Untitled - UBI Banca

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					                                                                            Joint stock co-operative company
                                                         Registered office: Bergamo, Piazza Vittorio Veneto 8
                             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 3rd March 2011: Euro 1.597.865.425,00 fully paid up

                                                                                         www.ubibanca.it
Contents

Our mission ...........................................................................................................................                    5
Letter from the chairmen........................................................................................................                           6
UBI Banca: company officers ..................................................................................................                            10
UBI Banca Group: branch network as at 31st December 2010 ................................................                                                 11
UBI Banca Group: the main investments as at 31st December 2010 ...................................                                                        12
UBI Banca Group: principal figures and performance indicators ........................................                                                    14
The rating ..............................................................................................................................                 15
Notice of call ..........................................................................................................................                 17




CONSOLIDATED FINANCIAL STATEMENTS OF THE UBI BANCA GROUP
AS AT AND FOR THE YEAR ENDED 31ST DECEMBER 2010
CONSOLIDATED MANAGEMENT REPORT ...................................................................................                                         20
▪   The macroeconomic scenario .............................................................................................                               21
▪   Significant events that occurred during the year ................................................................                                      31
▪   Commercial activity ...........................................................................................................                        38
▪   The distribution network and positioning ..........................................................................                                    54
▪   Human resources ..............................................................................................................                         62
▪   The consolidation scope ....................................................................................................                           74
▪   Reclassified consolidated financial statements, reclassified income statement net
    of the most significant non-recurring items and reconciliation schedules ...........................                                                   84
    -    Reclassified consolidated statement of financial position ............................................................                            84
    -    Reclassified consolidated quarterly statements of financial position ............................................                                 85
    -    Reclassified consolidated income statement ...............................................................................                        86
    -    Reclassified consolidated quarterly income statements ...............................................................                             87
    -    Reclassified consolidated income statement net of the most significant
           non-recurring items ...................................................................................................................         88
    -   Reconciliation schedules............................................................................................................               89
    -   Notes to the reclassified consolidated financial statements .........................................................                              90
▪   The consolidated income statement ............................................................................................                         91
▪   General banking business with customers: funding ...........................................................                                          102
    -   Funding policies ........................................................................................................................         102
    -   Total funding .............................................................................................................................       104
    -   Direct funding ...........................................................................................................................        105
    -   Indirect funding and assets under management .........................................................................                            109
▪   General banking business with customers: lending ............................................................................                         111
    -   Performance of the loan portfolio ..............................................................................................                  111
    -   Risk ..........................................................................................................................................   114
▪   The interbank market and the liquidity situation ...............................................................                                      119
▪   Financial assets ................................................................................................................                     123
▪   Equity and capital adequacy .............................................................................................                             140
▪   Research & Development...................................................................................................                             146
▪   The system of internal control ...........................................................................................                            147
▪   Transactions with related parties ......................................................................................                              148
▪   Consolidated companies: the principal figures ...................................................................                                     150
▪   The performance of the main consolidated companies .......................................................                                            154
▪   Other information .............................................................................................................                       188
    -   Treasury shares.........................................................................................................................          188
    -   Litigation ...................................................................................................................................    188
    -   Inspections ................................................................................................................................      190
    -   Tax aspects ..............................................................................................................................        191
    -   Investor relations and external communication ..........................................................................                          193
    -   Social and environmental responsibility .....................................................................................                     195
    -   Legislation on the protection of personal data ............................................................................                       198


                                                                                    1
▪   Principal risks and uncertainties to which the UBI Banca Group is exposed ......................                                                    199
▪   Subsequent events occurring and the business outlook
    for consolidated operations................................................................................................                         205


STATEMENT OF THE CHIEF EXECUTIVE OFFICER AND OF THE SENIOR OFFICER
RESPONSIBLE FOR PREPARING THE CORPORATE ACCOUNTING DOCUMENTS ............................                                                               206


INDEPENDENT AUDITORS’ REPORT ..........................................................................................                                 209


CONSOLIDATED FINANCIAL STATEMENTS .................................................................                                                     212
▪   Consolidated statement of financial position ......................................................................                                 213
▪   Consolidated income statement .........................................................................................                             214
▪   Consolidated statement of comprehensive income .............................................................                                        215
▪   Statement of changes in consolidated equity .....................................................................                                   216
▪   Consolidated statement of cash flows ................................................................................                               218


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ...................................................                                                      220
▪   Part   A – Accounting policies ..............................................................................................                       221
▪   Part   B – Notes to the consolidated statement of financial position ......................................                                         265
▪   Part   C – Notes to the consolidated income statement .........................................................                                     325
▪   Part   D – Consolidated comprehensive income ....................................................................                                   346
▪   Part   E – Information on risks and the relative hedging policies ..........................................                                        347
▪   Part   F – Information on consolidated equity .......................................................................                               432
▪   Part   G – Business combinations transactions concerning companies or lines of business ..                                                          439
▪   Part   H – Transactions with related parties .........................................................................                              440
▪   Part   I – Share based payments ..........................................................................................                          445
▪   Part   L – Segment Reporting ...............................................................................................                        446


ATTACHMENT
Disclosures concerning the fees of the independent auditors and services other than auditing in
compliance with Art. 149 duodecies of the Issuers’ Regulations .............................................. 449




SEPARATE FINANCIAL STATEMENTS OF UBI BANCA SCPA
AS AT AND FOR THE YEAR ENDED 31ST DECEMBER 2010
MANAGEMENT REPORT.................................................................................................                                      453
▪   UBI Banca: principal figures and performance indicators ..................................................                                          454
▪   The UBI Banca organisation chart .....................................................................................                              455
▪   The macroeconomic scenario .............................................................................................                            457
▪   Human resources ..............................................................................................................                      458
▪   Reclassified financial statements, reclassified income statement net
    of the most significant non-recurring items and reconciliation schedules ...........................                                                460
    -    Reclassified statement of financial position. ...............................................................................                  460
    -    Reclassified quarterly statements of financial position ................................................................                       461
    -    Reclassified income statement ...................................................................................................              462
    -    Quarterly reclassified income statements ...................................................................................                   463
    -    Reclassified income statement net of the most significant
           non recurring items ..................................................................................................................       464
    -   Reconciliation schedules............................................................................................................            465
    -   Notes to the reclassified financial statements .............................................................................                    466
▪   The income statement .......................................................................................................                        467
▪   General banking business .................................................................................................                          475
    -   Funding ....................................................................................................................................    475
    -   Lending .....................................................................................................................................   477



                                                                                  2
    -   Operations on the interbank market ..........................................................................................                    478
▪   Financial assets ................................................................................................................                    481
▪   Equity and capital adequacy .............................................................................................                            487
▪   Relations with Group member companies ..........................................................................                                     489
▪   Research & Development...................................................................................................                            489
▪   The system of internal control ...........................................................................................                           489
▪   Transactions with related parties. .....................................................................................                             490
▪   Share performance and shareholder structure ...................................................................                                      492
    -   Share performance ....................................................................................................................           492
    -   Report on corporate governance and the ownership structure ....................................................                                  494
    -   Treasury shares.........................................................................................................................         495
    -   Report on the admission of new registered shareholders.............................................................                              495
    -   Report on mutual objects...........................................................................................................              495
    -   Initiatives to reform legislation on ‘popular’ co-operative banks ..................................................                             497
    -   Shareholdings of management and supervisory bodies,
           the General Manager and Senior Managers with strategic responsibilities...................................                                    497
    -   De jure and delegated powers of the corporate bodies .................................................................                           497
▪   Other information .............................................................................................................                      498
    -   Litigation ...................................................................................................................................   498
    -   Legislation on the protection of personal data ............................................................................                      498
▪   Principal risks and uncertainties to which UBI Banca is exposed.......................................                                               499
▪   Subsequent events and the business outlook .........................................................................                                 499
▪   Proposal for the allocation of profit for the year and dividend distribution ..........................                                              500


STATEMENT OF THE CHIEF EXECUTIVE OFFICER AND OF THE SENIOR OFFICER RESPONSIBLE FOR
PREPARING THE CORPORATE ACCOUNTING DOCUMENTS ................................................... 503


INDEPENDENT AUDITORS’ REPORT .................................................................................                                           505


SEPARATE FINANCIAL STATEMENTS ...............................................................................                                            509
▪   Statement of financial position ..........................................................................................                           510
▪   Income statement..............................................................................................................                       511
▪   Statement of comprehensive income ..................................................................................                                 512
▪   Statement of changes in equity ..........................................................................................                            513
▪   Statement of cash flows. ...................................................................................................                         515


NOTES TO THE SEPARATE FINANCIAL STATEMENTS ..........................................................                                                    517
▪   Part   A – Accounting policies ........................................................................................................              518
▪   Part   B – Notes to the statement of financial position ..........................................................                                   553
▪   Part   C – Notes to the income statement .............................................................................                               611
▪   Part   D – Comprehensive income ........................................................................................                             636
▪   Part   E – Information on risks and the relative hedging policies ...............................................                                    638
▪   Part   F – Information on equity ...........................................................................................                         717
▪   Part   G – Business combination transactions concerning companies or lines of business ...                                                           724
▪   Part   H – Transactions with related parties ................................................................................                        725
▪   Part   I – Share based payments ...................................................................................................                  739
▪   Part   L – Segment Reporting .........................................................................................................               739


ATTACHMENTS TO THE SEPARATE FINANCIAL STATEMENTS ..............................................                                                          740
▪   List of real estate properties. .............................................................................................                        741
▪   Convertible bonds .............................................................................................................                      746
▪   List of significant equity investments held in unlisted companies as at 31st December 2010
    in compliance with Art. 126 of Consob Resolution No. 11971/1999 ...................................                                                  747
▪   Disclosures concerning the fees of the independent auditors and services other than
    auditing in compliance with Art. 149 duodecies of the Issuers’ Regulations .......................                                                   752




                                                                                3
REPORT ON CORPORATE GOVERNANCE AND
THE OWNERSHIP STRUCTURE OF UBI BANCA SCPA ................................................................................        753




REPORT OF THE SUPERVISORY BOARD TO THE SHAREHOLDERS’ MEETING
in compliance with Art.153, paragraph 1 of Legislative Decree No. 58 of 24th February 1998
and of Art. 46, paragraph 1, letter h) of the corporate by-laws. ....................................................             807




REPORTS ON THE OTHER ITEMS ON THE AGENDA OF THE SHAREHOLDERS’ MEETING .................                                           820




GLOSSARY.......................................................................................................................   853




BRANCH NETWORK OF THE UBI BANCA GROUP                       ………………………………………………………………868



CALENDAR OF CORPORATE EVENTS OF UBI BANCA FOR                           2011 ……………………………………………881



CONTACTS      …………………………………………………………………………………..……………………882




Key
The following abbreviations are used in the tables:
- dash (-): when the item does not exist;
- not significant (n.s.): when the figure is insufficient to reach the minimum level in question or is in any case 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 indicated otherwise.




                                                                    4
Our mission




                    To create value for our customers
                           and all our stakeholders,
           by generating sustainable and lasting profit
     through our ability to interpret, serve and encourage
            economic development and social well-being
                           in the local communities
                              in which we operate.



                     We work everyday with passion,
            experience and the ability to blend tradition
       with innovation to provide families and businesses
              with excellence in our banking, financial
                 and insurance products and services,
            thereby building long-lasting relationships,
                   based on trust, with our customers
                      and with all our stakeholders.




     (from the “Charter of Values” of the UBI Banca Group, approved on 29th January 2008)



                                              5
Letter from the chairmen

Dear registered and non registered shareholders,


   The year just ended was yet again a difficult one: the macroeconomic context continues to
show signs of recovery, but the situation remains uncertain; financial markets are periodically
shaken by turmoil which never dies down, but on the contrary was stirred up again during the
year by fears of insolvency for some sovereign countries; and the banking system is struggling to
recover from circumstances it has never experienced before. On the one hand the diminished
propensity to save by households is placing limits on the growth of funding from customers and
on the other hand lending business is recording a moderate recovery – after a low in October
2009 – but is faced with a quality of credit that is far from satisfactory, even if it has improved
compared to the recent past.

   And the results achieved during the year were in fact modest.
Nevertheless, the UBI Banca Group did not remain dormant, but used all possible internal
organisational and operational means to make significant savings on costs, with a focus on its
core business, a change in the organisational configuration and a more streamlined geographical
market presence for its network banks.

•   The agreement reached on 20th May 2010 concluded trade union negotiations and achieved a
    structural reduction in costs at Group level by reducing personnel numbers and the relative
    unit cost. It was supported by the adoption of appropriate organisational and operational
    measures designed to encourage improvements in efficiency and productivity. The planned
    decrease in total personnel numbers was of 895 employees, including 500 through a
    redundancy incentive scheme implemented during the year. Over a full year this will result in
    a decrease in personnel expense of 70 million euro from 2011.

•   An agreement was concluded on 31st May to transfer a business unit to Royal Bank of
    Canada Dexia Investor Services consisting of the depositary banking business of the UBI
    Banca Group and also the transfer of correspondent bank contracts. The operation not only
    reduced operational risk for the Group to the advantage of its core banking business, but also
    generated a net gain of 83,4 million euro.

•   At the same time the Group commenced internal action to simplify operations:
    - the “Simplicity objective” project to find solutions to improve services and customer
       response times for products and services considered high priority, in order to optimise
       support processes and tools for the commercial network;
    - a project to revise the lending proces, with the dual aim of reducing customer response
       times and lightening administrative loads on account managers, but of course without
       relaxing credit risk management. It was implemeted with the intention of improving the
       effectiveness and efficiency of the process in the network banks;
    - organisational changes at the Parent, designed to streamline some units and at the same
       time strengthen the integrity of the supervision of important operational processes, with
       the objective of shortening the chain of command and strengthening some operational
       areas considered strategically important.

   However, the most important action in 2010 was that taken on the branch networks, with the
reorganisation of the areas covered by the network banks, and that taken on the distribution
model.
The project to optimise the branch network designed to focus each network bank on its own local
market by grouping all the branches in a given area under a single brand was completed on 25th
January 2010. At the same time a series of branches were transformed into mini-branches,
which report to a parent branch. The network banks are currently present in 78 provinces and
operate under a single brand in 74 of these.



                                                6
On 21st June action was taken as planned under the trade union agreement of May 2010 to
eliminate overlap and streamline market presence in areas with low growth forecasts, while at
the same time expanding branches with good growth prospects.
An enhancement to the distribution model was developed in the third quarter with the
introduction of a “group branch”, which, although autonomous from both a commercial and a
credit viewpoint, reports to a “head branch”, which provides operational support for it.
In consideration of its role as the principal bank in the Piedmont area, Banca Regionale Europea
transferred its General Management to Turin from January 2011.

  Moreover the Group has not abandoned endogenous growth and opened 17 new branches
during the year and transformed six existing “treasury” branches into mini-branches.

   From a commercial viewpoint, policies were focused on broadening the product range, the
acquisition of new customers and initiatives to support families and enterprises.
More careful analysis of customer needs and requirements was performed with an increasingly
more advisory approach, designed to generate customised services and solutions. The
commercial strategy also continues to maximise synergies between network banks and product
companies. Particular attention was placed on multi-channel growth (with new and enhanced
consultative and transaction functions and devices for internet and mobile banking functions)
and the contact centre was expanded (with the creation of a new unit in Milan).
A new business unit was created in October 2010 dedicated to public authorities, associations
and non profit organisations (including Church and religious entities), with the formulation of a
specific product range to support a customer differentiated and distinctive service model. The
development of this area occurs in an operating context of confirming and enhancing the role of
the main bank played by the Group in its local markets.

    UBI Banca is committed to supporting the economy even in the face of persistent uncertainties
and the difficulties of the economic situation. Its lending policies prioritise an orientation of
participation in numerous initiatives to assist families and businesses, introduced by both the
Italian Banking Association and at local level (e.g. guarantee bodies and Dioceses).

   If the large corporate segment is excluded, which does not form part of the Group’s traditional
mission, annual lending increased by +4,8%, more than that for the sector nationally to the
private sector of +4,3%.
   Furthermore, lending to the economy has grown progressively over the years, reaching almost
102 billion euro in December 2010, with significant increases compared both to 2008 (+5,7%)
and to 2007 (+9,5%). Within the aggregate, medium-to-long term lending gradually increased to
reach a total of 69,9 billion euro at the end of last December.
This progress was made possible by historically weighted management of pricing consistent
with the cost of risk (and also with the increased cost of funding) and the spreads on the lending
rates applied were again lower on average than those for the sector, thereby ensuring the
competitiveness of the Group and growth in market share.



    Funding policies are oriented towards increasingly more diversification of the sources, both in
terms of type and maturity, pursued in parallel with action to increase growth designed to
encourage balanced growth of volumes from non institutional customers.
The Group pays particular attention to strengthening funding from ordinary customers, by
pursuing policies focused on structural balance, able to generate sustainable inflows over time,
consistent with growth in lending. Initiatives developed during the year included the issue of
listed UBI Banca bonds for 1,8 billion euro (fixed rate, mixed rate and with a lower tier two
subordination clause).
Funding from institutional customers – constantly below 20% of total funding – consisted mainly
of covered bonds for the medium-to-long term component with 1,75 billion euro issued during the
year, while use of the EMTN programme was limited, partly in relation to the higher cost, with
issues of 1,7 billion, which basically offset bonds maturing and redeemed during the year. Short
term institutional funding, on the other hand, saw an intensification of issues of French
certificates of deposit and euro commercial paper, instruments able to act as buffers for the
management of liquidity and funding.


                                                7
   At the end of December, consolidated direct funding rose to 106,8 billion euro (+9,8%
compared to 2009 and +4% net of total business with the Cassa di Compensazione e Garanzia
(central counterparty clearing), to record growth compared to both 97,6 billion euro in 2008 and
90,3 billion euro at the end of 2007.
Within the aggregate, medium-to-long term funding reached more than 43 billion euro.

   Group profits were penalised by a fall in revenues, which could not be offset by the policy to
contain costs – rigorously pursued – as they continued to be affected by both the high cost of
credit, although now falling, and by impairment losses on financial assets (approximately 50
million euro).
The year therefore ended with consolidated profit of 172 million euro (270 million euro in 2009),
the result of operating income of 3,5 billion euro (3,9 billion euro the previous year), held down
above all by the performance of net interest income and the result for financial activities, in
addition to the absence of net income from insurance operations following the partial disposal of
UBI Assicurazioni. Operating expenses amounted to 2,5 billion euro, down by 46 million euro
including: -14 million relating to personnel expense, -7,5 million euro to other administrative
expenses and -24 million euro to depreciation and amortisation.
Net impairment losses on loans fell by 158 million euro and stood at 707 million euro, due to the
quality of the loan portfolios of some network banks, which was brought into line with the Group
average, and to the marked reduction in single impairment losses on deteriorated loans for
those same network banks. However, this performance was offset by the difficulties of some
product companies in relation to specific business sectors, such as consumer finance, which is
nevertheless showing the first signs of improvement after the corrective action taken, and
property leasing, where a project was commenced in the fourth quarter to redefine business as a
whole in co-ordination with the Parent.
   The UBI share has not remained immune to the pressures on financial markets, where the
banking sector in particular was hit very hard. After the sharp fall in the spring triggered by the
Greek sovereign debt crisis, equity markets started to recover partially in the third quarter
compared to the lows recorded at the end of June, only to sink again towards the end of the year
as the difficulties of the Irish banking sector emerged. The year again opened in 2011 with
markets performing weakly: signs of a partial recovery in the second half of January gradually
disappeared as tensions intensified in North Africa (in Libya in particular) and as oil prices rose
as a consequence.

    The Management Board has decided to submit a proposal to the shareholders meeting
convened for 29th -30th April 2011 to declare a dividend of 0,15 euro on the 639.146.170
ordinary shares with dividend entitlement from 1st January 2010 – to be drawn on the profit of
the Parent of 284 million euro – for a total of 96 million euro (amount virtually the same as the
normalised consolidated profit) after statutory and by-law allocations and an allocation to the
extraordinary reserve. An allocation of 154 million euro is proposed to the latter to fully replenish
it, after drawing from it in 2008, and to further strengthen capital.
When approving the separate and consolidated financial statements, the Supervisory Board
expressed its opinion in favour of the proposal for the allocation and distribution of profit
formulated by the Management Board. Payment of the dividend, if approved, will be made on
23rd May 2011, with value date of 26th May 2011.

   The time is arriving in the current context for the application of new prudential supervisory
rules, to strengthen the quality and quantity of banking capital, to contain financial leverage in
the banking system, reduce the possible pro-cyclical effects of prudential rules and to tighten
control over liquidity risks.

   UBI Banca has always considered capital solidity to be a distinguishing factor and its
consolidated capital is in fact of high quality with 94% of its tier one capital consisting of core tier
one capital (share capital + reserves) and only 6% of innovative capital instruments. Despite the
economic situation, this characteristic has enabled UBI to support its customers, increase market
share and to pay regular dividends, without the need for government assistance.

   Nevertheless, recent changes in legislation and regulations connected with the expected
future capital requirements demanded by Basel III, market trends and the imminent launch of a


                                                   8
new business plan, have led the Group to reconsider its capital situation with the following aims:
to position itself at a higher than average level of capitalisation, consistent with the prudent and
realistic approach typical of the Group; to achieve a further improvement in the mix and quality
of the Group’s capital, strengthening its common equity, as required by the new regulations; to
avoid the issue, in the short term, of capital instruments with high costs for which full eligibility
for inclusion in supervisory capital is uncertain; to grasp, all opportunities for endogenous
growth which may arise during the period of the business plan, pursuing, at the same time, a
sustainable dividend policy; and also to support and strengthen the ratings assigned by
international rating agencies with positive impacts on the international perception of UBI Banca
and on the cost of funding.

   For these reasons, the Management Board has passed a resolution, with the approval of the
Supervisory Board, to submit a proposal to an extraordinary Shareholders’ Meeting of the Bank,
for examination and approval, for authorisation to increase the share capital by up to one billion
euro with option rights for shareholders and holders of the convertible bond “UBI 2009/2013
Convertibile con facoltà di rimborso in azioni”. It is planned to implement the authorisation
presumably by the end of the summer, if market conditions allow and subject to obtaining the
necessary authorisations, while the new Group business plan will also form an integral part of
the prospectus for the share issue.

    The amount of the proposed increase in the share capital is such as to achieve a
remuneration of capital consistent with its cost, over the period covered by the Business Plan.
According to a simulation on figures as at 31st December 2010, following the increase, the core
tier one ratio would stand at 8,01%, the tier one ratio at 8,53% and the total capital ratio at
12,23%. These ratios would also allow the Group to continue to issue covered bonds without
limits.

A capital buffer remains available, consisting of an outstanding bond amounting to 639 million
euro, already convertible since 10th January of this year, maturing in July 2013 and accounting
for approximately 70 basis points of the core tier one ratio on current figures.

   Strengthening capital constitutes a primary and indispensible requirement for UBI Banca to
be able to continue to operate as a bank in the most traditional sense, supporting potential
growth in lending at the service of its customers and the local communities in which it has
always operated. UBI Banca is a local community bank, but with global operations, a
continuously evolving range of products and services, the ability to assist its customers in all
important economic and financial affairs, even abroad, through its representative offices and
numerous co-operation agreements.
This long term action will be illustrated in the Business Plan, in the certainty that our work as a
“traditional bank”, will not fail to give satisfactory results in future.




The Chairman of the Management Board                    The Chairman of the Supervisory Board
          Emilio Zanetti                                            Corrado Faissola




April 2011




                                                 9
UBI Banca: company officers
Honorary Chairman                                                             Giuseppe Vigorelli

Supervisory Board (appointed by a Shareholders’ Meeting on 24th April 2010)
  Chairman                                                                    Corrado Faissola
  Senior Deputy Chairman                                                      Giuseppe Calvi
  Deputy Chairman                                                             Alberto Folonari
  Deputy Chairman                                                             Mario Mazzoleni
                                                                              Battista Albertani
                                                                              Giovanni Bazoli
                                                                              Luigi Bellini
                                                                              Mario Cattaneo
                                                                              Silvia Fidanza
                                                                              Enio Fontana
                                                                              Carlo Garavaglia
                                                                              Alfredo Gusmini
                                                                              Pietro Gussalli Beretta
                                                                              Giuseppe Lucchini
                                                                              Italo Lucchini
                                                                              Federico Manzoni
                                                                              Toti S. Musumeci
                                                                              Sergio Orlandi
                                                                              Alessandro Pedersoli
                                                                              Giorgio Perolari
                                                                              Sergio Pivato
                                                                              Roberto Sestini
                                                                              Giuseppe Zannoni


Management Board (appointed by the Supervisory Board on 27th April 2010)
  Chairman                                                                    Emilio Zanetti
  Deputy Chairman                                                             Flavio Pizzini
  Chief Executive Officer                                                     Victor Massiah
                                                                              Giampiero Auletta Armenise
                                                                              Giuseppe Camadini
                                                                              Mario Cera
                                                                              Giorgio Frigeri
                                                                              Gian Luigi Gola(*)
                                                                              Guido Lupini
                                                                              Andrea Moltrasio
                                                                              Franco Polotti


General Management
  General Manager                                                             Graziano Caldiani(**)
  Deputy General Manager                                                      Rossella Leidi
  Deputy General Manager                                                      Giovanni Lupinacci
  Deputy General Manager                                                      Ettore Medda
  Deputy General Manager                                                      Pierangelo Rigamonti


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


Independent auditors                                                          KPMG Spa



(*) Appointed on 30th June 2010 by the Supervisory Board

(**) In office since 1st October 2010.




                                                           10
UBI Banca Group: branch network as at 31st
December 2010




                    11
UBI Banca Group: the main investments as
at 31st December 2010




                    12
13
UBI Banca Group:
principal figures and performance
indicators1

                                                                                                         31.12.2010     31.12.2009     31.12.2008


STRUCTURAL INDICATORS
Net loans to customers/total assets                                                                            78,0%          80,1%          79,0%
Direct funding from customers/total liabilities                                                                81,8%          79,5%          80,0%
Net loans to customers/direct funding from customers                                                           95,4%         100,8%          98,7%
Equity (including profit for the year) /total liabilities                                                       8,4%           9,3%           9,1%
Assets under management/indirect funding from private customers                                                54,6%          53,2%          53,1%
Leverage ratio (total assets-goodwill-other intangib le assets)/(equity+minority interests-intangib le
assets)                                                                                                          19,9           17,8           17,5

PROFIT INDICATORS
ROE (Profit for the year/equity excluding profit for the year)                                                  1,6%           2,4%           0,6%
ROA (Profit for the year/total assets)                                                                         0,13%          0,22%          0,06%
The cost/income ratio (operating expenses/operating income)                                                    70,6%          64,4%          63,9%
Personnel expense/operating income                                                                             41,5%          37,5%          38,8%
Net impairment losses on loans/net loans to customers (cost of credit)                                         0,69%          0,88%          0,59%
Net interest income/operating income                                                                           61,3%          61,5%          68,7%
Net commission income/operating income                                                                         33,9%          31,1%          33,3%
Net result on financial activities/operating income                                                             1,0%           3,2%          -5,9%

RISK INDICATORS
Net non performing loans/net loans to customers                                                                1,91%          1,36%          0,88%
Net impairment losses on non-performing loans/gross non-performing loans (coverage for non-
performing loans)                                                                                             48,69%         51,57%         54,58%
Net non-performing + net impaired loans/net loans to customers                                                 3,91%          3,24%          2,08%
Net impairment losses on non-performing and impaired loans/gross non-performing
loans+impaired loans (coverage)                                                                               34,89%         35,93%         38,22%
Net non-performing loans /equity excluding profit for the year                                                17,95%         11,96%          7,67%

CAPITAL RATIOS Basel 2 standard
Tier 1 ratio (tier 1 capital/total risk weighted assets)                                                       7,47%          7,96%          7,73%
Core tier I ratio after specific deductions to tier 1 capital
(tier 1 capital net of preference shares/total risk weighted assets)                                           6,95%          7,43%          7,09%
Total capital ratio [(supervisory capital+tier 3/total risk weighted assets]                                 11,17%         11,91%          11,08%
Supervisory capital (in thousands of euro)                                                                10.536.200     10.202.555       9.960.812
 of which: Tier one capital after the application of prudential filters and specific deductions            7.047.888      6.816.876       6.944.723
Risk weighted assets                                                                                      94.360.909     85.677.000     89.891.825
INCOME STATEMENT, STATEMENT OF FINANCIAL POSITION FIGURES (in thousands of euro),
STRUCTURAL DATA (numbers)
Profit                                                                                                       172.121        270.099         69.001
Normalised profit                                                                                             105.116        173.380        425.327
Operating income                                                                                            3.496.061      3.906.247      4.089.739
Operating expenses                                                                                        (2.468.564)    (2.514.347)    (2.611.348)
Net loans to customers                                                                                   101.814.829     98.007.252     96.368.452
 of which: net non-performing loans                                                                        1.939.916      1.332.576        848.671
         net impaired loans                                                                                2.032.914      1.845.073      1.160.191
Direct funding from customers                                                                            106.760.045     97.214.405     97.591.237
Indirect funding from customers                                                                           78.078.869     78.791.834     74.288.053
  of which: assets under management                                                                       42.629.553     41.924.931     39.430.745
Total funding from customers                                                                             184.838.914    176.006.239    171.879.290
Equity (excluding profit for the period)                                                                  10.806.898     11.141.149     11.071.206
Total assets                                                                                             130.558.569    122.313.223    121.955.685
Branches in Italy                                                                                              1.892          1.955          1.944
Total personnel at the end of year (actual employees in service + workers on agency leasing
contracts)                                                                                                    19.699         20.285         20.680
Average total personnel (actual employees in service + workers on agency leasing contracts) (*)               19.384         20.185         20.606
Financial advisors                                                                                               786            880            924


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.
    Information on the share is reported in the relative section of the UBI Banca Management Report.
(*) Part time employees have been calculated within total average personnel numbers according to convention on a 50% basis.



                                                                               14
The rating

The tables below summarise the ratings assigned to the Group by the international agencies,
Standard & Poor’s, Moody’s and Fitch Ratings.

As part of its general analysis of Italian banks, on 23rd April 2010 Standard & Poor’s affirmed
its short and long term counterparty ratings for UBI Banca and revised its Outlook from Stable
to Negative in relation to a perceived decrease in the Group’s capacity to absorb credit losses
greater than expected should fragile recovery in progress run into difficulties.

On 17th December 2010 Fitch Ratings lowered its long term counterparty rating for UBI
Banca to A from A+, with a Stable Outlook, affirming all its other ratings. The downgrade was
made in consideration of the sluggish activity in the Italian economy and the continued low
interest rates, which, in the opinion of the rating agency, made any swift recovery in UBI
Banca’s operating profitability unlikely.
At the same time Fitch Ratings emphasised the importance of the following: the Group’s strong
franchise in the richest regions of the country; solid management and a credit risk awareness
which has allowed asset quality to deteriorate less than its peers; adequate capitalisation in
relation to a conservative approach to risk; adequate liquidity with diversified sources of
funding.
As a consequence of the manoeuvre the ratings on outstanding issues (senior debt, lower tier
two and hybrid securities) were downgraded by one notch.



  STANDARD & POOR’S
                                                             (i) The ability to repay debt maturing in less than one year.
  Short-term Counterparty Credit Rating (i)        A-1           (A-1: best rating – D: worst rating)
  Long-term Counterparty Credit Rating (ii)         A       (ii) With reference to debt maturing after one year, it indicates the
                                                                 ability to pay interest and repay principal, together with any
  Outlook                                        Negative        sensitivity to the adverse effects of changes in circumstances or
  RATINGS ON ISSUES                                              economic conditions.
                                                                 (AAA: best rating – D: worst rating)
  Senior unsecured debt                             A
  Subordinated debt (Lower Tier II)                A-
  Preference shares                               BBB
  French Certificats de Dépôt Programme            A-1




                                                             (I) The ability to repay long-term debt (maturing after one year) in
   MOODY'S                                                       local currency. By using the JDA method (Joint Default Analysis),
   Long-term debt and deposit rating (I)            A1           this rating associates the financial strength rating (BFSR – Bank
                                                                 Financial Strength Rating) with the probability of intervention if
   Short-term debt and deposit rating (II)        Prime-1
                                                                 needed by external support (shareholders, the group to which it
   Bank Financial Strength Rating (BFSR) (III)       C           belongs or official institutions). (Aaa: prime quality – Baa3:
   Baseline Credit Assessment (BCA) (IV)            A3           medium quality).
   Outlook (deposit ratings)                      Stable    (II) The ability to repay debt in local currency maturing in the short
   Outlook (Bank Financial Strength Rating)      Negative        term (due in less than one year).
                                                                 (Prime -1: highest quality – not prime: speculative grade)
   RATINGS ON ISSUES
   Senior unsecured LT                              A1      (III) This rating does not relate to the ability to repay debt but
                                                                  considers the bank’s intrinsic financial strength (by analysing
   Lower Tier II subordinated                       A2            factors such as its geographical market presence, the
   Preference                      shares                         diversification of its activities, the financial basics) in the absence
   (former BPB-CV and Banca Lombarda)              Baa3           of external support. (A: best rating – E: worst rating)
   Euro Commercial Paper Programme                Prime-1
                                                            (IV) The Baseline Credit Assessment represents the equivalent of the
   Covered Bond                                     Aaa          Bank Financial Strength Rating on the traditional scale of the long
                                                                 term rating.




                                                             15
                                                       (1) The capacity to repay debt in the short term (less than 13
FITCH RATINGS                                              months). (F1: best rating – D: worst rating)
Short-term Issuer Default Rating (1)           F1      (2) The ability to meet financial commitments in the long term,
                                                           independently of the maturity of individual bonds. This rating is
Long-term Issuer Default Rating (2)             A
                                                           an indicator of the probability that an issuer will default. (AAA:
Bank Individual Rating (3)                    B/C          best rating – D: worst rating)
Support Rating (4)                              2      (3) An assessment of a bank’s intrinsic strength (profitability,
Support Rating Floor (5)                      BBB          balance sheet strength, commercial network, ability of
                                                           management, operational environment and outlook), on the
Outlook for Long-term Issuer Default Rating   Stable       assumption that the bank cannot rely on external support
RATINGS ON ISSUES                                          (possible intervention by a lender of last resort, support from
Senior unsecured debt                           A          shareholders, etc.). (A: best rating - E: worst rating)

Lower Tier II subordinated                     A-      (4) A rating of the possibility of concrete and timely external support
                                                           (from the state or large institutional investors) if the bank finds
Preference shares                             BBB+         itself in difficulty. (1: best rating – 5: worst rating)
Euro Commercial Paper Programme                F1      (5) This rating gives additional information, closely linked to the
Covered bond                                  AAA         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.




                                                       16
Notice of call1

An Ordinary and Extraordinary General Meeting of the Shareholders of Unione di Banche
Italiane Scpa is convened in first call on Friday 29th April 2011 at 5.00 p.m. at the registered
address of the bank, at No. 8 Piazza Vittorio Veneto, Bergamo, and in second call on Saturday
30th April 2011 at 9.30 a.m. at the New Bergamo Trade Fair, in Via Lunga, Bergamo to
discuss and resolve on the following


                                                                Agenda

Ordinary session
1) Proposal for the allocation and distribution of profit, after first presenting the separate and
   consolidated financial statements as at and for the year ended 31st December 2010,
   pursuant to article 22, paragraph 2, letter d) of the Corporate By-Laws.
2) Report to the shareholders on Group remuneration and incentive policies.
   Proposals for:
   - remuneration policies for members of the Management Board;
   - the incentive scheme based on financial instruments for the top management of the
      Group.
3) Authorisation of the Management Board concerning treasury shares.
4) Proposal concerning the appointment for the legal external audit (article 13, paragraph 1 of
   Legislative Decree No. 39 of 27th January 2010).

Extraordinary session
1) Proposal to amend the following articles of the Corporate By-Laws: numbers 22, 25, 26 and
   No. 28 (Title V - Shareholders’ Meetings), No. 37 (Title VI - Management Board), No. 44, No.
   45, No. 46 and No. 49 (Title VIII - Supervisory Board), No. 50 (Title IX – General
   Management). Relative and consequent resolutions.
2) 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, within twelve
   months of the date of the shareholders’ resolution, by a total maximum amount of one
   billion euro, inclusive of any share premiums, by the issue of ordinary shares having the
   same characteristics as those already outstanding, to be offered to the holders of option
   rights, 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 amendments to Art. 5 of the Corporate By-Laws.
                                                                    ***
The subscribed and paid up share capital of UBI Banca Scpa amounts to Euro
1.597.865.425,00 consisting of 639.146.170 shares with a nominal value of Euro 2,50 each.
The total number of registered shareholders with the right to vote is 78.705.
Only persons who have been registered shareholders for at least 90 days from the date of entry
in the shareholders’ register may attend the Shareholders’ Meeting and exercise voting rights.
Legitimate authorisation to participate in shareholders’ meetings and to exercise voting rights
is certified by a communication to the Bank, performed by the relative intermediary, in
compliance with its accounting entries, in favour of the party holding the right to vote. In this
regard, registered shareholders for whom the said communication has been made to the Bank
at least two working days prior to that set for the Shareholders’ Meeting in first call may
attend the Shareholders’ Meeting, in accordance with the Law. The legitimate right to attend
and vote nevertheless remains, should the communications be received by the Bank later than

1   This notice of call for a General Meeting of the Shareholders will be published in the Official Journal, No. 37 on 2nd April 2011.




                                                                    17
the aforementioned time limit, provided they are received before the commencement of the
proceedings of each single session of the shareholders’ meetings.
A registered shareholder is entitled to only one vote no matter how many shares are
possessed.
A registered shareholder is entitled to be represented by issuing a written proxy to another
registered shareholder having the right to attend the Shareholders’ Meeting. Proxies may not
be granted to members of the governing or controlling bodies or to employees of the Bank, to
companies controlled by it, or to the members of the governing or controlling bodies or to
employees of the latter.
No registered shareholder may act as a proxy for more than 3 (three) other registered
shareholders.
Voting by post is not permitted.
Registered shareholders holding shares that have not yet been dematerialised pursuant to the
legislation and regulations in force must deliver them in good time to an approved
intermediary in order to perform the dematerialisation procedure required and to make the
communication mentioned above.
The communication performed by the intermediary shall contain a special section which may
be used to authorise a proxy by signing the said section. In compliance with the procedures
and the time limits set by law, a number of registered shareholders equal to not less than one
fortieth of the total number of registered shareholders entitled on the date of the request, may
make an application in writing for additions to be made to the agenda to be dealt with in the
meeting, as it results from the notice convening the Shareholders' Meeting, with the indication
in the request of the additional items proposed. The signature of each registered shareholder
making the request must be duly authenticated either in accordance with the law or by
employees of the Bank or its subsidiaries specifically authorised for that purpose. The
legitimacy of that right is given by the validity of the documentation testifying to the
possession of the shares on the date of the presentation of the application.
The documentation relating to the items on the agenda will be deposited and made available to
the public at the registered address of the Bank and on the website www.ubibanca.it and it
will be filed with Borsa Italiana SpA within the time limits and according to the procedures of
the Law and regulations.
Registered Shareholders may view and obtain copies of the aforementioned documentation in
accordance with the law by applying in advance to the Management Board Support and
Registered Shareholders Department.


Bergamo, 28th March 2011




The Chairman of the Management Board
                                                                  Emilio Zanetti




                                              18
The macroeconomic scenario

The severe recession in 2010, which followed the financial crisis triggered by sub-prime
mortgages, has given way to a global economic recovery, but in the presence of a series on
uncertainties which seem prejudicial to a return to normality: the reduction in financial leverage,
the variability of exchange rates and its impact on world imbalances, the high rates of
unemployment and public debt and, since the autumn, a recovery in inflation even in advanced
economies.
The pressures unleashed in the spring by the Greek public debt crisis – the consequences of
which then progressively extended to other countries in the euro area with high levels of debt
(Ireland, Portugal and Spain) – also helped to render more fragile a recovery that was already
affected by weak domestic demand.
The renewed pressures on financial markets towards the end of the year, triggered by the serious
difficulties experienced by the Irish banking sector and by uncertainties over new European anti-
crisis regulations1, resulted in a progressive rise in yields on long term government securities. At
the same time risk levels for major international banks started to increase again with a rise in
premiums on credit default swaps (CDS) after the decrease that followed the highs recorded in the
spring at the time of the Greek crisis, as they incorporated a heightened perception of risk on
sovereign debt.
On 21st November Ireland made an official request for a loan to the European Union and to the
International Monetary Fund which was accepted on 28th November, when a bailout plan was
prepared for a total of 85 billion euro, composed as follows: 45 billion euro provided by the EU-
EMU through the EFSF and EFSM programmes and by bilateral loans from the United Kingdom,
Sweden and Denmark; 22,5 billion euro from the IMF and the remaining 17,5 billion euro from
the Irish Government itself (Treasury monetary funds and investments by the national Pension
Reserve Fund).

Important measures were taken during the year designed to prevent the repetition of new financial crises. In
detail:
−    in May, after the adoption of a three-year programme of bilateral loans to Greece of 80 billion euro (in
     addition to the 30 billion euro granted by the IMF), the European Union and the countries in the euro area
     formulated two agreements for financial stability: on the one hand the European Financial Stabilisation
     Mechanism (EFSM) was created to allow the European Commission to acquire up to 60 billion euro,
     guaranteed by the EU budget, for loans to EU countries suffering exceptional circumstances beyond their
     control; on the other hand a three-year plan was launched jointly with the IMF, designed to guarantee the
     funding requirements of countries in the euro area with high levels of debt. Additionally, 440 billion euro
     may be made available through the European Financial Stability Facility (EFSF)2, a special purpose entity
     created on 7th June to acquire funds on the market by issuing securities guaranteed by countries in the euro
     area3;
−    reforms of the regulation and supervision of the financial system have been approved in both the United
     States and Europe. In the United States greater powers have been conferred on the Federal Reserve over
     major financial groups, with the creation of a financial stability council composed of regulatory authorities,
     including the Federal Reserve itself, called upon to oversee systemic risks. In Europe, on the other hand, a
     European System of Financial Supervision (ESFS) has been operational since 1st January 2011. This
     system consists of a European Systemic Risk Board – ESRB, with general oversight functions and of three
     new authorities4 called upon to work with the 27 national authorities of the individual member countries of
     the union with country specific oversight functions;


1   The yield differentials on ten year government securities for Greece, Ireland, Spain and Portugal, widened substantially compared those
    for Germany, while Italy and Belgium experienced a smaller rise.
2   The IMF will make 250 billion euro available which, in addition to the 60 billion euro provided by the EFSM and the 440 billion which
    should come from the EFSF, will allow the planned total of 750 billion euro to be reached.
3   The rules that govern the functioning of this special purpose entity state that a ratio of 120% must be maintained between the
    guarantees provided and the securities issued to finance applicant countries. Another rule states that the ratio between loans granted
    and securities issued shall be approximately two thirds with the remaining part invested in a liquidity reserve. Moreover studies are in
    progress to assess the adequacy of the programme to manage a crisis which includes several countries and which could soon lead to an
    increase in the amount of the guarantees which set limits on the funding and lending performed.
    The first European debt instrument was placed on markets by the EFSF in January 2010. It has a duration of five years, is directly
    guaranteed by member countries in the eurozone and is entirely destined to finance Ireland at a rate lower than that country would have
    had to pay on its own issues.
4   One for the banking sector (European Banking Authority – EBA), one for financial markets (European Securities and Markets Authority –
    ESMA) and one for insurance companies and pension funds (European Insurance and Occupational Pensions Authority – EIOPA).


                                                                      21
−    at the end of November the Finance Ministers of the countries in the euro area defined the main
     characteristics of a permanent mechanism to safeguard financial stability in the area (the European
     Stability Mechanism, ESM). This mechanism, which should replace the European Financial Stability Facility
     (EFSF) from June 2013, will provide financial support to countries requesting assistance under rigorous
     conditions, similar to those set by the EFSF. It will have initial funding of 500 billion euro subject to
     subsequent revision on a two yearly basis;
−    the debate on the proposal to strengthen the stability pact also continued with the introduction of monetary
     penalties applicable prior to the start of an excess deficit procedure, which could be started even if the debt
     reduction of a country towards the limit of 60% of GDP were not considered satisfactory. A possibility was
     also introduced to accompany supervision of public debt and deficits with a procedure designed to promptly
     identify macro economic imbalances of potential importance for the financial stability of the area by making
     use of quantitative indicators, currently being defined, such as savings rates, private debt, balance of
     payments and income from investments and transfers;
−    at the end of December the Basel Committee on Banking Supervision published the final documents on the
     new regulations for banks (Basel 3). The new regulations require larger amounts of higher quality capital,
     improved risk hedging, the introduction of a ceiling on leverage as an addition to the “risk-based” capital
     requirements, measures to encourage the accumulation of capital in positive phases of the credit cycle and
     the introduction of two liquidity requirements. The new regulations must be implemented by all member
     countries with laws and national regulations which will come into force gradually over six years from 1st
     January 2013.

Aggregate debt and its components (% of GDP) in the principal European countries

                                                      Aggregate debt                           Private sector(1)                        Public sector
Percentages
                                               2007         2008         2009           2007         2008          2009         2007         2008         2009

    Italy                                     218,2        226,7        241,3         114,6         120,4          125,3       103,6        106,3        116,0
    Germany                                   196,7        197,8        207,9         131,8         131,5          134,5        64,9         66,3         73,4
    France                                    210,3        221,5        240,5         146,5         154,0          162,4        63,8         67,5         78,1
    Portugal                                  291,6        309,8        336,3         228,9         244,5          260,2        62,7         65,3         76,1
    Ireland                                   236,8        319,3        397,1         211,8         275,0          331,6        25,0         44,3         65,5
    Greece                                    212,2        229,4        250,3         107,2         119,1          123,5       105,0        110,3        126,8
    Spain                                     250,0        259,9        279,2         213,9         220,1          226,0        36,1         39,8         53,2
    United Kingdom                            253,1        274,0        293,1         208,6         221,9          224,9        44,5         52,1         68,2
Source: Eurostat
(1) Non consolidated data w as used for the private sector (households, non profit organisations, non financial companies). Loans and securities excluding shares
w ere comprised w ithin the notion of private sector debt.
With regard to monetary policy, trends for advanced and developing economies moved in
different directions. In the case of the former, central banks maintained an expansionary attitude
– with official rates at record low levels – designed to support the fragile recovery in progress in a
context of very low inflationary risks for most of the year5. The rapid increase in prices in the last
quarter may lead to a change in that orientation. On the other hand, the monetary authorities of
the main emerging countries have already put restrictive measures in place designed to contain
pressure on prices generated by the large quantities of liquidity injected into markets during the
crisis6.




5   At the beginning of November the Federal Reserve launched a new programme for the purchase of long term government securities for a
    total of 600 billion dollars, to be completed by the middle of 2011. The programme is in addition to the re-investment, again in
    government securities, of the proceeds from redemptions of government agency securities and mortgage backed securities, amounting to
    approximately 250-300 billion euro in the same period.
    In October the Bank of Japan marginally reduced its reference rate, which now lies between 0% and 0,10%, announcing a quantitative
    easing programme which involves the purchase of equity and property funds (for a total of 500 billion yen).
    The Governing Council of the ECB decided to continue to conduct principal refinancing operations and those with maturities equal to the
    compulsory reserve maintenance period by means of fixed rate tender procedures with full allotment of all bids as long as it is considered
    necessary or at least until 12th July 2011. It also decided that three month operations performed until this date will be conducted with
    full allotment of all bids and at a rate equal to the average of the principal refinancing rate over the duration of the operation.
6   Since March 2011, the Indian central bank has increased its reference rate six times during the year and twice in January and March
    2011; it now stands at 6,75%.
    The People’s Bank of China has intervened repeatedly on compulsory reserve requirements (six times in 2010 and three times in the first
    three months of 2011), raising it to a record high of 20%, while there have been three increases in bank lending rates (+25 basis points in
    October and December 2010 and in February 2011); it now stands at 6,06%.
    The Central Bank of Brazil performed three rises in 2010 and two in January and March 2011 to bring the reference rate up to 11,75%.
    The Central Bank of Russia, which had made four cuts to rates in the first half of 2010 in consideration of the fragility of the recovery
    after the sharp fall in 2009, raised the reference rate, currently at 8%, by 25 basis points at the end of February.


                                                                                   22
 On foreign exchange markets M ajor exchange rates and oil prices (Brent) at the end of period
 the euro generally depreciated
                                                            Dec-10   Sep-10  Jun-10  Mar-10  Dec-09  % change
 against    all    the    principal                            A       B       C       D        E       A/E
 international currencies – with a
                                     Euro/Dollar                      1,3630  1,2234  1,3510  1,4316   -6,6%
 partial recovery in the first few   Euro/Yen
                                                              1,3377
                                                              108,60  113,75  108,15  126,27  133,08  -18,4%
 months of 2011 – as a               Euro/Yuan                8,8148  9,1192  8,2972  9,2230  9,7726   -9,8%
 consequence of the repeated         Euro/Franc CH            1,2486  1,3387  1,3177  1,4236  1,4823  -15,8%
                                     Euro/Sterling                    0,8675  0,8183  0,8898  0,8860   -3,3%
 pressures generated by the          Dollar/Yen
                                                              0,8572
                                                               81,15   83,45   88,39   93,46   92,90  -12,6%
 sovereign debt crisis. As shown     Dollar/Yuan              6,5900  6,6905  6,7815  6,8258  6,8259   -3,5%
 in graph one, after reaching a      Futures - Brent (in $)    94,75   82,31   75,01   82,70   77,93   21,6%

 low of less than 1,20 euro
 against the dollar at the beginning of June, the single currency recovered partially in the third
 quarter only to be affected by new difficulties in the economic situation in November. The trend
 for the yen, on the other hand, was more uniform, appreciating progressively between March and
 November against the United States currency to reach almost 80 yen per dollar.
 Despite intervention by the Chinese central bank, which returned to a controlled floating regime
 against a basket of currencies, the hoped for revaluation of the yen against the dollar was
 nevertheless fairly modest.

       Euro-dollar and dollar-yen exchange rates (2009-2010)                                       Graph No.1                   Oil prices Brent (2009-2010)                                                      Graph No. 2
1,58                                                                                                            102   100

1,54                                                                                                            100   95
                                                                          €/$          $/Yen (right)
                                                                                                                      90
1,50                                                                                                            98

                                                                                                                      85
1,46                                                                                                            96
                                                                                                                      80
1,42                                                                                                            94
                                                                                                                      75

1,38                                                                                                            92    70

1,34                                                                                                            90    65

                                                                                                                      60
1,30                                                                                                            88
                                                                                                                      55
1,26                                                                                                            86
                                                                                                                      50
1,22                                                                                                            84
                                                                                                                      45

1,18                                                                                                            82    40

1,14                                                                                                            80
                                                                                                                      35
       J   F   M   A   M   J      J   A   S   O   N   D   J   F   M   A    M    J      J   A   S   O   N   D                J     F   M   A   M   J   J   A   S   O   N   D   J   F   M   A   M   J   J   A   S     O   N   D

                           2009                                                     2010                                                          2009                                            2010




 The macroeconomic background

 According to the IMF, while slowing in the second half, world GDP returned to growth of 5% (-
 0,6% in 2009) in the year just ended, although with marked differences between countries and
 geographical areas. While the main emerging countries, and Asian countries in particular,
 experienced accelerating growth rates as at the same time they increased their importance at
 global level, the recovery in advanced countries was more moderate and at times uneven, as in
 the case of the euro area.
 The scenario was one of high unemployment and a progressive return to inflation attributable to a
 generalised increase in raw materials, foodstuffs and energy prices, due mainly to increased
 demand against a relatively rigid supply, particularly with regard to foodstuffs.
 As shown in graph two, after fluctuating at around 70 to 80 dollars per barrel, the price of Brent
 oil ended the year on an upwards trend, which continued into January and February, when
 prices exceeded 110 dollars per barrel pushed up by geopolitical tensions in the North African
 area.

 After slowing during the spring, the United States economy accelerated progressively. In the
 fourth quarter, the quarterly increase in GDP was 2,8% annualised (+2,6% in the third quarter),
 driven primarily by consumption, and by durable goods in particular, but also by a new positive
 contribution from net exports, largely due to a decrease in imports. The contribution from fixed
 investments, however, where the residential component continues to be weak, was more modest.
 Generally average annual GDP for the United States returned to growth (+2,8%) after a fall in
 2009 (-2,6%).



                                                                                                                      23
The principal element of weakness today is the unemployment rate (9,4% in December), slightly
down compared to the highs recorded during the year (9,8% in April and November), but stably
above 9% for twenty months. The improvement in progress was confirmed by figures for January
2011 (9%). The average of 9,6% for 2010 was the highest since 1984.
After peaking at the end of 2009 (2,7%), inflation fell rapidly to a little over 1% between June and
November, ending the year at 1,5%. “Core” inflation (net of foodstuffs and energy products), on
the other hand, has remained stably below 1% (0,8% in December) since April.
The “twin deficits” continued to move in opposite directions but with the roles reversed compared
to the previous year. The federal deficit was reduced to 1.277 billion dollars from 1.471,3 billion
euro in 2009 (-13,2%)7, while the negative balance of trade started to grow again to 497,8 billion
dollars (+32,8%), affected mainly by greater deficits with China and Opec countries.

Actual and forecast data: industrialised countries

                                                       Consumer prices                      Unemployment                                                         Reference interest
                     Gross domestic product                                                                                Public Sector Deficit (% of GDP)
                                                       (average annual rate)                (average annual rate)                                                      rates
Percentages
                     2009    2010     2011(1)   2009          2010         2011(1)   2009          2010         2011(1)      2009      2010(1)     2011(1)       Dec-09        Dec-10

    United States    -2,6      2,8      2,1     -0,4            1,6            2,0    9,3           9,6              9,4     11,3       10,3        12,1         0-0,25        0-0,25
    Japan            -6,3      3,9      1,3     -1,4           -0,7            0,2    5,2           5,1              5,2      8,7       10,6         9,0          0,10         0-0,10
    Euro Area        -4,1      1,7      1,5      0,3            1,6            2,2    9,4          10,0             10,0      6,3        6,2         4,8          1,00          1,00
    Italy            -5,2      1,2      1,1      0,8            1,6            2,2    7,8            8,5             9,2      5,4        4,6         3,9                  -             -
    Germany          -4,7      3,6       2,2     0,2            1,2            2,1    7,5           6,9              6,6      3,0        3,6         2,6                  -             -
    France           -2,6      1,6       1,6     0,1            1,7            2,1    9,5           9,8              9,7      7,5        7,7         6,5                  -             -
    Portugal         -2,5      1,3      -1,0    -0,9            1,4            1,8    9,6          10,9             11,0      9,3       -7,0        -5,3                  -             -
    Ireland          -7,6     -0,2       0,9    -1,7           -1,6            0,8   11,9          13,5             14,0     14,4       32,3        10,5                  -             -
    Greece           -2,0     -4,2      -3,0     1,3            4,7            3,0    9,5          13,8             13,6     15,4        9,3         7,6                  -             -
    Spain            -3,7     -0,2       0,7    -0,2            2,0            3,0   18,0          20,1             20,7     11,1        8,9         7,6                  -             -
    United Kingdom   -4,9      1,3      2,2      2,2            3,3            3,6    7,6            7,8             7,6     11,4       10,1         7,8           0,50          0,50

(1) Forecasts                                                                                                                                    Source: Prometeia and official statistics



The recovery in Japan slowed during the spring and now seems to have halted. In the last quarter
of the year, GDP fell by 0,3% compared to the previous period after +0,8% in the third quarter
(+1,5% and +0,5% in the first and second quarters respectively.). The trend reflects a strong
slowdown in consumption, the persistent weakness of investments and a progressive weakening
of the balance of trade, penalised, amongst other things, by a stronger yen. The economic
situation also appears to be in line with the Tankan report anticipations which reported a fall in
the confidence of businesses for the first time in six half year periods. On the other hand some
positive signals seem to be coming from industrial output, up in November over the previous
period (+3,3% in December) after five consecutive falls and on the labour market where the
unemployment rate fell in December fell below 5% for the first time after nine months (it peaked
at 5,3% in June).
Japan has not yet come out of the period of deflation in progress since February 2009. The
general consumer price index stood at zero in December, while “core” inflation, net of foodstuffs
continued to remain negative (-0,4%).

China further accelerated its growth rate in 2010, with an average increase in GDP of 10,3%
(+9,2% in 2009), which is pushing it into second position in the world ahead of Japan. This
annual performance was driven by all components, and by domestic demand in particular:
+23,8% for fixed investments, although decelerating compared to 2009; +18,4% for sales of
consumer goods; +15,7% for industrial output, driven by heavy industry.
The positive balance of trade fell to 183,1 billion dollars (-6,4% compared to 2009) due to more
intense growth in imports (+38,7%) compared to exports (+31,3%). Currency reserves reached
almost 2.600 billion dollars (+7,6%), including a significant proportion (approximately 1.160
billion euro) stably invested in United States government securities.
The acceleration in economic growth was accompanied by a rise in inflation to high levels (4,6% in
December, 4,9% in January 2011), which reflected price increases in the foodstuffs and property
sectors.




7   In order to consolidate the recovery, in December the United States Government launched a new fiscal stimulus programme of
    approximately 800 billion dollars (5,5% of GDP), to be performed over the two years: 2011-12.


                                                                                     24
          Actual and forecast data: the principal emerging countries

                                                          Consumer prices                           Unemployment                    Reference interest
                           Gross dom estic product
                                                              (average annual rate)                 (average annual rate)                 rates
          Perc entages    2009      2010     2011(1)   2009          2010         2011(1)   2009           2010         2011(1)      Dec-09       Dec-10

            China          9,2      10,3        8,5    -0,7            3,3            2,7    4,3             4,1            4,0        5,31         5,81
            India          5,7       9,5        7,3    10,9          13,2             6,7    n.a.            n.a.           n.a.       4,75         6,25
            Brazil         -0,6      7,5        4,5     4,9            5,0            4,6    8,1             6,7            7,5        8,75        10,75
            Russia         -7,9      3,7        4,5    11,7            6,6            7,4    8,4             7,5            7,3        8,75         7,75

          (1) Forecasts                                                                                        Source: Prometeia, IMF and official statistics



The main emerging countries also recorded a return to high growth rates after a slowdown in 2009.
In the third quarter India’s GDP increased by 10,6% year-on-year, a reflection of a significant acceleration in
domestic demand, both for consumer goods (+9,3%) and for investments (+12,4%), and an improvement of
foreign demand, which, however continues to make a marginal contribution. The favourable context benefited
both the industrial sector (an average increase of +9,5% in industrial output on an annual basis between April
and November) and the service sector. Despite lower levels between August and November, Indian inflation
continues to be the highest in the Asian area.
Russia made up lost ground after the fall in 2009, benefiting from the gradual recovery in the global economy
and the consequent revival of exports (oil in particular) and industrial production. Signs of a slowdown
appeared in the third quarter with an increase in GDP of just 2,7% on an annual basis, the combined effect of
an acceleration in consumer spending and a deceleration in investments, but above all of a significant increase
in imports against more modest performance by exports. Inflation increased to 8,8% in December, reflecting
increases in international prices.
The Brazilian economy was driven by industrial output (+10,5% on average annually), positively affected by
receipts from raw materials prices which remained high and by huge inflows of foreign capital, attracted by
favourable returns in a stable macroeconomic context. However, the capital inflows helped fuel inflation which
reached 5,9% in December, above the target set by the Brazilian authorities.

The year 2010 was generally one of recovery for the euro area, although at different rates in the
various countries of the Monetary Union and with a deceleration in the second half. GDP
increased by just 0,3% over the previous period in the third and fourth quarters (+1% in the
spring), affected mainly by a progressive slowdown in the German economy, which was, however,
again the most lively.
On aggregate average annual GDP increased by 1,7% (-4,1% in 2009) driven by positive
performance by net exports, even if now slowing, as they responded to world economic trends,
while consumption and investments made a small contribution to output.
The industrial production index has recorded year-on-year changes of greater than 5% since
March (+8% in December) but in monthly terms the trend is not yet clear (-0,1% in December).
Unemployment remained at high levels (10% at the end of 2010; 9,9% at the end of 2009) with
Spain continuously above 20% since May.
Inflation has increased progressively: the harmonised consumer price index rose to 2,2% in
December from 0,9% twelve months before (an annual average of 1,6% compared to 0,3% in
2009). Net of foodstuffs and energy products, along with alcohol and tobacco products, the index
recorded significant changes (1,1% in December).
The number of countries which form part of the Monetary Union rose to 17 with the entrance of Estonia on 1st
January 2011. Estonia, which became part of the European Union on 1st May 2004, satisfied all the
requirements (public debt, budget deficit, interest rates and inflation) for admission.

In line with international performance, the weak recovery in Italy also lost vigour in the second
half of the year. The quarterly increase in GDP between September and December was just 0,1%
(+0,3% and +0,5% in the third and second quarters respectively), affected by a lower contribution
from net foreign demand, partly the result of an increase in imports against persistent weakness
for consumption and investments.
Average annual GDP grew by 1,2% after the significant contraction in 2009 (-5,2%), driven by the
rebuilding of inventories and by the recovery of private sector consumption and gross investment
against a still negative, but improving, balance of payments.
Industrial production (seasonally adjusted), which has recorded positive growth since February –
with year-on-year changes of greater than 7% between March and June and a peak of +9,7% in
August –, subsequently lost vigour to record an increase of 5,4% in December (an increase of
+5,3% on average over twelve months after two consecutive years of reductions). In terms of
individual sectors, the most lively were those of “refineries” (+15,6%), “fabrication of machinery
and equipment” (+13,3%) and “metal products” (+12,2%), while negative growth was recorded for



                                                                         25
“computer fabrication” (-13,1%), “pharmaceuticals” (-7,4%), “mineral extraction” (-3,6%),
“fabrication of electrical equipment” (-2,8%) and “foodstuffs” (-2,5%).
The most recent estimates for December confirmed an unemployment rate of 8,6% (over 2,1
million jobless), still close to the high recorded in October (8,7%), but nevertheless lower than the
European average (10%) as a result of the use of state income benefits: a total of 1,2 billion hours
of state lay-off and redundancy benefits were authorised in 2010, an increase of 31,7% compared
to 914 million hurs in 2009. In the last months of the year the trend, which was already slowing,
seems to have reversed with four consecutive falls year-on-year which also affected extraordinary
and exceptional lay-off benefits in December8.
Prices in Italy were affected by a progressive recovery of inflation, although a little lower than in
the euro area. In December the harmonised consumer price index rose to 2,1% (2,2% for Europe)
from 1,1% at the end of 2009 (0,9%). Average annual inflation was 1,6% (0,8% in 2009), in line
with European levels.
The Italian balance of payments deficit reached 27,3 billion euro, a fourfold increase compared to
2009, due principally to a return to deficit for intermediate products and a deepening of the
energy deficit. The increase in imports (+22,6%) exceeded that for exports (+15,7%) and was
higher in both cases for trade with non EU countries.
Finally, with regard to public finance, the Stability Law for 20119, enacted by Parliament last
December, does not generate any net debt over the next three years. The targets set by the “Public
Finance Decision” at the end of September therefore remain in place, although they have been
updated on the basis of Istat (Italian office for statistics) data for 2010: the ratio of deficit to GDP,
which fell to 4,6% (from 5% of the Public Finance Decision) will fall below 3% in 2012, in line with
commitments undertaken at European level, while the ratio of public debt to GDP, which
decreased further to 119% (from 118,5% of the Public Finance Decision), is not expected to
decrease until 2012.




8   According to preliminary Bank of Italy estimates, a measure of the underuse of the labour supply which includes the equivalent of the
    hours of state lay-off and redundancy benefits and discouraged workers who are seeking jobs with less intensity would stand at least two
    percentage points above the rate of unemployment.
9   This law, which replaces the Finance Act from this year onwards, following the reform of public accounts and finance (Law No. 19/2009),
    requires the acquisition of funds of six billion euro in 2011, 1,6 billion euro in 2012 and 1,2 billion euro in 2013.


                                                                      26
Financial markets




United States and European yield curves for maturities of greater than one year shifted
substantially downwards compared to December 2009, in line with the continuation of
particularly expansionary monetary policies in the two areas. Nevertheless a rise occurred
compared to the end of June – which in the case of the United States only affected maturities of
longer than two years – in relation to both an improvement in the outlook for economic growth
and expectations of increased inflation. The concerns expressed by the ECB, repeated, moreover
in a meeting of March 2011, over the sharp rise in prices in recent moths and the consequent
expectation of a possible rate rise in the short term, resulted in a rise in European rates
compared to June, even for maturities of less than two years.

After a positive start, in the second quarter of 2010 the trend for the equity markets of the major
industrialised economies reversed sharply due to the fragility of the recovery, but above all to the
turmoil triggered by the sovereign debt crises of some European countries which penalised the
banking sector in particular. The recovery was generalised in the second half, even if in some
cases insufficient to cover the losses that had been incurred.

Over twelve months United States stock exchanges recorded rises of over 10%, managing in some
cases to return to levels prior to the Lehman Brothers collapse, while Japanese markets ended
the year with a moderate fall. Trends in Europe were divergent: the brilliant result for the German
stock exchange, driven by a strong economic recovery, was offset by the difficulties of those
countries most affected by the sovereign debt crises (Portugal, Ireland, Greece and Spain) with
particularly evident repercussions on other markets in the area such as the Italian market.
In line with trends on other world stock exchanges, equity prices on emerging markets recovered
compared to the lows recorded in the second quarter. At the end of the year the MSCI Emerging
Market index recorded an improvement of 16%.

The political events affecting North African countries and the violent earthquake that hit Japan
pulled down international share prices, wiping out the improvements that had been recorded in
the first few weeks of the year.

After a partial recovery compared to the lows recorded in May, the equity markets managed by
Borsa Italiana fell again in the last quarter to end 2010 with losses of over 10% year-on-year.
They were attributable partly to the substantial impact of the banking sector which, despite the
soundness of Italian banks, were particularly affected by the multiple shocks generated by the
progressive spread of the sovereign debt crisis.

Trading in equities reduced in terms of the number of contracts (62,2 million, -3%), while the
volume increased compared to the previous year (748,2 billion euro, +11%). Similarly the



                                                 27
numbers of average daily trades in shares also fell (243 thousand contracts) while the value
increased (2,9 billion euro).


                              The principal share indices in local currency

                                                                 Dec-10            Sep-10         Jun-10        Mar-10       Dec-09     % change
                                                                   A                 B              C             D            E           A/E
                               Ftse Mib (Milan)                    20.173           20.505          19.312          22.848    23.248     -13,2%
                               FTSE Italy All Share (Milan)        20.936           21.098          19.869          23.368    23.653     -11,5%
                               Xetra Dax (Frankfurt)                6.914            6.229           5.966           6.154     5.957      16,1%
                               Cac 40 (Paris)                       3.805            3.715           3.443           3.974     3.936      -3,3%
                               Ftse 100 (London)                    5.900            5.549           4.917           5.680     5.413       9,0%
                               S&P 500 (New York)                   1.258            1.141           1.031           1.169     1.115      12,8%
                               DJ Industrial (New York)            11.578           10.788           9.774          10.857    10.428      11,0%
                               Nasdaq Composite (New York)          2.653            2.369           2.109           2.398     2.269      16,9%
                               Nikkei 225 (Tokyo)                  10.229            9.369           9.192          11.244    10.546      -3,0%
                               Topix (Tokyo)                          899              830             828             985       908      -1,0%
                               MSCI emerging markets                1.151            1.076             918           1.010       989      16,4%




                                Principal short and long term interest rates in 2010                                                              Graph No. 5
                   5,25
                   5,00
                   4,75
                   4,50
                   4,25
                   4,00
                   3,75
                   3,50
                   3,25
                   3,00
                   2,75
                   2,50
                   2,25
                   2,00
                   1,75
                   1,50
                   1,25
                   1,00
                   0,75
                   0,50
                   0,25
                   0,00
                          J       F           M      A         M               J            J           A            S       O          N          D

                              US Treasury 10 years       Federal f unds rate                    BTP 10 years                 Euribor 3 month
                              Bund 10 years              ECB principal ref inancing rate        USA Libor 3 month




Despite the difficult context, in 2010 the markets managed by Borsa Italiana nevertheless
managed to set further new records: new record highs for trading in ETFs (exchange traded
funds) and ETCs (exchange traded commodities), with a value of 78,5 billion euro and 3,4 million
contracts, and for trading on the MOT (electronic bond market) and the ExtraMOT (a total value
of 230 billion euro and 3,9 million contracts); record trades for the equities derivatives on the
IDEM (Italian Derivatives Market), with a daily average of 173 thousand standard contracts;
continued European leadership for contracts on both the electronic stock exchange and the
electronic bond market.
At the end of the year listed companies on the Italian Stock Exchange numbered 332, unchanged
compared to twelve months before as a result of ten new admissions and ten withdrawals. The
total market capitalisation of listed companies fell to 425 billion euro (27,5% of GDP) from 457
billion euro at the end of 2009 (30,1% of GDP).
As a consequence of the increase in the value of equity trades, while capitalisation was lower,
turnover velocity10 increased from 147% to 176% over twelve months.

On 9th February 2011 the London Stock Exchange Group, the company which controls Borsa Italiana, and the
TMX Group, the owner of the Toronto stock exchange, announced a coming merger which should lead to the
creation of a leading organisation in the commodities, derivatives and bond sectors with over 6.700 listed
companies on different segments and capitalisation of around 4,5 billion euro. The new Group will be 55%
owned by the LSE and 45% by the TMX. The operation will enhance Borsa Italiana’s experience in post trading
services and also its position as a global centre for fixed income trading.


10   An indicator which, as the ratio of the value of the shares traded electronically to capitalisation, gives a measure of the turnover of the
     shares traded .


                                                                                       28
After a favourable start to the year and a subsequent alternation of positive and negative results,
the mutual investment funds sector again started to show signs of weakness in the last quarter of
2010. Net inflows for the year were nevertheless positive at 5,7 billion euro (-0,7 billion euro in
2009), the aggregate result of opposing performance by Italian registered funds (-10,1 billion euro)
– still penalised by unfavourable tax treatment11 – and by foreign registered funds (+15,8 billion
euro) which now account for almost 58% of assets. In terms of the type of fund, disinvestments
from monetary products (-23,7 billion euro) and from hedge funds (-2 billion euro) were more
than offset by increases in bond funds (+19,9 billion euro), equities funds (+3,7billion euro),
balanced funds (+3,6 billion euro) and flexible funds (+4,2 billion euro)12.
At the end of December assets amounted to 460 billion euro, an increase of 5,7% compared to
435,3 billion euro twelve months before with a change in composition into bond funds (up from
38,1% to 41,1%), equity funds (from 21,2% to 23,4%) and to a lesser extend into flexible funds
(from 13,1% to 14,6%) and balanced funds (from 3,9% to 4,6%), against a substantial movement
out of monetary funds (from 20% to 13,5%) and to a slight extent out of hedge funds (from 3,7%
to 2,8%).




The banking system

The pace of growth in funding from customers in the Italian banking system slowed during the
year, affected by a lower propensity to save by households. This was set against by a moderate
recovery in lending business after a low recorded in October 2010. The quality of credit continued
to deteriorate, although at a slower rate than in the recent past.

On the basis of Bank of Italy data13, direct funding (deposits of residents and bonds) increased
year-on-year in December by +3,1% (+9,2% in December 2009), the aggregate result of a
reduction in the bond component (-1,6% compared to +11,2% at the end of 2009) and a still
positive trend for other types of funding (+6,3% compared to +7,8% in December 2009), driven
principally by repurchase agreements (+82,7%).

As concerns loans to private sector residents, this had increased on an annual basis at the end of
the year by +4,3% (+1,7% in December 2009). Total loans to households and non financial
companies increased by 3,8% (+0,5% at the end of 2009), driven by the households component
(+7,5% compared to +5,9% twelve months before) and by home purchase loans in particular
(+8%), while the various forms of consumer credit tended to slow (+1,8% from +4,9% in
December 2009). The trend for loans to businesses finally reversed (+1,6% compared to -2,3% at
the end of 2009).

In terms of risk, non performing loans to the private sector gross of impairment losses increased
over twelve months by 31,2% (those to households by +31,3% and those to businesses by
+31,5%). The ratio of gross non-performing loans to the private sector to gross loans to the private
sector therefore rose to 4,60% (3,81% in December 2009).
Net non-performing loans, which had grown significantly in terms of the total since March had
increased by 28,9%. Consequently the ratio of net non-performing loans to total loans rose to
2,43% from 2,03% at the end of 2009, while the ratio of net non performing loans to capital and
reserves reached 13,28% (10,47% at the end of 2009).

At the end of the year securities, other than shares and ownership interests, issued by residents
in Italy and present in the portfolios of Italian banks had increased, year-on-year, by 8,5%,
attributable mainly new investments in government securities (+30,5%) concentrated mainly in
the first half of the year – both medium-to-long term (CCTs and BTPs, +36,2%) and short term
(BOTs and CTZs, +20,1%) – against a reduction in “other certificates” (-2,7%). Within the latter,

11  Decree Law No. 225/2010 known as the “Thousand extensions”, converted into Law No. 10/2011, introduced the expected tax reform
    for mutual funds, which will come into force from 1st July 2011. On the basis of the new law, taxation on actual profit taking will also be
    applied to Italian investment funds, that is on gains or losses recorded when investments are sold, rather than on the “mark-to-market”
    value accruing, thereby bringing the tax treatment into line with that for foreign funds.
12 Assogestioni (national association of asset management companies), “Map of assets under management (collective instruments and

customer portfolio management) 4th quarter 2010”.
13 Bank of Italy, supplement to the statistics bulletin “Moneta e Banche”, March 2011.




                                                                       29
more than 70% continue to consist of bank bonds. The ratio of securities to private sector loans
therefore stood at 33,4% (28,3% at the end of 2009).

After reaching a low in June (1,36%) the average weighted interest rate on bank funding from
customers calculated by the Italian Banking Association14 (which includes the yield on deposits,
bonds and repurchase agreements in euro for households and non financial companies) stood at
1,50% compared to 1,59% twelve months before. Similarly, in line with conditions on the
interbank market, the average weighted interest rate on loans to households and non financial
companies also showed signs of recovery with respect to the record low reached in June, (3,52%),
returning to 3,62% (3,76% in December).

                                                                    ***

In addition to the developments in progress in international regulations already mentioned, a
number of changes were introduced into the legislative framework for Italian banks in 2010:
• on 1st March the European Payment Services Directive (PSD) entered into force, a measure
   designed to eliminate regulatory differences between member countries and to increase
   competition between operators, by guaranteeing equal conditions, more transparency and
   protection for customers. The directive sets the whole subject of payments within a single
   regulatory framework with the objective of supporting an integrated European market for
   electronic payments and reducing the costs and inefficiency of paper and cash instruments;
• on 11th October trading commenced on the new segment of the Mercato Interbancario
   Collateralizzato (MIC – collateralised interbank market)15, named the “New MIC”, with the
   transfer to the Cassa di Compensazione e Garanzia (central counterparty clearing) and to
   Monte Titoli S.p.A. of the functions performed previously by the Bank of Italy (guaranteeing
   transactions, acquisition, valuation, custody and administration of financial assets conferred
   by banking operators);
• with Decree Law No. 78/2010, converted into Law 122/2010, the limit on the transfer of cash,
   the issue of bank cheques, bankers’ drafts, postal cheques and holding bearer passbooks was
   reduced from 12.500 euro to five thousand euro;
• Legislative Decree No. 39/2010, which incorporated Directive No. 43/2006, rewrote the rules
   for statutory audits reorganising them in a consistent manner, requiring compliance with
   specific requisites concerning independence, ethics, training and quality control. For public
   interest entities (including banks, companies that issue listed financial instruments, insurance
   companies and stock broking companies) statutory audits may not be performed by the Board
   of Statutory Auditors, but must be performed by external statutory auditors or by audit firms
   and the appointment must be for a minimum of seven/nine financial years;
• finally with regard to listed banks:
   − in March the Consob (Italian securities market authority)16 issued a regulation on
      transactions with related parties which regulates procedures to be followed for the approval
      of transactions of significant amount where the counterparties have potentially conflicting
      interests;
   − Legislative Decree No. 27/2010 implemented EC Directive No. 2007/36/EC on
      shareholders’ rights with innovative changes to many articles of the Italian Civil Code and
      the Consolidated Law on Finance, with consequent amendments also to the Issuers’
      Regulations17. The changes introduced, applicable to shareholders’ meetings held after 31st
      October 2010, have no effects on co-operative companies, which were expressly excluded
      from the scope of the new legislation.




14   Italian Banking Association, Monthly Outlook, Economia e mercati Finanziari-Creditizi, February 2011.
15   The MIC was an anonymous guaranteed segment of the e-Mid platform, created to encourage the recovery of trading on interbank
     circuits following the 2008 financial crisis. When it was created, the guarantees granted by the Bank of Italy were scheduled to lapse on
     31st December 2010.
16   Resolution No. 17221 amended by a later Resolution No. 17389 of 23rd June 2010.
17   Consob Resolution No. 17592 of 14th December 2010.


                                                                       30
Significant events that occurred during the
year

The trade union agreement of 20th May 2010

Trade union negotiations were concluded on 20th May 2010, designed to achieve a significant
reduction in costs at consolidated level, by decreasing personnel numbers and the relative unit
costs. These were supported operationally by the adoption across the board (for all companies) of
appropriate organisational and management measures designed to increase efficiency and
productivity.

As concerns personnel expense in particular, a reduction in total Group personnel numbers by
895 was planned to be implemented for 500 employees by means of a redundancy incentive
scheme and by means of normal personnel management mechanisms, including the partial
replacement of personnel normally leaving the Group for the remaining reductions.

The redundancy incentive scheme involved all employees who had attained the right to a pension
by 31st December 2011.
The voluntary applications received (497) allowed the target set to be met virtually completely
without the need to resort to the use of Law No. 223/1991 as permitted under the agreement1.
Group banks and companies contributed jointly to reaching the Group target, accepting
applications received in excess of the quota set at individual company level and using these to
compensate for other companies where targets were not fully met.
The first Group of personnel to leave (321) occurred at the end of June with effect from 1st July;
the remaining group with effect subsequent to 1st July 2010 as shown in the table

                                                  Personnel leaving with effect     Personnel leaving with effect
          Banks/Companies involved                                                                                          Total
                                                       from 1st July 2010           subsequent to 1st July 2010

Banca Popolare di Bergamo                                       62                                25                          87
Banco di Brescia                                                41                                33                          74
Banca Popolare di Ancona                                        58                                18                          76
Banca Popolare Commercio e Industria                            26                                16                          42
Banca Regionale Europea                                         23                                8                           31
Banco di San Giorgio                                             6                                2                           8
Banca di Valle Camonica                                          4                                2                           6
Banca Carime                                                    58                                54                         112
Centrobanca                                                      6                                3                           9
UBI Banca                                                       31                                12                          43
UBI Sistemi e Servizi                                            6                                6                           12
Total                                                          321                               179                         500




The total cost of the operation – with account taken of the provisions of Decree Law No. 78/2010
converted into Law No. 122/2010 – was 33,2 million euro, already recognised in the income
statement for the period ended 30th June 2010. It was divided between incentives, for those who
had already acquired the right to retire, and use of the “solidarity fund” pursuant to Ministerial
Decree No. 158 of 2000.
When fully phased in, the agreement, together with other personnel management mechanisms,
will create personnel expense synergies of approximately 70 million euro from 2011. Net of the
above expenses, the savings for the second half of 2010 were approximately 13 million euro.



1   The completion of the redundancy plan for 500 personnel was implemented by proceeding, until the target was reached, to terminate the
    employment contracts of senior management who had acquired the right to a pension and had not voluntarily applied for retirement
    under the scheme, through application of the relative law and clauses in the contract.


                                                                     31
In order to balance the personnel leaving under the agreement reported here and in order to
guarantee the necessary operational continuity for those business units affected by the
organisational changes, a commitment was made, in conjunction with the memorandum signed
by UBI Banca, to convert the temporary employment contracts of 550 personnel to permanent
contracts for young people already working for the Group. These conversions, concluded in the
fourth quarter, were in addition to 170 already provided for under the previous trade union
agreement of 23rd January 2010 concerning the branch network optimisation.
A basic requirement for the conversion of contracts was the positive assessment of workers, with
priority given to those with the greatest length of service in the Group, compatible with
requirements that emerged on local markets and in individual banks and companies on the basis
of their dimension objectives.

