01.03 indice ing 13-06-2007 12:22 Pagina 1 - UBI...

01.03 indice ing 13-06-2007 12:22 Pagina 1

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C M Y CM MY CY CMY K

This is a summary version of the 2006 Financial Statements (Bilancio di Esercizio 2006)


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CONTENTSCentrobanca: profile and description of operations 4Mission statement and corporate structure 4Plan for the merger of Banca Lombarda 6e Piemontese and Banche Popolari UniteDevelopment strategy of Centrobanca 6National network and distribution structure 8

Trend of operations 10Loans 10Credit finance 11Risk Management & Derivatives 12Investment banking 12Private equity 13

Capital structure 16Loans to Customers 16Financial assets 19Shareholdings 21Loan provisions 22Financial liabilities 23Hedging derivatives 23

Economic trend 24Interest margins 25

Dividends 25Net commissions 25Net result of trading and hedging activity 26Profit/Loss from sale/repurchase of loans and financial assets/liabilities 26Administrative expenses 26Net value adjustments for loan ond financial asset/liability impairment 27Profit/Loss on disposals 27Taxation 27

Capital 28Proposed allocation of profit for the period 28Regulatory capital and capital requirements 29Personnel and personnel development 30

Other information on management and outlook 31Financial statements 32Principle figures and indicators 37

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04.09 per estratto ing 13-06-2007 12:21 Pagina 1

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CENTROBANCA: PROFILEAND DESCRIPTIONOF OPERATIONS

Mission statementand corporate structure

The area of consolidation also includesthe assets and liabilities of the followingcompanies:- Albenza Srl, Albenza 2 Srl and Albenza3 Srl deriving from securitisationtransactions originating in the period 1999-2000-2001 of the ex-BPB-CV Scri- Orio Finance Nr. 1 Plc, Orio Finance Nr2 Plc and Orio Finance Nr 3 Plc derivingfrom securitization transactions originatingin the period 2000-2001-2002 of BPUInternational Finance Plc (now liquidated)- Sintonia Finance Srl, limited to the assetsand liabilities relating o securitizationtransactions originating in 2003 ofCentrobanca Spa.

(1) Control is held by Banche PopolariUnite Scpa with 99.9975% andCentrobanca owns the remaining 0.0025%

(2) The company has 100% control of :By You Piemonte Srl, By You Liguria Srl,By You Mutui Srl, By You Adriatic Srl, ByYou Nord Srl, By You Centro Srl, and ByYou Sud Srl, all consolidated on theproportional method within BPU BancaGroup.

Centrobanca is the Corporate and Investment Bank of the BPU Group which offers the mid-uppercorporate market a complete, integrated and specialised range of products and services designedto support innovation, growth, and the financial restructuring of companies also through access tothe capital markets (extraordinary finance projects).

The bank is active in the Industrial Credit market, in Investment Banking, in structured finance, inAssisted Finance and in Private Equity.

On 1 April 2007 the Ubi Banca Group was created from the merger of Banca Lombarda e PiemonteseS.p.A and Banche Popolari Unite Scpa (BPU Banca): one of the leading banking groups in Italy, ofwhich Centrobanca is the operating unit engaged in Corporate and Investment Banking.

Centrobanca’s mission, defined in the Industrial Plan for 2006-2008, approved in December 2005and reconfirmed to the present date, is based on four principles:

� Focus on the requirements of the mid-upper corporate segment of the market ;� A comprehensive and complete range of Corporate and Investment Banking services, with particular

attention on products and services for extraordinary business finance;� Capacity to cover the entire national market through the Group’s banks, the direct distribution

network of Centrobanca and through agreements with local banking organisations with a strongterritorial base.

� Constant reinforcement of its skills and the quality of its products and services.

Group structure of Banche Popolari Unite at December 2006

100%

20%(2)

20%

35% 100%

9,8%

100%

30%

100%

100%(1)

100%

100%

100%

100% 99,998%

100% 85,8252% 100%83,361%

100%

100%

98,5332% Mercato -Impresa

Spa

CoralisRentSrl

BPU SimSpa

Polis FondiSGRpA

SF ConsultingSrl

PlurifidSpa

CapitalMoneySpa

BY YOUSpa

BPBImmobiliare

Srl

BDGFinanziaria Sa

Svizzera

Banquede Dépôt et

de Gestion SaSvizzera

SOFIPOFiduciaire Sa

Svizzera

BPBFunding Lic

USA

BPBTrust Co. Ltd

Jersey

BPU BancaInternational

SaLussemburgo

B@nca 24-7Spa

BancaCarime

Spa

BancaPopolare

Commercio eIndustria Spa

BancaPopolare

di BergamoSpa

BPBCapital Trust

USA

BPCIFunding Lic

USA

BPCICapital Trust

USA

Banche Popolari Unite ScpaCapogruppo

Companies fully consolidatedCompanies consolidated on proportional basisCompanies consolidated on share of net equity basis

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There have been no changes to the corporate structure of Centrobanca in 2006: Banche PopolariUnite holds 97.82% of Centrobanca (of which 5.47% is held through its subsidiary Banca Popolaredi Ancona); the remaining share capital is subdivided between 30 banks, primarily “Popolari” (co-operative banks).

Centrobanca holds shareholdings in other companies of the Group with the sole aim of carrying outits own activities.

Centrobanca Sviluppo Impresa SGR (100% owned). This subsidiary is engaged in private equity:it promotes, sets up, administers and manages closed-end property investment funds.

Group SRL (shareholding 22.5%). Shareholding which is instrumental to the bank’s InvestmentBanking operations. The company was established in 2005 and owned by Banca Aletti (GruppoBanca Popolare di Verona Novara), Banca Akros (Gruppo Banca Popolare di Milano), Banca Popolaredell’Emilia Romagna, Banca Popolare di Sondrio.Through the coordination of the banking networksof its shareholders, the Group today has access to over 6,000 branches, the largest distributionnetwork in Italy. By making its structure available the Group hopes to gain access to more seniorroles in public issues of securities.

Finanzattiva Servizi (shareholding 50%). This is a joint equal shareholding with BPU Pramerica. Itprovides information and back-office services for financial operations.

IW Bank - (shareholding 51%). This shareholding was acquired in the field of private equity. Thecompany is specialized in trading, banking and on-line savings. It is a leader in on-line trading andamongst the leading players in the e-banking and on-line financial services sector. The parent, BPU,through the acquisition of a further 20% in 2006, has reinforced its interest in line with the strategicobjectives stated in its 2006-2008 industrial plan to optimise the value of its interests.

85%

61,7262%

38,2738%

15%

100%

100%

88%

10%

50%

30%

23,124%

3,584%

25% 20% 51%

100%

50%

50%

5,4712%

92,3515%

13,2795%

100%

99,178% 51,7205%

100%

22,5%

BPUPartecipazioniAssicurative

Spa

BPUEsaleasing

Spa

BPUAssicurazioni

Spa

BPUAssicurazioni

Vita Spa

BPUMediazioniAssicurative

Srl

Secur BrokerSrl

Aviva VitaSrl

BancaPopolaredi Ancona

Spa

Arca SGRSpa

SPF StudioProgetti

FinanziariSrl

CentrobancaSpa

IW BankSpa

CentrobancaSviluppoImpresaSGR Spa

FinanzAttivaservizi Srl

GroupSrl

BPUCentrosystem

Spa

BPUPramericaSGR Spa

BPU PramericaAlternativeInvestimentSGR Spa

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On 12 December 2006 the Boards of Directors of Banche Popolari Unite Scpa (BPU Banca) andBanca Lombarda e Piemontese S.p.A. (Banca Lombarda) unanimously approved plans to mergeBanca Lombarda with BPU Banca.

On 26 January 2007 the Bank of Italy granted its approval to the merger. On 3 March 2007 theshareholders’ meetings of BPU Banca e Banca Lombarda approved the merger, the designation ofa new name, “Unione di Banche Italiane Scpa” (UBI Banca) and the adoption of new articles ofincorporation.

The merger represents the realisation of a highly strategic industrial project thanks to the synergiesthat will come from the combination of the banking network and the corporate product range.

The combination of quantitative values and qualitative skills of the new Group, represents forCentrobanca an opportunity to further strengthen and enhance its role as a centre of specialistexcellence at the service of the Corporate client base of the branch network.

Ubi Banca will be the fourth largest bank by number of branches in Italy. Pro forma figures at 30September 2006, reveal the following statistics:

� clients: over 4 million;� employees: circa 21,500;� direct deposits: circa euro 82 billion (fifth in Italy, first position amongst co-operative banks -banche popolari);� customer loans: circa euro 80 billion (fifth in Italy, first position amongst co-operative banks -banche popolari);� high asset quality: bad debts/net loans equal to 0.7%;� assets under management - managed savings: circa euro 59 billion (third in Italia, first positionamongst co-operative banks - banche popolari), of which euro 23 billion relates to private bankingactivities;� total assets: approx. euro 112 billion (sixth in Italia, second position amongst co-operative banks);� aggregate net equity: euro 10.9 billion (including goodwill arising from the merger);� aggregate net profit: of circa euro 746 million;� core tier 1 ratio: 6.2% and� total capital ratio: 10.2%;� network of 1,970 branches: the fourth largest network in Italy, with a share of the national marketof 6,3%,with no significant overlap;� high market share in the wealthiest regions: second largest banking group in Lombardy with935 branches and a market share of over 15%;� branch market share of over 10% in 21 provinces amongst which Bergamo (26%), Brescia(29%), Varese (29%), Cuneo (26%), Pavia (18%) and Milan (10%).

During 2006 a number of initiatives were developed to address three key aspects of the bank’s marketactivity:

� efficiency of the distribution model;� development of the offer;� efficiency of the structure.

Efficiency of the Distribution Model

The actions taken to improve the efficiency of Centrobanca’s distribution model, and those taken toreinforce the integration with the network of the Group, were focused on a series of projects.

Client Planning for customers of the BPU Group: a project was commenced with thecollaboration of the parent company to set up and test an efficient method of managing operationscombined with the objective of increasing cross-selling on the captive customer base.The initiative was based on the preliminary targeting of the customer base and on follow-upcontact supported by the availability of an accompanying Client Plan. The pilot project coveredabout a third of the Group’s business centres and has already produced positive results. Theinitiative will be completed during 2007.

Plan for the mergerof Banca Lombardae Piemonteseand Banche Popolari Unite

Development strategyof Centrobanca

•

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Strengthening the network: one specific project regards the inspection and refining of thecustomer service model in order to make it more appropriate and coherent with the bank’smission.The bank, together with the parent company, examined the size and scope of the Commercialmanagement structure and provided for a significant reinforcement of resources to be allocatedin 2007.

Establishment of a Commercial Coordination Unit: a new central management unit, theCommercial Coordination Unit, was set up within the Commercial Management division with theobjective of supporting the process of managing and targeting the commercial activity and directionof the bank.

Develop agreements with non-Group banks: with the aim of increasing activity in the areasin which the group has no direct presence. In 2006 the group proceeded with its intention ofidentifying new commercial partners. Several agreements were made which give the Group accessto about 300 branches.

