Report and consolidated financial statements of

Transcription

BANCA LOMBARDA E PIEMONTESE
Società per Azioni
Capital stock: € 325,733,219 authorized
€ 317,400,065 subscribed and paid in
Tax code and registration number at
Brescia Registry of Companies: 00285280178
Registered and head office: Via Cefalonia 62, Brescia
Member of the Banking register and
Parent Bank of the Banca Lombarda e Piemontese Group
Member of the Interbank Deposit Guarantee Fund and of the
National Guarantee Fund
Report and
consolidated financial
statements of the Group
Report on operations and
financial statements of
Banca Lombarda
e Piemontese S.p.A.
as of December 31, 2003
This English version is available for the convenience of the reader.
It is a traslation of the italian original version “Bilanci 2002”, that takes precedence
and will be made available to interested readers upon written request to
Banca Lombarda e Piemontese – Relazioni Esterne - Via Cefalonia, 62 – 25175 Brescia (Italy)
1
CONTENTS
NOTICE OF THE ORDINARY GENERAL MEETING
KEY FIGURES
BOARD OF DIRECTORS, BOARD OF STATUTORY AUDITORS
AND SENIOR MANAGEMENT
POWERS OF THE BOARD OF DIRECTORS, THE EXECUTIVE COMMITTEE
AND SENIOR MANAGEMENT
REPORT ON THE CONSOLIDATED FINANCIAL STATEMENTS
OF THE BANCA LOMBARDA E PIEMONTESE GROUP
THE ECONOMY, THE FINANCIAL MARKETS AND THE BANKING INDUSTRY
ACTIVITIES OF THE BANCA LOMBARDA E PIEMONTESE GROUP
BALANCE SHEET AND STATEMENT OF INCOME
Balance sheet
Statement of income
Performance of Group companies
RATINGS
OTHER INFORMATION
SIGNIFICANT SUBSEQUENT EVENTS AND FUTURE PROSPECTS
REPORT OF THE INDEPENDENT AUDITORS
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated balance sheet as of December 31, 2003
Consolidated statement of income for the year ended December 31, 2003
EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Introduction
Part A: Consolidation methods and accounting policies
Part B: Information on the consolidated balance sheet
Part C: Information on the consolidated statement of income
Part D: Other information
ATTACHMENTS TO THE CONSOLIDATED FINANCIAL STATEMENTS
REPORT ON OPERATIONS AND FINANCIAL STATEMENTS
OF BANCA LOMBARDA E PIEMONTESE
REPORT ON OPERATIONS
ACTIVITIES OF BANCA LOMBARDA E PIEMONTESE
ADOPTION OF THE CODE OF SELF-REGULATION FOR LISTED COMPANIES
PERFORMANCE OF THE BANK
Balance sheet
Economic performance
Intercompany and related party transactions
Other information
SIGNIFICANT SUBSEQUENT EVENTS AND FUTURE OUTLOOK
PROPOSAL FOR APPROVAL OF THE FINANCIAL STATEMENTS
AND ALLOCATION OF NET INCOME
REPORT OF THE BOARD OF STATUTORY AUDITORS
REPORT OF THE INDEPENDENT AUDITORS
FINANCIAL STATEMENTS OF BANCA LOMBARDA E PIEMONTESE
BALANCE SHEET AS OF DECEMBER 31, 2003
STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31, 2003
EXPLANATORY NOTES
Introduction
Part A: Accounting policies
Part B: Information on the balance sheet
Part C: Information on the statement of income
Part D: Other information
ATTACHMENTS TO THE FINANCIAL STATEMENTS
STOCKHOLDERS’ RESOLUTIONS
3
5
7
9
10
13
15
18
47
51
55
57
68
68
70
71
75
76
79
81
83
84
99
136
143
145
151
152
152
153
155
157
160
162
164
170
170
171
179
183
184
186
187
189
190
201
233
240
245
260
783 BRANCHES
Banco di Brescia (including the Luxembourg branch) 375
Banca Regionale Europea
(including the Nice Branch)
266
Banca di Valle Camonica
56
Banco di San Giorgio
32
Banca Cassa di Risparmio di Tortona
29
Banca Lombarda
20
Banca Lombarda Private Investment
5
The number of branches in each region is indicated in brackets
Situation as of December 31,2003
NOTICE OF MEETING
STOCKHOLDERS’
MEETING
The Stockholders are called to the Ordinary General Meeting to be held on
Monday, April 26, 2004 at 4.30 p.m. at the head office in Via Cefalonia 62,
Brescia in first calling and, if needed, in second calling at the Conference
Center of the President Hotel in Via Roncadelle 48, Castelmella (Brescia) on
Tuesday, April 27, 2004 at 10.00 a.m. to vote on the following
Agenda:
1) Financial statements as of December 31, 2003; Directors’ report on operations and report of the Board of Statutory Auditors; related resolutions.
2) Allocation of net income for 2003.
3) Appointment of independent auditors to audit the parent bank’s and the
consolidated financial statements for the three-year period 2004/2006, to
check that the accounting records are properly kept, and to perform limited examinations of the parent bank’s and the consolidated reports for the
semesters ended June 30, 2004, 2005 and 2006.
Stockholders may attend the meeting on presentation of the meeting certificate issued by an authorized intermediary in accordance with current regulations.
The required documentation about the items on the agenda will be made
available to the stockholders, who are entitled to a copy, and to the general
public at the Bank’s head office and at Borsa Italiana S.p.A. by the deadline
established by law.
Brescia, March 15, 2004
BANCA LOMBARDA E PIEMONTESE SPA
Chairman of the Board of Directors
The notice of meeting was published in the Italian Official Gazette, Part II
no. 67, on March 20, 2004.
5
KEY
FIGURES
(millions of euro)
BANCA LOMBARDA E PIEMONTESE GROUP
2003
2002
Direct customer deposits
Indirect customer deposits
(at market value) and actuarial reserves
Total customers’ funds under administration
Loans to customers
Capital and reserves (excluding net income)
Net income
Number of employees at year end
Number of banking branches
FINANCIAL INDICATORS
ROE (cash)
Cost/Income ratio
22,369
21,434
40,532
62,901
23,584
1,888
112
7,475
783
37,077
58,511
21,707
1,618
130
7,446
770
8.9%
62.4%
11.4%
61.7%
BANCA LOMBARDA E PIEMONTESE S.P.A.
2003
2002
Equity investments
Total assets
Net income
Dividend per share (euro)
2,525
9,289
1,628
108
0.30
2,383
8,562
1,579
114
0.33
7
BOARD OF DIRECTORS
BOARD OF
DIRECTORS,
BOARD OF
STATUTORY
AUDITORS AND
SENIOR
MANAGEMENT
Chairman
Gino Trombi *
Senior Vice Chairman
Alberto Folonari *
Vice Chairman
Giovanni Bazoli *
Chief Executive Officer
Corrado Faissola *
Director and Secretary
Mario Cera
Luigi Bellini, Piero Bertolotto*,
Giuseppe Camadini*, Mario Cattaneo*,
Virginio Fidanza, Attilio Franchi,
Ugo Gussalli Beretta, Giuseppe Lucchini,
Felice Martinelli, Giovanni Minelli*,
Luigi Nocivelli, Francesco Passerini Glazel,
Pierfrancesco Rampinelli Rota, Adriano Rodella,
Antonio Spada, Romain Zaleski
* members of the Executive Committee
Directors
BOARD OF STATUTORY AUDITORS
Chairman
Sergio Pivato
Auditors
Angelo Coen, Filippo Rovetta
Alternate auditors
Vincenzo Broli, Marco Confalonieri
DIREZIONE
SENIOR MANAGEMENT
General manager
Bruno Degrandi until January 31, 2003
Victor Massiah from February 1, 2003
Deputy General Managers
Ettore Medda
Alberto Pella
Elvio Sonnino
from January 1, 2004
(seconded to Lombarda Sistemi e Servizi
with the grade of General Manager)
9
POWERS
OF THE BOARD OF
DIRECTORS,
THE EXECUTIVE
COMMITTEE AND
SENIOR
MANAGEMENT
In accordance with CONSOB’s recommendation no. 97001574 of February
20, 1997, the following disclosure describes the powers of the Board of
Directors and senior management.
This report names the members of the Board of Directors and indicates the
duties performed for the Bank by each director.
Pursuant to art. 18 of the by-laws, the Board of Directors is responsible for
the ordinary and extraordinary administration of the Bank. To this end, it
exercises the widest possible powers, except for those that the law reserves
for the Stockholders in General Meeting.
For individual matters of ordinary and extraordinary administration, the
Board can delegate signature powers to one or more of its members; while
for certain categories of acts and matters of ordinary administration, it can
even grant proxies to persons who are not employed by the Bank. To facilitate the Bank’s normal operations, the Board can authorize employees to
sign individually in relation to transactions decided upon by the Board.
Pursuant to art. 20 of the by-laws, the Board of Directors can appoint an
Executive Committee with five to eight members, and delegate powers to it
in accordance with art. 18 of the by-laws.
The Executive Committee currently consists of eight members, and was
appointed under the Board resolution dated May 2, 2002.
The Board of Directors has granted the Executive Committee all powers for
the ordinary administration of the Bank, except for some that are the exclusive responsibility of the Board.
In urgent cases, the Executive Committee can take certain decisions that are
normally the responsibility of the Board of Directors . Any such decisions
must be reported to the Board at its next meeting.
Pursuant to art. 21 of the by-laws, the Chairman, or whoever stands in for
him, legally represents the company in dealings with third parties and in
court, at any level of justice, with the right to appoint attorneys and legal
counsel. Acting on a recommendation from the Chief Executive Officer, if
appointed, the Chairman can take decisions in an emergency that would
normally be the responsibility of the Board or of the Executive Committee.
Any such decisions must be reported to the Board at its next meeting. The
Chairman allocates and distributes the amounts set aside for donations on
the basis decided by the Board of Directors.
10
The Board of Directors has empowered the Chief Executive Officer to supervise the ordinary administration of the Bank, with the assistance of the General Manager, in compliance with guidelines formulated by the Board of
Directors. He also has powers concerning operational matters, lines of credit,
transactions in securities, personnel and organization, and the coordination
of the activities of the Parent Bank and the companies forming part of the
Group.
With regard to the Parent Bank’s consent for the resolutions adopted by
Group companies in accordance with art. 136 of Decree 385/93, the Board of
Directors has granted individual powers to the President, the Vice President
and the Chief Executive Officer to give such consent, except in relation to
resolutions adopted by Banco di Brescia. Because of the President, Vice
President and Chief Executive Officer of Banca Lombarda e Piemontese are
the same as those for Banco di Brescia, the individual powers to give consent for the resolutions adopted by Banco di Brescia have been granted to
Mario Cattaneo, Giovanni Minelli and Francesco Passerini Glazel, directors.
In compliance with art. 22 of the by-laws, the General Manager is the chief
operating officer and performs his duties within the scope of the powers
granted by the Board of Directors.
The Board of Directors is periodically informed about the activities of the
persons to whom it has granted powers.
The Vice President, Giovanni Bazoli, has been appointed by the Board of
Directors as the liaison officer for the Banca Intesa stockholder syndicate.
11
Report on the
Consolidated Financial Statements
of the Banca Lombarda e
Piemontese Group
as of December 31,2003
13
The international context
THE ECONOMY,
THE FINANCIAL
MARKETS AND THE
BANKING INDUSTRY
The international economic situation in 2003 was influenced by the differing
performances of the various national economies. Encouraging signs emerged
from the United States and Japan, while the Euro zone remained essentially
weak. Strong growth in the principal developing nations exceeded 2002 levels.
The US economy expanded by slightly more than 3%, which was rather better than the progress reported in 2002 (2.2%). This upturn was stimulated by
the expansion of investment, especially in the technology sector, by the rise
in personal consumption and by higher public expenditure. The last factor
has, however, contributed to a further rise in the federal deficit and the ratio
of public borrowing to GDP. There were no improvements on the employment front: the unemployment rate was 6%, compared with 5.8% in 2002.
The average rate of retail price inflation rose to 2.3%, up from 1.6% in 2002.
There was also an upturn in Japan during 2003, due to higher investment
and stronger exports. Industrial output rose by 3.1%, as against a contraction
of 1.2% in 2002. GDP also rose by about 2%, which was considerably better
than the contraction reported in 2002. Elsewhere in Asia, China consolidated
its role as the principal market and locomotive in the Far East. Chinese GDP
continued along a strong upward path, rising by around 8% in 2003.
The positive international situation benefited the economies in South America,
where overall GDP rose by 1.5% compared with a fall of 0.6% in 2002. There
has been an upturn in Argentina, with steady improvements in GDP on an
annualized basis and a marked cut in the rate of inflation. Further signs of
encouragement came from the recent three-year agreement reached with the
International Monetary Fund. However the ratio of public borrowing to GDP
remains critical, having reached 140% compared with 115.5% in 2002.
There was also a noticeable recovery in Russia, with economic growth of
almost 7%, as against 4.2% in 2002. The commitment to structural reform
seems to be reflected in progress with regard to both inflation, down to
13.4% from 15.8% in 2002, and public borrowing, which eased from 41.6% of
GDP in 2002 to 37.9% in 2003.
The growth in the GDP of the 10 nations about to enter the European
Union varied considerably, from 7-8% for Lithuania and Latvia to rather
more modest levels for Malta and Cyprus.
15
Against this international background, there was an evident growth gap in
the Euro zone. GDP rose a modest 0.4% compared with 0.9% in 2002. In
particular, Germany appears to blocked into stagnation with essentially no
rise in GDP; the situation in France was only marginally better. The Eurozone’s problems in joining in with the international upturn appear to be
largely caused by the weakness of both domestic demand and exports,
which were hit by the appreciation of the Euro against the US dollar by
more than 20% in 2003. Household consumption increased slightly, while
capital investment contracted.
Difficulties are compounded by unemployment of 8.8%, up from 8.4% in
2002. Retail price inflation of 2% was a few points lower than in 2002 (2.3%).
Performance in Italy was about average within the Euro zone, with a rise in
GDP of 0.3%. However Italy still has an inflation gap, with a rise in retail
prices of 2.7% compared with an average of 2% in the Euro area. On the job
front, the unemployment rate fell from 9% in 2002 to 8.7% in 2003. This
improvement helped to sustain consumption, while the capital investment
element of domestic demand contracted and capacity utilization remained at
an historical low of around 76%. The manufacturing index improved in the
second part of the year, but a contraction was reported for the year as a
whole. The strongest sectors were construction and various parts of the service industry.
Given these protracted macroeconomic difficulties, the monetary policy of
the European Central Bank was designed to stimulate a recovery in investment, with two cuts in the official refinancing rate by a total of 75 basis
points during the year, from 2.75% to 2%.
The improved international scenario enabled stock markets to invert their
downward trends: the US market grew by about 20% in 2003, while there
was roughly a 19% improvement in Japan. By comparison, the Italian Mibtel
index rose by about 14%.
This recovery of the stock markets helped to relaunch asset management
activities. In particular, the mutual funds managed by Italian intermediaries
reported a marked increase in assets administered to 514 billion Euro at the
end of 2003, up 9.7% over the year. The overall composition of these funds
was only slightly changed: the weighting of stocks was essentially the same
at around 22%, bonds eased by about two points from 48.5% to 46.3% and
monetary funds rose by about three percentage points to 21%.
16
Banking activity in 2003 was marked by about 4% growth in direct deposits
and an appreciable rise in lending by almost 7%.
In terms of funding, the rate of deposit-taking slowed in December to just
over 2%. However bonds continue to rise at more than 8.5%.
With regard to lending, the rise in the long-term element (13.3%) offset the
fall in short-term loans (-1.5%). Home loans, within the long-term segment,
are rising at an annual rate of more than 20%. The expansionary trend has
significantly strengthened the market share of the Italian banking system
within the entire Euro zone. In particular, home loans in Italy now represent
about 7% of the market, compared with 4% five years ago.
The reduction in reference rates was reflected in bank lending rates, with
further erosion of the spread. The differential between average lending rates
and those on deposits contracted by 52 basis points during 2003, from 436
basis points in December 2002 to 384 at the end of 2003.
The quality of lending, as measured by the incidence of net non-performing
loans to total lending, remained broadly stable during 2003 at 2%.
In this regard, a number of leading industrial groups collapsed in the last
part of the year, resulting in the reclassification as non-performing of substantial loans that had previously been considered good. The adverse impact
of this situation is not only reflected in the statements of income of the leading banking groups, which have had to record prudent writedowns against
the related lending, but has also been felt by the holders of the stocks and
bonds issued by these operators. The fact that these securities are widely
held by small savers raised immediate questions, both in Italy and the European Union, regarding the regulations applied by the Authorities and the
tools available for the protection of savings.
17
ACTIVITIES OF THE
BANCA LOMBARDA E
PIEMONTESE GROUP
Despite just timid signs of recovery in the Italian market, the business and
banking aggregates of the Banca Lombarda e Piemontese Group expanded
considerably in 2003.
In particular, the Group has consolidated its position in the various areas of
core business, such as lending, direct funding, asset management and nearbanking activities. The significant rise in volume resulted in higher revenues, although these only partly reflected the scope for additional profitability deriving from the development of the banking aggregates. Specifically, the movement in bank rates squeezed the spread still further, while
average commissions remained relatively low since asset management and
insurance funds have continued to be highly liquid, with low exposure to
financial risk.
In organizational terms, the project to optimize the retail network continued during the year and further work was performed at the Parent Bank in
order to consolidate the system of Corporate Governance.
With regard to capital investment and the control of costs, corporate policy
has continued to focus on the tight control of expenditure in order to free
resources for technological innovation and the development of new products.
The circumstances surrounding the cases of financial default by certain
major Italian industrial groups during 2003 have had a relatively limited
effect on the lending position of the banks within the Banca Lombarda
Group. Furthermore, the Group did not play an active role in the underwriting and/or placement syndicates for the debt and risk capital issued by
these industrial firms.
There now follows an analysis of the Group’s activities and results of operations, with a particular focus on:
Changes in Group structure and equity investments
Organizational changes;
Product and sales channel development;
Risk management;
Audit activities;
Human resources;
Transactions with Group companies and related parties;
Balance sheet and statement of income;
Performance of Group companies.
18
CHANGES IN GROUP STRUCTURE AND EQUITY INVESTMENTS
The principal changes during 2003 in the structure of the Banca Lombarda
e Piemontese Group and its portfolio of equity investments are described
below.
Group companies
In January, Banca Lombarda e Piemontese formed Capitalgest Alternative
Investments SGR S.p.A., a company that manages hedge funds which is
wholly owned by Banca Lombarda e Piemontese. The formation of this
company, which is authorized for the collective management of savings,
extends the range of services available to specific customer segments, such
as institutional investors and private customers.
In July, Banca Lombarda e Piemontese acquired 100% of Banca Idea
S.p.A. from Banca Popolare di Vicenza. Financial consultants represent the
bulk of this subsidiary’s distribution network. This investment totaled 43.5
million Euro. Via Banca Idea, a 99% interest was also acquired in Idea
Advisory S.A.., an asset management consultancy based in Luxembourg.
Subsequent to their acquisition by Banca Lombarda e Piemontese, Banca
Idea and Idea Advisory changed their names to, respectively, Banca Lombarda Private Investment S.p.A. and Lombarda Advisory S.A.. The purpose of this purchase was to achieve a rapid, significant increase in both
the Group’s network of financial consultants and in the number of branches and outlets that support them.
With regard to the agreements reached with Fondazione Cassa di
Risparmio di Cuneo and Fondazione Banca del Monte di Lombardia on the
acquisition of control over Banca Regionale Europea, the terms of the
put options for the BRE shares still held by these Foundations were amended during 2003; in particular, the original annual expiry dates established
through March 2005 were revised to reflect two fixed date options: March
3, 2006, for 50% of the shares and March 3, 2009, for all the shares.
In September, Banca Lombarda e Piemontese acquired 90% of Electrolux
Financiera S.A.from the Electrolux Group. This company, based in Spain,
operates principally in the factoring sector and also has some leasing activities. The company mainly factors amounts due to suppliers of the Electrolux Group by that group. The acquisition of Electrolux Financiera was
carried out in part directly by Banca Lombarda e Piemontese (51%) and in
part by Veneta Factoring (39%), with a total investment of about 6.2 million
Euro. The objective of this operation is to expand the range of services
offered in the near-banking sector, while also strengthening the Banca
Lombarda e Piemontese Group’s presence abroad.
19
During the year, Banca Lombarda e Piemontese increased its direct and/or
indirect equity interests in Banca Cassa di Risparmio di Tortona S.p.A., CBI
Factor S.p.A., Banco di San Giorgio S.p.A. and Corporation Financière
Européenne S.A..
The principal transaction was the purchase for 38.7 million Euro of a 15.2%
interest in Banca Cassa di Risparmio di Tortona, which was already 60%
owned via Banca Regionale Europea. The total book value of this direct
and indirect interest has therefore risen to 183.9 million Euro, including
145.2 million Euro recorded by Banca Regionale Europea. This acquisition
reflects the exercise by Fondazione Cassa di Risparmio di Tortona of a put
option for 15.3% of the related capital granted by Banca Lombarda e
Piemontese at the time of acquiring control over Banca Cassa di Risparmio
di Tortona.
Various blocks of shares were also acquired in CBI Factor, representing in
total 9.76% of capital, with an investment of 7.0 million Euro. As a result of
these transactions, the interest in this company has risen to 97.23%, with a
total book value of 62.3 million Euro. The acquisition of shares in CBI Factor has continued subsequent to year end with the purchase of a further
1.49% interest in its capital for 1.1 million Euro.
With reference to Banco di San Giorgio, further blocks of shares representing 1.96% of capital were acquired for 2.1 million Euro. As a result, this
bank is now 86.70% owned (including 54.07% held via Banca Regionale
Europea), with a total book value of 107.5 million Euro (including : 82.2
million Euro recorded by Banca Regionale Europea). The purchase of
shares in Banco di San Giorgio has also continued subsequent to year end,
although the quantities concerned were somewhat modest.
The holding in Corporation Financière Européenne, a company that
provides exhibition finance, was increased by 12.75% with an investment
of 0.2 million Euro. This company is now 63.75% owned with a total book
value of 0.8 million Euro. The purchase took place on the exercise of preemption rights following the decision of one of the stockholders to exit the
company.
Events that did not modify the overall interest in Group companies held by
Banca Lombarda e Piemontese included the transfer to the Parent Bank of
all the shares in Solimm S.p.A., a real estate company, and subscription by
the Parent Bank for its share of the increase in the capital of SBS Leasing
S.p.A..
20
In relation to Solimm, Banca Lombarda e Piemontese has acquired the
remaining 2% interest held by Banco di San Giorgio for about 56 thousand
Euro, determined with reference to the book value of stockholders’ equity;
the purpose of this transaction was to streamline the ownership structure
of the Group.
With regard to SBS Leasing, 98% owned, the increase in capital involved
the payment of 19.7 million Euro and raised the total investment to 55.7
mill Euro; the purpose of this transaction was to adjust the company’s capital structure to reflect the scale of its operations.
Other companies
In January and November, Banca Lombarda e Piemontese subscribed for its
share of a double capital increase by Lombarda Vita, a 49.9% held insurance joint venture with Società Cattolica di Assicurazione; total payments
amounted to 22.5 million Euro, thereby increasing the investment in this
company to 28.4 million Euro.
The purpose of this major recapitalization is to provide the company with a
capital structure capable of supporting the rapid growth in its activities.
Among new equity investments, the most significant took place in December
with the formation of Siderfactor S.p.A. by CBI Factor, in a joint venture
with the Marcegaglia steel group. This new company will focus on factoring
amounts due to the suppliers of the Marcegaglia Group by that group. CBI
Factor has taken a 27% interest in this company for 324 thousand Euro, and
has signed stockholders’ agreements that ensure the exercise of joint control.
This transaction is part of a strategy to strengthen activities in the factoring
sector by replicating with a solid partner, the Marcegaglia Group, the captive company model so successfully tested with the Electrolux Group.
In January, Banco di Brescia acquired 10.06% of Vemer Siber Group
S.p.A., a Brescia-based company listed on the Milan stock exchange and
parent of a group that mainly operates in the electrical products sector. The
amount invested was 6.5 million Euro. The investment took place by subscribing at par value to a capital increase reserved for Banco di Brescia and
other banks as part of the restructuring of the company’s exposure to the
banking system, including Banco di Brescia. A 2.72% interest in the company was sold in July for 1.8 million Euro; this transaction, carried out at par
value and therefore without effect on the statement of income, was related
to the exercise of a call option granted to a third party at the time the
investment was acquired by Banco di Brescia. Following this sale, the
residual interest is 7.34%, with a book value of 4.8 million Euro.
21
On allocation of the net income for 2002 of Banca Intesa, Banca Lombarda e Piemontese and Banco di Brescia were allotted bonus shares in the
ratio of 1 ordinary share for every 40 held by each stockholder in any category; accordingly, these companies received, respectively, 3,259,712 and
112,914 ordinary shares worth 7.0 million Euro and 0.2 million Euro. As a
result of this allocation, the Group’s interest in the ordinary capital of Banca Intesa has risen from 2.28% to 2.34% and the book value of the investment has increased to 330.6 million Euro.
In May, Banca Lombarda e Piemontese acquired 10% of Ponente S.r.l.,
renamed Lombarda Lease Finance 3 S.r.l., which became the vehicle
company for a new securitization transaction involving lease installments
due to SBS Leasing; the payment for this interest in the company, which is
90% owned by an independent Netherlands Foundation, amounted to
about 1,000 Euro.
The securitization transaction completed in June involved the issue of notes
with a par value of 662.6 million Euro by the company and the acquisition
of lease installments with a face value of 650.5 million Euro. SBS Leasing
subscribed for junior notes totaling 12.55 million Euro.
In November, Banco di Brescia acquired 0.06% of Autostrade Lombarde
S.p.A., the company responsible for constructing the new Brescia-Bergamo-Milan motorway link; this transaction took place by subscription to a
capital increase and involved the payment of 18 thousand Euro for threetenths of the capital subscribed.
The reason for this acquisition is to facilitate the inclusion of Banco di
Brescia, together with other banks, as a financial partner in this broad initiative.
In August, Banca Lombarda e Piemontese sold its 33.33% interest in Itradeplace, a company set up to create a business-to-business portal aimed at
developing online commercial transactions. The sale raised 0.5 million Euro
and generated a gain of 0.2 million Euro. At the same time, the Bank’s
share of the stockholders’ interest-bearing loan to the company was also
repaid (0.5 million Euro).
22
Banca Lombarda e Piemontese S.p.A. - Group Structure
Asset Management
Banks
100%
49%
Banco di
Brescia S.p.A.
100%
Capitalgest Alternative
Investments SGR S.p.A.
100%
Grifogest S.p.A
51%
Solofid
8.72%
74.24%
Capitalgest SGR S.p.A.
100%
100%
Sifru Gestioni Fiduciarie
SIM S.p.A
Banca di Valle
Camonica S.p.A.
99%
Lombarda Advisory
S.A.
Near-banking and Financial
57.83% (*)
Banca Regionale
Europea S.p.A.
SBS Leasing S.p.A
98%
CBI Factor S.p.A.
97.23%
39%
60%
15.20%
Veneta Factoring S.p.A.
39%
Banca Cassa di Risparmio
di Tortona S.p.A.
40%
32.63%
Banco di S. Giorgio S.p.A.
54.07%
0.51%
91.90%
Banca Lombarda
International S.A.
51%
7.59%
95%
Electrolux Financiera S.A.
51%
Silf S.p.A.
60%
Mercati Finanziari SIM S.p.A.
100%
Banca Lombarda Preferred
Capital Co. LLC
100%
GE.SE.RI. S.p.A.
(in liquidation)
Others
100%
Banca Lombarda
Private Investment S.p.A.
Sbim S.p.A.
100%
Solimm S.p.A.
100%
Lombarda Sistemi e Servizi S.p.A.
100%
(*) with reference to ordinary capital stock
Andros S.r.l.
Corporation Financiére
Européenne S.A.
23
100%
63.75%
ORGANIZATIONAL CHANGES
In February 2003, Victor Massiah took over as General Manager of Banca
Lombarda e Piemontese from Bruno Degrandi. Bruno Degrandi has terminated his employment with the Bank, but still maintains a position on the
boards of certain Group companies.
Work to reorganize during 2003 related to projects that commenced in prior
years, as well as to new action.
