consolidated half-year report at 30 june 2013

Transcription

Gruppo Banca Popolare di Vicenza
Relazione intermedia sulla gestione al 30 giugno 2012
CONSOLIDATED HALF-YEAR REPORT AT 30
JUNE 2013
(Translation from the Italian original which remains the definitive version)
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Banca Popolare di Vicenza Group
Half-year report at 30 June 2013
Contents
BPVI GROUP STRUCTURE AT 30 JUNE 2013 ............................................................................................................................ - 4 PRINCIPAL DATA AND SUMMARY INDICATORS FOR THE BPVI GROUP .................................................................... - 5 TERRITORIAL PRESENCE OF THE BPVI GROUP AT 30 JUNE 2013 (Research Department) ........................................... - 6 ECONOMIC AND FINANCIAL SCENARIO ............................................................................................................................. - 8 CHANGES IN THE REGULATORY AND TAX FRAMEWORK ............................................................................................ - 13 GROWTH OF THE BPVI GROUP: ACTIVITIES WITH STRATEGIC IMPORTANCE ....................................................... - 15 OPERATIONAL STRUCTURE .................................................................................................................................................... - 23 RESEARCH AND DEVELOPMENT........................................................................................................................................... - 30 SYSTEM OF INTERNAL CONTROLS AND AUDITING ....................................................................................................... - 31 CORPORATE SOCIAL RESPONSIBILITY AND IMAGE ........................................................................................................ - 51 TRANSACTIONS WITH RELATED PARTIES, SIGNIFICANT NON-RECURRING AND ATYPICAL AND/OR
UNUSUAL TRANSACTIONS ..................................................................................................................................................... - 53 SIGNIFICANT SUBSEQUENT EVENTS .................................................................................................................................... - 55 MAIN RISKS AND UNCERTAINTIES AND OUTLOOK FOR OPERATIONS ................................................................... - 56 GLOSSARY ..................................................................................................................................................................................... - 57 CONSOLIDATED STATEMENT OF FINANCIAL POSITION .............................................................................................. - 64 CONSOLIDATED INCOME STATEMENT ............................................................................................................................... - 66 STATEMENT OF CONSOLIDATED COMPREHENSIVE INCOME ..................................................................................... - 67 STATEMENT OF CHANGES IN CONSOLIDATED EQUITY ................................................................................................ - 68 STATEMENT OF CONSOLIDATED CASH FLOWS ............................................................................................................... - 70 EXPLANATORY NOTES ............................................................................................................................................................. - 71 CERTIFICATION OF THE FINANCIAL REPORTING MANAGER ................................................................................... - 145 AUDITORS‟ REPORT ON REVIEW OF CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS .. - 147 -
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BPVI GROUP STRUCTURE AT 30 JUNE 2013
Banks
0.04%
Banca Nuova S.p.A.
100%
Asset Management
Farbanca S.p.A.
66.81%
B.P.Vi Fondi SGR S.p.A.
100%
1.00%
Corporate & Investment Banking
Product companies
BPVi Multicredito
Agenzia in Attività
Finanziaria S.p.A.
100%
Prestinuova S.p.A.
100%
Nordest Merchant S.p.A.
100%
Proprietary Trading
BPV Finance
International Plc
99.99%
1.00%
Service companies
Servizi Bancari
S.c.p.A.
96%
1.00%
0,04%
Immobiliare Stampa
S.c.p.A.
99.92%
BPVi Covered Bond
S.r.l.
60%
Pop. Vicenza Assessoria
e Consultoria LTDA
99%
BERICA MBS S.r.l
100%
BERICA 2 MBS S.r.l
100%
BERICA 3 MBS S.r.l
100%
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100%
NEM SGR S.p.A.
PRINCIPAL DATA AND SUMMARY INDICATORS FOR THE BPVI GROUP
Statement of Financial Position figures, Regulatory
Capital and Capital adequacy ratios
(in million of euro)
Banking business
- of which Direct funding
- of which Indirect funding
- of which Loans to customers
Net interbank position
Financial cash exposures
- of which Financial assets available for sale
Property, plant and equipment and intangible assets
- of which land and buildings
- of which goodwill
Total Assets
Equity (including net income for the period)
Tier 1 capital (1)
Regulatory capital (1)
Risk-weighted assets (1)
Core Tier 1 Capital Ratio (1)
Tier 1 Capital Ratio (1)
Total Capital Ratio (1)
Reclassified Income Statement figures (2)
Net financial income
Net operating income
Net operating costs
Net profit from operating activities
Net impairment adjustments
Net income for the period before income tax
Net income
Other information and indicators
Number of employees at the end of the period
Average number of employees (3)
Outlets
Loans to customers / direct funding
Total Assets / equity (leverage)
Cost/Income (4)
Net impaired loans /net loans
Net non-performing loans/net loans
Impaired loans coverage (%) (5)
Non-performing loans coverage (%) (5)
Performing loans coverage (%) (6)
Credit cost (7)
30/06/2013 31/12/2012 30/06/2012
82,242
33,230
17,803
31,209
-3,595
7,013
6,851
1,565
520
927
46,478
3,222
2,349
3,201
28,951
8.11%
8.11%
11.06%
80,689
32,387
17,589
30,713
-3,017
5,738
5,566
1,580
524
943
46,709
3,322
2,375
3,250
28,851
8.23%
8.23%
11.26%
76,618
29,592
16,756
30,270
-4,947
5,365
4,412
1,575
466
943
44,062
3,035
2,371
3,275
28,904
8.20%
8.20%
11.33%
30/06/2013 31/12/2012 30/06/2012
268.4
545.6
-328.6
216.9
-193.0
20.2
1.6
531.1
1,054.9
-672.3
382.6
-242.6
133.5
100.3
262.2
530.2
-332.3
197.9
-111.5
79.2
69.4
30/06/2013 31/12/2012 30/06/2012
5,498
5,284
690
93.92%
14,4 x
58.78%
11.39%
4.60%
30.21%
48.03%
0.39%
1.24%
5,496
5,314
691
94.83%
14,1 x
62.01%
10.49%
4.14%
29.64%
47.94%
0.38%
0.71%
5,541
5,332
685
102.29%
14,5 x
60.80%
9.64%
3.64%
30.20%
50.13%
0.28%
0.61%
Changes
Changes
30/06/13 - 31/12/12 30/06/13 - 30/06/2012
(+/-)
%
(+/-)
%
1,553
843
214
496
-578
1,275
1,284
-15
-4
-16
-231
-100
-26
-49
100
-0.12 p.p.
-0.12 p.p.
-0.20 p.p.
1.9%
2.6%
1.2%
1.6%
19.2%
22.2%
23.1%
-0.9%
-0.8%
-1.7%
-0.5%
-3.0%
-1.1%
-1.5%
0.3%
5,624
3,638
1,047
939
1,353
1,648
2,439
-10
54
-16
2,416
187
-22
-74
47
-0.09 p.p.
-0.09 p.p.
-0.27 p.p.
7.3%
12.3%
6.2%
3.1%
-27.3%
30.7%
55.3%
-0.6%
11.6%
-1.7%
5.5%
6.2%
-0.9%
-2.3%
0.2%
Changes
Changes
30/06/13 - 31/12/12 30/06/13 - 30/06/2012
(+/-)
%
(+/-)
%
n.s.
n.s.
n.s.
n.s.
n.s.
n.s.
n.s.
n.s.
n.s.
n.s.
n.s.
n.s.
n.s.
n.s.
6.2
15.4
3.7
19.0
-81.5
-59.0
-67.8
2.4%
2.9%
-1.1%
9.6%
73.1%
-74.5%
-97.7%
Changes
Changes
30/06/13 - 31/12/12 30/06/13 - 30/06/2012
(+/-)
%
(+/-)
%
2
-30
-1
-0.91 p.p.
0,3 x
-3.23 p.p.
0.90 p.p.
0.46 p.p.
0.57 p.p.
0.09 p.p.
0.01 p.p.
0.53 p.p.
0.0%
-0.6%
-0.1%
-43
-48
5
-8.37 p.p.
-0,1 x
-2.02 p.p.
1.75 p.p.
0.96 p.p.
0.01 p.p.
-2.10 p.p.
0.11 p.p.
0.63 p.p.
-0.8%
-0.9%
0.7%
The figures on Capital adequacy ratios at 30 June 2013 may differ marginally from those that will be reported to the Bank of Italy within
the required deadline.
(2) For the reconciliation between the reclassified income statement data and the Income Statement items prescribed by Bank of Italy
Circular no. 262, reference is explicitly made to the “key” provided in the paragraph “Comment to the income statement” of the
explanatory notes.
(3) The average number of employees is calculated in accordance with the indications contained in Bank of Italy Circular n. 262 dated 22
December 2005 and subsequent amendments.
(4) This indicator is calculated by dividing “operating costs” (income statement item 230) after net allocations to provisions for risks and
charges and including the “commission for draw downs outside credit lines” by net interest and other banking income (income statement
item 120 net of the “commission for draw downs outside credit lines”).
(5) The coverage is determined including “memorandum accounts” pertaining to write-offs for bankruptcy proceedings in progress at the
reporting date. The figure of 30 June 2013, for consistency of comparison with 31 December 2012, also includes the gross exposures (Euro
40.7 million) and the related adjustments (Euro 38.5 million) referred to non-performing loans sold during the half year.
(6) The coverage is determined excluding repurchase agreements and guarantee margins.
(7) The indicator is calculated by annualising the ratio between “Net impairment adjustments on: loans and advances” and gross customer
loans, excluding guarantee margins and repurchase agreements because neither one is impaired.
(1)
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TERRITORIAL PRESENCE OF THE BPVI GROUP AT 30 JUNE 2013 (Research
Department)
2
88
2
5
64
259
BPVi
16
91
Banca Nuova
2
16
Farbanca
1
1
1
14
78
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The sales network of the
BPVi's Group
30/06/2013
Branches
Finance
Shops
Private
Customer
Points
Financial
Spaces
TOTAL
Comp. %
Banca Popolare di Vicenza
Banca Nuova
Farbanca
Prestinuova
546
93
1
-
15
-
28
4
-
3
574
112
1
3
83.2%
16.2%
0.1%
0.4%
Total
640
15
32
3
690
100.0%
30/06/2013
Geographical distribution of branches
Number
Comp. %
Northern Italy
Central Italy
Southern Italy
436
110
94
68.1%
17.2%
14.7%
Total
640
100.0%
Presence abroad
BPVi Representative Office
Bancassurance and Proprietary Trading Companies
Partnership with Banks of Eastern Europe
International desks
- Slovenia
- Slovak Republic
Ireland
- BPVi Finance
- Cattolica Life
- Hungary
- Czech Republic
- Croatia
China
- Hong Kong
- Shanghai
- Romania
U.S.A
New York
- Bosnia
(opened in February 2012)
India
- New Delhi
Brasil
San Paulo
(operating from January 2011)
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ECONOMIC AND FINANCIAL SCENARIO
OVERVIEW OF THE INTERNATIONAL MACROECONOMIC SCENARIO
In the initial months of 2013, the international economy benefited from the consolidation of the
recovery in the United States, where the negative repercussions of the budget policy were less
severe than expected, and from economic expansion in Japan. For the current year, according to the
most recent estimates by the International Monetary Fund, global growth will remain at the levels of
2012, intensifying only from 2014 onwards when it will reach 3.8%.
In detail, in the first quarter of 2013 the United States returned to accelerate its economic growth,
although the decline in export and the substantial stability of productive investments are harbingers
of modest growth in the second quarter of the year. While the main emerging economies are
characterised by higher growth rates than advanced economies, they slowed down in the first three
months of the year, particularly in China.
In the Euro Area, instead, the recession was not avoided, leading to a worsening situation for
peripheral countries. Economic performance deteriorated progressively, recording the sixth
consecutive contraction in GDP (-0.3%) in the first quarter of the year. The industrial production
data and the other economic activity indicators show that the situation started slowly to improve in
the second quarter of the year, but the pace of recovery remains gradual and low. Estimated GDP
for the second quarter of 2013 points to a return to growth, albeit minimal, i.e. 0.3% compared to the
previous quarter, hence attesting Europe‟s tottering exit from the recession.
The relatively weak European economic scenario was clearly confirmed in the trends of the Italian
economy. Our Country’s economic performance was mostly affected by the weakening domestic
demand, thus contributing to the eighth consecutive contraction of the Gross Domestic Product,
which in the second quarter declined by -0.2% compared to the previous quarter. However, most
recently production showed the first positive signs of a trend reversal, which need to be
consolidated in the second part of the year.
EURO AREA
In the Euro Area, GDP continued to decline in the first quarter of 2013, exhibiting the sixth
consecutive contraction, by -0.3% compared to the previous quarter (-0.6% in the fourth quarter of
2012); according to Mr. Mario Draghi, ECB Chairman, the gradual recovery of the European
economy will take place towards the end of the year, driven by exports, by the monetary policy, set
to remain accommodating, and by the stable inflation at modest levels. The decline in the first three
months of the year reflects mainly the contractions in Italy, Spain (respectively -0.6% over the
previous quarter and -0.5%) and France (-0.2% in quarterly terms) and the slowdown of growth in
Germany (+0.1% in quarterly terms). The first estimates for the second quarter of 2013 point to a
return to growth in GDP, albeit minimal, i.e. 0.3% compared to the previous quarter, hence attesting
Europe‟s tottering exit from the recession.
However, the economic indicators for the second quarter of the year point to some progress, but
with gradual recovery times. Industrial production exhibited an improving trend in the first
months of 2013, confirmed by the growth recorded in June (+0.7% compared to May), but still
remaining close to the previous years levels (+0.3% year on year). In June, the manufacturing PMI
(Purchasing Managers Index) grew for the fourth consecutive time, signalling the first, modest,
expansion in the industry after more than two years, and in the same month, business confidence
also improved in all major Euro Area countries.
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The evolution of domestic demand still remains weak: retail sales, after their May recovery,
exhibited a new contraction in June (-0.5% on a monthly basis), reaching lower levels than the
previous year (-0.9% compared to June 2012)
From the beginning of the year, the deterioration in consumer confidence stopped, with a modest
return to optimism, albeit penalised by the challenging labour market situation: the European
unemployment rate remained at historical highs in June (12.1%), the new historical high point, up
by 0.7 percentage points compared to June 2012.
The performance of foreign trade, which in past years, given the weakness of the domestic market,
had bolstered the European economy, was lacklustre in the first six months of 2013, with exports
1.6% higher than in the same period of 2012 (while imports declined by -4.2%).
The general lack of dynamism on the front of production and trade is also evidenced by the
attenuation in inflationary pressures, with the consumer price index remaining at moderate levels
(+1.6% in July), below the medium/long term targets of the ECB.
INTERNATIONAL MONETARY POLICY
In an environment characterised by slow economic growth and by low inflation expectations, the
monetary policies in the main advanced Countries remain strongly expansionary in the first months
of the year. The FED confirmed that Fed Funds rates will be kept in the range between 0.0% and
0.25%, as long as the unemployment rate stays high and inflation expectations remain low. In
addition, the FED left unchanged the amount of the monthly purchases of securitised mortgages
and Treasury bonds (85 billion US Dollars per month), stating in June that if the data confirm the
recent improvement in the economic scenario, a progressive reduction in the amount of the
purchases and a suspension of the programme around mid-2014 are possible.
The accommodating policies of the Bank of England and of the Bank of Japan were also
unchanged: they both left the reference rates as they were (respectively, 0.5% and between 0.0%
and 0.1%) and they intensified their financial securities purchase programmes as they attempt to
support the economy. Specifically, Bank of Japan, in order to achieve the 2% inflation target,
confirmed the monetary expansion plan, involving amounts between 60 and 70 trillion Yen per year,
with the simultaneous purchase of maturing government bonds.
The Governing Council of the European Central Bank, in its early May meeting, cut the reference
rate by 25 basis points, to 0.5%, the lowest level ever reached in the history of the institution. In
early July, the Council announced that official rates will be maintained at current levels, or even
lower, for a prolonged time interval, because of the conditions of moderate inflation (below 2%), of
the weak economy and of the modest monetary base growth. Among the significant
unconventional measures introduced by the ECB in 2012 and confirmed in 2013 were the LTRO
(Longer Term Refinancing Operations), i.e. 36-month refinancing operations in favour of European
banks, and the OMT (Outright Monetary Transactions), i.e. extraordinary interventions to restore
the ordinary transmission of monetary policy to the markets. This latter instrument, in particular,
consists of purchases, for a potentially unlimited amount, of government bonds with maturity
between 1 and 3 years for those countries (none, at present) that previously activated an ESM or
EFSF financial aid programme.
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THE ITALIAN ECONOMY
In Italy, the economic environment, which still remains recessionary, is starting to show the first
positive signs of a possible trend reversal. In the second quarter of 2013, GDP declined less
markedly (-0.2% was GDP change from the previous year, according to the initial ISTAT estimate,
an improvement from -0.6% in the first quarter of 2013), but value added continues to decline in all
three major economic sectors: farming, industry and services. According to analysts‟ forecasts, the
GDP could stabilise in the second half of the year, whilst an economic recovery, however modest,
will not take place before 2014.
Another positive sign for the economy is given by industrial production: in June, it slowed down its
declining trend, started at the end of 2011, reaching -2.1%, a lower value than the previous year and,
above all, it exhibited a recovery of industrial activity on a monthly basis (+0.3% m/m).
The most recent qualitative indicators also point to favourable dynamics; in particular, business
confidence and expectations, after declining in June, resumed improving in July, albeit remaining
at very low levels. In addition, in July the manufacturing PMI (Purchasing Managers Index),
returned to expanding territory, recording the highest value of the last 26 months.
On the other hand, signs of weakness are perceived if one takes into consideration internal
consumption, which continues to decrease, affected by the prolonged decline in disposable income
and the severe uncertainty that characterises the labour market; with regard to this aspect, of note is
the worrying drop in employment - in June, the number of jobs was lower by nearly 414 thousand
than the previous year - and the rise in unemployment, which reached 12.1%, a record high, with
youth unemployment sharply above the European average (39.1% versus 23.9% in the Euro Area).
Consumer confidence indicators, on the other hand, recovered again in July after a stabilisation
period.
Foreign demand also continues to slow down: exports contracted modestly in the first five months
of the year, by -0.4% compared to the same period of 2012, sustained exclusively by trade with nonEU Countries (+3.0% in the period), while trade between Italy and the other European Countries
contracted (-3.1% year on year). Imports, instead, declined by -7.0% in the first half of the year,
compared to the same period of the previous year, as result of the weakness of consumption and
internal investments.
Inflation remained low throughout the first half of the year. In July 2013, the general consumer
price index grew only by +1.2% per year, slowing down from +3.3% in June 2012. Core inflation
(i.e. net of energy and food products), instead, grew by +1.1% per year.
Lastly, public finance data provide negative signals. Based on the latest information available from
the Bank of Italy, in June 2013 public debt reached a new record high at Euro 2,075.1 billion, up by
+4.3% (Euro +86 billion) compared to the end of 2012; the public debt to GDP ratio also increased in
the first three months of the year, reaching 130.3% from 127% of the last quarter of 2012. The
Government, in the April Economic and Financial Document (DEF), projected a decline in the
debt/GDP ratio, in the presence of an economic recovery expected from 2014 onwards. A positive
note is that the excessive deficit procedure against Italy, opened in 2009, was closed: the
Government succeeded in bringing the deficit to GDP ratio below the 3% threshold in 2012.
According to the DEF, this year the deficit will decrease slightly, to 2.9%, and will then drop to 1.8%
in 2014.
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CREDIT AND SAVINGS DYNAMICS
The recession and, to a lesser extent, the effects of the sovereign debt crisis continued to penalise
the operations of Italian banks in the first six months of 2013 as well. The progressive worsening
of business creditworthiness, coupled with the weak demand for loans, led to a consequent
contraction in lending, in spite of the improvement in lending conditions, which benefited from the
normalisation of international financial markets.
As to the evolution of rates, the attenuating tensions on the market for Italian sovereign debt, in
spite of the volatility caused by the instability of the domestic political scenario, led to the a
reduction, albeit modest, of the cost of funding in the first six months of the year. On the loans
front, the ever greater counterparty risk led banks to raise spreads on loans. In spite of this, the
level of rates on loans remained substantially unchanged in the first six months of the year, thanks
to the reduction in the cost of deposits.
Deposits
In the first six months of 2013, the abated tensions on financial markets enabled Italian banks’
funding activity to continue growing. In June 2013, Italian banks’ direct deposits1 from residents
grew by 2.2, versus +3.6% in December 2012, though there was a slightly negative change (-0.3%) in
the first half of the year. This trend benefited in particular from the expansion of deposits, which
grew by 6.3% (+1.1% from December 2012), thanks to the positive performance of all technical
forms. In particular, the strong growth of deposits with pre-set duration continues, and they
exceeded the levels of June 2012 by 14.5% (+2.2% from the start of the year), due to the process of
recomposition of savings towards alternative forms of investment that are still liquid, but have
higher returns than current account deposits, which nonetheless exhibited a positive performance
in June, growing by +4.1% year on year (+0.8% is the change from the start of the year). Bond
funding2, particularly penalised by the rating companies‟ repeated downgrades of issuers and by
the greater availability of loans from other sources, was lower by -9.5% compared to June 2012, with
a decline of -7.1% in the first six months of the year alone. The normalising conditions on
international financial markets and the return of foreign investors‟ confidence are also obvious if
one observes the performance of repurchase agreements, which grew by 14.4% year on year
(+16.1% from the start of the year) as a result of the intense interbank operations guaranteed by
central counterparties, which reflect interbank transactions with foreign operators, and of deposits
from foreign countries, which in the first six months of the year, after a prolonged period of
contraction, had a positive performance (growing by +2.3% compared to December 2012), although
it is still lower by -5.3% compared to the levels of June 2012.
With regard to indirect deposits, the first months of 2013 exhibited a trend reversal compared to the
previous year, with positive net transfers due to the lower returns offered by government securities
and to the return to placement of asset management products thanks to the attenuating tensions on
the bank liquidity front.
According to the most recent data published by Assogestioni (the Italian association of the major
asset management firms in the industry, which monitors asset management market performance) in
the first 6 months of 2013, over Euro 38 billion flowed into funds and asset management products,
thus marking 6 consecutive months of positive net investment, thanks to new transfers from
investors; of these, approximately Euro 2.5 billion were in June alone.
In June 2013 total assets under management amounted to Euro 1,242 billion, up by +4.0%
compared to December 2012 (Euro +48 billion), thanks both to the new inflows and to the positive
performance of the markets.
1
2
The aggregate does not include the bonds issued by Italian banks and bought back by them.
See previous note.
- 11 -
Bank lending and credit risk indicators
In the first half of 2013 lending activities in Italy contracted, in spite of the improvement in banks‟
lending conditions, as a result of the effects of the negative phase of the economic cycle, which led to
a worsened business creditworthiness and weak demand for loans on the part of businesses and
households.
In June 2013, gross lending to the private sector3 declined by -1.6% year on year (-2.1% compared
to the end of 2012), although operations with central counterparties (counterparty included among
“other financial institutions”) up by +107.5% year on year and by +4.0% since the end of 2012, net of
which lending declined by -3.6% (-2.3% since the start of the year). The lending contraction
particularly involved businesses and households, with respect to which banks reduced lending by 3.4% year on year (-1.9 compared to December 2012). The credit contraction is more evident with
regard to lending to businesses, which contracted sharply (-4.8% year on year, -2.8% in the first six
months of the year), tied mostly to the high perception of counterparty risk by bank, because of the
economic crisis, which led to more restrictive criteria for granting credit applied by banks The
contraction in loans to households, instead, was less significant: in June, they decreased by -1.4%
per year (-0.6% compared to the end of 2012), penalised both by the decline in the consumer credit
segment and, above all, by the reduction in mortgages, tied to the worsening real estate market.
The persistence of the recession experienced by our Country exacerbated the deterioration in the
quality of banks’ loan portfolios. In June 2013, the stock of gross non-performing loans was
+22.0% higher than the previous year, (growth from the start of the year was +10.5%), bringing the
ratio of gross non-performing loans to total lending to 7.08%, from 5.72% in June 2012 (6.28% at
the end of 2012). Significant increases were also noted on the other categories of hardship loans
(watchlist, overdue and restructured exposures), whose impact on total lending, according to the
latest available data, rose by 5.61% in December 2012 to 5.95% of the first quarter of 2013.
Bank interest rates
In June 2013, the average rate on deposits (weighted average rate of deposits, Pct and bonds)
declined to 1.96%, down by -13 basis points compared to June of the previous year (the reduction in
the first six months of the year was -12 basis points). This performance is the result of a contraction
in the average rate on deposits (-16 basis points relative to June 2012, -17 from December 2012),
thanks to the reduction in the BTP-BUND spread and to banks‟ lower need for liquidity. On the
other hand, the average bond yield raises (+7 basis points year on year, +6 compared to December
2012).
On the assets front, there was a progressive reduction in the conditions applied, both on stocks
and on new issues. In June 2013, the weighted average rate of loans to households and nonfinancial businesses was 3.76%, down by -21 basis points from the previous year, but by only -3
points since the end of 2012. This trend, particularly evident on loans with longer maturity, was
affected above all by the marked decline in the market rates used to index the loans.
The decline in lending rates, sharper than for funding rates, led to a contraction in the banking
spread, which declined by -9 basis points overall compared to the previous year, although it did
grow by +9 basis points since the end of 2012.
3
The private sector includes loans to: Insurance companies and pension funds, other financial institutions, businesses and households.
- 12 -
CHANGES IN THE REGULATORY AND TAX FRAMEWORK
The main regulatory and fiscal changes that occurred in the first half of 2013 are described below.
With regard to finance and corporate law, first of all, Italian Legislative Decree no. 91/2012
changed the rules prescribed in Italian Legislative Decree no. 58/98 (Italy‟s Consolidated Financial
Markets Act – TUF) for issuers of financial instruments held by the public and for co-operatives. On
one hand, the Decree repealed, effective 1 January 2013, Article 116, Paragraph 2-ter of the TUF,
which extended to issuers of financial instruments held by the public the enforcement of a series of
rules prescribed for companies with listed shares, while on the other hand the Decree made
significant changes to the rules applicable to co-operatives with listed shares, reformulating the
entire section II-bis of the TUF (articles 135 et seq.). As a result of this measure, today the rules for
co-operatives with listed shares are more consistent than those for the other companies with listed
shares. In particular, by effect of the provisions of the Decree, co-operatives qualified as “issuers of
financial instruments held by the public” today must comply, without exceptions, with the same
rules generally prescribed for this type of issuer.
In 2013, from the reform of the TUF brought about by the regulatory measures of 2012 (in particular:
Legislative Decree no. 91/2012, Legislative Decree no. 184/2012 and Legislative Decree no.
179/2012 (the “Second Development Decree”), subsequently converted into Italian Law no. 221 of
17 December 2012, stemmed the consequent and related reforming initiative by Consob on the
provisions of the Issuers’ Regulations for co-operatives. In particular, the changes, introduced by
the Supervisory Board with its resolution no. 18523 of 10 April 2013, concerned the regulatory
provisions that prescribe, for listed co-operatives, specific obligations to disclose to the public and to
Consob certain information which must be publicised before the shareholders‟ meeting, and a
specific set of rules for the election and appointment of the members of the governing and
controlling bodies by list voting.
Subsequently, still pursuing the goal of simplifying and rationalising current regulations, on 3 May
2013 Consob submitted for consultation some additional proposals to amend the Issuers‟
Regulations that stemmed, on one hand, from the update of the European Union‟s regulatory
framework, involving regulatory provisions for the prospectus to be published for the public
offering or initial listing of financial instruments, and, on the other hand, from the legislative
changes made to the TUF with regard to price sensitive disclosure, shareholders‟ rights and price
quotes. Additionally, some amendment proposals derive from the application practice and they
involve the rules covering takeover bids, listing and disclosure obligations.
With regard to banking law, and specifically to regulations, with its instruction of 29 March 2013,
Bank of Italy implemented Directive 2008/48/EC on credit agreements for consumers, changing
the assumptions for the calculation of the effective annual rate (TAEG) and allowing intermediaries
no more than 90 days to comply, from the date of publication of the instruction on the Official
Gazette of the Republic of Italy.
Subsequently, on 3 April 2013 Bank of Italy issued the following instructions, published in Ordinary
Supplement no. 35 of the Official Gazette no. 105 of 7 May 2013, which will enter into force on 1
January 2014:
–
the Instruction containing implementing provisions for the adequate checking of
customers, in accordance with Article 7, Paragraph 2, of Italian Legislative Decree no.
231/2007 (regulations against money laundering),
–
the Instruction containing implementing provisions for keeping the unified computerised
archive and for the simplified recording procedures per Article 37, Paragraphs 7 and 8, of
Italian Legislative Decree no. 231 of 21 November 2007.
In June 2013, Bank of Italy submitted for public consultation certain amendments to the provisions
for the transparency of transactions and of banking and financial services and for proper relations
between intermediaries and customers (Bank of Italy instruction of 29 July 2009, and subsequent
amendments). The proposed amendments incorporate the innovations made to the regulatory
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framework and the application practice in recent years, further simplify the disclosure documents
and provide clarifications on current rules.
On 5 June 2013, DPCM 22/02/2013 entered into force (it is referenced by Italian Legislative Decree
no. 82/2005 “Digital Administration Code” – CAD) which set out the awaited technical rules to
make the Advanced Electronic Signature operational and legally valid. In this regard, the
aforementioned “Second Development Decree” allowed use of the advanced electronic signature to
sign documents that require the written form in order not to be invalid in accordance with Article
1350, number 13), of the Italian Civil Code (such as banking agreements per Article 117 of Italian
Legislative Decree 385/1993 – Consolidated Law on Banking and Lending).
Lastly, on 2 July 2013, Bank of Italy updated Circular no. 263 of 27 December 2006 “New
prudential supervisory instructions for banks”, by inserting, in Title V, Chapter 7 “The internal
control system”, Chapter 8 “The reporting system” and Chapter 9 “Operating continuity” with the
goal of enhancing the ability of banks and banking groups to control corporate risks, creating a
comprehensive regulatory framework that is consistent with best international practices and with
the recommendations of major international bodies (Financial Stability Board, Basel Committee on
Banking Supervision, EBA).
With regard to regulatory changes on tax-related matters, the main changes are provided in Law
no. 228 of 24 December 2012 (2013 Stability Law) containing provisions for the preparation of the
annual and multi-annual State budget, in force since 1 January 2013.
On VAT matters, the Stability Law prescribed that, effective from 1 January 2013, individual
portfolio management activities shall be subject to VAT (with the ordinary rate of 21%): the change
was introduced to implement the indications of the European Court of Justice, contained in the
decision of 16 July 2012, case C-44/11.
Moreover, planned increase by two percentage points that had been provided by Article 40 of Law
Decree no. 98/2011 was repealed, providing that the ordinary VAT rate shall change by one
percentage point, from 21% to 22%. The increase of the VAT rate by one percentage point, originally
due to take effect from 1 July 2013, was postponed to 1 October 2013 by Italian Law Decree no. 76 of
28 June 2013. To offset the deferral of the VAT rate change to 22%, the aforementioned Law Decree
no. 76/2013 raised the amounts to be advanced for direct taxes to be paid for 2013, and of the
advances due by credit institutions in relation to the taxes withheld on interest and on other capital
income.
The Stability Law also established a new tax on financial transactions, which adheres to the
principles contained in the regulations being examined by European lawmakers, within the scope of
the “strengthened cooperation” project, involving 10 nations, including Italy. The new tax (known
as “Tobin Tax”) applies to transfers of the ownership of stocks and other equity instruments issued
by companies residing in Italy, to derivatives, to futures and to the equivalent transactions whose
underlying assets are mainly stocks or other equity instruments issued by resident companies, and
on the value of cancelled or modified orders, relating to financial instruments affected by the Tobin
Tax, within the scope of so-called “high-frequency” trading in excess of a certain threshold to be set
by ministerial decree. The new tax shall progressively enter into force over time: for stocks and the
other equity financial instruments, the tax applies for transactions completed from 1 March 2013
onwards, whereas for derivatives its entry into force, initially prescribed for transactions completed
from 1 July 2013 onwards, was postponed to 1 September 2013 by Italian Law Decree no. 69 of 21
June 2013.
Lastly, Law no. 228/2012 once again made changes to the IRAP (Regional Business Tax) to reduce
taxation of the cost of labour, increasing, starting from the tax period after the one at 31 December
2013, flat rate deductions from the IRAP taxable base for employees with open-ended contracts if
female workers or workers under 35 years of age are hired, as well as for employees with openended contracts hired in Abruzzo, Basilicata, Calabria, Campania, Molise, Puglia, Sardinia and
Sicily.
- 14 -
It should also be pointed out that Italian Law no. 64 of 6 June 2013 converted Law Decree no. 35 of 8
April 2013 aimed at releasing the payments of the Public Administration‟s overdue trade payables.
Moreover, from 2014 onwards, this law raised from Euro 516,000 to Euro 700,000 the maximum
limit of the tax credits and social security contributions that may be offset.
GROWTH OF THE BPVI GROUP: ACTIVITIES WITH STRATEGIC
IMPORTANCE
In the first half of 2013, the macroeconomic and operating environment was confirmed to be still
challenging and uncertain. The long recessionary phase, which has been penalising domestic
consumption and investments for the past two years or so, were compounded by the effects of the
Italian political instability, tied to the springtime elections and to the subsequent difficulties in
consolidating a solid Government majority. The most recent economic data, as indicated in the
chapter dedicated to the macroeconomic scenario, are showing some positive signs which seem to
point to the beginning of a change, but the outlook for our Country’s economy still seem to remain
structurally weak: Italy should get out of the recessionary phase only in the last quarter of 2013, and
in the following years GDP could still grow at a modest rate.
The evolution of the economy, both current and prospective, affected the performance of volumes
traded in the first half of 2013, maintaining at very weak levels the demand for new loans, both by
households and businesses. The further deterioration of the quality of loan portfolios in the first
half of 2013 continued to penalise the profitability of banks and the willingness of the banking
system to take on new risks with lending activities.
In the first six months of 2013, the BPVi Group continued to carry out its business according to the
strategy outlined in the 2012-2014/16 Business Plan, advancing certain significant initiatives aimed
at further enhancing the Group‟s ability to rise to the challenges of the current operating
environment and continue to carry out its mission as a bank serving local communities.
Among the main initiatives that characterised the operations of the first half of 2013, particularly
noteworthy is the successful completion of the major capital strengthening operation totalling
Euro 506 million, which brought the pro-forma Core tier 1 at 30 June 2013 to 9% after the capital
increase and laid the ground work for a further major increase with the conversion of the bond. The
strengthening initiative, as described in detail in the next chapter, consists of a capital increase,
amounting to Euro 253 million, and a simultaneous issue of convertible bonds, with a nominal value
of Euro 253 million, with the option, for the issuer, of early repayment in shares. The transaction
was successfully completed on 9 August 2013, with a number of subscription requests that exceeded
the available quantity, concretely attesting the Members‟ confidence in the present and future
potential of the BPVi Group.
After the good results already achieved in 2012, in 2013 the improvement of the Group’s structural
liquidity profile continued, prioritising the procurement of financial resources originating from the
branch network and from the placement of securitisation tranches on the market (“non wholesale”
components). In the first 6 months of 2013, the ratio of loans to direct deposits contracted further,
by approximately 1 percentage point, from 94.8% at the end of 2012 to 93.9% in June 2013 (the ratio
of loans to direct deposits for retail customers decreased by -5 percentage points). In addition, in
July the BPVi Group‟s liquidity position further benefited from two new securitisations of portfolios
of commercial loans granted by the Group‟s Banks to Italian small and medium enterprises: the first
one, placed on the market, called “Berica PMI”, with a total nominal value of approximately Euro
1.6 billion, and the second one, a self-securitisation called “Piazza Venezia”, with a total nominal
value of approximately Euro 1.1 billion.
- 15 -
In the first half of 2013, revision work was started on the organisational model of the BPVi Group’s
distribution network was revised, providing, in particular, the development of a “star-shaped”
geographic presence model, characterised by the combination of full-service branches and
“satellite” branches providing partial service. In addition, an experimental “extended working
hours” project was launched, involving 8 of the Parent Bank‟s branches and enabling them to offer
customers non-stop service from 8 am to 7.30 pm, 5 days a week.
In parallel, in the early months of 2013 a project was launched for the extension of third party
Networks with variable costs, consisting of Financial Promoters and Financial Agents, and their
integration with the traditional branch Network. The purpose of this project is to promote the
acquisition and retention of a significant number of new customers, both among individuals and
small businesses, assuring high levels and service and risk management.
Thanks to the initiatives taken and above all to its image as a serious and dependable bank, which
BPVi has in the areas where it operates, the significant growth of the Group’s customer base
continued and, indeed, it accelerated, reaching approximately 1.3 million customers, i.e. 53
thousand more than at the start of the year (+41,000 in the 1st half of 2012).
Lastly, of note is the launch of the significant Group initiative aimed at accomplishing the shift to
advanced methods for credit risk management, called A-IRB Project (A-IRB: Advanced Internal
Rating Based). The project will span an estimated 24-36 months, including the necessary validation
by the Supervisory Body.
The main activities of strategic importance that marked the operations of the BPVi Group during the
first half of 2013 are described in greater detail below.
CAPITAL STRENGTHENING OPERATION
On 16 April 2013 the Board of Directors of the Parent Bank, exercising the powers vested in it by the
Shareholders‟ Meeting of 30 April 2011, resolved to carry out a capital strengthening operation
consisting of a capital increase amounting to Euro 253 million and a simultaneous issue of 5-year
convertible bonds amounting to Euro 253 million with the possibility of early repayment in
shares (called “Banca Popolare di Vicenza 5% 2013/2018 convertibile con facoltà di rimborso in azioni”,
i.e. convertible bond with possibility of repayment in shares). With this operation, the Bank further
increases its capital, also in order to continue the action in support of households and businesses
in local areas and communities.
The shares and convertible bonds involved in the loan were offered optionally to members and
stockholders (at a price of Euro 62.5), and to the holders of the 2009-2016 convertible bond, in the
ratio of 1 share and 1 convertible bond for every 20 shares held or every 20 POC bonds held. The
unopted shares and bonds were offered to the public and assigned to those who requested them
during the tender period. The tender period was 12 June 2013 – 9 August 2013.
Moreover, the subscribers of the aforesaid increase shall be awarded a “loyalty bonus”, i.e. 20% of
the amount of the shares subscribed (i.e., one new share to be assigned free of charge every 5 shares
subscribed) if they do not sell the subscribed shares and those already held at the date of
assignment for at least 24 months.
With regard to the convertible bond, Banca Popolare di Vicenza has the option to repay the loan
early, starting from 2015, in shares and/or cash. In this case, for the part converted into shares, a
10% premium in Bank shares will also be recognised.
At the expiration of the tender period on 9 August 2013, the capital strengthening operation was
successfully completed, with the entire subscription both of the capital increase (Euro 253 million)
and of the convertible bond (Euro 253 million), for a total amount of Euro 506 million, leading to
a significant strengthening of the capital ratios (the pro form Core Tier 1, including the capital
increase, rose from 8.11% to 8.99%). Subscription request exceeded the supply, so the allotment
- 16 -
procedure was followed, as provided in the Securities Note. The financial resources obtained with
this initiative will enable, inter alia, to increase the stability of the funding sources and will feed the
Group‟s lending activities, which nonetheless is oriented to prudence when granting loans, in a
challenging and uncertain macroeconomic environment.
In addition to the “extraordinary” capital increase, described above, the Board of Directors in the
course of the same meeting resolved to proceed with a specific initiative to increase the “ordinary”
capital, intended for new shareholders up to Euro 100 million which individually allows the
subscription of 100 shares of the Bank, i.e. the quantity prescribed by the Articles of Association to
request admission as a Shareholder. The purpose of the operation is further to expand the
membership base of BPVi, thus enabling the Bank to meet the demand that comes from the social
fabric of the communities where it operates, especially where it has most recently started operations.
This demand is attested by the results achieved in terms of growth of the number of stockholders:
+ 3,125 Members/stockholders in the first 6 months of 2013, after +6,184 in 2012 as a whole, which
bring the total number to 76,399.
The “ordinary” capital increase, intended for persons who do not own any BPVi share or hold less
than 100 shares, is accompanied by the possibility, for the new shareholder, to apply for a loan to
be used to subscribe the shares, in accordance with Article 2358 of the Italian Civil Code. In this
latter case, the number of shares paid with the amounts lent by the Bank will be subject to lock-up
(obligation not to sale all or part of the shares held) until the maturity of the loan or its full
repayment. If the new shareholder uses the loan, the related principal shall be computed for
supervisory purposes for the portion of loan repaid. The period of acceptance to the ordinary
capital increase, described above, is from 15 July to 31 December 2013.