Personnel development in the Bpu Group: a series of three-day employee placements wasorganised and 240 Corporate Managers participated (80% of the staff population involved). Theinitiative, which centred on Centrobanca products and services, is nearing completion and willbe continued in 2007.

Coverage Large Corporate Centrobanca: this was defined in the Industrial and OperatingPlan of 2006 under Service Coverage. The objective of this service is to put into practice withrespect to company policy and strategy “relationship management” methodology on a selectedportfolio of Large Corporate and Institutional clients with the objective of maximising the opportunitiesfor cross-selling, to increase the returns on capital employed per customer and to consolidatethe client relationship. .

Development of Offer

The strategic objective pursued by Centrobanca is to increase the offer of value added products/services.The three principle initiatives of the year fall within this category.

Equity Reaserch and Sales for institutional investors. The objective is to rapidly build upa team of analysts, sales staff and traders to offer a credible and reliable service to domestic andinternational institutional investors.The team aims to reach a sufficiently large volume of trading to position Centrobanca amongstthe leading Italian intermediaries specialising in the equity market.In addition, through the development of the franchise, the bank aims to become a reference pointfor issuers, above all in the mid corporate segment, contributing to the growth of its InvestmentBanking activity.During 2006 the bank continued the development of its principal activities of setting up andplanning. Operations are expected to commence in April 2007.

Syndication Desk. A Syndication Desk is being set up and is expected to begin operating inApril 2007. The objective is to reinforce the origination and execution capability of the structuredFinance Division.This activity will allow Centrobanca to assume a senior role in the domestic lending market, bybeing able to underwrite larger issues, thanks to its capacity to offset part of the risk throughsyndication.The skills of the new team will allow the bank when considering participation in issues to have amore considered view of the degree to which operations under review can be syndicated and,therefore, a better appreciation of the risk involved.

Non-performing loans project - In 2006, as well as the normal management of theunderperforming loans portfolio, Centrobanca directly sold further non-performing loans ( 96.8million of net credits with a profit of 28.1 million) which are added to those sold last year ( 117.2million of net credits with profit of 36.8 million).In addition Centrobanca acted as advisor to the BPU group on its sales of on non-performingloans ( 86.9 million of credits with profits of 7.2 million).

•

•

•

•

•

•

•

•

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In December 2006 a joint project was started up with the parent company with the aim of optimisingthe strong loan management capabilities of Centrobanca, developing a Management businessline.

Structural efficiency

The process of rationalising and improving the efficiency of the operating apparatus continued through2006. The main initiatives taken to achieve this improvement are the following:

Integration of IPI: in August the group completed the full merger of IPI (Investimenti PiccoleImprese), a company specialising in financial services to small companies, already 99.9% owned.This led to the creation in Centrobanca of a new division which will focus on advisory servicesto small and medium-size companies.

Sale of Centrosiel and centralising of IT: the project to centralise the information technologymanagement activities of all the companies of BPU Group not in service led to the sale to BPUby Centrobanca of its stake in Centrosiel - a company 53% owned which provided outsourcedtechnology services - and the transfer in October 2006 of all of its assets and resources; a formaloutsourcing contract was then agreed between Centrobanca and BPU CentroSystem.

Centralising of Middle Office Finance and Order Routing: following the centralisation ofthe Middle Office Finance structure and operations within BPU, the centralization of third partyaccount trading structure and activity was completed according to plan.

Centralising and outsourcing operational services: in 2006 the customer rating services,IT and Human resources were all centralised at group level. The centralisation of Logistic andProcurement services and the rationalisation of other operating services, such as Accounting andAuxiliary services is continuing. These initiatives will be complted during 2007.

Internal Controls System: projects for the upgrading of Internal Control Systems to acceptedGroup standards are continuing.

Group Rating: in 2006 the group completed the installation of the calculation of Customer Ratingby Corporate client segment on its Web system, CEBI.

Operating Risk: as well as the allocation of roles provided by the Group Organisational Modelfor the monitoring of Operating Risk, the Group completed its risk mapping of each area with theco-operation of the risk owner. The Auditing division of the Group is currently examining theoperating risk management system.

The bank has access to customers through three channels:

The banking network of the BPU group through which it acts as the specialist centre in supportof the Corporate Banking Office; (from 1 April 2007 the 1970 branches of the Ubi Banca Group, thefourth largest Italian bank in terms of national coverage).

Direct presence of Centrobanca through 7 branch offices and 2 Commercial Offices

Agreements with banking institutions based in Italy in areas where the Group is less presentand for which Centrobanca acts as a specialist counterparty.

National network anddistribution structure

•

•

•

•

•

•

•

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320 166 2 2 1 1 Lombardia(492) 3 3Veneto

(6)

30 13 1 Piemonte(44)

4 Liguria

1 Toscana

Emilia Romagna(37) 17 13 6 1

Marche(110) 108 1 1

Umbria(20) 17 3

Abruzzo(16) 15 1

Molise(7) 6 1

Puglia(128) 126 1 1

Basilicata 45

26 15 11 1 Lazio(53)

62 29 2 1 Campania(94)

1 Sicilia 124Calabria

Milano

Torino

Bologna

Bari

Roma

Napoli

Ancona

Branches abroad 5Banca Popolare di Bergamo SpaMonaco (Germany)

Banque de Dépôts et de Gestion Sa (Switzerland)Losanna, Lugano, Neuchãtel, Mendrisio

International officesBPU Banca International SaLuxembourg

BPU Trust Co. LtdJersey

Representative officesSingapore, Hong Kong, San Paolo (Brasile), London, Mumbai,ShanghaiUpdated to 20 march 2001

Branches in Italy 1.182

BPU Banca Scpa 2

Banca Popolare di Bergamo Spa 374

Banca Popolare Commercio e Industria Spa 223

Banca Popolare di Ancona Spa 248

Banca Carime Spa 325

Centrobanca Spa 7

B@nca 24-7 Spa 1

IW Bank Spa 2

National presence of the Banche Popolari Unite Group

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2006 ended very positively with further growth in the result for the year compared to the very satisfactoryresult of the previous year with regard to ratios of qualitative-quantitative performance, asset performanceand profitability.

This is a testimony to the validity and efficacy of the various “Industrial Plans” which, since 2003,have focused on the development of the important strategic role of Centrobanca within the BPUGroup, a role that is destined, in the light of the forthcoming leap in its size, to become a propellantof future growth and importance.

For a more complete evaluation of the following data, it must be remembered that management hasalways adopted a very prudent approach to the evaluation of risk/reward considerations and thatconservatism has always favoured a high quality of assets even at the expense of growth andprofitability of those assets.

In 2006 the growth of Centrobanca’s principal activities (medium/long term lending) continued. Theseservices are the basis of the group’s offer of services and products to corporate clients.

There was growth in the group’s loan book both for approved credit (+19%) and issued credit (+8%).At the end of the year the group was working on requests for a total amount of 1,759 million(+31%), while total outstanding credit for issued financing rose by over 7% rising from 5.5 billiona 5.9 billion.

The increase in issued loans was principally attributable to Structure Finance operations (project &acquisition), which doubled compared to the previous year while there was a 24% reduction inCorporate Finance operations (portions of pooled financing for Prime borrowers, industrial andinternational companies with a high credit rating and tradable on secondary markets) as well as, toa lesser extent, in industrial loans (-7%).

The trend of business

Loans

Type of transaction Net Loans issued2006 2005 Change %

Value % Value %

Acquisition & Project Finance

- acquisition finance

- project finance

Corporate Finance

Lending

- industrial loans

- portfolio discounts

- retail mortgages

TOTAL

(euro millions)

865.9

812.1

53.8

522.3

1,293.9

1,265.5

18.5

9.9

2,682.1

32.3%

30.3%

2.0%

19.5%

48.2%

47.2%

0.7%

0.4%

100.0%

403.7

275.9

127.8

687.4

1,394.6

1,366.0

20.6

8.0

2,485.8

16.2%

11.1%

5.1%

27.7%

56.1%

55.0%

0.8%

0.3%

100.0%

+ 114.5%

+ 194.3%

- 57.9%

- 24.0%

- 7.2%

- 7.4%

- 10.2%

+ 23.9%

7.9%

2006 2005 Change %

(euro millions)

Funding flows:

- transactions approved

- financing allocated

Outstanding at period end:

- operations accepted and to be contracted

- operations under contract yet to be issued

TOTAL LOANS

- Value of current issued loans (*)

(*) remaining loans for finance in issue with clients and banks

3,280.0

2,485.8

949.4

396.6

1,346.0

5,486.6

+ 18.9%

+ 7.9%

+ 49.9%

- 15.5%

+ 30.7%

+ 7.4%

3,899.0

2,682.1

1,423.6

335.3

1,758.8

5,893.9

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The majority of loans were issued to non-financial counterparts operating in the manufacturing sector(41%of the total issued), which grew by over 5 b.p. compared to its share of loans by sector in 2005,while the amount issued to financial companies declined (-5%).

From the point of view of geographical location, loans to non-resident customers doubled. This wasabove all due to acquisitions and corporate finance. In Italy, the share of loans grew most in the South(+3.2 % points) and in the North East (+1.6% points).

During 2006 meetings continued with Government Ministries and at the Cassa Depositi e Prestiti (CDP)- a public finance institute which raises funds through post office deposits- for the definition of the initiationprocedures necessary for the full application of the regulations contained in Law 80/2005 which amendedthe form of assisted intervention permitted by the principal national laws and in particular those managedby Centrobanca (legge 488/92 -ordinary investment in depressed areas of the country; legge 47/82 -projects for technological innovation of products or processes and DL 297/99 for projects of industrialresearch).The Law 80/05 established a fund at the CDP with an initial contribution of 6 billion aimed at providingassisted finance to businesses operating in various productive sectors of the country; the assistanceissued to the businesses, following the amendments, is therefore composed of a mix of grants, assistedfinance and bank debt.In order to qualify for this new form of assistance, in addition to the traditional documentation businessesmust present to participating banks an approval from a Credit Institute that certifies to the credit standingof the business in order to gain access to either the CDP assisted finance or ordinary bank credit.Following the amendments described above Centrobanca therefore reached an agreement during theyear with the CDP to carry out credit checks on its own behalf and for the CDP. In addition it reached arelated agreement with the CDP and Government Ministries giving it authorization to carry out relatedAgency functions which include stipulating the terms of the finance contract, approving the issue ofordinary and assisted finance to businesses and managing any related claims.Activity levels during the year reflect delays in the application of the new legislation. In 2006 just oneBando 488 (State assisted loan package) was issued compared to two in the previous year, resultingin a halving of the requests considered.

