 11,096

Net impairment losses on loans and receivables and other financial assets (13,422)

Goodwill impairment losses (85,370)

Pre- tax loss from continuing operations (87,548)

Income taxes 10,689

Post- tax loss from continuing operations (76,859)

Loss for the year (76,859)

The company became fully operational on 1 January 2012, with the transfer of the business unit consisting of the branch networks in the Regions of Marche and Umbria by Credito Artigiano. 2011 figures are not shown because they are not significant.

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THE PERFORMANCE OF STOCK MARKET QUOTATIONS

In 2012, the price of the Credito Valtellinese share was affected by the economic and financial situation, which bore down on both Italian and European bank shares. Banks are incurring the heavy consequences of the double recession and of the sovereign debt crisis and have met severe funding challenges, tackling the need to strengthen their capital and having been subjected to a market compression in profitability. These conditions severely penalised the sector’s performance, at least until last summer. Thereafter, the implementation by the ECB and by the EU of extraordinary measures to separate the sovereign debt crisis enabled to close the year 2012 containing losses with respect to the lows reached during the first seven months of the year. The price of the Credito Valtellinese share also substantially followed this trend. During the first quarter of 2012, the performance of the share rose above the market, albeit with reduced volumes. In the second quarter, instead, the trend was affected by the announcement of the early redemption of the 2009-2013 Convertible Bonds, followed by speculative pressures which led to high volatility. This circumstance, accompanied by the resumption of the downward trend in the Italian stock market, accelerated the contraction in the prices of the Credito Valtellinese share. In the third quarter, performance exceeded both the main comparable companies and the market as a whole, with average traded values returning in line with the volumes preceding the conversion of the Convertible Bonds. In the last part of the year, conversely, performance was negative compared to the market, with declining trade values compared to those recorded in the Italian stock market. The short-term and long-term volatility of Creval shares, while less marked than the comparables, exceeds the market as a whole.

The average price of the Credito Valtellinese share in 2012 was EUR 1.405, with a low of EUR 0.908 on 18 May and a maximum of EUR 2.574 on 22 February 2012. The average volumes traded daily on the market exceeded 969 thousand shares, confirming a good level of interest by investors and a good level of liquidity and price transparency of the Credito Valtellinese share, even in the most challenging times experienced in 2012.

During the year, the average capitalisation of Credito Valtellinese amounted to EUR 475 million, returning to approximately EUR 500 million at the end of the year.

The share recorded a negative performance of 19.7% - calculated on the basis of the average listed price in 2012 with respect to the price at the end of 2011, while the FTSE IT-Financial Index recorded a 4.5% decrease for the same period, as shown by the charts below.

The market performance of the share, as stated, was affected by the announcement and subsequent completion of the early full redemption with conversion of the convertible bonds into newly issued shares. Bondholders were given 14 newly issued shares at EUR 1.02 and a cash amount of EUR 35.72, plus an adjustment of EUR 0.32 per bond. The consequent dilution effect led to a sell-off on the market, mainly caused by institutional investors, which thus made it more challenging for the share to recover in the following months. Bondholders, who became shareholder as a result of the early conversion, benefited from a net capital increase of approximately 14 cents per share, considering that they received newly issued shares at EUR 1.02, whilst the stock price at the end of 2012 was EUR 1.166, realising an increase of approximately 14.3% in approximately seven months.

89

Credito Valtellinese share performance

Source: Bloomberg, adjusted values

90

CREDITO VALTELLINESE SHARE PERFORMANCE COMPARED WITH FTSE IT- ALL SHARE AND FTSE IT-FINANCIALS

(base 30 December 2011 = 100)

Source: Bloomberg, adjusted values

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THE MONITORING OF BANK RISKS AND THE INTERNAL CONTROL SYSTEM OF THE GROUP

The clear identification of risks to which the Company is potentially exposed constitutes the essential prerequisite for a knowledgeable assumption of said risks and their effective management, also based on appropriate mitigation and transfer tools and techniques.

The set of company risks is monitored within a precise organisational context, defined in the Group, according to a model that integrates control methods at various levels, all converging with the objectives of ensuring efficiency and effectiveness of operating processes, safeguarding the integrity of corporate assets, protecting from losses, ensuring reliability and integrity of information and verifying proper execution of activities with respect to the internal and external regulations.

In line with its operational characteristics, the Bank and the Group are mainly exposed to credit risk and other types of operating risks that are typical of the banking business.

For a full description of the organisational structure and operational procedures to oversee the different risk areas and the methods used for the measurement and prevention of such risks, please refer to Part E of the Notes to the financial statements - Information on risks and related hedging policies.

For a description of the overall approach of the Internal Auditing System, reference should be made to the Report on Corporate Governance and Ownership Structures pursuant to Article 123-bis of the Consolidated Law on Finance.

The document is available at the Company’s website: http://www.creval.it –Investor relations section - Information for shareholders and Corporate Governance.

Information on going concern assumptions, financial risk, impairment testing and uncertainties in the use of estimates

With reference to the Bank of Italy, Consob and Isvap Documents no. 2 of 6 February 2009 and no. 4 of 3 March 2010, pertaining to the information to be provided in the financial reports on business outlook, with particular reference to going concern assumptions, financial risk, impairment testing and uncertainties in the use of estimates, the Board of Directors confirms its reasonable expectation that the Bank and the Group will remain a going concern in the foreseeable future and, consequently, the separate and consolidated 2012 financial statements were prepared on a going concern basis.

The Board of Directors also confirms that the financial position and result of operations have brought to light no symptoms that could imply the uncertainty of going concern assumptions.

As regards the requirements relating to financial risks, impairment testing and uncertainties in the use of estimates, please refer to the information provided in this report and/or in the Notes to the Financial Statements, within the discussion of the related items.

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RELATED PARTY TRANSACTIONS

The matter is mainly regulated by Article 2391-bis of the Italian Civil Code, whereby the governing bodies of companies resorting to the equity market adopt, according to general principles indicated by Consob, rules that assure “the transparency and substantial and procedural correctness of related party transactions” carried out directly or through subsidiaries. The control body must oversee compliance of the adopted rules and reports thereon in the report to the shareholders’ meeting.

The Consob, with resolution no. 17221 of 12 March 2010, implementing the delegation contained in Article 2391-bis of the Italian Civil Code, approved the “Related Party Transaction Regulation” (hereafter also the “Consob Regulation”), subsequently amended with resolution no. 17389 of 23 June 2010, which defines the general principles with which the companies resorting to the equity market must comply when setting the rules for ensuring transparency and substantive and procedural correctness in related party transactions.

In relation to the specific activity, the Bank must also comply with the provisions of Article 136 of the Consolidated Banking Act with regard to the obligation of bank officers.

In accordance with the Consob Regulation, on 9 November 2010 the Board of Directors of Credito Valtellinese, with the favourable opinion of a specifically established committee, consisting solely of Independent Directors, approved the “Procedures for related party transactions” (hereafter, the “OPC Procedures”).

The document was then published on the Website, as prescribed by the specific regulations, at the page http://www.creval.it/investorRelations/cv_corporateGovernance.html.

The OPC Procedures, in force since 1 January 2011, establish in detail the procedural and information obligations the Bank must meet within the management of related party transactions carried out directly or through subsidiaries.

In particular, the OPC Procedures:

a) identify the most significant transactions;

b) identify the cases of partial or complete exclusion from the enforcement of the decision-making procedures (transactions involving small amounts, ordinary transactions completed at conditions equivalent to market or standard ones, transactions to which Article 136 of the Consolidated Law on Banking applies);

c) exclude from the enforcement of the provisions of the OPC Consob Regulation the transactions carried out with or between subsidiaries, even jointly, and transactions with associates provided that there are no significant interests of other related parties.

In this regard, concerning intragroup transactions in particular, it is specified that the relations with other companies in the Credito Valtellinese banking group were established within a consolidated “network-company” organisational model - as widely illustrated in this Report - whereby each legal entity focuses solely on its own core business, in a business framework that enables effective and efficient management of overall Group resources.

On this basis, the set of contractual dealings with the specialised finance companies and special purpose companies of the Group regard support and consulting services and specialised services in support of current operations.

The economic effects of such interbank transactions are regulated on the basis of specific contractual agreements which, with the main objective of optimising synergies and economies of scale and purpose at Group level, refer to long-term objective and constant parameters, distinguished by substantial transparency and fairness. Again in the year in question, the

93

quantification of fees for services was defined and formalised according to tested parameters that take into account the effective utilisation by each user company.

The Board of Directors is exclusively responsible for the definition of intragroup contractual agreements and approval and possible amendment of the related economic conditions.

For the transactions of greatest importance, as defined in the aforesaid Regulation, carried out during the financial year, the procedural regulations and the reporting obligations specified by the OPC Procedures were applied.

For these transactions, listed below, please see the disclosure provided in other parts of this Report, as well as the Information documents drawn up pursuant to Article 5 of the OPC Regulations and published on the website of the company at: http://www.creval.it/investorRelations/cv_documentiInformativiOPC.html - 26.03.2012 - Information document as per Article 5 of Consob Regulation 17221/2010 OPC. Intragroup merger of Credito Artigiano S.p.A into Credito Valtellinese S.c.

Detailed information on intragroup and related party transactions, including information on the effects of transactions or existing positions with such counterparties on the statement of financial position and on the income statement, accompanied by summary tables of such effects, are contained in Part H of the Notes to the Financial Statements.

No atypical or unusual transaction, also with Group companies or with related parties - as defined according to Article 2427, second paragraph, of the Italian Civil code, or according to the international accounting standards adopted by the European Union - that had a significant influence on the financial position or on the results of operation of the companies was carried out during the year.

For complete disclosure, it should be further noted that on 12 December 2011 the Bank of Italy promulgated the 9th update to Circular 263 of 27 December 2006 (hereafter also the “Bank of Italy Regulation”), which introduces new prudential supervisory provisions for banks, prescribing - among others - a new and specific regulation in relation to risk assets and conflicts of interest with respect to Associated Parties, term that includes, in addition to related parties as defined by Consob, also the parties connected to the related parties, as they are identified by said provisions. This regulation therefore complements the provisions of the Consob Regulations.

During the year, therefore, the Credito Valtellinese Group adopted - in accordance with the combined provisions of the aforesaid regulations - the new “Procedures for Related party transactions and Associated Parties”, which regulate the safeguards and procedures adopted to carry out related party transactions and associated parties. In accordance with current regulations, the document has been published on the Website, at http://www.creval.it/investorRelations/cv_corporateGovernance.html.

These procedures, in force since 31 December 2012, were also adopted by all banks of the Credito Valtellinese Group and in particular, in addition to the Parent, by Credito Siciliano, Carifano and Mediocreval.

94

OTHER INFORMATION

Research and Development Work

For information about the research and development work carried out by the Bank, please refer to other parts of this Report and of the Notes to the Financial Statements, in particular to the chapter called “Main aspects of the commercial activity” with regard to readying new products and services for customers and upgrading the internal procedures in view of changes in reference regulations, and to Part E of the Notes to the Financial Statements with regard to research work aimed at the establishment of risk measurement systems, in particular for rating models for the analysis of credit positions.

Treasury shares

Reference is made to the resolution with which the Ordinary Shareholders’ Meeting of Credito Valtellinese, convened on 28 April 2012, renewed the authorisation to the Board of Directors to carry out, in compliance with Article 12 of the Articles of Association and with the regulations in force, the repurchase of treasury shares.

The proposal approved by the Shareholders’ Meeting aims mainly at promoting circulation of the share within standard brokerage activities and requires that the transactions carried out on treasury shares are carried out based on the methods and in respect of the limits established by the Shareholders’ Meeting.

It should also be noted that on 13 March 2012, with operating effectiveness from 29 March 2012, the appointment to support the liquidity of the Credito Valtellinese ordinary shares was renewed to Equita Sim S.p.A. pursuant to Consob Resolution no. 16839 of 19 March 2009.

In this regard, the following transactions were carried out in 2012:

- 3,066,796 shares purchased for EUR 3,387,408.90;

- 2,854,236 shares sold for EUR 3,182,625.77.

As a result of these purchase and sale transactions, at the end of 2012 Credito Valtellinese held in its portfolio 1,250,060 ordinary shares issued by the Bank, i.e. 0.28% of the total number of shares as at that date.

Information on ownership structures

For information on the ownership structures of Credito Valtellinese, prescribed by Article 123-bis of Italian Legislative Decree no. 58 of 24 February 1998 (Consolidated Law on Finance), reference should be made to the Report on Corporate Governance and the ownership structures, also through the bank’s Internet site at the address http://www.creval.it - Investor relations - Information for Stakeholders and Corporate governance sector.

Adoption of opt-outs per Articles 70 and 71 of the Issuers’ Regulations

On 29 January 2013, the Bank chose the opt-outs per Article 70, Paragraph 8 and Article 71, Paragraph 1-bis, of the Regulation approved with Consob resolution no. 11971 of 14 May 1999 as subsequently amended (Issuers’ Regulation), exercising its right to waiver the obligations to publish the information documents prescribed on the occasion of significant mergers, demergers, capital increases by contributions in kind, acquisitions and sales.

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Opting for tax consolidation

The Parent Credito Valtellinese and the subsidiaries Credito Siciliano, Mediocreval, Aperta Fiduciaria, Creset and Stelline, all subsidiaries in accordance with Article 2359 of the Italian Civil Code, have renewed the option, for the 2013 - 2015 years, per Article 117, Paragraph 1 of the Income Tax Consolidation Act, for group taxation, and they have adopted the related regulations governing its implementation between the parties.

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EVENTS AFTER THE REPORTING PERIOD After the reporting date, on 25 January 2013, the Board of Directors of the Bank approved the merger into the Parent of Deltas Società consortile per Azioni, a subsidiary of Credito Valtellinese, in accordance with Article 2505 of the Italian Civil Code.

The merger, authorised by the Bank of Italy on 6 December 2012, was also approved - on 22 January 2013 - by the Board of Directors of the company to be merged.

The execution of the merger deed and the date of validity of its legal effects is expected to be 31 March 2013.

Additionally, on 1 March 2013 a Framework Agreement was signed with Istifid Società Fiduciaria e di Revisione S.p.A., calling for the sale of Aperta Fiduciaria to Istifid for a price in line with the carrying amount of the equity investment in the financial statements, subject to possible adjustment on the basis of the financial position and performance of Aperta Fiduciaria on the effective date of the transaction, expected to be 1 July 2013.

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BUSINESS OUTLOOK

The tensions on the sovereign debt markets of the Euro area, with their impact on credit conditions, have relented, thanks to the monetary policy interventions ordered by the Governing Council of the EBC, whilst growth dynamics, on the other hand, remain uncertain. The evolution of the global scenario, however, also has some upside potential, in that the US economy may recover more strongly and better overall conditions may prevail in the Euro area as a result of the implemented structural reforms. The aforementioned scenarios enable to forecast a trend reversal and the resumption of growth only from the second half of 2013, with a gradual progression at a low pace and in an environment still characterised by concern and uncertainty, whilst the main forecast scenarios expect the recovery with sharp and significant growth only in 2014.

Although there are some signs that the international environment may be settling and consolidating, nonetheless the global scenario remains characterised by weakness and uncertainty, which negatively affect growth outlook for the future, with persistently stalled consumption expenditures and a modest improvement in investments, which - by enduring - could foster the cyclical reversal, with the consequent recovery of demand in the Euro area.

The public finance consolidation process and the introduction of structural reforms aimed at restarting the Italian economy indicated, during the year, the path to follow to get out of the long financial crisis, to confirm the consolidation action and enhance the economy’s growth mechanism.

The unanimous, joint action of domestic and European policies, the re-balancing of public accounts and the will to strengthen competitiveness will be decisive for the achievement of the hoped-for stability.

In such a contingent and structural scenario, the bank’s management will remain focused on the rationalisation of productive processes and the requalification of the distribution organisations, on stringent cost control actions, also through possible additional initiatives for the simplification of the Group’s corporate structure, and on the management of risks, mainly credit risk, in order to allow consolidation of adequate levels of profitability.

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THE PROPOSAL TO COVER THE LOSS FOR THE PERIOD

Dear Shareholders,

We hereby submit for your approval the financial statements as at 31 December 2012, comprising the statement of financial position, income statement, statement of comprehensive income, statement of changes in equity, statement of cash flows and Notes to the Financial Statements, together with related attachments, and the Report on Operations.

We thus submit for your approval the proposal for the coverage of the loss for 2012, i.e. EUR 316,604,991.40, set out below, noting that available reserves at 31 December 2012 - as shown in the Statement per Article 2427, Paragraph 1, no. 7-bis of the Italian Civil Code - amount to EUR 727,014,656.58.

We propose to cover the loss for 2012 using the following reserves:

Currency revaluation reserves 20,629,308.83 - of which 1975 currency revaluation reserves 5,088.47 - of which 1983 currency revaluation reserves 10,957,552.52 - of which 1991 currency revaluation reserves 9,666,667.84 Reserves eligible for tax relief 23,629,112.33 - of which Reserve per art.1,p.469-476 Law 266/2005 2,698,684.10 - of which Reserve per art.1,p.469-476 Law 266/2005 reconstituted 19,720,894.20 - of which Reserve per Law 72/1983 reconstituted 111,954.38 - of which Reserve per Law 342/2000 reconstituted 353,880.65 - of which other reserves eligible for tax relief (included in “Other reserves” in the Statement of distribution and availability of equity items) 743,699.00 Other reserves 18,060,654.73 Reserve per art. 13 p.6 - Legislative Decree 124/93 103,929.50 Reserve available from transactions under common control 1,132,231.44 Other reserves not eligible for tax relief (included in “Other reserves” in the Statement of distribution and availability of equity items) (art. 2427 Par. 7-bis of the Italian Civil Code) 16,824,493.79

Share premium reserve 254,285,915.51

Total 316,604,991.40

Lastly, we submit to the Shareholders’ Meeting the coverage, through the use of the Extraordinary Reserve, of the negative equity item of EUR 130,025.40 arisen as a result of amendments to IAS 19 - Employee Benefits - applied from the 2012 financial statements and to the related retrospective effects provided by IAS 8 - Accounting Policies, Changes in Accounting Estimates and Errors.

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CLOSING REMARKS

Dear Shareholders,

In a year characterised by a highly perturbed global environment, the traditional acknowledgements that conclude the report on operations are an expression of heartfelt and authentic gratitude towards all those who, for various reasons, have interacted with the Credito Valtellinese Group with trust and confidence.

Therefore, we would first of all address the Shareholders, who have supported us and encouraged us in the pursuit of the provisions of the Articles of Association and in our aspiration always to be a Co-operative Bank, open and attentive to the requests and demands of the local communities and of the economic and social fabric of the areas where the Bank operates.

We equally thank also our Customers and the local Institutions and Operators, for the unanimous contribution provided to the bank in the achievement of its results, but also for the wealth of ideas and relationships, support and participation that accompanied the life of the Bank during the year.

We wish to thank in particular the Managing Directors and the Top Managers for their hard work and dedication in the performance of their duties and in the pursuit of the identified strategic goals.

We also consider it our duty to extend our heartfelt thanks to all Employees, at all levels, who work for the Banks and Companies of the Group, for going about their daily duties with their loyalty and dedication and their professionalism, in a highly turbulent environment, and for implementing the complex corporate reorganisation project with complete awareness and responsibility.

We are grateful to the members of the Board of Statutory Auditors, for their contribution in assisting the Board of Directors, their professionalism and the effort they expended in the performance of their duties. We equally thank the Auditing Company that performed its specific duties with a high degree of professionalism.

Lastly, we wish to express our heartfelt esteem to the Supervisory Authorities, who accompanied the Bank during the year with a fruitful collaboration, and for the trade Associations, who supported our Bank with competence and constancy of effort.

The Board of Directors

Sondrio, 19 March 2013

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Consolidated financial statements of the Credito Valtellinese Group

101

CONSOLIDATED FINANCIAL STATEMENTS

102

CONSOLIDATED STATEMENT OF FINANCIAL POSITION (in thousands of EUR)

ASSETS 31/12/2012 31/12/2011

10. Cash and cash equivalents 227,330 181,775

20. Financial assets held for trading 106,628 106,414

40. Available-for-sale financial assets 3,489,800 1,412,554

50. Held to maturity investments 304,326 507,555

60. Loans and receivables with banks 1,630,744 1,618,517

70. Loans and receivables with customers 22,007,837 22,330,187

100. Equity investments 241,530 219,315

120. Property, equipment and investment property 474,283 471,065

130. Intangible assets 354,834 663,933

of which:

- goodwill 305,492 609,498

140. Tax assets: 625,116 499,872

a) current 106,966 81,362

b) deferred 518,150 418,510

b1) set forth in Italian Law 214/2011 386,025 189,205

160. Other assets 433,635 400,303

Total assets 29,896,063 28,411,490

LIABILITIES AND EQUITY 31/12/2012 31/12/2011

10. Due to banks 4,545,536 3,171,929

20. Due to customers 16,054,685 15,418,674

30. Securities issued 6,047,965 6,661,927

40. Financial liabilities held for trading 15,671 9,527

60. Hedging derivatives 231,186 159,608

80. Tax liabilities: 123,242 135,288

a) current 113,423 109,620

b) deferred 9,819 25,668

100. Other liabilities 755,964 601,554

110. Post-employment benefits 63,912 58,305

120. Provisions for risks and charges: 70,827 59,172

a) pension and similar obligations 34,773 29,991

b) other provisions 36,054 29,181

140. Valuation reserves -88,736 -210,757

160. Equity instruments 197,825 197,825

170. Reserves 125,395 59,326

180. Share premium reserve 554,648 822,116

190. Share capital 1,516,699 945,679

200. Treasury shares (-) -1,518 -2,474

210. Equity attributable to non-controlling interests (+/-) 5,201 271,040

220. Profit (Loss) for the year -322,439 52,751

Total liabilities and equity 29,896,063 28,411,490

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CONSOLIDATED INCOME STATEMENT (in thousands of EUR)

ITEMS 2012 2011

10. Interest and similar income 1,008,139 925,697

20. Interest and similar expense (530,043) (400,304)

30. Net interest income 478,096 525,393

40. Fee and commission income 309,529 315,904

50. Fee and commission expense (43,939) (27,709)

60. Net fee and commission income 265,590 288,195

70. Dividends and similar income 299 1,647

80. Net trading income 5,216 5,902

90. Net hedging expense (311) (988)

100. Profit on sale or repurchase of: 27,139 4,505

b) available-for-sale financial assets 23,586 992

d) financial liabilities 3,553 3,513

120. Total income 776,029 824,654

130. Net impairment losses on: (391,249) (171,929)

a) loans and receivables (354,492) (167,274)

b) available-for-sale financial assets (34,334) (4,054)

d) other financial transactions (2,423) (601)

140. Net financial income 384,780 652,725

180. Administrative expenses: (548,693) (563,893)

a) personnel expenses (321,225) (333,694)

b) other administrative expenses (227,468) (230,199)

190. Net accruals to provisions for risks and charges (6,838) (6,225)

200. Depreciation and net impairment losses on property, equipment and investment property (22,576) (22,955)

210. Amortisation and net impairment losses on intangible assets (11,390) (11,316)

220. Other operating net income 66,111 64,280

230. Operating costs (523,386) (540,109)

240. Net gains on investments 16,628 17,265

260. Goodwill impairment losses (302,570) (102,190)

270. Net gains (losses) on sales of investments (71) 912

280. Pre-tax profit (Loss) from continuing operations (424,619) 28,603

290. Income taxes 80,063 31,873

300. Post-tax profit (Loss) from continuing operations (344,556) 60,476

310. Post-tax profit from discontinued operations 26,430 4,784

320. Profit (Loss) for the year (318,126) 65,260

330. Profit for the year attributable to non-controlling interests (4,313) (12,509)

340. Profit (Loss) for the year attributable to the owners of the parent (322,439) 52,751

Basic earnings (loss) per share (0.91) 0.13

Diluted earnings (loss) per share (0.91) 0.13

Basic earnings (loss) per share (from continuing operations) (0.98) 0.11

Diluted earnings (loss) per share (from continuing operations) (0.98) 0.11

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CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(in thousands of EUR)

Items 2012 2011

10. Profit (Loss) for the year (318,126) 65,260

Other comprehensive income net of income taxes

20. Available-for-sale financial assets 124,414 (222,126)

90. Actuarial gains (losses) on defined benefit plans (10,291) 1,398

100. Portion of valuation reserves of equity-accounted investees 8,527 (4,647)

110. Total other comprehensive income net of income taxes 122,650 (225,375)

120. Comprehensive income (Item 10+110) (195,476) (160,115)

130. Consolidated comprehensive income attributable to non-controlling interests (4,428) (15,748)

140. Consolidated comprehensive income attributable to the owners of the parent (199,904) (175,863)

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STATEMENT OF CHANGES IN CONSOLIDATED EQUITY (in thousands of EUR)

Equity

Balances as at

31/12/2011

Change

in opening balance

s

Balances as

at 1/1/2012

Allocation of prior year

profit

Changes during the year

Equity

attributable to the owners of the parent as

at 31/12/2012

Equity attributable to

non-controlling interests as at

31/12/2012

Changes in

reserves

Equity

Comprehensive income

31/12/2012

transactions

Reserves

Dividends and other

allocations

Issue of

new shares

Purchase of treasury

shares

Extraordinary dividends

distribution

Chang

e in equity instru

ments

Derivatives on treasury

shares

Stock

options

Capital:

a) ordinary shares 1,050,201 1,050,201

-101,631 571,020 1,516,699 2,891

b) other

shares

Share premium

reserve 904,653 904,653 -81,450 -267,468 554,648 1,087

Reserves:

a) of profits 127,232 127,232 21,975 -35,859 5,627 -790 123,331 -5,146

b) other 2,582 2,582 1,495 2,064 2,013

Valuation reserves -209,773 -209,773 -1,570 122,650 -88,736 43

Equity instruments 197,825 197,825 197,825

Treasury shares -2,474 -2,474 6,206 -5,250 -1,518

Profit (loss) for the year 65,260 65,260 -21,975 -43,285 -318,126 -322,439 4,313

Equity attributable to the owners

of the parent 1,864,466 1,864,466 -33,111 41,078 315,385 -5,250 -790 -199,904 1,981,874

Equity

attributable to non-

controlling interests 271,040 271,040 -10,174 -260,093 4,428 5,201

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Equity

Balances as at

31/12/2010

Change

in opening balance

s

Balances as

at 1/1/2011

Allocation of prior year profit

Changes during the year

Equity

attributable to the owners of the parent as at

31/12/2011

Equity

attributable to non-

controlling interests as at

31/12/2011

Changes in

reserves

Equity

Comprehensive income

31/12/2011

transactions

Reserves

Dividends and other

allocations

Issue of

new shares

Purchase of treasury

shares

Extraordinary dividends

distribution

Change in equity instrume

nts

Derivatives on treasury

shares

Stock

options

Capital: a) ordinary

shares 933,671 933,671 -4,390 120,920 945,679 104,522 b) other shares

Share premium reserve 941,825 941,825 -13,698 -23,474 822,116 82,537

Reserves:

a) of profits 90,871 630 91,501 25,089 -43,004 3,657 49,989 58,750 68,482

b) other 2,724 2,724 -142 576 2,006

Valuation reserves 40,547 -923 39,624 -24,022 -225,375 -210,757 984

Equity instruments 197,825 197,825 197,825

Treasury shares -2,327 -2,327 8,983 -9,130 -2,474

Profit (loss) for the year 81,714 293 82,007 -25,089 -56,918 65,260 52,751 12,509

Equity attributable

to the owners of the parent 2,002,868 2,002,868 -48,058 -51,545 110,086 -9,245 36,223 -175,863 1,864,466

Equity attributable to non-

controlling interests 283,982 283,982 -8,860 -33,711 115 13,766 15,748 271,040

The column “Change in opening balances” shows the effects deriving from the retrospective application of the revised version of

IAS 19 - Employee benefits.

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CONSOLIDATED STATEMENT OF CASH FLOWS - Direct method (figures in thousands of EUR)

2012 2011

A. OPERATING ACTIVITIES

1. Cash flow from operating activities 251,247 188,190

- interest income received (+) 1,012,143 924,747

- interest expense paid (-) -464,062 -380,831

- dividends and similar income (+) 299 1,647

- net fee and commission income (+/-) 254,856 292,009

- personnel expenses (-) -325,838 -335,418

- other costs (-) -181,225 -230,512

- other revenue (+) 115,780 82,690

- taxes (-) -164,699 -170,926

- costs/revenue related to disposal groups net of tax (+/-) 3,993 4,784

2. Cash flow generated/used by financial assets -2,009,246 -1,862,675

- financial assets held for trading 4,111 115,951

- available-for-sale financial assets -1,925,998 -884,285

- loans and receivables with customers -43,075 -479,762

- loans and receivables with banks: on sight 165,753 -103,165

- loans and receivables with banks: other -170,334 -429,991

- other assets -39,703 -81,423

3. Cash flow generated/used by financial liabilities 1,552,652 1,837,381

- due to banks: on sight 94,440 29,723

- due to banks: other 1,259,931 1,247,547

- due to customers 608,449 401,375

- securities issued -619,790 52,493

- financial liabilities held for trading 3,304 10

- other liabilities 206,318 106,233

Cash flow from (used in) operating activities -205,347 162,896

B. INVESTING ACTIVITIES

1. Cash flow generated by 235,181 38,228

- sales of equity investments 796 20,353

- dividends from equity investments 3,147 3,970

- sales/redemptions of held to maturity investments 202,000 10,000

- sales of property, equipment and investment property 3,224 2,203

- sale of subsidiaries and business units 26,014 1,702

2. Cash flow used for -45,459 -247,929

- purchase of equity investments -707 -

- purchase of held to maturity investments - -140,295

- purchase of property, equipment and investment property -17,742 -18,030

- purchase of intangible assets -6,297 -4,950

- purchase of subsidiaries and business units -20,713 -84,654

Cash flow from (used in) investing activities 189,722 -209,701

C. FINANCING ACTIVITIES

- issue/repurchase of treasury shares 104,465 97,184

- dividend distribution and other -43,285 -56,918

Cash flow from financing activities 61,180 40,266

NET CASH FLOW GENERATED/USED DURING THE year 45,555 -6,539 Key: (+) generated (-) used;

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RECONCILIATION

Financial statement items 2012 2011

Cash and cash equivalents at the beginning of the year 181,775 188,314

Net liquidity generated/used during the year 45,555 -6,539

Cash and cash equivalents at the end of the year 227,330 181,775

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CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS

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PART A - ACCOUNTING POLICIES

A.1 - GENERAL INFORMATION SECTION 1 - STATEMENT OF COMPLIANCE WITH INTERNATIONAL FINANCIAL REPORTING STANDARDS

Pursuant to Article 4 of Italian Legislative Decree no. 38 of 28 February 2005, the consolidated financial statements of the Credito Valtellinese Group have been drawn up according to the lFRS issued by the International Accounting Standards Board (IASB) and endorsed by the European Union, including the related interpretations of the International Financial Reporting Interpretations Committee (lFRIC), as set forth by EC Regulation no. 1606 of 19 July 2002.

The financial reporting standards applied in preparing these consolidated financial statements are those in effect as at 31 December 2012 except for IAS 19 - Employee benefits for which the Group used the option to apply early the revised version approved with Regulation no. 475/2012 as shown below. SECTION 2 - BASIS OF PREPARATION The consolidated financial statements comprise the Statement of financial position, Income Statement, Statement of Comprehensive Income, Statement of changes in equity, Statement of cash flows and Notes to the financial statements and are accompanied by the report on operations.

The amounts reported in the Consolidated Financial Statements, the Notes to the financial statements and the Report on operations, are in thousands of euro, unless indicated otherwise. The financial statements and the notes to the financial statements show, in addition to the amounts for the reporting period, also the comparatives as at 31 December 2011.

The consolidated financial statements as at 31 December 2012 have been prepared in compliance with the instructions issued by the Bank of Italy within the scope of its regulatory function over the technical structure of financial statements of banks and financial institutions as provided by Legislative Decree 38/05 “Instructions for the preparation of the separate and consolidated financial statements of banks and financial companies that are parents of banking groups” (Provision of 22 December 2005 - Circular no. 262 and subsequent updates).

In 2012, with the letter of the Bank of Italy no. 46586/13 of 15 January 2013, Circular no. 262 “Banking financial statements: formats and guidelines” has been subject to some minor changes in order to acknowledge:

- the amendment to the IFRS 7 standard, introduced with regulation no. 1205/2011;

- detailed qualitative and quantitative information on purchased impaired loans (to be shown in the tables breaking down loans and receivables with customers of Part B and in Part E - “Section 1 - credit risk”).

With reference to the amendments made to IFRS 7, the amendment introduced requires an additional disclosure with regard to the transferred assets that are not entirely derecognised from the financial statements; the group must disclose information that enables users of its financial statements to understand the relationship between transferred financial assets that are not derecognised and the associated liabilities. If the transferred assets are entirely derecognised, but the group maintains continuing involvement, information must be disclosed

111

that enables users of the financial statements to evaluate the nature of, and risks associated with, the continuing involvement in derecognised financial assets. The Group does not have assets with these characteristics, hence there was no impact on the presentation of the financial statements of the Group.

Moreover, with the letter of the Bank of Italy no. 0677311/12 of 7 August 2012, some detailed information was introduced on deferred tax assets set forth in Italian Law no. 214/11. These details are aligned with the clarifications provided in the joint document of the Bank of Italy, Consob and Isvap no. 5 of 15 May 2012.

Article 2 of Italian Law Decree no. 255 of 29 December 2010, (the so-called “mille proroghe” decree) converted, with amendments, by Italian Law no. 10 of 26 February 2011, allows to transform into tax credits the deferred tax assets recorded in the financial statements, upon the occurrence of certain conditions. The provision was amended finally by Italian Law no. 214 of 22 December 2011.

The regulation that allows to transform deferred tax assets (or DTA) provides that, upon the occurrence of losses for the period recognised in the separate financial statements, the DTA are transformed into tax credits. The transformation works in an amount corresponding to the portion of the loss for the period that corresponds to the ratio between the DTA and the amount of share capital and reserves. The portion of DTA that is transformed in DTA from tax losses is converted into tax credit by disabling the limits of recoverability contemplated for tax losses.

In order to allow the reader of the financial statements to appreciate the different nature of this taxation compared to other deferred tax assets, specific disclosure must be provided of the assets set forth in Italian Law no. 214/11 under the sub-item “Deferred tax assets” of the statement of financial position and its changes in the period, with a special reference to deferred tax assets transformed into tax credits during the financial year.

The consolidated financial statements were drawn up by applying the general drafting standards provided under IAS 1, the accounting policies illustrated in Part A.2 of the notes to the financial statements and in compliance with the general provisions included in the framework for the preparation and presentation of financial statements issued by the International Accounting Standards Board (IASB).

In 2012, the European Commission published the following regulations for the endorsement of the new international financial reporting standards and for the amendments to the financial reporting standards already in force:

- Regulation no. 475/2012 that adopts the amendments to IAS 1 Presentation of financial statements and IAS 19 Employee benefits (compulsory as from 1 January 2013);

- Regulation no. 1254/2012 that adopts IFRS 10 Consolidated financial statements, IFRS 11 Joint Arrangements, IFRS 12 Disclosure of interests in other entities as well as IAS 27 Separate Financial Statements and IAS 28 Investments in associates and joint ventures (compulsory as from 1 January 2014);

- Regulation no. 1255/2012 that adopts the amendments to IFRS 1 First-time Adoption of International Financial Reporting Standards - Severe hyperinflation and removal of fixed dates for first-time adopters, amendments to IAS 12 Income taxes - Deferred taxes:

112

recovery of underlying assets and IFRS 13 Fair value measurement (compulsory as from 1 January 2013);

- Regulation no. 1256/2012 that adopts amendments to IFRS 7 Financial Instruments: Additional disclosures - Asset and liability offsetting and IAS 32 Financial Instruments: Presentation - Asset and liability offsetting (compulsory as from 1 January 2013).

As illustrated above, the Group used the option to apply early the revised version of IAS 19 Employee benefits as from these financial statements.

The main objective in issuing a new financial reporting standard is to facilitate the understandability and the comparability of the financial statements.

The main new element of the revised version of IAS 19 is represented by the provision of a single accounting method for actuarial gains and losses arising from measurement of defined benefit plans. In fact, compared to the previous version of the standard, the possibility of recognising immediately in the income statement all actuarial gains and losses - choice so far made by the Group - was abolished; they must be recorded under a specific equity item to be shown in the statement of comprehensive income.

The other new issues and amendments to the IAS/IFRS were not adopted in advance and therefore had no impact on the financial position (as at 31 December 2012) and on the result of operations of the Group for the year ended.

The 2011 financial statements were restated to reflect retroactively the application of the amendments to IAS 19 as requested by IAS 8. Accordingly actuarial gains/losses were reclassified from item “180 a) Personnel expenses”, net of the relevant tax included in item “290.Income taxes”, to item “140.Valuation reserves”. The reclassification did not impact on the carrying amount of equity, in that the actuarial gains/losses were recorded in an equity reserve instead of being recorded as an offsetting item to profit.

The Statement of Financial Position did not show the financial position as at 1 January 2011, as required by IAS 1, par. 39, in that the early application of the revised IAS 19 had no impact on the opening balances at that date, but only a reclassification within the Equity items between item “170 Reserves” and item “140 Valuation reserves”.

In 2012, the application of the new standard mainly determined the recognition in equity of actuarial losses recognised in the period of EUR 10,291 thousand (net of tax) that, based on the representation provided by the previous accounting method, would have been recognised in the income statement.

The income statement figures of the corresponding period were restated, in compliance with what was required by IFRS 5, to reflect retroactively the economic effects deriving from the classification as “assets held for sale” in 2012 of the subsidiaries Aperta SGR and Lussemburgo Gestioni S.A.. Costs and revenue related to assets held for sale, net of intragroup items, were reported separately in the income statement under “Post-tax profit from discontinued operations”.

The following table shows the items involved in the reclassification as at 31 December 2011 and the related quantitative impacts:

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The Statement of cash flows, the Statement of comprehensive income and the tables of the notes to the financial statements of 2011 were restated to take account of costs/revenue related to assets held for sale.

In these financial statements, there were no departures from the application of the IFRS. The Report on operations and the Notes to the Financial Statements report the information requested by the IFRS, laws, the Bank of Italy and Consob, in addition to other non-obligatory information deemed necessary to provide a truth and fair view of the Group’s situation. Content of the financial statements and the notes to the financial statements

The consolidated financial statements and the Notes to the Financial Statements were prepared in compliance with the “Instructions for the preparation of the separate financial statements and of the consolidated financial statements of banks and financial companies that are parents of banking groups” contained in Circular no. 262/2005 of Bank of Italy and following updates.

In the Statement of financial position, Income Statement and Statement of Comprehensive Income, drafted according to Bank of Italy’s regulation, the items equal to zero for the corrent year and for the previous year have not been included. Expenses are preserved in brackets in the Income Statement while there is no sign in front of revenues. In the Statement of Comprehensive Income, the negative amounts are reported in brackets.

The Statement of Comprehensive Income presents the profit (loss) for the period as well as the other income components that are not recognised in the income statement but are recorded as a change in the equity valuation reserves.

The Statement of Changes in Equity presents the breakdown and changes in equity during the current year and the previous one. The statement reports the break down of the share capital, the issue premiums, the reserves and the profit (loss) among the portions attributable to the owners of the parent and to non-controlling interests.

The Statement of Cash Flows has been prepared according to the direct method, in which the main gross cash collection and disbursement items are displayed. The cash flows for the year are divided into operating, investing and financing activities. In the statement, the flows related to the liquidity generated during the period are reported with no sign, while those utilised are preceded by the minus sign.

LIABILITIES AND EQUITY IAS 19 reclassifications 31/12/2011 Restated

140. Valuation reserves -211,127 370 -210,757

170. Reserves 58,417 909 59,326

220. Profit (Loss) for the year (+/-) 54,030 -1,279 52,751

31/12/2011

INCOME STATEMENT ITEMS IFRS 5 reclassifications IAS 19 reclassifications

40. Fee and commission income 324,926 -9,022 315,904

50. Fee and commission expense (28,818) 1,109 (27,709)

180. Administrative expenses: (564,337) (563,893)

a) personnel expenses (333,416) 1,650 (1,928) (333,694)

b) other administrative expenses (230,921) 722 (230,199)

200. Depreciation and net impairment losses on property,equipment and investment property (22,957) 2 (22,955)

220. Other operating net income 64,300 -20 64,280

290. Income taxes 30,568 775 530 31,873

310. Post-tax profit (loss) from discontinued operations 0 4,784 4,784

330. Profit (loss) for the year attributable to non-controlling interests (12,628) 119 (12,509)

340. Profit (loss) for the year attributable to the owners of the parent 54,030 (1,279) 52,751

2011 2011 Restated

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The notes to the financial statements do not include sections pertaining to items equal to zero in 2012 or the previous year.

In Parts A and B of the Notes to the Financial Statements, fair value measurements are classified according to a series of levels reflecting the significance of the valuation input. The levels have the meaning below:

- “level 1” - use of prices (without adjustments) recorded on an active market according to IAS 39;

- “level 2” - use of input other than listed prices above, directly observable (prices) or indirectly observable (deriving from prices) on the market;

- “level 3” - use of input not based on observable market data. Business performance and outlook (Bank of Italy-Consob-Isvap document no. 2 of 6 February 2009 and no. 4 of 3 March 2010)

With reference to the Bank of Italy, Consob and Isvap Document no. 2 of 6 February 2009, as well as to the following Document no. 4 of 3 March 2010, relevant to the information to be provided in the financial statements on business outlook, with particular reference to going concern assumptions, financial risk, impairment testing and uncertainties in the use of estimates, the Credito Valtellinese Directors confirm their reasonable expectations that the Bank and the Group will remain a going concern in the foreseeable future and, consequently, the financial statements as at 31 December 2012 were prepared on a going concern basis. The Directors also confirm that the financial position and result of operations have brought to light no symptoms that could imply the uncertainty of going concern assumptions.

As regards the requirements relating to the disclosure on financial risks, impairment testing and uncertainties in the use of estimates, please refer to the information provided in this report as well as the information provided in the Directors’ report and in the Notes to the Financial Statements, within the discussion of the related items.

More specifically, risks related to the economy and financial market trends were described in the chapter on the macroeconomic reference context. Specific analyses are dedicated to the trend and to the prospects of economy and finance in our country. Finally, further information is contained in the chapter on the management trend and in the following chapters prepared as notes to the results and statement of financial position aggregates.

Information on financial risks and operational risks are described in the chapter of the Notes to the financial statements dedicated to risk management. Moreover, the notes to the financial statements provide information with reference to the segmentation among the different measurement levels of the fair value of the financial instruments.

At the end of the year, impairment tests were carried out as required by IAS 36 and specific tests were carried out to ascertain any impairment of goodwill, equity investments and available-for-sale securities, subject to the analysis of the presence of impairment indicators. For further detailed information, please refer to the Notes to the financial statements - Part B.

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SECTION 3 - SCOPE AND METHODS OF CONSOLIDATION

The consolidated annual financial statements include Credito Valtellinese and the companies directly or indirectly controlled. Special purpose companies are included as required in compliance with SIC 12. The financial statements of the consolidated companies used for preparing the consolidated financial statements have the same reporting date.

Investments in companies subject to exclusive control are those in respect of which Credito Valtellinese has the power of governing the financial and operating policies with a view to gaining economic benefits from them. Investments in companies subject to joint control are those in respect of which the Parent, together with other parties subject to the terms of an agreement, has the power of governing the financial and operating policies of the entities with a view to gaining economic benefits from them. Such control exists only when the decisions require unanimous consent of the parties that hold the joint control.

The financial statements of subsidiaries are consolidated on a line-by-line basis. The carrying amount of the equity investments in these companies is offset against the corresponding share in the equity. The differences arising from this transaction, after recording the subsidiary’s assets and liabilities, are recorded, if positive under “Intangible assets” - Goodwill; if negative, they are directly recognised in the income statement. Non-controlling interests are assigned the corresponding shares of equity and profit (loss).

Assets, liabilities, income and expenses among consolidated companies are eliminated. The financial statements of subsidiaries are prepared at the same reference date and adopting accounting standards consistent with the Parent: in case of discrepancy between the measurement criteria adopted by a subsidiary and those used in the consolidated financial statements, the subsidiary’s financial statements are adjusted for consolidation purposes.

Investments in companies subject to joint control have been accounted at equity. The equity investment is initially recognised at cost, the amount later being increased or decreased due to the effect of investee profits or losses, recorded according to the equity ratios under “Net gains (losses) on equity investments”, of dividends received and other changes in the equity of the investees. Other changes are booked to reserves. The differences between the carrying amount of the equity investment and the equity of the related investee are included in the carrying amount of the investee.

Dividends booked to the parent’s financial statements and concerning equity investments in companies included in the scope of consolidation or equity-accounted have been cancelled. Taxes associated with consolidation adjustments have been accounted for, where applicable.

Commitments for the repurchase of own equity instruments, including commitments to purchase equity instruments of companies consolidated in full, give rise to a financial liability for the current amount payable. The initial recognition of the liability occurs by using the equity as an offsetting item.

As it can be inferred from the table below, compared to the financial statements as at 31 December 2011, the scope of consolidation as at 31 December 2012 also includes Quadrivio SME 2012 S.r.l., special purpose company of the securitisation transaction carried out during the year.

As part of the simplification and optimisation project of the company structure of the Group, outlined by the 2011-2014 Strategic Plan, during 2012 the following operations were carried out:

- on 1 January 2012, the merger into Credito Artigiano of Carifano - Cassa di Risparmio di Fano S.p.A. with subsequent immediate assignment of the branch network present in

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the Marche and Umbria regions in a newly set-up bank, named again Cassa di Risparmio di Fano, or Carifano in abbreviated form;

- with legal effect as from 10 September 2012, the merger of Credito Artigiano S.p.A. into the parent Credito Valtellinese S.c. was carried out; the accounting effects are effective as from 1 January 2012.

The business combinations described above are carried out between parties under common control; therefore, they are excluded from the scope of application of IFRS 3 - Business combinations. Since they are achieved as part of company reorganisations, they were accounted for by preserving the continuity of the values of the acquiree in the financial statements of the acquirer. In particular, the carrying amounts of assets and liabilities acquired were recorded at the carrying amounts resulting from the consolidated financial statements of the Credito Valtellinese.

Therefore, there are no impacts on the consolidated financial statements except those related to the acquisition of non-controlling interests. The acquisition of minority shares is included in the financial statements from the date of acquisition.

Main transactions carried out during the year:

- on 10 December 2012, the condition precedent of the wilful public takeover and exchange bid on Credito Siciliano S.p.A. was met. The Parent, as a result of the effectiveness of the wilful public takeover and exchange bid, holds 97.95% of the share capital of Credito Siciliano;

- on 27 December 2012, the transfer of equity investments of the Group in Aperta SGR S.p.A. and in Lussemburgo Gestioni S.A. were completed, as part of the agreement for the development of a strategic alliance in managed funds signed on 9 August 2012 between the Group and Asset Management Holding S.p.A. (AMH), company controlling Anima SGR S.p.A.. The results of the companies before the transfer are included in the consolidated income statement.

A list is provided below of equity investments in fully consolidated subsidiaries.

1. Investments in companies subject to exclusive and joint control (consolidated on a proportional basis)

Company name

Registered office

Type of

relationship (1)

Quota capital

(amounts in

thousands of EUR)

Type of equity

investment

% voting rights

available (2)

Investor company % held

A. Companies

A.1 Consolidated on a line-by-line basis

1. Credito Valtellinese Soc. Coop. Sondrio 1 1,516,699

2. Credito Siciliano S.p.A. Palermo 1 124,573 A.1.1 97.95

3. Mediocreval S.p.A. Sondrio 1 95,733 A.1.1 76.58

A.1.2 23.41

4. Bankadati Servizi Informatici Soc.Cons. P.A. Sondrio 1 2,500 A.1.1 81.00

A.1.2 4.00

A.1.3 1.00

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A.1.5 1.00

A.1.6 1.00

A.1.7 1.00

A.1.9 1.00

A.1.10 1.00

A.1.12 1.00

A.1.13 4.00

5. Stelline Servizi Immobiliari S.p.A. Sondrio 1 25,000 A.1.1 100.00

6. Deltas Soc.Cons. P.A. Sondrio 1 120 A.1.1 85.00

A.1.2 4.00

A.1.3 1.00

A.1.4 1.00

A.1.5 1.00

A.1.7 1.00

A.1.9 1.00

A.1.10 1.00

A.1.12 1.00

A.1.13 4.00

7. Creset S.p.A. Sondrio 1 5,720 A.1.1 100.00

8. Aperta Fiduciaria S.r.l. Milano 1 50 A.1.1 100.00

9. Finanziaria San Giacomo S.p.A. Sondrio 1 15,000 A.1.3 100.00

10. Global Assicurazioni S.p.A. Milano 1 120 A.1.1 60.00

11. Omega Costruzioni S.r.l. Trento 1 10 A.1.5 100.00

12. Global Broker S.p.A. Milano 1 500 A.1.1 51.00

13. Cassa di Risparmio di Fano S.p.A. Fano 1 156,300 A.1.1 100.00

14. Quadrivio Finance S.r.l. Conegliano 8 12

15. Quadrivio Rmbs S.r.l. Conegliano 8 10

16. Quadrivio Sme 2012 S.r.l. Conegliano 8 10

Key: (1) Type of relationship: 1 = majority of voting rights in the ordinary shareholders’/quoteholders’ meeting; 2 = dominant influence in the ordinary shareholders’/quoteholders’ meeting; 3 = agreements with other shareholders/quoteholders’; 4 = other forms of control; 5 = sole management pursuant to Article 26, paragraph 1, of “Italian legislative decree 87/92”; 6 = sole management pursuant to Article 26, paragraph 2, of “Italian legislative decree 87/92”; 7 = joint control; 8 = SIC 12; (2) Voting rights available at ordinary shareholders’/quoteholders’ meetings, only if different from the % investment, distinguishing between actual and potential votes: 1 = actual, 2 = potential.

2. Other information Associates are those under significant influence, i.e. the Parent has the power of participating in the determination of financial and operating policies, but has no control or joint control over those policies. These equity investments are measured using the equity method. In applying such method for the equity investment in Istituto Centrale delle Banche Popolari Italiane, its consolidated results have been taken into account.

SECTION 4 - EVENTS AFTER THE REPORTING PERIOD

See the relevant chapter in the Report on operations.

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SECTION 5 - OTHER ASPECTS

The annual consolidated financial statements are audited by KPMG S.p.A.

Tax consolidation

In accordance with article 2359 of the Italian Civil Code, the subsidiaries that form part of the Credito Valtellinese Group have exercised the option, along with the Parent, to be subject to group IRES tax for a three-year period pursuant to Article 117, paragraph 1 of the Income Tax Consolidation Act, and comply with the regulations that govern its implementation between the parties. All the parties that are subject to group taxation must present their tax returns in accordance with standard terms while the consolidating party has to make the consolidated tax return and pay the group tax. The consolidated companies will undertake to collaborate with the consolidating company, providing it with all relevant information in order to meet the obligations that the consolidating company must meet with respect to the financial authorities.

In the event of tax losses, the grant of amounts used for offsetting, the tax credits for taxes paid abroad by the consolidated companies and for the consolidation adjustments, amounts equal to the actual tax benefit to the Group will be recognised.

If, for any reason, the control requirement should no longer be met before expiry of the three-year period for one or more of the consolidated companies, the consolidating company will make the variations pursuant to article 124, paragraph 1 of the lncome Tax Consolidation Act on its own income. If the option is not renewed, the companies involved must pay the advance amount with reference to their own income resulting from the communication pursuant to article 121 of the Income Tax Consolidation Act. In this event, the amounts requested for reimbursement, the surplus carried forward and the tax losses resulting from the group statements will remain with the consolidating party.