The agreement also covered a series of operational and organisational lines of action as follows:
•   the streamlining of the branch network of the Group, as reported in detail in a subsequent
    sub-section and the consequent change in the composition of customer portfolios;
•   the development of Contact Centre activities in order to strengthen support for the commercial
    activities of the network banks and to improve contacts with customers, with particular
    reference to the retail and small business segments. This will also contribute to a more
    effective and contained management of geographical mobility as the result of the creation of a
    new unit in Milan, in addition to the existing centre in Brescia.
    Total employees working in the Contact Centre therefore rose from 65 at the end of 2009 to
    153 in December 2010. This unit, originally located in the Commercial Macro Area of the
    Parent, was moved to UBI Sistemi e Servizi on 1st January 2011, in order to guarantee better
    management of the service by means, amongst other things, of more direct involvement by the
    network banks which benefit from it directly;
•   general increases in efficiency which will include Group companies as follows:
    - the Business Process Re-engineering Project for Loans (described on subsequent pages),
       with organisational impacts on UBI Banca, the network banks and UBI.S, designed to
       improve the lending process within the Group with particular reference to the grant and
       monitoring of loans and credit recovery;
    - UBI Banca Private Investment, with the closure of twelve branches (including six already
       closed in June, when action was taken on the business units of the network banks) and the
       creation of a Central Back Office in Milan in July to which administrative activities
       previously performed by branches to support Financial Advisors were transferred (order
       processing and first level controls for orders placed off-site in relation to assets under
       management, insurance and pension products and personal loans);
    - SILF, with the reorganisation and focus of activities on two centres: Cuneo and Bergamo. All
       the SILF activities complementary to B@nca 24-7, previously performed in Milan, have been
       located on the Bergamo centre, created in June, in order to improve costs as a result of
       more effective operations;
    - Centrobanca, with a revision of the scope of its activities in order to increase the focus of
       the company on transactions with a higher specialist content (specialised lending,
       acquisition finance, project financing, leveraged finance, shipping, pool financing and
       industrial credit operations with non standard and/or complex structures including the
       monitoring of covenants).
       As a consequence, the authorisation ceilings for the company in the industrial credit sector
       were raised from 2010, with the network banks now responsible for all non secured loan
       transactions of less than 15 million euro, non operating asset mortgage loans below four
       million euro and all transactions pursuant to the Sabatini Law.




                                                 32
Action undertaken on the branch network of the Group and on
the distribution model

The distribution network of the UBI Banca Group was subjected in 2010 to a number of actions
taken with the primary purpose of strengthening the relationship of network banks with their
local markets and subsequently to streamline the distribution network of those banks with a view
to achieving an enhanced market presence and a significant reduction in costs. Finally, towards
the end of the year the distribution model was developed to strengthen the commercial
effectiveness of branches and to ensure increasingly more rapid response times.

Details are given as follows:
•     on 25th January the project to optimise the branch network was completed. It involved Banca
      Popolare di Bergamo, Banco di Brescia, Banca Popolare Commercio e Industria, Banca
      Regionale Europea and Banco di San Giorgio2 and its objective was to increase the focus of the
      network banks on their respective geographical markets, by grouping together branches in the
      same geographical area under a single brand name. As a result, the network banks now
      operate with a single brand name in 72 of the 78 provinces in which they are present3.
      Technically the project involved the intragroup transfer of 316 branches through contributions
      of 14 sets of operating assets. On 21st July, the restoration of the original ownership interests
      held by UBI Banca took place (with the repurchase of the minority shareholdings acquired by
      each network bank following the contributions performed), together with the reorganisation of
      the shareholdings of the foundations, as reported in detail in the section “The consolidation
      scope”;
•     at the same time as the optimisation operation was performed, 37 Group branches, including
      existing branches and those resulting from the “switches”, were transformed into mini-
      branches reporting to a parent branch. The operation involved 16 branches belonging to the
      BPCI, 14 to the BPB, six to BRE and one to BBS;
•     on 21st June action was taken on the distribution network as provided for under the Trade
      Union Agreement of 20th May 2010, designed to eliminate overlaps and streamline market
      presence in areas with limited margins for growth and with insufficient current and/or
      potential profitability of the branches concerned. At the same time branches near those
      affected by the action were strengthened and those with better growth prospects expanded. A
      total of 44 branches4 and 37 mini-branches5 were closed, 101 small branches were
      transformed into mini-branches6 and the parent branch of five mini-branches was changed7;
•     in the third quarter an enhancement to the distribution model was developed, with the
      introduction of a new type of “Group Branch”, which, although autonomous from both a
      commercial and a credit viewpoint, reports to a “head branch” – generally larger and with
      greater authorisation powers over both commercial and credit matters – that is able to provide
      operational support to “group branches” partly through the local centralisation of some
      processes. The project was implemented at the beginning of 2011 at Banco di Brescia, Banca
      Carime, Banca Regionale Europea and Banca di Valle Camonica and was accompanied by a
      change in the composition of customer portfolios with the more complex accounts moving to
      head branches, which, since they possess all types of specialist personnel, have become
      leading local players;
•     consistent with its role as the leading bank in the Piedmont area, Banca Regionale Europea
      has transferred its General Management, central offices and decentralised units at Cuneo to
      11, Via Santa Teresa in Turin from January 2011.



2    The operation did not involve Banca Popolare di Ancona, Banca Carime and Banca di Valle Camonica.
3   The co-presence provinces are: Milan, Rome, Bergamo, Brescia, Monza Brianza and Como. For the latter two provinces attributed to BPB,
    the presence of BPCI and BVC is residual (1 branch in the fist case, 1 parent branch and 1 related mini-branch in the second case).
4    In detail: 12 branches of the BPB, 10 of the BPCI, seven of BBS, six of UBI BPI, four of BPA plus one for institutional customers, two of
     Banca Carime plus one for institutional customers, two of BRE, one of BSG and one of UBI Banca for institutional customers.
5    In detail: 17 mini-branches of BPCI including one in-house company branch, plus one advisory branch, 12 of BPB, six of the BPA and
     two of BBS.
6    In detail: 65 branches of Banca Carime, 11 of BPA, nine of BRE, six of BSG, five of BPCI, three of BPB, one of BBS and one of the Parent
     UBI Banca.
7    In detail: two mini-branches of BRE, two of BPCI and one of BPA.


                                                                       33
Although priority was given during the year to the reorganisation of the distribution network, the
Group nevertheless continued with its endogenous growth by opening 17 new branches – half of
which belonging to Banca Popolare di Bergamo – and by transforming six existing “treasury”
branches into mini-branches.
This growth will continue in 2011 with both the opening of new branches (approximately twenty)
and intervention on existing units, with further closures, transformations and/or transfers.
A detailed summary of the operations performed in 2010 on the branch network of the Group is
given in a table contained in the section “The distribution network and positioning”, which may be
consulted.




The international presence: development

Action was also taken on the international front in relation primarily to two foreign subsidiary
banks, designed to improve the Group focus and strengthen its commercial potential. In detail:
•     Banque de Dépôts et de Gestion Sa was reorganised to focus business on the private banking
      segment, with the reconfiguration of its geographical presence to concentrate operations on the
      most important centres. In this context:
      - its presence in the Ticino Canton was streamlined in June with the closure of the Mendrisio
         branch and the merger from 31st October of its subsidiary Gestioni Lombarda Suisse Sa
         into it;
      - the sale to the Swiss Banking Group Valiant of the Neuchâtel and Yverdon branches, which
         conduct mainly retail business, was concluded, with effect from 31st December 2010, with a
         gain on the sale of approximately 5,6 million euro;
      - an increase in the capital of the subsidiary BDG Singapore Private Ltd. of four million Swiss
         francs was decided in December (concluded in January 2011). This subsidiary commenced
         asset management activities after obtaining a “Capital Markets Services” license in October;
•     with effect from 10th December, the Luxembourg branch of Banco di Brescia was contributed
      to UBI Banca International Sa, thereby streamlining the Group presence in Luxembourg with
      the merger of two entities which already operated with a high degree of integration. UBI Banca
      International Sa took over the transferred branch’s short term institutional funding activities,
      performed by the issue of French certificates of deposit and euro commercial paper8;
•     the range of co-operation agreements with foreign banks was broadened further: currently 37
      exist which give cover for more than 50 countries9;
•     finally the Group sponsored events of great importance in order to increase the visibility of the
      brand abroad and to consolidate its closeness to customers that operate on international
      markets10.




8    The euro commercial paper and French certificates of deposit programmes of the new issuer were formalised on 13th August and 22nd
     September 2010 respectively The original programmes of the branch transferred came to an end with the maturity of the last issues (30th
     November for the euro commercial papers and 22nd December 2010 for the French certificates of deposit).
9    A co-operation framework agreement was signed in 2010 with OJSC OTP Bank, a Russian subsidiary of the Hungarian OTP Group. The
     agreement completes the two that already exist in the country (with Center-Invest Bank, which operates in southern regions and Bank of
     Moscow, well-established in the capital). Amongst other things, OJSC OTP is able to provide operating standards very similar to those of
     the UBI Group and has a multi-lingual international desk in Moscow which can also provide assistance in the Italian language.
     Lastly an agreement was signed on 2nd December with the Russian state bank Vnesheconombank (VEB), which involves the
     establishment of a maximum budget of 50 million euro to finance co-operation projects between Russian and Italian small to medium-
     sized enterprises.
     A further two agreements were added to the 37 mentioned with the European Bank for Reconstruction and Development (EBRD) and
     with the International Financial Corporation (IFC) of the World Bank Group for access to their respective “trade facilitation” programmes.
10           These included a series of initiatives designed to reward the excellence of Italian businesses in the world: the “China Trader
     Award” awarded to companies that have distinguished themselves for their innovation and technology; “The Golden Bridge” in Russia
     and the “Amerigo Vespucci Prize” awarded to San Paolo of Brazil.
     Organisational and financial support was also given to foreign commercial missions, organised by the chambers of commerce of Italian
     provinces of major importance to the UBI Group. The objective here is to assist businesses in the process of internationalising their
     business on foreign markets.
       Finally, the event “U will Be International” was organised in November, during which 500 businesses met representatives of the UBI
       Banca foreign network at the Kilometro Rosso Science Park in Bergamo.




                                                                        34
Action taken to simplify operations

Business Process Re-engineering (BPR) for Loans
Business Process Re-engineering (BPR) for Loans is a project started in the second half of 2009
designed to improve the effectiveness and efficiency of the lending process in the network banks
of the Group. It meets the dual requirement to reduce customer response times and at the same
time to simplify administrative procedures for account managers without, however, relaxing credit
risk controls.
The project was developed along the following lines of action:
•    excellence in customer response times: while maintaining adequate control over credit risks,
     the action undertaken included the redistribution of work loads between central and
     peripheral units, by increasing the ordinary authorisation powers of peripheral approval bodies
     and of local loan approval centres (LACs) for counterparties with low risk profiles (“low” and
     “medium”);
•    the appointment of external suppliers to perform property appraisals and the centralisation of
     mortgage guarantee processing at UBI.S: this was implemented gradually during the year in all
     Group banks by means of the following:
     - the introduction of a single procedure for requesting property appraisals by specialist
        external companies;
     - the centralisation of mortgage guarantee processing at UBI.S, in order to reduce manual
        administrative activities by account managers for the processing of mortgage guarantees;
•    the introduction of a Counterparty Problem Indicator: calculated automatically by means of a
     mechanism which progressively aggregates weighted problem phenomena on each
     counterparty at network bank level, it allows, in combination with internal rating systems,
     reports to be generated for timely action to be taken;
•    management of arrears. The project is designed to preserve and protect customer relationships
     by means of the prompt resolution of lending irregularities (late repayments/unauthorised
     overdrafts) detected on performing private individual and “small economic operator” customers
     by providing direct support from a specialist central unit operating since June 2010 at UBI.S
     offered to customers by account managers;
•    the new credit recovery model. As part of action to generally improve the efficiency of the
     processes and units involved in this activity, the decentralisation in network banks of the
     management of customers classified as “recoverable impaired positions” 11, previously managed
     as a service by units in the Parent, was completed. A special business unit entitled “Problem
     Loan Service” was also created in the Credit Area of the Parent whose tasks include the
     supervision of credit recovery processes, support for network banks with debt restructuring,
     monitoring of Group problem loans and supervision of processes and tools relating to the
     “arrears management” system;
•    Credit quality. This project was commenced in 2008 as an approach to improve credit quality
     in the retail customer segment for Banca Popolare Commercio e Industria and Banca Popolare
     di Ancona. It was gradually extended in 2009 to all the Group’s network banks with positive
     results in terms of improvement for all types of problem loan. It was therefore decided, as part
     of the BPR for lending project, to transform what had originally commenced as action to
     improve an incidental problem into a consolidated approach and therefore into an ordinary
     model for monitoring the quality of credit.




11   “Recoverable impaired positions” are those for which total disengagement is planned (exposures being repaid, exposures for which a
     normalisation plan of longer than twelve months must be drawn up for which, although no normalisation plan exists, the exposures are
     subject to progressive reduction). These are therefore different from “operationally impaired loans” which are positions for which
     situations of temporary difficulty can be overcome in a very short period of time and for which controlled operation is allowed in order
     to mitigate risk and return the position to “performing” status, i.e. with a “normalisation plan” of less than 12 months. Counterparties
     are included in this class for which a restructuring plan with a duration of longer than six months is being drawn up (referred as a
     “stand-still” stage).


                                                                      35
The “Simplicity objective” project
The “Simplicity objective” project was launched to find solutions to improve service and customer
response times for products and services considered high priority, by improving support
processes and tools for the commercial network. The main areas of intervention were as follows:
‐ the simplification of procedures for the sale of the main current account and investment
   products by automating and integrating the compilation and printing of all forms and by
   reducing the number of signatures required for stipulating contracts;
‐ response times on mortgage loans to private individuals with the introduction of condition
   based products, designed to inform customers of the feasibility of a loan within 48 hours of
   receiving income documents on the basis of predetermined assessment parameters;
‐ the revision of the commercial independence of the larger branches with greater volumes of
   business in order to increase customer response times to requests to change interest rates and
   conditions;
‐ the creation of a specialist “Delivery Management” unit for the entire life cycle of payment
   cards issued by the network banks, reducing delivery times, minimising delays and supporting
   the distribution network with problem management;
‐ the continuous improvement of response times and standards of service for the helpdesk used
   by the distribution network, by means of initiatives designed to develop the analysis of internal
   requirements, support action, “technical professional” and “behavioural” training for helpdesk
   personnel and improvement of the information website used by the distribution network;
‐ the improvement of the management of internal Group regulations by means of action to
   rationalise the existing regulations, to simplify the publishing and the approval of new
   regulations and the introduction of an evolved front end for consultation by the distribution
   network.




The divestment of non strategic assets

On 31st May 2010 the agreement with RBC Dexia Investor Services12 (RBC Dexia), signed on 28th
September 2009, was concluded – one of the largest suppliers in the world of services to
institutional investors – involving the following:
▪ the transfer to RBC Dexia of a business unit consisting of the depositary banking business of
   the UBI Banca Group (more than 19 billion euro of assets administered, relating mainly to
   mutual fund management activities performed by the subsidiary UBI Pramerica SGR);
▪ the transfer of correspondent banking operations to RBC Dexia through the sale of contracts
   held by BPCI for the supply of paying agent services in Italy to Luxembourg Sicavs and Irish
   UCITS;
▪ the supply to UBI Banca of custody and settlement services for foreign securities activities
   relating to customer and proprietary business.

As a result of this transaction, by making use of the services of a global specialist able to
guarantee a high standard of service in the depositary banking sector, UBI Banca has further
optimised its operational risk and is continuing to invest in and focus on its core business of
supplying products and services to its customers.

The transaction is worth 93 million euro. A contract was also signed, with a life of ten years, for
the supply, under market conditions, of depositary banking services to UBI Pramerica by RBC
Dexia.
No guarantee was issued in this respect by UBI concerning the minimum level of assets under
management present in the business unit contributed. The agreements signed, nevertheless
contain some adjustment mechanisms to the transfer price, if certain events occur – including
withdrawal from the contract and renegotiation of the consideration – connected with the

12   RBC Dexia Investor Services is a joint venture between the Royal Bank of Canada and Dexia which provides a full range of services for
      investors at global level.


                                                                      36
performance for the two main contracts with UBI Pramerica falling within the scope of the
business operations contributed: (i) the depositary banking contract and (ii) the contract for the
outsourced provision of administrative services.
In terms of profit and loss, the transfer of the interest as part of the contribution of the depositary
banking operations generated a net gain of 83,4 million euro, recognised from 30th June 2010
within item 310 “post-tax profit from discontinued operations”.
The transfer of the contracts, however, gave rise to proceeds of 957 thousand euro for BPCI,
recognised within item 220 “Other operating income (expenses)”.

From an operational viewpoint, the IT migrations for the depositary banking and the
correspondence banking systems were completed in June. The migration of the retail and
institutional customers’ assets was performed and at the beginning of 2011 the migration of the
software managed by Unione Fiduciaria to Dexia for the calculation of NAVs was completed.




The renewal of the partnership in the life banc assurance sector

On 30th September 2010, UBI Banca and Cattolica Assicurazioni concluded an agreement for the
renewal of their partnership in the life insurance sector, which was due to expire at the end of the
year, extending it until 31st December 2020. The agreement, signed on 29th July 2010, involves
the distribution of the insurance products of the Lombarda Vita joint venture on an exclusive
basis through the branch networks of the network banks of the former Banca Lombarda Group
(Banco di Brescia, Banca Regionale Europea, Banca di Valle Camonica and Banco S. Giorgio).
In this context, the partnership was strengthened with the transfer by the UBI Banca Group of a
further 9,9% of the share capital of the joint venture to the Cattolica Assicurazioni Group. On
completion of the transaction, the share capital of Lombarda Vita was held as follows: 60% by
Cattolica Assicurazioni (compared to 50,1% previously) and 40% by UBI Banca Group (compared
to 49,9% previously).
The operation, which received the necessary authorisations from the competent authorities,
involved the payment of total consideration of 118,3 million euro, including 60,9 million euro (net
of taxation) as the consolidated gain, recognised in the results to 30th September 2010.

On 21st December 2010, the UBI Banca Group and the Aviva Group agreed to renew their
strategic partnership in the life insurance sector, which expires at the end of the year, by
extending it for a further five years until 31st December 2015 and maintaining the contractual
conditions unchanged.
The agreements involve the distribution of Aviva Vita insurance products through the branches of
Banca Popolare Commercio e Industria, Banca Popolare di Bergamo and Banca Carime, while
products designed by Aviva Assicurazioni Vita will be sold through the branches of Banca
Popolare di Ancona.
Since the agreements are not subject to authorisation by the competent authorities they therefore
became immediately operational.




                                                   37
Commercial activity

Reorganisation action and commercial policies

The UBI Banca Group performed its activities during the year in a context of substantial
reorganisation of the distribution networks of the network banks, designed to reduce costs
significantly by means of an improved local market presence and more effective customer service.
The Commercial Macro Area of the Parent was also affected by reorganisation with the expansion
of some operating functions considered of strategic importance including “payment systems and
electronic payment cards” and “third sector associations and organisations”.

Commercial policies were focused during the year on broadening the product range with an
increasingly advisory oriented approach, on the acquisition of new customers and young
customers in particular and on initiatives to support families and enterprises, both nationally and
locally.

Full use of customer relationship management tools was made for a more careful analysis of
customer needs and requirements to identify sub-segments with specific needs for which “made-
to-measure” commercial services could be provided.

The release of the “Financial planning and advice” platform was completed on the entire
commercial network at the beginning of 2010. In addition to compliance with the more stringent
regulatory requirements for investment services (MiFID), this also enabled customised services for
private individual customers to be developed.

The Group “catalogue” was then enriched with new products including the Mutuo Prefix (a floating
rate mortgage with a maximum limit or cap which “protects” borrowers from potential rate
increases), the “CLUBINO” savings book (for customers between the age of 0 to 12) and the Enjoy
card. At the same time specific advertising and/or product initiatives aimed at young people were
implemented.

The commercial strategy also continued to maximise synergies between network banks and
product companies, by promoting, for example, banking products for the “non captive” customers
of these companies. In the consumer credit sector the Group strengthened its position by
acquiring control of Prestitalia, a leading company in the sector in Italy.

Finally, particular attention was paid to multi-channel growth. The Contact Centre was expanded
during the year with the creation of a new unit in Milan and both new consultative and
transaction functions of internet and mobile banking services were put in place.

Commercial policies in 2011 will be oriented towards the achievement of sustainable growth over
time, with attention paid to maintaining a general structural balance based on the capacity of all
markets (including the corporate market) to generate direct funding to support growth in lending
and to maintain high levels of capital strength, through rationalising, amongst other things, the
use of capital and careful control over the quality of credit.
The management of pricing will continue to be weighted, on the basis of the cost of the risk and
the increased cost of funding, with a focus on customer targets and on high value added business
and on the following in particular: small business counterparties, the affluent segment, young
people and foreigners in the Retail Market; high potential counterparties and foreign trade
business for the Corporate Market; remunerated advisory services and, “Pro-Active Wealth
Advisory” services for high-net-worth and institutional customers in the Private Market.




                                                 38
The Retail Market

The retail market includes a total of approximately 3,6 million customers, consisting of 3,2
million private individuals (mass market and affluent segments), 355 thousand businesses (small
economic operators1 and small businesses2) and approximately 30 thousand authorities and
associations. These customers are served by 7.000 staff consisting of account and branch
managers.
In consideration of the difficult economic situation, yet again in 2010 the commercial activities of
the Group continued to be oriented on the one hand to providing solutions to help customers deal
with the current difficulties and on the other to constantly improving the quality and quantity of
the products and services provided.


“Anti Crisis” measures to support small-to-medium sized enterprises
and families
During the year the banks in the Group participated in new initiatives organised at national and
local level and took forward measures launched in 2009 to help families and businesses in their
respective local markets, co-operating with public institutions (chambers of commerce, regional
and provincial governments) and guarantee bodies3.

In August 2009 the Group had promptly joined the initiative, “Joint Announcement” to help SMEs
or in other words the “Agreement for the deferral of the debts of small-to-medium size enterprises
to banks” 4 (and subsequent additions) signed by the Ministry of the Economy and Finance, by
the Italian Banking Association and by other associations belonging to the Banks-Businesses
Observatory. In June 2010 it also participated in the extension to the time limit for the
presentation of the relative applications from businesses until 31st January 2011, which put back
the original deadline of 30th June 2010 by seven months.
At the end of December more than 14.800 thousand applications had been received – principally
attributable to medium-to-long term loans – for a total of 4,3 billion euro, of which more than
13.000 had already been processed for a quota of deferred repayment on capital amounting to
520 million euro. Almost all the applications meeting the requirements for eligibility were
accepted.

As concerns the provision of products under the Agreement to strengthen the capital of SMEs, the
Group confirmed its creation of a credit line entitled “200% Immediate Recapitalisation”, (which
provides loans equal to twice the increases in capital actually paid in by the
shareholders/proprietors of a business, up to a maximum of four million euro) and also of two
credit lines backed by guarantees under arrangements with major guarantee bodies, with more
attractive conditions than those of the Agreement:
- “400% Support and Development” – loans up to four times the amount of capital contributions
   made by the shareholders/proprietors of a business (up to a maximum of 500 thousand euro)
   designed to support growth projects by making fixed investments;
- “200% Capital Reinforcement”, loans of up to twice the amount of capital contributions made
   by the shareholders/proprietors of a business (joint stock companies, partnerships or sole
   proprietor businesses), for a maximum amount of one million euro, designed to support the
   capitalisation of businesses and the restructuring of the sources of funding. These loans may


1   Companies with a turnover below 300 thousands euro.
2   Companies with a turnover above 300 thousands euro.
3   These included a variety of subsidised instruments for businesses supported by the UBI Group: measures in the Piedmont Region for
    innovation by SMEs to support energy efficiency, to support firms operating in the tourist industry and for farms (tenancies and
    mechanisation); measures in the Region of Lombardy to support innovation in businesses, the introduction of new technologies and to
    enhance competitiveness as well as measures to meet the functional needs of farms; measures in Calabria to consolidate short term
    liabilities, to support investments and to improve and expand hotel facilities. Operations were also commenced to support farms based
    on the 2007-2013 Rural Development Programmes which included measures to assist with interest payments.
4   The agreement, which became operational on 28th September 2009 is for SMEs that are in temporary difficulty but which have good
    operating prospects and are going concerns. It enables them to benefit from four measures: i) the deferral for twelve months of capital
    repayments on mortgages; ii) the deferral for twelve or six months of the capital repayment portion of property or equipment leasing
    instalments respectively; iii) an extension to 270 days for the repayment of bank advances on short term receivables; iv) special finance
    designed to strengthen capital.


                                                                       39
   also be granted even in cases where capital payments are deferred or where future profits are
   to be allocated to reserves.
Since the weak economic recovery would suggest that the liquidity problems of businesses are
likely to continue, following the expiry of the deferral mentioned above and in order to support
businesses which survived the most acute phase of the crisis, on 16th February 2011 the Italian
Banking Association and the other signatories to the Joint Announcement signed an “Agreement
for loans to small-to-medium sized enterprises” to which the Group promptly adhered for all the
measures involved.
The Agreement extends the time limit until 31st July 2011 for the presentation of applications to
defer loans to banks by SMEs which have not already taken advantage of a similar benefit, under
the same conditions as the Joint Announcement and the subsequent addendum of 23rd December
2009.
The new Agreement also extends the repayment schedules for medium-to-long term loans which
have benefited from the deferral under the Joint Announcement by up to a maximum of two years
(three years for secured loans). As part of that extension, SMEs which apply may use instruments
to manage interest rate risk that are directly linked to the loans in question.
The provision of loans by banks in the UBI Group to strengthen the capital of SMEs again under
the Agreement described above, was confirmed.

On the basis of conventions signed subsequently by the Italian Banking Association and the
Cassa Deposito e Prestiti (CDP – state controlled fund and deposit institution), the Group also
continued to grant loans to SMEs under attractive conditions using CDP funds resulting from
postal savings (with a lower cost) as follows:
1) in the first stage of the operation, (Convention signed on 28th May 2009) – designed to support
   investments to be made, and/or in progress, or to increase working capital – which involved the grant of
   three billion euro nationally, the banks in the Group accepted approximately 1.200 applications for
   assistance for loans, amounting to more than 107 million euro of loans disbursed;
2) as part of the Convention signed on 17th February 2010, designed to regulate the criteria for distributing
   and granting the second tranche of five billion euro, the Group signed a new loan contract with the CDP
   which involved the allocation of a budget to be used by 28th February 2011, amounting to 286 million
   euro.
   The duration of the repayment schedule was set at a maximum of seven years, at an interest rate equal
   to the Euribor half year plus a spread differing according to the duration of the loan and the grace period
   and also dependent on the tier one ratio of the Bank. In consideration of the grace period chosen and the
   tier one ratio of greater than 7%, the spread for the Group stood in February 2011 at 85 basis points for
   terms of three years, at 95 basis points for terms of five years and at 105 basis points for terms of seven
   years.
   In February 2011, 1.911 loans had been approved for more than 154 million euro, of which
   approximately 117 million euro had already been disbursed, while applications for loans of more than 63
   million euro were being assessed;
3) on 17th December 2010 a third Convention was signed, designed to support the recovery in progress,
   which involved two further types of loan:
   -   a “Ten year budget”, in addition to the three, five and seven year budgets, with funding of one billion
       euro, to support lending requirements for long term investments by SMEs:
   -   a “Stable budget” to finance the growth of SMEs, into which the funds not fully used by the previous
       budgets will gradually flow, and which will offer all maturities (three, five, seven and ten years).
   The Group has been granted funding of 51,6 million euro for the “Ten year budget”, which must be used
   by 30th June 2011.
   The “Stable budget” on the other hand may be used “on demand” and must be used to fund unsecured
   loans (maturities of 13 to 120 months) and secured loans (maturities of 61 to 120 months) for
   investments to be made or being made and to increase working capital (with loans for 100% of the
   planned expenditure).
   In consideration of the tier one ratio of the Group, in January 2011 the spread for maturities of up to ten
   years was 106 basis points.

Memorandums of intent were signed in 2010 between banks in the Group and local Provincial
Governments (e.g. the Provinces of Brescia and Bergamo) designed to pay advances on sums
owed to businesses by local authorities, thereby reducing financial pressures on businesses
created by late payments.




                                                       40
These agreements involved the payment of advances by the banks participating on those
receivables, subject to notification of the receivables, with repayment in up to 17 months with low
spreads.
On their part the local authorities certify that the companies’ receivables are undisputed claims
payable in cash and indicate the period of time in which they will make the payment to the banks
making advances on the certified sums, together with the relative method of payment.

On 20th January 2010, the Group adhered to one of the Italian Banking Association “Families
Plan” initiatives designed to support the sustainability of the retail lending market. It was an
agreement to defer the repayment of mortgages by families in difficulty as a result of the crisis,
signed by the Italian Banking Association and thirteen consumer associations5 (a similar measure
to the Agreement for the deferral of loans to SMEs described above).
During the year the Agreement led to the deferral of 1.114 mortgages, on a remaining total debt of
more than 93 million euro.

As concerns the framework agreement signed in May 2009 by the Italian Banking Association and
by the Italian Episcopal Conference to grant “Loans of hope” 6 – disbursement of which is from
September 2009 until 2012 and which is centred on B@nca 24-7 –, this resulted in the grant of
16 loans for a total of 96.000 euro. Because the number of families financed was relatively low,
due to the strictness of the constraints imposed by the memorandum of intent, the agreement has
been modified recently and it is forecast that the project will involve larger numbers of families in
2011.

In consideration of the continuing severe hardship suffered by families in Abruzzo hit by the 2009
earthquake, the Group adhered to the new agreement signed between the Italian Banking
Association and the CDP – to supplement that signed in 2009 – raising the ceilings on loans and
adding new forms of finance to those already provided.
In 2010 UBI Banca Private Investment, the Group’s lead bank in the earthquake zone, granted 34
loans for a total of approximately 1,3 million euro.

To confirm the Group’s closeness to its traditional local markets, it intervened, through Banco di
Brescia, to support towns in the Veneto region hit by flooding on 31st October 2010, adhering –
both for families and for SMEs – to the measures of the Ordinance of the President of the Council
of Ministers No. 3906 of 13th November 2010 (deferral of mortgage repayments).

Finally, in the last quarter of the year the “‘Solidarity Fund’ for mortgages for the purchase of a
main dwelling” became operational. It was created by an initiative of the Ministry of the Economy
and Finance (MEF) with Law No. 244 of 24th December 2007, with the objective of assisting
debtors in difficulty with regular mortgage repayments, and it included the following:
- for mortgage contracts for the purchase of a main dwelling for borrowers, the possibility for a
   customer, if certain conditions are met, to apply for the deferral of repayments not more than
   twice for a maximum period of not longer than 18 months in the life of the mortgage;
- the creation at the MEF of the “Fund” mentioned, usable on request by mortgage borrowers
   who intend to make use of the right to defer payments, in order to pay for the costs of the
   banking procedures and possible notary fees required to defer the mortgage repayments;
- the deferral of payments, if the mortgage borrower can demonstrate the inability to meet
   mortgage repayments and rescheduling expenses, but before enforcement proceedings on the
   mortgage security have commenced.
The Group has already received the first applications and an assessment of the success of the
initiative will become possible as the year progresses.




5   Briefly the agreement involves the deferral for at least twelve months of repayments on mortgages of up to 150.000 euro taken out for the
    purchase, construction or renovation of a main dwelling even with arrears in payments of up to 180 consecutive days for customers:
    - with taxable annual income of up to 40.000 euro;
    - who have suffered from particularly negative events in the two year period 2009-2010 (death, job loss, becoming non self-sufficient,
      becoming eligible for state redundancy benefits).
6   For families that have lost all income from work, have no unearned income or income other than that generated by the ownership of a
    home or ordinary or extraordinary state redundancy benefits. It is designed to implement projects for the return to work or the start of
    small businesses.


                                                                       41
Private individuals
Investment in the development of service models for “Private individual” customers continued
during the year with an advisory approach committed to excellence. In detail, tools were released,
described below, designed to increase efficiency in the management of commercial proposals that
are increasingly customised to meet specific customer requirements.

PLANNING AND FINANCIAL ADVICE PLATFORM
The main objective is to support account managers in the formulation of appropriate investment
proposals that are in line with third level MiFID regulations and optimised to fit the relative
customer profile. The advisory platform was rolled out throughout the Group in 2010 and further
functional enhancements are planned for 2011 with the definition of a more distinctive product
range for affluent segment customers.

MORTGAGE PLATFORM
Released in 2010 and 2011, it provides account managers with a set of tools designed to provide
the following:
- estimates for customised and sustainable products for customers;
- a rapid response capacity by means of condition based products and services;
- simplified and efficient management of the mortgage application processing stages.

NEED ANALYSIS PLATFORM
This tool allows account managers to study the “overdraft” financial requirements of customers in
a structured manner, so that they can offer solutions consistent with a customer’s personal
characteristics and projects with a significant impact on household budgets.

The release of a further advisory platform is planned for the current year designed to ensure
excellence in the provision of non life insurance policies.
                                             * * *
Attention was focused in the Group’s commercial activity in 2010 on improving customer trends,
both in terms of attracting new customers to the Group and increasing the loyalty of existing
customers.
The campaigns for the acquisition of new customers have focused on high potential segments and
primarily on the following:
- young people: with the launch of a new savings book, CLUBINO, for minors and the marketing
    of a prepaid card ENJOY, targeted at 18-30 year olds and supported by advertising initiatives
    including Libertà di Comunicare (Freedom to communicate) and Promozione Natale 2010 (2010
    Christmas promotion) in partnership with the telephone operator Vodafone;
- foreigners: with the launch in 2010 and 2011 of the “Money Transfer” service on a limited
    number of pilot branches, the result of an agreement signed with Western Union.
The action taken to increase the loyalty and satisfaction of “private individual” customers
included the start of targeted “Loyalty programmes”, which involve various customer segments,
with different scoring methods depending on the products and services used. The first prize
operation launched in 2010 was linked to the prepaid card Enjoy, with the Enjoy People Club for
“young people”. On the other hand a “Loyalty programme” commenced in the first few months of
the year targeted at holders of the Libra credit card. Customer behaviour that was rewarded
included not only use of the card, but also use of a wide range of Group products and services
(e.g. loans, non life insurance policies, etc.).

CURRENT ACCOUNTS
The new Bank of Italy regulations governing transparency came into force on 26th May 2010,
which involve the insertion of “Summary cost indicators” in information sheets. Summary cost
indicators give the annual indicative cost of a current account and the figure is obtained by
summing fixed and variable annual costs for six standard users, to each of which different levels
of use are associated. The account Conto Zero Zero UBI (UBI zero zero account) was therefore
created for better positioning with respect to competitors. The account has no fixed charges, no
expenses for management and use and no constraints to link it with mortgages, personal loans or


                                                42
forms of investment. It was created primarily to acquire new customers and to meet the
expectations of those who want a transparent product that is above all always accessible.
The conditions of the Duetto Basic account were renewed with the monthly charge down from
4,95 euro to 3,00 euro. The Duetto Basic account not only includes all banking services
comprised within the fixed charge (direct debit of utility bills, cheque books, debit cards, Qui UBI
remote banking), but also three insurance services provided by Europ Assistance, with cover for
accidents, withdrawals and health services.
The CLUBINO, the savings book for children from 0 to 12 years of age – for which UBI Banca was
awarded second place in the children’s/youth accounts category in the Milano Finanza
classification of banking products – was a great success. In order to ensure continuity in the
product range it is being followed by a new current account, currently being defined, for young
people between the ages of 14 and 18, with operations limited to paying in cash, receipt of credit
transfers and cash withdrawals from branches or from ATMs using the Libramat card for minors.

LOANS
In 2010 the “Mortgages for private individual customers” sector showed the first signs of recovery
after two sluggish years. The Group nevertheless succeeded in maintaining positive growth in
disbursements, assisted by the good reception given to the new product “Prefix”, a floating rate
mortgage with a cap launched in February. With a maximum contractual limit set on the interest
rate of 5,50%, the Prefix Mortgage allows customers to enjoy the benefits of a variable rate, while
protected from excessive rises in the reference parameter (the Euribor three month rate). It also
includes the application of a competitive spread which differs on the basis of the life of the loan
and the credit rating of the customer.


Small Businesses
Commercial policies led to the progressive establishment of different service models for Small
Economic Operators (SEOs) and small-to-medium sized enterprises (SMEs). They are designed to
respond to the specific requirements of Small Business customers more effectively, which are
particularly uniform both financially and in terms of size.
The “standardised” commercial approach to SEO customers, who are more numerous and have
“basic” requirements, is designed to progressively integrate with direct channels (call centres,
internet banking, evolved ATMs), which are constantly implemented with new services.
The service model for SME customers, who have more sophisticated and varied requirements,
involves a “relationship” approach, with importance given to regular meetings with account
managers (at least quarterly), in order to explore customers’ needs, their potential and future
requirements and to propose more attractive solutions.
The relationship approach with SME customers was further enhanced during the year with
intense and progressive training action to support the network of specialist account managers
and to consolidate planning activity aspects and a “risk-adjusted” approach to pricing.

FINANCIAL CONSULTING
This is based on co-operation by the network banks with SF Consulting, an associate company
controlled by the Finservice Group and specialised in the supply of consulting services in the
subsidised loans sector which include: assessment of the eligibility of companies for subsidies,
the preparation of investment projects, the assessment of investment plans and general
assistance in making and processing applications for subsidised loans.
Recently the activities of SF Consulting have extended to include the energy efficiency of businesses, with good results for
corporate customers, which suggests further possibilities also exist for co-operation involving Retail customers.
Commercial action with the network banks resulted in more than 1.600 new potential
applications with visits to more than four thousand concerns in the small business and corporate
segment.
UBI Banca, SF Consulting and Finservice have also signed a convention for support and advisory
activities in relation to formalities for the issue of guarantees under the “Guarantee Fund for
SMEs” pursuant to Law No. 662 of 23rd December 1996. It became operational in February 2011.
The purpose of the convention is to support account managers with activities required to obtain
guarantees issued by the Fund, ranging from feasibility assessment (inclusive of verification of


                                                             43
the subjective and objective requirements of the enterprise) to the acquisition of guarantee
certification. Businesses can benefit from the Guarantee Fund created by Law No. 662 for any
type of operation, provided it is directly linked to the operating activities of the enterprise.
Depending on the nature of the eligible operations, the type of beneficiaries and their location, the
guarantee covers 85%, 80% or 60% of the loan with a maximum amount guaranteed per
enterprise of 1.500.000 di euro.
As part of the convention, SF Consulting has created a special IT platform, implemented by the
Group, which allows account managers to interact with the company while applications to the
Guarantee Fund are being processed.

SECTOR PRODUCTS
The Small Business service model is also based on the development of specific products targeted
on different sectors designed to strengthen UBI Banca’s role as a “partner bank”. The products
were created following a process of analysis and study based on special “focus group” surveys on
businesses in individual sectors, on interviews with account managers and on specific meetings
with the relevant trade associations.
The product range reserved to farms entitled SubitoImpresa Agriculture was launched in 2010,
which follows that for wholesale merchants which came out in 2009. The initiative was designed
to satisfy the principal needs of businesses in the sector: savings on the management of
payments and receipts, increased return on company liquidity, rapid finance for current
operations, cover for company risk, immediate advances against predetermined credit
authorisations to grasp commercial opportunities and deal with adversities, such as climatic
disasters and livestock epidemics as well as to simplify administrative and corporate costs.
A complete range of loans for farms was therefore made available, designed in particular for
initiatives to shorten supply chains, diversify production and facilitate generation turnover.

“NEW ENERGY” LOANS
Proposals to support investments in the production of “clean” energy and for energy savings
launched in 2009 were as follows: “New Photovoltaic Energy”, designed to finance investments in
photovoltaic plant, and “New Energy - Renewable Sources and Energy Savings”, to support
corporate development programmes designed to generate energy either from renewable sources or
with a low environmental impact (i.e. wind power, hydro, biomass generation) and to improve
energy efficiency.
Group co-operation continued in support of these proposals with the Department of Mechanical
and Industrial Engineering in the Faculty of Engineering at the University of Brescia to develop a
software application – recently updated in the light of new incentive regulations and available on
the website www.ubibanca.com – to measure the technical and economical sustainability of these
investments by simulating the expected economic and environmental cost-benefits.

INITIATIVES IN CO-OPERATION WITH THE   EUROPEAN INVESTMENT BANK
On 12th April 2010, the European Investment Bank (EIB) signed a finance contract with the UBI
Banca Group which represents the first tranche of a total EIB loan of 500 million euro to UBI
Banca already approved and destined entirely to Italian small-to-medium sized enterprises
(SMEs). Technically the operation will take the form of the subscription by the EIB of covered
bonds issued by UBI Banca: the first issue of 250 million euro, relating to the financing just
mentioned, took place at the end of April.
The projects that may be financed, through mortgage or unsecured loan contracts (although
finance leases are available), are mainly in the agriculture, industry, services and tourism sectors
with a maximum limit on each project of 12,5 million euro. The funds will be disbursed by seven
banks in the Group (Banca Popolare di Bergamo, Banco di Brescia, Banca Popolare Commercio e
Industria, Banca Regionale Europea, Banca Carime, Banca di Valle Camonica and Banco di San
Giorgio) and by UBI Leasing. The issue of covered bonds lowers the cost of funding and enables
reduced interest rates to be charged to businesses which take advantage of this opportunity: 20
basis points less on average compared to the standard cost of loans for each class of risk.
The product became operational at the end of July 2010 and as at 31st January 2011, 65
applications had been received for loans.
Commercial activities will be intensified in the first half in order to complete the first tranche of
the loans by September and to perform the subsequent issue of 250 million euro and the relative
loans by the end of this year.

                                                  44
Again with regard to EIB initiatives, Banca Popolare di Ancona won a contract under a tender
procedure organised by the Marches Region for the management of an EIB credit line worth 100
million euro for investments and expenses incurred in the context of an appropriate SME
development programme. The projects must be located in the Region and the maximum amount
that can be financed is 1,6 million euro.


Authorities, Associations and the third sector
UBI Banca has created a specific business unit, operational since 1st October 2010, dedicated to
the management and development of business in the following segments: public authorities, trade
associations, guarantee consortium bodies and funds and organisations operating in the non
profit sector including Church and religious entities.
The Group intends in this manner to identify structured commercial approaches and the relative
service models which – based on the specifics, complexity and organisation of the customers in
question – require a separate and differentiated approach with the design of products and
services able to meet the needs expressed. Completion of the activity is in progress and it will be
rolled out gradually, partly as a function of the development of market prospects and the
legislative and regulatory contexts of the sectors concerned.
The approach of all the network banks will therefore be standardised, consolidating and
developing activities already performed over the years with the same partners, as an expression of
local economies and institutions and also with the “world” associated with them (enterprises,
employees and families). The development of relations in this area occurs in a context of
confirming and enhancing the role of lead bank played in the Group’s local markets.

ASSOCIATIONS AND GUARANTEE BODIES: CONVENTION LOANS
Particular attention has always been paid, with regard to medium-to-long term lending to SMEs,
to loans granted “under convention”, i.e. loans provided on the basis of agreements with
guarantee bodies and trade associations, which represent an important link in relations with local
economies. At the same time the use of public sector instruments to mitigate credit risk
continued in the current difficult economic situation, including the use of the Guarantee Fund for
SMEs (pursuant to Law No. 662/1996) and the Fund managed by the SGFA (Fund Management
Company for the agricultural and food sectors which manages intervention for the issue of direct
and subsidiary guarantees) for farms.
As a result of new medium-to-long term loans granted in 2010 – 1.485 million euro for more than
16.700 loans (+25% in terms of amount and +4% in terms of number of loans compared to 2009)
– total outstanding medium-to-long term loans rose to 3.475 million euro (+21% compared to the
end of 2009). Short term loans rose from approximately 500 million euro to 600 million euro
(+20%).
The broad range of existing products was added to by numerous initiatives organised in co-
operation with local public institutions (chambers of commerce, regions and provinces) and by
those already described in the sub-section “Anti crisis measures to support small-to-medium
sized enterprises and families”7.
In the light of the growing Group business with guarantee bodies through conventions and of the corporate changes in
progress (company reorganisations and mergers between guarantee bodies and the transformation of some guarantee bodies
into intermediaries supervised by the Bank of Italy), a new service model will be adopted in the first half of 2011 designed to
standardise the processes for stipulating conventions, for assessing guarantee bodies and monitoring operations for all the
banks in the Group.
The website “UBI-Confidi Web” was created in September 2010, a platform for online dialogue
between guarantee bodies with convention agreements and the banks in the Group and for the
exchange of information. The website will be enriched with additional functions to manage credit
risk and to develop business by the end of June 2011.
A review of the product range and the rates and charges applied to credit lines granted under
conventions is currently in progress to bring them into line both with the increase in the cost of
funding and credit risk and also with the actual “value” of the guarantees acquired.


7   The “Portfolio PMI Jeremie FESR”, became operational in the first half of the year at BPB, Banco di Brescia and BPCI. It is a synthetic
    securitisation performed on the basis of convention agreements with Confapi Lombarda Fidi and Confidi Province Lombarde, destined to
    support investments with a high innovative content. The operation, which will be completed on 30th June 2011, involves the potential
    creation of two loan portfolios for a total of 87 million euro.


                                                                     45
THIRD SECTOR
The third sector has become a fundamental player in the Italian economy, having incorporated,
amongst other things, parts of the welfare system previously managed by the public sector. Non
profit organisations (NPOs) are experiencing a growing need for finance – as government funds
allocated to them are contracting and support from private individuals is diminishing due to the
economic crisis – which only the banking sector can provide.
This relationship, which offers banks an important return in terms of reputation and links with
local markets (as a multiplier of relationships and a social aggregator), has become strategic
commercially, partly in consideration of the considerable growth in the sector since the 1990s:
NPOs operating in Italy number around 250 thousand with turnover of more than 45 billion euro
and they involve total connected “private individuals” (employees, volunteers and associate
workers) estimated at four million.
Historically the UBI Banca Group holds a quota of deposits from and loans to the third sector
that is higher than for the sector nationally. This is due to its traditional presence on local
markets in which NPOs are more numerous and to relationships established over the years (NPOs
account for 3.4% of total Group deposits compared to 2% for the sector nationally; while they
account for 0,68% of Group loans compared to 0,52% for the sector8).
In order to strengthen network banks’ links with local communities and to further improve
market positioning, consultation with NPOs was conducted in 2010 to measure their
characteristics and needs. The results were used to define dedicated products and a specific
service model to distribute them.
Agreements are currently being defined with umbrella organisations in order to develop areas of
co-operation for initiatives to assist NPOs on local markets. At the same time training activity will
be commenced for network bank personnel designed to enhance relations with these
organisations.
The commercial model will be rolled out in the second quarter of 2011 in approximately 50
branches of the Provinces of Bergamo and Brescia and it will be extended to the whole country
within a few months.

AUTHORITIES
The “Authorities” segment is composed of public authorities and condominiums.
Public authorities constitute a sector currently undergoing a period of profound change. This is
partly due to the intense computerisation of public administrations designed to generate greater
efficiency in organisational and service delivery terms and also to comply with European
standards.
In this context, the Group is seeking to manage legislative and regulatory change in order to
increase its expertise and specialisations needed to support the development of public
administrations, especially for treasury services for public authorities (at the end of the year it
managed 2.166 treasury services).




PattiChiari Consortium: commitments to quality

Activities to implement and manage quality commitments promoted by the PattiChiari
Consortium continued during the year. They were adhered to by all the Group’s network banks
with the aim of improving retail customer relationships.
On the one hand quality commitments not yet introduced were rolled out according to the agreed
consortium calendar and on the other hand commitments already put in place were consolidated.
Group banks also continued with financial education programmes in schools, already actively
supported for some years.
It was decided in the second half of the year to commence a project to streamline quality
commitments to both make them clearer and easier to communicate to customers and to align
the general self-regulatory framework with changes that have since occurred in compulsory

8      Source: data from Bank of Italy accounts for September 2010.


                                                                46
regulations, in order to avoid unnecessary overlap. The dynamic nature of the project led to the
exclusion of some initial commitments from the scope of the PattiChiari initiative and to
incorporate others in uniform areas, while basically maintaining the entire contents of the
existing service9.
As a result of this optimisation process, which moreover is consistent with the general principles
underlying the project (simplicity, clarity, comparability and customer mobility), Group banks will
find it easier to inform customers of the commitments and to make better use of tools designed to
enable customers to make aware and informed decisions.




9   The perimeter of the project currently comprises eleven quality commitments (current accounts compared, basic account, average times
    for closing current accounts, transferability of payment services, transferability of mortgage information, transferability of securities
    dossiers, transferability of collection orders, FARO – ATM function services, home banking security, payment card security, certification
    of mortgage expenses and interest charges) and two optional initiatives (list of services provided on an account, information for access to
    credit for small-to-medium sized enterprises).


                                                                       47
The Private Banking Market

Private Banking service of the UBI Banca Group is a specialist service available throughout the
country, provided through individual network banks by 360 “private bankers” in more than 100
dedicated units.
UBI Private Banking is the third largest private banking operator nationally in Italy with 35 billion
euro of assets under management and approximately 29.000 relationships (around 65.000
customers).

The UBI private banking service model underwent intense development in 2010 with the
expansion of advisory services in the following areas:
• the “Pro-Active Wealth Advisory Service” (a customised financial advisory service which
   performs thorough assessments of the characteristics and needs of family groups, analysing
   estates and proposing the best investment solutions available on the market) was further
   developed with a focus on the following:
   - strong synergies with UBI Pramerica SGR;
   - systematic comparison with the major investment houses;
   - professionalism and team commitment (over 2.000 meetings with customers and over 3.500
      customised reports delivered);
   - a tested and systematically verified quantitative method: launch/development of
      performance attribution (analysis for each customer of the impact of strategies proposed by
      the ProAWA service); automation of reports for customers on portfolio, scenario and strategy
      analysis and on asset allocation proposals;
   - advanced investment and support tools;

• the “Family Business Advisory Service” – designed to meet specific customer requirements for
  generation turnover, family and corporate governance and asset control structures – has been
  gradually consolidated by means of in-depth training programmes and the organisation of
  meetings with customers;
• the launch of a new Planninng and financial consulting tool on the whole distribution network
  which, on the basis of customer profile analysis and answers furnished from the MiFID
  questionnaire, is used to formulate financial solutions that are highly customised to match the
  customer’s requirements.

The following progress was made with the product range in 2010:
• the “UBI Pramerica asset management” range of products was broadened:
  - the number of indices underlying the open, customer portfolio management products was
      increased to give greater customisation of the product;
  - the range of Sicav classes dedicated to the private banking market was enlarged;
• the range of banc assurance products was extended by:
  - the creation, within the broad range of products, of a new capitalisation product (insurance
      branch V), designed to attract new customers;
  - the extension of sales of Aviva products to include Banca Popolare di Ancona (unit linked
      policies in insurance branch III).




                                                  48
The corporate market

The Corporate Market has approximately 40.000 clients classified in the segment on the basis of
a minimum turnover of five million euro and therefore characterised by complex financial
behaviour patterns.
It has been divided into three sub-segments on the basis of the complexity of the financial
behaviour of the clients: Large Corporate (turnover of greater than 150 million euro), Mid
Corporate (turnover between 25 and 150 million euro) and Lower Corporate (turnover between 5
and 25 million euro). The three sub-segments are managed and supported by a network of
specialist account managers comprising a total of approximately 750 account managers and
assistants working in 65 Corporate Banking Units and 30 “Corners” and supported, for “foreign
commercial” activities, by 300 specialists operating in 35 foreign centres.

In 2010 the corporate market fully implemented the concept of an INTEGRATED PRODUCT RANGE (UBI
Corporate Advisory), by making use of the Group’s product companies and an evolved commercial
approach, which involves the following:
- integration with the product companies through the presence of a liaison officer in           the
   network banks (integrated product range contact) for the more complex products (structured
   finance, investment banking, leasing, factoring, advisory services for subsidised loans,
   insurance brokerage), who reports directly to the Corporate Area of the Parent, with the
   objective of systematically managing the commercial approach and defining a customer driven
   product range;
- the Mid Corporate Advisory Service, a programme to support Mid Corporate clients, which by
   processing a client’s historical data and comparing them with the performance of the sectors to
   which it belongs and its main competitors, is able to highlight the client’s overall needs. The
   programme has shown that the new commercial approach, which is designed to propose the
   Bank as a partner at all stages in the life cycle of a business, is becoming fundamental for the
   creation of value for companies themselves;
- the Large Corporate Advisory Service: an approach that is integrated with the demands of the
   sub-segment, centred on the preparation of evolved commercial plans, the result of joint
   contributions from a virtual team (network banks, product companies, foreign commercial
   centres). The project is designed to improve the overall service in order to increase market
   share. Approximately 350 detailed commercial plans were prepared on companies in the sub-
   segment in 2010;
- the extension of customer relationship management (CRM) to include foreign commercial
   services in order to support the operations of corporate and foreign commercial supply chains.

With regard to the FOREIGN COMMERCE SECTOR, the recent crisis which hit Italy found a sort of
safety valve in the increase in foreign trade: in 2010 Italian exports increased by more than 15%
compared to 2009, with more lively business with non EU countries than with those in the union,
while imports increased by 22%.
The commitment and effort concentrated in this area by the Group allowed the network banks to
increase the quantity and quality of their volumes of business with corporate clients, with positive
returns also in terms of customer satisfaction.

At the same time the focus on business with India, China, Brazil and other emerging countries
(markets with very attractive high growth rates) continued in order to identify – with the
assistance of commercial agreements and partnerships with major international operators –
business areas with high valued added connected with the world of trade finance.

The Group also continues to invest in:
- initiatives designed to strengthen its image and those of its local banks: the event “U will Be
  International” organised at the Kilometro Rosso venue in Bergamo was a great success. It was
  the first opportunity for businesses to meet the entire foreign network of the Group
  (companies, branches, representative offices);




                                                 49
-   constant monitoring of the quality of the service provided to clients by the dedicated
    distribution network, combined with the search for new technical and organisational solutions
    to render processes increasingly more efficient;
-   an increase in the professionalism of personnel achieved as a result of a significant
    commitment to commercial and technical training.

Finally, with regard to the network of personnel specialising in MARKET DEVELOPMENT – Market
Developer Corporate Account Managers, who report directly to the Corporate Departments of the
network banks – 32 market developers operated in 2010, who were assigned set geographical
areas and lists of specific target clients. They contributed significantly to the diffusion of a
corporate advisory approach and to an integrated corporate product range.




Communication and marketing initiatives

In recent months UBI Banca has sought and adopted a style of advertising – which continues to
be clear, transparent and honest in its contents – that is very personal and innovative, highly
attractive and distinctive in the Italian banking world.
The advertising campaigns are characterised by the use of amiable irony in the messages and a
“sunny” graphics format which, together, act to involve the public emotionally, communicating a
positive feeling of trust and friendliness. The communication is modern, simple, close to the
everyday lives of people and more akin to life in successful sectors in industry and commerce.
The objective is not just to effectively present individual products targeted according to the case at
different customer segments, but also to acquaint everyone with the “honest banking” on which
the identity of the group and its “historical” corporate culture is based.
Communication and marketing activity was focused in 2010 on the acquisition of new customers
and of young people between the ages of 0 and 29 in particular.

CLUBINO
“Clubino”, the savings book for children aged between 0 and 12 was launched in January 2010
and met with considerable interest and appreciation by customers. The product educates children
on the subject of saving in an entertaining and involving manner with prizes, a dedicated website,
local events and special initiatives. The latter included the competition “Draw your town” which
was very popular: from more than 12.000 drawings received, a jury of experts selected the 13 best
works in terms of imagination and originality which were published in the 2010 UBI Banca
calendar. The result was an explosion of light and colours which express how children see their
towns. In addition to the publication of the drawings on the calendar, each little artist was
awarded a beautiful prize.

ENJOY
Enjoy is a prepaid, reloadable MasterCard which, because it has an IBAN code, can be used to
perform many of the transactions normally only possible with a current account. It is an
innovative product for young people aged between 18 and 29, an important target for increasing
the customer base.
The launch of the product was announced by an advertising and marketing campaign designed to
arouse as much curiosity as possible. It performed the function of drawing the attention of young
people to UBI Banca, stimulating their desire to appear, thanks to a photographic competition,
and involving them in the definition of an “ideal bank for young people” through messages loaded
onto the bulletin board of a website created for the initiative. These messages not only confirmed
the validity of the “Enjoy” product and appreciation for it, but also furnished interesting ideas for
the development of products designed for young people.
The inspiration for the advertising was taken from the period of the “flower children” and 1970s
styles, which is currently extremely popular in the world of fashion and design. The positive
values of modernity, change and above all the freedom of that historical and social period were
evoked. It is precisely the value of freedom which young people of all generations have always
asked for and demanded. It became the basic idea and rationale of the “banking freedom” which
UBI Banca wants to provide today with its new product Enjoy.



                                                  50
In order to acquaint the target with new banking methods, various initiatives were organised to
support the commercialisation of the product in co-marketing with the telephone operator
Vodafone. A loyalty programme was also launched which rewards each use of the card and
passing the word around within the “Enjoy People” community.
These activities occupied the whole of 2010, with advertising in all Group branches and intense
dedicated advertising campaigns mainly on the internet and radio, with occasions of high
visibility in universities and shopping centres in major cities10.




Customer Care

The Consultation Project

Attention to managing the qualitative aspects of customer relationships and service activities had
already led, in 2008, to the launch of the Consultation Project with the objective of measuring the
satisfaction of network bank customers by means of a customer satisfaction index for the Retail,
Corporate and Private Banking markets.
The measurement of the index is performed with the assistance of a major national market
research institute. It is measured continuously in terms of aggregates and also at the level of
network banks, market segments, local retail banking areas, branches, corporate business units
(CBU) and private banking business units (PBU), by means of approximately 150.000 telephone
interviews of a representative sample of customers each year. The customer satisfaction index has
been included among incentive scheme objectives since 2009.

The performance of the indices improved progressively for the three markets (Retail, Private
Banking and Corporate) until October 2010, when it was followed by a fall in the last two months
of the year.
In detail, in December the index for the total Retail Market increased slightly compared to the
                                                                                    index in 2009, again above the
           Customer satisfaction indices of the network banks                       benchmark comparison, which
    59                                                                              also increased by a similar
   58,5
                                   58,4                                             amount.
                                                         58,22
              57,99                                                          58,11  The improvement for the Retail
    58
                                                                                    Market was due mainly to the
   57,5                            57,73                 57,69               57,74  affluent segment, while the
    57
             56,17
                                                                                    mass     market     and    small
   56,5                                                  56,16
                                                                                    business segments remained at
    56
                                   56,58                                            the same level as the year
               56,52                                                         56,09  before. The index nevertheless
   55,5
                                                                                    remained above the relative
    55                                                                              benchmark comparisons for all
           Index 2009         October 2010       November 2010       December 2010  three market segments.
                Retail Market        Corporate Market        Private Banking Market The research also identified
                                                                                    discriminating factors for Retail
Market customers such as contact with the branch manager and the offer of new products and
services: more offers and a higher frequency of contact was associated with a higher index of
customer satisfaction.

The most significant improvement was found for the Private Banking Market, which rose even
further than the benchmark comparison rose. An analysis by asset class shows an improvement
across the board for all customers, with higher index values for those in the higher net worth
groups.
In continuity with what was already found in 2009, customers expressed a high degree of
satisfaction with account managers, with regard to both relationship aspects and professional
expertise, but they would appreciate more proposals from them.


10   Pictures are published at the beginning of this report of the main communication and marketing activities targeted at young people.


                                                                       51
The Corporate Market ended the year with a slightly lower index than in 2009 as a result of the
fall that occurred in the last two months of the year and the index was still below the benchmark
comparison which also fell slightly. An analysis by segment confirmed that the degree of
satisfaction increases with company size both for the Group and for its competitors.

Some in depth surveys were conducted on specific subject areas in parallel to the measurement of
the customer satisfaction index, which allowed the Group to acquire interesting indications with
a view to improving the service.

These surveys involved the following:
‐ retail customers, holders of UBI Pramerica mutual funds and customer portfolio managements, who judged
   the range of products offered by the Group to be complete and the service to be high quality, declaring
   themselves fairly satisfied with the products chosen;
‐ customers holding UBI Assicurazioni non life insurance policies, who, as in 2009, expressed a degree of
   satisfaction that was higher than the average for the Group and a high level of loyalty;
‐ public authority treasuries, customers of UBI Banca, who expressed a high degree of satisfaction. The
   customers of these authorities appreciated the centralisation and the automation in a central office,
   although they did not yet make full use of the IT tools available (the survey performed formed part of the
   monitoring activities required for quality certification);
‐ the quality of “foreign services” provided by Group banks was judged by corporate and SME clients as
   generally satisfactory: the index showed higher levels of growth in the value added by the service and in
   direct contact with the Foreign Centre;
‐ the customers of the 316 branches involved in the “branch switching” operation, the majority of whom found
   no significant differences compared to the past. Some aspects of operational functioning were subject to
   complaint, but only in the period immediately following the operation, which then disappeared as operations
   normalised;
‐ the customers using the QuiUBI home banking services, for whom widespread use was found together with
   a medium, but increasing, index of satisfaction, higher than that of customers not using the services;
‐ the satisfaction of customers with accounts at different banks compared to those with accounts at one bank
   (i.e. who have accounts with banks in the UBI Group only): retail customers with accounts in more than one
   bank, with indices down compared to previous surveys, accounted for a third of the total Retail Market and
   more than half of the small business segment. UBI Banca was nevertheless considered the main bank for
   these customers. Customers who declared that they had accounts with one bank only had a higher
   satisfaction index than those who also used other banks. The Private Banking Market, which has a higher
   percentage of customers with accounts at different banks (more than half of the total), also had higher
   indices of satisfaction for those with accounts at Group banks only. The Corporate Market, which consists
   almost entirely of clients with accounts at more than one bank, recorded a slight reduction in the average
   number of accounts held compared to 2009.


Complaints

Complaints constitute a valuable instrument for customer consultation and each one, or even
just one complaint, may contain valuable information for improving the quality of the services
provided.
This orientation led the UBI Group to broaden the means available to customers for making
complaints to include the internet channel, available on all the websites of the network banks.




                                                      52
  Distribution of complaints received by the network banks in 2010 by channel of communication


                                                                                              Website 4,1%
                                                             Email 17,5%

                                                                                         Fax 6,7%

                                 Hardcopy  71,3%

                                                                                    Telephone 0,4%




In 2010 a total of 4.256 complaints were received by the Group’s network banks, a reduction of
17% compared to the previous year. Complaints to report impolite or unprofessional conduct by
personnel accounted for less than 2% of the total (1,74%). With an average response time of 22
days (32 days in 2009), complaints processed during the year numbered 4.188 including 1.636
accepted (they included 1.318 resolved fully in favour of customers).

The distribution of the complaints shows that more than 50% of the local units of the network
banks (branches, private and corporate banking centres) either received no complaints (29% of
cases) or just one (27%).


           Distribution of complaints received in 2010 by local unit of the network banks


                                 no complaints;              1 complaint; 
                                      29%                        27%

                                         more than 2                         2 complaints; 
                                         complaints;                             16%
                                            28%




Sixty four complaints were presented to the Financial Banking Arbitrator service, formed within
the Bank of Italy for the out-of-court settlement of disputes. In 2010 the Financial Banking
Arbitrator examined a total of 32 cases, of which 13 were resolved in favour of the customers.
Ten new complaints were presented to the Banking Ombudsman, which made eight decisions,
two of which in favour of the applicants.

Activity continued again in 2010 to inform and train the commercial personnel of all the Group’s
network banks, designed to facilitate an increasingly effective ability to consult customers and to
interpret their needs and take action on sources of even latent dissatisfaction manifested by
customers. Classroom training activity, which involved 3.200 employees, consisted of strictly
relevant courses delivered across the board and it was flanked by initiatives directly accessible
from the work station of each employee.




                                                        53
The distribution network and market
positioning

The branch network of the Group

As at 31st December 2010 the UBI Banca Group had 1.901 branches, (unchanged at the date of
this report), compared to 1.967 at the end of 2009.

                    The branch network of the UBI Banca Group in Italy and abroad

                    number o f branches                                           31.12.2010     31.12.2009        Change

                    UBI Banca Scpa                                                           2               2               -
                    Banca Popolare di Bergamo Spa (1)                                     365             375             -10
                    Banco di Brescia Spa (2)                                              362             363               -1
                    Banca Popolare Commercio e Industria Spa (3)                          234             214               20
                    Banca Regionale Europea Spa (3)(4)                                    229             295             -66
                    Banca Popolare di Ancona Spa                                          248             256               -8
                    Banca Carime Spa                                                      294             295               -1
                    Banca di Valle Camonica Spa                                             64             59               5
                    Banco di San Giorgio Spa                                                57             53                4
                    UBI Banca Private Investment Spa                                        31             36               -5
                    B@nca 24-7 Spa                                                           1               1               -
                    IW Bank Spa                                                              2               2               -
                    Centrobanca Spa                                                          6               7              -1
                    Banque de Dépôts et de Gestion Sa - Switzerland                          3               6              -3
                    UBI Banca International Sa - Luxembourg                                  3               3               -
                    TOTAL (1)(3)                                                        1.901           1.967             -66
                    Total Branches in Italy (1)(3)                                       1.892          1.955             -63


                      Financial advisors                                                  786             880             -94
                      ATMs                                                              2.470           2.533             -63

              (1)    The figure as at 31st December 2010 includes a temporary mini-branch for the launch of the prepaid card
                     Enjoy.
              (2)    The figure as at 31st December 2009 included a foreign branch which was contributed on 10th December
                     2010 to UBI Banca International.
              (3)    The figures do not include the business units dedicated exclusively to pawn business [ten as at 31st December
                     2009, belonging to Banca Regionale Europea; nine (following the branch switching operation) as at 31st
                     December 2010, operating under the Banca Popolare Commercio e Industria brand].
              (4)    The figure as at 31st December 2010 includes three foreign branches, while that as at 31st December 2009
                     included two foreign branches.



As already reported in the previous section “Significant events that occurred during the year
2010”, the main changes that occurred to the branch network of the Group during the year can
be summarised as follows:
− intragroup transfers which in January involved 316 branches, through the contribution of
  operations, performed to increase the focus of the network banks on their respective
  geographical markets. At the same time, 37 Group branches, both existing branches and those
  resulting from transfers, were transformed into mini-branches;
− direct action to streamline market presence, in implementation of the trade union agreement of
  20th May 2010, which resulted in the closure in June of 81 business units and the
  transformation of 101 branches into mini-branches;
− the continuation of the programme to open new branches with the start-up of 17 units and the
  transformation of six units previously providing treasury services into mini-branches;




                                                                        54
Action taken in 2010 on the branch network of the Group in Italy and abroad

                                                                       Opening of:              Transformation of                    Transformation of
                                           Net effect of branch                                                     Closures/
                                                                                                treasury branches                    branches into mini-
                                                switches          branches       mini-branches into mini-branches   transfers
                                                                                                                                         branches


UBI Banca Scpa                                              -                -             -                  -                  -                  1
Banca Popolare di Bergamo Spa                               7                5             3                  1                 26                 17
Banco di Brescia Spa                                       9                 -             -                  -                 10                  2
Banca Popolare Commercio e Industria Spa                  47                 -             -                  -                 27                 21
Banca Regionale Europea Spa                              -68                 4             -                  -                  2                 15
Banca Popolare di Ancona Spa                                -                1             1                  1                 11                 11
Banca Carime Spa                                            -                1             -                  -                  2                 65
Banca di Valle Camonica Spa                                 -                -             1                  4                  -                  -
Banco di San Giorgio Spa                                    5                -             -                  -                  1                  6
UBI Banca Private Investment Spa                            -                1             -                  -                  6                  -
Centrobanca Spa                                             -                -             -                  -                  1                  -
Banque de Dépôts et de Gestion Sa                           -                -             -                  -                  3                  -
TOTAL                                                       -            12                5                  6                 89                138


A summary is given below of the changes (other than branch switches) that occurred in 2010 and
until the date of this report, which affected the Group presence in Italy, while details of the
foreign network are given in a separate sub-section:
•    BANCA POPOLARE DI BERGAMO opened five branches at Muggiò and Bernareggio (Monza
     Brianza), Bagnatica (Bergamo), in Rome in Largo di Vigna Stelluti and at Velletri (Rome) and
     four mini-branches (including one former treasury branch) at Bergamo at Kilometrorosso and
     in Viale Vittorio Emanuele II (a temporary mini-branch closed in March 2011), at Songavazzo
     and Scanzorosciate, Tribulina district (Bergamo). On the other hand it closed a total of 26
     units1;
•    BANCO DI BRESCIA closed nine branches2 in June 2010 and                                              opened a new mini-branch at
     Brescia in March 2011;
•    BANCA POPOLARE COMMERCIO E INDUSTRIA closed 27 units3;
•    BANCA REGIONALE EUROPEA    opened two branches at Asti in Corso Savona and at Ivrea (Turin)
     changing its presence in the capital of Piedmont by opening a branch in Corso Francia, while it
     closed branches in Via Gobetti and Piazza Gran Madre di Dio. Finally, in February and March
     2011 a new branch became operational at Ovada (Alessandria) along with two new mini-
     branches at Casale Monferrato and Tortona at the local health board premises, while two mini-
     branches closed, again at Casale Monferrato in Via Hugues and at Rivoli (Turin) in Piazza
     Martiri della Libertà;
•    BANCA POPOLARE DI ANCONA opened a new branch at Filottrano (Ancona) and two mini-
     branches (including one former treasury branch) at Grazzanise (Caserta) at the air and naval
     base and at Gualdo Cattaneo (Perugia), while it closed 11 units4. In January 2011 a new mini-
     branch also started to operate at the air and naval base at Frosinone;
•    BANCA CARIME   opened a second branch at Monopoli (Bari), while it closed branches at Ceglie
     Messapica (Brindisi) and at Carmiano (Lecce). In March 2011, the mini-branch at Vibo
     Valentia in Corso Vittorio Emanuele III was closed;
1   Varese in Via Luini, Via Veratti, Via Griffi and at 60 Via Sanvito Silvestro; Bergamo in Via Suardi, at 2 Viale Vittorio Emanuele II and at 3
    Piazza Pontida; Laveno Mombello (Varese) at 81 and 89 Via Labiena; Venegono Superiore (Varese) in Via Busti; Uboldo (Varese) in Viale
    Italia; Busto Arsizio (Varese) in Corso Europe; Cardano al Campo (Varese) in Via Gramsci; Cassano Magnago (Varese) at 6 Via Aldo Moro;
    Gavirate (Varese) in Via IV November; Lonate Pozzolo (Varese) in Via Cavour; Sesto Calende (Varese) in Piazza Abba; Tradate (Varese) in
    Corso Bernacchi; Induno Olona (Varese) at 28 Via Porro; Lavena Ponte Tresa (Varese); Como in Viale Giulio Cesare; Cermenate (Como) at
    29/31 Via Matteotti; Cantù (Como) in Largo Adua; Lecco in Via Resinelli; Seregno (Monza Brianza) in Corso Matteotti; Vimercate (Monza
    Brianza) in Via Garibaldi.
2   Mantua in Via Calvi and Piazza de Gasperi; Cremona in Via Mantova and in Via Giordano; Caldiero (Vicenza) in Via Strà; Milan in Via
    Negri; Castiglione delle Stiviere (Mantova) at 36 Via Cavour; Brescia at 3 Piazza della Loggia; Piansano (Viterbo).
3   Milan in Via Gentilino, at 97 Via Padova, Via Rosellini, Via Sanzio, Via Secchi, at 3 Via Solari, Viale Corsica, Via Pindemonte, Viale
    Romagna, Via Tucidide, Corso Cristoforo Colombo, Largo d’Ancona; Parma at 32 Via della Repubblica and Via Tanara; Piacenza in
    Piazzale Velleia and Via Sopramuro; Melzo (Milan) in Piazza Repubblica; Sesto San Giovanni (Milan) at 40 Viale Casiraghi; Abbiategrasso
    (Milan) in Piazza Golgi; Rozzano (Milan) in Via Torino; Cinisello Balsamo (Milan) in Via Libertà; Trezzano sul Naviglio (Milan) in Via
    Leonardo da Vinci; Voghera (Pavia) in Via XX September; Vigevano (Pavia) in Piazza Volta; Casteggio (Pavia) in Via Giulietti; Mortara
    (Pavia) in Piazza Silvabella; Carpi (Modena) in Via Peruzzi.
4   Marcianise (Caserta) on the Sannitica state road; Ancona in Piazza Rosselli; Fabriano (Ancona) in Via Martiri della Libertà; Senigallia
    (Ancona) at the “Il Maestrale” shopping centre; Fano (Pesaro Urbino) in Via Pisacane; Porto Recanati (Macerata); Rimini in Via
    Gambalunga; Misano Adriatico (Rimini); Pescara at 263 Via Marconi; Rome in Via Ortolani; Guidonia Montecelio (Rome) on the Tiburtina
    state road at Setteville.


                                                                             55
•    BANCA DI VALLE CAMONICA    opened five new mini-branches (including four former treasury
     branches) at Sonico, Niardo and Darfo Boario Terme, Corna district (Brescia), Villa di Tirano
     (Sondrio) and Menaggio (Como);
•    BANCO DI SAN GIORGIO opened a mini-branch at Lerici (La Spezia) and, in March 2011, a mini-
     branch in Genoa in Via alla Porta degli Archi;
•    UBI BANCA PRIVATE INVESTMENT opened a second branch in Florence, while it closed six units
     at Bologna, Foggia, Frosinone, Pesaro, Rome in Via Baldovinetti and Varese;
•    CENTROBANCA closed its branch in Bari.

A full list of all Group branches in Italy and abroad is given in the final pages of this publication.

After the end of the year the UBI Banca Group rolled out an evolved distribution model (see the
previous section “Significant events that occurred during the year”) with the introduction of new
types of “head branch” and “group branch”. The action involved a total of 552 branches in four
network banks5.

The Italian distribution network of the Group is completed by units dedicated specifically to
private banking customers (private banking units and the associated “corners”) and to corporate
customers (corporate banking units and the associated “corners”).
                                               P rivate banking and corporate units
The summary given in the                                                                                   31.12.2009
table “Private banking and                                                                 31.12.2010      reclassified   Change       31.12.2009
corporate units” shows that                                                                                after switch

there    were   94    corporate                          Private Banking Units                107             104           3             122
banking units and 107 private                  Private Banking Units (PBU)                          58              58             -         60

banking units operating as at                                Banca Popolare di Bergamo
                                                                        Banco di Brescia
                                                                                                    14
                                                                                                    12
                                                                                                                    14
                                                                                                                    12
                                                                                                                                   -
                                                                                                                                   -
                                                                                                                                             13
                                                                                                                                              9
31st December 2010. As can be                     Banca Popolare Commercio e Industria               8               8             -         13
seen from the table, these                                     Banca Regionale Europea
                                                                          Banca Carime
                                                                                                     6
                                                                                                     3
                                                                                                                     6
                                                                                                                     3
                                                                                                                                   -
                                                                                                                                   -
                                                                                                                                              7
                                                                                                                                              3
units were also subject to                                     Banca Popolare di Ancona              5               5             -          5
reorganisation                and                               Banca di Valle Camonica              1               1             -          1
                                                                    Banco di San Giorgio             3               3             -          3
rationalisation as part of the                              UBI Banca Private Investment             6               6             -          6
branch optimisation project                    Private corners                                      49              46            3          62
                                                             Banca Popolare di Bergamo              18              15            3          18
performed in January 2010,                                              Banco di Brescia             3               3             -          7
with a consequent reduction                       Banca Popolare Commercio e Industria               5               5             -         12

compared to the end of 2009                                    Banca Regionale Europea
                                                                          Banca Carime
                                                                                                     1
                                                                                                    11
                                                                                                                     1
                                                                                                                    10            1
                                                                                                                                   -          3
                                                                                                                                             10
(-18 private banking facilities                                Banca Popolare di Ancona             11              11             -         11

and -25 corporate facilities)6.                                     Banco di San Giorgio               -             1           -1           1

                                                        Corporate Banking Units               94               95           -1            120
New action was taken to Corporate Banking Units (CBU) Bergamo
                                               Banca Popolare di
                                                                                                    66
                                                                                                    18
                                                                                                                    66
                                                                                                                    18
                                                                                                                                   -
                                                                                                                                   -
                                                                                                                                             71
                                                                                                                                              17
restructure these facilities in                          Banco di Brescia                           15              15             -          18
the first few weeks of 2011,         Banca Popolare Commercio e Industria                            9               9             -          11
                                                 Banca Regionale Europea                             8               8             -           9
performed in parallel with the                              Banca Carime                             5               5             -           5
changes that affected the                        Banca Popolare di Ancona                            6               6             -           6
                                                  Banca di Valle Camonica                            2               2             -           2
distribution models of some                          Banco di San Giorgio                            3               3             -           3
network banks. In detail:         Corporate corners                                                 28              29           -1          49
                                               Banca Popolare di Bergamo                             1               1             -           5
- with     regard   to   private                         Banco di Brescia                            8               8             -          13

   banking facilities, Banco di      Banca Popolare Commercio e Industria
                                                 Banca Regionale Europea
                                                                                                     4
                                                                                                     3
                                                                                                                     6
                                                                                                                     3
                                                                                                                                 -2
                                                                                                                                   -
                                                                                                                                              11
                                                                                                                                               9
   Brescia    streamlined    its                            Banca Carime                             3               2            1            2
   presence in Milan and                         Banca Popolare di Ancona                            7               7             -           7
                                                  Banca di Valle Camonica                            1               1             -           1
   Brescia unifying the four                         Banco di San Giorgio                            1               1             -           1
   units previously operating in
   the two Lombard cities into just two PBUs;

5   Banco di Brescia, Banca Carime, Banca di Valle Camonica and Banca Regionale Europea.
6   Additional changes occurring in 2010 were as follows:
    − in the private banking sector, BPB opened three new corners at Arcore, Cesano Maderno, Binzago district (Monza Brianza) and Erba
      (Como); Banco di San Giorgio closed its only corner at Chiavari, while Banca Carime opened a corner at Vibo Valentia, which then
      ceased operations in March 2011 when its mini-branch host closed;
    − in the corporate banking sector, Banca Carime opened a new corner at Lamezia Terme (Catanzaro), while Banca Popolare Commercio e
      Industria closed corners at Sassuolo (Modena) and Reggio Emilia.


                                                                       56
-    as concerns corporate banking facilities on the other hand, again Banco di Brescia unified two
     units operating previously in Milan into one single CBU and it transformed its Cremona CBU
     into a corner, while opening two new corners in Milan at Lambrate and Corsico (Milan). Banco
     di San Giorgio, on the other hand, closed a corner at Imperia, while Banca Carime transformed
     a corner at Lecce into a CBU and opened a new corner at Martina Franca (Taranto).

Following the action described, 104 private banking facilities (56 PBUs and 48 corners) and 95
corporate banking facilities (65 CBUs and 30 corners) were in operation at the date of this Report.

The distribution network of the Group was also supported by a network of 786 financial advisors
reporting to UBI Banca Private Investment, consisting of 419 operating in the central and
northern division and 367 in the central and southern division. The decrease compared to 880
financial advisors at the end of 2009 reflects the streamlining process started in the second half
of 2008 designed to increase the average per capita portfolio of financial advisors7 and to improve
the quality of the network.
On the basis of Assoreti (national association of stock brokerage companies) data published in December, UBI
Banca Private Investment was again in 2010 among the first ten operators nationally in terms of number of
advisors, assets and net inflows. The latter were driven by assets under management, two thirds of which
consisting of mutual funds and Sicavs.




The international presence

At the date of this report the international presence of the UBI Banca Group was structured as
follows:
•    two foreign banks, Banque de Dépôts et de Gestion Sa (with branches in Switzerland at
     Lausanne, Geneva and Lugano and a fund management company in Singapore) and UBI
     Banca International Sa (with headquarters in Luxembourg, branches in Munich and Madrid
     and a trust company in Luxembourg);
•    three foreign branches of Banca Regionale Europea in France (at Nice, Menton and Antibes);
•    representative offices in Sao Paolo in Brazil, Mumbai, Shanghai, Hong Kong and Moscow;
•    equity investments (mainly controlling interests) in four foreign companies: in addition to UBI
     Trustee Sa Luxembourg and BDG Singapore Private Ltd. also in Lombarda China Fund
     Management Co. and UBI Management Co. Sa;
•    one Branch of UBI Factor Spa in Krakow in Poland;
•    37 commercial co-operation agreements with foreign banks (covering more than 50 countries)
     two “Trade Facilitation” agreements with the European Bank for Reconstruction and
     Development (EBRD) and with the International Financial Corporation (IFC) and a “product
     partnership” in the Middle East and in Asia with Standard Chartered Bank to guarantee
     effective assistance on all the principal international markets for corporate clients.