The principal areas of action are described below.
During 2003, Banca Lombarda e Piemontese and other Italian banks promoted the Patti Chiari (clear terms) initiative, a project launched by the Italian
Banking Association with a view to “re-writing”, in new and positive terms,
the system of relations between banks and the community. «Patti Chiari» is a
quality brand that guarantees customers the principles of transparency, clarity and comparability. All Group banks became members of the “Patti Chiari
Consortium” at the time of its formation on September 9. The project has
various working parties that cover savings, lending and services; the following initiatives were launched during the fourth quarter of 2003 and the first
three months of 2004:
• FARO (on-line identification of the nearest ATM).
• List of bonds with low risk and low yield.
• Clear information about subordinated structured bank bonds.
• General criteria for assessing the borrowing capacity of SMEs.
• Comparison of current accounts.
• Basic banking services.
• Average response times for lending to small firms.
• Guaranteed access times for amounts paid in by check.
The procedures for certifying the initiatives launched by Group banks will
commence during 2004.
With regard to the distribution network, much work has been done within
the context of major strategic projects.
The principal activity in relation to the Group’s divisionalized distribution
model concerned the “codification” of certain rules needed to standardize
the criteria for segmentation, the definition of customer portfolios and the
identification of uniform professional families for network operators. The
related rules have been distributed within the Group and the necessary IT
work has begun.
24
In addition, specific organizational work has been performed to refine the
segmentation of customers into «portfolios» administered by responsible professionals at the branches of Banca Cassa di Risparmio di Tortona and Banca
di Valle Camonica, with a view to raising the level of operational efficiency
and commercial effectiveness of the distribution network.
The following projects are part of efforts to improve the efficiency of the
distribution network:
• Analysis of Resources dedicated to Administrative Activities.
Launched in 2002 and in its final stages, the purpose of this project is to
determine the theoretical capacity utilization of the resources employed in
retail branch executive/administrative activities, in order to identify an
efficient level of staffing. The next stage, already planned, will be to
refine the model and develop a capacity utilization indicator for the commercial activities at retail branches. The extension of this analysis to the
Corporate Business Units has already commenced.
• Optimization of the Retail Model. This project was also started in 2002.
Work in 2003 included various action to optimize operational processes
within the commercial network, in order to enhance its ability to sell and
rationalize activity with a view to saving time and containing costs.
The following projects involving the branch network are of particular importance:
• The Internal Credit Portal is a project aimed at further improving the commercial relationship with customers and strengthening controls over credit
risk by the local branches. The portal is a new point for congregating all
the information and applications in support of the lending process. It has a
state-of-the art graphic interface, user-friendly navigation systems and its
functions and potential mean that it has an important strategic role to play.
• Internal Retail and Asset Allocation Portal is the project aimed at
strengthening the customer relationship, supporting commercial campaigns and the achievement of cross-selling objectives. Its functions allow
for customer segmentation to be refined still further using different behavioral profiles, making it possible to tailor the range of products offered
more effectively. Work started on the project during the first semester and
a prototype version was ready by the end of July.
Lastly, the following projects are also worthy of mention:
• The Broadband network project is of considerable strategic importance,
since it involves migration to a new network infrastructure with a transmission capacity up to 15 times greater than at present. Implementation of
this new infrastructure will help to improve system performance considerably, with major benefits for the quality of customer service.
25
• Integration of Banca Lombarda Private Investment within the Group’s IT
platform, which was completed during the second half of November.
The transfer of the “Linea Top” asset management activities to Capitalgest
was completed in early 2003. Previously, this line was only distributed by
Banco di Brescia which administered it directly. As a result of this centralisation, the service is now distributed by all Group banks.
The regulations of the Operations Committee, now renamed Asset Allocation Committee, have been revised in this context. In particular, this body
no longer authorizes transactions but rather coordinates or provides support
to Group banks. Having considered the recommendations of the Committee,
Group banks now give the Authorized Manager (Capitalgest) independent
instructions with regard to the investment policies to be adopted.
Various changes have been made with regard to the organization of Banca
Lombarda e Piemontese and the central functions performed on behalf of
Group companies.
A Finance Development Plan was established for Banca Lombarda e
Piemontese during the first semester of 2003, with a view to seeking sources
of revenue that are more stable over time and less conditioned by the volatility of the financial markets. This last objective is being pursued by the identification of new businesses that are significantly linked with the activities of
the other business units and Group companies, with a view to integration
and the provision of support. Another of the project’s goals is to rationalize
activities in such a way that efficiency is improved and organization streamlined. This will involve making the most of the investments already made
and improving control over the business by making specific changes to the
organizational structure and providing IT support.
Implementation of this complex plan commenced during the second semester, involving work on processes, controls, human resources and IT systems.
This has resulted in adoption of the new organization structure for the
Finance Area in early 2004.
The following organizational changes have been made to strengthen governance at the Parent Bank and improve the quality of services provided by
Banca Lombarda to Group companies:
• a document entitled “Corporate Governance – Regulations for governing and controling the Banca Lombarda e Piemontese Group»
was approved during 2003 in order to bring together the various regulations and ensure their consistency. The document sets down the Corporate Governance regulations for the Group and, in particular, guidelines
and institutional mechanisms for the functioning of the Group. In this regulatory context, Banca Lombarda e Piemontese has redefined in detail the
services provided by the Parent Bank and revised the related Service
contracts with the network banks and Lombarda Sistemi e Servizi.
26
Consistent with the Corporate Governance Regulations, a project was
launched to revise the Group Regulations which is now in its final
stages. The objective has been to define more precisely the operational
processes and institutional mechanisms for functioning set down in the
Corporate Governance regulations. The changes made to the organizational structure during 2003 have taken account of the guidelines established within the Corporate Governance Regulations and the preliminary
results of the Group Regulations project.
• The Products and Channels Strategic Marketing Area, renamed Strategic
Marketing Area, has made a series of organizational changes for greater
consistency with the Group’s distribution model based on the segmentation of customers. To this end, the activities carried out by the Network of
Financial Consultants and the Banca Lombarda Points have been moved
from the Marketing Area to the new Commercial Area.
• The Administrative Area within Banca Lombarda e Piemontese has been
reshaped in order to respond to changing requirements, given the development of the Group and the modifications introduced by the New
Accounting Model, the IAS, the Reform of Company Law and the Tax
Reforms.
• Finally with regard to organizational changes, the Strategic Development and Organization Area activated at the end of 2002 gradually
became fully operational during 2003. The functions attributed to this
Area include, in particular, the coordination of organizational planning
and development and the provision of support for business strategies, by
defining approaches to implementation that cover structures, processes
and human resources.
Further significant structural changes at Banca Lombarda e Piemontese were
approved at the end of 2003 and implemented at the start of 2004. In particular, Ettore Medda, Alberto Pella and Elvio Sonnino became Deputy General
Managers from January 1, 2004, and will assist the General Manager, Victor
Massiah, in the management of Banca Lombarda e Piemontese. In this
regard, Elvio Sonnino is seconded to Lombarda Sistemi e Servizi with the
grade of General Manager. At the same time, a new Credit Area has been
established and the Corporate Secretariat has been strengthened with the
creation of a Legal Function. The creation of a Business Finance unit has
also been approved, in order to provide adequate support to the network
banks that provide extraordinary finance to corporate customers. This unit
will work together with the Investment Banking unit created within the
Finance Area.
With regard to the Risks Area, a unit has been established to administer the
insurance cover of Group companies. This function became operational in
early 2004.
27
A project has been devised with a view to redefining the entire “system of
compliance», given the increased focus of domestic and international Supervisory Authorities on compliance by banks with the various regulatory
requirements, as well as the guidelines for the “Compliance Function” established by the Basel Committee. This project includes action to ensure that the
Group is constantly updated on regulatory changes, identifies the implications and impact of new regulatory requirements, makes consequent changes
to the internal organization and regulations, and promotes and constantly
verifies compliance by the organization, processes and personnel with the
law and internal and external regulations.
The following projects were launched during the second semester of 2003
with a view to aligning the Group’s organizational structure with external
regulatory requirements and, at the same time, take advantage of business
opportunities:
• Analysis of the organizational impact of the new Basel II
Agreement. The purpose of this project is to assess the impact on the
organization and processes of the Banca Lombarda e Piemontese Group
deriving from the new system for measuring credit risk developed in
accordance with the guidelines laid down by the Basel II Agreement. The
first step was to analyze lending processes and the organizational structures within the Group dedicated to lending. Subsequently, as a second
step, the required organizational and process modifications were defined
together with the necessary supporting tools.
• Reform of Company Law. The purpose of this project was to analyze
the impact of the Reform of Company Law (Decree 6 dated January 17,
2003), identifying the changes and action needed in relation to the Credit
process, Finance, the By-laws and the Financial Statements of Group companies. Particular attention was paid to changes affecting the granting of
lines of credit in regulatory, procedural and IT terms, as well as the training requirements for the network and the by-laws.
DEVELOPMENTS IN PRODUCT SALES AND MARKETING
During 2003, the Group continued its drive to innovate in the various areas
of banking activity.
In the area of Asset Management, the expansion of the product range was
intended to meet new customer requirements, especially for forms of investment that offer greater assurance for the protection of savings. In the segment for products with guaranteed yields and capital protection, a number of
further refinements were introduced to the GPF Crescita Protetta (protected
growth) line; in fact, the new GPF Garanzia Attiva portfolio management
scheme was launched in April.
28
This portfolio management solution offers a more dynamic guarantee mechanism, allowing improved performance thanks to new operating strategies.
The value of the assets invested is protected through reinvestment in a liquidity fund, making the product particularly flexible. The Group has also
introduced a new service known as Investment in portfolio management schemes through savings plans. This service has been well
received thanks to its flexibility.
The placement of a new fund known as Grifo Plus, managed by Grifogest
Sgr, commenced in November. “Grifo Plus” is a flexible fund and, right from
the early months, has been well received by customers.
The distribution of the funds managed by the newly-formed Capitalgest Alternative Investment commenced during the year. Two new hedge funds were
launched in the latter part of the year. These are funds of funds known as,
respectively, Capitalgest Alternative Dynamic and Capitalgest Alternative
Conservative. These two new products were much appreciated by the public, thus confirming the positive market trend already in evidence.
The bancassurance segments continued to grow strongly in 2003, with premiums written almost reaching 1,200 million Euro, up 11.2% with respect to
2002. The situation in the financial markets heightened the already marked
risk aversion of savers, who directed their preferences towards more traditional policies. The premiums for accumulation products represented 44% of
total insurance premium revenues. The weighting of Unit and Index Linked
products remained significant. The success of unit-linked guaranteed-capital
insurance products resulted in the launch of two new “Quota Sicura Multimanager” lines. The range of products sold specifically by financial consultants was also enlarged, with the addition of the “Stellar serie I 2003” indexlinked line, and “Formula Link Platinum”, a new unit-linked product with no
subscription costs. The “Stellar” line is an index-linked, single premium policy, with the capital invested guaranteed at maturity and whose return
depends upon the performance of the DJ Global Titans 50 index.
“Formula Link Platinum” is a traditional type of unit-linked product, whose
return is solely linked to the performance of the selected funds and does not
guarantee the capital invested. The lack of protection is compensated for by
being able to select from among the various investment options that most
suited to the investor’s own risk profile. The traditional lines have also been
extended by the “Crescita Giovane” supplementary pension plan, a regular
premium policy offering great flexibility and low commission costs.
In the area of direct deposits, the Eonia Bonds issued by Group banks met
with a positive reception from customers. These bonds are indexed to the
daily Eonia rate and their price has a relatively limited risk of fluctuation, a
fact that is particularly appreciated by customers at times of highly volatile
markets.
29
With regard to commercial initiatives in the lending area, the new line of
Mutuo Chiaro products was launched in March. This represents a new
answer to the growing demand for mortgages, offering solutions that are
increasingly clear and complete. The conditions can be customized and
involve loans of up to 100% of the value of the property. The launch of this
new line in February was accompanied by a successful promotional campaign that was very well received by both the public and the specialist press.
The “Soddisfatti e Rimborsati” (satisfied and reimbursed) initiative was
launched in the early part of the year. This campaign was directed at savers
who were not yet the Group’s customers, by specifically promoting the quality of its banking services and the competitive nature of the related conditions. Customer response was favorable with a good level of take-up. Promotion of the Conto Creso account package also continued; Banca Cassa
di Risparmio di Tortona started offering it in February. This package is aimed
at retail customers and is divided into four lines as follows: Doblone for private clients, Fiorino for customers with medium-size financial assets, Ghinea
for all other customers. The fourth line is called “Università” and is directed
at university students.
Focus on the customer segments that are less bank-aware resulted in the
launch of “Easy Money Transfer”, a new package of banking services dedicated exclusively to immigrants. The strengths of this product include the
“Conto Easy” and a range of assistance for the transfer of funds abroad. In
addition, the contents of a proposal for “young people” have been defined
and will be the subject of specific promotional activity when launched during the first semester of 2004.
A number of projects were started in the Cash segment. Innovations mostly
related to the prepaid S€MPRE cards, ATM and “Extensive” services. More
specifically, a prepaid international Web version of the S€MPRE card was
introduced, completing the functions of this prepaid card with the addition
of internet-based transactions. This proposal is new for the Italian market
and uses the international MasterCard circuit. The “ S€MPRE PER TE” loyalty program has been particularly successful, even winning a quality award.
IT channels and services
As from April it has been possible to top-up “3» branded UMTS phones at the
Group’s ATMs; it is now possible to pay television license fees at the Group’s
ATMs as well. Lastly, via the call center it is possible to request the automatic
issue of a duplicate multi-function S€MPRE credit card in the event of lost or
stolen cards being blocked.
30
Customer use of the new virtual channels intensified during 2003 and about
10% of current accounts are associated with customers that use the Group’s
Internet and telephone banking services. The number of transfers arranged via
the Internet banking services has almost doubled, confirming the rapid growth
experienced in 2002. There has also been a significant increase in the volume
of trading on line transactions. The number of top-up transactions for telephone
and prepaid cards has also grown very significantly. Online sales and purchases
of the Capitalgest fund reported a reasonable increase, although still modest.
The trading on line service has been extended to cover foreign “blue chips».
The functions available users of the “Extensive” service have been expanded
further. Marketing of the Bankpassweb, the secure internet payment system,
began during the first semester. The new service consists of two versions: one
for consumers (“digital wallet”) and one for businesses (“virtual pos”).
Usage of the virtual channel by information seekers was particularly intensive, and the Contact Center has confirmed its specific role as a service center for customers. There were 230,000 calls during the year, while the automated reply system routed 350,000 calls.
Financial consultants
Major changes were made to Banca Lombarda e Piemontese’s network of
financial consultants during 2003. Banca Idea, subsequently renamed Banca
Lombarda Private Investment, was acquired during the year in order to accelerate achievement of the planned number of 800 experienced financial consultants. At the end of 2003, Banca Lombarda Private Investment has 182
financial consultants who, together with the 423 consultants of Banca Lombarda e Piemontese, comprise a network of 605 persons.
Pursuit of the objective to expand rapidly has been combined with organizational measures designed to encourage the loyalty of consultants and a
review of the commission structure, in order to further contain the fixed elements. This action resulted in a selective shake-out of consultants without
any adverse effect on volumes which, rather, increased considerably.
More specifically:
• the network of consultants reporting to Banca Lombarda e Piemontese was responsible for direct and indirect deposits in excess of 1,400
million Euro. Six new Banca Lombarda Points were opened during the
year in Turin, Genoa, Pisa, Latina, RomaOstia and Salerno. At the end of
2003 there was a total of 20 such points.
31
• Banca Lombarda Private Investment (formerly Banca Idea) administered assets totaling about 410 million Euro at the time of acquisition. This
aggregate has risen to 461 million Euro at the end of 2003.
The Commercial Area has been established by Banca Lombarda e Piemontese in order to administer the network of financial consultants, the Banca
Lombarda Points and the Private Banking units established within Banca
Lombarda commencing from March 2003. The Private units comprise bank
employees tasked with gaining market share in the “private banking” segment. This represents a new approach to the Parent Bank’s project for the
development of a new network with variable costs, intended to gain share in
markets not served by the branches of the subsidiary network banks. The
Private Banking units took on 11 Relationship Managers during the year,
which resulted in new deposits in excess of 250 million Euro. The work of
the Relationship Managers has been supported by opening 3 Private Centers
in Turin, Rome and Genoa. For branch transactions, these units are supported by the network of Banca Lombarda Points located throughout Italy.
Branch network
At the end of the year, the Group’s branch network, comprising traditional
branches and Banca Lombarda Points, consisted of 783 branches. Six new
Banca Lombarda Points, branches that support the activities of the Group’s
financial consultants, were opened during 2003. Banca Lombarda Private
Investment, which joined the Banca Lombarda Group in July, has activated 4
new branches - in addition to the established Milan branch - by converting
offices previously used by consultants for administrative purposes. Lastly,
Banca Regionale Europea has opened a branch in Nice, France, while Banco
di San Giorgio has opened a branch in Rapallo. The following table shows
the geographic distribution of the Group’s branches as of December 31, 2003.
32
Region
Banca CR di
Banco di San
Banca di Valle
Tortona
Giorgio
Camonica
Europea
Brescia
-
-
-
-
-
1
-
1
1
1
Total ABRUZZO
-
-
-
-
-
1
1
2
CAMPANIA
-
-
-
-
-
1
1
-
1
1
Total CAMPANIA
-
-
-
-
-
2
-
2
EMILIAROMAGNA
PARMA
PIACENZA
BOLOGNA
-
-
-
3
8
-
2
-
1
-
5
8
1
Total EMILIA-ROMAGNA
-
-
-
11
2
1
-
14
FRIULIV. GIULIA
-
-
-
-
3
9
-
-
3
9
Total FRIULI-VENEZIA GIULIA
-
-
-
-
12
-
-
12
LAZIO
-
-
-
-
2
19
33
-
1
4
1
-
3
23
33
1
-
-
-
-
54
6
-
60
-
15
7
9
-
-
1
-
1
1
-
-
17
7
1
9
-
31
-
-
1
2
-
34
-
-
8
38
1
9
-
5
1
1
5
1
2
2
40
48
4
22
181
4
4
2
6
47
12
1
-
1
-
35
220
6
9
3
2
8
89
48
9
16
-
-
56
109
278
1
1
445
29
-
-
-
1
2
124
4
11
2
1
-
1
-
-
30
2
124
4
13
2
29
-
-
144
1
1
-
175
-
-
-
-
-
1
1
1
3
-
1
1
1
3
ABRUZZO
Province
L’AQUILA
PESCARA
NAPLES
SALERNO
PORDENONE
UDINE
LATINA
ROME
VITERBO
FROSINONE
Total LAZIO
LIGURIA
GENOA
IMPERIA
LA SPEZIA
SAVONA
Total LIGURIA
LOMBARDY
BERGAMO
BRESCIA
COMO
CREMONA
LECCO
LODI
MANTUA
MILAN
PAVIA
SONDRIO
VARESE
Total LOMBARDY
PIEDMONT
ALESSANDRIA
ASTI
CUNEO
NOVARA
TURIN
VERCELLI
Total PIEDMONT
PUGLIA
Total PUGLIA
BARI
FOGGIA
TARANTO
Banca Reg. Banco di
Banca
Banca
Grand
Lombarda Lombarda P.I.
Total
(following)
33
(straight)
Region
Banca CR di
Banco di San
Banca di Valle
Tortona
Giorgio
Camonica
Europea
Brescia
-
1
-
-
-
-
1
1
1
1
-
1
1
1
1
1
Total TUSCANY
-
1
-
-
-
1
3
5
TRENT.A.A.
-
-
-
-
2
-
-
2
Total TRENTINO-ALTO ADIGE
-
-
-
-
2
-
-
2
UMBRIA
-
-
-
-
-
1
-
1
Total UMBRIA -
-
-
-
-
1
-
1
VAL D'AOSTA AOSTA
-
-
-
1
-
-
-
1
Total VAL D' AOSTA
-
-
-
1
-
-
-
1
VENETO
-
-
-
-
3
3
2
12
4
1
-
-
3
3
3
12
4
Total VENETO
-
-
-
-
24
1
-
25
TOTAL ITALY
29
32
56
265
374
20
5
781
-
-
-
1
1
-
-
-
1
1
29
32
56
266
375
20
5
783
TUSCANY
FRANCE
Province
MASSA CARRARA
GROSSETO
LUCCA
PRATO
PISA
TRENTO
TERNI
PADUA
TREVISO
VENICE
VERONA
VICENZA
LUXEMBOURG
NICE
GRAND TOTAL
Banca Reg. Banco di
Banca
Banca
Grand
Lombarda Lombarda P.I.
Total
RISK MANAGEMENT
The overall design of the risk management system is based on the principles laid down for such
matters by the Basel Committee for Banking Supervision and is in line with the instructions issued
by the Bank of Italy.
In particular, the functions of identifying, measuring and controlling quantifiable risks on an integrated basis have been centralized in independent departments within the Parent Bank (Risk Management and Planning and Management Accounting). These departments are responsible for ensuring
constant control over the Group’s current and prospective exposure to market, lending, liquidity and
operating risks.
The functions carried out by the risk management department take two forms:
• management of current risks, carried out through the existing control system;
• a profiling project for the development of a system for the control of risk consistent with the
“New Basel Capital Accord” proposed by the Basel Committee in January 2001.
34
Consistent with the Basel requirements, the Credit Function was detached
from the Risks Area at the end of 2003 and has become the Credit Area, with
responsibility for the guidance and general supervision of lending activity at
Group level.
The Risk Area includes the Risk Management sector which is separated into
three distinct functions, each dedicated to managing one of the risks identified
in the proposed New Basel Capital Accord (credit, market and operational
risk). This Area now also monitors Insurance activities at Group level, in order
to harmonize application of the results of the Operational Risks project.
Current activities
The control of interest risk is carried out by means of Gap analysis and
Sensitivity models, using the Static A&LM system, developed during the
course of 2001, which forms part of a wider project entitled the “Evolution
and integration of the financial risk management and control system”.
In particular, the Static A&LM system (operational from September 2001 for
all banks in the Group) introduces important features absent from the previous system:
• the “stickiness» of positions due on demand;
• the index-linking of floating rate positions (especially mortgage loans);
• an initial approach to the logic of transferring risks and yields using the
model of Risk Taking Centers, reflecting the current divisionalization of
the Commercial Banks (Corporate, Retail, Institutional Counterparties, Private Customers, Financial Consultants).
Sensitivity is measured in terms of duration (sensitivity of values to parallel
shifts in the yield curve of 100 bp). Gap analysis is carried out both with a
view to the short term (within 12 months) and to the medium/long term
(beyond 12 months). The analysis up to 12 months is carried out by groups
of monthly maturities, while six-monthly groups are used up to 3 years and
annual ones for maturities over 3 years.
Static A&LM is also used to analyze liquidity risk, based on the flows of
principal and interest falling due each month over the next twelve months.
A&LM reports are produced monthly for the larger banks in the Group, and
quarterly for the other banks. Gap analysis beyond a year is also carried out
with greater frequency any time it is necessary to monitor the interest rate
risk to ensure balance sheet items are hedged properly.
35
As regards the market risk generated by the Finance Department’s trading
activity, at the start of 2003 the Board of Directors of Banca Lombarda e
Piemontese approved a new set of Finance Regulations giving the Finance
Department limits in terms of Value At Risk (VaR) calculated using
variance/covariance methods, with a time horizon of one day and a confidence
level of 99%; these risk limits are also accompanied by Stop Loss criteria.
The limits for VaR cover:
1. Exposure to exchange risk;
2. Exposure to equity risk;
3. Exposure to interest rate risk.
4. Exposure to volatility risk (Vega risk).
In order to limit exposure to corporate securities, criteria have been introduced that will lead to the definition of limits in terms of notional amounts
per sector/rating.
The new finance regulations also contain an approval process for new business on financial markets.
As regards exposure to interbank markets and interest risk generated
by the Group’s structural assets (Banking Book), the Finance Regulations
define limits for the Finance Department’s activities on behalf of all Group
banks in order to ensure structured, effective management of the different
levels of risk.
The ratio of the sensitivity of the value of on- and off- balance sheet assets
and liabilities less trading balances to stockholders’ equity will be monitored
in this respect. When calculating this ratio, all balance sheet items have to be
marked to market, even those that are not negotiable, so that any exposures
of all assets and liabilities to interest rate risk can be evaluated. The upper
limit for this ratio is set at 2% of stockholders’ equity for the Parent Bank.
the method used for calculating sensitivity, both for the unrestricted securities portfolio and for the entire balance sheet structure, is called parallel shift
analysis. This method calculates the change in value in reaction to parallel
shocks to the entire interest rate structure: the Banca Lombarda e Piemontese
Group has assumed a shock of +/-100 basis points, calculated by means of
A&LM and VaR.
The subsidiary banks have also adopted the Finance Regulations and have
granted a mandate to Banca Lombarda e Piemontese to manage their securities portfolio and financial risks. This mandate establishes that the Finance
Area has to operate within the limits laid down in the Regulations.
36
As for lending risk, the procedure currently in use makes it possible to take
account of the Group’s overall exposure to an individual customer or group
of related customers. The credit limits are reviewed on a daily basis and
any overruns not previously authorized are identified and reported to the
appropriate level of authority, so as to check the global exposure to each
authorized borrower.
Control over the regularity of all positions is carried out by a specific central
function at each of the subsidiary banks, with the power to classify loans in
the way that suits them best if branches appear not to be monitoring the situation adequately.
As regards the monitoring of performing loans, automated risk analysis procedures are used to highlight counterparties showing anomalies, which are
then examined individually.
In order to measure the potential loss of value inherent in the performing
loans portfolio and calculate the amount of the general provisions that need
to be made, current procedures work out the amount of the writedown to be
applied to individual counterparties and to the individual types of loans,
based on the results of this automated risk analysis procedure. For any
anomalous positions within the performing loans category, higher writedown
rates are applied automatically. In addition, positions considered of greatest
risk are written down on a case-by-case basis.
The Parent Bank reviews the performance of each bank’s loan portfolio by
geographical area, sector of the economy and customer segment. In so doing
it identifies the proportion of non-performing and anomalous situations,
thereby providing fundamentally important information for devising a prudent strategy for commercial development.
As regards the management of credit limits for Italian and foreign institutional counterparties and country risk, there are IT procedures in place to monitor these risks.
Ratings on institutional counterparties and countries are also obtained from
outside agencies in order to have constant updates on their solvency.
As for legal risk, the Bank maintains constant control over the validity,
effectiveness and enforceability of contracts under current legal norms and
regulations.
As regards the validity and effectiveness of contracts, the formats developed
by the trade associations (ABI, ISDA, etc) are usually adopted, adapting them
if necessary to our own requirements. As regards the checking of signature
powers, suitable documentation (by-laws, board resolutions, powers of attorney, etc) is obtained on each occasion as required.
37
Project development
The project development activities performed by the Parent Bank’s Risk and
Planning and Management Accounting departments are particularly important. They seek to provide the Group with a system for controlling market,
lending and operational risks according to the classification recommended
by the Basel Committee, which is geared to risk management and control as
well as the allocation of capital.
The Group is being organized by business areas in order to:
• improve corporate governance at the business level;
• explicitly consider “risk” as a key factor when deciding how to allocate
assets;
• reason by lines of business in terms of their contribution to the creation
of stockholder value in order to allocate the Group’s capital more effectively.
As for credit risk, the Parent Bank’s Risk Department is currently leading a
project aimed at setting up a system of lending risk management and control,
parts of which will be submitted for Bank of Italy authorization. This program
is one step in the process of adopting new standards for quantifying capital for
supervisory purposes, as recommended by the “New Basel Capital Accord”.
The project will be implemented using a step-by-step approach made up of
various phases, at the end of which it will be possible to obtain a rating and
measure the capital at risk for each and every customer, together with the
related credit exposures by using Credit Value at Risk methods (CreditVaR).
The project is currently at the stage of developing the Group’s internal rating
model. The internal rating system will become an integral part of the various
processes of customer credit line approval, lending policy management and
pricing, and the measurement of the risk capital allocated.
The customers will be grouped divided into “Large Corporate”, “Corporate”,
“Small Business” and “Retail” for development of the models.
Presently, models currently being prepared are those relating to the “Large
Corporate” businesses - as part of the S.I.R.C. project promoted by the Centrale dei Bilanci (Financial Statement Archive) in Turin, together with primary
Italian banking groups - and the “Corporate” segment.