The consolidating company will be solely responsible for answering to the financial authorities for any greater amounts of tax ascertained with respect to the overall income for the declaration of tax consolidation and for the other amounts and obligations established by Article 127, paragraph 1 of the Income Tax Consolidation Act.

The individual consolidated companies will be jointly responsible with the consolidating company for any greater amount of tax plus related interest for the overall income, and for the other amounts and obligations established by Article 127, paragraph 2 of the Income Tax Consolidation Act.

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SUMMARY OF THE OPTIONS OF TAX CONSOLIDATION AS AT 31 DECEMBER 2012

Company Year in which the option was exercised

Three-year period of the option

Credito Siciliano S.p.A. 2010 2010-2012

Mediocreval S.p.A. 2010 2010-2012

Aperta Fiduciaria S.r.l. 2010 2010-2012

Creset S.p.A. 2010 2010-2012

Deltas Soc.cons.p.a. 2010 2010-2012

Stelline S.I. S.p.A. 2010 2010-2012

Carifano S.p.A 2012 2012-2014

Finanziaria San Giacomo S.p.A. 2012 2012-2014

Bankadati S.I. Soc.Cons.P.A. 2012 2012-2014

Global Assicurazioni S.p.A. 2012 2012-2014

Global Broker S.p.A. 2012 2012-2014

In 2012, the option for group taxation was discontinued by Aperta SGR S.p.A. as a result of the transfer of the controlling interest held in it by Credito Valtellinese S.c. to AMH Holding S.p.A.

Moreover, in 2012, the consolidated company, Credito Artigiano S.p.A., was merged into the consolidating company, Credito Valtellinese S.c.

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A.2 - MAIN ITEMS IN THE FINANCIAL STATEMENTS

This section provides information on the accounting policies adopted for drawing up the annual financial statements as at 31 December 2012, with the recognition, classification, measurement and derecognition criteria illustrated for each individual item, including, if relevant, the recognition criteria for the income components. 1 - Financial assets held for trading

Item “20.Financial assets held for trading” includes:

- debt, equity instruments and OEIC units acquired primarily to obtain short-term profit;

- derivative contracts other than those designated as effective hedging instruments, when their fair value is positive.

Debt and equity instruments and OEIC units are recognised in the financial statements at their settlement date, while derivative financial instruments at the trading date. Upon initial recognition, they are recorded at fair value, usually represented by the transaction price, without considering the transaction costs attributable to the instrument charged directly to the income statement. After initial recognition, they are measured at fair value.

The methods of calculation of the fair value of the financial instruments are reported in point 18 - Other information (Calculation of the fair value of financial instruments).

Gains and losses associated with the above, including those arising from trading, interest and dividends received and changes in fair value due to market rate fluctuations, changes in share prices and other market variables, are recognised in the income statement.

Financial assets or parts thereof are derecognised when the contractual rights to the cash flows expire or are transferred without retaining the associated risks and benefits. On the other hand, if a significant portion of the risks and benefits attached to the financial assets remains, they will continue to be recognised in the financial statements upon transfer of their legal ownership, they continue to be recorded in the financial statements. 2 - Available-for-sale financial assets

This item comprises non-derivative financial assets designated as available-for-sale and not classified as loans and receivables, held to maturity investments or financial assets held for trading or measured at fair value. In particular, this category includes, in addition to debt instruments and OEIC units that are not subject to trading activities and are not classified in the other above-mentioned portfolios, equity investments that are not held for trading purposes or do not qualify as controlling, related or joint control investments. These assets are recognised under item “40 Available-for-sale financial assets”.

They are initially recognised at the settlement date, and measured at fair value inclusive of transaction costs directly attributable to the acquisition. If the recognition should occur following reclassification from other portfolios, the recognition value is the fair value at the time of transfer.

Interest is measured using the effective interest method. The effective interest rate is the rate that aligns the present value of cash flows expected throughout the life of the instrument to the carrying amount of the asset. Use of this rate to calculate interest involves the uniform distribution of interest throughout the life of the instrument. The expected flows have been calculated considering all contractual terms of the instrument and including all fees and base

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points paid or received by and between the contracting parties, transaction costs and any other premium or discount that is measurable and considered an integral part of the effective interest rate of the transaction. Dividends on equity instruments are recognised to the Income Statement when payment becomes due.

After initial recognition, the available-for-sale assets are measured at fair value with recognition of the changes in fair value in an equity reserve until such assets are derecognised, when they are then recognised in the income statement.

The methods of calculation of the fair value of the financial instruments are reported in point 18 - Other information (Calculation of the fair value of financial instruments). If the fair value of equity instruments and OEIC units cannot be determined reliably, they are carried at cost.

At every reporting date, these financial assets are tested for evidence of impairment. Evidence of impairment originates from one or more events occurring after the initial recognition of the asset, which have an impact on the estimated future cash flows of the financial asset (or group of financial assets) that can be reliably estimated. The impairment process starts if there are indicators that would lead to the presumption that the original carrying amount of the investment cannot be recovered.

These indicators include profitability of the company in question and its future income prospects, a significant deviation from the budget objectives or provided by long-term-year plans communicated to the market, downward reviews by outside rating companies and the announcement of company restructuring plans.

Regarding the equity instruments included as Available-for-sale financial assets, there are certain indicators that represent estimates of significant and prolonged fair value decreases to below the carrying amount of the financial assets. Specifically they refer to market quotations or valuations lower than the initial carrying amount for an amount higher than 30%, or the recognition of quotations or valuations that are lower than the carrying amount for a period of more than 18 months. Exceeding one of these thresholds leads to the recognition of impairment.

Should the stated thresholds not be exceeded and in case of qualitative impairment elements, the recognition of an impairment loss must be supported by specific performance analyses. The amount of the impairment is calculated with reference to the fair value of the financial asset.

In the event that available-for-sale financial assets are impaired, the whole loss, including the portion previously accounted at equity, is booked to the income statement.

Any reversal of impairment loss, allowed only if the circumstances giving rise to the impairment no longer exist, is recognised in the income statement if referring to debt instruments, and in equity if referring to equity instruments and OEIC units. For debt instruments, the reversal of impairment loss cannot in any case exceed the amortised cost that the financial instrument would have had if no adjustments had been made in the past.

Financial assets or parts thereof are derecognised when the contractual rights to the cash flows expire or are transferred without retaining the associated risks and benefits. 3 - Held to maturity investments

Item “50 Held to maturity investments” comprises non-derivative financial assets with fixed payments or payments that can be determined and with a fixed expiry, for which there is an actual intention and capacity to hold them until expiry. They are initially recognised at the settlement date, and measured at fair value including transaction costs directly attributable to

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the acquisition. Subsequent to initial recognition, they are measured at amortised cost using the effective interest method.

The effective interest rate is the rate that aligns the present value of cash flows expected throughout the life of the instrument to the carrying amount of the asset. Use of this rate to calculate interest involves the uniform distribution of interest throughout the life of the instrument. The expected flows have been calculated considering all contractual terms of the instrument and including all fees and base points paid or received by and between the contracting parties, transaction costs and any other premium or discount that is measurable and considered an integral part of the effective interest rate of the transaction.

At every reporting date, these financial assets are assessed for objective evidence of an impairment loss. Evidence of impairment originates from one or more events occurring after the initial recognition of the asset, which have an impact on the estimated future cash flows of the financial assets (or group of financial assets) that can be reliably estimated.

The impairment loss is measured as the difference between the carrying amount and the present value of the future estimated cash flows discounted at the effective original interest rate of the asset.

Any reversal of impairment loss is allowed only if the circumstances that caused the impairment no longer exist. The reversal of impairment loss is recognised in the income statement and, in any case cannot exceed the amortised cost that the instrument would have had if no previous adjustments had been recognised.

Financial assets or parts thereof are derecognised when the contractual rights to the cash flows expire or are transferred without retaining the associated risks and benefits. 4 - Loans and receivables

These are non-derivative financial assets with fixed or calculable payments that are not listed on an active market. Loans and receivables are recognised under “60 Loans and receivables with banks” and “70 Loans and receivables with customers”.

This item includes loans and receivables with customers and banks as well as the bonds mainly issued by banks.

Loans and receivables are initially recognised at the disbursement date, and debt instruments are recognised at their settlement date. Initial recognition is at fair value, which normally corresponds to the consideration paid, including directly attributable transaction costs. Subsequently they are measured at amortised cost using the effective interest method.

The effective interest rate is the rate that aligns the present value of cash flows expected throughout the life of the instrument (up to maturity or “expected” maturity, or a shorter period if appropriate) to the net carrying amount of the asset. Use of this rate to calculate interest involves the uniform distribution of interest throughout the life of the instrument.

The expected flows have been calculated considering all contractual terms of the instrument and including all fees and base points paid or received by and between the contracting parties, transaction costs and any other premium or discount that is measurable and considered an integral part of the effective interest rate of the transaction. If it is not possible to obtain a reliable estimate of the expected cash flows or of the expected life of the instrument, the contractual cash flows determined according to the terms set for the instrument are used instead. The amortised cost is not calculated for short-term transactions if the effect is considered immaterial and for loans without a defined maturity or revocable loan. These loans

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are measured at historical cost and costs/revenue related to them are recognised in the income statement on a straight-line basis over the contractual term of the loan.

At the end of each reporting period, these financial assets are tested for impairment. Evidence of impairment originates from one or more events occurring after the initial recognition of the asset, which have an impact on the estimated future cash flows of the financial asset (or group of financial assets) that can be reliably estimated.

Instruments which, based on the regulations of the Bank of Italy, have been designated as non-performing, substandard, restructured or past due/overdue have been assessed on an analytical basis.

Impaired loans are classified, in accordance with the criteria set by the Bank of Italy, as follows:

- non-performing loans: loans with customers in a state of insolvency due to the impossibility by the customer to fulfil its debt obligations, to non-compliance with a previously agreed repayment plan, to bankruptcy proceedings or to the presence of prejudicial encumbrances;

- substandard loans: these are loans to parties experiencing temporary financial hardship that are expected to be overcome within a reasonable period of time;

- restructured loans: this category comprises loans whose original contractual terms have changed giving rise to a loss for the bank due to deterioration of the original economic-financial conditions of the debtor;

- past due loans: past due and/or overdue exposures from over 90 days (180 days until 31 December 2011 by virtue of the temporary derogation granted by the Supervisory Board) classified as impaired according to the definition of current supervisory reports, other than those classified as non-performing, substandard or restructured loans. Regarding the methods to calculate past due exposures, the approach by transaction was adopted (considering each single relationship with the debtor) with reference to the prudential portfolio of “exposures guaranteed by property” and the debtor approach for the remaining positions (these approaches are described in the Bank of Italy Circular no. 272 of 30 July 2008).

With reference to restructuring of exposures, the group identifies two different cases:

- restructuring in the strict sense (as defined by circular 272 of the Bank of Italy described above);

- renegotiations.

The renegotiation of exposures, granted by the group to performing customers is basically considered similar to the opening of a new position, should this be granted mainly for business reasons, other than the economic and financial problems of the debtor, and provided that the applied interest rate is a market rate at the date of renegotiation.

In the analytical testing of impaired loans, the loss is measured as the difference between the carrying amount and the present value of the future estimated cash flows discounted at the original effective interest rate of the loan. The estimated cash flows take account of the guarantees associated with the loans. In the event that the guarantees are not likely to be enforced, account will be taken of either their present value or their realisable value net of expenses to be incurred to recover the amount due. The cash flows for loans that are expected to be recovered within a short period of time are not discounted.

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The analytical impairment loss relates to expected losses on individual impaired loans. For impaired loans classified as “substandard loans”, which have a limited unitary amount, and as “past due exposures”, the expected loss is calculated by homogenous categories according to internal statistical models and analytically applied to each position.

Where the causes giving rise to previous adjustments no longer exist, the reversal of impairment losses on previously loans tested are recognised in the income statement.

Assets that have been individually valued and for which no impairment losses have been recorded are evaluated on a collective basis. The impairment loss on a collective basis refers to losses expected on homogeneous groups of loans (e.g. loans exposed to same sector, country or inherent risk) and is calculated according to internal statistical models.

In order to measure losses on a portfolio basis, financial assets are grouped based on similar credit risk characteristics representing the debtor’s capacity to pay all amounts due according to the contractual terms. The risk categories identified represent the basis for calculating historic evidence of loan impairment.

Financial assets or parts thereof are derecognised when the contractual rights to the cash flows expire or are transferred without retaining the associated risks and benefits. If a significant portion of the risks and benefits attached to the financial assets remains upon transfer of their legal ownership, they will continue to be recognised in the financial statements. Loan repurchase agreements

These are spot purchases of securities negotiated together with the obligation of forward sale.

As all the risks connected with the title to of the securities are borne by the seller, only a loan to the seller is recognised. The spreads between spot and forward prices, including the accrued interest and the share of any issue premium, are recognised on an accruals basis in the income statement items dealing with interest and similar income. Finance leases

Loans and receivables with customers for leased assets are initially recognised at the effective date of the corresponding agreements, i.e. upon formal delivery of the asset.

Loans and receivables with customers for leased assets are stated in the financial statements at amortised cost, that is the initial value of the investment including direct costs initially incurred and any directly attributable commissions, less any capital repayment and adjusted by the amortisation calculated using the effective interest method, i.e. by discounting the future estimated payments at the effective interest rate for the estimated term of the loan. Similar criteria to the above ones are followed for impairment losses and reversals of impairment losses. 5 - Financial assets at fair value through profit or loss

This item comprises financial assets at fair value through profit and loss on the basis of an option set forth by IAS 39 (“Fair value option”) for specific cases.

The Group has not exercised this option. 6 - Hedging transactions

Hedging transactions are carried out in order to neutralise the impact of potential losses on individual or a group of financial instruments attributable to a specific risk that may have an impact on the Income Statement.

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There are three types of hedge employed:

- Fair value hedge: This covers the exposure to risk of changes in the fair value of assets or liabilities recognised in the statement of financial position (or part of the same) or unrecognised irrevocable commitments (or part of the same) that can be attributed to a specific risk and that may have an impact on the income statement;

- Cash flow hedge: This covers the exposure to fluctuations in cash flows attributable to a specific risk associated with a recognised asset or liability (such as all or some payments of future interest on a liability with a variable interest rate) or to future transactions that are very likely to have an impact on the income statement;

- Hedge of a net investment in a foreign operation: this covers the exposure to currency risk on a net investment in a foreign operation as defined by IAS 21.

The Group adopts the fair value hedge to hedge the interest rate risk referring to specific assets.

Fair value hedge accounting contemplates the income statement recognition of the effects deriving from the fair value change of the hedged element and of the hedging instrument.

In particular, the fair value change of the hedged element due to the change in the hedged risk increases/decreases the carrying amount of the asset offset the income statement in the “Net hedging income (expense)” item as well as the fair value change of the derivative. Both changes in fair value indicated are calculated net of accruals/deferrals accrued that are recognised among the interest. Net effect in income statement is represented by any unbalanced difference, or by the partial ineffectiveness of the hedging.

When the transaction is carried out, the hedge is formally documented through the definition of the objectives and risk management strategies on the basis of which the hedge was implemented, the hedging instrument, the hedged item, the nature of the risk hedged and how hedge effectiveness is to be measured. The hedge effectiveness is established by comparing the changes in fair value of the cash flows of the hedged instrument, with reference to the risk to be hedged, with the changes in fair value of the cash flows of the hedging instrument. The performance of the prospective and retrospective effectiveness tests are carried out on a regular basis for all the hedging period.

Hedging transactions are no longer recorded in the Financial Statements when they prove ineffective or cease to be so, the derivative expires or is sold, extinguished or exercised, the hedged instrument expires, is sold or repaid or the hedge is cancelled. 7 - Equity investments

Item “100.Equity investments” comprises the carrying amount of equity investments in subsidiaries and associates, and companies subject to joint control.

Investments in companies subject to joint control are those for which the Group, together with other parties subject to the terms of an agreement, holds the power to control financial and operating policies with a view to gaining economic benefits from their activities; conversely, investments in associates are those for which the Group exercises significant influence, i.e. has the power to take part in decisions regarding the financial and operating policies but has no further control. Significant influence is presumed when the Group holds more than 20% of the investee’s share capital.

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These equity investments are recorded at cost at the time of initial recording, and subsequently in accordance with the equity method.

The equity investments are subject to impairment in accordance with IAS 36 when their carrying amount exceeds their recoverable amount, defined as the higher of their fair value less costs to sell and their value in use. Fair value is determined based on the best information available to reflect the amount that the entity could obtain, at the end of the reporting period, from the disposal of the asset in an arm’s length transaction between knowledgeable, willing parties, following the deduction of disposal costs. This value is determined considering the outcomes of recent transactions for similar assets carried out within the same industry sector. Value in use is calculated by using models based on the present value of the future cash flows expected.

The party who holds the asset is only required to calculate the recoverable amount if there is evidence of potential impairment. The following elements were considered in evaluating whether there was impairment:

- significant negative changes for the associates occurred during the year or will occur in the near future in the area in which the party operates;

- the market interest rates or other capital payment rates on investments have increased during the year and it is likely that these increases will influence the discount rate used in the calculation of the value in use of the equity investment and significantly reduce its recoverable amount;

- significant changes with an adverse effect on the investee company have taken place during the period, or are expected to take place in the near future;

- internal information that the financial performance of the associate or company under joint control is or will be worse than expected;

- significant financial difficulties expected in the associate or company under joint control;

- the associate or company under joint control is subject to insolvency proceedings;

- significant or prolonged reduction in the fair value of the associate or company under joint control to below its cost;

- quantitative indicators referred to the significant and prolonged reduction in fair value to below the carrying amount of the financial assets. Specifically they refer to market quotations or valuations that are 30% or lower than the initial carrying amount or the recognition of quotations or valuations that are lower than carrying amount for a period of more than 18 months.

- if a dividend was recognised for investments in companies subject to joint control and associates if:

o the carrying amount of the equity investment in the separate financial statements exceeds the carrying amount in the consolidated financial statements of the net assets of the investee, including the related goodwill;

o the dividend exceeds the total comprehensive income of the jointly controlled entity or associate during the period in which it is declared.

In the presence of impairment indicators, the impairment is recognised to the extent that the recoverable amount is lower than the carrying amount, allocating the relative adjustment to the income statement. Should the reasons for the impairment cease to exist following a subsequent event, a reversal of impairment loss is recorded in the income statement.

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Equity investments are derecognised when the contractual rights to the corresponding cash flows expire or when they are sold substantially transferring all related risks and benefits. 8 – Property, equipment and investment property

Property, equipment and investment property purchased on the market are recognised as assets under “110.Property, equipment and investment property” when the main risks and benefits associated with the assets are transferred.

The “Operational property and equipment” are the assets used to carry out the business, assuming that they will be used for a time period longer than the reporting date, while “Investment property” is the assets that provide rental income or held for appreciation of invested capital or both.

Initial recognition is at cost, including all directly related charges, both for the operational property and equipment and investment property.

Land is recognised separately, even when purchased together with the building, using a component approach. Land and buildings are separately assessed on the basis of independent appraisals and only in the case of self-contained buildings.

Assets are subsequently valued at cost, adjusted for related depreciation and losses/recoveries of value.

The depreciable value of property and equipment, identified as the difference between the purchase cost and the residual value, is systematically charged on a straight-line basis over the estimated useful use of the assets according to an allocation criterion that reflects the technical-economic duration and the residual use of each asset item.

According to that criterion, the life of the different categories of property and equipment is as follows:

- for buildings, from 30 to 70 years;

- for furniture, furnishings and sundry equipment, from 5 to 8 years;

- for office machines, electronic security systems, from 3 to 5 years;

- for motor vehicles, from 4 to 5 years.

Land and artistic assets are not subject to depreciation, as the former has an indefinite useful life and the latter normally increase in value over time.

At each reporting date, if there are indications that the property, equipment and investment property may have suffered an impairment loss, the carrying amount and recoverable amount of the asset (defined as the greater of fair value and value in use) are compared and, if the latter is lower than the carrying amount, the asset is impaired.

The resulting carrying amount, after reversal of impairment losses on a previouslyimpaired asset, may not exceed the carrying amount that would have been determined had there been no impairment in previous periods.

Property, equipment and investment property are derecognised when they are sold or no future economic benefits are expected from their use or disposal. 9 - Intangible assets

Assets recognised under intangible assets are non-monetary assets, without physical substance, identifiable and able to generate future economic benefits that can be controlled by the group. Intangible assets purchased externally are recognised as assets at purchase price

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when the main risks and benefits connected with the asset are transferred. Intangible assets generated internally are recognised on the basis of the directly attributable costs sustained.

All intangible assets recorded in the financial statements other than goodwill have a finite useful life and are consequently amortised in consideration of said life.

Intangible assets are derecognised when they are sold or when no future economic benefits are expected from their use or disposal. Goodwill

Goodwill generated from business combinations represents the difference between the purchase cost, including accessory charges incurred, and the fair value at the acquisition date of the assets and liabilities of the acquired company. If positive, it is booked at cost as an asset (goodwill) as it represents the amount paid by the acquirer for the future benefits arising from assets that cannot be either identified as single components or booked separately. If negative, it is recorded directly in the income statement (excess over cost).

Goodwill recorded as an asset must be allocated to the cash-generating units to which it refers (CGU). These units were identified considering the lowest level at which company management estimates the investment revenue and considering that this level may not be higher than the reportable segment in the primary or secondary segment presentation established in accordance with IFRS 8 - Operating Segments. For the Group in particular, CGUs were identified as individual entities less the investments in associates and companies subject to joint control classified in the portfolios of Equity investments and of Available-for-sale financial assets, if any, as already tested independently.

The cash-generating unit to which goodwill has been allocated is tested annually for impairment or every time there is an indication that the unit may have undergone impairment.

In accordance with IAS 36, an asset is subject to impairment when its carrying amount exceeds its recoverable amount, or the higher of its fair value less costs to sell and its value in use. Fair value is determined based on the best information available to reflect the amount that the entity could obtain, at the end of the reporting period, from the disposal of the asset in an arm’s length transaction between knowledgeable, willing parties, following the deduction of disposal costs. This value is determined considering the outcomes of recent transactions for similar assets carried out within the same industry sector. Value in use is calculated by using models based on the present value of the future cash flows expected. The model for the banks assumes that the value of the asset results from the present value of the future distributable cash flows including the excess or lack of Tier 1 ratio at the end of the reference period compared to a pre-established minimum objective and from the final value calculated as perpetual income calculated in accordance with an economically sustainable normalised cash flow and consistent with the long-term growth rate. The income model for companies other than the banks assumed that the value of an asset derives from the discounting of the income flows produced by the company, increased by the terminal value calculated as perpetual income calculated in accordance with an economically sustainable normalised cash flow and consistent with the long-term growth rate.

Any difference between the carrying amount and the recoverable amount will be recognised in the income statement.

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Software

Software is recognised at cost, net of the relative amortisation and of any impairment loss. The costs connected to the purchase and development of the software are capitalised when control over the same is acquired and when future benefits that exceed costs are likely to arise over a period of several years.

This intangible asset is amortised on the basis of its relative useful life estimated as a maximum of 3 years, while its residual value is assumed to be zero. Other intangible assets

These mainly comprise intangible assets with a finite useful life recognised on application of IFRS 3 - Business combinations and identified in the process of allocating the cost of the business combination. These assets, represented by the valuation of the transactions with customers, comprise the “core deposits” and the “assets under management” that are amortised on a straight-line basis considering the estimated useful life (maximum 16 years), while the residual value is assumed to be zero.

According to IAS 36, the recoverable amount of the intangible assets with a definite useful life must be calculated every time there is evidence of impairment. The impairment test must be made by comparing the carrying amount of the asset with its recoverable amount. An impairment loss must be recognised where the recoverable amount is lower than the carrying amount. The recoverable amount of the asset is the higher between its fair value net of sales costs and its value in use. In order to calculate the value in use of the intangible asset, reference must be made to its cash flows in current conditions on the impairment test date, regardless of the fact that these flows were generated by the assets originally recognised when applying IFRS 3. 10 - Non-current assets held for sale

Non-current assets must be classified as held for sale if their carrying amount will be recovered principally through a sale rather than through continuous use. In order for this to occur, the asset must be available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such assets and its sale must be highly probable. Once classified as held for sale, the asset is valued at the lower of its carrying amount and its fair value less costs to sell. 11 - Current and deferred taxation

Current taxes are recognised in the statement of financial position under tax liabilities. If the amount already paid in respect of current and prior periods exceeds the amount due for those periods, the excess must be recognised in the statement of financial position as a tax asset.

Deferred taxation is recognised according to the statement of financial position method, whereby deferred taxes are recognised by comparing the various carrying amount and tax bases of the items included under assets and liabilities in the statement of financial position.

If these differences in value cause future increases or decreases in the taxable income of a subsequent period, they are defined as timing differences:

- deductible timing differences are those that will generate a future reduction in the total taxable amount, as they are non- deductivable this year (e.g. an accrual to a provision that does not meet the tax requirements for its deduction in the recognition period). To the extent that a future taxable amount is likely to be available, which can be used to offset the deductible timing differences, deferred tax assets must be recorded;

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- taxable timing differences are those differences that create deferred tax liabilities, as they generate taxable amounts in future years, as they are deductible or non taxable in the current year (e.g. a capital gain subject to deferred taxation). The relevant deferred tax liabilities are recorded for any other taxable timing difference.

Recognition of deferred tax liabilities and deferred tax assets is reviewed periodically to take into account any change in rates or tax regulation or a new estimate of the probability of recovering the deductive timing differences.

With reference to goodwill and to other intangible assets that were recognised for tax purposes by paying special substitute taxes, the second method proposed in the document of the OIC “Accounting treatment of the substitute tax on the exemption of goodwill ex Article 15, paragraph 10, of Italian Law Decree no. 185/2008”, which provides for the recognition of deferred tax assets for an amount totalling the tax benefit expected from the future deductibility of exempted taxes, with income statement recognition of the entire amount of the substitute tax paid.

In the following tax periods, the tax asset will be released to the income statement according to the share deductible on an annual basis of the goodwill or other intangible asset exempted (currently, to the maximum extent of one-tenth per tax period).

Deferred tax liabilities and deferred tax assets are not discounted as envisaged by IAS 12. 12 - Provisions for risks and charges

Provisions for risks and charges are recorded when the group has a present obligation (legal or constructive) resulting from a past event, when it is probable that an outflow of resources representing economic benefits will be required to settle the obligation, whose amount can be reliably estimated.

The amount recorded represents the present value of the amount that a company would reasonably pay in order to extinguish the obligation at the end of the reporting period. If the impact of the temporary deferral of the obligation is considered insignificant, the amount is not discounted.

Such provisions are measured at every reporting date and adjusted in order to reflect the best current estimate. If it is no longer likely that the resources producing economic benefits will be used to meet the obligation, the provision is reversed and any excess is recorded in the income statement. Company pension funds

Pensions, set up on the basis of internal agreements, are defined as provisions for employee benefits to be paid once they stop working for the company. The provisions present at the end of the reporting period are classified as defined benefit plans. A defined benefit plan is a post-employment benefit plan according to which the group has the obligation to pay its employees the benefit agreed.

The determination of the obligation and of the cost of the defined benefit plans requires for the amount of employee benefits matured in accordance with the work carried out in the current year and previous years to be calculated in a reliable manner. Present values are calculated using the “projected unit credit method”. Actuarial gains and losses from changes in the actuarial assumptions previously applied, entail a restatement of the liability and are recognised as an offsetting item to equity reserve shown in the statement of comprehensive income as provided by the revised version of IAS 19 applied in advance.

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13 - Liabilities and securities issued

Financial instruments issued are classified as liabilities when, according to the substance of the agreement, the Group has a contractual obligation to deliver cash or another financial asset to another entity. Outstanding amounts due to banks and customers and securities issued mainly represent the funding collected on the inter-bank market and from customers also through the placement of bonds and certificates of deposit.

Transactions with banks are recognised at the time they are executed, except those relative to remittance of bills and to the placement of securities, which are recognised at settlement. Initially, financial liabilities are designated at fair value plus any directly attributable transaction costs. Subsequently, they are measured at amortised cost using the effective interest method. The amortised cost has not been calculated for short-term transactions, for which the effect of the calculations is considered immaterial.

The items also include payables for commitments to repurchase own equity instruments if the conditions for their recognition are applicable.

Financial liabilities or parts thereof are derecognised when extinguished, i.e. when the obligation has been met, cancelled or has expired. They are derecognised also following their repurchase on the market. The derecognition is made on the basis of the fair value of the issued item and of the repurchased item at the purchase date. The profit or loss resulting from the transaction, depending on whether the carrying amount of the repurchased item is higher or lower than the purchase price, is recorded in the income statement. The subsequent re-placement of the securities is considered as a new issue, recognised at the new placement price.

Deposit repurchase agreements

These are spot sales of securities negotiated together with the obligation of forward repurchase.

As the risks associated with the securities underlying the transactions are not transferred, these securities are recorded in the financial statements along with the related liability. The spreads between spot and forward prices, including the accrued interest and the share of any issue premium, are recognised in the income statement on an accruals basis as interest and similar income. 14 - Financial liabilities held for trading

Trading liabilities are represented by trading derivative financial instruments with a negative fair value. They are recognised at the subscription or issue date at a value equal to the fair value of the instrument, without considering any directly attributable transaction costs or income.

Trading liabilities are recognised at fair value and changes are recognised in the income statement.

They are derecognised from the financial statements when the contractual rights to the corresponding cash flows expire or when they are sold substantially transferring all related risks and benefits. 15 - Financial liabilities at fair value

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This item comprises financial liabilities at fair value through profit or loss on the basis of an option set forth by IAS 39 (“fair value option”).

The Group has not exercised this option. 16 - Foreign currency transactions

Transactions denominated in foreign currency are translated, at initial recognition, into the reporting currency by applying the exchange rate ruling on the transaction date.

At the end of each subsequent reporting period:

- the monetary elements are retranslated at the spot closing rate;

- the non-monetary elements measured at historical cost are retranslated using the transaction’s date exchange rate;

- the non-monetary elements measured at fair value are retranslated at the exchange rate ruling on the date when the fair value was determined.

A monetary element represents the right to receive, or the obligation to pay, a fixed or determinable amount of money. Conversely, the key characteristic of non-monetary items is the absence of the right to receive, or the obligation to pay, a set amount of money or an amount that can be determined. The exchange rate differences relating to monetary items are recorded in the income statement as and when they arise; those related to non-monetary items are recorded in equity or in the income statement in line with the method used to record the profits or losses that include that component. Revenue and expenses in foreign currency are shown at the exchange rate prevailing at the time they are recorded or, if accruing, at the closing rate. 17 - Insurance assets and liabilities

The consolidated financial statements do not include insurance assets or liabilities. 18 - Other information Business combinations

IFRS 3 (Revised) defines a business combination as a transaction or another event in which a purchaser acquires control of a business consisting of factors of production and processes applied to such factors able to create production. Therefore, the acquisitions of equity investments in subsidiaries, mergers, the acquisition of business units etc. are all considered business combinations.

IFRS 3 envisages that all business combinations that fall within the relative scope must be recognised using the acquisition method.

For each business combination, one of the combining entities must be identified as the acquirer that obtains control of another entity or group of businesses. Control is the power to determine the financial or management policies of an entity or business in order to obtain a return from the activities of the latter. Control is obtained when the latter acquires more than half of voting rights.

Even if not in possession of more than half of voting rights, control can be acquired if power is obtained:

- over more than half of voting rights by virtue of an agreement with other investors;

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- to determine the financial policies and the management decisions of the other entity by virtue of a statute or agreement;

- to appoint or replace the majority of members of the management body of the other entity;

- to have availability of the majority of votes at meetings of the body assigned the management of the company.

Even though in some cases it is difficult to identify an acquirer, there are usually situations that demonstrate its existence. In a business combination mainly carried out by transferring cash or other assets or through assumption of liabilities, generally the acquirer is the entity that transfers cash or other assets or assumes the liabilities. In a business combination mainly carried out by exchanging interests, in general the acquirer is the entity that issues the interests. Other relevant facts and circumstances must be taken into consideration, including:

- the relative voting rights in the combined entity after the business combination;

- the existence of a urge minority voting interest in the combined entity if no other owner or organised group of owners has a significant voting interest;

- the composition of the management of the combined entity;

- the composition of the senior management of the combined entity;

- the terms of the exchange of equity interests.

In general, the acquirer is the combining entity whose size (e.g. designated according to assets, revenue or profits) is considerably bigger compared to the size of the other combining entity. Moreover, in a business combination comprising more than two entities, for the purposes of determining the acquirer, we must consider, among other things, which of the combining entities started the combination as well as the relative size of the combining entities.

The acquisition date is the date on which the acquirer obtains control of the acquiree and consists of the date from when the acquiree is consolidated in the financial statements of the acquirer company. In the event in which a business combination is achieved in a single exchange transaction, the date of the exchange is the acquisition date.

The consideration transferred in a business combination must be measured at fair value calculated as the amount of the fair values, on the acquisition date, of the assets transferred by the acquirer to the previous shareholders of the acquiree, of the liabilities borne by the acquirer for these subjects and of the interests issued by the acquirer. The consideration that the acquirer transfers in exchange for the acquiree includes any asset or liability resulting from a contingent consideration arrangement.

The costs related to the acquisition are the charges that the acquirer bears for carrying out the business combination. The acquirer must record the costs related to the acquisition as expenses in the periods in which these costs are borne and the services are received, except for issue costs of shares or debt instruments that must be recognised according to IAS 32 and IAS 39.

Business combinations are recorded according to the “acquisition method”, according to which the acquired identifiable assets, including any intangible asset not previously recognised by the acquired company, and the assumed identifiable liabilities must be recognised at their respective fair value on the acquisition date. The fair value of the assets, liabilities and potential liabilities of the acquiree may be determined provisionally by the end of the year in which the business combination is achieved and must be finalised within twelve months of the acquisition date.

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If the control is carried out through subsequent purchases, the acquirer must recalculate the interest that it held before in the acquired company at its respective fair value on the acquisition date and record in the income statement any difference compared to the previous carrying amount.

The acquirer must record the goodwill on the acquisition date measuring it as the surplus of the amount of the transferred consideration, of the amount of any minority interest in the acquiree and, in a business combination carried out in steps, of the fair value on the acquisition date of the interest in the acquiree previously held by the acquirer, on the net value of the amounts, determined on the acquisition date, of the acquired identifiable assets and of the identifiable assumed liabilities measured on the basis of what was stated above. In case a negative difference is reported, it is recorded in the income statement.

For each business combination, any non-controlling interests in the acquiree can be recognised at fair value, with the resulting increase in the transferred consideration, or in proportion to the non-controlling interest in net identifiable assets of the acquiree. For the transactions carried out, the Group recognised the non-controlling interests in proportion to the share of the minority interest in the identifiable net assets of the acquirer without increasing the consideration transferred, hence by recognising only its own share of goodwill.

Following the purchase of control of a company, further equity investments are accounted for by recognising the difference between the purchase price and the carrying amount of the non-controlling interests purchased in equity attributable to the owners of the parent. Similarly, the sale of the non-controlling interest without loss of control will not generate profits/losses in the income statement, but variations in equity attributable to the owners of the parent.

IFRS 3 does not apply to business combination transactions between parties subject to common control.

In the absence of specific indications envisaged by the IFRS, IAS 8 requires that the entity must make use of its own judgement when applying an accounting standard for the purpose of providing relevant, reliable and prudent disclosure that reflects the economic essence of the transactions.

These types of business combinations, usually achieved as part of company reorganisations, are therefore accounted for by preserving the continuity of the values of the acquiree in the financial statements of the acquirer. In particular, the acquired assets and liabilities were recorded at the carrying amounts resulting from the consolidated financial statements of the Group.

The business combinations carried out at a date before January 2011 were recorded in accordance with the provisions of the previous version of IFRS 3 (not revised). In particular, the events following the acquisition of control were rated differently . For the transactions carried out before 31 December 2010, the restatement of the additional consideration, calculated during the acquisition of control of the company, involves the adjustment of the originally calculated cost of the business combination. Determination of the fair value of financial instruments

The fair value is defined as the amount for which an asset may be exchanged, or a liability may be extinguished in an arm’s length transaction between knowledgeable, willing parties.

The fair value of financial assets and liabilities was determined by using prices acquired from financial markets for instruments quoted on active markets, or by using evaluation models for other financial instruments.

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According to IAS 39, the best means of representing fair value is the existence of an official price on an active market. These quotes are used mainly for the valuation of the financial assets and liabilities (level 1 fair value).

A financial instrument is considered to be quoted on an active market if the quotations are immediately and duly available from sources such as stock exchanges, dealers, brokers or information providers, and these prices promptly and duly represent arm’s length market transactions between the parties. The objective in calculating the fair value of a financial instrument that is traded on an active market is to determine the price at which the transaction would have been made on the date of the financial statements in that market.

Where there is an active market, the fair value of the financial instruments is represented by the current year-end price (bid, ask or average price depending on which financial instrument is being valued).

Spot exchange transactions, shares quoted on regulated markets and bonds for which bid or ask prices were presented contemporaneously with a differential between those quotations considered reasonable, with volumes immediately exchangeable, with a risk premium implicit in the measurement adequate to that of the issuer and variability of the quotations made in the immediately preceding period are considered as being quoted on an active market that complies with the above mentioned criteria.

The other instruments are not considered to be quoted on active markets and are mainly valued using valuation techniques that reflect the current market practices, where the objective is to adequately reflect the potential market price of the instrument at the valuation date. The technical valuations adopted include:

- reference to market values indirectly linked to the instrument to be valued and assumed based on products with similar risk characteristics with reference to market parameters (level 2 fair value);

- valuations performed using either full or partial input not assumed from benchmarks available on the market, for which the assessor uses estimates and assumptions (level 3 fair value).

Bonds are valued by referring to the price of recent market transactions, or if these elements are not present, through the method of discounting the future cash flows expected in accordance with the terms of the instrument, adjusted to take account of any issuer credit risks and the liquidity conditions of the instrument.

OEIC units are designated on the basis of the official Net Asset Value (Nav) at the reporting date. As regards the fair value levels, level 2 OEIC units are those comprising listed securities, while level 3 OEIC units are those comprising unlisted securities.

The fair value in the notes to the financial statements of loan assets and liabilities recognised in the financial statements at cost or amortised cost is mainly calculated by discounting future cash flows taking account of the current credit risk of the parties and mainly included in level 2.

If the fair value of equity instruments cannot be determined reliably, they are carried at cost. These instruments are classified as level 3.

Regarding the information on financial instruments at fair value, the aforementioned levels used to calculate the fair value (levels 1, 2 and 3) are applied consistently for the breakdown of the accounting portfolios on the basis of fair value levels (see subsection A.3.2).

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Criteria for the preparation of segment reporting

Segment reporting is prepared on the basis of IFRS 8 - Operating Segments. This standard requires that companies base their segment reporting on elements used by management to make their operating decisions, and therefore calls for the identification of operating segments according to the internal reporting system regularly reviewed by management (the management approach) in order to allocate resources to the various segments and analyse performance.

An operating segment is a component of an entity:

- whose business activities generate revenue and costs;

- whose operating results are periodically reviewed by the entity’s chief operating decision maker;

- for which discrete financial information is available.

The Group has an organisational-corporate structure including companies focusing on banking business, on the provision of specialist financial services and support activities. The specialisation and the unique nature of each Group entity’s mission allow the assignment of each company or its divisions to a specific segment. Therefore, an analysis of the specific divisions of the Credito Valtellinese Group and compliance with the requirements of IFRS 8 resulted in identification of the following three operating segments:

- The Market segment: generates its revenue from the production and sale of lending products and services, investment and transfer services for the Group’s customers (traditionally households, trades, professionals and SMEs). The statement of financial position and income statement items for this segment refer to the Group’s territorial banks (Credito Valtellinese, Credito Siciliano, Carifano and Deltas company merged in Credito Valtellinese as from 31 March 2013);

- The Specialised Finance segment: generates its revenue from the distribution of bancassurance products, disbursement and management of lease credits and medium and long-term financing, the management and disposal of problem loans and services for public entities. The statement of financial position and income statement items for this segment refer to Global Assicurazioni, Global Broker, Aperta Fiduciaria, Mediocreval, Finanziaria San Giacomo and Creset;

- The Production segment: monitors ICT management and development and manages the Group’s real estate assets. The statement of financial position and income statement items for this segment refer to Stelline and Bankadati.

For segment reporting and comments in the notes to the financial statements, information is allocated to the three operating segments with reference to the following criteria:

- the assets and liabilities of Group companies, net of consolidated and intragroup entities, are recognised in full to the reference segment, except for available-for-sale assets represented by shares held for investment purposes and equity investments in companies which, as they cannot be allocated to any of the operating segments, are indicated separately as assets not linked to any other segment;

- all income components of Group companies, net of consolidated and intragroup entities, except for dividends, profit of equity-accounted investees and profits on sales of available-for-sale assets and represented by shares held for investment purposes, are allocated to the related operating segment;

- the net interest income has been determined using applicable internal rates of transfer.

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Post-employment benefits

Post-employment benefits are defined and distinguished by IAS 19 as:

- defined contribution plans;

- defined benefit plans.

Defined contribution plans envisage the payment by the company of fixed contributions into a fund. The company has no legal or implicit obligation to make further payments if the fund does not have sufficient assets to pay all of the employees’ entitlements for the service rendered in the current year and in previous years. The company records the employee’s payments into the fund as a liability after deducting any contribution already paid. If, at the end of the reporting period, the contributions paid are higher than those actually due, the excess must be accounted for as an asset to the extent that the advance payment will reduce future payments or give rise to a refund.

A defined benefit plan is a post-employment benefit plan according to which the company has the obligation to pay its employees the benefit agreed.

Following the introduction of the 2007 Finance Act, the portion of the post-employment benefits that have accrued since 1 January 2007 were allocated, at the employee’s option according to explicit or tacit acceptance, to supplementary pension plans or held within the company, which will ensure that such accrued benefits are paid into the Treasury Fund managed by INPS.

The reform of supplementary pension plans has entailed an adjustment of the accounting treatment of post-employment benefits, as explained below:

- any post-employment benefit vested up to 31 December 2006 continues to be considered as a “defined benefit plan” to be assessed by actuaries according to the “Projected Unit Credit Method”, as provided by IAS 19. The liability associated with the vested post-employment benefit is assessed by actuaries without applying the pro-rata of the service rendered, as the service to be assessed has already fully vested. Actuarial gains and losses from changes in the actuarial assumptions previously applied, entail a restatement of the liability and are recognised as an offsetting item to equity reserve shown in the statement of comprehensive income;

- any post-employment benefit accrued since 1 January 2007 is deemed to be a “defined contribution plan”, whether the employee opts for supplementary pension plans or decides to pay such benefits into the Treasury Fund managed by INPS. The amount of the benefits is determined based on the contributions due by the employee without using actuarial calculations.

Treasury shares

Shares issued and repurchased are recorded as a direct reduction of equity. No profit or loss resulting from the purchase, sale, issue or cancellation of said instruments is recorded in the income statement. Any amount paid or received for said instruments is recorded directly under equity.

A specific reserve is recorded, pursuant to Article 2357-ter of the Italian Civil Code.

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Guarantees and commitments

Guarantees given are initially recognised at their fair value, represented by the commission received, and subsequently at the higher of the estimated obligation and the initially booked amount gradually reduced by the portion related to the year. The overall nominal value of guarantees given, net of amounts used, is highlighted in the notes to the financial statements.

Commitments are entered in the financial statements on the basis of the best estimate of the obligation determined according to IAS 37. The overall amount of the commitment assumed is shown in the notes to the financial statements. Accounting of revenue and costs

Revenue resulting from the third-party use of company assets generating interest, commissions and dividends must be recorded when it is probable that the economic benefits associated with the transaction will flow to the company and the amount of the revenue can be measured reliably.

Interest and commissions are recorded in the income statement according to the classification of the financial instrument to which they refer. Dividends are recorded when the shareholders become entitled to receive the related payment.

Other commissions are recorded on an accruals basis.

The costs are recognised in the period when they are incurred, following the criterion of correlation between costs and revenues that derive directly and jointly from the same transactions or events. If the correlation between costs and revenues is possible only in a generic and indirect way, the costs are recognised in more periods according to a systematic allocation method.

If the costs can be associated to the revenues, these are recognised immediately in the income statement. Use of estimates and assumptions in drawing up the financial statements

In drawing up the financial statements, estimates and assumptions were used that may affect the carrying amounts recorded in the statement of financial position, income statement and the notes.

More specifically, subjective valuations by group management were made in the following cases:

- to quantify the impairment of financial assets, especially loans and receivables, equity investments and property, equipment and investment property;

- to determine the fair value of financial instruments to be used for financial reporting and the use of valuation models to determine fair value of financial instruments that are not quoted on active markets;

- to assess the reasonableness of the amount of goodwill and the other intangible assets;

- to quantify employees’ provisions and provisions for risks and charges;

- the actuarial and financial assumptions used to determine liabilities associated with defined benefit plans for employees;

- the estimates and assumptions made with regard to the recoverability of deferred tax assets.

139

In order to formulate reasonable estimates and assumptions for the recording of business transactions, subjective assessments are made based on all information and historical experience available.

A.3 - FAIR VALUE INFORMATION

A.3.1 Transfers between portfolios

The Group did not make any transfers between portfolios of financial assets as required by IAS 39.

A.3.2 Fair value level

A.3.2.1 Accounting portfolios: breakdown of fair value by levels

31/12/2012 31/12/2011

Financial assets/liabilities at fair value L1 L2 L3 L1 L2 L3

1. Financial assets held for trading 77,593 23,142 5,893 69,690 30,547 6,177

2. Financial assets at fair value trough profit or loss - - - - - -

3. Available-for-sale financial assets 3,428,500 7,043 54,257 1,339,659 8,923 63,972

4. Hedging derivatives - - - - - -

Total 3,506,093 30,185 60,150 1,409,349 39,470 70,149

1. Financial liabilities held for trading 5,942 9,729 - 3,103 6,424 -

2. Financial liabilities at fair value trough profit or loss - - - - - -

3. Hedging derivatives - 231,186 - - 159,608 -

Total 5,942 240,915 - 3,103 166,032 -

Key: L1= Level 1 L2= Level 2 L3= Level 3

140

A.3.2.2 Annual changes of financial assets at fair value (level 3)

FINANCIAL ASSETS

held for trading at fair value available-for-sale hedging

1. Opening balance 6,177 - 63,972 -

2. Increases 22 - 22,423 -

2.1. Purchases - - 21,640 -

2.2 Gains recognised in : 20 - 783 -

2.2.1. Profit or loss 20 - 398 -

- of which gains on sales 20 - - -

2.2.2. Equity X X 385 -

2.3. Transfers from other levels - - - -

2.4. Other increases 2 - - -

3. Decreases -306 - -32,138 -

3.1. Sales - - -385 -

3.2. Redemptions - - - -

3.3 Losses recognised in : -230 - -31,753 -

3.3.1. Profit or loss -230 - -30,911 -

- of which losses on sales -230 - -30,903 -

3.3.2. Equity X X -842 -

3.4. Transfers to other levels -76 - - -

3.5. Other decreases - - - -

4. Closing balance 5,893 - 54,257 -

A.3.3 Information on “day one profit/loss”

Turning to the “Day One Profit” (difference at the time of the first recognition, not recognised immediately in the income statement, according to the provisions of par. AG76 and AG76A of IAS 39, between the transaction price and the value obtained by using valuation techniques that apply parameters that cannot be observed on the market), taking into account the composition of the financial instrument portfolio and the results of the analyses carried out, no significant amounts of this nature were identified.

141

PART B - INFORMATION ON THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION

ASSETS

SECTION 1 - CASH AND CASH EQUIVALENTS - ITEM 10

1.1 - Cash and cash equivalents: breakdown

31/12/2012 31/12/2011

a) Cash 227,330 181,775

b) Deposit accounts with central banks - -

Total 227,330 181,775

SECTION 2 - FINANCIAL ASSETS HELD FOR TRADING - ITEM 20

2.1 - Financial assets held for trading: breakdown by type

Item/Amounts

31/12/2012 31/12/2011

Level 1 Level 2 Level 3 Level 1 Level 2 Level 3

A. Assets 1. Debt instruments 76,338 21,435 2 68,559 26,645 2

1.1 Structured instruments - - - - - -

1.2 Other debt instruments 76,338 21,435 2 68,559 26,645 2

2. Equity instruments 1,253 29 - 1,106 29 -

3. OEIC units - 860 5,891 - 720 6,175

4. Loans - - - - - -

4.1 Reverse repurchase agreements - - - - - -

4.2 Other - - - - - -

Total A 77,591 22,324 5,893 69,665 27,394 6,177

B. Derivatives 1. Financial derivatives 2 818 - 25 3,153 -

1.1 trading 2 818 - 25 3,153 -

1.2 associated with fair value option - - - - - -

1.3. other - - - - - -

2. Credit derivatives - - - - - -

2.1 trading - - - - - -

2.2 associated with fair value option - - - - - -

2.3. other - - - - - -

Total B 2 818 - 25 3,153 -

Total (A+B) 77,593 23,142 5,893 69,690 30,547 6,177

142

2.2 - Financial assets held for trading: breakdown by debtor/issuer

Item/Amounts 31/12/2012 31/12/2011

A. Assets

1. Debt instruments 97,775 95,206

a) Governments and Central Banks 25,769 23,574

b) Other government agencies 924 885

c) Banks 71,080 70,737

d) Other issuers 2 10

2. Equity instruments 1,282 1,135

a) Banks 2 11

b) Other issuers: 1,280 1,124

- insurance companies - -

- financial companies 29 29

- non-financial companies 1,251 1,095

- other - -

3. OEIC units 6,751 6,895

4. Loans - -

a) Governments and Central Banks - -

b) Other government agencies - -

c) Banks - -

d) Other parties - -

Total A 105,808 103,236

B. Derivatives

a) Banks

- fair value 592 2,003

b) Customers

- fair value 228 1,175

Total B 820 3,178

Total (A+B) 106,628 106,414

143

2.3 Financial assets held for trading: annual changes

2012

Debt instruments

Equity instruments OEIC units Loans Total

A. Opening balance 95,206 1,135 6,895 - 103,236

B. Increases 1,731,483 4,086 84 - 1,735,653

B.1 Purchases 1,718,424 3,844 - - 1,722,268

of which: business combinations - - - - -

B.2 Fair value gains 6,092 230 84 - 6,406

B.3 Other increases 6,967 12 - - 6,979

C. Decreases -1,728,914 -3,939 -228 - -1,733,081

C.1 Sales -714,081 -3,866 - - -717,947

of which: business combinations - - - - -

C.2 Redemptions -1,013,504 - - - -1,013,504

C.3 Fair value losses -571 -73 -228 - -872

C.4 Transfers to other portfolios - - - - -

C.5 Other decreases -758 - - - -758

D. Closing balance 97,775 1,282 6,751 - 105,808

SECTION 4 - AVAILABLE-FOR-SALE FINANCIAL ASSETS - ITEM 40

4.1 - Available-for-sale financial assets: breakdown by type

31/12/2012 31/12/2011

Item/Amounts Level 1 Level 2 Level 3 Level 1 Level 2 Level 3

1. Debt instruments 3,423,639 7,043 374 1,332,453 8,823 430

1.1 Structured instruments - - - - - -

1.2 Other debt instruments 3,423,639 7,043 374 1,332,453 8,823 430

2. Equity instruments 4,749 - 46,727 7,206 - 59,285

2.1 FVTPL 4,749 - 34,021 7,206 - 48,107

2.2 Cost - - 12,706 - - 11,178

3. OEIC units 112 - 7,156 - 100 4,257

4. Loans - - - - - -

Total 3,428,500 7,043 54,257 1,339,659 8,923 63,972

Level 3 also contains equity instruments measured at cost.