INITIATIVES AND RESULTS ON THE LIQUIDITY RISK MANAGEMENT FRONT
In the first 6 months of 2013, the BPVi Group decisively continued its development of direct
deposits, already started in 2012, in order further to strengthen the Group‟s structural liquidity
profile, mostly by increasing funding from the branch Network and from securitisations (“non
wholesale” component).
In the first half year, direct deposits grew further (+2.6% compared to 31 December 2012), thanks
mostly to the contribution from the “non wholesale” component (+2.7% in the first 6 months). The
latter component benefited from the good results achieved by the commercial Network, in
particular with small and medium enterprises, and from the sale on the secondary market of senior
tranches of securitisations originated in the last quarter of 2012 (Berica 10 and Berica ABS 2 for an
approximate total nominal amount of Euro 1 billion).
Thanks to these initiatives, the ratio of loans to direct deposits for retail customers (i.e. excluding
payables and receivables owed to and by Cassa di Compensazione e Garanzia, bonds placed on the
Euromarket and Private Placements) was further reduced by approximately 5 percentage points,
from 122% at the end of 2012 (it was 140% at the end of 2011) to 117% in June 2013, with a positive
prospective impact on the Group‟s liquidity risk profile, also in relation to the values of the
indicators that will gradually enter into force with “Basel III”.
Lastly, in July 2013 the BPVi Group completed two new securitisations, with underlying loans to
companies:
–
Berica PMI – securitisation of a portfolio of commercial loans granted by the Banks of the
BPVi Group (Parent Bank and Banca Nuova) to Italian small and medium enterprises with a
total nominal value of approximately Euro 1.6 billion. The securitisation was particularly
successful on the market: it should be recalled that it was the first public securitisation of
loans of Italian SMEs since 2008, and the first public securitisation by an Italian bank since
2011, when BPVi itself had successfully placed a securitisation of residential mortgages.
Demand widely exceeded the original amount on offer (230% of the original amount, which
- 17 -
–
initially was Euro 500 million), so the amount placed was increased to fully cover the senior
tranche at Euro 980 million. The investor base was broad and diversified, including mutual
funds, insurance companies, banks and other financial institutions. Over 70% of the
securitisation was placed with foreign operators, confirming the interest for the Italian SME
segment and the recognised reliability of Banca Popolare di Vicenza, active on the
securitisation market since 2001. The Berica PMI securitisation enabled the BPVi Group further
to improve its structural liquidity profile, both in terms of maturity latter and with reference to
the ratio of loans to direct deposits for retail customers, which declined from 117% on 30
June 2013 to 113% in July 2013.
Piazza Venezia – self-securitisation of a portfolio of commercial loans granted by the Banks
of the BPVi Group (Parent Bank and Farbanca) to Italian small and medium enterprises with
a total nominal value of approximately Euro 1.1 billion. The A1, A2 and A3 tranches of the
Piazza Venezia securitisation, amounting to approximately Euro 700 million, will be used as
collateral in repo transactions.
A-IRB PROJECT: SHIFT TO ADVANCED CREDIT RISK MANAGEMENT METHODS
In the first quarter of 2013, on the basis of the feasibility study carried out in the last quarter of 2012,
the A-IRB Project (where A-IRB stands for Advanced Internal Rating Based) was formally launched
with the aim of completing the shift to advanced credit risk management methods. The project
consists of seven operating work sites, directed and coordinated by a Steering Committee that is
attended by the Bank‟s top management.
Currently, the BPVi Group applies the standardised method for the calculation of capital adequacy
requirements in view of credit risks, which calls for subdividing exposures into different classes
(“portfolios”) according to the nature of the counterparty or of the technical characteristics of the
relationship or of the manner of its performance, applying diversified weight coefficients to each
portfolios (as prescribed by the “New prudential supervisory instructions for banks”, Circular
263/2006).
Adoption of the internal rating based method is one of the major changes of Basel 2 and it originates
from the Authorities‟ intention to cause the banking system to evolve in its measurement and
management of credit risk; it meets the need to complement external ratings, recognised in the
standardised method, with risk measurements devised by the banks themselves and “certified”
by the Supervisory Authority.
Internal rating based models, already in use in the BPVi Group for management purposes only,
have undoubted qualitative and quantitative advantages over the use of external ratings, because
they are the summarised result of the analysis of a broad range of information about brokers‟ own
customers and they also enable to assess the creditworthiness of entities that typically are not
assigned external ratings, e.g. small and medium enterprises.
In terms of corporate management, the adoption of advanced methods also provides many other
benefits which are not limited to the determination of capital requirements for credit risk. One of
these benefits is the enhancement and better integration of corporate processes and controls
pertaining to managing, monitoring and issuing credit and of strategic and operational planning
processes, as well as the improvement in the sales approach through pricing policies that are
calibrated according to “validated” customer risk measurements.
The project will span an estimated 24-36 months, including the necessary validation by the
Supervisory Body. The objective set out in the Project Master Plan is to submit to Bank of Italy the
request for authorisation to use internal models (PD and LGD) to calculate the capital requirement
for credit risk by the end of 2014. The Group companies involved in the project are the Parent Bank,
i.e. Banca Popolare di Vicenza, and the subsidiaries Banca Nuova and Farbanca, whilst the loan
portfolios considered are the Corporate and the Retail portfolios; Prestinuova‟s portfolio, consisting
mainly of loans secured against one fifth of salary, could be included in a subsequent project
extension phase.
- 18 -
EVOLUTION AND ENHANCEMENT OF THE BPVI GROUP‟S DISTRIBUTION MODEL
Consistently with the provisions of the 2012-2014/16 Business Plan, since the end of 2012 and
through the first months of 2013 the BPVi Group concentrated on carrying out a series of significant
initiatives to revise the organisational model of the distribution network, with the goal of
implementing a method of covering the territory and managing customer relations that can best
couple effective commercial action with efficient resource utilisation.
Among these initiatives, of particular note is the recent development of a “star-shaped” geographic
presence model, characterised by the combination of full-service branches (Hub Branches) and
“satellite” branches providing partial services (Light Branches). The Hub Branches will carry out all
banking transactions, from teller operations to advisory services, whilst the Light Branches will
merely provide basic services, with the support of the Hub Branch for services with higher value
added. This model assures a more efficient management of geographic presence, by maintaining
physical presence and defending customer relation continuing, enabling, among other
advantages, a more efficient utilisation of Human Resources and strengthening local branches
with higher commercial potential. As at 30 June 2013, the new “star-shaped” network model had
been activated on approximately 24% of the Group’s branches.
In parallel to the definition of the new model, other initiatives are ongoing, with the goal of further
enhancing branch operations; among them, the following are highlighted:
–
the launch of an experimental “extended working hours” project on 8 branches of Banca
Popolare di Vicenza, mostly located in provincial capitals, which enabled to offer customers
continuous services from 8 am to 7.30 pm (for 5 days a week). The results of the trial will be
reviewed after the summer break in order to calibrate, starting in the autumn, any specific
initiatives on certain identified areas.
–
The progressive introduction of new “self service” devices in support of direct channel
development, e.g. advanced ATMs to manage cash and check deposit operations, and tablets
to collect customers‟ electronic signatures on “digital accounting forms”, made available to
customers in electronic format.
The evolution and enhancement of the BPVI Group‟s Sales Network is also accomplished by
structuring a distribution model that locally integrates, in a virtuous way, the traditional branch
Network (consisting of employees) with the BPVI Group‟s freelance professional networks: the
Financial Promoter Network (being strengthened) and the Financial Agent Network (recently
launched and being strengthened).
Through the integration of its various Networks, also by physically sharing branch spaces, the BPVI
Group intends to support the commercial policy aimed at acquiring and retaining new customers,
both among individuals and among small businesses, whilst assuring high levels of service and risk
management.
As at 30 June 2013, the financial promoter network consisted of 94 professionals (13 BPVi and 81
Banca Nuova). The plan for the next two years calls for a strong growth of the promoter network
with the inclusion of highly professional individuals, to be located where the BPVi Group already
has branches. The target for the BPVi Group is to reach the end of 2015 with a network comprising
approximately 200 financial promoters.
In addition, as a result of the recent reforms to the laws regulating the industry, the BPVi Group
decided to rationalise and simplify its collaboration agreements with credit brokers/financial
agents, focusing on the development of a Network of Financial Agents. For this purpose, in April
2013 Banca Popolare di Vicenza incorporated a NewCo called BPVI Multicredito – Agenzia in
Attività Finanziaria S.p.A.; the purpose of the company is exclusively to serve as a financial agency
(per Article 128-quater of Italian Legislative Decree no. 385 of 1 September 1993). The company is
recruiting industry professionals, to be located in the areas where the BPVI Group has Branches. The
agent network will focus on the acquisition of new customers (individuals and small businesses) in
- 19 -
support of the Group‟s branches, through the promotion of the same loan products and of the
accessory products already offered by the branch Network. By the end of 2013, the network of BPVI
Multicredito Agenzia in Attività Finanziaria Spa will consist of over 150 professionals and it is
expected to have more than 250 by the end of 2015.
CHANGES IN THE INVESTMENT SEGMENT
In the first half of 2013, the programme for the rationalisation of the BPVi Group product
companies continued, as indicated in the guidelines of the 2012-2014/16 Business Plan, aimed at
simplifying their structure.
With regard to the subsidiary BPVi Fondi Sgr, an asset management company of the BPVi Group,
on 1 January 2013 the sale of two business units to Arca Sgr became effective; the two business
units pertained respectively to the management of the fourteen mutual funds belonging to the Pacto
Funds System (with total assets of Euro 393 million), consisting of the collective asset management
activities carried out by BPVi Fondi, and the management of institutional portfolios (with total
assets of Euro 1,074 million) comprising the asset management appointments of Berica Vita, ABC
Assicura and the Cariprato Pension Fund. The transaction is a part of a more general strategy for
the revamping and revision of the governance of Arca SGR, as the main reference point for the
management of the mutual funds of Italian co-operative banks, within which in 2012 BPVi increased
its share from the previous 10.92% to the current 19.99%. Subsequently, on 26 February and 1 March
2013 the Board of Directors of the Parent Bank and of BPVi Fondi Sgr respectively approved the
planned absorption of BPVi Fondi by Banca Popolare di Vicenza. Said absorption was subsequently
authorised by the Supervisory Authority with its decision of 17 June 2013 (in accordance with
Article 57 of Italian Legislative Decree no. 385/93 and with Article 34 of Italian Legislative Decree
no. 58/98), which also authorised Banca Popolare di Vicenza to perform the portfolio management
service (per Article 1, Paragraph 5, Letter d) of Italian Legislative Decree no. 58/98). Lastly, on 23
July 2013, the Board of Directors of the Parent Bank and the Shareholders‟ Meeting of BPVi Fondi
Sgr definitively approved the absorption of BPVI Fondi Sgr by the parent bank Banca Popolare di
Vicenza. With regard to the timing, assuming that all legal requirements are completed within the
times prescribed by law and upon the expiration of 60 days from the registration of the absorption
resolutions in the Office of the Register of Companies without any opposition to the aforesaid
resolutions, the absorption is expected to be completed by the month of November 2013, with
legal effect from 1 December 2013.
In the first half of the year, the other absorption, by the Parent Bank, of Nordest Merchant S.p.a.,
merchant bank of the BPVi Group, whose activity will be carried out in a yet more integrated
manner with the networks of the BPVI Group, by an organisational structure of the Parent Bank,
was approved. This new positioning will enable specialists to perform their advisory activities in a
more structured and complete way, also with the support and skills of the other central offices, in
order to identify the best solutions for the company not only in terms of debt, but also in terms of
structural and capital strengthening, through the activation and participation in closed-ended
mutual funds managed by the subsidiary Nem Sgr. The absorption, whose plan had been approved
by the Board of Directors of BPVi and of Nordest Merchant respectively on 12 and 14 March 2013,
was authorised by Bank of Italy with a specific decision issued on 10 May 2013 (in accordance with
Article 57 of Legislative Decree 385/93). Lastly, on 9 July 2013, the Board of Directors of BPVi and
the Shareholders‟ Meeting of Nordest Merchant definitively approved the absorption, which should
be completed by the month of November 2013, with legal effect from 1 December 2013.
- 20 -
Among the other significant changes in the investment segment, of note is the establishment of BPVI
Multicredito – Agenzia in Attività Finanziaria S.p.A., a company is purpose is exclusively to serve
as a financial agency, already described in the chapter dedicated to the enhancement of the
distribution model, as well as a series of acquisitions of stocks of Società Cattolica di Assicurazione
Società Cooperativa, carried out between January and June on the MTA for a total amount of Euro
13 million, which brought the equity investment held by Banca Popolare di Vicenza in the insurance
partner to 14.92%. Lastly, Banca Popolare di Vicenza purchased 100% of the capital stock of Berica
MBS S.r.l., Berica 2 MBS S.r.l. and Berica 3 MBS S.r.l., between March and April 2013 for a total
amount of Euro 92 thousand; these companies had once been used as special purpose entities for
loan securitisation, but they were no longer operating and cannot be further used for new
securitisations. In the course of the second half of 2013, the three companies will be merged by
absorption into the Parent Bank within the rationalisation of the Banking Group‟s overall structure.
OTHER INFORMATION
Banca Popolare di Vicenza‟s Ratings
The further deterioration of the national economic environment, coupled with the persistent
sovereign debt crisis, led the major international rating agencies further to downgrade Italy’s
ratings, to unprecedented low levels. At the same time, judgements and forecasts on the
performance of the Italian banking industry were downgraded, as it appears more exposed to the
negative effects of a crisis that is turning out to be longer than expected.
As a result of the worsening macroeconomic scenario and of the consequent rating actions on Italy,
ratings for Italian credit institutions were subsequently downgraded as well. The negative
outlook, assigned to nearly all banks, is mainly due to the uncertainties surrounding the evolution
of our Country‟s economy and sovereign risk.
Rating's agency
Standard & Poor's
Fitch Ratings
Long term
Short term
Outlook
Date
BB
B
Negative
24/07/2013
BB+
B
Negative
26/07/2013
More specifically, in late July Standard & Poor’s, as a result of its downgrade of Italy and of the
consequent worsening assessment of Italy‟s economic risk and of its banking industry, carried out a
rating action involving all Italian banks rated by it. According to the agency, while on one hand the
banks‟ exposure to the effects of a longer than expected recession increased, on the other hand the
cost of funding, higher than the European average, could limit access to capital markets, which also
remains subject to the risk of a downgrade to Italy‟s credit rating. With reference to Banca Popolare
di Vicenza, this action entailed the downgrade, in late July, of the long-term debt rating from BB+
to BB, while both the short-term rating, at B, and the “negative” outlook remained unchanged.
On 26 July 2013, Fitch Ratings revised its rating of 8 Italian local banks it evaluates. For BPVi, this
revision entailed a confirmation of its long and short term rating (respectively, BB+ and B), and of
its “negative” outlook. The confirmed rating by Fitch reflects the progress made by the Bank from
the viewpoint of capitalisation, thanks to the Euro 253 million capital increase and to the convertible
bond by the same amount, as well as of liquidity and funding.
- 21 -
Implementation of the 2012-2014/16 Business Plan
As described in the Report on Operations of the 2012 Financial Statements, on 20 March 2012 the
Board of Directors of the Parent Bank approved the new 2012-2014/16 Business Plan which, in an
environment that will remain challenging and uncertain, calls for a progressive improvement of
profitability and efficiency indicators with consequent benefits in terms of the Group‟s competitive
positioning within the Italian banking System.
Following approval of the new Business Plan, in June 2012 a specific Masterplan was defined and
launched to direct the implementing activities for the actions prescribed therein and assure
achievement of the indicated objectives. The plan had originally been organised in 7 specific “Work
Sites” on the main change issues indicated; subsequently, the sites became 8 with the introduction of
a new one dedicated to the achievement of the shift to advanced credit risk estimation methods (AIRB Work Site). Based on the latest progress reported submitted to the Board of Directors in June
2013, approximately half the projects contained in the Masterplan were completed.
Updates on significant proceedings
Some officers of the Bank are involved as accessories in the criminal proceedings initiated in 2010 by
the Public Prosecutor at the Court of Parma against Callisto Tanzi and Giambattista Pastorello for
bankruptcy offences related to Parmalat‟s default. In 2010 the Italian Tax Police seized a total
amount of Euro 4.2 million from the Bank; subsequently, this amount was reduced to Euro 2.7
million as a result of the application for review submitted by the Bank.
On 19 June 2013, the Judge for Preliminary Hearings, accepting the Prosecutor‟s request, ordered the
dismissal of the criminal proceeding against all involved officers; in addition, on 2 August 2013, the
Judge ordered the release of the aforementioned amount of Euro 2.7 million and its return to the
Bank.
Currently, it is likely that the civil case will be settled with the bankruptcy proceedings, for an
amount that in any case will not exceed the originally seized amount, prudentially allocated to
provisions since 2011.
- 22 -
OPERATIONAL STRUCTURE
This section of the Interim Report on Operations provides information about the territorial presence
and positioning of the Sales Network and the changes in employment of the BPVi Group.
TERRITORIAL PRESENCE OF THE BANCA POPOLARE DI VICENZA GROUP
Traditional distribution channels
At 30 June 2013, the BPVi Group’s network comprises 640 branches, unchanged from 31 December
2012, situated in 15 regions and 65 provinces throughout Italy. This represents approximately 1.9%
of the national total.
Trend of branches BPVi's Group
453
67
54
492
500
99
100
61
67
640
640
3
1
95
94
93
525
541
543
546
dec2010
dec2011
dec2012
jun2013
637
638
633
639
1
1
1
1
2
528
106
106
107
107
103
92
94
94
429
436
436
dec2007
dec2008
dec2009
628
1
80
332
332
333
345
dec2003
dec2004
dec2005
dec2006
BPVI
Cariprato
Banca Nuova
BCF
As shown in the above chart, at 30 June 2013 the BPVi Group maintained its number of branches
stable (640) compared to 31 December 2012, continuing the path to consolidation it has been
following for over 5 years. In the first six months of 2013, of particular note is the 1 January 2013
sale, from the subsidiary Farbanca to the Parent Bank, of 2 branches located in Jesi (Ancona Marche) and in San Giovanni Teatino (Chieti - Abruzzo). With this transaction, the Banca Popolare
di Vicenza brand expanded further in Italy, reaching the regions of Marche and Abruzzo,
progressing with the plan to achieve thorough local coverage.
In addition to the aforementioned territorial reorganisation, Banca Popolare di Vicenza opened 2
other branches (in Varese and Terni) and closed 1 (in Treviso).
In the first 6 months of the year, Banca Nuova opened 1 branch (Palermo) and closed 2 (Palermo
and Grotteria, in the province of Reggio Calabria).
The geographical distribution (regions and main provinces) of the BPVi Group‟s branches is shown
below. The first 5 provinces by number of branches are confirmed to be, in this order: Vicenza (96
branches), Treviso (53), Brescia (36), Udine (36) and Prato (32), tied with Padua (32).
- 23 -
Geographical distribution of
branches BPVi's Group
30/06/2013
31/12/2013
Change
Veneto
Vicenza
Treviso
Padova
Verona
Venezia
Friuli Venezia Giulia
Udine
Pordenone
Lombardia
Brescia
Bergamo
Milano
Emilia Romagna
Liguria
Piemonte
Trentino Alto Adige
NORTHERN ITALY
259
96
53
32
31
26
64
36
14
88
36
25
13
16
5
2
2
436
260
96
54
32
31
26
64
36
14
87
36
25
13
16
5
2
2
436
-1
0
-1
0
0
0
0
0
0
+1
0
0
0
0
0
0
0
0
Toscana
Prato
Firenze
Pistoia
Marche
Umbria
Lazio
Roma
CENTRAL ITALY
91
32
22
8
1
2
16
13
110
91
32
22
8
1
1
16
13
109
0
0
0
0
0
+1
0
0
+1
1
1
78
28
18
14
94
1
1
78
28
18
15
95
0
0
0
0
0
-1
-1
640
640
0
Abruzzo
Puglia
Sicilia
Palermo
Trapani
Calabria
SOUTHERN ITALY
TOTAL
- 24 -
The following table shows the changes during the year in the branch network of each Group bank in
the first half of 2013.
Trend of branches BPVi's Group
30/06/2013 31/12/2012
Change
Banca Nuova
Farbanca
546
93
1
543
94
3
+3
-1
-2
Total
640
640
0
In addition to branches, the BPVi Group‟s sales network includes 15 finance shops4 (all Banca
Nuova), 32 private customer points5 (28 for BPVi, 4 for Banca Nuova), 3 financial spaces for
Prestinuova, totalling 690 outlets, and a network of 94 financial promoters (of which 13 with BPVi
and 81 with Banca Nuova). Growth in the number of financial promoters, in particular, is tied to a
specific initiative to enhance third party networks (financial promoters and financial agents) of the
BPVi Group, launched at the start of 2013. Through the integration between the traditional branch
Network and the networks of freelance professionals, the BPVI Group intends to promote a
commercial policy aimed at acquiring and retaining a significant number of new customer, both
among individuals and small businesses, assuring high levels of service and risk management. For
additional details, please refer to the chapter of this Report dedicated to “Activities with strategic
relevance”.
Other distribution channels
BPVi's Group
30/06/2013 31/12/2012
Finance Shops
Private Customer Points
Financial Spaces
Financial Planners
15
32
3
94
16
32
3
88
Change
-1
0
0
+6
Presence abroad
The BPVi Group has five Representative Offices abroad, whose purpose is to facilitate commercial
transactions between Italian companies and the principal international markets, providing
appropriate services for entrepreneurs intending to expand in those areas, and to develop lasting
business relations with the principal and most experienced banking counterparties in these
countries. The Offices are located in Hong Kong (China), which has been operating since the
Eighties, in Shanghai (China), inaugurated in June 2005, in New Delhi (India), inaugurated in April
2006, in Sao Paulo (Brazil) in operation since January 2011 and New York, operational since midPermanent operating point open to the public where the Bank allows one or more Financial Promoters appointed with a specific agency
agreement to carry out their professional activities exclusively for the bank.
5 Permanent operating point open to the public, dedicated to the operating management of Private Banking customers.
4
- 25 -
October 2011. In particular, the office in Sao Paulo follows, in addition to Brazil, also the entire
Mercosur, the fourth largest market block in the world with 270 million people, which also includes
Argentina, Uruguay and Paraguay, whilst the New York Office follows the trade and investment
activities of Italian companies not only in the United States, but also in the entire Nafta area, which
includes Canada and Mexico. In upcoming months, the Moscow Representative Office is due to
open; in addition to the Russian Federation, it will also follow the other Countries of the
Community of Independent States (CIS), e.g.: Armenia, Azerbaijan, Byelorussia, Kazakhstan,
Kyrgyzstan, Moldova, Tajikistan, Turkmenistan, Ukraine, Uzbekistan.
In addition, the BPVi Group relies on “International desks” in seven Central and Eastern
European banks, i.e. in Slovenia, Croatia, the Czech Republic, Slovakia, Hungary, Romania and
Bosnia Herzegovina, in order to support those Italian firms that maintain commercial relations with
and invest in the countries concerned.
In countries where the BPVi Group does not maintain a direct or indirect presence, to provide the
best support to companies in international markets, cooperation agreements have been signed with
52 foreign banks with a total network of approximately 70,000 branches located in 30 countries,
i.e.: Australia, Argentina, Albania, Byelorussia, Bulgaria, Canada, Chile, China, Korea, Egypt,
Russian Federation, Philippines, Georgia, Japan, India, Indonesia, Iraq, Malaysia, Morocco, Mexico,
Macedonia, Peru, Poland, Spain, South Africa, United States, Taiwan, Tunisia, Turkey, Vietnam. In
July 2013, Banca Popolare di Vicenza entered into the 52nd agreement with TBC Bank, Georgia‟s
second largest bank.
Lastly, the BPVi Group has 4,140 correspondent bank relationships with banks located in 152
Countries, so it can send and receive payment orders and document transactions in favour of the
direct beneficiaries. Through the Irish subsidiary BPV Finance International PLC, headquartered in
Dublin, the banking group is able to assist the foreign subsidiaries of the Bank‟s customer
companies.
- 26 -
HUMAN RESOURCES
At 30 June 2013 the BPVi Group had 5,498 employees: this number was substantially unchanged
compared to 31 December 2012 (+2 persons), but down by 43 persons compared to June 2012.
The analysis of the changes in the numbers of employees of the different companies of the BPVi
Group compared to the end of 2012 shows the Parent Bank‟s increase by 47 persons, mainly as a
result of the reorganisation and efficiency-boosting activity carried out within the other Companies
in the Group, e.g. Servizi Bancari (-24 persons) and BPVi Fondi Sgr (-7), as well as of the sale, to
BPVi, of two Farbanca branches situated in Jesi (Ancona - Marche) and San Giovanni Teatino (Chieti
– Abruzzo).
30/06/2013
Staff
31/12/2012
Number Comp. % Number Comp. %
Change
n.
Change
Y/Y
30/06/2012
%
Number
n.
%
Banca Nuova
Farbanca (1)
4,370
719
29
79.5%
13.1%
0.5%
4,323
724
37
78.7%
13.2%
0.7%
47
-5
-8
1.1%
-0.7%
-21.6%
4,330
744
38
BANKS TOTAL EMPLOYEES
5,118
93.1%
5,084
92.5%
34
0.7%
5,112
PrestiNuova
BPV Finance
B.P.Vi. Fondi SGR
Nordest Merchant
NEM SGR
Servizi Bancari
Immobiliare Stampa
67
6
15
12
3
241
36
1.2%
0.1%
0.3%
0.2%
0.1%
4.4%
0.7%
68
6
22
13
3
265
35
1.2%
0.1%
0.4%
0.2%
0.1%
4.8%
0.6%
-1
0
-7
-1
0
-24
1
-1.5%
0.0%
-31.8%
-7.7%
0.0%
-9.1%
2.9%
67
7
24
12
2
281
36
0
0.0%
-1 -14.3%
-9 -37.5%
0
0.0%
1 50.0%
-40 -14.2%
0
0.0%
OTHER COMPANIES TOTAL EMPLOYEES
380
6.9%
412
7.5%
-32
-7.8%
429
-49 -11.4%
5,498
100.0%
5,496
100.0%
2
0.0%
5,541
-43 -0.8%
TOTAL EMPLOYEES
40
0.9%
-25 -3.4%
-9 -23.7%
6
0.1%
(1) The Farbanca figure as at 30 June 2012 also includes Banca di Credito dei Farmacisti, which Farbanca subsequently took over.
The distribution of the Group Banks’ personnel as at 30 June 2013, as shown in the following
table, has no substantial differences from the data of the end of 2012: approximately 80% is
employed by the branch Network, while the remaining 20% of personnel work at the Central
Offices or at present are not assigned to any office (seconded, on maternity leave, on leave of
absence, etc.).
30/06/2013
BANKS EMPLOYEES
Banca Nuova
Farbanca (1)
TOTAL BANKS EMPLOYEES
Branch
network
Corp.
Center
31/12/2012
Other (2)
% Branch Branch
network
Corp.
Center
Other (2)
% Branch
3,495
683
192
80.0%
3,465
675
183
80.2%
611
86
22
85.0%
614
98
12
84.8%
6
22
1
20.7%
13
24
0
35.1%
4,112
791
215
80.3%
4,092
797
195
80.5%
(1) Farbanca is an online bank and, as such, it has a call centre classified within the Central Offices
(2) The category “Other” includes personnel not assigned to any organisation because they are seconded to other companies or
temporarily absent for maternity leave, leave of absence, etc.
The breakdown of Group employment by professional category at 30 June 2013 shows that there
are 102 executives (-10 compared to December 2012), i.e. 1.9% of the Group‟s total number of
- 27 -
employees, 2,294 managers (+5 compared to December 2012), i.e. 41.7% of the total, and 3,102
clerical and other employees (+7 persons compared to December 2012), i.e. 56.4% of the Group‟s
employees.
Category
Employees by professional
Total
Senior
Remaining
category 30/06/2013
Managers
Other staff (1)
managers
Banca Nuova
Farbanca
Banca di Credito dei Farmacisti
PrestiNuova
BPV Finance
B.P.Vi. Fondi SGR
Nordest Merchant
NEM SGR
Servizi Bancari
Immobiliare Stampa
TOTAL
Composition %
staff
77
11
1
0
1
1
1
3
0
4
3
1,870
292
8
0
11
1
8
7
2
82
13
2,422
414
20
0
55
4
6
2
1
148
20
1
2
0
0
0
0
0
0
0
7
0
4,370
719
29
0
67
6
15
12
3
241
36
102
2,294
3,092
10
5,498
1.9%
41.7%
56.2%
0.2%
100.0%
At 30 June 2013 the “effective” employment of the BPVi Group, considering the employees of the
Group companies as well as persons on secondment and project workers, totals 5,520 persons, an
increase compared to 31 December 2012 (+0.3%), but a decrease by 30 persons from June 2012. The
following table shows the actual workforce of BPVi Group companies at 30 June 2013.
30/06/2013
Permanent Staff
Banca Pop. di Vicenza
Banca Nuova
Staff (a)
seconded at
seconded at
other BPVi's
other
Group
companies
companies
(c)
(b)
seconded
from other
companies
(d)
31/12/2012
30/06/2012
Other staff
Permanent staff
(a-b-c+d+e)
(1)
(e)
Permanent
Staff
Change
Permanent
Staff
Change
Farbanca (2)
PrestiNuova
BPV Finance
B.P.Vi. Fondi SGR
Nordest Merchant
NEM SGR
Servizi Bancari
Immobiliare Stampa
4,370
719
29
67
6
15
12
3
241
36
40
8
0
22
0
1
5
0
1
1
2
0
0
0
0
0
0
0
0
0
22
12
3
3
0
0
6
6
20
6
22
0
2
0
0
0
0
0
0
0
4,372
723
34
48
6
14
13
9
260
42
4,318
732
39
52
6
22
14
10
273
41
54
-9
-6
-4
0
-8
-1
-1
-13
1
4,315
745
40
74
7
25
13
9
278
44
57
-22
-7
-26
-1
-11
0
0
-18
-2
TOTAL BPVi GROUP
5,498
77
2
77
24
5,520
5,506
14
5,550
-30
(1) Contains project workers
(2) The Farbanca figure as at 30 June 2012 also includes Banca di Credito dei Farmacisti, which Farbanca subsequently took over.
- 28 -
Management and development of Human Resources
In relation to the personnel management of the BPVi Group, the first half of 2013 was characterised,
in particular, by the launch of the project for the evolution of the Network model, i.e. the “StarShaped Model” project. As has already been described in the specific paragraph of the chapter
dedicated to initiatives with strategic relevance, this model calls for a reorganisation of the local
presence through the combination of full-service branches (Hub Branches) and “satellite” branches
providing partial services. The launch of the new Network model entailed, inter alia, the need to
relocate part of the personnel of the branches involved in the initial stage of the project (153
branches, of which 133 of the Parent Bank and 20 of Banca Nuova), with changes involving over one
hundred persons, enabling to strengthen the branches with the best development prospects. The
project will continue in the second half of the year as well.
Among the other significant personnel management initiatives, of note is the start of the
experimental “extended working hours” project on 8 Banca Popolare di Vicenza branches, mostly
located in provincial capitals, which has enabled to offer customers a branch open from 8 am to 7.30
pm. After a summertime break, the experimental stage will resume in September. The involved
branches were allocated more personnel when necessary, and they were adequately organised to
accommodate their changed opening hours.
Another significant project, also in view of the consequent impacts in terms of personnel
management, was the launch of the A-IRB Project (Advanced Internal Rating Based), already
described in the specific paragraph of the chapter dedicated to initiatives with strategic relevance,
whereby the Group will adopt the advanced methods for the purposes of determining capital
requirements in view of credit risk. For the completion of the aforesaid project, which requires
complex organisational actions, a multi-function working group has been established; it covers all
involved areas and it is supported by two outside consulting companies.
In relation to the development activities, of particular note is the start of the “Path for the
Evaluation and Development of the potential of Central Office personnel”, a significant initiative
aimed at allowing the potential of the workers in the company to emerge and be cultivated. Also
noteworthy is the continuation of certain initiatives, such as the “Development Path for Potential
Branch Managers”, intended for some Banca Nuova employee, and the coaching path intended for
BPVi Regional Managers, dedicated to the development of management skills. The “Sviluppo
Giovani” (Youth Development) initiative, launched last year and intended for a selected group of
young people with the aim of developing their technical skills and aptitudes, was completed
successfully. The outside training initiatives continue at qualified manager education institutions,
such as SDA Bocconi, The European House Ambrosetti, ABI Formazione, Fondazione CUOA and
Captha. Lastly, the remuneration and incentive systems of the Group‟s Companies were
implemented and developed.
Training Activities within the BPVi Group
In the first half of the year, the planned training activities of the BPVI Group reflected the business
and management priorities identified for the current year, consistently with the Business Plan.
Particular care was placed on the evolution of the new Organisational Model of the branch
Network, promoting the “Moving Target” educational curriculum, intended for Retail Managers
and “star” branches, to facilitate the immediate adoption of the most effective organisational and
commercial behaviours in relation to the assigned targets. With the same aim, an innovative Path
was set up for Customer Managers, to enhance their selling and commercial development skills,
alternating classroom work with coaching in the branch. Affluent Account Managers were again
involved this year in the financial skills certification curriculum, recognised at the European level by
- 29 -
the Efpa Body, whilst for Private Banking Managers two specialist initiatives were planned on
“Advanced Advice” and on the “Management of real estate assets”.
In addition, during the first half of the year, a cycle of meetings was promoted for Credit specialists
and top Commercial Network managers, to align them to the most recent Bankruptcy Law
provisions that significantly affect the management of Anomalous Loans.
The focus on risk management was equally thorough, in view of the significance of the proper
control of credit and operational risks. Hence, by way of example, initiatives were planned on the
Credit and Anti-money laundering management for Branch Managers and on the CAI regulations
for Customer Managers; additionally, the training paths for Branch Deputy Managers, Corporate
Assistants and Foreign Managers continue.
Summarising, a total of more than 14,306 days of training were administered to employees of the
BPVi Group‟s Banks during the first half of the year (over 11,500 in the Parent Bank alone).
RESEARCH AND DEVELOPMENT
In view of its business and industry sector, the BPVi Group does not generally carry out research
and development as such. As a result, it has not recognized any intangible assets or costs in this
regard. The routine implementation and update of the product catalogue, designed to ensure that
each business offers a complete range of products and services in line with those of major
competitors, and the revision of procedures and internal processes to ensure that the operational
structure functions adequately, do not result in new or significantly improved products, services or
processes with respect to those already present on the market, since they are not the result of
research and development in the strict sense.
- 30 -
SYSTEM OF INTERNAL CONTROLS AND AUDITING
THE SYSTEM OF INTERNAL CONTROLS AND AUDIT FUNCTIONS
The System of Internal Controls comprises the set of rules, procedures and organizational
structures that seek to ensure compliance with business strategies and the achievement of effective
and efficient business processes, the safeguarding of assets and protection from loss, the reliability,
completeness and accuracy of accounting and operational information, and to ensure that
transactions comply with the law, supervisory regulations and internal instructions.
The System of Internal Controls is an integral part of the daily activities of the Group‟s banks and
companies and operates on three levels:
line controls (first level): designed to ensure that transactions are carried out properly. These
controls are performed within the same production unit (e.g. hierarchical controls) or are
included in the procedures and information systems, or are carried out as a back-office
activity;
second level controls: these controls are performed by functions outside of the production
unit and are intended to:
contribute to the definition of methodologies for the measurement of risk, check
compliance with the limits assigned to the various operational functions and check the
consistency of the transactions carried out by each production unit with the assigned
risk-return targets. These activities are assigned to the Risk Management function.
contribute to the definition of methodologies for the measurement/assessment of noncompliance risk, identify suitable procedures for preventing the risks identified and
request their adoption. These activities are assigned to the Compliance function.
continuously check whether company procedures are consistent with the goal to prevent
and contrast the violation of regulations for the prevention of money laundering and
terrorism funding. These activities are assigned to the Anti Money Laundering
function.
Certify corporate accounting information in accordance with legal requirements. This
activity is performed by the Financial Reporting Manager.
internal audit activity (third level): designed to identify anomalous trends, violations of
procedures and regulations, and to evaluate the functioning of the system of internal controls,
taken as a whole. This work is carried out on a continuous, periodic or exception basis by
functions other than and independent of the production units and of the second-level control
functions, and includes on-site inspections (as required by the Supervisory Instructions, Book
IV, Chapter 11, Section II). These activities are assigned to the Internal Audit function.
The activities of the Internal Audit function are organized in two specific areas: Inspection, tasked
with checking behavioural compliance with procedures, internal regulations and the corporate
standards established for the branch network, and Auditing, focused on checking the adequacy of
the rules, processes and organizational structures put in place to control all forms of business risk;
The Inspection Team carried out a total of 123 routine inspections of the BPVi Group‟s branch
network in the first half of 2013 (92 at the Parent Bank, 30 at Banca Nuova and 1 at Farbanca),
consisting of full audits on Branches, audits on Private Customer Points, on Financial Promoters,
remote credit audits, etc.
Additionally, a series of in-depth surveys and remote analyses was also carried out (a total of 96
interventions at the Group level), with focus on particular events (e.g., robberies, suspicion of
internal or external fraud, customer and/or employee operations, remote analyses, etc.).
- 31 -
With regard to the Group-level audit of processes and central functions by the Auditing team, work
during the first half of 2013 included 24 audits of processes and on the central offices, and 12 more
are still ongoing. The audits pertained to the processes in the areas of lending, finance, ICT,
governance and support and operational processes and second level controls.
The Internal Audit Function is carried out centrally by the Parent Bank‟s Internal Audit Department
for all Companies in the Group, on the basis of specific outsourcing service agreements. In
particular, during the period an audit was carried out on Prestinuova.
Internal Audit also provides, as usual, support to the Control Bodies of the Group‟s Companies:
the Board of Statutory Auditors, the Audit Committee and the 231/01 Supervisory Body.
With regard to the activities carried out by the Audit Committee of the Parent Bank, in the first half
2013 it met 10 times, once in a joint session with the Parent Bank‟s Supervisory Body, to consider,
inter alia, the Plan of action for 2013 of the various second and third level control functions; the
periodic reports on the activities carried out by Internal Audit, Compliance, Anti-Money
Laundering and by the Financial Reporting Manager; the periodic reports prepared by the Risk
Management function on the risk profile of the loans portfolio, on market, interest rate, liquidity,
operational risks, related parties and equity investments that may be held. Additionally, the Audit
Committee was provided with the reports on the audits carried out by the Internal Audit Function
on the Central Office Processes and Organisations and the audits on the Branch Network and the
most common surveys in terms of anomalies or risk. The Audit Committee was also shown the
reports on the audit and monitoring activities carried out by the Compliance Function and by the
Anti-Money Laundering Function. The Audit Committee was constantly informed of the
monitoring activity pertaining to the implementation of the initiatives identified in view of the
audits performed by the Internal Audit, Compliance and Anti-Money Laundering Functions.
In the first half of 2013, the 231/01 Supervisory Body of the Parent Bank held 6 meetings, one of
which was a joint session with the Audit Committee of the Parent Bank. In the course of the
meetings, the Supervisory Bodies discussed, inter alia, the definition of the Audit Plan for 2013, the
start of the Project for the integration of the current 231/01 Organisational Model, the activities
carried out in 2012 and those planned for 2013, the initiatives carried out with respect to Health and
Safety in the Workplace, periodic reports on the activities performed by the Internal Audit function,
by the Compliance function and by the Anti Money Laundering function, and the audits conducted
by these Functions that have relevance for the purposes of safeguarding against risks per Legislative
Decree no. 231/2001. Lastly, during the first half of 2013, no reports of possible violations of the
Organisational Model for the prevention of crimes pursuant to Legislative Decree no. 231 were
received.
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THE COMPLIANCE AND ANTI-MONEY LAUNDERING FUNCTIONS
As described in the previous section dedicated to the Internal Control System, the Compliance
Function carries out a second level control activity, the objective of which, as required by the law, is
to prevent and manage the risk of non-compliance with the law, i.e. the risk of incurring judicial or
administrative sanctions, significant financial losses or reputation damage as a consequence of
violations of compulsory or self-imposed rules.
The Anti Money Laundering Function also performs a second level control activity, whose goal is
to prevent and manage the risk of non compliance with rules against money laundering and
funding to terrorism. The Function fulfils the two needs to:
–
satisfy the compliance requirements traditionally performed by the Anti-Money Laundering
Organisation (analysis and transmission of suspicious transaction reports; remote checks of
the precise compliance, by sales Network persons, with anti–money laundering provisions,
forwarding notices of violations of the rules on the use of cash and bearer securities to the
Ministry of the Economy and Finance and response to requests from the Authorities);
–
provide advisory support to the organisational Functions as a result of the promulgation of
new regulations impacting the Group and performing ex post audits on the suitability of the
System of Internal Controls and on the procedures adopted and formulate proposed
organisational and procedural changes necessary to assure adequate safeguard against the
risks of money laundering and terrorism funding.
The Group organisational Model of the Compliance and Anti Money Laundering functions did not
undergo any changes. It is centralised for all the Group‟s Banks and SGRs and for the company
PrestiNuova and it calls for the appointment of single Contact Persons for the two Functions with
the Subsidiaries.
The Revision of the Regulations, function statements and SLAs of the two Functions was completed,
consistently both with the results of the Project called “Accountability of the risk of non-compliance at
Group level” carried out in 2012 and with the Instructions of the Bank of Italy (released for
consultation purposes in September 2012 and promulgated on 2 July 2013) entitled “Internal control
system, reporting system and operating continuity”.
In the first half of 2013, the Compliance and Anti Money Laundering Functions performed the
activities for which they are responsible, as prescribed in the respective 2013 Compliance Plan and
2013 Anti-money laundering Plan, both through preventive assessments (ex ante activities) and
through continuous monitoring and dedicated audits (ex post activities).
In the early part of the year, progressively more attention was paid to regulatory changes and the