The Group is currently analyzing the other customer segments.
As for operational risk, work has begun on a group-wide project aimed at
setting up an integrated system for the identification, measurement and control of operating risks, based on international best practices and the qualitative and quantitative standards recommended in the New Basel Accord.
38
At present, the Banca Lombarda e Piemontese Group has implemented the
requirements for the Standardized Approach, as indicated in the current version of the New Basel Accord. The project also envisages taking the steps
necessary to apply an Advanced internal measurement system, at least for
the more significant business lines.
As regards the status of the project currently in progress, the operating losses
in 2001 and 2002 have been historically reconstructed and, starting in early
2003, there is a function, available on the Group’s internal network, for the
integrated and systematic reporting of such losses.
In keeping with the recommendations contained in the proposed New Basel
Accord, an organizational model has been defined for managing operating
risks and an Operational Risks Committee set up within the Parent Bank,
charged with deciding policies and monitoring the complex process of Operational Risk Management. As already stated, a specific function for studying
methods, analysis and assessment of these risks is operating within the Risk
Management sector.
The Group has also joined the DIPO Observatory on operational risks
launched by the Italian Bankers’ Association for the exchange of data on
losses by the industry as a whole.
AUDIT ACTIVITIES
The system of internal control adopted by the Banca Lombarda e Piemontese
Group involves, in the first place, the Board of Directors and senior management, who define the strategies, policies and control objectives for all the
risks that have been identified. The Board also establishes the way that powers are delegated in order to ensure that the various levels of risk are managed in a careful and effective manner.
After this, the system of controls involves in various ways the administrative
functions, the Board of Statutory Auditors, the Internal Control Committee,
Management and Personnel.
Verification that operations are performed properly is entrusted to a specific
internal auditing function which assesses the overall functioning of the system of internal controls designed to guarantee the effectiveness and efficiency of business processes, the safeguarding of assets and the avoidance of
losses, as well as the reliability and completeness of accounting and management information.
Verification work is performed directly in relation to the Parent Bank and at
those Group companies that have arranged for outsourcing support; work at
the other subsidiaries was carried out in accordance with recommendations
from the Bank of Italy.
39
Activities comprise:
- verification of operational processes within central and branch functions,
including on site checks, covering compliance with legislative and regulatory requirements, as well as the adequacy of internal regulations and
related compliance;
- verification of the adequacy of line controls and the reliability of the operational structures and mechanisms for delegation;
- verification of the accuracy of the information available in the various
areas and the way it is used;
- verification of the lending process and loan administration, including
remote monitoring;
- assessment of the adequacy and effectiveness of the processes for the
development and administration of the information systems, in order to
ensure their reliability, security and functionality;
- monitoring, with on site visits, of dealing in financial instruments and the
adequacy of the related control systems, as well as of compliance with the
rules of conduct;
- verification of compliance with the anti-money laundering regulations,
together with the provision of consultancy and other awareness support.
Internal auditing activities are carried out with reference to an annual plan,
devised following an analysis of the risks in order to determine the priorities,
consistent with the Bank’s objectives.
The assessment of the systems of internal control and the results of the verification work performed are periodically presented to the Board and supervisory committees; any weaknesses identified during on site visits are communicated to the managers of the organizational units concerned for the implementation of timely action, which is the subject of follow-up activity.
40
HUMAN RESOURCES
At December 31, 2003, the Group employed 7,475 persons, including 328 under fixed-term contracts
and 550 under part-time contracts.
The breakdown of employment by Group company is as follows:
COMPANY
STAFF EMPLOYED
12.31.2002
Total
of which on
long-term
contracts
BANCA LOMBARDA
409
371
BANCA LOMBARDA PRIVATE INVESTMENT
LOMBARDA SISTEMI E SERVIZI
634
602
STAFF EMPLOYED
12.31.2003
Total
of which on
long-term
contracts
DIFFERENCE
Total
of which on
long-term
contracts
49
455
420
46
17
11
17
11
652
628
18
26
BANCA REGIONALE EUROPEA
2,026
1,985
1,977
1,954
- 49
- 31
BANCO DI BRESCIA (incl. Luxembourg branch)
3,004
2,816
2,965
2,810
- 39
-6
6
5
5
5
-1
-
BANCA DI VALLE CAMONICA
377
357
377
35
-
-4
BANCA CASSA DI RISPARMIO DI TORTONA
219
211
215
213
-4
2
BANCO DI SAN GIORGIO
217
206
220
207
3
1
SBS LEASING
145
136
155
150
10
14
CBI FACTOR
132
109
129
108
-3
-1
SILF
81
75
99
95
18
20
CAPITALGEST
57
55
63
61
6
6
BANCO DI BRESCIA (Luxebourg branch subject
to Lux. law)
CAPITALGEST ALTERNATIVE INVESTMENT
-
-
1
1
1
1
VENETA FACTORING
45
38
44
38
-1
-
GRIFOGEST
19
18
23
21
4
3
BANCA LOMBARDA INTERNATIONAL
47
44
46
45
-1
1
SOLOFID
11
11
14
11
3
-
MERCATI FINANZIARI
14
14
15
13
1
-1
3
3
3
3
-
-
7.446
7.056
7.475
7.147
29
91
SIFRU SIM
TOTALE RESOURCES
Total employment has increased by 29 persons since December 31, 2002. This rise principally relates
to the addition to the Group of Banca Lombarda Private Investment (+ 17 persons) and to the effect
of new jobs created within Banca Lombarda (+ 46 persons, mostly in the Commercial Area following
expansion of the network of financial consultants), Lombarda Sistemi e Servizi (+ 18 persons), S.B.S.
Leasing (+ 10 persons) and SILF (+ 18 persons), net of terminations at Banco di Brescia (- 39 persons) and Banca Regionale Europea (- 49 persons).
The reduction in employment at Banco di Brescia and Banca Regionale Europea reflects efficiency
improvements deriving from the gradual rationalization of central departments and operating units
subject to territorial overlap following the reallocation of branches among Group banks in 2002.
41
Rationalization of the workforce
With regard to the management of human resources within the Banca Lombarda e Piemontese Group, significant action was taken in 2003 with regard to the
rationalization of the workforce, completion of work to renew the supplementary in-house agreements, and the continuous education of employees.
In addition, the objectives set for the containment of payroll costs were achieved
in 2003, with a rise of about 2% at Group level following incisive action to
reduce the level of untaken vacation and further contain overtime working.
Work continued in 2003 on streamlining organizational structures (particularly those at head office) and optimizing the allocation of human resources
within the Group, mostly through transfers of individual employment contracts.
Implementation of the agreements reached between Group companies and
the respective trade unions was completed in the second semester. These
relate to admission to the“ “Solidarity fund for income and employment support, and retraining of banking personnel» of workers meeting the requirements set out in Ministerial Decree no. 158/2000 and subsequent minutes of
the meeting held at the Italian Bankers’ Association on January 24, 2001.
This recourse to the Solidarity Fund relates to 189 employees, analyzed as follows by Group company:
COMPANY
ACCESS TO THE
% OF
SOLIDARITY FUND
STAFF
BANCA LOMBARDA
5
1,1
BANCO DI BRESCIA
77
2,6
73
3,7
9
2,4
25
3,8
189
2,9
TOTAL
These leavers were mostly replaced with new hires, representing no more
than a third of those admitted to the Fund.
The new Corporate and Retail divisional distribution model was implemented by virtually all Group banks during 2003, with the identification of the
new professional managers concerned.
As mentioned, the network banks have continued to implement the project
entitled “Optimization of the Retail Model” launched in 2002. This is intended to improve the commercial services provided to customers and further
rationalize payroll costs, by recourse to the flexible hours and forms of
employment envisaged in the national payroll contract and the new law that
reforms the labor market (the “Biagi law”).
42
With a view to increasing the level of flexibility in personnel management
and the related costs, priority has been given to hiring new staff on fixedterm contracts, mainly to cope with turnover at the network banks, and the
use of part-time contracts has been encouraged.
In addition to these rationalization measures, the Group has continued to
work on its expansion plans. This involved identifying and recruiting suitable
professional and managerial staff to support expansion of the network of
Banca Lombarda Points and the Parent Bank’s Private branches, and to
strengthen the areas responsible for governance within Banca Lombarda,
with particular reference to Strategic Marketing, Administration, Credit and
Finance.
New Incentive Scheme
The “New Incentive Scheme» project was launched during 2003, with IT and
procedural support from Lombarda Sistemi e Servizi, in order to improve the
commercial effectiveness of the network and other operational efficiency of
central departments. The objective is to promote “active participation” by
Group employees, via transparent incentive mechanisms that are as automatic as possible (and therefore not arbitrary), while encouraging the achievement of corporate objectives via the realization of personal goals. The incidence of the incentive element increases as a direct function of the value
created, with the rapid elimination of one-off bonuses.
The new Scheme has the following objectives:
• to encourage the involvement of all network employees in the achievement
of established objectives by rewarding teamwork;
• to link the payment of bonuses to the achievement of individual, team
and local company goals associated with the established objectives;
• to differentiate rewards based on Roles, levels of Responsibility and the
nature of the Results achieved, applying objective, transparent and easily
understood criteria;
• to stimulate achievement of the objectives by the size of the performancerelated bonuses;
• to work on the variable element of remuneration by distributing part of
the additional value generated in the form of bonuses.
The new Scheme, which will be applied from 2004, is based on the allocation of budget objectives for personal and/or operating unit portfolios
including, as a significant innovation, the allocation of specific quali/quantitative objectives to the staff in Central Departments.
43
Contract renewals
Having completed the procedures for the renewal of the in-house supplementary payroll contract, consistent with the related clauses of the national
payroll contract dated July 11, 1999, for Professional and Management
grades, the principal Group companies signed coordinated agreements with
trade unions during 2003. These agreements, prepared on a common basis
and standard throughout the Group, provide a uniform point of reference for
future renewals of supplementary payroll contracts by all Group companies.
The project to upgrade the human resources IT system continued in 2003
together with the concentration at the Parent Bank of all personnel administration activities and the processing of Group payroll, which now includes
the employees of Solofid, Sifru and Banca Lombarda Private Investment.
Training
During 2003, the Banca Lombarda e Piemontese Group felt the need to
launch a two-year Group training program involving all professionals from
every bank and supplementing previous training, with a view to enabling
each person to consolidate their role with reference to their objectives, the
related requirements and their professional knowledge.
The training plan was coordinated with common guidelines at Group level
and adapted to the needs of each company. Action taken has involved professionals operating in the Retail, Corporate and Private divisions of the network banks, with particular emphasis on managerial and technical-commercial aspects.
The training program for new recruits at network banks was also formalized
during the year. This is an intercompany program operated on a modular
basis and covers all key aspects as an introduction to branch activities.
Particular attention was also paid to language training, especially for personnel in central departments, given the increasing need for contacts at an international level.
Recourse was also made to e-learning during 2003, especially as support for
specific projects (e.g. the Patti Chiari initiative, the security project and the
application of Law 626/1994), as well as for introductory training regarding
regulatory changes.
44
The total training carried out within the Group amounted to 16,816
man/days, analyzed as follows:
COMPANY
IN-HOUSE
COURSES
SELFSTUDY/
E-LEARNING
EXTERNAL
COURSES
TOTAL
AVERAGE
CLASSRROOM
DAYS MAN/DAYS
1,379
166
328
1,873
4.3
BANCO DI BRESCIA
3,765
2,028
322
6,115
2.0
4,066
465
96
4,627
2.3
862
217
73
1,152
3.0
384
15
3
402
1.9
647
32
2
681
3.1
995
457
514
1,966
3.1
12,098
3,380
1,338
16,816
2.45
BANCA LOMBARDA
TOTAL MAN/DAYS
The process of selecting personnel for all Group companies - increasingly oriented towards the use of electronic channels and recruiting on line - has
involved the recruitment of both professionals and persons without experience.
Particular attention has been given to the correct application of regulations
for ensuring the health and safety of working environments. In order to
monitor more carefully and precisely the complex process of compliance
with occupational health and safety regulation, a computer system dedicated
to the integrated management of safety has been installed. The use of this
product, known as BANSIC, has been accompanied by numerous on-site
inspections, in conjunction with the appointed medical expert, in order to
verify the compliance of work places with current legislation.
The steady improvement in occupational safety has been monitored constantly, avoiding, as far as possible, the emergence of any problems.
In order to coordinate activities more effectively, the equivalent functions
within Banca Regionale Europea have been transferred to the Workplace
Safety and Prevention department at the Parent Bank.
Careful attention has also been given to training updates in the specific area
of occupational safety, taking forward programs for staff in charge of emergency procedures.
An analysis of personnel by category is provided below (at the end of the
year).
45
The employees in each of the following categories at the end of 2003 were
as follows:
COMPANY
EXECUTIVES
SUPERVISORS
(1)
PROFESSIONAL
GRADES
TOTAL
56
171
228
455
BANCA LOMBARDA
BANCA LOMBARDA PRIVATE INVESTMENT
BANCO DI BRESCIA (incl. Luxembourg branch)
2
5
10
17
53
879
2,033
2,965
-
2
3
5
BANCO DI BRESCIA (Luxembourg branch subject
to Lux. law)
30
508
1.439
1.977
2
101
274
377
4
44
167
215
4
61
155
220
BANCA LOMBARDA INTERNATIONAL
1
11
34
46
10
188
454
652
SBS LEASING
6
23
126
155
CBI FACTOR
7
40
82
129
SILF
-
19
80
99
CAPITALGEST
4
23
36
63
CAPITALGEST ALTERNATIVE INVESTMENT
-
1
-
1
VENETA FACTORING
3
5
36
44
GRIFOGEST
1
5
17
23
MERCATI FINANZIARI
2
4
9
15
SOLOFID
1
2
11
14
SIFRU SIM
-
1
2
3
186
2.093
5.196
7.475
TOTALE RISORSE
(1) including personnel in the 1st, 2nd, 3rd and 4th level managerial grades.
TRANSACTIONS WITH GROUP COMPANIES AND RELATED PARTIES
As explained previously, the Group’s organizational structure centralizes certain functions and services of the subsidiaries within the Parent Bank, Banca
Lombarda e Piemontese, and Lombarda Sistemi e Servizi.
These service relationships are remunerated at market conditions, including
overheads and depreciation.
Transactions between related parties, as defined by CONSOB in recommendations 97001574 dated February 20, 1997, and 98015375 dated February 27,
1998, and Banca Lombarda e Piemontese and other Group companies relate
to normal financial intermediation and services. These transactions are monitored to identify possible conflicts of interest and are conducted on the usual
terms for prime customers.
46
BALANCE SHEET
AND STATEMENT OF
INCOME
CONSOLIDATED COMPANIES
The consolidated financial statements of the Banca Lombarda e Piemontese
Group comprise the situation of the Parent Bank, and of those subsidiaries
belonging to the banking group. The changes in the scope of consolidation
since December 31, 2002, are discussed below with regard to companies
consolidated line-by-line and those carried at equity.
Consolidation line-by-line
Capitalgest Alternative Investments SGR S.p.A., a wholly-owned subsidiary of
the Parent Bank, was formed in January.
Banca Lombarda e Piemontese signed a preliminary agreement with Banca
Popolare di Vicenza in April to purchase 100% of Banca Idea S.p.A..This
transaction was completed in July. Banca Idea was subsequently renamed
Banca Lombarda Private Investment S.p.A.. With regard to the statement of
income, the results of Banca Idea have been consolidated on a line-by-line
basis from April 2003 onwards.
Idea Advisory S.A., 99% owned by Banca Idea, also entered the scope of
consolidation as a result of this transaction.
A 90% interest in Electrolux Financiera S.A. was purchased in September
(51% by the Parent Bank and 39% through Veneta Factoring S.p.A.).
Given the limited impact of these acquisitions on the pre-existing Group, it
was decided not to prepare pro-forma versions of the accounts as of December 31, 2002.
During the year, the Parent Bank also completed the following transactions:
• purchase of a 15.2% interest in Banca Cassa di Risparmio di Tortona
S.p.A., already 60% owned by Banca Regionale Europea S.p.A.;
• purchase of an additional 9.76% interest in CBI Factor S.p.A,, increasing
its investment to 97.23%;
• purchase of an additional 1.96% interest in Banco di San Giorgio S.p.A.,
increasing its investment to 32.63% and that of the Group to 86.70%, since
this company is 54.07% owned by Banca Regionale Europea.
Equity method
In May the Parent Bank purchased an additional 12.75% interest in Corporation Financière Européenne S.A., increasing its investment to 63.75%; this
company is valued at equity because does not carry on a business activity
related to that of the Group.
In August, the Parent Bank sold its 33.33% interest in Itradeplace SpA.
47
The reclassified balance sheet and statement of income, highlighting the
principal results of operations, are provided below. These are followed by
comments on the principal indicators relating to earnings, productivity and
efficiency.
The results of Banca Lombarda Private Investment have been consolidated in
the financial statements as of December 31, 2003, from the date of acquisition (April 2003). The overall economic impact of consolidating Banca Lombarda Private Investment was a loss of 7.4 million Euro. This amount also
includes the reduction in taxation deriving from the writedown of the book
value of the investment in that bank by Banca Lombarda e Piemontese.
The consolidated economic and financial data for 2002 have not been restated on a pro forma basis to take account of the acquisition of Banca Lombarda Private Investment. This is because the company was affected by extraordinary events in 2003 which do not allow comparison with the prior year on
a consistent basis.
The other changes in the scope of consolidation during 2003, referred to earlier, have not had a significant effect on the consolidated financial statements.
48
RECLASSIFIED CONSOLIDATED BALANCE SHEET
(thousands of euro)
ASSETS
12.31.2003
12.31.2002
Changes
Amount
%
150,348
135,733
14,615
10.8
23,584,079
21,707,339
1,876,740
8.6
23,141,912
21,377,532
1,764,405
8.3
194,262
86,273
107,989
125.2
Cash and deposits with central banks
and post offices
Loans to customers
of which:
- lending
- repurchase agreements
247,905
243,534
4,346
1.8
Due from banks
- non-performing loans
2,383,294
2,466,841
-83,547
-3.4
Securities
1,663,036
2,307,354
-644,318
-27.9
Equity investments
477,713
437,350
40,363
9.2
Intangible and tangible fixed assets
873,117
565,797
307,320
54.3
717,681
726,643
-8,962
-1.2
1,649,805
1,677,051
-27,246
-1.6
31,499,073
30,024,108
1,474,965
4.9
31.12.2003
31.12.2002
22,369,446
21,433,954
935,492
19,737,782
18,633,490
1,104,292
5.9
1,863,846
2,053,177
-189,331
-9.2
Goodwill arising on application of the equity method
and on consolidation
Other assets
TOTAL ASSETS
LIABILITIES AND STOCKHOLDERS’
EQUITY
Due to customers
Changes
Amount
%
4.4
of which:
- deposits
- other technical forms
Due to banks
Provisions for specific use
Other liabilities
Minority interests
767,818
747,287
20,531
2.7
2,829,587
2,527,510
302,077
12.0
668,004
604,681
63,323
10.5
1,866,534
1,894,927
-28,393
-1.5
459,526
467,483
-7,957
-1.7
1,305,821
1,347,138
-41,317
-3.1
1,888,096
1,618,337
269,759
16.7
112,059
130,078
-18,019
-13.9
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 31,499,073
30,024,108
1,474,965
4.9
Subordinated liabilities
Stockholders' equity:
- Capital stock, reserves and retained earnings
- Net income for the year
49
RECLASSIFIED CONSOLIDATED STATEMENT OF INCOME
(thousands of euro)
12.31.2003
12.31.2002
Changes
Amount
%
10.
Interest income
1,335,089
1,400,143
-65,054
-4.6
20.
Interest expense
-589,440
-682,660
-93,220
-13.7
30.
Dividends and other revenues
16,593
30,311
-13,718
-45.3
762,242
747,794
14,448
1.9
40. Commission income
469,446
457,805
11,641
2.5
50. Commission expense
-96,473
-70,899
25,574
36.1
70. Other operating income
168,849
144,129
24,720
17.2
110. Other operating expenses
-31,234
-21,973
9,261
42.1
510,588
509,062
1,526
0.3
45,885
25,925
19,960
77.0
1,318,715
1,282,781
35,934
2.8
- Payroll costs
-429,778
-419,899
9,879
2.4
- Other administrative costs
-295,374
-295,587
-213
-0.1
Administrative costs
-725,152
-715,486
9,666
1.4
OPERATING INCOME
593,563
567,295
26,268
4.6
90. Total adjustments to tangible and intangible assets
-156,058
-132,951
23,107
17.4
-18,927
-16,346
2,581
15.8
-173,057
-148,383
24,674
16.6
43,799
46,193
-2,394
-5.2
-154
-5,502
-5,348
-97.2
4,092
2,606
1,486
57.0
293,258
312,912
-19,654
-6.3
190. Extraordinary income
36,791
47,773
-10,982
-23.0
200. Extraordinary charges
-22,658
-12,939
9,719
75.1
INCOME BEFORE INCOME TAXES
307,391
347,746
-40,355
-11.6
240. Income taxes for the year
-158,865
-179,549
-20,684
-11.5
148,526
168,197
-19,671
-11.7
-150
-
-150
n.s.
-36,317
-38,119
-1,802
-4.7
112,059
130,078
-18,019
-13.9
NET INTEREST INCOME
Net income from services
60. Profits (losses) on financial transactions
NET INTEREST AND OTHER BANKING INCOME
80. Administrative costs
100. Provisions for liabilities and charges
120. Adjustments to loans and provisions for
guarantees and commitments
130. Writebacks of loans and provisions for
guarantees and commitments
150. Adjustments to financial fixed assets
170. Income from investments carried at equity
INCOME FROM OPERATING ACTIVITIES
NET INCOME FOR THE YEAR
(prior to allocations to equity reserves)
230. Change in reserve for general banking risks
250. Income (loss) attributable to minority interests
NET INCOME FOR THE YEAR
50
BALANCE SHEET
Funding
Assets under management of 62,901 million Euro are 4,391 million higher
than at the end of 2002, up 7.5%.
This growth is attributable to both direct and indirect deposits. In particular,
the level of direct deposits was sustained by the trend in deposits on current
account. These benefited from the low rates of interest available on alternative investments, which have not penalized the holding of liquidity, and from
the tendency of customers to subscribed for bonds issued by the Bank. Within asset management, indirect deposits performed very well due, in large
measure, to the steady recovery of the financial markets. Insurance-linked
savings have continued to expand with exceptional rapidity.
Change in funds under management
(millions of euro)
12.31.2003
Value
%
12.31.2002
Value
%
Changes
Amount
Direct customer deposits
22,369
35.6%
21,434
36.6%
- Due to customers
14,681
23.3%
14,161
24.2%
520
3.7%
1,864
3.0%
2,053
3.5%
-189
-9.2%
of which repurchase agreements
- Securities issued
935
%
4.4%
7,688
12.2%
7,273
12.4%
415
5.7%
7,156
11.4%
6,688
11.4%
468
7.0%
Indirect deposits
40,532
64.4%
37,077
63.4%
3,455
9.3%
- Administered savings
18,144
28.8%
17,619
30.1%
525
3.0%
- Asset management
22,388
35.6%
19,458
33.3%
2,930
15.1%
4,908
7.8%
3,673
6.3%
1,235
33.6%
58,511 100.0%
4,390
7.5%
of which Bonds
of which: technical reserves
Total assets under management
62,901 100.0%
Direct deposits
Market uncertainties have continued to influence the nature and dynamics of
deposit taking from customers, sustaining the more liquid elements.
Amounts due to customers of 22,369 million Euro have increased by 935 million Euro, up 4.4%.
With regard to the short-term elements, there has been a strong increase in
current accounts (+8.5%), while savings deposits and certificates of deposit
have contracted further with respect to 2002. At the medium/long-term end,
bonds have increased by 7%.
51
Indirect deposits
Following the contraction in 2002, indirect deposits from customers have
increased steadily due to the good performance of asset management activities, subscriptions to insurance policies and the rise, if only modest, in securities lodged for safe-keeping and administration.
In particular, the total of 40,532 million Euro is 9.3% higher than at the end
of December 2002.
The administered element (18,144 million Euro) has risen by 3%.
With reference to the bonds of customers held for safekeeping and administration that were issued by major Italian industrial group in financial difficulties, it is confirmed that Group banks merely gathered the related orders in
accordance with Consob and Bank of Italy regulations. Furthermore, the
Banca Lombarda e Piemontese Group did not play an active role in the
underwriting and/or placement syndicates for the debt and risk capital
issued by these industrial groups.
Asset management (22,388 million Euro) has increased by 15.1%. This total
reflects a rise in monetary and so-called “flexible” funds and a decrease in
bond funds. Following substantial downsizing over the past two years, the
overall weighting of funds investing in stocks has recovered slightly with
respect to total funds.
Insurance reserves of 4,908 million Euro have increased by 33.6%, following
premium income over the year of 1,187 million Euro.
Subordinated liabilities fell by 3.1% to 1,306 million Euro. They comprised
preference shares, and upper and lower tier II liabilities forming part of regulatory capital. No further subordinated loans were issued in 2003.
Loans to customers
Overall, loans to customers increased over the year by 8.6% to 23,584 million
Euro. This rise in lending benefited, in particular, from demand for
medium/long-term loans which, due to the low level of interest rates,
remains strong among both households and businesses. With regard to shortterm lending, there was a 3.5% decrease in current account overdrafts.
In terms of the analysis of lending by customer segment, the greatest growth
has come from households, followed by finance companies and manufacturing industry.
52
This strengthening of relations with customers was accompanied by a policy
of selective lending, focusing on geographic areas, economic sectors and
market segments. As part of the process of improving the quality of the loans
portfolio, there has been a gradual shift towards economic sectors with better growth prospects: loans to the service sector (27% of the total) exceeded
those to the manufacturing industry (22%), followed by the construction sector (6%) and agriculture (2%).
Doubtful loans
Despite the prolonged, adverse economic conditions, the quality of the
Group’s lending has not deteriorated.
With reference to the financial difficulties of certain major Italian industrial
groups, the total exposure of the Banca Lombarda Group to the Parmalat
group amounts to 35 million Euro, of which about 80% has been covered by
provisions. More specifically, the amounts due from the Parmalat group companies in extraordinary receivership pursuant to Decree 347 dated December
23, 2003, have been written off and expensed; the remaining amounts due
from that group have been classified as non-performing loans.
Overall, non-performing loans of 248 million Euro have increased by 1.8%
with respect to the prior year. However, they have improved as a percentage
of total lending from 1.12% in 2002 to 1.05% at year end.
The coverage of non-performing loans amounts to 41.5%, having regard for
expected recoveries in relation to these balances.
Problem loans, including those to customers in temporary difficulty, amount
to 323.7 million Euro, of which 12.9% is covered by provisions.
The provision for so-called “general coverage» amounts to 83.5 million Euro
(0.36% of performing loans).
Securities
The securities portfolio has decreased by 27.9% with respect to December 31,
2002, to 1,664 million Euro. The average duration is 0.65 years.
In particular, the securities portfolio contains 378.5 million Euro in investment,
primarily floating-rate, securities with an average duration of 0.66 years. The
dealing portfolio amounts to 1,284.5 million Euro with a duration of 0.64 years.
Interbank balances
The net interbank borrowing position is 446.3 million Euro (-60.7 million
Euro in 2002).
The increase reflects the faster growth of lending with respect to the rise in
customer deposits.
53
Derivatives
The activities of the Banca Lombarda e Piemontese Group in the derivatives
sector have focused on achieving a high degree of correlation between the
income-earning profiles of assets and liabilities, adopting prudent managerial
criteria without any speculative element. Accordingly, derivative transactions
have served to hedge interest rate, maturity date and exchange rate risks
related to the profile of the Group’s assets and liabilities.
Stockholders’ equity
Consolidated stockholders’ equity as of December 31, 2003, comprises net
income for the year of 112.1 million Euro and capital and reserves of 1,888.1
million Euro. The latter balance has increased by 241.7 million Euro over the
year, mainly as a consequence of the reserve recorded on the revaluation of
property pursuant to Law 350/2003, as discussed in the section of this report
dedicated to this subject.
The Parent Bank’s stockholders’ equity and net income for the year are reconciled with the consolidated amounts below.