7   The average size of financial advisors’ portfolios increased from approximately five to six million euro over twelve months


                                                                        57
Remote channels

The Group’s market presence is strengthened by functions for the consultation and management
of bank accounts provided for network bank customers by multi-channel services. An innovative
new platform on which all direct channels available to private individuals and businesses
converge (internet and mobile banking, the contact centre, interbank corporate banking, ATMs
and POS terminals) ensures the constant enhancement and customisation of services based on
customer profiles and the channel used.

Channels available to private individual customers include:
• the QUI UBI internet banking service for information on banking positions (current accounts,
  securities deposits, payment cards, mortgages, insurance policies, etc.) and to perform
  numerous payment and investment transactions autonomously, with maximum security,
  speed and savings for those gaining access from a PC or a smart cell phone. The “business”
  version for small business clients provides additional specific functions for single bank
  management of a company, which include the payment of single or multiple bills of exchange
  and the management of commercial portfolios;
• the QUI UBI Contact Centre service, contactable on a toll free number even outside normal
  branch opening times, which in addition to normal telephone services (information, order
  collection and payment instructions) comprises both actual and potential customer support
  and consultation activity together with advertising and marketing activity;
• a network consisting of approximately 2.500 ATMs, including over 300 equipped for paying in
  banknotes and cheques in addition to normal consultation, withdrawal and payment
  functions.

Customers of the QUI UBI Internet Banking service grew in 2010 by more than 23%, exceeding
643 thousand at the end of the year (approximately 520 thousand in December 2009). The growth
of the QUI UBI Affari service was particularly encouraging having reached more than 65 thousand
users at the end of the year (+84% compared to twelve months before).
The mobile banking service recorded 15 thousand accesses per month on the website optimised
for cell phone navigation, while in December, the first month of availability, over ten thousand
downloads of applications for iPhones and Androids were recorded.

The speed and increasing security of these channels has increased customer satisfaction as
confirmed by the increase in their use:
- the number of payment and telephone recharge transactions rose to around 4,5 million, an
   increase of 45%;
- more than half of the trading in securities on regulated markets is now regularly performed
   through direct channels;
- the percentage of payments performed using evolved ATMs, accounting for 15% in 2010, also
   increased, although by a limited amount.

These results were also assisted by numerous improvements made during the year, as follows:
•   the internet banking platform for private individual and small business customers was
    improved with new consultation functions (consultation of direct debit instructions, amount of
    total securities deposits, capital gains) and instruction functions (payment of multiple bills of
    exchange, revocation of hardcopy advice of collection orders, email address certification, credit
    transfers for building renovation and energy savings, customisation of menu preferences and
    fast transactions);
•   the rollout of the free information service entitled “QUI UBI Light” designed to help customers
    uneasy with the internet to use this channel;
•   the development of a new multichannel “demo” which shows customers the main functions
    available on direct channels by means of illustrative videos and interactive simulations;
•   the launch of a mobile application for navigation using iPhones and Android smartphones in
    addition to that on the optimised site already available for approximately two thousand models
    of cell phones;



                                                  58
•     the adoption of a single infrastructure for the public websites of the network banks based on
      the model adopted for the commercial website ubibanca.com;
•     the launch of a prize competition “Qui fai. Qui hai. Qui UBI” to incentivise the electronic mail
      receipt service entitled Le mie contabili (my accounts)8;
•     in the first half, the installation was also completed of 30 kiosks, self service machines,
      equipped with touch screen technology which provide consultation and instruction functions
      by means of Bancomat debit cards that are very simple and intuitive to navigate.

Action to enhance internet banking products is also moving forward in the current year with the
implementation of new functions to further improve customer access to information by means of
self service procedures and broader technological support in the use of banking services9.
Services for businesses allow companies to manage all their banking and interbank transactions,
both single and multi-bank. in an efficient and integrated manner. They also allow companies to
configure the connection for use by single companies or groups of companies, to provide
economic and organisational benefits in the management of cash flows with banks customers and
suppliers.
In the fourth quarter of 2010 the migration onto the new interbank corporate banking platform
was concluded, which allowed the range of services offered to be redefined on the basis of the real
needs of the end users. Some small economic operator (SEO) customers were therefore moved to
the QUI UBI Affari Service, more appropriate to the requirements of these counterparties, while
the commercial range of products and services for the corporate and small business segments
was focused on the QUI UBI Businesses Service, the Group’s multi-bank, interbank corporate
banking product.
Consequently at the end of December the UBI Banca Group had over 146 thousand companies
connected to the interbank corporate banking channel, which confirmed the growth in the
number of payment and receipt instructions communicated on electronic channels.




Cards

At the end of 2010 total credit cards issued by B@nca 24-7 and by Cartasì numbered 1.020.898,
an increase of 6% compared to 963.351 cards in December 2009 and recovering strongly
compared to June (+17%), a result assisted by marketing initiatives10.
The range currently offered by the UBI Group is differentiated by type of user:
− private individual customers can choose between flexible cards (with repayment either of the
  balance or in instalments) and revolving cards of different varieties according to the market
  (Retail or Private Banking);
− companies, on the other hand, are offered business and corporate cards which vary according
  to the credit limit and the services.

In order to satisfy the different needs of customer segments more fully in terms of functions and
additional bundled services, a series of actions were defined to streamline the Libra range of
credit cards issued by B@nca 24-7 and distributed by the network banks of Group. More
specifically action was taken to diversify the type on the basis of the target customers, with
consequent differentiation in terms of maximum credit limits and charges, the latter in proportion
to the services linked to the card.
In detail, in July:



 8    The number of customers who agreed to forgo hardcopy correspondence in 2010 practically doubled to 200 thousand. At the same time
      the number of current and deposit accounts linked to this service (305 thousand as at December 2010) increased significantly.
 9   Initiatives carried forward in the first quarter of 2011 include: the launch of the prize competition entitled “Formula UBI”, reserved to
      holders of the Libra card, which can be managed on a multi-channel basis (branch, internet, contact centre, SMS); the release of new
      instruction functions for QUI UBI and QUI UBI Affari (e.g. donations to non profit organisations and POS terminal statements); the
      creation of a mobile application for Blackberry and Nokia.
10    The “Family Range” offer – which allows four payment cards to be purchased (a Libramat debit card, a Libra Classic credit card, an
      additional or family Libra Classic credit card and a SEMPRE prepaid card) offered in a single package at a total cost of 24 euro – was
      flanked in July by the prize competition Il cielo in una carta (heaven in a card) targeted at all those who take out a payment card from
      among a set range during the period when magnetic band cards are replaced with microchip cards.


                                                                        59
− marketing of the Libra Gold Superior card was launched, a new “premium” charge card linked
  to the international MasterCard association, available for the Retail and Private Banking
  segments in both a principal and a family version;
− “Plus” versions of the Libra Classic and Libra Extra cards were introduced;
− the Libra Gold card was repositioned on the basis of the maximum credit limits and the
  annual charge. Libra Gold, like the new Libra Gold Superior, has therefore become a
  “premium” product which provides additional packages and services of certain interest to
  customers.

All the new types of card incorporate highly specialised insurance packages that are distinctive on
the Italian market, provided in co-operation with Chartis Insurance together with the normal
insurance policies provided by UBI Assicurazioni. The “rebate program” was also extended to the
Gold and Gold Superior cards. This mechanism, already provided for Libra Extra and Kalìa cards,
eliminates the annual charge if spending in the year before exceeds a set amount11.

Prepaid cards increased by 30% over twelve months to 175.942 (135.413 at the end of 2009), as a
result of the success of “Enjoy”, the new reloadable evolved card launched in April which
incorporates the services of a current account12.
The Enjoy card, which achieved immediate popularity with 45 thousand cards issued in 2010,
won the “MF Innovation Award” for services and prepaid cards13.
The launch of this new prepaid card was effectively supported by the advertising campaigns
Libertà di comunicare (Freedom to communicate) and Promozione Natale 2010 (2010 Christmas
promotion), both designed to acquire new customers. It was also assisted by the possibility
introduced in December to book the card online and then collect it from branches as part of the
“Remote selling project” for the development of internet sales of banking products14.

Finally, as concerns debit cards (Bancomat-Pagobancomat), at the end of 2010 these came to
number 1.900.000, an annual increase of over 25%.
The trend was assisted by the marketing in the second half of the new Libramat card, a debit card
equipped with a microchip which responds to the new general SEPA recommendations.
The distinctive feature of this new card is the ability to make withdrawals and payments subject
to online control of current account balances, both in Italy and abroad (termed “OLI”, On Line to
Issuer). It is also possible to set further limits (termed “card” limits) without online controls of
current account balances.

In July the Group commenced the progressive replacement of the current multifunction debit and
credit cards equipped with magnetic bands only with new chip cards. This process, which should
be complete by the end of the first half of 2011, involves over a million and a half cards.

The Group also has more than 61.220 POS terminals installed in retail outlets. In 2010, Banca
Popolare Commercio e Industria participated in a pilot initiative to install POS terminals with
contactless technology in the Milan area which allow payments of small amounts to be accepted,
termed micro-payments, swiftly and securely, where the transaction is performed in just a few
seconds, without cardholders losing possession of their payment cards. The contactless
technologies installed are PayWave by Visa and PayPass by MasterCard.




11   “Formula UBI” was launched in February 2011, a prize competition designed to increase customer loyalty by the extraction of prizes for
     holders (both new and existing customers) of at least one Libra card linked to the MasterCard association.
12   These included the following; credit transfers in Italy and in the Sepa Area; payment of wages directly into the card account; direct debit
     of utility bills; the definition, from time to time, of the maximum balance that can be spent by telephone or internet banking (box
     service); the possibility to make micro-payments using innovative new contactless technology(MasterCard, PayPass).
13   The “Milano Finanza” newspaper awards, made in co-operation with Accenture, are among the most important made to companies in
     the banking, financial and communication industries. The Innovation Award in particular is made to financial products and services
     which respond best to market demands.
14   Additional versions of the Enjoy card were launched in March 2011 with the common feature that they can be customised by customers:
     Enjoy standard, with indication of the first and last name of the holder, Enjoy Gallery Card, with customisable graphics; Enjoy Brand
     Card, the result of co-branding initiatives with institutions and companies made-to-measure to meet the requirements of the brand
     partner.


                                                                        60
The positioning of the Group

The table summarises the positioning of the                        UBI Banca Group: market shares
UBI Group in terms of branches as at 30th
September 2010, on the basis of the latest                         Branches                                 30.9.2010   31.12.2009

available Bank of Italy data.                                                               North Italy          6,4%         6,6%
                                                                   Lombardy                                    12,9%        13,4%
Compared to the position at the end of 2009,                        Prov. of Bergamo                           20,9%        20,8%
                                                                    Prov. of Brescia                           22,8%        22,4%
market share has fallen in some of the                              Prov. of Como                               6,1%         6,7%
Lombard provinces affected by geographical                          Prov. of Lecco                              5,4%         5,9%
streamlining initiatives agreed under the                           Prov. of Sondrio                            8,1%         7,1%
                                                                    Prov. of Mantua                             5,7%         6,5%
trade union agreement of 20th May 2010.                             Prov. of Milan                              9,1%         9,6%
                                                                    Prov. of Monza Brianza                      8,5%             -
With account taken of recently formed                               Prov. of Pavia                             15,5%        16,4%
                                                                    Prov. of Varese                            23,7%        26,5%
provinces15, at the end of September the
                                                                   Piedmont                                     8,4%         8,3%
Group had a market share equal to or greater                        Prov. of Alessandria                       11,2%        11,0%
than 10% in 19 Italian provinces, as well as                        Prov. of Cuneo                             24,5%        24,6%
an important presence in Milan (9%) and in                          Prov. of Novara                             5,1%         5,0%

Rome (4%).                                                         Liguria                                      6,0%         6,0%
                                                                     Prov. of Genoa                             5,0%         4,9%
                                                                     Prov. of Imperia                           5,8%         5,7%
                                                                     Prov. of Savona                            5,9%         5,9%
                                                                     Prov. of La Spezia                        10,3%        10,9%
                                                                                           Central Italy         3,6%         3,7%
                                                                   Marches                                      8,7%         9,0%
                                                                    Prov. of Ancona                            10,5%        11,1%
                                                                    Prov. of Macerata                           9,5%         9,8%
                                                                    Prov. of Ascoli Piceno                      3,6%         6,4%
                                                                    Prov. of Fermo                             10,6%             -
                                                                    Prov. of Pesaro-Urb ino                     8,1%         8,2%
                                                                   Latium                                       4,3%         4,4%
                                                                    Prov. of Viterb o                          14,9%        15,2%
                                                                    Prov. of Rome                               4,0%         4,1%
                                                                                            South Italy          8,3%         8,3%
                                                                   Campania                                      6,1%        6,1%
                                                                    Prov. of Caserta                             8,6%        8,6%
                                                                    Prov. of Salerno                             8,1%        8,0%
                                                                    Prov. of Naples                              5,5%        5,4%
                                                                   Calabria                                    22,2%        21,7%
                                                                    Prov. of Catanzaro                         14,2%        13,9%
                                                                    Prov. of Cosenza                           25,7%        25,6%
                                                                    Prov. of Crotone                           18,9%        18,4%
                                                                    Prov. of Reggio Calab ria                  22,2%        21,4%
                                                                    Prov. of Vib o Valentia                    28,2%        26,8%
                                                                   Basilicata                                  14,5%        14,5%
                                                                    Prov. of Matera                            15,7%        15,5%
                                                                    Prov. of Potenza                           13,9%        13,9%
                                                                   Apulia                                       8,1%         8,2%
                                                                    Prov. of Brindisi                          11,6%        12,3%
                                                                    Prov. of Bari                              10,1%         9,2%
                                                                    Prov. of Barletta-Andria-Trani              6,3%             -
                                                                    Prov. of Taranto                            8,3%         8,3%
                                                                                              Total Italy        5,6%         5,7%




15   The Bank of Italy has provided market share data from June 2010 for the new provinces of Monza Brianza, Fermo and Barletta-Andria-
     Trani, formed in 2009.


                                                                    61
Human resources

 Changes in the composition of Group Personnel

                                                                 Employees actually in service                       Employees on the payroll

                                                             31.12.2010     31.12.2009      Changes        31.12.2010        31.12.2009    Changes
 Number                                                           A              B             A-B               C               D           C-D

     Banca Popolare di Bergamo Spa                                 3.761           3.606           155            3.808           3.664          144
     Banco di Brescia Spa                                          2.632           2.624             8            2.625           2.643          -18
     Banca Carime Spa                                              2.221           2.211            10            2.363           2.395          -32
     Banca Popolare Commercio e Industria Spa                      1.756           1.965          -209            1.952           1.946            6
     Banca Popolare di Ancona Spa                                  1.715           1.692            23            1.795           1.805          -10
     Banca Regionale Europea Spa                                   1.552           1.958          -406            1.585           2.011         -426
     UBI Banca Scpa                                                1.367           1.318            49            2.171           2.204          -33
     Banco di San Giorgio Spa                                        417             373            44              418             369           49
     Banca di Valle Camonica Spa                                     346             349            -3              346             353           -7
     Centrobanca Spa                                                 325             351           -26              316             337          -21
     IW Bank Spa*                                                    291             281            10              312             284           28
     B@nca 24-7 Spa                                                  227             204            23              172             135           37
     UBI Banca Private Investment Spa                                167             174            -7              163             171           -8
     Banque de Dépôts et de Gestion Sa                               110             124           -14              107             124          -17
     UBI Banca International Sa                                       98              96             2               92              91            1
 TOTAL FOR BANKS                                                  16.985         17.326           -341           18.225          18.532         -307
   UBI Sistemi e Servizi SCpA                                      1.860          1.838             22              665             657            8
   UBI Leasing Spa                                                   242            226             16              250             245            5
   UBI Factor Spa                                                    153            145              8              145             143            2
   UBI Pramerica SGR Spa**                                           142            128             14              122             117            5
   Prestitalia Spa                                                   105            107              1              102             107           -5
   UBI Insurance Broker Srl                                           40             38              2               36              36            -
   UBI Fiduciaria Spa                                                 23             25             -2               17              18           -1
   Silf Spa                                                           14             26            -12               25              28           -3
   BPB Immobiliare Srl                                                 9             10             -1                4               5           -1
   IW Lux Sàrl                                                         7             13             -6                8              10           -2
   UBI Gestioni Fiduciarie Sim Spa                                     7              8             -1                4               4            -
   Gestioni Lombarda (Suisse) Sa                                       6              8             -2                5               8           -3
   Centrobanca Sviluppo Impresa SGR Spa                                6              6              -                2               2            -
   Coralis Rent Srl                                                    6              5              1                -               -            -
   UBI Trustee Sa                                                      4              -              4                4               -            4
   UBI Management Company Sa                                           2              3             -1                2               3           -1
   S.B.I.M. Spa                                                        1              1              -                -               -            -
   Twice Sim Spa*                                                      -             44            -44                   -           44          -44
   Capitalgest Alternative Investments SGR Spa**                        -            10            -10                   -            1           -1
   UBI Pramerica Alternative Investments SGR Spa**                      -             2             -2                   -            5           -5
   CB Invest Spa                                                        -             1             -1                   -            3           -3
 TOTAL                                                            19.612         19.970           -358           19.616          19.968         -352
 Workers on personnel leasing contracts                                87            373          -286                 87            373        -286

 TOTAL PERSONNEL                                                  19.699         20.343           -644
   On secondment outside the Group
         - out                                                         17             14             3
         - in                                                                                                        13              16           -3
 TOTAL WORKFORCE                                                  19.716         20.357           -641           19.716          20.357         -641

∗    The position of IWBank as at 31st December 2010 also includes the personnel of Twice Sim, merged on 1st November 2010.
**   The position of UBI Pramerica SGR Spa as at 31st December 2010 also includes the personnel of Capitalgest Alternative Investments SGR Spa and UBI
     Pramerica Alternative Investments SGR Spa merged with effect from 1st July 2010.

The table above gives details for each company of the actual distribution of ordinary employees (workers on permanent and temporary
contracts and on apprenticeship contracts) within the Group as at 31st December 2010, adjusted to take account of secondments to and from
other entities within or external to the Group (column A) compared with the position at the end of 2009 (column B) restated on a consistent
basis. Column C, on the other hand, gives details for each company of the number of employees on the payroll as at 31st December 2010
compared with the end of 2009 restated on a consistent basis (column D).
The position as at 31st December 2009 was restated as follows:
  the personnel of UBI Banca was reduced by 50 employees working on depositary banking operations disposed of on 31st May 2010;
  the personnel of Banca Carime was increased by one, reinstated in 2010.



                                                                            62
At the end of 2010 the total personnel of the UBI Banca Group numbered 19.699 compared to
20.343 in December 20091, a decrease over twelve months of 644. This change reflects, on the
one hand, less recourse to agency leasing contracts by network banks and Group member
companies and, on the other, a reduction in the numbers of employees actually in service, on
temporary and on permanent contracts, due to personnel turnover with recruitment and persons
leaving and to redundancy schemes.

The synergies involved primarily the network banks (-612 consisting of 378 employees and 234
on agency leasing contracts), mainly in relation to two batches leaving under incentive schemes
under the agreement of 20th May 2010 (which involved a total of 500 personnel, including 436 in
the network banks), but also as a result of redundancy initiatives performed in the distribution
network.
Furthermore, the changes in personnel numbers at the level of individual network banks are attributable to the
branch “switches” performed in January as part of the branch network optimisation plan, which led to
specialisation of the banks by geographical area.

The remaining personnel working in other banks and companies in the Group also recorded a
decrease in personnel (a total of -32), which nevertheless included some units with growth in
personnel consistent with the specific organisational and market contexts in which they operate.

The table gives details of changes in the type                           Employees on the payroll
of employee contract, with a total decrease
in numbers over twelve months of 352, the                                Number                                       31.12.2010        31.12.2009         Change

result of 1.056 personnel leaving – 153 due                              Total employees                                    19.616             19.968            -352
to use of the “solidarity fund”, 413 for                                 of which: permanent                                19.420             19.441              -21

retirement, (392 on incentive schemes) and                                          on temporary contracts
                                                                                    apprentices (*)
                                                                                                                                171                498           -327
                                                                                                                                 25                 29              -4
198 for end of contract – and 704 new
appointments, as follows:                                                (*)   Contract regulated by Legislative Decree No. 276/2003 (Biagi Law) for young people
                                                                               between the ages of 18 and 29, by which they acquire a qualification through training at
- 293 on permanent contracts (including                                        work which provides them with specific occupational skills. The duration varies from a
                                                                               minimum of 18 months to a maximum of 48 months.
   part of the 550 temporary contract                                          In the fourth quarter of 2010, the contracts of 13 employees were converted from

   conversions pursuant to the agreement of                                    temporary to permanent contracts.

   20th May 20102),
- 400 on temporary contracts and
- 11 on apprenticeship contracts.

Intragroup mobility involved 641 personnel consisting of 505 on secondment and 136 leaving and
being re-appointed in a new Group member company. This mobility was attributable mainly to
organisational measures taken in connection with processes to reallocate personnel as a
consequence of initiatives to increase efficiency performed in implementation of the trade union
agreement of 20th May 2010 and in connection with merger operations.

The average age of Group employees as at 31st December 2011 was 43 years and five months
compared to 43 years and three months at the end of 2009, while the average length of service
was 16 years and nine months compared to 16 years and seven months a year before.

The percentage of part time
employees was 7,3% (7% at the                     Composition of personnel in Group Banks by rank

end of 2009). Female personnel                    Number                                                    31.12.2010          %          31.12.2009          %
accounted for 36,7% of the total,
compared to 35,5% in the year
                                                  Senior managers                                                    411         2,3%               465         2,5%
                                                  Middle managers 3rd and 4th level                                3.209        17,6%             3.291        17,8%
before.                                           Middle managers 1st and 2nd level                                3.877        21,3%             3.961        21,4%
                                                  3rd Professional Area (office staff)                            10.488        57,5%            10.540        56,8%

As can be seen from the table 1st and 2nd Professional Area (other personnel)    240   1,3%    275   1,5%

there  were    no   significant TOTAL FOR BANKS                               18.225 100,0% 18.532 100,0%

changes in the composition of personnel by rank. The reduction shown in both absolute and

1   The figure published in the consolidated financial statements as at and for the year ended 31st December 2009 (20.285) also included 50
    personnel working in the depository operations business unit disposed of by UBI Banca in May 2010; on the other hand it did not yet
    include Prestitalia (107 employees), included in the consolidation with effect from September 2010, and also one employee of Banca
    Carime reinstated during the year.
2   The remaining conversions to permanent contracts do not appear as new appointments because they were performed with changes in the
    contract with no intervening interruption.


                                                                               63
percentage terms in the senior manager category reflects the redundancy incentive scheme
implemented in 2010.

Further details in trends and in the composition of Group personnel are given in the 2010 Social
Report, which may be consulted.




Developments              in     redundancy               plans     and      the      employment
programme

As concerns the redundancy plan implemented by the UBI Banca Group on the basis of the trade
union agreement of 14th August 2007, this resulted in 36 personnel leaving in 2010 which, added
to the 864 that had already left since 31st December 2009, brought the total number of personnel
leaving at the end of 2010 to 900. This incentive scheme will end in 2011 with 60 employees
leaving after a postponement in relation to new measures introduced by Decree Law No. 78/2010
(converted into Law No. 122/2010).

As concerns the 500 redundancies planned under the trade union agreement of 20th May 2010,
321 were implemented effective from 1st July and the remainder took effect subsequent to that
date.
Personnel leaving through use of the ‘credit solidarity fund’ numbered 116, while in all other
cases personnel left due to retirement.

As concerns the employment programme, the 425 conversions from temporary to permanent
contracts planned under the agreement of 14th August 2007 had already been completed in 2009.
However, the following was performed in 2010:
- 170 temporary to permanent contract conversions pursuant to the trade union agreement of
   23rd January 2010 concerning “the branch switching operation”;
- 550 contract conversions under the agreement of 20th May 2010, all completed in the last
   quarter of the year, the majority of which with the transformation performed with no
   interruption in service.

The children of workers who had applied for early redundancy were considered in the selection of candidates
in compliance with the trade union agreement of August 2007 and subsequently affirmed in that of May 2010.




Management policies and instruments

The difficult economic context in recent years, characterised by increasing demands from
customers and strong pressure on profits, required action to be taken in a number of areas. In
this situation the UBI Group considered it even more important to focus on human capital as a
key factor in the success of the Group.

With a view to enhancing and encouraging the growth of its human resources, the UBI Group
uses operational and development tools established and periodically updated over the years,
which provide it with a valuable database on the occupational history of personnel.
The system of roles, skill measurement and performance assessment are used to manage almost
all personnel and the results represent the basis for the definition of career paths, the
identification of training requirements and how economic recognition is assigned.
“Managerial appraisal” methods (assessment through structured interviews) are used to enhance
and develop key personnel with the objective of verifying – and if necessary increasing –
consistency between market challenges and the skills of senior management.

Particular attention is paid to the management of talent in the Group, in order to ensure
continuity in management and appropriate action to guarantee personnel retention. In this


                                                     64
respect the measurement of potential was continued, in order to facilitate the ability to fill future
key positions in the Group, by giving priority to internal personnel, and was extended in the
current year to include mass market account managers, professionals in the product companies
and function managers at UBI Banca and UBI Sistemi e Servizi, with a total of 262 personnel
involved.

Finally the release of ERM (Employee Relationship Management) was completed during the year
at UBI Banca, UBI Sistemi e Servizi and in the network banks. It is an innovative tool designed to
integrate and enhance the management and development of human resources. ERM not only acts
as a pool for all information on employees, but also assigns a portfolio of resources to each
manager, providing them with valid support in directing and managing their actions, in order to
ensure a proactive, swift and standard approach in behaviour adopted throughout the Group. All
this allows an increasingly sharper focus on individuals, thereby placing human resources at the
centre of management activity.




Remuneration and incentive policies

The pursuit of the objectives of sustainable growth and the creation of value, defined in the
document “Risk appetite and the creation of value in the UBI Banca Group: details and
governance” also apply in the governance of remuneration and incentive schemes, where the
objective is to encourage, by means of planning over a number of years and through sound and
prudent management, the maintenance of a level of capitalisation that is adequate for the risks
assumed.

In view of this, on 10th March 2010 the Supervisory Board of UBI Banca, having consulted the
Remuneration Committee, approved the “Remuneration and incentive policies” of the UBI Group
(“2010 Policy”), formulated on the basis of EU and national legislation, with the involvement of the
corporate functions responsible for risk management, strategic planning and compliance and also
with the support of a major external consulting firm.

The basic principles on which the incentive and remuneration system for 2010 was based are as
follows:
- identification of conditions for implementation in terms of profit appropriate to the risk;
- the definition of a total amount of performance related remuneration such as not to limit the
    ability of the bank to maintain an adequate level of capitalisation for the risks assumed;
- the establishment of symmetry with respect to the results achieved with significant reductions
    (even to zero) if performance is below forecasts or negative;
- assessment of the results of the business unit a person belongs to and to that of the bank or
    Group as a whole and, where possible, of the results of the individual;
- variable remuneration linked to long term performance measurement indicators which reflect
    the profitability of the bank over time, adjusted for current and future risks, for the cost of
    equity and the liquidity required to perform the activities undertaken;
- the presence of an adequate system for deferring remuneration for an appropriate period of
    time, for a substantial proportion of the remuneration of those roles of particular importance
    to Group profits and risk;
- any clauses agreed for the early termination of employment contracts are such as to ensure
    that the remuneration paid in these circumstances is linked to the performance achieved and
    the risks assumed.


The 2010 Policy consists of five chapters as follows:
1) defines the general principles to be applied to determine remuneration for company officers;
2) deals with the principles for the determination of fixed remuneration and approaches and
   methods for determining the variable component and its partial deferment;
3) gives details of roles and responsibilities in the definition, proposal and approval of the
   remuneration and incentive system;
4) illustrates operational procedures and timing for the implementation of the system;


                                                  65
5) defines control mechanisms for the system in compliance with supervisory authority
   recommendations.

The values on which the 2010 Policy is based are those of equity, uniformity, meritocracy and
consistency over time. Pursuit of these values is important to the Group and it also relates to
models for determining variable components of remuneration introduced in Group companies in
2010, attributable to three types of incentive, depending on the recipients and the specific
mechanisms:
- the first is for top and senior management (Management by Objectives – “MBO TSM”);
- the second is for the remaining executive personnel (Management by Objectives – “MBO Other
   executive personnel”);
- the third is for middle managers and professional areas (Ordinary Incentive Schemes– “OIS”).

Conditions were established for the implementation of incentive schemes for 2010 based on value
creation and risk parameters such as the achievement of normalised gross income targets and
return on risk adjusted capital (“RORAC”). The schemes are based on the principle of
management by objectives, where specific objectives at company, team and individual level are
set, with the calculation of bonuses linked to the achievement of those objectives. In
consideration of the particular economic situation resulting from the financial crisis, the models
adopted involved the payment of significant and growing variable remuneration only if budget
objectives are exceeded.

With regard to the types of objective, use was made of indicators which, in compliance with the
requirements of “objectivity” and “immediate measurement”, were consistent with long term
strategies and interests (including sustainable growth, ethics, uniformity, personnel development,
skills acquired) and the effectiveness and permanence of the results, also for the purposes of
adequate capitalisation in relation to the risks assumed. The definition of the objectives
underlying the incentive mechanisms and generally those connected with banking or insurance
products and services was performed with regard to the need to pursue and safeguard the
integrity of relations with customers and to comply with regulations and legislation in force. To
give an example, direct links with individual services or products are excluded for personnel
responsible for the sale of financial products and instruments, and reference is made more
generally to areas or sectors of activity and types of service or product.
Other indicators used, either directly or indirectly adjusted for risk, or of a non financial type,
concern the following:
- profit objectives adjusted for actual or expected losses (e.g. operating losses and impairment
   losses on loans either singly or collectively calculated);
- non financial objectives, related also to monitoring of ex-ante risk (e.g. performing positions
   past due for longer than 60 days, MiFID advice, net customer flows);
- customers satisfaction objectives, using specific surveys and continuous monitoring of
   customer satisfaction levels;
- income objectives and volumes for aggregates without reference to single products, although
   with a distinction made between direct and indirect funding, with different weightings.

The schemes involve the exclusion of employees subject to disciplinary measures more serious
than a verbal reprimand. Special treatments such as guaranteed bonuses and leaving bonuses
which exceed those provided for by collective labour agreements are also excluded.

The use of economic and financial indicators was expressly excluded for those functions included
in cases mentioned in legislation and regulations, such as for example functions involved in the
preparation of corporate accounting documents, internal controls, compliance and risk
management. In these cases appropriate indicators linked to the operations of the organisational
unit were identified.

The bonus is linked to medium-to-long term objectives for roles that are of particular importance
to Group profitability and risk as follows:
- payment of a part of the bonus accruing on the basis of annual results achieved (by the Group,
   company, business unit/function and individual), in relation to the position occupied, in the
   year following the period in question, with deferral of the remaining part paid after three years,
   depending on the achievement of profit and risk objectives;


                                                  66
-    for the achievement of three-year objectives, payment of a part of the deferred bonus at the end
     of the three-year period, without interest, while a remaining part is linked to the UBI Banca
     share price in the observation period 1st January 2011 – 31st December 2014, as specifically
     decided by the Shareholders’ Meeting of UBI Banca of 24th April 2010, with subsequent
     payment after five years;
-    any deferred part of bonuses are not paid if the three-year objective is not achieved;
-    loss of all rights to deferred bonuses if the contract of employment is terminated in the period
     considered.

As concerns members of the governing bodies of the Group (with the exception of executive board
members/chief executive officers, who may receive performance related remuneration),
remuneration and incentive policies exclude them from variable remuneration and no guaranteed
bonuses or leaving bonuses are paid to members of these bodies. Furthermore, the fees set for
board members who are employees of the UBI Banca Group and hold positions in a Group bank
or company is incorporated in their salaries and is therefore paid back to the company concerned.

In terms of amount, at consolidated level the                                              UBI Banca Group:
fees of directors and statutory auditors                                                   composition of personnel expense
accounted    for  approximately    1,47%     of
personnel expense as shown in the table aside.                                             Figures in thousands of euro                                                       31.12.2010


                                                                                           Directors and statutory auditors' fees                                                        20.880
                                                                                           Other items                                                                              1.397.471
                                                                                                                                      (1)
                                                                                           Total Personnel expense                                                                  1.418.351
                                                                                             )
                                                                                           (1 Net o f no n-recurring items



The tables below show the distribution of the cost of gross annual remuneration for employees at
consolidated level and for the Parent.
                                                                                                                                            (1)
                                                                                             Gross Annual Remuneration :
                                                  (1)
Gross Annual Remuneration : UBI Banca Group                                                  UBI Banca Scpa (employee workforce)

                                                                        31.12.2010                                                                              31.12.2010
Figures in thousands of euro                                                                 Figures in thousands of euro


Senior managers                                                                  88.913      Senior managers                                                             25.588
Middle managers                                                                 608.050      Middle managers                                                             56.965
Professional Areas                                                              565.091      Professional Areas                                                          27.990
TOTAL                                                                        1.262.054
                                                                                             TOTAL                                                                      110.543
 )
1 Valued at co st, by applying an average co st o f appro ximately 40%. Co st items no t
co nsidered a co mpo nent o f fixed remuneratio n have been excluded (e.g. o vertime,        1) Valued at cost, by applying an average cost of approximately 40%. Cost items not considered a component of
travelling allo wances, expense refunds, bo nuses and incentives, pro ductivity awards,      fixed remuneration have been excluded (e.g. overtime, travelling allowances, expense refunds, bonuses and
etc.).                                                                                       incentives, productivity awards, etc.).




The composition of gross annual remuneration is also reported below for individual Macro Areas
of the Parent, in terms of senior management, middle management and professional areas.




                                                                                           67
                                        (1)
               Gross Annual Remuneration : Unione di Banche Italiane Scpa [w orkforce(2)]

                                                                                     Senior              Middle            Professional           Total
              Figures in thousands of euro                                          managers            managers              Areas               2010


              Legal and corporate affairs and subsidiaries                                  2.245               3.522                   1.852           7.619
              Administration and operational control                                        2.347               5.091                   3.887         11.325
              Parent and Group audit                                                        1.231             11.109                    2.515         14.855
              Commercial                                                                    6.022               9.717                   7.566         23.305
              Risk control                                                                  2.430               6.593                   3.158         12.181
              Credit and credit recovery                                                    1.848               4.824                   2.537           9.209
              Finance                                                                       1.994               5.563                    943            8.500
              Human resources and organisation                                              3.376               7.946                   4.697         16.019
              Strategic development and planning                                            1.060               1.954                    465            3.479

              TOTAL                                                                       22.553              56.319               27.620           106.492

               )
              1 Valued at co st, by applying an average co st o f appro ximately 40%. Co st items no t co nsidered a co mpo nent o f fixed remuneratio n have
              been excluded (e.g. o vertime, travelling allo wances, expense refunds, bo nuses and incentives, pro ductivity awards, etc.).

              (2) Excluding General M anagement and perso nnel repo rting directly to the Superviso ry B o ard and the Chief Executive Officer.




Lastly, gross annual remuneration for the “key personnel” of the Group is given in compliance
with the latest Bank of Italy “Supervisory measures concerning the remuneration and incentive
practices of banks” (document subject to public consultation until 22nd January 2011 and
currently being published3).

                                                                                               (1)
                                             Gross Annual Remuneration : "Key personnel"
                                             (2011 Policy)

                                             Figures in thousands of euro                                            28.02.2011


                                             Key personnel                                                                      13.958

                                              )
                                             1 Valued at co st, by applying an average co st o f appro ximately 40%. Co st items no t
                                             co nsidered a co mpo nent o f fixed remuneratio n have been excluded (e.g. o vertime,
                                             travelling allo wances, expense refunds, bo nuses and incentives, pro ductivity awards,
                                             etc.).




Finally, with regard to variable remuneration at Group level for 2010 this amounted, inclusive of
collective company bonuses, paid on the basis of allocations made in the accounts, to 1,54% of
personnel expense net of non-recurring items, due to the failure to meet the conditions required
to trigger bonus schemes.

                                                                                        ***

As concerns the most recent developments, at the end of 2010 further changes were introduced to
the relative regulations.
On 14th December 2010, Directive 2010/76/EC of the European Parliament and the Council of
the European Union was issued, which amended Directives No. 2006/48EC and No. 2006/49/EC
with regard to the capital requirements for trading portfolios and for securitisations and the
supervisory authority review of remuneration policies. It expressly includes remuneration policies
and practices in the organisational structures and governance of banks and in the oversight
activities of supervisory authorities and it contains specific criteria with which banks must
comply in order to: guarantee proper processing and implementation of remuneration schemes;
manage potential conflicts of interest effectively; ensure that remuneration schemes take
appropriate account of the current and future risks, the degree of capitalisation and the liquidity


3 “Subjects whose professional role has or may have a significant impact on the banks risk profile” category. The

Supervisory measures provide a non exhaustive list of positions which unless differently indicated belong to this category,
as: Director with executive powers, General Managers and Managers of the main business or geographical areas; staff
directly reporting to the boards in charge for strategic supervision, management and control.


                                                                                           68
levels of each bank; increase the degree of transparency towards markets; strengthen oversight
action by supervisory authorities.
In order to implement Directive 2010/76/EC, on 22nd December 2010 the Bank of Italy opened
the document “Supervisory measures concerning the remuneration and incentive practices of
banks”, which is currently being published, to public consultation, on the basis of articles 53 and
67 of the Consolidated Banking Act and decrees of the Ministry of Economics and Finance, in its
capacity as Chair of the Interministerial Committee for Credit and Savings meetings of 5th August
2004 and 27th December 2006, which addressed the subjects of the organisation and governance
and the capital adequacy and the containment of risk and the public disclosures of banks and
banking groups, respectively.

For the purpose of implementing the latest changes in regulations, on 25th February 2011, the
Supervisory Board of UBI Banca, after consultation with the Remuneration Committee, approved
the document “Remuneration and incentive policies” (“Policy 2011”), on the following matters:
1. general policy on the remuneration of corporate bodies;
2. remuneration and incentive policies for employees or associate workers not linked to the
   Group by regular employee contracts;
3. powers and responsibilities (in the definition, proposal and approval of the remuneration and
   incentive system);
4. controls (to be performed by the relative corporate functions designed to pursue the adequacy
   and regulatory compliance of the remuneration policies and practices adopted and their proper
   functioning).

As concerns the remuneration structure for members of governing bodies, the 2011 Policy affirms
the guidelines set out in the 2010 edition, but with some amendments. Principles of the policy
include the following:
- the fees of members of the governing bodies of the UBI Group are structured with a ceiling set
   by that of the Chairman of the Management Board which is set at the same level as that of the
   Chairman of the Supervisory Board, (the amount of which is related to decisions taken by
   shareholders);
- for subsidiaries, fees for attendance by the Chairman and Deputy Chairman at meetings of the
   Board of Directors and the Executive Committee may be included in the fixed fee for the
   position;
- executive board members and chief exective officers may receive forms of remuneration linked
   to results, while all the other members of the governing bodies of the Group receive no variable
   remuneration;
- traditional “attendance tokens” are incorporated as part of the fixed remuneration;
- no guaranteed bonuses or leaving bonuses exist for members of governing bodies (apart for
   any exceptions expressly allowed for by the “Supervisory Measures).

In consideration of the need for UBI Banca Group policy to comply with these new requirements,
the 2011 Policy provides for the following:
- the identification of “key personal” in accordance with the Bank of Italy “Supervisory
   Measures” currently being published;
- the identification of performance indicators measured net of risks over several years;
- for top management, deferment of payment of a portion of between 40% and 60% of bonuses
   and the introduction of the use of financial instruments for a portion equal to at least 50% of
   variable remuneration, setting an adequate period of personnel retention for this.

The incentive mechanisms put in place to implement the 2011 Policy included details of aspects
relating to conditions to trigger incentives, definition of the underlying objectives, calculation
formulas, procedures for payment of bonuses (including matters concerning deferment and the
use of financial instruments), specifications concerning personnel belonging to control functions
and payment rules.




                                                 69
Trade union relations

Activity involving relations with trade union organisations was intense during the year in
question. It was attributable mainly to the streamlining and optimisation of the distribution
networks of some Group banks and to the continuation of integration processes.

The procedures agreed for the optimisation of the branch network of the UBI Group were
concluded on 23rd January 2010. They were performed by means of transfers of business units
between Banca Popolare di Bergamo, Banco di Brescia, Banca Regionale Europea, Banca
Popolare Commercio and Industria e Banco di San Giorgio, by the transformation of branches
into mini-branches and adjustment to the new geographical organisation of banks. A special
Trade Union Memorandum of Intent was signed to regulate all financial and regulatory aspects of
the procedures for the transfer of the employment contracts of the approximately 2.200 personnel
affected by the operation.
With specific reference to Banca Regionale Europea, following, amongst other things, the new
focus of the bank in Piedmont, the agreement signed on 21st October 2010 regulated the transfer
to Turin of the Central Management in Milan and the decentralised offices in Cuneo. The
operation did not involve job losses, but did involve geographical mobility measures and, where
necessary, job retraining measures.

Again with regard to action taken on the local distribution networks of the network banks, the
introduction of an evolved distribution model was agreed with trade union organisations at Banco
di Brescia, Banca Regionale Europea, Banca di Valle Camonica and Banca Carime, (parent
branches – group branches). The main aims included strengthening market presence and
improving the commercial effectiveness and operational efficiency of branches.

An agreement was signed on 20th May at Group level concerning procedures for the management
of redundancies within the UBI Group, designed to improve efficiency and productivity through
rigorous containment of costs, and of labour costs in particular, against a background scenario of
general weakness in the banking sector and a consequent reduction in revenues (see the section
“Significant events that occurred during the year” for further details).

Negotiations were commenced in January 2010 and subsequently concluded on 3rd February
concerning the discontinuance of operations at UBI Sistemi e Servizi relating to Sicav
administration and the consequent reorganisation of the Finance and Foreign Back Office
Department. This action, taken in preparation for the transfer of correspondent banking
operations to RBC Dexia, did not involve job losses, but did involve job conversion processes
within UBI Sistemi e Servizi for the personnel concerned.

The redefinition of the operational perimeter and the organisational structure of Twice Sim Spa
was performed in March, followed by the merger of Twice Sim Spa into IW Bank Spa, with effect
from 1st November. Procedures for the management of geographical and occupational mobility
were agreed upon with trade union organisations with an agreement of 21st October 2010.

An agreement was signed in June concerning the merger of UBI Pramerica Alternative
Investments SGR Spa and Capitalgest Alternative Investments SGR Spa into UBI Pramerica SGR.
The operation in question, designed primarily to streamline the corporate structure of the
companies controlled by UBI Pramerica SGR Spa, did not involve any job losses, nor were there
any significant repercussions in terms of geographical and occupational mobility.

On 26th November 2010 a Memorandum of Intent on “Climate” was signed, the result of wide
ranging consideration of issues relating to the best use of human resources and their centrality
and enhancement as a key factor for the development and success of the Group. This trade union
agreement was designed to seek solutions which will ensure fair and sustainable working
conditions centred on respect for the dignity of workers, by putting in place an adequate system
of guarantees concerning working conditions and the organisation of personnel. On that same
date it was decided to reward all personnel for the great efforts made in the reorganisation
processes which affected the Group with an extraordinary one-off payment in the form of fuel
coupons and/or a contribution to pension funds.


                                                70
Finally, to complete the picture of discussions and negotiations with trade unions, mention must
be made of agreements signed in application of and in compliance with measures established
under the national labour contract in force, on specific company issues at Banca Regionale
Europea, Banco di Brescia, Banco di San Giorgio and UBI Factor.




Training

Training constitutes a key factor for the professional enhancement of personnel. Appropriately
structured and integrated with other systems for the development of human resources, it is an
effective tool for improving specialist skills and for developing corporate identity and culture
through the dissemination of Group values and strategies.

The overall training supply, which may be consulted in a special online catalogue, includes the
following:
    a system of defined training programmes, structured in the form of a sequence of
    recommended courses and on-the-job experience stages designed to ensure the development
    and refinement of the knowledge and skills considered necessary for each role and required as
    part of the skill measurement system;
    specific training, designed to satisfy the requirements of specific segments of Group personnel
    and to support the dissemination of strategies and projects relating to organisational
    innovation, changes generated by regulatory developments and the more significant product,
    instrument and process innovations.

Over 96.000 training days (in the classroom, job experience and remote training) were delivered in
2010, virtually unchanged compared to 2009 and with an average of approximately 5,2 training
days per employee. Seventy five percent of training was for personnel working in retail market
roles, 52% for personnel in professional areas and 46% for middle management personnel.

A total of approximately 443.000 training days were delivered in the period 2007-2010, over 10%
more than that planned under the 2007-2010 Business Plan.
Training activity already commenced in 2009 continued during the year, designed to improve the
professional skills of roles in the distribution network, with attention focused on personnel with
management responsibilities for business activities. The main projects implemented included the
following:
    ValoRe in Rete, an innovative training programme designed to stimulate and enhance existing
    Branch Managers;
    the introduction of a compulsory, role qualifying, training programme for potential new Branch
    Managers;
    an “Excellence in Corporate Banking” programme, a new highly specialised training initiative
    to furnish all Corporate Account Managers in the UBI Group with excellence in their
    professional expertise

A third of all activity as devoted to improving the operational, commercial, credit and financial
skills of distribution network personnel. In the finance area in particular the project “Planning
and Financial Consulting”, for all retail, private banking and corporate account managers, was
completed. It was designed to adequately accompany the release of the new service model in
network banks for the provision of investment services to customers and further improve
knowledge of MiFID regulations.

Insurance subjects accounted for 32% of the training delivered during the year. They consisted of
programmes specialised by market and by customer segment (private individuals, corporate)
designed to qualify personnel to sell insurance products and to update them, in compliance with
ISVAP (Insurance Authority) regulation No. 5/2006.




                                                 71
Refresher and teaching initiatives continued in the regulatory field (more than 20% of the total) on
regulations and legislation with a substantial impact on banking operations, including those
concerning “transparency” and “health and safety at the workplace”. The implementation of the
training programme designed to ensure that all Group personnel have an adequate knowledge
and understanding of the “Organisation, Management and Control Model pursuant to Legislative
Decree No. 231/2001” was of particular importance.

A significant managerial training programme was implemented in 2010, designed for roles with
greater responsibility in which the various initiatives included participation at intercompany
events to encourage exchange of knowledge with others in different professional fields

The School for Instructors is available to the in-house instructor corps, consisting of more than
300 personnel who delivered almost 12.000 training hours (approximately 60% of total classroom
training).

The      normal       training Training by subject area in 2010
programmes        for     new                                                                 Total
employees and personnel                                 Classroom
                                                                   Remote
                                                                   training
                                                                                 Job
                                                                              experience
                                                                                         person/days of  %
involved     in     retraining Subject area                                                 training

programmes                 are Insurance                    15.245    16.019           -        31.264   32,4%

accompanied        by     new Commercial
                                 Finance
                                                             6.295
                                                            11.242     1.840
                                                                            8        845
                                                                                     381
                                                                                                  7.148
                                                                                                13.463
                                                                                                          7,4%
                                                                                                         13,9%
training programmes for Credit                               5.878          6      2.173          8.057   8,3%
employees appointed on the Managerial-Behavioural            8.959          -         17          8.976   9,3%

basis     of     “professional Regulatory                    4.405    15.311           -        19.716   20,4%
                                 Other subjects              7.170          -        827          7.997   8,3%
apprentice” contracts. The
                                 TOTAL                      59.194    33.184       4.243        96.621  100,0%
IT-language     project   was
further incentivised to offer all Group personnel the chance to benefit freely from online courses
designed to develop and/or perfect their knowledge of computers and the English language.



The training programme for branch managers


In a particularly difficult and more competitive economic context, awareness of the crucial role
played by Branch Managers in maintaining market share and growth of business on the complex
retail market led the UBI Banca Group to approve an important strategic training project (ValoRe
in Rete) designed to stimulate and enhance the professional skills of Branch Managers.

The ValoRe in Rete project is an innovative and structured training programme, a genuine
“workshop” in which Branch Managers worked and addressed the challenge of “virtuous
behaviour” – whether commercial, credit, organisational or HR management – which they need to
put into practice to “make a difference” in the excellent management of branch teams and in
relationships with customers and the community.

During the four classroom days, over 1.300 Branch Managers of the UBI Group – led by a
selected panel of 45 Branch Managers working in the role of “instructors-facilitators” – worked
intensely on the focus and study of behaviours and key moments which can make a concrete
impact on branch performance and also on an “improvement plan” consisting of concrete action
to achieve it.
The findings of this “workshop” – in which a training programme was implemented which involved
all areas of Branch Managers’ responsibilities, right across the board, – confirmed the validity and
success of this innovative approach, designed also to share best experiences and practices among
Group Branch Managers.

At the same time a new compulsory training programme was introduced for potential new branch
managers to qualify for the role, which involves the participation of candidates in two separate
classroom activities for a total of ten days, structured as follows:
1) improvement and certification of technical and professional knowledge (six classroom days
   with individual study and a final qualification examination);


                                                      72
2) managerial training to develop management skills (four classroom days).
The five examination sessions organised in 2010 led to the qualification of 110 new potential
Branch Managers.


Internal communication

The internal communication activities performed in 2010 were designed and implemented to
accompany processes of change with initiatives to promote and strengthen corporate identity. The
overall internal communication strategy was therefore designed and developed with the objective
of informing, motivating and involving personnel with continued use of the Group house organ4
and the introduction of innovative multimedia communication including the following:
- a multimedia magazine for the shareholders meeting (developed to provide all Group employees
   with prompt information on the main subjects addressed during the 2010 annual
   shareholders’ meeting of UBI Banca). It is an easy to consult electronic magazine which
   contains different types of media (texts, images, audio and video recordings), within a co-
   ordinated graphics environment. Inserted in the homepage of the corporate portal, it has the
   appearance of a genuine magazine to be leafed through and it allows readers to choose topics
   for further study (short video interviews during and after the meeting, an organisation chart
   giving the composition of the new governing bodies, texts on the macroeconomic scenario and
   the outlook for the Group, etc.);
- UBI Click, a multimedia tool through which the senior management of the Parent and of
   individual companies periodically informs employees of policies and important activities
   concerning the general context of the Group and individual banks and companies;
- UBI Pod, an experimental means of communication which has the style of a radio broadcast to
   facilitate the direct involvement of employees in person. Two UBIPods were organised in 2010
   to support the Training Project ValoRe in Rete for Branch Managers of the Group;
- a new corporate portal, a new version of the Group portal, in which new spaces are provided
   for communication to give better support for corporate processes and to organise occasions for
   participation and direct involvement by all personnel. The relative project activities were
   commenced in 2010, while the operational release will take place in 2011.


The work environment

The section “Principal risks and uncertainties to which the UBI Banca Group is exposed” may be
consulted for information on matters regulated by Legislative Decree No. 81 of 9th April 2008
(health and safety at the workplace), while information on environmental responsibility is given as
part of the information on corporate social and environmental responsibility contained in the
section “other information”.




Welfare

The main initiatives carried forward in the field of welfare are reported as part of the information
given on corporate social responsibility contained in the section “Other information”.




4   yoUBI – A two monthly periodical of company information and culture.


                                                                    73
 Consolidation scope

 The companies that formed part of the consolidation as at 31st December 2010 are listed below,
 divided into subsidiaries (consolidated line-by-line), companies subject to joint control
 (proportionately consolidated) and associates (consolidated using the equity method).
 The percentage of control or ownership attributable to the Group (direct or indirect), their
 headquarters (registered address or operating headquarters) and the share capital is also
 indicated for each of them.



 Companies consolidated on a line-by-line basis (control is by the Parent of the Group where no other
 indication is given):

 1. Unione di Banche Italiane Scpa – UBI Banca (Parent)
    registered address: Bergamo, Piazza Vittorio Veneto, 8 – share capital: 1.597.864.755 euro
 2. Banca Popolare di Bergamo Spa (100% controlled)
       registered address: Bergamo, Piazza Vittorio Veneto, 8 – share capital: 1.350.514.252 euro
 3. Banco di Brescia San Paolo CAB Spa (100% controlled)
       registered address: Brescia, Corso Martiri della Libertà, 13 – share capital: 615.632.230,88 euro
 4. Banca Popolare Commercio e Industria Spa (75,0769% controlled)
       registered address: Milano, Via della Moscova, 33 – share capital: 934.150.467,60 euro
 5. Banca Regionale Europea Spa (74,9437% controlled)1
       registered address: Cuneo, Via Roma, 13 – share capital: 468.880.348,04 euro
 6. Banca Popolare di Ancona Spa (92,8983% controlled)
       registered address: Jesi (Ancona), Via Don A. Battistoni, 4 – share capital: 122.343.580 euro
 7. Banca Carime Spa (92,8322% controlled)
       registered address: Cosenza, Viale Crati snc – share capital: 1.468.208.505,92 euro
 8. Banca di Valle Camonica Spa (74,2439% controlled and Banco di Brescia holds 8,7156%)
       registered address: Breno (Brescia), Piazza Repubblica, 2 – share capital: 2.738.693 euro
 9. Banco di San Giorgio Spa (the Parent holds 36,1939% and 57,3332% controlled by BRE)
       registered address: Genova, Via Ceccardi, 1 – share capital: 94.647.277,50 euro
10. Banque de Dépôts et de Gestion Sa (100% controlled)
       registered address: Avenue du Théâtre, 14 - Lausanne (Switzerland) – share capital: 10.000.000 Swiss
       francs
11. BDG Singapore Pte Ltd (100% controlled by Banque de Dépôts et de Gestion)
       registered address: 391B Orchard Road # 15-01 Ngee Ann City Tower B Singapore – share capital:
       325.000 Singapore dollars2
12. UBI Banca International Sa (90,6031% controlled            and Banco di Brescia holds 5,8519%, BPB
       3,3723% and Banco di San Giorgio 0,1727%)
       registered address: 37/A, Avenue J.F. Kennedy, L – Luxembourg – share capital: 59.070.750 euro
13. UBI Trustee Sa (100% controlled by UBI Banca International)
       registered address: 37/A, Avenue J.F. Kennedy, L – Luxembourg – share capital: 250.000 euro
14. B@nca 24-7 Spa (100% controlled)
       operating headquarters: Bergamo, Via A. Stoppani, 15 – share capital: 316.800.000 euro




 1   The percentage of control relates to the total share capital held. The Group does in fact possess 80,1054% of the ordinary shares,
     26,4147% of the privileged shares and 59,127% of the savings shares.
 2   On 10th December 2010, the parent company, Banque de Dépôts et de Gestion, decided to increase the share capital of the company by
     5.275.000 Singapore dollars, which it paid in on 19th January 2011. The new share capital therefore rose to 5.600.000 Singapore dollars.


                                                                       74
15. Barberini Sa (100% controlled)
    registered address: Woluwe-Saint-Pierre, Avenue de Tervueren, 237 – Brussels (Belgium) – share capital:
    3.000.000 euro
16. Prestitalia Spa (100% controlled by Barberini)
    registered address: Roma, Salita San Nicola da Tolentino, 1/b, Sc. B – share capital: 46.385.482 euro
17. Silf Società Italiana Leasing e Finanziamenti Spa (100% controlled)
    registered address: Cuneo, Via Roma, 13 – share capital: 2.000.000 euro
18. IW Bank Spa (55,2740% controlled and Centrobanca holds 23,496%)
    registered address: Milano, Via Cavriana, 20 – share capital: 18.404.795 euro
19. InvestNet International Sa (100% controlled by IW Bank)
    registered address: 8, Boulevard Royal – Luxembourg – share capital: 12.478.465 euro
20. Investnet Italia Srl, formerly IW Lux Sàrl (100% controlled by IW Bank)
    registered address: Milano, via Cavriana 20 – share capital: 5.000.000 euro
21. Invesclub Srl (100% controlled by IW Bank)
    registered address: Milano, Via San Vittore al teatro, 1 – share capital: 10.000 euro
22. UBI Banca Private Investment Spa (100% controlled)
    registered address: Brescia, Via Cefalonia, 74 – share capital: 67.950.000 euro
23. Centrobanca Spa (92,3818% controlled and BPA holds 5,4712%)
    registered address: Milano, Corso Europe, 16 – share capital: 369.600.000 euro
24. Centrobanca Sviluppo Impresa SGR Spa (100% controlled by Centrobanca)
    registered address: Milano, Corso Europe, 16 – share capital: 2.000.000 euro
25. FinanzAttiva Servizi Srl (100% controlled)
    registered address: Bergamo, Piazza Vittorio Veneto, 8 – share capital: 5.660.000 euro
26. UBI Pramerica SGR Spa (65% controlled)
    operating headquarters: Milano, Via Monte di Pietà, 5 – share capital: 19.955.465 euro
27. UBI Management Company Sa (100% controlled by UBI Pramerica SGR)
    registered address: 37/A, Avenue J.F. Kennedy, L – Luxembourg – share capital: 125.000 euro
28. UBI Insurance Broker Srl (100% controlled)
    registered address: Bergamo, Via f.lli Calvi, 15 – share capital: 3.760.000 euro
29. UBI Leasing Spa (79,9962% controlled and BPA holds 18,9965%)
    registered address: Brescia, Via Cefalonia, 74 – share capital: 196.557.810 euro
30. Unione di Banche Italiane per il Factoring Spa - UBI Factor Spa (100% controlled)
    registered address: Milano, Via f.lli Gabba, 1/a – share capital: 36.115.820 euro
31. BPB Immobiliare Srl (100% controlled)
    registered address: Bergamo, Piazza Vittorio Veneto, 8 – share capital: 185.680.000 euro
32. Società Bresciana Immobiliare Mobiliare - S.B.I.M. Spa (100% controlled)
    registered address: Brescia, Via A. Moro, 13 – share capital: 35.000.000 euro
33. Società Lombarda Immobiliare Srl- SOLIMM (100% controlled)
    registered address: Brescia, Via Cefalonia, 74 – share capital: 100.000 euro
34. BPB Funding Llc (100% controlled)
    registered address: One Rodney Square, 10th floor, Tenth and King Streets, Wilmington, New Castle
    County, Delaware, USA – share capital: 1.000.000 euro
35. BPB Capital Trust (100% controlled by BPB Funding Llc)
    registered address: One Rodney Square, 10th floor, Tenth and King Streets, Wilmington, New Castle
    County, Delaware, USA – share capital: 1.000 euro
36. Banca Lombarda Preferred Capital Company Llc (100% controlled)
    registered address: 1209, Orange Street the Corp. Trust Center, Wilmington, New Castle County,
    Delaware, USA – share capital: 1.000 euro
37. Banca Lombarda Preferred Securities Trust (100% controlled)
    registered address: 1209, Orange Street the Corp. Trust Center, Wilmington, New Castle County,
    Delaware, USA – share capital: 1.000 euro




                                                       75
38. BPCI Funding Llc (100% controlled)
       registered address: One Rodney Square, 10th floor, Tenth and King Streets, Wilmington, New Castle
       County, Delaware, USA – share capital: 1.000.000 euro
39. BPCI Capital Trust (100% controlled by BPCI Funding Llc)
       registered address: One Rodney Square, 10th floor, Tenth and King Streets, Wilmington, New Castle
       County, Delaware, USA – share capital: 1.000 euro
40. UBI Fiduciaria Spa (100% controlled)
       registered address: Brescia, Via Cefalonia, 743 – share capital: 1.898.000 euro
41. UBI Gestioni Fiduciarie Sim Spa (100% controlled by UBI Fiduciaria)
       registered address: Brescia, Via Cefalonia, 743 – share capital: 1.040.000 euro
42. Coralis Rent Srl (100% controlled)
       registered address: Milano, Via f.lli Gabba, 1 – share capital: 400.000 euro
43. UBI Sistemi e Servizi SCpA4 – Consortium Stock Company (70,9193% controlled and 2,9599%
       held by: Banca Popolare di Bergamo, Banco di Brescia, Banca Popolare Commercio e Industria, Banca
       Popolare di Ancona, Banca Carime and Banca Regionale Europea; 1,5539% held by UBI Pramerica SGR;
       1,4799% held by: Banco di San Giorgio, Banca di Valle Camonica, UBI Banca Lombarda Private
       Investment, Centrobanca and B@nca 24-7; 0,74% held by UBI Factor; 0,74% held by: UBI Insurance
       Broker and SILF).
       registered address: Brescia, Via Cefalonia, 62 – share capital: 35.136.400 euro
44. UBI Finance Srl5 (60% controlled)
       registered address: Milano, Foro Bonaparte, 70 – share capital: 10.000 euro
45.    Albenza 3 Srl6
46.    Orio Finance Nr. 3 Plc6
47.    Sintonia Finance Srl6
48.    24-7 Finance Srl7
49.    Lombarda Lease Finance 3 Srl8
50.    Lombarda Lease Finance 4 Srl8
51.    UBI Finance 2 Srl9
52.    UBI Finance 3 Srl
53.    UBI Lease Finance 5 Srl10


  3   With effect from 1st January 2011, UBI Fiduciaria and UBI Gestioni Fiduciarie Sim transferred their registered addresses in Brescia from
      70, via Cefalonia to 74, via Cefalonia in the new UBI Banca management centre.
  4   The Group holds a controlling 98,52% interest in the share capital of UBI.S; the remaining 1,48% is held by UBI Assicurazioni.
  5   A special purpose entity in compliance with Law No. 130/1999, this company, enrolled on the general list of intermediaries pursuant to
      Art. 106 of the consolidated banking act, was formed on 18th March 2008 to allow the Parent to implement a programme to issue
      covered bonds.
  6   Special purpose entities formed in compliance with Law No. 130/1999 for the securitisations performed in 2001 and 2002 by the former
      BPB-CV Scrl (Albenza 3 Srl), by BPU International Finance Plc Ireland, subsequently closed down – (Orio Finance Nr. 3 Plc) and by
      Centrobanca (Sintonia Finance Srl). They were included in the consolidated financial statements because they are in reality controlled,
      since their assets and liabilities were originated by Group member companies. The consolidation only concerns those assets subject to
      securitisation and the relative liabilities issued. As concerns Sintonia Finance, as the securitisation was multioriginator, only those
      assets and liabilities relating to the operation originated by Centrobanca were consolidated.
  7   A special purpose entity (formerly Lombarda Lease Finance 1 Srl) used in compliance with Law No. 130/1999 for the B@nca 24-7
      securitisations performed in 2008. It was included in the consolidated financial statements because this company is in reality
      controlled, since its assets and liabilities were originated by a Group member company. UBI Banca holds a 10% stake in the company.
  8   Special purpose entities formed in compliance with Law No. 130/1999 for the securitisations performed in years running from 2002
      until 2005 by SBS Leasing. They were included in the consolidated financial statements because these companies are in reality
      controlled, since their assets and liabilities were originated by Group member companies. UBI Banca holds an interest of 10% in each
      company.
      In the third quarter of 2010, UBI Leasing (formerly SBS Leasing) proceeded to the early close down of the Lombarda Lease Finance 3
      securitisation. The originator (UBI Leasing) exercised its option, as provided for under the contracts, to repurchase all the loans (en bloc
      and without recourse) (a remaining amount of 47,5 million euro out of 650,5 million euro securitised relating to lease contracts for
      machinery and equipment, property and automobiles), which had been sold in 2003 to Lombarda Lease Finance 3, which had in turn
      redeemed all the notes issued as part of the securitisation transaction on 30th July 2010. As the transaction was closed, only the items
      in the income statement, relating to the assets and liabilities recognised by the Company during the year, remained in the end of year
      accounts. The disappearance of the cash flows (although the company remains operational) will result in the elimination of the company
      from the consolidation scope from the first quarter of 2011.
  9   A special purpose entity formed in accordance with Law No. 130/1999 for the securitisation performed in 2001 by Banco di Brescia and
      completed in the meantime. The company (formerly “Lombarda Mortgage Finance 1 Srl”) was used as an SPE (special purpose entity) for
      the securitisation of a portfolio of performing loans performed by Banco di Brescia at the beginning of 2009. It was included in the
      consolidated accounts because this company is in reality controlled, since its assets and liabilities were originated by a Group member
      company. UBI Banca holds a 10% stake in the company.
 10   A special purpose entity formed in compliance with Law No. 130/1999 and used as an SPE for the securitisation of performing loans by
      UBI Leasing in November 2008. It was included in the consolidated financial statements because this company is in reality controlled,
      since its assets and liabilities were originated by a Group member company. UBI Banca holds a 10% stake in the company.


                                                                          76
 Companies consolidated using the proportionate method (the investment is by the Parent where no
 other indication is given):
 1. UBI Trust Company Ltd (99,9980% controlled by UBI Banca International)11
       registered address: Esplanade, 44 – St. Helier, Jersey (Great Britain) – share capital: 50.000 pounds
       sterling
 2. BY YOU Spa12 (formerly Rete Mutui Italia Spa, 40% interest held)
       registered address: Milano, Corso Venezia, 37 – share capital: 650.000 euro
 3. Polis Fondi SGRpA (9,8% interest held)13
       registered address: Milano, Via Solferino, 7 – share capital: 5.200.000 euro




 Companies consolidated using the equity method (the investment is by the Parent where no other
 indication is given):

 1. Aviva Vita Spa (50% controlled)
       registered address: Milano, Viale Abruzzi, 94 – share capital: 115.000.000 euro
 2. Aviva Assicurazioni Vita Spa (formerly UBI Assicurazioni Vita Spa) (49,9999% held UBI Banca)
       registered address: Milano, Viale Abruzzi, 94 – share capital: 49.721.776 euro
 3. Lombarda Vita Spa (40% interest held)
       registered address: Brescia, Corso Martiri della Libertà, 13 – share capital: 185.300.000 euro
 4. UBI Assicurazioni Spa (49,9999% interest held)
       registered address: Milano, Piazzale f.lli Zavattari, 12 – share capital: 32.812.000 euro
 5. Lombarda China Fund Management Company (49% interest held)
       registered address: 47, Sin Mao Tower, 88 Century Boulevard, Pudong Area 200121, Shanghai (China) –
       share capital: 120.000.000 yuan/renminbi
 6. SF Consulting Srl (35% interest held)
       operating headquarters: Mantova, Via P.F. Calvi, 40 – share capital: 93.600 euro
 7. Sofipo Fiduciaire Sa (30% interest held by Banque de Dépôts et de Gestion)
       registered address: Via Balestra, 22B - Lugano (Switzerland) – share capital: 2.000.000 Swiss francs
 8. Arca SGR Spa (23,1240% interest held by the Parent and 3,5840% by BPA)
       registered address: Milano, Via M. Bianchi, 6 – share capital: 50.000.000 euro
 9. S.P.F. Studio Progetti Finanziari Srl (25% interest held by BPA)
       registered address: Roma, Via National, 243 – share capital: 92.960 euro
10. Prisma Srl (20% interest held)
       registered address: Milano, Via S. Tecla, 5 – share capital: 120.000 euro
11. Siderfactor Spa (27% interest held by UBI Factor)
       registered address: Milano, Via f.lli Gabba, 1/A – share capital: 1.200.000 euro
12. Tex Factor Spa – in liquidation (20% interest held by UBI Factor)
       registered address: Milano, Via f.lli Gabba, 1/A – share capital: 1.033.000 euro
13. Capital Money Spa (20,6711% interest held)
       registered address: Milano, Via Lausanne, 16 – share capital: 2.042.955 euro
14. Ge.Se.Ri. – Gestione Servizi di Riscossione Spa in liquidation (100% controlled by BRE)
       registered address: Cuneo, Via Roma, 13 – share capital: 323.520 euro
15. UFI Servizi Srl (23,1667% interest held by Prestitalia)
       registered address: Roma, Via G. Severano, 24 – share capital: 150.000 euro




 11   Following the geographical repositioning of trustee services to Luxembourg, the company was closed down with effect from 30th June
      2010. The local monetary authority – Jersey Financial Services Commission Companies Registry – announced that it had removed UBI
      Trust Company from the companies register on 10th February 2011.
 12   The company has 100% control of: By You Piemonte Srl, By You Liguria Srl, By You Mutui Srl, (which controls Sintesi Mutuo Srl) and
      By You Adriatica Srl,), all proportionately consolidated within the Group.
 13   Polis was included in the consolidation using the proportionate method because joint control emerged. The company manages the fund
      Polis, listed on the stock exchange since April 2001.


                                                                     77
Changes in the consolidation scope

There have been no changes to the scope of consolidation compared to 31st December 2009
except for a few changes in the percentage of interests held and some streamlining action.

Network banks:
• Banca Popolare di Bergamo, Banco di Brescia, Banca Popolare Commercio e Industria, Banca
  Regionale Europea, Banco di San Giorgio: the situation described – in terms of share capital
  and percentage shareholdings – reflects the implementation, in January 2010, of the “branch
  switching” operation already mentioned (see also the previous section “Significant events that
  occurred during the year”). The project involved the transfer of a series of branches performed
  by the contribution of 14 sets of corporate assets. Each of the five network banks receiving
  assets performed specific increases in share capital at the service of the contributions14. Since
  these are transactions “under common control”, the increases in the share capital did not give
  rise to a share premium because the shares were issued at the nominal value, in relation to
  the actual value of the assets transferred.
  The minority interests acquired reciprocally by the individual banks as a by-product of the
  operation were repurchased by the Parent on 27th July 2010 and the original percentage
  ownership interests in the network banks will be restored, except for a change in the
  configuration of the holdings of the two foundations (the Cassa di Risparmio di Cuneo
  Foundation and the Banca del Monte di Lombardia Foundation), to take account of the new
  focus of the network banks on the historical geographical areas of the foundations themselves.
  The Banca del Monte di Lombardia Foundation is in fact no longer a shareholder of Banca
  Regionale Europea, having become a shareholder of Banca Popolare Commercio e Industria.
  The Cassa di Risparmio di Cuneo Foundation has remained a shareholder of Banca Regionale
  Europea – focused on the North East area – with its investment increasing from the 20% to
  25% with an investment of 125 million euro.
     The changes that occurred between 31st December 2009 and 27th July 2010 are summarised
     in the table below.
         Position as at 31st December 2009                                                       Investees (number of shares and % held)
         Shareholders                                     BRE           %          BPCI           %           BPB            %           BBS           %           BSG           %
         AVIVA Spa                                                                 77.278.293 11,89%
         Minority interests                                  687.838 0,08%                                                                                         4.225.647 7,22%
         UBI Banca                                       509.595.702 59,95%       572.721.707 88,11%        1.256.300.000   100,0%      872.500.000   100,0%      20.760.378 35,45%
         Fondazione Cassa di Risparmio di Cuneo          169.858.230 19,98%
         Fondazione Banca del Monte di Lombardia         169.858.230 19,98%
         Banca Regionale Europea                                                                                                                                  33.574.808 57,33%
         Total number of shares and percentage held
         by the Group                                    850.000.000 59,95%       650.000.000 88,11%        1.256.300.000   100,0%      872.500.000   100,0%      58.560.833 92,78%
         Nominal value of shares (in euro)                      0,52                      1,05                       1,00                      0,68                      1,50
         Share capital (in euro)                        442.000.000              682.500.000               1.256.300.000               593.300.000              87.841.249,50


         Changes due to increases in share capital
         and contributions (25th January 2010)            BRE           %          BPCI           %           BPB             %          BBS           %           BSG            %
         Banco di Brescia                                 13.548.699   1,50%        1.456.507    0,16%        23.568.210     1,75%                                  392.721      0,62%
         Banca Regionale Europea                                                  169.494.668 19,05%            6.477.249    0,48%       11.694.531    1,29%
         Banca Popolare di Bergamo                        35.837.198   3,97%       68.715.937 7,72%                                      11.840.156    1,31%       4.144.631    6,57%
         Banca Popolare Commercio e Industria              2.307.080   0,26%                                   64.168.793    4,75%        9.306.829    1,03%
         Total number of shares after share capital
         increases                                       901.692.977              889.667.112               1.350.514.252               905.341.516               63.098.185
         of which number of shares issued for
         increases in the share capital                   51.692.977   5,73%      239.667.112 26,93%           94.214.252    6,98%       32.841.516    3,63%       4.537.352    7,19%


         Position after re-adjustment (27th July
         2010)
                                                          BRE           %          BPCI           %           BPB            %           BBS           %           BSG           %
         AVIVA Spa                                                                 77.278.293    8,69%
         Minority interests                                  687.838   0,08%                                                                                       4.225.647    6,70%
         UBI Banca                                       675.762.233 74,94%       667.934.237 75,08%        1.350.514.252   100,0%      905.341.516   100,0%      22.696.320 35,97%
         Fondazione Cassa di Risparmio di Cuneo          225.242.906 24,98%
         Fondazione Banca del Monte di Lombardia                                  144.454.582 16,24%
         Banca Regionale Europea                                                                                                                                  36.176.218    57,33%
         Total number of shares and percentage held
         by the Group                                    901.692.977 74,94%       889.667.112 75,08%        1.350.514.252   100,0%      905.341.516   100,0%      63.098.185 93,30%
         Nominal value of shares (in euro)                      0,52                      1,05                       1,00                      0,68                      1,50
         Share capital (in euro)                      468.880.348,04           934.150.467,60            1.350.514.252,00            615.632.230,88            94.647.277,50



14   A shareholders’ meeting of Banco di San Giorgio held on 8th January 2010 passed a resolution to increase the share capital at the
     service of the contributions and also to authorise the Board of Directors to issue share capital, in one or more tranches up to a total of
     20 million euro, to be completed by 31st December 2013 and to offer option rights on the issues to registered shareholders. The
     objective is to bring the total capital ratio back into line with the target (7%) set for commercial banks in the Group.


                                                                                        78
• Banca Popolare di Ancona Spa: UBI Banca made further purchases during the year from
  minority shareholders, for a total of 11.181 shares (a small fraction amounting to 0,0457% of
  the share capital) which brought its controlling interest up from 92,8526% at the end of 2009
  to 92,8983%;
• Banca Carime Spa: in the twelve months in question, the Parent acquired 31.781 shares from
  minority shareholders to bring its controlling interest up to 92,8322% (92,8299% as at 31st
  December 2009).
• Banco di San Giorgio Spa: subsequent to 27th July, UBI Banca acquired 141.361 shares from
  private individuals to bring its investment up from 35,9698% (post readjustment of interests)
  to 36,1939% as at 31st December 2009.


Other Banks:
• IW Bank: on 20th October 2010, UBI Banca purchased 156.488 shares, to bring its interest
  held in the share capital up to 55,2740% (from 55,0614% at the end of 2009) and the interest
  held by the Group up to 78,77% (78,5574% as at 31st December 2009).
  Following that purchase, UBI Banca acquired both direct and indirect control through
  Centrobanca, with 57.989.829 ordinary shares of IW Bank (accounting for 79,6695% of the
  share capital, net of the treasury shares held by IW Bank), while Webstar held 7.609.144
  ordinary shares (10,4538% of the share capital, net of the treasury shares held by IW Bank).
  Together UBI Banca and Webstar15 held 65.598.973 shares, accounting for 90,1233% of the
  share capital, net of the treasury shares held by IW Bank.
  Since they then held more than 90% of the share capital with voting rights (a threshold which
  determines the obligation to purchase the remaining shares of the issuer), on the following 27th
  October 2010, UBI Banca and Webstar jointly announced, in compliance with Art 50 of the
  Issuers’ Regulations (residual public tender offer), their intention not to restore the free float
  and to comply with the purchase obligation.
  With Resolution No. 17669 of 16th February 2011, the Consob (Italian securities market
  authority) set the share price at 1,988 euro per share for the purchase, in accordance with Art.
  108, paragraph 2 of the Consolidated Finance Act, of the ordinary shares of IW Bank by the
  offerors.
  On 22nd February 2011, UBI Banca decided to pay an increase on the price set by the Consob,
  thereby bringing it up to 2,043 euro16 for each share offered for sale, if it came to hold at least
  95% of the share capital (inclusive of the IW Bank shares held by Webstar and also of the
  treasury shares held in portfolio by IW Bank). In this event, the maximum amount disbursed
  by UBI Banca, if the offer is fully taken up, will be 14.7 million euro and it will be paid from its
  own funds. The price set by the Consob on the other hand would remain the consideration
  recognised if the acceptance of the offer was insufficient to acquire an interest at least equal to
  95% of the share capital.
  On 15th March 2011, with Note No. 11019656 the Consob authorised the publication of the
  information document in relation to the operation for the obligation to purchase 7.189.039
  ordinary shares of IW Bank (9,8767% of the share capital with voting rights and 9,7652% of
  the total share capital) in compliance with Art 108, paragraph 2 of the Consolidated Finance
  Act.
  In this respect, the period for the presentation of applications to sell, agreed with Borsa
  Italiana, collected on the Mercato Telematico Azionario (electronic stock exchange) began on
  21st March and will end on 8th April, unless extended. Payment of the price will take place on
  13th April 2011.
  The delisting of the share will take place at the end of the procedures laid down by the primary
  and secondary rules concerning compulsory public tenders to purchase.

     With regard to IW Bank’s subsidiaries, numerous actions were concluded during the year both
     to simplify and streamline the organisational structure, and to develop and enhance the core
     business consisting of online trading and banking:


15   UBI Banca and Webstar had signed a shareholders’ voting agreement (published on 15th September 2009 in accordance with article 122
     of the Consolidated Finance Act, subsequently amended on 29th June 2010) concerning the ordinary shares of IW Bank.
16   The highest official market price of the IW Bank share in the last 12 months.


                                                                   79
  -   on 22nd March 2010, the disposals were completed of Twice & Partners Corporate Advisers
      Srl and Twice Research Srl (both previously 100% controlled by Twice Sim and consolidated
      on a line-by-line basis);
  -   Italforex Srl was excluded from the consolidation from 30th September 2010 (at the end of
      2009 it was recognised using the equity method), in consideration of its negligible
      importance and consistent with decisions taken by IW Bank;
  -   on 1st November 2010, after obtaining the legal authorisations, Twice Sim was merged
      (100%) into its parent, IW Bank, consistent with decisions taken by the respective Boards of
      Directors in December 2009 and by a Shareholders’ Meeting of Twice Sim of 26th August
      2010, in accordance with the corporate by-laws. Since the entire share capital was held by
      the internet bank, the shares of Twice Sim were cancelled when the merger transaction was
      stipulated, without proceeding to replacement or new issues. The transaction is effective for
      accounting and tax purposes from 1st January 2010. The company was consolidated on a
      line-by-line basis as at 31st December 2009;
  -   as a result of the above merger, on 1st November 2010 control of Invesclub Srl, formerly
      controlled by Twice Sim, was acquired by IW Bank;
  -   on 23rd July 2010, the Board of Directors of IW Bank decided to merge IW Lux Sàrl, a fully
      controlled, Luxembourg registered company, into its Parent, after transferring its
      headquarters to Italy. This preparatory measure was officially completed by a Shareholders’
      Meeting of IW Lux Sàrl on 25th October 2010, which passed resolutions to relinquish its
      authorisation to provide financial services granted by the Ministry of Finance of
      Luxembourg on 26th January 2010, to make the related changes to its business purpose, to
      transfer the registered address to Milan, to change the name of the company to Investnet
      Italia Srl and to approve a new text of the corporate by-laws. On 28th December 2010,
      InvestNet Italia was registered with the Milan Company Registrar;
  -   on 13th January 2011, IW Bank acquired an interest in the consortium company UBI
      Sistemi e Servizi, purchasing 50.000 shares (0,074% of the share capital) from UBI
      Pramerica SGR for 38.500 euro;
  -   on 2nd March 2011, a Shareholders’ Meeting of Invesclub Srl passed a resolution to wind up
      the company by placing it into voluntary liquidation in accordance with Art. 2484 of the
      Italian Civil Code. This was in consideration of its non strategic importance both for its
      parent and for the Group;
• Centrobanca Spa: on 4th November 2010, the Parent purchased 101.732 shares from a
  banking counterparty for 177 thousand euro (equivalent to the pro-rata equity value as at 30th
  June 2010). The investment held therefore rose from 92,3515% at the end of 2009 to
  92,3818% as at 31st December 2010; while Group control increased at the same time over
  twelve months from 97,8227% to 97,8530%.
  As concerns the streamlining process in progress, action taken with regard to the subsidiaries
  of the Group’s “corporate bank” are summarised as follows:
  - on 27th December 2010, the merger of CB Invest Spa (formerly Medinvest Spa, acquired on
      22nd December 2009 from Twice Sim and then consolidated on a line-by-line basis) into
      Centrobanca became effective. As the merged company was wholly owned by Centrobanca,
      in compliance with Art. 2505 of the Italian Civil Code, the shares forming the share capital
      of CB Invest were cancelled with no share exchange. The transaction is effective for
      accounting and tax purposes from 1st January 2010;
  - on 29th December 2010, the liquidation of H&C Spa was concluded and it is therefore no
      longer included in the consolidation (the company, in which CB Invest held a 49,0833%
      interest, was consolidated using the equity method at the end of 2009);
• UBI Banca International Sa: on 10th December 2010, this Luxembourg based bank
  strengthened its capital by a total of 2,9 million euro, including 1.531.020 euro used to
  increase its share capital (up from 57.539.730 euro to 59.070.750 euro), for the purpose of
  acquiring the Luxembourg branch of Banco di Brescia. To achieve this, the contributing party
  received 3.002 new shares of UBI Banca International, which brought the interest held by
  Banco di Brescia up to 5,8519% (from 3,3468% before). As a result of the dilution effect, the
  remaining interests were reduced: for the Parent to 90,6031% (93,0138% as at 31st December
  2009), for BPB to 3,3723% (from 3,4621%) and for Banco di San Giorgio to 0,1727% (0,1773%
  twelve months before). UBI Banca International is wholly owned by the Group.