related organisational updates, also through participation in numerous inter-disciplinary projects
and working groups, and to consultant support within the scope of the most important projects
carried out by the bank (foremost among them, in relation to the capital increase initiated in June).
Among these project, of particular note is the “adequate customer verification” project, coordinated
by the Anti Money Laundering Function and initiated as a result of the promulgation of Bank of
Italy‟s Instruction of 3 April 2013.
At Group level, the initiatives for the modification of products and processes and the new product
proposals were then evaluated (through the release of “Compliance Opinions for the Products and
Wealth Management Committee”). Additionally, draft Board of Directors resolutions pertaining to
sensitive cases in terms of non-compliance risks and the Commercial Directives about to be
promulgated were evaluated. In relation to these ex ante advisory activities, as at 30 June 2013 a total
number of 128 interventions had been released (comprising “Alerts”, “Compliance assessments”,
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“Compliance statements” and “Opinions”) for the regulatory contexts of Operations, Governance &
Administration and Financial Markets & Investments, as well as 4 anti money laundering interventions.
Continuous monitoring activities have enabled to enhance the safeguards and they are leading to a
gradual improvement of the predictive effectiveness of the anomaly indicators available to the
Compliance Function to carry out its audits and plan its initiatives. Monitoring is focused, in
particular, on the data flows originated by the audits performed by the Internal Audit Department
on the Group, specific excerpts in the Mifid Area pertaining to questionnaires, orders and securities
movements, the assessment of adequacy and effectiveness for the management of conflicts of
interest, the rates and conditions applied to verify compliance with the usury-prevention rules, data
on the complaints received from customers at the Group level and checks on the financial promoter
network. As at 30 June 2013, a total number of 71 monitoring results were released for the areas
under the responsibility of the Compliance Function.
The interventions of the Anti-Money Laundering Function (16 monitoring actions during the
period) instead pertained to compliance with respect to: adequate customer checking, transaction
recording, reporting of suspicious transactions and limitations to the use of cash.
With regard, instead, to the audits carried out (“Compliance audits”, “In-depth surveys” and
“Follow-ups”) a total number of 15 interventions were carried out for compliance and 8
interventions for anti money laundering.
THE FINANCIAL REPORTING MANAGER AND THE PRINCIPAL CHARACTERISTICS
OF THE SYSTEM OF RISK MANAGEMENT AND INTERNAL CONTROLS OVER
FINANCIAL INFORMATION (also pursuant to article 123-bis, paragraph 2 (b) of the
Consolidated Financial Markets Act)
This section describes the principal characteristics of the “Model for the Governance and Control
of the BPVi Group’s administrative and accounting processes”, which is an integral part of the
Banca Popolare di Vicenza‟s system of internal controls and designed to guarantee the credibility,
accuracy, reliability and timeliness of financial information.
The definition of the “Model for the Governance and Control of the BPVi Group‟s administrative
and accounting processes” was guided by:
the preliminary identification of a recognized and well-known comparative model;
comparison with reference practices defined or referred to by institutional bodies6;
comparison with domestic and international best practices adopted by organisations
comparable with the BPVi Group.
Based on the model that has been defined, the Financial Reporting Manager‟s operations will
develop along a cycle of sequential activities (the “DP cycle”7), which aims to place the
The COSO Report – “Internal Control Integrated Framework” developed by the Committee of Sponsoring Organizations of the
Treadway Commission, comprising the principal US professional accounting and auditing associations was used as a reference for
defining the Financial Reporting Manager's Model. It represents a methodology for the analysis and evaluation of the system of internal
controls recognized at an international level and recommended by ANDAF (National Association of Finance Directors) in a specific
position paper, as well as by ABI in Circular 13 dated 27 April 2007.
7 The operational activities comprising the “DP cycle” are grouped in terms of sequence, nature and purpose into the phases indicated
below:
Phase 1 - Assessment of business controls (Entity Level Control) established by the administrative-accounting Model;
Phase 2 - Definition of scope and planning of activities;
Phase 3 - Formalization/update of administrative-accounting processes;
Phase 4 - Assessment of risks and design of accounting controls, as well as monitoring of the plan for corrective action (Risk &
Control Assessment);
Phase 5 - Test of controls;
Phase 6 - Assessment of process controls and preparation of the declaration/certification.
6
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administrative accounting processes under a plan, assess the adequacy and functionality of the
related audits, ascertain/declare the corporate accounting disclosures required by law with the
knowledge deriving from the existence/adequacy of processes and the actual performance of
accounting controls.
The phases of the cycle of activities fall under the responsibility of the Financial Reporting Manager
who, however, under his direct supervision and coordination, draws on support from other
business functions (e.g., the Internal Audit Department and the Organisation and Safety
Department), in order to increase efficiency while minimising the resources required.
The work performed by the Financial Reporting Manager during the first half of 2013 was in line
with the established program. During the second half, the scope of responsibility of the Financial
Reporting Manager was further extended to reach a complete outline of the process tied to Financial
disclosure on related parties in addition to the upgrade of controls within the accounting process,
and to assess their adequacy and the functionality of their controls. Furthermore, based on a webbased application, the Financial Reporting Manager obtained the internal sub-certification by the
Control Owners on the actual execution of the administrative and accounting audits during the half
year.
Analysis of the above processes identified that the Group‟s exposure to administrative-accounting
risk is compatible with the requirements to provide correct financial information.
The results achieved provide reasonable certainty to both senior management and the Financial
Reporting Manager that the aforementioned business processes which generate accounting
information are properly monitored and that the related controls have been implemented
effectively, thus enabling the Financial Reporting Manager to certify the accounting information
reported in the 2013 condensed interim consolidated financial statements.
RISK MANAGEMENT
This section of the report presents key information about the work performed by the Group in the
first half of 2013 to manage banking and financial risks.
The purpose of the Risk Management function is to measure and control risks, both at an individual
level and on a consolidated basis. This mission involves:
the definition and development of models and tools for the measurement and control of
risks at Group level, as well as the systematic and continuous verification of the adequacy
of the risk management models and tools used, while also monitoring developments in the
regulatory framework;
verification that the risk profiles of the Group‟s banks and companies comply with the limits
established by the respective Boards of Directors, and by the Board of Directors of the Parent
Bank with regard to the overall risk profile for the Group.
In particular, with reference to credit risk, the Risk Management function develops rating models
and defines methodologies for estimating the general provisions needed with reference to the
related components of risk. More generally, the function also provides support for the definition of
credit measurement methodologies for accounting purposes, excluding the “analytical” component.
Additionally, the Risk Management Function monitors changes in the risk profile of the loans
portfolio at a consolidated level and for each Group bank. This activity includes the preparation of
monthly and quarterly reports, respectively for senior management at Group banks and for the
respective Boards of Directors. Lastly, in terms of the definition of the Risk Appetite Framework
(RAF) approved by the Board of Directors, the Risk Management Function defines, together with
the Loans Division, the thresholds of attention and the operating limits pertaining to the risk level of
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the performing loans portfolio, the single name and geographic and industry concentration level,
and identifies the “critical industries”, for which specific credit policies are applied.
With regard to market risks, the main activities of the Risk Management function are to propose,
together with the Finance Function, a system of VaR, stop-loss and operational limits that are
consistent with the Risk Appetite Framework approved by the Board. The function also monitors,
on a daily basis, compliance with these limits, validates and documents the sources of and the
processes for gathering market data, and determines and validates the methodologies and criteria
adopted for pricing the financial instruments used by various entities within the Group, also for
accounting purposes.
In relation to interest rate and liquidity risks, the Risk Management function develops strategic
Asset & Liability Management (ALM) models and tools, establishes, together with the finance
function, operational limits and early warning thresholds consistent with the risk propensity
expressed by the Board of Directors, produces daily and monthly reports for the corporate bodies
and top management, and conducts effectiveness tests on asset and liability line items under hedge
accounting. The Risk Management Function also prepares, monitors and updates the Contingency
Funding Plan, or revises if necessary.
With regard to operational risk, the Function defined a framework for their management, based, on
one hand, on the assessment of the 1st and 2nd level organisational controls, through a self-risk
assessment, and on the construction of the so-called Risk Map and, on the other hand, the loss data
collection procedures at Group level.
Lastly, with reference to the risks underlying the equity investments that may be held and to Risk
assets with Related Parties, the Risk Management Function, in line with the risk policies set forth in
2012, monitors compliance with the maximum exposure limits defined within the scope of the Risk
Appetite Framework approved by the Board of Directors.
Risk profile of the BPVi Group
Consistently with the self-assessment of capital adequacy (ICAAP process) and taking into account
changes in the operating environment, the Board of Directors of the Parent Bank approves, at least
once a year, the Risk Appetite Framework, which defines the Group‟s risk propensity, as part of the
strategic planning and budgeting process. The BPVi Group’s propensity to accept risk has been
defined in terms of the level of the Group’s target capitalisation, setting minimum levels in terms
of Core Tier 1 Ratio. In addition, the BPVi Group‟s Risk Appetite Framework risk is further
analysed by setting operational limits and/or maximum exposures for each type of risk.
The following discussion covers the management and monitoring of the principal types of risk.
Credit risk
Credit risk is defined as the risk of loss due to an unexpected deterioration in the creditworthiness
of a borrower, whether as a result contractual non-performance or otherwise. Counterparty risk is
also included in this context: it is the risk that the counterparty to a transaction involving specified
financial instruments will default prior to settlement, as is concentration risk, i.e. the risk deriving
from a concentration of exposures in the portfolio of loans to counterparties/groups of
counterparties operating in the same economic sector, industry or geographical area.
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With regard to the way credit risk is managed, the BPVi Group approved a policy that describes the
methodologies for the measurement of risk, the roles and responsibilities of the committees and
business functions involved, and the related management reports.
As part of action to support the management of credit risk, the BPVi Group has implemented an
internal rating system that is used within its business processes and assists with the assessment of
creditworthiness. The internal rating represents a summary assessment, for the coming year, of the
credit quality of the customer expressed as a probability that the counterparty may become
insolvent. This assessment is expressed on an internal scale of 11 rating classes for performing
accounts and one residual class for those in default. A probability of default is associated with each
rating class. The rating classes are ordered according to credit risk: moving from a lower risk class to
a higher risk class means an increase in the probability of default by the debtor.
The BPVi Group has decided to develop internal rating models that primarily cover the types of
counterparties with which it usually works and to which it is most exposed: retail counterparties
(private customers and small businesses), small corporate counterparties (sales between Euro 0.5
and 2.5 million) and mid corporate counterparties (sales between Euro 2.5 and 50 million). These
models were completed during 2008 and released to all Group banks. With regard to the corporate
segment (companies with sales in excess of Euro 50 million, financial and investment holding
companies, regardless of sales, parent companies of groups with sales in excess of Euro 50 million),
since 2009 the BPVi Group has used a “mixed judgmental” model that requires considerable
specialist skills; accordingly, the related ratings for all Group banks are determined solely by a
specific structure of the Parent Bank, reporting directly to the Loans Division.
Upon defining the Risk Appetite Framework of the Group for 2013, and for more effective credit
risk monitoring, a threshold was defined for expected loss levels of the loans portfolio, and the
critical industries on which specific credit policies are to be applied were updated.
Routine monitoring activities are based on the GDC (Credit Management) instrument, aimed at
defining an advanced model for managing loan books based on predetermined strategies (goals,
actions and timing) according to the level of customer risk. This IT tool supports account managers,
allowing them to check on changes in the credit status of customers, and quickly to identify any
deterioration in the standing of borrowers. This management tool is based on an Early Warning
monitoring system which promptly identifies anomalies that are indicators of possible deterioration
in customers‟ creditworthiness. In greater detail, categories have been identified that include
positions that, while still performing, exhibit performance anomalies: in the last months of 2012,
the “Watch” (SOR) class was established; with a view to rationalising the anomalous credit process
and classes, it partially incorporated the “Observation” – OS - and “High Risk” – AR – classes, of
which the latter expresses a higher risk level than the former. This action followed, in terms of time,
the positive introduction, in 2012, of the “Pre – Past Due” category, which enabled to carry out
focused initiatives on positions, previously mainly classified as “Observation” and “High Risk”,
which had been continuously above the allowed limit for more than 40 days. Moreover, in light of
the current economic environment, taking into account the growing need to stipulate debt
restructuring agreements with customers, using both the legal instruments introduced by the
Bankruptcy Law reform of 2005 and its subsequent implementing provisions (debt restructuring
agreements in accordance with Article 182 bis of the Budget Law and recovery plans in accordance
with Article 67.3, Letter D) and ordinary debt restructuring operations in general, the class called
“To be restructured” was introduced. These positions are subject to specialised management by
dedicated Bank Functions.
In addition, the management of loans is governed by “Lending Policies” that specify how the Bank
intends to accept credit risk in relation to its customers, covering both the granting and the renewal
phases of the lending relationship. The purpose of the policies is to facilitate the balanced growth
of lending to lower risk customers, while limiting, or taking particular care over, lending to
customers that are less creditworthy. In particular, four different lending policies have been
identified: “development”, “operations and protection”, “rebalancing” and “disengagement”. The
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assessment is made by the authorised functions, while the system automatically establishes, based
on the internal rating and environmental score taken together, the powers of the network
authorisation committees based on the level of risk (lower powers in the case of high risk and
greater powers in relation to more creditworthy customers). Lastly, the standard reports on the
dynamics of anomalous loans are, via the intranet, now available to individual account managers
within the commercial network.
Lastly, in January 2013 the Board of Directors of the Parent Bank resolved to carry out the project
aimed at shifting to advanced credit risk measurement methods (Advanced Internal Rating Based
– AIRB), as required by the supervisory regulations in compliance with Basel 2 principles. This
project, as is thoroughly described in the section of this Report dedicated to activities with strategic
relevance, is aimed at enhancing and more completely integrating, through the development of
processes, procedures and models for credit risk management, the processes and corporate
safeguards pertaining to credit management, monitoring and granting, as well as strategic and
operational planning processes
Concentration risk
Concentration risk is defined by the BPVi Group as the risk deriving from a concentration of the
exposures in the loans portfolio towards counterparties and groups of counterparties in the same
industry or exercising the same activity or located in the same geographic area.
There are two types of concentration risk:
–
single name concentration risk (concentration to parties belonging to the same economic
group and/or connected);
–
sectorial concentration risk (concentration towards particular industries and/or geographic
areas).
Exposures to banks and supervised intermediaries in accordance with Article 107 of the
Consolidated Law on Banking and Lending.
Upon defining the Group‟s Risk Appetite Framework for 2013, operating limits and thresholds of
attention were set with respect to the single name and geographic/sectorial concentration levels of
the loans portfolio. In the single name concentration risk, analysis is focused on companies
belonging to the supervisory portfolios “Companies and other parties”, “Short-term exposures to
companies”, and the exposures to companies contained in the “Past-due loan” and “Exposures
guaranteed by real estate” portfolios, as indicated in the supervisory instructions. Additionally, at
the management level the positions with borrowings exceeding Euro 60 million (Banca Popolare di
Vicenza) and exceeding Euro 20 million (Banca Nuova) are monitored.
In the sector concentration risk, concentration by economic sector is monitored, using the
breakdown called for by the method proposed by the ABI Studies and Research Centre; reference is
made to the business categories, which are able to represent economic and “supply chain” links
between companies belonging to sectors that deal with classes of goods that are mutually connected,
also from the viewpoint of risk.
Market risk
The BPVi Group has defined market risk as the risk of adverse changes in its exposure to financial
instruments included in the trading portfolio for supervisory purposes, due to unfavourable
changes in risk factors (interest rate, exchange rate, market prices, credit spread, commodity prices)
and their volatility.
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With regard to the way market risk is managed, the BPVi Group approved a policy that describes
the methodologies for the measurement of risk, the roles and responsibilities of the committees
and business functions involved, and the related management reports.
For some time now, the BPVi Group has quantified market risk and, as a consequence, set limits by
using a Value-at-Risk model derived from historical simulation. The current process for
determining VaR involves estimating the portfolio risk, with a time interval of one day and a 99%
confidence interval, with reference to historical market changes. Since this is an estimate, the above
internal system for the measurement of risk is subjected to back-testing in order to assess the
forecasting efficiency of the VaR results. This involves comparing the loss estimated by the model
with the profit & loss effect of measuring the positions using actual market data. In addition, a stress
test is performed to assess the ability, in terms of capital availability, to absorb the effects of
significant market shocks. This involves re-measuring the portfolio using extremely adverse values
for risk factors, as well as re-measuring it using a number of historical market crash scenarios (e.g.
the terrorist attack on 11 September 2001, the failure of Lehman Brothers etc.). The stress test
therefore complements the VaR and measures the potential vulnerability to exceptional, but
nevertheless plausible events.
Compliance with the limits set for VaR should cap, within the established confidence interval, the
maximum daily loss. An individual unit may comply with the established limits on daily VaR, and
report losses over a period of days that fall within these limits; however, the sum of the losses
accumulated over a given period of time may still reach excessive values. This risk is tackled by
associating indicators with the daily VaR limits designed to monitor any losses arising over
longer periods (Stop Loss). This represents the maximum allowed loss that can be accumulated
over a given period of time (one month and the entire year), at a given level of authorization,
without the need to take specific action. Lastly, for completeness, additional operational limits have
been defined in terms of sensitivity, delta, vega, concentration and credit risk.
The risk management function of the Parent Bank is responsible for the quantification and control of
the VaR limits, while a dedicated organisation within the Finance Division of the Parent Bank is
responsible for the daily checking of operational and stop-loss limits.
During the first half of 2013, the Risk Management function carried out routine monitoring of the
VaR limits as set when the Group‟s Risk Appetite Framework was defined. This activity was carried
out for both the Parent Bank and BPV Finance (the only two Group companies with their own
trading books). The above VaR and operational limits are determined with reference to each trading
book. The AFS (Available For Sale) portfolio is covered by the banking book concept and the related
rate risk is monitored using the internal ALM system; nevertheless, risk monitoring is also carried
out (on a VaR basis) if it contains “tactical/strategic” investments that have been specifically
authorized by the Board of Directors of the Parent Bank, which receives regular reports in this
regard.
During the first half of 2013, the 1-day 99% Value at Risk of BPVi averaged Euro 1.1 million (31.3%
in terms of absorption of the limit, set to Euro 4 million within the Risk Appetite Framework). For
the subsidiary BPV Finance, the 1-day 99% Value at Risk averaged Euro 420 thousand (33.8% in
terms of absorption of the limit, set to Euro 1.2 million within the Risk Appetite Framework).
Interest-rate risk
Interest-rate risk may be defined as the current and prospective risk of volatility affecting profits
or equity due to adverse changes in interest rates. Interest-rate risk is associated with asset and
liability positions within the banking portfolio and mainly derives from the transformation of
maturities. The interest-rate risk particularly arises from the mismatch of interest-bearing assets and
liabilities in terms of amount, due date and interest rates.
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With regard to the way interest-rate risk is managed, the BPVi Group approved a policy that
describes the methodologies for the measurement of risk, the roles and responsibilities of the
committees and business functions involved, and the related management reports.
The Group‟s exposure to the change in the interest-rate curve is monitored each month using
ALMPro ERMAS, an Asset & Liability Management tool, which measures in “static” conditions the
effect on the financial margin and equity of a change in interest rates. Operational and strategic
decisions regarding the banking book by the Finance and ALM Committee are designed to
minimize the volatility of the net interest income (considering current profits) expected over the
financial year (12 months) and of total economic value (considering the market value of the banking
book) as a consequence of changes in interest rates.
The Parent Bank‟s Board is ultimately responsible for the management of interest-rate risk, as
assisted by the Finance and ALM Committee and the business functions responsible for the strategic
and operational management of such risk, both at Group level and at all individual companies
within the Group. The Parent Bank‟s Board of Directors approves the strategic guidelines and
operational limits proposed by the Finance and ALMS Committee, and is periodically informed
about changes in the exposure to interest-rate risk and the way it is managed.
The Risk Management function inputs a complex and continuous flow of data into the Asset &
Liability Management system, and is also responsible for reporting and the monitoring of
operational limits. Lastly, the Finance Division is directly responsible for the operational
management of interest-rate risk.
When defining the Group‟s Risk Appetite Framework and in order to monitor the rate risk on the
banking book more effectively, limits on rate risk have been set at both the consolidated level and
at the individual company level. The system of limits is organized to identify percentage
thresholds, i.e. the change in the economic value of assets and liabilities following an immediate
parallel shock to the rate curves of 200 basis points (with respect to the inertial situation), as a
percentage of the Regulatory Capital at the measurement date. In this regard, the sensitivity
analysis of the banking book at 30 June 2013 shows a change of -8.8% and of -15.9% in economic
value in the hypothesis of a theoretical instantaneous shift, respectively, of +100 and +200 basis
points in the rate curves (-7.9% and -11.8% at 31 December 2012).
With a view to facilitating a more timely management of risk, consistent with the “Policy for the
management of rate risk”, “thresholds of attention” have also been defined with reference to
sensitivity on various time buckets as a result of a parallel, immediate shock of interest rate curves
amounting to +100 basis points in addition to a “threshold of attention” with reference to the change
in net interest income as a result of a parallel, immediate shock of interest rate curves amounting to
+100 bps on the time span (so-called gapping period) of 12 months.
Liquidity risk
The BPVi Group has defined liquidity risk as the risk of being unable to meet payment
obligations, caused by inability to obtain funding (funding liquidity risk) and/or the presence of
restrictions on the ability to sell assets (market liquidity risk). This risk can also take the form of a
loss relative to fair value deriving from a forced sale of assets or, more generally, of a loss in terms of
reputation or business opportunities. Funding liquidity risk is incurred as the prevalent risk in
banking activities when institutional counterparties withdraw their usual funding, or request a
significantly higher return than in normal circumstances. Market liquidity risk on the other hand
relates to the risk that the Group may be unable to sell an asset, except at a capital loss, due to the
illiquid nature of the market and/or due to the timing required for the transaction.
With regard to the way liquidity risk is managed, the BPVi Group defined a policy that describes
the methodologies for the measurement of risk, the roles and responsibilities of the committees and
business functions involved, and the related management reports.
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The Risk Management function develops the ALM models and tools for the measurement of
liquidity risk, produces the daily operational maturity ladder and the monthly structural maturity
ladder, and analyzes, maintains and develops the various reports produced, ensuring coordination
with the related functions within the Group‟s banks and companies.
Following the activation of ALMPro ERMAS at the start of 2010, the Risk Management and Treasury
functions have developed a process for the integrated monitoring of liquidity risk. The high level of
automation in terms of both database input and report production fosters early monitoring of the
risk/operating limit indicators as set when the Group‟s risk propensity was defined.
Upon defining the Group‟s Risk Appetite Framework, and for more effective monitoring of liquidity
risk, a system of limits and “thresholds of attention” was defined: it is functional to the daily
monitoring of the operational liquidity position and the monthly monitoring of the structural
liquidity position. With regard to the monitoring of the Group‟s daily liquidity, this system is based
on the calculation of the selected reference indicator, the “Liquidity Coverage Ratio”. This indicator
identifies, at Group level, the stock of uncommitted high quality liquid assets held by the Bank,
usable to cover net cash outflows which the Bank might need to cover in the short term. With
regard to monitoring the Group‟s structural liquidity position, the selected reference indicator is the
Net Stable Funding Ratio. This indicator identifies the ratio of Available Stable Funding to
Required Stable Funding, which are both calculated as the sum of capital cash flows in the banking
book expiring starting from the time bucket of 1 year, exclusive, up to the end of the time span in
which the Group operates.
Moreover, a series of early warning indicators, identified when defining the Risk Appetite
Framework, are monitored on a daily basis; these indicators are used, inter alia, to identify a state of
liquidity “early warning” within the Contingency Funding Plan.
The operational management of liquidity risk is entrusted to a dedicated function within the
Finance Division of the Parent Bank, whose objective is to maintain the best balance between the
medium-term maturities of loans and short-term funding, while taking care to diversify it by
counterparty and maturity arranged over the counter and in the interbank deposits market. In
addition to usual banking treasury activities (daily monitoring of the Group‟s liquidity and
optimization of its short-term management), any medium and long-term imbalances are managed
using appropriate policies established by the Finance and ALMs Committee. Additionally, the
Finance and ALMs Committee is provided a weekly report on the performance of the Loans/Direct
Deposit ratio as further support to monitor the Group‟s structural liquidity. For the same purpose,
once a quarter the leverage ratio is calculated as the ratio between capital and total assets in the
balance sheet and off-balance sheet.
To assure compliance with its payment commitment even in a situation of liquidity stress, the BPVi
Group has adopted a Contingency Funding Plan: this plan defines the intervention strategies in
case of liquidity stress, setting out the procedures for the obtainment of emergency funding sources.
Operational risks
Operational risk is defined as the risk of losses deriving from inadequate or dysfunctional
procedures, human resources or internal systems, or external events.
This category includes, inter alia, losses deriving from fraud, human error, the interruption of
operations, the malfunction and non-availability of systems, contractual non-performance and
natural catastrophes. Operational risk also includes legal risk, but excludes strategic and reputation
risk.
With regard to the way operational risk is managed, the BPVi Group has defined a policy that
describes the methodologies for the measurement of risk, the roles and responsibilities of the
committees and business functions involved, and the related management reports.
- 41 -
With regard to the monitoring of operational risks, the Parent Bank was a founding member in 2002
of DIPO, the interbank consortium promoted by ABI that maintains an Italian database of
operational losses. As a consequence, the Group gathers regular information about its operational
losses.
Although the BPVi Group determines its prudent capital requirement for the coverage of
operational risk using the Basic Indicator Approach (BIA), a framework for the measurement and
management of operational risk has also been defined. As a consequence, it has also been possible to
define the “Risk Mapping and Classification Models”, the “Policy and Governance of Operational
Risk Management” and the “Self Risk Assessment Model”.
In the first half of 2013, within the ICAAP Process, the Risk Self Assessment was updated by
building the “Risk Map” pertaining to the Group‟s situation at the end of 2012. In addition, the
Parent Bank continued to report realised operating losses, collected for the purposes of the Italian
Operating Losses Data Base (DIPO). Commencing from the June 2008 reporting date, Banca Nuova
has gathered information in the same way as the Parent Bank following the extension of activities to
them and adoption of the related regulations.
The risks underlying the equity investments that may be held
The new supervisory instructions on the matter of “Equity investments that may be held by banks
and banking groups”, introduced with the 9th revision of 12 December 2011 of Bank of Italy
Circular no. 263/2006 (Title V - Chapter 4), prescribe that the Control System adopted by banks shall
be capable of assuring the regulatory compliance and consistency of operations and of the
organisations with respect to the strategies defined by the Bank.
Accordingly, in 2012 the BPVi Group introduced a new set of regulations, consisting of the
“Regulations covering the Equity Investments that may be held by the Banca Popolare di Vicenza
Group” and the “Policy for managing the risks underlying the Equity Investments that may be
held”, to contain the risk of excessive illiquidity of the assets deriving from equity investments in
financial and non financial entities and to promote adequate management of risks and conflicts of
interest in accordance with sound and prudent management principles. The regulations are based
on the following fundamental elements:
–
the procedures for measuring and managing the risks underlying the equity investments
through the definition of the criteria for managing risk with reference to the roles and
responsibilities of corporate Bodies and Functions;
–
the procedures for monitoring the risks linked to the equity investment portfolio and
verifying the (regulatory and internal operational) limits assigned to the different operating
organisations and units;
–
the definition of the levels of risk propensity within the definition of the Group‟s Risk
Appetite Framework;
–
the reports to corporate Bodies and Functions.
Concerning risk appetite, the Risk Management Function, with the input of the operating
organisations directly involved, annually submits for approval to the Parent Bank’s Board of
Directors the maximum limits of exposure for the individual management portfolios in which
the equity investments are classified and for individual exposures. The aforesaid levels of risk
appetite must reflect the strategic profile and the organisational characteristics of the BPVi Group.
Since the end of 2012, the Risk Management Function has performed 2nd level controls on
compliance both with Supervisory limits and with the operating limits set internally in the Risk
Appetite Framework on the basis of the information provided by the General Accounting
Department. The outcome of this control is reported to the Parent Bank‟s Equity Investment
Committee and Board of Directors.
- 42 -
Risk Assets to Related Parties
To comply with the provisions of Title V - Chapter 5 of the 9th revision of 12 December 2011 of
Bank of Italy Circular no. 263/2006 (“New prudential supervisory instructions for banks”) on “Risk
assets and conflict of interest with respect to related parties” the BPVi Group has set down
“Regulations for Transactions with Related Parties” and a “Policy for Managing Risk Assets with
respect to Related Parties”.
In particular, this latter policy, in line with the regulatory provisions, is aimed at providing
protection against the risk that the nearness of certain persons to the Bank’s decision-making
centres may compromise the objectivity and impartiality of the decisions to issue loans and to
carry out other transactions with the same persons, with possible distortions in the resource
allocation process, exposure of the bank to inadequately measured or controlled risks, potential
damage for depositors and stockholders.
The same policy defines the internal policies the BPVi Group intends to apply for the assumption of
risks with respect to “Related Parties” and describes:
–
the steps and structure of the process for managing transactions with Related Parties, with
particular reference with the assumption of risks with respect to them;
–
the roles and responsibilities of the corporate Bodies and Functions to assure a correct
management of potential conflicts of interest inherent in transactions with Related Parties;
–
the reporting system addressed to company Bodies and Functions in relation to the
management of risks connected to transactions with Related Parties.
The core principles of the governance model of the BPVi Group within the assumption of risks with
respect to Related Parties, developed according to a logic consistent with the roles and
responsibilities defined in the ICAAP, prescribe that:
–
responsibility for defining the guidelines on managing the risks underlying transactions with
Related Parties shall rest with the Parent Bank‟s Board of Directors;
–
the assumption of risks with respect to Related Parties shall be monitored centrally by the
Parent Bank with reference to the individual entities and to the Group as a whole;
–
individual entities shall comply with the guidelines defined by the Parent Company for the
assumption of risks with respect to Related Parties.
With reference to risk appetite, within the definition of the Group‟s Risk Appetite Framework, the
Risk Management Function, with the input of the operating organisations directly involved,
annually submits for approval to the Parent Bank’s Board of Directors the maximum limits in
terms of maximum size of the Risk Assets with respect to Related Parties deemed acceptable in
relation to the Regulatory Capital, with reference to all exposures to Related Parties.
The Risk Management Function, within the scope of its own 2nd level controls, in the first half of
2013 started monitoring the risks connected with transactions with Related Parties, which entails the
following stages:
–
measuring the risks underlying exposures to Related Parties that may be mainly due to credit,
market and counterparty risks;
–
verifying compliance with prudential limits (regulatory limits) at the consolidated level and at
the individual Group bank level;
–
verifying compliance with the limits set in Risk Appetite Framework in terms of risk exposure
to Related Parties.
- 43 -
DISCLOSURE ON STRUCTURED CREDIT PRODUCTS AND EXPOSURES TO SPECIAL
PURPOSE ENTITIES
Based on the recommendations provided in 2008 by the Financial Stability Board and the Bank of
Italy (communication no. 671589 of 18 June), this section provides an update about the exposures of
the BPVI Group at 30 June 2013 to structured credit products deemed to be high risk by the market,
including, specifically, Collateralised Debt Obligations (CDO), Residential Mortgage-Backed
Securities (RMBS), Commercial Mortgage-Backed Securities (CMBS), Leveraged Finance and to
Special Purpose Entities (SPE) for securitisations originated and/or subscribed by the Group.
EXPOSURE TO STRUCTURED CREDIT PRODUCTS DERIVING FROM SECURITISATION
TRANSACTIONS ORIGINATED BY THE GROUP
At 30 June 2013 there were ten securitisations originated by the BPVi Group and called Berica
Residential MBS 1, Berica 5 Residential MBS, Berica 6 Residential MBS, Berica 8 Residential MBS,
Berica 9 Residential MBS, Berica 10 Residential MBS, Berica ABS, Berica ABS 2, Berica PMI and
Piazza Venezia (the latter two were carried out in the first half of 2013).
All the above securitisations were carried out pursuant to Italian Law no. 130/1999 through the
incorporation of a special-purpose entity (SPE) to which the securitised assets (portfolios of
performing mortgages and unsecured loans) were sold without recourse. None of the above SPEs
has been consolidated, since the conditions prescribed by IAS 27 and SIC 12 do not apply.
Nevertheless, with the exclusion of the securitisation entitled “Berica Residential MBS 1” 8, all
securitised assets and related liabilities were “written back” in the statement of financial position,
since the conditions provided by IAS 39 for the derecognition of such assets and liabilities were not
met because the Group essentially continues to hold the risks and benefits associated with the loans
assigned. In relation to the two securitisations carried out during the half year, the following
information is provided:
–
Berica PMI: the originators are the Parent Bank BPVi and the subsidiary Banca Nuova which
assigned a portfolio of performing loans totalling Euro 1,572 million, of which 64% is
represented by mortgage loans and the remaining 36% by unsecured loans. The securitisation
was completed in July with the issue of the Asset Backed Securities by the special purpose
vehicle; they were placed on the market for Euro 980 million (senior tranche), while the
originator subscribed the more subordinated tranches (mezzanine and junior) for a total
amount of Euro 589 million;
–
Piazza Venezia: the originators are the Parent Bank BPVi and the subsidiary Farbanca which
assigned a portfolio of performing loans totalling Euro 1,161 million, of which 53% is
represented by mortgage loans and the remaining 47% by unsecured loans. The transaction
was completed in June, with the issue of the Asset Backed Securities by the special purpose
entity; they were entirely subscribed by the originators, in proportion to the share of loans
assigned.
Lastly, in the first half of 2013 the senior tranches of the Asset-Backed Securities deriving from the
securitisations “Berica 10 Residential MBS” (nominal Euro 311 million) and “Berica ABS 2” (nominal
Euro 720 million), initially subscribed by the originators to have available assets that can be lodged
with the European Central Bank or used in refinancing operations (repo and/or swaps) with
institutional counterparties, were placed on the market.
The following table shows the details of the exposures held by the Group as at 30 June 2013 deriving
from the Group‟s own securitisations.
With regard to the Berica Residential MBS 1 securitization, carried out before 1 January 2004, the securitized assets were not reinstated
on the first-time adoption of IAS 39, as allowed by paragraph 27 of IFRS 1.
8
- 44 -
Cash exposures
SPE
senior
Berica Residential Mbs 1
Berica 5 Residential Mbs
Berica Abs
Berica Abs 2
Berica PMI
Piazza Venezia
Total
mezzanine
Total
junior
25.6
54.5
1,571.6
520.0
17.7
21.1
249.2
466.2
447.0
110.0
0.1
173.4
9.3
33.6
1.0
201.5
226.8
228.7
395.5
213.5
463.0
52.6
109.2
250.2
201.5
693.0
675.7
505.5
213.6
1,571.6
1,156.4
2,171.7
1,484.7
1,772.9
5,429.3
All exposures considered (with the sole exceptions of those referred to the Berica Residential Mbs 1
securitisation) are not reported as assets since the aforesaid securitisations do not qualify for
derecognition under IAS 39. Therefore, the assets held were eliminated and the securitized assets
remaining on the date and the related liabilities were written back. The amounts indicated in the
table relate to the residual nominal values of the various tranches of ABS held by the Group and to
the residual amount recoverable in relation to the other exposures.
The following table shows the details of the securitised assets underlying the exposures held by the
Group as at 30 June 2013 deriving from the Group‟s own securitisations.
Securitized assets (net exposure)
SPE
Berica Residential Mbs 1
Berica Abs
Berica Abs 2
Berica PMI
Piazza Venezia
Total
Nonperforming
loans
Watchlist
loans
Restructured Past due Performing
exposures exposures
loans
Total
13.3
27.7
8.7
10.8
0.5
0.5
2.7
0.2
-
6.0
15.5
31.6
34.5
8.9
7.7
21.9
4.0
-
0.1
2.9
7.1
2.1
0.4
0.8
1.0
0.3
-
1.1
4.3
5.2
2.3
2.5
7.7
4.8
0.1
-
122.4
184.3
511.5
822.9
868.2
786.5
1,150.0
825.3
1,456.2
1,112.5
141.8
231.5
563.2
875.5
880.3
798.0
1,183.3
834.6
1,456.3
1,112.5
64.4
130.1
14.7
28.0
7,839.8
8,077.0
- 45 -
EXPOSURE AS INVESTOR TO STRUCTURED CREDIT PRODUCTS DERIVING FROM
SECURITISATION TRANSACTIONS ORIGINATED BY THIRD PARTIES
As at 30 June 2013, the BPVi Group‟s exposure to Asset Backed Securities deriving from
securitisations originated by third parties totals Euro 265.8 million. The table that follows shows the
details of the exposures held, divided according to the type of underlying securitized assets and to
the degree of subordination of the individual tranches of ABS held. For none of the aforesaid
securitisations was the special purpose entity consolidated, since the conditions prescribed by IAS
27 and by SIC 12 are not met. All exposures are recorded under “Loans and advances to customers”
and none of them suffered any impairment losses to be recorded in the income statement in
accordance with IAS 39.
Exposures
Type of asset securitized
Residential Mortgage-Backed Securities
Commercial Mortgage-Backed Securities
Collateralised loans (ABS)
Leasing (ABS)
Other loans (ABS)
Total
senior
mezzanine
junior
21.7
3.9
5.1
145.7
21.1
31.7
7.5
7.6
21.5
-
176.4
89.4
-
Total
42.8
35.6
12.6
7.6
167.2
265.8
The exposures of BPV Finance, totalling Euro 98.6 million, relate to various Residential MortgageBacked Securities (RMBS) and Commercial Mortgage-Backed Securities (CMBS), and to receivables
deriving from leases and from collateralised loans to small and medium enterprises. This
subsidiary‟s investment policy is to optimise the medium-term value of the ABS, requiring that they
be denominated in Euro and have a minimum rating of single A (unless approved otherwise by the
Board) at the time the investment is made. The geographical breakdown of the assets underlying