(thousands of euro)
Stockholders’
equity
Net income
for the year
1,735,471
108,078
75,223
58,065
7,370
14,082
-
286,936
2,864
-165,774
152,843
2,872
-42
-165,774
2,000,155
112,059
Balance as of 12.31.2003 BANCA LOMBARDA E PIEMONTESE
risk reserves considered part of equity
reserves for general banking and financial risks
reserves for accelerated depreciation
Other adjustments:
- consolidated companies
- companies carried at equity
Dividends collected during the year
Dividends recorded on an accruals basis
Balance as of 12.31.2003 CONSOLIDATED FINANCIAL STATEMENTS
54
STATEMENT OF INCOME
The rise in revenues during 2003 and the containment of costs resulted in a
4.6% rise in consolidated operating income with respect to the prior year.
However net income was affected by greater provisions against loans, the
effect of the revaluation of property on depreciation and the cost of termination incentives paid to employees, as well as by a significant drop in net
extraordinary income. Overall, net income was 13.9% lower than in 2002.
Net interest income of 762.2 million Euro was 1.9% higher than in 2002
due to higher volume.
This improvement in margin was however partially offset by a fall in “extraordinary” dividends.
Net income from services of 510.6 million Euro was slightly higher than in
the prior year. In detail: commission income rose by 11.6 million Euro, but
was essentially unchanged after excluding the contribution made by Banca
Lombarda Private Investment; commission expense was 25.6 million Euro
higher (including about 9 million in relation to Banca Lombarda Private
Investment). The significant growth in this cost mainly reflects the commissions paid to the distribution channels of the near-banking companies; “net
operating income” has risen from 122.2 to 137.6 million Euro, mainly as a
result of higher income from securitization transactions.
Profits on financial transactions have risen from 25.9 to 45.9 million
Euro. These revenues include those deriving from trading in securities and
currency, together with commissions from the placement of derivatives with
customers to hedge rate risks.
Net interest and other banking income amounted to 1,318.7 million Euro,
2.8% higher than in 2002.
Administrative costs amounted to 725.2 million Euro, compared with 715.5
million in 2002. The rise of 1.4%, significantly below the rate of inflation, was
due to the growth in “payroll costs”; by contrast, “other administrative costs”
were unchanged.
“Payroll costs” (430 million Euro) grew by 2.4%, partly due to the increase in
employment and partly because of pay rises governed by the national payroll contract.
“Other administrative costs” of 295 million Euro remained at the 2002 level,
confirming the degree of attention paid to the control of this type of expenditure.
Operating income of 593.6 million Euro was 4.6% higher than in the previous year.
55
The adjustments to tangible and intangible fixed assets amounted to
156.1 million Euro, up 17.4% with respect to 2002. These include additional
depreciation (10.8 million Euro) on the revaluation of property and the
amortization of deferred costs relating to employees who were allowed to
join the Solidarity Fund in 2003.
Following these “extraordinary» operations, the cost/income ratio has risen
from 61.7% to 62.4%, a deterioration of 7 tenths of a point with respect to
2002.
Provisions for liabilities and charges rose from 16.3 to 18.9 million Euro.
This amount includes prudent provisions against claims from customers in
relation to investment services, having regard for possible future claims.
Net adjustments to loans, which write down specific positions to their estimated realizable value and reflect the inherent risk associated with performing loans, increased from 102.2 to 129.3 million Euro. This rise was
largely due to the recognition of losses and writedowns relating to the Parmalat group. For this reason, the cost of lending has risen to 0.55% from
0.47% in the prior year.
Income from ordinary activities amounted to 293.3 million Euro, down
6.3% with respect to 2002.
Net extraordinary income fell from 34.8 million Euro in 2002 to 14.1 million Euro in 2003; in particular:
• extraordinary income was 11 million Euro lower than in the prior year,
when gains on the disposal of equity investments totaled 12 million Euro;
• extraordinary charges were almost 10 million Euro higher than in 2002
due to the effect of the Tremonti tax reforms regarding the “participation
exemption”. This involved the elimination of deferred tax assets recorded
in prior years with regard to gains deriving from the intercompany transfer of equity investments.
Income taxes for the year of 158.9 million Euro correspond to an effective
tax rate for the Group of 51.7%, which is unchanged with respect to 2002.
Net income for the year was 13.9% lower at 112.1 million Euro.
56
PERFORMANCE OF GROUP COMPANIES
The performance of the principal Group companies during the year is
described below, with a brief comment on each.
BANKING
Banco di Brescia
Customer assets managed by the bank at the end of 2003 amount to 34,410
million Euro, up 6.6% over the year.
Direct deposits of 12,152 million Euro are 6.1% higher, mainly in relation to
current accounts (+7.8%) and bonds (+6.6%). Repurchase agreements have
fallen by 2% and represent just over 3% of total funding by the bank.
Following the contraction in 2002, indirect deposits from customers have
recovered steadily due to the good performance of asset management activities, subscriptions to insurance policies and the rise, if only modest, in securities lodged for safe-keeping and administration. The total of 22,258 million
Euro is 6.9% higher than at the end of 2002.
Loans to customers have risen by 8% to 11,346 million Euro. This rise in
lending benefited, in particular, from demand for medium/long-term loans
which, due to the low level of interest rates, remains strong among both
households and businesses.
Despite the prolonged, adverse economic conditions, the quality of the
bank’s lending has not deteriorated and total net non-performing loans fell
by 4.3% over the year. The incidence of non-performing loans to total lending fell to 0.85% from 0.96% in the prior year.
The bank’s statement of income reflects the performance of the banking system, affected by low interest rates and the timid recovery of the financial
markets.
Accordingly, net interest income fell by 4.3%, while net income from services
was 6.2% lower than in 2002. The continuing contraction of the margins
from banking activities has resulted in the implementation of cost containment policies: payroll costs were 0.8% lower, while other costs were essentially unchanged.
In this situation, the “cost/income” efficiency ratio has fallen by 3.4 percentage points to 55.9%. In addition, the depreciation charge contains an “extraordinary» element related to the revaluation of property.
Net income fell by 21.1% with respect to 2002.
57
(millions of euro)
Balance sheet
Loans to customers
Securities
Equity investments
Total assets
Due to customers
Indirect deposits and life insurance policies
- Asset management
Customer assets under administration
12.31.2003
12.31.2002
+/- Change % Change
11,346
430
85
15,341
12,152
22,258
10,425
11,833
2,952
34,410
800
10,504
870
79
14,319
11,449
20,821
10,250
10,571
2,384
32,270
636
842
-441
5
1,022
703
1,437
175
1,262
568
2,140
165
8.0
-50.6
6.6
7.1
6.1
6.9
1.7
11.9
23.8
6.6
25.9
375
267
642
334
308
118
392
285
676
335
341
150
-17
-17
-34
-1
-34
-32
-4.3
-6.2
-5.1
-0.2
-9.9
-21.1
375
375
-
-
Statement of income
Net interest income
Net interest and other banking income
Operating income
Net income
Other information
No. of branches
Banca Regionale Europea
Customer assets administered by the bank at the end of 2003 exceeded 18
billion Euro (847 million more than in 2002), up 4.9%. This growth was
mostly due to the rise in indirect deposits (+6.3%) and, to a lesser extent, in
direct deposits (+2%). Within asset management, indirect deposits performed
very well due to the steady recovery of the financial markets. Insurancelinked savings have continued to expand with exceptional rapidity.
Loans to customers rose over the year by 7.6% to 5,598 million Euro. The
most significant growth came from the household segment, with particular
demand for medium/long-term funds such as secured home loans.
Economic conditions lowered the creditworthiness of bank customers and
net non-performing loans were 5.7% higher than at the end of 2002. Their
incidence as a percentage of lending is however unchanged.
58
With regard to profitability, the expansion of the volume of banking business
was only partly reflected in the interest margin which was affected by the
trend in interest rates, with a further reduction in the spread compared with
last year. By contrast, net income from services has improved as a result of
the commissions generated by asset management activities.
Work to rationalize expenditure contained the rise in costs to 1.3% but,
despite this, operating income was 5.8% lower than in 2002. Increased
adjustments and provisions, together with a deterioration in “extraordinary”
items, affected overall results which were 17.4% lower than in 2002.
(millions of euro)
Balance sheet
Loans to customers
Securities
Equity investments
Total assets
Due to customers
- Asset management
12.31.2003
12.31.2002
+/- Change % Change
5,598
116
247
7,260
5,559
12,515
5,363
7,152
1,411
18,074
925
5,201
164
245
6,890
5,449
11,778
5,686
6,092
1,037
17,227
774
397
-49
1
370
110
737
-323
1,060
374
847
151
7.6
-29.6
0.6
5.4
2.0
6.3
-5.7
17.4
36.1
4.9
19.5
230.0
146.1
376.0
224.7
151.3
66.3
241.8
140.6
382.4
221.8
160.6
80.3
-11.8
5.5
-6.3
2.9
-9.3
-13.9
-4.9
3.9
-1.7
1.3
-5.8
-17.4
266
265
1
0.4
Statement of income
Net interest income
Operating income
Net income
Other information
No. of branches
Banca di Valle Camonica
Customer assets managed by the bank have risen by 5.9% to 2,219 million
Euro. Within this total, there has been a significant shift towards indirect
deposits which now represent 45.6% of total funding.
In particular, direct deposits amount to 1,208 million Euro, down 0.9% over
the year while, following the contraction in 2002, indirect deposits (1,011
million Euro) have increased steadily due to the trend in asset management
activities, subscriptions to insurance policies and the rise in securities lodged
for safe-keeping and administration.
59
The rise in lending by 9.7% was mainly due to demand for medium/longterm loans from households and businesses.
Against the tide, non-performing loans fell by 15.8% over the year and their
incidence as a percentage of lending is now 1.16%. By contrast, problem
loans, including those to customers in temporary difficulty, have increased
by more than 50% with respect to last year.
With regard to profitability, the bank was affected by the weak economic
conditions and the lower contribution from asset management due to the fall
in market rates; as a consequence, operating income was 9.2% lower than in
2002.
Despite efforts to contain expenditure, overall costs rose by 5.1% as a result
of higher costs incurred to maintain property and other fixed assets, and for
services provided by the Parent Bank and Lombarda Sistemi e Servizi.
Net income for the year was 18.8% lower than in 2002.
(millions of euro)
Balance sheet
Loans to customers
Securities
Equity investments
Total assets
Due to customers
- Asset management
12.31.2003
12.31.2002
+/- Change % Change
1,134
60
0.1
1,407
1,208
1,011
402
609
149
2,219
87
1,034
93
0.1
1,441
1,219
877
349
528
112
2,095
77
100
-33
-34
-11
134
53
81
37
124
10
9.7
-35.1
-2.4
-0.9
15.3
15.2
15.3
32.8
5.9
13.4
44.9
22.0
66.9
42.6
24.3
7.7
45.8
21.6
67.4
40.5
26.8
9.4
-0.8
0.4
-0.4
2.1
-2.5
-1.8
-1.8
1.9
-0.6
5.1
-9.2
-18.8
56
56
-
-
Statement of income
Net interest income
Operating income
Net income
Other information
No. of branches
60
Banco di San Giorgio
Customer assets managed by the bank have risen to about 1,600 million
Euro, up more than 200 million Euro (+ 14.7%) since the end of 2002.
This rise came mainly in the form of direct deposits, since the continuing climate of uncertainty has reinforced the propensity of customers to favor the
more liquid forms of investment. The rise in indirect deposits, although
smaller, reflected the strong performance of asset management following the
recovery of the financial markets.
The rise in volume also involved lending, which rose by 12.7% over the year.
As elsewhere in the banking system, the growth mainly came from
medium/long-term lending, stimulated by low interest rates, while the rise in
short-term lending was less marked.
Focus on the quality of lending has helped to lower even further the incidence of non-performing loans as a percentage of total lending, to 1.79% at
the end of 2003.
In terms of profitability, net interest income rose 8.2% due to the higher volume of deposits and lending to customers. Net income from services was
14.8% higher, mainly due to the good performance of “collection and payment services”, “guarantees given”, “international”, “recharging of account
expenses” and “credit application fees”.
Despite significantly higher costs linked with the growth in the scale and
organization of the bank, net income was 43.8% higher than in 2002.
(millions of euro)
Balance sheet
Loans to customers
Securities
Equity investments
Total assets
Due to customers
- Asset management
12.31.2003
12.31.2002 +/- Changes % Change
794
15
1
892
671
914
473
441
96
1,585
69
704
18
1
825
549
832
460
372
59
1,381
68
89
-2
0
67
122
82
13
69
37
204
1
12.7
-14.1
-2.6
8.1
22.2
9.8
2.7
18.6
62.7
14.7
1.2
26.9
15.4
42.3
24.2
18.1
4.3
24.9
13.3
38.2
22.1
16.0
3.0
2.0
2.1
4.2
2.1
2.1
1.3
8.2
16.0
10.9
9.3
13.0
43.8
32
31
1
3.2
Statement of income
Net interest income
Operating income
Net income
Other information
No. of branches
61
Banca Cassa di Risparmio di Tortona
Customer deposits managed by the bank have risen to 1,345 million Euro,
up 72 million (5.6%) since the end of 2002.
This rise is reflected in both direct deposits, since the continuing climate of
uncertainty has reinforced the propensity of customers to favor the more liquid forms of investment, and in indirect deposits represented by new investment in products offering capital protection.
Despite the continuation of adverse economic conditions, lending rose by
13.4% on demand from businesses in the province of Alessandria and from
households for secured home loans; furthermore, the risk index has also
improved with a fall in non-performing loans to 1.51% of total lending.
These growth dynamics have resulted in a rise in net interest and other
banking income by 3.1% with respect to 2002. A 1.9% reduction in overall
costs with respect to 2002 contributed to the 11.7% improvement in operating income. Nevertheless, net income for the year was lower than in 2002
due to a reduction in the level of extraordinary income.
(millions of euro)
Balance sheet
Loans to customers
Securities
Equity investments
Total assets
Due to customers
- Asset management
12.31.2003
12.31.2002
+/- Change
Change %
556
97
7
792
650
695
314
381
92
1,345
77
490
133
7
763
611
663
360
303
67
1,273
68
66
-36
29
39
33
-46
78
25
72
8
13.4
-27.2
3.9
6.4
4.9
-12.7
25.9
37.6
5.6
12.0
24.9
12.7
37.6
22.6
15.0
6.0
25.0
11.4
36.5
23.1
13.4
10.0
-0.2
1.3
1.1
-0.4
1.6
-4.0
-0.7
11.3
3.1
-1.9
11.6
-40.2
29
29
-
-
Statement of income
Net interest income
Operating income
Net income
Other information
No. of branches
62
Customer assets managed by the bank as of December 31, 2003, amount to
460.8 million Euro (up 8.4% over the year). In particular, direct deposits
amount to 49.6 million Euro and solely comprise short-term elements; indirect deposits total 411.2 million Euro, comprising administered funds of 92.5
million Euro and asset management of 318.7 million Euro.
The loss for the year was 6.9 million Euro; results were partly affected by
expenses and “extraordinary” adjustments to align the bank with the quality
standards adopted by all other Group companies.
Banca Lombarda International
Customer assets managed by the bank amount to 1,873 million Euro (449
million in direct deposits and 1,423 million in indirect deposits), down slightly with respect to the prior year.
Loans to customers of 105 million Euro are 4.1% lower than at the end of 2002.
With regard to profitability, net interest income of 5.4 million Euro was 20%
lower, while net income from services, including profits on financial transactions, fell by 7.3% (from 7.5 to 6.9 million Euro). Principally as a result of
lower payroll costs, total costs fell from 8.5 to 6.1 million Euro.
Net income amounted to 4.2 million Euro, 17.8% higher than in 2002.
PRODUCTS
SBS Leasing
The volume of business generated during the year by SBS Leasing totaled
969.4 million Euro, down 28.9% with respect to the prior year. Business was
affected by the stagnation of the economy, while performance in 2002 had
benefited from the tax relief for capital investment available under the
“Tremonti bis” law.
Against this background, SBS maintained its market share of 3.04% and
remains among the fifteen leading operators in the sector.
The total value of leased assets amounts to 2,658 million Euro, compared
with 2,345 million in 2002. Lending, net of securitization transactions, totals
1,811 million Euro. In this context, the company completed a third securitization transaction in June 2003, with the sale of debt with a nominal value of
650 million Euro.
In terms of profitability, SBS has reported an interest margin of about 40 million Euro, up 5.7% with respect to 2002.
63
The adverse economic conditions have caused the quality of lending to deteriorate, although much of this was due to writedowns recorded in relation to
just one counterparty.
Net income for statutory purposes was 9.2 million Euro, down 5% with
respect to 2002. However, net income for group purposes was 15% lower.
CBI Factor
Despite the general economic difficulties, the profitability of this company
improved significantly in 2003 following a good performance in 2002.
The results reported confirm the important position of CBI Factor in the
domestic market considering the volume of lending, territorial coverage
(both in terms of customers and factored debtors), the economic sectors
served and the breadth of factoring services provided.
Turnover was almost 3 billion Euro (-0.5% with respect to the prior year),
while total lending has risen from 1,486 to 1,519 million Euro, up 2.2% since
2002. The expansion of lending has not affected the quality of loans; in particular, net non-performing loans have fallen by 36.7 % and their incidence
on total lending has fallen from 1.1% to 0.7%.
Commercial activity, focused on increasing the level of service provided to
customers, has resulted in income from services being about the same as net
interest income.
Net income rose by 23.6% to 6.5 million Euro; the dividend was 23.3% higher.
Veneta Factoring
There was a 19% increase in the factoring business compared with 2002,
with turnover exceeding 2,500 million Euro. New installment loans amounted to 25.7 million Euro, while new leasing contracts totaled 26 million Euro.
Total lending amounts to 617 million Euro, compared with 602 million Euro
in 2002. Despite this growth, the quality of assets continued to be very good.
The incidence of expected losses on non-performing loans to total lending
amounts to 0.19%.
Net interest and other factoring income rose by 8.6% with respect to 2002,
while administrative costs climbed by 6.2%. Income from operating activities
was 4.9 million Euro, up 15.2% on 2002.
64
SILF
Lending for the purchase of consumer or operating assets rose by 68% in
2003 to 550 million Euro. This spectacular increase, well above the industry
average, is explained by the implementation of company’s business strategy,
involving the gradual extension of its “mixed» sales network to cover the
entire country, the diversification of the portfolio and the expansion of the
product range.
Total customer lending amounts to 646.4 million Euro, 92.2% more than at
the end of 2002. The commercial effort to expand the customer network has
been accompanied by an improvement in the quality of lending (the incidence of net non-performing loans on total lending is now 0.35%).
The statement of income reports net income of 6.5 million Euro compared
with a loss of 2 million Euro in 2002. These results benefited from the recognition of deferred tax assets as a result of circumstances identified in 2004.
ASSET MANAGEMENT
Capitalgest SGR
Assets under management (own products and other managed assets)
increased in 2003 by 2,366 million Euro (+14.4%), from 16,374 to 18,739 million Euro.
With regard to mutual funds, the volume of assets managed rose by 11.5% (to
9,708 million Euro in 22 funds). This rise (998 million Euro) comprises net
inflows of 770 million Euro and the results of operations of 228 million Euro.
This performance promotes the company from 12th to 11th in the national
ranking of total assets under management, with a rise in market share from
2.37% at the end of 2002 to 2.49%. Net income for the year was 4.5 million
Euro, up 42.7%.
The newly-formed Capitalgest Alternative Investments SGR commenced
operations in the hedge fund sector during November 2003. In just two
months of operations, “Capitalgest Alternative Dynamic” has collected more
than 41 million Euro, while inflows to “Capitalgest Alternative Conservative”
totaled 11 million Euro.
The loss for the year was 262 thousand Euro.
Grifogest SGR
The acquisition of Grifogest at the end of 2002 has enabled the Group to
extend its range of action, broadening and diversifying the range of products
on offer.
65
This company currently manages 8 mutual funds (the most recent, Grifoplus,
a flexible fund, was launched at the end of November 2003), 5 fund management lines and, from January 1, 2003, the “Bilanciata Globale Equilibrata» and
“Bilanciata Globale Dinamica» lines of Banca Regionale Europea’s employees’
pension fund.
Assets managed of 941 million Euro at the end of 2002 increased steadily
throughout the year to 1,543 million Euro at December 31, 2003, a rise of
about 64%.
Net income was stable at 2.4 million Euro.
Mercati Finanziari SIM
Mercati Finanziari SIM continued to trade in bonds during 2003: principally
government securities, but also bank and corporate bonds and options on
Government securities.
The results reported are significant in that they were achieved at a time of
uncertainty in the financial markets. The rise in the dealing margin from
2,363 to 3,334 million Euro (+ 41.1%) is most satisfactory, as was the containment of administrative costs.
Net income amounted to 392 thousand Euro, compared with a loss of 796
thousand Euro in the prior year.
Solofid and Sifru Gestioni Fiduciarie SIM
Solofid and Sifru Gestioni Fiduciarie SIM have further consolidated their position in the market, partly via the opening of new offices in Milan.
Total trust assets of 885 million Euro at the end of 2002 rose by 16% over the
year to 1,025 million Euro at year end.
Solofid administers trust assets totaling 656 million Euro and reported net
income of 987 thousand Euro.
Sifru SIM administers trust assets of 369 million Euro and reported net
income of 874 thousand Euro
66
OTHER RELATED ACTIVITIES
Lombarda Sistemi e Servizi
The value of production in 2003 of 112 million Euro mainly derived from
revenues from services provided to Group companies.
The cost of production was 101 million Euro and mainly consisted of the following items: services (16.5 million Euro), leases, rentals and hire charges
(14.1 million Euro), direct payroll costs (35.6 million Euro), depreciation and
writedowns (33.8 million Euro), provisions for risks (263 thousand Euro).
During the year intangible fixed assets increased by 33 million Euro, mostly
as a result of software purchases.
Net income for 2003 was 3.3 million Euro. The increase with respect to the
prior year reflects the change in the accounting for VAT on capital investments.
Società Lombarda Immobiliare
Having sold the San Remo property during the year, the remaining assets
comprise a number of garages and parking places in the Via delle Rose complex in Brescia. Stockholders’ equity amounts to 2,804,174 Euro and the liquidity has been invested in repurchase agreements. Following provisions for
risks and charges of 23,417 Euro and taxation of 8,724 Euro, net income
amounted to 5,736 Euro.
SBIM
During 2003, the company essentially concentrated on the construction of
the new management offices for the Banca Lombarda e Piemontese Group.
Work continues apace, on schedule. The structure of the property is finished
and the external walls and installations are currently being put in place, with
the creation of internal divisions. Investment during 2003 totaled 17,948,877
Euro. The value of production from ordinary operations amounted to
369,208 Euro, comprising rental income and real estate commissions. The
cost of production was 1,196,056 Euro. The sale of the second lot of the sites
in via Aldo Moro generated a capital gain of 1,970,203 Euro. Following the
provision of taxation totaling 344,000 Euro, the financial statement as of
December 31, 2003, report net income of 822,865 Euro.
67
RATINGS
In 2003 the rating agencies Moody’s, Fitch IBCA and Standard & Poor’s maintained their ratings on the Bank’s short and medium/long term debt at the
same level as last year.Agenzie Debito a breve termine
Debito a medio lungo termine
Agency
Short-term debt
Medium/long term debt
Moody’s
P-1
A2
Fitch Ibca
F1
A
Standard & Poor’s
A-2
A-
Revaluation of property
OTHER
INFORMATIONS
As allowed by Law 350/2003 (2004 Finance Law), certain Group banks have
revalued land and buildings in order to align their carrying value with their
market value, ahead of the introduction of International Accounting Standards (IAS). These revaluations were based on specialist appraisals made to
determine their most likely market value, taking account of the condition of
the properties, their characteristics and their residual lives.
With regard to a small number of recently-acquired properties, this methodology identified a market value that is about 4.7 million Euro lower than
their book value as of December 31, 2003. This difference is justified by the
capitalization subsequent to purchase of branch fittings (such as the safe and
security systems) and VAT, not included in the appraised valuation. Since the
above differences relate to banking premises, not due to be sold, that are
depreciated at 3% per annum, the book value (historical purchase cost) has
been maintained.
The effect on the consolidated financial statements of the above revaluation
is analyzed below in millions of Euro:
Increase in the book value of property (*)
325.5
Increase in the revaluation reserve (*)
241.7
Specific tax charged against the revaluation reserve and credited to the provision for taxation
71.8
Higher depreciation recorded on the increased value of the property
10.8
(*) Net of the amounts already allocated to property on the initial consolidation of Banca Regionale Europea, to reflect the appraised higher value of such property and to reflect the consolidation adjustments to
eliminate the accelerated depreciation recorded in prior years.
68
Adoption of international accounting standards (IAS)
EU Regulation 1606 dated July 19, 2002, requires all companies listed on a
regulated market in the EU to prepare consolidated financial statements in
accordance with International Accounting Standards (IAS) from 2005. Italy
has extended the effects of this Regualtion to require all financial and insurance institutions, whether listed or otherwise, to prepare statutory and consolidated financial statements in accordance with IAS standards from January
1, 2005, pursuant to art. 25 of Law 306 (Community Law).
The Banca Lombarda e Piemontese Group began the process of alignment
with the IAS in early 2003, with an initial phase involving the identification
and assessment of the principal effects of this change on the statutory and
consolidated statements of income. This phase terminated in September
2003 with the preparation of a master plan for the process, systems and
organizational changes needed in order to complete the transition to the new
accounting standards by January 1, 2005.
With regard to the consolidated financial statements of the Banca Lombarda
e Piemontese Group, the principal differences between the current accounting policies and the international accounting standards relate to the classification, the recording and the valuation of financial instruments (loans to customers, securities, derivatives, amounts due to customers), the methodology
for the valuation of goodwill, goodwill arising on consolidation, and the
recording of the provision for employee termination indemnities and the
provisiosn for risks and charges.
Privacy Law
Pursuant to Decree 196 dated June 30, 2003, the companies in the Banca
Lombarda e Piemontese Group have prepared a “Security Planning Document in relation to Personal Information” on the basis and with the timing
required by this regulation.
69
SIGNIFICANT
SUBSEQUENT EVENTS
AND FUTURE
PROSPECTS
There have not been any events of particular significance subsequent to year
end. A total of 748,866 shares in Banca Popolare di Lodi held by Banco di
Brescia and Banca Regionale Europea were sold in January. These shares
were obtained on the absorption of Efibanca by Banca Popolare di Lodi in
December; the transaction generated consolidated proceeds of 6.2 million
Euro and a capital gain of 3.6 million Euro.
On March 5, the Board of Directors of Banco di Brescia resolved to propose to the stockholders’ meeting a bonus increase in capital stock drawing
on the revaluation reserve recorded in the 2003 financial statements pursuant
to Law 350/03 (Financial Law); in detail, this operation would involve an
increase in capital from 453.7 to 593.3 million Euro by increasing the nominal value of each of the 872,500,000 shares from 0.52 to 0.68 Euro.
Prospects over coming months will depend on developments on the macroeconomic front, which is still complex and affected by several areas of
uncertainty.
If the signs of recovery at an international level are consolidated, the European and Italian economies should also experience an upturn which will
benefit the various segments of the financial and banking industries.
The Banca Lombarda Group will make every commercial and operational
effort to benefit from the opportunities that may arise from this expected
economic recovery. In addition, budget objectives include tight control over
operating costs and especially attentive monitoring of the quality of lending.