Assisted finance

(euro millions)

0.0

488.7

18.7

2,174.6

3.5

1,095.5

116.9

958.8

2,682.1

0.0%

18.2%

0.7%

81.1%

0.1%

40.8%

4.4%

35.7%

100.0%

0.1

514.1

32.1

1,939.5

8.6

884.9

106.2

939.9

2,485.8

0.0%

20.7%

1.3%

78.0%

0.3%

35.6%

4.3%

37.8%

100.0%

-100.0%

-4.9%

-41.6%

12.1%

7.9%

States and public entities

Banks and financial entities

Families and other

Non Financial businesses

- agriculture

- manufcaturing

- building & construction

- services and commerce

TOTAL

Economic sector Net Loans IssuedDecember 2006 December 2005 Change %

Value % Value %

Geographical area Net Loans Issued2006 2005 Change %

Value % Value %

NORTH WEST

NORTH EAST

CENTRE

SOUTH

ISLANDS

NON RESIDENT

TOTAL

(euro millions)

870.7

336.6

356.7

249.5

46.2

822.4

2,682.1

32.5%

12.5%

13.3%

9.3%

1.7%

30.7%

100.0%

1,130.6

271.7

444.2

150.9

71.7

416.6

2,485.8

45.5%

10.9%

17.9%

6.1%

2.9%

16.8%

100.0%

- 23.0%

+ 23.9%

- 19.7%

+ 65.3%

- 35.6%

+ 97.4%

7.9%

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Revenue deriving from the management of the existing portfolio has, however, generated a satisfactorylevel of income equal to that reported in 2005 ( 4.2 million).

Centrobanca has a specialised division which offers corporate clients, both directly and through theBPU Group network, analytical services and derivative instruments to cover interest rate, exchangerate and commodity price risk.This business reported growth in the number of transactions (+19%) and commission income of 6.5 million, up from 5.6 million the previous year (+16%).

In the months immediately prior to the end of last year and the opening months of the current yeara number of interesting projects have been initiated. The aim of these initiatives is to increase andimprove the level of service that is provided for the banks of the BPU Group and their clients.Amongst these is a project relating to “small amount” operations that involves small business clientsas well as traditional corporate clients. This project also involves setting up a dedicated trading deskwithin the Finance and Markets division. These projects will contribute to further significant developmentof these activities in the future.

The investment banking division is the business area that provides a range of services and financialproducts characterised by a high degree of specialisation and innovation to the most exactingcorporate clients who are frequently engaged in extraordinary activities (capital operations) or corporaterestructuring.During the year, therefore, a great effort was made to train relationship managers in the banks of theGroup to raise their level of awareness of Centrobanca’s offer and to improve their capacity to analysethe requirements of their clients. This training should lead to more effective leverage of the businesspotential to be realized from existing corporate clients of the Group.2006 was year of consolidation and reinforcement of the position of Centrobanca in this area; thenumber of mandates/operations acquired more than doubled during the year and generated aconsequent increase in income from this activity of more than 50%.

N° mandates/transactions received

Risk Management& Derivatives

Investment banking

Regulation 2006 2005Requests Investments Investments Requests Investments Investments

received (n°) expected made received (n°) expected made

Legge 488/92

Legge 46/82

MIUR (1)

POR (2)

TOTAL

(euro millions)

303

34

22

-

359

1,630.0

112.0

177.0

-

1,919.0

1,572.0

52.4

151.0

-

1,723.0

514

40

16

35

605

906.6

46.0

80.0

93.0

1,125.6

460.7

6.0

65.0

-

531.7

(1) Ministry of Education, University and research - (2) Regional operating programme

Pair trades

risk hedging derivatives

- of rates and other

- exchange rate

(euro million)

415

413

828

1,137

418

1,555

353

343

696

1,413

306

1,719

17.6%

20.4%

19.0%

-19.6%

36.8%

-9.5%

Product type 2006 2005 Change %number of Notional number of Notional number of Notional

transactions value transactions value transactions value

2006 2005 Change %

63

34

5

102

Mergers & acquisition/advisory

Equity capital markets

Debt capital markets

TOTAL

18

19

6

43

+ 250.0%

+ 78.9%

- 16.7%

+ 137.2%

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Total income from investment banking

In terms of specific operations the Investment Banking Team supported its clients in the followingoperations:� Assisting the controlling shareholders of Miro Radici Ag in opening its share capital to financial

investors and thereafter providing consultancy services in the acquisition of the Steilmann Group;� Assisting the quoted Belgian company Hamon et C.ie in restructuring the debt of its subsidiary

FBM Hudson and in the subsequent sale by the latter of the Malaysian quoted company KNM;� Advisory services to Arkimedica in its acquisition of clinics owned by Sangro Invest;� Assisting the Banca di Bologna in structuring a securitisation operation;� Assisting the IPO of Arkimedica in the role of co-lead managerof the institutional offering.

As well as the operations mentioned above several other smaller operations were carried out, in linewith the Bank’s strategy of offering a complete range of Corporate and Investment banking solutionsto medium sized companies as well as large corporate clients. This strategy was carried forward in2006 with the integration of Investimenti Piccole Imprese (IPI) (Small Business Investments) whichoperated successfully in this market segment and which has a good track record of working inassociation with the banks of the BPU Group.

During 2006 the Group proceeded with its activity in the “private equity” sector through the managementof an existing portfolio of five investments to which a further three new investments were added duringthe year . This was mainly achieved through strategic and operational consultancy services offeredby the subsidiary, Centrobanca Sviluppo Impresa SGR.

The new investments are:� Miro Radici AG:acquisition of an 8.1% shareholding for an investment of 10 million;� ACH IMMOBILIARE S.p.A.: subscription to a capital increase with an investment of 6.2 million

giving a shareholding of 44% of the company;� Pellegrini Group S.p.A.: acquisition of a 7% stake in the company at a cost of 6.7 million.

In addition the bank made a further investment in Radicifilm S.p.A. completing the purchase of afurther 1.3% of the company at a cost of 1.5 million (This investment was contractually dictatedby the exercise of a Put option by the original vendor).Finally, following the integration of IPI, Centrobanca acquired shareholdings in a further seven smallercompanies which had already been acquired and managed under the criteria applicable to privateequity deals. The total outlay for these investments was 3.5 million.The following comments relate to the main private equity investments:

Humanitas S.p.A. / Techosp Clinical Services S.p.A. - This is one of the main private hospitalgroups operating in the Italian healthcare industry. The group, controlled by the Techint group, manages6 clinics (almost all accredited with the SSN) located in Lombardy, Piedmont and Sicily. All specialisein treatment of the highest complexity such as oncology, cardiology and orthopaedics. The Humanitasclinic in Milan also incorporates a University department.The group’s strategy is to achieve further growth through the acquisition of other clinics both in Italyand abroad.The preliminary results for 2006 reveal further growth both in revenues and in underlying profitability.The outlook for 2007, based on the budgets of the two companies, indicates growth in the revenuesof each of the clinics accompanied by an improvement in margins.In January 2007, Centrobanca S.p.A., as part of a broader reorganisation of its property and corporate

Private equity

2006 2005 (*) Variazione %

(euro millions)

601.0

4,569.6

278.3

357.7

5,806.7

Dividends

Net commissions

Net trading result

Other operating income/expense

TOTAL

(*) including IPI

3,105.0

719.7

3,824.7

+ 47.2%

- 50.3%

+ 51.8%

13


Colori compositi


interests, acquired a further 2% of the capital of Humanitas S.p.A. and of Techosp Clinical ServicesS.p.A. for an outlay of, respectively 3.17 million and 0.36 million. Following this investment thecombined shareholdings held by Centrobanca S.p.A. in the two companies is equal to 9,06%.

Car Testing S.A. - This Luxembourg company controls the PROTOTIPO Group, which is involvedin the provision of highly specialised engineering services to the automobile industry. In particular itprovides reliability and testing services to the world’s leading automobile producers. The parentcompany (Prototipo S.p.A.) operates in the region of Turin (Trofarello), while its 100% subsidiary, NardòTechnical Center s.r.l. owns and operates the distinctive Nardò test circuit in the southern provinceof Lecce (Puglia). This investment has been in the group’s portfolio since12 December 2002.The results for 2006 were unsatisfactory in terms of both sales and margins. Ebitda was slightlybetter than in 2005, but was still below budget, (Ebitda of 2.4 million equal to a margin of 12%on sales).On the other hand, the outlook for the business received a positive stimulus from the fact that NardòTechnical Center s.r.l. has obtained a grant of 8.7 million from the regional authority of Puglia,through a Contratto di Programma - Programme Contract - (POR 4.18). These funds will contributeto a planned investment of 19 million which should allow the company to upgrade its structure tomeet the demands of its clients and respond to 80% of their testing requirements.The financing of the entire investment programme was secured through a partial property sale whichwas completed in January 2007. In addition a new managing director with proven commercial skillswas appointed to Nardò Technical Center s.r.l. and he will take office by the end of March 2007.

Radici Film S.p.A. - The preliminary results for the company for 2006 reveal better than expectedgrowth in sales and an increase in European market share above all for special products. Revenueswere 187.0 million with Ebitda of 23.3 million and net debt of 83.5 million (down by 17.0million compared to the previous year).The divergent performance of the Italian and Hungarian subsidiaries continued (the former was underbudget, the latter above budget, as the group’s strategic and commercial efforts were focused onthe Hungarian subsidiary). This was due to the different market trends affecting each area (the Italianmarket was static, Western Europe experienced modest growth and East Europe enjoyed strongergrowth).The reduction in net debt was a positive sign (better than budget) which confirms the group’s capacityto generate significant cash.The 2007 budget was approved and anticipates a slight improvement in revenues (to just below 200million), Ebitda at the same level as 2006 (ca. 24million) and a further significant reduction ingroup net debt (< 70 million).

Bouty Healthcare S.p.A. - The preliminary consolidated results for 2006 shows growth of 2.5% innet revenues of 68.9 million, compared to 67.5 million in the previous year.Ebitda grew substantially and was 5.0 million was in line with budget, and compares to 4.0 millionthe previous year. Net debt at the end of 2006 was 11.7 million and rose slightly year-on-year.During the year the group continued with its programme of commercial development, both of its ownproducts and those of third party suppliers (distribution contracts) increasing its penetration of themass-market and maintaining its revenue stream from the pharmaceutical sales channel. Profitabilityof the diagnostics sector improved and was accompanied by growth in sales. The expected progressof the DDS (Transdermal) division continued and sales in this division reached 4.0 million with furthergrowth expected in 2007 thanks to contracts with large pharmaceutical companies.As a result of the strong performance in 2006 and the high expectations for 2007 the probability ofquoting the company on the mercato Expandi is increasing. The company is considering this optioncarefully with the help of the best advisors on the market. The financial resources that may be raisedby such a listing could be used to acquire companies, some of which have been under considerationfor some time, or to acquire product lines that are complementary to those already in the group’sportfolio.

Ach Immobiliare S.p.A. - During 2006 Centrobanca subscribed to a capital increase, investing 6,160,000, giving it 44% of the capital of the new company. The capital of the company is composedof the 16% held by Aedes Investissment (Gruppo Aedes), 30% held by Humanitas Mirasole S.p.A.e 10% held by Cliniche Gavazzeni S.p.A. (the latter two companies belong to the Humanitas S.p.A.Group). The total equity capital of the company amounts to 14,000,000.

14


Colori compositi


The purpose of Ach Immobiliare is to unite in one company all of the property companies in whichthe clinics of the Humanitas Group operate.For this reason in December 2006, Ach Immobiliare began a reorganisation of the property companiesthat own the real estate tied to the activity of the Humanitas Group (Mirasole S.p.A.; ImmobiliarePerseghetto S.p.A., ICT Immobiliare S.p.A.). The real estate owned by the above companies is allleased to clinics of the Humanitas Group on long term leases at market rates.