144

4.2 - Available-for-sale financial assets: breakdown by debtor/issuer

Item/Amounts 31/12/2012 31/12/2011

1. Debt instruments 3,431,056 1,341,706

a) Governments and Central Banks 3,419,595 1,328,581

b) Other government agencies - -

c) Banks 11,087 12,695

d) Other issuers 374 430

2. Equity instruments 51,476 66,491

a) Banks 21,057 50,498

b) Other issuers: 30,419 15,993

- insurance companies 1,062 1,018

- financial company 1,020 1,251

- non-financial company 28,309 13,696

- other 28 28

3. OEIC units 7,268 4,357

4. Loans - -

a) Governments and Central Banks - -

b) Other government agencies - -

c) Banks - -

d) Other parties - -

Total 3,489,800 1,412,554

4.3 Available-for-sale financial assets subject to specific hedging

Item/Amounts 31/12/2012 31/12/2011

1. Financial assets subject to specific fair value hedging 662,663 528,960

a) interest rate risk 662,663 528,960

b) price risk - -

c) currency risk - -

d) credit risk - -

e) more than one risk - -

2. Financial assets subject to specific cash flow hedging -

a) interest rate risk - -

b) currency risk - -

c) other - -

Total 662,663 528,960

145

4.4 Available-for-sale financial assets: annual changes

2012

Debt instruments

Equity instruments

OEIC units Loans Total

A. Opening balance 1,341,706 66,491 4,357 - 1,412,554

B. Increases 3,482,979 19,318 4,139 - 3,506,436

B.1 Purchases 3,206,638 17,878 3,741 - 3,228,257

- of which: business combinations - - - - -

B.2 Fair value gains 248,507 54 5 - 248,566

B.3 Reversals of impairment losses - 920 385 - 1,305

- recognised in profit or loss - X - - -

- recognised in equity - 920 385 - 1,305

B.4 Transfers from other portfolios - - - - -

B.5 Other increases 27,834 466 8 - 28,308

C. Decreases -1,393,629 -34,333 -1,228 - -1,429,190

C.1 Sales -1,363,142 -385 - - -1,363,527

- of which: business combinations - - - - -

C.2 Redemptions -30,487 - - - -30,487

C.3 Fair value losses - - -437 - -437

C.4 Impairment losses - -33,948 -791 - -34,739

- recognised in profit or loss - -33,543 -791 - -34,334

- recognised in equity - -405 - - -405

C.5 Transfers to other portfolios - - - - -

C.6 Other decreases - - - - -

D. Closing balance 3,431,056 51,476 7,268 - 3,489,800

For what concerns impairment losses that the table shows, it is specified that as required by the accounting policies of the Group, the quantitative and duration thresholds beyond which the decrease in fair value of the equity instruments immediately results in the posting of an impairment loss in the income statement refer to market quotations or valuations lower than the initial carrying amount for an amount higher than 30%; or the recognition of quotations or valuations that are lower than carrying amount for a period of more than 18 months. Exceeding one of these thresholds during the year resulted in the recognition of impairment losses in the income statement of:

- EUR 29.5 million referable to the equity investment held by Credito Valtellinese in Tercas S.p.A. (7.8% of share capital), company placed under administration as from May 2012, whose value in use was determined in compliance with the approach described in Section 13 - Intangible assets - item 130;

- EUR 2.7 million referable to the A2A security;

- EUR 2.1 million referable to the other equity investments held in the AFS portfolio.

Finally, the purchase of equity instruments includes a portion accounting for 2.8% of the share capital of Asset Management Holding S.p.A. deriving from the subscription of a reserved share capital increase of EUR 16 million as defined in the agreement signed in 2012 between the Creval Group and Asset Management Holding S.p.A. for the development of a strategic alliance in managed funds.

146

SECTION 5 - HELD TO MATURITY INVESTMENTS - ITEM 50

5.1 - Held to maturity investments: breakdown by type

TOTAL TOTAL

31/12/2012 31/12/2011

CA FV CA FV

Level 1 Level 2 Level 3 Level 1 Level 2 Level 3

1. Debt instruments 304,326 21,415 279,532 - 507,555 14,881 457,854 -

- structured - - - - - - - -

- other 304,326 21,415 279,532 - 507,555 14,881 457,854 -

2. Loans - - - - - - - -

Key FV = fair value CA = carrying amount

Securities with level-2 fair value are represented by securities issued by banks quoted on a market that can no longer be defined as an “active market”.

5.2 - Held to maturity investments: breakdown by debtor/issuer

31/12/20012 31/12/2011

1. Debt instruments 304,326 507,555

a) Governments and Central Banks 13,239 13,253

b) Other government agencies - -

c) Banks 291,087 494,302

d) Other issuers - -

2. Loans - -

a) Governments and Central Banks - -

b) Other government agencies - -

c) Banks - -

d) Other parties - -

Total 304,326 507,555

Total fair value 300,947 472,735

5.3 Held to maturity investments subject to specific hedging

There are no held to maturity investments subject to specific hedging.

147

5.4 - Held to maturity investments: annual changes

2012

Debt instruments Loans Total

A. Opening balance 507,555 - 507,555

B. Increases - - -

B.1 Purchases - - -

- of which: business combinations - - -

B.2 Reversals of impairment losses - - -

B.3 Transfers from other portfolios - - -

B.4 Other increases - - -

C. Decreases -203,229 - -203,229

C.1 Sales - - -

- of which: business combinations - - -

C.2 Redemptions -202,000 - -202,000

C.3 Impairment losses - - -

C.4 Transfers to other portfolios - - -

C.5 Other decreases -1,229 - -1,229

D. Closing balance 304,326 - 304,326

SECTION 6 - LOANS AND RECEIVABLES WITH BANKS - ITEM 60

6.1 - Loans and receivable with banks: breakdown by type

Type of transaction/Amounts 31/12/2012 31/12/2011

A. Loans and receivables with Central Banks 359,627 267,622

1. Term deposits - -

2. Obligatory reserve 359,627 267,622

3. Reverse repurchase agreements - -

4. Other - -

B. Loans and receivables with banks 1,271,117 1,350,895

1. Current accounts and deposit accounts 30,493 196,246

2. Term deposits 901 16,018

3. Other loans: 824,321 563,793

3.1 Reverse repurchase agreements 194,638 263,105

3.2 Finance leases - -

3.3 Other 629,683 300,688

4. Debt instruments 415,402 574,838

4.1 Structured instruments - -

4.2 Other debt instruments 415,402 574,838

Total (carrying amount) 1,630,744 1,618,517

Total (fair value) 1,626,382 1,577,932

Other loans mainly include the items related to the securitisation transactions.

148

SECTION 7 - LOANS AND RECEIVABLES WITH CUSTOMERS - ITEM 70

7.1 - Loans and receivables with customers: breakdown by type

31/12/2012

31/12/2011

Impaired Impaired

Type of transaction/Amounts Performing Purchased Other Performing Purchased Other

1. Current accounts 5,913,641 - 821,534 6,659,773 - 658,249

2. Reverse repurchase agreements - - - - - -

3. Mortgages 9,689,948 - 1,002,596 9,731,902 - 802,378

4. Credit cards, personal loans and salary-backed loans 382,231 - 22,680 470,455 - 18,850

5. Finance leases 1,196,066 - 85,340 1,234,497 - 66,603

6. Factoring - - - - - -

7. Other 2,715,160 - 166,726 2,550,078 - 125,130

8. Debt instruments 11,915 - - 12,272 - -

8.1 Structured instruments - - - - - -

8.2 Other debt instruments 11,915 - - 12,272 - -

Total carrying amount 19,908,961 - 2,098,876 20,658,977 - 1,671,210

Total fair value 20,049,750 - 2,118,540 20,898,947 - 1,706,823

7.2 - Loans and receivables with customers: breakdown by debtor/issuer

Type of transaction/Amounts

31/12/2012

31/12/2011

Impaired Impaired

Performing Purchased Other Performing Purchased Other

1. Debt instruments 11,915 - - 12,272 - -

a) Governments - - - - - -

b) Other government agencies 4,620 - - 4,679 - -

c) Other issuers 7,295 - - 7,593 - -

- non-financial companies 1,607 - - 1,607 - -

- financial companies 5,688 - - 5,986 - -

- insurance companies - - - - - -

- other - - - - - -

2. Loans to: 19,897,046 - 2,098,876 20,646,705 - 1,671,210

a) Governments 29,578 - - 1,679 - 1

b) Other government agencies 55,733 - 3 90,773 - -

c) Other parties 19,811,735 - 2,098,873 20,554,253 - 1,671,209

- non-financial companies 15,348,338 - 1,764,781 16,155,147 - 1,385,819

- financial companies 368,010 - 60,307 342,928 - 26,956

- insurance companies 15,367 - - 13,604 - -

- other 4,080,020 - 273,785 4,042,574 - 258,434

Total 19,908,961 - 2,098,876 20,658,977 - 1,671,210

149

7.3 Loans and receivables with customers subject to specific hedging

There are no loans and receivables with customers subject to specific hedging.

7.4 Finance leases

31/12/2012

Finance leases to customers: reconciliation

Financial surplus before application of amortised cost method 1,306,476

Time value accrued -3,099

Financial surplus after application of amortised cost method 1,303,377

Allowance for impairment referred to minimum payments 21,971

Residual life of financial surplus before application of amortised cost

Present value of minimum payments within 1 year 235,721

Present value of minimum payments between 1 year and 5 years 430,869

Present value of minimum payments over 5 years 617,915

Residual life of financial surplus after application of amortised cost

Present value of minimum payments within 1 year 236,002

Present value of minimum payments between 1 year and 5 years 431,402

Present value of minimum payments over 5 years 614,002

The lease contracts agreed by the Group Banks have the following characteristics:

- all the risks and benefits related to ownership of the goods are transferred to the lessee;

- upon agreement of the contract, the lessee pays an advance deposit, which will be purchased by the lessor once the contract produces income and will reduce the amount financed;

- during the useful life of the contract, the lessee will make regular payments (generally on a monthly basis), which may vary in accordance with the indexing clauses;

- upon termination of the contract, the lessee will have the option to purchase ownership of the goods governed by the contract at a price less than the fair value at the date that the option could be exercised, so it is reasonably certain that the option will be exercised.

Since legal ownership of the goods is held by the lessor for the entire duration of the contract, the goods themselves represent the implicit guarantee against lessee exposure, therefore non-guaranteed residuals remain. In the event the goods cannot be currently sold or are subject to rapid obsolescence, the lessee, or the supplier of the goods will be requested to provide additional guarantees.

Deferred non-trading profits amount to EUR 316,636 thousand.

During the year, contingent rents of EUR 17,694 thousand were recognised as income.

150

SECTION 10 - EQUITY INVESTMENTS - ITEM 100

10.1 - Equity investments in companies subject to joint control (equity-accounted) and in companies subject to significant influence: information on the investment shares

Name

Registered office

Type of relationship

(1)

Type of equity investment

Investor company

% held

% voting rights

available

A. Companies

1. Rajna Immobiliare S.r.l. Sondrio 1 Credito Valtellinese 50.00

2. Global Assistance S.p.A. Milano 2 Credito Valtellinese 40.00

3. Istituto Centrale delle Banche Popolari Italiane S.p.A. Milano 2 Credito Valtellinese 20.39

4. Banca di Cividale S.p.A. Cividale del Friuli (UD) 2 Credito Valtellinese 20.00

5. Sondrio Città Futura S.r.l. Milano 2 Stelline S.I. 49.00

6. Sondrio Città Centro S.r.l. Sondrio 2 Stelline S.I. 30.00

7. Soc. Coop. del Polo dell’Innovazione della Valtellina S.p.A. Sondrio 2 Credito Valtellinese 8.59

8. Istifid S.p.A. Milano 2 Credito Valtellinese 28.66 26.21

9. Finanziaria Laziale S.p.A. in liquidation Frosinone 2 Finanziaria San Giacomo S.p.A. 20.00

10. Adamello S.p.A. Milano 2 Stelline S.I. 10.00

11. Miri & Giò S.p.A. Sondrio 2 Stelline S.I. 30.00

12. Valtellina Golf Club S.p.A. Sondrio 2 Credito Valtellinese 36.67

Key (1) Type of relationship: 1 = joint control 2 = significant influence

The percentage of available votes is not indicated, as it corresponds to the percentage of the equity investment.

Although the investments are less than 20% of the share capital, equity investments in Soc. Coop. del Polo dell’Innovazione della Valtellina S.p.A. and in Adamello S.p.A. are included among equity investments in companies subject to significant influence by virtue of the significant presence in their Board of Directors and Board of Statutory Auditors of parties related to the Creval Group.

151

10.2 - Equity investments in companies subject to joint control and in companies subject to significant influence: accounting information

Name

Total

assets

Total

revenue

Profit (loss)

Equity

Consolidated carrying amount

Fair

value

A. Equity-accounted investees

A.1 subject to joint control

1. Rajna Immobiliare S.r.l 873 131 45 844 422 -

A.2 subject to significant influence

1. Global Assistance S.p.A. 19,023 6,906 1,481 7,523 3,504 -

2. Istituto Centrale delle Banche Popolari Italiane S.p.A. 8,372,595 1,109,884 90,118 800,518 158,424 -

3. Banca di Cividale S.p.A. 2,847,614 136,942 -7,173 229,353 73,795 -

4. Sondrio Città Futura S.r.l. 8,643 976 -34 105 49 -

5. Sondrio Città Centro S.r.l. 9,449 1,182 -286 243 1 -

6. Soc. Coop. del Polo dell’Innovazione della Valtellina S.p.A. 673 563 -193 219 19 -

7. Istifid S.p.A. 7,496 5,110 172 3,837 1,611 -

8. Finanziaria Laziale S.p.A. in liquidation 3,648 939 -17 583 - -

9. Adamello S.p.A. 14,154 90 -366 10,630 762 -

10. Miri & Giò S.p.A. 22,497 31 -10 5,956 1,790 -

11. Valtellina Golf Club S.p.A. 7,917 775 -417 3,506 1,153 -

The equity and profit (loss) are taken from the 2012 financial statements approved by the respective Shareholders’ Meetings, or, if these are not available, from the draft financial statements approved by the respective Boards of Directors, except for those of Sondrio Città Futura S.r.l., Sondrio Città Centro S.r.l., Società Cooperativa del Polo dell’Innovazione della Valtellina, Adamello S.p.A., Miri & Giò S.p.A. and Valtellina Golf Club S.p.A. that are taken from the 2011 financial statements. The figures as at 31 December 2010 were recorded for Finanziaria Laziale S.p.A. as the company is in liquidation. The figures of Istituto Centrale delle Banche Popolari Italiane relate to the consolidated financial statements.

10.3. - Equity investments: annual changes

2012 2011

A. Opening balance 219,315 230,079

B. Increases 25,520 19,312

B.1 Purchases 707 -

B.2 Reversals of impairment losses - -

B.3 Revaluations 19,039 16,271

B.4 Other increases 5,774 3,041

C. Decreases -3,305 -30,076

C.1 Sales -895 -20,353

C.2 Impairment losses -737 -

C.3 Other decreases -1,673 -9,723

D. Closing balance 241,530 219,315

E. Total revaluations 57,915 38,876

F. Total adjustments 914 177

152

Annual changes in equity investments include the transfers of investments in Aperta Gestioni S.A. and Progetti Industriali Valtellina S.r.l..

10.4 - Commitments referred to equity investments in companies subject to joint control

There are no commitments referred to equity investments in companies subject to joint control.

10.5 - Commitments referred to equity investments in companies subject to significant influence

There are no commitments referred to equity investments in companies subject to significant influence.

SECTION 12 – PROPERTY, EQUIPMENT AND INVESTMENT PROPERTY- ITEM 120

12.1 – Property, equipment and investment property: breakdown of assets measured at cost

Asset/Amounts 31/12/2012 31/12/2011

A. Assets used in the business

1.1 owned 445,646 443,353

a) land 64,939 65,242

b) buildings 341,316 336,571

c) furniture 25,408 27,558

d) electronic systems 4,369 3,934

e) other 9,614 10,048

1.2 acquired through a finance lease - -

a) land - -

b) buildings - -

c) furniture - -

d) electronic systems - -

e) other - -

Total A 445,646 443,353

B. Investment property

2.1 owned 28,637 27,712

a) land 2,741 3,861

b) buildings 25,896 23,851

2.2 acquired through a finance lease - -

a) land - -

b) buildings - -

Total B 28,637 27,712

Total (A+B) 474,283 471,065

153

12.3 - Operational property and equipment: annual changes

2012

Land Buildings Furniture Electronic

systems

Other

Total

A. Opening balance, gross 65,242 450,025 99,515 49,899 119,752 784,433

A.1 Total net depreciations - 113,454 71,957 45,965 109,704 341,080

A.2 Opening balance, net 65,242 336,571 27,558 3,934 10,048 443,353

B. Increases 1,424 18,386 2,549 2,115 3,842 28,316

B.1 Purchases - 603 1,877 2,115 3,596 8,191

- of which: business combinations - - - - - -

B.2 Capitalised improvement costs - 8,135 - - - 8,135

B.3 Reversals of impairment losses - - - - - -

B.4 Fair value gains recognised in: - - - - - -

a) equity - - - - - -

b) profit or loss - - - - - -

B.5 Exchange rate gains - - - - - -

B.6 Transfers from investment property - - - - - -

B.7 Other increases 1,424 9,648 672 - 246 11,990

C. Decreases -1,727 -13,641 -4,699 -1,680 -4,276 -26,023

C.1 Sales - -2,212 - - -60 -2,272

- of which: business combinations - - - - - -

C.2 Depreciation - -11,429 -4,668 -1,676 -4,149 -21,922

C.3 Impairment losses recognised in: - - - - - -

a) equity - - - - - -

b) profit or loss - - - - - -

C.4 Fair value losses recognised in: - - - - - -

a) equity - - - - - -

b) profit or loss - - - - - -

C.5 Exchange rate losses - - - - - -

C.6 Transfers to: - - - - - -

a) investment property - - - - - -

b) discontinued operations - - - - - -

C.7 Other decreases -1,727 - -31 -4 -67 -1,829

D. Closing balance, net 64,939 341,316 25,408 4,369 9,614 445,646

D.1 Total net depreciations - 124,883 76,625 47,641 113,853 363,002

D.2 Closing balance, gross 64,939 466,199 102,033 52,010 123,467 808,648

E. Measurement at cost - - - - - -

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12.4 - Investment property: annual changes

2012 Land Buildings

A. Opening balance, gross 2,741 28,208

A.1 Total net depreciations - 4,357

A.2 Opening balance, net 2,741 23,851

B. Increases - 2,990

B.1 Purchases - 196

- of which: business combinations - -

B.2 Capitalised improvement costs - 18

B.3 Fair value gains - -

B.4 Reversals of impairment losses - -

B.5 Exchange rate gains - -

B.6 Transfers from operating assets - -

B.7 Other increases - 2,776

C. Decreases - -945

C.1 Sales - -291

- of which: business combinations - -

C.2 Depreciation - -654

C.3 Fair value losses - -

C.4 Impairment losses - -

C.5 Exchange rate losses - -

C.6 Transfers to other asset portfolios

a)operating assets - -

b) non-current assets held for sale - -

C.7 Other decreases - -

D. Closing balance, net 2,741 25,896

D.1 Total net depreciations - 5,011

D.2 Closing balance, gross 2,741 30,907

E. Measurement at fair value 2,741 30,028

12.5 - Commitments to purchase property, equipment and investment property.

There are no commitments to purchase property, equipment and investment property.

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SECTION 13 - INTANGIBLE ASSETS - ITEM 130

13.1 - Intangible assets: breakdown by type

Asset/Amounts

31/12/2012 31/12/2011

Finite life

Indefinite life

Finite life

Indefinite life

A.1 Goodwill X 305,492 X 609,498

A.1.1 attributable to owners of the parent X 305,492 X 609,498

A.1.2 attributable to non-controlling interests X - X -

A.2 Other intangible assets 49,342 - 54,435 -

A.2.1 Assets measured at cost: 49,342 - 54,435 -

a) internally generated intangible assets 342 - 790 -

b) other assets 49,000 - 53,645 -

A.2.2 Assets measured at fair value: - - - -

a) internally generated intangible assets - - - -

b) other assets - - - -

Total 49,342 305,492 54,435 609,498

The above goodwill is a result of:

1. consolidation of controlling interests acquired by the companies of the Group;

2. transactions for the purchase of bank branches with parties outside the Group, which imply the recognition of intangible assets directly in the separate financial statements of the parent or one of its subsidiaries.

3. business combinations between parties subject to common control accounted for by preserving the continuity of the values of the acquirer as resulting from the consolidated financial statements of the common Group to which it belongs. This implies the recognition in the separate financial statements of the parent or one of its subsidiaries of the carrying amount of the goodwill previously entered in the consolidated financial statements as a result of the consolidation of the equity investment.

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13.2 - Intangible assets: annual changes

2012

Goodwill

Other intangible

assets: generated internally

Other intangible

assets: other

Total

DEF INDEF DEF INDEF

A. Opening balance 746,605 2,400 - 86,517 - 835,522

A.1 Total net depreciations and impairment losses 137,107 1,612 - 32,870 - 171,589

A.2 Opening balance, net 609,498 788 - 53,647 - 663,933

B. Increases - - - 6,297 - 6,297

B.1 Purchases - - - 6,297 - 6,297

- of which: business combinations - - - - - -

B.2 Increases in internally generated intangible assets X - - - - -

B.3 Reversals of impairment losses X - - - - -

B.4 Fair value gains recognised in

- equity X - - - - -

- profit or loss X - - - - -

B.5 Exchange rate gains - - - - - -

B.6 Other increases - - - - - -

C. Decreases -304,006 -448 - -10,942 - -315,396

C.1 Sales - - - - - -

- of which: business combinations - - - - - -

C.2 Impairment losses

- Amortisation X -448 - -10,842 - -11,290

- Impairment losses

+ equity X - - - - -

+ profit or loss -302,570 - - -100 - -302,670

C.3 Fair value losses recognised in

- equity X - - - - -

- profit or loss - - - - - -

C.4 Transfers to non-current assets held for

sale - - - - - -

C.5 Exchange rate losses - - - - - -

C.6 Other decreases -1,436 - - - - -1,436

D. Closing balance, net 305,492 340 - 49,002 - 354,834

D.1 Total net depreciations and impairment losses 439,677 2,060 - 43,812 - 485,549

E. Closing balance, gross 745,169 2,400 - 92,814 - 840,383

F. Measurement at cost - - - - - -

Key DEF: with definite life INDEF: with indefinite life

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13.3 - Other information

Goodwill

In accordance with IAS 36, goodwill must be subject to impairment tests on an annual basis to ensure its recoverability. To this end, goodwill must be allocated to individual or cash generating units of the acquirer or groups of such cash generating units (hereinafter “CGU”) so that these units may benefit from the synergy of the combination, independently of whether the other assets or liabilities related to the acquisition were assigned to that unit or group of units. At a consolidated level, the CGUs were identified as the individual legal entities, (Credito Valtellinese market CGU, Credito Siciliano market CGU, Carifano market CGU and Global Assicurazioni Finance CGU), less the investments in associates and companies subject to joint control classified in the portfolios of Equity investments and of Available-for-sale financial assets. They represent the lowest level at which group management estimates the return on investment and this level is not greater than the operating segments identified for the segment reporting of the group prepared according to IFRS 8 Operating segments. Specifically, all the corporate centre costs were allocated in the mentioned CGUs.

Description CGU definition Market CGU - Credito Valtellinese

Credito Valtellinese excluding equity investments

Market CGU - Carifano Carifano excluding equity investments Market CGU - Credito Siciliano Credito Siciliano excluding equity investments Finance CGU - Global Assicurazioni

Global Assicurazioni Legal entity

It is also specified that, compared to what was defined in the impairment tests carried out in 2011, Credito Valtellinese market CGU takes account of the effects of the merger of Credito Artigiano into Credito Valtellinese completed in 2012, and of the effects - albeit marginal - of the merger of Deltas Soc.Cons.p.A. into Credito Valtellinese in the first quarter of 2013.

The following shows the carrying amount of the goodwill referred to the CGUs above before carrying out the test:

Description Carrying amount of the allocated

goodwill Market CGU - Credito Valtellinese 353,145 Market CGU - Carifano 141,714 Market CGU - Credito Siciliano 78,046 Finance CGU - Global Assicurazioni 35,157 Total 608,062

The IFRS require the impairment test to be made by comparing the carrying amount of the CGU with its recoverable amount. An impairment loss must be recognised where the recoverable amount is lower than the carrying amount. The recoverable amount of the CGU is the higher between its fair value net of sales costs and its value in use.

For the purpose of the impairment procedure, approved by the Board of Directors, the Group - with the help of an influential external expert - used the value in use for the recoverability check of the recorded goodwill.

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Value in use

The value in use is determined by estimating the present value of the future cash flows expected to be generated by the CGU. The value of an asset is calculated by discounting the cash flows increased by the terminal value calculated as perpetual income estimated in accordance with an economically sustainable normalised cash flow and consistent with the long-term growth rate. Cash flows

The value in use was determined by discounting future cash flows in accordance with forecasts approved by the directors that cover a 5-year period and on projections after the period covered by the plan, based - consistently with what was defined during the impairment test carried out in the 2011 financial statements - on a constant growth rate of 2% (i.e. the long-term growth rate estimated on the basis of the forecasts on the inflation rate) by maintaining a satisfactory degree of capitalisation (7.5% Tier 1 target).

According to the Board of Directors, as a result of the re-examination of the scenarios formulated by leading private research centres and of the analyses of the nature of the deviations occurred between the 2012 budget and the actual figures, the economic and financial targets for the 2012-2014 two-year period, approved in March 2012 when updating the 2011-2014 industrial plan, are no longer consistent with the current market context and therefore, in order to prepare the impairment tests, the board used the 2013 budget, approved by the competent bodies in January 2013, together with 2014 - 2017 projections based on the best estimates made by management on the basis of the measurements made as part of its operations in the sector of reference.

The projections are developed within an economic context that continues to show signs of weakness and the ECB continues to maintain unconventional monetary policy measures.

With special reference to repercussions of this context on the banking activity, the following is expected:

- a development of direct and indirect funding, affected by a limited economic growth, by the effects of the tax policies on household savings and by the re-opening of the wholesale markets deriving from a gradual normalisation of the financial markets;

- a trend of loans characterised by an initial phase - until 2015 - of reduction due to the weakness on the demand side and of the constraints of the offer related to the need to limit the risks, share capital consumptions and the cost of funding, followed by a period of gradual recovery in supporting the real economy favoured by a substantial improvement of overall macroeconomic conditions;

- an estimate of short-term rates below 1% until 2015 with a significant upturn in 2016-2017 (until approx. 2%) that will lead to a normalisation of the markup and of the markdown and to an increase in spread from customers;

- development of net fee and commission income deriving from traditional business channels such as current accounts and payment systems and from the acceleration in the placements of indirect funding instruments by widening the offer in managed funds also as a result of the strategic partnership signed with Asset Management Holding S.p.A - company controlling Anima SGR - in 2012;

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- operating costs in decline compared to what was recorded in 2012, resulting from careful cost management actions necessary to maintain operating profitability and from staff optimisation policies;

- a cost of credit risk in gradual reduction as from 2014 albeit at levels higher than before the crisis.

All the forecast figures used are sensitive to the change in the macroeconomic scenario that is significantly affected by the uncertainty of the timing and strength of the recovery of the Italian economy, in particular. Discount rate

In calculating the value of use, the cash flows must be discounted at a rate that includes both the time value of money and the risks of the business. In line with the current evaluation method, the discount rate net of taxes amounts to 9.8% for all the banking CGUs in that the risk factors to which they are subjected are similar given the operations on the national territory.

The discount rate applied corresponds to the cost of the risk capital, equal to the equity yield rate requested by investors/shareholders for investments with similar risk characteristics. This rate is estimated by using the Capital Asset Pricing Model (“CAPM”) on the basis of the formula below: ke = Rf + Beta * (Rm-Rf), where

Rf = yield rate for risk free investments, considered as equal to the annual average return of ten-year long-term treasury bonds issued by the Italian government, equal to 5.47%;

Rm - Rf = premium for the risk requested by the market, considered equal to 5%, in line with the evaluation method;

Beta = factor correlating the actual return of a share and the overall return of the reference market (measuring the volatility of a security with respect to the market), equal to 0.88, which represents the beta related to the Credito Valtellinese Group.

Summarised below is the discount rate after tax used for market CGUs:

Ke parameters 2012 2011 Risk free 5.47% 5.35% Beta 0.88 0.81 Market risk Premium 5% 5% Discount rate 9.8% 9.4%

The discount rate after tax used for Finance CGU - Global Assicurazioni is 10.5% (10.3% in 2011) in consideration of the difficulty of identifying Italian listed companies comparable to Global Assicurazioni. Outcome of the impairment tests

The results of the impairment test carried out on the goodwill recorded in the consolidated financial statements showed the need of a goodwill impairment loss of EUR 85 million with regard to the Carifano market CGU and of EUR 217 million with regard to the Credito Valtellinese market CGU. The reasons that led to these impairment losses are attributable to the combined effects of the prolonged economic downturn and of the uncertainty on the recovery prospects that particularly impacted on this area. With respect to Credito Siciliano market CGU and the Global Assicurazioni finance CGU, the results of the impairment test did

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not reveal any impairment of the goodwill recorded, also in case of changes in the value assigned to the basic assumptions following the sensitivity analysis (Discount rate +30 bp and Growth rate -50 bp).

Finally, it is highlighted that the persisting volatility of the share prices, also following the uncertainty in the macroeconomic situation, does not allow the stock market quotations, or the multipliers that they derive from, to fully express the company’s listed value based on the future growth opportunities and the ability to create sustainable value in the medium term. Intangible assets with a definite useful life

The core deposits and the asset management relationships represent the intangible assets linked with relationships with customers. The carrying amount of intangible assets with a finite useful life (customer list) as at 31 December 2012 totalled approx. EUR 39 million.

The value of intangible assets linked to the core deposits is related to the future benefits that the purchaser of the deposits in current account and savings deposits can benefit from in the long term that expresses the residual duration. These intangible assets with a finite useful life are amortised on a straight line basis over the period in which most of the expected economic benefits will fall, i.e. 16 years for the intangible asset linked to the core deposits deriving from the purchase of the branches of Intesa Sanpaolo and 14 years for the one deriving from the purchase of Carifano and Banca Cattolica.

The value of intangible assets linked to asset management relations was calculated with a similar approach to that adopted for the core deposits, i.e. discounting of the income margins generated by them over the period representing the residual duration of the existing relations. These intangible assets with a finite useful life are amortised on a straight-line basis over the period in which most of the expected economic benefits will fall, i.e. 7 years for intangible assets linked to the asset management deriving from the purchase of the branches of Intesa San Paolo.

The amortisation period was established by considering the years of decline of half the deposits subject to valuation and by hypothesising the same number of years of decline for the residual portion.

According to IAS 36, the recoverable amount of the intangible assets with a definite useful life must be calculated every time there is evidence of impairment. The impairment test must be made by comparing the carrying amount of the asset net of the relevant amortisation with its recoverable amount. An impairment loss must be recognised where the recoverable amount is lower than the carrying amount. The recoverable amount of the asset is the higher between its fair value net of costs to sell and its value in use. In order to calculate the value in use of the intangible asset, reference must be made to its cash flows in current conditions on the impairment test date, regardless of the fact that these flows were generated by the assets originally recognised when applying IFRS 3. Therefore the cash flows concerning the core deposits and the asset management determined for the verifications for the purpose of the impairment test refer to the technical form considered in the initial valuation of the intangible asset with the amounts existing as at 31 December 2012 since it is no longer possible to differentiate the flows referring to the intangibles purchased compared to those generated by the other deposits produced subsequently. The value in use is calculated as the current value of the future income margins generated from the existing transactions at the valuation date along a time horizon that expresses their residual duration.

Thus, there is no evidence of impairment losses concerning the intangible assets with a finite useful life recognised as at 31 December 2012.

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SECTION 14 - TAX ASSETS AND LIABILITIES - ITEM 140 UNDER ASSETS AND ITEM 80 UNDER LIABILITIES AND EQUITY

14.1 - Deferred tax assets

Banking Group

Insurance companies 31/12/2012 31/12/2011

IRES

Provisions for claims by bankruptcy liquidators 2,873 - 2,873 2,163

Provisions for legal disputes 2,809 - 2,809 2,560

Provisions for sundry charges 674 - 674 804

Provisions for personnel charges 2,677 - 2,677 926

Mathematical reserve provision 9,044 - 9,044 7,553

Loans impairment surplus 179,326 - 179,326 106,406

Impairment of other loans and receivables 6,777 - 6,777 3,049

Non-deductible amortisation 3,300 - 3,300 3,209

Goodwill impairment loss 45,341 - 45,341 23,793

Goodwill exemption 138,015 - 138,015 112,955

Measurement of debt instruments and OEIC of AFS portfolio 49,566 - 49,566 98,970

Costs for share capital increase 152 - 152 172

Other 22,508 37 22,545 5,400

Total 463,062 37 463,099 367,960

IRAP

Provisions for legal disputes 534 - 534 413

Provisions for sundry charges 204 - 204 201

Impairment of other loans and receivables - - - 179

Non-deductible amortisation 614 - 614 593

Goodwill impairment loss 9,184 - 9,184 4,819

Goodwill exemption 27,954 - 27,954 22,879

Valuation of debt instruments, equity instruments and OEIC of AFS portfolio 12,470 - 12,470 20,702

Other 4,089 2 4,091 764

Total 55,049 2 55,051 50,550

Exemption of goodwill and other intangible assets

Paragraph 10 of Article 15 of Italian Law Decree no.185/2008 allows the exemption of higher values of goodwill, brands and other intangible assets arising in separate financial statements as a result of “fiscally neutral” non-recurring operations, such as mergers, demerges and contributions. The exemption is against payment of a substitute tax of 16%.

The tax recognition of the higher values subjected to substitute tax is effective as from the tax period in which the substitute tax is paid. However, the related amortisation commence in the next tax period. Specifically:

- goodwill is amortised on a straight-line basis not exceeding 1/10;

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- the amortisation of intangible assets with a finite useful life (customer list) follows the accounting amortisation made in the financial statements.

Article 176, paragraph 2-ter of the TUIR envisages the option of exempting the higher values assigned in the financial statements to the assets items forming property, equipment and investment property and intangible assets against the payment, mandatory in three instalments, of a substitute tax. This tax of 12% is applied to the part of the higher values included in the limit of EUR 5 million, 14% on the part of the higher values exceeding EUR 5 million and up to EUR 10 million and 16% on the part of the higher values exceeding EUR 10 million.

This provision can be applied in conjunction with paragraph 10 of Article 15 of Italian law Decree 185/2008, even in the same tax period and in relation to the same non recurring transaction, with respect to misalignments related to two individual and different assets.

One of the methods contemplated for the recognition of the values deriving from the exemptions (ref. OIC Document of February 2009 called “Accounting treatment of the substitute tax on the exemption of goodwill ex Italian Law Decree no. 185 of 29 November 2008, Article 15, paragraph 10, converted by Italian Law no. 2 of 28 January 2009 for subjects preparing the financial statements in compliance with the IFRS”) provides for the recognition of deferred tax assets against the tax benefit expected from the future deductibility of goodwill and other assets to be exempted. Therefore, at the accounting level, current taxes to be paid are recognised for an amount totalling the substitute tax of the exemption to be made and deferred tax assets are recognised for the total amount of the tax benefit (calculated on the basis of the IRES and IRAP rates in force applied to the amount of assets). The balancing entry is the item income taxes in the income statement.

The provisions (Article 2, paragraphs 55 to 58, Italian Law Decree 225/2010) that allow the conversion of deferred tax assets (DTA) recorded due to the exemption in tax credits apply to these DTA at the occurrence of

- losses for the period,

- tax losses,

- voluntary liquidation or bankruptcy or crisis management proceedings, respectively.

With reference to the above regulation, the recent Bank of Italy, Consob and Isvap Document no. 5 of 15 May 2012 specified that for the DTA benefiting from the possibility of conversion there is no need to carry out a probability test since their recovery is practically certain, even in the absence of large taxable income. However, the Group carried out the probability tests in the light of the forecasts used for goodwill impairment tests (for further details refer to the above) that show large taxable income compared to the amortisation of goodwill and other intangible assets, which will become deductible and therefore the requirement for their recognition in the financial statements is met.

This being stated, it is noted that as a result of the merger of Banca Cattolica and Credito del Lazio, the exemption of goodwill and other intangible assets for a total of EUR 50 million was carried out in the separate financial statements of Credito Artigiano, with the resulting payment of a substitute tax of EUR 8 million and recognition of a tax asset totalling EUR 16.5 million. The net accounting profit totalled EUR 8.5 million

With reference to the transaction that involved Cassa di Risparmio di Fano consisting in its merger into Credito Artigiano, followed by the contribution to in a newly established company, Nuova Carifano (then renamed Cassa di Risparmio di Fano - Carifano), of the branches present in the Marche and Umbria regions, on the basis of the above considerations, the exemption of

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goodwill and other intangible assets was resolved totalling EUR 68.4 million, on the basis of the year-end impairment test, resulting in the recognition of the amount due for the payment of the substitute tax totalling EUR 10.6 million that will be carried out no later than next 17 June 2013 and a tax asset totalling EUR 22.6 million. The net accounting profit totalled EUR 12 million.

Likewise, Credito Valtellinese, which subsequently merged Credito Artigiano, resolved the exemption of goodwill and other intangible assets for a total of EUR 43.4 million, on the basis of the year-end impairment test, resulting in the payment of a substitute tax of EUR 7 million that will be made no later than 17 June 2013 and a tax asset totalling EUR 14.4 million. The net accounting profit totalled EUR 7.4 million.

It is specified that, with reference to the customer list of Banca Cattolica and Cassa di Risparmio di Fano, no tax asset was recognised, but deferred tax liabilities previously recognised were reversed.

The overall effect in the income statement of the consolidated financial statements amounts to approx. EUR 27.9 million.

14.2 - Deferred tax liabilities: breakdown

Banking Group

Insurance companies 31/12/2012 31/12/2011

IRES

Gains 60 - 60 170

Goodwill 222 - 222 6,697

Measurement of trading portfolio shares 82 - 82 180

Measurement of AFS portfolio 11 - 11 13

Post-employment benefits - discounting - 16 16 88

Other 7,807 - 7,807 14,389

Total 8,182 16 8,198 21,537

IRAP

Gains 12 - 12 34

Goodwill 45 - 45 1,356

Measurement of trading portfolio shares 17 - 17 36

Measurement of AFS portfolio 41 - 41 28

Other 1,506 - 1,506 2,677

Total 1,621 - 1,621 4,131

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14.3 - Changes in deferred tax assets (recognised in profit or loss)

2012 2011

1. Opening balance 297,346 107,534

2. Increases 171,284 200,475

2.1 Deferred tax assets recognised in the year 152,773 200,244

a) relating to previous years 714 19

b) due to changes in accounting policies - -

c) reversals of impairment losses - -

d) other 152,059 200,225

2.2 New taxes or increases in tax rates - 207

2.3 Increases due to business combinations - -

2.4 Other increases 18,511 24

3. Decreases -13,793 -10,663

3.1 Deferred tax assets cancelled during the year -13,759 -10,486

a) reversals -13,655 -10,429

b) impairment due to non-recoverability - -

c) due to changes in accounting policies - -

d) other -104 -57

3.2 Reduction in tax rates - -

3.3 Decreases due to business combinations - -

3.4 Other decreases -34 -177

a) conversion into tax assets set forth in Italian Law 214/2011 - -

b) other -34 -177

4. Closing balance 454,837 297,346

The trend of deferred tax assets recognised in profit or loss in 2011 was revised in relation to the early application of IAS 19.

14.3.1 - Changes in deferred tax assets set forth in Italian Law 214/2011 (recognised in profit or loss)

2012 2011

1. Opening balance 188,080 44,993

2. Increases 205,117 146,266

3. Decreases -9,537 -3,179

3.1 Reversals -9,537 -3,179

3.2 Conversions into tax assets - -

a) deriving from losses for the year - -

b) deriving from tax losses - -

3.3 Other decreases - -

4. Closing balance 383,660 188,080

Article 2 of Italian Law Decree no. 255 of 29 December 2010, (the so-called “mille proroghe” decree) converted, with amendments, by Italian Law no. 10 of 26 February 2011, allows the

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conversion into tax assets of the deferred tax assets recorded in the financial statements, upon the occurrence of certain conditions. The provision was amended finally by Italian Law no. 214 of 22 December 2011.

The regulation that allows this conversion of deferred tax assets (or DTA) provides that, upon the occurrence of losses for the period recognised in the separate financial statements, the DTA are transformed into tax assets. The transformation works in an amount corresponding to the portion of the loss for the period that corresponds to the ratio between the DTA and the amount of share capital and reserves. The portion of DTA that is transformed in DTA from tax losses is converted into tax asset by disabling the limits of recoverableness contemplated for tax losses.

The tax asset is non-interest bearing. It can be used, without amount restrictions, offsetting against other tax (including those deriving from the withholding agent activity) and contributory liabilities within each bank and tax consolidation. Moreover, the credit can be transferred at nominal value according to the procedure set forth in Article 43-ter of Italian Presidential Decree 602/1973 and can be claimed as a refund of the residual portion after offsetting.

Moreover, the Bank of Italy, Consob and Isvap Document no. 5 of 15 May 2012 specifies the following:

- the transformation of the DTA recognised as assets into tax assets generates a mere statement of financial position exchange of the relevant portion of DTA, with no impact on the income statement; the remaining portion of unconverted DTA remains recorded in the financial statements as deferred tax assets;

- the DTA that contributes to the calculation of the tax loss of a company that participated in the tax consolidation remains recorded - for the portion that is transformed into tax asset - in the financial statements of the company itself;

- if, pursuant to IAS 12, before issuing Italian Law no. 214/2011, a company did not recognise in the financial statements or derecognised, if already recognised, DTA, this company can currently recognise these DTA, in consideration of paragraph 37 of IAS 12 that requires the “reassessment” at the end of each financial year of the DTA so far not reported. In particular, these DTA must be recognised only for the amount not yet “reversed” to the income statement, if the DTA were recognised in the financial statements.

Note that the deferred tax assets recognised in equity shown above include deferred tax assets set forth in Italian Law 214/2011 of EUR 2,365 thousand as at 31 December 2012 (EUR 1,125 thousand as at 31 December 2011).

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14.4 - Changes in deferred tax liabilities (recognised in profit or loss )

2012 2011

1. Opening balance 24,923 24,063

2. Increases 2,946 3,875

2.1 Deferred tax liabilities recognised in the year 2,946 3,641

a) relating to previous years - -

b) due to changes in accounting policies - -

c) other 2,946 3,641

2.2 New taxes or increases in tax rates - 216

2.3 Increases due to business combinations - -

2.4 Other increases - 18

3. Decreases -18,840 -3,015

3.1 Deferred tax liabilities cancelled during the year -12,040 -2,425

a) reversals -12,040 -2,261

b) due to changes in accounting policies - -

c) other - -164

3.2 Reduction in tax rates - -

3.3 Decreases due to business combinations - -

3.4 Other decreases -6,800 -590

4. Closing balance 9,029 24,923

14.5 - Changes in deferred tax assets (recognised into equity)

2012 2011

1. Opening balance 121,164 11,390

2. Increases 4,438 110,561

2.1 Deferred tax assets recognised inthe year 4,438 110,321

a) relating to previous years - -

b) due to changes in accounting policies - -

c) other 4,438 110,321

2.2 New taxes or increases in tax rates - 240

2.3 Increases due to business combinations - -

2.4 Other increases - -

3. Decreases -62,289 -787

3.1 Deferred tax assets cancelled during the year -62,289 -787

a) reversals -62,289 -787

b) impairment due to non-recoverability - -

c) due to changes in accounting policies - -

d) other - -

3.2 Reduction in tax rates - -

3.3 Decreases due to business combinations - -

3.4 Other decreases - -

4. Closing balance 63,313 121,164

The increase in deferred tax assets recognised in equity during the financial year is mainly due to the fair value measurement of debt instruments contained in the “Available-for-sale assets” portfolio.

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Deferred tax assets recognised in equity in 2011 were restated following the early application of IAS 19.

14.6 - Changes in deferred tax liabilities (recognised in equity)

2012 2011

1. Opening balance 745 1,308

2. Increases 3,602 44

2.1 Deferred tax liabilities recognised in equity 53 22

a) relating to previous years - -

b) due to changes in accounting criteria - -

c) other 53 22

2.2 New taxes or increases in tax rates - 4

2.3 Increases due to business combinations - -

2.4 Other increases 3,549 18

3. Decreases -3,557 -607

3.1 Deferred tax liabilities cancelled during the year -3,557 -607

a) reversals -3,557 -607

b) due to changes in accounting criteria - -

c) other - -

3.2 Reduction in tax rates - -

3.3 Decreases due to business combinations - -

3.4 Other decreases - -

4. Closing balance 790 745

14.7 - Other information

Accruals to provisions for risks and changes were carried out in connection with overall risks of tax disputes.

Tax dispute

With reference to the disputes occurred in 2012, notices of assessment were received claiming a total of EUR 770 thousand by way of taxes, sanctions and interest. In particular, this dispute concerns the depreciation period of the renovations made on the rented buildings (the so-called leasehold properties). In connection with the above, accession procedures were immediately started and already completed, only for the purposes of deflation of the tax dispute. Group situation

With reference to the Parent, 2 tax disputes are pending, for a total value of EUR 3.1 million, calculated taking into account both administrative and court disputes at different levels of jurisdiction and cassation.

In particular, the notice of the summons of the hearing at the Central Tax Commission was notified in 2012 for an assessment for IRES and ILOR purposes relating to the 1983 tax period for a total value of approximate EUR 1.8 million by way of taxes, sanctions and interests. The reasons of the Bank were upheld in the previous instances of the judgement and we are confident that the Central Tax Commission will confirm these results.

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A tax dispute is pending for the purchase of bank branches, within a procedure requested by the Competition Authority, whose claim amounts to EUR 1.3 million by way of stamp duty, in relation to the higher goodwill value assigned compared to the one recognised and paid to the counterpart and declared in the deeds. In relation to this dispute, no accruals to provisions for risks and changes were made in that the claim is considered absolutely groundless. The Regional Tax Commission of Milano upheld the appeal of the Bank. The Tax Authorities, in turn, appealed to the Regional Tax Commission, against which the Bank appeared immediately before the court.

At the other companies of the Group included in the scope of consolidation, the tax disputes existing as at 31 December 2012 amount to a total of approx. EUR 770 thousand, all pertaining to a single company, Credito Siciliano, to which an official record of ascertainment was notified in 2012 relating to IRES for the deduction of renovations on leasehold properties. Accession procedures on previous page were submitted in connection with the disputes, since the continuation of the dispute was not considered convenient - also only for the costs of the tax dispute - and in March 2013 the relevant payments were made, considering that, since the dispute concerns the accruals basis of said charges, the tax, amounting to approx. EUR 580 thousand, will be recovered in future financial years.

The rights of the Group companies are protected by external professionals with special skills and experience, with the intention to enforce the rights of the companies in the competent administrative and legal venues.

Requests for IRES refund for the portion of IRAP related to personnel expenses

The tax simplification decree (Italian Law Decree no. 16/2012) acknowledged also for the years before 2012 the possibility of deducting, when determining the business income or self-employed income, the IRAP related to personnel expenses, by submitting a special request for refund.

With measure of 17 December 2012 of the Director of the Italian Tax Authorities, the methods of presentation of the requests for refund were established relating to the tax periods previous to the current period as at 31 December 2012, for which, on 2 March 2012, the deadline set forth in Article 38 of Italian Presidential Decree no. 602/1973 is still pending.

The Measure established that the requests be submitted electronically and according to a precise timetable, depending on the premises of the claimants.

The requests for refund of the companies of the Credito Valtellinese Banking Group were submitted electronically on the days indicated in the said Measure of the Director of the Tax Authorities.

The total amount requested for refund was approx. EUR 14.6 million. The amount is recorded in tax assets. Based on the Solution IAS ABI no. 144 of 2012 and circular no. 2/2013 of the Italian National Association of Professional Accountants, the amounts requested for refund were recognised when preparing the financial statements as at 31 December 2012.

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SECTION 15 - NON-CURRENT ASSETS HELD FOR SALE AND DISPOSAL GROUPS AND ASSOCIATED LIABILITIES - ITEM 150 UNDER ASSETS AND ITEM 90 UNDER LIABILITIES AND EQUITY 15.1. Non-current assets held for sale and disposal groups: breakdown by type of asset

As at 31 December 2012, no non-current assets held for sale are to be reported since the sale transactions of Aperta SGR and Lussemburgo Gestioni were completed. OTHER INFORMATION

On 1 March 2013, a framework agreement was signed with Istifid Società Fiduciaria e di Revisione S.p.A., which provides for the sale of Aperta Fiduciaria to Istifid for a value in line with the carrying amount of the equity investment in the financial statements. The transaction is effective as from 1 July 2013.

For segment reporting, the company is included in the “Specialised Finance” sector.

SECTION 16 - OTHER ASSETS - ITEM 160

16.1 - Other assets: breakdown

31/12/2012 31/12/2011

Amounts due from the tax authorities for withholdings on interest paid to customers and other amounts due 48,721 51,304

Cheques drawn on the bank to be settled 78,685 85,180

Counterparts for securities and coupon payments to be received 32,116 10,940

Sundry items to be charged to customers and banks 104,269 27,382

Value date differences on portfolio transactions 15,440 59,774

Real estate inventory 42,940 26,362

Costs and other advance payments 4,733 4,185

Receivables related to the supply of goods and services 11,159 10,896

Leasehold improvements 12,709 16,785

Accruals not recorded separately 174 175

Other items 82,689 107,320

Total 433,635 400,303

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LIABILITIES AND EQUITY

SECTION 1 - DUE TO BANKS - ITEM 10

1.1 – Due to banks: breakdown by type

Type of transaction/Amounts 31/12/2012 31/12/2011

1. Due to central banks 3,470,963 2,103,711

2. Due to banks 1,074,573 1,068,218

2.1. Current accounts and deposit accounts 127,917 76,523

2.2. Term deposits 184,740 274,124

2.3 Loans 724,358 714,834

2.3.1 repurchase agreements 472,785 411,769

2.3.2. other 251,573 303,065

2.4 Payables for commitments to repurchase own equity instruments - -

2.5 Other payables 37,558 2,737

Total 4,545,536 3,171,929

Fair value 4,526,776 3,097,330

The item “2.3.2 Loans other” mainly includes loans received from the European Investment Bank.

On 8 March 2012, Bank of Italy / Consob / IVASS issued document no. 6 - Accounting treatment of “structured long term repo” transactions.

To this end, item “repurchase agreements” includes a long term transaction signed jointly with the purchase of the underlying instrument (there are no hedging derivatives).

The transaction is not similar to a structured long-term repo in that the two transactions have a different expiry and, upon occurrence of any credit event, the loan agreement is not interrupted and the underlying instrument is replaced. The transaction was carried out as part of the funding operations of the bank treasury.

As a result, the transaction was recognised in the financial statements considering separately each contractual component (repo and instrument).

1.2 – Breakdown of item 10 “Due to banks: subordinated debts

There are no subordinated debts in “Due to Banks”.

