Reports and

Financial

Statements

2016

Translation from the Italian original

which remains the definitive version

14th financial year

Joint Stock Company Head Office and General Management: Piazza Vittorio Veneto 8, Bergamo (Italy) Operating offices: Bergamo, Piazza Vittorio Veneto 8; Brescia, Via Cefalonia 74

Member of the Interbank Deposit Protection Fund and the National Guarantee Fund Tax Code, VAT No. and Bergamo Company Registration No. 03053920165

ABI (Italian Banking Association) 3111.2 Register of Banks No. 5678 Register of banking groups No. 3111.2 Parent of the Unione di Banche Italiane Banking Group

Share capital as at 31st December 2016: EURO 2,440,750,987.50 fully paid up

www.ubibanca.it

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Contents

UBI Banca: company officers ................................................................................................ 4

Letter from the Chairwoman and Chairman . ..................................................................................... 5

UBI Banca Group: key figures and performance indicators ............................................................ 8

UBI Banca Group: branch network as at 31st December 2016 ................................................ 9

UBI Banca Group: the main investments as at 31st December 2016 ....................................... 10

The rating. ............................................................................................................................. 12

Notice of call .......................................................................................................................... 15

CONSOLIDATED FINANCIAL STATEMENTS OF THE UBI BANCA GROUP AS AT AND FOR THE YEAR ENDED 31ST DECEMBER 2016

CONSOLIDATED MANAGEMENT REPORT ...................................................................... 21

▪ The macroeconomic scenario ......................................................................................................... 22 ▪ Significant events in 2016 ................................................................................................. 33 ▪ Commercial activity ......................................................................................................................... 50 ▪ The distribution network and market positioning .............................................................. 72 ▪ Human resources ............................................................................................................................. 75 ▪ The scope of the consolidation ....................................................................................................... 82 ▪ Reclassified consolidated financial statements, reclassified income statement net of the most significant non-recurring items and reconciliation schedules .............................. 87

▪ The consolidated income statement .............................................................................................. 95 ▪ General banking business with customers: funding .................................................................. 108

- Total funding ............................................................................................................................... 108 - Direct funding .............................................................................................................................. 109 - Indirect funding and assets under management ..................................................................... 113

▪ General banking business with customers: lending ................................................................... 116 - Performance of the loan portfolio ................................................................................................. 116 - Risk ............................................................................................................................................. 120

▪ The interbank market and the liquidity position ......................................................................... 126 ▪ Financial activities ........................................................................................................................... 130 ▪ Equity and capital adequacy .......................................................................................................... 147 ▪ Research & Development ................................................................................................................ 152 ▪ The internal control system. .............................................................................................. 153 ▪ Transactions related parties and with connected parties. ................................................... 153 ▪ Consolidated companies: the principal figures ............................................................................ 157

- Information on the network banks ............................................................................................... 161 - Information on the main product companies ............................................................................... 166

▪ Other information ............................................................................................................................ 171 - Treasury shares ........................................................................................................................... 171 - Litigation ...................................................................................................................................... 171 - Inspections .................................................................................................................................. 171 - Compounding of interest .............................................................................................................. 174 - Tax aspects .................................................................................................................................. 175 - Investor relations and external communication ........................................................................... 182 - The “Italian Responsible Payments Code” . ................................................................................... 182 - Social and environmental responsibility ....................................................................................... 182

▪ Principal risks and uncertainties to which the UBI Banca Group is exposed ......................... 184 ▪ Subsequent events occurring and the business outlook

for consolidated operations ............................................................................................................. 191

STATEMENT OF THE CHIEF EXECUTIVE OFFICER AND OF THE SENIOR OFFICER RESPONSIBLE FOR

PREPARING THE CORPORATE ACCOUNTING DOCUMENTS ................................................................. 193

INDEPENDENT AUDITORS’ REPORT ...................................................................................................... 197

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CONSOLIDATED FINANCIAL STATEMENTS ........................................................................................... 201

▪ Consolidated balance sheet ............................................................................................................ 202 ▪ Consolidated income statement ...................................................................................................... 203 ▪ Consolidated statement of comprehensive income ..................................................................... 204 ▪ Statement of changes in consolidated equity ............................................................................... 205 ▪ Consolidated statement of cash flows ........................................................................................... 207

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ................................................................ 209

▪ Part A – Accounting policies ............................................................................................. 210 - A.1 – General part ......................................................................................................................... 210 - A.2 – The main items in the financial statements .......................................................................... 236 - A.3 – Information on transfers between portfolios of financial assets ........................................... 257 - A.4 – Information on fair value ...................................................................................................... 258 - A.5 – Information on “Day one profit/loss” ................................................................................... 268

▪ PART B – Notes to the consolidated balance sheet ...................................................................... 269 - Assets. .......................................................................................................................................... 269 - Liabilities ..................................................................................................................................... 302 - Other information.. ...................................................................................................................... 331

▪ Part C – Notes to the consolidated income statement ........................................................ 335 ▪ Part D – Consolidated comprehensive income ............................................................................. 352 ▪ Part E – Information on risks and the relative hedging policies ................................................ 353 ▪ Part F – Information on consolidated equity ................................................................................ 455 ▪ Part G – Business combination transactions concerning companies or lines of business .... 467 ▪ Part H – Transactions with related parties ................................................................................... 468 ▪ Part I – Share-based payments ...................................................................................................... 472 ▪ Part L – Segment Reporting ............................................................................................................ 476

ATTACHMENTS TO THE CONSOLIDATED ANNUAL ACCOUNTS ........................................................... 479

▪ Disclosures concerning the fees of the independent auditors and services other than auditing in compliance with Art. 149 duodecies of Consob Issuers’ Regulations ................... 480

▪ Information pursuant to letters a), b) and c) of Attachment A to Part One, Title III, Chapter 2 of Bank of Italy Circular No. 285 of 17th December 2013 Situation as at 31st December 2016 ................................................................................... 481

SEPARATE FINANCIAL STATEMENTS OF UBI BANCA SPA AS AT AND FOR THE YEAR ENDED 31ST DECEMBER 2016

MANAGEMENT REPORT .......................................................................................................................... 1*

▪ UBI Banca: principal figures and performance indicators ......................................................... 2* ▪ The UBI Banca organisation chart ................................................................................................ 3* ▪ Introduction ...................................................................................................................................... 7* ▪ Human resources ............................................................................................................................. 7* ▪ Reclassified financial statements, reclassified income statement net of the most significant non-recurring items and reconciliation schedules ...................................................................... 9*

▪ The income statement. ...................................................................................................... 17* ▪ General banking business .............................................................................................................. 25*

- Funding ....................................................................................................................................... 25* - Indirect funding and assets under management .......................................................................... 27* - Lending ........................................................................................................................................ 28* - Operations on the interbank market ............................................................................................ 31*

▪ Financial activities ........................................................................................................................... 34* ▪ Equity and capital adequacy .......................................................................................................... 42* ▪ Relations with Group member companies ......................................................................... 44* ▪ Transactions with related parties and connected parties .......................................................... 44* ▪ Share performance and shareholder structure ............................................................................ 46*

- Share performance ....................................................................................................................... 46* - Investor Relations: relations with analysts and institutional investors ......................................... 48* - Report on corporate governance and the ownership structure ..................................................... 49* - Treasury shares ........................................................................................................................... 50* - De jure and delegated powers of the corporate bodies .................................................................. 50*

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▪ Other information ............................................................................................................................ 51* - Litigation ...................................................................................................................................... 51* - Complaint management. ............................................................................................................... 51*

▪ Principal risks and uncertainties to which UBI Banca is exposed ........................................... 53* ▪ Subsequent events and the business outlook ................................................................... 53* ▪ Proposal to replenish the loss for the year and the declaration of a dividend ......................... 54*

STATEMENT OF THE CHIEF EXECUTIVE OFFICER AND OF THE SENIOR OFFICER RESPONSIBLE FOR PREPARING THE COMPANY ACCOUNTING DOCUMENTS .................................................... 55*

INDEPENDENT AUDITORS’ REPORT ...................................................................................................... 59*

SEPARATE FINANCIAL STATEMENTS .................................................................................................... 63*