Pellegrini Group S.p.A. - This is the vehicle that was used for the acquisition of 100% of the capitalof PELLEGRINI S.p.A.. Centrobanca, through a capital increase, acquired a 7% stake in PellegriniGroup at a cost of 6,667,500.Pellegrini S.p.A. has a history that goes back 40 years (established by Cav. Ernesto Pellegrini nel1965) and, despite its size (sales of over 300 million), remains solidly under the control of thefounder. Some years ago, however, it began to install professional managers.This is an investment in a growing and well-managed business which enjoys significant growthopportunities. Some key financial indicators for the year just ended are available ahead of approvalof the financial statements for 2006 (these refer to the consolidated accounts for Pellegrini GroupS.p.A. - Pellegrini S.p.A.): revenues were over 330 milliuon with an Ebitda of 28.2 million; Netfinancial debt was 74.2 million. The budget for 2007 is for further growth in revenues to over

350 million, with Ebitda of about 30 million, giving a return on sales in line with that of 2006.

Miro Radici AG - Miro Radici Ag is a solution provider to large retail chains in the Fashion, Hometextilee Retail sectors, with consolidated sales in 2006 of about 690 million.During 2006 the group developed a vertically integrated strategy through the direct sales of Fashionproducts to the final consumer through its Retail division and, in particular, in Germany through theBoecker chain of shopping malls (acquired in January 2005) and the Wehmeyer department storechain (acquired in July 2005).In 2006 it acquired 100% of the Steilmann group which includes 15 companies with combinedrevenues of 170 million. It includes four production sites in Romania and several commercialsubsidiaries around the world.The preliminary results for 2006 show an improvemement in operating profitability, with an Ebitda of

34.8 million, attributable to a change in the product mix especially in the home textiles and fashionsegment. Net debt was in line with budget at 68.5 million.

15


Colori compositi


The items shown in the reclassified balance sheet correspond to those in the draft balance sheetwith the exception of the extrapolation of bank debt of the subordinate deposit account. To makethe accounts comparable with those of 2005, historic data has been restated on a pro-forma basisto take into account the integration of the subsidiary, I.P.I.

The continued growth of loan activity, credit issued of about 2.7 billion, led to growth of outstandingcredit of 6.6% (+9.7% for just the in bonis component), even in the context of the sale of over 97million of non-performing loans.

Capital structure

Loans to customers

(euro millions)

8,882.8

5,746.3

306.9

2,755.3

411.9

326.3

2,017.1

7.6

62.0

4.8

-8,018.1

-3,618.8

-3,864.4

-13.4

-200.0

-321.5

-194.6

Loans and Assets:

Due from customers

- financing

- securities

- other credits

Due from Banks

- financing and deposits for pooled operations for customers

- securities

- current accounts, deposits and other

Financial assets:

- Trading assets

- Dect securities

- Equity securities - core shareholdings

- derivatives for trading

- embedded derivatives

- available for sale investments

- Debt securities

- Equity securities - core shareholdings

- fair value financial assets

- capitalisation policies (**)

Shareholdings

- in being

- in disposal

Fixed assets

Other assets

Funding with charges:

Securities in issue:

- bonds

- certificates of deposit

Due to Banks

Due to Customers

subordinated liabilities

Tradable financial liabilities

- derivatives for trading

- embedded derivatives

Hedging:

- hedging derivatives assets

- hedging derivatives liabilities

- adjustment of asset value

with general cover - customer financing

(*) including IPI,(**) included amongst tradable assets in previous period

5,332.1

19.6

37.8

154.5

9.6

242.7

10.1

59.4

102.8

286.9

288.4

13.5

1,895.6

7.6

0.3

-3,454.5

-324.5

-103.8

-286.9

158.0

-267.1

17.2

4.15%

6.62%

-24.55%

3.71%

-10.29%

8.04%

-4.14%

-1.49%

-3.63%

2.95%

-4.24%

13.64%

-24.29%

0.00%

-17.71%

111.58%

5,690.5

20.0

35.8

203.4

0.0

103.5

12.6

79.2

84.6

235.5

321.5

4.7

2,017.1

7.6

0.0

-3,346.6

-272.2

-86.0

-235.5

58.1

-258.4

5.7

8,528.8

5,389.5

406.8

2,656.7

459.2

302.0

1,895.6

7.9

63.0

4.9

-7,788.0

-3,779.0

-3,400.6

-17.7

-200.0

-390.7

-92.0

2006 2005 (*) Change %

16


Colori compositi


The breakdown by type of loan shows an increase in structured finance (+35%) compared to a broadlystable level of medium-long term credit; the latter segment experienced a continued decline in theshare of the Sabatini Law assisted finance portfolio and of agricultural loans.The corporate finance component (share of pooled financing of large industrial and internationalcompanies with a high credit rating and tradable on secondary markets) remained at about 500million.

The breakdown by sector and economic activity reveals substantial stability in the productive sector(79%), within which there was growth in manufacturing(+3.2 % points) and building (+0.8 % points)compared to a decline in agriculture (-0.6 % points) and service and commerce (-3.3 % points). Thegrowth of the financial sector (+2.6 % points) is related to financial vehicles used in structured financeoperations.

From the point of view of geographical breakdown, there has been an explosion in non-residentcounterparties (+43%) which reflects the growth already illustrated in the analysis of new loans; therewas a more modest increase in credits issued in central and southern Italy (respectively +4% e +19%).

(euro millions)

1,383.2

1,110.1

273.1

479.9

3,827.4

3,348.7

66.6

254.9

157.3

55.7

5,746.3

24.1%

8.4%

66.6%

1.0%

100.0%

1,021.6

704.6

317.0

515.8

3,813.6

3,235.8

107.7

243.9

226.2

38.1

5,389.1

19.0%

9.6%

70.8%

0.7%

100.0%

35.4%

-7.0%

0.4%

46.4%

6.6%

Acquisition & Project Finance

- acquisition finance

- project finance

Corporate Finance

Lending

- industriale loans

- portfolio discount

- retail mortgages

- agricultural loans

Other loans

TOTAL

Operation by type Outstanding loansDecember 2006 December 2005 Change %

Value % Value %

(euro millions)

81.8

797.3

328.2

4,539.0

87.3

3,172.4

417.8

861.5

5,746.3

1.4%

13.9%

5.7%

79.0%

1.9%

69.9%

9.2%

19.0%

100.0%

72.1

607.2

389.6

4,320.2

114.5

2,881.3

362.1

962.2

5,389.1

1.3%

11.3%

7.2%

80.2%

2.7%

66.7%

8.4%

22.3%

100.0%

13.5%

31.3%

-15.7%

5.1%

6.6%

States and public entities

Banks and financial entities

Families and other

Non financial businesses

- agriculture

- manufacturing

- building & construction

- services & commerce

TOTAL

Economic sector Outstanding loansDecember 2006 December 2005 Change %

Value % Value %

(euro millions)

2,336.7

895.6

993.6

582.4

145.3

792.7

5,746.3

40.7%

15.6%

17.3%

10.1%

2.5%

13.8%

100.0%

2,358.5

902.0

956.4

489.0

127.3

555.8

5,389.1

43.8%

16.7%

17.7%

9.1%

2.4%

10.3%

100.0%

-0.9%

-0.7%

3.9%

19.1%

14.1%

42.6%

6.6%

NORTH WEST

NORTH EAST

CENTRE

SOUTH

ISLANDS

NON RESIDENT

TOTAL

Geographical area Outstanding loansDecember 2006 December 2005 Change %

Value % Value %

17


Colori compositi


With regard to improving credit quality, following the two operations carried out last year there werefurther sales of non-performing loans completed in 2006:� the first transaction, completed in June with Deutsche Bank, involved the block sale of non-

performing mortgages and mortgages on the watch-list relating to 205 clients and with a net bookvalue of 54 million;

� a second transaction, carried out in September with Tolomeo Finance, involved the sale of non-performing and watch-list loans of 3 clients with a combined net book value of 22.8 million;

� the final transaction, completed in December with Deutsche Bank, involved the sale of non-performing loans of 9 clients with a combined book value of 20.2 million.Net profits from the disposal of these non-performing loans were 28 million.

Summary of sales of non-performing loans

The effect of these disposals, combined with a lower trend to putting loans on the non-performinglist, resulted in growth that was very slightly higher than those of the previous year. (da 0,43% a 0,64%- see chart on rates of decay). This took the ratio of non-performing to total customer loans from2.8% in December 2005 to 1.0% at the end of 2006.In total the value of “doubtful debts”, including expired debt of over 180 days, has been halvedcompared to the previous year, while the percentage of cover exceeds 50% (ratio between valueadjustment and gross credit).

I 2004 II 2004 III 2004 IV 2004 I 2005 II 2005 III 2005 IV 2005 I 2006 II 2006 III 2006 IV 2006

quarterly data 0.69% 0.83% 0.37% 0.39% 0.07% 0.26% 0.07% 0.03% 0.23% 0.29% 0.06% 0.05%

annual data 2.28% 2.28% 2.28% 2.28% 0.43% 0.43% 0.43% 0.43% 0.64% 0.64% 0.64% 0.64%

1.25%

1.00%

0.75%

0.50%

0.25%

1.00%

1.25%

1.00%

0.75%

0.50%

0.25%

1.00%

Rate of quarterly impairment (rate of new non-performing loans on loans in bonis at start of period)

(euro millions)

42.9

69.6

112.5

45.1

13.8

20.2

79.1

3.0

1.7

4.7

8.8

9.0

0.0

17.8

46.0

71.2

117.2

53.9

22.8

20.2

96.8

11.7

25.2

36.8

28.4

1.8

-2.1

28.1

1^ tranche

2^ tranche

TOTAL 2005

3^ tranche

4^ tranche

5^ tranche

TOTAL 2006

portion sold (net of ias) gross profit

non-performing watch-list Total

Non-performing

Watch list

Restructured

Past due

Country risk

DOUBTFUL DEBTS

CREDITS “IN BONIS”

TOTAL LOANS

Netcredit

56,4

50,5

1,9

21,5

3,5

133,9

5.612,4

5.746,3

% oftotal

1,0%

0,9%

0,0%

0,4%

0,1%

2,3%

97,7%

%cover (*)

64,3%

38,9%

1,8%

5,2%

0,4%

50,2%

0,2%

2,5%

Netcredit

153,4

85,7

0,8

21,0

10,3

271,2

5.118,2

5.389,5

% oftotal

2,8%

1,6%

0,0%

0,4%

0,2%

5,0%

95,0%

%cover

55,3%

38,6%

8,4%

0,6%

0,1%

47,3%

0,6%

4,8%

Netcredit

- 63,3%

- 41,1%

+ 156,9%

+ 2,3%

- 65,9%

- 50,6%

+ 9,7%

+ 6,6%

% oftotal

-1,9%

-0,7%

0,0%

0,0%

-0,1%

-2,7%

2,7%

%cover (*)

+ 9,1%

+ 0,3%

- 6,7%

+ 4,6%

+ 0,3%

+ 2,9%

- 0,4%

- 2,3%

(euro millions)

December 2006 December 2005 (*) Change %

(*) the % covered is equal to the ratio between adjustments and gross credits

qua

rter

ly d

ata

annu

al d

ata

18


Colori compositi


Financial assets

Loan growth has resulted in increases in risk concentration, as can be seen in the data in exposureto the principal clients and from the indicators relating to regulations on large loans, not such as tocompromise financial stability and nevertheless in line with the strategy of Centrobanca to focus oncorporate clients and extraordinary finance.