these transactions principally encompasses Western Europe and North America. The total fair value
at 30 June 2013 is Euro 88 million, representing a negative difference of approximately Euro 10.6
million with respect to the carrying amount, mainly because of the “repricing” of such securities in
the financial markets and the absence of market liquidity. The aforesaid difference did not affect the
Group‟s overall profits, because the entire portfolio held was reclassified to “Loans and advances to
customers” on 1 July 2008, in accordance with the amendments to IAS 39 published by the IASB on
13 October 2008 and endorsed by the European Commission on 15 October 2008 in EC Regulation
1004/2008. At 30 June 2013, the residual negative reserves recorded in a specific equity line item,
amount to Euro 3.3 million, net of the related tax effect.
The remaining exposures of Euro 167.2 million are held by the Parent Bank, Banca Popolare di
Vicenza (Euro 47 million) and Banca Nuova (Euro 120.2 million), comprise ABS issued in relation to
securitisations arranged pursuant to Law no. 130/1999 and originated by construction firms
operating with public institutions, by the Palermo Chamber of Commerce and by Sicilian SMEs. For
the aforesaid transactions, the Group acted as arranger in the structuring of the transactions and also
acts as servicer, calculation agent, cash manager, paying agent and collection account bank for
nearly all of them.
- 46 -
EXPOSURE TO SOVEREIGN DEBT SECURITIES
As a result of the growing interest of the market in exposures held by the company in sovereign
debt securities, and as recommended by the European Securities and Markets Authority (ESMA) in
Document no. 2011/226, the details of the related exposures held by the BPVi Group at 30 June 2013
are provided below. As indicated in the ESMA document, “sovereign debt” means bonds issued by
central and local governments and government entities, as well as loans granted by said parties.
Country
Exposures to sovereign debt
Italy
Financial assets held for trading
Financial assets available for sale
Total
Argentina
Total
7.1
5,940.9
0.6
7.1
5,941.5
5,948.0
0.6
5,948.6
Exposures to Italian sovereign debt refer to Government bonds:
–
with fixed rate (Euro 1,449.2 million, of which Euro 443.2 million are subject to fair value
hedging, limited solely to the interest rate risk component);
–
with floating rate (Euro 636.4 million, of which Euro 47.3 million are subject to cash flow
hedging, limited solely to the interest rate risk component);
–
inflation linked (Euro 3,862.4 million, of which Euro 853.3 million referred to “BTP Italia” and
the remainder to “BTPEI” subject to full hedging of the interest rate and inflation risk, partly
in fair value hedging and partly in cash flow hedging.
Lastly, the residual maturity of the aforesaid exposures is:
–
less than 5 years for Euro 2.7 billion;
–
between 5 and 8 years for Euro 2.6 billion;
–
over 8 years for Euro 0.6 billion.
At 30 June 2013, the Italian Government bonds classified among “Financial assets available for sale”
have a sensitivity, with 1 bps changes in the credit spread of the Italian Republic, of approximately
Euro 3.1 million. Far smaller, i.e. approximately Euro 4 thousand, is the sensitivity of securities
classified among “Financial assets held for trading”.
- 47 -
INFORMATION ABOUT LENDING
Information about lending by the BPVi Group is presented below in terms of concentration,
geographical distribution and distribution by economic sector, together with a number of risk
indicators. The data used in this analysis were drawn from the financial statements and the
information reported to the Central Risks Database, including cash loans, guarantees and
derivatives. Group banks and companies are excluded from the aggregates, which however do
include all securitized mortgages, even if derecognized, in order to provide a complete picture of the
way the Group‟s loans portfolio is structured.
Concentration of customers
The Group’s loans portfolio is well spread overall with 273 thousand positions, of which
approximately 253 thousand, i.e. 92.7% of the total, have facilities of less than euro 250 thousand
(data as at 30 June 2013).
The most numerous category, with facilities of up to Euro 25 thousand, represents 50.8% of total
positions, an increase compared to 49.0% at December 2012. The categories from Euro 26 to 250
thousand account for 42.1%, a contraction from 43.5% at the end of 2012, while those with greater
facilities represent 7.1% of the total, compared to 7.5% in December 2012. Considering the amounts
drawn down, instead, the categories with facilities up to Euro 25 thousand account for just 3.0%
of total loans granted by the Group (a marginal increase from 2.9% at the end of 2012), while
significant rises are seen in the categories from Euro 26 thousand to Euro 250 thousand (32.2%,
versus 32.1% in December 2012) and those drawing against greater facilities (64.8%, versus 65.0% in
December). In particular, facilities in excess of Euro 5 million represent 28.6% of total loans drawn
down, a decline from 28.9% at the end of 2012.
Additionally, concerning the single name concentration risk the Group, in order to assure
appropriately fractioned positions, set specific limits on the total amount granted to customers or
groups of customers whose facilities exceed certain thresholds. In particular:
–
for the Parent Bank, the percentage of credit granted to counterparties, whether individual or
in the same group, with facilities exceeding Euro 60 million, must remain within a
maximum limit of 8% of the bank’s total facilities (net of those pertaining to banking and
insurance Groups);
–
for Banca Nuova, the percentage of credit granted to counterparties, whether individual or in
the same group, with facilities exceeding Euro 20 million, must remain within a maximum
limit of 4% of the bank’s total facilities.
At the end of June 2013 the limit had not been exceeded either by the Parent Bank (7.7%, with the
limit at 8%) or by Banca Nuova (1.8%, whereas the limit is 4%).
- 48 -
Geographical distribution
The geographical distribution of Group lending in June 2013, considering the region/province of
residence of individuals and the registered offices of legal persons, is essentially unchanged since
the end of December 2012, confirming the strong concentration of the Group‟s loans in its original
home regions, like Veneto (37% of total loans, with the Vicenza province at 16%) and Friuli V.G.
(8%).
Distribution by region
June 2013
Lazio
8%
Sicilia
8%
Emilia R.
4%
Toscana
13%
Lombardia
14%
Distribution by region
December 2012
Sicilia
8%
Other
regions and
non citizens
8%
Veneto
37%
Lazio
6%
Emilia R.
4%
Toscana
13%
Lombardia
15%
Veneto
38%
Friuli V.G.
8%
Friuli V.G.
8%
Other
regions and
non citizens
8%
Among the other region, particularly noteworthy is the increase in the weight of Lazio, from 6% to
8%, and the still significant weight of Lombardy, with 14%, and Tuscany, with 13%. The positioning
of the other Italian regions was substantially unchanged.
Distribution by business sector
Analysis at Group level of the distribution of the loans portfolio by economic sector highlights, in
June 2013, a slight contraction in the weightings of “Non financial companies” (from 58.1% at the
end of 2012 to 57.9%) and an equivalent increase (from 30.4% to 30.6%) in “Households”, while the
other sectors remained stable at the levels of December 2012, with “Personal Businesses” at 6.5%
and “Financial Companies” at 4.3%.
Distribuzion by sectors
Distribuzion by sectors
June 2013
Finance
companies
4.3%
Households
30.6%
Personal
Businesses
6.5%
December 2012
Hother
sectors
0.7%
Finance
companies
4.3%
Non
financial
companies
57.9%
Households
30.4%
Personal
Businesses
6.5%
Hother
sectors
0.7%
Non
financial
companies
58.1%
With respect to the loans of Non Financial Companies and Personal Businesses, which together
account for 66.9% of the total loans portfolio, our Group is mostly present in 7 sectors:
“Construction and Real Estate”, which together reach 18.9%, “Engineering” (combination of
“metallurgy”, “metal products” and “machinery manufacturing”) at 7.5%, “Services to companies”
- 49 -
(corporate and financial advice, other support services) at 6.2%, “Retail commerce”, accounting for
5.8% of total loans, “Wholesale” (5.3%), “Textiles, leather and footwear, clothing” (including leather
tanning) at 2.6% and “Basic Industry” (iron and steel, construction materials, mining) with 2.6%.
Other risk indicators
With regard to performing loans, the main instrument for monitoring changes in risk conditions is
the Early Warning system, based on performance indicators of the relationship and on all the
information that comes from the IT systems of the Group‟s banks and that can forewarn of a change
in the risk level associated with the counterparty. Within the Parent Bank, the “Observation – OS”
status was suppressed in November 2012, with the establishment, within the EW anomalies, of the
single status “Watch” (SOR), which incorporates “High Risk – AR” and the more severe range of
anomalies of the previous “Observation – OS” status. This change was introduced in Banca Nuova
and FarBanca in February 2013. Hence, at the Group level, performing positions with performance
anomalies are classified as “Watch” and “Pre-Past Due”; with regard to the evolution of these
categories, between December 2012 and June 2013, the percentage of draw-downs classified as
“SOR” relative to the portfolio as a whole increased from 5.6% to 6.1%, as did the proportion of “Pre
Past Due” loans, i.e. from 1.8% to 2.4%.
In addition, in October 2012 a new category of default loans was introduced in the Parent Bank, i.e.
those To be restructured (RSD), which includes positions undergoing restructuring and hence
awaiting, once all activities necessary to implement the restructuring agreement are completed, to
be classified as “Restructured”. The original status remains valid in any case for reporting and
financial statements purposes and it is used by us in calculating deterioration rates. This change was
introduced in Banca Nuova and Farbanca in February 2013.
The changes in the standard risk indicators identifiable from the financial statements are analysed in
the section of this report covering the results of Group operations.
- 50 -
CORPORATE SOCIAL RESPONSIBILITY AND IMAGE
This section describes the projects supported and actions taken by the Parent Bank in the first six
months of the year for the benefit of all stakeholders.
Socially worthy donations
Drawing on the funds allocated by the stockholders for charitable donations, assistance, culture and
the public interest, during the first six months of 2013 a total amount of Euro 353,489 was paid out
to 53 worthy causes. 36% of these donations involved association activities in the social and cultural
sphere, confirming the Bank‟s attention to grassroots associations, highly popular in the local
communities served by the Bank. As for the destination of these funds, 38% was allocated to
supporting study, research and training activities, 32% to volunteer associations and parishes in the
areas where the Bank operates, 24% to the culture sector and the recovery of our historical and
artistic heritage and the remainder to healthcare and solidarity to disadvantaged members of
society.
Institutional initiatives in support of the local economy
The leading role played by Banca Popolare di Vicenza in the areas where it operates was
characterised by many, highly valuable initiatives, e.g., in the first half of 2013, the institutional
support given to Entities and Trade Associations in Vicenza, of Veneto and of Lombardy, such as:
Associazione Industriali di Vicenza (the Vicenza Industrial Association), Confindustria Veneto,
Confindustria Venezia, Confindustria Verona, Confindustria Dolomiti Belluno, Confindustria
Bergamo, Apindustria Vicenza, Piccola Industria Brescia (Small Industry of Brescia),
Confcommercio Verona as well as the renewed contribution to the Vicenza Trade Fair.
Additional support was also provided to trade associations in Tuscany: among them, those in
favour of Confesercenti in Prato and Coldiretti in Arezzo.
Support to sports
In the sporting field, the Bank officially sponsored Vicenza Calcio (football), Rugby Rovigo,
Cavalieri Rugby of Prato and Reggiana Basketball, partnered with Udinese Calcio and supported
the 13th edition of the “Stravicenza” running event. Also noteworthy is the sponsorship of the
Vicenza to Colli Berici stage of Giro d‟Italia.
Support to culture
Banca Popolare di Vicenza has always provided concrete support to culture; among its various
initiatives, of note is the partnership with La Fenice Theatre Foundation of Venice, of which the
Bank is an official partners, whereby tickets for La Fenice Theatre shows are sold in all BPVi
branches, and the Institute‟s logo is reproduced on tickets and on all promotional support.
In the first half of the year, the Bank also supported the “Vicenza Fiorita 2013” contest, promoted by
the Vicenza section of F.A.I., the Italian Environmental Fund, in collaboration with Giornale di
Vicenza.
Promotion of culture, art and the artistic treasures owned by the Bank
In the first half of the year, the Bank confirmed its commitment to culture, through a series of
significant initiatives, such as the many lectures held in Palazzo Thiene.
- 51 -
The first set of events was the traditional cycle of “Sunday Lectures” organised in the Bank‟s
historical headquarters from 13 to 27 January 2013, accompanying the 2012 Christmas exhibition
“Capolavori che ritornano. Un regale servizio da tavola della Manifattura Antonibon. Dalla Corte d’Olanda a
Palazzo Thiene” (Royal tableware by Manifattura Antonibon. From the Dutch Court to Palazzo
Thiene). These Sunday events, held by art and architecture historians, delved into themes linked to
Eighteenth Century majolica works from Veneto.
Also in January, Cardinal Gianfranco Ravasi held a meeting on “Religion, culture and society”,
followed by the two lectures on economics held by Guidalberto Guidi, Chairman e Managing
Director of Ducati Energia and Beppe Severgnini, journalist and writer.
In June, the Bank hosted the lecture on “Europe: origins and development of a civilisation”, held by
Professor Louis Godart, Advisor to the President of Italy for the Conservation of the Artistic
Heritage.
In April, the Bank then presented to the public, in a dedicated gallery in Palazzo Thiene, the series of
Nineteenth Century marble sculptures by Lorenzo Bartolini, recently notified by the Ministry for
Cultural Assets and Activities and belonging to the Tuscan collections of BPVi. In this occasion, also
in the Bank‟s historical headquarters, art lectures were held on Bartolini and on European sculpture
in the 19th Century.
The “Palazzo Thiene Schools Project” for the 2012-2013 school year continued throughout the first
half of 2013. This project involved, once again, pupils from schools in the Veneto and Friuli Venezia
Giulia regions, and the provinces of Bergamo and Brescia, in a renewed and expanded range of
educational visits to the palace and its art collections. Over 4,500 students participated.
To promote its artistic treasures, the Bank accepted, in the first half of the year, to have certain major
works of the BPVi Collections exhibited by significant cultural initiatives, e.g. the loan of the
“Jupiter on Mount Olympus” painting by Anton Domenico Gabbiani to the exhibition entitled
“Ferdinando di Cosimo III de’ Medici, gran principe di Toscana”, held from June to November at Galleria
degli Uffizi in Florence.
Regarding the Bank‟s policy for the purchase of art to restore works at risk of dispersion in the
market to their home territory, worthy of note, among numerous acquisitions, the Nineteenth
Century painting “Amor materno” (“Motherly love”) by Egisto Lancerotto, and a beautiful view of
Venice by Antonio Milesi.
Acquisitions continued in the numismatics field, with the intention of expanding the Bank‟s
collection of Venetian coins; of particular note is the significant acquisition of the Nicolò Contarini
gold zecchino, one of the three coins needed to complete the Bank‟s collection of Venetian zecchini,
and the rare Mezzo Leone per il Levante of Doge Francesco Morosini.
- 52 -
TRANSACTIONS WITH RELATED PARTIES, SIGNIFICANT NONRECURRING AND ATYPICAL AND/OR UNUSUAL TRANSACTIONS
In relation to disclosure on related-party transactions, significant and non-recurring events and
operations, and positions and transactions deriving from atypical and/or unusual transactions, as
prescribed by CONSOB Communication no. 6064293 of 28 July 2006 regarding “Disclosures by listed
issuers and issuers whose financial instruments are held by the general public per Article 116 of the TUF –
Requirements pursuant in accordance with Article 114.5 of Legislative Decree no. 58/98”, the definitions
and qualitative/quantitative criteria prescribed in the Internal Regulations approved by the Board
of Directors at the meeting of 23 January 2007 to identify the aforesaid operations are provided
below.
Related-party transactions
For the definition of related-party transactions, please refer to Point 2 of the Chapter “Related-party
transactions” of the Explanatory Notes to this Half-Year Report.
Significant and non-recurring transactions
“Significant and non-recurring” transactions are defined as all transactions that are not repeated
frequently in the ordinary course of the Group‟s activities and whose balance sheet and/or
economic value exceeds a certain materiality threshold. In particular:
- Significant transactions:
transactions whose balance sheet and/or economic value exceeds at least one of the following
parameters:
1% of Group equity, as reported in the latest consolidated financial statements;
4% of the Group‟s net income for the year, as reported in the latest consolidated financial
statements.
For the purposes of the above calculation, each transaction must be considered separately; if
transactions are strictly and objectively related as part of the same strategic or operational plan,
the calculation must refer to all the related transactions taken together.
If no consideration is agreed for a transaction, its “normal value” must be determined beforehand
to reflect the price at which the transaction would have taken place between independent parties
on arms‟ length terms.
Standard funding, lending and investment activities conducted on normal market terms are not
reported as significant transactions.
- Non-recurring transactions:
transactions that are not repeated frequently in the ordinary course of the Group‟s activities. The
frequency of transactions must also be assessed with reference to prior years as well as to the
current year.
With effect on 1 January 2013, the subsidiary BPVi Fondi Sgr sold two business units to Arca Sgr
pertaining, respectively, to the management of the fourteen mutual funds belonging to the Pacto
Funds System and the management of the institutional portfolios comprising the asset management
appointments of Berica Vita, ABC Assicura and the Cariprato Pension Fund. The sale generated a
gross gain of Euro 21 million. As a result of the aforesaid transaction, part of the assets to which the
consolidation difference existing on the subsidiary BPVi Fondi Sgr was no longer in place, leading to
- 53 -
the need to recognise an impairment of Euro 15.2 million thereon. Overall, taking also into account
the tax effect on the realised gain (i.e. Euro 5.8 million), the sale in question is substantially neutral
on net income for the period. The above significant, non-recurring transaction is part of ordinary
operations, and does not constitute an “atypical and/or unusual transaction”.
Atypical and/or unusual transactions
These are defined as all “significant” transactions, as defined above, which due to the nature of the
counterparties, the purpose of the transaction, the method of determining the transfer price or the
timing of the event (close to the accounting reference date) may give rise to doubts about the
correctness/completeness of the information reported in the financial statements, possible conflicts
of interest, the safeguarding of assets or the protection of minority stockholders.
Atypical and/or unusual transactions are a subset of significant transactions and are identifiable
from the atypical nature of the counterparty or purpose of the transactions and/or from the unusual
way in which the transfer price is determined or from the timing of the event.
As an example, the following may be atypical and/or unusual transactions:
–
with reference to the nature of the counterparties: the significant transactions entered into with
related parties;
–
with reference to the purpose of the transaction: significant transactions involving the transfer
of resources, services or obligations that are not conducted in the ordinary course of the
Group‟s activities;
–
with reference to the way the transfer price is determined: significant transactions whose
transfer price is not determined on an arms‟ length basis and, in any case, those for which no
consideration is agreed;
–
with reference to the timing of the event: significant transactions entered into close to the
accounting reference date or other relevant dates for the purposes of providing information to
the Stockholders and/or the market.
No atypical and/or unusual transactions with a significant effect on the Group‟s balance sheet,
financial position and results of operations were arranged during the first half of 2013.
- 54 -
SIGNIFICANT SUBSEQUENT EVENTS
There have been no significant events since the date of the condensed interim consolidated financial
statements (30 June 2013) and the date of their approval by the Board of Directors (27 August 2012)
except as described below.
On 9 July 2013, the Shareholders‟ Meeting of Nordest Merchant, merchant bank of the BPVi Group,
and the Board of Directors of Banca Popolare di Vicenza approved the merger by absorption of
Nordest Merchant by the parent bank, Banca Popolare di Vicenza; this operation had already been
authorised by the Bank of Italy with its decision of 10 May 2013.
On 23 July the Board of Directors of Banca Popolare di Vicenza and the Shareholders‟ Meeting of
BPVi Fondi Sgr approved the merger by absorption of BPVi Fondi Sgr by the Parent Bank, Banca
Popolare di Vicenza; this operation, too, had been previously authorised by the Bank of Italy with
its decision of 17 June 2013, which also authorised Banca Popolare di Vicenza to perform the
portfolio management service (per Article 1, Paragraph 5, Letter d) of Italian Legislative Decree no.
58/98).
The two aforementioned mergers should be completed by the month of November 2013 with legal
validity from 1 December 2013.
On 12 July 2013 the BPVi Group successfully completed a new securitisation, called “Berica PMI”,
pertaining to a portfolio of commercial loans issued by Banca Popolare di Vicenza and Banca Nuova
to Italian small and medium enterprises, for a nominal value of approximately Euro 1.6 billion. This
new securitisation was the first public securitisation of loans of Italian SMEs since 2008, and the first
public securitisation by an Italian bank since 2011. The investor base was broad and diversified,
including mutual funds, insurance companies, banks and other financial institutions. Over 70% of
the securitisation was placed with foreign operators, confirming the interest for the Italian SME
segment and the recognised reliability of Banca Popolare di Vicenza, active on the securitisation
market since 2001. The Berica PMI securitisation enabled the BPVi Group further to improve its
structural liquidity profile, both in terms of maturity latter and with reference to the ratio of loans to
direct deposits for retail customers.
Also in the first half of July, a new self-securitisation of commercial loans of the BPVi Group (Parent
Bank, Banca Nuova and Farbanca) to Italian small and medium enterprises was structured; it is
called “Piazza Venezia” and its total nominal value is approximately Euro 1.1 billion. The tranches
of the Piazza Venezia securitisation will be used as collateral in repo transactions.
On 24 July 2013, the international rating agency Standard & Poor’s, after downgrading Italy‟s long
term rating from “BBB+” to “BBB” on 9 July 2013 and with the perception of a greater risk profile,
generally attributed to Italy‟s economic scenario and its banking industry, revised the rating of
many Italian banks, including Banca Popolare di Vicenza whose long-term rating was downgraded
by one notch, from “BB+” to “BB”, confirming the short-term rating at “B”. The outlook remains
“negative”.
On 26 July 2013, Fitch Ratings updated its rating of 8 Italian local banks, including Banca Popolare
di Vicenza, whose long and short term ratings were confirmed (respectively at BB+ and B), along
with the “negative” outlook. The confirmation of the rating by Fitch reflects the progress made by
the Bank in terms of capitalisation, thanks to the capital strengthening initiative, worth Euro 506
million, and the improvements made on the liquidity and funding front.
On 9 August 2013, the capital increase and convertible bond totally Euro 506 million (Euro 253
million referred to the capital increase and Euro 253 million referred to the issue of the convertible
bonds) was met with full success and with demand exceeding the amount on offer. Subscription
requests greatly exceeded the supply, so the allotment procedure was followed, as provided in the
Securities Note. The overall capital strengthening initiative, as is amply described in the chapter
- 55 -
dedicated to “Activities with strategic relevance” of this Report, had been resolved by the Board of
Directors of BPVi last 18 April in order to increase capital, consistently with the strategy of further
strengthening capital ratios. The fully successful completion of the capital increase enables the
consolidated Core Tier 1 to rise to 9% from 8.11% in June 2013.
MAIN RISKS AND UNCERTAINTIES AND OUTLOOK FOR OPERATIONS
The preliminary GDP data of the second quarter of 2013 have outlined a mixed economic situation:
on one hand, the contraction by -0.2% confirmed the deep recession experienced by the Italian
economy, but on the other hand the decline was less heavy than expected and in any case it is the
best result in nearly two years. The sense that the most critical point has been overcome, not only by
our own economy but by Europe as a whole, is also supported by other significant economic
indicators, like the industrial production index, which in June grew for the second month in a row,
and the PMI (i.e., Purchasing Managers‟ Index, a survey carried out among purchasing managers in
the manufacturing sector), which after 23 months returned to expansionary territory. Small signs of
change can also be found in the periodic qualitative surveys of household and business confidence,
which in July marked a growing trend for the first time, albeit remaining at historical lows. The level
stably reached by the spread between BTPs and the safer German Bund, around 250 bps, also
seems to outline a situation that is on its way to normalisation. In spite of these initial positive signs,
however, our Country’s economic activity still seems far from returning to a sound growth path:
the structural weaknesses that hamper our enterprises‟ international competitiveness remain
substantially unresolved and the fundamental contribution of domestic consumption, the true
engine of our economy, is still lacking (domestic consumption accounts for approximately 80% of
Italy‟s GDP). The contribution of international markets, the lone positive factor in this recession, is
progressively losing its vigour: in the first 6 months of 2013, exports recorded a slight annual
decline, i.e. -0.4%, because of the drop in sales in Europe (-3.1%) only partially offset by the slight
increase in trade with non-European markets (+3.0%). Lastly, concern remains strong over labour
data, with nationwide unemployment at record levels, i.e. above 12% overall and with youth
unemployment at nearly 40%.
The European financial environment is still fragile and uncertain, in spite of the slow normalisation
process currently underway, propelled by the ECB‟s monetary policy. In this scenario, lending
activities will remain weak in Italy, because of the modest demand for new loans by households
and businesses and of banks‟ need to reduce asset risk and contain liquidity risk. Bank profitability
at the banking system level should still be confirmed at low levels, penalised as it is by small
trade volumes, by a low banking spread and, above all, by a structurally high level of adjustments,
consequent to the fragility of the macroeconomic environment. The careful management of
operating costs will still be an essential instrument to defend the already limited income levels of the
credit systems.
The upcoming months will thus continue to be challenging for the BPVi Group, in view of the
situation outlined above. The ongoing initiatives and the results already achieved, foremost among
them the fully successful conclusion of the important capital strengthening initiative, the attainment
of a more balanced liquidity profile, and the enhancement of the commercial capabilities of the
Group‟s distribution network, confirm our Institution’s ability to react to the effects of the crisis in
a timely manner and attest, yet again, its quality and soundness. The constantly growing number
of members and customers, moreover, provides the basis on which tomorrow’s results will be
built, once the challenging operating context is normalised. The economic performance for 2013 as a
whole is affected by the uncertainty surrounding the evolution of the macroeconomic
environment and of businesses’ ability to withstand it, and the consequent impacts on credit,
which may be offset by the continuing positive trend in revenues and by the actions, most of which
are already ongoing, aimed at closer control over operating costs.
- 56 -
GLOSSARY
ABS (Asset backed
securities)
Securities deriving from securitisations and, therefore, guaranteed by a
portfolio comprising various underlying assets (consumer loans, credit cards,
mortgages, lease instalments etc.).
ALMS
Asset & Liability Management System. This is an instrument for measuring
interest rate risk relating to interest-bearing assets and liabilities and identifies
how changes in rate curves influence the Bank‟s future profit margins.
The ALMS is a valid tool for management allowing it to assess ex-ante at what
level of risk the Bank intends to position itself in expected financial scenarios
and to estimate the value of balance sheet items by discounting future cash
flows, thus keeping the Bank‟s value under constant observation.
Euro Area
The group of countries which have adopted the euro as the single currency.
The Euro area consists of the following countries: Belgium, Germany, Greece,
Spain, France, Ireland, Italy, Cyprus, Luxembourg, Malta, the Netherlands,
Austria, Portugal, Finland, Slovenia, Slovakia and, starting from 1 January
2011, Estonia.
Assessment
An assessment is an evaluation involving an opinion on the likely turn of the
events assessed.
Asset allocation
It consists of identifying asset classes to be included in the portfolio in order
optimally to allocate financial resources, in view of the reference time horizon,
risk-return preferences and the set of existing assets.
Asset management
The management of wealth on behalf of third parties, comprising collective
management (open-end and closed-end mutual funds, real estate funds,
pension funds and SICAVs), endowment assurance products and individual
management (by banks, brokers and trust companies).
ATM
Automatic Teller Machine: a machine that dispenses cash. The “Bancomat”
machines installed by banks are ATMs.
Back office
The department of a financial institution which deals with all the reporting,
accounting and administrative requirements relating to transactions carried
out by the front office (branches).
Back-testing
Retrospective analysis to test the reliability of measurements of the sources of
risk associated with asset positions.
Bancassurance
It represents the set of relations that may take place between banks and
insurance companies, both in terms of shareholding and with respect to the
creation of integrated distribution systems.
Banking book
Generally relates to securities and financial instruments in general, identifying
that part of the investment portfolio held for internal purposes.
- 57 -
Basel 3
The abbreviated expression „Basel 3‟ is used to denote a set of rules for the best
management of risk assets in the banking system, drawn up by the Basel
Committee for Banking Supervision. The new provisions, which supplement
and/or amend the criteria previously established in 1998 (Basel 1) and in 2008
(Basel 2) shall be focused on certain issues, mainly the guarantee of liquidity
and capital requirements of banks.
ECB
European Central Bank. It meets periodically to analyse the economic
situation in Europe (GDP, inflation, unemployment rate, etc) and to decide
monetary policy.
Securitisation
A securitisation represents a special issue of bonds with the payment of
coupons and the redemption of principal on maturity funded by the cash
flows deriving from a portfolio of financial assets (mortgages, commercial
paper, leasing contracts) held by the vehicle company for the securitisation.
Each securitisation is divided into various tranches of bonds with different
ratings (from AAA to BBB or even lower), depending on the credit risk
involved.
CDO (Collateralized Securities issued as part of securitisation transactions, guaranteed by an
Debt Obligations) underlying represented by loans, securities or other financial assets.
Compliance
function
The compliance function serves to prevent the risk of non-compliance by
company activity with compulsory regulations and laws or self-regulatory
ones (for example, articles of association, codes of conduct, self-regulatory
codes etc.).
Confidi (Credit
Guarantee
Associations)
Economic trend
Organisations with co-operative or consortium structure, which provide
collective loan guarantees in favour of member or participating companies.
CONSOB
The “Commissione Nazionale per le Società e la Borsa” (Italian stock market
regulator), set up under Law no. 216 dated 7 June 1974, is an independent
administrative authority, with a separate legal identity and full autonomy
under Law no. 281/1985, whose activities are aimed at investor protection,
and the efficiency, transparency and development of the Italian stock market.
Corporate finance
Comprises the full range of products offered by the Bank to meet the financing
and consultancy needs of businesses.
Cost/income
A performance indicator which expresses in percentage terms the ratio
between a bank‟s costs and its income. The lower it is the more efficient the
bank.
Performing loans
Loans for which no risk of default is perceived.
Period-on-period
growth
Growth relative to the previous reporting period (for example, the previous
quarter).
This indicates the general state of the national economy and its related growth
trend.
- 58 -
Year-on-year growth Growth relative to the same period in the prior year.
Cross selling
This is an indicator of the average number of products held by each customer;
the higher the number of products held, the greater the degree of customer
loyalty and the more profitable the relationship.
Deemed cost
The deemed cost is the presumed cost to be applied to property, plant and
equipment and intangible assets for IAS purposes.
Probability of
default (PD)
The probability that a counterparty enters a state of default, even if
temporarily, before the end of the reference period (one year). This measure is
the output of a rating system.
EFSF
European Financial Stability Facility. The instrument instituted as a result of
the EU Council decision of 9 May 2010, with the aim of safeguarding the
financial stability of the Euro area by providing temporary financial assistance
to countries experiencing hardship.
ESM
European Stability Mechanism. Permanent crisis management mechanism,
which will gradually replace the EFSF. The ESM may provide financial
support to requesting Euro area member states and it may use the instruments
already available to the EFSF.
Euribor
Euribor (Euro Interbank Offered Rate) is the principal market reference rate
and is calculated as the weighted average of interest rates applied to financial
transactions in euro between prime European banks. It is published on a daily
basis by the European Banking Federation with quotations for 1 month, 3
month and 6 month maturities.
Fair value
The price that would be received to sell an asset or paid to transfer a liability
in an orderly transaction between market participants in the principal (or most
advantageous) market at the measurement date, at current market conditions
(i.e. a closing price), irrespective of whether the price is directly observable or
is estimated using a valuation technique.
FED
Federal Reserve System. The US Federal Reserve. This is the central bank of
the United States, authorized by Congress to issue money and implement
monetary policy; it thus determines the quantity of the money supply and sets
the level of interest rates.
Financial Stability
Board (FSB)
The Financial Stability Board is an international body in charge of
international coordination of the work of national financial authorities and the
commissions that define international standards. It was created in April 2009
by the G20, as the successor of the Financial Stability Forum, and brings
together national authorities responsible for stability (i.e. Central banks,
supervisory authorities and Treasury Departments), international financial
institutions, committees of experts from central banks and international
supervisory and regulatory bodies. Mario Draghi, governor of the Bank of
Italy, is currently chairman of the Financial Stability Board.
- 59 -
Governance
This term is used to refer to the governing bodies of a company and the
associated rules (voting rights, hierarchies etc.). It indicates the set of
principles and processes adopted by a company to create value for its
stockholders and the well-being of its other stakeholders.
Home banking,
Remote banking
Telematic connection to access bank accounts, carry out transactions and
check movements and terms and conditions.
House organ
Periodic publication by a business to communicate with its employees and/or
customers.
IAS/IFRS
International Accounting Standards/International Financial Reporting
Standard. These are the international accounting standards issued by the IASB
(International Accounting Standards Board), whose application is compulsory
(under a decree promulgated in November 2004) for the purposes of
preparing separate and consolidated financial statements by a wide array of
companies, including banks
Impairment
In the context of international accounting standards (IAS), impairment
represents the loss in the value of an asset that is recognized if its carrying
amount exceeds its recoverable value, being the amount that could be
obtained by selling it or using it in the business. Impairment testing must be
performed on all assets, except for those measured at fair value since, in this
case, any losses (or gains) are implicit in such value.
ISTAT
Italy‟s publicly-operated central statistics office. It has been in operation since
1926 and is the principal producer of official statistics in support of citizens
and public policy-makers.
ISVAP
This institute supervises the insurance industry. It has a separate legal identity
under public Law no. and was set up under Law no. 576 dated 12 August 1982
to supervise insurance and reinsurance companies, and all other parties
governed by the Law no. on private insurers, including agents and insurance
brokers. ISVAP carries out its duties on the basis of government-determined
policy.
Joint venture
A company or business set up under joint ownership for a specific purpose.
Mark-down
Negative differential relative to a reference indicator, normally an interbank
rate, applied to the rate on customer deposits.
Mark-up
Positive differential relative to a reference indicator, normally an interbank
rate, applied to the rate on loans to customers.
Maturity Ladder
Representation of cash inflows/outflows by settlement date, in order to
highlight cash mismatches (exact and/or cumulative), during various time
buckets.
- 60 -
Merchant Banking
This comprises a series of services to companies such as: investments in risk
capital, advice on special financing transactions etc., mainly for the purpose of
company reorganization, growth in business, or satisfaction of financial needs
in view of a subsequent sell-off.
Mezzanine
financing
A type of financing with characteristics partly similar to debt and partly
similar to an equity interest. It generally takes the form of convertible bonds or
warrants.
MIFID
Markets in financial instruments directive. European regulations provided by
Directive 2004/39/EC to increase investor protection and assure the greatest
possible transparency through mandatory disclosure to Customers.
Multi-channel
activities
The offer of retail banking products and services both through traditional
physical channels (branches) and through telematic channels.
OTC (Over The
Counter)
Over the counter market. All those “markets” in which financial assets are
traded other than official regulated ones. The methods of contracting are not
standardized and it is possible to agree “atypical” contracts. Securities traded
on an OTC market are generally less liquid that those traded on official
markets.
Outlook
When used by rating agencies, this means a company‟s forecast or prospects.
GDP
Acronym of Gross Domestic Product. It refers to the value of all goods and
services produced by an economy, plus indirect taxes on imports less goods
for intermediate consumption. It is the fundamental measure of economic
activity. In national accounting, GDP is the same as national income.
POS
POS (Points of Sale) are small terminals at cash registers in shops and
supermarkets used for making payments with debit or credit cards.
Rating
Classification or rating of an issuer of securities on international financial
markets, by a specialist agency. A rating expresses the creditworthiness of
issuers of bonds using letters that indicate the debtor‟s reliability. For
example, a triple A (AAA) rating represents the highest quality investment
grade; the scores descend progressively (AA, A, BBB, BB, B). Triple C (CCC)
ratings are awarded to the least reliable debtors.
Recession
Negative economic situation featuring a reduction in industrial output, a fall
in consumption, and a decrease in household income.
- 61 -
Risk management
This refers to all practices (measurements, estimates, analyses, actions) that
allow the Bank to be constantly and promptly informed about the status of
risks to which it is exposed and any changes therein and to be able to
intervene when the risks requires mitigating and/or the instruments and
functions of control require revision. The Risk Management unit is
independent from the units that assume risk and is responsible for developing
methods and principles for measuring credit, financial and operational risks
so as to let top management and the Board of Directors govern the exposure to
such risks. The Risk Management unit is therefore part of the wider spectrum
of the Bank‟s risk management.
Sec Servizi
SEC SERVIZI is a credit and finance outsourcing co-operative which provides
highly innovative services ranging from software applications, centralized
back office services and advanced multi-channel solutions, consulting,
training and support services.
SGR
SGRs (Società di Gestione del Risparmio) or asset management companies are
companies authorized to promote, set up, organize and manage the assets of a
mutual fund (collective asset management), keeping their own assets separate
from those of the fund. An SGR can also manage funds set up by other asset
management companies.
Small business
Market segment relating to small and very small businesses (typically
tradesmen and shopkeepers).
Stakeholder
This term is used to indicate all categories of parties which may influence, be
influenced by or hold a stake in the activities of a business/bank, such as
Human Resources, Stockholders, Customers, the National Community and
the State, Suppliers and future generations.
Stress testing
Simulation used to measure the impact of extreme market scenarios on the
bank‟s overall exposure to risk.
Sub-prime
Literally “less than prime”, being a residential mortgage that carries more risk
that prime quality US mortgages. Sub-prime mortgages are granted to low
quality borrowers: in many cases, repayment instalments in the first two years
are extremely low. Alt-A mortgages fall half way between sub-prime (for high
risk borrowers) and prime (top-end borrowers), and target borrowers with
low savings.
Trading Book
Identifies the part of a portfolio of financial instruments held for trading.
VaR
Value at Risk is an estimate of the expected potential loss on a portfolio of
financial instruments in a specified time period, with a defined level of
probability, upon the occurrence of unfavourable market conditions.
VIP
Category of very wealthy customers who require advisory services and
sophisticated investment management.
- 62 -
CONDENSED INTERIM FINANCIAL STATEMENTS
- 63 - 63 -
BANCA POPOLARE DI VICENZA GROUP
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
in thousands of euro
30 JUNE 2013
Assets
10.
Cash and cash equivalents
20.
31 DECEMBER 2012
190,331
409,976
2,453,714
2,605,913
40.
6,850,533
5,566,180
50.
Financial assets held to maturity
53,547
43,002
60.
Loans and advances to banks
2,848,246
4,341,438
70.
Loans and advances to customers
31,208,545
30,712,576
80.
Hedging derivatives
126,800
129,994
90.
Remeasurement of financial assets backed by macro
hedges (+/-)
49,941
67,338
100. Equity investments
342,082
350,472
120. Property, plant and equipment
616,274
619,256
130. Intangible assets
948,933
of which: - goodwill
927,362
140. Tax assets
a) current
b) deferred tax assets
of which: - of L. 214/2011
26,780
528,319
304,695
960,572
942,587
555,099
150. Non-current assets held for sale
160. Other assets
Total assets
64 --- 64
531,892
45,529
486,363
286,422
-
44
233,869
370,725
46,477,914
46,709,378
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
30 JUNE 2013
Equity and Liabilities
10.
Due to banks
20.
Due to customers
30.
40.
31 DECEMBER 2012
6,442,793
7,357,932
24,079,590
22,479,634
Debt securities in issue
7,331,439
8,176,762
Financial liabilities held for trading
2,005,392
2,250,037
50.
Financial liabilities at fair value
1,818,829
1,731,170
60.
Hedging derivatives
631,277
608,642
80.
Tax liabilities
a) current
b) deferred
90.
169,011
22,071
146,940
Liabilities associated with non-current assets
held for sale
100. Other liabilities
110. Provision for severance indemnities
120. Provisions for risks and charges:
a) pensions and similar commitments
b) other provisions
176,812
40,298
136,514
-
31
615,475
430,970
76,504
80,138
67,207
5,621
61,586
140. Valuation reserves
(146,520)
160. Equity instruments
170. Reserves
180. Additional paid-in capital
190. Capital stock
210. Minority interests (+/-)
220. Net income (loss) for the period (+/-)
Total Equity and Liabilities
- 65 -
74,950
5,923
69,027
(112,522)
1,627
1,665
589,012
530,931
2,480,640
2,504,229
295,417
296,923
18,576
20,821
1,645
100,253
46,477,914
46,709,378
CONSOLIDATED INCOME STATEMENT
Caption
30 JUNE 2013
30 JUNE 2012
10.
Interest income and similar revenues
627,144
671,286
20.
Interest expense and similar charges
(372,433)
(420,333)
30.
Net interest income
254,711