                                                 80
Asset management:
• on 19th March 2010, UBI Pramerica SGR repurchased 3,75% of the share capital from the
  management of UBI Pramerica Alternative Investments SGR Spa to restore its controlling
  interest to 100% (96,25% at the end of 2009). The operation was performed in preparation for
  the merger of the company into its asset management parent company;
• on 30th March 2010: in order to simplify the ownership structure of the Group, with the
  consequent elimination of the duplication of costs and overlap of business units, shareholders’
  meetings were held by UBI Pramerica SGR, UBI Pramerica Alternative Investments SGR and
  Capitalgest Alternative Investments SGR, which passed resolutions to merge, in simplified
  form (pursuant to Art. 2505 of the Italian Civil Code), both the speculative asset management
  companies into their parent. The transaction – authorised by the Bank of Italy in February –
  took effect from 1st July 2010, while it was effective for accounting and tax purposes from 1st
  January 2010. As the shares of the merged companies were cancelled, the share capital of UBI
  Pramerica SGR remained unchanged.
  UBI Pramerica also acquired the 50.000 shares of UBI.S held by UBI Pramerica Alternative
  Investments, which brought its investment in the service company up to 1,5539%.
  On 13th January 2011, these shares were sold to IW Bank to allow it to acquire an interest in
  the consortium company of 0,074%, while the interest held by UBI Pramerica SGR fell again to
  1,4799%;
• on 3rd August 2010, as part of the process to reorganise the sector, the transfer to UBI
  Pramerica SGR was completed of the entire interest in UBI Management Company Sa Lux held
  by UBI Banca Private Investment (99%) and by UBI Banca International (1%) for consideration
  of 560 thousand euro;
• on 7th December 2010, Gestioni Lombarda (Switzerland) Sa was merged into its parent,
  Company Banque de Dépôts et de Gestion, with effect from the preceding 31st October, using
  the simplified procedure in force according to Swiss regulations, which accelerated the timing
  of the transaction;
• on 14th February 2011, the agreement was completed, signed on 28th July 2010 by principal
  shareholders of Polis Fondi SGRpA: Sopaf on the one hand (which held 49% of the share
  capital) and UBI Banca and another four “popular” banks, Banche Popolari (Banco Popolare,
  BPER, Banca Popolare di Sondrio and Banca Popolare di Vicenza) on the other (shareholders
  who together also hold 49%). The purpose of the agreement was to acquire the investment held
  by Sopaf for consideration of eight million euro. Following the issue of the authorisation by the
  Bank of Italy (on 18th January 2011), the planned transactions commenced. In this context
  UBI Banca acquired a further 9,8% of the share capital (amounting to 50.960 shares) for
  payment of 1,6 million euro. The five “popular” banks – the new majority shareholders with
  98% of the share capital – therefore signed a new five year shareholders’ agreement.


Banc assurance:
•   on 30th September 2010, as part of the agreement for the renewal of the partnership in the life
    banc assurance sector, UBI Banca and Cattolica Assicurazioni strengthened their co-operation
    with the sale by the UBI Banca Group of a further 9,9% of the share capital of the Lombarda
    Vita joint venture to the Cattolica Assicurazioni Group (see also the previous section
    “Significant events that occurred during the year” for further information). At the end of
    December the share capital of Lombarda Vita was therefore held as follows: 60% by Cattolica
    Assicurazioni (compared to 50,1% previously) and 40% by UBI Banca Group (49,9%
    previously).
•   on 13th December 2010, the entire interest in Secur Broker Srl (10% held by the Parent and
    30% by UBI Insurance Broker) was sold to Marine & Aviation Spa (a well-established
    insurance brokerage) for 280 thousand euro. Secur Broker, consolidated using the equity
    method in December 2009, was therefore excluded from the consolidation.


Consumer credit:
• on 24th March 2010: UBI Banca signed two agreements, one with the shareholders of Barberini
  Sa (to purchase the remaining 66,7% of the share capital) and one with the agent shareholders


                                                 81
     of Prestitalia Spa (to purchase 100% of the share capital in the company held by them).
     Commitments were officially agreed with the latter for the exclusive distribution of “salary
     backed loan” and “deduction of loan repayments from salary” products.
           At the same time as the purchase contracts were signed for the acquisition of 100% of
     Barberini and Prestitalia, action was taken, through Barberini, to subscribe an increase in the
     share capital of Prestitalia amounting to 37 million euro, in order to implement the necessary
     plan to strengthen its capital (pursuant to a provision of the Bank of Italy of 3rd March 2010).
     The share capital of Prestitalia therefore rose to 46.385.482 euro (9.385.200 euro in December
     200917).
     The operation, which was authorised by the Antitrust Authority on 19th May and by the Bank
     of Italy on 4th August, was completed on 9th September 201018. In detail:
     - with regard to Barberini, UBI Banca acquired a total of 2.000.000 ordinary shares held by
         Medinvest International and Pharos Sa (accounting for 66,67% of the share capital subject
         to acquisition) for a total price of 7,3 million euro for the ordinary shares (of which 1,6
         million euro paid on 24th March 2011 after determined conditions to which it was subject
         concerning the agency network of Presitalia were met) and also 92.784 financial
         instruments, termed "parts bénéficiaires", for a total price of 341 thousand euro (including
         1,6 thousand euro paid on 24th March 2011);
     - with regard to Prestitalia, Barberini acquired 3.400 shares (6,4% of the share capital
         remaining after the increase in the share capital of 37 million euro fully subscribed by UBI
         Banca in March) at a price of 3,6 million euro;
     On 10th January 2011, Barberini Sa sold its entire investment held in Prestitalia (53.378
     shares accounting for 100% of the share capital) to B@nca 24-7 for a total price of 77 million
     euro;
•    on 5th July 2010, By You Mutui Srl acquired 100% of Sintesi Mutuo Srl (a credit brokerage
     company), which therefore is included in the consolidation under the proportionate method (as
     is the whole of the By You Group). The consideration, set at a maximum amount of 1,8 million
     euro, was paid progressively as determined volumes of mortgages granted were achieved; the
     last tranche of 0,3 million euro was paid in the fourth quarter of the year.


Other Group Companies:
• on 30th October 2009, UBI Leasing (formerly SBS Leasing) repurchased, without recourse and
  en bloc, all the loans, (the remaining amount of approximately 40 million euro of the 610
  million euro originally securitised, relating to lease contracts for machinery and equipment,
  property and automobiles), which had been sold in 2002 to Lombarda Lease Finance 2, which
  in turn redeemed all the notes issued as part of the securitisation transaction. Since the cash
  flows relating to the assets and liabilities recognised by the special purpose entity ceased to
  exist during the first few months of 2010, it became possible to exclude the underlying
  business of LLF2 from the consolidation. The company nevertheless remained operational (UBI
  Banca holds a 10% interest).
  As part of internal securitisation activity designed to create additional assets eligible for
  refinancing, it was decided to use the company Lombarda Lease Finance 2 Srl as a special
  purpose entity (already recognised in the Bank of Italy list pursuant to Art. 106 of the
  consolidated banking act), with the change of its name to UBI Finance 3 Srl (as approved by a
  Shareholders’ Meeting of 17th November 2010). UBI Banca had maintained a 10% interest in
  the company, while 90% is held by the Dutch foundation Stichting Brixia. A portfolio of Banca
  Popolare di Bergamo loans was sold (secured and unsecured loans to small-and-medium sized
  enterprises for a sum of 2,8 billion euro) to the company on 1st December 2010. At the end of
  the year the special purpose entity was therefore included in the consolidated financial
  statements because this company is in reality controlled, since its assets and liabilities were
  originated by a Group member company.
•    on 16th June 2010 an extraordinary shareholders’ meeting of Tex Factor Spa (20% interest
     held by UBI Factor) resolved to wind up the company (with effect from the date of filing the

17   As already reported, as at 31st December 2009 UBI Banca held 33,3333% of Barberini, which held a controlling interest in Prestitalia of
     68,5185%. The indirect interest held by UBI Banca therefore amounted to 22,8395%. The companies were consolidated proportionately.
18   From 30th September 2010, both Barberini Sa and Prestitalia Spa have been consolidated on a line-by-line basis; similarly as an investee
     of Prestitalia, UFI Servizi Srl was also included in the consolidation.


                                                                       82
    decision with the Company Registrar on 1st July 2010) and to put it into voluntary liquidation.
    The decision was taken on completion of analysis and assessment activity designed to
    ascertain the future prospects for growth, which were not found to be consistent with the
    expectations of the shareholders;
•   on 23rd September 2010: following the disposal by Centrobanca of some quotas of Group Srl
    (an equity accounted investee), the company is no longer included within the consolidation
    (14,2857% the percentage of the share capital held at the end of December compared to 20%
    twelve months before);
•   on 30th September 2010: following the increases in the share capital decided by PerMicro Spa,
    which increased the number of shareholders and consequently reduced the percentage held by
    UBI Banca Group, the company was excluded from the consolidation (an interest of 15,3041%
    held at the end of year compared to 20,6148% at the end of 2009);
•   on 30th December 2010: BRE purchased 16.176 shares (held by a co-operative credit bank) for
    1.500 euro, equal to the remaining 5% of the share capital of Ge.Se.Ri Spa in liquidation to
    achieve full control of the company (95% in December 2009). The company continues to exist
    because it holds tax credits not yet received;
•   Capital Money Spa: as a result of the incomplete subscription of operations to increase the
    capital performed in 2009 and 2010, the interest held by UBI Banca increased over twelve
    months from 20,4604% to 20,6711%.




                                                 83
    Reclassified consolidated financial
    statements, reclassified income statement
    net of the most significant non-recurring
    items and reconciliation schedules

Reclassified consolidated statement of financial position


                                                                                      31.12.2010       31.12.2009     Changes      % changes
Figures in thousands of euro


               ASSETS
    10.        Cash and cash equivalents                                                   609.040          683.845      -74.805        -10,9%

    20.        Financial assets held for trading                                         2.732.751        1.575.764    1.156.987        73,4%

    30.        Financial assets at fair value                                              147.286          173.727      -26.441        -15,2%

    40.        Available-for-sale financial assets                                      10.252.619        6.386.257    3.866.362        60,5%

    60.        Loans to banks                                                            3.120.352        3.278.264     -157.912         -4,8%

    70.        Loans to customers                                                      101.814.829       98.007.252    3.807.577         3,9%

    80.        Hedging derivatives                                                         591.127          633.263      -42.136         -6,7%

    90.        Fair value change in hedged financial assets (+/-)                          429.073          301.852     127.221         42,1%

   100.        Equity investments                                                          368.894          413.943      -45.049        -10,9%

   120.        Property, equipment and investment property                               2.112.664        2.106.835       5.829          0,3%

   130.        Intangible assets                                                         5.475.385        5.523.401      -48.016         -0,9%
               of which: goodwill                                                        4.416.660        4.401.911      14.749          0,3%

   140.        Tax assets                                                                1.723.231        1.580.187     143.044          9,1%

   150.        Non-current assets and disposal groups held for sale                          8.429          126.419     -117.990        -93,3%
   160.        Other assets                                                              1.172.889        1.522.214     -349.325        -22,9%

               Total assets                                                            130.558.569      122.313.223    8.245.346          6,7%


               LIABILITIES AND EQUITY
    10.        Due to banks                                                              5.383.977        5.324.434      59.543          1,1%

    20.        Due to customers                                                         58.666.157       52.864.961    5.801.196        11,0%

    30.        Securities issued                                                        48.093.888       44.349.444    3.744.444         8,4%

    40.        Financial liabilities held for trading                                      954.423          855.387      99.036         11,6%

    60.        Hedging derivatives                                                       1.228.056          927.319     300.737         32,4%

    80.        Tax liabilities                                                             993.389        1.210.867     -217.478        -18,0%

    90.        Liabilities associated with activities under disposal                               -        646.320     -646.320       -100,0%

   100.        Other liabilities                                                         2.600.165        3.085.006     -484.841        -15,7%

   110.        Post-employment benefits                                                    393.163          414.272      -21.109         -5,1%

   120.        Provisions for risks and charges:                                           303.572          285.623      17.949          6,3%
                a) pension and similar obligations                                          68.082           71.503       -3.421         -4,8%
                b) other provisions                                                        235.490          214.120      21.370         10,0%

  140.+170.
 +180.+1 90.   Share capital, share premiums, reserves and fair value reserves          10.806.898       11.141.149     -334.251         -3,0%

   210.        Minority interests                                                          962.760          938.342      24.418          2,6%
   220.        Profit for the year                                                         172.121          270.099      -97.978        -36,3%

               Total liabilities and equity                                            130.558.569      122.313.223    8.245.346          6,7%




                                                                                 84
Reclassified consolidated quarterly statements of financial position


                                                                                 31.12.2010            30.9.2010       30.6.2010       31.3.2010       31.12.2009       30.9.2009     30.6.2009     31.3.2009
Figures in thousands of euro

               ASSETS
    10.        Cash and cash equivalents                                              609.040              586.075         632.183         637.113          683.845         613.101       600.755       601.322
    20.        Financial assets held for trading                                    2.732.751            2.836.561       2.640.330       1.990.806        1.575.764       1.431.752     1.634.912     2.072.595
    30.        Financial assets at fair value                                         147.286              153.951         155.143         159.658          173.727         191.583       252.388       398.076
    40.        Available-for-sale financial assets                                 10.252.619           10.954.989      12.501.312       7.123.883        6.386.257       5.257.186     5.483.644     5.316.954
    50.        Held-to-maturity investments                                                   -                    -               -               -                -     1.687.077     1.577.276     1.657.865
    60.        Loans to banks                                                       3.120.352            3.427.795       3.290.637       2.996.834        3.278.264       3.101.108     3.184.949     2.824.055
    70.        Loans to customers                                                 101.814.829          101.195.034     100.157.746      97.805.640       98.007.252      96.554.963    96.830.116    96.892.382
    80.        Hedging derivatives                                                    591.127              816.673         916.055         743.946          633.263         652.898       641.238       604.739
    90.        Fair value change in hedged financial assets (+/-)                     429.073              796.414         621.964         450.741          301.852         403.522       313.129       461.224
   100.        Equity investments                                                     368.894              375.800         406.789         419.289          413.943         360.098       337.162       297.068
   110.        Technical reserves of reinsurers                                               -                    -               -               -                -        35.249        72.166        77.691
   120.        Property, equipment and investment property                          2.112.664            2.071.976       2.097.820       2.087.323        2.106.835       2.094.140     2.098.840     2.144.779
   130.        Intangible assets                                                    5.475.385            5.478.993       5.475.662       5.497.679        5.523.401       5.588.714     5.603.009     5.613.720
               of which: goodwill                                                   4.416.660            4.413.791       4.397.766       4.401.911        4.401.911       4.447.194     4.446.873     4.446.250
   140.        Tax assets                                                           1.723.231            1.379.250       1.362.428       1.616.739        1.580.187       1.200.391     1.163.829     1.555.575
   150.        Non-current assets and disposal groups held for sale                     8.429               48.256          40.285         134.769          126.419         398.011        71.265        20.704
   160.        Other assets                                                         1.172.889            1.622.444       1.801.061       2.351.971        1.522.214       1.931.071     1.978.893     1.940.263

               Total assets                                                       130.558.569          131.744.211     132.099.415     124.016.391      122.313.223     121.500.864   121.843.571   122.479.012

               LIABILITIES AND EQUITY
    10.        Due to banks                                                         5.383.977            7.126.257       9.252.062       4.612.141        5.324.434       5.306.536     6.073.741     5.953.954
    20.        Due to customers                                                    58.666.157           57.412.547      58.534.315      52.754.329       52.864.961      51.383.644    53.612.989    53.992.027
    30.        Securities issued                                                   48.093.888           46.463.566      44.828.119      45.670.177       44.349.444      44.162.873    42.522.368    41.707.004
    40.        Financial liabilities held for trading                                 954.423              978.064         896.016         948.995          855.387         815.697       746.246       856.656
    60.        Hedging derivatives                                                  1.228.056            1.827.144       1.560.152       1.130.958          927.319         883.088       724.402       981.373
    80.        Tax liabilities                                                        993.389              908.091         814.057       1.277.497        1.210.867       1.132.291     1.014.788     1.633.358
    90.        Liabilities associated with activities under disposal                          -                    -               -       803.894          646.320         810.081           156               77
   100.        Other liabilities                                                    2.600.165            4.288.484       3.697.804       3.859.410        3.085.006       3.743.221     3.916.535     3.939.651
   110.        Post-employment benefits                                               393.163              402.921         405.118         414.667          414.272         440.728       436.763       430.450
   120.        Provisions for risks and charges:                                      303.572              295.747         271.353         277.233          285.623         282.450       289.167       292.517
                a) pension and similar obligations                                     68.082               69.560          70.464          70.982           71.503          69.820        72.758        80.892
                b) other provisions                                                   235.490              226.187         200.889         206.251          214.120         212.630       216.409       211.625
   130.        Technical reserves                                                             -                    -               -               -                -       195.215       391.352       405.032
  140.+170.
 +1 80.+190.   Share capital, share premiums, reserves and fair value reserves     10.806.898           10.886.557      10.867.923      11.351.150       11.141.149      11.104.760    10.942.579    11.152.097
   210.        Minority interests                                                     962.760              957.099         870.422         877.815          938.342       1.052.983     1.046.548     1.110.471
   220.        Profit for the period                                                  172.121              197.734         102.074          38.125          270.099         187.297       125.937        24.345

               Total liabilities and equity                                       130.558.569          131.744.211     132.099.415     124.016.391      122.313.223     121.500.864   121.843.571   122.479.012




                                                                                                  85
Reclassified consolidated income statement

                                                                                                                                                                                                    4th Quarter     4th Quarter
                                                                                                                                            2010           2009         Changes      % changes                                      Changes       % changes
                                                                                                                                                                                                       2010            2009
Figures in thousands of euro                                                                                                                 A              B             A-B           A/B                                           C-D            C/D
                                                                                                                                                                                                         C               D

      10.-20.         Net interest income                                                                                                  2.142.526      2.400.543      (258.017)       (10,7%)         548.555         557.917        (9.362)        (1,7%)
                       of which: effects of the purchase price allocation                                                                    (61.141)       (62.248)       (1.107)        (1,8%)        (14.598)        (13.963)           635          4,5%
                       Net interest income excluding the effects of the PPA                                                                2.203.667      2.462.791     (259.124)       (10,5%)         563.153         571.880        (8.727)        (1,5%)
         70.          Dividends and similar income                                                                                             24.099         10.609        13.490       127,2%             3.531            856          2.675           n.s.
                      Profits (losses) of equity-accounted investees                                                                           17.613         35.375      (17.762)       (50,2%)          (1.867)         16.383      (18.250)            n.s.
      40.-50.         Net commission income                                                                                                1.185.297      1.214.688       (29.391)         (2,4%)        313.767         331.886      (18.119)         (5,5%)
                       of which performance fees                                                                                               15.384         22.930       (7.546)      (32,9%)           15.384          22.930       (7.546)       (32,9%)
      80.+90.+        Net income from trading, hedging and disposal/repurchase activities and from assets/liabilities at fair
     100.+110.        value                                                                                                                   34.044        126.783       (92.739)      (73,1%)          20.573          33.737       (13.164)       (39,0%)
     150.+160.        Net income from insurance operations                                                                                         -         30.945       (30.945)     (100,0%)               -             (51)           (51)     (100,0%)
        220.          Other net operating income                                                                                              92.482         87.304          5.178         5,9%          25.893          18.538          7.355         39,7%
                      Operating income                                                                                                     3.496.061      3.906.247     (410.186)        (10,5%)        910.452         959.266      (48.814)          (5,1%)
                      Operating income excluding the effects of the PPA                                                                    3.557.202      3.968.495     (411.293)       (10,4%)         925.050         973.229      (48.179)         (5,0%)
       180.a          Personnel expense                                                                                                   (1.451.584)    (1.465.574)     (13.990)         (1,0%)       (344.469)       (346.621)       (2.152)         (0,6%)
       180.b          Other administrative expenses                                                                                         (769.744)       (777.216)      (7.472)        (1,0%)       (201.335)       (219.492)     (18.157)          (8,3%)
     200.+210.        Net impairment losses on property, equipment and investment property and intangible assets                            (247.236)       (271.557)    (24.321)         (9,0%)        (63.996)         (97.914)     (33.918)        (34,6%)
                       of which: effects of the purchase price allocation                                                                    (74.889)      (100.992)     (26.103)       (25,8%)         (18.722)        (51.416)     (32.694)        (63,6%)
                       Net impairment losses on property, equipment and investment property and intangib le assets
                       excluding the effects of the PPA                                                                                    (172.347)      (170.565)         1.782          1,0%         (45.274)        (46.498)       (1.224)        (2,6%)
                      Operating expenses                                                                                                   (2.468.564)    (2.514.347)     (45.783)        (1,8%)       (609.800)       (664.027)      (54.227)         (8,2%)
                      Operating expenses excluding the effects of the PPA                                                                 (2.393.675)    (2.413.355)     (19.680)        (0,8%)       (591.078)       (612.611)      (21.533)         (3,5%)

                      Net operating income                                                                                                 1.027.497      1.391.900      (364.403)       (26,2%)        300.652         295.239         5.413           1,8%
                      Net operating income excluding the effects of the PPA                                                                1.163.527      1.555.140     (391.613)       (25,2%)         333.972         360.618      (26.646)         (7,4%)
       130.a          Net impairment losses on loans                                                                                        (706.932)      (865.211)     (158.279)      (18,3%)        (251.217)       (272.667)      (21.450)        (7,9%)
    130.b+c+d         Net impairment losses on other assets and liabilities                                                                  (49.721)       (49.160)           561         1,1%         (31.529)        (13.606)        17.923       131,7%
        190.          Net provisions for risks and charges                                                                                   (27.209)       (36.932)       (9.723)      (26,3%)         (15.204)         (7.440)         7.764       104,4%
 240.+260.+270.       Profit from the disposal of equity investments and net impairment losses on goodwill                                     90.700        100.302       (9.602)       (9,6%)           12.346          96.684      (84.338)       (87,2%)
                      Pre-tax profit from continuing operations                                                                              334.335        540.899     (206.564)        (38,2%)         15.048          98.210       (83.162)        (84,7%)
                      Pre-tax profit from continuing operations excluding the effects of the PPA                                             470.365        704.139     (233.774)       (33,2%)          48.368         163.589     (115.221)        (70,4%)
        290.          Taxes on income from continuing operations                                                                            (231.980)      (243.442)     (11.462)         (4,7%)        (34.693)        (22.524)       12.169          54,0%
                        of which: effects of the purchase price allocation                                                                    43.770          52.532       (8.762)      (16,7%)          10.720          21.093      (10.373)        (49,2%)
                      Integration costs                                                                                                             -        (15.465)     (15.465)     (100,0%)                -            (633)        (633)      (100,0%)
                      of which: personnel expense                                                                                                   -       (11.626)     (11.626)      (100,0%)                -             (97)         (97)      (100,0%)
                            other administrative expenses                                                                                           -         (5.886)      (5.886)     (100,0%)                -           (186)        (186)       (100,0%)
                            net impairment losses on property, equipment and investment property and intangib le assets                             -         (4.510)      (4.510)     (100,0%)                -           (646)        (646)       (100,0%)
                            taxes                                                                                                                   -           6.557      (6.557)     (100,0%)                -             296        (296)       (100,0%)
        310.          Post-tax profit (loss) from discontinued operations                                                                      83.368           5.155       78.213           n.s.            (1)                -            1            n.s.
        330.          Profit (loss) for the year/period attributable to minority interests                                                   (13.602)       (17.048)       (3.446)       (20,2%)         (5.967)           7.749     (13.716)             n.s.
                        of which: effects of the purchase price allocation                                                                    10.034          24.280     (14.246)       (58,7%)           2.503          12.461       (9.958)        (79,9%)
                      Profit for the year/period attrib utab le to the shareholders of the Parent excluding the effects of the PPA           254.347        356.527     (102.180)       (28,7%)          (5.516)        114.627     (120.143)       (104,8%)
        340.          Profit (loss) for the year/period attributable to the shareholders of the Parent                                       172.121        270.099       (97.978)       (36,3%)        (25.613)         82.802      (108.415)            n.s.


                      Total impact of the purchase price allocation on the income statement                                                  (82.226)       (86.428)       (4.202)        (4,9%)        (20.097)        (31.825)     (11.728)        (36,9%)




                                                                                                                                     86
Reclassified consolidated quarterly income statements

                                                                                                                                                                  2010                                                                 2009

Figures in thousands of euro
                                                                                                                                       4th Quarter     3rd Quarter       2nd Quarter       1st Quarter       4th Quarter    3rd Quarter       2nd Quarter       1st Quarter

      10.-20.         Net interest income                                                                                                  548.555          543.197           517.441          533.333           557.917         572.951           616.804          652.871
                       of which: effects of the purchase price allocation                                                                 (14.598)         (14.060)          (15.934)         (16.549)          (13.963)        (15.198)          (18.027)         (15.060)
                       Net interest income excluding the effects of the PPA                                                               563.153          557.257           533.375          549.882           571.880         588.149           634.831          667.931
         70.          Dividends and similar income                                                                                            3.531          2.331            16.862             1.375               856           6.253             1.656            1.844
                      Profits (losses) of equity-accounted investees                                                                        (1.867)          8.414             6.043             5.023            16.383           8.828             5.956            4.208
      40.-50.         Net commission income                                                                                                313.767         263.973           313.929           293.628           331.886         297.178           294.300          291.324
                         of which performance fees                                                                                          15.384                   -                 -                 -        22.930                  -                 -                 -
     80.+90.+         Net income (loss) from trading, hedging and disposal/repurchase activities and from assets/liabilities at
     100.+110.        fair value                                                                                                            20.573          19.357             (964)            (4.922)           33.737         26.363            48.429            18.254
     150.+160.        Net income from insurance operations                                                                                       -               -                 -                  -              (51)         8.967            16.088             5.941
        220.          Other net operating income                                                                                            25.893          25.327            17.170            24.092            18.538         24.249            23.226            21.291
                      Operating income                                                                                                     910.452         862.599           870.481           852.529           959.266        944.789         1.006.459           995.733
                      Operating income excluding the effects of the PPA                                                                    925.050         876.659           886.415           869.078           973.229        959.987         1.024.486         1.010.793
       180.a          Personnel expense                                                                                                   (344.469)       (359.587)         (376.496)         (371.032)         (346.621)      (373.655)         (366.562)         (378.736)
       180.b          Other administrative expenses                                                                                       (201.335)       (183.844)         (199.730)         (184.835)         (219.492)      (174.589)         (200.525)         (182.610)
     200.+210.        Net impairment losses on property, equipment and investment property and intangible assets                           (63.996)         (60.425)          (61.729)         (61.086)          (97.914)       (58.143)          (57.546)          (57.954)
                       of which: effects of the purchase price allocation                                                                   (18.722)       (18.723)          (18.722)          (18.722)          (51.416)       (16.526)          (16.525)          (16.525)
                       Net impairment losses on property, equipment and investment property and intangib le assets excluding               (45.274)        (41.702)          (43.007)
                       the effects of the PPA                                                                                                                                                 (42.364)          (46.498)        (41.617)          (41.021)         (41.429)
                      Operating expenses                                                                                                  (609.800)       (603.856)         (637.955)         (616.953)         (664.027)      (606.387)         (624.633)         (619.300)
                      Operating expenses excluding the effects of the PPA                                                                (591.078)       (585.133)         (619.233)         (598.231)         (612.611)      (589.861)         (608.108)         (602.775)

                      Net operating income                                                                                                 300.652         258.743           232.526           235.576           295.239        338.402           381.826           376.433
                      Net operating income excluding the effects of the PPA                                                                333.972         291.526           267.182           270.847           360.618        370.126           416.378           408.018
       130.a          Net impairment losses on loans                                                                                      (251.217)       (134.011)         (189.845)         (131.859)         (272.667)      (197.349)         (235.622)         (159.573)
    130.b+c+d         Net impairment losses on other assets and liabilities                                                                (31.529)           (147)          (18.660)               615          (13.606)          (580)            39.372          (74.346)
        190.          Net provisions for risks and charges                                                                                 (15.204)         (5.383)           (4.407)           (2.215)           (7.440)        (2.621)          (17.081)           (9.790)
 240.+260.+270.       Profits (loss) from disposal of equity investments and net impairment losses on goodwill                               12.346         80.498            (2.236)                92            96.684          (213)             (357)             4.188
                      Pre-tax profit from continuing operations                                                                             15.048         199.700            17.378           102.209            98.210        137.639           168.138           136.912
                      Pre-tax profit from continuing operations excluding the effects of the PPA                                            48.368         232.483            52.034           137.480           163.589        169.363           202.690           168.497
        290.          Taxes on income from continuing operations                                                                           (34.693)       (103.144)          (34.285)          (59.858)          (22.524)       (67.883)          (50.367)         (102.668)
                       of which: effects of the purchase price allocation                                                                   10.720          10.545            11.153            11.352            21.093         10.189            11.106            10.144
                      Integration costs                                                                                                           -               -                 -                 -             (633)         (3.875)           (4.555)          (6.402)
                      of which: personnel expense                                                                                                 -               -                 -                 -              (97)        (2.563)           (3.998)           (4.968)
                            other administrative expenses                                                                                         -               -                 -                 -            (186)         (1.690)           (1.136)           (2.874)
                            net impairment losses on property, equipment and investment property and intangib le assets                           -               -                 -                 -            (646)         (1.289)           (1.312)           (1.263)
                            taxes                                                                                                                 -               -                 -                 -              296           1.667             1.891             2.703
        310.          Post-tax profit (loss) from discontinued operations                                                                       (1)              12           83.035               322                  -            (33)               (5)            5.193
        330.          Profit (loss) for the period attributable to minority interests                                                       (5.967)           (908)           (2.179)           (4.548)            7.749         (4.488)          (11.619)           (8.690)
                        of which: effects of the purchase price allocation                                                                   2.503           2.395             2.622             2.514            12.461           4.219             4.117             3.483
                      Profit (loss) for the period attrib utab le to the shareholders of the Parent excluding the effects of the PPA        (5.516)        115.503            84.830            59.530           114.627         78.676           120.921            42.303
        340.          Profit (loss) for the period attributable to the shareholders of the Parent                                          (25.613)         95.660            63.949            38.125            82.802         61.360           101.592            24.345



                      Total impact of the purchase price allocation on the income statement                                               (20.097)         (19.843)          (20.881)         (21.405)          (31.825)        (17.316)          (19.329)          (17.958)




                                                                                                                                         87
Reclassified consolidated income statement net of the most significant non-recurring items

                                                                                                                                  non-recurring items                                                                                                                                                   non-recurring items
                                                                                                                                                                                                                                          2010                            Disposal of                                                                               2009
                                                                                                Impairment of                      Net
                                                                                                                                                                                                                                       net of non-                          shares,                              Tax realignment                                 net of non-
                                                                                                     equity                    impairment                                            Partial                                                                                                                                         Appraisal                                     Changes       % changes
                                                                                                              Contribution                                  Tax effect of                                      Full    Disposal of     recurring                       sale/impairment PEO gain on Impairment pursuant to Art.                                   recurring
                                                                                    2010         investments                    losses on                                       disposal of the Disposal of                                                2009                                                                    expenses for    Integration
                                                                                                              of depository                    Leaving        branch                                        impairment property in       items                              of equity     own       losses on 15, paragraph 3,                                     items
                                                                                                     Intesa                     goodwill of                                     interest held in   BDG                                                                                                                              the "branch     costs and                        A-B            A/B
                                                                                                                 banking                      incentives     switching                                         of IT  via Solferino,                                     investments, subordinated DD Growth        Decree Law
                                                                                                  Sanpaolo,                      Gestioni                                       Lombarda Vita branches                                                                                                                               switching"    other items
                                                                                                               operations                                   operations                                       systems      Milan            A                            impairment of instruments      Fund        185/2008 and                                      B
                                                                                                 A2A and the                    Lombarda                                              Spa                                                                                                                                            operation
                                                                                                                                                                                                                                                                           intangible                               IRAP refund
                                                                                                  Tlcom fund                  (Switzerland)
Figures in thousands of euro                                                                                                                                                                                                                                                 assets

Net interest income (including the effects of PPA)                                 2.142.526                                                                                                                                            2.142.526         2.400.543                                                                                               2.400.543        (258.017)       (10,7%)
Dividends and similar income                                                          24.099                                                                                                                                               24.099            10.609                                                                                                  10.609          13.490         127,2%
Profits (losses) of equity-accounted investees                                        17.613                                                                                                                                               17.613            35.375                                                                                                  35.375         (17.762)       (50,2%)
Net commission income                                                              1.185.297                                                                                                                                            1.185.297         1.214.688                                                                                               1.214.688         (29.391)        (2,4%)
  of which performance fees                                                           15.384                                                                                                                                               15.384            22.930                                                                                                  22.930          (7.546)       (32,9%)
Net income from trading, hedging and disposal/repurchase activities and from
assets/liabilities at fair value                                                      34.044                                                                                                        1.374                                  35.418           126.783          (37.441)      (60.543)     25.234                                                       54.033         (18.615)       (34,5%)
Net income from insurance operations                                                        -                                                                                                                                                        -       30.945                                                                                                  30.945         (30.945)      (100,0%)
Other net operating income                                                            92.482                         (957)                                                                                                                 91.525            87.304                                                                                     1.686        88.990           2.535           2,8%

Operating income (including the effects of PPA)                                    3.496.061               -          (957)               -             -                   -                -      1.374            -            -     3.496.478         3.906.247          (37.441)      (60.543)     25.234                 -               -        1.686     3.835.183        (338.705)         (8,8%)
Personnel expense                                                                 (1.451.584)                                                   33.233                                                                                 (1.418.351)       (1.465.574)                                                                                             (1.465.574)        (47.223)        (3,2%)
Other administrative expenses                                                      (769.744)                                                                                                                                             (769.744)        (777.216)                                                                       7.511                    (769.705)                39        0,0%
Net impairment losses on property, equipment and investment property and
intangible assets (including the effects of PPA)                                   (247.236)                                                                                                                    4.455                    (242.781)        (271.557)            34.891                                                                              (236.666)          6.115           2,6%

Operating expenses (including the effects of PPA)                                 (2.468.564)              -              -               -     33.233                      -                -           -      4.455             -    (2.430.876)       (2.514.347)           34.891             -           -                -          7.511              -   (2.471.945)        (41.069)         (1,7%)
Net operating income (including the effects of PPA)                                1.027.497               -          (957)               -     33.233                      -                -      1.374       4.455             -     1.065.602         1.391.900            (2.550)     (60.543)     25.234                 -          7.511         1.686     1.363.238        (297.636)        (21,8%)
Net impairment losses on loans                                                     (706.932)                                                                                                                                             (706.932)        (865.211)                                                                                     3.479      (861.732)       (154.800)       (18,0%)
Net impairment losses on other assets and liabilities                               (49.721)          41.111                                                                                                                               (8.610)         (49.160)            41.454                                                                                (7.706)               904       11,7%
Net provisions for risks and charges                                                (27.209)                                                                                                                                              (27.209)         (36.932)                                                                                     4.996       (31.936)         (4.727)       (14,8%)
Profit (loss) from the disposal of equity investments and net impairment losses
on goodwill                                                                           90.700                                          4.145                                           (81.095)     (6.596)                  (5.442)          1.712          100.302          (96.157)                                                                                  4.145         (2.433)       (58,7%)
Pre-tax profit from continuing operations before tax (including the effects of
PPA)                                                                                 334.335          41.111         (957)            4.145     33.233                      -         (81.095)     (5.222)      4.455       (5.442)       324.563           540.899          (57.253)      (60.543)     25.234                 -          7.511        10.161       466.009        (141.446)        (30,4%)
Taxes on income for the year from continuing operations                            (231.980)           (609)           263                      (9.139)            18.294              20.201       1.566      (1.444)       1.759       (201.089)        (243.442)               (20)      19.586      (8.156)         (31.038)         (2.433)       (2.524)     (268.027)        (66.938)       (25,0%)
Integration costs                                                                           -                                                                                                                                                        -     (15.465)                                                                                    15.465                  -            -              -
of which: personnel expense                                                                 -                                                                                                                                                        -     (11.626)                                                                                    11.626                  -            -              -
     other administrative expenses                                                          -                                                                                                                                                        -      (5.886)                                                                                     5.886                  -            -              -
     net impairment losses on property, equipment and investment property and
     intangib le assets                                                                     -                                                                                                                                                        -      (4.510)                                                                                     4.510                  -            -              -
     taxes                                                                                  -                                                                                                                                                        -        6.557                                                                                   (6.557)                  -            -              -
Post-tax profit (loss) from discontinued operations                                   83.368                       (83.356)                                                                                                                     12            5.155                                                                                    (5.155)                 -            12            n.s.
Profit (loss) for the year attributable to minority interests                       (13.602)                           173                      (1.711)            (2.951)                                       (279)                    (18.370)         (17.048)            (8.198)                                     3.284          (633)        (2.007)      (24.602)         (6.232)       (25,3%)

Profit for the year attributable to the shareholders of the Parent                   172.121          40.502       (83.877)           4.145     22.383             15.343             (60.894)     (3.656)      2.732       (3.683)       105.116           270.099          (65.471)      (40.957)     17.078          (27.754)          4.445        15.940       173.380         (68.264)        (39,4%)



ROE                                                                                     1,6%                                                                                                                                                   1,0%            2,4%                                                                                                      1,6%
Cost / Income ratio (including the effects of PPA)                                    70,6%                                                                                                                                                 69,5%            64,4%                                                                                                    64,5%
Cost / Income ratio (excluding the effects of PPA)                                    67,3%                                                                                                                                                 66,2%            60,8%                                                                                                    60,8%




                                                                                                                                                                                                    88
Reconciliation schedule to 31st December 2010


                                     RECLASSIFIED INCOME STATEMENT                                              2010                                    reclassifications                                       2010

                                                                                                                                                                                     maximum
  Ite ms                                                                                                     mandatory                                             depreciation for                        reclassified
                                                                                                                                                 profit of equity-                    overdraft
                                                                                                            consolidated             tax                           improvements                            consolidated
                                                                                                                                                   accounted                           charge
                                                                                                               financial         recoveries                          to leased                                financial
                                                                                                                                                   investees                        reclassificat-
                                                                                                             statements                                                assets                               statements
                                                                            Figures in thousands of euro                                                                                 ion

 10.-20.    Net interest income                                                                                 2.146.598                                                                  (4.072)              2.142.526
   70.      Dividends and similar income                                                                           24.099                                                                                          24.099
            Profit of equity-accounted investees                                                                           -                            17.613                                                     17.613
 40.-50.  Net commission income                                                                                 1.181.225                                                                   4.072               1.185.297
80.+90.+ Net income from trading, hedging and disposal/repurchase activities and from
100.+110. assets/liabilities at fair value                                                                         34.044                                                                                          34.044
150.+160. Net income from insurance operations                                                                             -                                                                                               -
  220.      Other net operating income/(expense)                                                                  239.430          (153.846)                                6.898                                  92.482

            Operating income                                                                                    3.625.396          (153.846)            17.613              6.898                -              3.496.061
  180.a     Personnel expense                                                                                 (1.451.584)                                                                                      (1.451.584)
  180.b   Other administrative expenses                                                                         (923.590)           153.846                                                                     (769.744)
          Net impairment losses on property, equipment and investment property and
200.+210. intangible assets                                                                                     (240.338)                                                  (6.898)                              (247.236)

            Operating expenses                                                                                (2.615.512)           153.846                    -           (6.898)               -             (2.468.564)
            Net operating income                                                                                1.009.884                    -          17.613                   -               -              1.027.497
  130.a     Net impairment losses on loans                                                                      (706.932)                                                                                       (706.932)
130.b+c+d Net impairment losses on other assets and liabilities                                                  (49.721)                                                                                        (49.721)
  190.      Net provisions for risks and charges                                                                 (27.209)                                                                                        (27.209)
240.+260.   Profit (loss) from the disposal of equity investments and net impairment
  +270.     losses on goodwill                                                                                    108.313                              (17.613)                                                    90.700

            Pre-tax profit from continuing operations                                                             334.335                    -                 -                 -               -                334.335
  290.      Taxes on income for the year from continuing operations                                             (231.980)                                                                                       (231.980)
  310.      Post-tax profit from discontinued operations                                                           83.368                                                                                          83.368
  330.      Profit (loss) for the year attributable to minority interests                                        (13.602)                                                                                        (13.602)

  340.      Profit for the year attributable to the shareholders of the Parent                                    172.121                    -                 -                 -               -                172.121




Reconciliation schedule to 31st December 2009


                                     RECLASSIFIED INCOME STATEMENT                                            2009                                                 reclassifications                                              2009

                                                                                                                                                                                           depreciation maximum
  Ite ms                                                                                                    mandatory                         net income                                                                       reclassified
                                                                                                                                                                        profit of equity-       for       overdraft
                                                                                                           consolidated        integration       from            tax                                                           consolidated
                                                                                                                                                                          accounted       improvements     charge
                                                                                                             financial            costs       insurance      recoveries                                                           financial
                                                                                                                                                                          investees         to leased   reclassifica-
                                                                                                            statements                        operations                                                                        statements
                                                                        Figures in thousands of euro                                                                                          assets        tion

 10.-20.    Net interest income                                                                               2.495.628                          (10.572)                                                       (84.513)          2.400.543
   70.      Dividends and similar income                                                                         10.609                                                                                                              10.609
            Profit of equity-accounted investees                                                                       -                                                         35.375                                              35.375
 40.-50.    Net commission income                                                                             1.130.175                                                                                          84.513           1.214.688
 80.+90.+   Net income from trading, hedging and disposal/repurchase activities and from
100.+110.   assets/liabilities at fair value                                                                    126.788                                (5)                                                                          126.783
150.+160.   Net income from insurance operations                                                                 20.049                            10.896                                                                            30.945
  220.      Other net operating income/(expense)                                                                235.042                             (319)    (155.308)                                7.889                          87.304

            Operating income                                                                                  4.018.291                  -               -   (155.308)           35.375               7.889            -          3.906.247
  180.a     Personnel expense                                                                                (1.477.200)           11.626                                                                                        (1.465.574)
  180.b   Other administrative expenses                                                                       (938.410)             5.886                      155.308                                                            (777.216)
          Net impairment losses on property, equipment and investment property and
200.+210. intangible assets                                                                                   (268.178)             4.510                                                            (7.889)                      (271.557)

            Operating expenses                                                                               (2.683.788)           22.022                -     155.308                 -             (7.889)           -         (2.514.347)

            Net operating income                                                                              1.334.503            22.022                -             -         35.375                    -           -          1.391.900
  130.a     Net impairment losses on loans                                                                    (865.211)                                                                                                           (865.211)
130.b+c+d Net impairment losses on other assets and liabilities                                                (49.160)                                                                                                            (49.160)
  190.      Net provisions for risks and charges                                                               (36.932)                                                                                                            (36.932)
240.+270.   Profits on the disposal of equity investments                                                       135.677                                                         (35.375)                                            100.302

            Pre-tax profit from continuing operations                                                           518.877            22.022                -             -               -                   -           -            540.899
  290.      Taxes on income for the year from continuing operations                                           (236.885)            (6.557)                                                                                        (243.442)
            Integration costs                                                                                          -         (15.465)                                                                                          (15.465)
  310.      Post-tax profit from discontinued operations                                                          5.155                                                                                                               5.155
  330.      Profit (loss) for the year attributable to minority interests                                      (17.048)                                                                                                            (17.048)

  340.      Profit for the year attributable to the shareholders of the Parent                                  270.099                  -               -             -               -                   -           -            270.099




                                                                                                                     89
Notes to the reclassified consolidated financial statements

The mandatory financial statements have been prepared on the basis of Bank of Italy Circular No. 262 of 22nd December 2005
and subsequent updates.

The contribution of depository banking operations was completed on 31st May 2010.
With regard to the statement of financial position, this involved the disposal of all the assets and liabilities associated with
these operations, and of direct funding in particular – the most significant component consisting of the accounts for the
management of the UBI Pramerica investment funds – which had been reclassified from 30th September 2009 within
“liabilities associated with activities under disposal”.
With regard to the income statement, this included not only the gain realised on the contribution in 2010, but also the
expenses and income from the operations transferred in respect of the first five months only.

The majority of the share capital (50% + 1 share) of UBI Assicurazioni was disposed of on 29th December 2009. Because this
partial disposal was concluded at the end of the year, the income statement for 2009 included all the income and expense
items on a “line-by-line” basis, while the statement of financial position items at the end of December no longer included the
assets and liabilities of the insurance company.
As from 1st January 2010 the income and expense items relating to UBI Assicurazioni formed part of the item profit (loss) of
equity-accounted investees (on the basis of the percentage interest held).

A “commitment fee” was introduced from 1st July 2009 which eliminated, amongst other things, the maximum overdraft
charge. This brought about a reclassification – made in the reclassified financial statements only and not the mandatory
financial statements – of the amounts for that fee, classified within interest until 30th June 2009.
In consideration of the commission nature of the commitment fee and the need for a uniform presentation of the data, the
income from the maximum overdraft charge was reclassified out of net interest income and into net commission income for
the periods prior to 1st July 2009.

The following rules have been applied to the reclassified financial statements to allow a vision that is more consistent with a
management accounting style:
-   net income from insurance companies comprises (for all the 2009 interim periods and for the full year 2009) the revenues of UBI
    Assicurazioni Spa: net interest, net premiums (item 150), income from trading activities and net income from insurance operations
    and other (items 160 and 220 in the mandatory financial statements);
-   the tax recoveries recognised within item 220 of the mandatory financial statements (other net operating income/expenses) were
    reclassified as a reduction in indirect taxes included within other administrative expenses;
-   the item profit (loss) of equity-accounted investees includes the profit (loss) of equity-accounted investees included within item 240
    in the mandatory financial statements;
-   the item net impairment losses on property, equipment and investment property and intangible assets includes items 200 and 210
    in the mandatory financial statements and also the instalments relating to the depreciation of leasehold improvements classified
    within item 220;
-   the item profit (loss) from the disposal of equity investments and impairment losses on goodwill includes the item 240, net of profit
    (loss) of equity-accounted investees and also items 260 and 270 in the mandatory financial statements;
-   the item other net operating income/expense includes item 220, net of the reclassifications mentioned above.

The reconciliation of the items in the reclassified financial statements with the figures in the mandatory financial statements,
prepared on the basis of Bank of Italy Circular No. 262 of 22nd December 2005, has been facilitated, on the one hand, with the
insertion in the margin against each item of the corresponding number of the item in the mandatory financial statements with
which it is reconciled and, on the other hand, with the preparation of specific reconciliation schedules.
The comments on the performance of the main statement of financial position and income statement items are made on the
basis of the reclassified financial statements and of the reclassified financial statements for the comparative periods, and the
tables providing details included in the subsequent sections of this financial report have also been prepared on that same
basis.
In order to facilitate analysis of the Group’s performance and in compliance with CONSOB Communication No. DEM/6064293
of 28th July 2006, a special schedule has been included in the reclassified financial statements to show the impact on
earnings only of the principal non-recurring events and items – since the relative effects on equity and cash flow, being
closely linked, are not significant – which are summarised as follows:
full year 2010:
-   impairment losses on AFS equity investments in Intesa Sanpaolo and A2A and also in the AFS fund TLcom;
-   the contribution of depository banking operations;
-   impairment losses on goodwill of Gestioni Lombarda (Switzerland);
-   leaving incentives (trade union agreement of 20th May 2010);
-   tax impact of the branch switching operation;
-   partial disposal (9,9%) of the investment held in the Lombarda Vita Spa joint venture;
-   disposal of two branches by BDG;
-   full impairment loss on some components of IT systems by UBI.S and IW Bank;
-   disposal by the Parent of a property located in via Solferino, Milan

full year 2009:
-   profits on the disposal of instruments recognised within investments held to maturity. impairment losses on some intangible assets
    (brands), impairment losses on equity investments in Intesa Sanpaolo investment and in the Fund Polis recognised within
    available-for-sale financial assets and profits on the sale of equity investments (quota of BPA, UBI Assicurazioni, Mercato Impresa
    and IW Bank)
- gain realised on the public exchange offer on own subordinated debt instruments;
- impairment loss on DD Growth Fund;
- tax effects of realignment pursuant to Art. 15, paragraph 3 of Decree Law No. 185/2008 and IRAP (local production tax) refund;
- appraisal expenses for the Group "branch switching" operation
extraordinary expenses/impairment/provisions relating to IW Bank, provision for the investment in Coralis Rent, integration costs,
profit on the sale of UBI Assicurazioni agent operations and sale to BPVI of a Palermo branch and a part of a Brescia corporate
business unit by BPCI.



                                                                   90
The consolidated income statement

The income statement figures commented on are based on the reclassified consolidated financial
statements (the income statement, the quarterly income statements and the income statement net of the
principal non-recurring items) contained in another section of this report and the tables furnishing details
presented below are also based on those statements. The notes that follow those reclassified financial
statements may be consulted as may the reconciliation schedules for a description of the reclassification.


The results for 2010 were again affected by the macroeconomic scenario, in a context of a
recession never completely recovered from, of uncertainty inherited from the turmoil and
imbalances of the last four years and of sudden and unexpected pressures on financial
markets, all factors which perpetuate the disorientation of operators.

The year was characterised for the Group by a fall in ordinary revenues, which could not be
offset by a policy to contain costs – rigorously pursued again in 2010 – as they continued to be
affected by the economic situation, the high costs of credit, although now falling, and
impairment losses on financial assets. The year 2010 therefore ended with a consolidated
profit for the year of 172,1 million euro1, down compared to 270,1 million euro twelve months
before, despite the presence of non-recurring items2, related principally to partial disposals of
equity investments and the disposal of assets not related to the core business of the Group.

The positive trend for operations recorded in 2010 was confirmed in the fourth quarter,
although it ended with a loss of 25,6 million euro, attributable to further impairment losses on
financial assets (over 22 million euro) and additional impairment losses and provisions, mainly
of a prudent nature. This result, which compares with a profit of 82,8 million euro in the
fourth quarter of 2009, did not benefit from any non-recurring gains, as occurred in the
comparative period.

Operating income – which summarises the performance of ordinary activities – totalled
3.496,1 million euro (-10,5% compared to 2009), held down primarily by the trend for net
interest income and by the result for finance activities, as well as by the absence of net income
from insurance operations (following the partial disposal of UBI Assicurazioni on 29th
December 2009 and the consequent consolidation according to the equity method).

On a quarterly basis, operating income amounted to 910,5 million euro (-5,1% compared to
the fourth quarter of 2009), although net interest income (-1,7% compared to the fourth
quarter of 2009) is showing signs of recovery after the uninterrupted fall commenced at the
end of 2008: +1% the increase compared to the third quarter of 2010, +6% compared to the
second quarter of 2010 and +2,9% compared to the first quarter of the year.

In detail, net interest income3, which includes the expense of the purchase price allocation
amounting to 61,1 million euro, fell to 2.142,5 million euro (-258 million euro the year before),
penalised by weak demand for credit and even more by interest rate levels4.


1   The result includes the expense resulting from the purchase price allocation of the merger amounting to 82,2 million euro (86,4
    million euro in 2009).
2   If non-recurring items are not included, then the normalised profit is 105,1 million euro, compared to 173,4 million euro in the
    comparative year. These items consisted of net income of 67 million euro in 2010 (net of tax and minority interests), attributable
    mainly to the contribution of the depository banking operations and the partial disposal of Lombarda Vita, although offset by
    impairment losses on available-for-sale equity investments and payments related to leaving incentives. Positive again in 2009, net
    income from non-recurring items amounted to 96,7 million euro in 2009 (again net of tax and minority interests) the result primarily
    of the following: profits on the partial disposal of UBI Assicurazioni, a quota of BPA and Mercato Impresa; the gains from the public
    exchange offer on own held-to-maturity investments held in portfolio; the tax realignment and the IRAP [local production tax] refund.
    This was partly offset in 2009 by impairment losses on the equity investment in Intesa Sanpaolo and in the Polis Fund, by
    impairment losses on intangible assets, by the full impairment loss on the DD Growth Fund, by integration costs and by appraisal
    expenses for the operation to optimise the branch network.
3   The introduction of a commitment fee from 1st July 2009 made it appropriate, for the purpose of a consistent comparison, to
    reclassify the old maximum overdraft charges (MOC), amounting to 84,5 million euro in 2009, out of net interest income and into net
    commissions. Since the commitment fee is of an all encompassing nature, not only was the MOC eliminated, but also a series of
    commissions applied to credit lines and to authorised current account overdrafts. This caused a decrease in the relative income from
    162,7 million euro in 2009 to 117 million euro in 2010.
4   The progressive average one month Euribor rate fell from 0,927% in 2009 to 0,573% in 2010 (-35 basis points).


                                                                   91
    Interest and similar income: composition


                                                                         Debt                               Other
                                                                                       Financing                            2010          2009
                                                                     instruments                        transactions
    Figures in thousands of euro

    1. Financial assets held for trading                                   30.701                   -            933           31.634        18.210
    2. Financial assets at fair value                                           -                   -              -                -             -
    3. Available-for-sale financial assets                               328.149                    -                  -      328.149       165.526
    3. Held-to-maturity investments                                                -             -                 -                -        59.659
    5. Loans to banks                                                              -        29.421               361           29.782        40.260
    6. Loans to customers                                                     2.814      3.125.154             1.922        3.129.890     3.831.817
    7. Hedging derivatives                                                X                X                       -                -             -
    8. Other assets                                                       X                X                   1.785            1.785         2.685
                                                             Total       361.664         3.154.575             5.001        3.521.240     4.118.157


    Interest and similar expense: composition

                                                                                                            Other
                                                                     Borrowings        Securities                           2010          2009
                                                                                                        transactions
    Figures in thousands of euro

    1. Due to Central Banks                                              (14.115)                   -                  -     (14.115)        (3.339)
    2. Due to banks                                                      (29.382)          X                   (590)         (29.972)      (45.217)
    3. Due to customers                                                 (195.937)          X                   (645)         (196.582)     (374.526)
    4. Securities issued                                                  X            (1.069.742)                 -       (1.069.742)   (1.195.592)
    5. Financial liabilities held for trading                              (9.108)                  -                  -       (9.108)        (810)
    6. Financial liabilities at fair value                                         -                -              -                -              -
    7. Other liabilities and provisions                                   X                X                   (789)            (789)        (1.406)
    8. Hedging derivatives                                                X                X                (58.406)          (58.406)      (96.724)
                                                             Total      (248.542)      (1.069.742)          (60.430)       (1.378.714)   (1.717.614)


    Net interest income                                                                                                     2.142.526     2.400.543


The main components were as follows5:
• the net balance on business with customers amounted to 1.969,4 million euro (-267 million
  euro), affected above all by the impact of interest rates on the volumes of lending.
  Lending business did in fact perform positively over twelve months (an increase in
  consolidated lending of +4,8%, net of the large corporate component) affected, however, in
  the Group’s network banks, by a further narrowing of the spread (-38 basis points), and by
  the poor performance of average volumes of business (-0,1% lending and -3,5% funding).
  These changes provide a general summary of the progressive reductions in short term
  lending and funding partially offset by growth in medium-to-long term loans (now the most
  significant component) and by the stability of longer maturity funding from customers. The
  final balance on business with customers also included the income from positive
  differentials on hedges on fixed rate bonds issued (approximately 106 million euro
  compared to -25 million euro twelve months before);
• financial assets relating to the owned securities portfolio generated net interest income of
  186,4 million euro (+15,6 million euro), the net effect of new investments in debt
  instruments performed in the first half (+5,4 billion euro over twelve months). In reality, the
  action taken to invest in Italian government securities, classified mainly within available-
  for-sale financial assets, made a marked improvement in the contribution from the
  securities portfolio to net interest income, (an increase of +162,6 million euro in interest
  income from AFS financial assets compared to twelve months before), but at the same time
  it incorporated the impacts of the differentials paid on derivatives to hedge interest rate risk
  (available-for-sale, fixed rate bonds) which more than doubled during the year;
• the net balance on interbank business showed net expense of 14,3 million euro, compared
  to -8,3 million euro recorded in 2009. This reflected on the one hand higher average levels
  of debt over twelve month and on the other a recovery in interest rates in the last quarter,
  especially on short term maturities.

Quarterly net interest income – 548,6 million euro – fell slightly compared to the fourth
quarter of 2009 (-9,4 million euro). On the one hand the item includes positive growth in the

5     The calculation of net balances was performed by allocating interest for hedging derivatives and financial liabilities held for trading
      within the different areas of business (financial, with banks, with customers).


                                                                      92
net balance on income from financial assets (60,2 million euro, compared to 32,9 million euro
in the fourth quarter of 2009), the result of substantial purchases of government securities,
and on the other the increased cost of funding6, partly in relation to the expansion in volumes
of business (+15,2 million euro for interest expense on securities issued, +7,6 million euro for
interest on amounts due to customers and +16,3 million euro for interest on amounts due to
banks). The delay of a few months with which the repricing of financial assets was performed
in relation to rises in interest rates (which nevertheless remain at very low record levels) must
also be underlined.

Dividends, amounting to 24,1 million euro compared to 10,6 million euro previously, relate
mainly to securities held in the AFS portfolio of the Parent, UBI Banca, and included 11,6
million euro of profits distributed on the ordinary shares of Intesa Sanpaolo (not remunerated
in the comparative year).

Profit of equity-accounted investees fell to 17,6 million euro (35,4 million euro in 2009) due
mainly to the lower contributions from Aviva Vita (two million euro, compared 18,5 million
euro before), Lombarda Vita (14,3 million euro compared to 11,2 million euro in 2009), Aviva
Assicurazioni Vita (1,5 million euro, compared to 3,3 million euro) and from Arca SGR (two
million euro compared to 2,8 million euro before) and also to the loss incurred by UBI
Assicurazioni (-2,2 million euro7).

Commission income: composition                                                    Commission expense: composition


                                                          2010        2009                                                              2010        2009
Figures in thousands of euro                                                      Figures in thousands of euro

a) guarantees granted                                      42.648      41.069     a) guarantees received                                   (809)       (765)
c) management, trading and advisory services              683.743     656.798     c) management and trading services:                   (90.276)    (82.311)
   1. trading in financial instruments                     39.462      37.830        1. trading in financial instruments                (16.368)    (17.093)
   2. foreign exchange trading                             12.259      11.510        2. foreign exchange trading                           (281)        (84)
   3. portfolio management                                273.077     258.769        3. portfolio management                             (5.772)     (2.877)
      3.1. individual                                      72.968      73.660           3.1. own                                         (5.083)     (1.653)
      3.2. collective                                     200.109     185.109           3.2. on behalf of third parties                    (689)     (1.224)
   4. custody and administration of securities             15.788      19.188        4. custody and administration of securities         (8.569)    (10.687)
    5. depository banking                                   7.751      21.022                               , instruments
                                                                                    5. placement of financial p                          (4.942)     (3.774)
    6. placement of securities                            105.533      78.411       services
    7. receipt and transmission of orders                  43.565      48.681          distributed through indirect networks            (54.344)    (47.796)
    8. advisory activities                                  6.062       5.965     d) collection and payment services                    (60.899)    (64.034)
       8.1 on investm ents                                  5.958       5.965     e) other services                                     (44.908)    (51.899)
       8.2 on financial structure                             104           -
    9. distribution of third party services               180.246     175.422
       9.1. portfolio management                               68           -
      9.2. insurance products                             127.927     105.233                                                  Total   (196.892)   (199.009)
      9.3. other products                                  52.251      70.189
d) collection and payment services                        146.820     156.170
f) services for factoring transactions                     26.995      26.799
i) current account administration                         213.902     225.262
j) other services                                         268.081     307.599
                                                 Total   1.382.189   1.413.697    Net commission income                                1.185.297   1.214.688



Net commission income amounted to 1.185,3 million euro (-2,4% compared to 2009) the
aggregate result of opposing trends that are becoming increasingly more evident.

On the one hand, income from areas typical of normal banking business continued to fall,
even if, after three years, the phenomenon seems to be showing the first signs of slowing. In
detail: -32,5 million euro for “other services” (including, -45,7 million euro in relation to the
new commitment fee as compared to the maximum overdraft charges and the previous
commissions applied to credit authorisations and overdraft accounts taken together); -11,4
million euro for the item “current account administration” (in relation to the lower unit profit
on both conventional products and bundled accounts); -6,2 million euro for “collection and
payment services” (the result, amongst other things, of the economic context)8.


6  The trend for interest rates reversed from July in the third quarter with modest signs of recovery and then more marked signs
   towards the end of the year (the average one month Euribor stood at 0,816% in the fourth quarter of 2010, compared to 0,453% in
   the same period of 2009).
7 UBI Assicurazioni was consolidated on a line-by-line basis in 2009 and therefore made no contribution to the item in question. As

   already reported, the profits of the company were recognised within the item on the basis of the percentage interest held by the
   Group.
 8 All the changes were calculated by subtracting commission expense from the respective commission income.




                                                                             93
On the other hand, management, trading and advisory services9, which had recorded
significant recoveries during the year, were held down in the fourth quarter by renewed
pressures on financial markets, settling to 581,5 million euro (+18,4 million euro) and
accounting for 49,1% of total net commission income for the year (46,4% in 2009).
More specifically, the increase was attributable to individual and collective portfolio
managements (+11,4 million euro), to the distribution of insurance products (+22,7 million
euro) and to the placement of securities, mainly third party bonds (+26 million euro). This was
partially offset by the absence of income from depository banking operations (-13,3 million
euro), following the contribution of these operations in May 2010 and also by a fall-off in order
collection (-5,1 million euro).
The increased contribution from “assets under management” was the combined result of an
increase in total average assets managed (assisted also by market trends) and in average
profitability, as a consequence of a return by customers to investments in equities and bonds.

Quarterly commission income reflected the volatility in prices toward the end of the year to
stand at 313,8 million euro (-5,5% compared to fourth quarter of 2009). It recorded a
fluctuating trend compared to previous interim periods: +18,9% compared to the low recorded
in the third quarter of 2010, -0,1% compared to the second quarter and +6,9% compared to
the first three months of the year.
Affected by market trends, performance fees, which related entirely to UBI Pramerica SGR and
were recognised in the last quarter of the year, fell from 22,9 million euro to 15,4 million euro
(accounting for 1,3% of total commission income).

Net income from financial activities fell to 34 million euro from 126,8 million euro the year
before (in normalised terms the result fell from 54 million euro to 35,4 million euro), the result
of performance in the following areas:
• trading activities recorded a loss of 56,9 million euro (compared to a profit of 13,9 million
  euro previously), attributable almost entirely (-55,8 million euro) to the unwinding and
  ineffectiveness of hedging derivatives, used on a macro-hedge basis, for fixed rate
  mortgages subject to either early repayment or renegotiation (unwinding)10.
  The extreme reactivity to the “sovereign debt” risk of some European countries, together
  with the growing difficulties of first Greece and then Ireland towards the end of the year,
  affected the price of financial instruments, reducing their contribution to income from
  trading activities: -14,6 million euro for debt instruments and the related derivative
  instruments, net of the component just mentioned concerning the unwinding of some
  derivatives (-6,1 million in 2009), -2,7 million euro for equity instruments and the related
  derivative instruments (+5,2 million euro), +0,4 million euro for investments in hedge funds
  (+2,3 million euro) and +14,7 million euro for foreign exchange business (+10,3 million
  euro).
      In December UBI Banca International disposed of a Lehman Brothers security (2,5 million euro nominal,
      recognised in the financial statements as at 31st December 2008 at the expected realisable value, equal to 8,625%
      of the nominal value), to realise a gain of over 300 thousand euro, recognised within item 80 “trading”;

• net income from financial assets and liabilities at fair value – relating to investments in
  hedge funds performed after 1st July 2007 – amounted to 6,7 million euro, compared to
  -25,2 million euro in 2009, which in addition to the gains realised on Capitalgest and from
  the redemptions that occurred, nevertheless included the full impairment loss of the SV
  Special Situation fund of 8,1 million euro and also the full impairment loss of 25,2 million
  euro on the DD Growth fund, which was classifed within non-recurring items;
• net hedging income – which represents the change in the fair value of hedging derivatives
  and the relative items hedged – rose to 67,2 million euro (16 million euro in 2009) and
  should be interpreted in combination with the information reported on trading activity
  concerning the unwinding of hedges. The positive performance also relates to the market
  context and more specifically to the reversal in the trend for interest rates which became
  more marked in the last quarter of the year and had a positive impact on the value of the
  bonds hedged.



 9    The amount consists of management, trading and advisory services net of the corresponding expense items and is calculated
      excluding currency trading.
10   See in this respect the Notes to the Consolidated Financial Statements, Part A – Accounting Policies – Section 5 – Other aspects.


                                                                  94
      Net trading income (loss)

                                                                                              Profits from                        Losses from         Net income
                                                                                 Gains                           Losses
                                                                                                trading                             trading           (loss) 2010         2009
      Figures in thousands of euro                                                (A)             (B)              (C)                (D)            [(A+B)-(C+D)]

      1. Financial assets held for trading                                        15.561           85.345          (61.541)          (243.918)            (204.553)       177.512
         1.1 Debt instruments                                                      8.704           14.297          (20.458)           (22.935)             (20.392)        17.405
        1.2 Equity instruments                                                     5.752               3.314        (7.500)            (5.940)               (4.374)       22.865
        1.3 Units in O.I.C.R. (collective investment instruments)                    117                 548           (97)              (181)                   387        2.292
        1.4 Financing                                                                     -                  -                -                 -                    -             -
        1.5 Other                                                                       988        67.186          (33.486)          (214.862)            (180.174)       134.950
      2. Financial liabilities held for trading                                   10.529                  1                (40)              (11)            10.479              391
         2.1 Debt instruments                                                     10.450                  -                (40)                 -            10.410              480
         2.2 Payables                                                                  -                  -                   -               (8)                (8)               -
         2.3 Other                                                                       79               1                   -               (3)                 77          (89)
      3. Financial assets and liabilities: exchange rate differences              X                X               X                   X                       2.204         3.766
      4. Derivative instruments                                                  255.111       2.142.572          (177.903)         (2.277.469)             134.979      (167.805)
         4.1 Financial derivatives                                               255.111       2.141.638          (177.903)         (2.275.746)             135.768      (168.637)
           - on deb t instruments and interest rates                             233.543       2.127.635         (160.855)         (2.260.740)             (60.417)       (23.985)
           - on equity instruments and share indices                               5.321            8.200           (6.676)            (5.210)                1.635       (17.680)
           - on currencies and gold                                               X                X               X                  X                     192.668      (128.390)
           - other                                                                16.247            5.803         (10.372)             (9.796)                1.882         1.418
        4.2 Credit derivatives                                                            -             934                   -        (1.723)                  (789)            832
                                                                        Total    281.201        2.227.918         (239.484)        (2.521.398)              (56.891)       13.864

      Net hedging income

      Figures in thousands of euro                                                                                                                       2010             2009

      Net hedging income                                                                                                                                     67.209        15.960

      Profit (loss) from disposal or repurchase
                                                                                                                                                    Net profit (loss)
                                                                                                                 Profits            Losses                                2009
      Figures in thousands of euro                                                                                                                       2010

      Financial assets
      1. Loans to banks                                                                                                1.463                 -                1.463                -
      2. Loans to customers                                                                                              -             (5.313)               (5.313)          (81)
      3. Available-for-sale financial assets                                                                        32.127                  (882)            31.245        30.511
           3.1 Deb t instruments                                                                                    19.670                 (581)             19.089        25.031
           3.2 Equity instruments                                                                                   10.418                 (298)             10.120         5.463
           3.3 Units in O.I.C.R (collective investment instruments).                                                   2.039                  (3)             2.036              17
           3.4 Financing                                                                                                      -                 -                    -             -
      4. Held-to-maturity investments                                                                                         -                 -                    -     37.441
                                                               Total assets                                         33.590             (6.195)               27.395        67.871
      Financial liabilities
      1. Due to banks                                                                                                         -                 -                    -             -
      2. Due to customers                                                                                                  -                 -                     -            -
      3. Securities issued                                                                                             6.574          (16.912)              (10.338)       54.239
                                                             Total liabilities                                         6.574          (16.912)              (10.338)       54.239
                                                                        Total                                       40.164            (23.107)               17.057       122.110

      Net profit (loss) on financial assets and liabilities at fair value

      Figures in thousands of euro                                                                                                                       2010             2009

      Net profit (loss) on financial assets and liabilities at fair value                                                                                      6.669      (25.151)



      Net income from trading, hedging and disposal/repurchase activities and from
      assets/liabilities at fair value                                                                                                                       34.044       126.783




• net income from the disposal/repurchase of financial assets/liabilities amounted to 17,1
  million euro compared to 122,1 million euro in 200911 and was composed as follows:
  ♦ 19,1 million euro from available-for-sale debt instruments, including 1,8 million relating
    to a corporate bond in the Centrobanca portfolio, 8,7 million relating principally to a BTP


11   The amount included both non-recurring items associated with the gains generated by the public exchange offer on own
     subordinated instruments (60,5 million euro) and by the disposal of BTPs in the held-to-maturity portfolio (37,4 million euro), as
     well as on ordinary operating items such as the disposal of equity instruments (5,5 million euro, including 2,1 million euro – net of
     a consolidation adjustment – for the sale of the equity investment in Cedacri held by BRE, 1,5 million euro in relation to the
     disposal of the investment in SIA-SSB, as well as approximately one million euro from accepting the Meliorbanca pubic tender offer)
     and the disposal of BTPs as asset swaps (classified as available-for-sale) which had generated gains of approximately 20 million
     euro.


                                                                                  95
          disposed of by IW Bank and another 8,7 million euro relating to UBI Banca, realised on
          the sale of BTPs, CTZs and bank bonds with a short residual life;
      ♦   10,1 million euro from equity instruments, including 9,1 million euro on the disposal of
          the interest held in CartaSì Spa12;
      ♦   two million euro from units held in monetary and bond funds (resulting from the
          contribution of operations by Capitalgest SGR) sold by UBI Pramerica SGR in the second
          half of the year;
      ♦   -10,3 million euro from the repurchase of securities issued as part of ordinary business
          with customers;
      ♦   -5,3 million euro from disposals of impaired loans by Centrobanca;
      ♦   +1,5 million from the sale by UBI Banca International of a loan to banks, net of the
          impairment loss, to a counterparty which acquired the former Soviet Republic bank in
          difficulty, the borrower in question;

On a quarterly basis, net income from financial activities amounted to 20,6 million euro (+33,7
million euro in the fourth quarter of 2009, which included profits of 37,4 million euro from the
disposal of the held-to-maturity portfolio), due mainly to profits on the disposal of AFS
securities and units of AFS funds (+19,1 million euro), hedging activity (+10,4 million euro)
and assets at fair value (+0,5 million euro), partially offset, however, by the loss for trading (-6
million euro, attributable above all to the impact of losses incurred as a result of the
broadening of spreads on securities issued by less virtuous countries) and by the disposal of
loans (-3,5 million euro related to Centrobanca).

Following the partial disposal of UBI Assicurazioni (performed on 29th December 2009), net
income from insurance operations was nil (31 million euro in 2009). The profits of the
company are now recognised in proportion to the percentage interest held within the item
“profit of equity-accounted investees”.

Other net operating income/(expense) amounted to 92,5 million euro (+5,2 million euro compared
to 2009).                           Other net operating income and expenses
The item includes the following: a
                                                                                               2010        2009
payment of 2,5 million euro to IW Figures in thousands of euro
Bank for the final settlement of Other operating income                                         165.869      195.055

the litigation that had arisen with Recovery of expenses and other income on current accounts     13.745      26.565
                                    Recovery of insurance premiums                                33.125      31.787
former officers of that bank13; 1,7 Recoveries of taxes                                         153.846      155.308
million euro relating to a recovery Rents and other income for property management                 8.959        7.936
from a network bank creditor Recovery of expenses on finance lease contracts                      14.020      13.946

action and approximately one Other income and priorrecoveries"
                                    Reclassification of "tax
                                                               year income                        96.020
                                                                                              (153.846)
                                                                                                             114.821
                                                                                                          (155.308)
million euro resulting from the
                                    Other operating expenses                                    (73.387)   (107.751)
disposal of BPCI’s correspondent Depreciation of leasehold improvements                          (6.898)      (7.889)
banking operations (as part of Costs relating to finance lease contracts                         (7.169)      (8.176)
the contribution of depository Expenses for public authority treasury contracts                  (7.542)      (8.042)

banking operations).                Ordinary maintenance of investment properties
                                    Other expenses and prior year expenses                      (58.676)
                                                                                                        -
                                                                                                            (91.533)
                                                                                                                    -

The       table      shows      the
corresponding decreases that Reclassification of depreciation of leasehold improvements            6.898       7.889

affected both other operating Other operating income and expenses                                 92.482      87.304
income (-29,2 million euro) and
other operating expenses (-34,4 million euro), mainly as a result of changes in prior year
income and expense14.


12   On 17th December 2010 UBI Banca sold its entire interest held in the company Società Istituto Centrale delle Banche Popolari
     Italiane Spa consisting of 4.289.751 shares accounting for 7,25% of the share capital for consideration of 23,4 million euro (5,4621
     euro per share), in addition to a dividend payment of 1,4 million euro.
13   Following the unexpected reorganisation of top management at IW Bank, inspections were commenced in 2009 by the Parent which
     also concerned the accounting system of that bank. The inspection found a series of problems of an operational and organisational
     nature, especially with the system of controls for suspense accounts. Amongst other things, deferred items were found dating back
     some time concerning business with customers, of uncertain recovery, for which impairment losses on loans were recognised
     amounting to 3,5 million euro, operating costs of 1,7 million euro and provisions for risks and charges of one million euro. The
     amounts were classified within non-recurring items.
14   The performance of prior year items relates, amongst other things, to Coralis Rent which ceased operations in November 2009. Its
     revenue and expenses were still included in the separate items of the comparative period figures amounting to 15,9 million euro for
     the income and 22,1 million euro for the expenses. Prior year expenses in 2009 also included 3,6 million euro due to litigation with
     a large Group of companies by BPA.


                                                                    96
The change in the item “recovery of expenses and other income on current accounts” is also to
be noted. It fell by 12,8 million euro, partly in relation to the implementation of the European
Directive on the transparency of transactions and banking services.

Total operating expenses incurred by the                         Personnel expense: composition
Group during the year amounted to
2.468,6 million euro, a decrease of 1,8%                        Figures in thousands of euro
                                                                                                                  2010          2009

compared to 2009. The item fell in                              1) Employees                                    (1.411.084)   (1.416.207)
normalised    terms,    excluding   non-                        a) Wages and salaries                             (948.075)     (974.448)
recurring items, by 1,7%.                                       b) Social security charges                        (250.714)    (264.733)

In detail:                                                      c) Post-employment benefits                        (62.432)     (60.006)
                                                                d) Pension expense                                    (105)        (111)
•    personnel expense – which includes 33,2      e) Provision for post-employment benefits              (10.817)   (17.407)

     million euro of leaving incentives           f) Pensions and similar obligations:
                                                     - defined contribution
                                                                                                          (4.144)
                                                                                                                 -
                                                                                                                     (6.660)
                                                                                                                       (156)
     recognised in connection with a trade           - defined service                                    (4.144)    (6.504)
     union agreement signed on 20th May           g) Payments to external supplementary pension
     2010 – fell to 1.451,6 million euro (-14        plans:                                              (50.411)   (50.338)
                                                     - defined contribution                              (50.363)   (50.188)
     million euro, compared to the previous          - defined benefits                                       (48)     (150)
     year; -47,2 million euro excluding the       h) Expenses resulting from share based payment
     extraordinary payment, classified within        agreements                                                  -     (179)
                                                  i) Other employee benefits                             (84.386)   (42.325)
     the item “other employee benefits”).       2) Other personnel in service                            (18.130)   (26.559)
     The change is the aggregate result, on       - Expenses for agency personnel on staff leasing
     the    one    hand,     of   savings    of     contracts                                            (14.216)   (21.628)
                                                  - Other expenses                                        (3.914)    (4.931)
     approximately 32 million euro related to 3) Directors and statutory auditors                        (22.118)   (22.701)
     changes in average personnel numbers 4) Expenses for retired personnel                                 (252)      (107)
     and of changes in the variable Total                                                            (1.451.584) (1.465.574)

     components of remuneration, and on the
     other hand, to ordinary increases in salaries, leaving incentives, other specific payments to
     employees and expenses for training in external organisations (4,3 million euro).
     The details of the composition reported Other administrative expenses: composition
     in the table show a significant reduction
     concentrated in the item wages and                                                                 2010        2009
     employee expenses (-40,4 million euro), Figures in thousands of euro
     and also a fall in expense for workers on A. Other administrative expenses                        (712.876)   (716.329)
     personnel leasing contracts (-7,4 million    Rent payable                                          (77.847)    (80.090)
                                                  Professional and advisory services                   (102.647)   (108.421)
     euro). The latter is due to both less use    Rentals hardware, software and other assets           (38.679)    (36.869)
     of this type of personnel and to the         Maintenance of hardware, software and other assets    (40.842)    (43.373)
     conversion to permanent contracts            Tenancy of premises                                   (51.748)    (58.178)
     which occurred in the second half of the     Property maintenance                                  (27.816)    (24.970)

     year.                                        Counting, transport and management of valuables       (16.503)    (17.893)
                                                  Membership fees                                       (10.818)    (11.541)
     Personnel expense also benefited in the      Information services and land registry searches       (13.168)    (16.718)
     accounts from savings of more than 14,8      Books and periodicals                                   (1.901)    (1.970)
     million euro following the exclusion from    Postal                                                (31.906)    (37.759)

     the consolidation of UBI Assicurazioni       Insurance premiums                                    (45.806)    (27.331)
                                                  Advertising                                           (24.663)    (28.033)
     and Mercato Impresa;                         Entertainment expenses                                  (2.099)    (2.385)

•    other        administrative      expenses,                   Telephone and data transmission expenses        (69.934)      (67.817)
                                                                  Services in outsourcing                         (51.223)       (47.597)
     amounting to 769,7 million euro,                             Travel expenses                                 (23.476)       (24.396)
     decreased by -7,5 million euro, including                    Credit recovery expenses                        (46.103)      (42.468)
     -3,5 million euro for current expenses                       Forms, stationery and consumables               (13.304)      (13.545)
     and -4 million euro for indirect taxation.                   Transport and removals                           (6.987)       (8.414)
                                                                  Security                                          (9.651)     (11.368)
     In reality, the higher expenses shown in                     Other expenses                                    (5.755)       (5.193)
     the table (a total of +14,9 million euro)                  B. Indirect taxes                                 (56.868)      (60.887)
     are the result of the effects in the                         Indirect taxes and duties                       (40.467)      (45.157)
     accounts of the partial disposal of UBI                      Stamp duty                                     (129.567)     (133.620)

     Assicurazioni (now an equity-accounted                       Municipal property tax                            (9.029)       (9.818)
                                                                  Other taxes                                     (31.651)      (27.600)
     investee), and also the full disposal of                     Reclassification of "tax recoveries"            153.846       155.308
     Mercato      Impresa15,     which,   while                 Total                                            (769.744)     (777.216)

15   Both companies were consolidated on a line-by-line basis until 2009 and the relative intragroup cash flows were eliminated as part
     of the consolidation process. The disposals (partial for UBI Assicurazioni and total for Mercato Impresa), which occurred in
     December 2009 brought out those items in the financial ye2010. However they were not sufficiently large as to warrant pro-forma
     restatement of the comparative period.