Concentration risk supervisory regulations

Concentration of risk by value (source Risk Management Centre)

The performance of financial assets, represented by investments and receivables and directly connectedto activity to service corporate clients, is illustrated in the next section, subdivided by balance sheetcategory determined according to IAS criteria.

Tradeable financial assets

Debt securities - This item is composed entirely of Sintonia Junior Notes receivable from thesecuritisation of land loans issued by Centrobanca at the end of 2002. The revaluation comparedto the previous year derives from the recalibration of the valuation model on the basis of the actualtrend of recovery and repayment identified after four years of activity.

Equity securities - This category includes both the shareholdings acquired in the course of privateequity operations (already highlighted in the paragraph dedicated to private equity) (up by a total of47%) and the shareholdings relating to capital market operations (down by 26%).

(euro million)

11

3

1,884,6

700.9

768.4

76.8

307.4

N. positions

of which: for capitalised policies (**)

Weighted value

of which: for capitalised policies (**)

Regulatory capital

Value of large loans (1)

Individual limits (2)

8

2

1,390.3

412.4

782.7

78.2

312.9

+ 3

+ 494.3

- 14.3

- 1.4

- 5.5

December 2006 December 2005 Change

(1) (1) weighted exposure > 10% regulatory capital - (2) weighted exposure > 40% regulatory capital(*) The data for 2005 were calculated on the basis of regulations then in force that required a greater aggregate capital and a lower requirement of absorption capital. (**) from 2006 the capitalisation policies have passed from the regulations relating to market risk to those relating to credit risk; in this specific case it has led to an increase ofteh required capital and the requirement to highlight amongst the large loans.

(euro millions)

841.5

1,288.0

2,131.4

2,917.7

14.5%

22.1%

36.6%

50.2%

855.8

1,238.8

1,941.2

2,675.1

14.7%

21.3%

33.4%

46.0%

-1.7%

4.0%

9.8%

9.1%

First 10 clients/groups




December 2006 December 2005 Change %Values % Values %

19


Colori compositi


Derivatives for trading (pair trades) - The market value of derivatives connected to customer riskhedging fell by 18%, in line with the reduction of the corresponding share of tradable financial liabilities.

Embedded derivatives - These are embedded options in structured financial instruments which arematched by corresponding amounts included amongst financial liabilities.

Fair value financial assets

This category includes investments in capitalisation policies issued by leading insurance companies.These items, previously included amongst “financial assets held for trading” have been designatedto fair value options as they are hybrid contracts incorporating derivative products that significantlymodify the cash flows otherwise expected from the contract. The increase is due to new investmentsof 100 million and annualised. Almost all of the contracts are exercisable by Centrobanca via a putoption.The stabilisation of yields, in the context of rising market rates has almost halved the contribution tointerest margins compared to the previous year (from 24 million to a 13 million).

Available for sale financial assets

Equity securities - This item includes shareholdings which do not qualify as controllingshareholdings and those not held in the private equity portfolio. The change compared to theprevious year is due to the sale of the shareholding in Italease for 10.6 million.Debt securities - This item includes corporate bond receivable from activities that pertain tothe strategic role of the bank in supporting businesses; at the close of the financial year this

(euro millions)

67,528.6

23,837.2

16,216.8

1,862.1

6,160.0

10,000.0

6,667.5

2,785.0

0.0

0.0

3,513.1

1,518.3

860.7

700.0

285.0

131.5

17.5

0.0

8,131.5

6,150.0

601.0

123.9

142.0

1,114.4

0.2

79,173.1

36.0%

7.1%

7.1%

44.0%

8.1%

7.0%

22.2%

32.2%

10.8%

11.3%

0.5%

10.0%

19.0%

0.8%

17.5%

8.3%

43,263.5

22,399.6

16,216.8

1,862.1

2,785.0

0.0

0.0

5,128.6

1,400.0

615.9

700.0

190.0

131.5

-

0.0

906.8

685.0

499.3

10,979.7

10,440.5

531.9

7.2

0.1

59,371.8

34,7%

7,1%

7,1%

22,2%

32,2%

10,8%

10,0%

0,7%

10,0%

19,0%

0,8%

17,5%

8,3%

40,0%

38,4%

+ 56.1%

- 31.5%

- 25.9%

+ 33.4%

From Private Equity

RADICI FILM SPA

HUMANITAS

TECHOSP CLINICAL SERV. SPA

ACH IMMOBILIARE SPA

MIRO RADICI AG

PELLEGRINI GROUP SPA

BOUTY HEALTHCARE SPA

CAR TESTING SA

IMPREND. ASSOCIATI SPA

From Private equity ex IPI

FRITTELLI MARITIME GROUP

BIOXELL SPA

COSMETAL

AFH SPA

KIWI.COM S.A.

MAXICUBO SELF STORAGE

M.G.S. SPA

WITTUR AG

VCS SPA

VETRERIA R.B.

From Investment Banking

AEDES ORD.

CALEFFI SPA

EUTELIA SPA

ARKIMEDICA

EUROPA IMMOBILIARE 1

Altre

TOTAL EQUITY SECURITIES

Equity securities December 2006 December 2005 Change %Value % shareholding Value % shareholding

20


Colori compositi


Shareholdings

portfolio had increased by 11% with a difference between book value and market value of 0.2million which was taken to the equity reserve.

Controlling shareholdings

Changes in this item during 2006 came from the sale of shareholdings Centrosiel and the mergerof IPI with Centrobanca. In particular, the merger of I.P.I. occurred prior to the acquisition of full controlin March 2006 (when the residual 0.038% was acquired). In July, the respective Boards of Directorsapproved the merger, while the merger itself was finalised on 29 August 2006. Therefore the activitiesof IPI have been included in the financial statements of Centrobanca from 1 January 2006; the effectsof the merger as regards third parties, however, commences from 1 September 2006.

Centrobanca Sviluppo Impresa SGR - During 2006 which closed with a positive result of 152,5662006, the company was active in:� researching investment opportunities for the Fondo SVILUPPO IMPRESA (Business Development

Fund): during 2006 the Board of Directors of the company approved 4 investments, of which onewas subsequently declined following the results of due diligence carried out.;

� managing the portfolio of investments of the Fondo Sviluppo Impresa (Business DevelopmentFund): (6 investments in portfolio at 31 December 2006 plus one other investment being finalised);

� broadening the range of activity through consultancy services provided to Centrobanca regardingits private equity shareholdings.With regard to the previous points:

� The Fondo Sviluppo Impresa (Business Development Fund) added three investmenst to its portfolio.Of these, two (Schema SDN S.p.A. and Pellegrini Group S.p.A.) have been concluded successfully.The third transaction (Gatto Astucci S.p.A.) will be completed by 31 March 2007 with the completionof the binding purchase contract, which was signed on 21 December 2006 by SO.GI.I. S.p.A., inwhich the fund already holds 61%;

� The company worked provide appropriate professional consultancy services to Centrobancaregarding its private equity portfolio ;

� At the period end, given the progressive exhaustion of the liquid resources of the Fondo SviluppoImpresa (Business Development Fund) and given its visibility on the market of the company withregard to the transactions carried out in 2006, a feasibility study was begun for the launch of a newinvestment fund.

Finanzattiva Servizi Srl - BPU Banca, in its role as parent company and in line with the industrialplan, approved the commencement of a rationalisation programme for the IT activities in some ofthe group companies, amongst which FinanzAttiva Servizi, with the aim of improving efficiency and

(euro millions)

2002

2002

2004

2003

1998

2003

2005

Controlling shareholdings

CENTROBANCA SVIL. IMPRESA SGR

INVESTIMENTI PICCOLE IMPRESE SPA

FINANZATTIVA SERVIZI SRL

BPU BANCA INTERNATIONAL SA

CENTROSIEL SPA

TOTAL

Shareholdings of substantive influence

IW BANK SPA

GROUP SRL

TOTAL

TOTAL SHAREHOLDINGS(1) incorporated 1/9/2006 (2) sold to BPU il 16/3/2006

20,000

-

2,830,000

1

-

30,887,080

18,000

100.0%

0.0%

50.0%

0.0%

0.0%

51.0%

22.5%

Shareholdings Year of acquisition N° shares Value % shareholding

1,562.9

-

2,891.7

1.0

-

4,455.6

3,115.1

18.1

3,133.2

7,588.8

(1)

(2)

21


Colori compositi


pursuing specific cost reduction targets, via the optimization of the use of its infrastructure and supplychain. This project aims to centralize in a single company (BPU CentroSystem SpA) the activities ofproducing and distributing IT services to some of the group companies which do not currently useparent company services. In order to start the project (1 November 2006), all of the IT activities ofFinanzAttiva Servizi, including related tangible and intangible assets as well as related personnel weretransferred, via a sale of the relevant business division, to BPU CentroSystem SpA.As a result of the events described above all of the operations of FinanzAttiva Servizi beginning from4Q 2006 were substantially reduced to administrative services carried out for BPU Pramerica SGR.The company reported a profit of 105,761 for 2006.With regard to the outlook it should be noted that in December 2006, BPU Pramerica SGR requestedauthority from the Bank of Italy to acquire Centrobanca’s stake in FinanzAttiva Servizi Srl andsubsequently to proceed with a full merger of the company.

Shareholdings subject to substantive influence

IW Bank SpA - Centrobanca maintained its shareholding of 51% in IW Bank, a company specialisingin trading, banking and on-line savings, a leader in on-line trading and amongst the leading playersin e-banking and on-line financial services. During 2006 the parent BPU Banca and directly acquireda further 20% held by Banca IMI. According to the current regulations on financial reporting ofCentrobanca, although in possesion of a majority of the votes, it does not have exclusive control asit is in turn controlled by BPU Banca; hence its inclusion amongst “shareholdings subject to substantiveinfluence” .On 15 December 2006 the ordinary shareholders’ meeting of IWBank, following the approval of theBoard of Directors of 22 November 2006, approved the project to list the shares and presented itsrequest to quote the ordinary shares on the Expandi market.The planned structure of the operation is for a mixed offer and therefore the listing of the shares willtake place ahead of a capital increase (OPS) alongside a public placing (OPV). Our group hasrecognised a shareholding of 50.1%. The initial float should not exceed 20% split equally betweena private issue to institutional investors and a public placing.Previous issues of warrants to employees/managers of Centrobanca have been reclassified amongstfinancial liabilities.

Group - The company was established in 2005 jointly with BancaAletti, Banca Akros and BIMERto gain access to senior positions in public issues of securities. In order to introduce Banca Popolaredi Sondrio to the shareholding structure, on 6 June Centrobanca sold 2,000 shares, taking its ownshareholding from 25% to 22%.During the year the Group promoted its associates activities for the successful IPO of Ansaldo STS,and also on the proposed quotation of Pirelli Tyre, which was, however, withdrawn prior to listing.The financial year ending 31 December 2006 closed with a loss of 9,149.00 principally due to theamortisation of start-up costs and the absence (due to cancellation or delay) of further public issueson which Group S.r.l. had been working on behalf of its associates (H3G, Eurizon).In 2007 the company will, however, continue to carry out its activities in the widest possible way onpublic issues planned in Italy, but also potentially on foreign markets, and for debt placings.