250,953
40.
Fee and commission income
177,517
191,648
50.
Fee and commission expense
(40,393)
(27,580)
60.
Net fee and commission income
137,124
164,068
70.
Dividend and similar income
8,332
5,875
80.
Net trading income
29,294
22,693
90.
Net hedging gains (losses)
34,683
25,086
100. Gains (losses) on disposal or repurchase of:
54,438
a) loans and advances
b) financial assets available for sale
d) financial liabilities
44,908
53
149
53,905
33,185
480
110. Net change in financial assets and liabilities at fair value
11,574
(5,345)
120. Net interest and other banking income
1,032
513,237
130. Net impairment adjustments on:
514,615
(192,986)
a) loans and advances
(111,509)
(187,398)
(95,000)
b) financial assets available for sale
(4,546)
(13,951)
d) other financial transactions
(1,042)
140. Net income from financial activities
(2,558)
320,251
170. Net income from financial and insurance activities
180. Administrative costs:
a) payroll
(197,779)
b) other administrative costs
(139,010)
190. Net provisions for risks and charges
200. Net adjustments to property, plant and equipment
403,106
320,251
403,106
(336,789)
(342,262)
(202,133)
(140,129)
(3,804)
(7,158)
(11,186)
(10,400)
210. Net adjustments to intangible assets
(1,980)
(1,892)
220. Other operating charges/income
48,272
32,455
(305,487)
(329,257)
230. Operating costs
240. Profit (loss) from equity investments
5,380
260. Adjustments to goodwill
(15,225)
270. Gains (losses) on disposal of investments
43
280. Profit (loss) on current operations before income taxes
5,392
(1)
4,962
79,240
290. Income taxes on current operations
(18,321)
(9,151)
300. Profit (loss) from current operations after tax
(13,359)
70,089
310. Profit (loss) from disposal groups, net of tax
320. Net income (loss) for the period
330. Minority interests
15,123
-
1,764
70,089
(119)
340. Net income (loss) for the period pertaining to the parent bank
(673)
1,645
69,416
Earnings per share (basic)
0.021
0.883
Earnings per share (diluted)
0.021
0.883
The comparative figures referred to 2012 were redetermined, with respect to line item 180 a) "Payroll" and line item 290 "Income taxes on current
operations", by effect of the retrospective adoption of the new accounting standard IAS 19 "Employee benefits".
- 66
- 66
- -
STATEMENT OF CONSOLIDATED COMPREHENSIVE INCOME
Caption
10.
30 JUNE 2013
Net income (loss) for the period
30 JUNE 2012
1,764
70,089
96,567
61,124
(125,836)
2,137
(22,410)
(251)
Other post-tax components of income
20.
60.
90.
Cash-flow hedges
Actuarial gains and losses on defined-benefit plans
Portion of valuation reserves of equity investments carried at
100.
equity
(9,868)
22,190
110. Total other post-tax components of income
(37,000)
60,653
120. Total comprehensive income (Lines 10. + 110.)
(35,236)
130,742
130. Total comprehensive income pertaining to minority interests
140. Total comprehensive income pertaining to the parent bank
(124)
(35,360)
(673)
130,069
The comparative figures referred to 2012 were redetermined, with respect to line item 10 "Net income (loss) for the period" and 90
"Actuarial gains and losses on defined-benefit plans", by effect of the retrospective adoption of the new accounting standard IAS 19
"Employee benefits".
In accordance with the new provisions of IAS 1, item 90 "Actuarial gains and losses on defined-benefit plans" includes element of
income that will not transfer to income statement. All other components of the total comprehensive income, however, will transfer to
income statement.
- 67- 67
- -
- 68 - 68 -
106,268
(112,537)
1,665
b) other
Valuation reserves
Equity instruments
20,821
3,321,479
101,138
Change in
opening
balances
-
-
-
-
-
-
-
-
-
-
20,821
3,321,479
101,138
-
1,665
(112,537)
106,268
426,764
533,032
2,509,097
-
309,905
309,905
Balance at
01/01/2013
-
-
-
-
-
-
(59,554)
-
-
-
59,554
59,554
Group
reserves
(644)
(40,940)
(41,584)
-
-
-
-
-
-
-
-
-
Dividends
and other
allocations
(*) The “issue of new shares” is stated net of the cancellations recorded during the period.
Minority interests
Group Equity
-
426,764
a) from earnings
Treasury shares
533,032
2,509,097
Reserves:
Additional paid-in capital
-
309,905
a) ordinary shares
b) other shares
309,905
Capital stock:
Balance at
31/12/2012
Allocation of prior year
results
19
1,775
-
-
3,004
(1,210)
-
(1,210)
-
-
-
Changes in
reserves
(1,744)
(25,095)
-
-
-
-
-
-
-
(24,071)
-
(2,768)
(2,768)
Issue of new
shares (*)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(38)
-
-
(38)
-
-
-
-
-
-
-
-
Purchase of Extraordinar Change in
treasury
y distribution
equity
shares
of dividends instruments
Equity transactions
Changes in the period
STATEMENT OF CHANGES IN CONSOLIDATED EQUITY
-
-
-
-
-
-
-
-
-
-
-
-
-
Derivatives
on treasury
shares
Stock
Options
-
-
-
-
-
-
-
-
-
-
-
-
-
124
(35,360)
1,764
-
-
(37,000)
-
-
-
-
-
-
-
-
3,221,821
1,645
-
1,627
(146,520)
105,008
484,004
589,012
2,480,640
-
295,417
295,417
18,576
-
119
(13)
50
2,314
2,364
4,386
-
11,720
11,720
Group equity Minority
Total
at
interests at
comprehensi
30/06/2013 30/06/2013
ve income at
30/06/2013
(in thousands of Euro)
- 69 - 69 -
34,447
Change in
opening
balances
-
-
-
-
-
-
-
-
-
-
-
-
-
34,447
2,933,580
95,558
(80,540)
1,707
(428,252)
110,530
406,394
516,924
2,539,414
-
323,216
323,216
Balance at
01/01/2013
-
-
-
-
(30,724)
-
-
-
30,724
30,724
Group
reserves
(830)
(3,338)
(64,834)
60,666
-
-
-
-
-
-
-
-
-
Dividends
and other
allocations
(11,078)
(5)
-
-
-
-
(3,295)
(613)
(3,908)
(325)
-
(6,850)
(6,850)
Changes in
reserves
-
(14,641)
-
-
-
-
-
-
-
(13,762)
-
(879)
(879)
Issue of new
shares (*)
-
(10,604)
-
(10,603)
-
-
-
(1)
(1)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2
-
-
2
-
-
-
-
-
-
-
-
Purchase of Extraordinar Change in
treasury y distribution
equity
shares
of dividends instruments
Equity transactions
-
-
-
-
-
-
-
-
-
-
-
-
-
Derivatives
on treasury
shares
Stock
Options
-
-
-
-
-
-
-
-
-
-
-
-
-
673
130,069
70,089
-
-
60,653
-
-
-
-
-
-
-
-
3,035,063
69,416
(30,477)
1,709
(367,599)
107,172
434,025
541,197
2,522,714
-
298,103
298,103
23,212
-
673
-
-
-
63
2,479
2,542
2,613
-
17,384
17,384
Group equity Minority
Total
at
interests at
comprehensi
30/06/2012 30/06/2012
ve income at
30/06/2012
(in thousands of Euro)
benefits".
The statement of changes in consolidated equity at 30 June 2012 was redetermined, with respect to "Valuation reserves" and "Net income (loss) for the period", by effect of the retrospective adoption of the new accounting standard IAS 19 "Employee
(*) The “issue of new shares” is stated net of the cancellations recorded during the period.
Minority interests
2,933,580
95,558
Group Equity
(80,540)
Treasury shares
1,707
Equity instruments
110,530
b) other
(428,252)
406,394
a) from earnings
Valuation reserves
516,924
2,539,414
Reserves:
-
323,216
a) ordinary shares
b) other shares
323,216
Capital stock:
Balance at
31/12/2011
Allocation of prior year
results
Changes in the period
STATEMENT OF CONSOLIDATED CASH FLOWS
Direct method
30 JUNE 2013
30 JUNE 2012
OPERATING ACTIVITIES
1. Cash generated from operations
- Interest income collected (+)
- Interest expense paid (-)
- Dividends and similar income
- Net fee and commission income (+/-)
- Payroll costs (-)
- Net premium income (+)
- Other insurance income (charges) (+/-)
- Other costs (-)
- Other revenues (+)
- Taxation (-)
-Costs/income relating to groups of assets held for sale, net of tax effect (+/-)
2. Cash generated/absorbed by financial assets
165,820
74,409
544,764
(339,700)
8,332
137,124
(193,955)
(143,325)
150,975
(13,518)
15,123
628,913
(409,863)
5,875
164,068
(202,104)
(140,129)
77,363
(49,714)
-
449,974
- Financial assets held for trading
- Financial assets at fair value
- Financial assets available for sale
- Loans and advances to customers
- Loans and advances to banks: demand
- Loans and advances to banks: other receivables
- Other assets
(44,095)
(1,532,457)
406,168
978,226
514,966
127,166
3. Cash generated/absorbed by financial liabilities
- Due to banks: demand
- Due to banks: other payables
- Due to customers
- Debt securities in issue
- Financial liabilities held for trading
- Financial liabilities at fair value
- Other liabilities
Net liquidity generated/absorbed by operating activities
(1,443,578)
(784,999)
(561,470)
(407,248)
(268,475)
406,762
171,852
(735,225)
1,366,345
(641,943)
(273,196)
1,143,799
(845,323)
(69,393)
(115,820)
66,651
897,617
(888,475)
1,234,809
173,472
30,907
(420,382)
338,397
(119,431)
(2,824)
B. INVESTING ACTIVITIES
1. Cash generated by
5,284
-
- Disposal of equity investments
- Dividends collected on equity investments
- Disposal/redemption of financial assets held to maturity
- Disposal of property, plant and equipment
- Sale of intangible assets
- Sale of subsidiary companies and business divisions
10
5,263
1
10
-
2. Cash absorbed by
(39,425)
(4,070)
- Purchase of equity investments
- Purchase of financial assets held to maturity
- Purchase of property, plant and equipment
- Purchase of intangible assets
- Purchase of subsidiary companies and business divisions
(13,476)
(10,728)
(6,904)
(6,210)
(2,107)
(3,932)
5,358
(5,496)
-
Net liquidity generated/absorbed by investing activities
(34,141)
(4,070)
- Issues/purchases of treasury shares
- Issues/Purchases of equity instruments
- Distribution of dividends and other purposes
(25,095)
(38)
(40,940)
(25,244)
2
(3,338)
Net liquidity generated/absorbed by funding activities
(66,073)
(28,580)
(219,645)
(35,474)
C. FUNDING ACTIVITIES
TOTAL NET CASH GENERATED/ABSORBED IN THE YEAR
Reconciliation
(in thousands of euro)
30 JUNE 2013
30 JUNE 2012
Captions
Cash and cash equivalents at the beginning of the year
Net liquidity generated/absorbed in the year
Cash and balances with central banks: effect of change in exchange rates
Cash and cash equivalents at the end of the year
- 70- -70 -
409,976
(219,645)
190,331
204,003
(35,474)
168,529
EXPLANATORY NOTES
- 71--71 -
ACCOUNTING POLICIES
GENERAL PART
Declaration of conformity with IFRS
The consolidated half-year report at 30 June 2013 of the Banca Popolare di Vicenza Group
includes:
the condensed interim consolidated financial statements, prepared in accordance with
the International Accounting Standards (IAS) and International Financial Reporting
Standards (IFRS) issued by the International Accounting Standards Board (IASB),
endorsed by the European Commission under the procedure in art. 6 of Regulation (EC)
1606/2002 of the European Parliament and Council dated 19 July 2002 and in force at the
current reporting date, including the related interpretations of the International
Financial Reporting Interpretations Committee (IFRIC);
the Interim report on operations which describes the significant events that took place
during the first half of the year and their effect on the consolidated half-year report, as
well as the principal risks and uncertainties for the remaining six months of the year;
the certification of the Financial Reporting Manager, as required by art. 154-bis, par. 5, of
Legislative Decree no. 58/98 (Italy‟s Consolidated Financial Markets Act – TUF) as
amended by Decree no. 195/2007.
The condensed interim consolidated financial statements consist of the statement of financial
position, the income statement, the statement of comprehensive income, the statement of
changes in equity, the statement of cash flows and these explanatory notes, which provide
details of the principal balance sheet and income statement aggregates, segment information
and information about related-party transactions.
Compliance with IAS 34
The condensed interim consolidated financial statements have been prepared in accordance
with IAS 34 “Interim Financial Reporting”. As allowed by this standard, they are presented in a
condensed format and, as such, do not make all the disclosures required for annual financial
statements.
List of international accounting standards (IAS/IFRS) currently in force
The currently applicable international accounting standards (IAS/IFRS), as endorsed by the
European Commission, adopted to prepare the condensed interim consolidated financial
statements are as follows:
IFRS 1 First-time adoption of IFRS
IFRS 7 Financial instruments: disclosures
IFRS 8 Operating segments
IFRS 13 Fair Value Measurement
IAS 1 Presentation of financial statements
IAS 7 Statement of cash flows
- 72 -
IAS 8 Accounting policies, changes in accounting estimates and errors
IAS 10 Events after the reporting period
IAS 12 Income taxes
IAS 16 Property, plant and equipment
IAS 17 Leases
IAS 18 Revenue
IAS 19 Employee benefits
IAS 21 The effects of changes in foreign exchange rates
IAS 23 Borrowing costs
IAS 24 Related party disclosures
IAS 26 Accounting and reporting by retirement benefit plans
IAS 27 Consolidated and separate financial statements
IAS 28 Investments in associates
IAS 32 Financial instruments: disclosure and presentation
IAS 33 Earnings per Share
IAS 36 Impairment of assets
IAS 34 Interim financial statements
IAS 37 Provisions, contingent liabilities and contingent assets
IAS 38 Intangible assets
IAS 39 Financial instruments: recognition and measurement
IAS 40 Investment property
The following is a list of the regulations endorsing certain new standards or amendments to
existing standards, whose adoption is mandatory from the year 2013 onwards, limited to the
cases of interest for the activities carried out by the Group, for which early adoption had not
been chosen in previous years:
 regulation no. 475 of 5 June 2012 – IAS 1: the objective of the amendments to IAS 1 is to make
the presentation of the increasing number of items of other comprehensive income clearer,
and to assist the users of financial statements in distinguishing between the items of other
comprehensive income that can be reclassified subsequently to profit or loss upon the
occurrence of certain conditions (e.g. sale, impairment), and those that will never be
reclassified to profit or loss.
 regulation no. 1255 of 11 December 2012 – IFRS 13: the new IFRS 13 standard “Fair value
measurement” establishes a new reference framework for the determination of fair value,
replacing the rules contained in various accounting standards and providing comprehensive
guidance on how to measure the fair value of both financial and non-financial assets and
liabilities, also in the presence of inactive, illiquid markets. The new standard does not
extend the use of the fair value accounting principle, whose application instead is required or
allowed by other standards, but it provides practical, comprehensive and shared instructions
on how to determine fair value;
 regulation no. 1256 of 13 December 2012 – IFRS 7: the changes introduced to IFRS 7 have the
dual purpose of enabling users of the financial statements to evaluate the actual or potential
effects of all set-off agreements on the entity‟s financial situation and to analyse and compare
the accounting records of transactions prepared according to international accounting
standards with those prepared according to the different American accounting standards. In
- 73 -
particular, disclosure is required on the financial instruments that were offset in the balance
sheet in accordance with IAS 32 and those subjected to a “framework set-off agreement or
similar agreements”, which, since the IAS 32 criteria for offsetting are not fulfilled, are
reported separately in the balance sheet among assets and liabilities, including the effects of
financial collateral;
 regulation no. 301 of 27 March 2013 – IAS 16, IAS 32, IAS 34, IFRIC 2: this is an endorsement
of the “Annual cycle of 2009-2011 improvements to international accounting standards”,
approved by the IASB on 17 May 2012. The purpose of the limited amendments introduced
by the aforementioned cycle of improvements is to resolve some inconsistencies noted in the
body of the IFRS, to provide terminology clarifications and to formulate additional
guidelines on the application of certain requirements.
Basis of preparation
The condensed interim consolidated financial statements are prepared using the Euro as the
accounting currency and the amounts, unless otherwise indicated, are expressed in thousands
of Euro, rounding off as appropriate in accordance with regulatory provisions.
In the preparation of the condensed interim consolidated financial statements, the general
reporting standards, detailed below, prescribed by IAS 1 “Presentation of financial statements”
and the accounting standards illustrated in the “Part relating to the principal financial statement
line items” of these explanatory notes, in compliance with the general provisions included in
the “Framework for the preparation and presentation of the financial standards” (the
“framework”) issued by the International Accounting Standards Board, with particular regard
to the fundamental principle of the prevalence of substance over form, and to the concept of the
relevance and significance of the information.
The general reporting standards prescribed by IAS 1 are summarised below.
Going concern
These condensed interim consolidated financial statements were prepared on a going concern
basis.
In this regard, the joint co-ordination committee for IAS/IFRS application between the Bank of
Italy, CONSOB and ISVAP (Italy‟s insurance industry regulator) issued its document no. 2 on 6
February 2009 entitled “Disclosures in financial reports on the going concern assumption, financial
risks, tests of assets for impairment and uncertainties in the use of estimates”. This document requires
management to carry out a detailed review in relation to the going concern presumption, in
accordance with the requirements of IAS 1.
Paragraphs 23-24 of IAS 1 establish that: “When preparing financial statements, management shall
make an assessment of an entity’s ability to continue as a going concern. Financial statements shall be
prepared on a going concern basis unless management either intends to liquidate the entity or to cease
trading, or has no realistic alternative but to do so. When management is aware, in making its
assessment, of material uncertainties related to events or conditions that may cast significant doubt upon
the entity’s ability to continue as a going concern, those uncertainties shall be disclosed. When financial
statements are not prepared on a going concern basis, that fact shall be disclosed, together with the basis
on which the financial statements are prepared and the reason why the entity is not regarded as a going
concern”.
The current conditions of financial markets and of the overall economy and the negative
short/medium-term forecasts mean that now the presumption of going concern must be
assessed particularly thoroughly.
- 74 -
Having examined the risks and uncertainties associated with the current macroeconomic
context and taking into account the indications contained in the 2012-2014 Business Plan,
revised and extended to 2017, which was approved by the Board of Directors on 12 March 2013,
the Group can reasonably expect to carry on its operations in the foreseeable future and so its
condensed interim consolidated financial statements as at 30 June 2013 have been prepared on a
going concern basis.
Uncertainties associated with liquidity, credit and earnings risks are not in fact such as to cast
doubt upon the Group‟s ability to continue as a going concern, also in view of the Group‟s
ability to achieve positive results in a macroeconomic scenario which is objectively difficult, the
level of capitalisation and its proven capacity to access the necessary financial resources.
Recognition on an accrual basis
The condensed interim consolidated financial statements are prepared, with the exception of
cash flow disclosure, according to the principle that costs and revenues are recognised on an
accrual basis, regardless of the time of their actual payment.
Relevance, significance and aggregation
Each relevant class of items, however similar they may be, shall be reported distinctly in the
financial statements. Items with dissimilar nature or destination may be aggregated only if they
are not significant. The presentation and classification of the items of the consolidated Financial
statements complies with the provisions set out in Bank of Italy Circular no. 262 “Banks‟
financial statements: layouts and preparation”.
In accordance with the provisions of the aforesaid Circular, statements of financial position,
income statements and comprehensive income statements comprise line items (indicated by
numbers), lines (indicated by letters) and additional information details (the “of which”
portions of line items and lines). The line items, the lines and their information details make up
the financial statement accounts. New items may be added to the aforesaid statements,
provided their content is not associated to any of the items already included in the statements
and only if the amounts are relevant. The lines provided by the statements may be grouped
when one of the two following conditions is met: a) the amount of the lines is irrelevant; b)
grouping enhances the clarity of the financial statements.
In this regard, the Group, in preparing the condensed interim consolidated financial statements
as at 30 June 2013, did not apply the aforesaid provisions that allow to add new items or to
group them. Line items in the statement of financial position, the income statement, the
statement of comprehensive income are not presented if their balance is zero in both years.
Offsetting
Unless otherwise provided or expressly allowed by international reporting standards or by an
interpretation thereof or by the provision of the aforementioned Bank of Italy Circular no. 262,
assets and liabilities as well as costs and revenues may not be mutually offset.
Uniformity of presentation
The standards for the presentation and classification of Financial statement items are kept
constant from one exercise to the other in order to assure the comparability of information,
unless differently required by an international accounting standard or by an interpretation or if
the need emerges of making the representation of the information more appropriate in terms of
- 75 -
significance. If feasible, the change is adopted retroactively and the nature, the reason and the
amount of the items affected by the change are indicated.
Comparative information
In addition to the financial information at 30 June 2013, the statement of financial position, the
income statement, the statement of comprehensive income, the statement of changes in equity
and the statement of cash flows also present the following comparative information:
statement of financial position: at 31 December 2012;
income statement: 30 June 2012;
statement of comprehensive income: 30 June 2012;
statement of changes in equity: 30 June 2012;
statement of cash flows: 30 June 2012.
If changes were made to the presentation or classification of line items, the comparative
amounts are reclassified as well, unless reclassification is not feasible. Non comparability and
the adaptation, or its impossibility, are pointed out and commented in the explanatory notes.
In particular, by effect of the early adoption to the 2012 Financial Statements of the new IAS 19
“Employee benefits” which prescribes that actuarial gains/losses accrued as at the date of the
financial statements shall be recognised in the Statement of Comprehensive Income - by
recognition in a specific Equity valuation reserve - and no longer in the Income Statement, the
changes deriving from new standard were applied retrospectively - as generally established by
IAS 8 for all changes in accounting standards - adjusting the balances of the Statement of
Financial Position and Income Statement, as well as of the Statement of Comprehensive Income
and of the statement of changes in equity as at 30 June 2012 with respect to the involved items.
Moreover, since 1 July 2012, for overlimit exposures the Fast Preliminary Commission (CIV) is
applied; it was introduced by the “Save-Italy Decree” (Italian Law Decree no. 201/2011) and it
replaced the Credit Line Service Commission (CSA) previously applied by the Bank to the
exposures in question. Since the CIV (in accordance with the instructions provided in Bank of
Italy circular letter no. 46586/13) is recognised in income statement line item 220 “Other
operating charges/income”, unlike the CSA which was recognised in income statement line
item 40 “Fee and commission income”, the aforesaid items of the first half of 2013 are not
directly comparable with those as at 30 June 2012. In addition, in order to take into account the
effect of the "actuarial valuation on defined-benefit plans" for year 2011, in the Statement of
Changes in equity at 30 June 2012 the opening balances of items "Net income (loss) for the year"
and" valuation reserves " were modified.
Scope of consolidation and methodology
The condensed interim consolidated financial statements of the Banca Popolare di Vicenza
Group include the financial and operating results at and for the period ended 30 June 2013 of
the Parent Bank Banca Popolare di Vicenza, its direct and indirect subsidiaries, companies
under joint control and associated companies. As required by IAS/IFRS, the scope of
consolidation also includes companies whose activities are dissimilar to those of the rest of the
Group. Companies with individual and cumulative financial statement values that are
irrelevant to the Group consolidated financial statements are not included in the scope of
consolidation. Equity investments in these companies are valued at cost.
- 76 -
Subsidiaries are defined as all those companies in which Banca Popolare di Vicenza holds,
directly or indirectly, more than half the voting rights, or in which the Parent Bank - despite
holding fewer voting rights - has the power to determine their financial and operating policies
and/or to appoint a majority of the members of their boards of directors or equivalent
governing bodies.
Companies under joint control (joint ventures) are defined as those companies in which the
voting rights and control over their economic activities are shared jointly, directly or indirectly,
by Banca Popolare di Vicenza and another party. Joint ventures also include those investments
in which, although the related voting rights are not shared equally, control over their economic
activities and strategic direction is shared with other parties under the terms of contractual
arrangements.
Associated companies are defined as all those companies not controlled by Banca Popolare di
Vicenza over which the Parent Bank, directly or indirectly, is able to exercise significant
influence. Such influence is presumed to exist for those companies in which the Group holds at
least 20% of the voting rights, or in which it is able to participate in the determination of
financial and operating policies as a consequence of specific legal arrangements.
With regard to the consolidation methods used, subsidiaries are consolidated in a line-by-line
basis, while associated companies are accounted for using the equity method. As allowed by
IAS 31, the investments held in joint ventures are also carried at equity.
Line-by-line consolidation: under this method, the assets, liabilities, off-balance sheet
transactions, income and expenses of Group companies are combined on a line-by-line basis.
Following the allocation of the minority interest in equity and the results for the period to
separate captions, the carrying amount of investments is eliminated against the Group‟s interest
in their equity at the time of acquisition or initial consolidation; any differences are allocated, as
far as possible, to the assets and liabilities of the consolidated companies concerned and
residual amounts are reported as “goodwill”. The amendments made in 2008 to IAS 27
“Consolidated and separate financial statements” are applicable from 1st January 2010 for the
accounting treatment of changes in a parent‟s ownership interest in companies already
controlled. Paragraph 30 states that “Changes in a parent‟s ownership interest in a subsidiary
that do not result in a loss of control are accounted for as equity transactions” with the result
that, as stated in paragraph 31, “any difference between the amount by which the noncontrolling interests are adjusted and the fair value of the consideration paid or received shall
be recognised directly in equity and attributed to the owners of the parent”.
Equity method: Under this method, equity investments are initially recognized at cost and
subsequently adjusted to reflect changes in the Group‟s interest in their equity. Differences
between the cost of an investment and the Group‟s interest in its equity at the acquisition or
initial consolidation date are reflected in its carrying amount, if they cannot be attributed to
specific assets or liabilities.
Equity investments classified as “non-current assets held for sale and discontinued operations”
in compliance with IFRS 5 are carried at the lower of their book or fair value, net of selling costs.
Dividends distributed within the Group are reversed back to reserves. Receivables, payables,
income and expenses arising from transactions between Group companies are eliminated,
except where insignificant.
The statements of financial position and income statements used for line-by-line consolidation
purposes were those at and for the period ended 30 June 2013 approved by the Boards of
Directors of the individual companies concerned. In particular, unadjusted information was
used if the companies prepared their half-year accounts under IAS/IFRS, while information
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adjusted to comply with the accounting policies adopted by the Parent Bank was used if their
half-year accounts were prepared under Italian accounting standards.
Investments in companies carried at equity that did not prepare half-year accounts at 30 June
2013, or whose half-year accounts have not yet been approved by their Boards of Directors, are
carried at the equity values reported in their 2012 financial statements (or their latest approved
financial statements).
Lastly, the income statements of companies joining or leaving the scope of consolidation in the
period (or whose method of consolidation changed during the period) are consolidated from the
date of acquisition or until the date of disposal of the interest held.
The scope of consolidation does not include any investments in companies under joint control.
Subsequent events
With regard to information on significant events occurred after the ending date of the
condensed interim Financial Statements, reference is explicitly made to the specific paragraph
of the interim Report on operations.
Other aspects
Limited audit of the condensed interim consolidated financial statements
The condensed interim consolidated financial statements have been subject to review by KPMG
S.p.A., an independent firm of auditors, under the engagement for external audit conferred for
the nine-year period from 2010 to 2018 by the Shareholders‟ Meeting on April 24, 2010.
Estimation uncertainty and risks
As indicated in the specific sections of these explanatory notes, accounting estimates have been
made in support of the carrying amounts for the more significant items requiring measurement
in the condensed interim consolidated financial statements at 30 June 2013, as required by
prevailing accounting standards and relevant regulations. This process, which largely involved
estimating the future recoverability of amounts reported in the financial statements in
accordance with current regulations, was performed on a going concern basis without
considering forced-sale values.
Estimates have been primarily used for determining the fair value of financial instruments, for
the valuation of loans, for determining other provisions for risks and charges and for
quantifying current and deferred taxes.
The outcome of this work supports the carrying amount of these items at 30 June 2013. This
valuation process was nevertheless particularly complex due to the current macroeconomic and
market conditions. In particular, the persistent abnormal volatility in all the financial and nonfinancial parameters used for measurement purposes has rendered it difficult to make shortterm or other forecasts for such financial and non-financial parameters, which have a significant
influence on estimated values.
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Part relating to the principal financial statement line items
This section describes the accounting policies adopted for the preparation of the condensed
interim consolidated financial statements at 30 June 2013. These policies are consistent with
those adopted for the preparation of the consolidated financial statements at 31 December 2012,
which were also prepared under IAS/IFRS.
1. Financial assets held for trading
Classification
This line item comprises financial instruments held for trading9 and derivative contracts with a
positive fair value that are not designated as effective hedging instruments. Such financial
instruments must not carry any clause restricting their trading, or they must be able to be
hedged and must satisfy the qualitative requirements set out in appendix A of Section II Chapter 4 of the Bank of Italy Circular no. 263 dated 27.12.2006 (“New prudential supervisory
instructions for banks”) and subsequent amendments.
Derivative contracts include embedded derivatives which are attached to a primary financial
instrument, known as the “host contract” when they have been recognized separately from the
host and forward transactions in currencies, securities, goods and precious metals. An
embedded derivative is recognized separately from the host contract when all of the following
conditions are satisfied:
its economic characteristics and risks are not closely related to those of the “host”
contract;
the separated embedded instrument meets the definition of a derivative;
the hybrid instrument is not measured at fair value through the income statement.
Financial instruments are designated as financial assets held for trading upon initial recognition,
except if former hedging derivatives with a positive fair value at the reporting date are
reclassified as “financial assets held for trading” after a hedging relationship has become
ineffective.
Recognition
The initial recognition of financial assets held for trading takes place: i) on the settlement date for
debt securities, equity instruments and units in mutual funds and SICAVs; and ii) on the
subscription date for derivative contracts. Financial assets held for trading are initially
recognized at their fair value, whereas transaction costs or income are written off immediately,
even if directly attributable to the instrument concerned.
The initial fair value of a financial instrument is usually the cost incurred in buying it.
Measurement and recognition of income and expense
After initial recognition, financial assets held for trading are stated at fair value through the
income statement.
For details on the methods used to identify fair value, see paragraph 17.5, entitled “Methods for
determining the fair value of financial instruments”.
Positions held for trading are those intentionally acquired for the purpose of sale in the near term and/or to benefit, in the near
term, from differences between the purchase and sale price, or from other changes in price or interest rates. “Positions” are those
held on own account and those arising from customer services or from market making.
9
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Gains and losses realized on sale or redemption and unrealized gains and losses deriving from
changes in the fair value of financial assets held for trading are booked to “net trading income”
in the income statement, except for any gains or losses on disposal or valuation relating to
derivative contracts linked to the “fair value option”, which are booked to “net change in
financial assets and liabilities at fair value”.
The profits and losses recognized in “Net trading income” in the income statement also include
the differentials collected and paid on trading derivatives, and those accruing up to the reporting
date, while differentials relating to derivative contracts associated with financial assets and
liabilities at fair value and/or with financial assets and liabilities classified in the trading
portfolio are recognized in “interest income” or “interest expense” depending on whether they
are positive or negative respectively.
Derecognition
Financial assets held for trading are derecognized when the contractual rights over the related
cash flows expire or when the financial asset is transferred together with substantially all the
contractual risks and benefits associated with its ownership.
2. Financial assets available for sale
Classification
This line item comprises monetary financial instruments that are not classified in the other
categories envisaged by IAS 39. It nonetheless includes:
 debt securities and loans for which the holder may not recover substantially all the initial
investment, other than because of deterioration in the issuer‟s creditworthiness;
 equities not quoted in an active market;
 unharmonised mutual funds;
 junior asset-backed debt securities (ABS) issued by SPVs as part of securitisations by the
Group or by third parties, unless classified as “Financial assets at fair value”;
 securities repurchased from customers following complaints/litigation.
Financial instruments are designated to this category upon initial recognition, or following
reclassifications allowed by paragraphs 50 to 54 of IAS 39, as amended by Regulation (EC)
1004/2008 of the European Commission issued on 15 October 2008.
Recognition
Financial assets available for sale (AFS) are initially recognized on the settlement date, on the
basis of their fair value, as uplifted by any directly-attributable acquisition costs/revenues. Costs
and revenues with the above characteristics are excluded if they are reimbursable by the
borrower or represent normal internal administrative costs.
The initial fair value of a financial instrument is usually the cost incurred in buying it.
Subsequent to initial recognition, AFS financial assets are stated at fair value; the profits and
losses deriving from any changes in fair value are recorded in a specific equity reserve,
recognized in the statement of comprehensive income, until the financial assets concerned are
derecognized or a permanent impairment of value is recognized.
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For details on the methods used to identify fair value, see paragraph 17.5, entitled “Methods for
determining the fair value of financial instruments”.
These assets are reviewed at the end of each reporting period for objective evidence of any
impairment in accordance with paragraph 58 et seq. of IAS 39. Such objective evidence in the
case of equities quoted in an active market includes a significant or prolonged reduction in fair
value below acquisition cost. In particular, as stated in the Group‟s policy for identifying
evidence of impairment of securities classified as financial assets available for sale, a significant
reduction in fair value is defined as more than 50% and a prolonged reduction in fair value is
defined as an unbroken period of more than 30 months. Any losses identified are charged to the
income statement as “net impairment adjustments to financial assets available for sale”. This
amount also includes reclassification to the income statement of fair value gains/losses
previously recognized in the specific equity reserve. If, in a subsequent period, the fair value of
the financial instrument increases and the increase can be objectively related to an event
occurring after the impairment loss was recognized in profit or loss, the impairment loss must be
reversed, with the amount of the reversal recognized in the same line of the income statement as
the original impairment in the case of monetary items (e.g. debt securities) or in equity in the
case of non-monetary items (e.g. equities). Write-backs cannot exceed the cost/amortised cost
that the instrument would have had in the absence of earlier write-downs.
If a financial asset classified in this line item has been reclassified to another category, the related
reserve accumulated up to the date of the reclassification is maintained in equity until such time
that the financial instrument in question is sold, if a non-monetary item is involved; on the other
hand, if a monetary item is involved, the reserve is amortised in the income statement (as
“interest income and similar revenues”) over the residual useful life of the financial instrument
to which it refers.
The interest income on these financial assets is calculated using the effective interest method,
with the associated income recognized in “interest income and similar revenues” in the income
statement. Gains and losses on the disposal or redemption of such financial assets are booked to
the income statement as “gains (losses) on disposal or repurchase of: financial assets available for
sale” and include any reversal to profit or loss of fair value gains/losses previously recognized
in the specific equity reserve.
Derecognition
Financial assets available for sale are derecognized when the contractual rights over the related
3. Financial assets held to maturity
Classification
This line item reports non-structured debt securities, quoted in an active market, with fixed
maturity and fixed or determinable payments, which the Group has the positive intention and
ability to hold until maturity. Financial instruments are designated as financial assets held to
maturity upon initial recognition or following reclassification in accordance with paragraphs 50
to 54 of IAS 39, as amended by Regulation (EC) 1004/2008 of the European Commission issued
on 15 October 2008.
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Recognition
Financial assets held to maturity are initially recognized on the settlement date, on the basis of
their fair value, as uplifted by any directly-attributable acquisition costs/revenues. Costs and
revenues with the above characteristics are excluded if they are reimbursable by the borrower or
represent normal internal administrative costs. The initial fair value of a financial instrument is
usually the cost incurred in buying it.
Subsequent to initial recognition, financial assets held to maturity are measured at amortised
cost.
The interest income on these financial assets is calculated using the effective interest method,
with the associated income recognized in “interest income and similar revenues” in the income
statement. Gains and losses on the disposal or redemption of such financial assets are booked to
the income statement as “gains (losses) on disposal or repurchase of: financial assets held to
maturity”.
An impairment test is carried out at the reporting date to check for objective evidence of any loss
in value. Any losses identified are charged to the income statement as “net impairment
adjustments to financial assets held to maturity”. If the reasons for such losses cease to apply due
to events arising subsequent to the write-down, the related write-backs are credited to the same
income statement line item. Write-backs cannot exceed the cost/amortised cost that the
instrument would have had in the absence of earlier write-downs.
Derecognition
Financial assets held to maturity are derecognized when the contractual rights over the related
4. Loans and receivables
4.1 Loans and advances to banks
Classification
This line item comprises monetary financial assets with banks, whether disbursed directly or
purchased from third parties, which carry fixed or determinable payments and are not quoted in
an active market (current accounts, guarantee deposits, debt securities, etc.). This balance also
includes amounts due from Central Banks, other than unrestricted deposits which are classified
as “cash and cash equivalents”.
Details of the recognition, measurement, derecognition and recording of these loans can be
found in the subsequent note 4.2 on “loans and advances to customers”.
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4.2 Loans and advances to customers
Classification
Loans and advances to customers include non-structured monetary financial assets with
customers, whether disbursed directly or purchased from third parties, which carry fixed or
determinable payments and are not quoted in an active market (current accounts, mortgage
loans, other kinds of loans, debt securities etc.). Financial instruments are designated as loans
and advances to customers upon initial recognition, or following reclassifications allowed by
paragraphs 50 to 54 of IAS 39, as amended by Regulation (EC) 1004/2008 of the European
Commission issued on 15 October 2008.
Recognition
The initial recognition of a loan takes place on the grant date or, in the case of debt securities, on
the settlement date, with reference to the fair value of the financial instrument, as uplifted by any
directly-attributable acquisition costs/revenues. Costs and revenues with the above
characteristics are excluded if they are reimbursable by the borrower or represent normal
internal administrative costs. The initial fair value of a financial instrument is usually equal to
the amount disbursed or the cost incurred in buying it.
Subsequent to initial recognition, loans and advances to customers are measured at amortised
cost. This is their initially-recorded value as decreased/increased by repayments of principal,
write-downs/write-backs and the amortisation – determined using the effective interest method
– of the difference between the amount paid out and that repayable on maturity, which typically
represents costs/income directly attributable to the individual loans.
The effective interest rate is the rate that discounts the flow of estimated future payments over
the expected duration of the loan so as to obtain exactly the net book value at the time of initial
recognition, which includes directly-related transaction costs/revenues and all fees paid or
received between the contracting parties. This financial method of accounting distributes the
economic effect of costs/income over the expected residual life of each loan. Estimates of the
flows and the contractual duration of the loan take account of all contractual clauses that could
influence the amounts and due dates (such as early repayments and the various options that can
be exercised), but without considering any expected losses on the loan.
The amortised cost method is not applied to short-term loans, since the discounting effect would
be negligible, and these are therefore stated at cost. The same measurement criterion is applied
to loans without a fixed repayment date or which are repayable upon demand.
At every reporting date an analysis is performed to identify any problem loans for which there is
objective evidence of possible impairment. This category includes loans classified as “nonperforming”, “watchlist”, “restructured” or “past due”, as defined by the supervisory
regulations.
The adjustment to the value of each loan represents the difference between its amortised cost (or
cost for short-term and demand loans) at the time of measurement and the discounted value of
the related future cash flows, determined using the original effective interest rate.
Key elements in determining the present value of future cash flows comprise the estimated
realizable value of loans, also taking account of any available guarantees, the expected timing of
recoveries and the forecast loan-recovery costs. Cash flows relating to loans due to be recovered
in the short term (12/18 months) are not discounted.
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The approach taken for case-by-case determination of the recoverable value of non-performing
loans depends on their amount, applying the following criteria:



up to Euro 25,000: the positions are analyzed case-by-case but are not discounted, since
they are frequently not taken to court, but sold after the usual attempts to obtain recovery
on an amicable basis; these loans generally remain in this category for not more than 12/18
months, representing the short term;
from Euro 25,000 to Euro 150,000: the positions are analyzed on a case-by-case basis to
estimate the amount recoverable, which is discounted over the average recovery period,
based on past experience and statistics;
amounts exceeding Euro 150,000 are analyzed on a case-by-case basis to estimate the
amount recoverable, which is discounted over the likely recovery period, as determined by
the competent corporate functions.
Watchlist loans exceeding Euro 150,000 are analyzed on a case-by-case basis to estimate the
amount recoverable, which is discounted over the likely average recovery period, based on past
experience and statistics. The remaining positions are assessed on a collective basis using
Probability of Default (PD) and Loss Given Default (LGD) parameters (which differ according to
the amounts concerned), with the related future nominal cash flows discounted over the
estimated average recovery period, based on past experience and statistics.
Restructured loans exceeding Euro 150,000 are valued by discounting the “implied” loss arising
from the restructuring of the position. The remaining positions are assessed collectively using
PD and LGD parameters, calculated on the basis of past experience and statistics that are
intended to estimate the latent loss. The related estimated future cash flows are discounted over
the estimated average recovery period, as determined with reference to past experience and
statistics. If restructured loans that have been analyzed case-by-case are expected to produce an
impairment loss, they are immediately classified either in the watchlist or as non-performing
and valued in accordance with the rules applying to these categories.
Past due exposures are written down on a collective basis. This test is performed by grouping
loans into categories that reflect a similar degree of credit risk. The related loss percentages are
then estimated with reference to past experience and statistics, in order to measure the inherent
loss for each category of loan. Estimated future cash flows are determined using PD and LGD
parameters by technical form and the resulting flows are discounted on the basis of average
recovery times, determined with reference to past experience and statistics.
Loans for which no objective evidence of loss has been individually identified, i.e. performing
loans, are tested for impairment on an overall basis. This test is performed by grouping loans
into categories that reflect a similar degree of credit risk. The related loss percentages are then
estimated with reference to past records, in order to measure the inherent loss for each category
of loan. Estimated future cash flows are determined using PD and LGD parameters by technical
form and the resulting flows are discounted on the basis of average recovery times, determined
with reference to past experience and statistics.
For performing loans only, the expected loss (equal to gross value x PD x LGD) is adjusted for
the Loss Confirmation Period (LCP), which expresses the average delay between the
deterioration of the debtor‟s financial conditions (“incurred loss”) and the actual classification
of individual exposures as defaulted, for various categories of homogeneous loans; its purpose
is to “adjust” PD, which is typically expressed on an annual time span.
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The PD, LGD, LCP parameters, and the average recovery period used to estimate future
nominal cash flows are updated once a year when preparing the financial statements for the
year.
No write-downs are recorded in relation to loans represented by repurchase agreements or
referable to guarantee margins, or to loans to non-profit organizations and local and public
administrations.
Provisions made for an impaired loan are only reversed if the credit quality has improved to the
extent that timely recovery of the principal and interest, with respect to the original terms for
the loan contract, is reasonably certain, or if the amount actually recovered exceeds the
recoverable amount estimated previously. Only for non-performing loans, write-backs also
include the positive effect of discounting adjustments made due to the progressive reduction in
the estimated time required to recover the related loans. Adjustments, net of previous
provisions and the partial or total recovery of amounts previously written down, are recorded
in the “net impairment adjustments to loans and advances” line item of the income statement.
Derecognition
Loans and advances are derecognized as assets when they are deemed to be unrecoverable or
are transferred together with substantially all the related risks and benefits.
5. Financial assets at fair value
Classification
This line item comprises monetary financial instruments of a structured kind (meaning that one
or more embedded derivatives is present) and/or those related to trading derivatives entered
into with an external counterparty for the purposes of transferring the risks of the financial asset
held (under the so-called “fair value option”, or FVO), unless classified as “Financial assets held
for trading”.
In particular, the FVO is used when it eliminates or significantly reduces accounting imbalances
deriving from the inconsistent recognition of financial instruments that are related (natural
hedges) or covered by derivative contracts which, due to difficulties and complexities, cannot be
recognized as hedges.
Financial instruments are designated as financial assets at fair value upon initial recognition.
They cannot be reclassified subsequently.
Recognition, measurement, derecognition and recording of income and expense
The principles applying to the recognition, measurement, derecognition and recording of income
and expense relating to financial assets at fair value are the same as those relating to “financial
assets held for trading”.
Gains and losses realized on sale or redemption and unrealized gains and losses deriving from
changes in the fair value of financial assets/liabilities at fair value are classified as “net change in
financial assets and liabilities at fair value” in the income statement.
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6. Hedging transactions
Classification
Hedging transactions are intended to neutralize possible losses on certain elements or groups of
elements due to a given risk (e.g. a rise in interest rates), via the generation of profits from the
hedging instruments if the events associated with that risk should actually occur.
Hedging transactions are conducted solely in the form of derivative contracts with
counterparties outside of the Group to whom the risk is transferred. The use of internal deals is
therefore not permitted.
At the time that a hedging transaction is arranged, it is classified as one of the following types of
hedge:
fair value hedge of a given asset or liability: the objective is to hedge the exposure to changes
in fair value of an item caused by one or more risks;
cash flow hedge attributable to a particular asset or liability: the objective is to hedge the
exposure to changes in the future cash flows associated with an item caused by given risks;
hedge of the effects of an investment denominated in foreign currency: the objective is to
hedge the risks associated with investing in a foreign operation denominated in foreign
currency.
Hedging transactions can refer to individual financial instruments and/or groups of financial
assets/liabilities.
The transaction is classified as a hedge if it has been formally designated as such, there is a
documented relationship between the hedged instrument and the hedging instrument, and it is
highly effective both at the start of the hedge and throughout its life. A hedge is considered
highly effective if changes in the fair value of the instrument being hedged or of the related
expected cash flows are offset by those of the hedging instrument. More precisely, the hedge is
effective when changes in the fair value (or cash flows) of the hedging instrument neutralize the
changes in the hedged instrument, deriving from the risk being hedged, within an interval of
80%-125%. The effectiveness of the hedge is assessed at the start of the hedge and throughout its
life and, in particular, on each reporting date, using:
 prospective tests that justify the adoption of hedge accounting by showing the expected
effectiveness of the hedge in future periods;
 retrospective tests that show the effectiveness of the hedge during the reference period.
If the tests do not confirm the effectiveness of the hedge, the hedge accounting described above
is terminated and the related derivative contract is reclassified among the “financial assets
(liabilities) held for trading”. In addition, hedging transactions are no longer classified as such if:
 the hedge ceases;
 the transaction expires, is sold, terminated or exercised;
 the hedged item is sold, expires or is redeemed;
 the hedge no longer meets the criteria to qualify for hedge accounting.
Recognition
Hedging derivatives are initially recognized at fair value on their subscription date.
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Subsequent to initial recognition, hedging derivatives are stated at fair value on the basis
described below:
in the case of fair value hedges, changes in the value of the hedged item (but only for the
portion attributable to the hedged risk) and the hedging instrument are reflected in the
income statement. In this way, changes in the fair value of the hedged item are substantially
offset against the opposite changes in the fair value of the hedging instrument. Any
difference, representing the ineffective portion of the hedge, therefore represents the net
effect of the hedge on profit or loss, which is booked to “Net hedging gains (losses)”;
in the case of cash flow hedges, changes in the fair value of the hedging transaction are
recorded in equity, to the extent that the hedge is effective, and are only released to the
income statement when the related cash flows are actually generated by the hedged item. If
the hedge is not effective, changes in the fair value of the hedging instrument are recorded in
the income statement as “other operating charges/income”;
hedges of investments denominated in foreign currency are recorded in the same way as
cash flow hedges.
Hedging contract differentials are booked to “interest income” or “interest expense” depending
on whether they are positive or negative.
Derecognition
Hedging transactions are derecognized on disposal if all the risks and benefits associated with
them are substantially transferred as a result.
7. Equity investments
Classification
This line item reports investments in associated companies and joint ventures.
Recognition
Investments in associated companies and joint ventures are carried at equity in accordance with
IAS 28 and 31. Under this method, equity investments are initially recognized at cost and
subsequently adjusted to reflect changes in the Group‟s interest in their equity. Differences
between the cost of an investment and the Group‟s interest in its equity at the acquisition or
initial consolidation date are reflected in its carrying amount, if they cannot be attributed to
specific assets or liabilities.
Measurement
Subsequent to acquisition, the value of investments in associated companies and joint ventures is
adjusted to reflect changes in the Group‟s interest in their equity value.
Equity investments are tested for impairment by estimating their recoverable amount, which
takes account of the present value of the future cash flows to be generated by them, including
their final disposal value and/or other factors.
Any resulting impairment adjustments, being the difference between the carrying amount of the
investments concerned and their recoverable value, are charged to “Profit (loss) from equity
investments” in the income statement.
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If the reasons for impairment adjustments cease to apply, due to events arising subsequent to
their recognition, the write-down is reversed by crediting the same line item in the income
statement for an amount not exceeding the original impairment loss.
Derecognition
Equity investments are derecognized on expiry of the contractual rights over the related
financial flows, or when the investment is sold with the transfer of substantially all the related
risks and benefits of ownership.
Recognition of income and expense
In accordance with IAS 28, the Group‟s interest in the results of associated companies and joint
ventures is recognized in “Profit (loss) from equity investments” in the income statement.
8. Property, plant and equipment
Classification
This line item comprises the fixed assets held for the generation of income, for rent or for
administrative purposes, such as land, business property, investment property, installations,
furniture, furnishings, all types of equipment and works of art.
Property, plant and equipment also include leasehold improvements, if they can be separated
from the related assets. If these items are expected to generate future benefits, but are not
functionally and operationally independent, they are classified as “other assets” and depreciated
over the expected useful life of the improvements or the residual lease period, whichever is
shorter.
Amounts paid in advance to acquire and restructure assets not yet used for productive purposes
are capitalized, but not depreciated.
Property, plant and equipment held “for business purposes” is defined as that held for
supplying services or for administrative purposes, while “investment property” is defined as
that held to earn rentals and/or for capital appreciation.
Recognition
Property, plant and equipment are initially recorded at cost, including all directly attributable
costs of bringing them to working condition.
Expenditure that improves an asset or increases the future economic benefits expected from the
asset is allocated to the asset concerned and depreciated over its remaining useful life.
Subsequent to initial recognition, property, plant and equipment held “for business purposes”
are stated at cost, net of accumulated depreciation and any impairment losses, consistent with
the “cost model” described in paragraph 30 of IAS 16. Property, plant and equipment are
systematically depreciated over their useful lives on a straight-line basis, except for:
land, whether acquired separately or included in the value of buildings, which is not
depreciated since it has an indefinite useful life. With regard to free-standing properties, the
value of the land is separated from the value of the related buildings by reference to internal
and/or independent expert appraisals, unless this information is directly available from the
purchase contract;
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works of art, which are not depreciated since they normally have an indefinite useful life and
their value is likely to increase over time;
investment properties, which are stated at fair value in accordance with IAS 40.
The depreciation charge for assets acquired during the period is determined on a daily basis
from the time they enter into service. The depreciation charge for assets sold and/or retired
during the half year is determined on a daily basis up to the date of disposal and/or retirement.
At each reporting date, if there is evidence that the value of an asset, other than investment
property, may be impaired, its carrying value is compared with its recoverable value, being
either its fair value net of any selling costs or its value in use, represented by the present value of
the future cash flows to be generated by the asset, whichever is greater. Any adjustments are
recorded as “net adjustments to property, plant and equipment” in the income statement.
If the reasons for recognizing an impairment loss cease to apply, the consequent write-back
cannot cause the value of the asset to exceed its net book value (after depreciation) had no
impairment losses been recognized in prior periods.
Investment properties covered by IAS 40 are stated at the market value determined by
independent appraisals, with changes in their fair value recorded in “net gains (losses) arising
on fair value adjustments to property, plant and equipment and intangible assets” in the income
statement.
Derecognition
Property, plant and equipment are derecognized upon disposal or when they are retired from
use on a permanent basis and no economic benefits are expected from their disposal.
9. Intangible assets
Classification
This line item reports non-monetary assets without physical form that have the following
characteristics: identifiability, control over the asset in question and existence of future economic
benefits.
If any one of these characteristics is absent, the related purchase or internally-generated cost is
expensed in the period incurred.
Intangible assets include, in particular, applications software used over a number of years,
“intangibles” associated with the valuation of customer relationships identified on allocation of
the purchase price paid for lines of business, and other identifiable intangible assets representing
legal or contractual rights.
This line item also includes goodwill, representing the positive difference between the purchase
cost and the fair value of assets and liabilities acquired as a result of business combinations. In
particular, an intangible asset is recorded as goodwill when the positive difference between the
fair value of the net assets acquired and their purchase cost (including related charges)
represents their ability to generate future earnings. If this difference is negative (badwill) or if the
goodwill is not justified by the ability of the acquired assets/liabilities to generate future
earnings, the difference is recorded directly in the income statement.
With the previous treatment, goodwill may no longer be recognized upon changes in a parent‟s
ownership interest in subsidiaries already under control. This is the result of applying from 1
January 2010 the amendments to IAS 27 “Consolidated and separate financial statements” which
require that the changes of a parent‟s ownership interest in a subsidiary (that do not result in
- 89 -
loss of control) are accounted for as “equity transactions”. As a result, the difference between the
additional purchase consideration (for a company in which a controlling interest is already held)
and the corresponding share of equity will be accounted for directly as a decrease in equity.
Recognition
Intangible assets are initially recorded at cost, including any directly-related charges.
Measurement
Subsequent to initial recognition, intangible assets are stated at cost, net of accumulated
amortisation and any impairment losses, in accordance with the “cost model” described in
paragraph 74 of IAS 38.
Intangible assets with a finite useful life are amortised systematically on a straight-line basis over
their estimated useful lives. The amortization charge for assets acquired during the period is
determined on a daily basis from the time they enter into service. The amortization charge for
those sold and/or retired during the period is determined on a daily basis up to the date of
disposal and/or retirement.
If there is evidence that the value of an intangible asset may be impaired, its carrying amount is
compared with its recoverable value. Any adjustments are recorded in “net adjustments to
intangible assets” in the income statement. If the reasons for such impairment losses cease to
apply due to events arising subsequent to the write-down, the appropriate write-backs are
credited to the same income statement line item. Such write-backs cannot cause the value of the
asset to exceed its net book value (after amortisation) had no impairment losses been recognized
in prior periods.
Assets with an indefinite useful life, such as goodwill, are not amortised but their carrying value
is tested periodically for impairment, as required by IAS 36. Any impairment losses,
representing the difference between the carrying value of the asset and its recoverable value, are
charged to “adjustments to goodwill” in the income statement. Impairment losses recognized for
goodwill cannot be reversed in later periods.
Derecognition
Intangible assets are derecognised from the statement of financial position if no future economic
benefits are expected, or on disposal.
10. Non-current assets held for sale and discontinued operations
Classification
This line item comprises all non-current assets (or discontinued operations) held for sale, as
defined by IFRS 5, being those individual assets or groups of assets held for sale whose carrying
amount will be recovered principally via sale rather than continuous use. This category also
includes discontinued operations which, by convention, are also referred to as discontinued
operations.
Measurement
Non-current assets (or discontinued operations) held for sale are measured at the lower of their
carrying amount or their fair value, net of selling costs, except for the following assets which
continue to be valued in accordance with the related accounting policies:
- 90 -
deferred tax assets;
assets deriving from employee benefits;
financial instruments;
investment property.
Recognition of income and expense
Income (interest income, dividends, etc.) and charges (interest expense, depreciation, etc.)
relating to individual non-current assets (or discontinued operations) held for sale and the
related liabilities are classified in the normal line items, while the income (interest income,
dividends, etc.) and charges (interest expense, depreciation, etc.) relating to discontinued
operations are classified, net of the related current and deferred taxation, in “profit (loss) from
non-current assets held for sale, net of tax” in the income statement.
The depreciation of depreciable assets ceases in the period in which they are classified as noncurrent assets held for sale.
11. Current and deferred taxation
Income taxes, calculated in accordance with current fiscal legislation and applying the corporate
income tax (IRES) and regional business tax (IRAP) rates expected at year-to the estimated
taxable amount of the period, are recorded in the income statement on an accruals basis in line
with the costs and revenues that generated them, except for those relating to items debited or
credited directly to equity; for consistency, the tax on such items is also booked to equity.
Income taxes reported in the income statement represent a prudent estimate of the current tax
charge and the related changes in deferred tax assets and liabilities. In particular, deferred tax
assets and liabilities are determined with reference to temporary differences between the book
value of assets and liabilities and their tax bases.
Deferred tax assets are recognized if they are likely to be recoverable, determined with reference
to the Group‟s ongoing ability to generate taxable income.
Deferred tax assets and liabilities are recorded in the statement of financial position as,
respectively, “Tax assets” and “Tax liabilities”, on an open account basis without offset.
In the case of current taxes, payments on account for individual taxes are offset against the
related tax payable, with positive balances reported as “tax assets: current” and negative
balances as “tax liabilities: current”.
In accordance with paragraph 52b of IAS 12, no provision for deferred taxation has been
recorded in relation to the reserves and revaluation surpluses that are in suspense for tax
purposes, since their distribution is not envisaged; in this regard, the Group has not carried out,
and has no short or medium-term plans to carry out, any activities which could give rise to the
payment of deferred taxes.
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12. Provisions for risks and charges
12.1 Pensions and similar commitments
IAS 19 classifies pension funds as post-employment benefits, making a distinction between
defined contribution plans and defined benefit plans. The company pension fund for employees
of the former subsidiary Cariprato (absorbed into the Parent Bank Banca Popolare di Vicenza
effective 1 January 2010) is split into two sections:
1) a capitalization section, qualifying as a defined contribution plan, for which there is only
the obligation to pay an annual amount calculated on the basis of salary paid to fund
participants. This section is not recognized in the statement of financial position, in
compliance with IAS 19. The costs of the annual payment by the Group are recognized in
the income statement;
2) a supplementary section, qualifying as a defined benefit plan, which is recognized in
provisions for risks and charges in the statement of financial position. The benefits are
assured by the return on the investments and by the mathematical reserve, calculated
annually by an independent actuary.
12.2 Other provisions
In accordance with IAS 37, the provisions for risks and charges reflect known obligations (legal
or constructive) deriving from past events, the settlement of which is likely to involve the use of
economic resources whose timing and extent are uncertain, on condition that a reliable estimate
can be made of the amount needed to settle them at the end of the reporting period. Where the
effect of the time value of money is material because the liability‟s settlement date is deferred,
the provisions are discounted using current market rates.
Provisions are re-examined at each reporting period and adjusted to reflect the best current
estimate. These are recorded in the appropriate line items of the income statement, depending
on the “nature” of the expense. In particular, provisions for future personnel expenses in
connection with bonuses and other incentive schemes are classified in “Payroll” costs, provisions
for tax risks and charges are classified in “Income taxes” and provisions for potential losses not
directly attributable to specific line items in the income statement are reported in “Net
provisions for risks and charges”.
13. Payables and debt securities in issue
Classification
Amounts due to banks and amounts due to customers include the various forms of interbank
and customer funding (current accounts, restricted and unrestricted deposits, loans, repurchase
agreements, etc.), while debt securities in issue report all the liabilities in respect of the Group‟s
own issues (savings certificates, certificates of deposit, bonds not classified as “financial
liabilities at fair value”, etc.).
All the financial instruments issued are reported in the financial statements net of any amounts
repurchased and include those which have expired at the reporting date but which have not yet
been repaid.
- 92 -
Recognition
These financial liabilities are initially recorded on receipt of the amounts collected or on the issue
of the debt securities.
They are initially recognized at the fair value of the liabilities, as uplifted for any directlyattributable acquisition costs/revenues. Costs and revenues with the above characteristics are
excluded if they are reimbursable by the borrower or represent normal internal administrative
costs.
The initial fair value of a financial liability usually corresponds to the amount received.
If the conditions set out in IAS 32 and 39 are satisfied, any derivatives embedded in the above
financial liabilities are separated and accounted for separately.
Measurement
Following initial recognition, the above financial liabilities are stated at amortised cost using the
effective interest method, except that short-term liabilities continue to be stated at nominal value
since the effect of discounting is negligible.
Derecognition
Financial liabilities are derecognized when they expire or are settled. Derecognition also applies
when issued securities are repurchased, even if such acquisition is only temporary. Any
differences between the book value of the derecognized liability and the amount paid are
recorded as “gains (losses) on disposal or repurchase of financial liabilities” in the income
statement. If, subsequent to repurchase, the securities are placed back in the market, this
transaction is treated as a new issue and the liabilities are recorded at the new placement price.
14. Financial liabilities held for trading
Classification
This line item reports short positions arising from trading activities and derivatives not
designated as effective hedging instruments that have a negative fair value.
Derivative contracts include embedded derivatives which are attached to a primary financial
instrument, known as the “host contract” when they have been recognized separately from the
host and forward transactions in currencies, securities, goods and precious metals.
An embedded derivative is recognized separately from the host contract when all of the
following conditions are satisfied:
its economic characteristics and risks are not closely related to those of the “host” contract;
the separated embedded instrument meets the definition of a derivative;
the hybrid instrument is not measured at fair value through the income statement.
If the fair value of a derivative contract subsequently becomes positive it is recorded as a
financial asset held for trading.
Financial instruments are designated as financial liabilities held for trading upon initial
recognition, except if former hedging derivatives with a negative fair value at the reference date
are reclassified as “financial liabilities held for trading” after a hedging relationship has become
ineffective. They cannot be reclassified subsequently.
- 93 -
The recognition, measurement, derecognition and recording of the effects on the income
statement of the above financial liabilities are described in the earlier paragraph on “financial
assets held for trading”.
15. Financial liabilities at fair value
Classification
This line item reports bonds issued that are related to trading derivatives entered with an
external counterparty for the purposes of transferring one or more risks associated with the
liability issued (fair value option).
Financial instruments are designated as financial liabilities at fair value upon initial recognition.
They cannot be reclassified subsequently.
The recognition, measurement, derecognition and recording of the effects on the income
statement of the above financial liabilities are described in the earlier paragraph on “financial
assets at fair value”.
16. Transactions in foreign currency
Foreign currency assets and liabilities include not only those denominated in a currency other
than the euro, but also those that carry financial indexation clauses linked to the euro exchange
rate against a specific currency or a specific basket of currencies.
Foreign currency assets and liabilities are split between monetary and non-monetary items for
currency translation purposes.
Recognition
Foreign currency transactions are initially recognized in euro, by translating the foreign currency
amount using the spot exchange rate prevailing on the date of the transaction.
Measurement
At the end of each reporting period:
foreign currency monetary items are translated using the closing rate;
non-monetary items that are measured in terms of historical cost in a foreign currency are
translated using the exchange rate at the date of the transaction;
non-monetary items that are measured at fair value in a foreign currency are translated
using the exchange rates at the date when the fair value was determined.
Exchange differences arising from the settlement of monetary items or from the translation of
monetary items using rates other than the initial translation rate, or the closing rate at the end of
the prior period, are recorded in the income statement for the period under “net trading
income”, or if such differences relate to financial assets/liabilities accounted for under the fair
value option permitted by IAS 39, under “Net changes in financial assets and liabilities at fair
value”.
- 94 -
When gains or losses on non-monetary items are recognized in equity, the exchange differences
on them are also recognized in equity in the same period. Similarly, when gains or losses on nonmonetary items are recognized in the income statement, the exchange differences on them are
also recognized in the income statement in the same period.
17. Other information
17.1 Provision for severance indemnities
According to IFRIC, the provision for severance indemnities is a “post-employment benefit”
qualifying as a “defined benefit plan”, the value of which according to IAS 19 must be
determined on an actuarial basis. As a consequence, the period-end actuarial valuation of this
line item is carried out with reference to earned benefits using the projected unit credit method.
This method involves the projection of future payments with reference to past trends and
statistical analyses and probabilities, adopting suitable demographic techniques.
This makes it possible to calculate the severance indemnities accruing at a specific date on an
actuarial basis, distributing the cost over the entire remaining service of the current workforce,
and no longer presenting them as a cost payable as if the business were to cease trading on the
reporting date.
The provision for severance indemnities has been valued by an independent actuary using the
method outlined above.
The Group opted for the early adoption in the 2012 financial statements of the new international
accounting standard IAS 19 “Employee benefits” (applicable to annual periods beginning on or
after 1 January 2013, with early adoption allowed).
17.2. Repurchase agreements and securities loans
“Repurchase agreements”, which obligate the buyer to resell/repurchase the assets of the
transaction (e.g., securities) and “securities loans” wherein the collateral is represented by cash
that returns to be fully available to the bearer, are treated as loans against securities and,
therefore, the amounts received and paid are recorded as payables and loans. In particular, the
aforesaid “repurchase agreements” and “securities loans” completed for funding purposes are
recognised in the financial statements as payables for the amount received, while when
completed for lending purposes they are recognised as receivables for the amount paid. These
transactions do not determine movements in the securities portfolio. Accordingly, the cost of
borrowing and income from lending are recorded as interest in the income statement.
17.3. Fee and commission income and expense
For fee and commission income and expense, the period-end accounting results are used,
supplemented by non-accounting verifications for the purpose of recording the fees and
commissions accruing for the half-year.
17.4 Other administrative costs
Other administrative costs are recorded on an accruals basis, taking account of the agreements
signed up to 30 June, as well as the estimates of consumption which has not yet been invoiced.
These estimates are primarily based on the updated half-year budget which, based on past
experience, is deemed representative of the accruals principle.
- 95 -
17.5 Methods for determining the fair value of financial instruments
IFRS 13 defines fair value as the price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants in the principal (or most
advantageous) market at the measurement date, at current market conditions (i.e. a closing
price), irrespective of whether the price is directly observable or is estimated using a valuation
technique.
In the case of financial instruments quoted in active markets, the fair value is determined on the
basis of the most advantageous market prices to which the Group has access (using the official or
other equivalent price on the last trading day of the period in question). In this connection, a
financial instrument is considered quoted in an active market if the prices quoted are readily and
regularly available by means of a listing, operator, intermediary, industrial sector, price-setting
agency or regulatory authority and such prices reflect effective market transactions that take
place regularly as part of normal trades.
In the absence of an active market, fair value is determined using valuation techniques generally
accepted in financial practice (market approach, cost approach and income approach) aimed at
estimating the price at which an orderly sale or transfer of a liability between market
participants would take place at the measurement date, at current market conditions. In the
hierarchical order in which they are reported, these valuation techniques call for the use of:
1. the latest NAV (Net Asset Value) published by the management companies of
harmonized funds (UCITS - Undertakings for Collective Investment in Transferable
Securities), Hedge Funds and SICAVs;
2. quoted prices for the assets or liabilities in inactive markets (e.g., those obtainable from
external info providers such as Bloomberg and/or Reuters) or prices of similar assets or
liabilities in active markets;
3. the fair value obtained from valuation models (e.g. Discounted Cash Flow Analysis,
Option Pricing Models), which estimate all of the possible factors that condition the fair
value of a financial instrument (cost of money, credit risk, liquidity risk, volatility,
exchange rates, early repayment, etc.) based on observable market data, also for similar
instruments, at the valuation date. If it proves impossible to refer to market data for one
or more risk factors, we use internal parameters based on past experience and statistics.
The valuation models are reviewed periodically to ensure that they are still completely
reliable;
4. price indications provided by the issuer, adjusted if necessary to take account of
counterparty and/or liquidity risk (e.g. the price approved by the Board of
Directors/AGM for the unquoted shares of cooperative banks, the unit value
communicated by the management company for closed-end funds reserved for
institutional investors or other kinds of mutual funds other than those mentioned in
point 1, the redemption value determined according to the issue regulations for
insurance contracts);
5. for equity instruments, where the valuation techniques mentioned above are not
applicable: i) the value shown in independent appraisals, if available; ii) the value
corresponding to the portion of net equity held as shown in the company‟s latest
approved financial statements; iii) the cost, adjusted if necessary to take account of
material impairment, where the fair value cannot be reliably determined.
Given these considerations and in compliance with IFRS 7, the Bank/Group classifies fair value
measurements according to a hierarchy that reflects the reliability of the inputs on which the
measurements are based. This hierarchy consists of the following levels:
- 96 -