Brescia, March 10, 2004
70
Report of the
Indipendent Auditors
71
Consolidated
Financial Statements
of the Banca Lombarda e Piemontese
Group as of December 31,2003
75
CONSOLIDATED BALANCE SHEET
(thousands of euro)
ASSETS
12.31.2003
12.31.2002
10 Cash and deposits with central banks and
post offices
150,348
135,733
14,615
10.8
20 Treasury bills and other bills
eligible for refinancing with central banks
418,948
350,151
68,797
19.6
30 Due from banks:
a) repayable on demand
b) other loans
2,383,294
162,115
2,221,179
2,466,841
131,657
2,335,184
-83,547
30,458
-114,005
-3.4
23.1
-4.9
40 Loans to customers
of which:
- loans using public funds
23,584,079
21,707,339
1,876,740
8.6
1,272
1,644
-372
-22.6
1,050,403
363,550
451,406
1,800,881
1,008,359
514,231
-750,478
-644,809
-62,825
-41.7
-63.9
-12.2
31,300
88,682
29,805
98,975
1,495
-10,293
5.0
-10.4
35,040
146,765
22,490
179,316
12,550
-32,551
55.8
-18.2
60 Shares, quotas and other forms of capital
193,685
156,322
37,363
23.9
70 Equity investments:
a) carried at equity
b) other
475,890
36,729
439,161
435,740
12,135
423,605
40,150
24,594
15,556
9.2
202.7
3.7
1,823
1,823
1,610
1,610
213
213
13.2
13.2
717,681
725,709
-8,028
-1.1
-
934
-934
-100.0
110 Intangible fixed assets
of which:
- start-up costs
- goodwill
146,477
137,188
9,289
6.8
113
24,342
84
34,713
29
-10,371
34.5
-29.9
120 Tangible fixed assets
726,640
428,609
298,031
69.5
1,169,141
1,045,975
123,166
11.8
480,664
408,719
71,945
631,076
566,523
64,553
-150,412
-157,804
7,392
-23.8
-27.9
11.5
959
2,226
-1,267
-56.9
31,499,073
30,024,108
1,474,965
4.9
50 Bonds and other debt securities:
a) public entities
b) banks
of which:
- own securities
c) financial institutions
of which:
- own securities
d) other issuers
80 Equity investments in Group companies:
a) carried at equity
90 Goodwill arising on consolidation
100 Goodwill arising on application of the equity method
150 Other assets
160 Accrued income and prepaid expenses:
a) accrued income
b) prepaid expenses
of which:
- bond issue discount
TOTAL ASSETS
76
Changes
+/%
CONSOLIDATED BALANCE SHEET
(thousands of euro)
LIABILITIES AND STOCKHOLDER’S EQUITY
12.31.2003
12.31.2002
2,829,587
2,527,510
302,077
12.0
839,425
668,668
170,757
25.5
1,990,162
1,858,842
131,320
7.1
14,680,967
14,160,958
520,009
3.7
11,410,148
10,960,196
449,952
4.1
3,270,819
3,200,762
70,057
2.2
7,688,479
7,272,996
415,483
5.7
7,156,424
6,688,480
467,944
7.0
b) certificates of deposit
372,216
443,110
-70,894
-16.0
c) other
159,839
141,406
18,433
13.0
1,381
1,276
105
8.2
1,592,226
1,403,864
188,362
13.4
272,927
489,787
-216,860
-44.3
a) accrued expenses
248,457
464,529
-216,072
-46.5
b) deferred income
24,470
25,258
-788
-3.1
70 Provision for termination indemnities
179,478
179,411
67
-
80 Provisions for liabilities and charges:
488,526
425,270
63,256
14.9
a) pensions and other commitments
26,051
27,401
-1,350
-4.9
409,685
345,257
64,428
18.7
52,790
52,612
178
0.3
64,222
62,750
1,472
2.3
1,305,821
1,347,138
-41,317
-3.1
25,622
25,622
-
-
21
21
-
-
140 Minority interests
459,526
467,483
-7,957
-1.7
150 Capital stock
316,644
315,729
915
0.3
160 Additional paid-in capital
624,034
621,704
2,330
0.4
170 Reserves:
591,431
568,107
23,324
4.1
132,641
132,641
-
-
-
-
-
-
458,790
435,466
23,324
5.4
10 Due to banks:
b) time deposits or with notice period
20 Due to customers:
b) time deposits or with notice period
30 Securities issued:
a) bonds
40 Public funds administered
50 Other liabilities
60 Accrued expenses and deferred income:
b) taxation
c) other
100 Reserve for general banking risks
110 Subordinated liabilities
120 Negative goodwill arising on consolidation
Changes
+/%
130 Negative goodwill arising on application
of the equity method
a) legal reserve
c) statutory reserves
d) other reserves
180 Revaluation reserves
266,122
24,404
241,718
990.5
200 Net income (loss) for the year
112,059
130,078
-18,019
-13.9
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 31,499,073
30,024,108
1,474,965
4.9
77
GUARANTEES AND COMMITMENTS
(thousands of euro)
Captions
10 Guarantees given:
31.12.2003
31.12.20002
1,478,810
1,337,461
Changes
+/%
141,349
10.6
of which:
- acceptances
- other guarantees
20 Commitments
78
770
1,152
-382
-33.2
1,478,040
1,336,309
141,731
10.6
4,113,216
3,379,434
733,782
21.7
CONSOLIDATED STATEMENT OF INCOME
(thousands of euro)
ASSETS
10
Interest income and similar revenues
Changes
+/%
12.31.2003
12.31.2002
1,335,089
1,400,143
-65,054
1,063,380
1,123,927
-60,547
-5.4
130,300
105,016
25,284
24.1
-589,440
-682,660
-93,220
-13.7
-25.0
-4.6
of which:
- loans to customers
- debt securities
20
Interest expense and similar charges
of which:
30
- due to customers
-141,684
-188,832
-47,148
- securities issued
-255,993
-282,074
-26,081
-9.2
16,593
30,311
-13,718
-45.3
Dividends and other revenues:
a) shares, quotas and other securities
b) equity investments
c) equity investments in Group companies
515
429
86
20.0
16,078
29,882
-13,804
-46.2
-
-
-
-
Commission income
469,446
457,805
11,641
2.5
50
Commission expense
-96,473
-70,899
25,574
36.1
60
Profits (losses) on financial transactions
45,885
25,925
19,960
77.0
70
Other operating income
168,849
144,129
24,720
17.2
80
Administrative costs:
-725,152
-715,486
9,666
1.4
a) payroll
-429,778
-419,899
9,879
2.4
40
of which:
- wages and salaries
-296,878
-289,009
7,869
2.7
- social security charges
-87,004
-82,708
4,296
5.2
- termination indemnities
-18,569
-19,324
-755
-3.9
- pensions and other commitments
-16,014
-16,744
-730
-4.4
-295,374
-295,587
-213
-0.1
17.4
b) other administrative costs
90
Adjustments to intangible
-156,058
-132,951
23,107
100 Provisions for liabilities and charges
and tangible fixed assets
-18,927
-16,346
2,581
15.8
110 Other operating expenses
-31,234
-21,973
9,261
42.1
-173,057
-148,383
24,674
16.6
43,799
46,193
-2,394
-5.2
-154
-5,502
-5,348
-97.2
57.0
120 Adjustments to loans and provisions
for guarantees and commitments
130 Writebacks of loans and provisions
for guarantees and commitments
150 Adjustments to financial fixed assets
170 Profit (loss) from investments
carried at equity
4,092
2,606
1,486
293,258
312,912
-19,654
-6.3
36,791
47,773
-10,982
-23.0
200 Extraordinary charges
-22,658
-12,939
9,719
75.1
210 Extraordinary income, net
14,133
34,834
-20,701
-59.4
180 Income (loss) from operating activities
190 Extraordinary income
230 Change in reserve for general banking risks
240 Income taxes for the year
250 Income (loss) attributable to minority interests
260
Net income (loss) for the year
79
-150
-
-150
n.s.
-158,865
-179,549
-20,684
-11.5
-36,317
-38,119
-1,802
-4.7
112,059
130,078
-18,019
-13.9
Explanatory notes
to the consolidated financial
statements of the Banca Lombarda
e Piemontese Group
as of December 31,2003
81
Introduction
EXPLANATORY
NOTES TO THE
CONSOLIDATED
FINANCIAL
STATEMENTS
Part A - Consolidation methods and accounting policies
Section 1 - Description of accounting policies
Section 2 - Adjustments and provisions made for tax purposes
Section 3 - Other information
Part B - Information on the consolidated balance sheet
Section
Section
Section
Section
Section
Section
Section
Section
1
2
3
4
5
6
7
8
-
Section
Section
Section
Section
9
10
11
12
-
Loans
Securities
Equity investments
Intangible and tangible fixed assets
Other assets
Payables
Provisions
Capital stock, equity reserves, reserve for general banking risks
and subordinated liabilities
Other liabilities
Guarantees and commitments
Concentration and distribution of assets and liabilities
Administration and dealing on behalf of third parties
Part C - Information on the consolidated statement of income
Section
Section
Section
Section
Section
Section
Section
1
2
3
4
5
6
7
-
Interest
Commission
Profits (losses) on financial transactions
Adjustments, writebacks and provisions
Other statement of income captions
Other information on the statement of income
Part D - Other information
Section 1 - Directors and Statutory Auditors
82
INTRODUCTION
The consolidated financial statements comprise the balance sheet, the statement of income and these notes, together with the report on operations for
the year, pursuant to Decree 87/1992 which regulates the statutory and consolidated financial statements of banks and similar institutions.
The explanatory notes form an integral part of the financial statements. Their
purpose is to provide all of the information required for a clear and full
explanation of the Group’s assets and liabilities, results and financial position, even if certain types of information are not specifically required by law.
The following attachments are provided in addition to the obligatory schedules:
• Statement of changes in consolidated stockholders’ equity
• Statement of changes in consolidated financial position.
The consolidated financial statements have been audited by Deloitte &
Touche SpA in accordance with article 155 of Decree 58 dated February 24,
1998 and with the stockholders’ resolution dated April 27, 2001, which
appointed them as auditors for the three-year period 2001-2003.
All information, unless otherwise specified, is presented in thousands of
Euro.
83
ACCOUNTING POLICIES
PART A
CONSOLIDATION
METHODS AND
ACCOUNTING
POLICIES
The accounting policies used for preparing the consolidated financial statements comply with Decree 87 of January 27, 1992 and the instruction of the
Governor of the Bank of Italy issued on July 30, 2002. They take account of
the accounting principles that are generally accepted in Italy.
The financial statements have been prepared in a way that, where possible,
gives preference to substance over form and records transactions at the time
of settlement rather than at the time of negotiation.
The accounting policies adopted, presented below, are unchanged with
respect to those used to prepare the prior year’s financial statements, except
in relation to the treatment of VAT by Lombarda Sistemi e Servizi S.p.A.,
which under art. 36 bis of Decree 633/72 exercised the option not to adopt
the “normal» VAT system, in order to apply the criteria used by other Group
banks. This option removes the obligations relating to the billing and recording of VAT-exempt transactions, as per article 10 of this Decree, meaning that
VAT on purchases now becomes non-deductible and so is added to the cost
to which it refers. VAT on depreciable assets is now capitalized and depreciated over the life of the related asset. The effects on net income and stockholders’ equity as of December 31, 2003 are not significant.
Lastly, as allowed by Law 350/2003 (2004 Finance Law), Banca Lombarda e
Piemontese S.p.A., Banco di Brescia S.p.A., Banca Regionale Europea S.p.A.,
Banca di Valle Camonica S.p.A. and Banca Cassa Risparmio di Tortona
S.p.A., have revalued their land and buildings by 381.4 million Euro in order
to align their carrying value with their market value, ahead of the introduction of International Accounting Standards (IAS).
These revaluations were based on independent expert appraisals and the
gross amount of the revaluation has been added to the book value of each
asset.
The resulting revaluation reserve has been recorded in the financial statements of the individual companies and totals 309.8 million Euro, representing the above revaluation surplus net of the related flat-rate tax charge of
71.6 million Euro, which has been credited to the provision for taxation.
The increase in tangible fixed assets (325.5 million Euro) and in the revaluation reserve (241.7 million Euro) stated in the consolidated financial statements is different from that mentioned above; this is because, on the first
time consolidation of Banca Regionale Europea, the higher value of properties determined on the basis of independent appraisals was booked to the
“Property» caption and because of consolidation adjustments for accelerated
depreciation made in prior years.
The accounting policies used by the companies included in the consolidation
are predominantly in line with those of the Parent Bank.
84
SCOPE OF CONSOLIDATION
The consolidated financial statements include the financial statements of
Banca Lombarda e Piemontese SpA, the Parent Bank, and of its direct and
indirect subsidiaries, which operate in the banking, financial and related sectors. Non-controlling investments, representing at least 20% of capital, in
companies operating in the banking, financial and related sectors are carried
at equity, as are other subsidiaries not operating in those sectors. Holdings of
less than 20% are carried at cost.
The following changes took place with respect to the financial statements as
of December 31, 2002.
Capitalgest Alternative Investments SGR S.p.A., a wholly-owned subsidiary of
the Parent Bank, was formed in January.
In April the Parent Bank signed a preliminary agreement with Banca Popolare di Vicenza to purchase 100% of Banca Idea S.p.A..This deal was closed
in July; Banca Idea was subsequently renamed Banca Lombarda Private
Investment SpA. The results of Banca Idea have been consolidated on a lineby-line basis from April 2003 onwards.
Idea Advisory S.A., 99% owned by Banca Idea, also entered the scope of
consolidation as a result of this transaction.
A 90% interest in Electrolux Financiera S.A. was purchased in September
(51% by the Parent Bank and 39% through Veneta Factoring S.p.A.).
Given the limited impact of these acquisitions on the pre-existing Group, it
was decided not to prepare pro-forma versions of the accounts as of December 31, 2002.
During the year, the Parent Bank also completed the following transactions:
- purchase of a 15.2% interest in Banca Cassa di Risparmio di Tortona
S.p.A., already 60% owned by Banca Regionale Europea SpA;
- purchase of an additional 9.76% interest in CBI Factor S.p.A,, increasing its
investment to 97.23%;
- purchase of an additional 1.96% interest in Banco di San Giorgio S.p.A.,
increasing its investment to 32.63% and that of the Group to 86.70%, since
this company is 54.07% owned by Banca Regionale Europea.
85
Equity method
In May the Parent Bank purchased an additional 12.75% interest in Corporation Financière Européenne S.A., increasing its investment to 63.75%; this
company is valued at equity because does not carry on a business activity
related to that of the Group.
In August, the Parent Bank sold its 33.33% interest in Itradeplace SpA.
CONSOLIDATION METHODS
The assets, liabilities and off-balance sheet transactions of companies included within the scope of consolidation are consolidated on a line-by-line basis,
together with their revenues and expenses. The book value of investments is
eliminated against the related stockholders’ equity at the time of acquisition
or initial consolidation.
The differences that emerge as a result of the above elimination are allocated, where possible, to the assets and liabilities of the subsidiaries concerned.
Residual differences:
- if positive, are classified as “goodwill arising on consolidation» and amortized over ten years on a straight-line basis. The differences relating to the
acquisition of Banca Cassa di Risparmio di Tortona S.p.A. and Banca
Regionale Europea S.p.A. are being amortized over twenty years, in view
of the benefits expected from the acquisition and the assumptions made
when the purchase price was determined. Goodwill relating to interests
purchased subsequently is amortized over the remaining life of the original goodwill;
- if negative, are classified as “negative goodwill arising on consolidation»,
which forms part of consolidated stockholders’ equity.
Equity method
The book value of investments is compared with the Group’s share of the
related stockholders’ equity at the time this method is first applied. The difference in these values:
- if positive:
a) where relating to depreciable assets, is classified among “equity investments» and depreciated using the rates applicable to the fixed assets
concerned;
b) where relating to goodwill, is classified as “goodwill arising on application of the equity method». This value is generally amortized on a
straight-line basis over ten years.
86
- if negative, is classified as “negative goodwill arising on application of the
equity method», which forms part of consolidated stockholders’ equity.
Elimination of intercompany transactions
Amounts due to and from consolidated companies, off-balance sheet transactions and revenues and costs arising from such balances are eliminated, together with profits and losses from dealing transactions between the companies
concerned, with the exception of transactions in securities as these are carried
out on arm’s-length conditions and for consideration.
For assets involved in leasing transactions between consolidated companies, the
original costs and accumulated depreciation up to the end of the year are recalculated and the net book values are recorded in the pertinent asset captions.
Minority stockholders
The minority interests in the equity and results of consolidated companies
are classified separately in the consolidated financial statements.
Dividends
Dividends from consolidated companies are not recorded in the consolidated
statement of income.
Consolidating financial statements
The consolidated financial statements are prepared using the financial statements of the individual Group companies, as prepared by their respective
Boards of Directors for approval at stockholders’ meetings held before that
of Banca Lombarda e Piemontese SpA.
S.B.S. Leasing SpA and Veneta Factoring SpA (as far as its leasing business is
concerned) have been consolidated on the basis of financial statements prepared using lease accounting methodology.
Accounting reference date
The financial statements used for consolidation purposes were all prepared
as of December 31, 2003, which is the accounting reference date of the Parent Bank.
87
Section 1 – Description of accounting policies
1) Loans, guarantees and commitments
1.1 Loans to customers
Loans, including contractual and default interest, are stated at their estimated
realizable value. This value is determined by writing down principal and
interest to reflect expected losses.
Estimated loan losses take into account the solvency of debtors, considering
any information obtained subsequent to year-end.
In particular:
1) the following are assessed in detail to determine the expected loss on
each account:
- non-performing loans, including both principal and interest,
- significant problem loans (equal to or more than 15,500 Euro),
- other loans that, due to size or the particular characteristics of the
debtor, are subject to specific review,
- restructured loans earning less than the refinancing rate;
2) the following are assessed with reference to historical-statistical data, to
take account of the risk of loss inherent in normal banking activities, and
the resulting adjustments are applied to the individual accounts concerned:
- small problem loans (less than 15,500 Euro),
- performing loans.
The assessment of performing loans in relation to historical-statistical data:
- takes into consideration the classification of customers in the “corporate»
and “retail» segments;
- applies writedown percentages, for each customer segment, differentiating between short-term drawdowns and long-term drawdowns, which are
generally secured by real guarantees;
- takes account of the higher creditworthiness of certain customer categories (e.g. customers belonging to banking groups, territorial public bodies, etc.).
General adjustments are also made by non-banking companies to take
account of the special nature of their lending (consumer credit).
The assessment of restructured loans earning less than the refinancing rate,
i.e. 3-month Euribor, takes account of the loss arising from discounting to
present value the financial flows deriving from the difference between the
agreed interest rate and the refinancing rate.
Loans affected by country risk are valued using the rates applied throughout
the banking system.
88
Adjustments are booked to the statement of income.
The original value of loans is reinstated by crediting the “writeback» account
if the reasons for any writedowns cease to apply.
Default interest considered collectible is covered in the financial statements
of consolidated companies by reserves for possible loan losses, in order to
defer the taxation of such income until collection. For consolidation purposes, such provisions are credited to stockholders’ equity, net of taxation, to
the extent that they relate to prior periods, while the current year element is
credited to the statement of income. The same applies to any difference
between total loan writedowns booked during the year, i.e. the maximum
amount allowed for tax purposes, and the adjustments needed to value loans
at their estimated realizable value. These amounts were booked to the
reserve for loan losses in the financial statements of the individual consolidated companies.
1.2 Explicit and implicit loans relating to lease contracts
For consolidation purposes, leases are recorded using finance leasing
methodology.
Implicit and explicit loans are stated at their estimated realizable value.
Writedowns are made taking into account the solvency of the debtor and the
value of the assets being leased.
1.3 Other amounts due
Other amounts due are stated at their estimated realizable value, which is
generally their nominal value. They include the interest calculated at yearend.
1.4 Guarantees and commitments
Guarantees given are stated at the value of the related commitment. Securities to be received are stated at the forward price contracted with the counterparties. Commitments to grant finance to counterparties and customers are
stated at the amount still to be drawn.
The risk associated with guarantees given and commitments to grant funds is
assessed on the basis applied in relation to cash lending. Doubtful positions
are covered indirectly by the provisions for liabilities and charges, determined both on analytical and historical-statistical bases. Any surplus provisions are released to the statement of income as writebacks.
89
2) Securities and off-balance sheet transactions (not including currency
transactions)
Securities held are classified as either investment securities or dealing securities.
2.1 Investment securities
Securities are deemed to be investment securities following specific resolutions of the Board of Directors.
Investment securities are valued at specific cost, as adjusted to reflect the
accrued difference between such cost and their redemption value upon
maturity, or, if transferred from the dealing portfolio, at their value at the
time of transfer determined using the related valuation criterion.
Cost includes accrued issue discounts and rolled-up interest on securities that
earn implicit interest.
Investment securities are written down in the case of permanent losses, taking into account the solvency of the issuers and the ability to repay debt of
their countries of residence. Their original value is reinstated in subsequent
years, to the extent that the reasons for any writedowns cease to apply.
This category also includes junior bonds linked to loan securitizations arranged
in 2001, 2002 and 2003 which were subscribed for in full by the Group companies that arranged the transactions. These are considered investment securities as they will remain in portfolio until maturity, being an integral part of the
securitization deals. Their estimated realizable value is determined with reference to expected recoveries on the portfolios underlying the transactions.
2.2 Dealing securities
These securities are held for dealing purposes or to cover treasury requirements.
They are valued:
- at market value, if quoted on official markets;
- at the lower of cost or market value, if not quoted on official markets.
Cost is determined on a LIFO basis with annual layers and includes accrued
issue discounts and rolled-up interest on securities that earn implicit interest.
Market value is determined as follows:
- securities quoted on official markets: the average of prices posted in
December;
- securities not quoted on official markets: the average of the prices struck
during December for quoted securities with similar characteristics or otherwise, the prices quoted in unofficial markets or by specialist sources. In
the absence of a reference price, estimated realizable value is obtained by
discounting to present value the flows of interest and expected payments
using the market rates applicable through redemption.
90
The original value of unquoted securities is reinstated in future accounting
periods if the reasons for any writedowns cease to apply.
Moreover, if dealing in securities involves short selling, reflected in the balance sheet among “other liabilities», the results are valued using the principles described above.
2.3 Off-balance sheet transactions in securities
The valuation of derivative contracts open at year-end depends on whether
they hedge assets and liabilities that generate interest, or are held for dealing
purposes.
1. Hedging contracts are valued on a basis consistent with that applied in
relation to the assets, liabilities and off-balance sheet positions being
hedged. The results of these valuations are reflected in the statement of
income as “Profits (losses) on financial transactions» and matched among
“Other assets/liabilities» in the balance sheet.
In the case of contracts hedging dealing securities that involve the payment of a single differential or margin (single-flow contracts), differentials
are reflected in full in the statement of income in the accounting period in
which they arise:
- as “Interest income/expense», when the underlying asset has a life of
less than one year;
- as “Profits (losses) on financial transactions» when the underlying asset
has a life of more than one year.
The differentials on other derivatives hedging assets and liabilities which
generate interest, are reflected in the statement of income on an accruals
basis as interest.
2. Dealing contracts negotiated on official markets are valued at market value or otherwise at the lower of purchase cost or market value.
Market value is determined as follows:
- contracts quoted on organized markets: at their quoted prices;
- other contracts: on the basis of quoted prices or objectively determinable prices taken from international information networks.
Differentials from dealing on own account are recorded as “Profits (losses) on financial transactions»;
Commission income and expense arising from dealing on behalf of customers is recorded in the appropriate captions when collected.
Commitments to the forward purchase (sale) of securities relative to contracts
open at year end are valued using the criteria adopted for the portfolio to
which they belong.
Writedowns and revaluations are included in the “Profits (losses) on financial
transactions» caption of the statement of income.
91
3) Equity investments
Equity investments are stated at purchase cost or their previously adjusted
value, except where consolidated or carried at equity as described earlier.
Such amounts are written down by charges to the statement of income to
reflect any permanent reductions in value. The original value is written back
in subsequent years if the reasons for the writedown cease to apply.
4) Foreign currency assets and liabilities (including off-balance sheet
transactions)
Assets, liabilities and spot and forward off-balance sheet transactions denominated in foreign currency are translated to Euro using the year-end
exchange rates.
The valuation of assets and liabilities linked to off-balance sheet transactions
takes account of such transactions.
The effect of any adjustments is recorded in the “profits (losses) on financial
transactions” caption of the statement of income.
Foreign currency revenues and expenses are stated using the exchange rates
applying at the time they are recorded.
5) Tangible fixed assets
Tangible fixed assets are recorded at purchase cost, including related
charges, or their previously adjusted value. Land and buildings have also
been revalued in accordance with specific laws. They are stated net of accumulated depreciation.
Depreciation is provided on a straight-line basis using rates which write down
the related assets over their residual economic useful lives. In cases where
there is a permanent impairment of value, the asset is written down to reflect
the loss, irrespective of how much has already been depreciated. The original
value is written back if the reasons for the writedown cease to apply.
In addition:
- new assets are depreciated from the year they enter service;
- assets entering service during the year are depreciated at half the standard
rate, accepted by the tax authorities, to reflect their reduced level of usage.
Non-banking property that is not directly utilized by the Bank is not depreciated since its value is retained as a result of maintenance expenditure which
is charged directly against income.
Compared with the values shown in the books of the individual companies,
accelerated depreciation charged solely to gain tax benefits has been
reversed.
92
6) Intangible fixed assets
These are stated at purchase cost, including related charges, and amortized
systematically over the period they are expected to benefit. They include
start-up and expansion costs, purchased goodwill and other costs benefiting
future periods (software costs incurred by Lombarda Sistemi e Servizi S.p.A.
in setting up its business include a portion of expenses for the personnel
involved in its development. The matching entry is booked under “Other
operating income»).
Such costs are recorded in the financial statements of each consolidated
company with the agreement of the Statutory Auditors, where this is explicitly required by the regulations.
Intangible fixed assets are amortized over a maximum of five years, with the
exception of the goodwill recorded on the merger of group companies. This
is amortized over ten years, which is considered to be the period that these
costs will benefit.
In cases where there is a permanent impairment of value, the asset is written
down to reflect the loss, irrespective of how much has already been depreciated. The original value is written back if the reasons for the writedown
cease to apply.
Intangible fixed assets also include the charges relating to extraordinary payments and related notional contributions due to employees who have been
allowed to use the “Solidarity Fund» set up with the Italian social security
authorities (INPS) under Ministerial Decree 158 dated April 28, 2000. These
charges are being amortized on a straight-line basis over five years, as
allowed by article 59.3 of Law 449/97 which sanctions the application of article 1.3(bis) of Decree 364 of August 14, 1992, instead of being expensed in
full to income in the year in which application to the Solidarity Fund is made
(as would be allowed by generally accepted accounting policies). Had these
charges had been expensed in full in the years in which application to the
“Fund» was made, the effect (after tax) as of December 31, 2003 would have
been:
- 9.4 million Euro on net income for the year;
- 20.1 million Euro on stockholders’ equity.
7) Other aspects
7.1 Accruals and deferrals
Accruals and deferrals are recorded in order to match income and expenses
in the accounting periods to which they relate.
93
7.2 Provision for termination indemnities
The provision for termination indemnities covers the liability to all employees as of December 31, 2003, accrued in accordance with current legislation.
Under specific agreements, amounts accrued by the employees of certain
Group companies recruited after April 28, 1993 are transferred to internal
supplementary pension funds.
In the case of Banca Regionale Europea SpA, the supplementary pension
fund also includes a portion of the total provision which relates to employees hired before April 28, 1993 who exercised a specific option on the basis
of company agreements.
7.3 Provisions for liabilities and charges
Pension fund
The staff pension funds of Banca Regionale Europea SpA represent the total
amount of current and future commitments to retired and working personnel
in accordance with the bank’s regulations.
Provision for taxation
The provision for taxation covers indirect taxes and income taxes payable,
determined from a prudent assessment of the tax liability under current fiscal
regulations.
The specific tax on the revaluation of properties is also classified in this caption. This tax, being 15% or 19% of the revaluation depending on the category of properties, has been recorded by decreasing the revaluation surplus
credited to a specific reserve within stockholders’ equity. The tax will be
paid over the next three years, as provided by law.
Deferred taxation is recorded in accordance with Bank of Italy instructions
(liability Method). These require that income taxes be recorded on an accruals basis, in order to fully match the costs and revenues giving rise to the
results for the year.
Deferred tax assets and liabilities are calculated on the timing differences
between the value of assets or liabilities for accounting purposes and their
corresponding value for tax purposes, using the rates expected to apply
when such timing differences reverse. In particular, deferred tax assets are
recognized only when it is reasonably certain that they will be recovered.
Deferred taxation is not determined in relation to reserves in suspense for
tax purposes, since no transactions that would give rise to such taxation are
likely to occur.
94
Other provisions
Other provisions cover losses on guarantees given and commitments undertaken, as well as other known or likely losses whose timing and extent cannot be determined at year-end or by the date these consolidated financial
statements are prepared. Provisions to cover the above liabilities reflect the
best possible estimates made on the basis of the information available.
7.4 Reserve for general banking risks
This reserve covers general business risks and therefore forms part of the
equity reserves. Any net change during the year is reflected in the statement
of income.
7.5 Subordinated liabilities and other securities issued
These are recorded at their issue value until repaid, except in the case of
zero-coupon bonds and structured bonds issued below par and linked to
financial market indices, which are recorded at their issue value as uplifted
by the interest rolled up each year.