▪ Balance sheet .................................................................................................................................... 64* ▪ Income Statement ............................................................................................................................ 65* ▪ Statement of comprehensive income ............................................................................................. 66* ▪ Statement of changes in equity ...................................................................................................... 67* ▪ Statement of cash flows .................................................................................................................. 69*

NOTES TO THE ACCOUNTS .................................................................................................................... 71*

▪ Part A – Accounting policies ........................................................................................................... 72* - A.1 – General part ........................................................................................................................ 72* - A.2 – The main items in the financial statements ......................................................................... 88* - A.3 – Information on transfers between portfolios of financial assets ........................................... 111* - A.4 – Information on fair value ..................................................................................................... 113* - A.5 – Information on “day one profit/loss” ................................................................................... 125*

▪ Part B – Notes to the balance sheet ............................................................................................... 126* - Assets .......................................................................................................................................... 126* - Liabilities ...................................................................................................................................... 159* - Other information ........................................................................................................................ 179*

▪ Part C – Notes to the income statement ........................................................................................ 184* ▪ Part D – Comprehensive income .................................................................................................... 204* ▪ Part E – Information on risks and the relative hedging policies ................................................ 206* ▪ Part F – Information on equity ....................................................................................................... 298* ▪ Part G – Business combination transactions concerning companies or lines of business .... 305* ▪ Part H – Transactions with related parties ................................................................................... 307* ▪ Part I – Share-based payments ...................................................................................................... 315* ▪ Part L – Segment Reporting ............................................................................................................ 319*

Attachments to the separate financial statements .......................................................... 320*

▪ List of real estate properties ........................................................................................................... 321* ▪ Disclosures concerning the fees of the independent auditors and services other than

auditing in compliance with Art. 149 duodecies of Consob Issuers’ Regulations ................... 329* REPORT ON THE CORPORATE GOVERNANCE AND OWNERSHIP STRUCTURE OF UBI BANCA SPA REPORT OF THE SUPERVISORY BOARD TO THE SHAREHOLDERS’ MEETING REPORTS ON THE OTHER ITEMS ON THE AGENDA OF THE SHAREHOLDERS’ MEETING GLOSSARY

BRANCH NETWORK OF THE UBI BANCA GROUP

CALENDAR OF CORPORATE EVENTS OF UBI BANCA FOR 2017 CONTACTS

Contacts

Key

The following abbreviations are used in the tables: - dash (-): when the item does not exist; - not significant (n.s.): when the phenomenon is not significant; - not available (n.a.): when the information is not available; - a cross “X”: when no amount is to be given for the item (in compliance with Bank of Italy instructions).

All figures are given in thousands of euros, unless otherwise stated.

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UBI Banca: company officers

Supervisory Board (appointed by a Shareholders' Meeting of 2nd April 2016) (*)

Chairman Andrea Moltrasio Senior Deputy Chairman Mario Cera Deputy Chairman Pietro Gussalli Beretta Deputy Chairman Armando Santus Francesca Bazoli Letizia Bellini Cavalletti Pierpaolo Camadini Alessandra Del Boca Giovanni Fiori Patrizia Michela Giangualano Paola Giannotti Lorenzo Renato Guerini Giuseppe Lucchini Sergio Pivato

Management Board (appointed by the Supervisory Board on 14th April 2016)

Chairwoman Letizia Maria Brichetto Arnaboldi Moratti Deputy Chairman Flavio Pizzini Chief Executive Officer Victor Massiah (**) Silvia Fidanza Osvaldo Ranica Elvio Sonnino Elisabetta Stegher

General Management

General Manager Victor Massiah(**) Senior Deputy General Manager Elvio Sonnino Deputy General Manager Frederik Geertman(**) Deputy General Manager Rossella Leidi

Senior Officer Responsible in accordance with Art. 154 bis of the Consolidated Finance Act Elisabetta Stegher

Independent Auditors DELOITTE & TOUCHE Spa (*) On 22nd December 2016 Gian Luigi Gola resigned for personal reasons. (**) Appointed Chief Executive Officer and General Manager by the Management Board on 15th April 2016. (***) Appointed Deputy General Manager with effect from 1st August 2016.

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Letter from the Chairwoman and Chairman

Dear Shareholders, To commence this letter we wish to dedicate a few words to the memory of our Honorary Chairman, Giuseppe Vigorelli, who passed away on 24th January 2017 ending a long and fruitful life spent entirely at the service of the banking world. Our most sincere thanks go to him and to all our colleagues who have left us during the course of the year, for the work they did and for the contribution each of them made to the creation of the Group and to its development. Moving on to illustrate the work we have carried out, we must first of all make a brief mention of changes made to corporate governance, as it is expressed by the current boards. Following the self-reform approved by a Shareholders’ Meeting held in May 2014, which initiated a series of actions (reduction of the number of members, limits on terms of office, strengthening independence requirements and development of professional requirements) summarised by the term “Integrated Popular” bank, UBI Banca completed its transformation into an ordinary joint-stock company (the first “Popular” co-operative bank in Italy to do so) on 10th October 2015 in order to ensure the stability of the company and guarantee a maximum focus on ordinary operations, in agreement with Supervisory Authority wishes as well as the spirit of the reform law. The election of the Supervisory Board on 2nd April 2016, which then appointed the Management Board, was therefore able to take place on the basis of criteria thus brought up-to-date, with a reduction in the number of board members to 15, broader professional requirements and the definition of new aptitude requirements. The year 2016 was a particularly important one. A Business Plan was approved on 27th June containing strategic guidelines and operating, financial and capital targets for the period 2016-2019/2020, which involved the following:

• the adoption of a single business unit – the “Single Bank”. The creation of a Single Bank originated primarily as a response to a change in the competitive scenario. This required greater simplification of operating processes, while at the same time safeguarding roots in local communities which lie at the base of the historical identity of the companies merged into UBI Banca. A single bank does in fact allow rationalisation of corporate governance, central units and geographical market coverage, with improvements in staff efficiency and processes at the service of customers (customer satisfaction), while also optimising investments to support its growth. On 14th October 2016 a Shareholders’ Meeting approved the merger of the network banks into the Parent by a large majority. This took place in two steps: BPCI and BRE were merged on 21st November and all the remaining five banks (BPB, BBS, BPA, Carime and BVC) were merged on the following 20th February. A challenging project, which forms the underlying basis of the Business Plan, was thereby successfully concluded well ahead of schedule;

• the evolution of the distribution model. The change in organisational structure, with geographical market coverage now provided by five Macro Areas and 36 Departments, will be accompanied by an evolution of the commercial approach. In this context additional units have also been created, focused on different customer segments (Corporate & Investment Banking and Top Private Banking), to sit alongside the new Wealth and Welfare Management Division –in operation since 1st August 2016 with the mission of creating an innovative product and service centre in the asset management, insurance and social and health service sectors – with the reinforcement at the same time of some specialist areas (remote channels, global transaction banking, UBI Comunità). The business model is based on an integrated multi-channel approach, which leverages on opportunities offered by technological innovation. In this manner customers can access UBI Banca continuously, moving without difficulty between all the available channels. The customer-bank relationship is simplified and improved thanks to intensive use of digital processes. Credit management, already subject to numerous organisational and process interventions over the years, has been further strengthened by streamlining the approval process and completing the centralisation of problem loan management. The unit responsible for bad loan positions at the Parent, in operation since 2009, has been added to with a similar unit for the management of counterparties classified as unlikely to pay. At the same time a real estate property company (Re.O.Co) became operational in the second half of the year with the objective of conserving the value of residential properties used to back bad loans by means of direct participation in judicial auctions;

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• keeping overheads down. Multichannel access allows a less saturated geographical market coverage. The transformation into a Single Bank has been accompanied by the closure of seven branches in November 2016 and 69 branches in February 2017, while a total of 280 points of sale will be closed down over the time frame of the Business Plan. At the same time, generation turnover and a reduction in staff numbers is required. This reduction, which is always on a voluntary basis, designed to cushion the social impacts, consisted of 1,300 redundancies, of which 600 occurring at the time of the Single Bank operation with a gross cost of €323 million charged to the income statement in the second quarter of 2016 and the subject of an agreement signed with trade unions in December 2016. These departures will be accompanied by the recruitment of around 1,100 staff designed to ensure the arrival of new professional expertise to support the change in the way the Bank does business;

• an increase in coverage for non-performing loans. In order to improve the ratio of net non-performing exposures to equity (known as the “Texas Ratio”), in line with best European practice, the Group has adopted an even more prudential approach, by increasing its coverage of problem loans with greater provisions amounting to €851 million recognised in June 2016. As a consequence this determined a partial absorption of the “shortfall” (i.e. the shortfall of provisions to expected losses). The quality of the performing portfolio (where the lower risk classes represent as much as 77.5% of the total, while the higher risk classes remain stably below the threshold of 5%) has now seen a reduction in new inflows of non-performing loans by half (-47% for gross inflows and -57% in net terms), to thereby return to pre-crisis levels. The year 2016 therefore emerged as a turning point, having incorporated a significant reduction in non-performing assets (although in the absence of substantial disposals of loans and ahead of schedule with respect to the Business Plan): -6.8% in gross terms down to €12.5 billion (14.4% of total loans) and -16.9% in net terms down to €8 billion (9.8% of net loans). At the same time coverage rose to 35.7% from 27.9% before (up to 45.8% from 37.2% inclusive of write-offs) in the presence of collateral and/or unsecured guarantees which back 87.7% of total outstanding net non-performing loans.