                                                                  97
     affecting all types of expense, are concentrated mainly in the items insurance premiums and
     outsourced services in relation to the management of commercial products for businesses. If
     these items are excluded, current expenses continue to show the action taken to contain
     them, attributable mainly to tenancy of premises, information services and land registry
     searches, advertising and promotion expenses, rent payable, postal expenses (which in 2009
     included expenses to communicate changes in terms and conditions and the abolition of the
     maximum overdraft charge) and professional and advisory services (due to a non recurring
     item of 7,5 million euro in 2009 relating to appraisal expenses and IT intervention for the
     “branch switching” operation, of which 7,1 million euro is included in the item). On the other
     hand telephone and data transmission expenses moved in the opposite direction (due to the
     higher costs incurred for participation in the guarantee system designed to cover the costs of
     damages resulting from the fraudulent use of credit cards) as did credit recovery expenses
     (in consideration of the current economic context);
•    Net impairment losses on property, equipment and investment property and intangible assets
     reduced to 247,2 million euro (-24,3 million euro compared to 2009). The reduction mainly
     reflects the change in the purchase price allocation performed here, which reduced by 74,9
     million euro after the exceptional amount of 101 million euro in 2009, which incorporated a
     non recurring negative component (-34,9 million euro) related to the impairment test on
     brands16.
     The item also included amortisation of new investments in software, as well as a 4,5 million
     euro non-recurring full impairment of some parts of the IT system of the Group’s consortium
     service company (3,1 million euro, related mainly to retirements for end of use and service
     contract and for replacement of the product) and of IW Bank (1,4 million euro, mainly for the
     retirement of the bank’s previous legacy system and to a lesser extent for the Twice Sim and
     InvestNet software).

On a quarterly basis, operating expenses totalled 609,8 million euro (-8,2% compared to the
fourth quarter of 2009), which confirmed the downward trend for average quarterly spending
(also for normalised figures): 608 million euro in 2010 compared to 618 million euro the year
before.
In terms of composition, the following trends were observed in the fourth quarter of the year
compared to the same period in 2009:
   a fall in personnel expense (-2,2 million euro, attributable mainly to workers on personnel
   leasing contracts, use of which was reduced partly by making permanent appointments);
   a significant reduction in other administrative expenses (-18,2 million euro, due to the
   presence in 2009 of the 7,5 million euro of non-recurring expenses already mentioned in
   relation to appraisal expenses for the branch switching operation, to savings on the item
   tenancy of premises, postal expenses – fewer communications of changes to customers –
   advertising and telephone and data transmission expenses);
   a reduction in net impairment losses on property, equipment and investment property and
   intangible assets (-33,9 million euro), which, while they included the amortisation of new IT
   investments, were affected by the absence of a non recurring item connected with the
   impairment test performed in December 2009 on indefinite life intangible assets (34,9
   million euro).

As a summary of overall performance, net operating income for the year amounted to
1.027,5 million euro, compared to 1.391,9 million euro in 2009.

As a result of the performance of operating expenses, quarterly net operating income (300,7
million euro) recorded growth compared both to the fourth quarter of 2009 (+1,8%), and to all
the previous periods: +16,2% compared to the third quarter of 2010, +29,3% compared to
second quarter and +27,6% compared to the first three months of the year.




16   The result related to the carrying amounts for indefinite life intangible assets of the network banks of the former Banca Lombarda e
     Piemontese Group. The remaining goodwill on the brands has been depreciated from 2010 over 19 years, for a total of
     approximately 357 million euro with an annual additional impact on the PPA of 11 million euro.


                                                                   98
Net impairment losses/reversals of impairment losses                        The figures for the year confirm the
on loans: composition
                                     Impairment losses/
                                                                            positive signals coming from net
                             reversals of impairment losses, net
                                                                  2010
                                                                            impairment losses on loans, down to
Figures in thousands of euro
                                  Specific         Portfolio                706,9 million euro, a reduction of
A. Loans to banks                            -                 23        23
                                                                            158,3 million euro compared to
B. Loans to customers               (630.973)           (75.982)  (706.955) 200917.
C. Total                            (630.973)           (75.959)  (706.932)
                                                                            The improvement affected both
                                                                            portfolio impairment losses and
                                     Impairment losses/                     reversals, which reduced by 29,5
                             reversals of impairment losses, net
                                                                  2009      million euro due, amongst other
                                 Specific          Portfolio
Figures in thousands of euro
                                                                            things, to bringing the quality of the
A. Loans to banks
B. Loans to customers
                                       (3.468)
                                    (756.318)
                                                             (14)
                                                       (105.411)
                                                                    (3.482)
                                                                  (861.729)
                                                                            portfolios of some of the network
C. Total                            (759.786)          (105.425)  (865.211) banks into line with the Group
                                                                            average,     while    coverage      for
performing loans grew over twelve months from 0,52% to 0,54%, and also to specific
impairment losses on deteriorated loans (down by 128,8 million euro). The latter – amounting
to 631 million euro – are the aggregate result of varying trends: on the one hand the network
banks by themselves recorded a significant reduction (-130,5 million euro), offering a signal for
confidence in the short term, and also for a reduced need to recognise impairment losses
following the improvement in the quality of some portfolios just mentioned.

 Net impairment losses/reversals of impairment losses on loans: quarterly performance


 Figures in                               1st                                2nd                                  3rd                                 4th
 thousands of   Specific    Portfolio               Specific    Portfolio               Specific    Portfolio               Specific    Portfolio
                                        Quarter                             Quarter                             Quarter                             Quarter
 euro

     2010       (105.366)    (26.493)   (131.859)   (184.080)     (5.765)   (189.845)   (124.200)     (9.811)   (134.011)   (217.327)    (33.890)   (251.217)

     2009       (122.845)    (36.728)   (159.573)   (176.919)    (58.703)   (235.622)   (178.354)    (18.995)   (197.349)   (281.668)       9.001   (272.667)

     2008        (64.552)       4.895    (59.657)    (85.136)     (8.163)    (93.299)    (77.484)    (25.384)   (102.868)   (219.512)    (90.887)   (310.399)



On the other hand difficulties were encountered for some of the product companies, associated
with specific operating segments: consumer finance, which is nevertheless showing some first
positive signals after the corrective action taken, and property leasing, where a project to
generally improve credit quality was launched in the fourth quarter in co-ordination with the
Parent.
The positive performance by individual impairment losses also contributed to reversals of
losses (excluding present value discounting), which totalled 196,2 million euro, an increase
from 128,2 million euro in 2009.

Total net impairment losses as a percentage of net loans to customers had fallen consistently
at the end of the year to 0,69% from 0,88% in 2009.

On a quarterly basis, net impairment losses fell less markedly, settling at 251,2 million euro
from 272,7 million euro in the fourth quarter of 2009.
In reality, the item included a significant reduction in specific impairment losses (-64,3 million
euro), but greater portfolio impairment losses (after the reversal of impairment losses that
occurred in the last quarter of 2009). In accordance with the provisions of Bank of Italy
Circular No. 263, the periodic update of the historical data series, which form the basis for the
estimate of the risk parameters for the rating models (PD – probability of default) and LGD
(Loss given default), did in fact introduce the period of recession (2008-2010), resulting in an
increase in collective impairment losses in December for the network banks only of greater
than 20 million euro.
The cost of credit in the last quarter of the year fell to 0,99%, annualised, from 1,11% (again
annualised) in the same period of 2009.

Net impairment losses on other assets and liabilities totalled 49,7 million euro (49,2 million
euro in the comparative year).
These included 41,1 million euro of non-recurring items, as follows: 36,8 million euro resulting
from the impairment loss on the AFS investment in Intesa Sanpaolo (an impairment loss had

17   The item includes recognition of a further impairment loss of the Mariella Burani Group amounting to 11,3 million euro, after
     impairment losses of 56,5 million euro recognised in 2009.


                                                                               99
already been recognised in the first half of 17,2 million euro and a further loss was then
recognised – on the basis of the official price of 2,0423 euro quoted on 31st December 2010);
2,6 million relating to the company A2A and 1,7 million euro relating to the permanent
impairment loss on the units of the British TLcom fund classified within available-for-sale
financial assets.
Net impairment losses on other assets and liabilities were recognised in 2009 of 49,2 million
euro as follows: 9,1 million euro on the Polis Fund and 32,4 million euro (all classified within
non-recurring items) on Intesa Sanpaolo (the impairment loss had been recognised in the first
half the year, while in the third and fourth quarter this investment recovered in value by 126,1
million euro gross on the basis of the official price – 3,1654 euro – recorded on 30th December
2009, which increased the equity reserve in relation to available-for-sale financial assets).

As a result, amongst other things, of Net provisions for risks and charges
the reversals recorded by some
network      banks      following    the Figures in thousands of euro                         2010     2009

settlement of litigation, net provisions Net provisions for risks and charges for revocations  (1.440)  (1.881)
for risks and charges fell from 36,9 Additions to and uses of personnel expense provisions        (79)        -
million euro18 to 27,2 million euro.       Net provision for bonds in default                       46    (739)
                                           Net provisions for litigation                      (16.924) (17.610)
The following was recognised within Other provisions for risks and charges                     (8.812) (16.702)
the item:                                  Total                                              (27.209) (36.932)

• a provision of eight million euro
   made by B@nca 24-7, in relation to the company Ktesios – specialised in the salary backed
   loans sector which operates as an agent of B@nca 24-7, providing services, partly through
   an associate company, for the recovery of credit.
   On 11th February 2011 Ktesios Spa, in consideration of the constant imbalance in its cash
   flows, announced that it had made proposals to its governing bodies to take appropriate
   corporate ownership initiatives, including a possible proposal to go into voluntary
   liquidation. With a provision of 8th March 2011 the Bank of Italy removed Ktesios from the
   special list pursuant to Art. 107 of the Consolidated Banking Act. Therefore, from that date
   the company is only registered in the general list pursuant to Art. 106 of Legislative Decree
   No 385/93 and may not undertake new transactions;
• a provision of two million euro made by Centrobanca against potential revocation action on
   the Burani Group;
• a provision of 2,3 million euro made by IW Bank (to increase the provision already made in
   2009) for potential future risks and charges connected with differences found when
   inspections were performed (intensified and further developed when the IT migration took
   place) in suspense accounts, between balances in the accounts and the results of a support
   inventory, the nature of which is still being clarified.

Profits from the disposal of equity investments and impairment losses on goodwill of 90,7 million
euro were recognised during the year, classified practically entirely within non-recurring
items19.
The item included the following gains: 81,1 million euro on the sale of a further 9,9% of
Lombarda Vita Spa to our joint venture partner (Società Cattolica di Assicurazione); 6,6 million
euro on the disposal by BDG of its Yverdon and Neuchâtel branches; and 5,4 million euro on
the disposal of a property belonging to the Parent located in via Solferino in the Milan. Losses
on the other hand included the impairment loss on the Gestioni Lombarda Suisse goodwill
(-4,1 million euro) and the impairment loss on Barberini goodwill (-1 million euro not classified
within non-recurring items considering the negligible amount of the loss).


18   The figure for 2009 included a provision of 2,8 million euro made for tax litigation arising with the Swiss authorities and a non-
     recurring provision of four million euro to cover risks connected with a portfolio belonging the subsidiary Coralis Rent as well as one
     million euro relating to IW Bank.
19   In 2009 the aggregate consisting of the items 240 (profits (losses) of equity investments), 270 (profits (losses) from the disposal of
     investments) and 260 (net impairment losses on goodwill), showed income of 100,3 million euro. It was the result of gains on the
     following non-recurring items: the sale on the basis of specific agreements of an interest in Banca Popolare di Ancona to Aviva for
     32,4 million euro (net of a consolidation adjustment), the disposal of the majority of the share capital of UBI Assicurazioni for 45,8
     million euro (net of a reversal of goodwill, accessory costs and the positive effect of a change in the consolidation criterion), the
     disposal of the entire interest held in Mercato Impresa for 12,8 million euro (net of a consolidation adjustment) and the partial
     disposal of IW Bank shares by Centrobanca for five million euro (net of consolidation adjustments).
     The item also included 3,8 million euro for the gain on the disposal of the non operating assets of BPB Immobiliare as part of a
     property management project.


                                                                    100
As a result of the performance described above, pre-tax profit from continuing operations
amounted to 334,3 million euro, compared to 540,9 million previously.

In the fourth quarter of the year pre-tax profit fell to 15 million euro from 98,2 million euro in
the same period in 2009. In normalised terms, excluding non-recurring income and expense
which affected the results for the year, pre-tax profit stood at 31,1 million euro up from 22,5
million euro in the last three months of 2009.

As a result of the trend for taxable income in 2010, taxes on income from continuing operations
fell to 232 million euro from 243,4 million euro in 2009, to give a tax rate of 69,39%, compared
to 45% in the previous year (61,96% and 57,52% respectively, in normalised terms), which,
however, benefited from the positive impact of 12,6 million euro resulting from a substitute tax
(with the relative release of the related deferred taxes) in relation to the realignment of
statutory accounts with tax accounts pursuant to Art. 15, of Decree Law No. 185/2008.

Compared to the theoretical tax rate (32,32%), the taxation levied was conditioned by the
combined effect of greater IRES (corporate income tax) and IRAP (local production tax), due to:
- the non deductibility of impairment losses on equity instruments recognised in the AFS
   portfolio, (four percentage points);
- the partial non deductibility of interest expense (4%), introduced by Law No. 133 of 6th
   August 2008 (six percentage points);
- the tax effect of the branch switching operation (with a negative impact of five percentage
   points);
- the total non deductibility for IRAP purposes of impairment losses on loans and personnel
   expenses and the partial non deductibility of other administrative expenses and
   depreciation and amortisation (approximately 25 basis points.
These impacts were only partly reduced (three percentage points) by the taxation on profit on
the sale of part of the interest held in Lombarda Vita.

On a quarterly basis, although there were no significant changes in terms of the result, taxes
rose to 34,7 million euro from 22,5 million euro in the fourth quarter of 2009. The tax burden
in 2009 benefited from gains on the sales of a portion of the interest held in BPA, the majority
of the share capital of UBI Assicurazioni and the entire interest held in Mercato Impresa (for a
total of over 90 million euro), all performed by making use of the PEX regime.

Following the conclusion of the activities for the implementation of the 2007-2010 Business
Plan, no integration costs were recognised in the period (15,5 million euro in 2009).

Finally, post-tax profit from discontinued operations of 83,4 million euro (non-recurring) was
recognised in relation to the contribution of depository banking operations performed on 31st
May 2010 by the Parent to RBC Dexia Investor Services.
The profit earned in 2009 – 5,1 million euro almost entirely non-recurring – included 2,6
million euro from the sale of the operations created by agents of UBI Assicurazioni to the
Cattolica Group and 2,5 million euro in respect of the sale by BPCI of its Palermo branch and
a portion of a corporate banking unit in Brescia to Banca Popolare Vicentina, on the basis of
agreements that had been stipulated.

As a result of the performance already reported and as a result of the lower profits earned by
some banks and companies of the Group, profit for the period attributable to minority interests
(inclusive of the effects of consolidation entries) fell from 17 million euro to 13,6 million euro.




                                               101
General banking business with customers:
funding

Funding policies

In 2010 Group funding policies were oriented towards increased diversification of the sources,
both in terms of type and maturity, pursued in parallel with action to increase growth
designed to encourage balanced and sustainable growth of volumes from non institutional
customers.

Institutional funding was affected by the high volatility present on international markets over
the twelve month period. In April markets started to feel the repercussions of the Greek crisis,
which rapidly spread to affect other European countries with high levels of public debt (Spain,
Ireland, Portugal). Italy was not exempt.
The heightened perception of sovereign debt risk rapidly transferred to the banking issues
market, in consideration of the large investments held by banks in government securities and
this led to a progressive increase in the premiums on credit default swaps. Spreads suddenly
widened as a consequence, which made it more costly, if not actually difficult at times, to
place new issues, especially for longer maturities. Modest signs of an improvement appeared
in September, which allowed UBI Banca to resume its funding programme and to intensify it
in the first few months of 2011.

In this context priority was given to covered bonds, because of their lower cost compared to
senior EMTN issues of the same maturity.
More specifically, in the second half of 2010, UBI Banca performed two significant
international placements of COVERED BONDS, pursuant to Art. 7 bis of Law No. 130/1999, with
AAA and Aaa ratings from Fitch and Moody’s respectively:
- on 15th September, a first issue of one billion euro, maturing in September 2017, with a
   coupon of 3,375%;
- on 18th October, a second issue of 500 million euro, maturing in October 2015, with a
   coupon of 3,125%.
At the end of April a private placement was also performed for 250 million euro with the
European Investment Bank – maturing in April 2022 with a variable coupon equal to the
Euribor six month rate plus 0,53% – as part of an agreement stipulated with the EIB for loans
to Italian SMEs.

After the end of the year, UBI Banca went to the covered bond market with two large
international placements: a first issue in January for one billion euro, with a ten year maturity
(28th January 2021) and a coupon of 5,25%; a second issue in February for 750 million euro,
with a fifteen year maturity (22nd February 2016) and a coupon of 4,5%.

All the operations reported above form part of a programme for a maximum issuance of ten
billion euro running since July 2008 – a “multioriginator” programme which when fully
underway will involve participation by ten banks in the UBI Group. They are in addition to two
previous issues of one billion each performed in the second half of 2009.
Therefore, at the date of publishing this report, UBI Banca had issued a total nominal amount
of 5,5 billion euro of outstanding covered bonds.

The issue is backed by UBI Finance Srl in which a portfolio of residential mortgages was formed, which as
at 31st December 2010 totalled 7,7 billion euro, 24,2% of which originated by Banca Popolare di Bergamo,
23,6% by Banco di Brescia, 17,2% by Banca Popolare Commercio e Industria, 9,9% by Banca Regionale
Europea, 8,7% by Banca Carime, 7,9% by Banca Popolare di Ancona, 4% by Banco di San Giorgio, 2,8% by
Banca di Valle Camonica and the remaining 1,7% by UBI Banca Private Investment.




                                                  102
The segregated portfolio has a high degree of fragmentation, because it includes 111 thousand mortgages
with average residual debt of 69,7 thousand euro, distributed with approximately 73% in North Italy and
12% in Central Italy.

For the reasons already given, the EMTN PROGRAMME was limited: after a public placement for a
nominal amount of 700 million euro performed in March – with a three year maturity (March
2013) and a Euribor three month rate plus 0,65% – UBI Banca only returned to the market at
the end of October, with a senior debt issue for a nominal amount of one billion euro, with a
two year maturity (5th November 2012) and a spread of 130 basis points on the Euribor three
month rate. These two issues basically offset securities matured or redeemed during the year
(six issues, including two subordinated, for a total nominal amount of 1,7 billion euro).
Funding on the EMTN market also continued into the first few months of 2011: a private
placement of 80 million euro with a two year maturity of due years performed in January, was
followed in February by a public placement for 700 million euro, with a two year maturity and
a fixed rate of 3,875%.

At the same time the Group intensified its short term institutional funding with its FRENCH
CERTIFICATES OF DEPOSIT AND EURO COMMERCIAL PAPER PROGRAMMES. In both cases these are
instruments listed in Luxembourg issued by UBI Banca International, generally with three
month maturities, able to act as buffers to optimise the management of liquidity and funding.
When the Luxembourg branch of Banco di Brescia (the original issuer) was contributed to UBI
Banca International, the two programmes were renewed by the latter bank with an increase at
the same time in the maximum authorised funding to meet growing volumes of business.

Although it is diversified, funding on institutional markets nevertheless accounts for a small
portion of the total, constantly below 20% of direct funding from customers.
The Group continues to pay particular strategic attention to strengthening its funding from
ordinary customers, by pursuing funding policies focused on the structural balance of the
Group, able to generate sustainable inflows over time, consistent with growth in lending.

Again in 2010, issues of UBI BANCA LISTED BONDS were received positively by network bank
customers and the new placements basically offset the maturing securities issued by those
same network banks.
The following debt was issued over twelve months:
‐ three bonds with a lower tier two subordination clause for a total nominal amount of 853
  million euro, all with a seven year maturity (the first two placed in February for a total of
  453 million euro and the third in November for 400 million euro);
‐ three fixed rate bonds for a total nominal amount of 810 million euro (two with a two year
  maturity: 278,6 million euro placed at the end of August and 450 million euro at the end of
  September; the third, with a three year maturity, for 81,3 million euro, issued in
  December);
‐ a mixed rate issue (fixed for the first two years and then variable) for 175 million euro, with
  a four year maturity, placed in December.


In the first few months of 2011 and until the date of this report, the Group issued a total nominal
amount of 4,3 billion euro against maturities of 3,1 billion euro in the first quarter and 11,4
billion euro for the current year.

More specifically, placements on institutional markets were for a total nominal amount of 2,5
billion euro, which fully offset issues that matured in the first quarter (1,1 billion euro) and
almost equalled the amount maturing in the whole of 2011 (2,7 billion euro).
Network bank issuances, on the other hand, amounted to 1,8 billion euro, compared to
maturities of 1,3 billion euro in the quarter.




                                                 103
The comments that follow are based on items in the consolidated statement of financial position contained
in the reclassified consolidated financial statements on which the relative tables furnishing details are also
based.
The sections “Consolidated companies: the principal figures” and “The performance of the main
consolidated companies” may be consulted for information on individual banks and Group member
companies.




Total funding

TOTAL GROUP FUNDING, consisting of total
                                                                                                              Direct and indirect funding 
amounts administered on behalf of                                                                      (end of quarter totals in millions of euro)
customers, reached 184,8 billion euro, with                           200.000

growth of 5% over twelve months benefiting                            180.000
from the positive performance of direct
                                                                      160.000
funding (+9,8%), which fully offset the
slight decrease in indirect funding (-0,9%),                          140.000

despite the recovery in the assets under                              120.000

management component (+1,7%).                                         100.000


As concerns market segmentation of            80.000

customers 1,    management      accounting    60.000

figures for the average volumes of total      40.000
funding for the network banks and for UBI
Banca Private Investment show that the        20.000

contribution to funding made by different          0

segments was distributed as follows: 67,6%
                                                                                  1 Q 08


                                                                                           2 Q 08


                                                                                                     3 Q 08


                                                                                                                4 Q 08


                                                                                                                         1 Q 09


                                                                                                                                  2 Q 09


                                                                                                                                               3 Q 09


                                                                                                                                                        4 Q 09


                                                                                                                                                                  1 Q 10


                                                                                                                                                                             2 Q 10


                                                                                                                                                                                      3 Q 10


                                                                                                                                                                                               4 Q 10
of total funding came from the retail                      Indirect funding Direct funding
market (67% in December 2009), 26,3%
from the private banking market (26,9%) and 6,1% from the corporate market (6,1%).
In terms of annual changes2, those same management accounting figures show changes of
-0,4% for the retail market, which nevertheless recorded different trends within it (-1,3% for
private individual customers, +5,4% for small business customers and +7,4% for the UBI BPI
network of financial advisors), -2,7% for the corporate market and -3,5% for the private
banking market.


Total funding from customers

                                                                                                                                                                           Changes
                                                         31.12.2010              %                  31.12.2009                             %
Figures in thousands of euro                                                                                                                                     amount                        %

Direct funding                                           106.760.045            57,8%                 97.214.405                     55,2%                        9.545.640                    9,8%
Indirect funding                                           78.078.869           42,2%                 78.791.834                     44,8%                          -712.965                   -0,9%
    of which: assets under management                       42.629.553          23,1%                     41.924.931                   23,8%                               704.622              1,7%

TOTAL FUNDING FROM CUSTOMERS                             184.838.914            100,0%              176.006.239                   100,0%                          8.832.675                    5,0%




1   Retail: comprises mass market customers (private individuals with financial wealth – direct and indirect funding – of less than 50
    thousand euro), affluent customers (private individuals with financial wealth – direct and indirect funding - of between 50 thousand
    and 500 thousand euro) and small businesses (firms with a turnover of up to 5 million euro).
    Corporate: comprises corporate customers (companies with a turnover of between five and 150 million euro) and large corporate
    customers (groups of companies and companies with turnover of more than 150 million euro).
    Private banking: comprises customers consisting of private individuals with financial wealth (direct and indirect funding) of greater
    than 500 thousand euro.
2   The changes relate to average balances in December


                                                                  104
Direct funding

DIRECT FUNDING, amounted to 106,8 billion euro, an increase of 9,5 billion euro year-on-year,
consisting of 5,8 billion euro of amounts due to customers and 3,7 billion euro of securities
issued.
The growth in AMOUNTS DUE TO CUSTOMERS over the twelve month period was driven by a
significant increase in repurchase agreements (+5,9 billion euro), as a result of greater
business with Cassa di Compensazione e Garanzia Spa (+5,7 billion euro) – used to fund the
position in Italian government securities as part of action taken to support profits decided in
May – and of a recovery by repurchase agreement business with customers (+0,2 billion euro).
Net of business with the Cassa di Compensazione e Garanzia (central counterparty clearing), amounts
due to customers would be virtually unchanged compared to the year before (+0,2%).

Funding from current accounts, on the other hand, recorded a decrease (-0,8 billion euro)
concentrated mainly in the first quarter of 2010, despite the partial recovery that occurred
in the second half of the year when a series of commercial initiatives were undertaken with
regard to funding.
Growth in term deposits (+0,4 billion euro), however, was attributable to UBI International
(+0,5 billion euro), as a result the transfer of business from Banco di Brescia’s Luxembourg
branch, and to UBI Banca (+0,1 billion euro), in relation to the new business with the Cassa
di Compensazione e Garanzia on the “New MIC” segment.

Considered net of total business with the Cassa di Compensazione e Garanzia, direct funding from Group
customers increased year-on-year by 3,7 billion euro (+4%).

Direct funding from customers

                                                                                                                                          Changes
                                                                           31.12.2010         %        31.12.2009         %
Figures in thousands of euro                                                                                                         amount           %

Current accounts and deposits (*)                                           45.209.037       42,3%      46.056.955       47,4%         -847.918      -1,8%
Term deposits                                                                1.341.501        1,3%         950.761        1,0%          390.740      41,1%
Financing                                                                   11.152.853       10,4%        5.156.697       5,3%        5.996.156     116,3%
  - repurchase agreements                                                    11.011.766      10,3%         5.143.394      5,3%         5.868.372    114,1%
   of which: repos with Cassa di Compensazione e Garanzia                      9.190.455      8,6%         3.510.031      3,6%         5.680.424    161,8%
  - other                                                                       141.087       0,1%           13.303       0,0%          127.784           n.s.
Other payables                                                                 962.766        1,0%         700.548        0,7%          262.218      37,4%

TOTAL AMOUNTS DUE TO CUSTOMERS (item 20 Liabilities)                        58.666.157       55,0%      52.864.961       54,4%        5.801.196      11,0%

Bonds                                                                       42.880.256       40,2%      39.514.741       40,6%        3.365.515       8,5%
Other certificates                                                           5.213.632        4,8%       4.834.703        5,0%          378.929       7,8%

TOTAL SECURITIES ISSUED (item 30 Liabilities)                               48.093.888       45,0%      44.349.444       45,6%        3.744.444       8,4%
  of which:
   securities subscribed by institutional customers:                        18.797.662       17,6%      16.039.495       16,5%        2.758.167      17,2%
     - EMTN (**)                                                             11.158.751      10,5%       11.187.997      11,5%           -29.246      -0,3%
     - French certificates of deposit                                          2.886.945      2,7%         1.846.552      1,9%         1.040.393     56,3%
     - Euro commercial paper                                                    521.256       0,5%          524.578       0,6%            -3.322      -0,6%
     - Covered bonds                                                           3.752.819      3,5%         1.978.464      2,0%         1.774.355     89,7%
     - Preference shares (***)                                                  477.891       0,4%          501.904       0,5%           -24.013      -4,8%
   bonds subscribed by ordinary customers                                   27.581.980       25,8%      25.853.627       26,6%        1.728.353       6,7%
    - of the Group:
            issued by UBI Banca                                                5.035.176      4,7%         3.413.707      3,5%         1.621.469     47,5%
            issued by the network banks                                      17.336.752      16,2%       19.550.948      20,1%        -2.214.196    -11,3%
     - of external distribution networks:
            issued by Centrobanca                                              5.210.052      4,9%         2.888.972      3,0%         2.321.080     80,3%

TOTAL DIRECT FUNDING                                                       106.760.045      100,0%      97.214.405      100,0%       9.545.640        9,8%
(*) In relation to the contribution of depository banking operations to RBC Dexia, concluded at the end of May 2010, the amounts on the UBI Pramerica fund
      management accounts forming part of those operations (0,6 billion euro) were reclassified within liabilities held for disposal from 31st December 2009,
(**) The corresponding nominal amounts were: 11.128 million euro (502 million euro subordinated) as at 31st December 2010 and 11.168 million euro (1.202
      million euro subordinated) as at 31st December 2009.
(***) The preference shares were issued for nominal amounts by BPB Capital Trust for 300 million euro, by Banca Lombarda Preferred Securities Trust for
      155 million euro and by BPCI Capital Trust for 115 million euro. Following the public exchange offer concluded on 25th June 2009, the residual nominal
      amounts consisted of 227,436 million euro for the BPB Capital Trust issue, 124,636 million euro for that of Banca Lombarda Preferred Securities Trust
      and 101,388 million euro for the BPCI Capital Trust issue.




                                                                           105
SECURITIES ISSUED amounted to 48,1 billion euro, with growth of 3,7 billion euro – concentrated
in the second half of the year – driven by bonds (+3,3 billion euro to 42,9 billion euro), in
relation to the placements reported in the preceding sub-section on funding policies, and to a
lesser extent by item “Other payables” (+0,4 billion euro to 5,2 billion euro).
Within the latter item, the increase in French certificates of deposit (up from 1,8 billion euro to
2,9 billion euro) more than compensated for the fall in certificates of deposit in yen
(-0,4 billion euro down to 0,8 billion euro).

Total institutional funding reached 18,8 billion euro, an increase of 2,8 billion euro, with
growth in both the long term maturity component, that of covered bonds (three issues for a
nominal amount of 1.750 million euro), and in short term funding (+1 billion euro for French
certificates of deposit), while the total for EMTN securities remained unchanged.
In December 2010, funding from the EMTN programme remained practically unchanged
compared to twelve months before. The two issues performed during the year for a nominal
amount of 1,7 billion euro offset securities that matured and were redeemed (six issues,
including two subordinated, for a total nominal amount of 1,7 billion euro3).

In detail, institutional funding was composed as follows as at 31st December 2010:
   EMTN securities (Euro Medium Term Notes) amounting to 11,2 billion (502,3 million euro
   subordinated), as part of a programme for a maximum issuance of 15 billion euro. All the
   securities are admitted for trading on the London stock exchange with the sole exception of
   those which had been issued by the former Banca Lombarda e Piemontese listed in
   Luxembourg;
   Covered bonds amounting to 3,7 billion euro, consisting of five issues by UBI Banca for a
   total nominal amount of 3,75 billion euro as part of a programme for a maximum issuance
   of ten billion euro. All the securities are listed in London;
   French certificates of deposit amounting to 2,9 billion euro, issued by the UBI Banca
   International as part of a programme for a maximum issuance of five billion euro, listed in
   Luxembourg4;
   Euro commercial paper amounting to 0,5 billion euro, issued by UBI Banca International as
   part of a programme for a maximum issuance of six billion euro, listed in Luxembourg5;
   Preference shares amounting to 0,5 billion euro consisting of the securities remaining
   following the public exchange offer of June 2009. These consist of three issues, two listed in
   Luxembourg and one in London. On 22nd December 2010 the UBI Banca Group announced
   that it would not be calling outstanding innovative equity instruments and it increased the
   spread to levels in line with that of issues with similar characteristics. As from the call
   dates in 2011, holders of the three outstanding issues will be granted an increase in the
   spread to +594 basis points.

Total funding from bonds issued to ordinary customers rose to 27,6 billion euro (+1,7 billion
euro). Within the item, listed placements by UBI Banca issued to network bank customers
(seven issues for a nominal amount of 1,8 billion euro, including three issues for 0,9 billion
euro with a lower tier two subordination clause) offset only two thirds of the net decrease in
issues by network banks (-2,2 billion euro). At the same time Centrobanca increased its
funding through non captive channels (+2,3 billion euro).




3   Subordinated securities redeemed included a BLP issue with maturity on 7th December 2015 (ISIN XSO237670319), which, together
    with other issues, formed part of the public exchange offer of 25th June 2009, for which an early redemption option was exercised on
    7th December 2010.
4   A new programme for issues by UBI Banca International Luxembourg was rendered official on 22nd September 2010, in relation to
    the contribution of Banco di Brescia’s Luxembourg branch to UBI Banca International concluded in December, The previous
    programme, in which the issuer was the branch transferred, remained operational until the natural maturity of the relative issues
    (22nd December 2010).
5   A new programme for issues by UBI Banca International Luxembourg was rendered official on 13th August 2010 in relation to the
    contribution of Banco di Brescia’s Luxembourg branch to UBI Banca International. The previous programme remained operational
    until the natural maturity of the securities which had been issued by the branch transferred (30th November 2010).


                                                                  106
Maturities for bonds outstanding as at 31st December 2010

                                                     1st Quarter       2nd Quarter                                                    Subsequent
No minal amo unts in millio ns o f euro                                            1st half 2011                 2012        2013                                  Total
                                                           2011              2011                                                          years

UBI BANCA*                                                  1.139                 555             1.056          4.834      2.577                9.795           19.956
    of which: EMTN                                           1.128                555              1.033         4.070      1.692                2.652           11.130
    Covered bonds                                                 -                  -                  -              -         -               3.750            3.750
Network banks                                               1.339              2.312              3.959          4.902      2.816                1.803           17.131
Other banks in the Group                                       591                349                111             188       85                3.956            5.280

TOTAL                                                       3.069              3.216              5.126          9.924      5.478            15.554              42.367

*   The EMTN subordinated bonds were placed on the date of the expiration or the exercise of a call option. Preference shares have not been included.


    Listed securities
 Bonds listed on the MOT (electronic bond market)                                                                          Nominal amount of      Book value as at 31st
 ISIN number                                                                                                                          issue         December 2010

 IT0001197083               Centrobanca zero coupon 1998-2018                                                                   L. 800 billion            € 154.479.568
 IT0001257333               Centrobanca 1998/2014 reverse floater                                                               L. 300 billion            € 120.874.797
 IT0001267381               Centrobanca 1998/2018 reverse floater capped                                                        L. 320 billion            € 120.200.696
 IT0001278941               Centrobanca 1998/2013 equity linked coupon                                                          L. 100 billion             € 42.938.603
 IT0001300992               Centrobanca 1999/2019 step dow n indicizzato al tasso sw ap euro 10 anni                          € 170.000.000               € 117.297.396
 IT0001312708               Centrobanca 1999/2019 step dow n eurostability bond                                                € 60.000.000                € 53.656.336
 IT0003834832               Centrobanca 2005/2013 inflazione Italia con leva                                                   € 16.280.000                  € 9.779.702
 IT0003210074               Banca Popolare di Bergamo-CV 2001/2012 a tasso variabile subordinato ibrido - upper tier 2        € 250.000.000               € 250.161.359
 IT0004424435               UBI subordinato low er tier 2 a tasso variabile con ammortamento 28.11.2008-2015                  € 599.399.000               € 591.835.287
 IT0004457187               UBI subordinato low er tier 2 a tasso variabile con ammortamento 13.03.2009-2016                  € 211.992.000               € 208.919.029
 IT0004457070               UBI subordinato low er tier 2 fix to float con rimborso anticipato 13.03.2009-2019                € 370.000.000               € 381.946.207
 IT0004497050               UBI subordinato low er tier 2 fix to float con rimborso anticipato 30.06.2009-2019                € 365.000.000               € 366.190.696
 IT0004497068               UBI subordinato low er tier 2 a tasso variabile con ammortamento 30.06.2009-2016                  € 156.837.000               € 154.171.471
 IT0004497043               Unione di Banche Italiane Scpa tasso misto 30.06.2009-2014                                        € 219.990.000               € 216.057.808
 IT0004496557               Unione di Banche Italiane Scpa tasso misto 07.07.2009-2014                                        € 200.000.000               € 199.346.886
 IT0004517139               Unione di Banche Italiane Scpa tasso misto 04.09.2009-2013                                         € 84.991.000                € 84.972.035
 IT0004572860               UBI subordinato low er tier 2 a tasso variabile con ammortamento 23.02.2010-2017                  € 152.587.000               € 150.468.611
 IT0004572878               UBI subordinato low er tier 2 a tasso fisso con ammortamento 23.02.2010-2017                      € 300.000.000               € 301.729.015
 IT0004624547               Unione di Banche Italiane Scpa tasso fisso 2,30% 31.08.2010-2012 Welcome Edition                  € 278.646.000               € 278.908.777
 IT0004632680               Unione di Banche Italiane Scpa tasso fisso 2,15% 28.09.2010-2012                                  € 450.000.000               € 448.161.421
 IT0004626617               IW Bank Obbligazioni agosto 2015 con opzione di tipo call asiatica                                  € 1.214.000                  € 1.115.514
 IT0004642382               IW Bank Obbligazioni ottobre 2015 con opzione di tipo call asiatica - II tranche                    € 1.045.000                   € 944.346
 IT0004645963               UBI subordinato low er tier 2 a tasso fisso con ammortamento 05.11.2010-2017                      € 400.000.000               € 380.788.851
 IT0004651656               Unione di Banche Italiane Scpa tasso fisso 2,30% 02.12.2010-2013 Welcome Edition                   € 81.322.000                € 80.835.676
 IT0004652043               Unione di Banche Italiane Scpa tasso misto 02.12.2010-2014                                        € 174.973.000               € 173.588.891


 Convertible bonds listed on the MOT (electronic bond market)                                                              Nominal amount of      Book value as at 31st
 ISIN number                                                                                                                          issue         December 2010

 IT0004506868               UBI 2009/2013 convertibile con facoltà di rimborso in azioni                                      € 639.145.872               € 652.263.445


 Covered bonds listed on the London Stock Exchange                                                                         Nominal amount of      Book value as at 31st
 ISIN number                                                                                                                          issue         December 2010

 IT0004533896               Covered Bonds due 23 september 2016 3,625% guaranteed by UBI Finance Srl                        € 1.000.000.000              € 1.028.582.677
 IT0004558794               Covered Bonds due 16 december 2019 4% guaranteed by UBI Finance Srl                             € 1.000.000.000              € 1.011.116.295
 IT0004599491               Covered Bonds due 30 april 2022 floating rate amortising guaranteed by UBI Finance Srl            € 250.000.000               € 250.543.687
 IT0004619109               Covered Bonds due 15 september 2017 3,375% guaranteed by UBI Finance Srl                        € 1.000.000.000               € 971.231.814
 IT0004649700               Covered Bonds due 18 october 2015 3,125% guaranteed by UBI Finance Srl                            € 500.000.000               € 491.344.223
 IT0004682305               Covered Bonds due 28 january 2021 5,25% guaranteed by UBI Finance Srl                           € 1.000.000.000                           -
 IT0004692346               Covered Bonds due 10 february 2016 4,5% guaranteed by UBI Finance Srl                             € 750.000.000                           -


 Innovative equity instruments (preference shares) listed on international markets                                         Nominal amount of      Book value as at 31st
 ISIN number                                                                                                                          issue         December 2010

 Luxem bourg
                            Non-cumulative Fixed/Floating Rate Guaranteed Trust Preferred Securities
 XS0123998394
                            Banca Popolare di Bergamo Capital Trust                                                           € 300.000.000               € 244.086.637
                            9% Non-cumulative Guaranteed Trust Preferred Securities
 XS0131512450
                            Banca Popolare Commercio e Industria Capital Trust                                                € 115.000.000               € 106.899.082
 London
 XS0108805564               Step-Up Non-voting Non-cumulative Banca Lombarda Preferred Securities Trust                       € 155.000.000               € 126.904.945

The list does not include the numerous EMTN issues listed in London and in Luxembourg, nor the securities generated by securitisations performed for
internal purposes by B@nca 24-7, UBI Leasing and Banco di Brescia, all listed on the Dublin stock exchange, nor the issues of French certificates of deposit
and of euro commercial paper, listed in Luxembourg.




                                                                                         107
As concerns market segmentation of customers1, management accounting figures for average
volumes of direct funding for the network banks and for UBI Banca Private Investment show
that in December 79,5% of funding from customers came from the retail market (76,8% in
December 2009), 11% from the private banking market (13,8%) and 9,5% from the corporate
market (9,4%).

 In terms of annual changes2, those same management accounting figures show changes of
+0,1% for the retail market, which recorded different trends within it (-1% for private
individual customers, compared to +7,6% for the small business segment), -2,7% for the
corporate market and -22,8% for the private banking market.


Geographical distribution of direct                                  Finally, the table, “Geographical distribution of
funding from customers by region of                                  direct funding from customers by region of location
location of the branch                                               of the branch” gives the geographical distribution of
                                                       (*)
(excluding repurchase agreements and bonds)                          traditional funding (consisting of current accounts,
                                                                     savings deposits and certificates of deposit) in Italy.
Percentage of total                31.12.2010       31.12.2009       The figures confirm the marked geographical
                                                                     concentration of the Group in the northern regions
Lombardy                                   59,11%       60,10%
                                                                     of Italy despite a slight decrease (from 72,9% to
Latium                                     8,69%             7,70%
                                                                     71,6%) in relation to the action taken to streamline
Piedmont                                   7,61%             7,88%
Calabria                                   4,76%             4,61%
                                                                     and optimise the presence of branches which
Apulia                                     4,77%             4,36%   involved network banks and was focused primarily
Campania                                   3,87%             3,77%   in north west Italy. On the other hand an increase
Marches                                    4,01%             4,41%   occurred in the percentage of funding from central
Liguria                                    2,50%             2,59%   regions (from 12,8% to 13,4%), and in Latium in
Emilia Romagna                             0,98%             1,08%   particular (from 7,7% to 8,7%) and in the South
Veneto                                     1,14%             0,99%   (from 14,3% to 15%).
Umbria                                     0,49%             0,50%
Abruzzo                                    0,41%             0,43%
Basilicata                                 1,01%             0,92%
Friuli Venezia Giulia                      0,26%             0,25%
Molise                                     0,20%             0,23%
Tuscany                                    0,16%             0,14%
Valle d'Aosta                              0,01%             0,01%
Trentino Alto Adige                        0,02%             0,03%
Sardinia                                   0,00%             0,00%

TOTAL                                  100,00%         100,00%


North                                      71,63%        72,93%
 - North West                              69,23%        70,58%
 - North East                               2,40%            2,35%
Central                                    13,35%        12,75%
South                                      15,02%        14,32%

(*) The aggregates relate to banks only.




                                                                        108
Indirect funding and assets under management


Indirect funding from ordinary customers

                                                                                                                                                                         Changes
                                                            31.12.2010                %                  31.12.2009                         %
Figures in thousands of euro                                                                                                                                  amount                        %

Assets under custody                                          35.449.316             45,4%                  36.866.903                     46,8%               -1.417.587                  -3,8%

Assets under management                                       42.629.553             54,6%                  41.924.931                    53,2%                        704.622                1,7%
 Customer portfolio management                                 9.112.815             11,7%                   8.654.514                    11,0%                        458.301                5,3%
     of which: fund based instruments                           2.065.172             2,6%                           2.116.155                2,7%                      -50.983             -2,4%
    Mutual investment funds and SICAV’s                       21.189.141             27,1%                  21.160.386                    26,8%                         28.755                0,1%
    Insurance policies and pension funds                      12.327.597             15,8%                  12.110.031                    15,4%                        217.566                1,8%
     of which: Insurance policies                              12.124.734            15,5%                    11.916.922                   15,1%                        207.812               1,7%

TOTAL INDIRECT FUNDING FROM ORDINARY CUSTOMERS                78.078.869             100,0%                 78.791.834                    100,0%                       -712.965            -0,9%



Group INDIRECT FUNDING from ordinary customers as at 31st December 2010 amounted to 78,1
billion euro, a decrease of 0,7 billion euro (-0,9%) compared to 78,8 billion euro twelve months
before.

As shown in the graph, no clear trend                                                                                Indirect funding
emerged for the total aggregate.                                                                        (end of quarter totals in millions of euro)

The growth which began in the spring of                           90.000

2009, and which in March 2010 had                                 80.000
brought the total back to the same level as
in the third quarter of 2008, was                                 70.000

interrupted in the months that followed as                        60.000
the Greek sovereign debt crisis became more
acute.                                                            50.000

The partial recovery in the summer was
                                                                  40.000
then followed by another decrease in the
last quarter when new pressures on                                30.000

financial markets arose, due to the
                                                                  20.000
difficulties of Irish banks which had a
negative effect on prices.                                        10.000


                                                                       0
The year-on-year trend was affected mainly
                                                                            1 Q 08


                                                                                      2 Q 08


                                                                                               3 Q 08


                                                                                                            4 Q 08


                                                                                                                        1 Q 09


                                                                                                                                 2 Q 09


                                                                                                                                           3 Q 09


                                                                                                                                                     4 Q 09


                                                                                                                                                              1 Q 10


                                                                                                                                                                         2 Q 10


                                                                                                                                                                                  3 Q 10


                                                                                                                                                                                           4 Q 10

by a fall in assets under custody (-1,4 billion
euro; -3,8%). On the other hand, assets                        Assets under custody Assets under management

under management, which came to account
for 54,6% of the total, recorded a slight increase (+0,7 billion euro; +1,7%), mainly attributable
to customer portfolio managements (+0,5 billion euro; +5,3%) – despite the modest contraction
in fund based instruments (-2,4%) – and to insurance policies and pension funds (+0,2 billion
euro; +1,8%), while mutual investment funds and SICAV’s remained unchanged compared to
the end of 2009.

                                                               ***
In terms of assets under management net of Group funds (collective instruments and
customer portfolio managements), at the end of the fourth quarter the UBI Banca Group was
positioned in sixth place among operators in the sector6 (fifth among Italian groups) with
assets amounting to 29,4 billion euro – including approximately 4,4 billion euro relating to
institutional customers – and a decrease in market share to 3,19% (3,54% in December 2009).

                                                               ***




6   Source: Assogestioni, “Map of assets under management (collective instruments and customer portfolio management) 4th quarter of
    2010”.


                                                               109
As concerns mutual investment funds and Sicav’s, the Assogestioni (national association of
asset management companies)7 figures for asset management companies of the UBI Group
reported the following for 2010:
− negative net inflows of 780,5 million euro, equivalent to -3,7% of assets under management
  at the end of 2009 (the figure for the sector nationally, on the other hand, recorded positive
  net inflows of 5.696 million euro, equivalent to 1,3% of assets under management twelve
  months before);
− net assets under management of approximately 21 billion euro, which in December
  confirmed the UBI Group’s position in third place among operators in the sector with a
  market share of 4,56%, down compared to 4,87% at the end of 2009. However, the UBI
  Banca Group has been in fourth place8 since January 2011;
− a slight reduction in assets under management (-259 million euro; -1,2%) compared to a
  positive trend for the sector nationally (+5,7%).

Fund assets

                          UBI Banca Group                                                                          Changes
                                                          31.12.2010       %        31.12.2009       %
Figures in millions of euro                                                                                   amount          %

Equities                                                        2.734     13,1%            2.225    10,5%           509      22,9%
Balanced                                                        1.512      7,2%            1.497     7,1%             15       1,0%
Bond                                                           11.784     56,2%            9.152    43,1%          2.632      28,8%
Monetary funds                                                  3.715     17,7%            6.947    32,7%         -3.232     -46,5%
Flexible                                                          840      4,0%            1.001     4,7%           -161     -16,1%
Hedge funds                                                       378      1,8%             400      1,9%            -22      -5,5%

                                              Total (a)        20.963    100,0%          21.222    100,0%          -259       -1,2%


                          Sector nationally                                                                        Changes
                                                          31.12.2010       %        31.12.2009       %
Figures in millions of euro                                                                                   amount          %

Equities                                                      107.423     23,4%          92.144     21,2%        15.279      16,6%
Balanced                                                       21.305      4,6%          17.040      3,9%          4.265      25,0%
Bond                                                          189.212     41,1%         165.823     38,1%         23.389      14,1%
Monetary funds                                                 62.333     13,5%          86.996     20,0%        -24.663     -28,3%
Flexible                                                       67.087     14,6%          57.265     13,1%          9.822      17,2%
Hedge funds                                                    12.689      2,8%          16.062      3,7%         -3.373     -21,0%

                                              Total (b)       460.049    100,0%         435.330    100,0%        24.719       5,7%


Market share of the UBI Banca Group (a/b)                        4,56%                     4,87%


The summary figures in the table confirm the prudential approach of UBI Group customers as
follows:
- a change in the composition out of monetary funds into bonds, which is greater for the
    Group than for the sector nationally;
- an increase in equity funds, which has become more marked over twelve months compared
    to the Assogestioni sample, although the percentage for the UBI Banca Group remains
    around ten percentage points below that for the sector nationally (13,1% compared to
    23,4%);
- a trend for flexible funds (-16,1%) in the opposite direction to that for the sector (+17,2%);
- a stable and much higher percentage of lower risk funds (monetary funds and bonds),
    accounting as a whole for 73,9% of the total compared to 54,6% for the sample mentioned.

Again in 2010 UBI Pramerica SGR Spa received important awards, details of which are given in the report
on the company in the section “The performance of the main consolidated companies”.


7   The data are taken from “Trend Mensile sui Fondi Aperti – December 2010” and “New map of assets under management relating to
    the 4th quarter of 2010 (Collective instruments: open funds).
8   “Trend Mensile sui Fondi Aperti – January 2011”. The Group moved down a place as a consequence of the formation of Am Holding,
    a new asset management company created from an alliance between Anima Sgr and Prima Sgr, two asset management companies
    which, considered singly, have lower assets under management and market share than those of the UBI Banca Group.


                                                               110
General banking business with customers:
lending

Performance of the loan portfolio
Composition of loans to customers

                                                             of which                                                                          of which                           Changes
                                   31.12.2010       %                                     31.12.2009                     %
Figures in thousands of euro                               deteriorated                                                                      deteriorated              amount                          %

Current account overdrafts          13.723.925     13,5%    1.067.391                      14.086.259                14,4%                      921.874                    -362.334                   -2,6%
Reverse repurchase agreements          323.597      0,3%                     -                292.127                        0,3%                              -                 31.470               10,8%
Mortgage loans and other
medium-to-long term financing       53.943.966     53,0%    2.512.658                      50.150.434                51,2%                    2.104.763                3.793.532                       7,6%
Credit cards, personal loans and
salary backed loans                  6.344.773      6,2%      144.009                       6.588.940                        6,7%               106.801                    -244.167                   -3,7%
Finance leases                       9.590.800      9,4%      769.279                       9.569.620                        9,7%               664.558                      21.180                    0,2%
Factoring                            2.988.697      2,9%       16.946                       2.533.777                 2,6%                       48.846                         454.920            18,0%
Other transactions                  14.846.953     14,6%      749.846                      14.681.758                15,0%                      684.392                         165.195             1,1%
Debt instruments:                       52.118      0,1%        1.000                         104.337                 0,1%                        1.000                         -52.219           -50,0%
  - structured instruments                3.409     0,0%                     -                         31.113                0,0%                              -                -27.704               -89,0%
  - other debt instruments               48.709     0,1%            1.000                              73.224                0,1%                         1.000                 -24.515               -33,5%

TOTAL                              101.814.829    100,0%    5.261.129                      98.007.252               100,0%                    4.532.234                3.807.577                       3,9%




At the end of December LENDING TO CUSTOMERS had exceeded 101,8 billion euro, an increase of
3,8 billion euro compared to 98 billion euro at the end of 2009 (+3,9% compared to an
increase for the sector nationally, relating to the private sector, of +4,3%).
In consideration of the persistent uncertainties and difficulties in the economic situation,
lending policies prioritised an orientation of participation by the Group in the numerous
initiatives to assist families and businesses, introduced by both the Italian Banking
Association and at local level. If the large corporate segment is excluded, which does not form
part of the Group’s traditional mission, annual lending increased by +4.8%.

After a slight fall in the first quarter, the
                                                                                          Annual rate of change in lending to the private sector(*)
total lending portfolio embarked on a                         10%

growth trend which was at its strongest                        9%
between April and June (+2,4% in                               8%
                                                                                                                                                                       Sector 

quarterly      terms),       but      slowed
                                                                                                                                                                       nationally

                                                               7%                                                                                                      UBI Group

progressively in the following months                          6%
(+1% and +0,6% quarter-on-quarter for
                                                               5%
the third and fourth quarters) as the
recovery in progress in the economy
                                                               4%


slowed.                                                        3%

                                                               2%


The long term trend shown in the graph    1%


was supported by both the network         0%


banks (+3,7%), which accounted for       ‐1%


more than 67% of the consolidated total  ‐2%

and by the product companies (+2,7%).    ‐3%
                                                                    1 Q 08



                                                                                 2 Q 08



                                                                                              3 Q 08



                                                                                                           4 Q 08



                                                                                                                    1 Q 09



                                                                                                                                    2 Q 09



                                                                                                                                                 3 Q 09



                                                                                                                                                              4 Q 09



                                                                                                                                                                       1 Q 10



                                                                                                                                                                                    2 Q 10



                                                                                                                                                                                             3 Q 10



                                                                                                                                                                                                           4 Q 10




It must also be considered that
approximately 40% of the business of         (*) Exlcuding loans to public  administrations 

the   latter   comes   from   “captive”
customers of the network banks (+4,9% annually).

Details for the types of lending over twelve months are as follows:



                                                                 111
• mortgages and other medium-to-long term lending drove growth in the total loans,
  representing the main form of lending accounting for 53% of the total and amounting to
  almost 54 billion euro (+3,8 billion euro; +7,6%). The result for B@nca 24-7 was particularly
  encouraging with total mortgages of over 5,1 billion euro, an annual increase of 558 million
  euro (+12%). On the basis of management accounting figures for performing residential
  mortgages only, granted by the network banks, Centrobanca and B@nca 24-7, total
  residential mortgages at the end of December had increased to 21,8 billion euro from
  approximately 20 billion euro at the end of 2009 (+9,4%);
• factoring loans granted by UBI Factor increased to approximately three billion euro (+0,5
  billion euro; +18%) with particularly lively performance in the last quarter (+0,4 billion
  euro);
• finance leases on the other hand remained stable at 9,6 billion euro (+0,2%);
• reverse repurchase agreements amounted to 323,6 million euro, up from 292,1 million euro
  twelve months before (+10,8%), reflecting the ordinary business of the Parent with Cassa di
  Compensazione e Garanzia (central counterparty clearing);
• short term forms of lending, more closely related to the demand from businesses for
  working capital, still did not show any significant signs of recovery: current account
  overdrafts fell to 13,7 billion euro (-0,4 billion euro; -2,6%) while “Other transactions” (loans
  for advances, portfolio, import/export transactions, very short term lending, etc.) rose to
  14,8 billion euro (+0,2 billion euro; +1,1%);
• on the other hand, the various types of consumer credit fell to 6,3 billion euro (-0,2 billion
  euro; -3,7%). The reduction mainly reflected the trend for B@nca 24-7, which reduced its
  total outstanding loans over twelve months (-0,2 billion euro to 6,1 billion euro; -3,1%),
  partly on the basis of precise company policies pursued in order to improve credit quality.
  More specifically, the fall of over 0,3 billion euro in the special purpose loans brokered by
  SILF and of approximately 0,4 billion euro for all the other personal loans, originated
  mainly by the network banks of Group, was offset by an increase of 0,5 billion euro in
  salary backed loans originated by external distribution networks which had exceeded 3,1
  billion euro in December.

   Lending in relation to salary backed loans are measured on the basis of guarantees provided by the
   finance companies with which B@nca 24-7 works.

   The loans originated by the finance company Ktesios Spa amounted to 1,1 billion euro as follows:
   − 358 million euro secured by a pledge of 4,1 million euro, consisting of a term deposit on a current
      account held with B@nca 24-7;
   − 747 million euro guaranteed by a “deducted for non payment” clause.

   With a provision of 8th March 2011, the Bank of Italy removed Ktesios from the special list pursuant to
   Art. 107 of the Consolidated Banking Act. Therefore, from that date the company is only registered in
   the general list pursuant to Art. 106 of Legislative Decree No 385/93 and may not undertake new
   transactions.

   In consideration of the current difficulties experienced by that company, B@nca 24-7 made an estimate
   of the risk attaching to the part of the portfolio consisting of loans backed by that counterparty. The
   estimates performed led the bank to make a provision of eight million euro classified within “Provisions
   for risks and charges”.

At the end of December the ratio of lending to funding stood at 95,4%, a decrease compared to
December 2009 (100,8%), a reflection of the different trends for the two items. If funding is
considered net of repurchase agreements with the Cassa di Compensazione e Garanzia (central
counterparty clearing) the ratios are 104,4% (104,6% in December 2009.)




                                                   112
With regard to market                      Distribution of loans by economic sector
                                           (Management accounting figures for network banks Centrobanca)
segmentation of customers,
management      accounting                                                                                       31.12.2010    30.9.2010    30.6.2010     31.3.2010       31.12.2009

figures     for    average                 Manufacturing and service companies

monthly      lending      by               (non financial companies and producer households)
                                            of which: other services destined for sale
                                                                                                                      62,8%
                                                                                                                       17,7%
                                                                                                                                  63,1%
                                                                                                                                    17,3%
                                                                                                                                               62,9%
                                                                                                                                                17,4%
                                                                                                                                                                62,4%
                                                                                                                                                                 17,4%
                                                                                                                                                                              62,7%
                                                                                                                                                                              16,9%

network banks and by UBI                            Commerce, recovery and repair services                              9,9%        10,0%        9,8%            9,7%          9,8%
                                                    Construction and public works                                       9,3%        9,6%         9,5%            9,8%          9,8%
Banca Private Investment                            Energy products                                                     3,6%        3,7%         4,2%            3,3%          3,7%

show that at the end of the                         Metal products, excluding machines and means of transport
                                                    Agricultural, forestry and fishery products
                                                                                                                        2,4%
                                                                                                                        2,1%
                                                                                                                                    2,5%
                                                                                                                                    2,0%
                                                                                                                                                 2,4%
                                                                                                                                                 2,0%
                                                                                                                                                                 2,4%
                                                                                                                                                                 2,0%
                                                                                                                                                                               2,2%
                                                                                                                                                                               2,0%
year, 55% was destined to                           Hotels and restaurants                                              2,0%        2,0%         2,0%            2,1%          2,1%

the retail market, (54,7%
                                                    Foodstuffs, beverages and tobacco products                          1,6%        1,8%         1,8%            1,8%          2,1%
                                                    Textiles, leather and footwear, clothing                            1,6%        1,8%         1,7%            1,8%          1,7%

at the end of 2009), 43,9%                          Agricultural and industrial machinery
                                           Consumer households
                                                                                                                        1,4%
                                                                                                                      29,4%
                                                                                                                                    1,5%
                                                                                                                                  28,9%
                                                                                                                                                 1,5%
                                                                                                                                               28,7%
                                                                                                                                                                 1,5%
                                                                                                                                                                28,7%
                                                                                                                                                                               1,5%
                                                                                                                                                                              28,3%
to the corporate market                    Financial companies                                                         4,6%         4,6%         4,7%            5,1%          5,1%

(44,3%) and the remaining                  Public administrations
                                           Other (not-for-profit institutions and the rest of the world)
                                                                                                                       0,9%
                                                                                                                       2,3%
                                                                                                                                    0,9%
                                                                                                                                    2,5%
                                                                                                                                                 1,0%
                                                                                                                                                 2,7%
                                                                                                                                                                 0,9%
                                                                                                                                                                 2,9%
                                                                                                                                                                               1,0%
                                                                                                                                                                               2,9%
1,1%    to    the    private               TOTAL                                                                     100,0%       100,0%       100,0%           100,0%       100,0%

banking market (1%).

In terms of annual trends1, those same management                                                           Geographical distribution of loans to
figures show an increase for the corporate market                                                           customers by region of location of the
                                                                                                                   (*)
                                                                                                            branch
(+1,7%), driven by the core segment (+3,4%), against a
decrease for the large corporate segment (-1,2%). Lending                                                   Percentage of total                31.12.2010          31.12.2009
to the retail market increased by 3,1%, driven by the
private individual segment (+4,2%) and to a lesser extent,                                                  Lombardy                               70,37%                70,32%
                                                                                                            Piedmont                                6,39%                 6,37%
by the small business segment (+1,8%).                                                                      Latium                                  4,62%                 4,71%
                                                                                                            Marches                                     3,84%             3,93%
                                                                                                            Liguria                                     2,82%             2,83%
Again on the basis of management figures, the results                                                       Campania                                    2,17%             2,12%
given in the table for network banks and Centrobanca                                                        Apulia                                      2,07%             2,08%

only – an aggregate which represents approximately 70%                                                      Emilia Romagna                              1,97%             1,93%
                                                                                                            Calabria                                    1,82%             1,81%
of gross loans – showed the following in December 2010:                                                     Veneto                                      1,59%             1,56%

− 92,2% of outstanding loans is destined to                                                                 Umbria                                      0,64%             0,62%
                                                                                                            Abruzzo                                     0,61%             0,61%
  manufacturing and service companies and consumer                                                          Basilicata                                  0,40%             0,41%
  households (91% twelve months before), which                                                              Friuli Venezia Giulia                       0,24%             0,26%

  confirms the traditional vocation of the Group to                                                         Molise                                      0,24%             0,25%
                                                                                                            Tuscany                                     0,20%             0,18%
  support communities in its markets;                                                                       Valle d'Aosta                               0,01%             0,01%
− as concerns the distribution by sector of lending to                                                      Trentino Alto Adige                         0,00%             0,00%

  non financial companies and to producer households,                                                       Sardinia                                    0,00%             0,00%

  “other services destined for sale” and “commercial                                                        Total                                 100,00%                100,00%

  services, recoveries and repairs”, continued to account                                                   North                                       83,4%              83,3%
  for the largest percentage of the total (27,6%). partly                                                       - North West                            79,6%              79,5%

  because of their heterogeneity.
                                                                                                                - North East                             3,8%               3,8%
                                                                                                            Central                                      9,3%               9,4%
                                                                                                            South                                        7,3%               7,3%
Details of the geographical distribution of lending are (*) The aggregates relate to banks only.
given in the table “geographical distribution of loans to
customers by region of location of the branch”. The total share of loans to northern regions
amounted to 83,4% of the total, (of which 79,6%. to the North-West) while that to central
regions constituted 9,3%. The remaining 7,3% was to southern regions. No significant changes
appeared compared to the previous year.

                                                                                                                From      the      viewpoint     of
Concentration of risk
(largest customers or groups as a percentage of total loans and guarantees)                                     concentration,     a   generalised
                                                                                                                reduction        was      recorded
Customers or Groups       31.12.2010   30.9.2010        30.6.2010            31.3.2010         31.12.2009       compared      to    June2,    while
                                                                                                                compared to December 2009 all
    Largest 10                  4,1%         4,1%                4,6%               4,0%             4,1%       the groups, except for the first,
    Largest 20
    Largest 30
                                6,8%
                                8,5%
                                             6,7%
                                             8,4%
                                                                 7,2%
                                                                 8,7%
                                                                                    6,5%
                                                                                    8,1%
                                                                                                     6,5%
                                                                                                     8,1%
                                                                                                                stood at slightly higher levels.
    Largest 40                  9,6%        9,5%                9,9%                9,2%             9,3%
    Largest 50                 10,5%       10,4%               10,9%               10,1%            10,3%       As concerns “large exposures” on
                                                                                                                the other hand, the relative

1     The changes relate to average balances in the month of December.
2     Since 30th June 2010, the method of calculation also includes exposures held in equity instruments.


                                                                                113
regulations were amended by the Bank of Italy3. According to the new regulations, “large
exposures” are now measured on the basis of the nominal value, instead of the value weighted
for counterparty risk. Consequently, at the end of 2010, the UBI Banca Group had five
positions which exceeded 10% of the supervisory capital for a total of 22,2 billion euro:
• 10,2 billion euro due to Cassa di Compensazione e Garanzia, in relation to repurchase
   agreement transactions by the Parent;
• 8,3 billion euro due to the Ministry of the Treasury, in relation to investments in
   government securities by the Parent;
• 1,4 billion euro due to a major banking group, in relation both to investments in bonds and
   to normal lending business with a non banking financial company of that group;
• 2,3 billion euro due to two major corporate counterparties, as part of ordinary lending
   business with customers.
It must be added, however, that the actual exposure of the UBI Group after weightings are
applied in accordance with the rules currently in force amounts to a total of 1,8 billion euro
and that for each of the five exposures, the percentage of consolidated supervisory capital is
well below the limit of 25% set for banking groups.

At the end of the year guarantees granted by the UBI Group totalled 6,1 billion euro, an
increase of 5,75 billion euro compared to December 2009 (+6,1%).
In detail, commercial guarantees had been granted for 4,5 billion euro (+2,5%) compared to
guarantees of a financial nature of more than 1,6 billion euro (+17,8%).


Risk
Although still increasing strongly year-on-year, in 2010 deteriorated loans as a whole slowed
significantly compared to the previous year, affected in the last quarter by compliance with
new provisions introduced by the Bank of Italy concerning exposures past due and/or in
arrears. More specifically, between October and December 2010, volumes of growth returned
to practically the same rate as in the second quarter after an acceleration over the summer4.

    Loans to customers as at 31st December 2010
                                                                                                    Impairment
    Figures in thousands of euro                                             Gross exposure                           Carrying amount        Coverage (*)
                                                                                                      losses

    Deteriorated loans                                                   (7,14%)        7.465.062      2.203.933    (5,17%)      5.261.129     29,52%
     - Non-performing loans                                              (3,62%)        3.780.973      1.841.057    (1,91%)      1.939.916     48,69%
     - Impaired loans                                                    (2,22%)        2.320.471       287.557     (2,00%)      2.032.914     12,39%
     - Restructured loans                                                (0,85%)         889.070         60.577     (0,81%)        828.493       6,81%
     - Past due loans                                                    (0,45%)         474.548         14.742     (0,45%)        459.806       3,11%

    Performing loans                                                    (92,86%)       97.073.520       519.820    (94,83%)     96.553.700       0,54%
    TOTAL LOANS TO CUSTOMERS                                                          104.538.582      2.723.753               101.814.829       2,61%
    The item as a percentage of the total is given in brackets.



    Loans to customers as at 31st December 2009
                                                                                                    Impairment
    Figures in thousands of euro                                             Gross exposure                           Carrying amount        Coverage (*)
                                                                                                      losses

    Deteriorated loans                                                   (6,35%)        6.373.596      1.841.362    (4,62%)      4.532.234     28,89%
     - Non-performing loans                                              (2,74%)        2.751.588      1.419.012    (1,36%)      1.332.576     51,57%
     - Impaired loans                                                    (2,20%)        2.208.369        363.296    (1,88%)      1.845.073     16,45%
     - Restructured loans                                                (0,48%)         479.520         40.785     (0,45%)        438.735       8,51%
     - Past due loans                                                    (0,93%)         934.119         18.269     (0,93%)        915.850       1,96%

    Performing loans                                                    (93,65%)       93.961.673       486.655    (95,38%)     93.475.018       0,52%
    TOTAL LOANS TO CUSTOMERS                                                          100.335.269      2.328.017                98.007.252       2,32%
    The item as a percentage of the total is given in brackets.

    (*) Coverage is calculated as the ratio of impairment losses to gross exposure.




3       Circular No. 263 “New regulations for the prudential supervision of banks” of 27th December 2010.
4       In detail: +0,21 billion euro in the first quarter, +0,24 billion euro in the second, +0,39 billion in third and +0,25 billion in the
        fourth.


                                                                                        114
At the end of December, net deteriorated loans totalled 5,26 billion euro, an increase year-on-
year of 0,73 billion euro (+16,1%) consisting of: +0,15 billion euro in the first quarter, +0,13
billion euro in the second, +0,35 billion euro in the third and +0,10 billion euro in the fourth.

The changes over twelve months mainly concerned non-performing loans (+0,61 billion euro),
compared to smaller increases in impaired loans (+0,19 billion euro) and restructured loans
(+0,39 billion euro). These were only partly offset by the reduction in exposures past due
and/or in arrears (-0,46 billion euro), within which the positions past due and/or in arrears
for more than 90 days backed by property mortgages fell appreciably (-0,27 billion euro).

Although increasing slightly (from 28,89% to 29,52%), total coverage remained again at low
levels in relation to the smaller estimated losses on newly classified positions due to the effect
of the existence of collateral or because they are operational impairment or restructured loans
for which agreements have been reached to reschedule debt by agreeing to a debt repayment
schedule pursuant to article 67 of the Bankruptcy Law or to a debt restructuring plan
pursuant to article 182-bis of the Bankruptcy Law.

From the viewpoint of the types of loan, as can be seen from the table, “Composition of loans
to customers”, more than 56% of the annual growth in net deteriorated loans regards the item
“Mortgage loans and other medium-to-long term loans” backed by collateral, which results
automatically in a lower level of coverage.

As concerns performing loans, total coverage increased further to 0,54% (0,52% at the end of
2009).


NON-PERFORMING LOANS

Net non-performing loans rose over twelve months from 1,3 million euro to 1,9 billion euro, an
increase of 607,3 million euro (+45,6%, compared to +28,9% for the sector nationally5),
including 160,4 million euro relating to the first quarter, 132,4 million euro to the second,
143,4 million euro to the third and 171,1 million euro to the fourth.
The network banks accounted for 56% of the year-on-year increase in non-performing loans
while the remainder is attributable almost entirely to Centrobanca (+33,8 million euro),
B@nca 24-7 (+62,2 million euro) and UBI Leasing in particular (+170,3 million euro, including
as much as 96 million euro in the last quarter of the year6).

As concerns gross non-performing
loans, on the other hand, these                     Quarterly rate of change in net non‐performing loans
                                            22%
increased by 1,03 billion euro to 3,78      20%
billion euro, a greater increase than       18%

that recorded for the sector nationally     16%

(+37,4%      compared     to    +31,2%).    14%
                                            12%
Volumes        of     growth       slowed   10%
progressively     until September, but       8%

then increased again in the last three       6%
                                                                   Sector nationally
months of the year: +0,28 billion euro
                                             4%
                                             2%
in the first quarter7, +0,24 billion euro
                                             0%
                                                                   UBI Group

in the second, +0,18 billion euro in        ‐2%

the third and +0,33 billion euro in the     ‐4%
                                            ‐6%
fourth, including approximately half
                                                                1 Q 09




                                                                         2 Q 09




                                                                                   3 Q 09




                                                                                            4 Q 09




                                                                                                      1 Q 10




                                                                                                                2 Q 10




                                                                                                                         3 Q 10




                                                                                                                                   4 Q 10




relating to UBI Leasing, partly in
relation to the classification of
contracts subject to termination out of the impaired into the non-performing class.




5   However, in the second half of 2010 only, Group net non-performing loans realigned with the figure for the sector nationally
    (+19,4% compared to +18%).
6   Of this 87 million euro relates to reclassifications into the non-performing class, that occurred in the 4th quarter, of contracts
    which UBI Leasing had classified as impaired and which were subject to termination.
7   Including an exposure to the Burani Group of 72,5 million euro gross of impairment losses.


                                                                 115
More than 65% of the 1,03 billion euro of annual growth consisted of positions backed by
collateral, which came to account for almost 44% of total gross non-performing loans (35% at
the end of 2009).
The rate of new classifications out of the performing class reduced slightly compared to the
previous year, while new classification from other deteriorated classes and from impaired
loans in particular increased by a fifth. Recognition of full impairment losses on loans
considered no longer recoverable increased by more than 15% compared to the previous year.

As a result of the trends just reported, the ratio of non-performing loans to loans rose to
1,91% in net terms (i.e. net of impairment losses) and to 3,62% in gross terms. Despite this
the UBI Group continues to maintain a qualitative advantage compared to the average for
Italian banks, which is 2,43% for net non-performing loans and 4,60% for gross non-
performing loans in the private sector.

Coverage at 48,69%, appears to be falling compared to a year before (51,57%), but remains
fairly stable compared to September (48,63%).
For an accurate assessment of the performance of that level it must, however, be considered
on the one hand that the calculation does not include positions subject to proceedings by
creditors (bankruptcy, arrangement with creditors, extraordinary administration, etc.) with the
non recoverable part and the relative impairment losses recognised eliminated and on the
other hand that the percentage of secured loans with a normally lower level of coverage has
increased.
The coverage for unsecured non-performing loans, considered gross of impairment losses, had
risen at the end of 2010 to 80,14% (78,45% in December 2009).




IMPAIRED LOANS

After a temporary reversal of the trend in the summer, net impaired loans recorded a higher
increase in the last quarter of the year. The total rose from 1,84 billion euro to 2,03 billion
euro, an increase of 187,8 million euro (+10,2%) distributed as follows: +59,3 million euro in
the first quarter, +31,5 million in the second, -25,3 million euro in the third and +122,3
million euro in the fourth.
The total change that occurred over twelve months is attributable entirely to the network
banks and to B@nca 24-7, while Centrobanca and UBI Leasing recorded a decrease in the
item following the reclassification of positions into the non-performing class.
The ratio of net impaired loans to net lending rose as a consequence to 2% (1,88% at the end
of 2009).

Gross impaired loans also rose from 2,21 billion euro to 2,32 billion euro, growth of 112,1
million euro, occurring mainly in the last quarter: changes of +5,2 million euro, +32 million
euro, -30,9 million euro and +105,8 million euro in each of the quarters of the year).
At the end of year the percentage of total gross impaired loans backed by collateral had
exceeded 60% (51% at the end of 2009).
Reclassifications from the performing loan class fell by more than a quarter compared to the
year before. The trend for this class also benefited from the approval of restructuring plans,
which resulted in the reclassifications of many positions into the restructured class.




                                             116
         Loans to customers: changes in deteriorated gross exposures in 2010
                                                                              Non-
                                                                                                          Restructured    Past due
                                                                           performing    Impaired loans
         Figures in thousands of euro                                                                      exposures     exposures
                                                                             loans

         Opening gross exposure as at 1st January 2010                       2.751.588       2.208.369         479.520       934.119
         Increases                                                           1.649.454       2.484.776       1.046.418     1.811.969
            transfers from performing exposures                                422.669       1.258.375         181.571     1.617.752
            transfers from other classes of deteriorated exposures           1.114.275         780.327         372.139        30.112
            other increases                                                    112.510         446.074         492.708       164.105

         Decreases                                                            -620.069       -2.372.674       -636.868     -2.271.540
           transfers into performing exposures                                  -1.606         -294.429        -28.558     -1.228.549
           full impairment losses                                             -285.864              -83         -1.521              0
           disposals                                                           -29.486                -              -              -
           transfers to other classes of deteriorated exposure                  -3.013       -1.379.429        -31.859       -882.552
           other decreases                                                    -300.100         -698.733       -574.930       -160.439

         Final gross exposure as at 31st December 2010                       3.780.973       2.320.471         889.070       474.548



         Loans to customers: changes in deteriorated gross exposures in 2009
                                                                              Non-
                                                                                                          Restructured    Past due
                                                                           performing    Impaired loans
         Figures in thousands of euro                                                                      exposures     exposures
                                                                             loans

         Opening gross exposure as at 1st January 2009                       1.868.615       1.382.852         142.114       214.007

         Increases                                                           1.383.829       2.817.924         638.098     2.200.633
            transfers from performing exposures                                455.774       1.745.232         302.734     2.030.659
            transfers from other classes of deteriorated exposures             921.622         777.374         110.626       129.860
            other increases                                                      6.433         295.318         224.738        40.114

         Decreases                                                            -500.856       -1.992.407       -300.692     -1.480.521
           transfers into performing exposures                                  -1.020         -327.980        -61.085       -592.403
           full impairment losses                                             -245.501           -1.175        -26.445            -32
           disposals                                                                -8              -24              -              -
           transfers to other classes of deteriorated exposure                  -7.657       -1.111.672           -791       -819.362
           other decreases                                                    -246.670         -551.556       -212.371        -68.724

         Final gross exposure as at 31st December 2009                       2.751.588       2.208.369         479.520       934.119



Coverage decreased to 12,39% from 16,45% at the end of 2009 in relation to the increase in
positions backed by collateral, with account also taken on the one hand of the reclassification
of the Burani Group exposures into the non-performing class in the first quarter8 and on the
other of the reclassification already mentioned into the non-performing class of UBI Leasing
positions subject to contract termination (with coverage of 29%).
Net of secured loans, coverage for impaired loans stood at 22,41% (28,39% twelve months
before).


RESTRUCTURED LOANS

Net restructured loans almost doubled to 828,5 million euro from 438,7 million euro at the end
of 2009. Moreover the increase, amounting to 389,8 million euro, related almost entirely to the
progressive growth that occurred in the first nine months of the year (+360,5 million euro),
while the trend slowed considerably in the last quarter (+29,3 million euro).
The increase in the item – more than 60% of which related to Banco di Brescia (+128,6 million
euro) and to Centrobanca (+120,2 million euro) – was partly the result of already deteriorated
positions for which restructuring plans were agreed, which explains the reduction in coverage
to 6,81% from 8,51% at the end of 2009.




8   Coverage as at 31st December 2009 calculated net of the exposures to the Burani Group, reclassified as non-performing loans in the
    first quarter 2010 together with the relative impairment losses, was 14,4%.


                                                                     117
EXPOSURES PAST DUE AND/OR IN ARREARS

Moving in the opposite direction to other types of deteriorated loan, net exposures past due
and in arrears halved over twelve months to 459,8 million euro compared to 915,8 million euro
at the end of 2009, which also included the implementation of new Bank of Italy provisions
regarding exposures past due and/or in arrears for more than 90 days, backed by property
mortgages, at the level of single transactions.
Net of the increase that occurred in the third quarter, the annual change for this class is one
of a progressive decrease, which was particularly marked between October and December
(-135,7 million euro in the first quarter, -155,5 million euro in the second, +55,8 million euro
in the third and -220,6 million euro in the fourth), in parallel with the reduction in the “90
days past due” component. The latter actually fell from 569,3 million euro at the end of 2009
to 294,8 million euro in December 2010 (-133,6 million euro in the first quarter, -13,4 million
euro in the second, +60,2 million euro in the third and -187,7 million euro in the fourth).
The network banks accounted for 60% of the decrease in exposures past due and/or in
arrears as a direct result of improved credit quality management, introduced in a structured
fashion on the corporate and retail markets of the network banks at the beginning of 2010.
This was also confirmed by the increase in reclassifications into the performing class which
doubled over the year compared to 2009.

Because they are fully secured by collateral, the prevalent percentage of positions past due
and/or in arrears for more than 90 days (64% in December 2010; 62% at the end of 2009)
explains the low coverage for this class, although it did increase from 1,96% to 3,11%.


UBI LEASING

The continuation of the economic crisis in 2010 resulted in a significant worsening of the
credit quality of the UBI Leasing property and machinery and equipment portfolios originated
both through its own agents and through the network banks (captive market), with a
consequent strong impact in terms of impairment losses on loans.
The negative trend worsened further in the fourth quarter, due to the adoption of restrictive
criteria on the reclassification into the non-performing class of positions with terminated
contracts and to the increase of provisions on the performing portfolio.

In view of the scenario described the following actions were commenced in 2010:
• a far reaching internal reorganisation of the company, which included corporate
   governance, by strengthening management;
• a project initiative with the involvement of the Parent, focused on improving the quality of
   the portfolio and revising credit approval processes to increase quality standards at the
   disbursement, monitoring and credit recovery stages.

The restructuring path undertaken will result in a strong focus on captive market growth and
careful selection of business on the agent channel to address the higher risk profile and the
significant losses incurred.