1.3 – Breakdown of item 10 “Due to banks: structured debts

There are no structured debts in “Due to Banks”.

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SECTION 2 - DUE TO CUSTOMERS - ITEM 20

2.1 - Due to customers: breakdown by type

Type of transaction/Amounts 31/12/2012 31/12/2011

1. Current accounts and deposit accounts 11,765,440 12,202,683

2. Term deposits 3,402,874 1,334,102

3. Loans 791,927 1,732,965

3.1 repurchase agreements 771,690 1,693,755

3.2. other 20,237 39,210

4. Payables for commitments to repurchase own equity instruments 28,733 28,592

5. Other payables 65,711 120,332

Total 16,054,685 15,418,674

Fair value 16,053,920 15,399,698

Payables for commitments to repurchase own equity instruments refer to purchase options for non-controlling interests in Global Assicurazioni S.p.A.

2.2 - Breakdown of item 20 “Due to customers”: subordinated debts

There are no subordinated debts in “Due to customers”.

2.3 - Breakdown of item 20 “Due to customers”: structured debts

There are no structured debts in “Due to customers”.

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SECTION 3 - SECURITIES ISSUED - ITEM 30

3.1 Securities issued: breakdown by type

Type of security/Amounts

31/12/2012 31/12/2011

Carrying amount

Level 1

Fair value Level 2

Level

3

Carrying amount

Level 1

Fair value Level 2

Level 3

A. Securities

1. bonds 5,890,926 - 5,855,634 - 6,463,002 365,141 5,520,827 -

1.1 structured - - - - - - - -

1.2 other 5,890,926 - 5,855,634 - 6,463,002 365,141 5,520,827 -

2. other instruments 157,039 - 157,039 - 198,925 - 198,925 -

2.1 structured - - - - - - - -

2.2. other 157,039 - 157,039 - 198,925 - 198,925 -

Total 6,047,965 - 6,012,673 - 6,661,927 365,141 5,719,752 -

3.2 - Analysis of item 30 “Securities issued”: subordinated securities

The above bonds include the following subordinated bond issues:

- “XS0167255958 - Credito Valtellinese 2003/2013 subordinated EMTN” of EUR 150 million. The issue, indexed to 3-month Euribor, may be recalled by the issuer starting from April 2008;

- “XS0213725525 - Credito Valtellinese 2005/2015 subordinated EMTN” of EUR 150 million. The issue, indexed to 3-month Euribor, may be recalled by the issuer starting from March 2010;

- “IT0004438252 - Credito Valtellinese 2008/2013 subordinated” of EUR 143 million, issued as part of the purchase of the Cassa di Risparmio di Fano;

- “IT0004593296 - Credito Valtellinese 2010/2017 subordinated” of EUR 150 million. The issue is indexed to 6-month Euribor;

- “IT0004648736 - Credito Valtellinese 2010/2015 subordinated” of EUR 32.5 million. The issue is indexed to 6-month Euribor;

- “IT0004735913 - Credito Valtellinese 2011/2016 subordinated” of EUR 10 million.

- “IT0004762859 - Credito Valtellinese 2011/2016 subordinated” of EUR 44 million.

- “IT0004847957 - Credito Valtellinese 2012/2017 subordinated” of EUR 125 million.

- “IT0004432925 - Credito Artigiano 2008/2013 subordinated” of EUR 50 million. The issue is indexed to 6-month Euribor;

- “IT0004653348 - Credito Artigiano 2010/2015 subordinated” of EUR 35 million. The issue is indexed to 6-month Euribor;

- “IT0004736432 - Credito Artigiano 2011/2016 subordinated” of EUR 15 million.

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- “IT0004763089 - Credito Artigiano 2011/2016 subordinated” of EUR 30 million. The issue is indexed to 3-month Euribor;

- “IT0004762867 - Credito Artigiano 2011/2016 subordinated” of EUR 55 million.

- “IT0004432917 - Credito Piemontese 2008/2013 subordinated” of EUR 10 million. The issue is indexed to 6-month Euribor;

- “IT0004652373 - Credito Piemontese 2010/2015 subordinated” of EUR 10 million. The issue is indexed to 6-month Euribor;

- “IT0004734486 - Credito Piemontese 2011/2016 subordinated” of EUR 6 million.

- “IT0004432909 - Banca dell’Artigianato e dell’Industria 2008/2013 subordinated” of EUR 10 million. The issue is indexed to 6-month Euribor;

- “IT0004644214 - Banca dell’Artigianato e dell’Industria 2010/2015 subordinated” of EUR 10 million. The issue is indexed to 6-month Euribor;

- “IT0004734502 - Banca dell’Artigianato e dell’Industria 2011/2016 subordinated” of EUR 5 million.

- “IT0004643562 - Cassa di Risparmio di Fano 2010/2015 subordinated” of EUR 17.5 million. The issue is indexed to 6-month Euribor;

- “IT0004648322 - Cassa di Risparmio di Fano 2010/2015 subordinated” of EUR 1.5 million. The issue is indexed to 6-month Euribor;

- “IT0004735053 - Cassa di Risparmio di Fano 2011/2016 subordinated” of EUR 10 million.

- “IT0004763105 - Cassa di Risparmio di Fano 2011/2016 subordinated” of EUR 15 million;

- “IT0004871940 - Cassa di Risparmio di Fano 2012/2017 subordinated” of EUR 10 million;

- “IT0004432891 - Credito Siciliano 2008/2013 subordinated” of EUR 40 million. The issue is indexed to 6-month Euribor;

- “IT0004641848 - Credito Siciliano 2010/2015 subordinated” of EUR 30 million. The issue is indexed to 6-month Euribor;

- “IT0004734494 - Credito Siciliano 2011/2016 subordinated” of EUR 15 million.

- “IT0004762867 - Credito Siciliano 2011/2016 subordinated” of EUR 30 million.

- “IT0004870181 - Credito Siciliano 2012/2018 subordinated” of EUR 30 million.

As a result of the mergers, subordinated loans originally issued by Carifano in 2010 and 2011, Credito Artigiano, Credito Piemontese and Banca dell’Artigianato e dell’Industria are currently included among the issues of Credito Valtellinese.

3.3 - Analysis of item 30 “Securities issued”: securities with specific hedging

There are no securities with specific hedging.

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SECTION 4 - FINANCIAL LIABILITIES HELD FOR TRADING - ITEM 40

4.1.- Financial liabilities held for trading: breakdown by type

31/12/2012

Transaction type/Group elements NV FV FV*

L1 L2 L3

A. Liabilities

1. Due to banks - - - - -

2. Due to customers - - - - -

3. Debt instruments - - - - X

3.1. Bonds - - - - X

3.1.1 structured - - - - X

3.1.2 other bonds - - - - X

3.2. Other securities - - - - X

3.2.1 structured - - - - X

3.2.2. other - - - - X

Total A - - - - -

B. Derivatives - - - - -

1. Financial derivatives X 5,942 9,729 - X

1.1 trading X 5,942 9,729 - X

1.2 associated with fair value option X - - - X

1.3. other X - - - X

2. Credit derivatives X - - - X

2.1 trading X - - - X

2.2 associated with fair value option X - - - X

2.3. other X - - - X

Total B X 5,942 9,729 - X

Total (A+B) - 5,942 9,729 - -

Key FV = fair value FV* = fair value calculated by excluding the gains and losses due to changes in creditworthiness with respect to the issue date NV = nominal or notional value L1= Level 1 L2= Level 2 L3 =Level 3

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31/12/2011

Type of transaction/Amounts NV FV FV*

L1 L2 L3

A. Liabilities

1. Due to banks - - - - -

2. Due to customers - - - - -

3. Debt instruments - - - - X

3.1. Bonds - - - - X

3.1.1 structured - - - - X

3.1.2 other bonds - - - - X

3.2. Other securities - - - - X

3.2.1 structured - - - - X

3.2.2. other - - - - X

Total A - - - - -

B. Derivatives - - - - -

1. Financial derivatives X 3,103 6,424 - X

1.1 trading X 3,103 6,424 - X

1.2 associated with fair value option X - - - X

1.3. other X - - - X

2. Credit derivatives X - - - X

2.1 trading X - - - X

2.2 associated with fair value option X - - - X

2.3. other X - - - X

Total B X 3,103 6,424 - X

Total (A+B) - 3,103 6,424 - -

Key FV = fair value FV* = fair value calculated by excluding gains and losses due to changes in creditworthiness with respect to the issue date NV = nominal or notional value L1= Level 1 L2= Level 2 L3 = Level 3

In the previous tables, derivative financial instruments with level–1 fair value are mainly represented by “2014 Credito Valtellinese Warrants” linked to the convertible bonds “2009/2013 Credito Valtellinese”.

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4.2 - Breakdown of item 40 “Financial liabilities held for trading”: subordinated liabilities

The financial liabilities held for trading do not include subordinated liabilities.

4.3 - Breakdown of item 40 “Financial liabilities held for trading”: structured debts

The financial liabilities held for trading do not include structured debts.

SECTION 6 - HEDGING DERIVATIVES - ITEM 60

6.1 Hedging derivatives: Breakdown by type of hedge and level

31/12/2012 31/12/2011

Fair value NV Fair value NV

L1 L2 L3 L1 L2 L3

A. Financial Derivatives - 231,186 - 600,000 - 159,608 - 600,000

1) Fair value - 231,186 - 600,000 - 159,608 - 600,000

2) Cash flows - - - - - - - -

3) Investments in foreign operations - - - - - - - -

B. Credit Derivatives - - - - - - - -

1) Fair value - - - - - - - -

2) Cash flows - - - - - - - -

Total - 231,186 - 600,000 - 159,608 - 600,000 Key NV = nominal value L1= Level 1 L2= Level 2 L3 = Level 3

During 2011, the group purchased Italian Government bonds (BTP) recognised in the banking book of Available-for-sale financial assets were purchased and it agreed hedging derivatives with the objective of hedging the variability of the relevant fair value component linked to changes in interest rates, excluding the residual component of the credit risk, whose effects remain in the relevant Equity reserve.

To this end, forward starting IRSS which start in about 12 months were used. They were entered into together with the purchase of underlying securities.

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6.2 - Hedging derivatives: breakdown by hedging portfolios and by type of hedge

31/12/2012

Transactions/Type of hedge

Fair Value

Cash flow Investment in

foreign operations

Specific

Generic interest rate risk

currency risk

credit risk

price risk

more than one risk

Specific Generic

1. Available- -for-sale financial assets 231,186 - - - - X - X X

2. Loans and receivables - - - X - X - X X

3. Held to maturity investments X - - X - X - X X

4. Portfolio X X X X X - X - X

5. Other transactions - - - - - X - X -

Total assets 231,186 - - - - - - - -

1. Financial liabilities - - - X - X - X X

2. Portfolio X X X X X - X - X

Total liabilities - - - X - - - - X

1. Expected transactions X X X X X X - X X

2. Other financial assets and liabilities X X X X X - X - -

SECTION 8 - TAX LIABILITIES - ITEM 80

See section 14 under assets.

SECTION 10 - OTHER LIABILITIES - ITEM 100

10.1 - Other liabilities: breakdown

31/12/2012 31/12/2011

Amounts due to tax authorities for indirect taxes 5,158 4,190

Amounts due to social security and welfare institutions 12,644 12,353

Amounts due to public entities on behalf of third parties 44,845 56,472

Sundry items to be credited to customers and banks 138,974 157,898

Amounts available to customers 81,344 64,143

Amounts payable to employees 19,393 27,653

Value date differences on portfolio transactions 186,173 56,267

Items in transit between branches 6,784 9,864

Guarantees given 4,042 1,619

Accruals other than those capitalised 12,248 9,706

Payables related to the supply of goods and services 33,970 30,146

Sundry and residual items 210,389 171,243

Total 755,964 601,554

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SECTION 11 - POST-EMPLOYMENT BENEFITS - ITEM 110

11.1 - Post-employment benefits: annual changes

31/12/2012 31/12/2011

A. Opening balance 58,305 62,520

B. Increases 22,669 14,736

B.1 Accruals 22,123 14,619

B.2 Other increases 546 117

C. Decreases -17,062 -18,951

C.1 Benefits paid -5,107 -4,456

C.2 Other decreases -11,955 -14,495

D. Closing balance 63,912 58,305

The post-employment benefits may be included among the defined benefit plans not directly financed. This amount has been actuarially calculated, for all group companies, in accordance with the “Projected Unit Credit Method” and using the following actuarial assumptions:

Actuarial assumptions 2012 2011

Mortality rate IPS55 tables IPS55 tables

Disability rate INPS-2000 tables INPS-2000 tables

Personnel turnover rate 3.0% 3.0%

Discount rate 2.69% 4.50%

Salary increase rate 3.0% 3.50%

Inflation rate 2.0% 2.0%

As at 31 December 2012, the IBOXX corporate AA 10+ rate of 2.69% will be used. In the event of shifts in the interest rate curve by +0.5%, the decrease in the provision would be EUR 2.1 million, whereas a change in the rate of -0.5% would imply an increase in the provision of EUR 2.2 million.

Reconciliation of the opening and closing balances of the defined benefit liability:

Post-employment benefits according to IAS 19 as at 31 December 2011 58,305

Use of post-employment benefits -4,751

Interest expense 2,517

Social security cost 22

Actuarial gains/losses 7,819

Post-employment benefits according to IAS 19 as at 31 December 2012 63,912

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SECTION 12 - PROVISIONS FOR RISKS AND CHARGES - ITEM 120

12.1 - Provisions for risks and charges: breakdown

Item/Amounts 31/12/2012 31/12/2011

1. Company pension funds 34,773 29,991

2. Other provisions for risks and charges 36,054 29,181

2.1 legal disputes 20,446 17,410

2.2 personnel expenses 11,184 6,939

2.3. other 4,424 4,832

Total 70,827 59,172

12.2 - Provisions for risks and charges: annual changes

2012

Item/Amounts Pension funds Other provisions

A. Opening balance 29,991 29,181

B. Increases 6,961 15,485

B.1 Accruals 1,439 15,015

B.2 Discounting - -

B.3 Variations due to changes in the discount rate 5,522 142

B.4 Other increases - 328

C. Decreases -2,179 -8,612

C.1 Utilisation in the period -2,179 -8,181

C.2 Variations due to changes in the discount rate - -

C.3 Other decreases - -431

D. Closing balance 34,773 36,054

The accrual for the period to other provisions also includes the provision to the “Solidarity Fund” for the credit sector - of EUR 7.4 million - to assist, as per the signed trade-union agreement, the voluntary retirement of employees who on 31 December 2012 accrued rights to a pension.

12.3 - Defined benefit company pension funds

12.3.1 - Description of pension funds

The defined benefit company pension funds consist of a provision for the commitment undertaken by Credito Valtellinese S.c., Bankadati Soc.Cons.P.A. and Stelline S.I. S.p.A. towards their employees whether retired or not (only the Fund for the employees of Credito Artigiano - now Credito Valtellinese includes working personnel) that have opted for the defined benefit annuity option. There have been no new entries since 31 December 2003.

The amount allocated represents the estimated actuarial liability, equal to EUR 46,656 thousand as at 31 December 2012. The actuarial amount is calculated at every year-end, with the assistance of an actuary. The defined benefit company pension funds of Credito Artigiano

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(now Credito Valtellinese), in accordance with the provisions of IAS 19 are not included under the liability items of the statement of financial position, nor is it included in the related tables of the Notes to the financial statements as it is set off against the corresponding plan assets.

12.3.2 - Changes in pension funds during the year

As at 31 December 2011, the present value of defined benefit liability was equal to EUR 40,432 thousand. During the period under review a total of EUR 2,951 thousand benefits were disbursed, interest expense matured amounted to EUR 1,820 thousand and the actuarial losses calculated totalled EUR 7,355 thousand. Actuarial losses are recognised in equity (other comprehensive income).

The outstanding liability as at 31 December 2012, equal to EUR 46,656 thousand, derives from non-directly funded plans for EUR 34,773 thousand, and from a directly funded plan for EUR 11,883 thousand.

12.3.3 - Changes during the period in pension plan assets and other information

With regard to the fund of Credito Artigiano (now Credito Valtellinese), the assets used directly to fund defined benefit plans amounted to EUR 10,453 thousand as at 31 December 2011.

This was used to pay a total amount in pensions of EUR 772 thousand. Considering the positive return on plan management of EUR 1,436 thousand and the contribution paid by the company of EUR 766 thousand, assets amounted to EUR 11,883 thousand as at 31 December 2012.

These assets are broken down as follows: bond and equity instruments of EUR 10,892 thousand and liquidity of EUR 991 thousand.

12.3.5 - Description of the main actuarial assumptions

The present value of both mathematical reserves of the retired employees is equal to the present actuarial value of the pension that they will be paid in the future, considering the possibility of reversibility. The value of the assets mathematical reserve is equal to the present actuarial value of the future benefits, net of the product of the present actuarial value of the future services and the set percent contribution.

The technical criteria used are described below.

Actuarial assumptions 2012 2011

Demographic base IPS55 tables IPS55 tables

Discount rate 2.69% 4.50%

Rate of increase in services 1.5% 1.5%

12.3.6 - Comparative information

The estimated actuarial liability amounts to EUR 46,656 thousand as at 31 December 2012 compared to EUR 40,432 thousand at 31 December 2011 and EUR 42,263 thousand at the 2010 reporting date.

The assets allocated to the directly funded defined-benefit plan amount to EUR 11,883 thousand as at 31 December 2012, compared to EUR 10,441 thousand in 2011 and EUR 10,891 thousand in 2010.

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12.4 - Provisions for risks and charges - other provisions

The other provisions for risks and charges mainly regard:

- bankruptcy liquidations (EUR 6,032 thousand);

- law case risks linked to banking activities (EUR 6,426 thousand).

The other provisions for risks and charges also include:

- charges for long-service bonuses to be disbursed to employees calculated in accordance with actuarial valuations (EUR 3,459 thousand);

- staff redundancy funds (EUR 1,003 thousand);

- solidarity fund calculated in accordance with actuarial valuations (EUR 6,650 thousand);

- contractual commitments (EUR 7,988 thousand).

SECTION 15 - GROUP EQUITY - ITEMS 140, 160, 170, 180, 190, 200 AND 220

15.1 “Share capital” and “Treasury shares”: breakdown

At the end of the early redemption of the convertible bond issue “2009/2013 Credito Valtellinese fixed-rate convertible bonds with the right of redemption in shares”, 105,993,720 Credito Valtellinese ordinary shares were issued.

As a result of the registration at the Companies Registry of the minutes of the Shareholders’ Meeting of 28 April 2012, the nominal value of the shares was cancelled during an extraordinary meeting.

Moreover, as a result of the merger of Credito Artigiano S.p.A. into Credito Valtellinese that was effective as from 10 September 2012, Credito Valtellinese increased its share capital by EUR 179,853 thousand, by issuing 51,386,642 ordinary shares with no indication of the nominal value, bearing dividend to be assigned to the shareholders of Credito Artigiano, other than the majority shareholder, with the share exchange ratio of 0.70 Credito Valtellinese ordinary shares, for each Credito Artigiano ordinary share.

On 9 October 2012, the Board of Directors of Credito Valtellinese, pursuant to and for the purposes of Articles 102, paragraph 1 and 114 of the Consolidated Act on Income Tax, decided to promote a wilful public takeover and exchange bid pursuant to Article 102 of the Consolidated Act on Income Tax covering all 1,995,906 ordinary shares of its subsidiary Credito Siciliano S.p.A. of the nominal value of EUR 13.00 each.

At the end of the transaction, Credito Valtellinese holds 9,386,002 shares of Credito Siciliano, accounting for 97.95% of its share capital with an increase of its share capital of EUR 20,189 thousand amounting to 15,294,483 shares.

Costs incurred in the period strictly connected to share capital increases needed for the transactions represented above were recognised as a reduction of the share premium reserve amounting to EUR 1,251 thousand.

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At the end of 2012, as a consequence of the operations described above, the share capital of Credito Valtellinese s.c. - fully subscribed and paid-in - amounted to EUR 1,516,699 thousand, comprising 442,868,742 ordinary shares.

As at 31 December 2012, the portfolio contained 1,250,060 treasury shares for EUR 1,518 thousand, i.e. 0.28% of total shares outstanding at year end. During the period, 4,087,417 shares were purchased for EUR 5,250 thousand and 3,887,241 shares were sold for EUR 6,206 thousand, resulting in a net loss of EUR 930 thousand allocated to the share premium reserve.

15.2 - Share capital - Number of shares of the Parent: annual changes

2012 Items/Types Ordinary Other

A. Shares at the beginning of the year 270,193,897

- fully paid-up 270,193,897 -

- not fully paid-up - -

A.1 Treasury shares (-) -1,049,884 -

A.2 Outstanding shares: opening balance 269,144,013 -

B. Increases 176,562,086 -

B.1 New issues 172,674,845 -

- against payment: 157,380,362 -

- business combinations 51,386,642 -

- conversion of bonds 105,993,720 -

- exercising of warrants - -

- other - -

- free: 15,294,483 -

- on behalf of employees - -

- on behalf of directors - -

- other 15,294,483 -

B.2 Sale of treasury shares 3,887,241 -

B.3 Other increases - -

C. Decreases -4,087,417 -

C.1 Cancellation - -

C.2 Repurchase of treasury shares -4,087,417 -

C.3 Disposals of companies - -

C.4 Other decreases - -

D. Outstanding shares: final balance 441,618,682 -

D.1 Treasury shares (+) 1,250,060 -

D.2 Outstanding shares at the end of the year 442,868,742 -

- fully paid-up 442,868,742 -

- not fully paid-up - -

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15.4 - Income-related reserves: other information

The item “Income-related reserves” includes the Legal Reserve, the Extraordinary Reserve other reserves and the reserves deriving from consolidation effects.

15.5 - Other information

Consolidated equity also includes the financial instruments under Article 12 of Italian Law Decree 185/2008 - so-called “Tremonti bonds”.

SECTION 16 - EQUITY ATTRIBUTABLE TO NON-CONTROLLING INTERESTS - ITEM 210

Items 2012 2011 Share capital 2,891 104,522

Share premium reserve 1,087 82,537

Reserves -3,133 70,488

Valuation reserves 43 984

Equity instruments - -

Treasury shares - -

Profit for the period attributable to non-controlling interests 4,313 12,509

Equity attributable to non-controlling interests 5,201 271,040

184

OTHER INFORMATION

1 - Guarantees given and commitments

Transactions 31/12/2012 31/12/2011

1) Financial guarantees

a) Banks 33,317 31,546

b) Customers 66,905 78,299

2) Commercial guarantees

a) Banks 16,828 16,233

b) Customers 1,116,892 1,273,959

3) Irrevocable commitments to grant finance

a) Banks

i) certain to be called on 7,838 38,707

ii) not certain to be called on 2,507 7

b) Customers

i) certain to be called on 23,648 7,309

ii) not certain to be called on 654,056 1,067,645

4) Commitments underlying credit derivatives: protection sales - -

5) Assets pledged as guarantee for third-party commitments 1,302 785

6) Other commitments - -

Total 1,923,293 2,514,490

2 - Assets pledged as guarantee for the Group’s Bank’s liabilities and commitments

Portfolios 31/12/2012 31/12/2011

1. Financial assets held for trading 68,512 66,416

2. Financial assets at fair value through profit or loss - -

3. Available-for-sale financial assets 1,070,720 1,247,273

4. Held to maturity investments 118,863 366,862

5. Loans and receivables with banks 311,476 672,588

6. Loans and receivables with customers 3,686,599 1,415,049

7. Property, equipment and investment property - -

Credito Valtellinese issued and fully repurchased the guaranteed instruments representing liabilities of the Italian Government pursuant to Article 8 of Italian Law Decree no. 201 of 6 December 2011 converted to Law no. 214 of 22 December 2011, totalling a nominal amount of EUR 1.5 billion. They are used as collateral for refinancing transactions with the European Central Bank and are not represented in the asset and liability items of the statement of financial position and therefore do not appear in the above table.

185

3 - Information on operating leases

The Group, for what concerns the operating lease, acts solely as a lessee. The main operating lease contracts stipulated by Group Companies and that cannot be cancelled comprise the following types:

• contracts for the leasing of vehicles with the following minimum future payments:

- EUR 1,353 thousand within one year;

- EUR 1,555 thousand between one and five years;

- no payment due after more than five years.

• contracts for the leasing of stamping and envelope sealing machines, with the following minimum future payments:

- EUR 18 thousand within one year;

- EUR 92 thousand between one and five years;

- no payment due after more than five years.

• contracts for the leasing of banknote counting machines, with the following minimum future payments:

- EUR 260 thousand within one year;

- EUR 1,300 thousand between one and five years;

- no payment due after more than five years.

• contracts for the leasing of photocopying machines, with the following minimum future payments:

- EUR 6 thousand within one year;

- no payment due between one and five years;

- no payment due after more than five years, with the option to have the equipment replaced in case of wear and tear.

• contracts for the leasing of machines and hardware, with the following minimum future payments:

- no payment due within one year;

- no payment due between one and five years;

- no payment due after more than five years.

For all these contracts, in 2012 minimum payments totalling EUR 122 thousand were recorded as costs.

186

5 - Management and trading on behalf of third parties

Type of service 31/12/2012 31/12/2011

1. Execution of orders on behalf of customers

a) Purchases

1. settled - -

2. unsettled - -

b) Sales

1. settled - -

2. unsettled - -

2. Portfolio management

a) individual - 2,232,963

b) collective - -

3. Custody and administration of securities

a) third-party securities held on deposit: when acting as custodian bank (excluding portfolio management)

1. securities issued by companies included in the scope of consolidation - -

2. other instruments - -

b) other third-party securities held on deposit (excluding portfolio management): other

1. securities issued by companies included in the scope of consolidation 4,593,717 4,122,347

2. other instruments 5,001,812 4,227,967

c) third-party securities deposited with third parties 9,526,377 8,122,596

d) portfolio securities deposited with third parties 6,468,839 2,741,486

4. Other transactions 1,599,143 1,681,513

187

PART C - INFORMATION ON THE CONSOLIDATED INCOME STATEMENT

SECTION 1 - INTEREST - ITEMS 10 AND 20

1.1 - Interest and similar income: breakdown

Items/Technical forms Debt

instruments Loans Other transactions 2012 2011

1. Financial assets held for trading 12,755 - - 12,755 6,103

2. Financial assets at fair value through profit or loss - - - - -

3. Available-for-sale financial assets 88,940 - - 88,940 41,865

4. Held to maturity investments 13,606 - - 13,606 15,835

5. Loans and receivables with banks 19,848 12,997 - 32,845 21,095

6. Loans and receivables with customers 295 859,658 - 859,953 840,718

7. Hedging derivatives X X - - 23

8. Other assets X X 40 40 58

Total 135,444 872,655 40 1,008,139 925,697

The interest accrued on loans of item “Loans and receivables with customers” includes interest on impaired loans of EUR 75,074 thousand.

1.2 Interest and similar income: differentials relating to hedging transactions

Items 2012 2011

A. Gains on hedging transactions - 32

B. Losses on hedging transactions - (9)

C. Balance (A-B) - 23

1.3 - Interest and similar income: other information

1.3.1 - Interest income on foreign currency financial assets

2012 2011

Interest income on foreign currency financial assets 3,012 2,294

1.3.2 Interest income on finance lease transactions

2012 2011

Interest on finance lease transactions 33,427 38,377

188

1.4 - Interest and similar expense: breakdown

Items/Technical forms Payables Securities Other

transactions

2012 2011

1. Due to central banks (26,172) X - (26,172) (13,303)

2. Due to banks (37,031) X - (37,031) (22,095)

3. Due to customers (263,717) X (1,018) (264,735) (197,610)

4. Securities issued X (188,335) - (188,335) (165,759)

5. Financial liabilities held for trading - - (783) (783) (1,537)

6. Financial liabilities at fair value through profit or loss - - - - -

7. Other liabilities and provisions X X - - -

8. Hedging derivatives X X (12,987) (12,987) -

Total (326,920) (188,335) (14,788) (530,043) (400,304)

1.5 Interest and similar expense: differences relative to hedging transactions

Items/Sectors 2012 2011 A. Gains on hedging transactions 10,481 -

B. Losses on hedging transactions (23,468) -

C. Balance (A-B) (12,987) -

1.6 - Interest and similar expense: other information

1.6.1 - Interest expense on foreign currency financial liabilities

2012 2011

Interest expense on foreign currency financial liabilities (1,143) (782)

1.6.2 - Interest expense on finance lease transactions

There is no interest expense on finance lease transactions.

189

SECTION 2 - FEES AND COMMISSIONS - ITEMS 40 AND 50

2.1 Fee and commission income: breakdown

Type of services/Amounts 2012 2011

a) guarantees given 10,593 10,171

b) credit derivatives - -

c) management, trading and consulting services: 63,807 74,718

1. trading of financial instruments 10 16

2. currency trading 5,981 6,782

3. portfolio management 17,891 21,849

3.1. individual 17,891 21,849

3.2. collective - -

4. custody and administration of securities 1,524 1,625

5. custodian bank - -

6. placement of securities 6,159 5,489

7. order acceptance and transmission 9,149 10,488

8. consulting services 2,168 4,817

8.1 on investments - -

8.2 on financial structuring 2,168 4,817

9. distribution of third party services 20,925 23,652

9.1. portfolio management - 17

9.1.1. individual - 17

9.1.2. collective - -

9.2. insurance products 16,938 21,481

9.3. other products 3,987 2,154

d) collection and payment services 73,474 70,102

e) servicing for securitisation transactions 247 69

f) factoring transaction services - -

g) tax collection services 3,270 3,653

h) management of multilateral trading facilities - -

i) current account management 65,422 63,248

j) other services 92,716 93,943

Total 309,529 315,904

Fee and commission income included under “j) other services” mainly refers to commissions on loan transactions of EUR 85,311 thousand, commissions for rights and pledges of EUR 4,057 thousand and commissions on expenses recovered on deposit accounts of EUR 824 thousand.

190

2.2 Fee and commission expense: breakdown

Services/Amounts 2012 2011

a) guarantees received (15,215) (295)

b) credit derivatives - -

c) management and trading services (1,765) (1,137)

1. trading of financial instruments - -

2. currency trading (11) (12)

3. portfolio management: - -

3.1 own account - -

3.2 for third parties - -

4. custody and administration of securities (1,754) (1,125)

5. placement of financial instruments - -

6. off-premises provision of financial instruments, products and services - -

d) collection and payment services (23,053) (22,627)

e) other services (3,906) (3,650)

Total (43,939) (27,709)

The item “a) guarantees received” mainly refers to fees and commissions paid to the Italian Government on bonds issued by the Bank and fully repurchased aimed at obtaining the loans obtained by the ECB.

SECTION 3 - DIVIDENDS AND SIMILAR INCOME - ITEM 70

3.1 - Dividends and similar income: breakdown

2012

2011

Items/Income Dividends Income from

OEIC units

Dividends Income from

OEIC units

A. Financial assets held for trading 69 - 17 -

B. Available-for-sale financial assets 230 - 1,630 -

C. Financial assets at fair value through profit or loss - - - -

D. Equity investments - X - X

Total 299 - 1,647 -

191

SECTION 4 - NET TRADING INCOME - ITEM 80

4.1 - Net trading income: breakdown

Transactions/Income components Gains (A) Trading income (B) Losses (C) Trading

losses (D)

Net trading income [(A+B)-(C+D)]

1. Financial assets held for trading 6,406 4,051 (872) (4,666) 4,919

1.1 Debt instruments 6,092 3,145 (571) (2,746) 5,920

1.2 Equity instruments 230 906 (73) (1,920) (857)

1.3 OEIC units 84 - (228) - (144)

1.4 Loans - - - - -

1.5 Other - - - - -

2. Financial liabilities held for trading - - - - -

2.1 Debt instruments - - - - -

2.2 Payables - - - - -

2.3 Other - - - - -

3. Financial assets and liabilities: exchange rate differences X X X X 4,372

4. Derivatives 1,487 15,509 (5,566) (15,474) (4,075)

4.1 Financial derivatives:

- On debt instruments and interest rates 1,487 15,509 (2,726) (15,474) (1,204)

- On equity instruments and stock market indices - - (2,840) - (2,840)

- On currencies and gold X X X X (31)

- Other - - - - -

4.2 Credit derivatives - - - - -

Total 7,893 19,560 (6,438) (20,140) 5,216

192

SECTION 5 - NET HEDGING EXPENSE - ITEM 90

5.1 - Net hedging expense: breakdown

Income components/Amounts 2012 2011

A. Gains on:

A.1 Fair value hedges - -

A.2 Financial assets with fair value hedges 68,631 117,410

A.3 Financial liabilities with fair value hedges - 63

A.4 Financial derivatives for cash flow hedges - -

A.5 Foreign currency assets and liabilities - -

Total hedging income (A) 68,631 117,473

B. Loss on:

B.1 Fair value hedges (68,942) (118,461)

B.2 Financial assets with fair value hedges - -

B.3 Financial liabilities with fair value hedges - -

B.4 Financial derivatives for cash flow hedges - -

B.5 Foreign currency assets and liabilities - -

Total hedging expense (B) (68,942) (118,461)

C. Net hedging expense (A-B) (311) (988)

Italian Government bonds (BTP) in the banking book of Available-for-sale financial assets were hedged, with the objective of hedging the variability of the relevant fair value component linked to changes in interest rates, excluding the residual component of the credit risk, whose effects remain in the relevant Equity reserve.

To this end, forward starting IRSS which start in about 12 months were used. They were entered into together with the purchase of underlying securities.

193

SECTION 6 - PROFIT (LOSSES) ON SALE/REPURCHASE - ITEM 100

6.1 - Profit (loss) on sale/repurchase: breakdown 2012 2011

Items/Income components Profits Losses Net profit Profit Losses Net profit

Financial assets

1. Loans and receivables with banks - - - - - -

2. Loans and receivables with customers - - - - - -

3. Available-for-sale financial assets

3.1 Debt instruments 23,247 (30) 23,217 1,349 (993) 356

3.2 Equity instruments 369 - 369 636 - 636

3.3 OEIC units - - - - - -

3.4 Loans - - - - - -

4. Held to maturity investments - - - - - -

Total assets 23,616 (30) 23,586 1,985 (993) 992

Liabilities

1. Due to banks - - - - - -

2. Due to customers - - - - - -

3. Securities issued 3,713 (160) 3,553 3,527 (14) 3,513

Total liabilities 3,713 (160) 3,553 3,527 (14) 3,513

The amount of EUR 23,247 thousand is related to profits realised as a result of Italian Government bond trading.

SECTION 8 - NET IMPAIRMENT LOSSES - ITEM 130

8.1 - Net impairment losses on loans and receivables: breakdown

Transactions/Income components

Impairment losses

Reversals of impairment losses 2012 2011

Individual Collective Individual Collective

Derecognition Other A B A B

A. Loans and receivables with banks - - - - - - 35 35 (5)

- Loans - - - - - - 35 35 (5)

- Debt instruments - - - - - - - - -

B. Loans and receivables with customers (5,114) (423,716) (6,654) 44,661 24,740 104 11,452 (354,527) (167,269)

Purchased impaired loans and receivables - - - - - - - - -

- Loans - - X - - - X - -

- Debt instruments - - X - - - X - -

Other loans and receivables (5,114) (423,716) (6,654) 44,661 24,740 104 11,452 (354,527) (167,269)

- Loans (5,114) (423,716) (6,654) 44,661 24,740 104 11,452 (354,527) (167,269)

- Debt instruments - - - - - - - - -

C. Total (5,114) (423,716) (6,654) 44,661 24,740 104 11,487 (354,492) (167,274)

Key: A = from interest B = other reversals

194

8.2 - Net impairment losses on available-for-sale financial assets: breakdown

Transactions/Income components

Impairment losses

Reversals of

impairment losses 2012

2011 individual Individual

Derecognition Other A B

A. Debt instruments - - - - - -

B. Equity instruments - (33,543) X X (33,543) (4,054)

C. OEIC units - (791) X - (791) -

D. Loans and receivables with banks - - - - - -

E. Loans and receivables with customers - - - - - -

F. Total - (34,334) - - (34,334) (4,054)

Key: A = from interest B = other reversals

As already indicated in Part B of the notes to the financial statements, in case of prolonged or significant decreases in fair value of the equity instruments below the initial carrying amount, an impairment loss is recognised.

During the year, impairment losses were recognised in the income statement:

- of EUR 29.5 million on equity investment held by Credito Valtellinese in Tercas S.p.A. (7.8% of share capital), company placed under administration as from May 2012, whose value in use was determined in compliance with the approach described in Section 13 - Intangible assets - item 130;

- EUR 2.7 million on A2A security;

- EUR 2.1 million on other equity investments held in the AFS portfolio.

8.4 - Net impairment losses on other financial transactions: breakdown

Transactions/Income components

Impairment losses Reversals of impairment losses

2012

2011

Individual Collective Individual Collective

Derecognition Other A B A B

A. Guarantees given - (3,118) (283) - 846 - 132 (2,423) (601)

B. Credit derivatives - - - - - - - - -

C. Commitments to grant finance - - - - - - - - -

D. Other transactions - - - - - - - - -

E. Total - (3,118) (283) - 846 - 132 (2,423) (601)

Key A = from interest B = other reversals

195

SECTION 11 - ADMINISTRATIVE EXPENSES - ITEM 180

11.1 - Personnel expenses: breakdown

Type of expense/Amounts 2012 2011

1) Employees (311,041) (321,332)

a) wages and salaries (195,390) (201,275)

b) social security charges (58,946) (61,002)

c) post-employment benefits (17,765) (17,999)

d) pension expenses - -

e) Accrual for post-employment benefits (2,994) (2,895)

f) Accruals for pension and similar provisions:

- defined contribution - -

- defined benefit (1,350) (1,988)

g) payments to external supplementary pension funds:

- defined contribution (9,707) (9,991)

- defined benefit (374) (217)

h) costs of share-based payment plans - -

i) other employee benefits (24,515) (25,965)

2) Other personnel in service (1,591) (1,878)

3) Directors and statutory auditors (7,669) (9,627)

4) Retired personnel (924) (857)

Total (321,225) (333,694)

11.2 - Average number of employees by category

2012 2011

Employees: 4,275 4,349

a) executives 65 72

b) middle managers 1,535 1,524

c) other employees 2,675 2,753

Other personnel 23 22

Total 4,298 4,371

11.3 - Defined benefit company pension funds: total costs

During the year a total of EUR 2,951 thousand of benefits was disbursed, interest expense matured amounted to EUR 1,820 thousand and the actuarial gains calculated totalled EUR 7,355 thousand.

196

11.5 - Other administrative expenses: breakdown

2012 2011

Fees for professional and consulting services (29,291) (28,834)

Insurance premiums (3,871) (4,036)

Advertising (5,094) (6,585)

Postage, telegraph and telephone (9,740) (9,731)

Printed materials and stationery (2,379) (1,995)

Maintenance and repairs (6,171) (5,003)

Data processing services (15,274) (16,933)

Hardware lease - (5)

Electricity, heating and shared property service charges (10,892) (10,184)

Charges for miscellaneous services provided by third parties (19,880) (20,062)

Cleaning (4,631) (4,837)

Transport and travel (4,108) (4,374)

Security and transport of valuables (8,673) (8,937)

Membership fees (2,428) (2,962)

Audit’ fees (1,718) (2,001)

Commercial information and searches (4,478) (5,324)

Subscriptions to newspapers, magazines and publications (716) (771)

Rent payable (26,930) (26,070)

Indirect personnel expenses (3,547) (4,164)

Entertainment expenses (2,528) (2,163)

Taxes (60,276) (56,993)

Contractual charges for treasury management services (2,462) (2,445)

Miscellaneous items (2,381) (5,790)

Total (227,468) (230,199)

197

Pursuant to Article 2427, first paragraph, sub-paragraph 16-bis of the Italian Civil Code, the amounts paid to KPMG S.p.A. and its network companies are shown below.

(In thousands of EUR)

Type of services Party that

provided the service

Beneficiary Fees paid in 2012

- Auditing services (1) KPMG S.p.A Credito Valtellinese Parent

420

- Attestation services (2) KPMG S.p.A Credito Valtellinese Parent

381

- Other services (3) KPMG S.p.A Credito Valtellinese Parent

190

- Auditing services KPMG S.p.A Subsidiaries 479

- Attestation services KPMG S.p.A Subsidiaries 6

- Other services KPMG S.p.A Subsidiaries -

- Other services: technical and methodological support to the Group for assistance under Basel 2

KPMG Advisory S.p.A. and Studio

Associato Consulenza legale e tributaria

Subsidiaries

612

- Other services: methodological support services relating to the lending process

KPMG Advisory S.p.A. and Studio

Associato Consulenza legale e tributaria

Subsidiaries

252

- Other services

KPMG Advisory S.p.A. and Studio

Associato Consulenza legale e tributaria

Subsidiaries

352

Total 2,692 Expenses, VAT and contributions provided for by the rules, where applicable, should be added to these amounts. (1) The amount also includes the fees for the audit activities carried out for Credito Artigiano until 10 September 2012, effective date of its merger into Credito Valtellinese. With regard to the merger, the fees for the audit activity envisaged in the proposal approved by the shareholders’ meeting of 28 April 2012 were revised.

(2) Includes fees for performing audit activities related to tax returns, with reference to the preparation of the “Prospectus” as part of the renewal of the program to issue debt instruments on the international markets, to the issue of the report of the forecast figures included in the Information Documents pursuant to Article 70 Issuers’ Regulation, and its update, on the merger into Credito Valtellinese Sc of Credito Artigiano S.p.A.

(3) Issue of the Report on the issue price of the shares for share capital increase with exclusion of the option right pursuant to Articles 158 and 165 of Italian Legislative Decree 58/98 and Article 2441 of the Italian Civil Code in relation to the wilful public takeover and exchange bid on Credito Siciliano S.p.A. shares.

198

SECTION 12 - NET ACCRUALS TO PROVISIONS FOR RISKS AND CHARGES - ITEM 190

12.1 - Net accruals to provisions for risks and charges: breakdown

Items 2012 2011

Provision for legal disputes and claims from liquidators (5,472) (4,565)

Provision for sundry risks and charges (1,366) (1,660)

Total (6,838) (6,225)

SECTION 13 - DEPRECIATION AND NET IMPAIRMENT LOSSES ON PROPERTY, EQUIPMENT AND INVESTMENT PROPERTY - ITEM 200

13.1 Depreciation and net impairment losses on property, equipment and investment property: breakdown

2012

Assets/Income components Depreciation (a)

Impairment losses (b)

Reversals of impairment losses (c)

Carrying amount (a+b-c)

A. Property, equipment and investment property

A.1 Owned

- Operational property and equipment (21,922) - - (21,922)

- Investment property (654) - - (654)

A.2 Acquired through a finance lease

- Operational property and equipment - - - -

- Investment property - - - -

Total (22,576) - - (22,576)

SECTION 14 - AMORTISATION AND NET IMPAIRMENT LOSSES ON INTANGIBLE ASSETS - ITEM 210

14.1 - Amortisation and net impairment losses on intangible assets: breakdown

2012

Assets/Income components Amortisation (a) Impairment losses (b)

Reversals of impairment losses

(c)

Carrying amount (a+b-c)

A. Intangible assets

A.1 Owned

- Generated internally - - - -

- Other (11,290) (100) - (11,390)

A.2 Acquired through a finance lease - - - -

Total (11,290) (100) - (11,390)

199

SECTION 15 - OTHER OPERATING NET INCOME - ITEM 220

15.1 - Other operating expenses: breakdown

2012 2011

Amortisation of leasehold improvements (6,163) (6,032)

Other expenses (25,235) (10,310)

Total (31,398) (16,342)

Other operating expenses mainly include costs to produce and manage property of EUR 21,424 thousand and lease expenses of EUR 678 thousand.

15.2 - Other operating income: breakdown

2012 2011

Rent receivable 898 1,138

Recoveries on current accounts 196 -

Income from real estate services (including income from review of prices on real estate agreements underway) 912 -

Income from data processing services 10,770 9,895

Income from other services 978 1,352

Recovery of indirect taxes 40,044 38,961

Recovery of insurance policy payments 1,231 1,352

Recovery of legal and notarial costs 13,971 12,516

Other income 28,509 15,408

Total 97,509 80,622

The other operating income mainly includes higher revenues from the sale of properties of EUR 18,284 thousand, more profits for e-money services of EUR 2,506 thousand, income and recoveries for leasing services of EUR 1,195 thousand, insurance repayments of EUR 373 thousand and changes in property works in progress of EUR 223 thousand.

200

SECTION 16 - NET GAINS (LOSSES) ON EQUITY INVESTMENTS - ITEM 240

16.1 - Net gains (losses) on equity investments: breakdown

Income components/Amounts 2012 2011

1) Companies subject to joint control

A. Income 22 30

1. Revaluations 22 30

2. Net gains on sales - -

3. Reversals of impairment losses - -

4. Other income - -

B. Expense - -

1. Impairment - -

2. Impairment losses - -

3. Net loss on gains - -

4. Other expenses - -

Net trading income 22 30

2) Companies subject to significant influence

A. Income 19,017 17,550

1. Revaluations 19,017 16,241

2. Net gains on sales - 1,309

3. Reversals of impairment losses - -

4. Other income - -

B. Expense (2,411) (315)

1. Impairment (1,570) (315)

2. Impairment losses (737) -

3. Net loss on gains (104) -

4. Other expenses - -

Net trading income 16,606 17,235

Total 16,628 17,265

SECTION 18 - GOODWILL IMPAIRMENT LOSSES - ITEM 260

18.1 Goodwill impairment losses: breakdown

2012 2011

Credito Valtellinese CGU impairment (217,200) (102,190)

Carifano CGU impairment (85,370) -

Total (302,570) (102,190)

As indicated in Part B of the Notes to the financial statements (13.3 - Other information), to which reference is made for detailed information, the results of the impairment test carried out on the goodwill recorded in the consolidated financial statements showed the need to recognise a goodwill impairment loss of EUR 85 million with regard to the Carifano market CGU and of EUR 217 million with regard to the Credito Valtellinese market CGU. The reasons that led to these impairment losses are attributable to the combined effects of the prolonged

201

economic downturn and of the uncertainty on the recovery prospects that particularly impacted on these operating areas of the two CGUs.

SECTION 19 - NET GAINS (LOSSES) ON SALES OF INVESTMENTS - ITEM 270

19.1 - Net gains (losses) on sales of investments: breakdown

Income components/Amounts 2012 2011

A. Property

- Gains on sales 78 975

- Losses on sales (145) (19)

B. Other assets

- Gains on sales 43 13

- Losses on sales (47) (57)

Net gains (losses) (71) 912

SECTION 20 - INCOME TAXES - ITEM 290

20.1 - Income taxes: breakdown

Income components/Amounts 2012 2011 1. Income taxes (-) (107,710) (157,284)

2. Changes in current taxes of prior years (+/-) 14,562 207

3. Reduction in current taxes for the year (+) - -

3. bis Reduction in current taxes for the year for credit taxes set forth in Italian Law no. 214/2011 (+) - -

4. Change in deferred tax assets (+/-) 157,317 189,812

5. Change in deferred tax liabilities (+/-) 15,894 (862)

6. Income taxes for the year (-) (-1 +/-2 +3 +/-4 +/-5) 80,063 31,873

As already stated in the previous sections, the item income taxes include:

a) the positive effect of the exemption for tax purposes of the higher values recorded as goodwill, pursuant to Article 15, paragraph 10, of Italian Law Decree no. 185 of 29 November 2008, and of Article 176, paragraph 2-ter, of the Consolidated Act on Income Tax of EUR 27.9 million;

b) the analytical deductibility from IRES of the IRAP portion related to personnel expenses not deducted for the tax periods as from 2007, pursuant to the Italian Law Decrees no. 201/2011 and no. 16/2012 of approximately EUR 14.5 million;

c) taxes related to the impairment of the goodwill recognised for tax purposes of EUR 38.5 million.

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20.2 - Reconciliation between theoretical tax expense and actual tax expense - IRES

2012

Pre-tax loss from continuing operations (424,620)

Profit from discontinuing operations 29,547

Taxable loss (395,073)

Theoretical tax expense - IRES 111,874

Effect of non-deductible negative components of income (106,887)

Effect of non-taxable positive components of income 92,320

Effective tax expense - IRES 97,307

- on continuing operations 99,916

- on discontinuing operations (2,609)

20.2 - Reconciliation between theoretical tax expense and actual tax expense - IRAP

2012

Pre-tax loss from continuing operations (424,620)

Profit from discontinuing operations 29,547

Taxable loss (395,073)

Theoretical tax expense - IRAP 22,148

Effect of non-deductible negative components of income (49,587)

Effect of non-taxable positive components of income 7,079

Effective tax expense - IRAP (20,360)

- on continuing operations (19,853)

- on discontinuing operations (507)

SECTION 21 - POST-TAX PROFIT (LOSS) FROM DISCONTINUED OPERATIONS - ITEM 310

21.1 - Post-tax profit (loss) from discontinued operations: breakdown

Income components/Amounts 2012 2011

1. Revenue 7,819 9,042

2. Costs (3,614) (3,483)

3. Gain (loss) on disposal groups and associated liabilities - -

4. Gains (losses) on sales 25,341 -

5. Taxes (3,116) (775)

Profit (loss) 26,430 4,784

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21.2 Breakdown of income taxes on discontinued operations

2012 2011 1. Current taxation (-) (3,116) (775)

2. Change in deferred tax assets (+/-) - -

3. Change in deferred tax liabilities (-/+) - -

4. Income taxes for the year (-1+/-2 +/-3) (3,116) (775)

On 9 August 2012, an agreement for the development of a strategic alliance in managed funds was signed with Asset Management Holding S.p.A., company controlling Anima SGR, Italian leading independent operator in managed funds, which involves implementing a long-term preferential business relation between the Creval Group and the AMH Group.

As part of this agreement, on 27 December 2012, the Group completed the sale to AMH of the entire share capital of Aperta SGR totalling EUR 27 million, and of Lussemburgo Gestioni S.A. shares held of EUR 5.5 million. Before the sale, the banks of the group transferred the management contracts to Aperta SGR. The total gains realised amounted to EUR 25 million.

The operating segment to which the two companies belong was the specialised finance segment.

SECTION 22 - PROFIT (LOSS) FOR THE YEAR ATTRIBUTABLE TO NON-CONTROLLING INTERESTS - ITEM 330

22.1 –Breakdown of item 330 “Profit for the year attributable to non-controlling interests”

The main components concern the following investee companies:

2012 2011 Credito Siciliano (948) (2,265)

Global Assicurazioni (1,399) (1,671)

Other (1,966) (8,573)

Total (4,313) (12,509)

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SECTION 24 - EARNINGS PER SHARE

The method of calculation of basic earnings per share and diluted earnings per share are defined by IAS 33 - Earnings per share. The basic earnings per share are defined as the profit or loss attributable to the owners of the parent or the result from continuing operations attributable to the holders of ordinary shares (therefore, excluding the post-tax result from discontinued operations) and the weighted average number of ordinary shares outstanding during the year. The following table displays the basic earnings per share with the calculation details. 2012 2011 Profit (Loss) attributable to holders of ordinary shares (322,439) 33,212

Profit (Loss) from continuing operations attributable to holders of ordinary shares (348,869) 28,539

Weighted average number of ordinary shares 354,520,026 252,692,071

Basic earnings (loss) per share (0.91) 0.13

Basic earnings (loss) per share from continuing operations (0.98) 0.11

The diluted earnings (loss) per share are calculated taking into account also the dilutive effects of the conversion of the potential ordinary shares, defined as financial instruments that attribute to the holder the right to obtain ordinary shares. As a result, for the purposes of the calculation, the numerator and denominator of the ratio are adjusted to take into account the effects of additional shares that would be outstanding in case of conversion of all the potential ordinary shares with dilutive effects. In 2011, the diluted earnings per share took into account also the potential ordinary shares resulting from converting the bonds “2009/2013 Credito Valtellinese fixed-rate convertible bond with the right of redemption in shares”, completely repaid during 2012. In 2012 year, the existing instruments with potential dilutive effect are represented by 2014 Credito Valtellinese Warrant” linked to the “Credito Valtellinese 2009/2013” convertible bonds and by the financial instruments set forth in Article 12 of Italian Law Decree no.185/2008 - so-called “Tremonti bonds”. These instruments are not considered in the calculation of the diluted loss per share in that their inclusion in the calculation would have an antidilutive effect by decreasing the loss per share. The following table displays the diluted earnings (loss) per share with the calculation details. 2012 2011 Profit (Loss) attributable to holders of ordinary shares (adjusted) (322,439) 46,920 Profit (Loss) from continuing operations attributable to holders of ordinary shares (adjusted) (348,869) 42,247

Weighted average number of ordinary shares 354,520,026 358,685,791

Diluted earnings (loss) per share (0.91) 0.13

Diluted earnings (loss) per share from continuing operations (0.98) 0.11

The basic and diluted earnings per share referring to disposal groups in 2012 amounts to 0.07.