Level 1 – quoted prices (unadjusted) in active markets for identical assets or liabilities
that the entity can access at the measurement date;

Level 2 - inputs other than quoted prices included within Level 1 that are observable for
the asset or liability, either directly or indirectly. This level also includes the valuation
techniques based on market approaches that mainly use data observable on the market,
prices obtained from external info providers and the valuations of mutual funds based on
the NAV communicated by the management company, the value of which is updated
and published periodically (at least once a month) and represents the amount at which
the position can be wholly or partially liquidated on the investor‟s initiative;

Level 3 - input that are unobservable for the asset or liability but that reflect the
assumptions that market participants would use when pricing the asset or liability. This
level includes prices provided by the issuer counterparty or derived from independent
appraisals, and those obtained with valuation models that do not use market data to
estimate significant factors affecting the fair value of the financial instrument. Level 3
also includes the valuations of financial instruments at cost or corresponding to the
fraction of equity held in the entity.
- 97 -
INFORMATION ABOUT FAIR VALUE
Transfers between portfolios
The market turmoil experienced in the second half of 2008 and the reduced liquidity of certain
financial instruments meant that it has no longer been possible to pursue in the near term the
original intent when classifying them as financial assets held for trading, since such instruments
will now have to be held in the medium/long-term or until maturity. In view of this state of
affairs, in 2008 the Group took up the reclassification option for financial instruments permitted
by the amendments to IAS 39 “Financial instruments: recognition and measurement” and to
IFRS 7 “Financial instruments: disclosures” contained in the “Reclassification of Financial
Assets” published by the IASB on 13 October 2008 and endorsed by the European Commission
on 15 October 2008 with Regulation EC 1004/2008.
The disclosures required by paragraph 12A (b) and (e) of IFRS 7 relating to the above
reclassifications will now be provided.
Type of financial
instrument
Debt securities
Mutual Funds
Origination portfolio
Destination portfolio
Financial assets available for
Loans and receivibles
sale
Financial assets held for
Financial assets available for
trading
sale
Total
Book value at Fair value at
30/06/2013
30/06/2013
Income components in the
Income components booked
absence of transfers (before
during the period (before
tax)
Valuation
133,545
117,483
2,239
11,572
11,572
(1,858)
145,117
129,055
- 98 -
381
tax)
Other
Valuation
Other
1,743
-
2,837
-
(1,858)
-
1,743
(1,858)
2,837
Fair value hierarchy
The financial instruments measured at fair value are classified in the following table according
to the IFRS 13 fair value hierarchy.
Financial assets/liabilities at fair value
1. Financial assets held for trading
30/06/2013
L1
31/12/2012
L2
L3
L1
L2
L3
33,082
2,419,482
1,150
50,835
2,554,225
854
7,088
75,660
-
41,407
77,755
3
25,994
-
-
9,428
-
-
- Mutual funds
-
-
-
-
-
-
- Loans
-
-
-
-
-
-
- Derivatives
-
2,343,822
1,150
-
2,476,470
851
410,255
- Debt securities
- Equities
2. Financial assets available for sale
6,076,643
339,430
434,460
4,702,935
452,990
- Debt securities
5,940,854
129,567
9,327
4,633,731
213,986
10,319
133,183
3,680
234,239
66,302
3,974
230,335
- Equities
- Mutual funds
2,606
206,183
164,749
2,902
235,030
143,833
- Loans
-
-
26,145
-
-
25,768
3. Hedging derivatives
-
126,800
-
-
129,994
-
Total
6,109,725
2,885,712
435,610
4,753,770
3,137,209
411,109
1. Financial liabilities held for trading
-
2,005,342
-
69,393
2,180,644
-
- Due to banks
-
-
-
69,393
-
-
- Due to customers
-
-
-
-
-
-
-
-
-
-
-
-
- Derivatives
-
2,005,342
-
-
2,180,644
-
2. Financial liabilities at fair value
-
1,818,829
-
-
1,731,170
-
- Due to banks
-
-
-
-
-
-
- Due to customers
-
-
-
-
-
-
-
1,818,829
-
-
1,731,170
-
3. Hedging derivatives
-
631,277
-
-
608,642
-
Total
-
4,455,448
-
69,393
4,520,456
-
Key:
L1= Level 1, L2= Level, 2 L3= Level 3
For details on the methods used to identify fair value and the classifications in the “levels of fair
value” prescribed by IFRS 13, please see the previous paragraph 17.5, entitled “Methods for
determining the fair value of financial instruments”, of these explanatory notes (“Accounting
policies – Part relating to the principal financial statement line items”). For most of the financial
instruments classified at level 3 in the hierarchy set forth by IFRS 13, “passive” valuation
techniques were used which do not use financial models based on market data but are based,
e.g., on equity, on the NAV and/or on the redemption values notified by the management
company. Therefore, any fair value sensitivity analysis would have little meaning.
During the period, no financial instruments were transferred between the various fair value
levels.
“Day one profit/loss” disclosure
The Group did not undertake any transactions during the year involving the recognition of
“day one profit/loss”.
- 99 -
CONSOLIDATED RESULTS OF OPERATIONS
SCOPE OF CONSOLIDATION
At 30 June 2013, the scope of consolidation of the BPVi Group is as follows:
Companies carried
at net equity
Companies consolidated
line-by-line
Capogruppo
S.c.p.A.
100%
Banca Nuova
S.p.A.
66.81%
Società Cattolica di
Assicurazione S.c.p.A.
Farbanca S.p.A.
100%
100%
99.99%
100%
100%
Nordest Merchant
S.p.A.
60%
NEM SGR S.p.A.
60%
BPVI Fondi SGR
S.p.A.
60%
BPV Finance
International Plc
0.10%
0.10%
1.66%
Prestinuova S.p.A.
1%
96%
Servizi Bancari
S.c.p.A.
1%
1%
1%
0,04%
99.92%
100%
Immobiliare
Stampa S.c.p.A.
0,04%
ABC Assicura S.p.A.
14.92%
40%
40%
Berica Vita S.p.A.
40%
Cattolica Life Ltd.
SEC Servizi
S.c.p.A.
47.95%
Interporto della
Toscana Centrale
S.p.A.
20%
Magazzini Generali
Merci e Derrate S.p.A.
25%
Monforte 19 S.r.l.
The company Popolare Assessoria e Consultoria Ltda, a subsidiary of which the Parent Bank
holds a 99% equity investment, the newly incorporated BPVI Multicredito Spa and the special
purpose entities held by the Parent Bank (BPVI Covered Bond Srl, 60% owned, Berica Mbs Srl,
Berica 2 Srl and Berica 3 Srl all wholly owned) were excluded from the scope of consolidation
and valued at cost, because their values are insignificant with respect to the Group‟s
consolidated financial statements.
- 100 -
The changes in the scope of consolidation since 31 December 2012 are indicated below.
Mergers and acquisitions, spin-off and cancellations
BPVI Multicredito – Agenzia in attività finanziaria Spa: in the first half of 2013, the Parent
Bank incorporated the company, a special purpose entity for the management of the financial
agent network. The total outlay amounted to Euro 120 thousand.
Berica Mbs Srl, Berica 2 Srl and Berica 3 Srl: in the first half of 2013, the Parent Bank acquired
the entire control of these special purpose entities, which had been used to carry out the first
three securitisations originated by the Parent Bank, that were closed in August 2011 and March
2012. The total outlay amounted to Euro 93 thousand. For all three companies, the merger by
absorption into the Parent Bank was started and will presumably be completed by the end of
the year.
Servizi Bancari Scpa: in the first half of 2013, the Parent Bank sold a 1% share in the company
to the investee SEC Servizi Scpa.
Changes in equity interests
Prestinuova SpA: in the first half of 2013, the Parent Bank acquired the equity investment in
this company held by the former minority shareholder Banca Popolare di Sant‟Angelo (5%) and,
therefore, it now has full control.
Società Cattolica di Assicurazione: in the first half of 2013, the Parent Bank acquired a further
1.65% interest in this company (i.e. 939,000 shares), raising its holding from 13.27% as at 31
December 2012 to 14.92% at 30 June 2013.
*************
The half-year consolidated financial statements of the Banca Popolare di Vicenza Group at 30
June 2013 therefore comprise, as required by IAS 27, the financial and operating information
reported by the Parent Bank and its direct and indirect subsidiaries and associated companies.
The statements of financial position and income statements used for consolidation purposes
according to line-by-line and equity methods were those referred to 30 June 2013, with the
exceptions set out below. These statements were adjusted, where necessary, to align them with
the correct and consistent IAF/IFRS standards applied by the Group. The financial statements
of companies consolidated line-by-line, but presented using formats that differ from those
established in Bank of Italy Circular 262 of 22 December 2005 and subsequent amendments,
have also been reclassified in accordance with these formats.
The investment in Magazzini Generali Merci e Derrate SpA is carried at the equity value
reported in the latest approved financial statements (2012 financial statements), while the
investment in Società Cattolica di Assicurazione SCpA, an associate, is carried at the equity
value reported in its consolidated financial statements at 30 June 2013. Lastly, the investment in
Interporto della Toscana Centrale SpA was maintained at cost.
- 101 -
THE MAIN AGGREGATES IN THE STATEMENT OF FINANCIAL POSITION
Banking business
Total funding
Direct funding
Indirect funding
Total
in milioni di €
30/06/2013 31/12/2012 30/06/2012
Changes
Jun/13 - Dec/12
(+/-)
33,230
17,803
51,033
32,387
17,589
49,976
RACCOLTA DIRETTA
29,592
16,756
46,348
Changes
Jun/13 - Jun/12
%
(+/-)
%
843
214
2.6%
1.2%
3,638
1,047
12.3%
6.2%
1,057
2.1%
4,685
10.1%
RACCOLTA DIRETTA
At 30 June 2013, the banking business of the Group, comprising total funding and loans to
customers, reached Euro 82,242 million, up by 1.9% compared to Euro 80,689 million at 31
December 2012.
The year on year growth of the aggregate amounted to 7.3%.
Total funding
Total funding
Direct funding
Indirect funding
Total
in milioni di €
30/06/2013 31/12/2012 30/06/2012
Changes
Jun/13 - Dec/12
(+/-)
33,230
17,803
51,033
32,387
17,589
49,976
RACCOLTA DIRETTA
29,592
16,756
46,348
Changes
Jun/13 - Jun/12
%
(+/-)
%
843
214
2.6%
1.2%
3,638
1,047
12.3%
6.2%
1,057
2.1%
4,685
10.1%
RACCOLTA DIRETTA
At 30 June 2013, the Group‟s total funding, i.e. the sum of direct funding and indirect funding,
amounted to Euro 51,033 million, up by 2.1% compared to Euro 49,976 million at the end of
2012. In detail, direct funding amounted to Euro 33,230 million, up by Euro 843 million from 31
December 2012 (+2.6%), whilst indirect funding totalled Euro 17,803 million, up by +1.2%
compared to the end of 2012.
Year on year, the aggregate value grew by 10.1% thanks to the positive contribution of both
direct funding (+12.3%) and indirect funding (+6.2%).
- 102 -
Direct funding
At 30 June 2013, Group direct funding, comprising the sum of amounts “Due to customers”
(Line item 20), “Debt securities in issue” (Line item 30) and “Financial liabilities at fair value”
(Line item 50), total Euro 33,230 million, up by 2.6% since the end of 2012. The aggregate grew
by 12.3% year on year. By way of comparison, it is pointed out that banking system data instead
show a decline by 0.3% in the half year and far weaker growth (+2.2%) over twelve months.
Direct funding
30/06/2013 31/12/2012 30/06/2012
(+/-)
Current accounts and demand deposits
Time deposits
Repurchase agreements
Bonds
Certificates of deposit and other securities
Other payables
12,440
3,789
5,071
9,004
146
2,780
11,419
4,447
4,331
9,735
173
2,282
10,766
4,508
2,070
10,725
182
1,341
Total
33,230
32,387
29,592
in milioni di €
Changes
Jun/13 - Dec/12
RACCOLTA33,212
DIRETTA
%
Changes
Jun/13 - Jun/12
(+/-)
%
1,021
-658
740
-731
-27
498
8.9%
-14.8%
17.1%
-7.5%
-15.6%
21.8%
1,674
-719
3,001
-1,721
-36
1,439
15.5%
-15.9%
145.0%
-16.0%
-19.8%
107.3%
843
2.6%
3,638
12.3%
RACCOLTA DIRETTA
The performance of this aggregate in the half year was characterised by the growth of current
accounts and demand deposits (+8.9%), repurchase agreements (+17.1%) and other payables
(+21.8%). On the other hand, time deposits declined (-14.8%), along with bonds (-7.5%) and
certificates of deposit and other securities (-15.6%); this aggregate figure, however, remained
at less than significant values.
The change in repurchase agreements reflects the higher volumes traded on the Euro MTS
market managed by Cassa Compensazione e Garanzia within the scope of Group treasury
management activities. The growth in current accounts and demand deposits is partly due to
the liquidity generated through the repayment of other forms of funding, with time deposits
foremost among them, as well as to the growth of the customer base during the half year.
The decline in bonds is due to the planned reduction in funding volumes from the wholesale
market (in the first half, net repayments of bonds issued on the EMTN programme have a
nominal amount of approximately Euro 470 million); the reduction in time deposits is mostly
due to the non renewal of certain operations of significant amount and greater costs carried out
at the end of 2011 and in early 2012 with individual customers and with financial institutions.
These policies were implemented with the goal of containing the cost of funding.
The other payables include Euro 2,340 million euro (Euro 1,883 million at 31 December 2012) of
liabilities relating to assets sold and not derecognized, as the matching entry of the receivables
sold within the own securitisations that do not meet the derecognition requirements under IAS
39 and therefore were reinstated under asset line item 70 in the balance sheet. The aforesaid
liabilities, posted net of the cash available to the various special purpose entities and generated
with the periodic collection of the instalments of the securitised mortgages, represent the share
of the Asset Backed Securities issued by the special purpose entities and placed on the market.
In the half year, part of the senior and mezzanine tranches of the securitisations Berica 10
Residential MBS (a nominal amount of Euro 311 million) and Berica ABS 2 (a nominal amount
of Euro 720 million), originally subscribed by the originators, were sold on the market.
- 103 -
The year on year changes in the above aggregates substantially reflect the trends identified
during the first half of 2013, confirming in particular both the strong growth in “current
accounts and demand deposits” (+15.5%) and in “other payables” (+107.3%) and the decline in
“time deposits” (-15.9%) and “bonds” (-16%). Repurchase agreements grew sharply, for the
same reasons pointed out above.
Indirect funding
At 30 June 2013, the market value of the Group‟s indirect funding amounted to Euro 17,803
million, with a positive change by 1.2% compared to the figure at the end of December 2012.
However, the year on year comparison shows growth by 6.2%.
Indirect funding
Assets under administration
Shares
Other securities
Treasury shares
Assets under management
Mutual funds/Sicav
Portfolio management
Pension premiums
Total
Source: management accounting
30/06/2013 31/12/2012 30/06/2012
Changes
Jun/13 - Dec/12
(+/-)
%
Changes
Jun/13 - Jun/12
(+/-)
%
13,197
1,517
7,048
4,632
2,604
2,320
284
2,002
13,240
1,483
7,112
4,645
2,401
1,978
423
1,948
12,558
1,393
6,557
4,608
2,216
1,719
497
1,982
-43
34
-64
-13
203
342
-139
54
-0.3%
2.3%
-0.9%
-0.3%
8.5%
17.3%
-32.9%
2.8%
639
124
491
24
388
601
-213
20
5.1%
8.9%
7.5%
0.5%
17.5%
35.0%
-42.9%
1.0%
17,803
17,589
16,756
214
1.2%
1,047
6.2%
RACCOLTA DIRETTA
In the half year, this aggregate was characterised by the positive contribution of pension
premiums (+2.8%) and of assets under management (+8.5%), which in turn benefited from the
positive performance of “mutual funds/Sicav” (+17.3%) whilst “portfolio management”
(-32.9%) confirmed the negative trend of recent years. On the other hand, assets under
administration declined (-0.3%): in this segment, only “shares” grew (+2.3%), whilst “other
securities” and “treasury shares” contracted, respectively, by 0.9% and 0.3%.
- 104 -
Overall year on year growth was 6.2%, thanks to the positive contribution of all segments, with
assets under administration growing by 5.1%, assets under management by 17.5% and
pension premiums by 1%.
Loans to customers
At 30 June 2013, loans to customers net of adjustments (asset line item 70 in the consolidated
statement of financial position) amount to Euro 31,209 million, up by 1.6% since 31 December
2012 (+3.1% since 30 June 2012). On the contrary, the banking system declined both in the half
year (-2.1%) and year on year (-1.6%). In the first half of 2013, the Group‟s new issues amount to
nearly Euro 1.2 billion, confirming the BPVI Group‟s constant support to the local economies
where it operates and in particular to households and small businesses.
Loans to customers
30/06/2013 31/12/2012 30/06/2012
(+/-)
RACCOLTA 4,991
DIRETTA5,010
in milioni di €
Current
accounts
RACCOLTA
Repurchase agreements
Mortagages
Credit cards, personal loans and salary
assignment
Other transactions
Debt securities
Total
in milioni di €
Changes
Jun/13 - Dec/12
Changes
Jun/13 - Jun/12
%
(+/-)
%
1,623
18,212
927
18,320
5,398
179
18,491
-19
696
-108
-0.4%
75.1%
-0.6%
-407
1,444
-279
-7.5%
806.7%
-1.5%
534
528
524
6
1.1%
10
1.9%
5,491
358
5,576
352
5,329
349
-85
6
-1.5%
1.7%
162
9
3.0%
2.6%
31,209
30,713
30,270
496
1.6%
939
3.1%
DIRETTA
+8,4%
RACCOLTA
DIRETTA
IMPIEGHI CON CLIENTELA
+2,4%
The aggregate performance is characterised by growth in repurchase agreements (+75.1%),
debt securities (+1.7%) and credit cards, personal loans and salary assignment (+1.1%), whilst
current accounts declined (-0.4%), along with mortgages (-0.6%) and other transactions (-1.5%).
The growth in repurchase agreements is almost entirely due to the higher volumes traded on
the Euro MTS market managed by Cassa Compensazione e Garanzia within the scope of Group
treasury management activities.
- 105 -
The decline in other transactions is mainly due to the contraction of the short term loan types,
such as import/export and trade discounts, affected by the challenging macroeconomic
environment that causes a generalised drop in the quality/quantity of demand for loans. This
item also includes the guarantee margins deposited with the Cassa di Compensazione e
Garanzia in view of repurchase agreements entered into on the Euro MTS market (Euro 574
million at 30 June 2013, Euro 480 million at 31 December 2012) and the net imbalance generated
with the reinstatement of the assets transferred in self-securitisations; this exposure in fact
represents the cash available at the various special purpose vehicles for repayment of the Asset
Backed Securities issued (Euro 164 million at 30 June 2013, Euro 197 million at 31 December
2012).
Lastly, the contraction in mortgages reflects the recessionary phase of the domestic real estate
market, where transactions dropped sharply and consequently so did new loan applications.
Loans to customers include assets sold but not derecognized totalling Euro 7,935 million (Euro
5,699 million at 31 December 2012) in relation to the Berica 5 Residential MBS, Berica 6
Residential MBS, Berica 8 Residential MBS, Berica 9 Residential MBS, Berica 10 Residential MBS
Srl, Berica ABS, Berica ABS 2, Berica PMI and Piazza Venezia securitisations; the latter two
securitisations were completed during the half year. These transactions do not meet the
derecognition requirements of IAS 39, so the residual securitised assets at the reporting date
have been “reinstated” in the financial statements, in the relevant technical forms.
The year on year changes in this aggregate accentuate the trends of the first half of 2013,
highlighting a more significant decline in current accounts (-7.5%) and mortgages (-1.5%),
whilst repurchase agreements grew significantly (over Euro 1.4 billion) with the consequent
increase in the guarantee margins deposited with Cassa di Compensazione e Garanzia which
positively influenced the change in other transactions (+3%). Debt securities also grew (+2.6%).
- 106 -
Loans/direct funding ratio
Loans / direct funding ratio
in milioni di €
Loans
to customers
Direct funding
Net imbalance
in milioni di €
30/06/2013 31/12/2012 30/06/2012
Changes
Jun/13 - Dec/12
(+/-)
RACCOLTA DIRETTA
30,713
31,209
RACCOLTA DIRETTA
33,230
-2,021
-1,674
+8,4%
+2,4%
RACCOLTA
DIRETTA
93.9%
678
%
(+/-)
%
496
843
1.6%
2.6%
939
3,638
3.1%
12.3%
-347
20.7%
-2,699
-398.1%
+2,4%
Loans / direct funding ratio
30,270
29,592
32,387
Changes
Jun/13 - Jun/12
94.8%
102.3%
At 30 June 2013, total direct funding exceed loans to customers, with a net imbalance of Euro
2,021 million in favour of direct funding, an increase compared to Euro 1,674 million of 31
December 2012. For this reason, the “Loans/direct funding Ratio” amounted to 93.9%, an
improvement by 0.9 percentage points from the figure of 31 December 2012.
Net of existing operations with Cassa di Compensazione e Garanzia, repurchase agreements traded
on the Euro Mts market and related guarantee margins, the loans/direct funding ratio improved by
1.5 percentage points over 31 December 2012, reaching 105.7%.
Lastly, in July the senior tranches of the Asset Backed Securities issued in the “Berica PMI”
securitisation, with a nominal amount of Euro 980 million, were placed on the market. Including
said transaction, the Loans/direct funding ratio would amount to 90.9% (101.7% net of exposures to
Cassa di Compensazione e Garanzia).
Quality of credit
Changes
Impaired loans net
30/06/2013
Non performing loans
Watchlist loans
Restructured loans
Loans past due
in milioni di €
Total
in milioni di €
31/12/2012
(+/-)
1,435.5
1,089.1
322.3
707.2
RACCOLTA DIRETTA
RACCOLTA DIRETTA
3,554.1
+8,4%
RACCOLTA DIRETTA
%
1,270.9
1,032.0
307.9
610.9
164.6
57.1
14.4
96.3
13.0%
5.5%
4.7%
15.8%
3,221.7
332.4
10.3%
+2,4%
Credit quality continued to be affected by the persistent weakness of the economic cycle. At 30
June 2013, net impaired loans to customers showed an increase in absolute value of Euro 332.4
million compared to 31 December 2012 (+10.3%), representing an increase with respect to total
net loans of 0.90 percentage points, up from 10.49% at 31 December 2012 to 11.39% at 30 June
2013.
This trend involved all technical forms. In detail, non-performing loans grew by Euro 164.6
million (+13%), watchlist loans by Euro 57.1 million (+5.5%), restructured loans by Euro 14.4
million (+4.7%) past due exposures by Euro 96.3 million (+15.8%).
- 107 -
30 June 2013
Categories
(in millions of euro)
Gross
exposure
Adjustments
Net
exposures
Impaired loans
Watchlist loans
Restructured loans
Loans past due
Performing loans
Loans to customers and debt securities
Repurchase agreements and collateral margin
4,746.5
2,417.3
1,259.0
334.1
736.1
27,754.6
25,557.9
2,196.7
1,192.4
981.8
169.9
11.8
28.9
100.2
100.2
-
3,554.1
1,435.5
1,089.1
322.3
707.2
27,654.4
25,457.7
2,196.7
Total
32,501.1
1,292.6
31,208.5
5,095.5
1,539.2
2,766.3
% loans
gross
%
coverage
% net
loans
14.60%
7.44%
3.87%
1.03%
2.26%
85.40%
78.64%
6.76%
25.12%
40.62%
13.49%
3.53%
3.93%
0.36%
0.39%
0.00%
11.39%
4.60%
3.49%
1.03%
2.27%
88.61%
81.57%
7.04%
3,556.3
15.53%
30.21%
11.39%
1,328.6
1,437.7
8.43%
48.03%
4.60%
Adjustments
Net
exposures
Impaired loans
(included partial write-offs for bankruptcy proceedings)
Credit Cost
1.24%
31 December 2012
Categories
(in millions of euro)
Gross
exposure
Impaired loans
Watchlist loans
Restructured loans
Loans past due
Performing loans
Loans to customers and debt securities
Repurchase agreements and collateral margin
4,263.6
2,125.6
1,190.8
314.7
632.5
27,591.3
26,184.0
1,407.3
1,041.9
854.7
158.8
6.8
21.6
100.5
100.5
-
3,221.7
1,270.9
1,032.0
307.9
610.9
27,490.8
26,083.5
1,407.3
Total
31,854.9
1,142.4
30,712.5
4,579.0
1,357.3
2,441.0
1,170.1
% loans
gross
%
coverage
% net
loans
13.38%
6.67%
3.74%
0.99%
1.99%
86.62%
82.20%
4.42%
24.44%
40.21%
13.34%
2.16%
3.42%
0.36%
0.38%
0.00%
10.49%
4.14%
3.36%
1.00%
1.99%
89.51%
84.93%
4.58%
3,221.7
14.23%
29.64%
10.49%
1,270.9
7.59%
47.94%
4.14%
Impaired loans
Credit Cost
0.71%
10
As detailed in the above statements, net impaired loans to customers at 30 June 2013 are
analyzed as follows:
 net non-performing loans, representing 4.60% of net loans (4.14% at 31 December
2012), amount to Euro 1,435.5 million, with a coverage percentage, excluding
“memorandum accounts”, of 40.62%, up by 0.41 percentage points compared to 40.21%
of 31 December 2012. The coverage percentage, including “memorandum accounts”,
would amount to 48.03% (47.94% as at 31 December 2012);
 watchlist loans, representing 3.49% of net loans (3.36% at 31 December 2012), amount
to Euro 1,089.1 million with a percentage coverage of 13.49% (13.34% at 31 December
2012);
 net restructured loans total Euro 322.3 million, with a coverage percentage of 3.53%
(2.16% at 31 December 2012);
 net past due exposures total Euro 707.2 million, with a coverage percentage of 3.93%
(3.42% at 31 December 2012).
“Memorandum accounts” pertain to partial write-offs for bankruptcy proceedings in progress at the reporting date The figure of
30 June 2013, for consistency of comparison with 31 December 2012, also includes the gross exposures (Euro 40.7 million) and the
related adjustments (Euro 38.5 million) referred to non-performing loans sold during the half year.
10
- 108 -
Overall, the coverage percentage of impaired loans calculated without “memorandum
accounts” grows from 24.44% at 31 December 2012 to 25.12% at 30 June 2013. The coverage
percentage of impaired loans, including “memorandum accounts”, grew slightly to 30.21%
compared to 29.64% as at 31 December 2012.
Lastly, the general provision for performing loans to customers (excluding repurchase
agreements and guarantee margins not impaired) amounted to Euro 100.2 million at 30 June
2013, assuring coverage of 0.39%, compared to 0.38% at 31 December 2012.
At 30 June 2013, the credit cost on a yearly basis, defined as the ratio between net adjustments
to cash loans to customers and gross loans to customers (excluding repurchase agreements and
guarantee margins) amounted to 1.24% (0.71% at 31 December 2012).
- 109 -
The interbank position
At 30 June 2013 the Group‟s net exposure on the interbank market, given by the algebraic sum
of amounts due from banks (asset line item 60) and amounts due to banks (liability line item 10)
amounted to Euro -3,594.5 million, increasing by Euro 578 million compared to Euro -3,016.5
million at 31 December 2012. The increase is mainly due to the higher investments in
Government Securities made by the Group in the first half year, only partly offset by the
improvement in the imbalance of customer loans/deposits
(in millions euro)
30/06/2013
31/12/2012
Changes
(+/-)
%
Position with Central Banks
Repurchase agreements position
Net exposure through cash collateral
"Unsecured " position
Debt securities
(2,893.6)
(340.4)
627.9
(1,092.1)
103.7
(3,179.4)
(83.1)
506.3
(374.3)
114.0
285.8
(257.3)
121.6
(717.8)
(10.3)
-9.0%
309.6%
24.0%
191.8%
-9.0%
Total
(3,594.5)
(3,016.5)
(578.0)
19.2%
The position with Central Banks includes refinancing operations with the ECB, in which the
Bank participated by forming a pool of assets eligible as collateral, including Euro 2 billion of
own-issue bonds guaranteed by the State. In detail, Euro -3.3 billion of the position refer to two
three-year LTRO - Longer Term Refinancing Operations and Euro +0.4 billion to the time
deposit connected with maintaining the compulsory reserve.
The repurchase agreements position had a negative imbalance of Euro -340.4 million, up
compared to Euro -83.1 million at 31 December 2012, as a result of the new transactions of this
kind carried out in the period with underlying newly issued “BTP Italy” securities, not usable
on the EuroMTS market.
The net exposure through cash collateral had a positive balance of Euro 627.9 million (Euro
506.3 million as at 31 December 2012) and refers to mutual guarantees, aimed at mitigating
credit risk, that are exchanged on a daily basis with all major market operators with which the
Group carries out OTC derivative and repo/bond buy sell back transactions, quantified on the
basis of the market value of existing positions. The guarantees are regulated by international
standards (CSA/GMRA) subscribed with the various market counterparties on existing ISDA
agreements that regulate the aforesaid transactions.
The net unsecured position amounts to Euro -1,092.1 million, versus Euro -374.3 million at 31
December 2012. The rise is almost entirely referred to the increase in the funds collected from
central institutions and small Italian banks. At the end of June, O/N funding, used for
temporary coverage of cash imbalances, amounted to zero.
- 110 -
Financial assets and liabilities
At 30 June 2013, the Group‟s cash financial assets amount to Euro 7,012.8 million, versus Euro
5,737.8 million at 31 December 2012 (+22.2%).
At 30 June 2013, there were no financial liabilities held for trading, which amounted to Euro
69.4 million at 31 December 2012 and entirely referred to “short positions” on Italian
Government securities.
Cash financial assets
Changes
30/06/2013
31/12/2012
(+/-)
%
- Debt securities: Governments and Central Banks
- Debt securities: other issuers
- Quoted equities
108.8
7.1
75.7
26.0
128.6
41.4
77.8
9.4
(19.8)
(34.3)
(2.1)
16.6
-15.4%
-82.9%
-2.7%
176.6%
- Debt securities: Governments and Central Banks
- Quoted equities
- Unquoted equities
- Mutual funds
- Loans
6,850.5
5,941.5
138.3
133.2
237.9
373.5
26.1
5,566.2
4,634.4
223.6
66.3
234.3
381.8
25.8
1,284.3
1,307.1
(85.3)
66.9
3.6
(8.3)
0.3
23.1%
28.2%
-38.1%
100.9%
1.5%
-2.2%
1.2%
53.5
53.5
43.0
43.0
10.5
10.5
24.4%
24.4%
7,012.8
5,737.8
1,275.0
22.2%
Financial assets held to maturity
Total
The breakdown for each item where they are classified is provided below:
 assets held for trading (asset line item 20) account for 1.5% of the Group‟s financial
assets, down by Euro 19.8 million from 31 December 2012 (-15.4%), as a result of the
combination of the increased investments in listed stocks and of the disposal of certain
investments in Italian Government bonds;
 financial assets available for sale (asset line item 40) represent 97.7% of the Group‟s
financial assets and they grew by Euro 1,284.3 million (+23.1%) compared to 31
December 2012. The most significant changes pertain to the increase in the amount
invested in Italian Government securities (Euro +1,307.6 million, +28.2%) and, to a lesser
extent, in listed shares (Euro +66.9 million, +100.9%), whilst exposures in other debt
securities declined (-38.1%). Within the strategy aimed to support the interest margin in
the medium term, on some investments in Italian Government securities (for a nominal
amount of Euro 3.28 billion) recorded among “financial assets available for sale” were
micro hedged for the interest rate risk and, possibly also for the inflation rate risk (both
with cash flow hedging and fair value hedging);
 financial assets held to maturity (asset line item 50) account for 0.8% of the Group‟s
financial assets and amount to Euro 53.5 million (Euro 43 million at 31 December 2012).
The breakdown of trading derivatives is shown below. If their fair value is positive, they are
recorded under asset line item 20; if their fair value is negative, they are recorded under liability
line item 40.
- 111 -
30/06/2013
Trading derivatives
Positive fair
value
31/12/2012
Negative
fair value
Positive fair
value
Negative
fair value
Derivatives on debt securities and interest rates
Derivatives on equities and equity indices
Derivatives on exchange rates and gold
2,148.6
1.1
23.9
(1,962.4)
(6.2)
(10.6)
2,286.9
1.9
10.4
(2,173.0)
(6.4)
Total
2,173.6
(1,979.2)
2,299.2
(2,179.4)
The exposures in derivatives on debt securities and interest rates reflects the effects of the
strategies for managing the banking book. To optimise their costs, the various hedging
transactions entered into by the Group transit on the trading portfolio, and in particular the
cash flow hedges on floating rate mortgages.
The breakdown of “hedging” derivatives is shown below. They are recorded under asset line
item 80 (positive fair values) and under liability line item 60 (negative fair values), with the
exception of those in fair value option (“natural hedges”), which instead are recorded under
asset line item 20 (positive fair values) and under liability line item 40 (negative fair values).
Hedging derivatives
Fair value hedging
Positive fair
value
30/06/2013
31/12/2012
Negative
Positive fair
Nominal Value
fair value
value
Negative
Nominal Value
fair value
- debt securities
- mortgages
- own bond issues
78.7
21.3
57.4
(406.6)
(337.1)
(69.5)
-
3,662.3
1,635.0
958.3
1,069.0
93.3
16.4
76.9
(583.5)
(498.8)
(84.7)
-
4,362.2
2,105.0
925.2
1,332.0
Cash flow hedging
- debt securities
- mortgages
- own bond issues
48.1
6.5
41.6
-
(224.7)
(125.3)
(99.4)
-
8,350.0
1,650.0
6,700.0
-
36.7
36.7
-
(25.1)
(25.1)
-
4,300.0
4,300.0
-
- debt securities
- mortgages
- own bond issues
171.3
171.3
(26.2)
(26.2)
2,586.9
2,586.9
178.1
178.1
(1.2)
(1.2)
2,100.2
2,100.2
Total
298.1
(657.5)
14,599.2
308.1
(609.8)
10,762.4
Fair value option
The fair value option is used to manage own-issue bonds related, from their origin, to
derivative contracts entered into in order to mitigate their interest rate risk.
The fair value hedges pertain to interest rate risk on specific fixed-rate and floating rate with
maximum rate mortgage portfolios classified as “Loans and advances to customers”, on
individual own-issue bonds recorded among “Securities in issue”, on a debt security recorded
among “Loans and advances to banks” and on Italian government bonds recorded among
“financial assets available for sale”, which also includes inflation linked BPT hedged also for
inflation rate.
To represent the aforesaid hedging transactions, the Group opted for the “Micro Fair Value
Hedge” accounting model for those relating to own-issue bonds and to investments in
government bonds, while it used the “Macro Fair Value Hedge” model for those relating to
mortgage loans, with the consequent recognition of the revaluations of the hedged assets (Euro
49.9 million as at 30 June 2013 versus Euro 67.3 million as at 31 December 2012) in Asset line
item 90 “Remeasurement of financial assets backed by macro hedges”.
- 112 -
The cash flow hedges pertain to specific portfolios of floating rate mortgages recorded among
“loans and advances to customers” and to Italian Government bonds recorded among
“financial assets available for sale”, in particular inflation linked BTP and CCT linked to the
Euribor. The underlying assets of cash flow hedging derivatives for mortgages refer both to
tailor-made interest rate swaps that replicate the amortisation schedule and the method of
indexing the hedged assets and to the related swaption collars that enable to limit the
consequences of any sudden changes in the interest rate curve. Overall, hedged floating rate
loans amount to Euro 3.35 billion, versus Euro 2.15 billion at 31 December 2012.
OTC derivatives entered into with market counterparties, mostly banks, is almost entirely
secured by bilateral offsetting agreements that provide the option of offsetting creditor
positions with debtor positions in case of counterparty default. Moreover, in order further to
attenuate credit risk, specific Credit Support Annex contracts were stipulated, which regulate
the cash collateral financial guarantees given/received by the various counterparties with
which the Group operates.
The following table shows the Group‟s net exposure in derivatives, determined on the basis of
the net fair values of all existing contracts with a single counterparty with respect to the
transactions that are secured by a bilateral offsetting agreement, whilst the remaining
transactions are posted on the basis of the fair value of each individual contract.
30/06/2013
Derivatives
Positive fair
value
OTC derivatives with market counterparties
- covered by bilateral offsetting arrangements
- not covered by bilateral offsetting arrangements
OTC derivatives with Group clients
227.4
205.8
21.6
91.9
Negative
fair value
(463.9)
(446.1)
(17.8)
(20.4)
The exposures with positive fair values with market counterparties are secured by cash
collaterals deposited with the Parent Bank BPVi, amounting to Euro 180.8 million.
Derivatives with customers include gross impaired exposures of Euro 3.2 million, which have
been written down by Euro 0.8 million to take account of the related credit risk. The remaining
performing positions, instead, were written down by Euro 2.7 million.
- 113 -
Equity investments
Equity investments (asset line item 100) amounted to Euro 342.1 million (Euro 350.5 million at
31 December 2012) and refer mostly to the interests held in the insurance company of the
Cattolica Assicurazioni Group.
Name
%
held
Subsidiary companies not included in the scope of
consolidation (valued at cost)
1. Popolare di Vicenza Assessoria e Consultoria Ltda
Net profit
(loss)
Equity
Book value
Fair value
99%
n.d.
n.d.
10
X
2. BPVi Multicredito
100%
n.d.
n.d.
120
X
3. Berica Mbs Srl
100%
n.d.
n.d.
28
X
4. Berica 2 Srl
100%
n.d.
n.d.
32
X
5. Berica 3 Srl
100%
n.d.
n.d.
33
X
60%
n.d.
n.d.
10
X
14.92%
30,308
1,271,410
283,724
40%
871
17,526
8,108
X
3. Berica Vita SpA (2)
40%
786
76,293
30,366
X
4. ABC Assicura SpA (2)
40%
252
10,000
4,417
X
436
109
X
6. BPVi Covered Bond Srl
Associated companies (subject to significant influence carried at equity)
1. Società Cattolica di Assicurazione SCpA
2. Cattolica Life Ltd
6. Magazzini Generali Merci e Derrate SpA
7. Interporto della Toscana Centrale SpA
8. Sec Servizi SCpA (4)
(3)
(1)
(3)
25%
(1,827)
20%
107
14,035
2,199
X
49.81%
-
25,951
12,926
X
Total
(1)
132,387
342,082
The data in the table refer to the consolidated financial statements at 30 June 2013.
The data in the table are taken from the “Group Reporting Package” used by the parent company “Società
Cattolica di Assicurazione” to prepare the group‟s consolidated financial statements as at 30 June 2013.
(2)
(3)
The data in the table refer to the financial statements at 31 December 2012.
The percentage held is determined by adding the percentage held directly by the Parent Bank, Banca Popolare di
Vicenza (47.95%), to those held indirectly through the subsidiaries Banca Nuova (1.66%), Farbanca (0.10%) and
Prestinuova (0.10%).
(4)
The main changes that took place in the half year pertain to the increase of the equity
investment in Società Cattolica di Assicurazione (939,000 shares, i.e. 1.65%).
The analyses carried out at 30 June 2013 on the equity investments held did not bring to light
trigger events that may require an impairment to be recognised in the income statement on
goodwill included in the carrying amount of the investments. With specific reference to the
equity investment held in Cattolica Assicurazioni, in the first half of 2013 the stock market price
increased significantly, from Euro 11.1 per share at 31 December 2012 to Euro 15.7 per share at
30 June 2013 (+41.3%); this trend was then also confirmed in July and August. The equity per
share at 30 June 2013 amounted to Euro 22.4. Moreover, also the analysis carried out on the
results achieved by the affiliate in the period, on analysts‟ updated forecasts, on the revenue
synergies deriving from the partnership agreement and on the cost of capital did not bring to
light any trigger events that would lead to deem that the equity investment has undergone an
impairment. Therefore, the determination of the value of the equity investment in accordance
with IAS 36 will be carried out at the end of the year.
- 114 -
The breakdown of “Property, plant and equipment” (asset line item 110) is shown below.
Property, plant and equipment
Changes
30/06/2013
31/12/2012
(+/-)
%
Property, plant and equipment carried at cost
Land
Buildings
Furniture
Electronic equipment
Other
76,321
302,743
22,675
6,825
67,160
76,278
305,997
22,961
8,044
64,495
43
(3,254)
(286)
(1,219)
2,665
0.1%
-1.1%
-1.2%
-15.2%
4.1%
Property, plant and equipment carried at fair value
Land
Buildings
27,461
113,089
28,058
113,423
(597)
(334)
-2.1%
-0.3%
Total
616,274
619,256
(2,982)
-0.5%
Property, plant and equipment for business purposes are systematically depreciated in each
year on a straight-line basis using rates that reflect the residual useful lives of the related assets.
The breakdown of “Intangible assets” (asset line item 120) is shown below.
Intangible assets
Changes
30/06/2013
31/12/2012
(+/-)
%
Goodwill
Capitalized software and user licenses
Other assets
927,362
6,397
15,174
942,587
2,115
15,870
(15,225)
4,282
(696)
-1.6%
202.5%
-4.4%
Total
948,933
960,572
(11,639)
-1.2%
Intangible assets with a definite useful life (other than goodwill) are amortised systematically
on a straight-line basis over their estimated useful lives. “Other intangible assets” are mainly
referred to “intangibles” identified as part of the Purchase Price Allocation process relating to
the acquisition of 61 branches from the UBI Group at the end of 2007. In fact, IFRS 3 states that
the cost of the acquisition of a Business Combination (such as the acquisition of the 61 UBI
branches) must be accounted for using the purchase method and that the price paid must be
allocated to the assets acquired and liabilities assumed as measured at their respective fair
values. The “intangibles” which express the value of customer relationships acquired are being
amortized over the period they are expected to benefit (the average life is estimated as 17 years
for intangibles relating to individual customers and as 12 years for corporate customers,
corresponding to the related retention rates).
- 115 -
With regard to goodwill, as intangible assets with indefinite useful life, at the end of each year
their carrying amount is tested for impairment, whilst at the closing date of the condensed
interim financial statements, in accordance with IAS 36, the existence of indications of
impairment of the value of the goodwill (“trigger events”) is checked. In this regard, at 30 June
2013 the external and internal indications set out in IAS 36 were therefore analysed; the
outcome of this test led to the conclusion that it is not necessary to carry out impairment tests
on goodwill allocated to individual CGU, and such tests shall be conducted at the closing date
of the 2013 financial statements. In a market environment that continues to be characterised by
high volatility, with system and industry projections that, in the medium-long term, do not
point to any significant trend changes relative to the projections used for the impairment test of
the 2012 financial statements, excepting a worsened set of starting figures for 2012/2013, taking
into account that last 12 March 2013 the revision of the 2012-2014/16 Business Plan with the
extension to 2017, on whose data the 2012 impairment test was based, was approved, and that it
is difficult to assess the results after just a few months of operations, at present the objectives
reflected in the plan and the conclusions drawn as a result of the impairment test as at 31
December 2012 are still deemed valid, also in view of the decreased discount rate (Ke) on the
cash flows of individual CGUs.
With reference to the subsidiary BPVi Fondi SGR, the consolidation difference was subjected to
partial impairment, by Euro 15,225 thousand, because, as a result of the sale of the business
units “O.I.C.R.” and “G.P.A.” to third parties on 1 January 2013, part of the assets to which it
referred no longer existed. The sale of the aforesaid business units generated a gross gain of
Euro 21 million, with a substantially neutral overall effect on the income statement for the
period.
As at 30 June 2013, therefore, goodwill consisted of:

Euro 440,144 thousand in goodwill paid by the Parent Bank to acquire 61 branches from the
UBI Group on 31 December 2007;

Euro 208,580 thousand in respect of the merger deficit relating to the former subsidiary
Cariprato SpA, which was absorbed into the Parent Bank in date 31 December 2010;

Euro 120,198 thousand representing the residual goodwill paid to the former Group banks
that sold their businesses to the Parent Bank in 2000;

Euro 55,930 thousand in respect of the merger deficit relating to the former subsidiary Banca
Nuova SpA which was absorbed into the Parent Bank on 28 February 2012;

Euro 52,889 thousand representing the residual goodwill paid for the purchase of 46 bank
branches from the Intesa Group during 2001;

Euro 36,000 thousand representing the residual goodwill paid to Banca AntonVeneta for the
purchase of 30 branches in eastern Sicily at the end of 2004;

Euro 6,223 thousand arising on consolidation of the subsidiary Farbanca SpA;

Euro 4,121 thousand in goodwill paid to acquire a business unit from Banca Steinhauslin
&C.;

Euro 1,619 thousand in goodwill paid to acquire the “Palermo Branch” business from Banca
Popolare Commercio e Industria (UBI Group) on 1 March 2009;

Euro 1,482 thousand arising on consolidation of the subsidiary BPVi Fondi SGR;