                                              118
The interbank market and the liquidity
situation
The quarterly changes in the net interbank debt

                                        31.12.2010    30.9.2010     30.6.2010     31.3.2010       31.12.2009      Changes A/E
Figures in thousands of euro                A            B             C             D                E         amount          %

Loans to banks                           3.120.352     3.427.795     3.290.637     2.996.834       3.278.264     -157.912    -4,8%
     of which: Loans to central banks       739.508      295.430       375.415       282.815          641.788      97.720    15,2%
Due to banks                             5.383.977     7.126.257     9.252.062     4.612.141       5.324.434      59.543        1,1%
     of which: Due to central banks       2.219.152     2.000.056     2.977.481      479.002          639.753   1.579.399   246,9%

NET INTERBANK DEBT                       -2.263.625   -3.698.462    -5.961.425    -1.615.307       -2.046.170    217.455     10,6%


                                        31.12.2009    30.9.2009     30.6.2009     31.3.2009       31.12.2008      Changes F/L
Figures in thousands of euro                 F            G             H              I               L        amount          %

Loans to banks                           3.278.264     3.101.108     3.184.949     2.824.055       3.053.704     224.560        7,4%
     of which: Loans to central banks       641.788      198.428       643.471       119.354        1.045.983    -404.195   -38,6%
Due to banks                             5.324.434     5.306.536     6.073.741     5.953.954       3.980.922    1.343.512   33,7%
     of which: Due to central banks         639.753      501.371      1.500.249               -       450.059     189.694    42,1%

NET INTERBANK DEBT                       -2.046.170   -2.205.428    -2.888.792    -3.129.899        -927.218    1.118.952   120,7%


The net interbank balance of the UBI Banca Group as at 31st December 2010 consisted of debt
of 2,3 billion euro. It had reduced progressively compared to the previous interim periods (with
the sole exception of March 2010), but was basically unchanged compared to 31st December
2009.

An analysis in terms of residual maturities shows a net short term balance of approximately
+300 million euro, calculated excluding central bank auctions outstanding at the end of year
(in consideration of the full allotment guarantee given). Even if that exposure is classified in
terms of the short term debt component, this continues to be below the early warning
threshold set by Group policy, standing at approximately -1,8 billion euro, as also occurred in
the preceding interim periods.

As shown in the table, which shows quarterly changes for the aggregates in 2010, while loans
to banks remained practically constant, the trend for funding from banks was more variable
and reached a high at the end of June, a time of difficulty on markets for longer term maturity
issues, only to return at the end of the year to the same levels as at the end of 2009, as a
result of a series of actions undertaken by the Group with regard to funding (bond and other)
and also of the resumption of international placements.

Access to the interbank market represents a source of complementary and residual funding for
the Group compared to other sources of funding on institutional markets (see also the
previous section “Funding policies”).

In detail, loans to banks as at 31st December 2010 amounted to 3,1 billion euro (3,3 billion
euro twelve months before), including 740 million euro of loans to the central bank for
compulsory reserve requirements, accounting for 24% of the total.
Loans to banks other than the central bank recorded no significant changes over twelve
months (-256 million euro), with only a small change in composition between the different
types of lending.
The decrease in term deposits (-262 million euro) and other financing (-135 million euro),
mainly in the reverse repurchase agreement component, was accompanied by a slight increase
in current account overdrafts and deposits (+142 million euro). More than 37% of loans
outstanding at the end of the year were concentrated in this item, the most significant,
amounting to 1,2 billion euro.




                                                           119
Loans to banks: composition

                                                                                                                                                        Changes
                                                                        31.12.2010              %             31.12.2009               %
Figures in thousands of euro                                                                                                                        amount          %

Loans to central banks                                                       739.508         23,7%                641.788              19,6%          97.720       15,2%
 Term deposits                                                                     -              -                     -                  -               -            -
  Compulsory reserve requirements                                            739.508         23,7%                641.751           19,6%             97.757       15,2%
  Reverse repurchase agreements                                                        -                -                     -            -                  -          -
  Other                                                                                -                -                    37        0,0%                 -37   -100,0%

Loans to banks                                                             2.380.844         76,3%              2.636.476           80,4%           -255.632        -9,7%
 Current accounts and deposits                                             1.161.396         37,3%              1.019.692           31,1%            141.704        13,9%
 Term deposits                                                               466.445         14,9%                728.828           22,2%           -262.383       -36,0%
  Other financing:                                                           753.003         24,1%                887.956           27,1%           -134.953       -15,2%
    - reverse repurchase agreements                                                988          0,0%               99.889              3,1%           -98.901      -99,0%
    - finance leases                                                               165          0,0%                     313           0,0%              -148      -47,3%
    - other                                                                   751.850        24,1%                787.754              24,0%          -35.904       -4,6%
  Debt instruments                                                                     -                -                     -                -              -          -

TOTAL                                                                      3.120.352        100,0%              3.278.264           100,0%          -157.912        -4,8%




At the end of year, interbank funding amounted to 5,4 billion euro, unchanged compared to
twelve months before (+59 million euro), although the change in the composition of the items
can be seen from the table.
Recourse to borrowing from the central bank intensified during the year – up by 640 million
euro to 2,2 billion euro in December 2010 – which offset the reduction in amounts due to
other banks (-1,5 billion euro), down to 3,2 billion euro.
This phenomenon – explained, amongst other things, by tensions on monetary markets –
triggered a process of replacement towards more stable funding (due to the full allotment
clause) which brought amounts due to central banks to account for more than 40% of the
total.
As concerns borrowing from other banks, the appreciable reduction in current accounts and
deposits (-1,9 billion euro) was contrasted by an increase in term deposits (+390 million euro);
while the opposing trends for financing and other payables virtually balanced each other.


Due to banks: composition

                                                                                                                                                       Changes
                                                                      31.12.2010            %               31.12.2009             %
Figures in thousands of euro                                                                                                                       amount           %

Due to central banks                                                     2.219.152          41,2%               639.753           12,0%            1.579.399      246,9%
    of which: repurchase agreements (*)                                            -                -           480.753            9,0%              -480.753     -100,0%

Due to banks                                                             3.164.825         58,8%              4.684.681           88,0%            -1.519.856     -32,4%
 Current accounts and deposits                                             692.788         12,9%              2.590.978           48,7%            -1.898.190     -73,3%
 Term deposits                                                           1.199.455         22,3%                809.405           15,2%               390.050      48,2%
  Financing:                                                             1.149.003         21,3%              1.191.381           22,4%              -42.378        -3,6%
    - repurchase agreements                                                 290.737         5,4%                347.603            6,5%               -56.866      -16,4%
    - other                                                                 858.266         15,9%               843.778           15,9%                14.488       1,7%
  Amounts due for commitments to repurchase own equity
  instruments                                                                      -                -                    -                 -                 -          -
  Other payables                                                           123.579          2,3%                 92.917            1,7%               30.662       33,0%

TOTAL                                                                    5.383.977         100,0%             5.324.434           100,0%              59.543        1,1%

(*) A new system came into operation on    28th     June 2010 for the pool management of assets posted as collateral for loans in the Eurosystem, with the
    introduction of a single pooled deposit account for collateral in which all assets pledged are held. This involved a change to the procedures used to post
    collateral assets, with the transformation of repurchase agreements into pledge agreements.




                                                                            120
Assets eligible for refinancing

                                                                                                           31.12.2010                        31.12.2009
                                                                                                    nominal       amount eligible      nominal       amount eligible
Figures in billions of euro                                                                         amount       (net of haircuts)     amount       (net of haircuts)

AFS and HTM securities                                                                                   1,40         1,34                 1,80          1,76
HFT securities                                                                                           0,00         0,00                 0,03          0,03
B@nca 24-7 residential mortgage securitisation (*)                                                       1,71         1,30                 2,28          1,68
B@nca 24-7 salary backed loan securitisation (**)                                                        0,38         0,31                 0,72          0,58
B@nca 24-7 consumer loan securitisation                                                                  2,13         1,73                 2,13          1,80
UBI Leased assets securitisation                                                                         3,44         2,87                 3,44          2,81
Securitisation of Banco di Brescia assets                                                                1,56         1,25                 1,56          1,02
Loans eligible resulting from participation in ABACO (***)                                               0,27         0,27                 0,27          0,25

TOTAL                                                                                                   10,89         9,07               12,23           9,93

(*) nominal residual amount after partial redemption (of approximately 25%) recognised in 2010.
(**) nominal residual amount after partial redemption (of approximately 48%) recognised in 2010.
(***) ABACO (bank assets eligible as collateral) is the name given to procedures drawn up by the Bank of Italy for the management of loans eligible for
      refinancing. In order to qualify as eligible, an asset must meet specific requirements concerning the following: type of debtor/guarantor (public sector,
      non financial company, international and supranational institutions), high credit rating (single “A-” credit quality level, equivalent to a default probability
      of 0,10%) and a minimum amount (one million euro for national use until 2011).




Assets eligible for refinancing with the central bank amounted to 9,1 billion euro as at 31st
December 2010 (9,9 billion euro at the end of 2009).
The decrease compared to the previous year is due mainly to repayments on internal
securitisations, and maturities of securities held in portfolio.

In the third quarter, the Group completed activity to restructure the main existing
securitisations and to render them revolving (by using the available liquidity of special purpose
entities) and it is completing the creation of a new securitisation for a nominal amount of two
billion euro and an expected increase, net of haircuts, of 1,5 billion euro.

On 1st January 2011 the central bank revised the classification and levels of haircuts for
eligible instruments: the level was raised for asset backed securities from 12% to 16% with an
impact on the total value of assets eligible for refinancing of approximately 0,3 billion euro.

A second rating requirement became operational from 1st March 2011. In order for
securitisations to be eligible for refinancing with the Bank of Italy and/or the European
Central Bank, ABS instruments must have ratings issued by at least two international
agencies.
The rating process specifically for internal securitisations (which regard four of the five existing
securitisations and amount to 7,5 billion euro net of haircuts) has at present been completed
on assets of 4,1 billion euro, with a consequent reduction in eligible assets (the delay was in
fact the result of factors not under the direct control of the Group).
In order to partially compensate for this decrease, UBI Banca entered into reverse repurchase
agreements with external counterparties to purchase eligible assets amounting to 1,7 billion
euro.
The second rating process is expected to be complete by the end of the first half of 2011.

As a result of the above, at the date of this report eligible assets amounted to 7,2 billion euro.

                                                                                ***


In December 2010, the final version of the Basel Committee Accord was published on the process to revise
international supervisory regulations on liquidity, which basically confirmed the version defined in
December 2009, with the introduction of two indicators associated with a minimum regulatory threshold
(nevertheless officially setting a specific percentage for the renewal of maturing loans, previously left to the
discretion of the bank).
At the same time, on 1st January 2011 amendments to Bank of Italy supervisory regulations entered into
force which make widespread changes to rules governing liquidity risk. These create an organised system
of principles and obligations designed to orient banks towards greater rigour in the management of
liquidity. This system is intended to direct banks and banking groups towards compliance with rules which



                                                                               121
will be introduced by the new international prudential regulations from 31st December 2015 and which will
form part of the general set of rules governing liquidity1.
Furthermore, in March 2011, the EBA (European Banking Authority) ordered an assessment of liquidity risk
in which the UBI Banca Group participated by preparing a standard matrix, structured by maturity
intervals with the identification of predefined time intervals, to be compiled on a consolidated basis with
data as at 31st December 2010. The assessment, which involves the application of common stress factors
by the EBA in order to estimate the survival period for each bank, is designed to assess the liquidity
position of banks in relative terms (it is not yet possible at present to formulate hypotheses concerning the
possible stress scenarios which will be applied). Finally there is a section relating to funding plans for the
same time intervals, in order to identify possible concentrations in terms of issues planned at system level.

The 2011 policy for the management of the financial risks of the UBI Banca Group significantly revised both
the system for monitoring liquidity risk, and that for structural balance between assets and liabilities, in
order to incorporate the developments and recommendations of the international process in progress to
revise the regulations governing liquidity risk.
From 20th May 2010, that risk is managed by means of the measurement, monitoring and management of
the expected liquidity requirement, using a net liquidity balance model of analysis at consolidated level on
a time horizon of 30 days, integrated with stress tests designed to assess the Group’s ability to withstand
crisis scenarios characterised by an increasing level of severity. The system adopted also involves
monitoring sources of funding both at consolidated and individual company level, in order to verify their
consistency and sustainability over time with respect to the current and expected liquidity requirement of
the Group and also consistency with the level of dependence on institutional markets considered
acceptable.
Management of structural balance is performed by using models which assess the degree of stability of
liabilities and the degree of liquidity of assets (based principally on criteria of residual life and on the
classification of the counterparties which contribute to the definition of the relative weightings), in order to
contain risk associated with the transformation of maturities within a tolerance threshold considered
acceptable by the Group. This model is designed to incorporate the general lines currently being defined in
the process to revise prudential regulations for liquidity risk with specific reference to medium-to-long term
indicators.




1   A summary of the new prudential regulatory framework is   given in the section “equity and capital adequacy”, which may be
    consulted.


                                                              122
Financial assets

With a view to supporting net interest income in a still fragile and uncertain market context, on 25th May
2010 a decision was taken – and finalised the following June – to invest in government securities. That
investment – for a total nominal amount of six billion euro with partial profit taking in September and
October – influenced trends for financial assets affecting both financial assets held for trading and
available-for-sale financial assets, with new purchases of Italian government securities classified within
debt instruments.


The total financial assets of the Group as at 31st December 2010 had exceeded 13 billion
euro, a significant increase compared to the previous year (+5 billion euro).
Net of financial liabilities held for trading, consisting mainly of financial derivatives, financial
assets amounted to 12,2 billion euro (7,3 billion euro at the end of the 2009).
In terms of composition, as can be seen from the table, the trend for the item is attributable to
increases in financial assets held for trading and above all in instruments classified within
available-for-sale financial assets as a result of the new investments in Italian government
securities (more than doubled over twelve months, to account for 73,5% of the total) as part
the action taken to support net interest income mentioned above. On the other hand financial
assets at fair value continued to decrease having now become a residual item.

Financial assets/liabilities

                                                                   31.12.2010                 31.12.2009                Changes
Figures in thousands of euro                                   Amount           %          Amount          %        amount         %

Financial assets held for trading                               2.732.751       20,8%      1.575.764       19,4%    1.156.987     73,4%
    of which: financial derivatives contracts                     514.141           3,9%     722.831        8,9%      -208.690    -28,9%
Financial assets at fair value                                    147.286        1,1%        173.727        2,1%      -26.441     -15,2%
Available-for-sale financial assets                            10.252.619       78,1%      6.386.257       78,5%    3.866.362      60,5%
Held-to-maturity investments                                             -             -            -           -            -         -

TOTAL FINANCIAL ASSETS (A)                                     13.132.656       100,0%     8.135.748       100,0%   4.996.908     61,4%
    of which:
    - debt instruments                                          11.611.039       88,4%      6.251.008       76,8%    5.360.031     85,7%
    - of which: Italian government securities                    9.646.573       73,5%      4.325.379       53,2%    5.321.194    123,0%
    - equity instruments                                          667.497           5,1%     846.841        10,4%     -179.344    -21,2%
    - Units in O.I.C.R. (collective investment instruments).      274.362           2,1%     310.488        3,8%       -36.126    -11,6%

FINANCIAL LIABILITIES HELD FOR TRADING (B)                       954.423        100,0%       855.387       100,0%      99.036     11,6%
    of which: financial derivatives contracts                     545.161        57,1%       746.752        87,3%     -201.591    -27,0%

NET FINANCIAL ASSETS (A-B)                                     12.178.233                  7.280.361                4.897.872     67,3%




Management accounting figures1 as at the 31st December 2010 show the following:
- in terms of types of financial instrument, the securities portfolio of the Group was composed
  as follows: 80,3% of government securities, 15,9% of corporate securities (of which 79%
  relating to major Italian and international banks and financial institutions), 1,3% of hedge
  funds and the remainder consisting of funds, equities and other instruments;
- from a financial viewpoint, floating rate securities accounted for 63,4% of the portfolio2 and
  fixed rate securities for 26,8%, while structured instruments (for which the optional
  component concerned the coupons only and not the capital invested), present mainly in the
  available-for-sale portfolio, accounted for 6,7%, while the remainder was composed of
  equities, funds and convertible bonds;


1   The management accounting figures relate to a smaller portfolio than that stated in the consolidated financial statements, because
    they exclude equity investments and some minor portfolios
2   The fixed rate securities purchased as part of asset swaps are also considered as floating rate. They account for 74% of the floating
    rate securities.


                                                                        123
- as regards the reference currency, 98,8% of the securities were denominated in euro, and
  0,6% in dollars with currency hedges, while in terms of geographical distribution, 95,2% of
  the investments (excluding hedge funds) were located in the euro area and 2,9% in USA
  securities;
- finally, an analysis by rating (for the bond portfolio only) shows that 97,8% of the portfolio
  consisted of “investment grade” securities with an average rating of A3.




Available-for-sale financial assets

“Available for sale financial assets”, asset item 40, are measured at fair value with the recognition of
changes in a separate fair value reserve in equity, except for losses due to reductions in value that are
considered significant or prolonged. In this case the reduction in value that occurred in the period is
recognised through profit or loss, the amount being transferred from the negative or positive reserve that
may have been recognised in equity previously. Following the recognition of impairment losses, recoveries
in value continue to be recognised in the separate fair value reserve in equity. Any decreases below the
level of the previous impairment losses are recognised through profit and loss.

Available-for-sale financial assets: composition

                                                         31.12.2010                                     31.12.2009                         Changes
Figures in thousands of euro              L1           L2        L3         Total          L1          L2        L3         Total       amount        %


Debt instruments                       8.509.464    1.115.988   10.255     9.635.707    4.041.201   1.573.093    6.586     5.620.880   4.014.827     71,4%
    of which: Italian government
    securities                          7.776.547           -         -     7.776.547   3.886.375           -          -   3.886.375   3.890.172     100,1%
Equity instruments                      346.586       73.614    70.357      490.557      489.825      71.083    75.540      636.448    -145.891      -22,9%

Units in O.I.C.R.
(co llective investment instruments)     18.313      106.596          -     124.909       17.177     110.046         260    127.483       -2.574      -2,0%
Financing                                       -           -    1.446         1.446            -           -    1.446        1.446              -        -

TOTAL                                  8.874.363    1.296.198   82.058    10.252.619    4.548.203   1.754.222   83.832     6.386.257   3.866.362     60,5%


As at 31st December 2010, available-for-sale financial assets had reached 10,3 billion euro (6,4
billion euro at the end of 2009) and were composed principally as follows:
-     the AFS portfolio of UBI Banca amounting to 8.698 million euro (4.919 million euro in
      December 2009);
-     the IW Bank portfolio, designed to stabilise net interest income given the nature of its
      normal operations, amounting to 845 million euro (787 million euro);
-     the Centrobanca corporate bond portfolio, which represents activity complementary to and
      consistent with the lending approach of that bank, amounting to 557 million euro (535
      million euro).

The significant growth that occurred reflects the trend for debt instruments, which rose from
5.621 million euro to 9.636 million euro (+71,4%), as a result of new investments in Italian
government securities contained primarily in the UBI Banca portfolio: a total of +3,9 billion
euro including a nominal amount of 3,3 billion euro relating to the action taken to stabilise net
interest income.

The action, which commenced at the end of May, took concrete form with the purchase of BTPs and CTZs
maturing in September 2011 for a total nominal amount of 5,5 billion euro classified within available-for-
sale financial assets (a further 0,5 billion euro, again maturing in September 2011, was classified within
financial assets held for trading).
Partial profit taking was performed in September and October (on the basis of the prices and credit spreads
of the Italian government issues), by the sale of securities for a nominal amount of 3,2 billion euro (two
billion euro of BTPs – of which 1,8 billion euro in asset swaps – and 1,2 billion euro of CTZs) and a
subsequent reinvestment of one billion euro in longer term BTPs (2020 and 2021).




                                                                                124
This action was accompanied by investments in long term BTPs made in the first quarter and
to a lesser extent in the third quarter, with partial disinvestments in the last quarter of the
year.

As concerns Centrobanca, the portfolio – 72,5% consisting of “investment grade” securities –
increased by approximately 22 million euro, approximately half of which attributable to net
investments and the remaining part to recoveries in value and positive exchange rate
differences. The IW Bank portfolio also increased (almost 60 million euro) due to new net
investments in Government securities (CCTs maturing in 2015).

The debt instruments also include ABS financial instruments – all held by UBI Banca – eligible
for refinancing with the ECB with a book value of 89,1 million euro consisting of securities
from INPS (national insurance institute) securitisations (two securitisations existed at the end
of 2009 for a total amount of 128,8 million euro).
In addition to the net fair value impact (+0,4 million euro), the decrease compared to 165,2
million of twelve months before is attributable to the redemption of an INPS securitisation
amounting to 40,1 million euro and to banking securitisations (RMBSs – residential mortgage
backed securities) with a book value of 36,4 million euro in December 2009 (49,7 million euro
nominal).

Total Group investments in ABS securities as at 31st December 2010, net of own
securitisations, amounted to 89,6 million euro (208 million euro the year before) and they were
composed as follows:
   89,1 million euro, classified in the AFS portfolio of UBI Banca, already mentioned;
   0,5 million euro classified within the HFT portfolio of UBI International (see in this respect
   the sub-section “Financial assets held for trading”);
   The total amount at the end of 2009 included a security classified within the Centrobanca
   loans and receivables portfolio with a nominal value of five million euro, sold in the second
   half of 2010.
Investments in own securitisations, eliminated in the consolidation, fell to 39,3 million from
43,4 million euro in 2009 and related to the following:
-  RMBS securities classified within financial assets held for trading relating to UBI Banca
   (Orio Finance) and amounting to 5,3 million euro (6,6 million euro twelve months before);
-  ABS securities amounting to 34 million euro (36,8 million euro in December 2009) as
   follows:
       7,2 million euro in the Centrobanca AFS portfolio (Sintonia Finance) (7,5 million euro);
       5,8 million in the Parent’s AFS portfolio (Lombarda Lease Finance 4) (8,3 million euro);
       21 million euro classified within loans and receivables held by UBI Leasing (Lombarda
       Lease Finance 4) (unchanged compared to twelve months before).
The sub-section "exposures of the UBI Banca Group to some types of products”, later in this section, may be
consulted for further information on exposures to ABS instruments and to special purpose entities (SPE).

Equity instruments fell to 491 million euro from 636 million euro the year before.
Shareholdings that are not classified as companies subject to control, joint control or
significant influence and that are not held for merchant banking and private equity activities,
are recognised here. The decrease in these assets is basically due to the decrease in the fair
value of listed equity investments classified within fair value level one and to the Intesa
Sanpaolo share in particular3. Its market value, affected by the sharp drop in banking share
prices at the end of the year, fell from 459,1 million euro to 296,2 million euro (-35,5%), while
the A2A Spa share also fell from 16,4 million euro to 11,6 million euro over twelve months. On
the other hand, an increase was recorded in the interest held in London Stock Exchange (from
12,6 million euro to 15,5 million euro; +22,5%).
The fair value level one class also includes an investment made in the second quarter of 2010
with a nominal value of 20 million euro (ETF on EuroStoxx 50).

As concerns unlisted equity investments, those with a level two and three fair value decreased
on aggregate by almost three million euro, principally as a result of disposals of holdings in

3   The UBI Banca Group holds a total of 145.022.912 shares, amounting to 1,22% of the share capital with voting rights.


                                                                 125
Carta SI, the former Si Holding Spa (-14,4 million euro), in Centrosim Spa
(-1,7 million euro at consolidated level) and Equinox Investment Company Scpa (-0,9 million
euro), while increases resulted from an increase in the value of some equity investments and
from new investments. The latter included further purchases by the Parent in Autostrada
Pedemontana Lombarda Spa (+5,3 million euro) and in Autostrade Lombarde Spa (+0,8 million
euro), 4,7 million euro relating to the investment in GGP Greenfield by Centrobanca acquired
through the conversion of amounts due from the company and one million euro net relating to
UBI Banca International.

The investment in OICR units (collective investment instruments) fell to 125 million euro from
127 million euro previously (-2%), the result on the one hand of purchases and a net increase
in the value of the UBI Banca investments (+15,6 million euro) and on the other of sales by
UBI Pramerica (-17,9 million euro). The item includes property funds – held almost entirely by
the Parent – totalling approximately 27 million euro (26,4 million euro in December 2009),
including 18,3 million euro relating to the Polis Fund (17,2 million euro at the end of 2009),
recognised within fair value level one.

As a result of the losses recorded by debt instruments in particular, at the end of year the
balance on the fair value reserve for available-for-sale financial assets recognised in equity was
negative by 311,5 million euro (it was positive by 168,7 million euro in December 2009).




Financial instruments held for trading

Financial assets held for trading
Asset item 20, “Financial assets held for trading”, includes financial trading instruments “used to generate
a profit from short-term fluctuations in price or from a dealer’s margin”. They are recognised at fair value
through profit or loss – FVPL.


Financial assets held for trading: composition

                                                      31.12.2010                                   31.12.2009                         Changes
Figures in thousands of euro              L1         L2          L3         Total       L1        L2        L3          Total      amount       %

A. On-balance sheet assets
Debt instruments                       1.964.319     11.013           -   1.975.332    479.546   150.582          -    630.128    1.345.204   213,5%
  of which: Italian government
  securities                            1.870.026          -          -    1.870.026   439.004         -          -     439.004   1.431.022   326,0%
Equity instruments                       72.856            2   104.082     176.940     109.266    80.592   20.535      210.393      -33.453   -15,9%
Units in O.I.C.R.
(co llective investment instruments)         512          54     1.601        2.167       628          8    8.642        9.278       -7.111   -76,6%
Financing                                       -    64.171           -     64.171           -     3.134          -      3.134       61.037    n.s.
Total A                                2.037.687     75.240    105.683    2.218.610    589.440   234.316   29.177      852.933    1.365.677   160,1%

B. Derivative instruments
Financial derivatives                      1.014    509.601      3.526     514.141        582    721.626        623    722.831     -208.690   -28,9%
Credit derivatives                             -          -          -           -          -          -          -          -            -        -
Total B                                    1.014    509.601      3.526     514.141        582    721.626        623    722.831     -208.690   -28,9%

TOTAL (A+B)                            2.038.701    584.841    109.209    2.732.751    590.022   955.942   29.800     1.575.764   1.156.987    73,4%




At the end of December financial assets held for trading amounted to 2.733 million euro, an
increase of more than 70% over twelve months, the result of new net investments in debt
instruments concentrated mainly in the first half of the year.

Debt instruments, amounting to 1.975 million euro (almost all with a level one fair value)
increased by 1.345 million euro (more than tripled compared to December 2009) due to the
net effect of sales, maturities and purchases of Italian government securities (+1.431 million



                                                                              126
euro, including a nominal amount of 0,5 billion euro connected with an investment decided in
May).

As at 31st December, the Group held Greek government securities in portfolio at the initial
purchase price of 23,6 million euro (a book value of 24,6 million euro inclusive of the coupon
interest accruing); the position was closed in February 2011.
At the date of this report no investments in government debt instruments issued by Portugal,
Ireland, Spain and Belgium were held in portfolio.
Debt instruments also included direct investments in “Asset Backed Securities”4, all held by
the subsidiary UBI Banca International Sa, consisting mainly of mortgage backed securities
(MBS), with the underlying assets principally of European origin amounting to 0,5 million euro
(a total book value of ABSs held in December 2009 of 37,8 million euro).
The decrease that occurred over twelve months (-37,3 million euro) is attributable to the
maturity of a collateralised debt obligation (“CBO Investment Jersey Ltd 1999-2010”)
subscribed by UBI Banca amounting to 35,6 million euro and to the redemption of a security
held in portfolio by UBI Banca International amounting to 1,5 million euro, as well as to the
net fair value impact amounting to -0,2 million euro.

Debt instruments also included a structured product, similar in terms of risk to ABS
securities, amounting to approximately 2,6 million euro and relating to UBI Banca
International Sa (2,4 million euro in December 2009).

Equity instruments decreased during the year, down from 210 million euro to 177 million euro,
principally in relation to disinvestments in European equities (all with a level one fair value) by
the Group’s asset management company under the management mandate granted to it5 (-52
million euro) partially offset by a new equity purchase by the subsidiary Centrobanca, which,
however, was sold in the first few days of 2011.

This category also includes investments in equity instruments held as part of merchant
banking and private equity business (in connection principally with Centrobanca’s activities).
In December 2010, these totalled 104,1 million euro – classified within fair value level three –
an increase compared to twelve months before (100,2 million euro) due to the net effect of new
investments and disposals performed by Centrobanca and to the changes in the fair value of
some equity investments.

Investments in OICR units (collective investment instruments) fell to 2,2 million euro relating
almost entirely to hedge funds purchased prior to 30th June 2007 and still held (1,6 million
euro classified within fair value level three compared to 8,6 million euro before)6.

As concerns the item financing – all relating to Prestitalia Spa – this increased from 3,1 million
euro to 64,2 million euro in relation to the full acquisition of the company, with consequent
line-by-line consolidation applied to it,

Finally, financial assets classified as held for trading also included derivative instruments
amounting to 514,1 million euro (722,8 million euro in December 2009), entirely of a financial
nature, for which the performance and amount must be interpreted in strict relation to the
corresponding item recognised within financial liabilities held for trading.

Financial instruments held for trading as at 31st December 2010 included impaired assets
amounting to 0,9 million euro (1,1 million euro in 2009), attributable to the expected
realisable value of bonds issued by Lehman Brothers and subscribed by UBI International and
by the Parent for a total nominal amount of 10 million euro. The change is due to the sale in

4   The preceding sub-section on the available-for-sale portfolio should be consulted for a full picture of the Group’s investments in ABS
     securities.
5    As already reported, this accounting class also includes the portfolio entrusted to UBI Pramerica SGR under the management
     mandate granted to it. On the basis of that mandate, management is performed following a capital protection strategy, which
     guarantees a level of capital protection on maturity of 96,80%.
     In December, approximately 39 million euro was invested in European equities (90,8 million euro at the end of 2009). Open positions
     also existed in futures on equity indices, options on exchange rates and forward currency contracts, The remaining part of the
     mandate was managed using monetary instruments.
6    The following sub-section, “financial assets at fair value”, may be consulted for a full picture of the Group’s investments in hedge
     funds.


                                                                   127
December of a Lehman security held by UBI International with a nominal amount of 2,5
million euro.
Furthermore, at the date of this report the remaining Lehman securities held in portfolio had
also been disposed of.

As concerns the position of the Group with regard to Lehman Brothers, as already reported in the 2009
Annual Report:
-   UBI Banca and Centrobanca have filed proof of claim applications with the Southern District Court of
    New York in connection with derivatives contracts which had been entered into with companies in the
    Lehman Brothers Group;
-   Centrobanca has filed proof of claim applications in relation to derivatives contracts which it had
    entered into with Lehman Brothers Special Financing Inc. subject to Chapter 11 bankruptcy proceedings
    in the USA;
-   UBI Banca has filed proof of claim applications in relation to bonds issued by Lehman Brothers Holdings
    Inc. which had been subscribed by UBI Banca, UBI Banca International and the Luxembourg branch of
    Banco di Brescia. The relative creditor’s claims must be considered as void in consideration of the
    disposal of the securities performed in the meantime.
As concerns the position of Lehman Brothers International (Europe), a company belonging to the Lehman
Brothers Group and subject to an administration order in the United Kingdom, on 17th September 2010 UBI
Banca filed a creditor’s claim for 485.930,71 GBP in relation to derivatives contracts that had been entered
into with Lehman Brothers International (Europe).
In relation to that last position, as already reported, UBI Banca had already filed creditor’s claims against
Lehman Brothers Holdings Inc., as the guarantor of Lehman Brothers International (Europe), in the context
of the Chapter 11 proceedings in the USA mentioned above.




Financial liabilities held for trading

Financial liabilities held for trading: composition

                                              31.12.2010                                31.12.2009                       Changes

Figures in thousands of euro       L1        L2        L3       Total        L1        L2        L3       Total       amount       %

A. On-balance sheet liabilities
Due to banks                      110.657         -         -   110.657      86.857         -         -    86.857      23.800     27,4%
Due to customers                  298.605         -         -   298.605      21.778         -         -    21.778     276.827      n.s.
Debt instruments                        -         -         -         -           -         -         -         -           -             -
Total A                           409.262         -         -   409.262     108.635         -         -   108.635     300.627    276,7%

B. Derivative instruments
Financial derivatives               1.191   543.970             545.161       3.960   742.792         -   746.752     -201.591   -27,0%
Credit derivatives                      -         -         -           -         -         -         -           -          -        -
Total B                             1.191   543.970         -   545.161       3.960   742.792         -   746.752     -201.591   -27,0%

TOTAL (A+B)                       410.453   543.970         -   954.423     112.595   742.792         -   855.387      99.036     11,6%




Financial liabilities totalled 954,4 million euro as at 31st December 2010, a moderate increase
compared to 855,4 million twelve months before. As can be seen from the table, financial
derivatives decreased during the year by 27% (-201,6 million euro to 545,2 million euro),
while liabilities increased both in terms of amounts due to banks (+23,8 million euro) and in
particular for amounts due to customers, up from 21,8 million euro to 298,6 million euro. In
both cases the amounts due related to uncovered short positions in Government securities.
As with financial assets held for trading, the changes for derivatives, almost all consisting of
interest rate contracts, relate mainly to smaller volumes of business.




                                                                 128
Financial assets at fair value

The item “financial assets at fair value” (asset item 30) includes financial instruments designated as such
in application of the fair value option (FVO). They consist exclusively of units in hedge funds purchased
subsequent to 1st July 2007.
These financial assets are recognised at fair value through profit or loss.

Financial assets at fair value: composition

                                          31.12.2010                                31.12.2009                       Changes
Figures in thousands of euro    L1       L2        L3        Total        L1       L2        L3       Total       amount        %

Debt instruments                     -                  -            -         -        -         -           -            -        -
Equity instruments                   -                  -            -         -        -         -           -            -        -
Units in O.I.C.R.
(co llective investment
instruments)                   116.208            31.078    147.286      108.819        -   64.908    173.727      -26.441     -15,2%
Financing                            -                  -            -         -        -         -           -            -        -

TOTAL                          116.208        -   31.078    147.286      108.819        -   64.908    173.727      -26.441     -15,2%



As at 31st December 2010, financial assets at fair value, consisting exclusively of O.I.C.R.
(collective investment instruments) units in hedge funds, amounted to 147,3 million euro
including 116,2 million euro – fair value level one – relating to UBI Pramerica SGR (formerly
Capitalgest).

If investments in hedge funds classified within financial assets held for trading are also
included, then investments in hedge funds as at 31st December 2010 totalled 148,9 million
euro (182,4 million euro at the end of 2009).
Redemptions, net of redemption fees7, were received during the year of approximately 43
million euro (36,1 million euro relating to investments classified within financial assets at fair
value and seven million euro relating to investments classified within financial assets held for
trading).
At the end of December requests to redeem not yet redeemed concerned the remainder of the
hedge fund portfolio with the exception of the UBI Pramerica (formerly Capitalgest) funds.
Management accounting figures show that ten funds, for an amount of approximately 22
million euro, are expected to pay and/or have declared that they were implementing a deferred
redemption plan (known as a "gate") – as allowed for in their respective regulations, while
another 19 funds have created “side pockets” for an amount of 11 million euro.

As concerns the Madoff collapse, court action initiated by UBI Banca against the fund Thema International
Plc and the relative depository bank, HSBC Institutional Trust Services Ltd, is proceeding before the
Commercial Court of Dublin. The “discovery” stage is currently in progress during which the parties
exchange documentation and information relevant to the case.
In the meantime, UBI Banca is monitoring the class actions brought in the USA and the liquidation
proceedings in progress in the British Virgin Islands brought against three funds attributable to Madoff,
Fairfield Sigma Ltd., Kingate Euro Ltd. and Kingate Global Ltd., in order to protect UBI Banca’s creditor
rights also with respect to these actions.

Finally, with regard to the Dynamic Decisions Growth Premium 2X fund, in liquidation, following the signing
of an agreement with the receivers which gives UBI Banca preference in the redemption of sums recovered
in the liquidation, in return for financing paid to the receivers, no significant and/or relevant developments
have occurred.




7   The technical term used to indicate expenses for repayment.


                                                                  129
Exposures of the UBI Banca Group to some types of products

This section provides an update of the position of the UBI Banca Group with regard to some
types of financial instruments, which since the subprime mortgage crisis in 2007, are now
considered at high risk.


Special purpose entities (SPEs)
The involvement of the UBI Group in special purpose entities (SPEs8) concerns the following
types:
- entities formed to allow the issue of preference shares;
- conventional securitisation transactions9 performed by Group member companies in
   accordance with Law No. 130 of 30th April 1999;
- the issue of covered bonds, in accordance with Art. 7 bis of Law No.130/1999.

Special purpose entities existed as at 31st December 2010, within the UBI Banca Group for the
issue of preference shares used as innovative equity instruments on international capital
markets. These issues, which current supervisory regulations allow to be included in the
consolidated tier one capital, take the form of non redeemable instruments and they have
particularly junior levels of subordination. The preference shares included in the tier one
capital amounted to 453,46 million euro and they were issued by a number of the banks
which formed part of the Group prior to the merger. These special purpose entities, which in
accordance with IFRS fall within the consolidation scope are as follows10:
BPB Funding Llc,
BPB Capital Trust (100% controlled by BPB Funding Llc),
Banca Lombarda Preferred Capital Company Llc,
Banca Lombarda Preferred Securities Trust,
BPCI Funding Llc,
BPCI Capital Trust (100% controlled by BPCI Funding Llc).

On the one hand securitisations form part of a strategic policy to expand lending by
simultaneously freeing up part of the supervisory capital relating to the amounts transferred
and on the other they constitute an important medium-to-long term funding instrument. The
underlying assets securitised consist of performing assets of the network banks and other
product companies. The list of SPEs used for the securitisations in which the Group is
involved is as follows:
Orio Finance Nr. 3 Plc,
Albenza 3 Srl,
Lombarda Lease Finance 4 Srl11,
UBI Lease Finance 5 Srl,
Sintonia Finance Srl,
24-7 Finance Srl,
UBI Finance 2 Srl,
UBI Finance 3 Srl.

Finally, the entity UBI Finance Srl was formed to purchase loans from banks as part of
operations to issue covered bonds.

With the exception of UBI Finance Srl, the special purpose entities listed above are included in
the consolidated accounts because these companies are in reality controlled, since their assets
and liabilities were originated by Group member companies. As concerns Sintonia Finance,

8 Special Purpose Entities (SPE) are special companies formed to achieve a determined objective.
9 With normal securitisations the originator sells the portfolio to a special purpose entity which then issues tranches of asset-backed
   securities in order to purchase it. With a synthetic securitisation, on the other hand, the originator purchases protection for a pool of
   assets and transfers the credit risk attaching to the portfolio – either fully or in part – by using credit derivatives such as CDSs (credit
   default swaps) and CLNs (credit-linked notes) or by means of personal guarantees.
10 Control is by the Parent of the Group where no indication is given. See the section “The consolidation scope” in this respect.
11   The securitisation Lombarda Lease Finance 3 Srl was closed down in the third quarter. The entity still remains operational.



                                                                    130
since the securitisation was multi-originator, only those assets and liabilities relating to the
operation originated by Centrobanca are consolidated.

The securitisations concerning the special purpose entities, 24-7 Finance Srl, UBI Lease
Finance 5 Srl and UBI Finance 2 Srl were performed in order to constitute a portfolio of assets
eligible as collateral for refinancing with the European Central Bank, consistent with Group
policy for the management of liquidity risk.
They were performed on performing residential mortgages, salary backed loans and consumer
loans of B@nca 24-7 (24-7 Finance Srl), on lease contracts of UBI Leasing (UBI Lease Finance
5 Srl) and on performing loans to small-to-medium sized enterprises of Banco di Brescia (UBI
Finance 2 Srl). In the securitisations in question the senior securities issued by the entities –
assigned a rating – are listed and can be used for refinancing operations with the ECB.
Again in this context, in December 2010 a new securitisation transaction was initiated by
transferring loans to small to medium sized enterprises, classified as performing and held by
Banca Popolare di Bergamo Spa, to the special purpose entity UBI Finance 3 Srl.
The operation consists of two stages:
- the transfer of the loans by the originator to the special purpose entity on 6th December
    2010 (effective from 1st December), for an amount of approximately 2,8 billion euro. The
    purchase of the mortgages by the special purpose entity, financed by deferring payment of
    the transfer price, which will be paid when the securities are issued;
- the issue of securities by UBI Finance 3.
The second stage has not yet taken place and it is scheduled for before the end of the first half
of 2011.

The issue of covered bonds is designed to diversify sources of funding for the Group and also
to contain the cost of it. As at 31st December 2010, UBI Banca had performed three
placements of covered bonds for a total nominal amount of 3,75 billion euro (1,75 billion euro
issued in 2010) as part of a programme for a maximum issuance of ten billion euro. The
originator banks issued a subordinated loan to the SPE, UBI Finance, equal to the value of the
loans sold, in order to fund the purchase. At the end of December, these loans amounted to
approximately 7,83 billion euro (3,67 billion euro in December 2009).

In this respect, exposures are present in the Group which relate solely to the special purpose
entities formed for the securitisations mentioned and they all fall within the consolidation
scope.

As at 31st December 2010, ordinary credit lines existed granted by the Parent to the special
purpose entity Orio Finance Nr.3 Plc for a total of five million euro, never drawn on (five
million euro as at 31st December 2009). Ordinary credit lines also existed granted by B@nca
24-7 to the entity 24-7 Finance for a total of 37,3 million euro, entirely drawn on (64,4 million
euro, entirely drawn on, at the end of 2009).

All the securitisations are hedged by swap contracts where the main objective is to stabilise
the flow of interest generated by the securitised portfolio and to protect the special purpose
entity from interest rate risk. These derivatives contracts were taken out between the entities
and the respective hedging counterparties which, in order to be able to “close” the risk with
originator, took out contracts – identical in form but opposite in the effects – with UBI Banca.
The Parent, then in turn, renegotiated further mirror swaps with the respective originators12.

The exposures relating to the derivatives mentioned (of the Parent, Centrobanca and UBI
Leasing towards the special purpose entities created for the securitisation of their assets) had
a total mark-to-market value of 35,1 million euro (65,6 million euro as at 31st December
2009).
No exposures exist to special purpose entities or other conduit operations with underlying
securities or investments linked to United States subprime and Alt-A loans.
The total assets of SPEs relating to securitisations and to covered bonds amounted to
approximately 21,9 billion euro (13,5 billion euro in December 2009).
12   The following constituted exceptions to that practice: the UBI Lease Finance 5 and UBI Finance 2 transactions, where the special
     purpose entity entered into swap contracts directly with UBI Banca (which then renegotiated mirror swaps with the originators UBI
     Leasing and UBI Banco Brescia) and the Sintonia Finance securitisation which Centrobanca Spa closed directly, without going
     through the Parent, hedging the risk by means of a swap contract.


                                                                 131
Details by asset class are given in the table below:

SPE UNDERLYING ASSETS

                                                        Classification of underlying assets of the securitisation                 31.12.2010                             31.12.2009
   Figures in millio ns o f euro
                                                                                                              Measurement   Gross of             Net of            Gross of             Net of
             Entity                Total assets           Class of underlying asset           Accounting        criteria  impairment          impairment         impairment          impairment
                                                                                             classification     adopted      losses             losses              losses             losses



    Albenza 3 Srl                           37,4   Mortgages                                     L&R              CA             36,3               36,3                53,3                53,2
  Sintonia Finance                          29,8   Mortgages                                     L&R              CA             25,5               23,4                33,4                31,4
    24-7 Finance                         5.492,9   Mortgages                                     L&R              CA          1.903,9   (*)      1.894,5   (*)       2.166,4   (*)       2.154,8   (*)
    24-7 Finance                               -   Salary backed loans                           L&R              CA            414,1   (*)        413,7   (*)         551,7   (*)         551,5   (*)
    24-7 Finance                               -   Consumer loans                                L&R              CA          1.809,6   (*)      1.761,8   (*)       1.665,2   (*)       1.629,7   (*)
  Lease Finance 3                           61,2   Leasing                                       L&R              CA                -                  -                56,0                56,0
  Lease Finance 4                          335,4   Leasing                                       L&R              CA            232,1              226,7               332,9               332,6
 UBI Lease Finance 5                     4.154,5   Leasing                                       L&R              CA          2.449,4   (*)      2.445,8   (*)       2.917,7   (*)       2.906,5   (*)
   Orio Finance 3                           37,4   RMBS Notes (ALBENZA 3 Srl)                    L&R              CA             37,4               37,4                54,3                54,3
    UBI Finance                          7.746,2   Mortgages                                     L&R              CA          7.700,0            7.687,2             3.613,7             3.606,5
   UBI Finance 2                         1.306,4   Loans to SMEs and small businesses            L&R              CA          1.241,8   (*)      1.236,9   (*)       1.632,7   (*)       1.627,9   (*)
   UBI Finance 3                         2.702,5   Mortgages                                     L&R              CA          2.707,7   (*)      2.699,5   (*)             -                   -




                                                   Total impaired assets, mortgages and loans                                  372,2               242,4               133,0               82,7
                                                   Total impaired assets, leasing                                              157,3               153,9               248,8              242,2

           TOTAL                        21.903,7                                                                             19.087,3           18.859,5            13.459,1           13.329,3


 (*) assets transferred not derecognised on the books of the originators




The distribution by geographical location and credit rating of the underlying assets relating to
the securitisations by the special purpose entities Lombarda Lease Finance 4 and UBI Lease
Finance 5 is given below.

                        Distribution of the underlying assets of the UBI Leasing securitisations

                          DISTRIBUTION BY GEOGRAPHICAL AREA                                                              DISTRIBUTION OF ASSETS BY CREDIT RATING

                                                                                                                     A       BBB              unrated
                                                                                                                    0%       1%                14%
                 1%
                 1%
                                                   16%
                 4%
                 2%
                                   8%                                                  53%

                                   5%
                                              10%
                                                                                                                                                                 AAA
                                                                                                                                                                 85%




                                                                                                                                        AAA         A        BBB        unrated
                  Lombardy                            Veneto                          Piedmont
                  Latium                              Trentino Alto Adige             Emilia Rom
                  Liguria                             Friuli Venezia Giulia           Other



Exposure in ABS, CDO, CMBS and other structured credit products

As at 31st December 2010, the UBI Banca Group held direct investments in ABS instruments
amounting to 92,2 million euro (210,4 million euro in December 2009), net of repurchases of
tranches of its own securitisations, composed as follows:
- ABS instruments totalling 0,5 million euro (recognised within financial assets held for
   trading), belonging to the subsidiary UBI Banca International Sa, with underlying assets
   mainly of European origin (2,2 million euro in December 2009);




                                                                                                132
-     other structured credit products totalling 2,6 million euro (classified within financial assets
      held for trading in the UBI Banca International Sa portfolio) with an investment grade credit
      rating (2,4 million euro at the end of 2009);
-     ABS instruments totalling 89,1 million euro (recognised within available-for-sale financial
      assets) relating to senior tranches of INPS (national insurance institute) securitisations
      (128,8 million euro at the end of 2009);

Group exposure to ABS instruments reduced following the sale of RMBS instruments for a
nominal amount of 49,7 million euro, the redemption of ABS instruments relating to senior
tranches of INPS securitisations for a nominal amount of 40 million euro and the sale of ABS
instruments – with performing loans originated by banks as the underlying assets – for a
nominal amount of five million euro. All the transactions mentioned took place in the second
half of the year.
The total amount of the direct investments in structured credit products (net of impairment
losses) listed above accounted for 0,07% of consolidated Group assets.
The ABS instruments classified within financial assets held for trading relate to trading
activity that is subject to risk limits which are monitored daily.
ABS securities recognised within available-for-sale financial assets are eligible for refinancing
with the European Central Bank.
No direct investments exist in securities backed by commercial mortgages (CMBS).

The table summarises Group exposures in ABS instruments: none of the positions listed
contained underlying assets linked to subprime or Alt-A loans.


DIRECT EXPOSURE IN ABS

                                                 Classifications                                      31.12.2010                            31.12.2009
Figures in millio ns o f euro
                                                                                                                     Hedged by
    Counterparty                                                       Accounting         Gross of      Net of      techniques       Gross of       Net of
    relationship                  Type of exposure   Rating Seniority classification    impairment   impairment      to reduce     impairment    impairment
                                                                                           losses      losses      counterparty/      losses       losses
                                                                                                                     credit risk

        investor                ABS                                        HFT                 0,5          0,5         no                2,2              2,2
        investor                ABS                    AAA   Senior        AFS                88,7         89,1         no              128,2            128,8
        investor                ABS                                        L&R                  -            -           -                5,0              5,0
        investor                RMBS                                       AFS                  -            -           -               34,3             36,4
        investor                CDO                                        HFT                  -            -           -               35,5             35,6
        investor                Other structured products                  HFT                 2,6          2,6         no                2,4              2,4

        TOTAL                                                                                 91,8         92,2                         207,6            210,4


Own securitisations, eliminated when consolidating the accounts, totalled 11,1 billion euro
(12,1 billion euro at the end of 2009) and related mainly to ABS instruments (including 9,2
billion euro of senior securities) used as collateral for advances from the ECB.

In addition to the direct exposures, hedge funds or funds of hedge funds were identified among
the assets present in Group portfolios with exposures to structured credit products of the CDO
and CMBS type. Investment in these funds as at 31st December 2010 amounted to
approximately 135 million euro (net of impairment losses/reversals) and presented low
percentages of exposure (no hedge funds out of a total of 11 had a percentage of exposure
lower than 2%). Total indirect exposure to CDOs and CMBSs amounted to approximately 0,1
million euro, (0,5 million euro in December 2009).

Net gains/losses attributable to structured credit products classified as held for trading are
recognised within item 80 of the income statement “net trading income (loss)” and amounted
to -3,1 million compared to +1,1 million euro in 2009.
As concerns the fair value impact on structured products classified within available-for-sale
financial assets, the reserve in equity was credited – net of tax – with approximately +0,2
million euro (+0,1 million euro at the end of 2009).



                                                                                       133
Other subprime and Alt-A exposures
Again at the end of 2010, indirect exposures to subprime and Alt-A mortgages existed that
were contained in hedge funds or funds of hedge funds held by the Parent. The percentages of
exposure to subprime and Alt-A mortgages were again low (no fund had a percentage exposure
of greater than 2%), with total exposure to subprime and Alt-A loans of approximately 0,3
million euro (one million euro as at 31st December 2009).


Exposures to monoline insurers
Indirect exposures to monoline insurance companies exist in hedge funds or funds of hedge
funds held by UBI Banca. The percentages of exposure remained very modest with an overall
amount of less than 0,1 million euro, unchanged compared to December 2009.
As on the other hand concerns insurance policies to protect residential mortgage loans – for
the part exceeding 80% of the mortgage – B@nca 24-7 eliminated its exposure to a monoline
insurance company amounting to 71,7 million euro at the end of 2009, having ceased
business relations with the company.


Leveraged Finance
The term leveraged finance is used in the UBI Banca Group to refer to finance provided for a
company or an initiative which has debt that is considered higher than normal on the market
and is therefore considered a higher risk. Usually this finance is used for specific acquisition
purposes (e.g. the acquisition of a company by other companies – either directly or through
vehicles/funds – owned by internal [buy-in] or external [buy-out] management teams). They
are characterised by “non investment grade” credit ratings (less than BBB-) and/or by
remuneration that is higher than normal market levels.

Leveraged finance business is performed by Centrobanca and is regulated by the Group Credit
Risk Policy designed to combine the achievement of budget targets in terms of business
volumes and profits with appropriate management of the attached risks.

Briefly, operations are based on a maximum investment ceiling, reviewed annually and
allocated on the basis of rating classes for operations according to predefined maximum
percentages. The system of limits is calculated to seek appropriate diversification both in
terms of sector and the concentration of risk on single company or Group counterparties.

The table below summarises on- and off-balance sheet exposure for leveraged finance by
Centrobanca. That activity accounts for 12,2% of total lending and guarantees granted by
Centrobanca (17% as at 31st December 2009). The amounts shown relate to 158 positions for
an average unit exposure of 5,6 million euro. There were around five positions of greater than
20 million euro (all relating to on-balance sheet loans) corresponding to approximately 18% of
the total.


                  Centrobanca leveraged finance business as at 31st December 2010

                                                On-bal ance sheet exposure                 Guarantees
             figure s in m illio ns o f e uro   gross exposure to customers        gross exposure to customers
                                                   us e d         im pa irm e nt      us e d         im pa irm e nt
             31 December 2010                     853,0              -7,7            51,9               -6,0
             31 December 2009                    1.194,3             -9,2            90,7               -6,5



The graphs below show the distribution of leveraged exposures by geographical area and by
sector.



                                                               134
                          Distribution of Centrobanca leveraged exposures
                                   (the figures as at 31st December 2009 are given in brackets)

          EXPOSURE BY GEOGRAPHICAL AREA                                    EXPOSURE BY SECTOR


                  USA and Mexico
                    4% (10%)

                                       Europe                                                     Commerce and 
                                      21% (31%)                                                      services
                                                                                                    39% (29%)

                                                                          Manufacturing
                Italy                                                      61% (71%)
              75% (59%)




Residual exposures also exist within the UBI Banca Group – approximately 265 million euro
(384 million euro as at 31st December 2009) – relating to leveraged finance transactions
performed before this type of business was centralised at Centrobanca. They were performed
by the network banks relating to a total of 34 positions with average unit exposure of 7,8
million euro.
The principal amounts related to Banco di Brescia (126,5 million euro), Banca Popolare di
Bergamo (61,2 million euro), Banca Popolare Commercio e Industria (35,6 million euro) and
Banca Regionale Europea (20,2 million euro).



Financial derivative instruments for trading with customers
In quantitative terms, the analysis performed as at 31st December 2010 for internal monitoring
purposes show that the risks assumed by customers are generally low and they outlined a
conservative profile for UBI Group business in OTC derivatives with customers.

An update of the qualitative analysis performed at the end of the year found the following:
- a slight reduction in the total negative mark-to-market for customers, which stood at
   3,35% of the notional amount of the contracts compared to 3,57% as at 31st December
   2009;
- the notional amount for existing contracts, totalling 7,037 billion euro, consisted of
   interest rate derivatives amounting to 6,490 billion euro and currency derivatives
   amounting 0,542 billion euro. The notional amount for contracts on commodities was
   marginal, amounting to six million euro;
- transactions in hedging derivatives accounted for approximately 95% of the notional
   amount traded for interest rate derivatives and 97% of the notional amount for currency
   derivatives;
- the total net mark-to-market (interest rate, currency and commodities derivatives)
   amounted to approximately -216 million euro. Those contracts with a negative mark-to-
   market for customers were valued at -236 million euro.

The Group has set a “Policy for the sale of OTC derivative instruments to customers” and has
issued “Regulations for the sale of OTC derivative instruments to customers”, which
implement the policy in operational terms and regulate the following:
• customer segmentation and classes of customers associated with specific classes of
   products, stating that the purpose of the derivatives transactions must be hedging and that
   transactions containing speculative elements must be of a residual nature;
• rules for assessing the appropriateness of transactions, defined on the basis of the products
   sold to each class of customer;


                                                              135
• principles of integrity and transparency on which the range of OTC derivatives offered to
  customers must be based, in compliance with the guidelines laid down by the Italian
  Banking Association (and approved by the CONSOB) for illiquid financial products;
• rules and processes for assessing credit exposure, which grant credit lines with maximum
  limits for trading in interest rate derivatives and credit lines on each single transaction for
  currency derivatives and commodities derivatives, while counterparty risk is assessed on
  the basis of Bank of Italy circular No. 263/2006;
• rules and processes for managing restructuring operations, while underlining their
  exceptional nature;
• the catalogue of products offered to customers and the relative credit equivalents.




                                              136
OTC INTEREST RATE DERIVATIVES: DETAILS OF INSTRUMENT TYPES AND CLASSES OF CUSTOMER
Data as at 31st December 2010

 Policy product                                                                                                                       Number of                                                              of which negative
                                      Type of instrument                         Policy customer class                                                         Notional                      MtM
      class                                                                                                                          transactions                                                                   MtM

          1
                       Purchase of caps                                          3: Professional and qualified                                    78           232.414.394,86                861.540,59                          -
                                                                                 2: Non private individual retail                              1.211           353.369.786,87              4.204.297,86                          -
                                                                                 1: Private individual retail                                  1.162           133.225.297,52              2.279.578,73                          -
                       Purchase of caps Total                                                                                                  2.451           719.009.479,25              7.345.417,18                          -

                       Capped swaps                                              3: Professional and qualified                                    88          427.742.575,68               -6.215.069,56            -6.439.426,61
                                                                                 2: Non private individual retail                              1.420          892.377.512,68              -16.646.702,50          -16.841.466,76
                                                                                 1: Private individual retail                                  6.175          663.064.276,37               -5.534.199,73            -5.566.073,33
                       Capped swaps Total                                                                                                      7.683        1.983.184.364,73             -28.395.971,79           -28.846.966,70

                       IRS Interest rate swaps                                   3: Professional and qualified                                   254        1.463.859.761,21             -53.170.837,75           -55.913.314,67
                                                                                 2: Non private individual retail                                792        1.314.505.785,40             -60.793.230,89           -62.250.539,20
                                                                                 1: Private individual retail                                    544           75.831.702,38              -3.525.681,75            -3.558.649,03
                       IRS Interest rate swaps Total                                                                                           1.590        2.854.197.248,99           -117.489.750,39          -121.722.502,90

                       IRS Step up                                               3: Professional and qualified                                    27            94.207.039,83              -5.179.486,33            -5.559.099,43
                                                                                 2: Non private individual retail                                 79           161.200.907,63             -20.438.871,13          -20.481.729,94
                       IRS Step up Total                                                                                                         106           255.407.947,46            -25.618.357,46           -26.040.829,37


Total Class 1: hedging derivatives                                                                                                            11.830         5.811.799.040,43           -164.158.662,46          -176.610.298,97

Class 1: % of Group total                                                                                                                    97,84%                       89,55%                    77,07%               78,33%

          2
                       Purchase of caps (including KI/KO)                        3: Professional and qualified                                      2           25.873.627,97                -274.154,87             -274.154,87
                                                                                 2: Non private individual retail                                  19           31.243.609,17                -448.353,36             -448.353,36
                       Purchase of caps (including KI/KO) Total                                                                                    21           57.117.237,14                -722.508,23             -722.508,23

                       Purchase of collars (including KI/KO)                     3: Professional and qualified                                      4           22.838.583,67                -320.288,59              -320.288,59
                                                                                 2: Non private individual retail                                  12           24.227.785,14              -1.658.587,69            -1.658.587,69
                       Purchase of collars (incl. KI/KO) Total                                                                                     16           47.066.368,81             -1.978.876,28            -1.978.876,28

                       IRS Cap spreads                                           2: Non private individual retail                                   1               311.409,00                   -1.994,36              -1.994,36
                       IRS Cap spreads Total                                                                                                        1               311.409,00                  -1.994,36              -1.994,36

                       IRS Convertible                                           3: Professional and qualified                                     11          161.849.635,48              -9.445.328,66           -9.445.328,66
                                                                                 2: Non private individual retail                                  50           81.576.305,63              -3.549.214,53           -3.549.214,53
                       IRS Convertible Total                                                                                                       61          243.425.941,11            -12.994.543,19          -12.994.543,19


Total Class 2: hedging derivatives with possible exposure                                                                                          99          347.920.956,06            -15.697.922,06           -15.697.922,06
                 to contained financial risks

Class 2: % of Group total                                                                                                                      0,82%                       5,36%                    7,37%                 6,96%

     3a
                       IRS Range                                                 3: Professional and qualified                                    18            78.199.356,64              -7.048.574,24            -7.048.574,24
                                                                                 2: Non private individual retail                                110           185.067.761,74             -18.547.830,54          -18.547.830,54
                                                                                 1: Private individual retail                                      1               500.000,00                 -53.565,52               -53.565,52
                       IRS Range Total                                                                                                           129           263.767.118,38            -25.649.970,30           -25.649.970,30

                       Memory floors 1                                           3: Professional and qualified                                      1             4.000.000,00             -4.102.134,49            -4.102.134,49
                       Memory floors Total                                                                                                          1             4.000.000,00            -4.102.134,49            -4.102.134,49

       Total Class 3a: partial hedging derivatives with pre-established maximum loss                                                              130          267.767.118,38            -29.752.104,79           -29.752.104,79

     3b
                       Gap floater swaps                                         3: Professional and qualified                                      1               710.740,00                  6.226,02                        -
                                                                                 2: Non private individual retail                                   3             6.628.182,00               -118.897,05             -128.779,71
                       Gap floater swaps Total                                                                                                      4             7.338.922,00               -112.671,03             -128.779,71

                       IRS corridor accruals                                     3: Professional and qualified                                      6           15.500.000,00                -193.867,36             -193.867,36
                                                                                 2: Non private individual retail                                   6            8.400.000,00                 -99.201,43               -99.201,43
                       IRS corridor accruals Total                                                                                                 12           23.900.000,00                -293.068,79             -293.068,79

                       IRS Range stability                                       3: Professional and qualified                                      2            7.000.000,00                -783.782,18              -783.782,18
                                                                                 2: Non private individual retail                                  14           24.204.867,00              -2.189.259,27            -2.189.259,27
                       IRS Range stability Total                                                                                                   16           31.204.867,00             -2.973.041,45            -2.973.041,45

       Total Class 3b: speculative derivatives with unquantifiable maximum loss                                                                    32            62.443.789,00             -3.378.781,27           -3.394.889,95


Total Class 3: derivatives not for hedging                                                                                                        162           330.210.907,38           -33.130.886,06           -33.146.994,74
Class 3: % of Group total                                                                                                                      1,34%                       5,09%                    15,56%               14,70%


Total UBI Group                                                                                                                               12.091         6.489.930.903,87           -212.987.470,58          -225.455.215,77

¹ Prior transaction not attributable to product policy - maturity 28/02/2012, relating to a customer previously classified as non private individual retail on the basis of incorrect indications




                                                                                                          137
OTC CURRENCY DERIVATIVES : DETAILS OF INSTRUMENT TYPES AND CLASSES OF CUSTOMER

Data as at 31st December 2010
   Policy
                                                                                                          Number of
  product                     Type of instrument             Policy customer class                                            Notional                MtM              of which negative MtM
                                                                                                         transactions
   class
      2
               Collars                                       3: Professional and qualified                         18           8.810.884,97           37.624,65                   -57.038,55
                                                             2: Non private individual retail                       1             262.206,15            -6.437,04                    -6.437,04
               Collars Total                                                                                       19           9.073.091,12           31.187,61                   -63.475,59

               Knock in collars                              3: Professional and qualified                         10           4.530.520,16          -143.151,32                -143.151,32
               Knock in collars Total                                                                              10           4.530.520,16          -143.151,32                -143.151,32

               New collars                                   3: Professional and qualified                         10           2.584.195,82           -45.225,16                  -59.166,63
                                                             2: Non private individual retail                       3           3.931.514,25           -15.717,64                  -15.717,64
               New collars Total                                                                                   13           6.515.710,07           -60.942,80                  -74.884,27

               Forward synthetic                             3: Professional and qualified                        251         200.211.403,59       -2.991.691,48                 -4.646.303,70
                                                             2: Non private individual retail                      43          23.404.162,59           46.327,55                   -347.612,44
               Forward synthetic Total                                                                            294         223.615.566,18      -2.945.363,93                 -4.993.916,14

               Knock in forward                              3: Professional and qualified                         75          59.562.699,99           -28.607,53                -882.712,57
                                                             2: Non private individual retail                      26          11.180.671,72            81.590,59                  -84.115,99
               Knock in forward Total                                                                             101          70.743.371,71            52.983,06                -966.828,56

               Bonus forward                                 3: Professional and qualified                          6           2.516.510,01           -90.076,75                  -90.076,75
               Bonus forward Total                                                                                  6           2.516.510,01           -90.076,75                  -90.076,75

               Options purchased by customer                 3: Professional and qualified                          6           4.223.265,52          232.753,49                            -
                                                             2: Non private individual retail                       7           1.138.092,23           34.500,72                            -
               Options purchased by customer Total                                                                 13           5.361.357,75          267.254,21                            -

               Plafond                                       3: Professional and qualified                        155         112.437.713,10           499.669,29               -1.215.453,65
                                                             2: Non private individual retail                     267          89.457.734,60          -727.648,27               -2.003.335,71
               Plafond Total                                                                                      422         201.895.447,70          -227.978,98               -3.218.789,36


Total Class 2: hedging derivatives with possible exposure                                                         878         524.251.574,70      -3.116.088,90                 -9.551.121,99
             to contained financial risks
Class 2: % of Group total                                                                                      96,27%                  96,77%                      -                  96,41%

      3
               Knock out knock in forward                    3: Professional and qualified                         18           6.550.526,67          -125.140,27                -127.734,09
                                                             2: Non private individual retail                       2           2.967.690,47           117.331,05                          -
               Knock out knock in forwards Total                                                                   20           9.518.217,14            -7.809,22                -127.734,09

               Options sold by customer                      3: Professional and qualified                         14           7.961.037,20           -227.767,65                -227.767,65
               Options sold by customer Total                                                                      14           7.961.037,20          -227.767,65                -227.767,65


Total Class 3: derivatives not for hedging                                                                          34         17.479.254,34          -235.576,87                 -355.501,74

Class 3: % of Group total                                                                                       3,73%                  3,23%                       -                   3,59%



Total UBI Group                                                                                                  912 541.730.829,04             -3.351.665,77                -9.906.623,73




OTC COMMODITIES DERIVATIVES: DETAILS OF INSTRUMENT TYPES AND CLASSES OF CUSTOMER
Data as at 31st December 2010
                                                                                           Number of
   Policy
                         Type of instrument            Policy customer class               transaction          Notional                        MTM                    of which negative MtM
product class
                                                                                                s
       2
                 Commodity swaps               3: Professional and qualified                       15                   5.800.290,00                  -13.433,76                   -334.312,76
                 Commodity swaps Total                                                             15                   5.800.290,00                  -13.433,76                   -334.312,76


Total Class 2: hedging derivatives with possible exposure                                          15                   5.800.290,00                  -13.433,76                   -334.312,76
                to contained financial risks

Total UBI Group                                                                                   15              5.800.290,00                    -13.433,76                    -334.312,76


Total UBI Group                                                                              13.018      7.037.462.022,91              -216.352.570,11                  -235.696.152,26




                                                                                        138
OTC DERIVATIVES: FIRST FIVE COUNTERPARTIES FOR NETWORK BANKS (figures in euro)

Data as at 31st December 2010
                         Bank                Classification Policy          MtM             of which negative MtM
Centrobanca                            3:   Professional and qualified        -11.380.926                -11.561.962
                                       3:   Professional and qualified         -4.102.134                  -4.102.134
                                       2:   Non private individual retail      -1.985.193                  -1.985.193
                                       3:   Professional and qualified         -1.772.052                  -2.043.971
                                       3:   Professional and qualified           -936.137                    -936.137
Banco di Brescia                       3:   Professional and qualified         -7.963.713                  -7.963.713
                                       3:   Professional and qualified         -2.537.435                  -2.537.435
                                       3:   Professional and qualified         -2.065.976                  -2.065.976
                                       2:   Non private individual retail      -2.039.807                  -2.039.807
                                       3:   Professional and qualified         -1.819.782                  -1.819.782
Banca Popolare Commercio & Industria   2:   Non private individual retail      -4.375.640                  -4.375.640
                                       2:   Non private individual retail      -1.441.024                  -1.441.024
                                       2:   Non private individual retail      -1.435.703                  -1.435.703
                                       3:   Professional and qualified         -1.431.887                  -1.438.113
                                       3:   Professional and qualified         -1.258.304                  -1.258.304
Banca Popolare di Ancona               2:   Non private individual retail      -4.174.041                  -4.174.041
                                       3:   Professional and qualified         -1.200.517                  -1.200.517
                                       2:   Non private individual retail      -1.000.354                  -1.000.354
                                       2:   Non private individual retail        -999.363                    -999.363
                                       3:   Professional and qualified           -706.745                    -706.745
Banca Regionale Europea                3:   Professional and qualified         -2.702.881                  -2.702.881
                                       3:   Professional and qualified           -837.632                    -837.632
                                       3:   Professional and qualified           -703.389                    -703.389
                                       3:   Professional and qualified           -611.141                    -865.896
                                       3:   Professional and qualified           -479.706                    -479.706
Banca Popolare di Bergamo              2:   Non private individual retail      -1.967.672                  -1.967.672
                                       3:   Professional and qualified         -1.761.019                  -1.761.019
                                       3:   Professional and qualified         -1.749.174                  -1.749.174
                                       3:   Professional and qualified         -1.403.230                  -1.403.230
                                       2:   Non private individual retail      -1.385.904                  -1.385.904
Banco di San Giorgio                   2:   Non private individual retail        -952.566                    -952.566
                                       2:   Non private individual retail        -925.805                    -925.805
                                       2:   Non private individual retail        -698.810                    -698.810
                                       2:   Non private individual retail        -674.699                    -674.699
                                       2:   Non private individual retail        -587.316                    -587.316
Banca di Valle Camonica                3:   Professional and qualified           -619.239                    -619.239
                                       3:   Professional and qualified           -587.006                    -587.006
                                       2:   Non private individual retail        -496.337                    -496.337
                                       2:   Non private individual retail        -263.453                    -263.453
                                       3:   Professional and qualified           -181.713                    -181.713
Banca Carime                           3:   Professional and qualified           -369.184                    -444.048
                                       2:   Non private individual retail        -327.746                    -327.746
                                       2:   Non private individual retail        -166.053                    -166.053
                                       3:   Professional and qualified           -165.188                    -165.188
                                       3:   Professional and qualified           -151.601                    -151.601
UBI Private Investment                 1:   Private individual retail              -1.016                      -1.016
                                       1:   Private individual retail                -465                        -465
                                       1:   Private individual retail                -418                        -418
                                       1:   Private individual retail                -272                        -272
                                       1:   Private individual retail                -196                        -196
                                       1:   Private individual retail                -196                        -196




                                                         139
Equity and capital adequacy
Reconciliation between equity and profit of the Parent with consolidated equity as at 31st
December 2010 and profit for the period then ended
                                                                                                                                    of which:
Figures in thousands of euro                                                                                 Equity
                                                                                                                                Profit for the year

Equity and profit for the year in the financial statements of the Parent                                      10.328.266                     283.720
Effect of consolidation of subsidiaries including joint ventures                                               1.517.263                   471.186
Effect of measuring other significant equity investments using the equity method                                  28.243                    17.594
Dividends received during the year                                                                                     -                  -286.048
Other consolidation adjustments (including the effects of the PPA)                                              -894.753                  -314.331

Equity and profit for the year in the consolidated financial statements                                       10.979.019                     172.121



The consolidated equity of the UBI Banca Group as at 31st December 2010 inclusive of profit
for the year, amounted to 10.979 million euro compared to 11.411,2 million euro at the end of
2009.

As can be seen from the statement of changes in equity, contained among the mandatory
consolidated financial statements, the total decrease of 432,2 million euro that occurred over
twelve months is attributable to:
- the allocation of 200,2 million euro of 2009 consolidated profit to dividends and other
   uses1;
- the negative impact on consolidated comprehensive income generated by the reduction in
   the fair value reserves amounting to 488,8 million euro. This consisted of -480,2 million
   euro relating to available-for-sale financial assets, -12,1 million euro to “Actuarial
   gains/losses on defined benefit plans”, +2,2 million euro to “Special revaluation laws” and
   +1,3 million to cash flow
   hedges;                             Fair value reserves attributable to the Group: composition
- an increase in other reserves
                                       Figures in thousands of euro             31.12.2010   31.12.2009
   amounting to 84,7 million euro,
   the aggregate result of impacts Available-for-sale financial assets              -311.493     168.729
   on equity resulting from the Cash flow hedges                                        -619       -1.948
   “branch switching” operation Foreign currency differences                            -243         -243
   between banks in the Group Actuarial gains/losses                                 -14.518       -2.399
   and the subsequent restoration Special revaluation laws                            73.146      70.904
   of   the    original   ownership
                                       TOTAL                                        -253.727     235.043
   interests held by UBI Banca in
   the network banks, together with the planned reorganisation of the shareholdings of the
   two foundations;
- posting of profit for the year of 172,1 million euro.

       Fair value reserves of available-for-sale financial assets attributable to the Group: composition


                                                                       31.12.2010                               31.12.2009
                                                          Positive         Negative               Positive        Negative
       Figures in thousands of euro                                                    Total                                         Total
                                                          reserve          reserve                reserve         reserve

       1. Debt instruments                                   66.715         -431.818   -365.103     72.813            -75.261          -2.448
       2. Equity instruments                                 58.225           -3.579    54.646     173.770              -390         173.380
       3. Units in O.I.C.R.
          (co llective investment instruments)                9.124          -10.160     -1.036       5.907            -8.110          -2.203
       4. Financing                                               -                -          -           -                 -               -

       TOTAL                                               134.064          -445.557   -311.493    252.490            -83.761        168.729




1          The profit was then fully drawn on with an allocation to reserves of 69,9 million euro.


                                                                           140
Fair value reserves of available-for-sale financial assets attributable to the Group: annual changes


                                                                                                      OICR units
                                                                            Debt          Equity        (co llective
Figures in thousands of euro                                                                                            Financing       Total
                                                                        instruments    instruments     investment
                                                                                                      instruments)


1. Opening balances as at 1st January 2010                                    -2.448       173.380            -2.203                -    168.729

2. Positive changes                                                          50.257          6.796            5.725                 -     62.778
   2.1 Increases in fair value                                               11.433          4.990            3.970                 -     20.393
   2.2 Transfer to income statement of negative reserves                      2.877          1.498            1.373                 -      5.748
    - for impairment                                                            349           1.245               949               -       2.543
    - for disposal                                                             2.528           253                424               -       3.205
  2.3 Other changes                                                          35.947            308               382                -     36.637

3. Negative changes                                                        -412.912       -125.530            -4.558                -   -543.000
   3.1 Decrease in fair value                                              -381.996         -7.750            -1.468                -   -391.214
   3.2 Impairment losses                                                          -              -                 -                -          -
   3.3 Transfer to income statement of positive reserves: for disposa       -13.990       -116.710              -945                -   -131.645
  3.4 Other changes                                                          -16.926         -1.070           -2.145                -    -20.141

4. Closing balances as at 31st December 2010                               -365.103         54.646            -1.036                -   -311.493




As can be seen from the table, the decrease of 480,2 million euro already mentioned in the
“fair value reserve for available-for-sale financial assets” primarily reflects the significant
decreases in fair value that occurred in the securities held in portfolio (net of tax and minority
interests). In detail:
   the negative balance on the fair value reserve for debt instruments increased by 362,7
   million euro, with reductions in fair value amounting to 382 million euro, including 314,6
   million euro relating to the UBI Banca portfolio and to government securities in particular
   (over 90%);
   the reserve relating to equity instruments decreased by 118,7 million euro to 54,6 million
   euro, due above all to the transfer to the income statement of the positive reserve
   recognised in December, following the recoveries in fair value at the end of the year. The fall
   in prices that occurred in 2010 made it necessary to recognise impairment losses on some
   equity instruments (Intesa Sanpaolo and A2A) with the elimination of the relative reserve (a
   total of -116,7 million euro net of tax, relating mainly to Intesa Sanpaolo).




                                                                          141
Capital adequacy

Capital ratios           (Standard Basel 2 standardised approach)


Figures in thousands of euro                                                             31.12.2010       31.12.2009


    Tier 1 capital before filters                                                          6.766.798        6.563.377
    Preference shares and savings/privileged shares attributable to minority interests       489.191          453.460
    Tier 1 capital filters                                                                   -73.593          -58.244
    Tier 1 capital after filters                                                           7.182.396        6.958.593
    Deductions from tier 1 capital                                                          -134.508         -141.717
Tier 1 after filters and specific deductions (Tier 1)                                      7.047.888        6.816.876
    Supplementary capital after filters                                                    3.770.505        3.683.037
    Deductions from supplementary capital                                                   -134.508         -141.717
Supplementary capital after filters and specific deductions (Tier 2)                       3.635.997        3.541.320
Deductions from tier 1+supplementary capital                                                -147.685         -155.641
Total supervisory capital                                                                 10.536.200       10.202.555
    Credit and counterparty risk                                                           6.952.925        6.190.116
    Market risk                                                                              106.636          143.085
    Operational risk                                                                         489.312          520.959
    Other prudential requirements                                                                  -                -
Total prudential requirements                                                              7.548.873        6.854.160
    Subordinated liabilities Tier 3
    Nominal amount                                                                                    -                -
    Amount eligible                                                                                   -                -

Risk weighted assets                                                                      94.360.909       85.677.000
Core tier 1 ratio after specific deductions from tier 1 capital
(tier 1 capital net of preference shares/risk weighted assets)                                6,95%            7,43%
Tier 1 capital ratio
(tier 1 capital/risk weighted assets)                                                         7,47%            7,96%
Total capital ratio
[(Supervisory capital+tier 3 eligible)/risk weighted assets]                                 11,17%           11,91%




As at 31st December 2010, the supervisory capital of the UBI Banca Group exceeded 10,5
billion euro, an increase compared to approximately 10,2 billion euro at the end of 2009.

The change that occurred over the twelve month period is the aggregate result of a
simultaneous increase in the tier one capital2 and the tier two capital3 and a reduction in the
deductions applied to both the tier one and the supplementary capital, the effects of which
more than offset the increase in the negative filters.

Use was made by the UBI Banca Group in the calculation of supervisory capital as at 31st December 2010 –
in compliance with provisions issued by the Bank of Italy in May 2010 – of the possibility of completely
neutralising the impacts on supervisory capital of gains and losses recognised in the fair value reserves
relating to government securities issued by EU member states held in the “available-for-sale financial
assets” portfolio. This approach is in addition to that already contained in regulations, which requires
losses to be deducted entirely from supervisory capital and gains to be only partially included. The option
in question has been applied across the board by all members of the banking group from 30th June 2010.

Compliance with capital adequacy requirements at the end of 2010 resulted in a capital
requirement of over 7,5 billion euro, 0,7 billion euro greater than in the previous year as a
result of increases in the absorption of capital for credit and counterparty risk4, against a

2   The growth in the tier one capital was mainly attributable to the increase in minority interests, following the operations to optimise
    the branch network performed in 2010. As compared to 2009, savings and privileged shares amounting to approximately 36 million
    euro are no longer eligible for inclusion in the core capital, although they are included in the tier one capital.
3   The increase in the tier two capital was generated almost entirely by changes in subordinated liabilities: the issue of subordinated
    liabilities sold to retail customers of the Group (853 million euro nominal) more than compensated for issues
    matured/redeemed/amortised during the year (a total of 738 million euro with account taken of the reduction by a fifth required by
    supervisory regulations in the five years prior to the maturity of the issues).
4   The factors which contributed to that increase are as follows:
    -    the entrance into force of new risk weighting coefficients for the Cerved (former Lince) rating;
    -    the application of supervisory provisions designed to limit the reduced weighting of mortgage security for property companies;


                                                                          142
slight reduction in absorption in relation to market risks, mainly due to the disappearance of
currency risk, and to operational risk, as a consequence of the fall in consolidated gross
income.

The result was a general worsening in all the capital ratios as at 31st December 2010,
calculated including the effects of the proposed dividend.
The core tier one ratio fell to 6,95% and the tier one ratio to 7,47%, while the total capital ratio
settled at 11,17%.
These ratios do not include the additional positive impact of more than 70 basis points
(estimated on current data) that could result from the potential conversion of the convertible
debt issued in July 2009. Further benefits may accrue in future from adopting the advanced
approach for the calculation of capital requirements for credit and operational risks.

                                                               * * *

As already reported, in April and May 2010, UBI Banca participated in the stress tests conducted at
European level by the CEBS (Committee of European Banking Supervisors) and by national supervisory
authorities.
The stress tests involved 91 banking groups in 20 member states including the five major Italian banks and
also the UBI Banca Group.
Generally speaking, the results – published simultaneously at European level on 23rd July 2010 – were
positive, confirming the solidity of the UBI Banca Group. In the adverse scenario hypothesised (which also
included an increase in sovereign risk for EU member countries) the estimated consolidated tier one ratio
stood at 7,1% in 2011 (6,8% also considering the impact of sovereign risk), compared to 8% at the end of
2009.

Stress tests are also scheduled at European level for 2011 – co-ordinated by the new monetary authority
(European Banking Authority, EBA) with the support of national supervisory authorities – in which the five
major Italian banking groups will again be involved.
There will be greater standardisation and severity than before in the criteria applied, hypothesising a
collapse in property prices and an increased cost of funding.




Changes in supervisory regulations


Basel 3
On 16th December 2010, the Basel Committee on Banking Supervision published new rules on the capital
and liquidity of banks which will enter into force on 1st January 2013.
The new regulations seek to strengthen the quality and quantity of the capital of banks, to contain financial
leverage in the banking system, reduce the possible pro-cyclical effects of prudential rules and to tighten
control over liquidity risks.
As compared to the proposal for consultation issued in December 2009, the absorption of capital against
deferred tax assets and major equity investments in banks and financial and insurance companies was
reduced, with partial recognition of the contribution to capital to cover risk at consolidated level of minority
interests held in banks and other companies belonging to the group subject to supervision, equivalent to
banking supervision.