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PART D - CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

ANALYTICAL STATEMENT OF CONSOLIDATED COMPREHENSIVE INCOME

Items Gross amount

Income tax

Net amount

10. Loss for the year X X (318,126)

Other comprehensive income

20. Available-for-sale financial assets :

a) fair value gains 175,738 (67,049) 108,689

b) reclassification to profit or loss 10,748 5,683 16,431

- impairment losses 34,334 (1,912) 32,422

- gains (losses) on sales (23,586) 7,595 (15,991)

c) other changes (1,061) 355 (706)

30. Property, equipment and investment property - - -

40. Intangible assets - - -

50. Hedging of investments in foreign operations:

a) fair value gains (losses) - - -

b) reclassification to profit or loss - - -

c) other changes - - -

60. Cash flow hedges:

a) fair value gains (losses) - - -

b) reclassification to profit or loss - - -

c) other changes - - -

70. Exchange rate gains (losses):

a) fair value gains (losses) - - -

b) reclassification to profit or loss - - -

c) other changes - - -

80. Non-current assets held for sale:

a) fair value gains (losses) - - -

b) reclassification to profit or loss - - -

c) other changes - - -

90. Actuarial gains (losses) on defined benefit plans (14,194) 3,903 (10,291)

100. Portion of valuation reserves of equity-accounted investees:

a) fair value gains (losses) 8,527 - 8,527

b) reclassification to profit or loss - - -

- impairment losses - - -

- gains (losses) on sales - - -

c) other changes - - -

110. Total of other comprehensive income 179,758 (57,108) 122,650

120. Comprehensive income (Item 10+110) (138,368) (57,108) (195,476)

130. Consolidated comprehensive income attributable to non-controlling interests (4,428) - (4,428)

140. Consolidated comprehensive income attributable to the owners of the parent (142,796) (57,108) (199,904)

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PART E - INFORMATION ON RISKS AND HEDGING POLICIES

SECTION 1 - RISKS OF THE BANKING GROUP

The identification of risks to which the Group is potentially exposed constitutes the essential prerequisite for a knowledgeable assumption of said risks and their effective management, making use of the appropriate mitigation and transfer tools and techniques. Risk management, based on criteria of prudence and implemented within a specific organisational sphere, aims to limit the volatility of expected results. In line with its focus on retail banking, the Group is mainly exposed to credit risk and other types of operational risks. The set of internal rules, operating procedures and control structures to oversee internal risks is structured according to a model that integrates control methods at various levels, all converging with the objectives of ensuring efficiency and effectiveness of operating processes, safeguarding integrity of corporate assets, preventing or mitigating losses, ensuring reliability and integrity of information and verifying proper execution of activities with respect to the internal and external regulations. The controls are subdivided according to the following types:

- line controls, aimed at ensuring proper execution of transactions, normally incorporated into the procedures or attributed to the productive structures and carried out as part of back office activities;

- controls on risk management, assigned to structures other than productive, aimed at defining risk measurement methods, verifying respect of assigned powers and control of the consistency of operations within the single areas with the risk-return objectives assigned;

- internal auditing controls, entrusted to the internal audit, aimed at identifying anomalous trends and violations of procedures and regulations, as well as evaluation of the functions of the overall internal control systems, attributed, also through on-site inspections, continuously, periodically or, in exceptional cases, to independent structures outside of the operating units.

The entire internal auditing system is periodically verified by the Boards of Directors and the Internal Control Committees set up with the aim of constantly adjusting operating strategies and processes as well as evaluating business risks.

With regard to the regulatory provisions concerning the prudential control process, enforced within the group is a specific corporate regulation - approved by the Board of Directors of the Parent and periodically updated - that governs the internal capital adequacy assessment process (ICAAP). Supervisory provisions envisage that ICAAP is centred on appropriate corporate risk management systems and requires adequate corporate governance mechanisms, an organisational structure with a well-defined hierarchy of responsibility and effective internal control systems. Responsibility for this process will be in the hands of company bodies who will independently establish the set-up and organisation in accordance with their respective powers and remits. They will ensure implementation and promote the updating of the ICAAP in order to ensure continued compliance with the operating

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characteristics and the strategic context in which the Group operates. The process must be formalised, recorded, subject to internal review and approved by the company bodies. Specifically, the process proposes to:

- identify capital requirements in relation to actual risk levels and to the strategic lines defined by the Group;

- guarantee constant share capital adequacy with respect to current and future requirements;

- constantly monitor the main risks;

- guarantee regular attention to risk measurement and management processes, developing a growing “risk culture”;

- define the means and tools, methodologies, organisational and control systems of risks and share capital measured against the strategies, characteristics, size and complexity of the Group, with a view to continuous and gradual improvement.

Once the above-described process was completed, in April the Board of Directors of the Parent approved the ICAAP report of 31 December 2011. It comprises the point of convergence and synthesis of the financial plans, risk management and capital management on the one hand, and an essential instrument to support strategic planning and the implementation of the corporate decisions on the other. Due to the persisting economic and financial crisis, the quantification of the risk that the Group is exposed to was carried out in a highly prudential manner. The ICAAP process led to the expression of an evaluation of the current and future adequacy of the total share capital to meet the relevant risks that the Group is exposed to, the growth plans and the need to maintain an adequate standing on the markets.

The Credito Valtellinese Group makes available to the public informative report on the “Third pillar” - regarding capital adequacy, risk exposure and general characteristics of the related management and control systems - on its Website, at the following address: www.creval.it

1.1 - CREDIT RISK

QUALITATIVE INFORMATION

1. General aspects

The focus on development in the area in which the Group operates continues to distinguish its lending practices in support of local production activities. The reference aggregate is represented by households and small and medium-sized enterprises, the recipients of most of the loans.

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2. Credit risk management policies

2.1 Organisational aspects

The organisational structure of the credit area is parallel at the various territorial banks of the Group. The disbursement powers are distributed over the sales network with hierarchically ascending powers and competences towards central structures in order to take advantage of the local knowledge while maintaining more and more specialist competences within the central structures. Every loan proposal is formulated by bodies within the territorial network, which shall complete the related decision-making procedure. Applications for larger credit lines, differentiated also on the basis of the risk, are automatically forwarded to central structures, which decide on the relative cases. In this perspective, all the cases of credit lines that are dealt with by the Board of Directors of the various banks, in addition to any particularly important topic relating to lending issues, are systematically and obligatorily monitored by the Parent’s Credit Management Department, and submitted to the Group Credit Committee for a non-binding opinion.

With regard to the control function assigned to the Parents of the banking groups by current legal regulations, all the loan resolutions passed by the Boards of Directors of the Banks, other than the Parent, are subordinated to a congruence opinion by the Executive Committee or Board of Directors of Credito Valtellinese. Should the Board of Directors of such Banks pass a resolution that does not correspond to the opinion of the Group Credit Committee, its enforceability is subject to this congruence opinion.

The decision-making process related to the credit is supported by an internal data processing procedure (Electronic Credit Line) that manages all the credit process phases, from the contact with customers and set up to the disbursement and management, up until the credit closure. The set authorisation levels are identified automatically on the basis of the rules and limits to the amount defined in the “Structure of the Delegated Powers”. Special functions are present in each procedure to detect any performance anomaly on the disbursed loans.

As part of the lending activity, the Bank, acting as lender, is exposed to the risk that some loans may not be paid, due to the deterioration of the financial conditions of the debtor, either at maturity or later and should therefore be derecognised in all or in part. The possible causes of non-fulfilment are mainly due to the inability of the borrower to repay the debt (liquidity shortage, insolvency, etc.). This risk is taken on when carrying out the traditional lending activity, regardless of the specific technical form in which the loan is granted.

2.2 Management, measurement and control systems

To assess and manage credit risk of counterparties, the Group makes use of all the traditional assessment elements, such as, income components, analyses of financial statements, internal performance data, central credit registers and performance analyses on economic segments. Moreover, for businesses, qualitative elements, such as the competitive context in which they operate and the professional experience of management are particularly important.

The Group has been developing an internal rating model for years. The rating represents an evaluation on an ordinal scale of the ability of a subject given or to be given a loan to honour its contractual commitments, with a twelve-month time frame. The rating model is divided in 9 loan merit classes for performing loans and one class for loans in default. The loans in default comprise non-performing, substandard or restructured loans, and loans that are past due or are overdue by more than 90 days. The model is based on systems that focus on the automatic component and comprises objectified qualitative elements that exclude what is

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known as overrides. The range of application of the internal rating model is that of businesses, identified by the counterparties classified as non-financial companies and family businesses. The model is divided among five modules:

- quantitative analysis of the financial statements indicators;

- assessment of the relationship between the company and the Credito Valtellinese Group;

- assessment of the company’s exposure to the banking system;

- assessment of macro-economic trends inherent to the company’s business;

- qualitative analyses of the company.

Each module works independently from the others and produces a partial assessment score. Depending on the scores obtained in the various assessments, the company is assigned to a specific rating class. The model was carried out with a view towards IRB-Foundation, therefore the only risk parameter estimated is the probability of default (PD). The assignment of the rating is linked to the credit disbursement process and is activated when a loan has been requested or is to be reviewed. Ratings are automatically updated on a monthly basis.

As part of the annual assessment of the performance of the internal rating system, the high level of accuracy, the good regulatory ability, the remarkable predictability level and the adequate stability of the creditworthiness over time were confirmed. Therefore, the internal rating is considered reliable to be used in managing the various loan processing stages.

Loan distributions in accordance with the ratings as at 31 December 2012 and 31 December 2011 are indicated below.

Chart 1 - Distribution of loans to enterprises by rating class

5.3%

7.2%

8.8%

12.0

%

16.3

%

12.2

%

11.9

%

10.8

%

8.8%

6.6%

5.1%

6.2%

7.9%

10.9

%

15.4

%

12.0

%

12.7

%

12.6

%

9.9%

7.3%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

Port

ion

Rating Class

December 2011 December 2012

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Compared to the situation as at 31 December 2011, the change in loan distribution indicates that the portfolio quality has felt the effects of the unfavourable economic situation.

During the year, the Group started the activities required for requesting formally the authorisation from the Supervisory Authority to use the internal rating system, suitably revised and updated, for the purpose of establishing the capital requirement in connection with the credit risk according to the AIRB (Advanced Internal Rating Based) method, which also included internal estimates of the expected loss rate in case of default (Loss Given Default - LGD).

More than a year ago, the methods that allowed to determine the correct pricing for the risk of the main lending products depending on the rating were introduced. Moreover, a model of risk-adjusted credit powers is operative, thanks to the introduction of the internal ratings in defining the decision-making body.

In addition to the internal rating model, performance-scoring systems (A.R.I.E.T.E.) have also been in use for some time in order to allow use of simplified credit line review procedures only for those positions that have passed the strict selection procedures. Regarding individual companies, as well as private customers, Crif acceptance score is used that - in addition to verifying any possible prejudicial encumbrance and the Eurisc databank - assigns a score from which three possibilities derive; direct approval of the loan by the branch; approval of the area manager or, approval of the Bank’s credit committee in cases of higher scoring.

Furthermore, in 2008 a new methodology was introduced that is based on the identification of certain “critical levels” of anomalies. An internal regulation - partly supported by an electronic procedure - provides that beyond those levels the position must assume a certain category of risk (watchlist, substandard or non-performing); only the Bank’s Credit Committee can justify a deviation from the minimum risk level pre-established by the model. The anomalies currently taken into account are those considered to be of major importance: repeated current account excess, the extent to which the transaction is tied up, non performing loans notified to the Risk Centre and the presence of prejudicial encumbrances. The application of the new rules have led over the last few years to a significant improvement in assessment transparency and the spreading of a better-shared risk culture.

Regarding the management of substandard loans of a limited amount (less than EUR 10,000), an automatic management procedure is used on a regular basis according to which, within a set period, the case must be completely defined. This procedure provides for the automatic sending of reminders and charging of interest to the customers in this category, with the subsequent mandate to external collectors and the passage to the loss or non-performing loan status for the residual cases.

Co-operation with a leading external company for the risk weighted analysis of the profitability of the Group’s portfolio and the identification of precise credit policies continued. The results obtained with the RARORAC (Risk-Adjusted Return On Risk-Adjusted Capital) analysis were transferred to the persons in charge of the practices for an evaluation and the possibility of an intervention.

With reference to the concentration risk, a specific regulation that formalises the performance of the risk management activities regarding such types of risks, defines the tasks and responsibilities assigned to the various organisational units in charge, and sets out, among other things, the strategic guidelines, management policy, measurement methods, exposure limits, information flows and any corrective action that may be necessary, is in force.

In accordance with the mission of the retail banking group that targets a broad, diversified market, comprising economic entities - families, trades, professionals, and companies -

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operating in geographically different sectors and contexts, assumption of the concentration risk deriving from lending activities will be kept within established limits. Concentration risk management will aim to limit the financial impact of non-performance by single parties or groups of related customers caused by both specific factors and by unfavourable economic conditions in specific sectors of the economy or geographical areas. Concentration risk will be limited by splitting up and diversifying the portfolio. The objectives with respect to concentration risk exposure are considered when carrying out strategic and operational planning, and at the time of lending.

Concentration risk measurement is the responsibility of the Risk Management department and it makes these measurements on a centralised basis on behalf of all Group banks. Risk measurement is carried out at both an individual and consolidated level in order to more fully identify and allocate the main sources of exposure to risk at the legal entity level. The approach followed in order to measure the concentration risk of the loan and receivables from customers portfolio differs in accordance with whether it is generated by concentration per single party or group of related customers or geo-sectorial concentration.

The granularity adjustment approach noted in the “New prudential supervisory provisions for banks” is used to measure the concentration risk per single party or group of related customers. This approach allows to determine the internal capital in connection with the concentration risk per single party or per group of related customers of a portfolio characterised by imperfect diversification. Information on the positions classified as “large exposure” is also important as part of the risk concentration per single party or group of related customers.

In order to measure the geo-sectorial concentration risk, the method proposed by ABI is followed. This method allows to estimate the internal capital in connection with the geo-sectorial concentration risk as “add-on” of the capital requirement for credit risk hedging, according to the distance of the level of concentration by economic sector/ATECO activity code of loans portfolio of the Group compared to the concentration level of the national banking system. The distance is measured by comparing the Herfindahl concentration indices by economic sector/ATECO activity code of the loans portfolio of the Group and the same indices calculated on the figures of the national banking system. By comparing the two indices, using a simulation algorithm, the internal capital for hedging the geo-sectorial concentration risk is calculated as “add-on” of the capital requirement for credit risk hedging. A series of exposure limits applicable at both consolidated and individual level were defined for the above-mentioned risk profiles. The differentiation of the limit structure takes account of the current and future operating specifics, size and composition of the loan portfolio and the equity available in each individual Group Bank.

2.3 Credit risk mitigation techniques

The loans granted are normally backed by collateral - relating to real estate property or financial instruments - and to a lesser extent, by personal guarantees. The company credit risk is also mitigated by the guarantees given by credit guarantee consortia, by the Guarantee Fund for SMEs and, in funding for internationalisation, by SACE. However, credit derivatives are not used. In any event, guarantees are always considered an additional element to the credit line and do not represent its sole basis.

For pledges, the procedure envisages the valuation of only predetermined elements that can be easily liquidated. For mortgages, the assessment of assets involves the intervention of experts who may be employed by Group Companies but have no involvement whatsoever with the credit rating process. The collection of personal guarantees is often preceded by checks

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carried out at the competent Land Registry, with the purpose of ascertaining the guarantor’s actual ownership of the property. Mortgage guarantees are the main part of the guarantees acquired on exposures to customers.

As part of the ICAAP process, the Group has provided for the assessment of residual risk, i.e. the risk that the recognised techniques used to mitigate credit risk are less effective than expected. The use of these techniques may in fact expose the Group to a series of further risks (for example of an operational or legal nature) which, if they occur, may lead to a greater lending risk than had been expected due to the lower effectiveness or actual unavailability of the protection. The residual guarantee is mainly managed by acting on the procedural and organisational plan. An internal rule book with guidelines on the correct acquisition, utilisation and management of guarantees has been prepared to ensure across-the-board standard application. The guarantees are managed on a centralised basis by the Group Bank Loans Departments, which deal with all aspects regarding the accounting, administration, control and safekeeping of guarantees received. Part of the duties of the Inspection Services involves verification that all obligations regarding guarantee management are met.

The guarantees acquired comply with the suitability criteria established by supervisory regulations on the mitigation of credit risk for the purpose of determining asset requirements. The Group has a “property value supervision” system in place that allows it to keep mortgage guarantees under suitable control. Specifically, the value of mortgaged properties backing loans of more than EUR 3 million are regularly updated by external experts, while an automatic evaluation mechanism keeps properties with mortgages of less than EUR 3 million under strict control.

2.4 Impaired financial assets

The irregularly performing loans consist of loans past due by more than 90 days (divided by, if any, mortgage lien), substandard, restructured and non-performing loans.

Substandard or restructured loans whose amount is above a prearranged threshold are assessed on an individual basis that tends to analyse thoroughly the actual validity of the customer and of the (personal or collateral) guarantees collected in support of the credit line. In particular, the economic situation, self-liquidating loans as well as personal or collateral guarantees must be taken into account. Substandard loans or restructured exposures whose amount is below the prearranged threshold mentioned above, within which most of the segment is included, are adjusted by an amount that represents the risk calculated on the basis of historical experience.

Irregular positions are identified by the Credit Performance Management Departments of the Bank on the basis of a set of analyses on internal performance indicators (particular attention being paid to positions that are overdue by more than 90 days), responses received from the risk centres, ratings and any prejudicial information.

The risk change is resolved by the Credit Committee, upon proposal by the Credit Performance Management Department. In case of substandard or restructured positions, the Committee also determines the impairment of the loans according to the specifications indicated above. Regarding these positions, all decision-making rights granted to individual bodies are suspended, and any subsequent granting of credit is at the sole discretion of corporate bodies or the Credit Management Department.

The positions are systematically monitored also using a series of controls available on the procedure, by the Credit Performance Management Department, which provide support to the

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single branches in terms of the method for managing relationships and the measures to be taken to attempt to return the positions to performing status. In order to guarantee a level of objectivity of behaviour and homogeneity in all the Banks of the Group, the adopted method was related to “critical indicators”. When the preset anomaly parameters are reached, the position must change its riskiness in the identified category (watchlist, substandard, non-performing).

It is further specified that all positions with significant amount (over EUR 10,000) with the watchlist, substandard or restructured category of risk, are assigned to an anomalous credit manager who - by accompanying the owner of the branch in this activity - assists with a specialist skill the regularisation or finalisation of the position.

In order to guarantee the highest level of objectivity in the assessment, the Credit Management Department reports to the General Management of the Bank autonomously and independently from the Regional Managements. At the Parent Credit Management Department, the Credit Analysis Service has the task of coordinating the activity of the Credit Performance Management Departments of the Group Banks by also monitoring the correct assignment of the risk code. The service also produces a series of reports for the Top Management with the aim of systematically verifying the irregularly performing loan.

In order to support the branches and guarantee the correct application of the Supervisory Regulations, a procedure is active for “objective substandard loans”, meaning those regarding positions that reach a specific degree of non-payment. If the irregularity is not suitably resolved during the quarter, the notification gradually progresses from the branches to the area manager, until it reaches the Credit Performance Management Department for the correct assignment of substandard status. Due to the non-discretional nature of the report, a mechanism according to which those positions that have reached the levels set by the Supervisory Authority are automatically moved to the substandard status is active.

With regard to classification as non-performing, the Supervisory Regulations are strictly observed, with separate classification of all insolvent parties (even if not legally declared so) or in similar situations, regardless of any collateral or personal guarantee obtained in support of the exposure. However, internal regulations provide for the accounting as non-performing in all cases in which the legal action was started to protect the loan. Accounting as non-performing requires the approval of a credit line, providing for the check by the Credit Performance Management Service in the Credit Management Department and the resolution by the Bank’s credit committee or a higher body that - in the meantime - makes an initial evaluation of the loan and resolves the required provision.

Regarding the management of non-performing loans, it is important to note that within the Group, Finanziaria San Giacomo has been assigned to monitor such activity. Part of all non-performing loans pertaining to Group Banks has been transferred to this company, along with the management of non-transferred non-performing loans. The centralising of this specialist activity within a single company favoured the transfer of the best operating methods among the various operating units throughout the country, and resulted in a significant improvement in the overall management of problem loans. A Disputes Committee operates within Finanziaria San Giacomo, with the task of managing its own cases, to the extent of its delegated powers, and expressing a compulsory, but non-binding, opinion on cases under the responsibility of the Board of Directors and those assigned under management, owned by the Banks.

Loans which, based on the regulations of the Bank of Italy, have been designated as non-performing, have been assessed on an analytical basis. As a rule, a formal Group policy is in place, approved by the Board of Directors, for the various types of non-performing loans classified based on the status of single procedures indicating the criteria to be followed in

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determining “doubtful” status. Decisions regarding individual allocations and any change are however made on each position by the Credit Committee on recommendation from the competent bodies of Finanziaria San Giacomo.

For a better optimisation of the work, last December, Finanziaria San Giacomo took on a new organisational structure that involves the centralisation, at a “special activity” department, of the management of all positions of significant amount (more than EUR 1 million) and of positions of an amount less than EUR 15,000 (small ticket) that are dealt with, with companies specialised in debt collection using the phone/home collection method and the intervention of specialised lawyers. Other two departments (Centre/ North and Sicilia) ensure the management of all the intermediate sector with resources located in the local premises of Palermo, Acireale, Rome, Milano and Sondrio. The new service “Recovery and reporting strategies” was set up precisely for the purpose of making a constant revision and improvement of the organisational process.

If, thanks to the many actions taken by the different company subjects involved in the management process of problem loans, solvency conditions are restored, impaired positions are made performing according to the same process of risk change described above.

The entire credit process is constantly reviewed and subject to careful inspections. All the Territorial Banks of the Group passed the test to obtain the quality certification of the “Loan application, granting and management” process that Credito Valtellinese has been awarded since 1995. The certification activities entail a constant and stringent verification of the entire lending process, the drafting of documents (Quality Manual and Operating Instructions) adequately examined by top management and distributed to the various departments of the company, as well as the timely updating of controls carried out by the appropriate Credit Management Department and by the Inspection Service. The purpose of this process is to ensure the utmost precision in assessing risk, maintaining a lean, efficient assessment and management process.

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QUANTITATIVE INFORMATION

A. QUALITY OF CREDIT

A.1 IMPAIRED AND PERFORMING LOANS: CARRYING AMOUNTS, IMPAIRMENT LOSSES, TRENDS, BUSINESS AND GEOGRAPHICAL DISTRIBUTION

A.1.1 - Distribution of exposures by portfolio and credit quality (carrying amounts)

Portfolio/Quality

Banking group Other companies

Total Impaired loans

Substandard loans

Restructured exposures

Past due exposures

Other assets Impaired Other

1. Financial assets held for trading - - - - 98,595 - - 98,595

2. Available- -for-sale financial assets - - 374 - 3,430,682 - - 3,431,056

3. Held to maturity investments - - - - 304,326 - - 304,326

4. Loans and receivables with banks - - - - 1,630,744 - - 1,630,744

5. Loans and receivables with customers 614,625 798,108 179,790 506,353 19,904,558 - 4,403 22,007,837

6. Financial assets at fair value through profit or loss - - - - - - - -

7. Financial assets held for sale - - - - - - - -

8. Hedging derivatives - - - - - - - -

Total as at 31/12/2012 614,625 798,108 180,164 506,353 25,368,905 - 4,403 27,472,558

Total as at 31/12/2011 572,722 633,108 123,343 342,411 24,219,894 - 4,871 25,896,349

216

A.1.2 - Distribution of credit exposures by portfolio and credit quality (gross amount and carrying amount)

Portfolio/Quality

Impaired assets

Performing Total

(carrying amount) Gross

amount Individual impairment

Carrying amount

Gross amount

Collective impairment

Carrying amount

A. Banking group 1. Financial assets held for trading - - - X X 98,595 98,595

2. Available-for-sale financial assets 374 - 374 3,430,682 - 3,430,682 3,431,056

3. Held to maturity investments - - - 304,326 - 304,326 304,326

4. Loans and receivables with banks - - - 1,630,744 - 1,630,744 1,630,744

5. Loans and receivables with customers 3,237,747 -1,138,871 2,098,876 20,017,155 -112,597 19,904,558 22,003,434

6. Financial assets at fair value through profit or loss - - - X X - -

7. Financial assets held for sale - - - - - - -

8. Hedging derivatives - - - X X - -

Total A 3,238,121 -1,138,871 2,099,250 25,382,907 -112,597 25,368,905 27,468,155

B. Other companies included in the consolidation scope

1. Financial assets held for trading - - - X X - -

2. Available-for-sale financial assets - - - - - - -

3. Held to maturity investments - - - - - - -

4. Loans and receivables with banks - - - - - - -

5. Loans and receivables with customers - - - 4,403 - 4,403 4,403

6. Financial assets at fair value through profit or loss - - - X X - -

7. Financial assets held for sale - - - - - - -

8. Hedging derivatives - - - X X - -

Total B - - - 4,403 - 4,403 4,403

Total as at 31/12/2012 3,238,121 -1,138,871 2,099,250 25,387,310 -112,597 25,373,308 27,472,558

Total as at 31/12/2011 2,511,250 -839,666 1,671,584 24,248,089 -121,708 24,224,765 25,896,349

With letter dated 16 February 2011, Bank of Italy requires to provide the breakdown by portfolio of the “performing loans” by length of expiry distinguishing between exposures subject to renegotiation and other exposures.

With reference to the situation of the Group, the Performing Loans and receivables from customers portfolio includes exposures subject to renegotiation within collective agreements of EUR 1,009,954 thousand and other exposures of EUR 24,372,354 thousand.

There are no exposures subject to renegotiation within collective agreements in the other portfolios.

Collective agreements existing as at 31 December 2012:

- Agreement authorisation with the MEF pursuant to Article 12, paragraph 2, of Italian Law Decree no. 185/2008 and of the ABI-MEF Agreement of 25 March 2009 containing the provisions on the subscription of the so-called “Tremonti bond” financial instruments;

- ABI Household Plan: agreement of 18 December 2009 between ABI and Consumer organisations for the suspension of the mortgage payments with regard to household in difficulties following the crisis;

217

- ABI MEF agreement and business representations of 3 August 2009;

- measures in support of residents in areas hit by natural disasters.

As specified in the Technical Note of the Bank of Italy of February 2012:

- in case of exposures with repayment by instalments with at least one expired instalment, the total amount of exposures recorded in the financial statements is reported as “past due”;

- in case of openings of an “uncommitted” current account credit line in which the arranged overdraft has been exceeded (even if due to the interest capitalisation), the total amount of exposures is reported.

As a result, the figures shown in the table below mainly represent amounts of loans not yet due.

Analysis of past due exposures divided by portfolio and length of expiry (amounts in thousands of EUR):

Up to 3 months From 3 months to 6 months

From 6 months to 1 year Over 1 year Total exposure

Loans and receivables with customers

- exposures subject to renegotiation within collective agreements 117,097 24 - - 117,121

- other exposures 2,800,799 151,236 166,711 52,698 3,171,444

218

A.1.3 - Banking Group - On and off-statement of financial position credit exposures with banks: gross amount and carrying amount

31/12/2012

Type of exposure/Amounts Gross amount

Individual impairment

Collective impairment

Carrying amount

A. ON-STATEMENT OF FINANCIAL POSITION EXPOSURES

a) Non-performing loans - - X -

b) Substandard loans - - X -

c) Restructured exposures - - X -

d) Past due exposures - - X -

e) Other assets 2,003,997 X - 2,003,997

TOTAL A 2,003,997 - - 2,003,997

B. OFF-STATEMENT OF FINANCIAL POSITION EXPOSURES

a) Impaired - - X -

b) Other 61,082 X - 61,082

TOTAL B 61,082 - - 61,082

TOTAL (A+B) 2,065,079 - - 2,065,079

A.1.6 - Banking group - On and off-statement of financial position credit exposures with customers: gross amount and carrying amount

31/12/2012

Type of exposure/Amounts Gross amount

Individual impairment

Collective impairment

Carrying amount

A. ON-STATEMENT OF FINANCIAL POSITION EXPOSURES

a) Non-performing loans 1,524,353 -909,728 X 614,625

b) Substandard loans 978,471 -180,363 X 798,108

c) Restructured exposures 210,774 -30,610 X 180,164

d) Past due exposures 524,523 -18,170 X 506,353

e) Other assets 23,479,562 X -112,597 23,366,965

TOTAL A 26,717,683 -1,138,871 -112,597 25,466,215

B. OFF-STATEMENT OF FINANCIAL POSITION EXPOSURES

a) Impaired 30,738 -4,042 X 26,696

b) Other 1,836,634 X - 1,836,634

TOTAL B 1,867,372 -4,042 - 1,863,330

TOTAL (A+B) 28,585,055 -1,142,913 -112,597 27,329,545

219

A.1.7 - Banking Group - On-statement of financial position credit exposures with customers: gross impaired loans

2012

Causes/Categories Non-

performing loans

Substandard loans

Restructured exposures

Past due exposures

A. Opening exposure (gross) 1,315,562 704,484 137,412 353,792

- of which: exposures transferred and not cancelled 10,092 15,129 - 19,816

B. Increases 349,174 675,895 99,821 573,172

B.1 transfers from performing loans 86,663 445,435 78,297 452,406

B.2 transfers from other categories of impaired loans 222,689 193,789 18,702 25,238

B.3 other increases 39,822 36,671 2,822 95,528

C. Decreases -140,383 -401,908 -26,459 -402,441

C.1 transfers to performing loans - -44,539 -3 -25,519

C.2 Derecognitions -82.022 -2,302 - -795

C.3 collections -57,289 -138,692 -13,085 -142,851

C.4 losses and sales - - - -

C.5 transfers to other categories of impaired loans - -213,803 -13,368 -233,247

C.6 other decreases -1,072 -2,572 -3 -29

D. Closing exposure (gross) 1,524,353 978,471 210,774 524,523

- of which: exposures transferred and not cancelled 16,680 41,100 - 64,949

Item B.3 “Other increases” of past due exposures include those past due by more than 90 to 180 days, which, until 31 December 2011, by virtue of the derogation provided by circular 272/2008 of the Bank of Italy, were considered not impaired.

220

A.1.8 - Banking Group - On-statement of financial position credit exposures with customers: total impairment losses

2012

Causes/Categories Non-

performing loans

Substandard loans

Restructured exposures

Past due exposures

A. Opening total impairment losses 742,840 71,376 14,069 11,381

- of which: exposures transferred and not cancelled 2,287 1,189 - 726

B. Increases 311,582 148,686 18,569 23,317

B.1 impairment losses 283,619 138,847 18,053 15,320

B.1 bis losses on sale - - - -

B.2 transfers from other categories of impaired loans 24,419 8,124 506 2,641

B.3 other increases 3,544 1,715 10 5,356

C. Decreases -144,694 -39,699 -2,028 -16,528

C.1 fair value gains -47,158 -3,075 -532 -2,769

C.2 reversals of impairment losses due to collections -15,450 -7,849 -245 -4,204

C.2 bis gains on sales - - - -

C.3 derecognitions -81,757 -2,971 - -920

C.4 transfers to other categories of impaired loans - -25,804 -1,251 -8,635

C.5 other decreases -329 - - -

D. Closing total impairment losses 909,728 180,363 30,610 18,170

- of which: exposures transferred and not cancelled 4,999 3,717 - 2,046

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A.2 - CLASSIFICATION OF EXPOSURES BASED ON INTERNAL AND EXTERNAL RATINGS

A.2.1 - Banking Group - Distribution of on and off-statement of financial position credit exposures by rating class

The table below considers the ratings assigned by Moody’s, Fitch and Standard & Poor’s. We will only note the distribution of cash on and off-statement of financial position credit exposures with banks, since the distribution of cash and unrecognised credit exposures with customers by external rating classes assigned by the aforesaid agencies do not appear significant in consideration of the Group loan portfolio composition, which mainly comprises exposures to small and medium-sized companies, family and craft businesses, professionals and households.

Exposures

External rating class No rating

Total class

1 class

2 class

3 class

4 class

5 class

6

A. On-statement of financial position exposures 166,544 468,444 160,559 601,786 98,180 - 508,484 2,003,997

B. Derivatives 95 173 123 8 - - 193 592

B.1 Financial derivatives 95 173 123 8 - - 193 592

B.2 Credit derivatives - - - - - - - -

C. Guarantees given - - 14,891 25 - - 35,229 50,145

D. Commitments to grant finance 7 - - 7,838 - - 2,500 10,345

E. Other - - - - - - - -

Total 166,646 468,617 175,573 609,657 98,180 - 546,406 2,065,079

Reported below is the mapping between risk classes and the external rating assigned by the reference agencies. Classes of creditworthiness ECAI

Moody’s Fitch Ratings Standard & Poor’s 1 from Aaa to Aa3 from AAA to AA- from AAA to AA- 2 from A1 to A3 from A+ to A- from A+ to A- 3 from Baa1 to Baa3 from BBB+ to BBB- from BBB+ to BBB- 4 from Ba1 to Ba3 from BB+ to BB- from BB+ to BB- 5 from B1 to B3 From B+ and B- From B+ and B- 6 Caa1 and lower CCC+ and lower CCC+ and lower

222

A.3 - DISTRIBUTION OF SECURED EXPOSURES BY TYPE OF GUARANTEE

A.3.1 - Banking group - Secured credit exposures to banks

31/12/2012

Value of net

exposure

Collaterals Total

Property Securities Other collaterals

1. On-statement of financial position secured credit exposures:

1.1 fully secured 194,638 - 194,638 - 194,638

- of which impaired - - - - -

1.2 partially secured - - - - -

- of which impaired - - - - -

2. Off-statement of financial position secured credit exposures:

2.1 fully secured - - - - -

- of which impaired - - - - -

2.2 partially secured - - - - -

- of which impaired - - - - -

31/12/2012

Value of net

exposure

Personal guarantees:

Credit derivatives

Personal guarantees: Credit derivatives - Other derivatives

Total

CLN

Governments and

central banks

Other government

agencies Banks Other

parties

1. On-statement of financial position secured credit exposures:

1.1 fully secured 194,638 - - - - - -

- of which impaired - - - - - - -

1.2 partially secured - - - - - - -

- of which impaired - - - - - - -

2. Off-statement of financial position secured credit exposures:

2.1 fully secured - - - - - - -

- of which impaired - - - - - - -

2.2 partially secured - - - - - - -

- of which impaired - - - - - - -

223

31/12/2012

Value of net

exposure

Personal guarantees: Endorsement credits

Total

Governments

and central banks

Other government

agencies Banks Other parties

1. On-statement of financial position secured credit exposures:

1.1 fully secured 194,638 - - - - -

- of which impaired - - - - - -

1.2 partially secured - - - - - -

- of which impaired - - - - - -

2. Off-statement of financial position secured credit exposures:

2.1 fully secured - - - - - -

- of which impaired - - - - - -

2.2 partially secured - - - - - -

- of which impaired - - - - - -

31/12/2012

Value of net

exposure

Collaterals

Personal guarantees:

Credit derivatives

Personal guarantees: Endorsement

credits

Total

1. On-statement of financial position secured credit exposures:

1.1 fully secured 194,638 194,638 - - 194,638

- of which impaired - - - - -

1.2 partially secured - - - - -

- of which impaired - - - - -

2. Off-statement of financial position secured credit exposures:

2.1 fully secured - - - - -

- of which impaired - - - - -

2.2 partially secured - - - - -

- of which impaired - - - - -

224

A.3.2 - Banking group - Secured exposures to customers

31/12/2012

Value of net exposure

Collaterals

Total Property Securities Other collaterals

1. On-statement of financial position secured credit exposures:

1.1 fully secured 16,443,407 32,215,776 516,134 521,112 33,253,022

- of which impaired 1,524,843 4,727,553 72,177 31,644 4,831,374

1.2 partially secured 719,887 29,576 134,444 15,477 179,497

- of which impaired 72,625 6,288 2,089 629 9,006

2. Off-statement of financial position secured credit exposures:

2.1 fully secured 503,103 1,803,204 69,471 21,195 1,893,870

- of which impaired 7,475 294,852 4,214 406 299,472

2.2 partially secured 84,151 - 17,334 7,772 25,106

- of which impaired 1,256 - 133 136 269

The column Collaterals - properties, on fully secured exposures, includes implicit guarantees represented by properties given through a finance lease of EUR 977,691 thousand, of which EUR 30,787 thousand refer to impaired exposures.

31/12/2012

Value of net

exposure

Personal guarantees:

Credit derivatives

Personal guarantees: Credit derivatives Other derivatives

Total

CLN

Governments and

central banks

Other government

agencies Banks Other

parties

1. On-statement of financial position secured credit exposures:

1.1 fully secured 16,443,407 - - - - - -

- of which impaired 1,524,843 - - - - - -

1.2 partially secured 719,887 - - - - - -

- of which impaired 72,625 - - - - - -

2. Off-statement of financial position secured credit exposures:

2.1 fully secured 503,103 - - - - - -

- of which impaired 7,475 - - - - - -

2.2 partially secured 84,151 - - - - - -

- of which impaired 1,256 - - - - - -

225

31/12/2012

Value of net

exposure

Personal guarantees: Endorsement credits

Total

Government

s and central banks

Other government agencies

Banks Other parties

1. On-statement of financial position secured credit exposures:

1.1 fully secured 16,443,407

9,212 34,296 10,722

2,936,252

2,990,482

- of which impaired 1,524,843 2 1,071 - 211,562 212,635

1.2 partially secured 719,887 2,660 27,501 70 259,236 289,467

- of which impaired 72,625 10 155 - 48,159 48,324

2. Off-statement of financial position secured credit exposures:

2.1 fully secured 503,103 - 694 16,304

259,333 276,331

- of which impaired 7,475 - - - 3,188 3,188

2.2 partially secured 84,151 - 67 7,625 30,794 38,486

- of which impaired 1,256 - - - 568 568

31/12/2012

Value of net

exposure

Collaterals

Personal guarantees:

Credit derivatives

Personal guarantees:

Endorsement credits

Total

1. On-statement of financial position secured credit exposures:

1.1 fully secured 16,443,407 33,253,022 - 2,990,482 36,243,504

- of which impaired 1,524,843 4,831,374 - 212,635 5,044,009

1.2 partially secured 719,887 179,497 - 289,467 468,964

- of which impaired 72,625 9,006 - 48,324 57,330

2. Off-statement of financial position secured credit exposures:

2.1 fully secured 503,103 1,893,870 - 276,331 2,170,201

- of which impaired 7,475 299,472 - 3,188 302,660

2.2 partially secured 84,151 25,106 - 38,486 63,592

- of which impaired 1,256 269 - 568 837

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B. DISTRIBUTION AND CONCENTRATION OF CREDIT EXPOSURES

B.1 - Banking Group - Distribution of on and off-statement of financial positions credit exposures with customers by business segment (carrying amount)

Exposures/Counterparts

Governments Other government agencies

Carrying amount

Individual

impairment

Collective impairment

Carrying amount

Individual impairment

Collective

impairment

A. On-statement of financial position credit exposures

A.1 Non-performing loans - - X 1 -3 X

A.2 Substandard loans - - X 1 - X

A.3 Restructured exposures - - X - - X

A.4 Past due exposures - - X - - X

A.5 Other exposures 3,488,181 X -3 61,278 X -402

TOTAL A 3,488,181 - -3 61,280

-3 -402

B. Off-statement of financial position credit exposures

B.1 Non-performing loans - - X - - X

B.2 Substandard loans - - X - - X

B.3 Other impaired assets - - X - - X

B.4 Other exposures 25,971 X - 9,601 X -

TOTAL B 25,971 - - 9,601 - -

TOTAL AS AT 31/12/2012 3,514,152 - -3 70,881 -3 -402

TOTAL AS AT 31/12/2011 1,434,500 - -4 137,763 -3 -423

227

Exposures/Counterparts

Financial companies Insurance companies

Carrying amount

Individual impairment

Collective impairment

Carrying amount

Individual impairment

Collective

impairment

A. On-statement of financial position credit exposures

A.1 Non-performing loans 1,801 -2,643 X - - X

A.2 Substandard loans 5,368 -1,652 X - - X

A.3 Restructured exposures 13,560 -2,255 X - - X

A.4 Past-due exposures 36,284 -1,247 X - - X

A.5 Other exposures 406,257 X -3,019 11,118 X -

TOTAL A 463,270 -7,797 -3,019 11,118 - -

B. Off-statement of financial position credit exposures

B.1 Non-performing loans - - X - - X

B.2 Substandard loans - - X - - X

B.3 Other impaired assets 3,211 -5 X - - X

B.4 Other exposures 38,508 X - 503 X -

TOTAL B 41,719 -5 - 503 - -

TOTAL AS AT 31/12/2012 504,989 -7,802 -3,019 11,621 - -

TOTAL AS AT 31/12/2011 445,528 -4,663 -2,443 9,942 - -1

Exposures/Counterparts

Non-financial companies Other parties

Carrying amount

Individual impairment

Collective impairment

Carrying amount

Individual impairment

Collective impairment

A. On-statement of financial position credit exposures

A.1 Non-performing loans 521,507 -713,369 X 91,318 -193,715 X

A.2 Substandard loans 706,152 -166,437 X 86,585 -12,273 X

A.3 Restructured exposures 163,292 -26,545 X 3,312 -1,809 X

A.4 Past-due exposures 374,163 -13,476 X 95,904 -3,447 X

A.5 Other exposures 15,317,084 X -86,680 4,083,049 X -22,493

TOTAL A 17,082,198 -919,827 -86,680 4,360,168 -211,244 -22,493

B. Off-statement of financial position credit exposures

B.1 Non-performing loans 9,745 -3,375 X 237 -28 X

B.2 Substandard loans 4,154 -286 X 201 -23 X

B.3 Other impaired assets 9,042 -260 X 1,981 -65 X

B.4 Other exposures 1,460,179 X - 299,997 X -

TOTAL B 1,483,120 -3,921 - 302,416 -116 -

TOTAL AS AT 31/12/2012 18,565,318 -923,748 -86,680 4,662,584 -211,360 -22,493

TOTAL AS AT 31/12/2011 19,295,882 -686,560 -94,087 4,804,964 -149,897 -24,800

228

B.2. - Banking Group - Breakdown of on and off-statement of financial position credit exposures with customers by geographical segment (carrying amount)

Exposure/region

NORTH-WEST

NORTH-EAST

CENTRE

SOUTH AND ISLANDS

Carrying amount

Total impairment

Carrying amount

Total impairment

Carrying amount

Total impairment

Carrying amount

Total impairment

A. On-statement of financial position credit exposures

A.1 Non-performing loans 313,319

-453,785 27,883 -40,179 101,312 -156,822 170,152 -257,814

A.2 Substandard loans 399,646 -103,653 48,026 -6,018 180,994 -38,645 167,018 -32,039

A.3 Restructured exposures 152,226 -26,226 11,951 -2,865 3,176 -388 12,888 -1,131

A.4 Past-due exposures 303,262 -11,597 23,269 -895 88,102 -3,137 89,927 -2,531

A.5 Other exposures 12,027,591 -68,333 1,208,037 -7,734 7,118,643 -18,999 2,957,093 -17,245

TOTAL 13,196,044 -663,594 1,319,166 -57,691 7,492,227 -217,991 3,397,078 -310,760

B. Off-statement of financial position credit exposures

B.1 Non-performing loans 2,552 -463 16 -5 333 -60 7,080 -2,875

B.2 Substandard loans 2,454 -108 159 -6 489 -66 1,253 -130

B.3 Other impaired assets 9,994 -202 484 -2 2,411 -87 1,276 -36

B.4 Other exposures 1,371,267 - 61,681 - 242,437 - 142,037 -

TOTAL 1,386,267 -773 62,340 -13 245,670 -213 151,646 -3,041

TOTAL AS AT 31/12/2012 14,582,311 -664,367 1,381,506 -57,704 7,737,897 -218,204 3,548,724 -313,801

TOTAL AS AT 31/12/2011 15,424,002 -488,518 1,370,286 -41,752 5,572,338 -156,870 3,662,815 -274,279

229

B.3. - Banking Group - Breakdown of on and off-statement of financial position credit exposures with banks by geographical segment (carrying amount)

Exposure/region

NORTH-WEST

NORTH-EAST

CENTRE

SOUTH AND ISLANDS

Carrying amount

Total impairment

Carrying amount

Total impairment

Carrying amount

Total

impairment

carrying amount

Total

impairment

A. On-statement of financial position credit exposures

A.1 Non-performing loans - - - - - - - -

A.2 Substandard loans - - - - - - - -

A.3 Restructured exposures - - - - - - - -

A.4 Past-due exposures - - - - - - - -

A.5 Other exposures 217,217 - 598,866 - 537,091 - 15,101 -

Total 217,217 - 598,866 - 537,091 - 15,101 -

B. Off-statement of financial position credit exposures

B.1 Non-performing loans - - - - - - - -

B.2 Substandard loans - - - - - - - -

B.3 Other impaired assets - - - - - - - -

B.4 Other exposures 16,140 - - - 33,198 - 3,472 -

Total 16,140 - - - 33,198 - 3,472 -

TOTAL AS AT 31/12/2012 233,357 - 598,866 - 570,289 - 18,573 -

TOTAL AS AT 31/12/2011 437,653 - 967,132 - 532,933 - 23,526 -

B.4 - Large exposures

31/12/2012

a) Amount - carrying amount 5,875,431

b) Amount - weighted amount 472,240

c) Number 6

As per the provisions of the Bank of Italy distributed by letter dated 28 February 2011, the amount of “risk positions” that constitute “large exposures” is provided referring both to the carrying amount and to the weighted amount.

The main “large exposure” position consists of the exposure towards the Italian State, subject to zero weighting.

230

C. SECURITISATIONS AND TRANSFERS OF ASSET

C.1 - Securitisation transactions

Qualitative information

In 2012, a securitisation transaction was performed, perfected through the Quadrivio Sme 2012 S.r.l. special purpose vehicle. The originator banks signed, at the time of the issue, the total liabilities issued by the special purpose vehicle. The Group Banks also hold the securities deriving from the Quadrivio Finance self-securitisation, occurred in 2009 and Quadrivio Rmbs 2011 S.r.l. occurred in 2011. A description of these transactions is provided in the Section dedicated to liquidity risk.

Furthermore, on 31 December 2009, Credito Artigiano, bank merged into Credito Valtellinese, subscribed the securities deriving from a securitisation transaction performed by the company Mecaer Aviation Group S.p.A. through Urania Finance SA, special purpose vehicle, which issued asset-backed securities in compliance with Luxemburg laws on securitisations. The senior securities issued were subscribed in full by Credito Artigiano for a total par value of EUR 4,140 thousand. During 2010, a new transaction of the same nature and same parties increased the value of the securities subscribed by Credito Artigiano for a total par value of EUR 7,060 thousand. As a result of the paid redemptions, the current equivalent carrying amount is EUR 5,197 thousand. The tables below illustrate the exposure deriving from this investment.

231

Quantitative information

C.1.1 - Banking Group - Exposures deriving from securitisation transactions analysed by the quality of the underlying assets

Quality of underlying assets/exposures

On-statement of financial position exposures

Senior Mezzanine Junior

Gross exposure

Net exposure

Gross exposure

Net exposure

Gross exposure

Net exposure

A. With own underlying assets - - - - - -

a) Impaired - - - - - -

b) Other - - - - - -

B. With third-party underlying assets 5,197 5,197 - - - -

a) Impaired - - - - - -

b) Other 5,197 5,197 - - - -

Quality of underlying assets/exposures

Guarantees given

Senior Mezzanine Junior

Gross exposure

Net exposure

Gross exposure

Net exposure

Gross exposure

Net exposure

A. With own underlying assets - - - - - -

a) Impaired - - - - - -

b) Other - - - - - -

B. With third-party underlying assets - - - - - -

a) Impaired - - - - - -

b) Other - - - - - -

Quality of underlying assets/exposures

Credit lines

Senior Mezzanine Junior

Gross exposure

Net exposure

Gross exposure

Net exposure

Gross exposure

Net exposure

A. With own underlying assets - - - - - -

a) Impaired - - - - - -

b) Other - - - - - -

B. With third-party underlying assets - - - - - -

a) Impaired - - - - - -

b) Other - - - - - -

232

C.1.3 - Banking Group - Exposures deriving from the main third party’s securitisation transactions analysed by type of securitised asset and type of exposure

Type of underlying assets/exposures

On-statement of financial position exposures

Senior Mezzanine Junior

Carrying amount

Impairment losses/

reversals of impairment

losses

Carrying amount

Impairment losses/

reversals of impairment

losses

Carrying amount

impairment losses/

reversals of impairment

losses

A.1 Urania Finance SA

- Asset type: Loans and Receivables 5,197 - - - - -

Type of underlying assets/exposures

Guarantees given

Senior Mezzanine Junior

Carrying amount

Impairment losses/

reversals of impairment

losses

Carrying amount

Impairment losses/

reversals of impairment

losses

Carrying amount

Impairment losses/

reversals of impairment

losses

A.1 Urania Finance SA

- Asset type: Loans and Receivables - - - - - -

Type of underlying assets/exposures

Credit lines

Senior Mezzanine Junior

Carrying amount

Impairment losses/

reversals of impairment

losses

Carrying amount

Impairment losses/

reversals of impairment

losses

Carrying amount

Impairment losses/

reversals of impairment

losses

A.1 Urania Finance SA

- Asset type: Loans and Receivables - - - - - -

C.1.4 - Banking Group - Exposures deriving from securitisation transactions analysed by portfolio and type

Exposures/Portfolio

Financial assets held for

trading

Financial

assets at fair value

through profit or

loss

Available -for- Sale

financial position

Held to maturity

investments

Loans and receivables 31/12/2012 31/12/2011

1. On-statement of financial position exposures - - - - 5,197 5,197 5,986

- Senior - - - - 5,197 5,197 5,986

- Mezzanine - - - - - - -

- Junior - - - - - - -

2. Off-statement of financial position exposures - - - - - - -

- Senior - - - - - - -

- Mezzanine - - - - - - -

- Junior - - - - - - -

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C.2 -TRANSFERS OF ASSETS

In the following tables, the securitisation transactions carried out by the Group are not recognised in that the originator banks subscribed, at the time of the issue, the total liabilities issued.