Euro 176 thousand arising on consolidation of the subsidiary Nordest Merchant SpA.
- 116 -
Provision for severance indemnities
Changes
30/06/2013
Total
31/12/2012
76,504
80,138
(+/-)
%
(3,634)
-4.5%
According to IFRIC, the “Provision for severance indemnities” (liability line item 110) is a “postemployment benefit” qualifying as a “defined benefit plan”, the value of which according to
IAS 19 must be determined on an actuarial basis. As a consequence, the period valuation of this
amount was carried out by an independent actuary using the Projected Unit Credit Method
with reference to earned benefits. This method involves the projection of future payments with
reference to past trends and statistical analyses and probabilities, adopting suitable
demographic techniques. This makes it possible to calculate the severance indemnities accruing
at a specific date on an actuarial basis, distributing the cost over the entire remaining service of
the current workforce, and no longer presenting them as a cost payable as if the business were
to cease trading on the reporting date.
The valuation carried out at 30 June 2013 brought to light a deficit of Euro 1.6 million (Euro 4.5
million at 31 December 2012) in the payable for severance indemnities, determined in
accordance with current laws and with the National Collective Labour Agreement, compared to
the result of the actuarial valuation. Consequently, the positive effect of the actuarial valuation
(Euro 2.9 million) was partly accounted for in the income statement (Euro 100 thousand), with
the remainder (Euro 2.8 million) recorded in the Equity valuation reserve.
Provisions for risks and charges
The breakdown of “Provisions for risks and charges” (liability line item 120) is shown below.
6/30/2013
Changes
12/31/2012
(+/-)
%
5,621
5,923
(302)
-5.1%
- legal disputes
- bankruptcy claims
- bonus system and other personnel expenses
- complaints and other
61,586
27,102
5,214
17,220
12,050
69,027
29,009
8,207
17,700
14,111
(7,441)
(1,907)
(2,993)
(480)
(2,061)
-10.8%
-6.6%
-36.5%
-2.7%
-14.6%
Total
67,207
74,950
(7,743)
-10.3%
“Provisions for pensions and similar charges” refer to the Supplementary Section of the pension
fund, a defined benefit plan of the former subsidiary Cariprato, absorbed into the Parent Bank
B.P.Vi. on 31 December 2010. The “bonus system and other personnel expenses” pertains
mainly to incentives for voluntary redundancy and, to a lesser extent, to the bonus system. The
“other” provisions for risks and charges relate to contingent liabilities connected to fiscal
disputes, customer complaints and other sundry charges.
- 117 -
Tax assets and liabilities
The breakdown of “Tax assets” (asset line item 140) is shown below.
Tax assets
Changes
30/06/2013
Deferred tax assets booked to income statement
- Goodwill subject to impairment and franking
31/12/2012
(+/-)
%
- Taxed provisions for risks and charges
- Other
368,264
230,679
199,765
106,724
104,930
15,611
15,250
351,824
246,304
204,820
83,326
81,602
16,419
5,775
16,440
(15,625)
(5,055)
23,398
23,328
(808)
9,475
4.7%
-6.3%
-2.5%
28.1%
28.6%
-4.9%
164.1%
Deferred tax assets through equity
- Revalutations of financial asset available for sale
- Cash-flow hedges
- Actuarial gains (losses) on defined-benefit pension plans
160,055
101,166
58,334
555
25,516
(32,022)
58,334
(796)
0
(18,749)
19.0%
-24.0%
n.s.
-58.9%
26,780
134,539
133,188
1,351
45,5290
555,099
531,892
- of which DTA convertible Law 214/2011
- Adjustments to loans to costomers
- of which DTA convertible Law 214/2011
Current tax assets
Total
-41.2%
23,207
4.4%
The breakdown of “Tax liabilities” (liability line item 80) is shown below.
Tax liabilities
Changes
30/06/2013
Deferred tax liabilities through the income statement
- Tax implications of goodwill amortization
- Gains in installments
- Other
31/12/2012
(+/-)
%
112,797
85,598
2,050
25,149
106,337
78,116
3,499
24,722
6,460
7,482
(1,449)
427
6.1%
9.6%
-41.4%
1.7%
Deferred tax liabilities through equity
- Revalutations of financial asset available for sale
- Cash-flow hedges
- Other
34,143
26,010
8,133
30,177
18,220
3,842
8,115
3,966
7,790
(3,842)
18
13.1%
42.8%
-100.0%
0.2%
Current tax liabilities
22,071
40,298
(18,227)
-45.2%
169,011
176,812
(7,801)
-4.4%
Total
In compliance with Bank of Italy Circular no. 262 dated 22 December 2005, as updated on 18
November 2009, “Tax assets” (asset line item 140) and “Tax liabilities” (liability line item 80) in
the statement of financial position only those tax assets and liabilities (current and deferred)
recognized in accordance with IAS 12 (governing income taxes), while other tax credit/debit
balances are reported in “Other assets” (asset line item 160) and “Other liabilities” (liability line
item 100) of the statement of financial position.
- 118 -
Other assets and liabilities
The breakdown of “Other assets” (asset line item 160) is shown below.
Changes
Other assets
30/06/2013
31/12/2012
(+/-)
- Transactions in transit
- Fiscal items
- Leasehold improvements
- Adjustments to non-liquid portion of notes
- Accrued income and prepaid expenses not allocated to specific accounts
- Other miscellaneous items
Total
%
78,837
46,815
18,551
5,410
84,256
84,898
35,123
21,644
138,858
3,535
86,667
(6,061)
11,692
(3,093)
(138,858)
1,875
(2,411)
-7.1%
33.3%
-14.3%
-100.0%
53.0%
-2.8%
233,869
370,725
(136,856)
-36.9%
“Leasehold improvements” consist of improvement expenditure that cannot be separated from
the assets themselves, meaning that it cannot be separately recognized in property, plant and
equipment. These costs are amortised over the period they are expected to benefit or the
residual duration of the lease, whichever is shorter.
The breakdown of “Other liabilities” (liability line item 100) is shown below.
Changes
Other liabilities
30/06/2013
31/12/2012
(+/-)
- Transactions in transit
- Employee salaries and contributions
- Due to suppliers
- Fiscal items
- Allowance for risks on guarantees and commitments
- Adjustments for non-liquid balances relating to the portfolio
- Accrued expenses and deferred income not allocated to specific accounts
- Other miscellaneous items
Total
390,267
28,541
25,513
20,275
5,981
50,703
11,166
83,029
219,878
27,181
38,715
42,198
4,938
10,260
87,800
615,475
430,970
170,389
1,360
(13,202)
(21,923)
1,043
50,703
906
(4,771)
184,505
%
77.5%
5.0%
-34.1%
-52.0%
21.1%
n.s.
8.8%
-5.4%
42.8%
The increase in “transactions in transit” is mainly due to bank transfers ordered by customers
and securities transactions carried out at the end of the half year but actually completed in the
settlement systems only in early July.
- 119 -
Equity
The definition of consolidated capital used by the Group corresponds to the sum of the
following line items: 140 “Valuation reserves”, 150 “Redeemable shares”, 160 “Equity
instruments”, 170 “Reserves”, 180 “Additional paid-in capital”, 190 “Capital stock”, 200
“Treasury shares” and 220 “Net income (loss) for the year”.
Group equity
(in millions euro)
Changes
30/06/2013
31/12/2012
(+/-)
Capital stock
Reserves
Valuation reserves
Equity instruments
Treasury shares
295.4
2,480.7
589.0
(146.5)
1.6
-
Equity
Net income for the period
Total equity
296.9
2,504.2
530.9
(112.5)
1.7
-
3,220.2
3,221.2
1.6
100.3
3,221.8
3,321.5
%
(1.5)
(23.5)
58.1
(34.0)
(0.1)
-
-0.5%
-0.9%
10.9%
30.2%
-5.9%
0.0%
(1.0)
0.0%
n.s.
n.s.
(99.7)
-3.0%
At 30 June 2013, Group equity amounted to Euro 3,220.2 million, substantially unchanged from
31 December 2012.
The changes in “Capital stock” (Euro -1.5 million) and “Additional paid-in capital” (Euro -23.5
million) refer mainly to the forced realisation for credit recovery of over 400 thousand shares
which were subsequently cancelled.
The increase in other “Reserves”, i.e. Euro 58.1 million, comprises the allocation of net income
from 2012, i.e. Euro 59.3 million. The remaining change (Euro -1.2 million) is connected to the
effect of the measurement of companies consolidated using the equity method and to other
minor effects.
“Equity instruments”, amounting to Euro 1.6 million at 30 June 2013, reflect the equity
component embedded in the convertible subordinated bond “BPVi 15^ Emissione 2009-2016”,
which is reported separately in accordance with IAS 32.
In the half year, the valuation reserves decreased by Euro 34 million compared to 31 December
2012, as a combined effect of the losses recognised on the derivatives hedging the cash flows of
certain assets (mortgages recorded among loans and advances to customers and Government
securities recorded among financial assets available for sale) and of the positive changes in fair
value recognised in the period on “financial assets available for sale” and in particular on Italian
Government securities. The “valuation reserves” also include the reserves deriving from the
actuarial valuation of defined benefit pension plans, the reserves arising from the valuation of
land, buildings and works of art at deemed cost upon the first-time adoption of IAS/IFRS,
together with the reserves relating to special revaluation laws. They also include the valuation
reserves of the investees measured at equity.
- 120 -
The following table shows the breakdown of valuation reserves as at 30 June 2013 compared to
31 December 2012.
Valuation reserves
(in millions euro)
Changes
30/06/2013
31/12/2012
(117.9)
(144.1)
(5.7)
(1.5)
51.9
(18.5)
0.1
(118.0)
(79.2)
(38.8)
(214.5)
(229.4)
(7.4)
(15.4)
47.2
(9.5)
0.1
7.8
7.8
(6.8)
(8.9)
2.1
-23.6%
9.7
16.6
(6.9)
-41.6%
86.4
86.4
- Italian government securities
- Other debt securities
- Quoted equities
- Unquoted equities
- Mutual funds
Property, plant and equipment
Cash-flow hedges
- Italian government securities
- Mortagages
Actuarial gains (losses) on defined-benefit pension plans
Portion of valuation reserves of equity investments carried at
equity
Special revaluation laws
Total
(146.5)
(+/-)
%
96.6
85.3
1.7
13.9
4.7
(9.0)
(125.8)
(79.2)
(46.6)
(112.5)
-45.0%
-37.2%
-23.0%
-90.3%
10.0%
94.7%
0.0%
n.s.
n.s.
n.s.
-
0.0%
(34.0)
30.2%
At 30 June 2013, the Group held no “Treasury shares”. The shares of the Parent Bank, Banca
Popolare di Vicenza, which is one of the Relevant Issuers listed in CONSOB Resolutions
11.768/98 and 11.862/99, are dematerialized and centralized with Monte Titoli, in accordance
with the provisions of Italian Legislative Decree 58/98 and Italian Legislative Decree 213/98.
The following table reports the Bank‟s purchases and sales of its shares in accordance with
Article 18 of the articles of association.
Number of % on Equity
(1)
shares
Treasury shares
Treasury shares at 31 December 2012
purchases
sales
Treasury shares at 30 June 2013
1
-
0.00%
1,922,757
1,922,757
2.44%
2.44%
-
0.00%
Percentage determined with reference to the number of shares comprising capital stock at 30 June 2013
- 121 -
Regulatory capital and capital adequacy ratios
At 30 June 2013, the Regulatory capital amounted to Euro 3,200.8 million (Euro 3,249.9 million
of 31 December 2012). The Tier I Capital Ratio was 8.11% (8.23% at 31 December 2012) whilst
the Total Capital Ratio was 11.06% (11.26% at 31 December 2012).
Regulatory capital and capital adequacy
ratio
Changes
30/06/2013
31/12/2012
(+/-)
(in millions euro)
Tier 1 capital
Tier 2 capital
Deductions
2,349.0
851.8
-
Regulatory capital
2,374.9
894.0
(19.0)
%
(25.9)
(42.2)
19.0
-1.1%
-4.7%
-100.0%
3,200.8
3,249.9
(49.1)
-1.5%
2,132.8
37.5
145.8
2,136.1
26.2
145.8
(3.3)
11.3
-
-0.2%
43.1%
0.0%
Total prudential requirements
2,316.1
2,308.1
8.0
0.3%
Risk-weighted assets
Core Tier 1
Tier 1
Total Capital Ratio
Surplus (Deficit)
28,951.5
8.11%
8.11%
11.06%
884.7
28,851.2
8.23%
8.23%
11.26%
941.8
Credit and counterparty risk
Market risk
Operational risks
100.3
-0.12 p.p.
-0.12 p.p.
-0.20 p.p.
(57.1)
0.3%
-6.1%
The Group‟s overall capital position as at 30 June 2013, equal to the difference between the
Regulatory Capital and the Capital Adequacy Requirements, shows a surplus of Euro 884.7
million (Euro 941.8 million as at 31 December 2012).
Regulatory capital at 30 June 2012 includes net income for the period, i.e. Euro 1 million, treated
as an increase in the value of reserves. The Group has quantified regulatory capital by adopting
full sterilization of valuation reserves relating to debt securities issued by central governments
of European Union countries held in the “Financial assets available for sale” portfolio; this
treatment is in place of the “asymmetrical method”, which previously was the only allowed
option. At 30 June 2013 said valuation reserves are negative by Euro 221 million, of which Euro
141.8 million refer to Italian Government securities and the remaining Euro -79.2 million refer to
derivatives hedging the cash flows of Italian Government securities recorded among “Financial
assets available for sale”.
At 31 December 2012 the waiver allowing to deduct the equity investments in insurance
companies acquired before 20 July 2006 from Tier 1 capital and from Tier 2 capital expired.
Therefore, from 1 January 2013 onwards, 50% of the aforesaid equity investments is deducted
from Tier 1 capital and 50% from Tier 2 capital, like the other investments of this kind made
after 20 July 2006.
In addition, the aforesaid results take into account the effects connected to the communication
sent by Bank of Italy to all intermediaries last 9 May 2013, with which the Supervisory
Authority established, from 31 March 2013, specific prudential treatments with respect to the
effects deriving from the adoption of the new IAS 19 and of multiple frankings of the same
goodwill.
Capital adequacy requirements were calculated using the same methods as those adopted last
year. In particular:
- 122 -
risk-weighted assets used for determining the credit and counterparty risk requirement
have been quantified using the standard method and simplified credit risk mitigation
(CRM), by adopting unsolicited external ratings by the ECAI Moody‟s, S&P and Fitch
for the supervisory portfolios “Central governments and central banks” and “Positions
relating to securitisations” and unsolicited ratings by the ECAI Cerved Group for the
supervisory portfolio “Companies and other parties”;
the market risk requirement has been determined using the standard method, under
which financial or sensitivity models have been used to represent derivatives and other
off-balance sheet transactions involving interest rates and debt securities;
the operational risks requirement has been determined using the basic method which
requires to apply a fixed ratio of 15% to the net interest and other banking income
average for the last three years.
Lastly, considering also the capital increase by Euro 253 million of the Parent Bank, Banca
Popolare di Vicenza, completed last 9 August with full subscription, the Core Tier 1 and Tier I
Capital Ratio would be 8.99% whilst the Total Capital Ratio would be 11.93%.
- 123 -
COMMENTS ON THE INCOME STATEMENT
In the first six months of the year, in a recessionary macroeconomic environment and in a still
challenging and uncertain industry environment, the BPVi Group was able to improve its
operating efficiency, achieving significant results both on the revenue growth front and in terms
of cost containment. Operating income increased by 2.9%, thanks to the growth of the financial
margin and to the good result obtained through trading book management, whilst operating
charges declined by 1.1%, also as a result of the containment of payroll costs. Overall, net profit
from operating activities grew by 9.6% over the same period of the previous year, with an
improvement by 2 percentage points on cost/income, which declined to 58.8%.
However, the result of the first half of the year was affected by the significant growth in net
impairment adjustments (+73.1% overall, +97.3% those on loans and advances to customers):
this figure reflects the effects of the persisting crisis and the economic climate still uncertain,
well summarised in the half year by the rise in the credit cost: 1.24% year on year at 30 June
2013, sharply higher both than the figure at 30 June 2012 (0.61%) and than the 2012 figure
(0.71%). The relevant provisions helped to strengthen the covers on all impaired loans
compared to 31 December 2012. Lastly, comparison with the previous year is also affected by
the different weight of taxation; at 30 June 2013, the tax rate amounted to 90.8%, versus 11.5% at
30 June 2012, a particularly low figure thanks to the non recurring tax benefits recognised last
year and totalling Euro 34.6 million.
The Group ended the first half with net income of Euro 1.6 million.
To better appreciate the contribution made to net income by the various areas of operations, the
trends in the principal performance indicators that characterised the first six months of 2013 are
discussed below and compared with those in the same period of the prior year.
The reconciliation of the items of the “reclassified” income statement, commented below, with
those prescribed in accordance with Bank of Italy Circular no. 262 “Banks‟ financial statements:
layout and preparation” is preliminarily provided.
Key:
Net interest income: income statement item 30.
Dividends and profit (loss) from equity investments: income statement items 70 and 240.
Net financial income: “Net interest income” + “Dividends and profit (loss) from equity investments” as defined
above.
Net fee and commission income: income statement item 60, excluding the “commission for draw downs outside
credit lines” (Euro +23,468 thousand as at 30 June 2012). The line “of which normalised net fees and commission income”
was determined excluding the costs incurred in connection with the guarantees received from the Italian State for
access to the refinancing operations with the ECB and with securities loans transactions.
Net profit from the property portfolios: income statement items 80, 90, 100 and 110.
Other operating charges/income: income statement item 220, excluding “recovery of stamp duty and other indirect
taxes” (Euro +25,333 thousand at 30 June 2013, Euro +26,511 thousand at 30 June 2012) and “depreciation for
expenses on third party property improvement” (Euro -4,008 thousand at 30 June 2013, Euro -4,278 thousand al 30
June 2012), but including the “commission for draw downs outside credit lines” (Euro +23,468 thousand at 30 June
2012).
Operating income: “Net financial income” + “Net fee and commission income” + “Net profit from the property
portfolios” + “Other operating charges/income” as defined above.
Administrative costs: “Payroll” + “Other administrative costs” as defined below.
Payroll: income statement item 180 a).
Other administrative costs: income statement item 180 b) net of income for “recovery of stamp duty and other
indirect taxes “ (Euro +25,333 thousand at 30 June 2013, Euro +26,511 thousand at 30 June 2012).
- 124 -
Depreciation: income statement items 200 and 210 and including “depreciation for expenses on third party property
improvement” (Euro -4,008 thousand at 30 June 2013, Euro -4,278 thousand al 30 June 2012).
Net operating costs: “Administrative costs” + “Depreciation” as defined above.
Net profit from operating activities: “Operating income” + “Net operating costs” as defined above.
Net impairment adjustments: income statement item 130. “Of which on loans and advances” refers to income statement
item 130 a).
Net provisions for risks and charges: income statement item 190.
Gains (losses) on disposal/evaluation of investments: income statement items 250 and 270.
Net income for the period before income tax: “Net profit from operating activities” + “Net impairment
adjustments” + “Net provisions for risks and charges” + “Gains (losses) on disposal/evaluation of investments” as
defined above.
Income tax: income statement item 290. “Of which non recurring tax benefits” refers to extraordinary income accounted
for in this item.
Profit (loss) from disposal groups, net of tax: income statement items 260 and 310.
Minority interests: income statement item 330.
Reclassified Income Statement
Changes
30/06/2013 30/06/2012
(+/-)
Net interest income
Dividends and Profit (loss) from equity investments
%
254,711
13,712
250,953
11,267
3,758
2,445
1.5%
21.7%
268,423
262,220
6,203
2.4%
137,124
113,070
26,947
140,600
93,719
33,690
(3,476)
19,351
(6,743)
-2.5%
20.6%
-20.0%
Net Operating income
545,564
530,229
Administrative costs:
- payroll
- other administrative costs
(311,456)
(197,779)
(113,677)
(315,751)
(202,133)
(113,618)
Net profit for the property portfolios
Other operating charges/income
Depreciation
(17,174)
(16,570)
(328,630)
216,934
(332,321)
197,908
(192,986)
(187,398)
(3,804)
43
Income tax
- of which non-recurring tax benefits
Profit (loss) from disposal groups, net of tax
Minority interests
Net Operating costs
- of which on loans and advances
Net provisions for risks and charges
Gains (losses) on disposal/evaluation of investments
Net income
15,335
4,295
4,354
(59)
(604)
2.9%
-1.4%
-2.2%
0.1%
3.6%
3,691
19,026
-1.1%
9.6%
(111,509)
(95,000)
(7,158)
(1)
(81,477)
(92,398)
3,354
44
73.1%
97.3%
-46.9%
n.s.
20,187
79,240
(59,053)
-74.5%
(18,321)
(102)
(119)
(9,151)
34,567
(673)
(9,170)
(34,567)
(102)
554
100.2%
-100.0%
n.s.
-82.3%
(67,771)
-97.6%
1,645
69,416
The net interest income, as at 30 June 2013, amounted to Euro 254.7 million, up by 1.5%
compared to 30 June 2012, in spite of the negative impact of the further reduction in interest
rates compared to the first half of 2012, in particular on the margins from existing medium-long
term floating rate loans with customers. The cost of funding declined, both for direct deposits
and for exposures on the interbank market, with the latter benefiting in particular from the
reduction to the official discount rate decided by the ECB last May. Lastly, the aggregate in
question was positively affected by the contributions of the increased volume of investments in
Italian Government securities and the contribution of the interest rate hedges carried out on
part of the assets of the banking book; both these types of operations were carried out by the
- 125 -
Group with the intent of sustaining the net interest income in the medium-long term. Including
dividends (Euro 8.3 million, +41.8% compared to June 2012) and the profit (loss) from equity
investments (Euro 5.4 million, substantially unchanged from the previous year), the net
financial income of the Group amounted to Euro 268.4 million, up by 2.4% compared to the
same period of the previous year.
Net fee and commission income, at 30 June 2013, amounted to Euro 137.1 million, in decline
compared to Euro 140.6 million of 30 June 2012 (-2.5%), affected by the higher impact (totalling
approximately Euro 10.8 million) of the costs incurred in connection with the guarantees
received from the Italian State for access to the refinancing operations with the ECB and those
paid to customers for securities loans borrowing transactions. “Normalised” net fee and
commission income, i.e. net of the aforesaid components linked to funding activities, grew by
4.7%.
The net profit from the property portfolios, at 30 June 2013, amounted to Euro 113.1 million,
up by 20.6% compared to Euro 93.7 million of June 2012, thanks mostly to the higher profits
realised on Italian Government securities classified among “financial assets available for sale”
(Euro 79.4 million, versus Euro 58.2 million as at 30 June 2012), obtained both with the sales and
with the early closure of certain hedges. The contribution of the trading activity also grew (Euro
+6.6 million, +29.1%), whilst the gains (losses) on disposal/evaluation of investments and of the
correlated “hedging” derivatives are negative, with a loss of Euro 4.9 million as opposed to
Euro +12.6 million at 30 June 2012. In this regard, last year‟s result benefited from the gains
deriving from a liability management transaction on bonds issued on the Luxembourg market
(Euro 6.8 million) and from buy-backs of ABS issued within own securitisations (Euro 2.7
million), whilst the 2013 result, in addition to lacking these components, also included the
negative pull to par effect (approximately Euro 3.6 million) connected to the reduction, due to
the passing of time, in profits deriving from the change in the Bank‟s creditworthiness recorded
last year on its bonds measured at fair value.
The other operating income at 30 June 2013 amounted to Euro 26.9 million versus Euro 33.7
million at 30 June 2012 (-20%); this decline is almost entirely due to the effect of the introduction
of the new “fast preliminary commission” fee which, starting from the second half of 2012,
replaced the “commission for draw downs outside credit lines”.
For the aforesaid reasons, net operating income thus amounted to Euro 545.6 million, up by
2.9% over the same period of 2012.
At 30 June 2013, administrative expenses amounted to Euro 311.5 million, down by 1.4% from
June 2012, thanks to the reduction in payroll costs (-2.2% as a result both of the reduction in
staff numbers and of the containment of the variable portion of remuneration) and to the
stability of the other administrative costs. Including depreciation (Euro 17.2 million, +3.6%
from June 2012), the net operating costs totalled Euro 328.6 million, down by 1.1% compared to
the same period of 2012.
Therefore, at 30 June 2013 net profit from operating activities amounted to Euro 216.9 million,
up by 9.6% from the same period of 2012, with cost/income11 at 58.8%, an improvement by 2
percentage points compared to 60.8% at 30 June 2012.
This indicator is calculated by dividing “operating costs” (income statement item 230 after net allocations to provisions for risks
and charges and including the “commission for draw downs outside credit lines”) by net interest and other banking income
(income statement item 120 net of the “commission for draw downs outside credit lines”).
11
- 126 -
Net impairment adjustments amounted to Euro 193 million, versus Euro 111.5 in June 2012
(+73.1%). In detail, Euro 187.4 million of said impairments (+97.3% over 30 June 2012) refer to
loans and advances, which reflects the further growth in impaired loans during the half year,
with the level of credit cost12 rising to 1.24% year on year, versus 0.71% at 31 December 2012
and 0.61% at 30 June 2012. Of the other impairments, Euro 4.5 million refer to financial assets
available for sale and Euro 1.1 million to other transactions. More specifically, impairments to
financial assets available for sale, accounted for in accordance with the policy introduced by the
Group with regard to the process for identifying any impairment of financial assets available for
sale, refer mostly to certain unlisted equity investments, whilst other transactions refer mostly
to guarantees issued to customers.
Taking into account the net provisions for risks and charges (Euro 3.8 million at 30 June 2013, 46.9% compared to June 2012) and the gains (losses) on disposal/evaluation of investments
(Euro 43 thousand at 30 June 2013, versus a loss of Euro 1,000 at 30 June 2012), the net income
for the period before income tax was Euro 20.2 million, versus Euro 79.2 million in June 2012 (74.5%).
Income taxes amounted to Euro 18.3 million (tax rate13 of 90.8%), compared with Euro 9.2
million at 30 June 2012 (the tax rate was 11.5%). In this regard, it should be specified that the
figure for the first half of last year included non-recurring tax benefits totalling Euro 34.6
million, of which Euro 14 million derived from the deduction, from the taxable amount for IRES
purposes, of the higher IRAP liquidated because of the non-deductibility from the latter tax of
payroll costs relating to previous years and not yet defined, whilst the remaining Euro 20.5
million referred to the positive effect obtained with the franking, for tax purposes, of the value
of the goodwill recorded in the Group's consolidated financial statements as at 31 December
2010, relating to the consolidation differences of certain banks that were formerly in the Group.
The profit (loss) from disposal groups, net of tax was negative by Euro 102 thousand (absent at
30 June 2012) and it refers to the business units “O.I.C.R.” and “G.P.A.” sold by the subsidiary
BPVi Fondi Sgr to Arca Sgr on 1 January 2013, realising a gross gain of Euro 21 million. As a
result of the aforesaid transaction, part of the assets to which the consolidation difference
existing on the subsidiary referred was no longer in place, leading to the need to recognise an
impairment of Euro 15.2 million thereon. Overall, taking also into account the tax effect on the
realised gain (i.e. Euro 5.8 million), the sale in question is substantially neutral on net income for
the period.
Minority interests, i.e. net income attributable to minority stockholders of subsidiaries,
amounted to Euro 119 thousand compared with Euro 673 thousand at 30 June 2012.
Thus, net income amounted to Euro 1.6 million versus Euro 69.4 million at 30 June 2012.
The indicator is calculated by annualising the ratio between “Net impairment adjustments on: loans and advances” and gross
customer loans, excluding guarantee margins and repurchase agreements because neither one is impaired.
12
13
The indicator is calculated as the ratio of “Income taxes” over “Net income for the period before income taxes.
- 127 -
Reconciliation of equity and net income of the Parent Bank with the related consolidated amounts
The following table reconciles equity and net income reported in the Parent Bank's half-year
report at 30 June 2013 with the corresponding figures in the consolidated financial statements at
that date.
30/06/2013
(in thousand of Euro)
Equity
Parent bank's statement of financial position
Year results pertaining to the Gruop, as to:
- companies consolidated line-by-line
- companies valued at shareholders'equity
Differences compared to carrying values, as to:
Write-off of dividends collected during the year from:
Derecognition of intercompany profit and loss
Derecognition of intercompany capital gains from
discontinuing and contributing operations
Other consolidation adjustments
Consolidated statement of financial position
31/12/2012
of which:
net income
for the
period
3,286,292
5,706
of which:
net income
for the year
Equity
3,369,472
39,481
4,544
39,481
4,544
49,216
15,513
4,868
(16,316)
(15,229)
205
(8,020)
(4,505)
-
(16,938)
(19,525)
-
64,023
49,216
15,513
(245)
(28,446)
(3,720)
(3,447)
2,737
(5,937)
(1,987)
(92,102)
786
(92,888)
6,143
(1,499)
(122)
(1,372)
(244)
3,221,821
1,645
3,321,479
100,253
Consolidated equity pertaining to the Parent Bank, Euro 3,221.8 million, is Euro 64.5 million
lower than that reported in the Parent Bank's half year accounts.
Consolidated net income, amounting to Euro 1.6 million, was Euro 4.1 million lower than the
Parent Bank‟s.
- 128 -
INFORMATION ON THE COMPANIES OF THE BPVI GROUP
The contribution of the Group's individual companies to the different components of banking
product and income for the period are summarised below, to identify their incidence on total
operations and provide a global overview of the Group‟s banking operations.
Direct funding
(in million euro)
Banca Nuova
Farbanca
Other companies
Total
Indirect funding
(in million euro)
29,631
89.2%
(394)
3,461
10.4%
402
(269)
133
0.4%
0.0%
0.0%
34,280
(1,050)
33,230
100.0%
Eliminations and
consolidation
adjustments
Contribution to consolidated
(+/-)
%
16,654
(23)
16,631
93.4%
1,146
(5)
1,141
6.4%
31
-
31
0.2%
0.0%
17,831
(28)
17,803
100.0%
Eliminations and
consolidation
adjustments
Individual
results
27,804
Banca Nuova
Farbanca
Prestinuova
(+/-)
(1,081)
%
26,723
85.6%
3,234
-
3,234
10.4%
454
-
454
1.5%
417
-
417
1.3%
380
1.2%
399
RACCOLTA DIRETTA
Other companies
Total
(387)
3,855
5
Farbanca
di €
BPVin milioni
Finance
%
--
Banca Nuova
(in million euro)
(+/-)
30,018
Individual
results
Total
5-
Loans to customers
Eliminations and
consolidation
adjustments
Individual
results
(19)
1
-
1
0.0%
32,309
(1,100)
31,209
100.0%
- 129 -
Individual
results
pertaining to
the Group
Net income
(in thousand of Euro)
Banca Nuova
Farbanca
Total banks
Prestinuova
BPV Finance
BPVi Fondi
Nordest Merchant
Nem Sgr
Total financial companies
Immobiliare Stampa
Servizi Bancari
Monforte 19
Total service companies
Companies carried at equity
Elimination of intercompany dividends
Impairment of consolidation differences
Other intercompany eliminations and consolidation adjustments
Net income pertaining to the Group
5,706
466
239
6,411
743
20,543
13,586
1,748
702
37,322
783
783
38,888
(36,464)
(15,225)
3,234
1,645
% Contribution to
consolidated
346.9%
28.3%
14.5%
389.7%
45.2%
1248.8%
825.9%
106.3%
42.7%
2268.8%
0.0%
0.0%
47.6%
47.6%
2364.0%
-2216.7%
-925.5%
196.6%
100.0%
The following pages contain the summary indicators (from the statement of financial position
and the income statement, as well as data about the organisations) and the main indicators of
the Parent Bank Banca Popolare di Vicenza and of the subsidiaries Banca Nuova, Farbanca.
For the other subsidiaries, instead, a short comment on the operating performance of the first
half of 2013 is provided.
- 130 -
Summary indicators of the Parent Bank Banca Popolare di Vicenza
30/06/2013
Banking business
- of which goodwill
Total Assets
Tier 1 capital (1)
74,476
30,018
16,654
27,804
-2,564
6,089
5,985
1,031
889
43,448
3,286
2,514
3,257
19,521
12.88%
12.88%
16.68%
30/06/2013
Net operating costs
Net income
246.9
467.8
-273.4
194.4
-176.4
14.9
5.7
30/06/2013
Outlets
Financial promoters
Total Assets / Equity (leverage)
Cost/Income (4)
Net impaired loans /Net loans
Net non-performing loans/Net loans
Credit cost (7)
4,370
4,156
574
13
92.62%
13,2 x
56.50%
11.27%
4.65%
29.84%
47.15%
0.37%
1.33%
31/12/2012
72,938
29,007
16,586
27,345
-2,365
4,925
4,803
1,026
889
43,671
3,369
2,549
3,323
19,456
13.10%
13.10%
17.08%
30/06/2012
Changes
(+/-)
1,538
1,011
68
459
-199
1,164
1,182
5
-223
-83
-35
-66
65
-0.22 p.p.
-0.22 p.p.
-0.40 p.p.
4,323
4,120
571
5
94.27%
13 x
63.09%
10.34%
4.15%
29.27%
47.08%
0.36%
0.69%
2.1%
3.5%
0.4%
1.7%
8.4%
23.6%
24.6%
0.5%
-0.5%
-2.5%
-1.4%
-2.0%
0.3%
Changes
(+/-)
234.1
425.6
-271.3
154.3
-89.8
57.9
63.6
31/12/2012
%
%
12.8
42.2
-2.1
40.1
-86.6
-43.0
-57.9
5.5%
9.9%
0.8%
26.0%
96.4%
-74.3%
-91.0%
Changes
(+/-)
47
36
3
8
-1.65 p.p.
0,2 x
-6.59 p.p.
0.93 p.p.
0.50 p.p.
0.57 p.p.
0.07 p.p.
0.01 p.p.
0.64 p.p.
%
1.1%
0.9%
0.5%
160.0%
(1) The figures on Capital adequacy ratios at 30 June 2013 may differ marginally from those that will be reported to the Bank of Italy within
(2) For the reconciliation between the reclassified income statement data and the Income Statement items prescribed by Bank of Italy Circular
no. 262, reference is explicitly made to the “key” provided in the paragraph “Comments to the income statement” of the explanatory notes,
except for the different numbering of the same items in the individual statement with respect to the consolidated statement.
(6) The coverage is determined excluding intra-group transactions, repurchase agreements and guarantee margins.
loans, excluding intercompany balances, guarantee margins and repurchase agreements because neither one is impaired.
- 131 -
Summary indicators of Banca Nuova
(in thousand of euro)
Banking business
- of which goodwill
Total Assets
Tier 1 capital (1)
Net operating costs
Net income
Changes
30/06/2013
8,235,004
3,854,867
1,146,106
3,234,031
270,362
396,545
396,544
121,257
110,000
4,928,909
295,397
207,170
219,181
2,017,041
10.27%
10.27%
10.87%
30/06/2013
35,997
69,570
-50,058
19,512
-14,632
4,052
466
30/06/2013
31/12/2012
8,062,040
3,790,255
1,016,222
3,255,563
405,454
231,070
231,069
121,397
110,000
4,904,185
314,704
207,862
219,881
2,011,988
10.33%
10.33%
10.93%
30/06/2012
40,370
93,004
-54,235
38,769
-21,341
16,887
8,615
31/12/2012
%
(+/-)
172,964
2.1%
64,612
1.7%
129,884
12.8%
-21,532
-0.7%
-135,092
165,475
-33.3%
71.6%
165,475
71.6%
-140
-0.1%
-
0.0%
24,724
-19,307
-692
-700
5,053
-0.06 p.p.
-0.06 p.p.
-0.06 p.p.
0.5%
-6.1%
-0.3%
-0.3%
0.3%
Changes
%
(+/-)
-4,373
-23,434
4,177
-19,257
6,709
-12,835
-8,149
-10.8%
-25.2%
-7.7%
-49.7%
-31.4%
-76.0%
-94.6%
Changes
%
(+/-)
719
724
-5
-0.7%
Outlets
Financial promoters
715
112
92
83.89%
16,7 x
731
114
83
85.89%
15,6 x
-16
-2
9
-2.00 p.p.
1,1 x
-2.2%
-1.8%
10.8%
Cost/Income (4)
70.02%
12.40%
4.35%
63.61%
11.54%
4.10%
6.41 p.p.
0.86 p.p.
0.25 p.p.
32.92%
32.29%
0.63 p.p.
54.45%
53.44%
1.01 p.p.
0.29%
0.28%
0.01 p.p.
Credit cost (7)
0.86%
0.82%
0.04 p.p.
(6) The coverage is determined excluding intra-group transactions, repurchase agreements and guarantee margins.
- 132 -
Summary indicators of Farbanca
Changes
30/06/2013
Banking business
Total Assets
Tier 1 capital (1)
Reclassified Income Statement figures
(2)
886,474
402,192
30,735
453,547
-29,530
11
11
83
504,568
55,941
55,640
55,640
306,169
18.17%
18.17%
18.17%
30/06/2013
Net operating costs
Net income
4,315
5,668
-2,616
3,052
-2,189
863
358
30/06/2013
31/12/2012
920,339
409,521
34,691
476,127
-21,915
11
11
122
498,786
57,509
55,606
55,606
321,707
17.28%
17.28%
17.28%
30/06/2012
4,215
5,585
-2,312
3,273
-73
3,207
2,031
31/12/2012
(+/-)
%
-33,865
-7,329
-3,956
-22,580
-7,615
-39
5,782
-1,568
34
34
-15,538
0.89 p.p.
0.89 p.p.
0.89 p.p.
-3.7%
-1.8%
-11.4%
-4.7%
34.7%
0.0%
0.0%
-32.0%
1.2%
-2.7%
0.1%
0.1%
-4.8%
Changes
(+/-)
%
100
83
-304
-221
-2,116
-2,344
-1,673
2.4%
1.5%
13.1%
-6.8%
2898.6%
-73.1%
-82.4%
Changes
(+/-)
%
29
37
-8
-21.6%
Outlets
Representative Offices
30
1
5
112.77%
9x
38
3
3
116.30%
8.7 x
-8
-2
2
-3.53 p.p.
0,3 x
-21.1%
-66.7%
66.7%
Cost/Income (4)
Impaired loans coverage (%)
Non-performing loans coverage (%)
Performing loans coverage (%)
44.27%
2.01%
0.38%
44.68%
69.68%
0.45%
51.75%
1.70%
0.46%
48.20%
73.21%
0.45%
-7.48 p.p.
0.31 p.p.
-0.08 p.p.
-3.52 p.p.
-3.53 p.p.
0.00 p.p.
0.94%
0.21%
0.73 p.p.
Credit cost (5)
- 133 -
PrestiNuova Spa
The Company, a wholly owned subsidiary of the Parent Bank, Banca Popolare di Vicenza, has
the core business of “lending secured against one-fifth of salary/pension” and “loans repaid
through withholdings from salaries and pensions”.
At 30 June 2013, loans to customers amounted to Euro 417.3 million, up by 0.3% relative to the
end of 2012. Impaired loans accounted for 2.3% of total loans, down from 2.82% of 31 December
2012. Equity, including net income for the period, amounted to Euro 34.5 million, whilst
regulatory capital amounted to Euro 29.9 million. Tier 1 Capital Ratio and the Total Capital
Ratio both amount to 11.42% (11.36% at 31 December 2012).
The Company ended the first half of 2013 with net income of Euro 743 thousand, up by 74.4%
compared to Euro 426 thousand at 30 June 2012, mostly thanks to the increase in net interest
income (+9.2%) and to the reduction in payroll costs (-14.5%). Net fee and commission income
declined, whilst both value adjustments and net allocations to provisions for risks and charges
increased.
The Company has 48 employees, 3 of whom are on secondment, net of the 23 employees
seconded to the Group‟s banks.
BPV Finance (International) Plc
This Irish-registered company is 99.99% owned by Banca Popolare di Vicenza and operates out
of Dublin‟s International Financial Services Centre. BPV Finance specializes in proprietary
trading and carries out its business by investing in financial instruments, taking a medium-long
term view, and by providing loans to foreign subsidiaries of the Group‟s corporate customers in
Italy. More specifically, the company‟s portfolio, which has a generally high rating, mostly
consists of bonds issued by European and US banks and financial institutions, government
securities, asset backed securities (ABS) (with European and US collateral), Undertakings for
Collective Investment (speculative and non-speculative), shares traded on the Italian Stock
Exchange and commercial loans granted to foreign subsidiaries of Italian companies.
In the first half of 2013, the protraction of the economic crisis and the challenges of the financial
industry with their repercussions on the prices of stocks and bonds led to the opening of certain
windows of volatility which enabled the Company profitably to trade a part of the securities in
its portfolio and, subsequently, to reconstruct the portfolio with exposures on similar securities
in terms of risk and return. These tactical decisions characterised most of the investment
activities of the first half of 2013 and enabled to record a gain from sales of approximately Euro
17.3 million, which are added to Euro 5.3 million in net interest income and Euro 0.9 million of
collected dividends. In this first part of 2013, management continued work on the optimisation
of the portfolios‟ risk-return profile, focusing its activity on those investment segments that
offered both attractive returns and easier access to the market of repurchase agreements as a
financing form that continued to be more cost-efficient and broader than the interbank deposits
market.
Overall, the first half of 2013 ended with net income of Euro 20.5 million, while the Company‟s
equity, including the income for the year, amounts to nearly Euro 123 million, i.e. nearly Euro
17 million more than at 31 December 2012, in spite of the unfavourable trend of valuation
reserves (Euro -3.8 million), affected by the correction in the prices of bank and government
securities at the end of the period.
- 134 -
BPVi Fondi Sgr Spa
On 1 January 2013 the Company, wholly owned by Banca Popolare di Vicenza, sold to Arca Sgr
the business units active in collective asset management (UCITS Business Unit) and in the
management of the institutional portfolios of certain insurance companies (G.P.A. business
unit), realising a gross gain of Euro 21 million. Currently, the company is active only in
individual portfolio management. The Company closed the first half of 2013 with a net income
of Euro 13.6 million (Euro 5 thousand as at 30 June 2012).
Lastly, within the Group‟s rationalisation plan, the planned merger by absorption of the
company into the Parent Bank BPVi was approved; it is expected to be completed by the end of
the current year.
Nordest Merchant Spa
In the first half of 2013, the Company, a wholly owned subsidiary of Banca Popolare di Vicenza,
continued its actions to support the Group‟s customers and financial operators with advisory
services for extraordinary transactions (mergers & acquisitions, capital market), as well as the
Parent Bank, Banca Popolare di Vicenza, in debt advisory services for structure finance
transactions. The private equity activity, carried out through the subsidiary Nem Sgr, also
continued. The Company closed the first half of 2013 with a net income of Euro 1,748 thousand
(Euro 733 thousand as at 30 June 2012).
Lastly, within the Group‟s rationalisation plan and with a view to performing advisory services
(mergers & acquisitions, capital market and debt advisory) still more effectively and with better
synergies with the Group‟s networks, the planned merger by absorption of the company into
the Parent Bank BPVi was approved; it is expected to be completed by the end of the current
year.
Nem Sgr Spa
The Company, wholly owned of Nordest Merchant S.p.A., in the first half of 2013 continued to
manage the funds “Industrial Opportunity fund”, “Nem Imprese” and “Nem Imprese II”. The
Company closed the first half of 2013 with a net income of Euro 702 thousand (Euro 621
thousand as at 30 June 2012).
Servizi Bancari Scpa
This company provides back office services to the Group‟s banks; its shareholders are Banca
Popolare di Vicenza with a 96% controlling interest and Banca Nuova, Farbanca and Sec Servizi,
all of whom hold 1% each. The company broke even in the first half of 2013, as it is a non-profit
co-operative.
Immobiliare Stampa Scpa
The Company, 99.92% owned by Banca Popolare di Vicenza, and 0.04% held by Banca Nuova
S.p.A. and Servizi Bancari S.C.p.A., respectively, manages the real estate portfolio of the Group,
provides real estate services and carries out administrative activities relating to the
management of group properties leased to third parties and of third-party properties leased by
Group banks. The company broke even in the first half of 2013, as it is a non-profit co-operative.
- 135 -
Monforte 19 Srl
This Company is a wholly-owned subsidiary of Banca Popolare di Vicenza; its business is the
letting and rental of own buildings to third parties, as well as the management and
administration of the buildings. Monforte 19 is the owner of two prime properties in Milan, one
of which let to companies outside the Banking Group, and the other a property in Prato,
formerly used as a barracks by the military police and which can now be converted for
residential/office use following recent changes in town planning policy. The Company closed
the first half of 2013 with a net income of Euro 783 thousand (Euro 481 thousand as at 30 June
2012).
- 136 -
SEGMENT INFORMATION
The composition of the various business segments is as follows:
Banks:
Banca Popolare di Vicenza SCpA
Banca Nuova SpA
Farbanca SpA
Product companies:
PrestiNuova SpA
Service companies:
Servizi Bancari SCpA
Immobiliare Stampa SCpA
Monforte 19 Srl
Asset management:
B.P.Vi. Fondi Sgr SpA
Corporate & Investment Banking:
Nordest Merchant SpA
Nem Sgr Spa
The composition of the various geographical areas is as follows:
Northern and Central Italy:
Banca Popolare di Vicenza SCpA
Immobiliare Stampa SCpA
Servizi Bancari SCpA
B.P.Vi. Fondi Sgr SpA
Nordest Merchant SpA
Nem Sgr Spa
Monforte 19 Srl
Farbanca SpA
PrestiNuova SpA
Southern Italy and the Islands:
Banca Nuova SpA
Other EU countries:
- 137 -
PRIMARY SEGMENT
Distribution by business segments: income statement
Line items/Business segments
Commercial
banks
Product
companies
Net interest income (line item 30)
245,200
4,806
Net fee and commission income (line item 60)
134,459
Dividends and similar income (line item 70)
42,004
-
Net change in financial assets and liabilities (line items 80, 90, 100 and 110)
95,833
-
Net impairment adjustments (line item 130)
Administrative costs (line item 180)
Net provisions for risks and charges (line item 190)
Net adjustments to property, plant and equipment (line items 200 and 210)
(line items 220, 240, 260 and 270)
(193,217)
(338,725)
(3,774)
(8,443)
Profit (loss) from current operations before tax (line item 280)
(153)
(182)
(3,042)
(55)
(22)
Asset
Corporate &
Service
Managemen Investment
companies
t
Banking
Other
Total
(1,590)
266
5,333
(14)
701
3,170
(1,039)
-
-
2,792
(36,464)
-
(4)
17,241
(14,181)
(4,768)
(1,583)
25
(8)
871
(3,062)
(10)
696
-
254,711
137,124
8,332
113,070
(458)
23,804
85
(192,986)
(336,789)
(3,804)
(13,166)
46,524
76
24,112
(1,658)
143
(30,727)
38,470
19,861
1,428
3,559
(2,261)
26,478
(44,103)
4,962
The “Other” column includes intercompany eliminations and consolidation adjustments.
Distribution by business segments: balance sheet
Line items/Business segments
Loans to customers (line item 70)
Commercial
banks
Product
companies
Asset
Corporate &
Service
Managemen Investment
companies
t
Banking
Other
Total
31,491,491
417,317
-
1,216
399,025
(1,100,504)
31,208,545
Deposits with banks and liquid assets (line items 10 and 60)
5,228,480
3,937
21,918
21,429
41,912
(2,279,099)
3,038,577
Financial assets (line items 20, 40, 50 and 80)
8,957,348
-
-
6,591
522,514
(1,859)
9,484,594
Equity investments (line item 100)
1,118,575
35
102
-
2,400
(779,030)
342,082
Property, plant & equipment & intangible assets (line items 120 and 130)
1,152,339
4,138
486,504
23
45
(77,842)
1,565,207
379,848
315
9,144
554
2,731
(108,782)
283,810
Total assets
48,328,081
425,742
517,668
29,813
968,627
(4,347,116)
45,922,815
Due to customers (line item 20)
24,152,630
-
4,474
88
-
(77,602)
24,079,590
7,361,456
379,965
233,616
608
796,339
(2,329,191)
6,442,793
12,748,921
-
-
-
9,802
(971,786)
11,786,937
Other assets (line items 90 and 160)
Deposits from banks (line item 10)
Financial liabilities (line items 30, 40, 50 and 60)
Other liabilities (line items 100, 110 and 120)
Total liabilities
841,640
13,372
18,319
1,184
3,353
(118,682)
759,186
45,104,647
393,337
256,409
1,880
809,494
(3,497,261)
43,068,506
- 138 -
SECONDARY SEGMENT
Distribution by geographical area: income statement
Line items/Geographical areas
Italy
Northern
Southern
and Central
Italy and
Italy
Islands
Other EU
countries
Other
Total
Net interest income (line item 30)
212,726
35,997
5,292
Net fee and commission income (line item 60)
114,914
23,137
112
(1,039)
696
137,124
Dividends and similar income (line item 70)
43,916
-
880
(36,464)
8,332
17,241
Net change in financial assets and liabilities (line items
80, 90, 100 and 110)
Net impairment adjustments (line item 130)
89,880
5,949
(178,767)
(14,632)
871
Administrative costs (line item 180)
(309,463)
(50,299)
(831)
(2,979)
(825)
(11,554)
(1,693)
(4)
62,779
6,418
-
(30,727)
23,561
(44,103)
Net provisions for risks and charges (line item 190)
Net adjustments to property, plant and equipment (line
items 200 and 210)
(line items 220, 240, 260 and 270)
Profit (loss) from current operations before tax (line item
280)
21,452
4,052
254,711
-
113,070
(458)
(192,986)
23,804
-
(336,789)
-
(3,804)
85
(13,166)
38,470
4,962
Distribution by geographical area: balance sheet
Line items/Geographical areas
Loans and advances to customers (line item 70)
Italy
Northern
Southern
and Central
Italy and
Italy
Islands
Other EU
countries
Other
Total
398,963
(1,100,504)
31,208,545
28,676,055
3,234,031
Cash, loans and advances to bank (line items 10 and 60)
4,315,648
970,739
31,289
(2,279,099)
3,038,577
Financial assets (line items 20, 40, 50 and 80)
8,571,556
414,348
500,549
(1,859)
9,484,594
Equity investments (line item 100)
1,120,581
531
-
(779,030)
342,082
Tangible and intangible assets (line items 120 and 130)
1,521,778
121,257
14
(77,842)
1,565,207
261,119
131,338
135
(108,782)
283,810
Othet assets (line items 90 and 160)
Total assets
Due to customers (line item 20)
Deposits from banks (line item 10)
Financial liabilities (line items 30, 40, 50 and 60)
Other liabilities (line items 100, 110 and 120)
Total liabilities
44,466,737
4,872,244
930,950
(4,347,116)
45,922,815
21,468,378
2,688,814
-
(77,602)
24,079,590
7,320,670
654,975
796,339
(2,329,191)
6,442,793
11,516,387
1,232,534
9,802
(971,786)
11,786,937
821,106
56,463
299
(118,682)
759,186
41,126,541
4,632,786
806,440
(3,497,261)
- 139 -
43,068,506
RELATED-PARTY TRANSACTIONS
1. Information on the remuneration of key management personnel
The following table reports the remuneration paid to key management personnel in the first
half of 2013.
Managers with
strategic
responsibilities
a)
Short-term benefits
5,124
b)
Post-employment benefits
c)
Other long-term benefits
-
d)
Indemnities due on termination of employment
-
e)
Share-based payments
-
152
Total
5,276
Key management personnel comprise members of the Parent Bank‟s General Management
team, as defined in its articles of association, as well as its serving directors and statutory
auditors.
The remuneration categories included in the above table comprise:
a) Short-term benefits: this includes: i) for General Management: wages, salaries and related
social security contributions, payment in lieu of vacation and sick leave, incentives and
benefits in kind, such as medical assistance, housing, company cars and goods and services
provided free or at reduced cost; ii) for Directors and Statutory Auditors: attendance fees,
remuneration for the performance of their duties (also for similar positions held with Group
companies);
b) Post-employment benefits: these include the Group‟s contributions to pension funds
(pension and retirement plans, life insurance and health care subsequent to termination)
and the provision for severance indemnities recorded on the basis required by law and inhouse agreements;
c) Other long-term benefits: there are no other long-term benefits worthy of mention (such as
leave of absence or sabbaticals related to length of service, bonuses linked to anniversaries,
other benefits linked with length of service, disability benefits and, if due more than twelve
months after the reporting date, profit share, incentives and deferred remuneration);
d) Indemnities due on termination of employment: these include the amounts paid for early
termination prior to pensionable age, incentives for voluntary redundancy and incentives
for early retirement;
e) Share-based payments: these include the cost of shares granted on achieving a certain length
of service or specific objectives.
- 140 -
2. Information on related-party transactions
“Related-party transactions” are defined as all transactions with parties defined as such in IAS
24.
More specifically, with reference to the organisation and governance of the Group, the
following parties are deemed to be “related parties”:
- companies under joint control: companies over which the Group exercises joint control,
whether directly or indirectly;
- associated companies: companies over which the Group exercises significant influence,
whether directly or indirectly;
- key management personnel, i.e. members of General Management of the Parent Bank and its
banking subsidiaries, the General Manager and/or Managing Director of the other
subsidiaries, the Directors and Statutory Auditors of the Parent Bank and other Group
companies;
- “close relatives” of key management personnel;
- companies controlled by, jointly controlled by or associated with key management personnel or their
close family;
- parties that manage pension plans for the Group’s employees and any other parties related to the
Group.
“Close relatives” are deemed to be: (a) companion and children of the related party; (b) children
of the companion; (c) dependents of the related party or of their companion.
The following tables summarize the balances and transactions with related parties during the
period and their impact on cash flow, according to their classification at 30 June 2013.
Statement of financial position
Related parties
- Associated companies
- Companies under joint control
- Managers with strategic responsibilities
- Other related parties3
Total related parties
Total statement of financial position
% incidence
Loans and Loans and
Deposits
Due to
advances to advances to Other assets1
from banks customers
banks
customers
-
40,278
32,611
237,270
122
8,935
-
99,985
10,350
59,784
Guarantees
Other
and
2
liabilities commitmen
ts
495,668
7,420
5,687
12,432
40
37,624
-
310,159
9,057
-
170,119
508,775
50,096
2,848,246
31,208,545
9,591,663
6,442,793
24,079,590
11,771,135
2,931,027
0.00%
0.99%
0.09%
1
Asset line items 20, 40, 50 and 160 from the consolidated statement of financial position.
2
Liability line items 30, 40, 50 and 100 from the consolidated statement of financial position.
0.00%
0.71%
4.32%
1.71%
Include the close relatives of key management personnel, companies controlled by, jointly controlled by or associated with key
management personnel or their close family, and parties that manage pension plans for the Group‟s employees and any other
parties related to the Group.
3
- 141 -
Income statement
Related parties
Interest
income
- Associated companies
- Companies under joint control
- Managers with strategic responsibilities
Interest
expense
Net fee and
commission
income
Other costs
/ other
revenues 1
- Other related parties 2
340
255
3,518
(11,330)
(164)
(593)
13,830
117
715
(6,192)
(5,276)
(698)
Total related parties
4,113
(12,087)
14,662
(12,166)
627,144
(372,433)
137,124
(288,517)
Total statement of financial position
% incidence
0.66%
3.25%
10.69%
4.22%
Line items 180 and 220 from the consolidated income statement. They include the remuneration paid to key management
personnel of the Parent Bank only.
1
Include the close relatives of key management personnel, companies controlled by, jointly controlled by or associated with key
management personnel or their close family, and parties that manage pension plans for the Group‟s employees and any other
parties related to the Group.
2
Cash flows
Cash flows
Related parties
30/06/2013
Loans and advances to banks
Loans and advances to customers
30,580
(503)
Other assets 1
Total cash flows with related parties
30,077
Total liquidity absorbed by financial assets
449,974
% incidence
1
6.68%
Asset line items 20, 40, 50 and 160 from the consolidated statement of financial position.
Related parties
30/06/2013
Due to banks
Due to customers
(46,343)
(80,909)
Other liabilities 2
(127,252)
Total liquidity generated by financial liabilities
(735,225)
% incidence
2 Liability
17.31%
line items 30, 40, 50 and 100 from the consolidated statement of financial position.
- 142 -
Related parties
30/06/2013
Interest income and similar revenues
Interest expense and similar charges
4,113
(12,087)
14,662
(12,166)
Other income/other costs 3
(5,478)
Total cash flow from operations
% incidence
3 Line
165,820
-3.30%
items 180 and 220 from the consolidated income statement.
- 143 -
- 144 -
CERTIFICATION OF THE FINANCIAL REPORTING MANAGER
- 145 -
CERTIFICATION OF THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
PURSUANT TO ART. 81-TER OF CONSOB REGULATION NO.11971 OF MAY 14, 1999, AS
AMENDED AND UPDATED
1.The undersigned
– Cav. Lav. Dott. Giovanni Zonin, as Chairman of the Board of Directors, and
– Dott. Massimiliano Pellegrini, as Financial Reporting Manager of Banca Popolare di Vicenza
S.C.p.A., taking into account of the provisions of Article 154-bis, paragraphs 3 and 4 of Legislative
Decree No. 58 of 24 February 1998, do hereby certify:
• the adequacy in relation to the enterprise's characteristics and
• the effective application
of the administrative and accounting procedures for preparing the condensed interim consolidated
financial statements, during the first half of 2013.
2. The adequacy of the accounting and administrative processes for preparing the condensed interim
consolidated financial statements at 30 June 2013 has been evaluated on the basis of an internal
procedure established by Banca Popolare di Vicenza S.C.p.A. in compliance with the Internal Control Integrated Framework published by the Committee of Sponsoring Organisations of the Treadway
Commission (COSO), which are internationally accepted frameworks for internal control system.
3. It is also certified that:
3.1 The condensed interim consolidated financial statements:
a) have been prepared in compliance with applicable international accounting standards recognized
by the European Community pursuant to European Parliament and Council Regulation no.
1606/2002 of 19 July 2002;
b)
correspond to the results of the book and accounts;
c) give a true and fair presentation of the balance sheet, profit and loss and financial position of the
issuer and of the companies included in the scope of consolidation.
3.2 The interim report on operations contains a reliable analysis of the most significant events that
occurred in the first six months of the year and their impact on the condensed interim
consolidated financial statements, as well as a description of the main risks and uncertainties
concerning the remaining six months of the year. The interim report on operations also contains a
reliable analysis of information on significant related-party transactions.
Vicenza, August 27, 2013
The Chairman of the Board of Directors
Financial Reporting Manager
Cav. Lav. Dott. Giovanni Zonin
Dott. Massimiliano Pellegrini
- 146 -
AUDITORS‟ REPORT ON REVIEW OF CONDENSED INTERIM
CONSOLIDATED FINANCIAL STATEMENTS
- 147 -
- 148 -
- 149 -

consolidated half-year report at 30 june 2013

Transcription

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