The new rules on capital

The new rules involve a change in the composition of the capital of banks in favour of common shares and
retained earnings (common equity), the adoption of more stringent criteria for the inclusion of other equity
instruments in capital and greater standardisation at international level of the components deducted.
Requirements relating to particularly high risk exposures were also increased (e.g. securitisations and
derivatives transactions).

When fully introduced, banks must possess capital that must not fall below the following levels:
     primary quality capital (common equity): 4,5% of risk weighted assets;
     tier one capital: 6% of risk weighted assets;
     total capital: 8% of risk weighted assets.


  -   the increase in risk assets that occurred with growth in lending.


                                                                 143
Banks must have primary quality capital that exceeds the minimum amount (a buffer to conserve capital)
by an amount equal to 2,5% of risk weighted assets, otherwise they will risk supervisory measures (e.g.
restrictions on the distribution of profits or the payment of bonuses to employees). In periods of excessive
growth in lending to the economy, a further buffer of up to 2,5% may be required of banks.

The new standards will be introduced gradually:
   - from 2013, the new minimum requirements for common equity and tier one capital will be 3,5% and
      4,5% of risk weighted assets respectively and they will be progressively increased until they reach
      the new requirements in 2015. Similarly the new deductions from capital will be fully applied from
      2018;
   - the buffer for the conservation of capital will be introduced from 2016 and the transition to the new
      regime will be completed in 2019;
   - the equity instruments already issued and eligible for inclusion according to the existing rules will
      remain fully eligible until 2013. Subsequently the amount recognised for supervisory purposes will
      be reduced by 10% each year.

New minimum capital requirements

                              Common Equity
                                                     Tier 1    Total Capital
                              (after deductions)

Minimum requirement                 4,5%             6,0%         8,0%
Conservation buffer                 2,5%
Total                             7,0%               8,5%         10,5%
Anti-cyclical buffer             0%-2,5%


Compliance timing (the dates relate to 1st January)

                                                        2013   2014            2015    2016    2017     2018     2019

Minimum common equity                                   3,5%   4,0%            4,5%    4,5%     4,5%    4,5%     4,5%
Conservation buffer                                                                   0,625%   1,25%   1,875%    2,5%
Common Equity + Minimum conservation buffers                                          5,125%   5,75%   6,375%    7,0%
Minimum tier one ratio                                  4,5%   5,5%            6,0%    6,0%     6,0%    6,0%     6,0%
Minimum total capital ratio                             8,0%   8,0%            8,0%    8,0%     8,0%    8,0%     8,0%
M inimum total capital ratio + conservation buffer      8,0%   8,0%            8,0%   8,625%   9,25%   9,875%   10,50%



Leverage ratio

A maximum leverage ratio has been introduced, designed to restrict growth in total exposures without an
adequate capital base and to contain the level of debt by banks in periods of expansion in the business
cycle. Banks will be obliged to hold tier one capital that is equal to at least 3% of non risk weighted assets.
This provision will also be introduced gradually. In the first few years the leverage ratio will represent a
pillar two measure. Any adjustments in the definition and the calibration of the instrument will be
considered before it is applied as a first pillar rule in 2018. Banks must make adequate disclosures to
markets concerning the ratio from 2015.

Liquidity risk standards

Two quantitative rules on liquidity have been introduced. The first, the liquidity coverage ratio, states that
banks must maintain high quality liquid assets sufficient to meet requirements under stress conditions for a
period of 30 days. The second, the net stable funding ratio, is designed to prevent structural imbalances in
the composition of assets and liabilities over a period of one year.
As with the measures on capital, the entrance into force of the liquidity risk requirements will also be
gradual. After an initial observation stage, the short term ratio will enter into force in 2015 and the
structural ratio in 2018.


Implementation of EU directives
On 31st December 2010, new supervisory provisions entered into force which implement provisions
approved by EU institutions in 2010 [directives 2009/27/EC, 2009/83/EC and 2009/111/CE which
amended directives 2006/48 and 2006/49 (the “CRDs” capital requirement directives)] in order to
strengthen some aspects of European prudential regulations, the weakness of which was revealed by the
financial crisis.
They consisted of an initial package of amendments (“CRD II”) which involved the following areas:



                                                               144
     -   the governance and management of liquidity, with the introduction of rules on organisation and
         internal controls, giving clear details of the role of corporate bodies and functions and outlining the
         basic organisation of the process of risk management with the adoption of a funds transfer pricing
         system5 and public disclosure obligations;
     -   supervisory capital: the notion of “capital” was redefined, limited to common shares only. The
         financial characteristics which innovative and non innovative (hybrid) equity instruments must
         possess was specified in terms of permanence, payment flexibility and ability to absorb losses (with
         different limits to eligibility for inclusion according to the quality of the capital) with a thirty year
         transition regime (grandfathering) for existing instruments which do not comply with the new criteria
         for eligibility;
     -   risk concentration, with the simplification, on the one hand, of the system of prudential limits and the
         relative weighting system, the criteria for which have been brought into line with techniques to
         mitigate credit risk and on the other hand with the establishment of oversight organisational units for
         the credit rating of customers to which the Bank has significant exposures (“large exposures”), for
         monitoring the relative exposures and for the detection of connections between customers.

Implemenation of the second package of amendments (“CRD III”) was commenced in 2011:
     -   new provisions for securitisations entered into force, designed to increase the degree of
         standardisation in regulations by means of uniform criteria for the recognition of securitisation
         transactions for supervisory purposes concerning, amongst other things, the grant and management
         of credit relating to securitisations. They make changes to the regulatory treatment of credit lines,
         introducing higher conversion factors and they are therefore more in line with the risk which that
         form of support manifested during the crisis. They also introduce a prohibition on banks investing in
         securitisation issues in which the seller or the originator has not retained a portion of the risk;
     -   as concerns remuneration policies, a Bank of Italy consultation process has commenced on a new
         consolidated law, which will replace the existing legislation. It combines general principles
         concerning remuneration policies for all personnel, to be applied to all banks following proportional
         criteria, with precise rules applicable above all to key personnel within banking organisations.




5   The UBI Banca Group has commenced a project for a new funds transfer pricing (FTP) system designed to ensure the following:
    -   accurate measurement of income from different types of products and services;
    -   the identification and pricing of expense and income items associated with risk positions, with account taken of the competitive
        context and the regulatory constraints;
    -   a single instrument common to the different macro area organisational units of the Parent.
    The FTP applicable to single financial transactions (lending or funding transactions) will be calculated by summing the basic market
    rate for risk free transactions firstly to the additional expense that the UBI Group must incur to acquire funds on the market with
    the same maturity as the transaction and secondly the additional cost for risk and optional factors incorporated in the transaction.
    The scope of application will initially consist of new medium-to-long term disbursements by the distribution network of the network
    banks.


                                                                  145
Research & Development

A summary is given below of the main research projects developed in 2010 by the Innovation
and Architecture Design Department of the Parent. In come cases these consisted of the
continuation of activity already commenced in the previous year and in other cases of new
projects started during the year. These initiatives do not necessarily originate from specific
requirements of the Group but are also based on technological developments which are
studied for possible application to improve the efficiency and effectiveness of corporate
processes including those regarding customer relationships.

As part of the “unified communication” project (integration of telephone and PC-workstations),
already commenced in 2008, in parallel with the completion at the Parent and in the network
banks of the implementation of the VoIP platform1, activities were oriented towards the
implementation of web collaboration2 instruments to share documents and applications.

As concerns video conference systems, a plan to expand use of them within the Group was
completed in 2010 with a total of approximately 300 stations installed, 50 with webcams
integrated in PC-workstations – while improvements in the quality were made at the same time
with the introduction of high definition systems. It has been confirmed that this technology
provides valid support to decision-making and information sharing processes and is also an
important factor in reducing times and costs connected with the movements of personnel.

The initial scope of application of the project “new work stations” is designed to simplify and
increase the efficiency of mortgage processing activities for retail customers. The first stage
has already been completed with the introduction of a paperless document management
platform which became operational in January 2011. A second stage was commenced at the
same time, designed to develop solutions for the integrated management of digital signatures,
legally valid electronic storage and certified email.

The new innovations of mobile web and application stores are clearly underlining the potential
of mobile telephones for provision and use of banking services. An application for the use of
home banking services3 from the most popular mobile terminals was therefore studied and
developed in combination with the Carta Enjoy products. This service, already successfully
operational on iPhone and Android systems, will be extended in 2011 to include BlackBerry
and Nokia devices.

Recent technological developments included a study of the iPad platform to assess its potential
for use in the Group. This led to an initial concrete application as a support to senior
management for the management and sharing of documents in board and committee
meetings. As part of the development of the document functions, it is planned, at a second
stage, to design versions for specific users and perhaps integrate it with corporate document
management systems.

The need to combine Group attention to maximum security in home banking with customer
demands for operational simplicity have led to the first testing of a new tool for the certification
and validation of payment transactions, alongside the current system based on the use of
identification codes.




1   Technology that can be used to have a telephone conversation over the internet.
2   Technology used for collaboration over the internet in real time both within the Group and in providing assistance to customers.
3   Excluding securities trading.


                                                                   146
The system of internal control

The document “Report on the corporate governance and ownership structure of UBI Banca
Scpa” attached to these reports may be consulted for a description of the architecture, rules
and organisational units of the system of internal controls. It also gives specific information
required under Art. 123 bis of the Consolidated Finance Act (Legislative Decree No. 58/1998)
concerning the risk management and internal control systems that govern the financial
reporting process.

Information on risk management and the relative hedging policies is contained in Part E of the
notes to the consolidated financial statements, where details are also given of the information
requested by Art. 2428 of the Italian Civil Code.




                                             147
Transactions with related parties

With Resolution No. 17221 of 12th March 2010 – amended by the subsequent Resolution No.
17389 of 23rd June 2010 – the Consob (Italian securities market authority) approved a
Regulation concerning related-party transactions. The new regulations concern the procedures
to be followed for the approval of transactions performed by listed companies and the issuers
of shares with a broad shareholder base with parties with a potential conflict of interest,
including major or controlling shareholders, members of the management and supervisory
bodies and senior managers including their close family members.

The key points of the regulations issued are as follows:
- they strengthen the role of independent board members at all stages of the decision-making
  process concerning related-party transactions;
- a regime of transparency;
- the introduction of detailed corporate governance regulations containing rules designed to
  ensure substantial and procedural integrity in related-party transactions (a special regime
  for companies which adopt a two tier system of governance).

The regulations apply within the UBI Banca Group to UBI Banca and IW Bank as listed
companies and to Banco San Giorgio, because that bank has a broad shareholder base.
In relation to the above, the members of the competent bodies of the banks mentioned have
approved regulations which govern related-party transactions, within the set time limits. These
are available on their respective corporate websites and appropriate internal processes have
been defined to ensure compliance with the new provisions.

As specifically concerns UBI Banca, the Supervisory Board has appointed a Related Parties
Committee from among its members to which transactions falling within the scope of the
regulations must be submitted in advance.
In this respect, the UBI Banca regulations have excluded the following transactions from their
scope of application and these are consequently not subject to the disclosure obligations
required under the Consob regulation, but without prejudice to the provisions of Art. 5,
paragraph 8, where applicable, of the said Consob Regulation:
(a) shareholders’ resolutions concerning the fees of the Members of the Supervisory Board
    passed in accordance with Art. 2364-bis of the Italian Civil Code, including those
    concerning the determination of a total sum for the fees of the Members of the Supervisory
    Board assigned particular offices, powers and functions.
(b) remuneration schemes based on financial instruments approved by shareholders in
    accordance with Art. 22, letter. b), of the By-Laws and in compliance with Art. 114-bis of
    the Consolidated Finance Act and the relative operations to implement them;
(c) resolutions, other than those referred to under the preceding letter a) of this article,
    concerning the fees of Members of the Management Board appointed to special positions
    and other key management personnel and also the resolutions with which the Supervisory
    Board determines the fees of the Members of the Management Board on condition that:
      i. UBI Banca has adopted a remuneration policy;
     ii. the Remuneration Committee formed by the Supervisory Board in accordance with Art. 49 of
         the By-Laws has been involved in the definition of that remuneration policy;
    iii. a report setting out the remuneration policy has been submitted for approval or a consultative
         vote to a Shareholders' Meeting;
    iv. the remuneration awarded is consistent with that policy;
(d) “transactions of negligible amount” are those related-party transactions for which the
    amount is less than 250 thousand euro. If a related-party transaction is concluded with a
    member of the key management personnel, a close family member of that person or with
    companies controlled by or subject to significant influence of those persons, it will be
    considered a transaction of negligible amount if the amount of the transaction is not
    greater than 100 thousand euro.



                                                 148
(e) transactions which fall within the ordinary performance of operating activities and the
    related financial activities concluded under equivalent market or standard conditions;
(f) transactions to be performed on the basis of instructions for the purposes of stability
    issued by the supervisory authority, or on the basis of instructions issued by the Parent of
    the Group to carry out instructions issued by the supervisory authority in the interests of
    the stability of the Group;
(g) transactions with or between subsidiaries and also venturers in joint ventures, as well as
    transactions with associates, if no significant interests of other related parties exist in the
    subsidiaries or associates that are counterparties to the transaction.

Also, in compliance with Consob recommendations, transactions with related-parties of UBI
Banca performed by subsidiaries are subject to the regulations in question if, under the
provisions of the By-Laws or internal regulations adopted by the Bank, the Management
Board, the Supervisory Board in response to a proposal of the Management Board, or even an
officer of the Bank, on the basis of powers conferred on that officer, must preliminarily
examine or approve a transaction to be performed by subsidiaries.

The section “The consolidation scope” gives details of the main transactions which involved
Group member companies in 2010 and which affected the consolidated capital and operating
position and also the consolidation scope existing as at 31st December 2009.

In compliance with IAS 24, part H of the Notes to the Consolidated Financial Statements also
provides information on statement of financial position and income state transactions between
UBI Banca1 and Group member companies, as well as those items as a percentage of the total
for each item in the consolidated financial statements.

Further information is given in the “Report on corporate governance and the ownership
structure of UBI Banca Scpa” attached to these reports.




1   Le società collegate nonché i dirigenti con responsabilità strategiche e i loro familiari stretti unitamente alle entità da loro stessi
    controllate/collegate ovvero soggette ad influenza notevole.


                                                                   149
Consolidated                                        companies:                  the           principal
figures

 Profit (loss) for the year

 Figures in thousands of euro                                        2010         2009        Change        % change


      Unione di Banche Italiane Scpa                                 283.720     406.317     (122.597)        (30,2%)
      Banca Popolare di Bergamo Spa                                  106.719     179.015       (72.296)       (40,4%)
      Banco di Brescia Spa                                            71.979     128.973       (56.994)       (44,2%)
      Banca Popolare Commercio e Industria Spa                        21.914       1.978          19.936           n.s.
      Banca Regionale Europea Spa (1)                                246.375      54.618       191.757         351,1%
      Banca Popolare di Ancona Spa                                    18.340      12.148           6.192        51,0%
      Banca Carime Spa                                                37.652      69.988       (32.336)       (46,2%)
      Banca di Valle Camonica Spa                                      1.574       9.533        (7.959)       (83,5%)
      Banco di San Giorgio Spa                                           375       1.934          (1.559)     (80,6%)
      UBI Banca Private Investment Spa                                    57      (3.874)          3.931           n.s.
      Centrobanca Spa                                                 16.153      28.042       (11.889)       (42,4%)
      Centrobanca Sviluppo Impresa SGR Spa                               287         137             150       109,5%
      Banque de Dépôts et de Gestion Sa (*)(2)                        (7.767)      2.297       (10.064)            n.s.
      B@nca 24-7 Spa                                                  (5.723)    (49.394)      (43.671)       (88,4%)
      BY YOU Spa                                                        2.187       4.365       (2.178)       (49,9%)
      IW Bank Spa (3)                                                  (444)       4.057          (4.501)          n.s.
      UBI Banca International Sa (*)                                   8.908      13.980          (5.072)     (36,3%)
      UBI Pramerica SGR Spa (4)                                       38.475      41.361          (2.886)       (7,0%)
      UBI Leasing Spa                                                (20.632)     11.578       (32.210)            n.s.
      UBI Factor Spa                                                  18.601      19.551           (950)        (4,9%)
      BPB Immobiliare Srl                                                747       2.135          (1.388)     (65,0%)
      Società Bresciana Immobiliare Mobiliare - S.B.I.M. Spa           1.251       1.017             234        23,0%
      UBI Sistemi e Servizi SCpA                                           -           -                -           -
      UBI Fiduciaria Spa                                                 209         162              47        29,0%
      UBI Assicurazioni Spa (49,99%)                                  (2.168)       (497)          1.671       336,2%
      Aviva Assicurazioni Vita Spa (49,99%)                            1.500       2.600          (1.100)     (42,3%)
      Aviva Vita Spa (50%)                                             2.000      18.350       (16.350)       (89,1%)
      Lombarda Vita Spa (49,90%)                                      14.333      10.841           3.492        32,2%
      UBI Insurance Broker Srl                                         3.571       3.050             521        17,1%
      UBI Trustee Sa                                                      25        4.393         (4.368)     (99,4%)
      Coralis Rent Srl                                                   271      (4.254)           4.525          n.s.

      CONSOLIDATED                                                   172.121     270.099       (97.978)        (36,3%)


(*)    The profit shown is from the financial statements prepared for the consolidation according to the accounting
       policies followed by the Parent.
(1) The figure for 2010 includes a gain of 225,4 million euro (net of taxes) on the sale of the interest held in Banca
    Popolare Commercio e Industria to the Banca del Monte di Lombardia Foundation.
(2) The figure for 2009 has been revised for consistency to include the results of Gestioni Lombarda Suisse Sa,
    merged on 31st October 2010.
(3) The figure for 2009 does not include the result for Twice Sim, merged on 1st November 2010.
(4) The figure for 2009 has been revised for consistency to include the results of Capitalgest Alternative Investments
    SGR Spa and UBI Pramerica Alternative Investments SGR Spa, merged into the company on 1st July 2010.




                                                               150
Net loans to customers

Figures in thousands of euro                                         31.12.2010         31.12.2009           Change       % change


  Unione di Banche Italiane Scpa                                       14.536.121        12.560.060          1.976.061          15,7%
  Banca Popolare di Bergamo Spa (*)                                    20.276.206        19.959.411            316.795           1,6%
  Banco di Brescia Spa (*)                                             15.078.204        14.178.741            899.463           6,3%
  Banca Popolare Commercio e Industria Spa (*)                          8.885.600           8.377.959          507.641           6,1%
  Banca Regionale Europea Spa (*)                                       6.851.620           7.278.450         -426.830          -5,9%
  Banca Popolare di Ancona Spa                                          7.702.345           7.332.080          370.265           5,0%
  Banca Carime Spa                                                      4.765.224           4.530.670          234.554           5,2%
  Banca di Valle Camonica Spa                                           1.885.564           1.816.418           69.146           3,8%
  Banco di San Giorgio Spa (*)                                          2.787.617           2.320.407          467.210          20,1%
  UBI Banca Private Investment Spa                                          439.511           404.622           34.889           8,6%
  Centrobanca Spa                                                       6.972.678           7.047.210          -74.532          -1,1%
  Banque de Dépôts et de Gestion Sa                                       207.425           272.862            -65.437         -24,0%
  B@nca 24-7 Spa                                                       11.219.553        10.855.336            364.217           3,4%
  UBI Banca International Sa                                            1.095.406             953.676          141.730          14,9%
  IW Bank Spa                                                               207.028           149.538           57.490          38,4%
  UBI Factor Spa                                                        2.744.758           2.323.230          421.528          18,1%
  UBI Leasing Spa                                                       9.698.555           9.597.373          101.182           1,1%

  CONSOLIDATED                                                        101.814.829        98.007.252          3.807.577           3,9%


                                                                                                              Net non-performing
                                                  Net non-performing           Net impaired loans /
                                                                                                              loans + Net impaired
                                                  loans / net loans            net loans
                                                                                                              loans / net loans

     Percentages                                  31.12.2010   31.12.2009      31.12.2010     31.12.2009        31.12.2010    31.12.2009


       Unione di Banche Italiane Scpa                      -            -                 -              -                -             -
       Banca Popolare di Bergamo Spa                  1,74%        1,25%              1,87%          1,69%            3,61%       2,94%
       Banco di Brescia Spa                           1,23%        0,93%              2,11%          1,77%            3,34%       2,70%
       Banca Popolare Commercio e Industria Spa       2,96%        2,54%              2,53%          2,38%            5,49%       4,92%
       Banca Regionale Europea Spa                    1,88%        1,52%              1,91%          1,62%            3,79%       3,14%
       Banca Popolare di Ancona Spa                   3,73%        2,85%              3,29%          3,66%            7,02%       6,51%
       Banca Carime Spa                               1,24%        0,95%              2,27%          1,59%            3,51%       2,54%
       Banca di Valle Camonica Spa                    1,60%        1,25%              2,52%          1,55%            4,12%       2,80%
       Banco di San Giorgio Spa                       1,68%        1,49%              4,34%          1,94%            6,02%       3,43%
       UBI Banca Private Investment Spa               1,17%        0,78%              1,34%          0,87%            2,51%       1,65%
       Centrobanca Spa                                1,16%        0,67%              2,07%          3,10%            3,23%       3,77%
       Banque de Dépôts et de Gestion Sa              0,09%        0,05%              0,65%          0,42%            0,74%       0,47%
       B@nca 24-7 Spa                                 1,55%        1,03%              0,65%          0,57%            2,20%       1,60%
       UBI Banca International Sa                     0,07%        0,06%              1,93%          1,22%            2,00%       1,28%
       IW Bank Spa                                         -            -             0,01%          0,08%            0,01%       0,08%
       UBI Factor Spa                                 0,42%        0,58%              0,15%          0,19%            0,57%       0,77%
       UBI Leasing Spa                                3,19%        1,45%              1,91%          2,25%            5,10%       3,70%

       CONSOLIDATO                                     1,91%        1,36%             2,00%          1,88%            3,91%        3,24%


(*) The change in lending during 2010 was affected by the “branch switches” performed on 25th January 2010 as part
    of the project to optimise the branch network.




                                                                151
Direct funding from customers

Figures in thousands of euro                                  31.12.2010     31.12.2009        Change        % change


  Unione di Banche Italiane Scpa                                31.369.474       21.111.671    10.257.803        48,6%
  Banca Popolare di Bergamo Spa (*)                             20.546.068       21.385.193      -839.125         -3,9%
  Banco di Brescia Spa (*) (1)                                  11.736.765       12.318.369      -581.604         -4,7%
  Banca Popolare Commercio e Industria Spa (*)                   7.994.465        7.850.961      143.504          1,8%
  Banca Regionale Europea Spa (*)                                5.391.805        7.460.874    -2.069.069        -27,7%
  Banca Popolare di Ancona Spa                                   6.485.148        6.747.461      -262.313         -3,9%
  Banca Carime Spa                                               7.562.665        7.892.084      -329.419         -4,2%
  Banca di Valle Camonica Spa                                    1.421.234        1.497.744      -76.510         -5,1%
  Banco di San Giorgio Spa (*)                                   1.572.492        1.352.344      220.148         16,3%
  UBI Banca Private Investment Spa                                489.429          561.051        -71.622        -12,8%
  Centrobanca Spa                                                5.345.526        3.067.540     2.277.986        74,3%
  Banque de Dépôts et de Gestion Sa (2)                           419.437          508.502        -89.065        -17,5%
  B@nca 24-7 Spa                                                   23.861           27.334         -3.473        -12,7%
  UBI Banca International Sa (3)                                 1.266.869         985.219       281.650         28,6%
  IW Bank Spa                                                    1.513.127        1.469.381       43.746          3,0%

  CONSOLIDATED                                                 106.760.045       97.214.405     9.545.640          9,8%


Direct funding from customers includes amounts due to customers and securities issued, with the exclusion of bonds
subscribed directly by companies in the Group



Direct funding for the following banks was therefore adjusted as follows:

BANKS                                                           31.12.2010                    31.12 2009

UBI Banca                                                 3.421 million euro           165,9 million euro

Banca Popolare di Bergamo                                    50 million euro         2.311,1 million euro

Banco di Brescia                                          382,2 million euro         1.652,3 million euro

Banca Popolare Commercio e Industria                        181 million euro              712 million euro

Banca Popolare di Ancona                                    352 million euro           1.249 million euro

Centrobanca                                               201,6 million euro         1.105,2 million euro

Banca Regionale Europea                                     201 million euro           502,1 million euro

Banca di Valle Camonica                                   201,7 million euro           351,5 million euro

Banco di San Giorgio                                      332,4 million euro           813,5 million euro

UBI Banca Private Investment                                                 -          75,2 million euro

B@nca 24-7                                                4.321 million euro         4.349,1 million euro


(*) The change in direct funding during 2010 was affected by the “branch switches” performed on 25th January 2010
    as part of the project to optimise the branch network.

(1) The figure as at 31st December 2009 is net of issues of French certificates of deposit and euro commercial paper
    totalling 5.200,5 million euro.
(2) The figure as at 31st December 2009 has been revised for consistency to include the funding of Gestioni Lombarda
    Suisse Sa, merged on 31st October 2010.
(3) The figure as at 31st December 2010 is net of issues of French certificates of deposit and euro commercial paper
    totalling 7.042,5 million euro.




                                                         152
Indirect funding from customers (at market prices)

Figures in thousands of euro                               31.12.2010     31.12.2009     Change       % change


  Unione di Banche Italiane Scpa                                     14             12            2       16,7%
  Banca Popolare di Bergamo Spa (*)                          24.944.977     21.544.048    3.400.929       15,8%
  Banco di Brescia Spa (*)                                   14.849.800     14.225.218      624.582        4,4%
  Banca Popolare Commercio e Industria Spa (*)               11.186.686     12.296.433   -1.109.747       -9,0%
  Banca Regionale Europea Spa (*)                             7.267.934      9.362.398   -2.094.464       -22,4%
  Banca Popolare di Ancona Spa                                3.828.041      3.670.727      157.314         4,3%
  Banca Carime Spa                                            5.753.026      5.705.915       47.111         0,8%
  Banca di Valle Camonica Spa                                 1.065.405        980.718       84.687         8,6%
  Banco di San Giorgio Spa (*)                                1.644.556      1.438.360     206.196         14,3%
  UBI Banca Private Investment Spa                            5.420.922      4.879.018     541.904         11,1%
  Banque de Dépôts et de Gestion Sa (1)                         991.880      1.204.560    -212.680        -17,7%
  Lombarda Vita Spa                                           5.149.988      5.061.697      88.291          1,7%
  Aviva Assicurazioni Vita Spa                                2.305.298      2.565.908    -260.610        -10,2%
  UBI Pramerica SGR Spa (2)                                  25.047.354     25.252.201    -204.847        -0,8%
  UBI Banca International Sa                                  2.971.932      3.086.749    -114.817        -3,7%
  IW Bank Spa                                                 3.037.925      2.403.852     634.073        26,4%
  Aviva Vita Spa                                              4.374.554      3.932.378     442.176        11,2%

  CONSOLIDATED                                               78.078.869     78.791.834    -712.965         -0,9%




Assets under management (at market prices)

Figures in thousands of euro                               31.12.2010     31.12.2009     Change       % change


  Unione di Banche Italiane Scpa                                      9             7            2        28,6%
  Banca Popolare di Bergamo Spa (*)                          12.460.373    10.911.606    1.548.767        14,2%
  Banco di Brescia Spa (*)                                    7.569.511     7.413.029      156.482         2,1%
  Banca Popolare Commercio e Industria Spa (*)                4.743.435      4.955.300     -211.865        -4,3%
  Banca Regionale Europea Spa (*)                             4.205.324      5.625.295   -1.419.971       -25,2%
  Banca Popolare di Ancona Spa                                1.879.189      1.937.869      -58.680        -3,0%
  Banca Carime Spa                                            3.688.062      3.947.603    -259.541        -6,6%
  Banca di Valle Camonica Spa                                   513.063        479.669      33.394         7,0%
  Banco di San Giorgio Spa (*)                                  637.651        559.528      78.123        14,0%
  UBI Banca Private Investment Spa                            4.073.214      3.515.213     558.001        15,9%
  Banque de Dépôts et de Gestion Sa (1)                         991.880      1.204.560    -212.680        -17,7%
  Lombarda Vita Spa                                           5.149.988      5.061.697      88.291          1,7%
  Aviva Assicurazioni Vita Spa                                2.305.298      2.565.908    -260.610        -10,2%
  UBI Pramerica SGR Spa (2)                                  25.047.354    25.252.201     -204.847        -0,8%
  UBI Banca International Sa                                    289.940        98.367      191.573       194,8%
  IW Bank Spa                                                   496.899       331.451      165.448        49,9%
  Aviva Vita Spa                                              4.374.554      3.932.378     442.176        11,2%

  CONSOLIDATED                                               42.629.553    41.924.931      704.622          1,7%


(*) The change in indirect funding during 2010 was affected by the “branch switches” performed on 25th January 2010
    as part of the project to optimise the branch network.

(1) The figures as at 31st December 2009 have been revised for consistency to include the funding of Gestioni
    Lombarda Suisse Sa, merged on 31st October 2010.
(2) The totals as at 31st December 2009 have been revised for consistency to include the assets under management of
    Capitalgest Alternative Investments SGR Spa and UBI Pramerica Alternative Investments SGR Spa, merged into
    the company on 1st July 2010.




                                                       153
The performance of the main consolidated
companies

BANCA POPOLARE DI BERGAMO SPA


                                                                                    31.12.2010       31.12.2009     Change       % change
Figures in thousands of euro

Statement of financial position
  Loans to customers (*)                                                             20.276.206       19.959.411       316.795        1,6%
  Direct funding (*) (**)                                                            20.596.076       23.696.263    -3.100.187      -13,1%
  Net interbank position                                                              2.537.387        5.573.557    -3.036.170      -54,5%
  Financial assets held for trading                                                      51.761           50.459         1.302        2,6%
  Available-for-sale financial assets                                                    20.795           21.283          -488       -2,3%
  Equity (excluding profit for the year)                                              2.143.727        1.721.337       422.390       24,5%
  Total assets (*)                                                                   24.455.885       26.506.767    -2.050.882       -7,7%
  Indirect funding from customers (including insurance) (*)                          24.944.977       21.544.048     3.400.929       15,8%
        of which: assets under management (*)                                         12.460.373       10.911.606    1.548.767       14,2%

Income statement                                                                      2010             2009
  Net interest income                                                                  443.493          550.870      (107.377)     (19,5%)
  Dividends and similar income                                                             254                -            254           -
  Net commission income                                                                302.214          308.849        (6.635)      (2,1%)
  Net income from trading, hedging and disposal/repurchase activities                    9.650            6.534          3.116       47,7%
  Other net operating income                                                            13.311           19.016        (5.705)     (30,0%)
      Operating income                                                                  768.922          885.269     (116.347)      (13,1%)
      Personnel expense                                                               (277.279)        (276.415)           864         0,3%
      Other administrative expenses                                                   (204.095)        (207.168)       (3.073)       (1,5%)
      Net impairment losses on property, equipment and investment property and
      intangible assets                                                                  (7.178)          (5.329)       1.849        34,7%
      Operating expenses                                                              (488.552)        (488.912)         (360)       (0,1%)
      Net operating income                                                             280.370           396.357     (115.987)      (29,3%)
      Net impairment losses on loans (***)                                             (96.212)        (109.700)      (13.488)     (12,3%)
      Net impairment losses on other assets/liabilities                                 (1.873)           (1.012)          861       85,1%
      Net provisions for risks and charges                                                  187            (543)          730           n.s.
      Loss on the disposal of equity investments                                            (30)            (12)           18       150,0%
      Pre-tax profit from continuing operations                                        182.442           285.090     (102.648)      (36,0%)
      Taxes on income for the year for continuing operations (****)                    (75.723)        (104.538)      (28.815)     (27,6%)
      Integration costs                                                                       -           (1.537)      (1.537)    (100,0%)
      of which: personnel expense                                                                -        (1.663)      (1.663)     (100,0%)
         net impairment losses on property, equipment and investment property and
         intangible assets                                                                       -          (490)        (490)     (100,0%)
        taxes                                                                                    -           616         (616)     (100,0%)
      Profit for the year                                                               106.719          179.015      (72.296)      (40,4%)

Other information
  Number of branches                                                                        365              375          -10
  Total work force (actual employees+personnel on leasing contracts)                      3.779            3.736           43

Financial ratios
  ROE [profit for the year/equity (excluding profit for the year)]                       4,98%           10,40%
  Cost/income ratio (operating expenses/operating income)                               63,54%           55,23%
  Net non-performing loans/net loans to customers                                        1,74%            1,25%
  Net impaired loans/net loans to customers                                              1,87%            1,69%

(*)    The total as at 31st December 2010 includes the effects of the branch switches performed on 25th January as part of the project
       to optimise the branch network.
(**)   Inclusive of bonds subscribed by the Parent amounting to 50 million euro as at 31st December 2010 (2.311,1 million euro as at
       31st December 2009).
(***) The item for 2010 includes an impairment loss relating to the Mariella Burani Group amounting to 1,4 million euro. That
       impairment loss for 2009 amounted to 6,9 million euro.
(****) The item for 2009 included the non recurring positive impacts resulting from the payment of a substitute tax with the release of
       deferred tax liabilities – for the purposes of the decree for the realignment of differences in statutory and tax accounting figures,
       following the adoption of IFRS – amounting to 0,8 million euro and from an IRAP (local production tax) refund amounting to five
       million euro.



                                                                             154
As part of the “branch switching” operation performed on 25th January 2010, Banca Popolare di Bergamo
disposed of 90 branches and acquired 97, to become the principal bank of the UBI Group in the provinces of
Bergamo, Varese, Como, Lecco and Monza Brianza.
The statement of financial position and income statement figures as at and for the year ended 31st
December 2010 incorporate the effects of that operation and are therefore not consistent with the
comparative figures.


The year 2010 ended with a profit of 106,7 million euro, down compared to 179 million euro in
2009, earned, moreover, in a context of higher interest rates.

Net operating income, down from 396,4 million euro to 280,4 million euro (-29,3%), was
penalised by a fall in operating income (-116,3 million euro to 768,9 million euro), while
expenses remained more or less unchanged at 488,6 million euro.

Income included the following:
- net interest income, which fell to 443,5 million euro (-107,4 million euro), mainly as a
   result of the market trend for interest rates already mentioned, while there was a modest
   contraction in volumes of business;
- net commission income, which fell marginally to 302,2 million euro (-6,6 million euro), the
   aggregate result of a decrease in all current account items (including commitment fees) and
   the sale of third party products and services, partially offset by increases in commissions
   from indirect funding;
- other net operating income/(expense), which amounted to 13,3 million euro (-5,7 million
   euro), the result primarily of lower expense recoveries from ordinary customers;
- net income from trading and hedging activity totalled 9,6 million euro (+3,1 million euro),
   benefiting from the positive impacts of hedges on fixed rate mortgages and the change in
   the fair value of hedges on bonds.

Expenses included the following:
- personnel expense, amounting to 277,3 million euro (+0,9 million euro), which included a
  non recurring item of leaving incentives in relation to the agreement of 20th May 2010 (6,1
  million euro). Net of that expense, the item fell by 5,2 million euro (-1,9%) compared to the
  previous year;
- the main decreases in other administrative expenses (-3,1 million euro to 204,1 million
  euro), which were in rent payable, expenses for outsourced services and for tenancy of
  premises and cleaning, while increases were recorded for equipment lease expenses, the
  hire of hardware, professional services (in relation to the securitisation transaction) and
  maintenance of properties and equipment;
- depreciation and amortisation, which increased by 1,8 million euro to 7,2 million euro,
  partly in relation to assets acquired as part of the distribution network optimisation
  operation.

As a result of these changes the cost/income ratio worsened, rising from 55,23% to 63,54%.

Net impairment losses on loans fell compared to the previous year to 96,2 million euro (-13,5
million euro). They included 71,7 million euro relating to net specific impairment losses (87,2
million in 2009) while 24,5 million euro related to collective impairment losses on performing
loans (22,5 million euro in 2009), which incorporated the effects of the refinement of the
calculation method and the update of the historical data series used as the basis for the
estimate of risk parameters


Despite the reduction in volumes of business following the completion of the “branch switches”
(-0,2 billion euro), loans to customers increased by 20,3 billion euro (+0,3 billion euro), the
aggregate result of an overall decrease in short term lending – penalised by the continuation of
the effects of the economic crisis – which was more than offset by the increase in medium-to-
long term lending, consisting primarily of mortgages.




                                                   155
Deteriorated loans net of impairment losses reached 1,06 billion euro (+112,6 million euro). In
detail: non-performing loans increased from 248,5 to 353,3 million euro; impaired loans rose
from 336,7 to 379,6 million euro; restructured loans increased from 243,5 to 301 million euro;
on the other hand, exposures past due and in arrears fell significantly from 120,5 million euro
to 27,9 million euro. Within that item exposures in arrears for between 90 and 180 days
secured by real estate property fell from 98,3 million euro to 23 million euro.

Direct funding from customers, which included a net increase of 0,4 billion euro as a result of
the distribution network optimisation operation, amounted to 20,6 billion euro, down by 3,1
billion euro (-13,1%) compared to the end of 2009, the result primarily of the early redemption
of bonds subscribed by the Parent (-2,3 billion euro).
The item was also affected by a fall in both certificates of deposit (-0,4 billion euro) and bonds
issued by the bank and placed with customers (-0,5 billion euro), which was only partially
offset by growth in current accounts and deposits.

Indirect funding from private customers increased during the year from 21,5 billion euro to
24,9 billion euro (+3,4 billion euro). It benefited to a considerable extent from the “branch
switches” which had a total net impact of 2,7 billion euro: over 1,7 billion euro relating to
assets under custody, which reached almost 12,5 billion euro, and approximately one billion
euro of assets under management, which also came close to 12,5 billion euro.

The net interbank position at the end of 2010 consisted of funds of 2,5 billion euro, a
significant decrease compared to 5,6 billion euro twelve months before in relation to opposing
trends for funding and lending with customers.

Capital ratios as at 31st December 2010 consisted of a tier one ratio (tier one capital/risk
weighted assets) of 16,23% (15,07% at the end of 2009) and a total capital ratio (supervisory
capital/risk-weighted assets) of 18,38% (17,56%).

The proposal for the allocation of profit is to distribute dividends of 27 million euro after legal
and by-law allocations and to allocate 72,3 million euro to the voluntary reserve.




                                               156
BANCO DI BRESCIA SPA


                                                                                    31.12.2010       31.12.2009       Change       % change
Figures in thousands of euro

Statement of financial position
  Loans to customers (*)                                                             15.078.204       14.178.741         899.463        6,3%
  Direct funding (*) (**)                                                            12.118.974       19.171.159      -7.052.185      -36,8%
  Net interbank position (debt)                                                      -2.490.173        6.071.367      -8.561.540          n.s.
  Financial assets held for trading                                                     100.954          114.259         -13.305      -11,6%
  Available-for-sale financial assets                                                    20.913           26.339          -5.426      -20,6%
  Equity (excluding profit for the year)                                              1.388.125        1.157.731         230.394       19,9%
  Total assets (*)                                                                   17.621.805       22.680.420      -5.058.615      -22,3%
      Indirect funding from customers (including insurance) (*)                      14.849.800       14.225.218        624.582         4,4%
        of which: assets under management (*)                                          7.569.511        7.413.029        156.482        2,1%

Income statement                                                                      2010             2009
  Net interest income                                                                  325.858          353.270         (27.412)      (7,8%)
  Dividends and similar income                                                            1.249           1.699            (450)     (26,5%)
  Net commission income                                                                196.007          200.248          (4.241)      (2,1%)
  Net income/(loss) from trading, hedging and disposal/repurchase activities            (1.477)          10.204         (11.681)          n.s.
  Other net operating income                                                            14.845           20.740          (5.895)     (28,4%)
      Operating income                                                                  536.482          586.161        (49.679)       (8,5%)
      Personnel expense                                                               (172.843)        (164.527)           8.316         5,1%
      Other administrative expenses                                                   (133.321)        (134.507)         (1.186)      (0,9%)
      Net impairment losses on property, equipment and investment property and
      intangible assets                                                                (11.101)         (11.627)           (526)      (4,5%)
      Operating expenses                                                              (317.265)        (310.661)           6.604         2,1%
      Net operating income                                                              219.217          275.500        (56.283)      (20,4%)
      Net impairment losses on loans (***)                                             (97.859)         (69.220)          28.639        41,4%
      Net impairment losses on other assets/liabilities                                    (849)          (1.348)          (499)     (37,0%)
      Net provisions for risks and charges                                               (2.875)          (3.258)          (383)     (11,8%)
      Profit/(loss) on the disposal of equity investments                                  1.296             (76)          1.372          n.s.
      Pre-tax profit from continuing operations                                         118.930          201.598        (82.668)      (41,0%)
      Taxes on income for the year for continuing operations (****)                    (46.951)         (71.894)        (24.943)     (34,7%)
      Integration costs                                                                        -            (731)          (731)    (100,0%)
      of which: personnel expense                                                                -          (597)          (597)     (100,0%)
         net impairment losses on property, equipment and investment property and
         intangible assets                                                                       -          (441)          (441)     (100,0%)
        taxes                                                                                    -           307           (307)     (100,0%)
      Post-tax profit (loss) from discontinued operations                                        -                -            -              -
      Profit for the year                                                                71.979          128.973        (56.994)      (44,2%)

Other information
  Number of branches                                                                        362              363             -1
  Total work force (actual employees+personnel on leasing contracts)                      2.634            2.624             10

Financial ratios
  ROE [profit for the year/equity (excluding profit for the year)]                       5,19%           11,14%
  Cost/income ratio (operating expenses/operating income)                               59,14%           53,00%
  Net non-performing loans/net loans to customers                                        1,23%            0,93%
  Net impaired loans/net loans to customers                                              2,11%            1,77%

(*)    The total as at 31st December 2010 includes the effects of the branch switches performed on 25th January as part of the project
       to optimise the branch network.
(**)   Inclusive of bonds subscribed by the Parent amounting to 382,2 million euro as at 31st December 2010 (1.652,3 million euro as
       at 31st December 2009). The figure as at 31st December 2009 also included issuances of French certificates of deposit and euro
       commercial paper totalling 5.200,5 million euro.
(***) The item for 2010 includes the impairment loss relating to the Mariella Burani Group amounting to 1,4 million euro. In 2009
       that impairment loss amounted to 2,4 million euro.
(****) In 2009 the item included the non recurring positive impacts resulting from the payment of a substitute tax with the release of
       deferred tax liabilities – for the purposes of the decree for the realignment of differences in statutory and tax accounting figures,
       following the adoption of IFRS – amounting to 2,8 million euro and from an IRAP (local production tax) refund amounting to 3,1
       million euro.



As part of the “branch switching” operation performed on 25th January 2010, the bank disposed of a total
of 28 branches and acquired 37 to become the principal bank of the Group in the provinces of Mantua,
Brescia, Cremona and Lodi as well as the entire Triveneto area. The statement of financial position and
income statement figures as at and for the year ended 31st December 2010 incorporate the effects of that
operation and are therefore not consistent with the comparative figures.


                                                                             157
Banco di Brescia ended 2010 with a profit of 72 million euro, a decrease compared to 129
million euro achieved in the year before.

Net operating income totalled 219,2 million euro compared to 275,5 million euro before,
penalised by a decrease in operating income (-49,7 million euro) against a small increase in
expense items (totalling +6,6 million euro).

Income, amounting to 536,5 million euro, included changes in the various items as follows:
• net interest income fell to 325,9 million euro (-27,4 million euro), mainly as a result of the
   trend for interest rates, which was only partly offset by growth in average volumes of
   lending business;
• net commission income recorded a smaller decrease to 196 million euro (-4,2 million euro).
   The reduction regarded commissions on current accounts and the sale of third party
   products (consumer credit provided by B@nca 24-7) in particular and was only partly offset
   by growth in commissions on assets under management and under custody, in relation to
   the sale of bonds issued by the Parent and by third parties;
• trading and hedging activity resulted in a loss of -1,5 million euro (income of 10,2 million
   euro in 2009), affected above all by the negative impact of hedges on fixed rate mortgages;
• other net operating income/(expense) decreased to 14,8 million euro compared to 20,7
   million euro the year before, the result primarily of lower expense recoveries from ordinary
   customers.

The increase in expenses by 2,1%, amounting to 317,2 million euro, was totally attributable
to the trend for personnel expense, up to 172,8 million euro from 164,5 million euro in 2009.
It was penalised primarily by “non recurring expenses” relating to leaving incentives pursuant
to the trade union agreement of 20th May 2010 (3,9 million euro) and changes in average
personnel numbers (partly in relation to changes in the distribution network), which were only
partly offset by lower provisions for company bonuses and incentive schemes.
On the other hand, other administrative expenses, amounting to 133,3 million euro, remained
more or less unchanged compared to the previous year (-0,9%).
Similarly, net impairment losses on property, plant and equipment and intangible assets,
amounting to 11,1 million euro, were also unchanged compared to the year before (11,6
million euro).
As a result of the performance reported above, the cost/income ratio rose from 53% to 59,1%,
although it remained below the average for the Group.

Net impairment losses on loans rose from 69,2 million euro to 97,9 million euro, as a result of
greater impairment losses recognised as a result of the weak economic context. Specific
impairment losses on deteriorated loans amounted to 77,2 million euro (60,5 million euro in
2009), including 59 million euro relating to non-performing loans, while collective impairment
losses on performing loans amounted to 20,7 million euro (8,8 million the year before). The
latter also incorporated the effects of the refinement of the calculation method and the update
of the historical data series used as the basis for the estimate of risk parameters

Net provisions for risks and charges fell from 3,3 million euro to 2,9 million euro, as a result of
the release of excess provisions and to lower provisions on revocation actions which partly
offset the increased provisions made for litigation concerning the compounding of interest and
financial investments.


As concerns changes in statement of financial position items, in December loans to customers
had exceeded 15 billion euro, an increase over twelve months of 0,9 billion euro, including 0,5
billion euro attributable to the “branch switching” operation in January 2010.
Good performance by loans was attributable both to “Current account overdrafts”, up to 2,6
billion euro (+0,3 billion euro) and to mortgages, up by 0,6 billion euro to 8,9 billion euro, now
accounting for 59,2% of the total lending portfolio.

At the end of the year, the net deteriorated loans of the bank amounted to 746,1 million euro,
an increase of 214,1 million euro compared to twelve months before (+40,2%).




                                               158
Net non-performing loans increased by 52,6 million euro to 184,9 million euro and impaired
loans rose to 318,7 million euro (+67,9 million euro), while restructured exposures almost
tripled rising from 72,9 million euro to 201,5 million euro. Both of the latter classes of loan
were affected by reclassifications into the class of new positions of significant amount.
On the other hand past due exposures fell from 76 million euro to 41 million euro and
included 35 million euro of exposures in arrears for between 90 and 180 days relating to
property mortgages (55,5 million euro at the end of 2009).

Direct funding had fallen at the end of the year by 7,1 billion euro to 12,1 billion euro,
attributable to a significant reduction in securities issued (from 10,3 billion euro to 3,2 billion
euro), due primarily to the contribution to UBI Banca International of the bank’s Luxembourg
branch, which at the end of 2009 had certificates of deposit and commercial paper in issue for
a total 5,2 billion euro and a subordinated deposit with the foreign branch by Banca
Lombarda Preferred Capital Company Llc of 165 million euro. Furthermore, in 2010 bonds
subscribed by the Parent amounting to 1,1 billion euro were subject to early redemption, while
bonds issued to ordinary customers which matured during the year (1,1 billion euro) were only
partly offset by new issues (0,6 billion euro).
Amounts due to customers, which remained more or less unchanged at 8,9 billion euro
(+0,2%), included an increase in repurchase agreements (+0,1 billion euro), which were
practically offset by the decrease in term deposits, while funding of 0,2 billion euro was
acquired from the “branch switches”.

As a result of net increases resulting from the branch network optimisation operation (+0,65
billion euro of assets under custody and +0,2 billion euro of assets under management),
indirect funding from ordinary customers increased by 0,6 billion euro to 14,9 billion euro,
mainly the result of growth in assets under custody (+6,9% to 7,3 billion euro), but also due to
the placement of bonds issued by the Parent (0,4 billion euro nominal) and third party bonds
(0,5 billion euro).
Assets under management (+2,1% to 7,6 billion euro) benefited from growth in customer
portfolio managements (+7,7% to 1,3 billion euro) and insurance products (+5,1% to 3,2 billion
euro), while decreases were recorded for mutual investment funds and Sicav’s (-3% to 3 billion
euro).

As a consequence of the differing trends for funding and lending with customers, at the end of
year the bank had net interbank debt of 2,5 billion euro compared to funds of 6,1 billion euro
the year before, attributable mainly to the reduction in deposits relating to the funding in CDs
and euro commercial paper of the Luxembourg branch transferred, and to the redemption of
the bonds subscribed by the Parent and the maturity of term deposits already mentioned.

Capital ratios as at 31st December 2010 consisted of a tier one ratio (tier one capital/risk
weighted assets) of 12,82% (14,04%) and a total capital ratio (supervisory capital and
reserves/risk-weighted assets) of 13,28% (15,23%).

The proposal for the allocation of profit is to distribute dividends of 18,1 million euro after
legal and by-law allocations.




                                               159
BANCA POPOLARE COMMERCIO E INDUSTRIA SPA


                                                                                    31.12.2010       31.12.2009     Change       % change
Figures in thousands of euro

Statement of financial position
  Loans to customers (*)                                                              8.885.600        8.377.959      507.641         6,1%
      Direct funding (*) (**)                                                         8.175.503        8.562.886     -387.383        -4,5%
      Net interbank position                                                            253.106          904.700     -651.594       -72,0%
      Financial assets held for trading                                                  32.731           28.430        4.301        15,1%
      Available-for-sale financial assets                                                19.314           12.167        7.147       58,7%
      Equity (excluding profit for the year)                                          1.159.451          830.972      328.479       39,5%
      Total assets (*)                                                               10.129.982       10.335.412      -205.430       -2,0%
      Indirect funding from customers (including insurance) (*)                      11.186.686       12.296.433    -1.109.747       -9,0%
        of which: assets under management (*)                                         4.743.435        4.955.300      -211.865       -4,3%

Income statement                                                                      2010             2009
  Net interest income                                                                  197.832          252.863       (55.031)     (21,8%)
      Dividends and similar income                                                             2               15         (13)     (86,7%)
      Net commission income                                                             134.274          141.940       (7.666)      (5,4%)
      Net income/(loss) from trading, hedging and disposal/repurchase activities         (2.145)          (4.607)      (2.462)     (53,4%)
      Other net operating income (***)                                                    7.791            6.050        1.741        28,8%
      Operating income                                                                  337.754          396.261      (58.507)     (14,8%)
      Personnel expense                                                               (137.261)        (142.102)       (4.841)      (3,4%)
      Other administrative expenses                                                   (116.059)        (118.523)       (2.464)      (2,1%)
      Net impairment losses on property, equipment and investment property and
      intangible assets                                                                  (6.122)          (3.934)       2.188        55,6%
      Operating expenses                                                              (259.442)        (264.559)       (5.117)       (1,9%)
      Net operating income                                                               78.312          131.702      (53.390)      (40,5%)
      Net impairment losses on loans (****)                                            (30.827)        (112.181)      (81.354)     (72,5%)
      Net impairment losses on other assets/liabilities                                     (13)           1.051       (1.064)          n.s.
      Net provisions for risks and charges                                               (2.718)          (5.293)      (2.575)     (48,6%)
      Loss on the disposal of equity investments                                            (20)             (49)         (29)     (59,2%)
      Pre-tax profit from continuing operations                                          44.734           15.230       29.504       193,7%
      Taxes on income for the year for continuing operations (*****)                   (22.820)         (14.508)         8.312       57,3%
      Integration costs                                                                       -          (1.274)       (1.274)    (100,0%)
      of which: personnel expense                                                                -        (1.430)      (1.430)     (100,0%)
         net impairment losses on property, equipment and investment property and
         intangible assets                                                                       -          (351)        (351)     (100,0%)
        taxes                                                                                    -           507         (507)     (100,0%)
      Pre-tax profit from discontinued operations (******)                                       -         2.530       (2.530)    (100,0%)
      Profit for the year                                                                21.914            1.978       19.936           n.s.

Other information
  Number of branches                                                                        234              214           20
  Total work force (actual employees+personnel on leasing contracts)                      1.756            1.982         -226

Financial ratios
  ROE [profit for the year/equity (excluding profit for the year)]                       1,89%            0,24%
      Cost/income ratio (operating expenses/operating income)                           76,81%           66,76%
      Net non-performing loans/net loans to customers                                    2,96%            2,54%
      Net impaired loans/net loans to customers                                          2,53%            2,38%

(*)     The total as at 31st December 2010 includes the effects of the branch switches performed on 25th January as part of the
        project to optimise the branch network.
(**) Inclusive of bonds subscribed by the Parent amounting to 181 million euro as at 31st December 2010 (712 million euro
        as at 31st December 2009).
(***) The item included approximately one million euro in 2010 as the price received for the sale to RBC Dexia of the
        correspondence banking operations and 1,7 million euro of amounts recovered following the bankruptcy of a
        counterparty.
(****) The item for 2010 included an impairment loss relating to the Mariella Burani Group amounting to 1,6 million euro.
(*****) In 2009 the item included the non recurring positive impacts resulting from the payment of a substitute tax with the
        release of deferred tax liabilities – for the purposes of the decree for the realignment of differences in statutory and tax
        accounting figures, following the adoption of IFRS – amounting to 0,9 million euro and from an IRAP (local production
        tax) refund amounting to 2,5 million euro.
(******)The item as at 31st December 2009 related to the sale of the Palermo branch and a portion of the Brescia corporate
        banking unit to Banca Popolare di Vicenza.




                                                                             160
As at 31st December 2010 UBI Banca held 75,0769% of the share capital of Banca Popolare Commercio, the
Banca del Monte di Lombardia Foundation held 16,2369% and the remaining 8,6862% was held by Aviva
Spa.

The “branch switching” operation performed on 25th January 2010 resulted in a general re-organisation of
the branch network of Banca Popolare Commercio e Industria, consisting of the disposal of 85 branches
and the acquisition of 132 branches. As a consequence, BPCI became the main bank of the Group in the
Lombard provinces of Milan and Pavia and in Emilian provinces of Bologna, Parma, Piacenza, Modena,
Reggio Emilia and Ferrara. It also retained its presence in Rome. The statement of financial position and
income statement figures as at and for the year ended 31st December 2010 incorporate the effects of that
operation and are therefore not fully consistent with the comparative figures of the year before.


The Bank ended the year with a profit of 21,9 million euro compared to two million euro in
2009, as a result of a significant reduction in impairment losses on loans made possible by an
improvement in the quality of the portfolio. Net operating income, on the other hand, fell to
78,3 million euro (-53,4 million euro compared to 2009) as a result of a fall in revenues (-
14,8% to 337,8 million euro), only partially offset by a modest reduction in expenses (-1,9% to
259,4 million euro).

The decrease in operating income (-58,5 million euro) is attributable mainly to net interest
income, down from 252,9 to 197,8 million euro, penalised by unfavourable trends in interest
rates (the spread narrowed by more than the average for the network banks), while growth was
recorded for average volumes of business, which was greater for funding.

Net commission income also fell to 134,3 million euro from 141,9 million euro in 2009 (-5,4%),
affected mainly by the fall in commissions on current accounts (inclusive of commitment
fees), and it was only partly offset by the increase in commission on electronic payment cards
and indirect funding. The latter were driven by the proceeds from the placement of bonds
issued by the Parent and third parties.
Trading and hedging activity recorded a loss of 2,1 million euro (-4,6 million in 2009),
attributable to losses on the disposal/repurchase of financial liabilities and the negative
impact of hedges on fixed rate mortgages, which was only partially offset by the positive
impact of fair value changes in hedges on bonds.

The item other net operating income/(expense), rose to 7,8 million euro from 6,1 million euro
the year before. It benefited from a non-recurring item of approximately one million euro from
the sale of corresponding banking and depositary banking contracts to RBC Dexia.

As concerns operating expenses, personnel expense fell from 142,1 million euro to 137,3
million euro as a result of lower provisions for company bonuses and lower outgoings due to
reduced personnel numbers
Other administrative expenses, amounting to 116,1 million euro, fell by 2,5 million euro,
attributable in particular to a reduction in intragroup service charges (-2,6 million euro) and a
reduction in expenses for professional and advisory services (-2 million euro approx.).
Net impairment losses on property, equipment and investment property and intangible assets
rose to 6,1 million euro from 3,9 million euro in 2009, in relation to the acquisition of
properties in connection with the “branch switches”.

As a result of the performance reported above, the cost/income ratio worsened, rising from
66,76% to 76,81%.

Although the macroeconomic context is still far from favourable, net impairment losses on
loans fell considerably (from 112,2 million euro to 30,8 million euro), as a result of action
taken to improve the quality of the portfolio in progress since 2008. At the same time,
provisions for risks and charges fell from 5,3 million euro to 2,7 million euro. They consisted
mainly of provisions for litigation relating to revocation actions and for customer claims
relating to investment services.

Integration costs were recognised in 2009 for a total of 1,3 million euro, relating mainly to personnel
expense incurred in relation to the completion of the IT migration together with a profit of 2,5 million euro



                                                    161
from non recurring operations held for disposal attributable to a gain on the sale of a Palermo branch to
Banca Nuova and a portion of the Brescia corporate banking unit to Banca Popolare di Vicenza.


As concerns the statement of financial position figures, lending to customers rose from 8,4
million euro to 8,9 billion euro due to an increase in volumes of business with retail
customers, partly as a result of the branch network optimisation operation (+0,3 billion euro).
Medium-to-long term lending increased by 24% and now accounts for more than 60% of the
total lending portfolio.

Net deteriorated loans increased by 60,7 million euro to 549,5 million euro.
In detail, net non-performing loans rose from 212,7 million euro to 263,3 million euro,
impaired loans from 199,8 million euro to 225 million euro and restructured exposures from
34,4 million euro to 42,3 million euro, while past due loans more than halved from 41,9
million euro to 18,9 million euro, as a result of a significant reduction in exposures in arrears
for between 90 and 180 days relating to property mortgages which were reclassified within
impaired loans (18 million euro compared to 38 million euro in 2009).

Direct funding of the bank as at 31st December 2010 amounted to 8,2 billion euro compared to
8,6 billion euro the year before (-4,5%). Although the “branch switches” resulted in an increase
in funding (mainly on demand deposits) of 0,8 billion euro, the fall in the item is attributable
to securities issued and subscribed by the Parent as a result of the early redemption of two
bonds for a total of 530 million euro, including 150 million euro subordinated.

Indirect funding also fell compared to the previous year, down from 12,3 billion euro to 11,2
billion euro, affected by the negative performance of markets.
As a result of the change in the composition of customers’ investment portfolios, assets under
custody decreased considerably (from 7,3 billion euro to 6,4 billion euro), while the fall in
assets under management was more modest (from 4,9 billion euro to 4,7 billion euro). The
latter included a reduction in customer portfolio managements (-0,2 billion euro, to 1,1 billion
euro) and in mutual funds and Sicav’s (-0,3 billion euro, to 2,5 billion euro), while insurance
products increased (approximately +0,3 billion euro, to 1,1 billion euro).

The interbank position at the end of 2010 consisted of funds of 0,3 billion euro, a significant
decrease compared to 0,9 billion euro in 2009, principally as a result of a decrease in current
accounts and deposits held with the Parent.

Capital ratios as at 31st December 2010 consisted of a tier one ratio (tier one capital/risk
weighted assets) of 19,78% (15,66% at the end of 2009) and a total capital ratio (supervisory
capital and reserves/risk-weighted assets) of 19,81% (18,59%).

The proposal for the allocation of profit is to distribute total dividends of 19,7 million euro
after legal and by-law allocations.




                                                  162
BANCA REGIONALE EUROPEA SPA


                                                                                               31.12.2010       31.12.2009     Change       % change
Figures in thousands of euro

Statement of financial position
  Loans to customers (*)                                                                         6.851.620        7.278.450      -426.830       -5,9%
  Direct funding (*) (**)                                                                        5.592.784        7.962.965    -2.370.181      -29,8%
      Net interbank position (debt)                                                               -195.497        1.328.154    -1.523.651          n.s.
      Financial assets held for trading                                                             25.269           47.284       -22.015      -46,6%
      Available-for-sale financial assets                                                            9.610           11.917        -2.307      -19,4%
      Equity (excluding profit for the year)                                                     1.216.497          925.018       291.479       31,5%
      Total assets (*)                                                                           8.132.305        9.706.497    -1.574.192      -16,2%
      Indirect funding from customers (including insurance) (*)                                  7.267.934        9.362.398    -2.094.464      -22,4%
        of which: assets under management (*)                                                     4.205.324        5.625.295   -1.419.971       -25,2%

Income statement                                                                                 2010             2009
  Net interest income                                                                             147.363          187.255       (39.892)     (21,3%)
  Dividends and similar income                                                                      1.318           10.300        (8.982)     (87,2%)
      Net commission income                                                                         99.330          131.903      (32.573)     (24,7%)
      Net income/(loss) from trading, hedging and disposal/repurchase activities (***)               (946)           12.756      (13.702)          n.s.
      Other net operating income                                                                     8.809            9.943       (1.134)     (11,4%)
      Operating income                                                                             255.874          352.157      (96.283)     (27,3%)
      Personnel expense                                                                          (110.126)        (128.627)      (18.501)     (14,4%)
      Other administrative expenses                                                               (80.870)         (96.002)      (15.132)     (15,8%)
      Net impairment losses on property, equipment and investment property and
      intangible assets                                                                             (6.644)          (9.125)      (2.481)     (27,2%)
      Operating expenses                                                                         (197.640)        (233.754)      (36.114)     (15,4%)
      Net operating income                                                                          58.234          118.403      (60.169)      (50,8%)
      Net impairment losses on loans                                                              (27.430)         (33.654)       (6.224)     (18,5%)
      Net impairment losses on other assets/liabilities                                              (169)            (506)         (337)     (66,6%)
      Net provisions for risks and charges (****)                                                    3.253          (2.196)         5.449          n.s.
      Loss on the disposal of equity investments (*****)                                          230.662               (40)     230.702           n.s.
      Pre-tax profit from continuing operations                                                   264.550            82.007      182.543       222,6%
      Taxes on income for the year from continuing operations (******)                            (18.175)         (26.106)       (7.931)     (30,4%)
      Integration costs                                                                                  -          (1.283)       (1.283)    (100,0%)
      of which: personnel expense                                                                           -        (1.481)      (1.481)     (100,0%)
         net impairment losses on property, equipment and investment property and intangible
         assets                                                                                             -          (309)        (309)     (100,0%)
        taxes                                                                                               -           507         (507)     (100,0%)
      Profit for the year                                                                          246.375           54.618      191.757       351,1%

Other information
  Number of branches                                                                                   229              295          -66
  Total work force (actual employees+personnel on leasing contracts)                                 1.552            1.958         -406

Financial ratios
  ROE [profit for the year/equity (excluding profit for the year)]                                 20,25%            5,90%
  Cost/income ratio (operating expenses/operating income)                                          77,24%           66,38%
      Net non-performing loans/net loans to customers                                               1,88%            1,52%
      Net impaired loans/net loans to customers                                                     1,91%            1,62%

(*)     The total as at 31st December 2010 includes the effects of the branch switches performed on 25° January as part of the project
        to optimise the branch network.
(**)    Inclusive of bonds subscribed by the Parent amounting to 201 million euro as at 31st December 2010 (502,1 million euro as at
        31st December 2009).
(***) In 2009 the item included a gain of 8,9 million euro on the disposal of the investment held in Cedacri.
(****) In 2010 the item included the release of a provision made in prior years for litigation with the Ministry of the Economy
        amounting to 3,9 million euro.
(*****) In 2010 the item related primarily to a gain on the sale of an interest held in BPCI to the Banca del Monte di Lombardia
        Foundation.
(******) The item for 2009 included the non recurring positive impacts resulting from the payment of a substitute tax with the release
        of deferred tax liabilities – for the purposes of the decree for the realignment of differences in statutory and tax accounting
        figures, following the adoption of IFRS – amounting to 1,6 million euro and from an IRAP (local production tax) refund amounting
        to 1,7 million euro.




                                                                               163
As at 31st December 2010 UBI Banca held 74,9437% of the share capital of Banca Regionale Europea, the
Cassa di Risparmio di Cuneo Foundation held 24,98% and the remaining 0,0763% was held by minority
shareholders.

As part of the “branch switching” operation performed on 25th January 2010, the bank disposed of a total
of 113 branches and acquired 45, to become the principal bank of the Group in the Piedmont area.
Consistent with this operation, General Management, central offices and decentralised units at Cuneo were
transferred to Turin in January 2011. The statement of financial position and income statement figures as
at and for the year ended 31st December 2010 incorporate the effects of that operation and are therefore
not fully consistent with the comparative figures.
The year 2010 ended with a profit of 246,4 million euro, a significant increase compared to
54,6 million euro the year before, as a result of a gain (225,4 million euro net of taxes) realised
following the sale of an interest held in the share capital of Banca Popolare Commercio e
Industria to the Banca del Monte di Lombardia Foundation as part of the ownership structure
reorganisation following the “branch switches” performed in January 2010.


Again in relation to the action taken on the distribution network, net operating income halved
over twelve months, down from 118,4 million euro to 58,2 million euro, as a result of a fall in
operating income (-96,3 million euro, -27,3%), which was only partially offset by a reduction in
expenses (-36,1 million euro, -15,4%).

Within operating income, amounting to 255,9 million euro:
• net interest income amounted to 147,4 million euro (-39,9 million euro) affected by trends
  for interest rates, but above all by reduced volumes of business, as a result of the net
  reduction in the number of branches following the switching operation;
• dividends and similar income amounted to 1,3 million euro (-9 million euro) and consisted
  principally of the dividend received from Banco di San Giorgio amounting to one million
  euro (-9,8 million in 2009);
• net commission income fell to 99,3 million euro (-32,6 million euro). The reduction regarded
  all the main items, again reflecting the impacts of the change in the geographical area
  covered by the distribution network;
• net income from trading and hedging activity was -0,9 million euro compared to 12,8
  million euro in 2009, which included non-recurring income of 8,9 million euro from the
  disposal of the interest held in Cedacri. The result for 2010 was affected by the negative
  impact of the hedges on fixed rate mortgages despite the positive effect of the fair value
  change in hedges on bonds;
• the item other net operating income/(expense) decreased by 1,1 million euro to 8,8 million
  euro, basically as a result of lower recoveries of charges from ordinary customers.

The fall in operating expenses, amounting to 197,6 million euro, affected all components, as a
result of the change in the operating structure produced by the “switch”:
   personnel expense, fell to 110,1 million euro from 128,6 million euro in 2009 due to a
   decrease in average personnel numbers, lower company bonuses and a lower actuarial
   valuation (post-employment benefits, loyalty bonus), despite 2,3 million euro of non-
   recurring expenses for leaving incentives;
   other administrative expenses fell to 80,9 million euro from 96 million euro before, as a
   result of lower intragroup service charges, lower tenancy of premises expenses and lower
   postal expenses;
   net impairment losses on property, equipment and investment property and intangible
   assets fell from 9,1 million euro to 6,6 million euro, as a result of the disposal of properties
   that occurred as part of the operation to optimise the branch network.

Net impairment losses on loans amounted to 27,4 million euro, down from 33,6 million euro
the year before. They included specific impairment losses on non-performing loans of 23,4
million euro (33,3 million euro in 2009) and collective impairment losses on performing loans,
up to four million euro (0,3 million euro in 2009), due to refinements made to the calculation
method.




                                                  164
Net releases of provisions for risks and charges amounted to 3,3 million euro. The item
benefited from a release of 3,9 million euro in relation to a settlement agreement concerning
litigation with the Ministry of the Economy and Finance, concluded in April.


As concerns statement of financial position items, in December loans to customers amounted
to 6,9 billion euro (-0,4 billion euro year-on-year), reflecting a reduction in volumes of
business as a consequence of the branch switches (-0,9 billion euro). In terms of types of
lending, mortgages fell to 3,9 billion euro (-0,4 billion euro) and current accounts to 1,3
billion euro (-0,4 billion euro), while there was an increase in “Other transactions” (+0,4
billion euro to 1,7 billion euro) which includes various types of short term lending (advances
on bills and import-export documents , etc..).
At the end of the year net deteriorated loans of the bank totalled 306,2 million euro, up from
285,2 million euro in December 2009. In detail, net non-performing loans, amounting to 128,5
million euro, increased by 18,1 million euro, impaired loans rose from 117,8 million euro to
131 million euro, while restructured loans doubled from 10,8 million euro to 20,3 million euro
as a result of reclassifications into this class of significant amount following the changes in the
composition of the branch network.
On the other hand past due exposures fell from 46,2 million euro to 26,4 million euro and
included 22,6 million euro of exposures in arrears for between 90 and 180 days, secured by
real estate property reclassified within deteriorated loans in accordance with supervisory
regulations (35,8 million euro at the end of 2009).

Direct funding amounted to 5,6 billion euro, compared to eight billion euro the year before,
reflecting a decrease in volumes of 1,5 billion euro, resulting from the “branch switches”. The
decrease in the total for the item was also the result of a fall in total bonds issued (-0,8 billion
euro), both for bonds issued to customers (-0,5 billion euro) and those subscribed by the
Parent (-0,3 billion euro for the early redemption of an issue of 0,5 billion euro against a new
issuance of 0,2 billion euro).

As concerns indirect funding from ordinary customers – amounting to 7,3 billion euro (-2,1
billion) – assets under custody totalled 3,1 billion euro (-0,7 billion euro year-on-year) with
lower net inflows of 1,5 billion euro as a result of the “branch switches”. Assets under
management fell to 4,2 billion euro (-1,4 billion euro), affected by lower net inflows of 1,2
billion euro as a result of the branch switching operation.

As a result of the differing trends for funding and lending with customers, the net interbank
debt of the bank at the end of year, relating primarily to the Parent, amounted to 0,2 billion
euro (compared to funds of 1,3 billion euro in December 2009).

Capital ratios as at 31st December 2010 consisted of a tier one ratio (tier one capital/risk
weighted assets) of 25,38% (15,52%) and a total capital ratio (supervisory capital and
reserves/risk-weighted assets) of 27,69% (17,98%).

The proposal for the allocation of profit is to distribute total dividends of 19,9 million euro.




                                                165
BANCA POPOLARE DI ANCONA SPA


                                                                                      31.12.2010       31.12.2009     Change        % change
Figures in thousands of euro

Statement of financial position
  Loans to customers                                                                    7.702.345        7.332.080      370.265          5,0%
      Direct funding (*)                                                                6.837.163        7.996.422    -1.159.259       -14,5%
      Net interbank position (debt)                                                      -209.751        1.314.307    -1.524.058           n.s.
      Financial assets held for trading                                                    25.159           20.259        4.900         24,2%
      Available-for-sale financial assets                                                  22.140           22.545         -405         -1,8%
      Equity (excluding profit for the year)                                              875.143          867.338        7.805          0,9%
      Total assets                                                                      9.100.755        9.377.093     -276.338         -2,9%
      Indirect funding from customers (including insurance)                             3.828.041        3.670.727      157.314          4,3%
        of which: assets under management                                                1.879.189        1.937.869      -58.680        -3,0%

Income statement                                                                        2010             2009
  Net interest income                                                                    204.263          234.174       (29.911)      (12,8%)
      Dividends and similar income                                                          3.757           16.437      (12.680)      (77,1%)
      Net commission income                                                               105.328          112.008       (6.680)       (6,0%)
      Net income/(loss) from trading, hedging and disposal/repurchase activities            2.970            (715)         3.685           n.s.
      Other net operating income/(expense) (**)                                             2.732            (196)        2.928            n.s.
      Operating income                                                                    319.050          361.708      (42.658)       (11,8%)
      Personnel expense                                                                 (125.953)        (128.114)       (2.161)        (1,7%)
      Other administrative expenses                                                      (90.704)         (96.523)       (5.819)       (6,0%)
      intangible assets                                                                  (11.980)         (12.262)         (282)       (2,3%)
      Operating expenses                                                                (228.637)        (236.899)       (8.262)        (3,5%)
      Net operating income                                                                 90.413          124.809      (34.396)       (27,6%)
      Net impairment losses on loans (***)                                               (51.481)        (115.745)      (64.264)      (55,5%)
      Net impairment losses on other assets/liabilities                                       955            (324)        1.279            n.s.
      Net provisions for risks and charges                                                 (1.057)          (3.320)      (2.263)      (68,2%)
      Profit on the disposal of equity investments (****)                                       25          17.077      (17.052)      (99,9%)
      Pre-tax profit from continuing operations                                            38.855           22.497       16.358         72,7%
      Taxes on income for the year for continuing operations (*****)                     (20.515)           (9.269)      11.246        121,3%
      Integration costs                                                                            -        (1.080)      (1.080)     (100,0%)
      of which: personnel expense                                                                  -        (1.200)      (1.200)      (100,0%)
           net impairment losses on property, equipment and investment property and
           intangible assets                                                                       -          (311)        (311)      (100,0%)
          taxes                                                                                    -           431         (431)      (100,0%)
      Profit for the year                                                                  18.340           12.148        6.192          51,0%

Other information
  Number of branches                                                                          248              256             -8
      Total work force (actual employees+personnel on leasing contracts)                    1.749            1.787          -38

Financial ratios
  ROE [profit for the year/equity (excluding profit for the year)]                         2,10%            1,40%
      Cost/income ratio (operating expenses/operating income)                             71,66%           65,49%
      Net non-performing loans/net loans to customers                                      3,73%            2,85%
      Net impaired loans/net loans to customers                                            3,29%            3,66%

(*)     Inclusive of bonds subscribed by the Parent amounting to 352 million euro as at 31st December 2010 (1.249 million euro as at
        31st December 2009).
(**)    In 2009 the item included a provision of 3,6 million euro following the conclusion of a settlement agreement with a large group of
        companies.
(***) The item for 2010 includes an impairment loss relating to the Mariella Burani Group amounting to 0,9 million euro. In 2009 that
        impairment loss amounted to 0,1 million euro.
(****) In 2009 the item included profit from the disposal of UBI Assicurazioni shares amounting to 17 million euro.
(*****) In 2009 the item included a non recurring positive impact resulting from an IRAP [local production tax] refund amounting to 1,6
        million euro.



As at 31st December 2010, UBI Banca held 92,8983% of the share capital of the Banca Popolare di Ancona,
Aviva Spa held 6,4853% and the remaining 0,6164% was held by minority shareholders.


The Bank ended the year with a profit of 18,3 million euro, an increase compared to 12,1
million euro in 2009, due to a significant reduction in impairment losses on loans as a result
of an improvement in the quality of lending.


                                                                             166
Net operating income nevertheless fell by 27,6%, as a result of a decrease in operating income
(-11,8%), only partly offset by a fall in expenses (-3,5%).

The     main    items      of  operating    income,    which   totalled    319,1     million  euro
(-42,7 million euro), performed as follows:
- net interest income fell to 204,3 million euro (-29,9 million euro), incorporating the effects
   of a reduction in the interest rate spread and unfavourable performance for average
   volumes of business;
- dividends and similar income fell to 3,8 million euro compared to 16,4 million euro the year
   before, which, however, included a dividend of 6,3 million euro paid by UBI Assicurazioni
   Spa (the investment was disposed of in December 2009);
- net commission income amounted to 105,3 million euro (-6,7 million euro), affected above
   all by commissions on current accounts, only partly offset by positive growth in assets
   under management and under custody, the latter driven by sales of bonds issued by the
   Parent and by third parties;
- trading, hedging and disposal/repurchase activities generated income of approximately
   three million euro (-0,7 million in 2009), mainly as a result of profit from fair value changes
   in mortgage and bond hedges, which more than compensated for losses on the repurchase
   of financial liabilities and the negative impact of unwinding derivatives to hedge against the
   early repayment of mortgages;
- other net operating income/expense, rose to 2,7 million euro compared a net expense in
   2009 (-0,2 million euro), which included a cost – amounting to 3,6 million euro – in
   relation to a settlement agreement with a major group of companies.

Operating expenses fell to 228,6 million euro (-8,3 million euro), as a result of contributions
from all expense items:
- personnel expense of 125,9 million euro fell by 2,2 million euro due mainly to lower
   provisions for company bonuses and also to a reduction in average personnel numbers. The
   item includes 4,5 million euro of leaving incentives following the trade union agreement of
   20th May 2010. Net of that non recurring item the expense decreased by 5,2%;
- other administrative expenses fell to 90,7 million euro (-5,8 million euro), due to lower
   expenses for professional and advisory services, the tenancy of premises, outsourced
   services and services provided by other Group member companies;
- net impairment losses on property, equipment and investment property and intangible
   assets also fell to 12 million euro from 12,3 million euro the year before.

As a result of an improvement in the quality of loans, net impairment losses on loans fell from
115,7 million euro to 51,5 million euro. The cost of credit therefore decreased as a result from
1,58% to 0,67%, returning into line with the average for the Group.
Net provisions for risks and charges fell from 3,3 million euro to 1,1 million euro, benefiting
from the release of excess and/or unnecessary provisions for losses on claims (+1,3 million
euro) and revocation actions (+0,7 million euro).


As concerns the statement of financial position, at the end of the year loans to customers had
reached 7,7 billion euro, up from 7,3 billion euro the year before, driven by growth in
mortgages (+0,5 billion euro to approximately five billion euro), while current account deposits
decreased (-0,1 billion euro to 1,5 billion euro).

Net deteriorated loans of the bank totalled 572,3 million euro compared to 508,2 million euro
twelve months before (+12,6%). Within the aggregate, net non-performing loans increased
(from 209,2 million euro to 287,4 million euro) as did restructured exposures (from 0,9 million
euro to 15,7 million euro). On the other hand decreases were recorded for impaired loans (from
268,7 million euro to 253,4 million euro) and past due exposures (from 29,4 million euro to
15,7 million euro), within which exposures in arrears for between 90 and 180 days secured by
real estate property fell from 24,4 million euro to 11,5 million euro.

Direct funding amounted to 6,8 billion euro, down from eight billion euro in December 2009 (-
14,5%), penalised above all by a fall in securities issued, down by over one billion euro to 2,3


                                               167
billion euro, mainly due to the redemption of bonds subscribed by the Parent (-0,9 billion
euro).
However, the fall in amounts due to customers was more modest (-0,1 billion euro to
approximately 4,5 billion euro), reflecting a fall in current account deposits (-0,3 billion euro
to 4,2 billion euro), only partly offset by funding from repurchase agreements.

Indirect funding grew by 0,2 billion euro to 3,8 billion euro as a result of an increase in assets
under custody (+0,2 billion euro, to almost two billion euro), which benefited from an issuance
of bonds (some subordinated), issued by third parties and by the Parent for a total of 0,3
billion euro. On the other hand, there was a slight fall in assets under management (-0,1
billion euro to 1,9 billion euro), due primarily to a decrease in mutual funds and Sicav’s (-0,1
billion euro to 0,8 billion euro), despite fair performance for customer portfolio management.

At the end of the year net interbank debt stood at 0,2 billion euro (funds of 1,3 billion euro in
December 2009). With regard to assets this was due to a decrease in liquidity on the interbank
current account held with the Parent, as a consequence of redemptions of bonds and the
maturities of two deposits (one a term deposit of 0,3 billion euro and one a subordinated
deposit of 0,2 billion euro), while with regard to liabilities it was due to an increase in debt as a
consequence of the redemptions already mentioned.

Capital ratios as at 31st December 2010 consisted of a tier one ratio (tier one capital/risk
weighted assets) of 15,13% (16,16% in 2009) and a total capital ratio (supervisory capital and
reserves/risk-weighted assets) of 15,57% (16,65%).

The proposal for the allocation of profit is to distribute dividends of 16,5 million euro after an
allocation to the extraordinary reserve of 1,2 and an allocation of 0,6 million euro to a fund
available to the Board of Directors.