Towards the end of 2016, UBI Banca examined a possible project to merge three of the four bridge banks created after the intervention by the Resolution Fund in November 2015, identifying a sound business, financial and operating rationale also in terms of value creation (an increase in market share of 1% in terms of both lending and direct funding resulting from the acquisition of approximately 900,000 customers, €14 billion of loans, €18.5 billion of direct funding and €7.5 billion indirect funding). On 11th January 2017 the UBI Banca Supervisory Board submitted a binding offer to acquire the entire share capital of Nuova Banca delle Marche, Nuova Banca dell’Etruria e del Lazio and Nuova Cassa di Risparmio di Chieti, the “Target Bridge Institutions”, at a price of one euro. The transaction is also subject to a series of conditions (significant parameters and specific provisions) including recapitalisation by the seller. The offer was accepted and completion is expected in the next few months. The financial commitment for the UBI Banca Group consists of an increase in the share capital up to a maximum of €400 million, which will be submitted to the Shareholders’ Meeting of 7th April, designed to maintain immediately from 2017 a fully loaded CET1 ratio for the new UBI Banca+Bridge Banks combination of greater than 11%, in line with the current level. Funds for the capital increase will be raised by means of option rights offered to shareholders. This will be underwritten by joint global coordinators and it will be used to meet temporary requirements resulting because the economic benefit of the badwill (the difference between the price of one euro paid and the equity) will not be fully eligible for inclusion in regulatory capital at the time of the transaction and also to support restructuring of the three banks. Some considerations on operating performance The year 2016 ended with a net loss of €830 million, caused by non-recurring items common to the whole banking sector (the write-down of the Atlante Fund, additional contributions to the Resolution Fund and impairment losses on the Interbank Deposit Protection Fund’s Voluntary Scheme – a total of €106 million net of tax and non-controlling interests), although above all by expenses for the implementation of the Business Plan: redundancy expenses (€207 million, again net of tax and non-controlling interests), impairment losses on network bank brands (€38 million), expenses connected with the Single Bank project (€16 million) and the increase in non-performing loan provisions. Core activities gave rise to operating income of €3.1 billion, affected in particular by poor performance from net interest income (€1.5 billion), which was held down by trends for interest rates, by volumes of lending and also by a smaller contribution from the securities portfolio in line with recommendations to reduce and diversify sovereign debt risk contained in the Business Plan. Notwithstanding lively growth in management, trading and advisory services, net fee and commission income (€1.3 billion) was unable to offset the trend for general banking business in the presence of a smaller contribution from financial activities (€154 million), as a consequence of fewer disposals. As a result of effective monitoring action still ongoing, operating expenses totalled €2.2 billion, down €22 million, even though these incorporated ordinary and additional contributions to the Resolution Fund and to the Deposit Guarantee Scheme amounting to €132 million. Net of those payments, general operating expenses recorded a decrease of €55 million (-3%).

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As concerns balance sheet items, on the other hand, at the end of the year the Group’s total funding stood at €167 billion consisting of amounts due to customers totalling €56 billion, debt securities issued of €29 billion and indirect funding of approximately €82 billion of which €55 billion were assets under management. Over twelve months UBI Banca increased its short-term funding from current accounts (+€4.7 billion) which, although being a form of investment with remuneration close to zero, constituted the instrument chosen by customers for their liquidity, sometimes only momentarily while waiting to reinvest in asset management products, but more often for longer periods, as a result of a generalised fear of perceived risks relating to the new regulatory framework for deposit protection. Again in accordance with the strategic guidelines of the Business Plan, bonds issued to ordinary customers were down, replaced mostly by Sicav’s, mutual funds and insurance products (up by a total of €6 billion). Placements of covered bonds and EMTNs achieved good results on the institutional market on which UBI Banca obtained competitive prices because it is perceived as a high quality debtor. Loans amounted to €82 billion at the end of December, down €2.7 billion Euro. Although this fall was affected by certain technical factors (business with the “Cassa di Compensazione e Garanzia” (a central counterparty clearing house) and the progressive run-off of non-captive product company loans to customers), it was also affected by structural factors, such as the revision of positions with negative or nil profitability and the persistance of an economic environment which, although slowly improving, is struggling to consolidate signs of recoveryand is holding down demand for credit. Nevertheless, important signs of stabilisation are not to be overlooked: average balances for gross interest-bearing loans remained almost unchanged, supported by growth in volumes with longer maturities which did in fact offset the contraction in short-term loans. The latter in particular continued to be affected by poor demand for working capital from businesses, which in many cases preferred to replace short-term loans with TLTRO financing. Outstanding loans drawn from those funds amounted to €6.9 billion at the end of the year, up €2.3 billion compared with December 2015. In addition to a more than adequate liquidity position (confirmed by fully loaded Basel 3 ratios) the Group continues to enjoy a solid capital base. As at 31st December 2016 the Common Equity Tier 1 ratio (CET1) and the Tier 1 ratio stood at 11.48%, while the Total Capital Ratio was 14.10%, well above the SREP requirement currently in force and that applicable for 2017.

Dear Shareholders, In compliance with Art. 2364 bis of the Italian Civil Code and Art. 44 of the Articles of Association, the Management Board, in conjunction with the Supervisory Board, has proposed replenishing the loss of the Parent for the year (€493 million) by drawing from the share premium reserve. In consideration of the adequate capitalisation of the Parent and the Group according to the parameters established by Basel 3 Rules and in compliance with the European Central Bank Communication of 13th December 2016 on the subject of dividend distribution policies, the Management Board, in agreement with the Supervisory Board, has decided to make a proposal to the Shareholders’ Meeting to distribute a dividend of €0.11 on the ordinary shares outstanding to give a payout of over €107 million drawn from the Extraordinary Reserve. Dear Shareholders, The year 2016 has been one of intense work, but many challenges and opportunities still lie ahead on which we intend to make every effort, aware above all, of the difficulties that we will need to face from day to day. For this reason, we wish, in the name of the Management Board and the Supervisory Board, to thank all our various stakeholders, our shareholders, investors, clients, the authorities, the associations and our suppliers for the trust they have placed in us and the support they have provided as well as to the institutions, with whom our collaboration is increasingly broader and more fruitful, and with particular thanks also to all our employees for the hard work and efforts they make every day to give continuity and quality to the services the UBI Banca Group provides. March 2017 Letizia Brichetto Arnaboldi Moratti Andrea Moltrasio

Chairwoman Chairman of the Management Board of the Supervisory Board

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UBI Banca Group: key figures and performance indicators1

1 The indicators have been calculated using the reclassified figures contained in the section “Reclassified consolidated financial statements, reclassified income statement net of the most significant non-recurring items and reconciliation schedules” in the Consolidated Management Report. Account has been taken with regard to the Alternative Performance Measures reported in the Consolidated Management Report of the ESMA guidelines issued on 5th October 2015, which came into force on the 3rd July 2016. Furthermore, on 18th October 2016, the Management Board approved the new UBI Banca Group guidelines on the identification of non-recurring items. Information on the share is reported in the relative section of the UBI Banca Management Report. In consideration of the loss recorded, profit indicators have not been given for 2016 because they hold little significance. The profit indicators for 2014 and 2011 were calculated on profit for the year before redundancy expenses and impairment losses.