C.2.1. Banking Group - Financial assets transferred and not derecognised: carrying amount and entire amount

Technical form/Portfolio

Financial assets held for trading

Financial assets at fair value through profit or

loss

A B C A B C

A. Assets - - - - - -

1. Debt instruments - - - - - -

2. Equity instruments - - - - - -

3. OEIC units - - - - - -

4. Loans - - - - - -

B. Derivatives - - - X X X

TOTAL AS AT 31/12/2012 - - - - - -

of which impaired - - - - - -

TOTAL AS AT 31/12/2011 1,857 - - - - -

of which impaired - - - - - -

A = financial assets transferred recognised in full (carrying amount). B = financial assets transferred recognised in part (carrying amount). C = financial assets transferred recognised in part (entire amount).

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Technical form/Portfolio

Available-for-sale financial assets

Held to maturity investments

A B C A B C

A. Assets 493,924 - - 107,792 - -

1. Debt instruments 493,924 - - 107,792 - -

2. Equity instruments - - - X X X

3. OEIC units - - - X X X

4. Loans - - - - - -

B. Derivatives X X X X X X

TOTAL AS AT 31/12/2012 493,924 - - 107,792 - -

of which impaired - - - - - -

TOTAL AS AT 31/12/2011 107,454 - - 60,793 - -

of which impaired - - - - - - A = financial assets transferred recognised in full (carrying amount). B = financial assets transferred recognised in part (carrying amount). C = financial assets transferred recognised in part (entire amount).

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Technical form/Portfolio

Loans and receivables with banks

Loans and receivables with customers Total

31/12/2012 Total

31/12/2011 A B C A B C

A. Assets 75,167 - - - - - 676,883 315,379

1. Debt instruments 75,167 - - - - - 676,883 315,379

2. Equity instruments X X X X X X - -

3. OEIC units X X X X X X - -

4. Loans - - - - - - - -

B. Derivatives X X X X X X - -

TOTAL AS AT 31/12/2012 75,167 - - - - - 676,883 X

of which impaired - - - - - - - X

TOTAL AS AT 31/12/2011 145,275 - - - - - X 315,379

of which impaired - - - - - - X -

A = financial assets transferred recognised in full (carrying amount). B = financial assets transferred recognised in part (carrying amount). C = financial assets transferred recognised in part (entire amount).

C.2.2 - Banking Group - Financial liabilities for assets transferred and not derecognised: carrying amount

Liabilities/Asset portfolio

Financial assets held for trading

Financial assets

at fair value

through profit or

loss

Available -for-sale financial assets

Held to maturity

investments

Loans and receivables with banks

Loans and receivables

with customers

Total

1. Due to customers - - 489,476 - 30,618 - 520,094

a) for assets recognised in full - - 489,476 - 30,618 - 520,094

b) for assets recognised in part - - - - - - -

2. Due to banks - - 656 83,776 154,132 - 238,564

a) for assets recognised in full - - 656 83,776 154,132 - 238,564

b) for assets recognised in part - - - - - - -

3. Securities issued - - - - - - -

a) for assets recognised in full - - - - - - -

b) for assets recognised in part - - - - - - -

TOTAL AS AT 31/12/2012 - - 490,132 83,776 184,750 - 758,658

TOTAL AS AT 31/12/2011 1,833 - 106,423 48,695 309,963 - 466,914

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C.2.3 Banking group - Transfers with liabilities with recourse only to transferred assets: fair value

Financial assets held for trading

Financial assets held for trading

Financial assets at fair value through

profit or loss

Financial assets at fair value through profit or loss

Available-for-sale financial

assets

Available-for-sale financial

assets

Technical form/Portfolio A B A B A B

A. Assets - - - - 493,924 -

1. Debt instruments - - - - 493,924 -

2. Equity instruments - - - - - -

3. OEIC - - - - - -

4. Loans - - - - - -

B. Derivatives - - X X X X

Total assets - - - - 493,924 -

C. Associated liabilities - - - - 490,132 -

1. Due to customers - - - - 489,476 -

2. Due to banks - - - - 656 -

3. Securities issued - - - - - -

Total liabilities - - - - 490,132 -

NET VALUE 31/12/2012 - - - - 3,792 -

NET VALUE 31/12/2011 - - - - - - A = financial assets transferred recognised in full B = financial assets transferred recognised in part

Technical form/Portfolio Held to

maturity investments (fair value)

Held to maturity

investments (fair value)

Loans and receivables with banks

(fair value)

Loans and receivables with banks

(fair value)

Loans and receivables

with customers (fair value)

Loans and receivables

with customers (fair value)

Total as at 31/12/2012

Total as at 31/12/2011

A B A B A B A. Assets 107,890 - 346,289 - - - 948,103 -

1. Debt instruments 107,890 - 346,289 - - - 948,103 -

2. Equity instruments X X X X X X - -

3. OEIC X X X X X X - -

4. Loans - - - - - - - -

B. Derivatives X X X X X X - -

Total assets 107,890 - 346,289 - - - 948,103 -

C. Associated liabilities 83,776 - 184,750 - - - X X

1. Due to customers - - 30,618 - - - X X

2. Due to banks 83,776 - 154,132 - - - X X

3. Securities issued - - - - - - X X

Total liabilities 83,776 - 184,750 - - - 758,658 -

NET VALUE 31/12/2012 24,114 - 161,539 - - - 189,445 X

NET VALUE 31/12/2011 - - - - - - X -

A = financial assets transferred recognised in full B = financial assets transferred recognised in part

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D. BANKING GROUP - CREDIT RISK MEASUREMENT MODELS

Refer to the description under the qualitative information on credit risk.

1.2 - BANKING GROUP - MARKET RISK

1.2.1 - INTEREST RATE RISK AND PRICE RISK - REGULATORY TRADING BOOK

“Regulatory trading book” means the portfolio of financial instruments subject to the capital requirements for the market risks, as stated by the measures regarding supervisory reports.

QUALITATIVE INFORMATION

A. General aspects

The trading book comprises bonds, shares, OEIC units, trading derivatives and in a very limited measure, units of hedge funds.

The bond component of the book consists mainly of fixed-rate securities with a quite limited duration and hedged against interest rate risk. The bonds held are almost exclusively issued by banks and by the Italian Republic. Direct equity investments, residual in size, mainly involve shares listed on the Italian Stock Exchange and with a high degree of liquidity. The financial instruments in the book are mostly in Euro.

The price risk affecting the regulatory trading book is generated by investments in OEIC units and in equity instruments.

B. Management process and measurement methods for the interest rate risk and the price risk

Investment policies are based on criteria that aim to limit market risk in terms of the risk components that the Group intends to consciously assume:

- interest rate risk;

- price risk;

- currency risk.

As a rule, the Bank does not enter into transactions that entail exposure to commodity risks. Risk hedging tools and techniques are used in the management of the book.

The risk management process regarding the market risk for the trading portfolio is governed by a specific corporate regulation approved by the Board of Directors of the Parent and periodically reviewed. This regulation formalises the performance of the risk management activities regarding the above mentioned risk, defines the tasks and responsibilities assigned to the various organisational units in charge, and sets out, among other things, the strategic guide-lines, management policy, measurement methods, exposure limits, information flows and any corrective action that may be necessary. Therefore, investment and trading is carried out in compliance with the mentioned policies and is implemented as part of an extensive system of assigned management powers and in accordance with detailed regulations envisaging defined management limits in terms of instruments, amounts, investment markets, issue and issuer types, sectors and ratings.

238

In accordance with the mission of the retail banking Group that mainly assumes credit risk with respect to specific customer segments, the financial assets are mainly used to ensure protection of the overall technical equilibrium of the Banks and the Group. Management of the trading book is specifically aimed at optimising income from the financial resources available, with the obligation of restraining variability of the forecast results from the Finance Area and individual and consolidated profits.

Risk is measured using both analytical techniques (establishing the duration of the bond portfolio with regard to interest rate risk exposure) and statistical estimate techniques of the Value at Risk (VaR).

The VaR measures the maximum loss the trading book may incur based on volatility and historic correlation of the individual risk factors (interest rates, share prices and exchange rates). The estimate is carried out by using the parametric approach, based on the volatility and the correlations of risk factors observed in a certain period, over a 10-day period and a 99% confidence interval. The data used is provided by RiskMetrics. On some types of financial instruments (e.g. units of hedge funds), VaR is calculated with a simplified method and added to the parametric VaR (excluding, for prudential reasons, the benefit of diversification). This model is not used to determine the minimum capital requirement with respect to market risk.

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QUANTITATIVE INFORMATION

1. Regulatory trading book: distribution by residual maturity (by re-pricing date) of on-statement of financial position financial assets and liabilities and financial derivatives

Currency: EURO

Type/Residual duration

On sight

Up to 3 months

From 3 months

to 6 months

From 6 months

to 1 year

From 1 year to 5

years

From 5

years to 10 years

Beyond 10

years

Unspecified maturity

1. Assets 1,455 16,287 4,852 45,637 24,863 4,629 31 -

1.1 Debt instruments 1,455 16,287 4,852 45,637 24,863 4,629 31 -

- with early repayment option - - - - - - - -

- other 1,455 16,287 4,852 45,637 24,863 4,629 31 -

1.2. Other assets - - - - - - - -

2. Liabilities - - - - - - - -

2.1 Repurchase agreements - - - - - - - -

2.2 Other liabilities - - - - - - - -

3. Financial derivatives - -259,691 36,710 -1,713 -47,506 -4,000 - -

3.1 With underlying security - -6,466 7,844 -73 -141 - - -

- Options - - - - 178 - - -

+ long positions - - - - 178 - - -

+ short positions - - - - - - - -

- Other - -6,466 7,844 -73 -319 - - -

+ long positions - 970 8,141 - 15 19 - -

+ short positions - 7,436 297 73 334 19 - -

3.2 Without underlying security - -253,225 28,866 -1,640 -47,365 -4,000 - -

- Options - - - - - - - -

+ long positions - 1 111 1 8 7 4 -

+ short positions - 1 111 1 8 7 4 -

- Other - -253,225 28,866 -1,640 -47,365 -4,000 - -

+ long positions - 635,119 33,873 1,393 5,619 6,679 8,915 -

+ short positions - 888,344 5,007 3,033 52,984 10,679 8,915 -

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Other currencies

Type/Residual duration

On sight

Up to 3 months

From 3 months

to 6 months

From 6 months

to 1 year

From 1 year to 5

years

From 5 years to 10 years

Beyond 10

years

Unspecified maturity

1. Assets - - 3 - 18 - - -

1.1 Debt instruments - - 3 - 18 - - -

- with early repayment option - - - - - - - -

- other - - 3 - 18 - - -

1.2. Other assets - - - - - - - -

2. Liabilities - - - - - - - -

2.1 Repurchase agreements - - - - - - - -

2.2 Other liabilities - - - - - - - -

3. Financial derivatives - 273,128 -26 475 - - - -

3.1 With underlying security - - - - - - - -

- Options - - - - - - - -

+ long positions - - - - - - - -

+ short positions - - - - - - - -

- Other - - - - - - - -

+ long positions - - - - - - - -

+ short positions - - - - - - - -

3.2 Without underlying security - 273,128 -26 475 - - - -

- Options - - - - - - - -

+ long positions - - - - - - - -

+ short positions - - - - - - - -

- Other - 273,128 -26 475 - - - -

+ long positions - 328,681 4,218 1,691 - - - -

+ short positions - 55,553 4,244 1,216 - - - -

Within the “other currencies”, the main currency for the trading book is the US dollar.

The sensitivity of the book to interest rate variations is very limited (the amended duration equals 1.8).

In the event of parallel shifts in the interest rate curve by +100 basis points, the consequent change in the interest income is expected to reach approximately EUR 224 thousand (EUR -42 thousand in the event of parallel shifts of -100 basis points, under the non-negativity restriction in nominal interest rates.)

The indicated changes, which are directly reflected on the net interest income, would be more than offset by changes of opposite sign of the value of the book (EUR -1,859 thousand and +1,030 thousand, respectively, in the two assumed scenarios).

The overall asset and income impact, taking also account of tax effects, would be limited.

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2. Regulatory trading book: distribution of exposures in equity instruments and share indices by main stock exchange

Type of transaction/Listing market

Listed

Unlisted

Italy

A. Equity instruments 511 -

- long positions 511 -

- short positions - -

B. Unsettled transactions involving equity instruments - -

- long positions - -

- short positions - -

C. Other derivatives on equity instruments 6 -

- long positions 40 -

- short positions 34 -

D. Derivatives on share indices - -

- long positions - -

- short positions - -

Since the amount of exposure in equity instruments and derivatives on such instruments is modest, any small or big change in prices would not have significant economic or financial effects.

3. Regulatory trading book - internal models and other sensitivity analysis methods

The Group uses a single model to monitor the risk to which the trading book is exposed. Therefore, the tables below illustrate information on VaR, inclusive of all risk factors (interest rate, price and currency).

Over the year, the VaR recorded limited values with relation to the book’s size. The main factors to which it is exposed are issuer and interest rate risk. The importance of the issuer risk is ascribable to the persistence of high credit spreads recorded during the period. Many of the bonds held in the trading portfolio are issued by Italian banks.

Table 1 - Regulatory trading book - VaR performance

Average Minimum Maximum 31/12/2012 Average Minimum Maximum

Consolidated 2,069,957 1,083,645 3,273,138 1,083,645 1,892,978 986,824 3,495,927

2012 2011

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Chart 2 - Regulatory trading book - VaR performance

Table 2 - Regulatory trading book - Contribution of risk factors to calculation of VaR

Situation as at 31/12/2012

Price risk Interest rate risk

currency risk Issuer risk OEIC units Hedge fund Benefit of

diversification 4.9% 12.5% 0.2% 73.3% 10.5% 3.1% -4.5%

Table 3 - Regulatory trading book - Breakdown of bond exposures by issuer type

Situation as at 31/12/2012

Sovereign issuers Public issuers Banks

Insurance companies and other financial

companies

Corporate

26.3% 0.9% 72.7% 0.0% 0.0%

-

800,000

1,600,000

2,400,000

3,200,000

4,000,000

2 Jan 1 Feb 1 Mar 30 Mar 3 May 1 Jun 2 Jul 31 Jul 29 Aug 27 Sep 26 Oct 27 Nov 28 Dec

2012 Group VaR

VaR

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1.2.2 - INTEREST RATE RISK AND PRICE RISK - BANKING BOOK

The banking book consists of all financial assets and liabilities not included in the trading book. It mainly comprises loans and receivables with banks and customers and amounts due to banks and customers.

QUALITATIVE INFORMATION

A. General aspects, management procedures and measurement methods for the interest rate risk and the price risk

The risk management process regarding the interest rate risk for the banking book is governed by a specific corporate regulation approved by the Board of Directors of the Parent and periodically reviewed. This regulation formalises the various activities carried out by the different internal departments within the scope of rate risk management and sets out, among other things, the strategies, the management policies, the measurement methods, the exposure limits, the information flows and any mitigation procedure.

Interest rate risk management aims to minimise the impact of unfavourable variations in the rates curve on fair value and on cash flows generated by financial statement items. Limiting exposure to interest rate risk is achieved primarily by index-linking asset and liability items to money market benchmarks (usually the Euribor rate) and by balancing the duration of the asset or liability at low levels. The objectives with respect to interest rate risk exposure are considered when carrying out strategic and operational planning, when identifying and developing new products.

Measurement of interest rate risk on the banking book is based on the fair value approach, defined as the present value of expected net cash flows, generated by the assets, by the liabilities and by the off-statement of financial positions. Given that the present value of the expected cash flows depends on the interest rates, their variation affects the fair value of the bank. This measurement is based on pre-set variations of the structure of the rates applied to on and off statement of financial position items at the reporting date. The reactivity to interest rate variations is measured by both sensitivity indicators (approximate amended duration in the simplified regulatory model) and revaluation of the assets, liabilities and off-statement financial position items (internal management model). The changes in the fair value that result are then normalised in proportion to the regulatory capital.

In order to better assess the exposure to the interest rate risk, a model was developed to treat on sight items with a theoretical maturity and frequency of rate review of one day (contractual profile) but deemed to be more stable on the basis of the statistical analysis of the persistence of volumes and the stickiness of the rates (behavioural profile). The statistical analysis identified a core component of the on sight items whose behaviour is replicated by a portfolio that, given a suitable combination of fixed rate and floating rate instruments with maturity up to 10 years, allows both the expected decrease in volume and the stickiness of the interest rates to be considered.

Regarding exposure to interest rate risk, which is measured on a monthly basis for each bank of the Group, reporting limits and actions at consolidated level were approved, defined in terms of fair value variation at the reporting date (static ALM) resulting from instantaneous movements of the rate curve. To this end, both parallel shifts of fixed size (typically 200 basis points) and specific variations for each node of the interest-rate structure are considered,

244

determined on the basis of major decreases and increases actually recorded in an observation period of 6 years (considering the 1st and 99th percentile of the distribution, respectively).

The banking book consists also of the shares that are held as part of more in-depth relations with specific companies or represent the instrument supporting significant initiatives undertaken in the Bank’s reference territory. The price risk management methods for such financial instruments, therefore, tend more towards the management approach for equity investments, rather than the risk measurement techniques and instruments used for the trading book.

B. Fair value hedges

The hedging of interest rate risk aims to protect the banking book from fair value changes of loans caused by the movements of the interest rate curve (fair value hedge); types of derivatives used are represented by interest rate swaps (IRS) carried out with third parties.

The hedge accounting of the Credito Valtellinese Group is carried out through the specific fair value hedge of assets specifically identified (specific hedging).

The Risk Management is responsible for verifying the effectiveness of the hedging of interest rate risk for the purpose of hedge accounting, in compliance with the IFRS.

During 2011, Italian Government bonds (BTP) in the banking book of Available-for-sale financial assets were hedged, with the objective of hedging the variability of the relevant fair value component linked to changes in interest rates, excluding the residual component of the credit risk, whose effects remain in the relevant equity reserve.

To this end, starting forward IRS that start in about one year were used. They were entered into together with the purchase of underlying securities. The effectiveness tests calculated with reference to the periodic dates of analysis confirmed an effectiveness not far from 100% and, anyway, within the 80%-125% range required by IFRS.

The hedge effectiveness is measured, specifically for each hedged tranche, as follows:

• at the initial date, the hedged component is defined by identifying the fixed coupon of a theoretical security (inclusive of the base component between the target hedging rate, i.e. 6-month Euribor, and the risk free rate, represented by the Eonia rate) in such a way that it has, on the basis of the current rate curve, a fair value equal to the amortised cost of the hedged BTP on the effective date of the relevant hedging derivative;

• the following fair value changes of this theoretical security are calculated (after adjusting the new base component) by comparing its new value, on the basis of the rate curve existing on the date of analysis, with the amortised cost of the BTP existing on that date (or with the amortised cost on the effective date, if the reference date is before) and are recorded in the Income Statement when the adjustment in the price (fair value) of the BTP is recorded in the Financial Statements (whereas the residual fair value change is recorded in equity);

• these fair value changes are compared to the fair value changes recorded by the relevant hedging IRS, less (only for the purposes of the effectiveness test) the previous described component of reverse entry in the Income Statement (net interest income) of the upfront implicitly received at source.

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C. Cash flow hedges

No cash flow hedges are pending or were carried out.

D. Hedging in foreign operations

No such transactions are pending or were carried out.

QUANTITATIVE INFORMATION

1. Banking book: distribution by residual maturity (by re-pricing date) of financial assets and liabilities

Please refer to the next paragraph “Internal models and other sensitivity analysis methods”.

2. Banking book: internal models and other sensitivity analysis methods

The measurement of the exposure to interest rate risk is performed through an internal model that provides a full-valuation approach to all positions that are interest-bearing assets and liabilities. In detail, the model includes the following phases:

- calculation of net present value of assets, liabilities and off-statement of financial position items and calculation of the previously translated as fair value;

- definition of a scenario with regard to a change in the interest-rate curve (i.e., parallel translation or steepening or flattening of the curve with respect to deadlines deemed most relevant);

- recalculation of the net present value of recognised and off-statement of financial position instruments with the new interest-rate curve and calculation of the new economic value in connection with the revalued instruments;

- calculation of the variation in previously translated as fair value as the difference of the ante and post-shock value of the rates.

As mentioned in the section dedicated to “Qualitative information”, the proper representation in terms of risk and profitability of on-sight negotiations required their modelling to estimate both the persistence of aggregates and the actual index-linking level of interest rates. Customer loyalty gives on-sight items a much higher actual duration than contractual duration. Moreover, for these items, the extent and ways of redefining the interest rate depends, in addition to the market rate trend, also on the specific characteristics of each relation between the bank and the customer.

At year-end, the changed duration calculated for all financial statements assets and liabilities as well as the duration gap were moderate. Assuming that the rate structure makes a parallel shift upwards of 100 basis points, the fair value would decrease by EUR 45.5 million. In case of an equal downward shift, under the non-negativity restriction in nominal interest rates, the fair value would increase by EUR 42.0 million.

As regards income profiles, in the hypothesis of instantaneous and parallel shifts of the interest rate curve by -100 basis points, the variation of the net interest income generated by the banking book, over a time horizon of 12 months, would equal EUR -8.5 million (EUR +40.2 million in the case of shifts of +100 basis points). These amounts express the effect of changes in the interest rates on the banking book, excluding modifications to the composition and size

246

of the financial statement items. As a result, this may not be considered as an indicator in forecasting the expected level of the net interest income. However, under the assumptions indicated, changes in the net interest income would result in an equal change in total income and a decrease in profit by netting it with the relevant tax effects.

1.2.3 - CURRENCY RISK

QUALITATIVE INFORMATION

A. General aspects, management processes and measurement methods for currency risk

A minor net exposure in exchange rates is generated mainly from short-term refinancing transactions in dollars with the European Central Bank. The relevant currency risk is hedged; any variation in exchange rates would not therefore have relevant economic or financial effects.

As regards management processes and measurement methods for currency risk in the trading portfolio, refer to that set forth in the paragraph “Interest rate risk and price risk - Regulatory trading book - Qualitative information”.

B. currency risk hedging

All foreign currency positions generated by transactions with customers are managed together through analysis of open gaps (non-offset positions). The monitoring of currency risk is based on defined limits in terms of maximum acceptable loss, forward gap position and overall open gap position.

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QUANTITATIVE INFORMATION

1. Distribution of assets, liabilities and derivatives by currency

31/12/2012

Items Currencies

US dollars Sterling Yen Canadian

dollars Swiss francs Other currencies

A. Financial assets

A.1 Debt instruments 14 7 - - - -

A.2 Equity instruments 50 - - - - -

A.3 Loans and receivables with banks 9,844 476 373 146 871 1,646

A.4 Loans and receivables with customers 24,732 426 4,186 - 29,074 13

A.5 Other financial assets - - - - - -

B. Other assets 2,864 1,290 293 582 2,863 7,043

C. Liabilities

C.1 Due to banks 190,939 231 296 251 757 517

C.2 Due to customers 82,506 11,197 72 1,261 42,795 5,985

C.3 Debt instruments - - - - - -

C.4 Other financial liabilities - - - - - -

D. Other liabilities - - - - - -

E. Financial derivatives

- Options

+ Long positions - - - - - -

+ Short positions - - - - - -

- Other

+ Long positions 305,433 9,406 19,523 1,238 13,252 7,106

+ Short positions 308,636 9,375 20,443 1,255 13,251 7,101

Total assets 342,937 11,605 24,375 1,966 46,060 15,808

Total liabilities 582,081 20,803 20,811 2,767 56,803 13,603

Difference(+/-) -239,144 -9,198 3,564 -801 -10,743 2,205

2. Internal models and other sensitivity analysis methods

As regards internal models for currency risk in the trading book, refer to that set forth in the paragraph “Interest rate risk and price risk - Regulatory trading book - Quantitative information”.

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1.2.4 - DERIVATIVE INSTRUMENTS

A. FINANCIAL DERIVATIVES

Only forward purchase and sale operations as defined in Circular no. 263 “New prudential supervisory provisions for banks” are recorded in the following tables.

A.1 - Regulatory trading book: notional amounts at the reporting date and averages

Underlying assets/Types of derivatives

31/12/2012 31/12/2011

Over the counter

Central counterparties

Over the counter

Central counterparties

1. Debt instruments and interest rates 51,870 - 175,120 -

a) Options 220 - 6,182 -

b) Swap 51,650 - 168,938 -

c) Forward - - - -

d) Futures - - - -

e) Others - - - -

2. Equity instruments and share indices - 142,599 - 145,734

a) Options - 142,599 - 145,734

b) Swap - - - -

c) Forward - - - -

d) Futures - - - -

e) Others - - - -

3. Currencies and gold 354,975 - 180,726 -

a) Options - - - -

b) Swap 290,209 - 91,669 -

c) Forward 64,766 - 89,057 -

d) Futures - - - -

e) Others - - - -

4. Commodities - - - -

5. Other underlying assets - - - -

Total 406,845 142,599 355,846 145,734

Average amounts 263,048 144,166 190,597 96,121

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A.2 - Banking book: notional amounts at the reporting date and averages

A.2.1 - Hedging

Underlying assets/Types of derivatives

31/12/2012 31/12/2011

Over the counter

Central counterparties

Over the counter

Central counterparties

1. Debt instruments and interest rates 600,000 - 600,000 -

a) Options - - - -

b) Swap 600,000 - 600,000 -

c) Forward - - - -

d) Futures - - - -

e) Others - - - -

2. Equity instruments and share indices - - - -

a) Options - - - -

b) Swap - - - -

c) Forward - - - -

d) Futures - - - -

e) Others - - - -

3. Currencies and gold - - - -

a) Options - - - -

b) Swap - - - -

c) Forward - - - -

d) Futures - - - -

e) Others - - - -

4. Commodities - - - -

5. Other underlying assets - - - -

Total 600,000 - 600,000 -

Average amounts 600,000 - 376,000 -

250

A.2.2 - Other derivatives

Underlying assets/Types of derivatives

31/12/2012 31/12/2011

Over the counter

Central counterparties

Over the counter

Central counterparties

1. Debt instruments and interest rates - - - -

a) Options - - - -

b) Swap - - - -

c) Forward - - - -

d) Futures - - - -

e) Others - - - -

2. Equity instruments and share indices - - - -

a) Options - - - -

b) Swap - - - -

c) Forward - - - -

d) Futures - - - -

e) Others - - - -

3. Currencies and gold - - - -

a) Options - - - -

b) Swap - - - -

c) Forward - - - -

d) Futures - - - -

e) Others - - - -

4. Commodities - - - -

5. Other underlying assets - - - -

Total - - - -

Average amounts - - 39,111 -

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A.3 Financial derivatives: positive gross fair value - breakdown by product

Portfolios/Types of derivatives

Positive fair value

31/12/2012 31/12/2011

Over the counter

Central counterparties

Over the counter

Central counterparties

A. Regulatory trading book 789 - 3,143 -

a) Options 3 - 45 -

b) Interest rate swap - - 658 -

c) Cross currency swap - - - -

d) Equity swaps - - - -

e) Forward 786 - 2,440 -

f) Futures - - - -

g) Others - - - -

B. Banking book - hedging - - - -

a) Options - - - -

b) Interest rate swap - - - -

c) Cross currency swap - - - -

d) Equity swaps - - - -

e) Forward - - - -

f) Futures - - - -

g) Others - - - -

C. Banking book - other derivatives - - - -

a) Options - - - -

b) Interest rate swap - - - -

c) Cross currency swap - - - -

d) Equity swaps - - - -

e) Forward - - - -

f) Futures - - - -

g) Others - - - -

Total 789 - 3,143 -

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A.4 Financial derivatives: negative gross fair value - breakdown by product

Portfolios/Types of derivatives

Negative fair value

31/12/2012 31/12/2011

Over the counter

Central counterparties

Over the counter

Central counterparties

A. Regulatory trading book 9,726 5,942 6,414 3,102

a) Options 2 5,942 45 3,102

b) Interest rate swap 5,074 - 4,024 -

c) Cross currency swap - - - -

d) Equity swaps - - - -

e) Forward 4,650 - 2,345 -

f) Futures - - - -

g) Others - - - -

B. Banking book - hedging 231,186 - 159,608 -

a) Options - - - -

b) Interest rate swap 231,186 - 159,608 -

c) Cross currency swap - - - -

d) Equity swaps - - - -

e) Forward - - - -

f) Futures - - - -

g) Others - - - -

C. Banking book - other derivatives - - - -

a) Options - - - -

b) Interest rate swap - - - -

c) Cross currency swap - - - -

d) Equity swaps - - - -

e) Forward - - - -

f) Futures - - - -

g) Others - - - -

Total 240,912 5,942 166,022 3,102

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A.5 OTC financial derivatives - regulatory trading book: notional amounts, positive and negative gross fair value by counterparty - contracts not included in netting

Contracts that are not offset

agreements

Governments

and Central Banks

Other government

agencies

Banks

Financial companies

Insurance companies

Non financial

companies

Other parties

1) Debt instruments and interest rates

- notional amount - - 51,760 - - 110 -

- positive fair value - - 9 - - 3 -

- negative fair value - - 5,082 - - - -

- future exposure - - 294 - - - -

2) Equity instruments and share indices

- notional amount - - - - - - -

- positive fair value - - - - - - -

- negative fair value - - - - - - -

- future exposure - - - - - - -

3) Currencies and gold

- notional amount - - 322,036 - - 26,801 6,138

- positive fair value - - 570 - - 159 48

- negative fair value - - 3,738 - - 737 150

- future exposure - - 3,220 - - 268 61

4) Other values

- notional amount - - - - - - -

- positive fair value - - - - - - -

- negative fair value - - - - - - -

- future exposure - - - - - - -

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A.7 OTC financial derivatives - banking book: notional amounts, positive and negative gross fair value by counterparty - contracts not included in netting

Contracts that are not offset

agreements

Governments

and Central Banks

Other government

agencies

Banks

Financial companies

Insurance companies

Non financial

companies

Other parties

1) Debt instruments and interest rates

- notional amount - - 600,000 - - - -

- positive fair value - - - - - - -

- negative fair value - - 231,186 - - - -

- future exposure - - 9,000 - - - -

2) Equity instruments and share indices

- notional amount - - - - - - -

- positive fair value - - - - - - -

- negative fair value - - - - - - -

- future exposure - - - - - - -

3) Currencies and gold

- notional amount - - - - - - -

- positive fair value - - - - - - -

- negative fair value - - - - - - -

- future exposure - - - - - - -

4) Other values

- notional amount - - - - - - -

- positive fair value - - - - - - -

- negative fair value - - - - - - -

- future exposure - - - - - - -

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A.9 Residual maturity of OTC financial derivatives: notional amounts

Underlying/Residual life Up to 1 year

From 1 year to 5 years

Beyond 5 years Total

A. Regulatory trading book

A.1 Financial derivatives on debt instruments and interest rates 1,130 46,740 4,000 51,870

A.2 Financial derivatives on equity instruments and share indices - - - -

A.3 Financial derivatives on currencies and gold 354,975 - - 354,975

A.4 Financial derivatives on other assets - - - -

B. Banking book

B.1 Financial derivatives on debt instruments and interest rates - - 600,000 600,000

B.2 Financial derivatives on equity instruments and share indices - - - -

B.3 Financial derivatives on currencies and gold - - - -

B.4 Financial derivatives on other assets - - - -

Total as at 31/12/2012 356,105 46,740 604,000 1,006,845

Total as at 31/12/2011 188,377 163,469 604,000 955,846

B. CREDIT DERIVATIVES

The group has not agreed credit derivatives.

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1.3 - BANKING GROUP - LIQUIDITY RISK

QUALITATIVE INFORMATION

A. General aspects, management processes and measurement methods for liquidity risk

The liquidity risk to which the banks are normally exposed due to the phenomenon of transformation of maturities is the “risk that the banks will not be able to meet their payment commitments”. The failure to meet their payment commitments may be due to the following inability to:

- procure the funds (funding liquidity risk);

- divest their assets (market liquidity risk).

Liquidity has three different aspects in the management approach (by purposes, time horizon, parties involved, instruments…), even though they are closely connected:

- short-term liquidity that deals with the daily management of treasury balances and the optimisation of short-term cash flows.

- medium-term liquidity in perspective, concerning the implementation of the funding plan of the financial year or of 3-12 months following the reporting date;

- structural liquidity that forms part of planning and assumes an overall business strategy.

As the considered time horizon increases, the levels of freedom of management increase: they cover structural and strategic interventions (e.g. securitisations, capital transactions, amendments to the Group structure, acquisitions and sales, supervision/abandonment of market segments). On the other hand, in the very short term, the reaction to unexpected and sudden tensions is based on the use of existing cash reserves (liquidity buffer).

Limiting liquidity risk exposure, aimed at ensuring Group solvency, including in highly critical situations, is mainly pursued through a distinct set of organisational management decisions and safeguarding measures, the more significant being:

- constant attention to the technical situations of the Bank and Group in terms of balanced structuring of asset and liability expiry dates, with special regard to short term maturities;

- the diversification of funding sources, with respect to the technical form, counterparties and markets. The Group intends to maintain a highly stable retail funding both in the form of deposits and in the form of debt represented by securities placed directly through the branch network. Reliance on market funds (interbank funding and issues targeting institutional investors) is therefore reduced and in line with a limited exposure to liquidity risk;

- the holding of assets readily convertible into cash to be used as guarantees for financing transactions or which can be sold directly in the event of stressful situations;

- the preparation of a contingency funding plan.

The approach adopted for risk management envisages integration of the cash flow matching approach (which tends to make expected cash inflows coincide with expected cash outflows for each time horizon) with the liquid assets approach (which requires the financial statements to include a set number of financial instruments that can be readily converted into cash). In order to face up to the possible occurrence of unexpected liquidity requirements and thus to mitigate

257

the relevant risk exposure, the Group provides itself with adequate short-term cash reserves (liquidity buffer).

The carrying-out of stress tests plays an important role in risk management, because it allows to evaluate more accurately the exposure to risks and their trend in adverse conditions, their mitigation and control systems and the adequacy of capital and organisational methods. Stress tests consider both idiosyncratic adverse events (bank specific) and systemic adverse events (market wide) based on their importance for company operations in terms of liquidity and assess the possible impacts of their occurrence both individually (uni-factorial analysis) or jointly (multi-factorial analysis; combined scenarios). With the aim to capture and highlight different aspects of potential vulnerability, some basic tests are performed concerning:

- the profile of concentration of financing sources (tests with different levels of severity) and the outflow of wholesale deposits;

- the reduction in retail deposits;

- the increased use of irrevocable credit lines to large corporates;

- the reduction of liquidity reserves due to the decrease in market values, the loss of eligibility requirements or the application of further haircuts.

The combined impact of the said tests on the Group’s overall liquidity net balance is analysed.

In order to identify in advance the onset of potential adverse situations that - due to specific factors concerning the Group or to system factors - could change the expected trend of the net balance of cumulated liquidity and cause the exceeding of the limits, several variables are monitored. The large set of examined quantitative and qualitative elements is summarised in two anticipating indicators that aim to represent the potential deterioration of the specific situation of the Group or of the more general market conditions. The two summary indicators are used either separately or together in the assessment of the exposure to liquidity risk.

Exposure to risk is monitored in relation to all the time horizons of the structural maturity ladder in terms of unbalance between liabilities and assets of the same time horizon. The model for dealing with on sight items, which is mentioned in the paragraph relating to the interest rate risk, is also used in the assessment of the exposure to liquidity risk.

Moreover, the definition of reporting thresholds and operating limits constitutes a fundamental tool for managing and reducing both the short-term and structural liquidity risk.

In addition to the maturity ladder, through which the structural liquidity profile is investigated, the liquidity risk is also assessed in the short and very short term as part of the treasury activity carried out by the Finance Department of the Parent.

The Contingency Funding Plan, prepared in accordance with the prudential supervisory provisions, defines and formalises the organisational escalation, the objectives and the management leverage required for protecting - through the preparation of strategies for managing the crisis and procedures for finding financing sources in the case of emergency - company assets in situations of extreme and unexpected cash drain. The elements characterising the emergency plan are set below:

- definition and formalisation of an action strategy - approved by the corporate bodies - defining specific policies on certain aspects in the management of liquidity risk;

- cataloguing of the various types of liquidity stress to identify the nature (specific or systemic);

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- legitimation of the emergency actions by the management. The management strategy to be adopted in the case of liquidity tensions clearly outlines responsibilities and related tasks during a crisis situation;

- estimates of the liquidity that can be obtained from the different financing sources.

Even though in a tense market context, the Group liquidity situation does not require the Contingency Funding Plan procedures to be implemented.

As at 31 December 2012, the Group had a negative net interbank position of EUR 2.9 billion, in respect of which it held assets that can be readily converted into cash mostly consisting of Italian Government bonds and deemed appropriate to the contingent and perspective requirements (in particular, EUR 7.3 billion, including those coming from securitisations, of which EUR 6.9 billion eligible for refinancing with the European Central Bank, EUR 2.6 billion of which free). With reference to a three-month time horizon, liquidity reserves amounted to EUR 3.4 billion. The Liquidity Coverage Ratio was higher than the minimum defined by the international standard for the indicator in its full application.

As at 31 December 2012, the main source of funding consisted of retail customers, stable and diversified, whereas the wholesale component remained low, representing 10.6% of the total. During the financial year, the Group implemented trade policies aimed both at the progressive reorganisation of deposits by increasing those from the retail segment, in particular for the bond component, and at the transformation of the deposits at sight into time deposits (this type increased by more than 9 percentage points compared to total funding, reaching 15.0%).

In consideration of the current composition of deposits carried out by the Group, in order to assess the concentration, the degree of dependence on a limited number of counterparties is analysed, in particular, whereas operations in currencies other than the euro and the concentration on special technical forms such as the securitisations are not important. The Group monitors the stock of liabilities on sight or with a short-term to the major wholesale counterparts (institutional investors, large companies or groups, non-economic institutions) considered more sensitive to the situation of the markets and to the real or perceived situation of the Banks of the Group. The degree of concentration at the end of 2012 was in line with that of the previous year.

From the structural perspective, the Group carries out a modest transformation of maturities. The ratio between assets and liabilities with a maturity of more than one year was close to the values provided for by international standards. The loan and deposit ratio was 99.6%, down from 101.1% in the previous year.

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QUANTITATIVE INFORMATION

1. Distribution of financial assets and liabilities by residual contractual maturity Currency: EURO

Items/Time periods On sight

From 1 day to 7 days

From 7 days to 15 days

From 15 days

to 1 month

From 1 month

to 3 months

From 3 months

to 6 months

From 6 months

to 1 year

From 1 year

to 5 years

Beyond 5 years

Unspecified maturi

ty

On-statement of financial position assets 6,692,784 89,481 226,600 1,191,520 1,781,623 774,003 2,528,929 7,725,235 7,578,178 4,611

A.1 Government bonds 1,978 - 8,775 - 45,262 33,512 494,807 2,186,932 702,008 -

A.2 Other debt instruments 936 - 124 - 149,069 10,212 941,150 373,807 19,851 4,600

A.3 OEIC units 14,019 - - - - - - - - -

A.4 Loans 6,675,851 89,481 217,701 1,191,520 1,587,292 730,279 1,092,972 5,164,496 6,856,319 11

- Banks 146,532 - - - 547,134 285,154 7 - 101,700 -

- Customers 6,529,319 89,481 217,701 1,191,520 1,040,158 445,125 1,092,965 5,164,496 6,754,619 11

On-statement of financial position liabilities 11,911,485 666,968 343,279 1,196,713 1,319,103 1,361,257 2,137,314 6,250,175 152,735 -

B.1 Deposits and current accounts 11,752,300 655,297 313,006 824,617 1,089,275 997,501 583,877 213,013 - -

- Banks 93,770 1,103 5,000 274,000 151,233 175,000 48,362 - - -

- Customers 11,658,530 654,194 308,006 550,617 938,042 822,501 535,515 213,013 - -

B.2 Debt instruments 61,829 3,565 5,433 274,124 201,373 329,626 1,519,473 2,630,884 53,320 -

B.3 Other liabilities 97,356 8,106 24,840 97,972 28,455 34,130 33,964 3,406,278 99,415 -

Off-statement of financial position transactions -230,446 -64,780 -24,887 -81,828 -125,871 43,053 39,883 6,584 -80,655 -

C.1 Financial derivatives with exchange of principal

- -64,780 -13,368 -83,034 -120,303 4,714 -644 -701 - -

- Long positions - 48,869 1,637 3,300 6,174 10,209 1,322 491 - -

- Short positions - 113,649 15,005 86,334 126,477 5,495 1,966 1,192 - -

C.2 Financial derivatives w/o exchange of principal 1 - -11,549 - -12,363 -681 -873 -93,425 -93,397

- Long positions 3 - - - 40 43 178 363 35,350 -

- Short positions 2 - 11,549 - 12,403 724 1,051 93,788 128,747 -

C.3 Deposits and loans to be received - - - - - - - - - -

- Long positions - - - - - - - - - -

- Short positions - - - - - - - - - -

C.4 Irrevocable commitments to grant finance -230,627 - 30 1,206 6,795 39,020 41,398 100,706 12,739 -

- Long positions 10,972 - 30 1,206 6,795 39,020 41,398 100,706 12,739 223

- Short positions 241,599 - - - - - - - - 223

C.5 Financial guarantees given 180 - - - - - 2 4 3 -

C.6 Financial guarantees received - - - - - - - - - -

C.7 Credit derivatives with exchange of principal - - - - - - - - - -

- Long positions - - - - - - - - - -

- Short positions - - - - - - - - - -

C.8 Credit derivatives without exchange of principal - - - - - - - - - -

- Long positions - - - - - - - - - -

- Short positions - - - - - - - - - -

260

Other currencies

Items/Time periods On sight

From 1 day to 7 days

From 7 days to 15 days

From 15 days

to 1 month

From 1 month

to 3 months

From 3 months

to 6 months

From 6 months

to 1 year

From 1 year

to 5 years

Beyond 5 years

Unspecified maturi

ty

On-statement of financial position assets 24,796 4,544 4,891 7,562 23,545 6,388 274 36 - -

A.1 Government bonds - - - - - 2 - 17 - -

A.2 Other debt instruments - - - - - 2 - - - -

A.3 OEIC units - - - - - - - - - -

A.4 Loans 24,796 4,544 4,891 7,562 23,545 6,384 274 19 - -

- Banks 13,355 - - - - - - - - -

- Customers 11,441 4,544 4,891 7,562 23,545 6,384 274 19 - -

On-statement of financial position liabilities 138,134 114 29,816 77,569 116,864 552 2,842 - - -

B.1 Deposits and current accounts 136,720 114 29,816 77,569 116,864 552 2,842 - - -

- Banks 31,113 - - 75,792 113,688 - - - - -

- Customers 105,607 114 29,816 1,777 3,176 552 2,842 - - -

B.2 Debt instruments - - - - - - - - - -

B.3 Other liabilities 1,414 - - - - - - - - -

Off-statement of financial position transactions - 58,804 13,330 80,930 119,129 -26 475 - - -

C.1 Financial derivatives with exchange of principal

- 58,804 13,330 80,930 119,129 -26 475 - - -

- Long positions - 105,252 14,940 84,154 125,146 4,218 1,691 - - -

- Short positions - 46,448 1,610 3,224 6,017 4,244 1,216 - - -

C.2 Financial derivatives w/o exchange of principal - - - - - - - - - -

- Long positions - - - - - - - - - -

- Short positions - - - - - - - - - -

C.3 Deposits and loans to be received - - - - - - - - - -

- Long positions - - - - - - - - - -

- Short positions - - - - - - - - - -

C.4 Irrevocable commitments to grant finance - - - - - - - - - -

- Long positions - - - - - - - - - -

- Short positions - - - - - - - - - -

C.5 Financial guarantees given - - - - - - - - - -

C.6 Financial guarantees received - - - - - - - - - -

C.7 Credit derivatives with exchange of principal - - - - - - - - - -

- Long positions - - - - - - - - - -

- Short positions - - - - - - - - - -

C.8 Credit derivatives without exchange of principal - - - - - - - - - -

- Long positions - - - - - - - - - -

- Short positions - - - - - - - - - -

Within the “other currencies”, the main currency for the trading portfolio is the US dollar.

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Securitisations

Together with Banca Popolare di Cividale Group, on 25 May 2009 the Credito Valtellinese Group completed a multi-originator securitisation on a portfolio of performing residential and commercial mortgage loans for a total of EUR 1,366,451 thousand - of which EUR 1,123,668 thousand originating from the Group Banks through Quadrivio Finance S.r.l., special purpose vehicle. The securitisation forms part of the prudential extension of eligible assets for refinancing through the European Central Bank, and was divided into:

- one tranche of senior securities of EUR 1,092,650 thousand, listed on the Luxembourg stock exchange, with a Fitch rating of AAA;

- six tranches of junior securities totalling EUR 224,500 thousand, unlisted and unrated.

Both security classes are fully subscribed by the individual originator banks participating in the securitisation, i.e. Credito Valtellinese, Credito Artigiano (bank merged into Credito Valtellinese), Credito Siciliano and Banca dell’Artigianato e dell’Industria (bank merged into Credito Valtellinese) for the Credito Valtellinese Group. The senior securities held by Group banks totalling EUR 906 million can be used as collateral for Central Bank funding transactions. The junior securities were also subscribed by the Group banks totalling EUR 177.2 million. At 31 December 2012, the overall residual notional amount of the securities was equal to EUR 623,672 thousand, whereas the residual notional of transferred loans, including also interests accrued and not paid, was equal to EUR 615,572 thousand of which EUR 14,866 thousand represented by non-performing loans.

On 1 December 2011, the Credito Valtellinese Group completed a new securitisation of performing residential mortgage loans disbursed by Credito Valtellinese, Credito Artigiano (bank merged into Credito Valtellinese), Credito Siciliano, Banca dell’Artigianato e dell’Industria (bank merged into Credito Valtellinese) and Credito Piemontese (bank merged into Credito Valtellinese) for a total of approximately EUR 883 million. The purpose of the transaction was to improve the liquidity position by using asset-backed securities, which were fully subscribed by the originator banks, as collateral in Long Term Repos with institutional counterparties and in refinancing with the European Central Bank. The above transaction consisted in the factoring without recourse of receivables by the originator Banks to the special purpose vehicle as per Italian Law 130/99 Quadrivio RMBS 2011 S.r.l., which financed the purchase of the loans by issuing asset-backed securities, of different subordination classes, which were fully subscribed by the originator banks with percentages that reflect the riskiness of each factored portfolio. The senior securities obtained upon issue (occurred on 1 December 2011), an AAA rating by the Fitch and Moody’s rating agencies. All in all, two A1 and A2 classes of senior securities were issued totalling EUR 730 million and a single subordinate class of EUR 153.1 million. An initial cash reserve was set up upon issue amounting to EUR 22.5 million by means of a subordinated loan, granted by the originator banks, which will be fully repaid following the full repayment of senior securities.

As at 31 December 2012, the overall residual notional amount of the securities was equal to EUR 883,100 thousand, whereas the residual notional of transferred loans, including also interest accrued and not paid, was equal to EUR 773,365 thousand of which EUR 297 thousand represented by non-performing loans.

During the second half of 2012, the Credito Valtellinese Group completed a new securitisation transaction, covering performing mortgage and unsecured loans, granted to companies, by Credito Valtellinese, Credito Artigiano (bank merged into Credito Valtellinese), Credito Siciliano

262

and Carifano for a total amount of about EUR 2,782.9 million. The purpose of the transaction was to improve the liquidity position by using asset-backed securities, which were fully subscribed by the originator banks, as collateral in Long Term Repos with institutional counterparties and in refinancing with the European Central Bank. The above transaction consisted in the factoring without recourse of loans by the originator banks to the special purpose vehicle as per Italian Law 130/99 Quadrivio SME 2012 S.r.l., which financed the purchase of the loans by issuing asset-backed securities, of two subordination classes, which were fully subscribed by the originator banks with percentages that reflect the riskiness of each factored portfolio. The senior securities obtained upon issue (on 6 August 2012), an AAA rating by the Fitch and DBRS rating agencies. All in all, classes of senior securities were issued totalling EUR 1,740 million and a junior security of EUR 1,043.9 million. An initial cash reserve was set up upon issue amounting to EUR 60.9 million by means of a subordinated loan, granted by the originator banks, with partial amortisation as from the second payment date of the transaction and which will be fully repaid following the full repayment of the senior security.

As at 31 December 2012, the overall residual notional amount of the securities was equal to EUR 2,578,356 thousand, whereas the residual notional amount of transferred loans, including also interests accrued and not paid, was equal to EUR 2,501,810 thousand of which EUR 1,517 thousand represented by non-performing loans.

With reference to the risk deriving from securitisations, considering that the asset-backed securities of the currently existing transactions were fully subscribed by the originator Banks, the Group did not carry out any transfer of the credit risk and, therefore, it does not run the risk that “the economic substance of the securitisation transaction may not be fully reflected in the decisions of risk assessment and management”. In consideration of the structure of the transactions, it is however possible to identify the cross collateralisation as specific risk, due to the presence of multioriginator transactions. There is therefore potential additional exposure for the group banks that participated in the various transactions linked to the possible impairment losses, higher than expected, on the loans portfolio securitised by the other banks that participated in the transactions. With reference to the Quadrivio Finance S.r.l. transaction, this potential exposure concerns also companies outside the Group (Banca di Cividale and Banca Popolare di Cividale).

Purchase of the senior and junior securities by the Group Banks involves constant involvement in the securitisations. As a result, given that most of the risks/benefits associated with the transferred portfolio are retained, derecognising the mortgages from assets in the financial statements is not envisaged.

263

1.4 - BANKING GROUP - OPERATIONAL RISKS

QUALITATIVE INFORMATION

A. General aspects, management processes and measurement methods for operational risk

Operational risk management is part of an integrated management strategy that aims to contain overall risk also by preventing propagation and transformation of the risks. The wide variety of operational risks is not normally associated with banking or business activities. These risks may originate either internally or externally and their scope may extend beyond the corporate structure.

The definition adopted, in line with supervisory legislation, identifies operational risk as the risk of incurring losses due to the inadequacy or inefficiency of procedures, human resources and internal systems or external events. It includes, inter alia, losses deriving from fraud, human error, interruption of operations, system break-down, contractual non-performance and natural disasters. Operational risk includes legal risk, whilst it excludes strategic and reputation risk.

Operational risk management is based on the following guidelines:

- to increase overall operating efficiency;

- to avoid the occurrence or reduce the likelihood of events that may potentially generate operating losses through appropriate regulatory, organisational, procedural and training measures;

- to mitigate the expected impact of said events;

- through insurance arrangements, to transfer risk that the Bank does not intend to maintain;

- to protect the reputation and brand of the Bank and of the Group.

Until the third quarter of 2012, the capital requirement for operational risks has been calculated using the Basic Indicator Approach (BIA). As from the supervisory reports of 31 December 2012, the Credito Valtellinese Group adopts the Traditional Standardised Approach (TSA), at the individual level for the Parent Credito Valtellinese and for the subsidiaries Credito Siciliano, Carifano and Mediocreval, in combined use with the BIA method, at the consolidated level. The adoption of the TSA increased the correlation of the capital requirement to the actual risk levels.

Operational risk measurement/assessment is the responsibility of the Risk Management department, which performs this task on a centralised basis on behalf of all Group Companies. An advanced operational risk management system is made up of a structured set of processes, functions and resources to identify, assess and control operational risk, concentrating particularly on its effective prevention and reduction.