The trend of funding with charges is strictly correlated to the financial requirement deriving from thedevelopment of assets. The reduction in non-performing loans and the liquidity generated from thegood results of the year have contributed to an improvement in free capital (differentiated betweenperforming assets and onerous liabilities which went from 170 million to 400 million), generatingan increase in funding raised with charges (+2.9% equal to 230million) which is less than the growthin assets.In the course of 2006 948 million of bonds were issued, over 94% of which were structuredsecurities placed with institutional investors. The higher level of redemptions led to a reduction in thetotal outstanding of 3%.The interbank portion is represented almost entirely by the utilisation of short term credit lines providedby the parent company at market rates. Amongst the interbank transactions is a subordinated loanof 200 million from the parent company included in tier 2 capital.Given the composition of funding - a prevalence of short term (3 - 4 months) variable rate debt onthe securitised and interbank portion- Centrobanca funding is directly linked to the market trend of

Funding with charges

22


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Financial liabilities

Hedging derivatives

interest rates. This has resulted in an increase in the cost of funding that is in line with the marketdespite this being a year of rapid growth.

Amongst the financial liabilities are warrants on IW Bank the beneficiaries of which are mainly ex-employees/managers of Centrobanca; adjustments to fair value have resulted in an increase in theliability owing to the recording of capital losses of 1.4 million.

Hedging transactions, placed in the context of ALM, are entered into in order to minimise financialrisk deriving from the varied composition of assets and liabilities in terms of expiry, indexation andcurrency. In particular they cover three areas:1) Coverage of structured loans to bring the cost into line with non-option levels. Notional value of

2.914 million (+2,4% compared to 2005);2) coverage of structured corporate bonds and fixed rate bonds to bring the yield into line with themarket or without option components. Notional value of 164 million (+ 20,8%);3) coverage of the portion of fixed rate financing that exceeds amount collected of similar characteristicsthrough interest rate swaps. Recourse to this coverage was more frequent in the past in view of ahigher quantity of fixed rate loans (assisted loans, agricultural loans e land loans). There remain totalcontracts with a notional value of 306 million (-27,9%).

23


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The income statement items included in the reclassified financial statements correspond to thoseof the draft income statement with the exception of the amount relating to tax rebates, which is netof both administrative expenses and management income. To make the income statement comparablewith that of 2005 historic data has been restated to take into account the integration of the subsidiaryIPI and to reflect changes introduced by the new obligatory format prescribed by circular 262/2005ofthe Bank of Italy. In particular, 2.2 million of recovered interest on arrears has been reclassified asincome from “net value adjustments for credit deterioration” to “interest margin”. 2.5 million ofprovisions for risks and charges have also been reclassified from “net provisions for risks and charges”,

1.4million of which has been reclassified within “other operating income/costs), 0.9 has beenreclassified within “value adjustments for credit deterioration”, and the remaining 0.2 million hasbeen included in “Personnel costs”.

The evolving trend of income and expenses for the year has resulted in strong growth in net profitin 2006 which rose by 21.3% to over 82 million.

Economic trends

(euro 000’s)

95,340

4,907

23,505

47,631

4,353

175,735

(47,036)

(1,139)

(48,174)

127,560

9,469

4,205

285

1,668

51

143,239

(61,166)

82,073

Interest margins

- on customer loans

- on financial assets

- other (late charges, corporate bond, interbanc.)

Dividends

Net Commissions

Net result of trading and hedging

Profit/Loss from sale/repurchase of loans and financial assets/liabilities

RESULT OF TRADING AND HEDGING AND PROFIT

FROM SALE/REPURCHASE LOANS AND

OTHER FINANCIAL ASSETS

Other operating income/expense (1)

OPERATING INCOME

Personnel costs

Other administrative expenses (1)

TOTAL OTHER ADMINISTRATIVE EXPENSES

Adjustment to net value of fixed assets

OPERATING EXPENSES

OPERATING RESULT

Adjustements to net value for loan impairment

Adjustments to net value for impairment of other financial assets/liabilities

Net provisions for risks and charges

Profit/Loss on shareholdings

Profit/Loss on disposals of investments

PROFIT/LOSS BEFORE TAXES

Income taxes

NET PROFIT FOR THE PERIOD

110,244

2,049

26,196

56,532

4,541

199,563

(46,140)

(1,206)

(47,346)

152,217

(22,620)

714

1,430

0

(38)

131,703

(64,024)

67,679

- 13.5%

+ 139.4%

- 10.3%

- 15.7%

- 4.1%

- 11.9%

+ 1.9%

- 5.6%

+ 1.7%

- 16.2%

n.s.

+ 489.0%

- 80.1%

n.s.

- 235.4%

+ 8.8%

- 4.5%

+ 21.3%

Income statement 2006 2005 (*) Change %

(1) net of tax rebates of € 2,286 in 2006 and € 2,400 in 2005

70,978

12,715

11,647

11,090

36,541

(26,401)

(20,635)

72,537

23,772

13,936

18,678

37,854

(26,431)

(19,709)

24


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Interest margins

Dividends

Net Commissions

The reduction in the interest margin is principally attributable to a change in the adjustment of thevarious components of assets and liabilities to the marked increase in market rates which occurredin 2006.

Interest bearing liabilities and assetse

Owing to an increase in market rates, above all in short-medium term rates, (the annual average 1month euribor rose by 80b.p. in 2006 compared to 2005), there was an increase in the cost of funding(+64 b.p.) which was greater than the increase in asset yields (+35 b.p.). This was characterized bythe substantial stability of yields of financial assets (policies and corporate bonds).The increase in total assets (+ 7,8%) and the increase of average free capital (difference betweenyielding assets and onerous liabilities) - which rose from 73 million to 140 million - was notsufficient to compensate for a 13.5% reduction in the interest margin.

The good performance reported in 2005 by the investments IWBank e Centrobanca Sviluppo ImpresaSGR led to the receipt of dividends in the year from these investments of 1.8 million (+166%) and

0.7 million (+40%) respectively. The total amount of dividends received also includes 1.1 millionfrom the shareholding in PB SRL acquired in 2003 as part of the credit restructuring of the PiaggioGroup.

The reduction in credit commissions in 2006 compared to the previous year (-18%) is attributableto the existence in 2005 of non-recurring income of about 4million deriving from loan restructuring.The investment banking result rose sharply (+47%), mainly due to the contribution from advisory andmerger and acquisition activity.Assisted Finance suffered from the delays in the application of new operational regulations governingassisted finance transactions. This led to the issue of just one grant block compared to two in theprevious year.Order routing for the client base of BPU Group was centralized in BPU from the 1 October 2006;therefore revenues from this source relate to just 10 months of the year.

2006 2005 Variazione %Interest bearing Assets average balance Rate % average balance Rate % average balance Rate %

- Customer loans

- Policies & Corporate bond

- Interbank

TOTAL INTEREST BEARING ASSETS

asset mark up (*)

Interest bearing Liabilities

- Bonds and certficates of deposit

- Interbank

TOTAL INTEREST BEARING LIABILITIES

liability mark up (**)

Free capital / spread

5,234.0

2,318.9

200.0

7,752.9

4,113.1

3,500.0

7,613.1

139.8

4.42%

3.72%

3.02%

4.18%

1.21%

3.06%

3.18%

3.07%

-0.10%

1.11%

4,856.3

2,157.5

180.9

7,194.7

3,793.0

3,328.6

7,121.6

73.1

3.77%

3.77%

2.05%

3.83%

1.66%

2.53%

2.47%

2.43%

-0.26%

1.40%

+ 7.8%

+ 7.5%

+ 10.5%

+ 7.8%

+ 8.4%

+ 5.1%

+ 6.9%

+ 91.2%

+ 0.65%

- 0.04%

+ 0.97%

+ 0.35%

- 0.45%

+ 0.53%

+ 0.72%

+ 0.64%

+ 0.16%

- 0.29%

(*) difference between average loan rate and euribor (average annual 1 month euribor)(**) difference between average deposit rate and euribor (average annual 1 month euribor)

2006 2005 Change %

(euro millions)

12,798

4,570

3,849

2,577

-288

23,505

From financing

From investment banking

From assisted finance

From order routing

Other

TOTAL NET COMMISSIONS

15,731

3,105

4,210

3,131

19

26,196

- 18.6%

+ 47.2%

- 8.6%

- 17.7%

n.s.

- 10.3%

25


Colori compositi


There was an 8% increase in income from the provision of hedging instruments to corporate clients;the total profit attributable to BPU Group was 6.5million, as part of the profit was recognised byother banks within the group for transactions presented.The sale of corporate bonds generated revenues 2.5 million represented mainly by realised capitalgains previously allocated to equity reserves as they were realised on securites held for sale; theirallocation to hedging revenues and not amongst profits from disposals (as they appeared in 2005)is due to the presence of derivative hedging instruments..Market conditions favoured the share buy back and cancellation programme which generated incomeof 1.7 million ( 2.8 million in 2005).Net income from revaluations in the year ( 7.1 million on Techosp and Humanitas) and losses (0.9 million on the funds Opera and Hemerald) are attributable to the private equity share portfolio.In addition there were other capital losses of 05 million deriving from the valuation at fair value offinancial liabilities represented by warrants on IW Bank; In 2006 the same valuation process resultedin capital losses of 1.3 million.The item “other” is mainly composed of the net result of valuations relating to hedging of ALM, tosecurities owned (Junior notes Sintonia) and to treasury/financial operations.

As previously illustrated, there were sales of non-performing loans in the period (profits 28.1 million)and disposals of non-controlled investments (Italease profit 8.7million). In order to compare theresult with 2005, the figure relating to sale of corporate bonds (- 0.3 million) is integrated withhedging income relating to the closure of hedges on securities sold (+ 2.5 million).

The modest increase in administrative expenses (+1.9%) despite an intense period of planning andorganisational activity, was possible by efficiencies achieved and by continuous attention to costcontrol.

Net result of trading andhedging activity

Profit/loss fromthe sale/repurchaseof loans and financialassets/liabilities

Administrative expenses

2006 2005 Change %

(euro millions)

3,431

2,479

1,670

750

-1,389

4,148

11,090

From risk management & derivatives

From corporate bonds

From repurchase of bonds.

From investment banking

From private equity

Other

TOTAL NET INCOME FROM HEDGING AND TRADING

3,168

-

2,779

-

5,647

7,085

18,678

+ 8.3%

n.s.

- 39.9%

n.s.

n.s.

- 41.5%

- 40.6%

2006 2005 Change %

(millions)

28,050

8,742

-251

36,541

Sale of loans

Sale of shares/fixed income securities

Sale of Corporate Bonds

TOTAL INCOME FROM HEDGING

36,819

-

1,035

37,854

- 23.8%

+ 744.4%

n.s.