7.6 Payables
Payables are stated at face value. They include the interest calculated at yearend.
Section 2 – Adjustments and provisions made for tax purposes
2.1
Adjustments recorded solely for tax purposes by consolidated companies have been eliminated on consolidation and the related deferred
taxation has been provided.
2.2
Provisions recorded solely for tax purposes by consolidated companies
exclusively concern those covering possible loan losses. These
amounts, net of the related tax effect, contribute to net income for the
year in the consolidated financial statements.
95
Section 3 - Other information
Unless stated otherwise, all figures in the notes are expressed in thousands
of Euro. The following is an explanation of when various balance sheet and
statement of income items are booked.
Amounts due from and to customers
Current account transactions with customers are recorded at the time they
are carried out. Other transactions (bill portfolio, international transactions,
securities, etc.) are recorded on settlement.
Amounts due from and to banks
These are recorded on settlement.
Other receivables and payables
Transactions are recorded when carried out.
Securities
Transactions in securities and similar instruments are recorded on settlement.
Interest accrued and not yet collectible is recorded as accrued income,
except for securities with implicit interest, which are stated inclusive of
rolled-up interest.
Repurchase agreements
Repurchase agreements on securities are considered to be the same as contangos; the amounts received and paid are therefore booked as payables and
receivables.
The cost of funding and revenues from lending, represented by the coupons,
any accrued issue discount and the differential between the related spot and
forward prices, are recognized as interest on an accruals basis.
Assets and liabilities in foreign currency
Assets and liabilities in foreign currency are recorded on settlement of the
related transactions.
96
Information required by CONSOB resolution 1011405
of February 15, 2001
The following information is given in compliance with CONSOB resolution 1011405 of February 15, 2001:
Capitalization of interest due
During the year, Group banks received thirty-six requests to recalculate interest applied to current accounts. Customers think that such interest is unjustifiable because of so-called “anatocism» (the charging of interest on interest).
The Constitutional Court has passed sentence on certain aspects of the matter (sentence 425 of October 9, 2000), declaring illegitimate, due to misuse of
power, that part of article 25.3 of the Decree of August 4, 1999, which sanctioned the effects to date of capitalizing interest.
Together with the rest of the banking system, being convinced that Parliament is bound to change the provision declared illegitimate by the Supreme
Court, Group banks have decided not to recalculate interest and therefore
made no provision, thus confirming the decision taken in the financial statements since the end of 2000.
Tax benefits included in Decree 153 of May 17, 1999
As detailed in the explanatory notes to the consolidated financial statements
as of December 31, 2002, the tax benefits included in Decree 153/99 have
been suspended. In accordance with Decree 282 of December 24, 2002, converted into Law 27 of February 21, 2003, Banca Lombarda e Piemontese
S.p.A., Banca di Valle Camonica S.p.A. and Banco di San Giorgio S.p.A. duly
paid back by December 31, 2002 an amount equating to the tax benefits
received in 1998, 1999 and 2000 together with the related interest.
With reference to the appeal filed with the first-level Court in Luxembourg
on February 21, 2002 by the Italian banks represented by the Italian Bankers’
Association, the Court suspended the proceedings until the European Court
of Justice has passed sentence. A similar appeal filed with the latter court by
the Ministry of Foreign Affairs on behalf of the Italian Government will be
heard without the presence of the banks concerned.
97
Assisted loans for the construction sector (Law 133 of May 13, 1999)
Of all the Group’s banks, only Banco di Brescia has granted an assisted loan
for construction purposes (one in total). In any case, the effects of article 29
of Law 133 on May 13, 1999 are not applicable. This article permits the bodies granting subsidies and the receivers of these subsidies, to ask the financing bank to renegotiate the loan should the interest rate applied be higher
than that determined in compliance with Law 108/96 (the “anti-usury law»).
Unassisted fixed-rate mortgages (Decree 394 of December 29, 2000)
This decree is an interpretation of Law 108/96, which provides for a reduction in interest considered excessive (or “usurious”) on repayments of fixedrate loans maturing after January 2, 2001.
Sentence 29 of the Constitutional Court in February 2002 declared the constitutional illegitimacy of article1.2 of Decree 394 dated December 29, 2000,
where it provides that the substitution of interest required by the article be
applied to installments falling due after January 2, 2001. The Court has therefore ruled that the substitution rate be applied to installments falling due
from the date when Decree 394/2000 came into effect, ie. December 31,
2000.
The Group’s banks consider that there will be no further liabilities following
the adjustments made to contracts in 2001.
***
As explained in the prior year’s financial statements, a stockholder has
impugned the stockholders’ resolution of April 27, 2001, which approved the
2000 financial statements, on the grounds that the Group’s treatment of the
question of anatocism (interest on interest) was not correct. The first-level
judgement has been handed down. The Court of Brescia, with sentence dated December 10, 2003, rejected the application as illegitimate and ruled that
the stockholder must pay 14,571.87 Euro to Banca Lombarda e Piemontese
as reimbursement of legal expenses, plus costs.
98
PART B
INFORMATION ON
THE CONSOLIDATED
BALANCE SHEET
Section 1 - Loans (captions 30 and 40)
Details of caption 30 “Due from banks”
a) due from central banks
12.31.2003
12.31.2002
Changes
98,556
97,235
1,321
-
-
-
b) notes eligible for refinancing
at central banks
c) due on leasing contracts
d) repurchase agreements
e) securities loaned
-
-
-
1,862,845
1,865,556
-2,711
-
-
-
12.31.2003
12.31.2002
Changes
128,438
121,452
6,986
This caption includes:
Correspondent current accounts
Obligatory reserve with the Bank of Italy
Deposits
Loans
98,556
97,235
1,321
179,769
271,330
-91,561
80,000
94,981
-14,981
1,862,845
1,865,556
-2,711
Non-performing loans
22
22
-
Other technical forms
33,664
16,265
17,399
2,383,294
2,466,841
-83,547
Total due from banks
1.2 Breakdown of risk on amounts due from banks as of 12.31.2003
Gross
exposure
Total
writedowns
Net
exposure
129
-1
128
22
-
22
a.2 Problem loans
-
-
-
a.3 Loans being restructured
-
-
-
A) Doubtful loans
a.1 Non-performing loans
a.4 Restructured loans
-
-
-
107
-1
106
B) Performing loans
2,383,166
-
2,383,166
Total
2,383,295
-1
2,383,294
a.5 Unsecured loans to countries at risk
99
1.3 Doubtful loans to banks as of December 31,2003
Descriptions
A. Gross exposure as of 1.01.2003
A.1. of which: default interest
B. Increases
B.1. transfers from performing loans
B.2. default interest
B.3. transfers from other categories
of doubtful loans
B.4. other increases
C. Decreases
C.1. transfers to performing loans
C.2. write-offs
C.3. collections
C.4. recovery through assignment
C.5. transfers to other categories
of doubtful loans
C.6. other decreases
D. Gross exposure as of 12.31.2003
D.1. of which: default interest
Nonperforming
loans
Problem
loans
Loans
being
restructured
Restructured loans
Unsecured
loans to
countries at risk
22
-
-
-
-
95
54
54
-
-
-
-
-
42
42
-
22
-
-
-
-
107
-
1.4 Movements in writedowns for the year as follows:
Description
A. Total writedowns as of 1.01.2003
B. Increases
B.1. writedowns
B.1.1. of which: default interest
B.2. use of provisions for
possible loan losses
B.3. transfers from other loan categories
C. Decreases
C.1. writebacks
C.1.1. of which: default interest
C.2. writebacks on collection
C.3. write-offs
C.4. transfers to other loan categories
D. Total writedowns as of 12.31.03
100
Nonperforming
loans
Problem
loans
Loans Restructured
being
loans
restructured
Unsecured loans to Performing
countries at risk
loans
-
-
-
-
8
-
-
-
-
-
-
-
-
-
-
-
-
7
7
1
-
-
1.5 Details of caption 40 “Loans to customers”
12.31.2003
12.31.2002
Changes
40,712
47,218
-6,506
1,831,482
1,884,443
-52,961
194,262
86,273
107,989
-
-
-
12.31.2003
12.31.2002
Changes
4,164,377
4,315,915
-151,538
14,936,262
12,976,495
1,959,767
117,607
138,630
-21,023
Due on leasing contracts (*)
1,831,482
1,884,443
-52,961
Due on factoring transactions (*)
2,042,736
1,999,084
43,652
247,905
243,534
4,371
Other technical forms
49,448
62,965
-13,517
194,262
86,273
107,989
23,584,079
21,707,339
1,876,740
12.31.2003
12.31.2002
Changes
a) loans secured by mortgages
5,980,105
4,527,308
1,452,797
b) loans secured by pledges on:
1,025,366
521,625
503,741
46,493
6,326
40,167
974,004
506,282
467,722
4,869
9,017
-4,148
4,250,862
3,809,208
441,654
6
-
6
a) notes eligible for refinancing
at central banks
b) due on leasing contracts
c) repurchase agreements
d) securities loaned
Loans to customers are analyzed by technical form below:
Current accounts
Loans, grants, advances and mortgages
Discounted notes
Total
(*) Net of non-performing loans.
1.6 Secured loans to customers
1. cash deposits
2. securities
3. other instruments
c) loans guaranteed by:
1. governments
2. other public entities
3. banks
4. other operators
Total
101
3,226
943
2,283
41,743
87,720
-45,977
4,205,887
3,720,545
485,342
11,256,333
8,858,141
2,398,192
1.7 Breakdown of risk on loans to customers as of December 31, 2003
Gross
exposure
Total
writedowns
Net
exposure
824,838
-231,231
593,607
a.1 Non-performing loans
424,051
-176,146
247,905
a.2 Problem loans
374,836
-48,171
326,665
A) Doubtful loans
a.3 Loans being restructured
a.4 Restructured loans
-
-
-
25,950
-6,914
19,036
1
-
1
B) Performing loans
a.5 Unsecured loans to countries at risk
23,079,765
-89,293
22,990,472
Total
23,904,603
-320,524
23,584,079
In compliance with the requirements of Consob resolution 97003369 of September 4, 1997, with
regard to credit factoring or securitization, it is confirmed that certain small loans have been assigned
without recourse (in addition to the securitization operations reported in section 11.8 below).
1.8 Doubtful loans to customers as of 12.31.2003
Description
A. Gross exposure as of 1.01.2003
B. Increases
B.1. transfers from performing loans
B.2. default interest
Nonperforming
loans
Problem
loans
Loans being
restructured
Restructured loans
Unsecured
loans to
countries at risk
406,892
302,055
6,294
47,858
279
46,047
2,377
-
1
-
197,856
257,895
-
2,902
-
96,755
218,916
-
2,122
-
6,975
1,231
-
6
-
89,580
573
-
-
-
B.3. transfers from other categories
of doubtful loans
C. Decreases
C.1. transfers to performing loans
4,546
37,175
-
774
-
180,697
185,114
6,294
24,810
278
79
27,621
-
598
-
C.2. write-offs
104,845
166
-
-
-
C.3. collections
67,273
77,511
-
8,770
278
2,869
2,260
-
-
-
C.4. recovery through assignment
C.5. transfers to other categories of
doubtful loans
D. Gross exposure as of 12.31.2003
102
749
67,668
6,294
15,442
-
4,882
9,888
-
-
-
424,051
374,836
-
25,950
1
45,657
3,022
-
6
-
1.9 Movements in writedowns for the year are as follows:
Nonperforming
loans
Description
A. Total writedowns as of 1.01.2003
163,358
38,167
B. Increases
136,738
B.1. writedowns
51,492
B.1.1. of which: default interest
3,052
B.2. use of provisions for possible loan losses
54,961
B.3. transfers from other loan categories
30,268
17
C. Decreases
123,950
C.1. writebacks
932
47
C.2. writebacks on collection
7,972
1,211
C.3. write-offs
C.4. transfers to other
loan categories
D. Total writedowns as of 12.31.03
Problem
Loans Restructured
Unsecured Performing
loans
being
loans
loans to
loans
restructured
countries at risk
37,952
1,503
32,018
29,787
875
2,197
34
21,799
3,425
87
2,590
139
3,147
3,147
-
8,828
1,060
1,054
6
2,974
253
-
83
83
27
55
-
79,507
1,002
44,116
40,422
1,716
1,978
34,330
15,408
9,120
-
107,384
482
-
-
-
-
7,001
661
176,146
38,237
14,721
581
48,171
2,122
3,147
-
2,721
6,914
-
1
-
6,596
3,206
89,293
910
Section 2 – Securities (captions 20, 50 and 60)
The securities portfolio comprises:
12.31.2003
12.31.2002
Changes
Treasury bills and other bills eligible
for refinancing with central banks (caption 20)
Bonds and other debt securities (caption 50)
Shares, quotas and other forms of capital (caption 60)
Total
418,948
350,151
68,797
1,050,403
1,800,881
-750,478
193,685
156,322
37,363
1,663,036
2,307,354
-644,318
378,547
754,485
-375,938
1,284,489
1,552,869
-268,380
of which :
- Investment securities
- Dealing securities
103
The details and movements are provided in accordance with current regulations.
2.1 I Titoli immobilizzati
12.31.2003
1. Debt securities
1.1 Government securities
- quoted
- unquoted
1.2 Other
- quoted
- unquoted
2. Equities
12.31.2002
Book value
Market value
Book value
Market value
378,547
383,916
754,485
762,850
170,934
174,304
514,424
521,593
170,934
174,304
514,424
521,593
-
-
-
-
207,613
209,612
240,061
241,257
65,776
66,305
103,719
103,000
141,837
143,307
136,342
138,257
-
-
-
-
- quoted
-
-
-
-
- unquoted
-
-
-
-
378,547
383,916
754,485
762,850
Total
Market value represents the average of stockmarket prices during the second
half of 2003 determined with the same principles as for “dealing securities”.
The difference between the book and market values, 5,369 thousand Euro,
should be considered together with the net losses (4,403 thousand Euro) on
the hedging contracts reported in section 10.5.
The total also includes an Augusta Vita 10-year endowment policy with yield
linked to the results of Augusta Risparmio Auris for 64,771 thousand Euro.
The differences between redemption value on maturity and book value as of
December 31, 2003 are as follows:
Government securities
Positive
differences
Negative
differences
261
-393
Bank bonds
-
-
Property bonds
-
-
Agricultural bonds
-
-
Other bonds
Other (Augusta policy)
Total
104
385
-
-
-336
646
-729
2.2 Changes during the year in investment securities
A. Opening balance
754,485
B. Increases
22,605
B1) Purchases (1)
12,553
B2) Writebacks
-
B3) Transfers from dealing securities
-
B4) Other (2)
10,052
C. Decreases
398,543
C1) Sales
648
C2) Redemptions
388,644
C3) Adjustments
-
of which: permanent writedowns
-
C4) Transfers to dealing securities
-
C5) Other (2)
9,251
D. Closing balance
378,547
(1) Including 12,550 thousand Euro relating to the securitization transaction, as described in section 11.8.
(2) Other concerns the recording of income from sales, capitalized issue discounts and the difference
between purchase and redemption costs reflected in the statement of income on an accruals basis.
Investment securities have been treated as fixed assets in accordance with
CONSOB and Bank of Italy regulations on the basis of specific resolutions by
the Boards of Directors of the individual companies concerned. These resolutions identify the fundamental characteristics of the categories concerned
and require that securities be allocated to the appropriate category at the
time of purchase; in relation to investment securities, they also establish
absolute and relative parameters for the size of the portfolio.
Changes during the year are analyzed by type of security as follows:
Purchases
Transfers
from dealing
securities
Other
changes
net
Transfers
to dealing
securities
Redemptions/
Sales
Government securities
- quoted
-
-
-66
-
343,436
- unquoted
-
-
-
-
-
-
-
-740
-
16,341
12,553
-
1,607
-
29,515
12,553
-
801
-
389,292
Other
- quoted
- unquoted
Total
105
2.3 Dealing securities
12.31.2003
Book value
Market value
12.31.2002
Book value
Market value
1. Debt securities
1.1 Government securities
- quoted
- unquoted
1.2 Other
- quoted
- unquoted
2. Equities
- quoted
- unquoted
1,090,301
504,178
502,758
1,420
586,123
416,332
169,791
194,188
191,957
2,231
1,093,825
504,208
502,788
1,420
589,617
416,613
173,004
187,613
185,381
2,232
1,396,549
688,965
687,456
1,509
707,584
520,081
187,503
156,320
41,737
114,583
1,399,845
688,991
687,471
1,520
710,854
520,081
190,773
157,509
42,926
114,583
Total
1,284,489
1,281,438
1,552,869
1,557,354
The difference between the book and market values, 3,051 thousand Euro,
should be considered together with the net capital losses (2,137 thousand
Euro) on derivative hedging contracts reported in section 10.5 on repurchase
agreements.
2.4 Changes during the year in dealing securities
A. Opening balance
B. Increases
B1) Purchases
- debt securities
- government securities
- other securities
- equities
B2) Writebacks and revaluations (1)
B3) Transfers from the investment portfolio
B4) Other (2)
C. Decreases
C1) Sales and redemptions
- debt securities
- government securities
- other securities
- equities
C2) Adjustments (1)
C3) Transfers to the investment portfolio
C4) Other (2)
D. Closing balance
1,552,869
29,297,229
28,901,459
28,117,852
22,959,916
5,157,936
783,607
14,975
380,795
29,565,609
29,507,358
28,750,664
23,383,129
5,367,535
756,694
3,241
55,010
1,284,489
(1) Writebacks and revaluations and writedowns have been recorded in the statement of income.
(2) Other changes include income from dealing activities and amounts arising on the recording of capitalized issue discounts and from short-selling. The contra-entry for the latter, 320,392 Euro, is classified
among other liabilities.
106
Section 3 – Equity investments (captions 70 and 80)
3.1 Significant investments
A. COMPANIES INCLUDED IN THE SCOPE OF CONSOLIDATION
A.1 LINE - BY - LINE
Type of
relationship
Stockholders’
equity
(A)
Net
income
for the
year (B)
1. BANCA CASSA DI RISPARMIO
DI TORTONA SpA - Tortona (Al)
Capital stock Euro 38,734,500
In shares of Euro 516.46 each
1
82,564
5,985
Banca Lombarda SpA
Banca Regionale
Europea SpA
15.20
60.00
15.20
60.00
2. BANCA DI VALLE CAMONICA SpA - Breno (BS)
In shares of Euro 1 each
1
94,861
7,659
Banca Lombarda SpA
Banco di Brescia SpA
74.24
8.72
74.24
8.72
3. BANCA LOMBARDA INTERNATIONAL S.A.
Luxembourg
1
32,280
4,234
Banca Lombarda SpA
Banco di San Giorgio SpA
91.90
7.59
0.51
91.90
7.59
0.51
4. BANCA LOMBARDA PREFERRED
CAPITAL COMPANY - LLC - Delaware (USA)
Capital stock Euro 1,000
In a single quota of Euro 1,000.
1
-196
-197
Banca Lombarda SpA
100.00
100.00
NAME AND LOCATION
Type of investment
(Loss) % Holding
Votes at
ordinary
meetings
% Holding
5.
BANCA LOMBARDA PRIVATE
INVESTMENT SpA - Brescia
1
23,328
-6,919
Banca Lombarda SpA
100.00
100.00
6.
BANCA REGIONALE EUROPEA SpA - Cuneo
1
991,362
66,342
Banca Lombarda SpA
53.33
57.83
7.
BANCO DI BRESCIA SpA – Brescia
1
918,730
118,231
Banca Lombarda SpA
100.00
100.00
8.
BANCO DI SAN GIORGIO SpA - Genoa
1
73,043
4,320
Banca Regionale
Europea SpA
Banca Lombarda SpA
54.07
32.63
54.07
32.63
CAPITALGEST SGR SpA – Brescia
1
20,339
4,497
Banca Lombarda SpA
100.00
100.00
10. CAPITALGEST ALTERNATIVE
INVESTMENTS SGR SpA - Brescia
In shares of Euro 1,000 each
1
1,238
-262
Banca Lombarda SpA
100.00
100.00
11. CBI FACTOR SpA – Milan
1
67,547
6,453
Banca Lombarda SpA
97.23
97.23
12. ELECTROLUX FINANCIERA SA E.F.C. - Madrid
1
6,592
281
Banca Lombarda SpA
Veneta Factoring SpA
51.00
39.00
51.00
39.00
13. GRIFOGEST SpA - Florence
1
8,454
2,439
Banca Lombarda SpA
Banca Regionale
Europea SpA
51.00
51.00
49.00
49.00
9.
(following)
107
(straight)
Type of
relationship
Stockholders’
equity
(A)
Net
income
for the
year (B)
14. LOMBARDA ADVISORY SA - Luxembourg
1
1,390
1,214
Banca Lombarda
Private Investment SpA
99.00
99.00
15. LOMBARDA SISTEMI E SERVIZI SpA - Brescia
1
15,929
3,280
Banca Lombarda SpA
100.00
100.00
16. MERCATI FINANZIARI SIM SpA - Milan
1
12,077
392
Banca Lombarda SpA
100.00
100.00
17. S.B.I.M. SpA – Brescia
1
26,904
823
Banca Lombarda SpA
100.00
100.00
18. SBS LEASING SpA – Brescia (C)
1
67,525
9,221
Banca Lombarda SpA
98.00
98.00
19. SIFRU GESTIONI FIDUCIARIE SIM SpA – Brescia
1
2,843
888
Solofid SpA
100.00
100.00
20. SILF SpA - Cuneo
1
28,844
6,522
Banca Lombarda SpA
Banca Regionale
Europea SpA
60.00
60.00
40.00
40.00
21. SOLIMM SpA – Brescia
1
2,804
6
Banca Lombarda SpA
100.00
100.00
22. SOLOFID SpA. – Brescia
1
3,057
987
Banca Lombarda SpA
100.00
100.00
23. VENETA FACTORING SpA - Pordenone
1
26,327
2,825
Banca Lombarda SpA
CBI Factor SpA
51.00
39.00
51.00
39.00
Type of investment
%
Votes at
Holding
ordinary
meetings
% Holding
Consolidated
book
value
NAME AND LOCATION
Type of investment
(Loss) % Holding
Votes at
ordinary
meetings
% Holding
B. INVESTMENTS CARRIED AT EQUITY
Group equity investments
NAME AND LOCATION
1. ANDROS Srl - Cuneo
In quotas of Euro 0.52 each
Type of Stockholders’
Net
relationship
equity income
(A) for the
year (B)
Loss
1
1,071
156
Banca Regionale
Europea SpA
100.00
100.00
1,073
2. CORPORATION FINANCIERE EUROPEENNE SA 1
Luxembourg
1,175
81
Banca Lombarda SpA
63.75
63.75
750
-54
-36
Banca Regionale
Europea SpA
95.00
95.00
-
3. GE.SE.RI SpA in liquidation - Cuneo
Total investments in Group companies
108
1
1,823
Other significant investments
NAME AND LOCATION
Type of Stockholders’
Net
relationship
equity income
(A) for the
year (B)
1. BRESCIA ON LINE Srl - Brescia
In quotas of Euro 1 each
8
Loss
-662 -5,675
Type of investment
%
Votes at
Holding
ordinary
meetings
% Holding
Consolidated
book
value
Banca Lombarda SpA
20.00
20.00
-
Banca Cassa di
Risparmio di Tortona SpA
32.50
32.50
1,628
2. CARALT SpA - Alessandria
8
5,010
1,701
3. FIDUCIARIA BANKNORD SpA - Milan
8
620
9
B.di V.Camonica SpA
30.00
10.00
30.00
10.00
-
4.
HELP RENTAL SERVICE Srl - Rome
8
408
52
SBS Leasing Spa
29.00
29.00
173
5.
LOMBARDA VITA SpA
8
66,967
8,637
Banca Lombarda SpA
49.90
49.90
33,417
6.
PAVIA SVILUPPO IMPRESE SpA – Pavia
8
2,139
-130
Banca Regionale
Europea SpA
32.32
32.32
691
7.
PRISMA Srl – Milan
In quotas of Euro 1 each
8
648
30
Banca Lombarda SpA
20.00
20.00
129
8.
SIDERFACTOR SpA - Milan
7
1,200
-
CBI Factor SpA
27.00
27.00
324
9.
TEX FACTOR SpA - Milan
8
1,757
139
CBI Factor SpA
20.00
20.00
367
Total
36,729
(A) Type of relationship:
1 = control as per art.2359.1.1 of the Italian Civil Code (majority of votes at ordinary stockholders’ meetings);
2 = control as defined by article 2359(1.2) of the Italian Civil Code (dominant influence at ordinary stockholders’ meetings);
3 = control as defined by article 23(2.1) of the Tax Consolidation Law (agreements with other stockholders)
4 = other forms of control;
5 = single management as defined by article 26(1) of Decree 87/92;
6 = single management as defined by article 26(2) of Decree 87/92;
7 = joint control;
8 = associated company
(B) Amount already included in stockholders’ equity.
(C) Stockholders’ equity and net income calculated using financial lease methodology.