2 The coverage for bad loans inclusive of write-offs as at 31st December 2015 has been restated because financial accounting data has been used since that date; the percentages shown for previous periods, however, remain of a management accounting nature.

3 The figures as at 31st December 2013 and as at 31st December 2012 were calculated according to AIRB Basel 2 rules and relate to the following ratios respectively: the Tier 1 ratio (Tier 1 capital/risk weighted assets); the core Tier 1 ratio after specific deductions from the Tier 1 capital (Tier 1 capital net of preference shares and savings or privileged shares held by non-controlling interests/risk weighted assets); total capital ratio (regulatory capital + Tier 3 /risk weighted assets). For previous periods the figures were calculated according to the Basel 2 standard rules.

4 Part time employees have been calculated within total average staff numbers according to convention on a 50% basis.

31.12.2016 31.12.2015 31.12.2014 31.12.2013 31.12.2012 31.12.2011 31.12.2010 31.12.2009 31.12.2008

STRUCTURAL INDICATORSNet loans and advances to customers/total assets 72.8% 72.2% 70.3% 71.2% 70.1% 76.8% 78.0% 80.1% 79.0%

Direct funding from customers/total liabilities 75.8% 78.1% 76.5% 74.5% 74.6% 79.2% 81.8% 79.5% 80.0%

Net loans and advances to customers/direct funding from customers 96.1% 92.4% 91.9% 95.5% 94.0% 97.0% 95.4% 100.8% 98.7%

Equity (including profit/loss for the year) /total liabilities 8.0% 8.5% 8.1% 8.3% 7.4% 6.9% 8.4% 9.3% 9.1%

Assets under management/indirect funding from individual customers 66.5% 61.1% 57.1% 55.2% 54.3% 51.2% 54.6% 53.2% 53.1%

Leverage ratio (total assets - intangible assets)/(equity inclusive of profit/loss + equity attributable to non-controlling interests - intangible assets) 15.0 13.2 14.0 14.7 17.0 18.5 19.3 17.1 17.3

PROFIT INDICATORS

ROE (Net profit/equity including profit (loss) for the year) n.s. 1.2% 2.4% 2.4% 0.8% 3.9% 1.6% 2.4% 0.6%

ROTE [net profit/tangible equity (equity inclusive of profit (loss) - intangible assets)] n.s. 1.4% 2.9% 3.4% 1.2% 5.9% 3.1% 4.6% 1.2%

ROA (net profit/total assets) n.s. 0.10% 0.19% 0.20% 0.06% 0.27% 0.13% 0.22% 0.06%

The cost:income ratio (operating expenses/operating income) 69.0% 64.5% 61.8% 62.3% 64.3% 69.5% 70.6% 64.4% 63.9%

Staff costs/operating income 40.9% 38.4% 38.2% 37.9% 39.0% 41.4% 41.5% 37.5% 38.8%

Net impairment losses on loans/net loans to customers (loan losses) 1.91% 0.95% 1.08% 1.07% 0.91% 0.61% 0.69% 0.88% 0.59%

Net interest income/operating income 48.0% 48.4% 53.3% 50.9% 52.8% 61.7% 61.3% 61.5% 68.7%

Net fee and commission income/operating income 42.8% 38.6% 36.0% 34.5% 33.5% 34.7% 33.9% 31.1% 33.3%

Net result on financial activities/operating income 4.9% 8.6% 5.9% 9.4% 7.3% 0.2% 1.0% 3.2% -5.9%

RISK INDICATORS

Net bad loans/net loans to customers 4.87% 5.07% 4.70% 3.89% 3.18% 2.49% 1.91% 1.36% 0.88%

Net impairment losses on bad loans/gross bad loans (coverage for bad loans) 45.08% 38.64% 38.56% 41.60% 42.60% 43.31% 48.69% 51.57% 54.58% Coverage for bad loans, gross of write-offs of positions subject to bankruptcy

proceedings and the relative impairment losses2 58.48% 52.25% 53.36% 56.05% 57.63% 59.06% 63.62% 66.10%

Net non-performing loans/net loans and advances to customers 9.84% 11.45% 11.10% 10.53% 8.73% 6.30% 5.17% 4.62% 2.40%

CAPITAL RATIOS Basel 3 from 31 3 2014 3

Tier 1 ratio (Tier 1 capital after filters and deductions/risk weighted assets) 11.48% 12.08% 12.33% 13.23% 10.79% 9.09% 7.47% 7.96% 7.73%

Common Equity Tier 1 ratio (Common Equity Tier 1 capital after filters and deductions/risk weighted assets) 11.48% 12.08% 12.33% 12.60% 10.29% 8.56% 6.95% 7.43% 7.09%

Total capital ratio (total own funds/risk weighted assets) 14.10% 13.93% 15.29% 18.91% 16.01% 13.50% 11.17% 11.91% 11.08%

Total own funds (f igures in thousands of euro) 8,389,105 8,545,017 9,441,598 11,546,144 12,203,619 12,282,153 10,536,200 10,202,555 9,960,812

of which: Tier 1 capital after filters and deductions 6,829,283 7,408,894 7,615,265 8,075,247 8,263,720 8,276,278 7,047,888 6,816,876 6,944,723

Risk weighted assets 59,483,864 61,344,866 61,762,588 61,045,600 76,589,350 91,010,213 94,360,909 85,677,000 89,891,825

INCOME STATEMENT, BALANCE SHEET FIGURES (in thousands of euro), STRUCTURAL DATA (numbers)

Profit (loss) for the year attributable to the shareholders of the Parent (830,150) 116,765 (725,767) 250,830 82,708 (1,841,488) 172,121 270,099 69,001

Profit (loss) for the year attributable to the shareholders of the Parent before Business Plan impacts (previously redundancy expenses and impairment) (565,812) 182,774 233,230 314,550 184,581 349,373 177,293 289,022 88,810

Profit (loss) for the year attributable to the Parent normalised (474,357) 195,132 146,537 100,220 97,324 111,562 105,116 173,380 425,327

Operating income 3,119,499 3,370,864 3,409,630 3,437,292 3,526,311 3,438,339 3,496,061 3,906,247 4,089,739

Operating expenses (2,153,466) (2,175,181) (2,108,222) (2,141,798) (2,266,660) (2,389,626) (2,468,564) (2,514,347) (2,611,348)

Net loans and advances to customers 81,854,280 84,586,200 85,644,223 88,421,467 92,887,969 99,689,770 101,814,829 98,007,252 96,368,452

of which: net bad loans 3,987,303 4,287,929 4,025,079 3,437,125 2,951,939 2,481,417 1,939,916 1,332,576 848,671

net non-performing loans 8,055,608 9,688,549 9,508,105 9,312,273 8,105,174 6,279,884 5,261,129 4,532,234 2,315,913

Direct funding from customers 85,166,013 91,512,399 93,207,269 92,603,936 98,817,560 102,808,654 106,760,045 97,214,405 97,591,237

Indirect funding from customers 82,116,013 79,547,957 75,892,408 71,651,786 70,164,384 72,067,569 78,078,869 78,791,834 74,288,053

of which: assets under management 54,631,219 48,567,539 43,353,237 39,553,848 38,106,037 36,892,042 42,629,553 41,924,931 39,430,745

Total funding from customers 167,282,026 171,060,356 169,099,677 164,255,722 168,981,944 174,876,223 184,838,914 176,006,239 171,879,290Equity attributable to the shareholders of the Parent (inclusive of profit (loss) for the year) 8,989,578 9,981,862 9,804,048 10,339,392 9,737,882 8,939,023 10,979,019 11,411,248 11,140,207

Intangible assets 1,695,973 1,757,468 1,776,925 2,918,509 2,964,882 2,987,669 5,475,385 5,523,401 5,531,633

Total assets 112,383,917 117,200,765 121,786,704 124,241,837 132,433,702 129,803,692 130,558,569 122,313,223 121,955,685

Branches in Italy 1,524 1,554 1,668 1,725 1,727 1,875 1,892 1,955 1,944

Total staff at the end of the year (actual employees in service + workers on agency leasing contracts) 17,560 17,716 18,132 18,337 19,090 19,407 19,699 20,285 20,680