- 3.5%

26


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Net value adjustments for loanand financial asset/liability

impairme

Profit/loss on disposals

Taxation

The net analytical adjustments to loans and positions at risk net of the financial effect of recovery timeintroduced by the IAS regulation (“time reversal”), fell by 70%, due to the efforts made to apply correctrisk recognition to the assurance and monitoring phase, made possible through the adoption of ratingmethodologies.The reduction of the time reversal write-backs is related to the significant reduction of the non-performing portfolio following the sales reported previously.The percentage of analytical write-downs on total loans to customers fell by 30 b.p. from 0.42% to0.12%.The improvement of credit quality in terms of fewer claims generated is reflected in the reduction ofthe risk indicator utilised in the calculation of write-down provisions on credits in bonis (“collectiveimpairment”), provisions which fell from 30 million to 13 million with a consequent recovery ofvalue of 17million.The recovery of net value on other financial assets ( 4.2 million) was also almost entirely due to theprocess of collective impairment on guaranteed loans (guarantees released and funding commitments).

The 1.7 million represented by this item is due to the sale of the subsidiary Centrosiel.

The effective tax charge, equal to 42.7%of pre-tax profit, decreased compared to the previous year(48.8%) despite changes regulations and tax treatment that occurred during the year.

2006 2005 Variazione %

(euro 000’s)

-27,409

16,920

-10,489

3,868

-6,621

-0.12%

-655

16,745

9,469

4,205

13,675

Loan value analysis

anlaytical write-downs

analytical write backs

time reversal write backs

Net

analytical impact on loans

Valuation impact on securities L&R

Collective valuation impact on cash credits

TOTAL

Valuation on other financial assets

TOTAL

-51,688

17,927

-33,761

11,174

-22,587

-0.42%

-1,300

1,267

-22,620

714

-21,906

- 47.0%

- 5.6%

- 68.9%

- 65.4%

- 70.7%

+ 0.30%

- 49.6%

+ 1221.8%

n,s,

+ 489.0%

n,s,

27


Colori compositi


At the year end the group capital was as follows:

With the approval of the Extraordinary Shareholders’ Meeting of 19 April 2006, the issued sharecapital was increased in a capitalization of reserves issue which led to an increase in issued capitalfrom 336,000,000.00 to 369,600,000.00 via an increase in the nominal value of shares from 1,00 to 1,10 of the n: 336,000,000 shares in issue, utilising reserves set up as part of the FTA onproperty assets for 33.6 million, in particular for the elimination of a land depreciation fund ( 8.1million) and for adjustment to fair value of the book value of land and buildings of 25.2 million.

Reserves were reduced 7.5 owing to the restatement of securities available for sale at a marketvalue that is lower than book value, and following the disposal of the shareholding in Italease ( 8.6million).

It is proposed to the Shareholders’ meeting that they approve the allocation of profit for the period,equal to 82,072,996.73 as follows:

Capital

Proposed allocationof profit for the period

(euro 000’s)

369,600

-

194,755

4,987

82,073

656,402

Capital

Share price premium

Reserves

Valuation reserves

- from valuation of fixed assets

- an available for sale securities

Profit (Loss) for the period

TOTAL

336,000

72,406

121,815

37,697

67,679

635,596

+ 10.0%

- 100.0%

+ 59.9%

- 86.8%

+ 21.3%

+ 3.3%

Item December 2006 December 2005 Change %

5% Legal reserve

5% other profit reserves

Euro 0.22 dividend payable on 336.000.000 shares in issue

Retained earnings (*)

4,103,649.84

4,103,649.84

73,920,000.00

-54,302.95

82,072,996.73

(*) The Retained earnings reserve will fall from € 158,704 to € 104,401

1,696

3,291

26,903

10,794

28


Colori compositi


Regulatory capitaland capital requirements

Assumming that the proposed allocation of profit for the year is approved, the net equity and regulatorycapital will be as follows:

The increases of loans and financial assets (+12%), combined with regulatory adjustments that requirean increase of requirements regarding financial assets (corporate bonds, capitalisation of policies andshareholdings acquired in the course of private equity transactions), together reduce the capitalsurplus by 22%. The total ratio - equal to 9.27%- is however maintained above the minimum levelrequired by banks belonging to a Banking Group (7%), raising the possibility for further growth inassets compared to the balances required by supervisory legislation (the potential asset increasewould be equal to 2.7 million).

(euro millions)

567.8

203.3

(2.8)

768.4

579.5

188.9

8,287.2

6.85%

9.27%

Total base capital (a)

Total supplementary capital

Deductions

Total Regulatory Capital (b)

of which:

. Portion absorbed by risk

- loan (required 7%)

- market risk

- subordinated securites

. Free/deficit capital portion

Total weighted assets (c)

Tier 1 Ratio (a/c)

Tier 2 Ratio (b/c)

420,8

92,9

4,3

+ 7.3%

- 12.5%

- 0.0%

+ 1.3%

+ 11.9%

- 21.6%

+ 11.9%

- 0.29%

- 0.97%

553.4

22.7

3.4

529.3

232.3

(2.8)

758.8

518.0

240.8

7,407.4

7.15%

10.24%

(*) At end December 2005 asset requirements, as indicated by the Regulatory Authorities, have been recognised and valued according to DL 87, whilst the regulatory capitalis already reported according to IAS criteria.Data for 2005 is stated on a pro forma basis.


29


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The incorporation of the subsidiary “Investimenti Piccole Imprese” (IPI), with effect from 1 January2006, increases total staff numbers at the start of the period to 293 people (of which 287 wereemployed by the bank at 31 December 2005 and 6 people join as a result of the merger).

Following the 33 departures and 37 new entrants which occurred during the year, teh number ofemployees at 31 December 2006 is made up of 297 people, giving an equivalent full time resourceof 287 people.

The above staff departures also involved the staff reduction mechanism previously introduced withthe agreement of the trade unions, and which were described in the previous financial statements.The related activity was is summarised as follows:

- 8 participants in the sector Solidarity Fund (which takes the total number of participants in this fundto 21);

- 5 incentivised redundancies (between one and the other institute, the number of people choosingto leave under the auspices of the previously introduced plans agreed with the unions amountsto a total of 26 for a total cost of 5 million in respect of a theoretical maximum of 45 adherentsat a total cost of 6.2 million)

- 4 people are reallocated within the group on the basis of an infra group agreement.- 1 incentivised departure.

In 2006 for the first time the group adopted a system of incentives relating to 2005 performancebased on the achievement of objectives tied to the results of the company and agreed and approvedby the parent. This permits the rational and objective calculation and distribution of performancebased bonuses for each area of the bank, in accordance with the Industrial Plan.

Also in 2006 Centrobanca provided professional education courses with the aim of updating andenhancing the professionalism of its human resources.948 man days were dedicated to professional education (228 more than in 2005), involving 296employees (173 male, 123 female), which was almost all of the staff employed.

Personnel and personneldevelopment

30


Colori compositi


In January 2007 Promac became officially operative, the promoter for the market reserved for smalland medium sized companies (Mercato Alternativo del Capitale), established by banks (amongstwhich Centrobanca with a 5,19 % share of the capital) and public institutions. The new market intendsto address the growth financing requirements of small and medium sized enterprises (SMEs) thatoccupy a key position in the Italian economy, but which remain undercapitalized compared to similarEuropean companies. Joint stock companies will be able to access this market as long as they canpresent the latest audited financial statements, without having to adhere to specific capital requirementsand without having to have a minimum float.

There were no post balance sheet events other than previously mentioned that could have an impacton the economic and financial situation as presented in the financial statements.

Finally, in the first two months of 2007 the group continued with its development project accordingto the guidelines given in the Industrial Plan and previously announced. The operating trend andresults in this period appear to be substantially in line with budget; credit quality continues to improve;the rate of impairment in the first two months of 2007 (the ratio of new non-performing loans to thebalance of credits in bonis at the start of the year) is less than 0.03%.

Other information onmanagement and outlook

31


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FINANCIAL STATEMENTS

BALANCE SHEET

(Euro)

Assets

Cash and liquid assets

Tradeable financial assets

Fair value financial assets

Available for sale financial assets

Loans to banks

Loans to customers

Hedging instruments

Value adjutments to generically

hedged financial assets (+/-)

Shareholdings

Tangible assets

Intangible assets

of which:

- goodwill

Tax assets

a) current

b) advance

Non-current assets and assets in course of divestment

Other assets

TOTAL ASSETS

10.

20.

30.

40.

60.

70.

80.

90.

100.

110.

120.

130.

140.

150.

31.12.2006

46,712

411,925,830

2,017,111,831

326,250,022

306,901,560

5,746,264,305

58,128,238

5,705,321

7,588,828

62,092,912

4,685,699

4,654,502

152,452,395

15,342,193

137,110,202

-

63,216,856

9,162,370,509

31.12.2005Centrobanca stand-alone

balance sheet (1)

34,248

2,349,623,058

-

301,969,052

405,164,229

5,389,061,816

157,952,235

17,200,033

14,998,571

63,157,143

4,270,031

4,220,380

122,200,469

13,464,128

108,736,341

346,174

135,435,740

8,961,412,799

31.12.2005pro-forma (2)

34,277

2,354,751,664

-

301,969,052

406,761,890

5,389,482,649

157,952,235

17,200,033

7,590,835

63,193,682

4,704,153

4,654,502

122,625,402

13,788,327

108,837,075

346,174

135,458,278

8,962,070,324

(Euro)

Liabilities and net equity

Due to banks

Due to customers

Debt securities in issue

Tradeable financial liabilities

Hedging instruments

Tax liabilities

a) current

b) deferred

Other liabilities

Employee termination fund

Provisions for risks and charges

a) retirement provisions

b) other provisions

Revaluation reserve

Reserves

Share premium reserve

Share capital

Profit/Loss for the period (+/-)

TOTAL LIABILITIES AND NET EQUITY

10.

20.

30.

40.

60.

80.

100.

110.

120.

130.

160.

170.

180.

200.