109
3.2 Amounts due to and from Group companies
12.31.2003
a) assets
12.31.2002
Changes
-
-
-
-
-
-
of which: subordinated
-
-
-
2. due from financial institutions
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,256
1,016
1,240
-
-
-
1. due from banks
3. due from other customers
4. bonds and other debt securities
b) liabilities
1. due to banks
2. due to financial institutions
-
-
-
2,256
1,016
1,240
4. securities issued
-
-
-
5. subordinated liabilities
-
-
-
-
-
-
1. guarantees given
-
-
-
2. commitments
-
-
-
12.31.2003
12.31.2002
Changes
340,574
159,225
181,349
-
38,474
-38,474
3. due to other customers
c) guarantees and commitments
3.3 Due to and from equity investments
(excluding Group companies)
a) assets
1. due from banks
2. due from financial institutions
3. due from other customers
4. bonds and other debt securities
b) liabilities
-
-
-
222,335
70,362
151,973
-
-
-
118,239
43,583
74,656
-
-
-
-
6,806
-6,806
-
-
-
681,625
569,802
111,823
1. due to banks
80,110
362
79,748
2. due to financial institutions
41,161
16,273
24,888
9,816
14,282
-4,466
550,528
538,864
11,664
10
21
-11
10,290
3. due to other customers
5. subordinated liabilities
c) guarantees and commitments
28,384
18,094
1. guarantees given
10,324
7,691
2,633
2. commitments
18,060
10,403
7,657
110
3.4 Equity investments (caption 70)
a) Investments in banks
1. quoted
2. unquoted
b) Investments in financial institutions
1. quoted
2. unquoted
c) Other investments
1. quoted
2. unquoted
Total
12.31.2003
12.31.2002
Changes
343,336
336,262
7,074
328,985
321,775
7,210
14,351
14,487
-136
65,901
62,946
2,955
-
-
-
65,901
62,946
2,955
66,653
36,532
30,121
-
-
-
66,653
36,532
30,121
475,890
435,740
40,150
3.5 Equity investments in Group companies (caption 80)
12.31.2003
a) Investments in banks
12.31.2002
Changes
-
-
-
1. quoted
-
-
-
2. unquoted
-
-
-
b) Investments in financial institutions
1. quoted
2. unquoted
c) Other investments
1. quoted
2. unquoted
Total
111
-
-
-
-
-
-
-
-
-
1,823
1,610
213
-
-
-
1,823
1,610
213
1,823
1,610
213
3.6 Changes during the year in equity investments
3.6.1 Equity investments in Group companies
A. Opening balance
B. Increases
1,610
213
B1.Purchases
-
B2.Writebacks
-
B3. Revaluations
-
B4. Other changes
B5. Valuation as per article 19 Decree 87/92
C. Decreases
213
-
C1. Sales
-
C2. Adjustments
-
C3. Other changes
-
D. Closing balance
1,823
E. Total revaluations
-
F. Total adjustments
413
3.6.2 Other equity investments
A. Opening balance
B. Increases
435,740
46,346
B1.Purchases
33,159
B2.Writebacks
-
B3. Revaluations
-
B.4 Other changes
B5. Valuation as per article 19 Decree 87/92
C. Decreases
13,187
6,196
C1. Sales
2,417
C.2 Adjustments
C.3 Other changes
D. Closing balance
3,779
475,890
15,664
12,646
112
Changes in these investments are detailed below:
B) Associated companies
Opening
B.1
B.2
B.3
B.4
balance
Purchases
Writebacks
Revalua-
Other
tions
changes
Brescia On Line Srl (1)
958
CARALT SpA
-
-
-
C.2
C.3
Closing
%
Sales Adjustments
C.1
Other
balance
owner-
changes
-
ship
-
958
-
20.00
1,562
-
-
553
-
-
487
1,628
32.50
Fiduciaria Banknord SpA (1)
-
-
-
-
-
-
-
-
40.00
Help Rental Service Srl
-
-
-
173
-
-
-
173
29.00
275
-
-
225
500
-
-
-
49.90
Itradeplace SpA
Lombarda Vita SpA
8,502
22,455
-
4,310
-
-
1,850
33,417
Pavia Sviluppo Imprese SpA
719
-
-
-
-
-
28
691
32.32
Prisma Srl
119
-
-
10
-
-
-
129
20.00
Siderfactor SpA
-
-
-
324
-
-
-
324
27.00
Tex Factor SpA
-
-
-
367
-
-
-
367
20.00
12,135
22,455
-
5,962
500
-
3,323
36,729
-
Total (B)
C) Other equity investments
Opening
B.1
B.2
B.3
B.4
C.1
C.2
C.3
balance
Purchases
Writebacks
Revalua-
Other
Sales
Adjust-
Other
tions
changes
ments
changes
Agemont SpA
ASM Brescia SpA
-
Closing
%
balance ownership
29
-
-
-
-
-
-
-
29
0.17
12,950
-
-
-
-
-
-
-
12,950
0.96
-
18
-
-
-
-
-
-
18
0.06
459
-
-
-
-
-
-
-
459
10.00
Autostrade Lombarde SpA
Autosystem Società di Servizi SpA
AQM Srl
EArchimede SpA
Banca d'Italia
83
-
-
-
-
-
-
-
83
4.17
516
2,548
-
-
-
-
-
-
3,064
1.40
1,824
-
-
-
-
-
-
-
1,824
0.25
321,775
-
-
-
7,210
-
-
-
328,985
2.34
Banca Popolare di Lodi Scrl
2,578
-
-
-
-
-
-
-
2,578
0.26
Banco Emiliano Romagnolo SpA
1,369
-
-
-
-
-
-
-
1,369
5.00
28
-
-
-
5
33
-
-
-
-
450
-
-
-
-
-
-
-
450
1.68
Cedacri SpA
1,980
-
-
-
-
-
-
-
1,980
12.20
Centrale dei Bilanci Srl
1,404
-
-
-
-
-
-
-
1,404
1.67
Centro Factoring SpA
207
-
-
-
-
-
-
-
207
0.90
Centro Fiduciario SpA
5
-
-
-
-
-
-
-
5
2.00
0.49
Banca Intesa SpA
Banca Lombarda Sicav
CartaSi Spa
Centro Leasing SpA
450
-
-
-
-
-
-
-
450
Cidneo Finance PLC
5,934
-
-
-
-
-
-
-
5,934
-
Compagnie Monegasque de Banque
8,670
-
-
-
-
-
-
-
8,670
4.50
-
-
-
-
-
-
-
-
-
0.02
Deutsche Morgan Grenfell Capital Italy Scpa 1,341
Cooperativa Farmaceutica Srl (1)
31
-
-
-
-
-
-
1,372
2.58
-
-
-
-
-
-
-
-
-
4.93
E-Mid SpA
221
-
-
-
-
-
-
-
221
3.68
EonTech Ventures SA & Alpha Sca
257
-
-
-
-
64
-
13
180
4.48
- -
-
-
-
-
-
-
-
6.25
267
1,206
-
-
-
-
-
-
1,473
0.92
-
-
-
-
-
-
-
-
-
0.45
294
-
-
-
-
-
-
-
294
3.75
EC Bic Piemonte SpA in liquidation (1)
Ente Turismo Alba Bra Langhe Roero Srl (1)
Equinox Investment Company Scpa
Eurocasse SIM SpA in liquidation (1)
Eurofidi Consorzio Garanzia Fidi
(2)
(3)
(following)
113
(straight)
C) Other equity investments
European Investment Fund
Euros Spa
Filse SpA
Finlombarda SpA
Finpiemonte
GAL Vallecamonica
GEC spa
Help Rental Service Srl
Hopa SpA
Immobiliare Fiera di brescia SpA
Informatica Servizi Organizzazione srl
Innoinvest Piemonte (1)
Interbrennero SpA
Isfor 2000 SpA
Latur SpA
LigurCapital SpA
Lineapiù SpA
Lombarda Mortgage Finance 1 Srl
Lombarda Lease Finance 1 Srl
Mediocredito Friuli SpA
Merc.Mob. Nord-est SpA in liquidation
Multiutility SpA
Parco Scientifico.Tecnologico e delle
Telecomunicazioni in Valle Scrivia SpA
Risparmio e Previdenza SpA
S.W.I.F.T. Sc.
Soc. Gestione per il Realizzo SpA
SO.P.R.IN SpA Ass. in participation
SSB SpA
Tex Factor
Unionfidi Liguria Srl
Vemer Siber Group SpA
Opening
B.1
B.2
B.3
B.4
C.1
C.2
C.3
balance
Purchases
Writebacks
Revalua-
Other
Sales
Adjust-
Other
tions
changes
ments
changes
-
31
-
-
198
2
-
1,000
133
283
514
612
27
98
48,529
1,696
26
43
372
200
163
1,463
1
1
1
1
46
619
0.25
1.43
1.66
4.68
1.82
11.11
7.20
2.00
7.38
10.00
11.34
0.42
9.82
10.00
2.86
2.31
10.00
10.00
10.00
10.00
0.09
9.87
34
200
-
46
33
619
1
-
813
1,883
24
72
1,446
65
243
26
-
4
6,550
-
-
10
-
15
1,774
-
243
-
813
1,883
23
72
1,446
65
26
4,776
16.95
5.00
0.04
0.93
35.71
1.07
3.94
7.34
117
112
-
-
-
-
-
-
229
-
Total (C)
423,605
10,704
-
-
7,225
1,917
-
456
439,161
-
Total (B + C)
435,740
33,159
-
-
13,187
2,417
-
3,779
475,890
-
-
-
-
-
%
-
Other minor investments
1,000
133
249
514
612
27
98
198
48,529
1,696
26
43
372
163
1,463
1
1
1
Closing
balance ownership
(1) Equity investments not reaching the minimum amount for reporting purposes (thousand Euro). These were written down in previous
years either because of the losses incurred or because they were placed in liquidation.
(2) The increase reflects recognition of the own shares distributed by that bank on the allocation of net income for 2002. The ownership percentage is determined with reference to ordinary capital.
(3) Equity investment represented by preference shares.
114
Section 4 - Tangible and intangible fixed assets (captions 120 and 110)
4.1 Changes during the year in tangible fixed assets (caption 120)
Property
Furniture and
installations
Total
A. Opening balance
362,160
66,449
428,609
B. Increases
351,952
48,565
400,517
19,302
45,253
64,555
-
-
-
325,460
-
325,460
7,190
3,312
10,502
C. Decreases
40,339
62,147
102,486
C1. Sales
15,573
145
15,718
B1. Purchases
B2. Writebacks
B3. Revaluations (1)
B4. Other changes
C2. Adjustments
a) depreciation
b) permanent writedowns
24,764
21,315
46,079
24,764
21,315
46,079
-
-
-
2
40,687
40,689
D. Closing balance
673,773
52,867
726,640
483,578
-
483,578
195,742
188,121
383,863
195,742
188,121
383,863
-
-
-
C3. Other changes
a) depreciation
(1) Revaluation of properties (under Law 350/2003) as discussed in the accounting policies.
4.2 Changes during the year in intangible fixed assets (caption 110)
Solidarity Fund
(Ministerial Decree
158/2000)
Software
Leasehold
improvements
A. Opening balance
16,679
63,121
9,555
B. Increases
26,265
37,143
6,992
287
3,760
74,447
26,265
35,374
4,110
-
3,446
69,195
B2. Writebacks
-
-
-
-
-
-
B3. Revaluations
-
-
-
-
-
-
B1. Purchases
B4. Other changes
C. Decreases
C1. Sales
Goodwill
Other
Total
34,713 13,120 137,188
-
1,769
2,882
287
314
5,252
9,424
32,961
7,206
10,658
4,909
65,158
-
-
-
-
-
-
9,424
32,610
5,460
10,658
4,175
62,327
9,424
32,610
5,460
10,658
4,175
62,327
-
-
-
-
-
-
C3. Other changes
-
351
1,746
-
734
2,831
D. Closing balance
33,520
67,303
9,341
C2. Adjustments
a) amortization
24,342 11,971 146,477
-
-
-
-
13,592
14,400
15,291
89,314
13,592
14,400
15,291
89,314
9,412
142,009
-
-
-
-
-
-
a) amortization
115
-
-
9,412 142,009
Section 5 - Other assets
(captions 150 and 160)
5.1 Other assets (caption 150)
12.31.2003
12.31.2002
Changes
Amounts due from tax authorities (1)
571,847
575,692
-3,845
Other items
161,534
165,904
-4,370
Items in transit
71,873
58,738
13,135
Amounts to be collected
92,653
94,469
-1,816
Value-date differences on exchange and dealing transactions
11,713
1,621
10,092
Third-party checks
70,819
65,787
5,032
-
756
-756
188,702
83,008
105,694
1,169,141
1,045,975
123,166
Amounts receivable in relation to securities transactions
Items being processed
Total
(1) Including deferred tax assets as detailed in the related table in section 7 “Provisions”.
The above assets have not been written down as they are fully collectible.
5.2 Accrued income and prepaid expenses (caption 160)
12.31.2003
12.31.2002
Changes
12,619
21,021
-8,402
Accrued income:
- interest on securities
- interest on bank deposits and loans
10,625
22,045
-11,420
- interest on loans to customers
31,624
34,413
-2,789
338,722
459,590
-120,868
15,129
29,454
-14,325
408,719
566,523
-157,804
1,242
1,010
232
57
165
-108
- differentials on derivative contracts
- other
Total accrued income
Prepaid expenses:
- insurance premiums
- rentals and condominium expenses
- specific tax to frank goodwill
- bond issue discount
- other
Total prepaid expenses
Total accrued income and prepaid expenses
116
4,352
9,288
-4,936
959
2,226
-1,267
65,335
51,864
13,471
71,945
64,553
7,392
480,664
631,076
-150,412
5.4 Distribution of subordinated assets
12.31.2003
a) due from banks
b) loans to customers
c) bonds and other debt securities
of which: own securities
Section 6 - Payables
12.31.2002
Changes
-
-
-
16,182
6,416
9,766
168,946
157,347
11,599
-
-
-
12.31.2003
12.31.2002
Changes
427,912
374,579
53,333
-
-
-
(captions 10, 20, 30 and 40)
6.1 Due to banks (caption 10)
a) operazioni pronti contro termine
b) prestito titoli
Amounts due to banks are analyzed by technical form as follows:
12.31.2003
correspondent current accounts
12.31.2002
Changes
606,886
582,038
24,848
1,558,680
1,326,234
232,446
mortgage loans
196,959
186,844
10,115
repurchase agreements
427,912
374,579
53,333
39,150
57,815
-18,665
2,829,587
2,527,510
302,077
12.31.2003
12.31.2002
Changes
1,863,846
-
2,053,177
-
-189,331
-
deposits
other technical forms
Total due to banks
6.2 Due to customers (caption 20)
a) repurchase agreements
b) securities loaned
Due to customers (caption 20) and securities issued (caption 30) are analyzed by technical form as follows:
Due to customers (caption 20)
current accounts
deposit accounts
repurchase agreements
assignors in factoring
other technical forms
Total
117
12.31.2003
12.31.2002
Changes
10,641,414
1,566,680
1,863,846
608,650
377
9,809,231
1,692,671
2,053,177
605,378
501
832,183
-125,991
-189,331
3,272
-124
14,680,967
14,160,958
520,009
Securities issued (caption 30)
Bonds
12.31.2003
12.31.2002
Changes
7,156,424
6,688,480
467,944
Certificates of deposit
372,216
443,110
-70,894
Bankers' drafts
112,638
110,153
2,485
47,201
28,651
18,550
-
2,602
-2,602
7,688,479
7,272,996
415,483
Total due to customers and securities issued 12.31.2003
12.31.2002
Changes
Total
21,433,954
935,492
12.31.2003
12.31.2002
Changes
1,381
1,276
105
Commercial paper
Other
Total securities issued (caption 130)
22,369,446
6.3 Public funds administered (caption 40)
Funds used to finance revolving agricultural loans
Section 7 – Provisions
(captions 70, 80 and 90)
7.3 Provisions for liabilities and charges: other (caption 80c)
This caption, together with movements during the year, is analyzed as follows:
12.31.2002
Provision for guarantees given
Increases
Decreases
Provision Other changes Provision Other changes 12.31.2003
7,247
88
-
-899
-
6,436
Provision for legal disputes and other charges
21,368
9,129
-
-9,830
-13
20,654
Provision for actions for revocation
16,027
4,086
-
-4,529
-
15,584
Provision for charitable donations
4,451
3,500
400
-3,560
-
4,791
596
-
-
-596
-
-
Provision for charges (Ciampi Law)
Provision for agents' indemnities
1,671
634
-
-
-
2,305
Other provisions
1,252
1,490
681
-379
-24
3,020
52,612
18,927
1,081
-19,793
-37
52,790
Total
The Provision for guarantees given includes an estimate to cover doubtful
guarantees.
The provision for legal disputes and other charges includes estimated losses
on lawsuits with customers and prudent provisions for disputes that may
arise in relation to investment services. The decrease relates to overprovisions that were written back as extraordinary income.
118
In particular, the provision of 5.2 million Euro recorded previously by a
Group company in relation to a dispute with the Ministry for the Economy
has been eliminated following the first-level sentence in favor of the Bank
handed down in January 2003. The Supreme Court filed opposition to the
first-level sentence in February 2004. Nevertheless, the group company has
maintained its position on the matter since, in the opinion of its legal advisors, the appeal by the Supreme Court is unfounded and inadmissible and,
consequently, the risk of an adverse judgement is remote.
The increase in the Provision for actions for revocation relates to new actions,
for which prudent provisions have been made. Decreases mainly relate to the
elimination of provisions, since the reasons for these ceased to apply; the utilization of this provision has been credited to extraordinary income.
Provision for termination indemnities (caption 70)
Balance as of 12.31.2002
Use
Provision for the year
179,411
-17,647
17,714
179,478
Staff pension funds (caption 80 a)
The pension fund represents the commitment of “BRE Banca” to retired personnel and to those still working. The amount is determined using an actuarial valuation of the pensions payable to those so entitled. The amount of
26,051 thousand Euro comprises:
- 10,041 thousand Euro for the fund of the former Banca del Monte di Lombardia (B.R.E. Banca);
- 16,010 thousand Euro for the fund of the former Cassa di Risparmio di
Cuneo (B.R.E. Banca).
Provisions for taxation (caption 80 b)
- Payments made during the year:
direct taxes
indirect taxes
+ Provisions for :
indirect taxes (included in caption 80 b of the statement of income)
direct taxes (included in caption 240 of the statement of income):
+ specific tax on monetary revaluation
345,257
-172,813
-171,277
-1,536
165,630
794
164,836
71,611
409,685
119
“Deferred tax assets” arise from provisions for liabilities and charges and
from expenses which are not tax deductible in the year in which they are
recorded for accounting purposes. They are reclassified in asset caption 130.
“Deferred tax liabilities” relate to gains arising on the disposal of equity
investments and buildings. They are classified as part of the provision for
taxation.
The above taxes have been determined using the future rates applying to the
consolidated companies.
7.4 Deferred tax assets
(1) Opening balance
(2) Increases
52,302
35,793
2.1 Deferred tax assets arising in the year
2.2 Other increases
(3) Decreases
29,429
6,364
29,822
3.1 Deferred tax assets reversing in the year
3.2 Other decreases
(4) Closing balance
18,039
11,783
58,273
7.5 Deferred tax liabilities
(1) Opening balance
(2) Increases
21,531
43,784
2.1 Deferred tax liabilities arising during the year
2.2 Other increases
(3) Decreases
43,412
372
4,778
3.1 Deferred tax liabilities reversing during the year
2,476
3.2 Other decreases
2,302
(4) Closing balance
60,537
The above balances are retained in the financial statements since the related
events are likely to crystallize in the future.
120
Section 8 –
Capital stock, additional paid-in capital, equity
reserves, reserve for general banking risks, goodwill
and negative goodwill arising on consolidation, subordinated liabilities and minority interests (liability captions 100, 110, 120, 130, 140, 150, 160, 170, 180 and 200
and asset captions 90 and 100)
12.31.2003
12.31.2002
Changes
Reserve for general banking risks (caption 100)
64,222
Capital stock (caption 150)
316,644
Additional paid-in capital (caption 160)
624,034
Reserves (caption 170)
591,431
A) Legal reserve
132,641
B) Other reserves:
458,790
- Extraordinary reserve
240,013
- Other reserves
218,777
Revaluation reserves (caption 180):
266,122
Negative goodwill arising on consolidation
(caption 120)
25,622
Negative goodwill arising on application
of the equity method (caption 130)
21
Retained earnings (Accumulated losses) (caption 190)
Net income for the year (caption 200)
112,059
Total stockholders' equity
2,000,155
62,750
315,729
621,704
568,107
132,641
435,466
216,716
218,750
24,404
1,472
915
2,330
23,324
23,324
23,297
27
241,718
25,622
-
21
130,078
1,748,415
-18,019
251,740
Subordinated liabilities (caption 110)
Minority interests (caption 140)
1,347,138
467,483
-41,317
-7,957
1,305,821
459,526
These captions are analyzed below:
Reserve for general banking risks: (caption 100) - The change relates to
the change in the interests in Cassa di risparmio di Tortona and in CB factor
and to the provision made by a Group company.
Capital stock: (caption 150)
This comprises 316,643,537 ordinary shares, par value Euro 1 each, issued by
the Parent Bank (*)
Additional paid-in capital (caption 160)
This pertains to the Parent Bank (*).
Legal reserve (caption 170 a)
This pertains to the Parent Bank (*).
Other reserves (caption 170 b):
Details of changes are shown in the attachments.
Revaluation reserves (caption 180) – The increase is due to the revaluation allowed by law recorded by five Group banks.
(*) Details and movements in these captions are shown in the Explanatory
notes of the Parent Bank (section 8).
121
Subordinated liabilities are analyzed in the following table:
Name
Interest rate
Book value
as of 12.31.2003
Fixed rate swapped
155,000
PREFERENCE SHARES (TIER I):
1 Banca Lombarda Preferred Capital Company
LLC 2000/2010
with 6-month Euribor +2.42%
HYBRID CAPITALIZATION INSTRUMENTS
(UPPER TIER II):
2 Banca Lombarda bond loan 1999-2009
3-mths euribor +1.05%
99,840
348,642
SUBORDINATE LOANS THAT CAN BE INCLUDED IN
CAPITAL FOR SUPERVISORY PURPOSES (LOWER TIER II):
4 Former Cab 1997-2004 bond loan
3-mths Ribor + 0.25%
5 Former Banca San Paolo di Brescia
1998-2006 bond loan
10,329
92,962
3-mths Euribor +0.65%
174,755
for the first five years,
+1.25% thereafter (1)
7 Banca Lombarda e Piemontese 2001-2011 bond loan
8 Banca Lombarda e Piemontese 2012-2012 bond loan
149,636
3-mths Euribor +1%
249,657
9 Banco di Brescia 2002-2009 bond loan
3-mths Euribor +0.40%
25,000
Total
1,305,821
(1) Except for exercise of the call option, which allows early repayment.
These loans comply with Bank of Italy requirements for inclusion in the calculation of capital for supervisory purposes, namely:
- advance repayment clause, with authorization from the supervisory authority;
- subordination clause which comes into play if the issuing bank is put into
liquidation.
The subordinated loans included in the “Upper Tier II” category are subject
to additional more restrictive clauses linked to any losses, suspension of
interest payments and repayment only after all other creditors not similarly
subordinated have been paid.
122
Negative goodwill arising on consolidation (caption 120)
This relates to:
12.31.2003
CBI Factor SpA
SBS Leasing Spa
Banca di Valle Camonica SpA
Capitalgest SpA
Solofid (formerly Sifru Fiduciaria SpA)
Lombarda Sistemi e Servizi
12.31.2002
Changes
226
226
-
1,646
1,646
-
10
10
-
22,546
22,546
-
1,884
1,884
-
15
15
-
7
7
-
Offset against positive goodwill:
- Sifru SIM SpA
- SBIM SpA (former Magazzini Gen.Borghetto SpA)
Total
-11
-11
-
-701
-701
-
25,622
25,622
-
Negative goodwill arising on application of the equity method (caption 130)
This relates to:
12.31.2003
12.31.2002
Changes
Prisma Srl
8
8
-
Andros Srl
115
115
-
- BRE
-102
-102
-
Total
21
21
-
12.31.2003
12.31.2002
Changes
11,423
12,891
63
403,477
15,530
1,832
626
1,073
16
1,426
7,405
39
3,725
27,047
13,798
61
391,737
14,653
8,111
1,009
994
6,157
39
3,877
-15,624
-907
2
11,740
877
-6,279
626
64
16
432
1,248
-152
459,526
467,483
-7,957
Offset against positive goodwill:
Minority interests (caption 140)
This relate to:
Banca Cassa Risparmio Tortona SpA
Banca Lombarda International S.A.
Banca Regionale Europea SpA
CBI Factor SpA
Electrolux financiera
Grifogest Spa
Lombarda advisory
SBS Leasing Spa
SILF
Solimm SpA
Veneta Factoring
Total
123
Assets
Goodwill arising on consolidation (caption 90)
This relates to:
12.31.2002 Increases
Banca Cassa di Risparmio di Tortona SpA
Banca Regionale Europea SpA
Capitalgest SpA (and former Unigest SpA)
CBI Factor SpA
Grifogest Spa
Solofid SpA (formerly Sifru Fiduciaria SpA)
Mercati Finanziari Sim SpA
Electrolux Financiera
Total
Decreases
12.31.2003
554
85,624
787
631,524
601
4,447
1,961
41
170
-
685
27,145
446
759
9,364
291
-206
-7,048
-112
-37,175
-100
-832
-218
-41
-21
-936
-29
1,033
105,721
675
594,795
501
4,374
1,743
149
8,428
262
725,709
38,690
-46,718
717,681
Goodwill arising on the application of the equity method (caption 100)
This relates to:
12.31.2002 Increases
Decreases
12.31.2003
Brescia On Line
934
-
-934
-
Total
934
-
-934
-
CAPITAL ADEQUACY REQUIREMENTS AT DECEMBER 31, 2003
Categories
Amount
A. CONSOLIDATED CAPITAL FOR SUPERVISORY PURPOSES
A.1 Tier 1 capital
A.2 Tier 2 capital
A.3 Items to be deducted
A.4 Capital for supervisory purposes
B. CAPITAL ADEQUACY REQUIREMENTS
B.1 Lending risks
B.2 Market risks
of which:
- dealing portfolio risks
- exchange risks
B.2.1 Tier 3 subordinated loans
B.3 Other requirements
B.4 Total requirements
C. RISK-WEIGHTED ASSETS AND CAPITAL ADEQUACY RATIOS (*)
C.1 Risk-weighted assets
C.2 Tier 1 capital / Risk-weighted assets
C.3 Capital for supervisory purposes / Risk-weighted assets
1,366,129
1,366,129
-152,826
2,579,432
1,922,746
47,610
46,793
817
55,204
2,025,560
25,319,501
5.40%
10.19%
(*) Total prudent requirements multiplied by the reciprocal of the minimum compulsory coefficient for
lending risks (as per Bank of Italy notice dated November 4, 1999).
Capital adequacy ratio for lending risks
124
10.73%
Section 9 – Other liabilities (caption 50 and 60)
9.1 Other liabilities (caption 50)
12.31.2003
12.31.2002
Changes
20,653
25,552
-4,899
Withholding taxes payable
Advances from customers for purchase of securities
-
417
-417
62,370
61,203
1,167
1,808
7,904
-6,096
37
-
37
320,392
261,835
58,557
Amounts awaiting customer instructions
190,621
186,226
4,395
Balances to be allocated
129,205
68,461
60,744
Miscellaneous payables
620,233
457,543
162,690
Due to suppliers
154,786
226,481
-71,695
Due to employees
Value-date differences on exchange transactions
Down-payments on property sales
Securities - short-selling (1)
Value-date differences on dealing transactions
1,127
24,962
-23,835
Items in transit with branches
24,061
13,126
10,935
Other transactions
35,128
23,823
11,305
Consolidation adjustments
31,805
46,331
-14,526
1,592,226
1,403,864
188,362
Total
(1) This involves short-selling of securities as part of normal operations by the Finance Area. They are valued using the same accounting principles as for dealing securities. The effects of the valuation have
been recorded in statement of income caption 60 “profits/losses from financial transactions”.
9.2 Accrued expenses and deferred income (caption 60)
12.31.2003
12.31.2002
Changes
- interest on securities issued
113,275
137,778
-24,503
- interest on derivative contracts
Accrued expenses:
101,138
298,229
-197,091
- interest on repurchase agreements with customers
5,276
10,310
-5,034
- interest on repurchase agreements with banks
5,240
9,187
-3,947
- interest on amounts due to banks
9,620
480
9,140
- interest on amounts due to customers
6,965
1,330
5,635
- other
6,943
7,215
-272
248,457
464,529
-216,072
- interest on discounted notes and loans
7,838
9,493
-1,655
- foreign currency forward transactions
1,818
-
1,818
Total accrued expenses
Deferred income:
- other
Total deferred income
Total accrued expenses and deferred income
125
14,814
15,765
-951
24,470
25,258
-788
272,927
489,787
-216,860
Section 10 – Guarantees and commitments (captions 10 and 20)
10.1 Guarantees given (caption 10)
12.31.2003
12.31.2002
Changes
- commercial guarantees
904,451
882,690
21,761
- financial guarantees
569,445
454,771
114,674
4,914
-
4,914
1,478,810
1,337,461
141,349
12.31.2003
12.31.2002
Changes
- assets lodged in guarantee
Total
10.2 Commitments (caption 20)
- commitments to grant finance (certain to be called on)
- commitments to grant finance (not certain to be called on) (1)
Total
689,524
484,978
204,546
3,423,692
2,894,456
529,236
4,113,216
3,379,434
733,782
(1) Represents put options for the sale of their residual equity interests granted to sellers on the acquisition
of controlling interests in Group companies for 1,042 million Euro.
10.3 Assets lodged to guarantee the Group’s liabilities
12.31.2003
12.31.2002
Changes
-
123,862
-123,862
a) Nominal value of Group's securities lodged
to guarantee
- other advances
- the issue of bankers' drafts
28,223
29,395
-1,172
252,194
883,787
-631,593
194,510
182,743
11,767
474,927
1,219,787
-744,860
12.31.2003
12.31.2002
Changes
92,431
89,834
2,597
-
-
-
b) Amounts due from customers assigned
with recourse to guarantee loans received
from Mediocredito Centrale (using EIB funds)
Total
10.4 Margins available on lines of credit
a) central banks
b) other banks
Represents the unrestricted portion of obligatory deposits placed with the
Bank of Italy.