Average total staff 4

(actual employees in service + workers on agency leasing contracts) 16,494 16,756 17,462 17,625 18,490 18,828 19,384 20,185 20,606Financial advisors 787 824 713 671 672 713 786 880 924

9

UBI Banca Group: branch network as at 31st December 2016

10

UBI Banca Group: the main investments as at 31st December 2016

11

12

The rating

The ratings assigned to the UBI Banca Group by the main international agencies are given below. On 25th January 2016, following the entry into force of decrees to implement the BRRD Directive in Italy – which set 1st January 2019 as the date for the application of “extended depositor preference” – Moody’s, having concluded its review commenced in October 2015, announced that it had raised its rating on the long-term deposits of 18 Italian banks. The rating on UBI Banca’s long-term deposits was upgraded to Baa1 from the previous Baa2 (+1 notch), with outlook stable. All the other ratings remained unchanged. While acknowledging the steps taken to improve the bank’s position as part of its multi-year business plan and also its results achieved in the third quarter of 2016, on 17th November the agency revised its ratings assigned to UBI Banca to reflect that, in the current context of a weak Italian economy, some of the bank’s fundamentals, notably its capital and profitability (and also in view of a comparison with its peers, which include international banks) are no longer compatible with a baseline credit assessment of ba1. In detail the following ratings were reduced by one notch: BCA from “ba1” to “ba2”; LTBDR from “Baa1” to “Baa2”; LT senior Debt Rating from “Baa2” to “Baa3”; Subordinated Debt from “Ba2” to “Ba3”; Commercial Paper Programme from “Prime-2” to “Prime-3”; LTCRA from “Baa1(cr)” to “Baa2(cr)”. The outlook on long-term bank deposits and long-term senior debt ratings remained stable. The rating on short-term deposits and the short-term counterparty risk assessment, on the other hand, were confirmed. Following the announcement and the subsequent stipulation of a contract to acquire three of the four bridge banks formed in November 2015 from the Resolution Fund, on 24th January 2017 Moody’s confirmed its ratings with a stable outlook.

(I) The ability to repay long-term deposits (with original maturity of one year or more) in local currency. (Aaa: best rating – C: default)

(II) The ability to repay short-term deposits (with original maturity of 13 months or less) in local currency. (Prime-1: highest quality – Not prime: not classifiable within any of the prime categories)

(III) The BCA is not a rating but an opinion on the intrinsic financial strength of the bank in the absence of external support (Aaa: best rating – C: default)

(IV) Rating on the ability of the issuer to honour senior debt and bonds (Aaa: best rating – C: default)

(V) The counterparty risk (CR) assessment is not a rating but an opinion on the likelihood of a default on certain senior operating obligations and other contractual commitments entered into by the bank [Aaa(cr): best rating – C (cr): Default] [P-1 (cr): best rating – Not prime (cr): not classifiable within any of the prime categories]

Following the presentation of the Group business plan, on 6th July 2016 S&P Global Ratings confirmed both its ratings and the stable outlook. In its analysis of the strategic business plan, this agency considered the impact of the initiatives identified on the overall credit rating of UBI Banca as substantially neutral, but also considered them as a positive force for the improvement of some weaknesses (in terms of efficiency with the merger of the seven network banks and streamlining of the distribution network and also in terms of coverage for non-performing loans). On the basis of the announcement to present a binding offer for the three bridge banks, on 13th January 2017 this agency confirmed all its ratings with a stable outlook.

MOODY'S

Long-term Bank deposits rating (I) Baa2

Short-term Bank deposits rating (II) Prime-2

Baseline Credit Assessment (BCA) (III) ba2

Long-term Issuer Rating (IV) Baa3

Long-term Counterparty Risk Assessment (V) Baa2(cr)

Short-term Counterparty Risk Assessment (V) Prime-2(cr)

Outlook Stable

RATINGS ON ISSUES

Senior unsecured rating Baa3

Subordinated debt Ba3

Euro Commercial Paper Programme Prime-3

Covered Bonds (First Programme – residential mortgages) Aa2

13

(i) The issuer credit rating reflects the agency’s opinion of the intrinsic creditworthiness of the bank combined with an assessment of the potential for future support that the bank might receive in the event of default (from government or from the group to which it belongs).

Short-term: ability to repay short-term debt with a maturity of less than one year (A-1: best rating – D: default)

Long-term: ability to pay interest and principal on debt with a maturity of longer than one year (AAA: best rating – D: default)

(ii) The SACP is a rating of the intrinsic creditworthiness of the bank in the absence of external support (from government or from the group to which it belongs). It is calculated on the basis of an “anchor SACP”, which summarises economic and industry risk for the Italian banking sector. This is then adjusted to take account of bank-specific factors such as capitalisation, market positioning, exposure to risk and the funding and the liquidity situation, which are also assessed from a comparative viewpoint.

As part of a periodic review, on 24th March 2016 Fitch Ratings confirmed its rating for UBI Banca changing the outlook from stable to negative. Even though UBI Banca has a percentage of gross non-performing loans that is lower than the average for Italian banks, this agency wished to underline its opinion on the Bank’s strategy for managing non-performing loans which, similarly to other Italian banks, gives priority to protecting the value of the relative collateral, rather than trying to substantially reduce the outstanding total, which in net terms is now equal in amount to the Group’s own funds.

(1) The ability to repay debt in the short-term (less than 13 months) (F1+: best rating – D: default)

(2) The ability to promptly meet financial commitments in the long-term, independently of the maturity of individual obligations. This rating is an indicator of the probability that an issuer will default. (AAA: best rating – D: default)

(3) An assessment of a bank’s intrinsic strength in the event that it cannot rely on forms of external support (aaa: best rating - f: default).

(4) A rating of the likelihood of possible external support (from the state or large shareholders) if the bank finds itself in difficulty. [1: high probability of external support – 5: no reliance may be placed on any possible support (as is the case for European banks subject to the BRRD resolution regime)]

(5) This rating gives additional information, closely linked to the Support Rating, in that for each level of the Support Rating it identifies the minimum level which the Issuer Default Rating could reach if negative events were to occur (No Floor for European banks subject to the BRRD resolution regime).

On 2nd February 2016, DBRS published its new methodology – Critical Obligations Rating (COR). This assigns a specific rating to address the risk of default of particular obligations/exposures considered critical, but which have a higher probability of being excluded from bail-in (such as those resulting from derivatives, payment services, covered bond issues, etc.). On the following 4th February, DBRS published the assignment of its new ratings for 33 European banking groups, including UBI Banca. The ratings assigned are “R-1 (low)” and “A” for the short-term and long-term CORs respectively (in the latter case two notches higher than the Intrinsic Assessment). On 10th March, on conclusion of a review commenced at the beginning of February to address both the introduction of the new CORs and some changes to methodologies for ratings on European covered bonds, this agency confirmed its “AA (low)” rating on the first programme backed by residential mortgages and it raised its rating on the second programme backed mainly by commercial mortgages from “A (low)” to “A”. As part of a periodic review of ratings assigned, on 25th November 2016 this agency confirmed all its ratings for UBI Banca with a stable trend.

S&P GLOBAL RATINGS

Short-term Issuer Credit Rating (i) A-3

Long-term Issuer Credit Rating (i) BBB-

Stand Alone Credit Profile (SACP) (ii) bbb-

Outlook (long-term rating) Stable

RATINGS ON ISSUES

Senior unsecured debt BBB-

Subordinated debt BB

Negotiable European Commercial Paper (former French Certificats de Dépôt) Programme A-3

FITCH RATINGS

Short-term Issuer Default Rating (1) F3

Long-term Issuer Default Rating (2) BBB

Viability Rating (3) bbb

Support Rating (4) 5

Support Rating Floor (5) NF

(No Floor)

Outlook (Long-term Issuer Default Rating) Negative

RATINGS ON ISSUES

Senior unsecured debt BBB

Subordinated debt BBB-

14

In consideration of the increased probability that under the BRRD regime (Directive for the recovery and resolution of banks) all subordinated debts are used, together with capital, to absorb losses, on 13th January 2017 DBRS placed the subordinated securities issued by 27 European banking groups (including UBI Banca) with a rating of one notch below the intrinsic assessment under review with possible negative implications. The review should last around 90 days. As concerns the acquisition of the three bridge banks, on 20th January the agency confirmed all its ratings for UBI Banca, modifying the trend from stable to negative to take account of the potential risks, including execution risks, connected with the operation.