The extent of risk exposure is assessed both in quantitative terms, by analysing the operating losses incurred, and in qualitative terms, through risk self-assessment and the comparison with the external data provided by DIPO (Database Italiano delle Perdite Operative, Italian database of operational losses):

264

- Loss Data Collection: internal operating loss data and the stratification of the historical series of internal loss data sufficiently profound and statistically significant are the primary component for the construction of a reliable and accurate system for measuring operational risks. In the light of the adoption of the TSA method for calculating the capital requirement for operational risks, during 2012, the Loss Data Collection activity was completely revised. The following interventions were prepared: precise definition of the reporting process of operating losses; restructuring of the network of contacts for reporting operational risk events; technical assistance to the electronic reporting procedure;

- Self-Assessment of Operational Risks: the RSA analysis allows identification of the risks deemed most critical for an organisation according to the perception of the people involved in the interviews. The data processed in the RSA are the basis for carrying out the appropriate insights aimed at improving the processes in operational terms. Through follow-up interviews, resulting from the processing of the data collected during the RSA, and in view of the losses actually observed and collected in the Group Loss Data Collection procedure, it is possible to identify specific case studies for some areas of potential risk deemed relevant;

- Analysing the external data: The Group belongs to the Italian Database of Operational Losses (DIPO), established on the initiative of the ABI, with the status of “total group member”. The DIPO data allows development of operational losses in the Italian banking system to be monitored by area of activity (business line) and sales channel, the extraction of probability distribution parameters, the preparation of data aggregates by group with similar characteristics for benchmarking purposes and expansion of its historical series.

From the joint analysis of the internal data of operating loss, of the Self Assessment results and of the external data provided by the DIPO, it is possible to reach an overall picture on the Bank’s exposure to operational risks.

Risk containment is achieved through the use of regulatory, organisational and procedural measures and training. Any critical area, identified through joint analysis of various sources of data, is examined in further depth by department managers who, together with the Risk Management Department, establish the appropriate corrective action.

Certain types of operational risk are mitigated through the employment of insurance contracts. In order to formalise at a strategic, tactical and organisational level, the methods for dealing with all those events from which the interruption of one or more services can derive and to meet the regulatory and mandatory requirements, in 2005 the Group set up a Business Continuity Management System - BCMS, recently updated. For the development of this system, a similar approach to that used for the management of the quality system (ISO 9001) was adopted and the BS25999 international standard as well as the directives of the Bank of Italy were benchmarked.

The disaster recovery plan laying down the technical and organisational measures to deal with events that result in the unavailability of data processing centres is part of problem management. The plan, designed to allow the operation of relevant computerised procedures in sites other than those of production, is an integral part of the business continuity plan.

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B. Legal risks

The risks relating to legal disputes involving various Group banks and companies are constantly monitored by Credito Valtellinese, as the Parent, and by the single banks and companies concerned. If a legal and accounting assessment reveals that a legal dispute is likely to be lost and damages paid, the bank makes a reliable estimate thereof and the provision of risk and charges is adequately increased prudently, in addition to carrying out, if possible, out of count negotiations.

Dispute regarding anatocism

The initiatives undertaken in this sector by consumers’ associations led to numerous disputes being filed by customers against Credito Valtellinese and the other Banks of the Group aimed at having the so-called compound interest recalculated and refunded.

This phenomenon, already of some significance especially for Credito Siciliano, received new impetus during the year due to the judgement of the Constitutional Court that declared unconstitutional the so-called “decreto mille-proroghe” on the ten-year period of prescription of the right to claiming back the amounts wrongly received by the Bank by way of compound interest and interest rates in excess of the legal rate.

In the event that legal proceedings are instituted pursuant to these complaints, Credito Valtellinese and the other group banks will make each time the necessary increases to the provisions to cover the risks as quantified in accordance with accounting calculations.

Dispute regarding defaulting bonds

With reference to dispute regarding bonds in default, the insolvency for the years 2001-2003 of the Argentine government and its territorial bodies, in addition to several leading national Italian companies, such as Parmalat, Cirio and Giacomelli subsequently resulted in litigation, including judicial litigation, instituted by customers who had acquired the defaulting bonds. In this respect, Credito Valtellinese and the other Group Banks have always been sensitive to fairness and inexpensiveness criteria, avoiding sterile and costly lawsuits and taking account of the legal stance consolidated over time. In this context, the Group has often promoted transactional logic, based either on the claims received or during legal proceedings. On the contrary, for several disputes, due to their specific nature, settlement was ruled out and it was decided to see the proceedings through to a decision by the courts.

Finally, worth mentioning is the insolvency of the Lehman Brothers Group, which resulted in some lawsuits against the Parent and the subsidiary Banks. In this regard, the first judgements delivered by the Courts in respect of the Banks of the Group are favourable. The Group promptly and free of charge claimed the rights of its customers holding Lehman Brothers bonds before the New York Supreme Court, where the relevant insolvency proceedings were filed (Chapter 11). In any case, however, based on a preliminary analysis of the legal dispute and the type of defaulted bond concerned, the single banks will make the necessary provisions for risks and charges.

Disputes regarding bankruptcy liquidations

With reference to the disputes regarding bankruptcy liquidations, the bankruptcy reform reduced the powers of actions carried out by the receivership pursuant to Article 67 of the Bankruptcy Law. Nonetheless, there are still several bankruptcy proceedings instituted

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according to the regulations prior to the reform, as provided by the transitory regulations and, in any case, a series of legal disputes continue to arise from the bankruptcy context. The Group pursues careful, considered transactional logic, based on an in-depth analysis of the concrete grounds on which the actions are based, meaning the existence of both the subjective and objective elements. More specifically, the Group Banks normally perform ex-ante accounting verifications in order to quantify risk and prudently set up a provision.

QUANTITATIVE INFORMATION

The percentage distribution of total operational losses recognised in the internal database on 31 December 2012 is shown, broken down by type of event.

Chart 3 - Operational losses - Distribution by type of event

During 2012, 838 events of operational risk were recorded amounting to EUR 1.2 million of operating losses, classified on the basis of the type of loss event, geographical area and distribution channel, and allocated to the eight business lines identified by prudential supervisory regulations.

In line with the Group’s characterisation, almost all of the recorded losses are attributable to the “retail banking services”. Much lower are the operating losses generated by “commercial banking services”, from “retail brokerage services”. The amount of operating losses from other business lines is negligible.

As regards risk factors, the category “external events” prevails in terms of both recorded losses and number of events. Moreover, the losses ascribed to the “people” and “processes” are less significant, though not negligible.

8% 1%

18%

0,2% 0.5%

70.3%

2%

Number of loss events

Clientela, prodotti e prassi professionali Danni da eventi esterni Esecuzione, consegna e gestione dei processi Frode interna Rapporto di impiego e sicurezza sul lavoro Frode esterna Interruzioni dell'operatività e disfunzioni dei sistemi

4% 2%

29%

8% 0.04%

56.56%

0.4%

Total amount of losses

Customers, products and business practices Damage caused by external events Execution, delivery and management of processes Internal fraud Contractual relationship and safety in the workplace External fraud Stoppage of operations and malfunctions of the systems

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PART F - INFORMATION ON CONSOLIDATED EQUITY

SECTION 1 - CONSOLIDATED EQUITY

A. Qualitative information

Equity is defined by the international accounting standards as “the residual interest in the assets of the entity after deducting all its liabilities”. In a financial logic, equity represents monetary value of the injections by the owners or generated by the company.

Asset management concerns all the policies and choices required for defining its size, as well as the optimal combination among different alternative instruments of capitalisation aimed at ensuring that the consolidated assets and ratios of the Creval Group are on a consistent basis with the risk profile assumed in full compliance with the supervisory requirements.

In particular, the equity policy adopted by the banks of the Group is based on a combination of the following three approaches:

- full respect of the requirements dictated by supervisory regulations (regulatory approach);

- adequate supervision of the risks associated with the banking business (management approach);

- support for corporate growth projects (strategic approach).

Each approach indicated corresponds to the appropriate definition of equity, precise objectives and specific corporate functions.

Under the regulatory profile, the configuration of equity used is that defined by regulatory provisions. Respect of minimum capital requirements on a continuous basis (Pillar 1), monitored regularly and adopted as a restriction during planning, represents an essential condition for the group’s business activities.

With regard to risk management, which represents one of the fundamental functions of banking activities, equity is considered to be the prime defence against possible unexpected losses arising from various risks encountered. From this perspective, the optimal magnitude of equity is that which, allowing for the absorption of unexpected losses calculated with a specific confidence interval, guarantees business continuity over a certain period of time (Pillar 2).

Therefore, capital management governs the current and future sound equity of the Group both by verifying the compliance over time of the regulatory requirements in connection with the Pillar I risks and by examining continuously the adequacy of the total share capital in connection with the Pillar II risks.

From the business point of view, evaluation of the capital adequacy refers to the financing of assets that create a return over the long-term (property and equipment, equity investments, goodwill), to strategic reorganisation transactions, to relaunching of activities and investment requirements. The actual availability of adequate capital, considered a scarce and costly resource, is related to the creation of value as a condition for the expected reward.

In line with its nature as a cooperative bank, which is firmly rooted in the local areas in which it operates, Credito Valtellinese realises its equity policy mainly through:

- the progressive expansion of the size and geographical extension of the shareholding structure;

- the issue of financial instruments (ordinary shares and convertible bonds);

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- significant possibility of trading the instruments issued, through listing on regulated markets.

On 19 March 2012, the Board of Directors of Credito Valtellinese decided to exercise the right of full early redemption, with settlement in shares, of 7,570,980 bonds with a par value of EUR 50.00 each, forming the bond called “2009/2013 Credito Valtellinese fixed-rate convertible bonds with the right of redemption in shares”, issued by the bank on 29 December 2009. The early redemption of the bonds were completed on 7 May 2012.

The operation implied the issue of 105,993,720 new Creval ordinary shares, corresponding to a share capital increase of EUR 370,978 thousand.

Moreover, as a result of the merger of Credito Artigiano, effective as from 10 September 2012, Credito Valtellinese issued 51,386,642 new ordinary shares, with no indication of the nominal value, to be assigned to the shareholders of Credito Artigiano, other than the majority shareholder, with the share exchange ratio of 0.70 Credito Valtellinese ordinary shares, for each Credito Artigiano ordinary share, resulting in share capital increase from EUR 1,316,657 thousand to EUR 1,496,510 thousand, made up of 427,574,259 ordinary shares with no indication of the nominal value.

As a result of the conclusion of the takeover and exchange bid promoted by Credito Valtellinese S.c. on the Credito Siciliano S.p.A. ordinary shares, Credito Valtellinese increased its share capital by EUR 20,189 thousand by issuing 15,294,483 new Creval ordinary shares with no indication of the nominal value, bearing dividend.

As at 31 December 2012, the share capital of Credito Valtellinese, fully subscribed and paid amounted to EUR 1,516,699 thousand and was made up of 442,868,742 ordinary shares with no nominal value.

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B. Quantitative information

B.1 - Consolidated equity: breakdown by type of business

Equity items Banking Group

Insurance companies

Other companies

Netting and consolidation adjustments

Total

Share capital 1,519,558 620 32 -620 1,519,590

Share premium reserve 555,735 - - - 555,735

Reserves 155,111 766 - -33,615 122,262

Equity instruments 197,825 - - - 197,825

(Treasury shares) -1,518 - - - -1,518

Valuation reserves: -88,693 - - - -88,693

- Available-for-sale financial assets -119,948 - - - -119,948

- Property, equipment and investments property - - - - -

- Intangible assets - - - -

- Hedging in foreign operations - - - - -

- Cash flow hedges - - - - -

- Exchange rate gains (losses) - - - - -

- Non-current assets held for sale - - - - -

- Actuarial gains (losses) on defined benefit plans -9,816 - - - -9,816

- Portion of valuation reserves of equity-accounted investees 13,702 - - - 13,702

- Special revaluation laws 27,369 - - - 27,369

Profit (loss) for the year (+/-) attributable to owners of the parent and non-controlling interests -322,163 4,037 - - -318,126

Equity 2,015,855 5,423 32 -34,235 1,987,075

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B.2 - Valuation reserves for available-for-sale financial assets: breakdown

Asset/Amounts

Banking group

Insurance companies

Other companies

Netting and consolidation adjustments

Positive reserve

Negative reserve

Positive reserve

Negative reserve

Positive reserve

Negative reserve

Positive reserve

Negative reserve

1. Debt instruments - -120,343 - - - - - -

2. Equity instruments 684 - - - - - - -

3. OEIC units - -289 - - - - - -

4. Loans - - - - - - - -

Total as at 31/12/2012 684 -120,632 - - - - - -

Total as at 31/12/2011 146 -244,508 - - - - - -

Asset/Amounts 31/12/2012

Positive reserve

Negative reserve

1. Debt instruments - -120,343

2. Equity instruments 684 -

3. OEIC units - -289

4. Loans - -

Total as at 31/12/2012 684 -120,632

Total as at 31/12/2011 146 -244,508

B.3 - Valuation reserves for available-for-sale financial assets: annual changes

Debt instruments

Equity instruments

OEIC units Loans

1. Opening balance -243,779 -315 -268 -

2. Increases 139,689 33,036 797 -

2.1 Fair value gains 139,689 1,341 10 -

2.2 Reclassification of fair value losses to profit or loss - 31,675 787 -

- from impairment - 31,675 787 -

- on sales - - - -

2.3 Other increases - 20 - -

3. Decreases -16,253 -32,037 -818 -

3.1 Fair value losses - - -289 -

3.2 Impairment losses - -31,675 -529 -

3.3 Reclassification of fair value gains to profit or loss: realised -15,526 -362 - -

3.4 Other decreases -727 - - -

4. Closing balance -120,343 684 -289 -

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SECTION 2 - REGULATORY CAPITAL AND RATIOS

2.1 - Scope of application of the regulations

In accordance with the provisions of the supervisory instructions, the composition and size of the regulatory capital differ from those of reporting equity. The main reasons for said differences are briefly summarised as follows:

- as opposed to equity, regulatory capital does not include the portion of profits to be distributed as dividends and benefits;

- the companies other than banking, financial and operating companies, subject to exclusive control and consolidated on a line-by-line basis in the consolidated financial statements, are consolidated with the equity method for supervisory purposes;

- regulatory capital includes also equity attributable to non-controlling interests, properly allocated between Tier 1 and Tier 2 capital;

- goodwill - which includes the “positive differences on equity” incorporated in the carrying amount of the equity-accounted equity investments in companies subject to significant influence - and the other intangible assets must be deducted from Tier 1 capital;

- Tier 2 capital can include subordinated loans provided that the requisites prescribed by prudential rules are complied with;

- any excess of the subordinated loans over 50% of Tier 1 capital including any element to deduct, will be included in the “Tier 3 capital”, permitted solely to cover 71.4% of the capital requirements on market risks;

- net capital gains on securities classified under “available-for-sale financial assets”, recorded in item 140 “Valuation reserves” may be included as part of Tier 2 capital, but only for 50% of the amount, while the net losses will be fully deducted from the Tier 1 capital; more precisely, according to the provision issued by the Bank of Italy on 18 May 2010, net gains and net losses, recognised as from 1 January 2010, related to securities issued by central governments of Countries belonging to the EU included in the “Available-for-sale financial assets” portfolio are neutralised in order to calculate the regulatory capital;

- equity investments in banks, financial companies and insurance companies of 10% or more of the share capital of the investee must be deducted as follows: 50% of the amount from Tier 1 capital and the remaining 50% from Tier 2 capital;

- also equity investments in insurance companies of 20% or more of the share capital of the investee, acquired before 20 July 2006, must be deducted from the aggregate value of Tier 1 and Tier 2 capital.

2.2 - Banking regulatory capital

A. Qualitative information

1. Tier 1 capital

Tier 1 capital, before the elements to deduct described in paragraph 2.1 above, totals EUR 1,720 million.

A comparison with the figure from the previous year shows that the aggregate increased by EUR 77 million (+4.7%) in 2012. The change is mainly due, in the positive elements, to the

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early redemption of the “2009/2013 Credito Valtellinese fixed-rate convertible bonds with the right of redemption in shares”, whereas, in the negative elements, to the recognition of a lower goodwill.

The Group, as from 30 June 2010, exercised the option to sterilise - in order to calculate the regulatory capital - net capital gains and net capital losses related to securities issued by governments of Countries belonging to the EU included in the “Available-for-sale financial assets” portfolio.

2. Tier 2 capital

Tier 2 capital (gross), after applying prudential filters, amounts to EUR 776 million, of which EUR 748 million are represented by subordinated liabilities that may be included in Tier 2 capital.

Tier 2 capital (gross) dropped by EUR 34 million compared to the figure reported as at 31 December 2011 mainly due to the theoretical amortisation of the existing subordinated loans prescribed by legal regulations.

More specifically, below is the list of subordinated liabilities issued by Credito Valtellinese and its subsidiaries, net of intragroup items and included in Tier 2 capital up to 50% of the value of Tier 1 capital before any deduction allowed.

- “XS0167255958 - Credito Valtellinese 2003/2013 subordinated EMTN” of EUR 150 million. The issue, indexed to 3-month Euribor, may be recalled by the issuer starting from April 2008;

- “XS0213725525 - Credito Valtellinese 2005/2015 subordinated EMTN” of EUR 150 million. The issue, indexed to 3-month Euribor, may be recalled by the issuer starting from March 2010;

- “IT0004438252 - Credito Valtellinese 2008/2013 subordinated” of EUR 143 million, issued as part of the purchase of the Cassa di Risparmio di Fano;

- “IT0004593296 - Credito Valtellinese 2010/2017 subordinated” of EUR 150 million. The issue is indexed to 6-month Euribor;

- “IT0004648736 - Credito Valtellinese 2010/2015 subordinated” of EUR 32.5 million. The issue is indexed to 6-month Euribor;

- “IT0004735913 - Credito Valtellinese 2011/2016 subordinated” of EUR 10 million;

- “IT0004762859 - Credito Valtellinese 2011/2016 subordinated” of EUR 44 million;

- “IT0004847957 - Credito Valtellinese 2012/2017 subordinated” of EUR 125 million;

- “IT0004432925 - Credito Artigiano 2008/2013 subordinated” of EUR 50 million. The issue is indexed to 6-month Euribor;

- “IT0004653348 - Credito Artigiano 2010/2015 subordinated” of EUR 35 million. The issue is indexed to 6-month Euribor;

- “IT0004736432 - Credito Artigiano 2011/2016 subordinated” of EUR 15 million;

- “IT0004763089 - Credito Artigiano 2011/2016 subordinated” of EUR 30 million. The issue is indexed to 3-month Euribor;

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- “IT0004762867 - Credito Artigiano 2011/2016 subordinated” of EUR 55 million;

- “IT0004432917 - Credito Piemontese 2008/2013 subordinated” of EUR 10 million. The issue is indexed to 6-month Euribor;

- “IT0004652373 - Credito Piemontese 2010/2015 subordinated” of EUR 10 million. The issue is indexed to 6-month Euribor;

- “IT0004734486 - Credito Piemontese 2011/2016 subordinated” of EUR 6 million;

- “IT0004432909 - Banca dell’Artigianato e dell’Industria 2008/2013 subordinated” of EUR 10 million. The issue is indexed to 6-month Euribor;

- “IT0004644214 - Banca dell’Artigianato e dell’Industria 2010/2015 subordinated” of EUR 10 million. The issue is indexed to 6-month Euribor;

- “IT0004734502 - Banca dell’Artigianato e dell’Industria 2011/2016 subordinated” of EUR 5 million;

- “IT0004643562 - Cassa di Risparmio di Fano 2010/2015 subordinated” of EUR 17.5 million. The issue is indexed to 6-month Euribor;

- “IT0004648322 - Cassa di Risparmio di Fano 2010/2015 subordinated” of EUR 1.5 million. The issue is indexed to 6-month Euribor;

- “IT0004735053 - Cassa di Risparmio di Fano 2011/2016 subordinated” of EUR 10 million;

- “IT0004763105 - Cassa di Risparmio di Fano 2011/2016 subordinated” of EUR 15 million;

- “IT0004871940 - Cassa di Risparmio di Fano 2012/2017 subordinated” of EUR 10 million;

- “IT0004432891 - Credito Siciliano 2008/2013 subordinated” of EUR 40 million. The issue is indexed to 6-month Euribor;

- “IT0004641848 - Credito Siciliano 2010/2015 subordinated” of EUR 30 million. The issue is indexed to 6-month Euribor;

- “IT0004734494 - Credito Siciliano 2011/2016 subordinated” of EUR 15 million;

- “IT0004762867 - Credito Siciliano 2011/2016 subordinated” of EUR 30 million;

- “IT0004870181 - Credito Siciliano 2012/2018 subordinated” of EUR 30 million.

As a result of the mergers, subordinated loans originally issued by Carifano in 2010 and 2011, Credito Artigiano, Credito Piemontese and Banca dell’Artigianato e dell’Industria are currently included among the issues of Credito Valtellinese.

No hybrid capitalisation instruments are included in Tier 2 capital.

3. Tier 3 capital

No excesses that cannot be calculated of the above subordinated liabilities are recorded as at 31 December 2012 in the Tier 3 capital.

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B. Quantitative information

31/12/2012 31/12/2011

A. Tier 1 capital before the application of prudential filters 1,522,557 1,446,822

B. Tier 1 prudential filters:

B.1 Positive IAS/IFRS prudential filters (+) 197,825 197,825

B.2 Negative IAS/IFRS prudential filters (-) -3 -1,331

C. Tier 1 capital before any deduction allowed (A+B) 1,720,379 1,643,316

D. Elements to be deducted from Tier 1 capital 103,439 95,170

E. Total Tier 1 capital (C-D) 1,616,940 1,548,146

F. Tier 2 capital before the application of prudential filters 776,136 810,329

G. Tier 2 - prudential filters:

G.1 Positive IAS/IFRS prudential filters (+) 17 -

G.2 Negative IAS/IFRS prudential filters (-) -197 -

H. Tier 2 capital before any deduction allowed (F+G) 775,956 810,329

I. Elements to be deducted from Tier 2 capital 103,439 95,170

L. Total Tier 2 capital (H-I) 672,517 715,159

M. Elements to be deducted from total Tier 1 and Tier 2 capital 5,220 5,438

N. Regulatory capital (E+L-M) 2,284,237 2,257,867

O. Tier 3 capital - -

P. Regulatory capital including TIER 3 (N+O) 2,284,237 2,257,867

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2.3 - Capital adequacy

A. Qualitative information

As at 31 December 2012, the ratio of Tier 1 capital to risk-weighted assets stood at 8.1%, compared to 7.3% at the end of 2011. The ratio of regulatory capital to risk-weighted assets stood at 11.5% (10.6% at the end of 2011).

In order to calculate the equity requirements with respect to the credit risk, the Group uses the standardised method that is a development of the system established by the 1988 Basel Accord. This method subdivides exposures into different classes (portfolios) in accordance with the type of counterparty, i.e. the technical characteristics of the relationship or the manner in which this is carried out, and the application of different weighting coefficients to each portfolio. To this effect, the regulation has identified 16 exposure classes:

-- central governments and central banks;

-- supervised intermediaries;

-- territorial entities;

-- non-profit organisations and public entities;

-- multilateral development banks;

-- international organisations;

-- companies and other parties;

-- retail exposures;

-- short-term exposures to companies;

-- OEICs;

-- positions towards securitisations;

-- exposures guaranteed by property;

-- exposures in the form of guaranteed bank bonds;

-- past due exposures;

-- exposures belonging to high-risk categories for regulatory purposes;

-- other exposures.

The most important segments for the Group are the following: companies and other parties, retail exposures, exposures guaranteed by property. In this regard, it should be mentioned that, in accordance with the “New prudential supervisory provisions for banks” (December 2010 update) the favourable weighting (35% - 50%) is applied to the operations guaranteed by mortgages on residential and non-residential properties and to the leasing operations on residential and non-residential properties provided that, among others, the repayment capacity of the debtor does not significantly depend on the financial flows generated by the building serving as collateral, but on the debtor’s capacity to repay the loan from other sources.

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As part of the standardised method, if the banks do not use recognised ratings agency valuations, they apply a weighting factor of 100 per cent to the loan exposures as a rule. This is without prejudice to the following:

• exposures in local currencies towards the governments and central banks of member states of the European Union are weighted at zero if the corresponding funding is in the same currency;

• exposures to supervised intermediaries with an original or residual duration equal to or less than three months are weighted at 20 per cent;

• exposures to supervised resident intermediaries with an original or residual duration of more than three months are weighted at 50 per cent;

• exposures classified in the retail portfolio have a 75 per cent weighting factor applied;

• a weighting factor of 35 per cent is applied to exposures guaranteed by mortgages on residential properties and those resulting from leasing operations for these types of properties;

• a weighting factor of 50 per cent is applied to mortgages guaranteed by non-residential properties (properties used as offices, shops or other types of production activities) and those resulting from leasing operations for those types of properties.

The new prudential supervisory regulations for banks provide that credit institutes may determine the weighting coefficients to calculate the capital requirements to meet credit risk as part of the standardised method on the basis of the creditworthiness valuations issued by external agencies that value creditworthiness (the “ECAI - External Credit Assessment Institutions”), recognised by the Bank of Italy. The Fitch Ratings agency was used for the banks of the Group during 2012 with reference to the following portfolios:

• exposure to governments and banks;

• exposures to international organisations;

• exposures to multilateral development banks

and Lince S.p.A. (currently Cerved Group S.p.A.) for the “companies and other parties” portfolio.

The Group opted to use the standard method to calculate the capital requirements to meet market risks, whereas the Traditional Standardised Approach (TSA) method was adopted for the operational risk as from 31 December 2012, at the individual level for the Parent Credito Valtellinese and for the subsidiaries Credito Siciliano, Carifano and Mediocreval, in combined use with the Basic Indicator Approach (BIA) method, at the consolidated level.

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B. Quantitative information

Categories/Amounts

31/12/2012 31/12/2011 31/12/2012 31/12/2011

Unweighted amounts

Weighted

amounts/requirements

A. RISK ASSETS

A.1 Credit risk and counterparty risk 30,937,429 31,055,030 18,396,974 19,652,550

1. Standardised method 30,937,429 31,055,030 18,396,974 19,652,550

2. Internal rating method - - - -

2.1 Base - - - -

2.2 Advanced - - - -

3. Securitisations - - - -

B. REGULATORY CAPITAL REQUIREMENTS

B.1 Credit risk and counterparty risk 1,471,758 1,572,204

B.2 Market risk 5,958 7,673

1. Standard method 5,958 7,673

2. Internal models - -

3. Concentration risk - -

B.3 Operational risk 113,100 121,529

1. Base method 1,026 121,529

2. Standardised method 112,074 -

3. Advanced method - -

B.4 Other prudential requirements - -

B.5 Other calculation elements - -

B.6 Total prudential requirements 1,590,816 1,701,406

C. RISK ASSETS AND CAPITAL RATIOS

C.1 Risk-weighted assets 19,885,200 21,267,575

C.2 Tier 1 capital/Risk-weighted assets (Tier 1 capital ratio) 8.13% 7.28%

C.3 Regulatory capital including TIER 3/Risk-weighted assets (Total capital ratio) 11.49% 10.62%

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PART G - BUSINESS COMBINATIONS SECTION 1 - TRANSACTIONS CARRIED OUT DURING THE YEAR 1.1 Business combinations

During the year, no business combinations were carried out with entities outside the Group regulated by IFRS 3.

During 2012, as already described in other parts of this document, as part of the wider project of simplification of the company structure of the Creval Group, outlined by the 2011-2014 Strategic Plan, approved in February 2011 and subsequently updated on 19 March 2012, the transactions described below were carried out.

The examined operations are deemed to be business combination transactions between parties under common control, planned and carried out following a reorganisation project prepared by the Parent; therefore, they are excluded from the scope of application of IFRS 3 - Business combinations.

IAS 8 requires that in the absence of specific indications envisaged by IFRS, the company must make use of its own judgement when applying an accounting standard that provides relevant, reliable, prudent disclosure and that reflects the economic substance of the transactions regardless of their legal form.

In compliance with these provisions, the methods for recording business combinations carried out within the reorganisation project of the Group, since they have no significant influence on the cash flows of the merged companies, preserved the continuity of the values of the acquiree in the financial statements of the acquirer. In particular, the acquired assets and liabilities were recorded at the carrying amounts resulting from the consolidated financial statements of the Group.

Given the absence of economic exchange with other economies, there are no impacts on the consolidated financial statements except those related to the acquisition of minority shares, transactions recorded as an offsetting item under equity.

Merger into Credito Artigiano of Carifano - Cassa di Risparmio di Fano

On 1 January 2012, the merger of Carifano - Cassa di Risparmio di Fano S.p.A. into Credito Artigiano S.p.A. became effective.

In compliance with that approved at the Extraordinary Shareholders’ Meeting on 25 November 2011, on 1 January 2012 Credito Artigiano S.p.A. increased its share capital from EUR 346,802 thousand to EUR 429,185 thousand, by issuing 74,893,095 ordinary shares of a par value of EUR 1.10 each assigned to Carifano shareholders, with the share exchange ratio of 5 Credito Artigiano ordinary shares for each Carifano ordinary share. At their Extraordinary Meeting, the shareholders of Nuova Carifano S.p.A. - a company wholly owned by Credito Artigiano - approved the increase in share capital of EUR 270 million, of which EUR 150 million as share capital and EUR 120 million as premium, offered in subscription to the sole shareholder Credito Artigiano and paid-up, by the latter, by the contribution of a business unit consisting of 40 “former Carifano” branches present in the Marche and Umbria regions (the “CRF business branch”) and appraised the report as per Article 2343-ter, second paragraph, letter b), of the Italian Civil Code, by the independent expert Equita SIM S.p.A.

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Merger into Credito Valtellinese of Credito Artigiano

In the third quarter of the financial year, the merger of Credito Artigiano S.p.A. into the parent Credito Valtellinese S.c. was completed.

As a result of the merger, Credito Valtellinese issued 51,386,642 new ordinary shares, with no indication of the nominal value, to be assigned to the shareholders of Credito Artigiano, other than the majority shareholder, with the share exchange ratio of 0.70 Credito Valtellinese ordinary shares, for each Credito Artigiano ordinary share, resulting in share capital increase from EUR 1,316,656,659.50 to EUR 1,496,509,906.50, made up of 427,574,259 ordinary shares with no indication of the nominal value.

The merger was effective as from 10 September 2012, following the registration of the related deed with the competent offices of the Companies Registry. The accounting and tax effects of the merger were effective as from 1 January 2012.

For detailed information on transactions carried out, reference is made to Part G of the Notes to the financial statements of Credito Valtellinese.

SECTION 2 - TRANSACTIONS CARRIED OUT AFTER THE REPORTING DATE

2.1 Business combinations

After the reporting date, on 25 January 2013, the Board of Directors of the Parent approved the merger into the Parent of Deltas Società consortile per Azioni, owned by Credito Valtellinese, pursuant to Article 2505 of the Italian Civil Code.

The merger, authorised by the Bank of Italy on 6 December 2012, was approved on 22 January 2013 by the Board of Directors of the company to be merged.

The signing of the merger deed and the starting date of the related legal effects is expected on 31 March 2013.

280

PART H - RELATED PARTY TRANSACTIONS

Foreword

Related party transactions are mainly regulated by Article 2391-bis of the Italian Civil Code, according to which the administrative bodies of companies resorting to the equity market adopt, based on the general principles indicated by Consob, rules that ensure “transparency and substantive and procedural correctness in related party transactions” carried out directly or through subsidiaries. The supervisory authority is obliged to ensure compliance of the rules adopted and refers on this in the report to the shareholders’ meeting.

Consob, with resolution no. 17221 of 12 March 2010, implementing the proxy contained in Article 2391-bis Italian Civil Code, approved the “Related Party Transaction Regulation” (hereinafter also referred to as “Consob Regulation”), as amended later by resolution no. 17389 of 23 June 2010, which defines the general principles with which the companies resorting to the equity market must comply when fixing the rules for ensuring transparency and substantive and procedural correctness in related party transactions.

In relation to the specific business, the provisions of Article 136 of the Consolidated Banking Act on obligations of banking representatives also apply to the company.

The Bank of Italy issued on 12 December 2011 the ninth up-date to circular 263 of 27 December 2006 (hereinafter also referred to as the “Regulation of the Bank of Italy”), which introduces new prudential supervisory provisions for banks providing in - among other things - a new and specific legislation in relation to the risk assets and conflicts of interest towards Related Subjects, a definition that includes in addition to the related parties, as defined by Consob, the subjects related to the same related parties, as identified by the same provisions. Therefore, such legislation complements the provisions of the Consob regulation.

The procedures adopted by the group in compliance with the regulatory provisions mentioned above are described in the special section of the Report on operations.

1. Information on remuneration of key management personnel

31/12/2012

a) short-term benefits (*) 8,990

b) post-employment benefits 420

c) other long-term benefits -

d) termination benefits -

e) share-based payments -

Total 9,410 (*) The amount indicated includes payments to directors and the Board of Statutory Auditors of EUR 4,268 thousand.

281

2. Information on related party transactions

On the basis of the instructions of IAS 24 applied to the organisational and governance structure of the bank and of the Credito Valtellinese banking group, the following natural persons and corporate bodies are considered related parties:

subsidiaries, companies over which the Parent directly or indirectly exercises control, as defined by IAS 27;

associates, companies over which the Parent directly or indirectly exercises significant influence, as defined by IAS 28 and their subsidiaries;

companies subject to joint control, companies in which the Parent directly or indirectly exercises joint control, as defined by IAS 31;

key management personnel and Directors and statutory auditors, namely Directors, Statutory Auditors, the General Manager, the Co-General Manager and Deputy General Managers of the parent and of the companies belonging to the Group;

other related parties, which include:

o immediate family members - relatives until the second degree of kinship and the spouse or common law spouses as well as their children - of key management personnel and Directors and statutory auditors as defined above;

o subsidiaries subject to joint control by key management personnel and supervisory authorities, as well as their immediate family members, as defined above;

o pension funds established by companies of the Group.

The economic effects of the transactions among the companies of the Group are regulated on the basis of specific contractual agreements that, with the main objective of optimising synergies and economies of scale and purpose at Group level, refer to long-term objective and constant parameters, distinguished by material transparency and fairness. Again, in the year under review, the quantification of fees for services was defined and formalised according to tested parameters that take into account the effective utilisation by each user company.

The Board of Directors is exclusively responsible for the definition of intragroup contractual agreements and approval and possible amendment of the related economic conditions.

For the transactions of greatest importance, as defined in the aforesaid Regulation, carried out during the year, the procedural regulations and the reporting obligations specified by the RPT Procedures were applied.

No atypical or unusual transactions, with Group companies or related parties - as defined by Article 2427, second paragraph, of the Italian Civil Code, or according to the IFRS endorsed by the European Union - that impacted significantly on the financial position or results of operations of the group has taken place during the year.

Related party transactions with parties other than companies in the Credito Valtellinese Group are part of normal banking activities and are generally regulated at arm’s length for specific transactions, or aligned to the most favourable measure that may have been agreed for employees.

282

Banking transactions with groups headed by Directors of the bank and other companies of the Credito Valtellinese Group are resolved in compliance with the provisions of Article 136 of the Consolidated Banking Act and settled at arm’s length as established for each transaction.

During the year, the following transactions took place:

- the merger into Credito Artigiano of Carifano - Cassa di Risparmio di Fano S.p.A. was carried out with legal effect as from 1 January 2012 with subsequent immediate contribution of the branch networks present in the Marche and Umbria regions in a newly set-up bank, named again Cassa di Risparmio di Fano, or Carifano in abbreviated form;

- the merger of Credito Artigiano S.p.A. into the parent Credito Valtellinese S.c. was carried out with legal effect as from 10 September 2012.

The transactions, excluded from the scope of application of IFRS 3 as they involved companies “under common control”, did not impact the consolidated annual financial statements. Given the reorganisational purpose of the transactions described, the latter was recorded in continuity of accounting values, without the recognition of economic effects.

The securitisation transaction carried out during the year with the special purpose vehicle Quadrivio SME 2012 S.r.l. is also reported.

The impact of related party transactions as defined above on the financial position (as at 31 December 2012) and on the income statement for the year then ended, together with the percentage weight of these transactions on the corresponding statement of financial position items, is illustrated in the tables below. The impact of transactions completed with Group companies has not been included, as their line-by-line consolidation requires the netting of intragroup balances and transactions.

283

RELATED PARTY TRANSACTIONS (figures in thousands of EUR) ASSOCIATES

COMPANIES SUBJECT TO JOINT CONTROL

EXECUTIVES AND CONTROL BODIES

OTHER RELATED PARTIES

% WEIGHT ON FINANCIAL STATEMENT ITEMS

Loans and receivables w ith banks 15,806 - - - 1.0Loans and receivables w ith customers 31,605 5 3,116 129,700 0.7Other Assets 8,325 - - 33 1.9TOTAL 55,736 5 3,116 129,733 Due to banks 11,451 - - - 0.3Due to customers 8,489 - 9,095 21,481 0.2Securities issued - - 1,273 6,088 0.1Other liabilities 4,949 - 48 44 0.7TOTAL 24,889 - 10,416 27,613 Guarantees given 15,622 - 11 29,082 3.6TOTAL 15,622 - 11 29,082

RELATED PARTY TRANSACTIONS (figures in thousands of EUR) ASSOCIATES

COMPANIES SUBJECT TO JOINT CONTROL

EXECUTIVES AND CONTROL BODIES

OTHER RELATED PARTIES

% WEIGHT ON FINANCIAL STATEMENT ITEMS

Net interest income 645 1 -208 1,767 0.5Net fee and commission income 3,113 2 89 504 1.4Administrative expenses -9,545 - -9,410 -476 3.5Other operating net income 15,705 - - 1 23.8TOTAL 9,918 3 -9,529 1,796

284

PART I - SHARE-BASED PAYMENTS

A. QUALITATIVE INFORMATION

No share-based payment agreements were put in place.

285

PART L - SEGMENT REPORTING

In compliance with IFRS 8, segment reporting is prepared on the basis of elements used by management to make operational and strategic decisions.

The following operating segments were identified for the Credito Valtellinese Group:

- The Market segment: generates its revenue from the production and sale of lending products and services, investment and transfer services for the Group’s customers (traditionally households, trades, professionals and SMEs);

- The Specialised Finance segment: generates its revenue from the distribution of bancassurance products, disbursement and management of lease credits and medium and long-term financing, the management and disposal of problem loans and services for public entities;

- The Production segment: monitors the management and development of Information and Communication Technology and manages the Group’s real estate assets.

As a result of the merger into the Parent on 31 March 2013, Deltas was included in the Market segment. The effects were appropriately represented both for 2012 and for 2011. The 2011 financial statements were restated also to reflect retroactively the application of the amendments to IAS 19 as requested by IAS 8. The summary statements are provided below: Amounts in thousands of EUR Market Specialised Finance

31/12/2012 31/12/2011 % change

31/12/2012 31/12/2011 % change

STATEMENT OF FINANCIAL POSITION

Loans and receivables with customers 19,707,285 19,930,844 -1.1 2,297,190 2,395,901 -4.1 Loans and receivables with banks 1,629,737 1,613,769 1.0 1,008 4,748 -78.8 Treasury securities and equity investments 3,848,459 1,956,851 96.7 1 1 - Due to banks 4,545,536 3,171,874 43.3 - 55 -100 Direct funding 22,034,733 21,972,536 0.3 67,917 108,066 -37.2 - Due to customers 16,004,311 15,322,656 4.4 50,374 96,018 -47.5 - Securities issued 6,030,422 6,649,880 -9.3 17,543 12,048 45.6 Indirect funding 11,200,816 11,566,237 -3.2 - - - ORGANISATIONAL DATA Personnel 3,782 3,866 -2.2 158 178 -11.2 Amounts in thousands of EUR Production Other Activities

31/12/2012 31/12/2011 % change

31/12/2012 31/12/2011 % change

STATEMENT OF FINANCIAL POSITION

Loans and receivables with customers 3,362 3,442 -2.3 - - - Loans and receivables with banks - - - - - - Treasury securities and equity investments - - - 293,005 285,806 2.5 Due to banks - - - - - - Direct funding - - - - - - - Due to customers - - - - - - - Securities issued - - - - - - Indirect funding - - - - - - ORGANISATIONAL DATA Personnel 419 435 -3.7 3 3 -

286

Amounts in thousands of EUR Market Specialised Finance 2012 2011 %

change 2012 2011 %

change INCOME STATEMENT DATA Net interest income 458,463 505,146 -9.2 28,436 29,426 -3.4 Net fee and commission income 253,799 269,046 -5.7 11,777 19,125 -38.4 Dividends and similar income - - - - - - Share of profit of equity-accounted investees - - - - - - Net trading and hedging income (expense) and profit (loss) on sales/repurchases 32,016 8,783 264.5 - - -

Other operating net income 3,927 4,691 -16.3 580 731 -20.6 Operating income 748,205 787,666 -5.0 40,793 49,282 -17.2 Personnel expenses -296,081 -308,315 -4.0 -6,292 -6,404 -1.7 Other administrative expenses -120,404 -127,786 -5.8 -5,015 -5,201 -3.6 Amortisation/depreciation on property, equipment and investment property and intangible assets -30,090 -30,394 -1.0 -147 -159 -7.8

Operating costs -446,575 -466,495 -4.3 -11,454 -11,764 -2.6 Operating profit 301,630 321,171 -6.1 29,339 37,518 -21.8 Net impairment losses on loans and receivables and other financial assets -337,544 -164,730 104.9 -19,372 -3,145 516.0

Net accruals to provisions for risks and charges -6,788 -5,908 14.9 -49 -247 -80.0 Goodwill impairment losses -302,570 -102,190 196.1 Net gains (losses) on sales of investments 2,026 908 -123.1 -122 1 n/a Pre-tax profit (loss) from continuing operations -343,246 49,251 -796.9 9,796 34,127 -71.3

Amounts in thousands of EUR Production Other Activities

2012 2011 % change

2012 2011 % change

INCOME STATEMENT DATA Net interest income -557 -862 -35.5 -8,245 -8,318 -0.9 Net fee and commission income 14 25 -42.4 - - - Dividends and similar income - - - 299 1,647 -81.8 Share of profit of equity-accounted investees - - - 17,316 15,956 8.5 Net trading and hedging income (expense) and profit (loss) on sales/repurchases - - - 28 636 -95.7

Other operating net income 12,523 12,060 3.8 - - - Operating income 11,980 11,223 6.8 9,398 9,921 -5.3 Personnel expenses -18,618 -18,746 -0.7 -234 -229 2.0 Other administrative expenses -46,518 -44,104 5.5 -284 -279 2.0 Amortisation/depreciation on property, equipment and investment property and intangible assets -9,894 -9,750 1.5 - - -

Operating costs -75,030 -72,600 3.3 -518 -508 2.0 Operating profit -63,050 -61,377 2.7 8,880 9,413 -5.7 Net impairment losses on loans and other financial assets - - - -34,334 -4,054 n/a

Net accruals to provisions for risks and charges - -70 - - - - Goodwill impairment losses Net gains (losses) on sales of investments -1,975 4 n/a -688 1,309 - Pre-tax profit (loss) from continuing operations -65,025 -61,443 5.8 -26,142 6,668 -492.1

Market

The market segment is the core business of the Group, as it includes all the (lending, investment and transfer) products and services offered to Group customers, traditionally represented by households, small-scale industry, professionals and small and medium-sized enterprises.

During 2012, the market segment generated operating income of EUR 748.2 million. The segment accounts for 92.3% of the operating income of the Group. Operating costs stood at EUR 446.6 million whereas pre-tax loss from continuing operations amounted to EUR - 343.2 million.

287

Amounts in thousands of EUR Market 2012 2011 %

change INCOME STATEMENT DATA Net interest income 458,463 505,146 -9.2 Net fee and commission income 253,799 269,046 -5.7 Net trading and hedging income (expense) and profit (loss) on sales/repurchases 32,016 8,783 264.5

Other operating net income 3,927 4,691 -16.3 Operating income 748,205 787,666 -5.0 Personnel expenses -296,081 -308,315 -4.0 Other administrative expenses -120,404 -127,786 -5.8 mortisation/depreciation on property, equipment and investment property and intangible assets -30,090 -30,394 -1.0

Operating costs -446,575 -466,495 -4.3 Operating profit 301,630 321,171 -6.1 Net impairment losses on loans and receivables and other financial assets -337,544 -164,730 104.9

Net accruals to provisions for risks and charges -6,788 -5,908 14.9 Goodwill impairment losses -302,570 -102,190 196.1 Net gains (losses) on sales of investments 2,026 908 -123.1 Pre-tax profit (loss) from continuing operations -343,246 49,251 -796.9

The direct funding of the market segment amounted to EUR 22,034.7 million. Indirect funding reached EUR 11,200.8 million. Loans and receivables with customers slightly decreased (-1.1%) reaching EUR 19,707.3 million. At the end of the year, the market segment had 544 branches. There were 3,782 human resources employed in the segment, equal to 86% of the total employees of the Group. Amounts in thousands of EUR Market

31/12/2012 31/12/2011 % change

STATEMENT OF FINANCIAL POSITION

Loans and receivables with customers 19,707,285 19,930,844 -1.1

Loans and receivables with banks 1,629,737 1,613,769 1.0

Treasury securities and equity investments 3,848,459 1,956,853 96.7

Due to banks 4,545,536 3,171,874 43.3

Direct funding 22,034,733 21,972,536 0.3

- Due to customers 16,004,311 15,322,656 4.4

- Securities issued 6,030,422 6,649,879 -9.3

Indirect funding 11,200,816 11,566,237 -3.2

ORGANISATIONAL DATA

Personnel 3,782 3,866 -2.2

Specialised Finance

The specialised finance segment includes the distribution of bancassurance products, disbursement and management of lease credits and medium and long-term financing, the management and disposal of problem loans and services for public entities.

288

During 2012, the specialised finance segment generated operating income of EUR 40.8 million, accounting for 5.0% of Group operating income, and recorded pre-tax profit from continuing operations of EUR 9.8 million.

Amounts in thousands of EUR

Specialised Finance

2012 2011 % change

INCOME STATEMENT DATA

Net interest income 28,436

29,425 -3.4

Net fee and commission income 11,777 19,125 -38.4 Other operating net income 580 731 -20.6 Operating income 40,793 49,282 -17.2 Personnel expenses -6,292 -6,404 -1.7 Other administrative expenses -5,015 -5,201 -3.6 Amortisation/depreciation on property, equipment and iand intangible assets -147 -159 -7.8

Operating costs -11,454 -11,764 -2.6 Operating profit 29,339 37,518 -21.8 Net impairment losses on loans and other financial assets -19,372 -3,145 516.0 Net accruals to provisions for risks and charges -49 -247 -80.0 Net gains (losses) on sales of investments -122 1 n/a Pre-tax profit (loss) from continuing operations 9,796 34,127 -71.3

Loans and receivables with customers slightly decreased (4.1%) reaching EUR 2,297.2 million. At the end of the year, the employees for this segment totalled 158, i.e. about 4% of the Group’s total workforce. Amounts in thousands of EUR Specialised Finance

31/12/2012 31/12/2011 % change

STATEMENT OF FINANCIAL POSITION Loans and receivables with customers 2,297,190 2,395,901 -4.1 Direct funding 67,917 108,066 -37.2

- Due to customers 50,374 96,018 -47.5

- Securities issued 17,543 12,048 45.6

ORGANISATIONAL DATA

Personnel 158 178 -11.2

Production

The segment only includes operations of the Group’s special purpose vehicles (Bankadati and Stelline).

Operating costs for the production segment amounted to EUR 75.0 million. The loss of the segment was EUR 65.0 million.

The employees of the production segment amounted to 419, equal to about 10% of the Group’s workforce.

289

Production

2012 2011 % change

INCOME STATEMENT DATA Net interest income -557 -862 -35.5 Net fee and commission income 14 25 -42.4 Other operating net income 12,523 12,060 3.8 Operating income 11,980 11,223 6.8 Personnel expenses -18,618 -18,746 -0.7 Other administrative expenses -46,518 -44,104 5.5 Amortisation/on property and equipment and intangible assets -9,894 -9,750 1.5 Operating costs -75,030 -72,600 3.3 Operating profit -63,050 -61,377 2.7 Net accruals to provisions for risks and charges - -70 - Net gains (losses) on sales of investments -1,975 4 n/a Pre-tax profit (loss) from continuing operations -65,025 -61,443 5.8

290

Other documents

291

Consolidated statement of the manager in charge of financial reporting

pursuant to Art. 81–ter of CONSOB Regulation no. 11971 of 14 May 1999, as amended

1. The undersigned, Miro Fiordi, as Managing Director, and Simona Orietti, as the Manager in

charge of financial reporting of Credito Valtellinese S.c., also considering the provisions of Article 154-bis, paragraphs 3 and 4, of Italian Legislative Decree no. 58 of 24 February 1998, hereby certify: • the adequacy, in relation to the business characteristics and • the effective application

of administrative and accounting procedures for the formation of the consolidated financial statements, in the period 1 January - 31 December 2012.

2. The assessment of the adequacy and the actual application of the administrative and

accounting procedures for the formation of the consolidated financial statements as at 31 December 2012 is based on a model conceived by Credito Valtellinese S.c., in line with the “Internal Control - Integrated Framework (CoSO)” and with the “Control Objective for IT and Related Technologies (Cobit)”, which represent reference standards for the internal control system and for financial reporting in particular, generally accepted at international level.

3. We also certify that: 3.1 the consolidated financial statements:

a) were prepared in compliance with applicable IFRS endorsed in the European Community pursuant to (EC) Regulation no. 1606/2002 of the European Parliament and Council, dated 19 July 2002;

b) are consistent with accounting books and records; c) provides a truth and fair view of the financial position and performance of the issuer

and the group of companies included in the scope of consolidation; 3.2 the report on operations include a reliable analysis of the performance and result of

operations, and the position of the issuer and companies included in the scope of consolidation, together with a description of the main risks and uncertainties to which they are exposed.

Sondrio, 19 March 2013 Manager in charge of financial The Managing Director reporting Miro Fiordi Simona Orietti

294

Financial statements of Credito Valtellinese

295

Financial statement highlights and alternative performance indicators

STATEMENT OF FINANCIAL POSITION 31/12/2012 31/12/2011 % change

(in thousands of EUR)

Loans and receivables with customers 15,422,640 8,071,176 91.08

Other financial assets and liabilities 3,644,751 1,801,377 102.33

Equity investments 835,821 1,505,109 -44.47

Total assets 25,807,561 16,800,562 53.61

Direct funding from customers 17,826,346 10,628,325 67.72

Indirect funding from customers 9,793,130 4,966,841 97.17

of which: - Managed funds 4,213,824 2,208,203 90.83

Total funding 27,619,476 15,595,166 77.10

Equity 1,944,781 1,900,166 2.35

SOLVENCY RATIOS 31/12/2012 31/12/2011

Tier 1 Capital/Risk-weighted assets 16.02% 26.49%

Regulatory Capital/Risk-weighted assets 21.14% 32.48%

FINANCIAL STATEMENT RATIOS 31/12/2012 31/12/2011

Indirect funding from customers / Total funding 35.5% 31.8%

Managed funds / Indirect funding from customers 43% 44.5%

Direct funding from customers / Total liabilities 69.1% 63.3%

Customer loans / Direct funding from customers 86.5% 75.9%

Customer loans / Total assets 59.8% 48%

296

CREDIT RISK 31/12/2012 31/12/2011 % change

Net non-performing loans (in thousands of EUR) 384,712 176,118 118.44

Other net doubtful loans (in thousands of EUR) 1,008,305 346,589 190.92

Net non-performing loans / Loans and receivables with customers 2.49% 2.18%

Other net doubtful loans / Loans and receivables with customers 6.54% 4.29%

Hedging of non-performing loans 59.15% 50.97%

Hedging of other doubtful loans 13.67% 7.30%

Cost of credit (*) 1.82% 0.73%

(*) Calculated as the ratio between the net impairment losses due to deterioration of loans and year-end loans.