126
10.5 Forward transactions
Type of transaction
1. Purchase/sale
1.1 Securities
- purchases
- sales
1.2 Currency
- currency against currency
Hedging
Dealing
Other transactions
1,849,575
335,923
-
-
335,923
-
-
166,969
-
-
168,954
-
1,849,575
-
-
24,853
-
-
- purchases against euro
889,451
-
-
- sales against euro
935,271
-
-
27,712
-
88,150
2. Deposits and loans
- to be made
-
-
35,678
27,712
-
52,472
15,929,700
16,796,429
1,715,265
-
981,074
1,425,403
-
26,110
1,425,403
- purchases
-
10,115
1,303,885
- sales
-
15,995
121,518
b) currency
-
-
-
-
-
-
- to be received
3. Derivative contracts
3.1 With exchange of capital
a) securities
-
-
-
-
-
-
c) other instruments
-
954,964
-
- purchases
-
477,482
-
- sales
-
477,482
-
15,929,700
15,815,355
289,862
92,825
-
-
3.2 Without exchange of capital
a) currency
b) other instruments
-
-
-
51,866
-
-
40,959
-
-
15,836,875
15,815,355
289,862
- purchases
9,614,993
7,667,319
-
- sales
6,221,882
8,148,036
289,862
17,806,987
17,132,352
1,803,415
Total
127
Details of the principal derivative contracts contained in the previous table
are as follows:
Hedging
3.1 With exchange of capital
Dealing
Other transactions
-
25,588
1,425,403
-
25,588
1,425,403
- purchases
-
9,593
1,303,885
. options
-
9,593
1,303,885
. futures
-
-
-
-
15,995
121,518
a) securities
- sales
. options
-
9,507
121,518
. futures
-
6,488
-
-
-
-
-
-
-
c) other instruments
- purchases for futures
-
-
-
3.2 Without exchange of capital
- sales for futures
15,836,875
15,815,355
289,862
b) other instruments
15,836,875
15,815,355
289,862
- purchases
9,614,993
7,667,319
-
. assets - basis swaps
5,293,760
200,000
-
. interest rate swaps
3,794,349
3,142,462
-
. options on indices
286,636
-
-
. other instruments on interest rates
- sales
. assets - basis swaps
240,248
4,324,857
-
6,221,882
8,148,036
289,862
-
5,293,760
200,000
. interest rate swaps
657,727
3,077,657
-
. options on indices
-
-
286,636
270,395
4,870,379
3,226
. other instruments on interest rates
Forward transactions include both assets to be received, already accounted
for in “commitments”, as well as all other off-balance sheet transactions traded on own account, which have been recorded as follows:
a) purchases/sales of securities and currency as well as derivative contracts
that entail or may entail an exchange of capital: at the settlement price;
b) deposits and loans: at the amount to be received or paid;
c) derivative contracts without exchange of capital: at the reference nominal
value.
Hedging transactions not involving an exchange of capital principally relate
to interest rate swaps that hedge against interest rate fluctuations. These offbalance sheet transactions are valued at year-end prices, using the same
principles adopted for stating the assets being hedged. This valuation has
produced an unrealized net loss of 6,540 thousand Euro, which has not been
recorded in the statement of income in accordance with current regulations.
This unrecognized loss is correlated with the gains shown on unquoted
investment and dealing securities, as discussed in sections 2.1 and 2.3.
All these transactions have been arranged with leading international banks
and financial institutions.
128
Section 11 –
Concentration and distribution of assets and liabilities
11.1 Significant exposures
12.31.2003
12.31.2002
a) amount
290,872
696,979
b) number
1
3
As required by Bank of Italy regulations, the weighted positions (from cash
lending, guarantees and commitments) in relation to clients or groups of
“related” customers, are reported under this heading.
11.2 Distribution of loans to customers by category
of borrower
12.31.2003
12.31.2002
Changes
58,003
74,615
-16,612
a) governments
b) other public entities
1,126,447
1,055,457
70,990
c) non-financial entities
13,533,449
12,794,379
739,070
d) financial institutions
2,501,794
2,101,135
400,659
e) family businesses
1,105,152
1,784,604
-679,452
f) other operators
5,259,234
3,897,149
1,362,085
23,584,079
21,707,339
1,876,740
Total
11.3 Distribution of loans to resident non-financial and family businesses
12.31.2003
12.31.2002
Changes
b) other services for sale
3,210,936
2,809,530
401,406
a) commerce, salvage and repairs
2,652,087
2,412,015
240,072
c) construction and public works
1,432,215
1,238,581
193,634
989,963
992,224
-2,261
-
801,437
-
d) metal products other than machines
and means of transport
e) other industrial products (*)
- ferrous & non ferrous minerals and metals (*)
f) other sectors
Total
616,010
-
-
5,567,790
6,148,591
-580,801
14,469,001
14,402,378
66,623
(*) Changes are not indicated because the description of the various sectors has changed between one year
and the next.
129
11.4 Distribution of guarantees given by principal category of borrower
12.31.2003
a) governments
312.31.2002
Changes
797
648
149
b) other public entities
13,426
13,242
184
c) banks
24,036
4,376
19,660
1,162,324
1,004,758
157,566
72,062
89,184
-17,122
d) non-financial entities
e) financial institutions
f) family businesses
g) other operators
Total
39,683
44,119
-4,43
166,482
181,134
-14,652
1,478,810
1,337,461
141,349
11.5 Geographical distribution of assets and liabilities as of 12.31.03
1 Assets
1.1 Due from banks
Italy
Other EU countries
Other countries
Total
26,068,669
1,391,840
169,900
27,630,409
1,860,513
504,089
18,692
2,383,294
22,996,300
521,477
66,302
23,584,079
1,211,856
366,274
84,906
1,663,036
24,740,187
1,200,899
565,149
26,506,235
1,919,978
639,088
270,521
2,829,587
2.2 Due to customers
13,989,273
555,806
135,888
14,680,967
2.3 Securities issued
7,678,763
5,976
3,740
7,688,479
2.4 Other
1,152,173
29
155,000
1,307,202
5,454,208
123,811
14,007
5,592,062
1.3 Securities
2. Liabilities
2.1 Due to banks
3. Guarantees and commitments
130
11.6 Distribution of assets and liabilities by maturity as of 12.31.03
Repayable
Caption/Residual duration on demand
1. Assets
7,591,459
Up to 3
months
Between
3 and 12
months
12,401,120 11,044,087
Fixed duration
Beyond 1 year
Fixed Floating
rate
rate
Beyond 5 years
Fixed
Floating
rate
rate
11,365,471
6,768,717
2,513,502
4,163,828
1,019
70,612
84,964
3,015
Unspecified
maturity
TOTAL
1,360,909 57,209,093
1.1 Securities eligible for refinancing
by the Treasury
1.2 Due from banks
2,059
16,051
51,429
189,799
418,948
235,687
1,855,848
194,911
-
590
-
406
95,852
2,383,294
7,113,276
3,886,206
2,118,156
1,032,923
4,037,745
457,572
3,900,365
1,037,836
23,584,079
871
37,627
285,325
245,436
225,642
37,222
180,858
37,422
1,050,403
239,566
6,605,388
8,394,266
10,086,093
2,434,128
1,933,744
79,184
-
29,772,369
13,185,174 10,728,124
9,145,343
5,121,904
4,230,789
883,369
1.4 Bonds and other
debt securities
1.5 Off-balance sheet transactions
2. Liabilities
12,478,613
2.1 Due to banks
2.2 Due to customers
2.3 Securities issued
- bonds
- certificates of deposit
- other securities
2.4 Subordinated liabilities
2.5 Off-balance sheet transactions
503,907 56,277,223
839,020
1,780,951
24,280
1,221
126,966
3,748
50,948
2,453
2,829,587
11,427,519
2,662,310
182,677
-
430
-
-
408,031
14,680,967
161,426
420,021
1,699,612
2,797,906
2,335,196
248,818
25,500
-
7,688,479
-
205,597
1,557,645
2,786,997
2,331,867
248,818
25,500
-
7,156,424
13,387
202,624
141,967
10,909
3,329
-
-
-
372,216
148,039
11,800
-
-
-
-
-
-
159,839
-
-
10,329
-
20,000
503,642
678,888
92,962
1,305,821
50,648
8,321,892
8,811,226
6,346,216
2,639,312
3,474,581
128,033
461
29,772,369
Off-balance sheet transactions include options totaling 328,098 thousand Euro regarding the transformation of fixed rates into floating rates or vice versa.
11.7 Assets and liabilities in foreign currencies
a) Assets
12.31.2003
12.31.2002
Changes
778,040
971,465
-193,425
1. due from banks
325,999
435,984
-109,985
2. loans to customers
346,370
429,836
-83,466
3. securities
100,374
101,348
-974
4. equity investments
5. other
b) Liabilities
-
-
-
5,297
4,297
1,000
737,331
907,622
-170,291
1. due to banks
349,641
497,161
-147,520
2. due to customers
369,810
409,090
-39,280
17,880
387
17,493
-
984
-984
4. other
131
11.8 Securitization transactions
SBS Leasing carried out another securitization deal in 2003, as follows:
LOMBARDA LEASE FINANCE 3 Securitization:
Originator:
Issuer:
Servicer:
Risk Protection Provider:
Representative of the Noteholders:
Paying Agent:
Rating Agencies:
Corporate Servicer:
The structure of the operation:
Legal nature of the transfer:
Nature of the portfolio transferred:
Amount of loans transferred:
Closing date:
Securities issued:
Arranger and Lead Manager:
SBS LEASING S.p.A.
Lombarda Lease Finance 3 S.r.l.
SBS LEASING S.p.A.
European Investment Fund
The Bank of New York, London Branch
BNP Paribas securities Services, Milan Branch
Moody’s and Fitch
KPMG Fides
In accordance with Law 130/99
without recourse
Loans deriving from lease contracts
Operating (27%) Property (54%)
Vehicles (19%)
Euro 650,529,119
06/30/2003
Class A1 (AAA/Aaa)
Euro 200,000,000
Class A2 (AAA/Aaa) Guaranteed E.i.f.
Euro 350,000,000 =
Class A3 (AAA/Aaa) Guaranteed E.i.f.
Euro 65,000,000 =
Class B (A/Aa3) Guaranteed E.i.f.
Euro 21,000,000 =
Class C (BBB/Baa2) Guaranteed E.i.f.
Euro 14,000,000 =
Credit Suisse First Boston
Securities in portfolio (from securitization transactions)
Investment securities
- Senior
- Mezzanine
- Junior (1)
Dealing securities
- Senior
- Mezzanine (2)
- Junior (2)
Total
- Senior
- Mezzanine
- Junior
Book value
Market value
43,390
43,390
6,862
6,175
687
43,390
43,390
6,862
6,175
687
50,252
50,252
6,175
44,077
6,175
44,077
(1) Securities from securitization deals:
- 8,350 Lombarda Mortgage Finance 1 Srl - Banco di Brescia 2001.
- 11,890 Lombarda Lease Finance 1 Srl - SBS Leasing 2001.
(2) Securities from Cidneo Finance Plc - Banca Lombarda 2001 securitization deal.
132
Breakdown of securitized securities by quality of underlying assets
Securities in portfolio - Book value
Mortgage loans to retail customers
Senior
Mezzanine
Junior
Total
-
-
8,350
8,350
Loans deriving from lease contracts
-
-
35,040
35,040
Securities
-
6,175
687
6,862
Total
-
6,175
44,077
50,252
Breakdown of securitized securities by quality of underlying assets
Securities in portfolio - Book value
a) Own underlying assets
Senior
Mezzanine
Junior
Total
-
6,175
44,077
50,252
-
-
3
3
Problem loans
-
-
-
-
Other assets
-
6,175
44,074
50,249
-
-
-
-
-
-
-
-
Problem loans
-
-
-
-
Other assets
-
-
-
-
-
6,175
44,077
50,252
a) Third-party underlying assets
Total
Securitized assets underlying junior securities
- Non-performing loans
- Problem loans
- Other assets (of which 27,641 relating to the "Cidneo" transaction)
Total
4,233
16,717
1,606,805
1,627,755
Writedowns of securities in portfolio (from securitization transactions)
- Senior
-
- Mezzanine
-
- Junior (1)
19
Total
19
(1) Adjustments for Cidneo Finance Plc 2001 securitization deal.
133
Writebacks to securities in portfolio (from securitization transactions)
- Senior
-
- Mezzanine (1)
75
- Junior
-
Totale
75
(1) Writebacks relate to securities linked to the Cidneo Finance Plc 2001 securitization deal.
Servicer and Arranger activities
Vehicle company
Securitized
assets
Loans collected Adjustments
(principal)
Residual
assets
Lombarda Mortgage Finance 1 Srl
499,895
122,477
-
377,418
495,401
286,639
1,318
207,444
610,008
167,890
931
441,187
650,529
76,370
94
574,065
2,255,833
653,376
2,343
1,600,114
Section 12 – Administration and dealing on behalf of third parties
12.1 Dealing in securities
12.31.2003
12.31.2002
Changes
8,927,851
6,041,702
2,886,149
a) purchases
1. settled
2. not settled
36,943
25,128
11,815
8,964,794
6,066,830
2,897,964
5,776,877
3,669,476
2,107,401
23,567
21,082
2,485
Total
5,800,444
3,690,558
2,109,886
Total
14,765,238
9,757,388
5,007,850
12.31.2003
12.31.2002
Changes
9,408,863
8,713,443
695,420
Total
b) sales
1. settled
2. not settled
12.2 Portfolio management
Assets under management
The amounts are stated net of current account balances under management.
134
12.3 Custody and administration of securities
12.31.2003
12.31.2002
Changes
A) Third-party securities on deposit
(excluding those in portfolio management)
35,196,080
32,078,788
3,117,292
B) Third-party securities deposited with third parties
30,250,013
28,648,244
1,601,769
1,475,694
2,075,420
-599,726
C) Own securities deposited with third parties
12.4 Collection of receivables on behalf of third parties: debit and credit
adjustments
a) Debit adjustments
12.31.2003
12.31.2002
Changes
4,975,718
5,078,200
-102,482
1. current accounts
37,769
38,935
-1,166
2. central portfolio
4,909,932
5,006,449
-96,517
-
-
-
3. cash
4. other
b) Credit adjustments
1. current accounts
2. presenters of notes and documents
3. other
135
28,017
32,816
-4,799
5,206,986
5,232,983
-25,997
28,017
32,966
-4,949
5,141,200
5,161,081
-19,881
37,769
38,936
-1,167
Section 1 – Interest (captions 10 and 20)
PART C
INFORMATION
ON THE
CONSOLIDATED
STATEMENT OF
INCOME
1.1 Interest income and similar revenues (caption 10)
a) On amounts due from banks
12.31.2003
12.31.2002
Changes
72,453
119,811
-47,358
5,402
10,231
-4,829
1,063,380
1,123,927
-60,547
-
-
-
130,300
105,016
25,284
5,388
5,446
-58
63,568
45,943
17,625
1,335,089
1,400,143
-65,054
of which:
deposits with central banks
b) On loans to customers
of which:
on loans using public funds
c) On debt securities
d) Other interest income
e) Positive differentials on hedging transactions
Total
1.2 Interest expense and similar charges (caption 20)
a) On amounts due to banks
12.31.2003
12.31.2002
Changes
61,096
143,004
-81,908
b) On amounts due to customers
141,684
188,832
-47,148
c) On securities issued
255,993
282,074
-26,081
7,721
12,782
-5,061
-
-
-
e) On subordinated liabilities
81,090
62,819
18,271
f) Negative differentials on hedging transactions
49,577
5,931
43,646
589,440
682,660
-93,220
of which:
on certificates of deposit
d) On public funds administered
Total
1.3 Interest income and similar revenues (caption 10)
a) on foreign currency assets
12.31.2003
12.31.2002
Changes
76,095
27,673
48,422
1.4 Interest expense and similar charges (caption 20)
a) on foreign currency assets
136
12.31.2003
12.31.2002
Changes
17,472
10,778
6,694
Section 2 – Commission (captions 40 and 50)
2.1 Commission income (caption 40)
12.31.2003
12.31.2002
Changes
a) Guarantees given
b) Derivatives on loans
c) Management, dealing and consultancy services:
1. dealing in securities
2. dealing in currency
3. portfolio management
3.1 individual
3.2 collective
4. custody and administration of securities
5. custodian bank
6. placement of securities
7. acceptance of instructions
8. consultancy
9. distribution of third-party services:
9.1 portfolio management:
a) individual
b) collective
9.2 insurance products
9.3 other products
d) Collection and payment services
e) Servicing for securitization operations
f) Tax collection services
g) Other services (*)
10,032
98
277,632
11,477
5,823
144,272
36,559
107,713
6,318
12,019
15,684
11,510
70,529
1,073
1,073
51,749
17,707
59,673
1,876
120,135
9,490
284,937
11,410
6,220
162,630
46,158
116,472
7,240
12,710
14,911
12,127
57,689
41,532
16,157
55,304
887
107,187
542
98
-7,305
67
-397
-18,358
-9,599
-8,759
-922
-691
773
-617
12,840
1,073
1,073
10,217
1,550
4,369
989
12,948
Total
469,446
457,805
11,641
(*) This caption includes transaction commissions on active current accounts with customers.
2.2 Detail of caption 40 - Commission income:
Distribution channels of products and services
a) at own branches:
12.31.2003
12.31.2002
Changes
215,360
232,962
-17,602
144,148
162,361
-18,213
11,256
13,485
-2,229
3. third-party services and products
59,956
57,116
2,840
15,125
2,268
12,857
124
269
-145
b) door-to-door:
3. third-party services and products
137
4,428
1,426
3,002
10,573
573
10,000
230,485
235,230
-4,745
2.3 Commission expense (caption 50)
12.31.2003
12.31.2002
Changes
a) Guarantees received
300
384
-84
b) Derivatives on loans
-
-
-
37,893
28,904
8,989
1. dealing in securities
2,970
4,250
-1,280
2. dealing in currency
-
-
-
187
1,643
-1,456
0
16
-16
c) Management and dealing services:
3. portfolio management:
3.1 own portfolio
3.2 third-party portfolio
4. custody and administration of securities
187
1,627
-1,440
2,786
1,267
1,519
730
637
93
10,113
6. door-to-door distribution of securities,
products and services
31,220
21,107
d) Collection and payment services
22,364
18,210
4,154
e) Other services
35,916
23,401
12,515
Total
96,473
70,899
25,574
Section 3
– Profits (losses) on financial transactions (caption 60)
3.1 Profit (losses) on financial transactions (caption 60)
A.1 Revaluations
Security
transactions
Currency
transactions
Other
transactions
Total
14,819
-
7,898
22,717
A.2 Writedowns
-3,685
-
-8,373
-12,058
B. Other gains/losses
11,782
6,483
16,961
35,226
22,916
6,483
16,486
45,885
Total
1. Government securities
4,453
2. Other debt securities
4,519
3. Equities
18,897
4. Security derivatives
-4,953
Total
22,916
138
Section 4
– Administrative costs (caption 80)
4.1 Average number of employees by category
12.31.2003
12.31.2002
Changes
a) managers
b) 3rd and 4th grade middle managers
c) other employees
183
1,030
6,259
170
1,027
6,236
13
3
23
Total
7,472
7,433
39
12.31.2003
12.31.2002
Changes
296,878
87,004
34,583
11,313
289,009
82,708
36,068
12,114
7,869
4,296
-1,485
-801
429,778
419,899
9,879
12.31.2002
Changes
Payroll is analyzed as follows:
wages and salaries
social security charges
termination indemnities and pensions
other charges
Total
Other administrative costs
Other administrative costs are analyzed as follows:
12.31.2003
Telephone, postage, data transmission and alarms
Repair and maintenance of premises
Rental of machines and software
Rental of premises
Security services
Transport
Professional and consultancy fees
Office supplies
Power, heat and water
Advertising
Legal fees for debt collection
External data processing
Insurance premiums
Credit information
Directors' and Statutory Auditors' fees
Membership fees
Expenses for treasury contracts with public entities
Other charges
Total administrative costs
Indirect taxes and duties:
- VAT (1)
Stamp duty, substitute and other taxes
34,098
34,816
13,359
24,227
8,893
8,940
13,904
4,637
8,919
17,086
6,232
24,098
9,944
4,794
9,385
2,390
9,024
10,236
244,982
33,319
34,917
9,479
20,646
9,930
9,080
11,883
7,120
8,162
14,315
6,568
24,159
8,884
5,991
9,795
2,217
9,291
8,655
234,411
779
-101
3,880
3,581
-1,037
-140
2,021
-2,483
757
2,771
-336
-61
1,060
-1,197
-410
173
-267
1,581
10,571
605
49,787
11,127
50,049
-10,522
-262
Total other administrative costs
295,374
295,587
-213
(1) As mentioned in “Part A - Accounting policies”, Lombarda Sistemi e Servizi changed the way it
accounts for VAT during 2003. By way of information, the VAT on costs in 2002 amounted to 3,784
thousand Euro, while that regarding fixed assets totaled 6,898 thousand Euro.
139
Section 5 –
Adjustments, writebacks and provisions (captions 90,
100, 120, 130, 140 and 150)
Adjustments to intangible and tangible fixed assets (caption 90)
12.31.2003
-
12.31.2002
Changes
9,424
46,079
52,903
46,718
934
4,170
37,416
47,324
43,924
117
5,254
8,663
5,579
2,794
817
156,058
132,951
23,107
Solidarity Fund (Ministerial Decree 158/2000)
depreciation of tangible fixed assets
amortization of intangible fixed assets
goodwill arising on consolidation
goodwill arising on application of the equity method
Total
Provisions for liabilities and charges (caption 100)
This caption includes provisions of 18,852 thousand Euro credited to liability
caption 80c “Provisions for liabilities and charges”, as mentioned in the earlier note on provisions.
5.1 Adjustments to loans and provisions for guarantees and commitments (caption 120)
12.31.2003
12.31.2002
Changes
a) adjustments to loans
of which:
- general adjustments for country risks
- other general adjustments
b) provision for guarantees and commitments
of which:
- general adjustments for country risks
- other general adjustments
172,969
145,954
27,015
8,826
88
51
3,239
2,429
-51
5,587
-2,341
50
2,279
-2,229
Total
173,057
148,383
24,674
Writebacks of loans and provisions for guarantees and commitments
(caption 130)
Writebacks comprise:
Recovery of loans written off in prior years
Writebacks of writedowns recorded in prior years
Other writebacks
Writebacks on guarantees and commitments
Total
140
12.31.2003
12.31.2002
Changes
20,118
20,518
2,698
465
23,566
19,994
2,629
4
-3,448
524
69
461
43,799
46,193
-2,394
Section 6 – Other statement of income captions (captions 70, 110, 190 and 220)
6.1 Other operating income (caption 70)
12.31.2003
Property rentals
Stamp duties and substitute tax recovered
12.31.2002
Changes
3,025
2,485
540
41,019
41,085
-66
35,953
31,850
4,103
Expense recoveries and other income on deposits
and current accounts
Income from back-dated bank transfers
3,774
4,479
-705
974
2,587
-1,613
5,695
5,380
315
Capitalized payroll costs (1)
Fees on taxes paid
Income from securitization transactions
35,028
25,099
9,929
Other income and recharges
43,381
31,164
12,217
168,849
144,129
24,720
Total
(1) As specified in Part A, Section 1, paragraph 6), these are payroll costs of Lombarda Sistemi e Servizi
staff used to develop software.
6.2 Other operating expenses (caption 110)
12.31.2003
12.31.2002
Changes
Finance leasing charges
1,098
1,578
-480
Prior-year commission and interest
2,035
2,062
-27
Expenses from back-dated bank transfers
5,317
6,209
-892
Other
22,784
12,124
10,660
Total
31,234
21,973
9,261
12.31.2002
Changes
6.3 Extraordinary income (caption 190)
12.31.2003
Out-of-period income:
- overprovision of taxed costs in previous years
10,315
8,092
2,223
- other
17,510
17,780
-270
8,616
9,880
-1,264
244
12,021
-11,777
5
-
5
101
-
101
36,791
47,773
-10,982
Gains on the disposal of:
- property and other fixed assets
- equity investments
- investment securities
Total
141
6.4 Extraordinary charges (caption 200)
12.31.2003
12.31.2002
Changes
Out-of-period expense:
- extraordinary personnel charges
- other (1)
2,147
4,292
-2,145
19,606
6,321
13,285
21
224
-203
-534
Losses on the disposal of:
- tangible and intangible assets
- equity investments
16
550
868
855
13
-
697
-697
22,658
12,939
9,719
Other
Total
(1) This includes 10,660 thousand Euro on the elimination of deferred tax assets that are not recoverable
following introduction of the “Tremonti” tax reform law.
Income taxes for the year (caption 240)
Income taxes for the year
(1) Current taxes
125,830
(2) Change in deferred tax assets
(3) Change in deferred tax liabilities
(4) Income taxes for the year
Section 7
31.12.2003
-5,971
39,006
158,865
– Other information on the statement of income
7.1 Geographical distribution of profits
The geographical distribution of revenues is such that no detailed breakdown is required.
142
Section 1
PARTE D
OTHER
INFORMATION
– Directors and Statutory Auditors
1.1 Remuneration
12.31.2003
a) directors
3,813
b) statutory auditors
243
These figures include amounts paid for duties carried out at the Parent Bank
and its subsidiaries.
1.2 Loans granted and guarantees given
12.31.2003
a) directors
30,378 (of which indirectly 30,354*)
b) statutory auditors
3,007 (of which indirectly 2,742*)
(*) Loans and guarantees granted, in compliance with current legislation, in favor of companies in which
the Directors and Statutory Auditors have an interest.
143
Attachments to the consolidated financial
statements of the Banca Lombarda
e Piemontese Group
- Statement of changes in consolidated financial position for the year
ended December 31, 2003
- Statement of changes in consolidated stockholders’ equity for the year
ended December 31, 2003
145
Statement of changes in consolidated financial position
(thousands of euro)
SOURCES OF FUNDS
Funds generated by operations
Net income for the year
Change in reserve for general banking risks (net of use for risk reserves)
Adjustments to intangible and tangible fixed assets
Adjustments to loans
Writebacks on loans
Provision for termination indemnities
Provisions for liabilities and charges
Adjustments to financial fixed assets
Increase in liabilities
Increase in capital stock and additional paid-in capital
Due to customers and securities issued
Due to banks
Other liabilities
Revaluation reserves
Specific tax on revaluation
Other changes in reserves
Changes in minority interests
Decrease in assets
Cash
Due from banks
Other assets
Portfolio securities
TOTAL SOURCES OF FUNDS
APPLICATION OF FUNDS
Application of funds generated from operations
Dividends distributed
Charitable donations
Use of provision for termination indemnities
Use of provision for taxation
Use of other provisions for liabilities and charges
Increase in assets
Cash
Loans to customers
Other assets
Equity investments
Intangible and tangible fixed assets and goodwill on consolidation
Decrease in liabilities
Other liabilities
Decrease in pension funds
Due to banks
TOTAL
147
12.31.2003
12.31.2002
112,059
1,472
156,058
173,057
-43,799
17,714
165,630
20,116
154
602,461
130,078
132,951
148,383
-46,193
17,562
184,054
16,346
5,502
588,683
3,245
935,492
302,077
241,718
71,611
-2,108
-7,957
277,129
1,539,099
220,429
23,034
-529
13,941
83,547
27,246
644,164
2,299,035
52,672
387,649
422,273
2,935,697
2,901,496
3,524,380
12.31.2003
12.31.2002
104,191
350
17,647
172,813
19,938
314,939
94,595
300
18,969
158,361
54,503
326,728
14,615
2,005,998
40,363
454,416
2,348,285
122,924
10,362
94,684
28,498
41,317
1,350
2,586,557
1,341
620,056
3,197,652
2,901,496
3,524,380
Statement of changes in consolidated stockholders’ equity for the year ended December 31, 2003
(thousands of euro)
Capital
stock
Total balances as of 12.31.2002
Legal ExtraordiReserve
reserve
nary
for general
reserve banking risks
Reserve
article 7.3
Law 218/90
Reserve
Decree
124/93
315,729
132,641
260,647
62,750
26,835
157
- for cash
268
-
-
-
-
-
- stock granting plan
647
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
25,537
-
-
-
Increases in capital stock for:
Allocation of Parent Bank's net income
- dividends to stockholders
- other reserves
Revaluation, Law 350/2003
-
-
-
-
-
-
Reserve article 13 , Decree 124/93
-
-
-
-
-
27
Charitable donations made by Group companies
-
-
-
-
-
-
Other adjustments on consolidation
-
-
-2,242
1,472
-
-
Net income for the year
-
-
-
-
-
-
316,644
132,641
283,942
64,222
26,835
184
Total balances as of 12.31.2003
148
Reserve
article 7.2
Law 218/90
Additional
paid-in
capital
Revaluations
reserve
Marger
surplus
Reserve
Law 153/99
Net income
for the year
Negative
goodwill
arising on cons.
Total
stockholders’
equity
46,533
621,702
24,404
370
100,926
130,078
25,643
1,748,415
-
2,332
-
-
-
-
-
2,600
-
-
-
-
-
-
-
647
-
-
-
-
-
-
-
-
-
-
-
-
-
-104,191
-
-104,191
-
-
-
-
-
-25,537
-
-
-
-
241,718
-
-
-
-
241,718
-
-
-
-
-
-
-
27
-
-
-
-
-
-350
-
-350
-
-
-
-
-
-
-
-770
-
-
-
-
-
112,059
-
112,059
46,533
624,034
266,122
370
100,926
112,059
25,643
2,000,155
149

Report and consolidated financial statements of

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