31.12.2006

4,064,400,357

13,382,285

3,618,780,175

321,498,611

258,395,670

96,041,457

6,464,443

89,577,014

106,663,822

5,480,513

26,312,667

1,849,597

24,463,070

4,986,553

194,755,402

-

369,600,000

82,072,997

9,162,370,509


balance sheet (1)

3,600,600,377

17,595,951

3,778,996,237

390,709,602

267,108,668

48,107,633

14,121,170

33,986,463

190,811,346

5,784,332

26,563,435

2,050,532

24,512,903

37,697,116

121,814,830

72,405,605

336,000,000

67,217,667

8,961,412,799

31.12.2005pro-forma (2)

3,600,602,777

17,676,415

3,778,996,237

390,709,602

267,108,668

48,155,699

14,138,170

34,017,529

190,837,763

5,823,201

26,563,435

2,050,532

24,512,903

37,697,116

121,814,830

72,405,605

336,000,000

67,678,976

8,962,070,324In order to make the balance sheet figures to 31 December 2006 more easily comparable with those to 31 December 2005, pro-forma figures have been given (2) showingthe impact of the merger by incorporation, from 1 September 2006, of the subsidiary Investimenti Piccole Imprese SpA as well as for the stand-alone accounts of Centrobancaas the company doing the incorporation (1)

To 31.12.2006 for centrobanca with comparative figures for centrobanca stand-alone to 31.12.2005and pro-forma 2005 figures

32


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INCOME STATEMENT

In order to make the balance sheet figures to 31 December 2006 more easily comparable with those to 31 December 2005, pro-forma figures have been given (2) showingthe impact of the merger by incorporation, from 1 September 2006, of the subsidiary Investimenti Piccole Imprese SpA as well as for the stand-alone accounts of Centrobancaas the company doing the incorporation (1)

To 31.12.2006 for Centrobanca with comparative figures for Centrobanca stand-alone to 31.12.2005and 2005 pro-forma figures

(Euro)

Items

Interest income and similar income

Interest costs and similar expenses

Interest margin

Commission income

Commission expenses

Net commissions

Dividends and similar income

Net result of trading activities

Net result of hedging activities

Profit/Loss from sale or repurchase of:

a) loans

b) available for sale financial assets

c) financial assets held to maturity

d) financial liabilities

Net trading result

Adjustments to net values for deterioration in

a) loans

b) available for sale financial assets

c) financial assets held to maturity

d) other financial activities

Net result of financial operations

Administrative expenses

a) personnel costs

b) other administrative expenses

Net provisions for risks and charges

Adjustments to net value of tangible assets

Adjustments to net value of intangible assets

Other operating expenses/income

Operating expenses

Profit/Loss on shareholdings

Profit/Loss on disposal of investments

Profit/Loss before taxes

Income taxes

Profit/Loss net of taxes

Net profit/loss for the period

10.

20.

30.

40.

50.

60.

70.

80.

90.

100.

120.

130.

140.

150.

160.

170.

180.

190.

200.

210.

240.

250.

260.

270.

290.

31.12.2006

338,027,134

-242,687,339

95,339,795

26,198,170

-2,693,383

23,504,787

4,906,925

3,870,395

7,219,572

36,540,606

28,020,168

8,520,438

-

-

171,382,080

13,674,750

9,469,413

4,205,337

185,056,830

-49,321,800

-26,400,656

-22,921,144

284,515

-1,088,294

-50,213

6,638,712

-43,537,080

1,667,982

51,480

143,239,212

-61,166,215

82,072,997

82,072,997


balance sheet (1)

296,732,514

-188,668,221

108,064,293

29,214,364

-3,013,992

26,200,372

1,859,490

11,548,304

6,346,033

37,854,228

36,818,951

1,035,277

-

-

191,872,720

-18,755,079

-19,466,037

710,958

173,117,641

-47,293,883

-25,453,345

-21,840,538

-1,100,591

-1,108,341

-77,599

7,790,545

-41,789,869

-

-38,014

131,289,758

-64,072,091

67,217,667

67,217,667

31.12.2005pro-forma (2)

296,733,004

-188,672,217

108,060,787

29,214,364

-3,018,222

26,196,142

2,049,437

12,331,952

6,346,033

37,854,228

36,818,951

1,035,277

-

-

192,838,579

-18,774,685

-19,485,643

710,958

174,063,894

-48,372,688

-26,264,008

-22,108,680

-1,100,591

-1,128,425

-77,599

8,356,509

-42,322,794

-

-38,014

131,703,086

-64,024,110

67,678,976

67,678,976

33


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REPORT ON CHANGESIN NET EQUITY AT31 DECEMBER 2006

Report notes 31.12.2006: (1) With regard to the changes in opening balance refer to the contents of the paragraph "Property Revaluation" on the "Explanatory notes on the trend of operations" containedin these financial statements. (2) Allocation of negative net reserves of FTA 1.1.2005 to the Profit reserves and Share Price Premium Reserves, as approved by the ordinary shareholders' meeting of19.4.2006 (3) Net changes in fair value/returns to the income statement on debt and equity securities in portfolio or sold (4) Free share capital increase with increase in nominal value from € 1.0 to € 1.10 of each share, as approved by the Extraordinary Shareholders' Meeting of 19.4.2006

Capital:

a) ordinary shares

b) other shares

Share Price Premium

Reserves:

a) profit reserves

b) other

Valuation reserves:

a) available for sale financial assets

b) cover of financial flows

c) special revaluation law reserves

Equity instruments

Treasury shares

Profit for the period

Net equity

Allocation of previousyear profits

Balance atal 31.12.2005

Change toopening balance (1)

Balance atall’1.1.2006

Reserves Dividends and other

distribution

336,000,000

336,000,000

72,405,605

121,814,831

81,247,681

40,567,150

37,697,116

10,794,064

26,903,052

67,217,667

635,135,219

5,033,264

5,033,264

516,648

516,648

5,549,912

336,000,000

336,000,000

72,405,605

126,848,095

81,247,681

45,600,414

38,213,764

10,794,064

27,419,700

67,217,667

640,685,131

3,377,667

3,377,667

-3,377,667

-

-63,840,000

-63,840,000

34


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33,600,000

33,600,000

-7,875,964

-

-7,875,964

-25,724,036

-25,724,036

-

Change in year

Net Equity Operations

Net Equity atal 31.12.2006

Profit for the period

Extraordinary dividend

distribution

Changein equity

instruments

Derivativeson ownshares

Stockoptions

Changesto reserves

Issuesof new

shares (4)

Purchaseof ownshares

-72,405,605

72,405,604

-302,084

72,707,688

-7,503,175

-7,503,175

-7,503,176

(2)

(2)

(2)

(2)

(3)

- - - - -

82,072,997

82,072,997

369,600,000

369,600,000

-

-

194,755,402

84,323,264

110,432,138

4,986,553

3,290,889

-

1,695,664

-

-

82,072,997

651,414,952

(Euro)

35


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CASH FLOW STATEMENTINDIRECT METHOD

NOTE: (+) generated (-) absorbed

A. OPERATING ACTIVITY

1. Management

- result for the period (+/-)

- capital gains/losses on financial assets held for trading and on financial

assets/liabilities valued at fair value (-/+)

- gains/losses on hedging transactions (-/+)

- net write downs/recovery of value relating to impairment (-/+)

- net write-downs/recovery of value on tangible and intangible assets (+/-)

- net provisions for risks and charges and other expenses/income (-/+)

- non cash taxes (+/-)

- net write downs/recovery of value of assets

to be sold net of tax effect (+/-)

- other adjustments

2. Cash generated/absorbed by financial assets

- financial assets held for trading

- financial assets valued at fair value

- available for sale financial assets

- loans to banks : current credits

- loans to banks : other credits

- loans to customers

3. Cash generated/absorbed by financial liabilities

- due to banks : current

- due to banks : other liabilities

- due to customers

- debt securities in issue

- tradeable financial liabilities

- financial liabilities valued at fair value

- other liabilities

Net Liquidity generated/absorbed by operations

B. INVESTMENT ACTIVITY

1. Cash generated by

- sales of shareholdings

- dividends received from shareholdings

- sales of financial assets held to maturity

- sales of tangible assets

- sales of intangible assets

- sales of business units

2. Cash absorbed by

- purchase of shareholdings

- purchase of financial assets held to maturity

- purchase of tangible assets

- purchase of intangible assets

- purchase of business units

Net cash generated/absorbed by investment activity

C. FINANCING ACTIVITIES

- issue/purchase of own shares

- issue/purchase of equity instruments

- dividend distribution and other allocations

Net cash generated/absorbed by capital

NET CASH GENERATED/ABSORBED IN THE PERIOD

31.12.2006

119,328,488

82,072,997

-3,870,395

-7,219,572

-13,674,750

1,138,507

-284,515

61,166,216

-

-

-362,487,544

1,937,697,228

-2,017,111,831

-24,280,970

129,965,863

-31,555,345

-357,202,489

302,106,546

-1,035,591,246

1,505,488,239

-4,213,666

-160,216,062

-69,809,183

-

66,448,464

58,947,490

4,909,087

2,162

4,906,925

-

-

-

-

-4,113

-4,113

-

-

-

-

4,904,974

-

-

-63,840,000

-63,840,000

12,464

(A+B+C)

31.12.2005

134,437,031

67,217,667

-11,548,304

-6,346,033

18,755,079

1,185,940

1,100,591

64,072,091

-

-

-680,199,712

-357,532,334

-

110,611,778

-88,330,615

-25,542,295

-319,406,246

590,547,773

592,334,848

7,431,635

2,051,987

-360,849,307

275,289,112

-

74,289,498

44,785,092

1,631,379

-

1,631,379

-7,475,787

-7,475,787

-5,844,408

-38,976,000

-38,976,000

-35,316

(A+B+C)

(Euro)

36


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RECONCILIATION

KEY DATAAND RATIOS

37

STRUCTURAL INDICES AND DATA

Net customer loans / total assets

Customer deposits / interbank deposits

Bonds and subordinated loans / mortgages and loans

Net equity (excluding profit for the period) / total liabilities

Average number of employees

Number of branches

PROFITABILITY INDICES AND DATA

Net Profit for the period (euro 000's)

ROE (profit/net equity excluding profit for period)

ROA (profit/total assets)

COST / INCOME (operating income/operating expenses)

Interest margin / operating income

Personnel expenses / operating income

RISK INDICES

Net non-performing loans / loans to customers

% non-performing loan cover (write-downs / gross non performing loans)

Net non-performing loans / Regulatory capital

Net non-performing and watch-list loans / loans to customers

% cover of non performing loans + watch-list

CAPITAL RATIOS

Tier 1 (base assets/total weighted assets)

Solvency ratio (Regulatory capital / total weighted capital)

PRODUCTIVITY INDICATORS' (euro 000's)

Total assets / average number of employees

Operating income / average number of employees

Personnel costs / average number of employees

CAPITAL DATA (euro 000's)

Net loans to customers

of which: net non-performing loans

Net Equity (excluding profit for the period)

Regulatory Capital(*) data including IPI

(Euro)

Items

Cash and cash equivalents at the start of the period

Net cash generated/absorbed in the period

Cash and cash equivalents: foreign exchange impact

Cash and cash equivalents at the end of the period

31.12.2006

34,248

12,464

-

46,712

31.12.2005

69,564

-35,316

34,248

62.72%

89.37%

59.02%

6.21%

305

7

82,073

14.42%

0.90%

27.41%

54.25%

15.02%

0.98%

64.33%

7.37%

1.86%

55.61%

6.85%

9.27%

30,041

576

87

5,746,264

56,367

569,342

768,379

60.14%

105.45%

66.23%

6.34%

302

7

67,679

11.92%

0.76%

23.72%

55.24%

13.24%

2.85%

55.27%

20.21%

4.44%

50.46%

7.15%

10.24%

29,676

661

88

5,389,483

153,398

567,918

758,843

+ 2.58%

- 16.08%

- 7.20%

- 0.12%

+ 0.99%

+ 21.27%

+ 2.50%

+ 0.14%

+ 3.69%

- 0.99%

+ 1.78%

- 1.87%

+ 9.06%

- 12.85%

- 2.58%

+ 5.15%

- 0.29%

- 0.97%

+ 1.23%

- 12.81%

- 1.10%

+ 6.62%

- 63.25%

+ 0.25%

+ 1.26%



Colori compositi


38


Colori compositi


39

01.03 indice ing 13-06-2007 12:22 Pagina 1 - UBI...

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