(I) The issuer rating is not a rating on issues but on the issuer, because it is an assessment of its creditworthiness. The rating is generally assigned on a long-term basis using the long-term rating scale. In the banking sector, the Issuer Rating represents the final rating on the credit worthiness of a bank which incorporates both the Intrinsic Assessment and possible considerations regarding external support.

(II) The ability to repay long-term debt (maturing in more than one year) (AAA: highest credit quality – C: very highly speculative)

(III) The ability to repay short-term debt (maturing in less than one year) [R-1 (high): highest credit quality - R-5: very highly speculative]

(IV) The Intrinsic Assessment (IA) is a rating of the intrinsic financial strength of a bank in the absence of external support. It assesses a bank’s intrinsic fundamentals in five areas: commercial network, earnings capacity, liquidity and funding, risk profile and capitalisation.

(V) External support assessment (Group to which it belongs or government) in case of need [SA1: internal support from the group to which it belongs; SA2: external support (government); SA3: no external support – SA4: potential support to the group to which it belongs]

DBRS

Issuer rating (I) BBB (high)

Senior Long-term Debt and Deposit rating (II) BBB (high)

Short-term Debt and Deposit rating (III) R-1 (low)

Intrinsic Assessment (IA) (IV) BBB (high)

Support Assessment (V) SA3

Long-Term Critical Obligations rating A

Short-Term Critical Obligations rating R-1 (low)

Trend (all ratings) Negative

RATINGS ON ISSUES

Senior unsecured BBB (high)

Subordinated debt BBB URNeg

Euro Commercial Paper Programme R-1 (low)

Negotiable European Commercial Paper (former French Certificats de Dépôt) Programme R-1 (low)

Covered Bonds (First Programme – residential mortgages) AA (low)

Covered Bonds (Second Programme – commercial mortgages) A

15

Notice of call1

An Ordinary and Extraordinary General Meeting of the Shareholders of Unione di Banche Italiane S.p.A is convened for

Friday 7th April 2017 at 2:30 p.m.

in a single call at the New Bergamo Trade Fair in via Lunga to discuss and resolve on the following

Agenda

Ordinary session 1. Proposal to replenish the loss for the year and to distribute a dividend drawn from the extraordinary

reserve, subject to the prior presentation of the separate and consolidated financial statements as at and for the year ended 31st December 2016.

2. Appointment of a Board Member, to fill a vacancy on the Supervisory Board. Relative and consequent resolutions.

3. Report on remuneration: resolution in accordance with Art. 123-ter, paragraph 6 of Legislative Decree No. 58/1998.

4. Proposal for setting remuneration and incentive policies for members of the Supervisory Board and members of the Management Board in accordance with the regulations and legislation in force.

5. Remuneration schemes based on financial instruments: a. proposal to pay a portion of the short-term (annual) variable component of remuneration for “Key

Personnel” in financial instruments and a proposal to authorise the purchase of treasury shares to service the incentive scheme;

b. proposal to pay the long-term (multi-year) variable component of remuneration for “Key Personnel” in financial instruments and a proposal to authorise the purchase of treasury shares to service the incentive scheme;

c. proposal to pay the productivity bonus (the “Company Bonus”) for the financial year 2017 in financial instruments and a proposal to authorise the purchase of treasury shares to service the Company Bonus.

6. Proposal regarding the criteria and limits for determining remuneration to be agreed in the event of the early termination of an employment relationship or early retirement from corporate office.

7. Proposal to set the ratio between the variable and fixed components of remuneration up to a limit of 2:1 for managers in the Investments Area of UBI Pramerica Sgr.

Extraordinary session Proposal to authorise the Management Board, pursuant to Art. 2443 of the Italian civil code, to increase the share capital by payment, in one or more tranches, by 31st July 2018, by a total maximum amount of €400,000,000, inclusive of any share premiums, by the issue of ordinary shares with no nominal value and having the same characteristics as those already outstanding, to be offered as an option to rights holders, with the broadest powers to establish, from time to time and in observance of the above limitations, the procedures, the terms and the conditions of the operation, inclusive of the issue price and comprising any share premiums and dividend entitlements. Relative and consequent resolutions. Consequent amendment to article 5 of the Articles of Association.

* * * In compliance with article 15 of the Articles of Association, arrangements have been made to employ remote connection systems at the premises at PalaBREBanca in Via Viglione Cuneo, which will be equipped with the necessary controls needed to ensure (i) identification of those with a legitimate right to participate, (ii) the possibility for them to take part in proceedings of the meetings and to vote on resolutions and also (iii) to ensure the security of the communications. In accordance with the provisions of the aforementioned Articles of Association, these connections will allow Shareholders who do not intend to travel to the place in which the meeting is convened at the New Bergamo Trade Fair in Via Lunga Bergamo – and who therefore do not intend to speak and participate in the discussions – to nevertheless follow the proceedings of the shareholders’ meeting and to cast their vote at the appropriate time during the course of the meeting.

* * * Information on the share capital as of today The subscribed and paid-up share capital of UBI Banca S.p.A. (hereinafter also the “Bank” or the “Company”) amounts to 2,443,094,485.00, consisting of 977,237,794 shares. At the date of this notice UBI Banca possesses 3,031,974 treasury shares.

Participation in the shareholders’ meeting

1 The notice of call to convene an Ordinary and Extraordinary Shareholders’ Meeting was published on the corporate website of UBI

Banca on 7th March 2017. An abstract of that same notice was also published on 8th March 2017, not only in local newspapers but also in the national daily newspapers Il Sole 24Ore, MF and Corriere of the Sera, as well as in the Financial Times, one of the leading international financial newspapers.

16

Those persons with the right to vote for whom a communication certifying their legitimate right has been received by the Bank within the legal time limits may take part in the Shareholders’ Meeting; according to the provisions of Art. 83-sexies of Legislative Decree No. 58/1998 (the “Consolidated Finance Act”), that communication is made to the Bank by an authorised intermediary on the basis of the records relating to the end of the accounting day of the seventh trading day prior to the date of the Shareholders’ Meeting (29th March 2017 – “record date”). Those who only became owners of shares of the Bank subsequent to that date shall have no right to take part and vote in the Shareholders’ Meeting. The communication from the intermediary must be received by the Bank by the end of the third market trading day prior to the date set for the Shareholders’ Meeting, and that is by 4th April 2017. The legitimate right to attend and vote nevertheless remains, should the communications be received by the Bank later than the aforementioned time limit, provided they are received before the commencement of the proceedings of the Shareholders’ Meeting. It is underlined that each ordinary share gives the right to one vote. Voting by mail is not permitted.

Participation and voting by proxy Those with the right to vote may have themselves represented in Shareholders’ Meetings in compliance with the relative provisions of the law by means of a proxy, with the option of using the facsimile proxy form available on the corporate website “www.ubibanca.it – Shareholders Section – Shareholders’ Meetings – April 2017 Shareholders’ Meeting”. The proxies may be conferred by means of an electronic document with an advanced electronic signature, qualified or digital in accordance with Art. 21, paragraph 2 of Legislative Decree No. 82/2005. Proxies may be notified by means of email, at the address “notifica.delega@ubibanca.it”. If a proxy holder transmits or delivers a copy of the proxy to the Company, that person must certify under their own responsibility, when being accredited for access to the proceedings of the Shareholders’ Meeting, that it is a true copy of the original proxy and to the identity of the principal.

Proxy holder designated by the Bank A proxy may be granted, free of charge, with voting instructions on all or some of the items on the agenda, to Computershare Spa as the “Designated Proxy Holder” in accordance with Art. 135-undecies of the Consolidated Finance Act by the end of the second trading day prior to the date of the Shareholders’ Meeting (and therefore by 5th April 2017). The proxy is valid solely for proposals in relation to which voting instructions have been given. The proxy and the voting instructions may always be revoked at any time within the time limit indicated above. A special form must be made to confer a proxy on the Designated Proxy Holder which will be made available on the corporate website “www.ubibanca.it – Shareholders Section – Shareholders’ Meetings – April 2017 Shareholders’ Meeting”. If necessary, the proxy form will be transmitted in hardcopy form to those who request this either of Computershare Spa on the Tel. No. 011.0923200, or of the Corporate Affairs Service of the Bank. The proxy must arrive with the voting instructions conferred on the Designated Proxy Holder by the aforementioned time limit of 5th April 2017 following one of the procedures indicated on the proxy form itself.