ORGANISATIONAL DATA 31/12/2012 31/12/2011 % change

Number of employees 2,421 1,257 92.60

Number of branches 368 193 90.67

Banc@perta line users 138,300 64,256 115.23

INCOME STATEMENT DATA 2012 2011 % change

(in thousands of EUR) Net interest income 335,591 185,351 81.06

Operating income 578,481 339,803 70.24

Operating costs (366,286) (206,937) 77

Net operating profit 212,195 132,866 59.71

Pre-tax loss from continuing operations (404,831) (31,153) n/a

Post-tax profit (loss) from continuing operations (335,629) 41,173 n/a.

Profit (loss) for the year (316,605) 42,359 n/a.

OTHER ECONOMIC INFORMATION 2012 2011

Cost/Income ratio 63.3% 60.9%

297

FINANCIAL STATEMENTS

298

STATEMENT OF FINANCIAL POSITION (in EUR)

ASSETS 31/12/2012 31/12/2011

10. Cash and cash equivalents 156,194,683 71,836,228

20. Financial assets held for trading 102,616,916 106,188,466

40. Available-for-sale Financial assets 3,489,445,295 1,389,497,215

50. Held-to-maturity investments 304,325,124 494,302,448

60. Loans and receivables with banks 4,202,065,477 4,365,949,574

70. Loans and receivables with customers 15,422,640,200 8,071,175,577

100. Equity investments 835,821,343 1,505,108,849

110. Property, equipment and investment property 339,210,745 223,386,479

120. Intangible assets 162,080,549 101,810,574

of which:

- goodwill 135,945,245 85,630,527

130. Tax assets 523,253,981 346,749,042

a) current 75,679,579 30,094,741

b) deferred 447,574,402 316,654,301

b 1) set forth in Italian Law 214/2011 327,919,525 160,871,432

150. Other assets 269,906,212 124,557,693

Total assets 25,807,560,525 16,800,562,145

LIABILITIES AND EQUITY 31/12/2012 31/12/2011

10. Due to banks 5,097,170,366 3,783,460,557

20. Due to customers 12,331,887,424 5,654,450,703

30. Securities issued 5,494,458,384 4,973,874,301

40. Financial liabilities held for trading 20,450,645 29,003,953

60. Hedging derivatives 231,185,605 159,607,554

80. Tax liabilities: 71,523,489 37,637,678

a) current 71,295,102 37,450,972

b) deferred 228,387 186,706

100. Other liabilities 530,564,456 209,660,097

110. Post-employment benefits 29,353,490 17,128,983

120. Provisions for risks and charges: 56,185,939 35,572,373

a) pension and similar obligations 32,559,947 28,139,680

b) other provisions 23,625,992 7,432,693

130. Valuation reserves -106,278,095 -222,411,649

150. Equity instruments 197,825,000 197,825,000

160. Reserves 100,338,711 117,400,733

170. Share premium reserve 554,319,976 821,788,139

180. Share capital 1,516,698,624 945,678,639

190. Treasury shares (-) -1,518,498 -2,474,301

200. Profit (Loss) for the year (-/+) -316,604,991 42,359,385

Total liabilities and equity 25,807,560,525 16,800,562,145

299

INCOME STATEMENT (in EUR)

ITEMS 2012 2011

10. Interest and similar income 801,403,086 445,509,715

20. Interest and similar expense (465,812,187) (260,158,247)

30. Net interest income 335,590,899 185,351,468

40. Fee and commission income 221,430,092 118,407,180

50. Fee and commission expense (38,574,710) (11,713,747)

60. Net fee and commission income 182,855,382 106,693,433

70. Dividends and similar income 16,000,496 36,850,335

80. Net trading income 4,189,680 5,114,782

90. Net hedging expense (311,159) (1,026,377)

100. Profit on sale or repurchase of: 26,531,220 1,847,659

b) available-for-sale financial assets 23,586,425 688,555

d) financial liabilities 2,944,795 1,159,104

120. Total income 564,856,518 334,831,300

130. Iimpairment losses on : (317,578,628) (61,920,463)

a) loans and receivables (280,845,743) (59,302,085)

b) available-for-sale financial assets (34,333,977) (2,520,341)

d) other financial transactions (2,398,908) (98,037)

140. Net financial income 247,277,890 272,910,837

150. Administrative expenses: (380,903,333) (210,165,281)

a) personnel expenses (183,644,433) (102,053,410)

b) other administrative expenses (197,258,900) (108,111,871)

160. Net accruals to provisions for risks and charges (5,566,026) (1,494,164)

170. Depreciation and net impairment losses on property, equipment and investment property (14,652,251) (9,558,459)

180. Amortisation and net impairment losses on intangible assets (3,094,267) (1,809,460)

190. Other operating net income 45,988,357 19,567,935

200. Operating costs (358,227,520) (203,459,429)

210. Net gains (losses) on equity investments (76,567,808) 1,314,111

230. Goodwill impairment losses (217,200,000) (102,190,000)

240. Net gains (losses) on sales of investments (113,363) 271,517

250. Pre-tax profit (loss) from continuing operations (404,830,801) (31,152,964)

260. Income taxes 69,201,816 72,325,927

270. Post-tax profit (loss) from continuing operations (335,628,985) 41,172,963

280. Post-tax profit from discontinued operations 19,023,994 1,186,422

290. Profit (Loss) for the year (316,604,991) 42,359,385

300

STATEMENT OF COMPREHENSIVE INCOME (in EUR)

Items 2012 2011 10. Profit (loss) for the year (316,604,991) 42,359,385

Other comprehensive income net of income taxes

20. Available-for-sale Financial assets 123,223,057 (243,372,637)

90. Actuarial gains (losses) on defined benefit plans (6,942,775) 822,390

100. Portion of valuation reserves of equity-accounted investees (146,728) -

110. Total other comprehensive income net of income taxes 116,133,554 (242,550,247)

120. Comprehensive income (Item 10+110) (200,471,437) (200,190,862)

301

STATEMENT OF CHANGES IN EQUITY (figures in EUR)

(*) This item includes revaluation reserves set up in compliance with specific laws and reserves related to actuarial gains and losses on defined benefit plans.

Equity transactions

Issue of new shares

Repurchase of treasury shares

Extraordinary dividends distribution

Change in equity instruments

Derivatives on treasury shares Stock options

Share capital: a) ordinary shares 945,678,639 0 945,678,639 0 0 0 571,019,985 0 0 0 0 0 0 1,516,698,624b) other shares 0 0 0 0 0 0 0 0 0 0 0 0 0 0Share premium reserve 821,788,139 0 821,788,139 0 0 0 -267,468,163 0 0 0 0 0 0 554,319,976Reserves: 0 0 0a) income-related 154,490,697 0 154,490,697 10,249,690 0 -36,969,904 5,626,657 0 0 0 0 0 133,397,140b) other -37,089,964 0 -37,089,964 0 0 4,031,535 0 0 0 0 0 0 0 -33,058,429Valuation reserves: 0 0 0a) available-for-sale -243,170,983 0 -243,170,983 0 0 0 0 0 0 0 0 123,223,057 -119,947,926b) cash flow hedge 0 0 0 0 0 0 0 0 0 0 0 0 0 0c) other (*) 20,759,334 0 20,759,334 0 0 0 0 0 0 0 0 0 -7,089,503 13,669,831Equity instruments 197,825,000 0 197,825,000 0 0 0 0 0 0 0 0 0 0 197,825,000Treasury shares -2,474,301 0 -2,474,301 0 0 0 6,206,040 -5,250,237 0 0 0 0 0 -1,518,498(Profit (loss) for the year 42,359,385 0 42,359,385 -10,249,690 -32,109,695 0 0 0 0 0 0 0 -316,604,991 -316,604,991Equity 1,900,165,946 0 1,900,165,946 0 -32,109,695 -32,938,369 315,384,519 -5,250,237 0 0 0 0 -200,471,437 1,944,780,727

Comprehensive income 31/12/2012 Equity as at 31/12/2012 Reserves

Dividends and other allocations

Changes in reserves

Changes during the period

Equity Balances as at 31/12/2011

Change in opening balances Balances as at 1/1/2012

Allocation of prior year profit

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(*) This item includes revaluation reserves set up in compliance with specific laws and reserves related to actuarial gains and losses on defined benefit plans. The column “Change in opening balances” shows the effects deriving from the application of the revised version of IAS 19.

Equity transactions

Issue of new shares

Repurchase of treasury shares

Extraordinary dividends distribution

Change in equity instruments

Derivatives on treasury shares Stock options

Share capital: a) ordinary shares 824,759,477 0 824,759,477 0 0 0 120,919,162 0 0 0 0 0 0 945,678,639b) other shares 0 0 0 0 0 0 0 0 0 0 0 0 0Share premium reserve 845,262,623 0 845,262,623 0 0 0 -23,474,484 0 0 0 0 0 0 821,788,139Reserves: 0a) income-related 144,143,577 502,698 144,646,275 6,116,539 0 71,160 3,656,723 0 0 0 0 0 154,490,697b) other 0 0 0 0 -37,089,964 0 0 0 0 0 0 0 -37,089,964 Valuation reserves: 0a) available-for-sale 201,654 0 201,654 0 0 0 0 0 0 0 0 0 -243,372,637 -243,170,983 b) cash flow hedge 0 0 0 0 0 0 0 0 0 0 0 0 0c) other (*) 20,629,309 -692,365 19,936,944 0 0 0 0 0 0 0 0 822,390 20,759,334Equity instruments 197,825,000 0 197,825,000 0 0 0 0 0 0 0 0 0 0 197,825,000Treasury shares -2,212,210 0 -2,212,210 0 0 0 8,983,394 -9,245,485 0 0 0 0 0 -2,474,301 Profit (loss) for the year 52,804,340 189,667 52,994,007 -6,116,539 -46,877,468 0 0 0 0 0 0 0 42,359,385 42,359,385Equity 2,083,413,770 0 2,083,413,770 0 -46,877,468 -37,018,804 110,084,795 -9,245,485 0 0 0 0 -200,190,862 1,900,165,946

Changes during the period

Comprehensive income 31/12/2011 Equity as at 31/12/2011 Reserves

Dividends and other allocations

Changes in reserves Equity

Balances as at 31/12/2010

Change in opening balances Balances as at 1/1/2011

Allocation of prior year profit

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STATEMENT OF CASH FLOWS - DIRECT METHOD (in EUR)

2012 2011 A. OPERATING ACTIVITIES

1. Cash flow from operating activities 193,627,215 20,492,279

- interest income received (+) 791,875,907 443,279,819

- interest expense paid (-) -410,037,803 -249,907,690

- dividends and similar income (+) 259,458 1,586,696

- net fee and commission income (+/-) 192,840,890 111,084,419

- personnel expenses (-) -185,958,840 -103,672,460

- other costs (-) -144,776,145 -93,769,059

- other revenue (+) 65,943,744 18,738,179

- taxes (-) -117,630,050 -108,579,851

- revenues related to disposal groups net of tax (+/-) 1,110,054 1,732,226

2. Cash flow used by financial assets -1,976,119,630 -935,645,230

- financial assets held for trading 14,340,158 113,406,933

- available-for-sale financial assets -1,857,737,386 -921,158,039

- loans and receivables with customers -252,133,852 161,960,851

- loans and receivables with banks: on sight 1,131,010,208 563,683,887

- loans and receivables with banks: other -1,028,251,769 -851,150,988

- other assets 16,653,011 -2,387,874

3. Cash flow generated by financial liabilities 1,601,723,574 1,147,989,480

- due to banks: on sight 479,590,420 -598,991,709

- due to banks: other 1,228,018,408 1,007,308,117

- due to customers 625,867,216 229,555,855

- securities issued -835,506,986 380,466,578

- financial liabilities held for trading -11,899,060 12,847,434

- other liabilities 115,653,576 116,803,205

Cash flow from (used in) operating activities -180,768,841 232,836,529

B. INVESTING ACTIVITIES 1. Cash flow generated by 257,313,447 67,085,982

- sales of equity investments 37,385,801 21,561,838

- dividends from equity investments 15,741,038 34,694,144

- sales/redemptions of held-to-maturity investments 202,000,000 10,000,000

- sales of property, equipment and investment property 2,186,608 830,000

2. Cash flow used for -42,980,086 -330,988,448

- purchase of equity investments -30,294,402 -175,003,419

- purchase of held to maturity investments -141,351,664

- purchase of property, equipment and investment property -12,685,684 -14,633,365

Cash flow from (used in) investing activities 214,333,361 -263,902,466

C. FINANCING ACTIVITIES - issue/repurchase of treasury shares 91,055,320 97,182,587

- dividend distribution and other -40,261,385 -46,877,468

Cash flow from financing activities 50,793,935 50,305,119

CASH FLOW GENERATED DURING THE YEAR 84,358,455 19,239,182

KEY: (+) generated (-) used

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RECONCILIATION

Financial statement items 2012 2011 Cash and cash equivalents at the beginning of the year 71,836,228 52,597,046

Net liquidity generated/used during the year 84,358,455 19,239,182

Cash and deposits at the end of the year 156,194,683 71,836,228

KEY: (+) generated (-) used

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NOTES TO THE FINANCIAL STATEMENTS

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PART A - ACCOUNTING POLICIES

A.1 - GENERAL INFORMATION

SECTION 1 - STATEMENT OF COMPLIANCE WITH INTERNATIONAL FINANCIAL REPORTING STANDARDS

Pursuant to Article 4 of Italian Legislative Decree no. 38 of 28 February 2005, the financial statements of the Credito Valtellinese Group have been drawn up according to the lFRS issued by the International Accounting Standards Board (IASB) and endorsed by the European Union, including the related interpretations of the International Financial Reporting Interpretations Committee (lFRIC), as set forth by EC Regulation no. 1606 of 19 July 2002.

The standards applied in preparing these financial statements are those in effect as at 31 December 2012 except for IAS 19 - Employee benefits for which the Bank used the option to apply early the revised version approved with Regulation no. 475/2012 as shown below.

SECTION 2 - BASIS OF PREPARATION

As already described in other parts of this document, as part of the wider company-restructuring project of the Group, with the signing of the merger deed on 29 August 2012, the merger of Credito Artigiano S.p.A. into the parent Credito Valtellinese was completed with legal effect as from 10 September 2012. This transaction, with accounting and tax effect as from 1 January 2012, may be included among “business combinations under common control”; therefore, the 2012 financial statements of Credito Valtellinese also reflects the financial and economic contribution of the merged company and is not readily comparable with the financial statements as at 31 December 2011, referring only to the merging company.

In the notes to the financial statements, the effects of the business combinations are presented in the tables that show the changes reported in the year among “increases/decreases” or as the “business combinations” when contemplated.

With the aim of enabling a consistent comparison, the report on operations also provides the reclassified financial statements of the previous year with data restated to reflect the merger. For further details on the policies and processes pursued for the accounting representation of the transaction, reference is made to Part G - Business combinations, of these notes to the financial statements.

The separate financial statements of Credito Valtellinese comprise the Statement of financial position, Income Statement, Statement of Comprehensive Income, Statement of changes in equity, Statement of cash flows and Notes to the financial statements and are accompanied by the report on operations.

The amounts reported in the Financial Statements are expressed in euros, while those in the Notes to the financial statements are in thousands of euros, unless otherwise indicated. The financial statements and the notes to the financial statements show, in addition to the amounts for the reporting period, also the comparatives as at 31 December 2011.

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The separate financial statements as at 31 December 2012 have been prepared in compliance with the instructions issued by the Bank of Italy within the scope of its regulatory function over the technical structure of financial statements of banks and financial institutions as provided by Italian Legislative Decree 38/05 “Instructions for the preparation of the separate and consolidated financial statements of banks and financial companies that are parents of banking groups” (Provision of 22 December 2005 - Circular no. 262 and subsequent updates).

The separate financial statements as at 31 December 2012 were prepared with a view to the company as a going concern. The Credito Valtellinese Directors confirm in this regard their reasonable expectations that the company will remain a going concern in the foreseeable future. The Directors also confirm that the financial position and result of operations have brought to light no symptoms that could imply the uncertainty of going concern assumptions.

In 2012, with the letter of the Bank of Italy no. 46586/13 of 15 January 2013, Circular no. 262 “Banking financial statements: formats and guidelines” has been subject to some minor changes in order to acknowledge:

- the amendment to IFRS 7, introduced with regulation no. 1205/2011;

- detailed qualitative and quantitative information on purchased impaired loans (to be shown in the tables breaking down loans and receivables with customers of Part B and in Part E - “Section 1 - credit risk”).

With reference to the amendments made to IFRS 7, the amendment introduced requires additional disclosure with regard to the transferred assets that are not entirely derecognised from the financial statements; in particular, the Bank must disclose information that enables users of its financial statements to understand the relationship between transferred financial assets that are not derecognised and the associated liabilities. If the transferred assets are entirely derecognised, but the company maintains continuing involvement, information must be disclosed that enables users of the financial statements to evaluate the nature of, and risks associated with, the continuing involvement in derecognised financial assets

The Bank does not have assets with these characteristics, hence there was no impact on the presentation of the financial statements.

Moreover, with the letter of the Bank of Italy no. 0677311/12 of 7 August 2012, some detailed information was introduced on deferred tax assets set forth in Italian Law no. 214/11. These details are aligned with the clarifications provided in the joint document of the Bank of Italy, Consob and Isvap no. 5 of 15 May 2012.

Article 2 of Italian Law Decree no. 255 of 29 December 2010, (the so-called “mille proroghe” decree) converted, with amendments, by Italian Law no. 10 of 26 February 2011, allows to transform into tax credits the deferred tax assets recorded in the financial statements, upon the occurrence of certain conditions. The provision was amended finally by Italian Law no. 214 of 22 December 2011.

The regulation that allows to transform deferred tax assets (or DTA) provides that, upon the occurrence of losses for the period recognised in the separate financial statements, the DTA are transformed into tax credits. The transformation works in an amount corresponding to the portion of the loss for the period that corresponds to the ratio between the DTA and the amount of share capital and reserves. The portion of DTA that is transformed in DTA from tax losses is converted into tax credit by disabling the limits of recoverableness contemplated for tax losses.

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In order to allow the reader of the financial statements to appreciate the different nature of this taxation compared to other deferred tax assets, specific disclosure must be provided of the assets set forth in Italian Law no. 214/11 under the subitem “Deferred tax assets” of the statement of financial position and its changes in the period, with special reference to deferred tax assets transformed into tax credit.

The separate financial statements were drawn up by applying the general standards provided under IAS 1, the accounting standards illustrated in Part A.2 of the notes to the financial statements and in compliance with the general provisions included in the framework for the preparation and presentation of financial statements issued by the International Accounting Standards Board (IASB).

In 2012, the European Commission published the following regulations for the endorsement of the new international accounting standards and for the amendments to the financial reporting standards already in force:

- Regulation no. 475/2012 that adopts the amendments to IAS 1 Presentation of financial statements and IAS 19 Employee benefits (compulsory as from 1 January 2013);

- Regulation no. 1254/2012 that adopts IFRS 10 Consolidated financial statements, IFRS 11 Joint Arrangements, IFRS 12 Disclosure of interests in other entities as well as IAS 27 Separate Financial Statements and IAS 28 Investments in associates and joint ventures (compulsory as from 1 January 2014);

- Regulation no. 1255/2012 that adopts the amendments to IFRS 1 First-time Adoption of International Financial Reporting Standards - Severe hyperinflation and removal of fixed dates for first-time adopters, amendments to IAS 12 Income taxes - Deferred taxes: recovery of underlying assets and IFRS 13 Fair value measurement (compulsory as from 1 January 2013);

- Regulation no. 1256/2012 that adopts amendments to IFRS 7 Financial Instruments: Additional disclosures - Asset and liability offsetting and IAS 32 Financial Instruments: Presentation - Asset and liability offsetting (compulsory as from 1 January 2013).

As illustrated above, the Bank used the option to apply early the revosed version of IAS 19 Employee benefits as from these financial statements.

The main new element of the revised IAS 19 is represented by the provision of a single accounting method for actuarial gains and losses arising from measurement of defined benefit plans. In fact, compared to the previous version of the standard, the possibility of recognising immediately in the income statement all actuarial gains and losses - choice so far made by the Group - was abolished; they must be recorded under a specific equity item included in the statement of comprehensive income.

The other new issues and amendments to the IFRS were not adopted early and therefore had no impact on the financial position and on the results of the Group (as at 31 December 2012).

The 2011 financial statements were restated to reflect retroactively the application of the amendments to IAS 19 as requested by IAS 8. Accordingly, actuarial gains/losses were reclassified from item “150 a) Personnel expenses”, net of the relevant tax included in item “280.Income taxes”, to item “130.Valuation reserves”. The reclassification did not impact the

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carrying amount of equity, in that the actuarial gains/losses were recorded in an equity reserve instead of being recorded as an offsetting item to profit. The Statement of Financial Position did not show the financial position as at 1 January 2011, as required by IAS 1, par. 39, in that the early application of the revised IAS 19 had no impact on the opening balances at that date, but only a reclassification within the Equity items between item “160.Reserves” and item “130.Valuation reserves”. In 2012, the application of the new standard mainly determined the recognition in equity of actuarial losses recognised in the period of EUR 6,943 thousand net of tax. Based on the presentation provided by the previous accounting method, they would have been recognised in the income statement.

The income statement figures of the corresponding period were restated, in compliance with what was required by IFRS 5, to reflect retroactively the economic effects deriving from the classification as “Assets held for sale” of the subsidiaries Aperta SGR and Lussemburgo Gestioni S.A. subsidiaries sold in 2012. Costs and revenues related to assets held for sale, net of intragroup items, were reported separately in the income statement under “Post-tax profit from discontinued operations”.

The Statement of cash flows of 2011 was restated to take account of costs/revenue related to disposal groups.

The following table shows the items involved in the reclassification as at 31 December 2011 and the related quantitative impacts in thousands of EUR:

LIABILITIES AND EQUITY 31/12/2011 IAS 19

reclassifications 31/12/2011 Restated

130. Valuation reserves -222,542 130 -222,412

160. Reserves 116,708 693 117,401

200. Profit (Loss) for the year (+/-) 43,182 -823 42,359

INCOME STATEMENT ITEMS 2011 IFRS 5

reclassifications IAS 19

reclassifications 2011 Restated

70. Dividends 38,088 -1,238 - 36,850

150. Administrative expenses:

a) personnel expenses -100,919 - -1,134 -

102,053

260. Income taxes 71,963 52 312 72,326 280. Post-tax profit from discontinuing operations - 1,186 - 1,186

290. Profit for the year 43,182 - -823 42,359

Therefore, EUR 661 thousand was reclassified from item “150.b) Other administrative expenses” to item “50.Fee and commission expense” in the 2011 income statement to provide a better representation of the nature of some expenses. Finally, in order to provide a clearer presentation, the 2011 statement of cash flows was restated compared to the published statement. In particular, the balances of the “Cash and cash equivalents at the beginning of the period”, cash flows generated by other activities and

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total cash flow generated during the period for the cash amount existing with the companies merged in 2011 were restated. Accordingly, also for 2012, the contribution referring to the “Cash and cash equivalents” item deriving from mergers of the year is shown as cash generated by other activities. The report on operations and the Notes to the Financial Statements report the information requested by the IFRS, laws, the Bank of Italy and Consob, in addition to other non-obligatory information deemed necessary to provide a truth and fair view of the Bank’s situation. In these financial statements, there were no deviations from the application of the IFRS.

Content of the separate financial statements and the notes to the financial statements

The separate financial statements and the Notes to the Financial Statements were prepared in compliance with the “Instructions for the preparation of the separate financial statements and of the consolidated financial statements of banks and financial companies that are parents of banking groups” contained in Circular no. 262/2005 of Bank of Italy and following updates.

In the Statement of financial position, Income Statement and Statement of Comprehensive Income, drafted according to Bank of Italy’s regulation, the items equal to zero for the current year and for the previous year have not been included. Expenses are presented in brackets in the Income Statement while there is no sign in front of revenues. In the Statement of Comprehensive Income, the negative amounts are reported in brackets.

The Statement of Comprehensive Income presents the profit (loss) for the period as well as the other income components that are not recognised in the income statement but are recorded as a change in the equity valuation reserves.

The Statement of Changes in Equity presents the breakdown and changes that occurred in equity during the current year and the previous one.

The Statement of Cash Flows has been prepared according to the direct method, in which the main gross cash collection and disbursement items are displayed. The cash flows for the year are divided into operating, investing and financing activities. In the statement, the flows related to the liquidity generated during the period are reported with no sign, while those utilised are preceded by the minus sign.

The notes to the financial statements do not include sections pertaining to items equal to zero in 2012 or the previous year.

In Parts A and B of the Notes to the Financial Statements, fair value measurements are classified according to a series of levels reflecting the significance of the valuation input. The levels have the meaning below:

• (level 1) - use of prices (without adjustments) recorded on an active market according to IAS 39;

• (level 2) - use of input other than listed prices above, directly observable (prices) or indirectly observable (deriving from prices) on the market;

• (level 3) - use of input not based on observable market data.

SECTION 3 - EVENTS AFTER THE REPORTING PERIOD

See the relevant chapter in the Directors’ report on operations.

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SECTION 4 - OTHER ASPECTS

The separate financial statements are audited by KPMG S.p.A.

The company has exercised the option of national tax consolidation, as regulated by Articles 117 et sequitur of the Income Tax Consolidation Act. SUMMARY OF THE OPTIONS OF TAX CONSOLIDATION AS AT 31 DECEMBER 2012

Company Year in which the option was exercised

Three-year period of the option

Credito Siciliano S.p.A. 2010 2010-2012

Mediocreval S.p.A. 2010 2010-2012

Aperta Fiduciaria S.r.l. 2010 2010-2012

Creset S.p.A. 2010 2010-2012

Deltas Soc.cons.p.a. 2010 2010-2012

Stelline S.I. S.p.A. 2010 2010-2012

Carifano S.p.A 2012 2012-2014

Finanziaria S. Giacomo S.p.A. 2012 2012-2014

Bankadati S.I. Soc.Cons.p.a. 2012 2012-2014

Global Assicurazioni S.p.A. 2012 2012-2014

Global Broker S.p.A. 2012 2012-2014

In 2012, the option for group taxation was discontinued by Aperta SGR S.p.A. as a result of the transfer of the controlling interest held in it by Credito Valtellinese S.c. to AMH Holding S.p.A.

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A.2 - MAIN ITEMS IN THE FINANCIAL STATEMENTS

This section provides information on the accounting policies adopted for drawing up the annual financial statements as at 31 December 2012, with the recognition, classification, measurement and derecognition criteria illustrated for each individual item, including, if relevant, the recognition criteria for the income components

1 - Financial assets held for trading

Item “20.Financial assets held for trading” includes:

- debt instruments, equity instruments and OEIC units acquired primarily to obtain short-term profit;

- derivative contracts other than those designated as effective hedging instruments, when their fair value is positive.

Debt instruments, equity instruments and OEIC units are recognised in the financial statements at their settlement date, while derivative financial instruments at the trading date. Upon initial recognition, they are recorded at fair value, usually represented by the transaction price, without considering the transaction costs attributable to the instrument charged directly to the income statement. After initial recognition, they are measured at fair value.

The methods of calculation of the fair value of the financial instruments are reported in point 17 - Other information (Calculation of the fair value of financial instruments).

Gains and losses associated with the above, including trading income and expense, interests and dividends received and changes in fair value due to market rate fluctuations, changes in share prices and other market variables, are recognised in the income statement.

Financial assets or parts thereof are derecognised when the contractual rights to the cash flows expire or are transferred without retaining the associated risks and benefits. On the other hand, if a significant portion of the risks and benefits attached to the financial assets remains upon transfer of their legal ownership, they will continue to be recognised in the financial statements.

2 - Available-for-sale financial assets

This item comprises non-derivative financial assets designated as available-for-sale and not classified as loans, held to maturity investments or financial assets held for trading or at fair value. In particular, this category includes, in addition to debt instruments and OEIC units that are not subject to trading activities and are not classified in the other above-mentioned portfolios, equity investments that are not held for trading purposes or do not qualify as controlling, related or joint control share investments. These assets are recognised under item “40 Available-for-sale financial assets”.

They are initially recognised at the settlement date, and measured at fair value inclusive of transaction costs directly attributable to the acquisition. If the recognition should occur following reclassification of other portfolios, the recognition value is the fair value at the time of transfer.

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Interest is measured using the effective interest method. The effective interest rate is the rate that aligns the present value of cash flows expected throughout the life of the instrument to the carrying amount of the asset. Use of this rate to calculate interest involves the uniform distribution of interest throughout the life of the instrument. The expected flows have been calculated considering all contractual terms of the instrument and including all fees and base points paid or received by and between the contracting parties, transaction costs and any other premium or discount that is measurable and considered an integral part of the effective interest rate of the transaction.

Dividends on equity instruments are recognised in the income statement when payment becomes due.

After initial recognition, the available-for-sale assets are measured at fair value with recognition of the changes in their value in an equity reserve until such assets are derecognised, when they are then recognised to the income statement.

The methods of calculation of the fair value of the financial instruments are reported in point 17 - Other information (Calculation of the fair value of financial instruments). If the fair value of equity instruments and OEIC units cannot be determined reliably, they are carried at cost.

At every reporting date, these financial assets are tested for evidence of impairment). Evidence of impairment originates from one or more events occurring after the initial recognition of the asset, which have an impact on the estimated future cash flows of the financial asset (or group of financial assets) that can be reliably estimated. The impairment process starts if there are indicators that would lead to the presumption that the original carrying amount of the investment cannot be recovered.

These indicators include profitability of the company in question and its future income prospects, a significant deviation from the budget objectives or provided by long-terms plans communicated to the market, downward reviews by outside rating companies and the announcement of company restructuring plans.

Regarding the equity instruments included as Available-for-sale financial assets, there are certain indicators that represent estimates of significant and prolonged fair value decreases to below the carrying amount of the financial assets. Specifically they refer to market quotations or valuations lower than the initial carrying amount for an amount higher than 30%, or the recognition of quotations or valuations that are lower than the carrying amount for a period of more than 18 months. Exceeding one of these thresholds leads to the recognition of impairment.

Should the stated thresholds not be exceeded and in case of qualitative impairment elements, the recognition of an impairment loss must be supported by specific performance analyses. The amount of the impairment is calculated with reference to the fair value of the financial asset.

In the event that a available-for-sale financial asset is impaired, the whole loss, including the portion previously accounted at equity, is booked to the income statement.

Any reversal of impairment loss, allowed only if the circumstances giving rise to the impairment no longer exist, is recognised in the income statement if referring to debt instruments, and in equity if referring to equity instruments and OEIC units. For debt instruments, the reversal of impairment loss cannot in any case exceed the amortised cost that the financial instrument would have had if no impairment losses had been made in the past.

Financial assets or parts thereof are derecognised when the contractual rights to the cash flows expire or are transferred without retaining the associated risks and benefits.

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3 - Held to maturity investments

Item “50.Held-to-maturity investments” comprises non-derivative financial assets with fixed payments or payments that can be determined and with a fixed expiry, for which there is an actual intention and capacity to hold them until expiry. They are initially recognised at the settlement date, and measured at fair value including transaction costs directly attributable to the acquisition. Subsequent to initial recognition, they are measured at the amortised cost applied using the effective interest method.

The effective interest rate is the rate that matches the present value of cash flows expected throughout the life of the instrument to the carrying amount of the asset. Use of this rate to calculate interest involves the uniform distribution of interest throughout the life of the instrument. The expected flows have been calculated considering all contractual terms of the instrument and including all fees and base points paid or received by and between the contracting parties, transaction costs and any other premium or discount that is measurable and considered an integral part of the effective interest rate of the transaction.

At the end of each reporting period, these financial assets are assessed for objective evidence of an impairment loss. Evidence of impairment originates from one or more events occurring after the initial recognition of the asset, which have an impact on the estimated future cash flows of the financial assets (or group of financial assets) that can be reliably estimated.

The impairment loss is measured as the difference between the carrying amount and the present value of the future estimated cash flows discounted at the effective original interest rate of the asset.

Any reversal of impairment loss is allowed only if the circumstances that caused the impairment no longer exist. The reversal of impairment loss is recognised in the income statement and, in any case cannot exceed the amortised cost that the instrument would have had if no previous impairment losses had been recognised.

Financial assets or parts thereof are derecognised when the contractual rights to the cash flows expire or are transferred without retaining the associated risks and benefits.

4 - Loans and receivables

These are non-derivative financial assets with fixed or calculable payments that are not listed on an active market. Loans and receivables are recognised under “60.Loans and receivables with banks” and “70.Loans and receivables with customers”.

This item includes loans and receivables with customers and banks as well as the bonds mainly issued by banks.

Loans and receivables are initially recognised at the disbursement date, and debt instruments are recognised at their settlement date. Initial recognition is at fair value, which normally corresponds to the consideration paid, including directly attributable transaction costs. Subsequently, they are measured at amortised cost using the effective interest method.

The effective interest rate is the rate that matches the present value of cash flows expected throughout the life of the instrument (up to maturity or “expected” maturity, or a shorter period if appropriate) to the net carrying amount of the asset. Use of this rate to calculate interest involves the uniform distribution of interest throughout the life of the instrument.

The expected flows have been calculated considering all contractual terms of the instrument and including all fees and base points paid or received by and between the contracting parties, transaction costs and any other premium or discount that is measurable and considered an

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integral part of the effective interest rate of the transaction. If it is not possible to obtain a reliable estimate of the expected cash flows or of the expected life of the instrument, the contractual cash flows determined according to the terms set for the instrument are used instead. The amortised cost is not calculated for short-term transactions if the effect is considered immaterial and for loans without a defined maturity or revocable loans. These loans are measured at historical cost and costs/revenue related to them are recognised in the income statement on a straight-line basis over the contractual term of the loan.

At the end of each reporting period, these financial assets are tested for impairment. Evidence of impairment originates from one or more events occurring after the initial recognition of the asset, which have an impact on the estimated future cash flows of the financial asset (or group of financial assets) that can be reliably estimated.

Instruments which, based on the regulations of the Bank of Italy, have been designated as non-performing, substandard, restructured or past due/overdue have been assessed on an analytical basis.

Impaired loans are classified, in accordance with the criteria set by the Bank of Italy, as follows:

- non-performing loans: loans with customers in a state of insolvency due to the impossibility by the customer to fulfil its debt obligations, to non-compliance with a previously agreed repayment plan, to bankruptcy proceedings or to the presence of prejudicial encumbrances;

- substandard loans: these are loans to parties experiencing temporary financial hardship that are expected to be overcome within a reasonable period of time;

- restructured loans: this category comprises loans whose original contractual terms have changed giving rise to a loss for the bank due to deterioration of the original economic-financial conditions of the debtor;

- past due loans: past due and/or overdue exposures classified as impaired according to the definition of current supervisory reports, other than those classified as doubtful, substandard or restructured loans. Regarding the methods to calculate past due exposures, the approach by transaction was adopted (considering each single relationship with the debtor) with reference to the prudential portfolio of “exposures guaranteed by property” and the debtor approach for the remaining positions (these approaches are described in the Bank of Italy Circular no. 272 of 30 July 2008).

With reference to restructuring of exposures, the bank identifies two different cases:

– restructuring in the strict sense (as defined by circular 272 of the Bank of Italy described above);

– renegotiations.

The renegotiation of exposures, granted by the bank to performing customers is basically considered similar to the opening of a new position, should this be granted mainly for business reasons, other than the economic and financial problems of the debtor, and provided that the applied interest rate is a market rate at the date of renegotiation.

In the analytical testing of impaired loans, the loss is measured as the difference between the carrying amount and the present value of the future estimated cash flows discounted at the original effective interest rate of the loan. The estimated cash flows take account of the guarantees associated with the loans. In the event that the guarantees are not likely to be enforced, account will be taken of either their present value or their realisable value net of expenses to be incurred to recover the amount due. The cash flows for loans that are expected to be recovered within a short period of time are not discounted.

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The analytical impairment loss relates to expected losses on individual impaired loans. For impaired loans classified as “substandard loans”, which have a limited unitary amount, and as “past due exposures”, the expected loss is calculated by homogenous categories according to internal statistical models and analytically applied to each position.

Where the causes giving rise to previous impairment losses no longer exist, the reversal of impairment losses on previously impaired loans are recognised in the income statement.

Assets that have been individually tested and for which no impairment losses have been recorded are evaluated on a portfolio basis. The impairment loss made on a collective basis refers to losses expected on homogeneous groups of loans and is calculated according to internal statistical models.

In order to measure losses on a collective basis, financial assets are grouped based on similar credit risk characteristics representing the debtor’s capacity to pay all amounts due according to the contractual terms. The risk categories identified represent the basis for calculating historic evidence of loan impairment.

Financial assets or parts thereof are derecognised when the contractual rights to the cash flows expire or are transferred without retaining the associated risks and benefits. If a significant portion of the risks and benefits attached to the financial assets remains upon transfer of their legal ownership, they will continue to be recognised in the financial statements.

Loan repurchase agreements

These are spot purchases of securities negotiated together with the obligation of forward sale.

As all the risks connected with the title to the securities are borne by the seller, only a loan to the seller is recognised. The spreads between spot and forward prices, including the accrued interest and the share of any issue premium, are recognised on an accruals basis in the income statement items dealing with interest and similar income.

Finance leases

Loans and receivables with customers for leased assets are initially recognised at the effective date of the corresponding agreements, i.e. upon formal delivery of the asset.

Loans and receivables with customers for leased assets are stated in the financial statements at amortised cost, that is the initial value of the investment including direct costs initially incurred and any directly attributable commissions, less any capital repayment and adjusted by the amortisation calculated using the effective interest method, i.e. by discounting the future estimated payments at the effective interest rate for the estimated term of the loan. Similar criteria to the above ones are followed for impairment losses and reversals of impairment losses.

5 - Financial assets at fair value through profit or loss

This item comprises financial assets at fair value through profit and loss on the basis of an option set forth by IAS 39 (“Fair value option”) for specific cases.

The Bank did not avail itself of this option.

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6 - Hedging transactions

Hedging transactions are carried out in order to neutralise the impact of potential losses on individual or a group of financial instruments attributable to a specific risk that may have an impact on the income statement.

There are three types of hedge employed:

- Fair value hedge: This covers the exposure to risk of changes in the fair value of assets or liabilities recognised in the statement of financial position (or part of the same) or unrecognised irrevocable commitments (or part of the same) that can be attributed to a specific risk and that may have an impact on the income statement;

- Cash flow hedge: This covers the exposure to fluctuations in cash flows attributable to a specific risk associated with a recognised asset or liability (such as all or some payments of future interest on a liability with a variable interest rate) or to future transactions that are very likely to have an impact on the income statement;

- Hedge of a net investment in a foreign operation: this covers the exposure to currency risk on a net investment in a foreign currency transaction as defined by IAS 21.

The Bank adopts the Fair value hedge to hedge the interest rate risk referring to specific assets.

Fair value hedge accounting contemplates the income statement recognition of the effects deriving from the fair value change of the hedged element and of the hedging instrument.

In particular, the fair value change of the hedged element due to the change in the hedged risk increases/decreases the carrying amount of the asset offset in the income statement in the “Net hedging income (expense)” item as well as the fair value change of the derivative. Both changes in fair value indicated are calculated net of accruals/deferrals accrued that are recognised among interest. The net effect in income statement is represented by any unbalanced difference, or by the partial ineffectiveness of the hedging.

When the transaction is carried out, the hedge is formally documented through the definition of the objectives and risk management strategies on the basis of which the hedge was implemented, the hedging instrument, the hedged item, the nature of the risk hedged and how hedge effectiveness is to be measured. The hedge effectiveness is established by comparing the changes in fair value of the cash flows of the hedged instrument, with reference to the risk to be hedged, with the changes in fair value of the cash flows of the hedging instrument. The performance of the prospective and retrospective effectiveness tests are carried out on a regular basis for all the hedging period.

Hedging transactions are no longer recorded in the Financial Statements when they prove ineffective or cease to be so, the derivative expires or is sold, extinguished or exercised, the hedged instrument expires, is sold or repaid or the hedge is cancelled.

7 - Equity investments

Item “100.Equity investments” comprises the carrying amounts of equity investments in subsidiaries, associates and companies subject to joint control.

Investments in companies subject to joint control are those for which the Bank, together with other parties subject to the terms of an agreement, holds the power to control financial and operating policies with a view to gaining economic benefits from their activities; conversely,

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investments in associates are those for which the Bank exercises significant influence, i.e. has the power to take part in decisions regarding the financial and operating policies but has no further control. Significant influence is presumed when the Bank holds more than 20% of the investee’s share capital.

Investments in subsidiaries (including parties held under joint control) and associates are measured at cost at the moment of initial recognition and subsequently.

The equity investments are subject to impairment in accordance with IAS 36 when their carrying amount exceeds their recoverable amount, defined as the higher of their fair value less costs to sell and their value in use. Fair value is determined based on the best information available to reflect the amount that the entity could obtain, at the end of the reporting period, from the disposal of the asset in an arm’s length transaction between knowledgeable, willing parties, following the deduction of disposal costs. This value is determined considering the outcomes of recent transactions for similar assets carried out within the same industry sector. Value in use is calculated by using models based on the present value of the future cash flows expected.

The party who holds the asset is only required to calculate the recoverable amount if there is evidence of potential impairment. The following elements were considered in evaluating whether there was impairment:

- significant negative changes for the associates occurred during the year or will occur in the near future in the area in which the party operates;

- the market interest rates or other capital payment rates on investments have increased during the year and it is likely that these increases will influence the discount rate used in the calculation of the value in use of the equity investment and significantly reduce its recoverable amount;

- significant changes with an adverse effect on the investee company have taken place during the period, or are expected to take place in the near future;

- internal information that the financial performance of the associate or company under joint control is or will be worse than expected;

- significant financial difficulties expected in the associate or company under joint control; - the associate or company under joint control is subject to insolvency proceedings; - significant or prolonged reduction in the fair value of the associate or company under

joint control to below its cost; - quantitative indicators referred to the significant and prolonged reduction in fair value

to below the carrying amount of the financial assets. Specifically they refer to market quotations or valuations that are 30% or lower than the initial carrying amount or the recognition of quotations or valuations that are lower than carrying amount for a period of more than 18 months.

- if a dividend was recognised for investments in companies subject to joint control and associates if:

o the carrying amount of the equity investment in the separate financial statements exceeds the carrying amount in the consolidated financial statements of the net assets of the investee, including the related goodwill;

o the dividend exceeds the total comprehensive income of the jointly controlled entity or associate during the financial period in which it is declared.

In the presence of impairment indicators, the impairment is recognised to the extent that the recoverable amount is lower than the carrying amount, allocating the relative impairment loss

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to the income statement. Should the reasons for the impairment cease to exist following a subsequent event, the reversal of impairment losses is recorded in the income statement.

Equity investments are derecognised when the contractual rights to the corresponding cash flows expire or when they are sold substantially transferring all related risks and benefits.

8 – Property, equipment and investment property

Property, equipment and investment property purchased on the market are recognised as assets under “110.Property, equipment and investment property” when the main risks and benefits associated with the assets are transferred.

The “Operational property and equipment” are assets used to carry out the business, assuming that they will be used for a time period longer than the reporting period, while “Investment property” is the asset that provide rental income or held for appreciation of invested capital or both.

Initial recognition is at cost, including all directly related charges, both for the operational property and equipment and property and equipment held for investment purposes.

Land is recognised separately, even when purchased together with the building, using a component approach. Land and buildings are separately assessed on the basis of independent appraisals and only in the case of self-contained buildings.

Assets are subsequently valued at cost, adjusted for related depreciation and losses/recoveries of value.

The depreciable value of property and equipment, identified as the difference between the purchase cost and the residual value, is systematically charged on a straight-line basis over the estimated useful use of the assets according to an allocation criterion that reflects the technical-economic duration and the residual use of each asset item.

According to that criterion, the life of the different categories of property and equipment is as follows:

- for buildings, from 30 to 70 years; - for furniture, furnishings and sundry equipment, from 5 to 8 years; - for office machines, electronic security systems, from 3 to 5 years; - for motor vehicles, from 4 to 5 years.

Land and artistic assets are not subject to depreciation, as the former has an indefinite useful life and the latter normally increase in value over time.

At the end of each reporting period, if there are indications that the property, equipment and investment property may have suffered an impairment loss, the carrying amount and recoverable amount of the asset (defined as the greater of fair value and value in use) are compared and, if the latter is lower than the carrying amount, the asset is impaired.

The resulting carrying amount, after reversal of impairment, losses on an impaired asset may not exceed the carrying amount that would have been determined had there been no impairment in previous periods.

Property, equipment and investment property are derecognised when they are sold or no future economic benefits are expected from their use or disposal.

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9 - Intangible assets

Assets recognised under intangible assets are non-monetary assets, without physical substance, identifiable and able to generate future economic benefits that can be controlled by the bank. Intangible assets purchased externally are recognised as assets at purchase price when the main risks and benefits connected with the asset are transferred. Intangible assets generated internally are recognised on the basis of the directly attributable costs sustained.

All intangible assets recorded in the financial statements other than goodwill have a finite useful life and are consequently amortised in consideration of said life.

Intangible assets are derecognised when they are sold or when no future economic benefits are expected from their use or disposal.

Goodwill

Goodwill generated from business combinations represents the difference between the purchase cost, including accessory charges incurred, and the fair value at the acquisition date of the assets and liabilities of the acquired company. If positive, it is booked at cost as an asset (goodwill) as it represents the amount paid by the acquirer for the future benefits arising from assets that cannot be either identified as single components or booked separately. If negative, it is recorded directly in the income statement (excess over cost).

Goodwill recorded as an asset must be allocated to the cash-generating units to which it refers (CGU). For the separate financial statements in particular, the CGU was identified in the bank itself less the investments in associates and companies subject to joint control classified in the portfolios of Equity investments and the available-for-sale financial assets, if any, as already tested independently.

The cash-generating unit to which goodwill has been allocated is tested annually for impairment or every time there is an indication that the unit may have undergone an impairment.

In accordance with IAS 36, an asset is subject to impairment when its carrying amount exceeds its recoverable amount, or the higher of its fair value less costs to sell and its value in use. Fair value is determined based on the best information available to reflect the amount that the entity could obtain, at the end of the reporting period, from the disposal of the asset in an arm’s length transaction between knowledgeable, willing parties, following the deduction of disposal costs. This value is determined considering the outcomes of recent transactions for similar assets carried out within the same industry sector. Value in use is calculated by using models based on the present value of the future cash flows expected. In particular, the adopted model assumes that the value of the asset results from the present value of the future distributable cash flows including the excess or lack of Tier 1 ratio at the end of the reference period compared to a pre-established minimum objective and from the terminal value calculated as perpetual income estimated in accordance with an economically sustainable normalised cash flow and consistent with the long-term growth rate. Any difference between the carrying amount and the recoverable amount will be recognised in the income statement.

Other intangible assets

These mainly comprise intangible assets with a definite useful life recognised on application of IFRS 3 - Business combinations and identified in the process of allocating the cost of the business combination. These assets, represented by the valuation of the transactions with

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customers, comprise the “core deposits” and the “assets under management” that are amortised on a straight-line basis considering the estimated useful life (maximum 16 years), while the residual value is assumed to be zero.

According to IAS 36, the recoverable amount of the intangible assets with a definite useful life must be calculated every time there is evidence of impairment. The impairment test must be made by comparing the carrying amount of the asset with its recoverable amount. An impairment loss must be recognised where the recoverable amount is lower than the carrying amount. The recoverable amount of the asset is the higher between its fair value net of costs to sell and its value in use. In order to calculate the value in use of the intangible asset, reference must be made to its cash flows in current conditions on the impairment test date, regardless of the fact that these flows were generated by the assets originally recognised when applying IFRS 3.

10 - Non-current assets held for sale

Non-current assets must be classified as held for sale if their carrying amount will be recovered principally through a sale rather than through continuous use. In order for this to occur, the asset must be available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such assets and its sale must be highly probable. Once classified as held for sale, the asset is valued at the lower of its carrying amount and its fair value less costs to sell.

Income and expenses (net of the tax effect), related to disposal groups or recognised as such during the financial year, are recognised in the income statement in a separate item.

11 - Current and deferred taxation

Current taxes are recognised in the Statement of financial position under tax liabilities. If the amount already paid in respect of current and prior periods exceeds the amount due for those periods, the excess must be recognised in the statement of financial position as a tax asset.

Deferred taxation is recognised according to the statement of financial position method, whereby deferred taxes are recognised by comparing the carrying amounts book and tax bases of the items included under assets and liabilities in the statement of financial position.

If these differences in value cause future increases or decreases in the taxable income of a subsequent period, they are defined as timing differences:

- deductible timing differences are those that will generate a future reduction in the total taxable amount, as they are non-deductible this year (e.g. an accrual to a provision that does not meet the tax requirements for its deduction in the recognition period). To the extent that a future taxable amount is likely to be available, which can be used to offset the deductible timing differences, deferred tax assets must be recorded;

- taxable timing differences are those differences that create deferred tax liabilities, as they generate taxable amounts in future years, as they are deductible or non-taxable in the current year (e.g. a capital gain subject to deferred taxation). The relevant deferred tax liabilities are recorded for any other taxable timing difference.

Recognitions of deferred tax liabilities and deferred tax assets is reviewed periodically to take into account any change in rates or tax regulation or a new estimate of the probability of recovering the deductive timing differences.

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With reference to goodwill and to other intangible assets that were recognised for tax purposes by paying special substitute taxes, the second method proposed in the document of the OIC “Accounting treatment of the substitute tax on the exemption of goodwill ex Article 15, paragraph 10, of Italian Law Decree no. 185/2008”, which provides for the recognition of deferred tax assets for an amount totalling the tax benefit expected from the future deductibility of exempted taxes, with income statement recognition of the entire amount of the substitute tax paied.

In the following tax periods, the tax asset will be released to the income statement according to the share deductible on an annual basis of the goodwill or other intangible asset exempted (currently, to the maximum extent of one-tenth per tax period).

Deferred tax liabilities and assets are not discounted as envisaged by IAS 12.

12 - Provisions for risks and charges

Provisions for risks and charges are recorded when the bank has a present obligation (legal or constructive) resulting from a past event, when it is probable that an outflow of resources representing economic benefits will be required to settle the obligation, whose amount can be reliably estimated.

The amount recorded represents the present value of the amount that a company would reasonably pay in order to extinguish the obligation at the end of the reporting period. If the impact of the temporary deferral of the obligation is considered insignificant, the amount is not discounted.

Such provisions are measured at every reporting date and adjusted in order to reflect the best current estimate. If it is no longer likely that the resources producing economic benefits will be used to meet the obligation, the provision is reversed and any excess is recorded in the income statement.

Company pension funds

Pensions, set up on the basis of internal agreements, are defined as provisions for employee benefits to be paid once they stop working for the company. The provisions present at the end of the reporting period are classified as defined benefit plans. A defined benefit plan is a post-employment benefit plan according to which the bank has the obligation to pay to its employees the benefit agreed.

The determination of the obligation and the defined benefit plan costs must be calculated in a reliable manner, the amount of employee benefits matured in accordance with the work carried out in the current year and previous years. Present values are calculated using the “projected unit credit method”. Actuarial gains and losses from changes in the actuarial assumptions previously applied, entail a restatement of the liability and are recognised as an offsetting item to equity reserve shown in the statement of comprehensive income.

13 - Liabilities and securities issued

Financial instruments issued are classified as liabilities when, according to the substance of the agreement, the Bank has a contractual obligation to deliver cash or another financial asset to another entity. Outstanding amounts due to banks and customers and securities issued

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represent the funding collected on the inter-bank market and from customers also through the placement of bonds and certificates of deposit.