Additions to the agenda and the submission of new proposals for resolutions On the basis of Art. 126-bis of the Consolidated Finance Act, Shareholders who, either alone or jointly, represent at least one fortieth of the share capital may ask, with a written application, within at least ten days of the publication of this notice (i.e. by 17th March 2017) for items to be added to the agenda, indicating the additional matters proposed, or submitting proposals for resolutions regarding matters already on the agenda. The written application must be submitted according to one of the following procedures: - to the “Corporate Affairs Service” of the Bank at 8 Piazza Vittorio Veneto Bergamo by 5.00 p.m. on 17th March

2017; - by sending them by certified electronic mail to the following address “soci.comunicazioni@pecgruppoubi.it”,

attaching the documents in pdf format with a digital signature by 17th March 2017.

The applications must be accompanied by a report which gives the reasons for the proposals for resolutions on new matters which it is proposed should be addressed or the reason for the additional proposals for resolutions submitted on matters already on the agenda. The applicants must send communications to the Company through their intermediaries certifying to the ownership of shares. If they have requested their intermediary to issue that communication, it is sufficient to provide references to that communication in the request or at least the name of the intermediary. Any additions to the agenda or the submission of proposals for resolutions regarding matters already on the agenda will be disclosed at least fifteen days before the date set for the Shareholders’ Meeting (i.e. by 23rd March 2017) following the same procedures as those laid down for the publication of this notice. At the same time, the reports prepared by applicants for additions and/or further proposals for resolutions submitted, accompanied by any assessments that may be presented by the Governing Bodies, shall be disclosed to the public according to the same procedures applying to documentation relating to the Shareholders’ Meeting. It is underlined that additions are not permitted for matters on which the shareholders vote in accordance with the law on proposals submitted by the Management Board or the Supervisory Board or on the basis of a draft document or a report prepared by them, other than those indicated in article 125-ter, paragraph 1 of the Consolidated Finance Act.

The right to submit questions on matters on the agenda In accordance with Art. 127-ter of the Consolidated Finance Act, those holding the right to vote may submit questions on the items on the agenda even before the Shareholders’ Meeting, ensuring that they are received by the end of the third day prior to the date of the Shareholders’ Meeting, which is by 4th April 2017. The questions can be sent by delivering them to the Corporate Affairs Service at 8, Piazza Vittorio Veneto, Bergamo or by email to the address domande.assemblea@ubibanca.it. The applicants must send communications to the Company through their intermediaries certifying that they may legitimately exercise this right. If they have requested their intermediary to issue that communication to participate in the Shareholders’ Meeting, it is sufficient to provide references to that communication in the request or at least the name of the intermediary.

17

Questions received before the Shareholders’ Meeting and which are found to be relevant to the items on the agenda will be given answers in accordance with the law not later than during the Shareholders’ Meeting. The bank may provide a single answer to questions with the same content.

Appointment of a board member, to fill a vacancy on the Supervisory Board For the purposes of filling vacant places on the Supervisory Board the procedure that will be followed shall comply with Art. 37 of the Articles of Association. In this respect, as already reported, the Member of the Supervisory Board who resigned had been appointed by a Shareholders’ Meeting held on 2nd April 2016 approved with a relative majority, because it had not been possible to use list voting procedures and therefore the replacement procedures pursuant to article 37.17 part one and 37.19 of the Articles of Association that regulate cases in which places are vacated by a Board Member elected in a list will not apply. The appointment of the Board Member will take place in accordance with the Articles of Association, with a relative majority vote without the obligation for a list provided for by the Articles of Association themselves and by Legislative Decree No. 58/98 and subsequent amendments. The member of the Supervisory Board called upon to replace the missing member will serve in office until the original mandate of the replaced member expires. However, in order to allow full and adequate assessment of candidates to the office of Member of the Supervisory Board by the shareholders of the Bank and also to facilitate the proceedings of the Shareholders’ Meeting, shareholders are strongly advised to present proposals for candidates at least 21 days before the date of the Shareholders’ Meeting and therefore by 17th March 2017. Nevertheless, whenever they are submitted, candidatures must be accompanied by the following: - documentation that provides adequate proof that the presenter is a shareholder; - a declaration by the candidate certifying that they accept their appointment together with the relative declarations

that no cause for ineligibility and incompatibility exists and also that they possess the requirements prescribed by law, regulations and the Articles of Association for the office. The candidate is invited in that declaration to take account of relevant situations within the meaning of Art. 36 of Decree Law No. 201/2011, converted by Law No. 2014/2011 (ban on “interlocking” positions). Candidatures must be accompanied by a curriculum vitae containing exhaustive information on the candidate’s professional characteristics and a list of any management and supervisory positions that may be occupied in other companies within the meaning of article 2400, paragraph 4 of the Italian Civil Code, with a commitment to update this if necessary at the date of the Shareholders’ Meeting.

Again in order to facilitate procedures for the submission of candidatures, the following is available on UBI Banca’s website “www.ubibanca.it – Shareholders Section – Shareholders’ Meetings – April 2017 Shareholders’ Meeting”: - a facsimile of the letter accompanying the candidatures containing the list of documentation that must accompany

them; - a facsimile for the declaration by candidates containing their acceptance of their candidature and certifying that

they are in possession of the requirements for taking up the position required by the law and regulations, with regard also to the requirements set by Art. 36 of the Articles of Association.

Candidature proposals are presented using one of the following procedures: - to the “Corporate Affairs Service” of the Bank at 8 Piazza Vittorio Veneto Bergamo by 5.00 p.m. on 17th March

2017; - by sending them by certified electronic mail to the following address “soci.comunicazioni@pecgruppoubi.it”,

attaching the documents in pdf format with a digital signature by 17th March 2017.

The above candidatures received by the ”Corporate Affairs Service” will be progressively registered and numbered on the basis of the day and time of receipt. The candidatures received shall be made available to the public at least 15 days before the Shareholders' Meeting on a storage facility named “1info” (www.1info.it) and they will also be published on the corporate website of UBI Banca “www.ubibanca.it – Shareholders Section – Shareholders’ Meetings – April 2017 Shareholders’ Meeting”. For further information reference is made to the Illustrative Report on the second item on the agenda of the Ordinary Shareholders’ Meeting available to the public as specified below.

Documentation for the shareholders’ meeting The documentation relating to the items on the agenda is deposited and made available to the public at the registered address of UBI Banca, on the website of the Bank (www.ubibanca.it,– Shareholders’ Section) and is filed on the storage facility named “1info” (www.1info.it) within the time limits and according to the procedures of the Law and regulations. Shareholders may view and obtain copies of the aforementioned documentation in accordance with the law by applying in advance to the “Corporate Affairs Service”. This notice to convene is published in accordance with Art. 125-bis of the Consolidated Finance Act and with Art. 15 of the Articles of Association on the corporate website of UBI Banca “www.ubibanca.it – Shareholders Section – Shareholders’ Meetings – April 2017 Shareholders’ Meeting” and an abstract of it is published in daily newspapers(“Il Sole 24 Ore” and “MF”). It is also communicated on the storage facility named “1info” (www.1info.it) in accordance with the provisions of the law and regulations currently in force. In accordance with Legislative Decree No. 196/2003, UBI Banca S.p.A. is the personal data controller. Full information on personal data processing is provided on the corporate website www.ubibanca.it.

Bergamo, 28th February 2017

The Chairwoman of the Management Board Letizia Maria Brichetto Arnaboldi Moratti

Consolidated

Financial

Statements of

the UBI Banca

Group

as at and for the year

ended 31st December 2016

19

CONSOLIDATED MANAGEMENT

REPORT

21

The macroeconomic scenario1

In 2016 the world scenario was increasingly affected by geopolitical variables that made the overall general scenario even more problematic and unstable, intensifying the economic uncertainties and volatility on the financial markets:

• the unsolved problem of how to manage migration in Europe2; • the repeated terrorist attacks on a large-scale; • tensions between Russia and the United States starting with the difficulty in reaching an

understanding for a peace agreement in Syria; • North Korea's repeated nuclear tests and threat to test an intercontinental ballistic missile; • the result of the British referendum at the end of June on the United Kingdom's continued

membership of the European Union. The impact of the British referendum on currency and financial markets was immediate. It was countered on the one hand by the strongly accommodative stance taken by the monetary authorities, primarily the Bank of England3, and on the other hand by the progressive depreciation of sterling against the leading international currencies. While recent macroeconomic indicators are encouraging – although in a context in which the pace of growth is slowing and inflation is increasing – looking ahead,

the intensity of the impacts of Brexit on the United Kingdom and on the euro area will depend on the new trade and finance agreements resulting from a complex negotiating process with unpredictable outcomes. The ruling issued by the British High Court on 3rd November4 further muddied the waters by forcing a delicate passage through Parliament before the Government can start negotiations and notify the European Council under article 50 of the Treat of Lisbon, which sets out the procedure to follow in the event that a Member State should decide to leave the European Union5;

• the increase in Turkey's strategic importance after the failed coup d'etat in July; • the unexpected result of the US presidential elections:

the arrival of Donald Trump in the White House has led to uncertainties about the feasibility and possible consequences of the changes to economic policy announced during his election campaign. The strategy directions adopted by the newly elected President – which aim to tighten up protectionism6 and to support trade by increasing growth through increased investment in infrastructures adopting an

expansive fiscal policy – could lead to an increase in the inflation prospects and therefore speed up the increase in interest rates, but also have repercussions on the increase in public debt and potentially strengthen the US dollar, causing further problems for countries that produce raw materials and for emerging economies.

Despite the efforts to achieve cohesion by its leaders, the process of European integration continues to prove to be fragile and vulnerable to national egotism amid growing populist

1 Prepared on the basis of data available as at 26th January 2017. 2 At the end of 2015 Hungary and Slovakia appealed to the European Court of Justice against an EU programme which involved the

relocation of refugees on the basis of national quotas. In October 2016 the Hungarian government held a referendum on whether it was legitimate for the EU to set compulsory quotas for the transfer of migrants into the country without the approval of the national parliament. Although the referendum did not reach the necessary quorum for it to be valid, the majority of voters voted against the impositions from Brussels.

3 In order to support the British economy in this delicate transition phase, the Bank of England reduced anti-cyclical capital requirements for banks at the beginning of July, while in August it increased the amount of its quantitative easing programme to 435 million Sterling (from 375 million) and reduced the reference interest rates by 25 basis points from its 0.50% level that had lasted for over seven years to its current level of 0.25%. A decision was also taken to purchase corporate bonds up to a total of 10 billion sterling for 18 months.

4 On 24th January the Supreme Court confirmed the High Court's decision, establishing the need for a parliamentary vote to authorise the triggering of article 50 of the Treaty of Lisbon. This decision will have repercussions on the strategy for leaving the EU adopted by prime Minister Theresa May, according to whom negotiations should begin before the end of March 2017.

5 Within this scenario, one of the recurrent questions is what will happen to London's financial centre. In the event of a 'hard Brexit', i.e. if the United Kingdom leaves the European Economic Area (EEA), banks (British or otherwise) based in London would lose their 'financial passporting rights' that allow them to provide services in other European countries thanks to the authorisation obtained in the UK. This situation could result in business being transferred from London to other EU financial centres, in order to guarantee continued use of the 'financial passporting rights' based on having registered offices in an EU Member-State. Otherwise, the possibility of providing services to other European countries could be dependent on obtaining a series of authorisations from local authorities. However, in the event of a 'soft Brexit' – a scenario in which the UK is outside the EU but a member of the EEA – intermediaries based in London would continue to benefit from their 'passporting rights'. However, in order to access the single market the UK would have to accept the industry regulations established by the EU government bodies, without having the right to contribute to their content.

6 During his election campaign, Trump proposed revising all the foreign trade agreements in order to replace multilateral agreements with bilateral agreements, claiming that he would be able to obtain better terms for US industry that would have significant repercussions on the domestic labour market. The President's intentions include renegotiating the NAFTA, the agreement with Mexico and Canada, and halting negotiations with the European Union for the Transatlantic Trade and Investment Partnership (TTIP), as well as having taken formal steps to abandon the Trans Pacific Partnership (TTP) after taking up residence in the White House on 20th January. The TTP, signed on 5th October 2015 in Atlanta is a commercial agreement between 12 countries (Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, Vietnam and the US) that aimed to create a free trade area in order to combat Chinese expansionism. The agreement was never implemented due to lack of ratification by various countries, including the US.

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pressures to reduce austerity and increase tax incentives. This has proven to be particularly the case in countries with elections due in 2017 (Netherlands, France and Germany). The risk of elections in the short term is not without grounds also in Italy after the Constitutional Court's decision on the electoral law. The negative constitutional referendum result in December has already resulted in political fragmentation, with the new Gentiloni government, which may not have had immediate repercussions on the financial markets – already subject to volatility due to the fragility of the Italian and European banking system – but could lead to a slowdown in the introduction of reforms7. Despite the further expansion of the quantitative easing (QE) programme decided in March, the spread between 10-year treasury bonds (BTP) and the equivalent German bund continued to be volatile, especially in the period of the referendums in the UK and Italy. After reaching record lows since 2014 at the time of the Italian constitutional referendum, at the end of December the spread returned to 161 basis points due to the rapid resolution of the government crisis and extension of the Eurosystem securities purchase programme (97 basis points at the end of 2015).

0

50

100

150

200

250

300

350

400

450

500

550

600

G F M A M G L A S O N D G F M A M G L A S O N D G F M A M G L A S O N D G F M A M G L A S O N D G F M A M G L A S O N D G F M A M G L A S O N D G F M A M G L A S O N D

Ten-year BTP-Bund spread

2010 2011

Basis points

20132012

Source: Thomson Financial Reuters

2014 2015 2016

In view of the weak recovery and the difficult international context, the major central banks have continued to move ahead with accommodative monetary policies despite the fact that at the end of 2016 the divergence between the United States and Europe has continued to widen.

As far as the European Central Bank is concerned:

• in order to support the recovery in the euro area and reduce the risks associated with an excessively long period of low growth in prices, on 10th March the ECB had decided to expand its monthly intervention under its security purchase programme (Expanded Asset Purchase Programme, APP) to €80 billion from the initially planned €60 billion, at least until the end of March 2017. The Governing Council of the ECB had also raised the limit on purchases of securities issued by international bodies and by multilateral development banks from 33% to 50%8, including investment grade bonds denominated in euro issued by non-banking companies located in the euro area in the programme from 8th June9. At its December meeting, the ECB agreed an extension of its Quantitative Easing programme at least to the end of 2017 and in any case until inflation in the euro area is in line with the monetary policy target (approx. 2%), but at the same time reduced the monthly purchase amount to €60 million from April 2017. In order to avoid that extension of the plan should come into conflict with a lack of assets for sale, it was also decided to amend the programme's technical parameters. From January 2017 it will be possible to carry out transactions also on assets with a residual minimal life of one year and, if necessary,

7 On 13th January 2017 the rating agency DBRS cut Italian's sovereign debt rating from A (low) to BBB (high), with a stable outlook.

The decision reflects uncertainty about Italy's political ability to sustain reform efforts and the banking industry's continuing weakness, despite recent steps to support lending, in a context of fragile growth. The downgrade by the Canadian agency brings the rating in line with those of Fitch, Moody's and S&P, respectively BBB+, Baa2 and BBB-. In the last few months of 2016, the first two agencies downgraded their outlook for the Italian rating, while S&P confirmed it as stable. The downgrade by DBRS meant the loss of the last A-grade rating still held by Italy with the consequent automatic increase of the haircuts (withholdings) implemented by the ECB on the Italian government bonds held as guarantees by banks in principal refinancing operations.

8 The limit relates to individual issuers and to a percentage of an issue. 9 As regards the corporate sector purchase programme (CSPP), the monetary authority has set out the eligibility criteria for the

issuer's admission, specifying that public sector issuers meeting the aforementioned criteria can benefit both from the public sector purchase programme (PSPP) and the CSPP. As opposed to the other programmes (for government securities, covered bonds and ABSs), the ECB set no target amount for monthly purchases for its CSPP due to the still small dimensions of the relative market. As at 6th January 2017, a total of 1,266 million in securities, 204 billion in covered bonds, 23 billion in ABS and 52 billion in corporate bonds had