                                                168
BANCA CARIME SPA


                                                                                  31.12.2010       31.12.2009     Change       % change
Figures in thousands of euro

Statement of financial position
  Loans to customers                                                                4.765.224        4.530.670      234.554         5,2%
  Direct funding                                                                    7.562.665        7.892.084     -329.419        -4,2%
  Net interbank position                                                            3.670.923        4.318.255     -647.332       -15,0%
  Financial assets held for trading                                                     2.698            2.214          484        21,9%
  Available-for-sale financial assets                                                  27.793           28.110         -317        -1,1%
  Equity (excluding profit for the year)                                            1.551.681        1.548.575        3.106          0,2%
  Total assets                                                                      9.784.297       10.094.090     -309.793         -3,1%
  Indirect funding from customers (including insurance)                             5.753.026        5.705.915       47.111          0,8%
    of which: assets under management                                                3.688.062        3.947.603    -259.541         -6,6%

Income statement                                                                    2010             2009
  Net interest income                                                                237.036          275.724      (38.688)       (14,0%)
  Dividends and similar income                                                           107              115           (8)        (7,0%)
  Net commission income                                                              109.737          118.201       (8.464)        (7,2%)
  Net income/(loss) from trading, hedging and disposal/repurchase activities            2.018            (609)         2.627           n.s.
  Other net operating income                                                            4.618            5.835       (1.217)      (20,9%)
  Operating income                                                                    353.516          399.266     (45.750)       (11,5%)
  Personnel expense                                                                 (153.219)        (154.655)      (1.436)        (0,9%)
  Other administrative expenses                                                       (94.309)        (95.118)        (809)        (0,9%)
  Net impairment losses on property, equipment and investment property and
  intangible assets                                                                   (14.582)        (13.703)          879          6,4%
  Operating expenses                                                                (262.110)        (263.476)       (1.366)       (0,5%)
  Net operating income                                                                  91.406        135.790      (44.384)       (32,7%)
  Net impairment losses on loans                                                      (22.875)        (20.128)        2.747         13,6%
  Net impairment losses on other assets/liabilities                                      (434)             123        (557)           n.s.
  Net provisions for risks and charges                                                     862         (6.076)        6.938           n.s.
  Profit (loss) on the disposal of equity investments                                       (2)             21         (23)           n.s.
  Pre-tax profit from continuing operations                                             68.957        109.730      (40.773)       (37,2%)
  Taxes on income for the year for continuing operations (*)                          (31.305)        (36.951)      (5.646)      (15,3%)
  Integration costs                                                                           -        (2.791)      (2.791)     (100,0%)
  of which: personnel expense                                                                  -        (3.541)      (3.541)     (100,0%)
       net impairment losses on property, equipment and investment property and
       intangible assets                                                                       -          (330)        (330)     (100,0%)
       taxes                                                                                   -         1.080       (1.080)     (100,0%)
  Profit for the year                                                                  37.652           69.988     (32.336)       (46,2%)

Other information
  Number of branches                                                                      294              295           -1
  Total work force (actual employees+personnel on leasing contracts)                    2.224            2.254          -30

Financial ratios
  ROE [profit for the year/equity (excluding profit for the year)]                     2,43%            4,52%
  Cost/income ratio (operating expenses/operating income)                             74,14%           65,99%
  Net non-performing loans/net loans to customers                                      1,24%            0,95%
  Net impaired loans/net loans to customers                                             2,27%           1,59%


(*) In 2009 the item included the non recurring positive impacts resulting from the payment of a substitute tax with the release of
    deferred tax liabilities – for the purposes of the decree for the realignment of differences in statutory and tax accounting figures,
    following the adoption of IFRS – amounting to 6,1 million euro and from an IRAP (local production tax) refund amounting to 1,2
    million euro.



As at 31st December 2010, UBI Banca held 92,8322% of the share capital of the Banca Carime, Aviva Spa
held 7,1476% and the remaining 0,0202% was held by minority shareholders.


The year 2010 ended with a profit for Banca Carime of 37,7 million euro compared to 70
million euro in 2009, the result of a difficult market context – characterised by continued falls
in volumes of business – against a structurally weak socio-economic background.




                                                                        169
Net operating income fell by 44,4 million euro to 91,4 million euro, as a result of a fall in
operating income (-45,8 million euro to 353,5 million euro) and a modest decrease in operating
expenses (-1,4 million euro to 262,1 million euro).
Within operating income, net interest income fell to 237 million euro (-38,7 million euro)
mainly due to the downwards pressure on interest rates, despite growth in average volumes of
lending (+5,1%).
Net commission income totalled 109,7 million, a decrease of 7,2% (-8,5 million euro), as a
result of different trends that affected individual items. Falls in commissions on current
account management and on consumer credit were only partially offset by commission income
on assets under custody – which benefited from the sale of bonds issued by the Parent and
third parties – and on insurance products.

Net income on trading, hedging and disposal/repurchase activities which showed a loss of 0,6
million euro in 2009, recorded income of two million euro, due to hedging activity (2,4 million
euro) – from hedge accounting on mortgages, financing and fixed rate bonds – and, although to
a lesser extent, to trading activity (1,2 million euro) driven by profits on trading in government
securities and in currencies, while losses were recorded of 1,5 million euro from the
disposal/repurchase of financial liabilities attributable to interest rate trends.

Other net operating income/(expense) fell from 5,8 million euro to 4,6 million euro due
primarily to lower expense recoveries from ordinary customers.

With regard to expenses, personnel expense amounted to 153,2 million euro, a decrease of 1,4
million euro (-0,9%), attributable to lower provisions for company bonuses and also to a
decrease in average personnel numbers. The item included the following:
-  a prudential provision for risks and charges of 3,4 million euro as the best present
   estimate of the increased liabilities arising from a refinement of the formula employed to
   calculate the pension fund with particular reference to periodic payments made to
   participants in the fund;
-  leaving incentives of 5,9 million euro, pursuant to the trade union agreement of 20th May
   2010. Net of that non recurring item the expense decreased by 4,8%.

Similarly other administrative expenses also decreased slightly to 94,3 million euro (-0,9%), as
a result of reduced “Tenancy of premises” expenses (electricity).
Net impairment losses on property, equipment and investment property and intangible assets
amounted to 14,6 million euro compared to 13,7 million euro in 2009.

As a result of the performance reported above, the cost/income ratio worsened, rising from
65,99% to 74,14%.

Net impairment losses on loans rose to 22,9 million euro (+2,7 million euro). While specific net
impairment losses remained almost unchanged (-0,8 million euro), collective impairment
losses recorded a decrease (+3,5 million euro), following a refinement of the calculation method
and the update of the historical data series used as the basis for the estimate of risk
parameters of the rating models (PD) and LGD.
        Net provisions for risks and charges – which included provisions for revocation actions
and for customer claims relating to compounding of interest and financial investments –
showed releases of 0,9 million euro following the conclusion of litigation without
disbursements or with settlements for sums lower than the provision set aside (provisions of
6,1 million euro were recognised in 2009).


As concerns the statement of financial position, in December loans to customers reached 4,8
billion euro (+0,2 billion euro), driven by medium-to-long term loans (+0,3 billion euro), which
now account for approximately 70% of the total.
The trend for net deteriorated loans rose to 184,6 million euro (+27,4 million euro), a reflection
of the fragile economic context and the consequent poorer quality of credit. Net non-
performing loans amounted to 58,9 million euro, an increase of 36,8% year-on-year, while net
impaired loans, amounting to 108 million euro, increased by 50,2%. On the other hand past
due exposures fell from 42,2 million euro to 15,5 million euro. These included, 12,1 million of


                                               170
exposures in arrears for between 90 and 180 days relating to property mortgages, classified in
that class in accordance with Bank of Italy provisions.

At the end of the year direct funding totalled 7,6 billion euro, a decrease of 0,3 billion euro (-
4,2%) compared to 2009, attributable to securities issued, and to bonds in particular (-0,5
billion euro, to 2,2 billion euro), which were replaced by forms of indirect funding to which
customers oriented their asset allocation decisions.

Amounts due to customers on the other hand recorded an increase (+0,2 billion euro to 5,2
billion euro), driven by the item current accounts and deposits.

Indirect funding, amounting to approximately 5,8 billion euro, remained more or less
unchanged over twelve months (+0,8%). Within the item, assets under custody increased by
17,4% to over two billion euro – due to the sale of bonds issued by the Parent and third parties
– which offset the fall in assets under management (-6,6% to 3,7 billion euro), penalised by
difficulties in the insurance area (-0,7% to 1,3 billion euro) and above all with mutual funds
and Sicav’s (-10,2% to 2,2 billion euro), while customer portfolio management performed well
(+5,1% to 0,2 billion euro).

As a result of the differing trends for funding and lending with customers, while still positive,
the net interbank position fell from 4,3 billion euro to 3,7 billion euro.

Capital ratios as at 31st December 2010 consisted of a tier one ratio (tier one capital/risk
weighted assets) of 25,23% (22,87% at the end of 2009) and a total capital ratio (supervisory
capital and reserves/risk-weighted assets) of 29,82% (27,08%).

The proposal for the allocation of profit is to distribute total dividends of 33,9 million euro
after legal and by-law allocations.




                                               171
CENTROBANCA SPA


                                                                                 31.12.2010       31.12.2009       Change        % change
Figures in thousands of euro

Statement of financial position
  Loans to customers                                                               6.972.678        7.047.210        -74.532         -1,1%
      Direct funding (*)                                                           5.547.161        4.172.765       1.374.396        32,9%
      Net interbank debt                                                          -1.514.777       -2.977.202      -1.462.425       -49,1%
      Financial assets held for trading                                              447.633          399.861         47.772        11,9%
      Available-for-sale financial assets                                            566.135          537.143         28.992          5,4%
      Equity (excluding profit for the year)                                         577.124          574.553          2.571          0,4%
      Total assets                                                                10.512.435        8.806.074      1.706.361        19,4%

Income statement                                                                   2010             2009
  Net interest income                                                               100.212          126.192         (25.980)      (20,6%)
  Dividends and similar income                                                        1.532            3.686          (2.154)      (58,4%)
      Net commission income                                                           42.102           40.890          1.212          3,0%
      Net income from trading, hedging and disposal/repurchase activities             14.010           24.264        (10.254)      (42,3%)
      Other net operating income                                                       5.351            3.543          1.808         51,0%
      Operating income                                                              163.207          198.575         (35.368)      (17,8%)
      Personnel expense                                                             (32.957)         (33.449)           (492)       (1,5%)
      Other administrative expenses                                                 (21.049)         (23.234)         (2.185)       (9,4%)
      Net impairment losses on property, equipment and investment property and
      intangible assets                                                               (1.003)           (993)             10          1,0%
      Operating expenses                                                            (55.009)         (57.676)         (2.667)        (4,6%)
      Net operating income                                                          108.198           140.899        (32.701)       (23,2%)
      Net impairment losses on loans (**)                                           (65.430)        (112.386)        (46.956)      (41,8%)
      Net impairment losses on other assets/liabilities                               (3.564)          (2.477)         1.087         43,9%
      Net provisions per risks and charges                                            (7.669)             679         (8.348)          n.s.
      Profit/loss on the disposal of equity investments (***)                            (15)          17.798        (17.813)          n.s.
      Pre-tax profit from continuing operations                                       31.520           44.513        (12.993)      (29,2%)
      Taxes on income for the year for continuing operations (****)                 (15.367)         (16.471)         (1.104)       (6,7%)
      Profit for the year                                                             16.153           28.042        (11.889)      (42,4%)

Other information
  Number of branches                                                                          6                7            -1
      Total work force (actual employees+personnel on leasing contracts)                 325              351            -26

Financial ratios
  ROE [profit for the year/equity (excluding profit for the year)]                    2,80%            4,88%
  Cost/income ratio (operating expenses/operating income)                            33,71%           29,04%
      Net non-performing loans/net loans to customers                                 1,16%            0,67%
      Net impaired loans/net loans to customers                                       2,07%            3,10%

(*)    Inclusive of bonds subscribed by the Parent (and by Banco di San Giorgio) amounting to 201,6 million euro as at 31st December
       2010 (1.105,2 million euro as at 31st December 2009).
(**)   The item for 2010 includes the impairment loss relating to the Mariella Burani Group amounting to six million euro. In 2009 that
       impairment loss amounted to 47 million euro.
(***) In 2009 the item related to the sale of IW Bank shares to Webstar Sa.
(****) In 2009 the item included a positive non-recurring impact resulting from an IRAP [local production tax] refund of 0,9 million
       euro.



As at 31st December 2010, UBI Banca held 92,3818% of the share capital of Centrobanca, while 5,4712%
was held by Banca Popolare di Ancona Spa, 1,6% by Banca Popolare di Sondrio Scpa, 0,1420% by Banca
di Piacenza Scpa, 0,1008% by Veneto Banca Holding Scpa and the remaining portion totalling 0,3042%
was held by 24 different banks, mainly “popular” banks.


Centrobanca is the bank in the Group which specialises in corporate and investment banking
to support corporate clients with innovation, expansion and financial restructuring.

The year 2010 ended with a profit of 16,2 million euro, a decrease compared to 28 million euro
the year before, which, however, had benefited from non-recurring income totalling 18,4
million euro net of taxes. In normalised terms, net of those items, 2010 profit recorded a
significant recovery from 9,6 million euro to 16,6 million euro (+72%).



                                                                      172
The continuing difficult economic situation and the extraordinary low levels of interest rates
affected the results of the bank, which recorded a fall in income which more than offset the
reduction in expenses and the lower cost of credit.

Net operating income fell to 108,2 million euro (-32,7 million euro; -23,2%).

Within operating income, amounting to 163,2 million euro (-35,4 million euro; -17,8%):
- net interest income amounted to 100,2 million euro, a decrease of over a fifth compared to
  2009, due to the combined effect of continuing low interest rates at record low levels and a
  reduction in average volumes of business;
- dividends (-2,2 million euro to 1,5 million euro) were affected by the generally lower
  dividends received from IW Bank and from investees as part of private equity business;
- net commission income increased to 42,1 million euro (+1,2 million euro), driven by
  commissions on lending activity;
- net income from trading hedging and disposal/repurchase activity decreased by 10,3
  million euro to 14 million euro, the aggregate result of opposing trends for trading (-7,7
  million euro, including -6,4 million euro from securities in the owned portfolio) and hedging
  (+3,4 million euro, largely in relation to the unwinding of hedges on owned securities
  subject to repurchase), against increased losses from disposal/repurchase activity
  amounting to six million euro (including -5,3 million euro resulting from the disposal of
  non-performing loans);
- other net operating income/(expense) totalled 5,4 million euro (+1,8 million euro) and
  included, the recovery of legal costs incurred by the bank (2,1 million euro) and receipts in
  relation to the price adjustment for the disposal of the interest held in Radici Film that
  occurred in 2009 (2,3 million euro), for which a provision of the same amount had been
  made.

Within operating expenses (-2,7 million euro to 55 million euro; -4,6%) the most significant
reduction regarded other administrative expenses (-2,2 million euro to 21 million euro), as a
result of a decrease of 1,3 million euro in business support expenses, mainly those of a legal
and advisory nature, resulting from action taken to optimise the professionals engaged,
despite the presence of particularly critical positions involved in litigation.

The decrease in personnel expense on the other hand (-0,5 million euro to 33 million euro)
reflects the following: a reduction in variable components of remuneration (bonuses and
incentive schemes); nine employees leaving under incentive schemes; less use of temporary
and external personnel; and effective management of personnel turnover (replacement of
personnel leaving with less costly appointments).

As a result of the performance reported above, the cost/income ratio increased to 33,71%,
from 29,04% in 2009.

Net impairment losses on loans, amounting to 65,4 million euro, fell significantly compared to
112,4 million a year before. The overall improvement is the aggregate result of a significant
decrease in net specific impairment losses (down to 68,2 million euro from 104,8 million euro
in 2009) and the presence of net reversals of impairment losses for collective impairment of
loans (2,8 million euro compared to impairment losses of 6,7 million euro in 2009).
Approximately 40% of the specific impairment losses were attributable to five positions
including that relating to the Mariella Burani Group amounting to six million euro (47 million
euro in 2009).
Net provisions for risks and charges rose to 7,7 million euro (+8,3 million euro), including two
million euro in relation to revocation risks on the Mariella Burani position.


As concerns the statement of financial position, loans to customers amounted to 6,97 billion
euro, slightly down compared to 7,05 billion euro in 2009 (-1,1%). In terms of type of business,
there was a slight decrease in corporate lending (-1,5%) and in corporate finance
(-1,1%), while Acquisition & Project Finance remained stable (+0,6%).




                                              173
The year 2010 recorded a slight recovery in lending, with an increase in loans approved (+2,1%
to 3,35 billion euro). The main recipients of new loans (+0,5% to 2,16 billion euro) were non
financial companies.

Total net deteriorated loans increased only slightly during the year to 437,8 million euro (+5,9
million euro; +1,4%), accompanied, however, by a change in the composition of the different
classes.     While      reductions    were      recorded      for    net     impaired      loans
(-74,1 million euro) and net past due exposures (-73,9 million euro), both net non-performing
loans (+33,8 million euro) and restructured loans in particular recorded increases (+120,2
million euro). As a result of these trends, the ratio of net impaired loans to net lending fell
from 3,1% to 2,1%, while the ratio of non-performing loans to net lending rose from 0,7% to
1,2% and the ratio of net restructured loans to net loans rose to 2,4% from 0,7% at the end of
2009.

Over twelve months net interbank debt halved (down from -3 billion euro to -1,5 billion euro),
mainly as a result of an increase in receivables from banks (+1,7 billion euro) following the
subscription of UBI bonds, as part of funding activity performed for the Parent.

Direct funding from customers rose to 5,5 billion euro from 4,2 billion euro the year before,
supported by the placement of bonds (mainly on external distribution networks) for
approximately 2,8 billion euro, including approximately 1,7 billion euro transferred to the
Parent, against maturities and redemptions of own securities amounting to 970 million euro.

Financial assets held for trading increased by 12% to 448 million euro in relation to both the
value of investments made as part of merchant banking and investment banking business and
to the purchase of the Vallourec share, which was nevertheless disposed of in the first few
days of 2011.
The portfolio of available-for-sale financial assets, consisting almost entirely of investments in
corporate bonds made as part of Centrobanca’s general lending business, increased to
approximately 566 million euro from 537 million euro the year before. Investment policies in
2010 were designed to refocus on captive Group customers with investments in Italian
corporate issuers and the major European players operating in Italy.

Capital ratios as at 31st December 2010 consisted of a tier one ratio (tier one capital/risk
weighted assets) of 6,30% (6,71% at the end of 2009) and a total capital ratio (supervisory
capital and reserves/risk-weighted assets) of 8,09% (9,08%).

The proposal for the appropriation of profits is to first allocate 0,8 million to the legal reserve
and then to distribute dividends of 15,5 million euro, by drawing 0,1 million euro from
retained profits.




                                               174
B@NCA 24-7 SPA


                                                                                               31.12.2010       31.12.2009       Change       % change
Figures in thousands of euro

Statement of financial position
  Loans to customers                                                                            11.219.553       10.855.336       364.217          3,4%
  Direct funding (*)                                                                             4.344.858        4.376.481       -31.623         -0,7%
  Net interbank debt                                                                            -7.757.694       -7.858.789      -101.095         -1,3%
  Equity (excluding profit for the year)                                                           348.179          397.552       -49.373        -12,4%
  Total assets                                                                                  12.957.569       13.136.902      -179.333         -1,4%
Income statement                                                                                 2010             2009
  Net interest income                                                                             200.453          174.415         26.038         14,9%
  Dividends and similar income                                                                              -                2         (2)     (100,0%)
  Net commission income                                                                             17.634           25.792        (8.158)      (31,6%)
  Net loss from trading, hedging and disposal/repurchase activity                                 (24.036)         (31.758)        (7.722)      (24,3%)
  Other net operating income                                                                        29.817           24.710          5.107        20,7%
  Operating income                                                                                223.868          193.161         30.707          15,9%
  Personnel expense                                                                               (13.046)         (12.775)           271           2,1%
  Other administrative expenses                                                                   (45.921)         (49.069)        (3.148)       (6,4%)
  Net impairment losses on property, equipment and investment property and intangible assets         (180)            (229)           (49)      (21,4%)
  Operating expenses                                                                              (59.147)         (62.073)        (2.926)        (4,7%)
  Net operating income                                                                             164.721          131.088         33.633        25,7%
  Net impairment losses on loans                                                                 (149.833)        (184.877)       (35.044)      (19,0%)
  Net provisions per risks and charges (**)                                                         (8.912)          (1.374)        7.538        548,6%
  Pre-tax profit from continuing operations                                                          5.976         (55.163)         61.139           n.s.
  Taxes on income for the year for continuing operations (***)                                    (11.699)            6.522       (18.221)           n.s.
  Integration costs                                                                                         -         (753)         (753)      (100,0%)
  of which: other administrative expenses                                                                   -        (1.112)       (1.112)      (100,0%)
         taxes                                                                                              -           359          (359)      (100,0%)
  Profit for the year                                                                               (5.723)        (49.394)       (43.671)       (88,4%)

Other information
  Number of branches                                                                                        1                1            -
  Total work force (actual employees+personnel on leasing contracts)                                   227              218               9

Financial ratios
  ROE [profit for the year/equity (excluding profit for the year)]                                 26,42%           32,14%
  Net non-performing loans/net loans to customers                                                   1,55%            1,03%
  Net impaired loans/net loans to customers                                                         0,65%            0,57%

   (*)   Inclusive of bonds subscribed by the Parent amounting to 4.321 million euro as at 31st December 2010 (4.349,1 million euro as at
         31st December 2009).
   (**) In 2010 the item included a provision of eight million euro in relation to estimated risks on the part of the lending portfolio
         guaranteed by Ktesios Spa.
   (***) In 2009 the item included a positive non-recurring impact resulting from an IRAP [local production tax] refund of 0,2 million euro.



   The bank ended the year with a loss of 5,7 million euro compared to -49,4 million euro in
   2009. Despite incurring a loss again, the improvement that occurred in both net operating
   income and in trends for impairment losses on loans, nevertheless resulted in a return to
   profit before taxes.

   Net operating income amounted to 164,7 million euro (+33,6 million euro; +25,7%), due
   primarily to good performance by revenues, up to 223,9 million euro (+30,7 million euro;
   +15,9%), but also to a reduction at the same time in expenses, down to 59,1 million euro (-2,9
   million euro; -4,7%).
   Operating income included the following:
   - net interest income, which was yet again the main driver, rising to 200,5 million euro (+26
      million euro) as a result of positive performance by average volumes of business and by the
      spreads. While interest income was more or less unchanged, the increase was attributable
      mainly to interest expense, within which the positive impact on securities issued was partly
      offset by negative differentials on hedges on loans to customers;


                                                                          175
-   net commissions, which fell to 17,6 million euro (-8,2 million euro), within which
    commissions on insurance policies decreased in particular, affected by the lower volumes of
    loans granted;
-   net income from trading, hedging and disposal/repurchase activities, which again showed
    an overall loss (-24 million euro), the result of an improvement in hedging activity and
    poorer performance by trading activity, affected solely by the failure to meet the “effective
    hedge” criterion (i.e. the unwinding of derivative positions);
-   other net operating income/(expense) increased to 29,8 million euro (+5,1 million euro),
    benefiting from lower prior year expenses.

Operating expenses included the following:
- other administrative expenses, which fell to 45,9 million euro (-3,1 million euro), mainly in
  relation to lower expenses for “Professional and advisory services” and for the “Use of
  networks and ICT services”, despite increases in expenses for credit recovery expenses and
  for IT system management services outsourced to other Group member companies;
- personnel expense on the other hand increased to 13 million euro (+0,3 million euro) partly
  in relation to increased personnel numbers.

As a result of the performance reported above, the cost/income ratio improved over twelve
months from 32,14% to 26,42%.

While net impairment losses on loans (-35 million euro to 149,8 million euro) still remained at
high levels, they benefited from action taken to contain risks, which took the form of reducing
loans to “non captive” customers originated through the network of the SILF Group and also to
“captive” customers originated through Group branches.
On the other hand an increase was recorded for net provisions for risks and charges (+7,5
million euro to 8,9 million euro), which took account of possible operational risks connected
with salary backed lending business.

Pre-tax profit, amounting to six million euro, recorded a considerable improvement compared
to the loss of 55,2 million euro incurred in 2009. The final loss for the year, amounting to 5,7
million euro, was affected by a particularly severe tax impact (11,7 million euro), due mainly to
the limits on the deductibility of impairment losses on loans.

As concerns the statement of financial position, the lending portfolio recorded a moderate
increased in 2010, while volumes of business decreased.

Total outstanding loans increased by 3,4% to 11,2 billion euro (+0,4 billion euro) over twelve
months with a change in composition in favour of mortgages (up from 42,3% to 45,9% of the
total) and salary backed loans (up from 23,6% to 27,7%), while the percentages of both non
captive loans originated by SILF (down from 14,8% to 9,7%) and captive loans originated by
Group branches (down from 18,4% to 15,9%) fell. On the other hand, the remaining types of
lending were practically unchanged (down from 0,9% to 0,8%).

The total amount of new loans granted, on the other hand, fell by 39,3%, falling from 4,4
billion euro in 2009 to 2,7 billion euro. In detail, these consisted of the following: over one
billion euro of salary backed loans originated by external networks (Prestitalia1 and others, -
24,8%); approximately one billion euro of mortgages (-33,5%), mainly through the network of
BY YOU Spa2; 0,7 billion euro of personal and special purpose loans distributed through the
network banks (-36,5%) and the SILF distribution network (-80,3%).
As concerns mortgages, an important project was prepared to be implemented in 2011. It
involves the transfer to the network banks of disbursement activities and overall customer
relationship management, designed on the one hand to ensure greater stability over time for
lending business, reducing expenses connected with early repayments and on the other to

1   On 10th January 2011, B@nca 24-7 acquired the entire investment in the share capital of Prestitalia Spa from Barberini Sa, a
    company 100% controlled by UBI Banca.
2   Contacts continued in 2010 between the Parent and the BY You distribution network designed to identify more appropriate methods
    to renew the commercial agreement with B@nca 24-7, which expires on 5th October 2011. On 15th February 2011, an “amendment
    agreement” to that commercial agreement was signed, designed to limit the exclusive rights of the bank for a limited period of time,
    thereby allowing BY YOU, in come cases, to propose property mortgages to other intermediaries.


                                                                 176
generate improved and sustainable economic returns by exploiting cross selling possibilities
with other Group products.

At the end of the year total active cards issued by B@nca 24-7 to Group customers numbered
close to 505 thousand, an increase year-on-year of 6,1% compared to 476 thousand at the
end of 2009. A particularly significant increase in new issues of cards was recorded, mainly
the result of the process of replacing multifunction cards which commenced in July.

Over the twelve months in question, net deteriorated loans increased from 198 million euro to
269,3 million euro (+36%): net non-performing loans increased from 111,5 million euro to
173,7 million euro (+55,7%), net impaired loans rose from 61,6 million euro to 73,1 million
euro (+18,6%), while exposures past due and in arrears fell from 24,9 to 22,6 million euro (-
9,3%). At the same time as the action already mentioned concerning new loans was taken to
reduce risk in the loan portfolio, in 2010 the bank took further initiatives to improve the
management of credit quality. It brought its organisational structure into line with that of the
Group with the creation of a specific unit entitled “Credit support and monitoring” and it
intensified controls on documentation of customer personal details and income, introducing
more stringent credit rules on mortgage lending3.

Lending business is financed mainly through intragroup interbank funding (current accounts
overdrafts with UBI Banca and Banca Popolare di Bergamo; term deposits and repurchase
agreements with the Parent, where the collateral consists of senior securities resulting from
securitisations), but also through the issue of bonds subscribed by the Parent4.
The net interbank position as at 31st December 2010 was therefore again one of debt of -7,8
billion euro, with no significant change compared to the previous year (-7,9 billion euro).

Capital ratios as at 31st December 2010 consisted of a tier one ratio (tier one capital/risk
weighted assets) of 6,85% (7,85% at the end of 2009) and a total capital ratio (supervisory
capital and reserves/risk-weighted assets) of 9,36% (10,78%).

The Board of Directors has proposed carrying forward the loss for 2010 amounting to 5,7
million euro.




3   In accordance with new Group policies, mortgages with a loan to value of greater than 80% were progressively reduced from the
    beginning of 2011 (a maximum of 5% of loans for mortgages with an LTV of greater than 80% and a maximum of 0,5% for
    mortgages with an LTV of greater than 95%).
4   At the end of August the Banca issued a bond with a seven year maturity, subscribed entirely by the Parent, amounting to 420
    million euro. This issue partly offset the early redemption of another issue for a nominal amount of 450 million euro, maturing in
    2015.


                                                                177
IW BANK SPA


                                                                                   31.12.2010      31.12.2009       Change       % change
Figures in thousands of euro

Statement of financial position
  Loans to customers                                                                    207.028         149.538        57.490         38,4%
      Direct funding                                                                  1.513.127       1.469.381        43.746          3,0%
      Net interbank position                                                            401.300         516.338      -115.038        -22,3%
      Financial assets held for trading                                                  21.113          39.648       -18.535        -46,7%
      Available-for-sale financial assets                                              845.043          787.147        57.896          7,4%
      Equity (excluding profit for the year)                                            36.065           61.858       -25.793        -41,7%
      Total assets                                                                    2.874.217       2.569.415       304.802         11,9%
      Indirect funding from customers (including insurance)                           3.037.925       2.403.852       634.073         26,4%
        of which: assets under management                                               496.899         331.451        165.448        49,9%

Income statement                                                                      2010            2009
  Net interest income                                                                   24.047          32.127         (8.080)      (25,2%)
      Net commission income                                                              33.062          31.738         1.324           4,2%
      Net income from trading, hedging and disposal/repurchase activities                 7.787           6.589         1.198         18,2%
      Other net operating income/(expense) (*)                                            4.175           (420)         4.595           n.s.
      Operating income                                                                   69.071          70.034         (963)         (1,4%)
      Personnel expense                                                                (20.577)        (19.517)         1.060           5,4%
      Other administrative expenses                                                    (31.977)        (26.453)         5.524          20,9%
      intangible assets (**)                                                             (8.470)         (6.510)        1.960         30,1%
      Operating expenses                                                               (61.024)         (52.480)         8.544         16,3%
      Net operating income                                                                8.047           17.554       (9.507)       (54,2%)
      Net impairment losses on loans                                                      (969)          (5.530)       (4.561)      (82,5%)
      Net impairment losses on other assets/liabilities                                   (613)                 -         613               -
      Net provisions for risks and charges (***)                                         (2.933)         (2.247)          686         30,5%
      Loss on the disposal of equity investments (****)                                  (1.982)               -         1.982             -
      Pre-tax profit from continuing operations                                            1.550           9.777       (8.227)       (84,1%)
      Taxes on income for the year from continuing operations                            (1.994)         (5.720)       (3.726)      (65,1%)
      Profit (loss) for the year                                                          (444)           4.057        (4.501)           n.s.

Other information
  Number of branches                                                                          2               2              -
  Total work force (actual employees+personnel on leasing contracts)                        292             282             10

Financial ratios
  ROE [profit for the year/equity (excluding profit for the year)]                       -1,23%           6,56%
      Cost/income ratio (operating expenses/operating income)                           88,35%          74,94%
      Net non-performing loans/net loans to customers                                         -               -
      Net impaired loans/net loans to customers                                           0,01%          0,08%

The figures as at and for the year ended 31st December 2009 have not been restated on a pro-forma basis to take account of Twice Sim, merged
on 1st November 2010, but relate to IW Bank only.
(*)    In 2010 the item included prior year income of 2,5 million euro following the conclusion of a settlement agreement with former
       Directors.
(**)   In 2010 the item included full impairment losses on intangible assets amounting to 1,4 million euro.
(***) In 2010 the item included a provision of 2,3 million euro in addition to that made in 2009 (one million euro), in relation to
       differences found when inspections were performed on suspense accounts when the migration to the new IT platform was
       performed.
(****) In 2010 the item included an impairment loss on interests held in InvestNet International and Investnet Italia amounting to two
       million euro.



For more than ten years IW Bank has specialised in the provision of banking and financial
services to retail and institutional customers almost exclusively through the internet. Its range
of services includes trading in financial instruments, the distribution of OICRs (collective
investment instruments), current accounts, the issue of credit and debit cards, electronic
money, insurance, personal loans and mortgages.

As at 31st December 2010, UBI Banca held 55,274% of the share capital of IW Bank and
Centrobanca held 23,496%, while 10,336% was held by Webstar Sa and 9,765% by other
shareholders and the remaining 1,129% consisted of treasury shares. On that same date the
shares of the bank were listed on the Mercato Telematico Azionario (electronic stock exchange)
operated by Borsa Italiana. Following the joint acquisition by the parent company, UBI Banca,


                                                                     178
and a major shareholder Webstar Sa of over 90% of the share capital (net of treasury shares)
on 27th October 2010, they announced their intention not to restore the free float of the IW
Bank share. UBI Banca therefore committed itself to complying with the obligation to purchase
the remaining ordinary shares in preparation for the delisting of the share, as already reported
in the preceding section “The consolidation scope”, which may be consulted.

During the year just ended the bank strengthened its business model, took action to
rationalise its equity investments with the mergers of its subsidiary Twice Sim (concluded on
1st November) and Investnet Italia, formerly IW Lux Sàrl5 (decided on 23rd July) and improved
its operating processes. Despite the extent of the action taken, the bank recorded considerable
commercial growth in 2010 which resulted in increases in the main operational performance
indicators and growing attention to customer requirements.
In February 2011 the bank successfully migrated from its legacy IT platform onto a new
platform supplied by the company Cedacri, developed with one of the major technological
centres in Italy specialised in processing banking and payment transactions with the objective,
amongst other things, of improving the operational efficiency of customer services.

In 2010 IW Bank further increased the number of active accounts held, up to 105,8 thousand
from 99 thousand at the end of 2009 (recalculated to include Twice Sim). Again on a like-to-
like basis, the average daily number of orders received from customers and implemented fell,
however, to 35,5 thousand (36,4 thousand in 2009).

It is underlined that the figures in reclassified statement of financial position and income
statement presented here have not been restated on a consistent basis to include the figures
for the merged company Twice Sim, but relate to IW Bank only.

From an operational viewpoint, the year ended with a loss of 0,4 million euro compared to a
profit of 4,1 million euro the year before. The result for the year, however, includes non-
recurring expense items totalling 3,9 million euro (net of tax), mainly related to management
decisions concerning the corporate reorganisation of the Group and the replacement of the
bank’s IT system. Net of those extraordinary items profit for the year amounted to +3,5 million
euro.

Net operating income more than halved to eight million euro from 17,5 million euro in 2009
(-9,5 million euro), affected by growth in expense items (+8,5 million euro to 61 million euro),
while operating income, which suffered from a fall in net interest income, decreased by
approximately one million euro to 69,1 million euro.

Operating income included the following:
- net interest income amounting to 24 million euro (-8,1 million euro; -25,2%), the result of a
  decrease in interest rates and a change in the composition of the AFS portfolio following the
  sale of part of the fixed rate investments;
- net commission income, which increased to 33,1 million euro (+1,3 million euro; +4,2%),
  the aggregate result of a fall in commissions on business with customers in the order
  routing area, which was offset by an increase in commissions on assets under management
  and in the banking area;
- net income from trading hedging and disposal/repurchase activity, which rose to 7,8
  million euro (+1,2 million euro; +18,2%) benefiting from 8,7 million euro of profits on the
  sale of BTPs in the AFS portfolio;
- other net operating income/(expense), which increased by approximately 4,6 million euro to
  4,2 million euro, benefited from a non recurring item of income amounting to 2,5 million
  euro following the conclusion of a settlement agreement with former Directors6.

Within operating expenses:
- personnel expense increased to 20,5 million euro (+1,1 million euro), the result, amongst
  other things, of an increase in personnel numbers due to the merger of Twice Sim;


5   The section “The consolidation scope” may be consulted for further details of the process to streamline the IW Bank Group.
6   2,1 million euro net of legal costs and the cancellation of a loan to the directors in question. See in this respect the specific sub-
    section in the section “Other information” of this report.


                                                                  179
-   other administrative expenses increased to approximately 32 million euro (+5,5 million
    euro) as a result of increases in IT expenses incurred for the IT migration and for disaster
    recovery and business continuity and in expenses for advisory services for legal affairs and
    CRM;
-   net impairment losses on property, equipment and investment property and intangible
    assets rose to 8,5 million euro (+2 million euro), mainly as a result of full impairment losses
    on intangible assets, largely due to the retirement of the previous legacy IT system and, to a
    lesser extent, to the retirement of software by the subsidiary InvestNet.

Net impairment losses on loans of one million euro were recognised, a significant reduction
compared to the end of 2009 (-4,6 million euro), while net provisions increased to 2,9 million
euro (+0,7 million euro).

Losses were also recognised on the disposal of equity investments, amounting to two million
euro, due to the impairment losses on the equity investments in InvestNet International and
Investnet Italia.


As concerns the statement of financial position, direct funding exceeded 1,5 billion euro, an
increase of 3% compared to 2009.
During the summer IW Bank placed two tranches of a structured bond with the yield linked to
the performance of the DJ Eurostoxx 5 share index, with capital guaranteed and redemption
after five years. The bonds, which were issued for a nominal amount of 4.361.000 euro
(including 2.259.000 placed with ordinary customers), are listed and traded on the
DomesticMOT market operated by Borsa Italiana.

Indirect funding from customers increased to three billion euro (+26,4%), partly as a result of
good performance by assets under management, which rose from 331 million euro to 497
million euro (+49,9%).

Lending to customers increased over twelve months from 149,5 million euro to 207 million
euro (+38,4%) and consisted of mortgages of approximately 117,6 million euro, personal loans
of 8,8 million euro, the use of credit cards amounting to 14,5 million euro, credit lines for
leveraged trading with financial leverage and to cover temporary overdrafts amounting to 38,7
million euro, while the remaining 27,4 million euro related to “Other transactions” (postal
deposits, security deposits, commercial credit and margins with clearing houses)

The net interbank position, consisting mainly of positions with the Parent, decreased to 401,3
million euro (516,3 million euro in December 2009).

The portfolio of available-for-sale financial assets, amounting to 845 million euro (+57,9
million euro), consisted mainly of Italian government securities, including 794 million euro of
floating rate certificates (CCT).

Capital ratios as at 31st December 2010 consisted of a tier one ratio (tier one capital/risk
weighted assets) of 10,91% (16,87% at the end of 2009) and a total capital ratio (supervisory
capital and reserves/risk-weighted assets) of 10,99% (18,12%).

The proposal to cover the loss of 0,4 million euro is to draw the entire amount from the
retained profit reserve.




                                                180
UBI PRAMERICA SGR SPA

                                                                                  31.12.2010        31.12.2009     Change       % change
Figures in thousands of euro

    OWN "RETAIL CUSTOMERS"                                                          7.724.350         7.264.874      459.476         6,3%
    Of which: customer portfolio management                                          5.659.178         5.148.719      510.459        9,9%
           Fund based instruments                                                    2.065.172         2.116.155      -50.983       -2,4%
    FUNDS                                                                          18.958.811        20.076.424    -1.117.613       -5,6%
    of which: Pramerica funds included in fund based instruments                     1.882.328         2.097.040     -214.712      -10,2%
           Other duplications                                                          125.379           75.624        49.755       65,8%
    SICAV’s and other (net of duplications)                                           371.900            83.567      288.333      345,0%
    TOTAL ASSETS UNDER MANAGEMENT                                                  25.047.354        25.252.201     -204.847        -0,8%

Income statement
  Net interest income                                                                     924             1.706         (782)     (45,8%)
    Dividends and similar income                                                             -              539         (539)    (100,0%)
    Net commission income                                                              70.142            65.594         4.548        6,9%
    Performance fees                                                                   14.982            22.930       (7.948)     (34,7%)
    Net income from trading, hedging and disposal/repurchase activity                   2.048               466         1.582      339,5%
    Other net operating income/(expense)                                                  (43)              667         (710)          n.s.
    Operating income                                                                   88.053           91.902        (3.849)       (4,2%)
    Personnel expense                                                                 (15.490)         (14.544)           946        6,5%
    Other administrative expenses                                                     (15.114)         (15.724)         (610)      (3,9%)
    Net impairment losses on property, equipment and investment property and
    intangible assets                                                                    (120)            (105)           15       14,3%
    Operating expenses                                                                (30.724)         (30.373)           351         1,2%
    Net operating income                                                               57.329           61.529        (4.200)       (6,8%)
    Net provisions for risks and charges                                                   292            (375)           667          n.s.
    Pre-tax profit from continuing operations                                          57.621           61.154        (3.533)       (5,8%)
    Taxation for the year                                                             (19.146)         (19.793)         (647)      (3,3%)
    Profit for the year                                                                38.475            41.361       (2.886)       (7,0%)

Other information
 Total work force (actual employees+personnel on leasing contracts)                       142               140             2


The figures as at and for the year ended 31st December 2009 have been restated for consistency to include the results of Capitalgest
Alternative Investments SGR Spa and UBI Pramerica Alternative Investments SGR Spa, merged into the company on 1st July 2010.



As at 31st December 2010, UBI Banca held 65% of the share capital of UBI Pramerica SGR and the
remaining 35% was held by Prudential International Investments Corporation.


Following the streamlining of the product range performed in 2009, in 2010 UBI Pramerica
SGR also completed the reorganisation of the Group’s asset management activities, designed
to simplify the management and structure of operations and generally contain costs. In this
respect:
- the merger of Capitalgest Alternative Investments SGR Spa and UBI Pramerica Alternative
   Investments SGR Spa into UBI Pramerica SGR Spa became effective from 1st July 2010, as
   authorised by the Bank of Italy with a provision of 19th February 20107. The operation –
   preceded in March by the repurchase of 3,75% of the share capital from the management of
   UBI Pramerica Alternative Investments SGR Spa – produced goodwill arising from the
   merger, recognised in the appropriate reserve in equity, of approximately 0,4 million euro,
   without any change to the share capital, having cancelled the shares of the merged
   companies;
- on the following 3rd August, the transfer (for consideration of 560 thousand euro) to UBI
   Pramerica SGR was performed of the entire interest in UBI Management Company Sa held
   by UBI Banca Private Investment (99%) and by UBI Banca International (1%).

Following the conclusion of the agreement for the disposal of depository banking operations,
from 31st May 2010 the assets previously administered by the Parent UBI Banca relating to


7    However, the transaction is effective for accounting and tax purposes from 1st January 2010.


                                                                    181
the management of mutual funds by UBI Pramerica SGR were transferred to RBC Dexia
Investor Services.
The inspections commenced in 2009 by the Bank of Italy were officially concluded in
September with no penalties imposed on the management and supervisory bodies of the
company.

UBI Pramerica SGR Spa received important recognition in 2010:
−   the 2010 Lipper Fund Awards Prize as the “Best Italian asset management company in the large bond class”
    as a result of the performance of its bond team over the last three years. UBI Pramerica received two more
    prizes awarded to the UBI Pramerica Euro B.T. fund as the best “Bond Eurozone – short term” fund over ten
    years and to the UBI Pramerica Portafoglio Moderato fund as the best “Mixed Asset EUR Conservative –
    Global” fund over five years;
−   the Triple A Mutual Investment Fund Prize awarded to the UBI Pramerica Portafoglio Moderato fund at the
    Milano Finanza 2010 Global Awards ceremony;
−   the 2009 “High Return Prize”, organised by “Il Sole 24 Ore”, awarded in March to the UBI Pramerica Euro
    Corporate fund as a result of its performance over three years and third place in the classification as “The best
    Italian mutual fund manager in the BIG category” in which companies with assets under management of more
    than 4.000 million euro are grouped;
−   the Morningstar Fund Awards Italy 2010 prize as the “Best euro area corporate bond fund”.
Further recognition was also received in the first few months of 2011:
−   the “Capitalgest Alternative Conservative” funds received the 2011 “Premio Mondo Hedge Awards” as the
    “best low and medium volatility funds in 2010”;
−   with regard to the 2010 “High Return Prize”, the “UBI Pramerica Obbligazioni Dollari” fund was nominated as
    the “Best American bond fund” as a result of its performance over three years, while UBI Pramerica SGR
    improved is performance over the previous year by finishing in third place in the classification for “The best
    Italian mutual fund manager in the BIG category”
−   the company received the Milano Finanza “Tripla A Fondi Comuni di Investimento” prize for the results
    achieved by the “UBI Pramerica Portafoglio Moderato” and “UBI Pramerica Euro Cash” funds over a period
    of 36 months
−   UBI Pramerica received four prizes at the 2011 Lipper Fund Awards 2011 granted to: the “UBI Pramerica
    Euro B.T.” fund as the best “bond-eurozone-short term” fund over three, five and ten 10 years; the “UBI
    Pramerica Euro Corporate” fund as the best “bond euro-corporates” fund over five years; the “UBI Pramerica
    Euro Medio/Lungo Termine” fund as the best “bond eurozone long term” fund over five years; and “UBI
    Pramerica Portfolio Moderato”, as the best “mixed asset EUR cons-global” fund over five years.

In terms of volumes, total assets under management by UBI Pramerica relating to ordinary
customers amounted to 25 billion euro as at 31st December 2010, a slight decrease compared
to 25,3 billion euro at the end of 2009. If the customer portfolios managed on behalf of
institutional customers are also considered, total assets under management by UBI Pramerica
at the end of 2010 amounted to 29,4 billion euro (net of duplications) compared to 30,4 billion
euro (again net of duplications) twelve months before.

From an operating viewpoint, net operating income, down by 4,2 million euro to 57,3 million
euro, was affected mainly by a contraction in revenues, while expenses remained more or less
unchanged.
Within operating income, the reduction in performance fees (-7,9 million euro; -34,7%) was
only partly offset by the increase in other items of net commission income (a total of +4,5
million euro; +6,9%). Similarly net interest income, penalised by the fall in lending rates,
decreased (-0,8 million euro; -45,8%), while net income from disposal and repurchase activity
(+1,6 million euro) benefited from the sale in the second half of the year of part of the shares in
UBI Pramerica fund classified within the AFS portfolio.
With regard to costs, the increase in personnel expense (+0,9 million euro; +6,5%) was offset to
a large extent by the reduction in other administrative expenses (-0,6 million euro; -3,9%).

As a result of the performance reported above, the year 2010 ended with a profit of 38,5
million euro, a decrease compared to 41,4 million euro earned in the previous year. The
proposal for the allocation of profits is to distribute dividends of 38,4 million euro.

A change in senior management occurred after the end of the year. Paolo Cavrioli, the General Manager –
who was appointed to new important positions in the UBI Banca Group – resigned with effect from 1st
March 2011 and was replaced by Andrea Pennacchia, previously the chief of the Organisation Area at the
Parent.




                                                        182
UBI LEASING SPA

                                                                              31.12.2010       31.12.2009     Change      % change
Figures in thousands of euro

Statement of financial position
 Loans to customers                                                             9.698.555        9.597.373     101.182         1,1%
 Due to customers (*)                                                             682.963          776.360     -93.397       -12,0%
  Net debt with banks                                                         -10.501.685       -9.561.805     939.880         9,8%
                                                                                    1.598            1.141         457        40,1%
  Available-for-sale financial assets                                                  26               26           -             -
  Equity (excluding profit for the year)                                          289.749          289.104         645         0,2%
  Total assets                                                                 11.601.054       10.765.141     835.913         7,8%

Income statement                                                                 2010            2009
  Net interest income                                                             114.422          98.776       15.646        15,8%
  Net commission income                                                            (2.283)          (4.000)     (1.717)     (42,9%)
  Net loss from trading, hedging and disposal/repurchase activities               (14.615)          (3.024)     11.591      383,3%
  Other net operating income                                                       44.037           31.962      12.075        37,8%
  Operating income                                                                141.561         123.714       17.847        14,4%
  Personnel expense                                                               (15.820)        (15.238)         582         3,8%
  Other administrative expenses                                                   (28.979)        (26.676)       2.303         8,6%
  Net impairment losses on property, equipment and investment property and
  intangible assets                                                                  (603)           (640)         (37)      (5,8%)
  Operating expenses                                                              (45.402)        (42.554)       2.848         6,7%
  Net operating income                                                             96.159          81.160       14.999        18,5%
  Net impairment losses on loans                                                 (114.612)        (59.320)      55.292        93,2%
  Net provisions for risks and charges                                             (2.646)             (62)      2.584          n.s.
  Profit (loss) on the disposal of equity investments                                  20               15           5        33,3%
  Pre-tax profit (loss) from continuing operations                                (21.079)         21.793      (42.872)          n.s.
  Taxes on income for the year for continuing operations (**)                          447        (10.137)       10.584          n.s.
  Integration costs                                                                        -           (78)        (78)    (100,0%)
  of which: other administrative expenses                                                  -         (115)        (115)     (100,0%)
   taxes                                                                                   -            37         (37)     (100,0%)
  Profit (loss) for the year                                                      (20.632)          11.578     (32.210)          n.s.

Other information
 Total work force (actual employees+personnel on leasing contracts)                   242              232          10

Financial ratios
  R.O.E. [Profit for the year/equity (excluding profit for the year)]              -7,12%           4,00%
  Cost/income ratio (operating expenses/operating income)                          32,07%          34,40%
  Net non-performing loans/net loans to customers                                   3,19%           1,45%
  Net impaired loans/net loans to customers                                         1,91%           2,25%

(*) The item includes variable rate subordinated bonds subscribed by the Parent amounting to 121,1 million euro (84 million euro at
     the end of 2009).
(**) In 2009 the item included non recurring income resulting from an IRAP (local production tax) refund amounting to 0,6 million
     euro.



As at 31st December 2010, UBI Banca held 79,9962% of the share capital of UBI Leasing, 18,9965% was
held by Banca Popolare di Ancona Spa and the remaining 1,0073% was held by Banca Cooperativa
Valsabbina Scpa.


After two years of an appreciable contraction in volumes of business, in 2010 some sectors of
the leasing market showed slight signs of recovery, while others confirmed the continuation of
the economic crisis with the absence of investment by firms.

On the basis of Assilea (national association of leasing companies) data, 2010 ended at
national level with total contracts signed worth 27,3 billion euro, an increase of approximately
5% compared to the year before. In terms of business sector there was slight growth in
machinery and equipment (+3,7%; +317 million euro) and automobiles (+1,7%; +97 million
euro), while the property sector produced the best result (+9,4%; +1 billion). The aeronautical
and rail sector, on the other hand, was the only one to perform badly (-16,1%; -207 million
euro).


                                                                        183
The trend for business was in the opposite direction to that for the sector nationally in the
year just ended with a fall in average business for UBI Leasing. This, however, did not affect its
third place in the Assilea classification (national association of leasing companies) among
leasing firms on the Italian market for volume of contracts signed, even if its market share
decreased to 6,81% (7,95% in 2009).

The company signed 10.216 contracts for a total amount of approximately 1,9 billion euro, a
decrease of 10,4% in volumes and of 4,1% in the number of transactions concluded. As can be
seen from the table, the machinery and equipment and aeronautical sectors recorded the
greatest decreases, although the property sector also contributed to the general reduction,
which was only partly offset by the good result for the automobile sector, which performed
markedly better than the sector nationally, while the trend for the captive business of many
automobile manufacturers was in the opposite direction

Performance by business sector

                                                          2010                           2009               % change    % change
    Figures in thousands of euro                number           amount        number           amount       number       amount

    Auto                                             5.745         223.580         5.147         193.676        11,6%        15,4%
    of which: - motor vehicles                       3.240         103.752         3.122          101.096        3,8%          2,6%
           - commercial vehicles                     1.560          36.237         1.299           32.059       20,1%         13,0%
           - industrial vehicles                         945        83.591              726        60.521       30,2%         38,1%
    Machinery and equipment                          3.402         390.210         4.298          466.805      -20,8%        -16,4%
    Aeronautical                                       242          93.689           303          154.645      -20,1%        -39,4%
    Property                                           827       1.151.425           905        1.260.102       -8,6%         -8,6%
    TOTAL                                           10.216       1.858.904        10.653        2.075.228       -4,1%        -10,4%




As concerns the statement of financial position, lending to customers reached 9,7 billion euro,
a slight increase compared to twelve months before (+1,1%). Approximately 28% of this had
been securitised at the end of December.

In order to support businesses on its local markets, a distinguishing characteristic of the company and the
Group historically, UBI Leasing participated in initiatives to assist small-to-medium sized enterprises
adhered to at Group level:
-     the “General agreement” with the European Investment Bank for the grant of subsidised finance;
-     a further extension until 31st July 2011 of the “Common agreement for the deferral of SME debts”8;

Modest performance by lending continued to be accompanied by a progressive deterioration in
the quality of credit, attributable to the protracted economic crisis, which affected the property
and machinery and equipment sectors above all, both on the agent and the banking (captive
market) distribution channels. Gross deteriorated loans rose from 761,7 million euro to 962,2
million euro, with an increase of 200,5 million euro (+26,3%). The reduction in quality mainly
affected both non-performing loans (+267,5 million euro), which now account for half of total
deteriorated loans, and also restructured loans (+52,2 million euro), while decreases were
recorded for impaired loans (-39,8 million euro) and past due exposures (-79,4 million euro),
partly the result of transfers to the non-performing loan class. However, this growth was
accompanied by only a partial increase in the degree of coverage (from 13,5% to 20,1%), which
remains less than the average for the Group, in relation to both the secured nature of the
loans (ownership of the asset leased) and the prevalence of property transactions (more than
70% of outstanding deteriorated loans at the end of 2010). On the other hand the coverage for
performing loans rose from 0,28% to 0,40%, as a result of an increase in impairment losses
recognised in the fourth quarter.

Having reached an extremely critical position, it was necessary to launch a project in that
same period entitled the “Credit quality project” implemented in co-ordination with the Parent,

8    UBI Leasing also adhered to a proposal of the Italian Banking Association to support people hit by the earthquake in Abruzzo by
     adapting the agreement mentioned to defer the debts of SMEs to meet specific local needs. The agreement was signed in 2009 by
     the Ministry of the Economy, by the Italian Banking Association and by other associations of the Banche-Imprese Observatory. That
     measure became operational on 14th August 2010.


                                                                  184
designed to rapidly and effectively improve credit quality. The project team conducted an-
depth analysis and review of lending processes, and defined a series of actions that will be
implemented in 2011. This initiative is focusing on analyses of the existing portfolio, the
adequacy of specific impairment losses recognised and on the verification of tools, processes
and organisational units involved in credit management. It will be completed by the end of
June 2011.
Again in order to ensure more precise risk management and credit recovery, the Credit Area
was reorganised in 2010 with the creation of two departments, one for the disbursement of
loans and one for the recovery of credit. The latter was then provided with three services: one
for high risk and past due positions; one for restructured and impaired loans; and finally one
for the management of non-performing loans.

As concerns the financial management of the company:
- a programme to strengthen capital was formulated in the first half of the year, which took
   the form of the issuance of a ten-year subordinated bond for a nominal amount of 50
   million euro and the early redemption of a ten-year subordinated bond with a nominal
   value of ten million euro issued on 22nd December 2004;
- in accordance with Group policies for the management of the structural balance of the
   company, further lines of medium-to-long term finance were granted in the second half of
   the year amounting to 1.621 million euro.

From an operating viewpoint, the result for the year was affected by high costs due to the
deterioration in credit quality, which more than offset the result for net operating income,
which did in fact increase by 15 million euro compared to the previous year (+18,5% to 96,2
million euro).

Operating income (+17,8 million euro to 141,6 million euro) was driven by net interest income
(+15,6 million euro to 114,4 million euro), while both the trend for other net operating
income/(expense) (+12,1 million euro to 44 million euro) and for net trading and hedging
income (-11,6 million euro to -14,6 million euro) was attributable mainly to the Lombarda
Lease Finance 3 securitisation, which was closed down during the year.
The increase in expenses (+2,8 million euro to 45,4 million euro) was to a large extent due to
other administrative expenses (+2,3 million euro to 29 million euro) and in particular to legal
advisory and credit recovery expenses and to insurance for leased assets.

Net impairment losses on loans doubled from 59,3 million euro in 2009 to 114,6 million euro
in 2010. As a consequence the year ended with a loss of 20,6 million euro compared to a profit
of 11,6 million euro in 2009.

The proposal to cover the loss is to draw on the extraordinary reserve for 18,6 million euro and
on the share premium reserve for the remaining two million euro.

Capital ratios as at 31st December 2010 consisted of a tier one ratio (tier one capital/risk
weighted assets) of 3,89% (4,77% at the end of 2009) and a total capital ratio (supervisory
capital and reserves/risk-weighted assets) of 5,58% (6,07%).

A change in senior management occurred during the year. Gianpiero Bertoli was appointed
Managing Director of the Board of Directors with effect from 1st November to replace Maurizio
Lazzaroni who went into retirement in 2010.
A project to review the entire organisational structure of the company was also launched in
December with the objectives of simplifying and streamlining it. It will be completed by the end of
the first half of 2011.




                                               185
UBI FACTOR SPA

                                                                                 31.12.2010     31.12.2009      Change       % change
Figures in thousands of euro

Statement of financial position
 Loans to customers                                                                2.744.758       2.323.230      421.528        18,1%
    Due to customers                                                                    9.539         15.946        -6.407       -40,2%
    Net debt with banks                                                            -2.609.221     -2.192.398      416.823        19,0%
    Equity (excluding profit for the year)                                            107.499         92.892       14.607        15,7%
    Total assets                                                                   2.775.049       2.366.367      408.682        17,3%

Income statement
  Net interest income                                                                 34.821          38.680       (3.859)      (10,0%)
  Dividends and similar income                                                             -              23          (23)     (100,0%)
    Net commission income                                                             16.251          16.260           (9)       (0,1%)
    Other net operating income                                                         2.159           4.069       (1.910)      (46,9%)
    Operating income                                                                  53.231         59.032        (5.801)       (9,8%)
    Personnel expense                                                                (11.180)       (10.644)           536         5,0%
    Other administrative expenses                                                     (9.859)       (10.136)         (277)       (2,7%)
    Net impairment losses on property, equipment and investment property and
    intangible assets                                                                   (649)          (349)          300        86,0%
    Operating expenses                                                               (21.688)       (21.129)          559          2,6%
    Net operating income                                                              31.543          37.903       (6.360)       (16,8%)
    Net impairment losses on loans                                                    (3.147)         (8.030)      (4.883)      (60,8%)
    Net impairment losses on other assets/liabilities                                       -            (89)         (89)     (100,0%)
    Net provisions for risks and charges                                                  (1)            (80)         (79)      (98,8%)
    Pre-tax profit from continuing operations                                         28.395         29.704        (1.309)       (4,4%)
    Taxation for the year (*)                                                         (9.794)       (10.153)         (359)       (3,5%)
    Profit for the year                                                               18.601          19.551         (950)       (4,9%)

Other information
 Total work force (actual employees+personnel on leasing contracts)                      153             147             6

Financial ratios
  R.O.E. [Profit for the year/equity (excluding profit for the year)]                 17,30%         21,05%
  Cost/income ratio (operating expenses/operating income)                             40,74%         35,79%
    Net non-performing loans/net loans to customers                                    0,42%          0,58%
    Net impaired loans/net loans to customers                                          0,15%          0,19%

(*) In 2009 the item included non recurring income resulting from an IRAP (local production tax) refund amounting to 0,2 million
    euro.



UBI Factor, the Group member company which specialises in factoring business, performs
“captive factoring” activity, mainly with major international industrial groups and with public
administrations. In 2010 the company rose from fifth to fourth place nationally in terms of
outstanding amounts (receivables which have been purchased, but not yet received), with a
market share of 6,5%, and in the same position in terms of advances with and without
recourse, with a market share of 7,1%.

Pursuit of policies continued during the year designed on the one hand to gradually reduce
business with public administrations as a percentage of revenues and to abandon high risk
sectors and on the other hand to focus on major large corporate counterparties, with an
increase in business through the network banks in the light of the commercial co-operation
agreement signed in 20089. In order to achieve this a “Large corporate commercial plans”
project was launched to promote growth in business with counterparties of high standing, able
to provide large volumes of business with very low risk.

Constant growth in foreign business continued based on factoring for export and import
transactions with customers of high standing, good profitability and low credit risk, operating
on both established and developing markets.


9    A revision of the contents is currently being evaluated, after two years since it entered into force. The purpose is to render the
     commissions paid to the network banks more consistent with UBI Factors commercial strategies and with the contribution made by
     the banks themselves on the basis of indications furnished by the company.


                                                                        186
The foreign investments in both the Polish branch in Krakow and the commercial partnership
with Strateji Faktoring Hizmetleri A.S., a major Turkish factoring company have been
successful in this respect. With regard to the latter, following an appropriate assessment UBI
Factor decided to acquire the company, to allow its large corporate customers to develop their
presence in that particular geographical area, distinguished by increasingly larger domestic
volumes of business. The relative letter of intent was therefore signed in 2010 which, if there
are no changes in regulatory and market conditions, will lead to the gradual purchase of the
entire Turkish company over the next three years.

The year 2010 ended with a profit of 18,6 million euro compared to 19,6 million euro the year
before.

Net operating income generated 31,5 million euro (-6,4 million euro; -16,8%), the aggregate
result of a fall of approximately 10% in operating income (-5,8 million euro to 53,2 million
euro) and a modest increase in operating expenses (+0,6 million euro to 21,7 million euro).
Net operating income included net interest income, down by 10% to 34,8 million euro, but
perfectly in line with trends on the domestic factoring market and other net operating
income/(expense), also down by 1,9 million euro to 2,2 million euro due to the failure of a
significant item of income in 2009 to recur. Net commission income, on the other hand,
remained stable at 16,3 million euro.
Expenses items included an increase to 11,2 million euro for personnel expense (+0,5 million
euro; +5%) due mainly to non-recurring factors (payment of leaving incentives in 2010
amounting to 0,2 million euro; lower costs of 0,3 million in 2009 due to the release of
provisions for redundancies in excess of the expected payments), while the reduction by 0,3
million euro in other administrative expenses was offset by greater amortisation of intangible
assets.
As a consequence, the cost/income ratio worsened by five percentage points, rising from
35,8% to 40,7%.
Net impairment losses on loans more than halved from over eight million euro in 2009, due to
an improvement in the quality of the portfolio, which demonstrated the effectiveness of the
commercial policies in terms of prudent risk management.

As concerns volumes of business, the total turnover for factoring business generated during
the year amounted to 7,6 billion euro (+38,1%), including 7,1 billion euro of factoring business
(+39,2%), which benefited from commercial action targeted at customers of banks in the
Group, which in terms of volumes reached almost 40% of the total result for UBI Factor.

As a consequence, loans to customers amounted to 2,7 billion euro (including 3% relating to
the Polish branch), an increase of 18,1% compared to 2,3 billion euro twelve months before.

Despite the difficult economic situation for domestic and international business, deteriorated
loans fell from 48,8 million euro to 17,3 million euro (-65%). More specifically “non-performing
loans” fell from 13,6 million euro to 11,5 million euro. Impaired positions – consisting mainly
of receivables purchased relating to public administrations and classified as deteriorated loans
because of the remaining duration of the loan and not on the basis of the collectability –
reduced slightly to 4,2 million euro (-0,1 million euro compared to 2009) and exposures past
due and in arrears fell almost to zero from 31 million euro to 1,6 million euro.

Capital ratios as at 31st December 2010 consisted of a tier one ratio (tier one capital/risk
weighted assets) of 8,09% (7,85% at the end of 2009) and a total capital ratio (supervisory
capital and reserves/risk-weighted assets) of 8,06% (7,83%).

The proposal for the allocation of profits is to distribute dividends of 4,9 million after allocating
13,7 million to reserves.




                                                187
Other information

Treasury shares

The companies included in the consolidation did not hold any of their own shares nor those of
the Parent during the course of 2010 with the sole exception of IW Bank which, as at 31st
December 2010 held 831.168 of its treasury shares (corresponding to 1,13% of the share
capital) for a nominal amount of 207.792 euro and recognised at the purchase price of
approximately 2,6 million euro. During the year IW Bank repurchased 4.000 treasury shares
(corresponding to 0,005% of the share capital) with a nominal value of 1.000 euro at a price of
approximately six thousand euro.




Litigation

THE MARIELLA BURANI GROUP

Following on from what has already been communicated in previous periodic financial reports
concerning the Mariella Burani Group, we report that with regard to the creditor court action
taken against Mariella Burani Family Holding Spa (MBFH), Burani Designer Holding N.V.
(BDH), Burani Private Holding Spa (BPH) and the Mariella Burani Fashion Group Spa (MBFG),
Centrobanca’s creditor claims were accepted with a final ruling for all the proceedings with
regard to the receivables resulting from a loan granted in August 2008 to MBFH concerning
the public tender offer on MBFG shares and also with regard to receivables resulting from
other loans granted between March 2004 and June 2007 to MBFG.
As already reported, impairment losses were recognised on the total exposure to the Burani Group
amounting to 56,5 million euro in 2009, with a further 11,3 million euro recognised in 2010. The latter are
also in addition to a provision of two million euro, made against risks of revocation action against Mariella
Burani Family Holding, performed by Centrobanca again in 2010.
In January 2011, Centrobanca received a letter from the official receiver of BDH in which
Centrobanca was held responsible for the bankruptcy of BDH as a consequence of the roles it
played in the public tender offer and of the fall in the price of MBFG shares owned by BDH.
The relative claim for damages amounted to approximately 134 million euro (the same as the
average amount indicated by the court appointed expert for the number of MBFG shares
owned by BDH before the public tender offer).
The letter was examined by external legal advisors and the Board of Directors of Centrobanca
assessed the position carefully, making a formal reply to the official receiver, firmly rejecting
all the allegations made and underlining that the affair had been construed erroneously and in
a contradictory manner.

APPEAL BY BANCA REGIONALE EUROPEA AGAINST A FINE IMPOSED BY THE MINISTRY OF THE ECONOMY
AND FINANCE

In 2001 the Ministry of the Economy and Finance imposed a fine on Banca Regionale Europea
(totalling 10,3 million euro) for alleged infringement of Law No. 197/1991 (the “anti-money
laundering law”).
A settlement agreement was signed in April 2010, which involved the payment of sum of one
million euro to the Ministry of the Economy and Finance, while the latter waived its right to
impose penalties awarded, with the abandonment of all the legal proceedings pending.
For accounting purposes use was made of the provision that had been made of 5,140 million
euro, with the recovery of the part in excess, net of the legal costs, in the form of a release of
provisions for risks and charges (3,9 million euro).




                                                    188
CONCLUSION OF THE APPEAL AGAINST THE FINE IMPOSED BY THE ANTITRUST AUTHORITY

On 23rd October 2010 the ruling was published with which the Council of State finally
quashed the appeal lodged by the Antitrust Authority against the ruling of the TAR
(Administrative Tribunal) of Latium No. 3685 of 6th April 2009. This ruling, which upheld the
appeals of all 23 of the banks that were fined – including Banca Popolare di Bergamo, Banca
Popolare Commercio e Industria, Banco di Brescia and Banca Regionale Europea – quashed
the administrative fines which the Antitrust Authority had imposed with a provision of 8th
August 2008, for unfair market practices in relation to the transfer of mortgages.
As already reported, each of the Group banks was fined 450 thousand euro, a sum which was
then returned by the Ministry of the Economy and Finance following the ruling of the court of
first instance. In December that same ministry then made an interest payment at the legal
rate on the sums reimbursed; a total of 74.515 euro recognised in the consolidated income
statement 2010, within item 10, interest income.
The ruling by the Council of State – which almost entirely upheld the grounds given by the
TAR of Latium in the decision of first instance – concluded the affair, testifying to the proper
conduct of the banks in the Group.

NOTIFICATIONS

On 10th March 2010, the Markets-Insider Trading Office Division of the Consob (Italian
securities market authority), notified UBI Banca Scpa, as the company into which Banca
Lombarda e Piemontese Spa (BLP) was merged, of an alleged violation by the Bank pursuant to
article 187-septies of Legislative Decree No. 58/1998 (Consolidated Finance Act) concerning an
affair dating back to the beginning of 2006 relating to possible irregularities pursuant to
article 187 ter of the Consolidated Finance Act (market manipulation) discovered in relation to
trading in listed shares performed by an untrustworthy employee (subsequently dismissed) on
an account of Banca Lombarda and on personal accounts of the employee himself, both by
means of trading performed directly on the Borsa Italiana Spa electronic market and through
orders placed though intermediaries.
After filing it’s defence, UBI Banca received a letter dated 7th March 2011 from the Consob
informing it that “the Commission, having assessed the results of the investigation, had found
no grounds for the adoption of penalties and it has therefore closed the relative proceedings”.

In 2010, the Guardia di Finanza (Finance Police), served eleven “Written notification of
findings” on nine branch managers of Banca Popolare di Ancona in relation to reporting
omissions under “anti-money laundering” laws. In nine cases those notifications were also
served on Banca Popolare di Ancona, as jointly liable.
The bank filed its defence with the Ministry of the Economy and Finance within the set time
limits and appropriate provisions were recognised.

IW BANK

Following inspections which took place between July 2009 and February 2010, facts and
situations of bad management and organisational negligence on the part of former directors
emerged. Consequently, on the basis of a proposal by UBI Banca, the controlling shareholder,
an ordinary shareholders’ meeting of IW Bank held on 6th April 2010 authorised the Board of
Directors of that bank to initiate a corporate liability action, pursuant to Art, 2393, paragraph
2 of the Italian Civil Code, against the former Managing Director, Pasquale Casale, who had
been served with an official written warning in relation to liability for mismanagement,
authorising the board to decide the timing and manner of conducting the action, subject to
advice concerning the conditions and contents of the legal action from the legal advisors of the
bank.
During the shareholders’ meeting held on 24th September 2010, a motion was approved to
abandon the liability action against the former director Pasquale Casale. This was decided
following and in the context of a more general settlement agreement stipulated in July 2010
between UBI Banca and IW Bank on the one hand and Pasquale Casale and other third
parties (Benedetto Marti – former Executive Deputy Chairman of IW Bank – and the company
Casale, Marti & Associati Spa) on the other. This finally concluded the complex litigation
between the parties. The basic terms of the agreement involved the following:
- the payment to IW Bank of a lump sum of 2,5 million euro, which was paid to IW Bank
    when the settlement agreement was reached and recognised in the third quarter of 2010


                                              189
   (2,1 million euro net of legal expenses and of the cancellation of amounts payable to those
   same former company officers). That amount, as provided for in the settlement agreement,
   also constitutes, up to an amount of 1.250.000 euro, a guarantee of prompt compliance
   with the reciprocal obligations contained within the said agreement;
- a non competition commitment on the part of Casale, Marti & Associati Spa and Mr. Casale
   and Mr. Marti until 31st March 2011 and a commitment not to appoint or solicit the
   appointment of employees, associate workers, financial advisors or customers of IW Bank
   and UBI Banca;
- a commitment on the part of Pasquale Casale and Benedetto Marti to sell to UBI all the IW
   Bank shares in their possession (through the company Giudoca and Ottotto) and a
   consequent commitment on their part not to purchase shares of IW Bank, neither directly
   nor through third parties, for a period of 12 months following the above sale;
- the abandonment by Pasquale Casale of all claims against IW Bank arising from his former
   employment relationship as General Manager.
In conjunction with and at the same time as the settlement agreement was concluded, an
agreement was signed between IW Bank and the IT supplier Enterprise Spa designed to settle
all pending items relating to business relations between the bank and Enterprise. The
settlement agreement concluded also requires Enterprise to provide a guarantee to the bank
that it will continue to supply contracted services with the professional diligence required,
until completion of all the activities resulting from the migration of the IT system of the bank
onto the system supplied by the company Cedacri, which occurred in February 2011.

With a letter of 12th April 2010, the Markets Division of the Consob commenced administrative
penalty proceedings, as the outcome of supervisory inspections conducted into IW Bank,
which included the inspection performed between 13th March and 3rd December 2008.
More specifically, the bank was charged with violation – relating to the period prior to the
conclusion of the inspections – of Art. 187 nonies of the Consolidated Finance Act and the
relative regulations to implement it issued by the Consob, which oblige those authorised to
“report transactions which on the basis of reasonable grounds may be considered to constitute a
violation of regulations [concerning market abuse] to the Consob without delay”.
In this respect the Bank filed its defence with the Consob on 7th July 2010 in the name of and
on behalf of all those who had received the letters of notification sent by the Consob on 12th
April 2010, giving the grounds for the defence of the Bank itself.
On 23rd November IW Bank received a communication informing it of the start of the
“investigative part of the decision” by the Consob, with the “Investigative Report” attached,
containing an assessment of the defence filed with the Consob. On the following 23rd
December 2010 a note containing additions to its defence was filed with the Consob, prepared
on behalf of IW Bank and those who had received notifications.




Inspections

In February 2010 the Bank of Italy commenced inspections – pursuant to articles 54 and 68 of
Legislative Decree No. 385/1993 (Consolidated Banking Act) – designed to assess the Group
with regard to the management, governance and control of credit risk in the corporate
customer segment, including the state of progress of the project to introduce an internal rating
system to measure risk, based on internal ratings. The inspections, which involved not only
UBI Banca but also other banks in the Group, were concluded at the end of July.
With a communication of 23rd September 2010, the supervisory authority announced further
inspections - pursuant to article 68 of Legislative Decree No. 385/1993 – designed to assess
the Group for liquidity and interest rate risk and related processes of governance,
management and control. These inspections were concluded in December.
In both cases the considerations expressed by the supervisory authority contained
observations, recommendations and suggestions which will be given the maximum
consideration, in view amongst other things, of the preparation of the new Business Plan.
Finally on 28th January 2011, the Bank of Italy announced the commencement of new
inspections of the UBI Banca Group – again pursuant to Art. 68 of Legislative Decree No.
385/1993 – into the management and measurement of risks assumed by the product


                                              190
companies which use large distribution networks (UBI Banca Lombarda Private Investment
and B@nca 24-7) or operate online (IW Bank).


On 25th October 2010, the on site inspection of Banca Popolare di Bergamo by the Consob,
commenced in December 2009, was completed. It was designed to ascertain proper application
of provisions concerning the MiFID and illiquid securities. The documentation acquired will be
sent by the inspection team to the Intermediaries Supervision Office of the Consob for the
assessment and the preparation of the final report, which had not yet been received at the
date of this report.

SANCTIONS

On 13th December 2010, the Bank of Italy imposed administrative fines totalling 532 thousand
euro on the members of the Board of Directors and Board of Statutory Auditors and on the
General Manager of Prestitalia Spa1.
The fines relate to irregularities found during inspections conducted between 16th September
and 4th December 2009 – when UBI Banca held only an indirect interest of 22,8395% –
following which the supervisory authority issued a temporary order, dated 3rd March 2010, to
suspend activities until the company was recapitalised.
The increase in the capital occurred in that same month of March, when agreements were
signed to acquire control of Prestitalia (see the section “The consolidation scope” for further
information).




Tax aspects

Summary of changes introduced during the year
New legislation on tax that affected the activities of the Group in 2010 was of a limited nature.
It must nevertheless be considered that the banking industry has repeatedly solicited
measures on the following issues:
- abuse of tax law with specific regard to restructuring/reorganisation operations or
   transnational financial operations;
- criteria for the deductibility of impairment losses on loans for IRES (corporate income tax)
   and IRAP (local production tax) purposes;
- the tax regime for financial instruments;
- the VAT treatment of intragroup transactions;
- and more generally the large tax burden for banks and financial intermediaries also
   compared to tax regimes in other EU countries.

A further critical aspect for the sector is the application of IFRS standards, which has not been
effectively accompanied by an appropriate tax framework.

Furthermore, the Italian tax regime generates substantial recognition of deferred tax assets,
which in the near future (Basel 3) will be considered as a negative component for the purposes
of supervisory capital.
Decree Law No. 225/2010 (known as the “thousand extensions”) – converted with Law No. 10
of 26th February 2011 – allows the main items of deferred tax assets (impaired
loans/intangible assets) to be transformed into tax credits if a loss for the year is recognised in
a bank’s separate financial statements. This provision is designed to ensure that the deferred
tax assets just mentioned do not qualify as negative components of supervisory capital.




1   In accordance with Art. 145, paragraph 10 of the Consolidated Banking Act, the company Prestitalia Spa is civilly liable to make the
    payment, with the obligation to recover the amounts from those responsible.


                                                                  191
EXTENSION OF DOMESTIC TAX LEGISLATION TO INCLUDE CONTROLLED FOREIGN COMPANIES

As already reported, article 13 of Decree Law No. 78/2009, converted into Law No. 102/2009,
introduced – with effect from 2010 – new and more stringent tax rules concerning business
with companies located in countries that are considered tax havens, where these are in turn
subsidiaries of Italian companies (CFC - Controlled Foreign Companies – legislation designed
to prevent the attribution to foreign companies of earnings which would otherwise relate to the
Italian parent company).
With Circular No. 51/E of 6th October 2010, the tax authorities furnished practical
instructions on the matter. It specified that the regulations apply to both controlling interests
in companies resident in countries on the “black list” and in companies resident in countries
where the level of taxation is 50% lower than the corresponding national IRES (corporate
income tax) and significant commercial and capital business relations exist with the Italian
Group to which it belongs.
An Italian company will not be obliged to tax the earnings of a foreign subsidiary “for
transparency”, only if it files an application, to the tax authorities by 1st June 2011 and
receives approval in time for the subsequent filing of tax returns for the financial year 2010.
While further clarifications may be issued by the tax authorities, the UBI Group considers that
once the necessary applications have been made, the conditions for taxation “for
transparency” are not met because its subsidiaries do not exceed the thresholds set by the
legislation. In this respect it is not expected that the taxation estimates for 2010 will be worse
than in prior years, since the only subsidiaries subject to the CFC regime are BDG Singapore
Pte Ltd and UBI Trust Company Jersey.

NEW VAT OBLIGATIONS

Decree Law No. 40/2010, converted into Law No. 73/2010, introduced further reporting
obligations for VAT taxpayers. More specifically – from 1st July 2010 – transactions performed
and received with businesses with headquarters, residence or domicile in determined
countries with low taxation must be declared (ministerial decrees of 4th May 1999 and 21st
November 2001). The reporting obligation concerns transactions performed since 1st July
2010. The return must be filed either monthly or quarterly according to the amount of the
transactions performed in the preceding four quarters (greater or less than 50 thousand euro).
The tax authority circular No. 53/E of 21st October 2010 established that for companies
operating in the financial sector and especially for those which adopt the regime pursuant to
Art. 36 bis of Presidential Decree No. 633/1972, the return must only concern income
transactions subject to VAT and therefore all expense transactions are excluded as are income
transactions that are exempt, not subject to Vat and excluded from VAT.
Furthermore, Decree Law No. 78/2010 (converted into Law No. 122/2010) introduced the
obligation to report transactions for amounts of not less than 3.000 euro subject to VAT to the
tax authorities via internet from 2010. The provision concerns all VAT taxpayers with regard to
sales of goods and assets and to services provided and received. The declarations must be
made by 30th April of the year following that to which they relate, while for 2010 only they
must be made by 31st October 2011.
Some exclusions are provided for the banking sector relating to information already present in
the general databank of the tax authorities (e.g. customer accounts).

BUSINESS WITH NON RESIDENTS   – TRANSFER PRICES
Decree Law No. 78/2010, converted into Law No. 122/2010 introduced special procedures to
prevent resident companies which hold business relations with foreign subsidiaries from being
subject to tax penalties in relation to violations concerning the determination of “transfer
prices” for tax purposes pursuant to Art. 110, paragraph 7 of the Consolidated Income Tax
Act.
Following the Provision of the Director of the Tax Authorities issued on 29th September 2010 to
implement the above legislation, the tax authorities furnished practical details with Circular
No. 58/E of 15th December 2010.
Briefly details were provided of the contents of the documentation considered indispensable in
order to be able to benefit from the exemption in the event of assessment for taxes. This
documentation consists of the “master file” (containing information on the Group) and the
“national documentation” (concerning the individual company). While the filing of that
documentation is optional and while transactions with foreign counterparties of the Group are


                                               192
at present limited to financial business relations, the competent offices of the Parent have
been asked to identify the most appropriate methods for measuring and comparing intragroup
prices in line with the OECD Guidelines of 28th July 2010 and the results of this activity will in
any case be used to demonstrate the correct determination of intragroup prices.
Generally speaking, firms which operate with foreign parent companies and subsidiaries are
hopeful that the financial authorities will simplify the obligations at least in relation to the
magnitude of transnational business.


TAX LITIGATION


Three tax inspections by the tax authorities and Guardia di Finanza (finance police) were
initiated and/or concluded at Group member companies in 2010. A new inspection was
commenced at Banca Popolare di Ancona in March 2011 and concerns 2008.
Further details of tax inspections concerning the Group in recent years and of action taken by
the tax authorities are given in the Notes to the Consolidated Financial Statements, Part B,
Section 12.5 Liabilities, Contingent liabilities, which may be consulted.




Investor relations and external communication

RELATIONS WITH ANALYSTS                AND     INSTITUTIONAL       INVESTORS       AND    COMMUNICATION          THROUGH        THE
CORPORATE WEBSITE
The work of the Investor Relations Function, which reports directly to the CEO, continued to
focus on both equity and debt security markets, under the difficult conditions which again
continued to characterise markets in 2010. The objective was to ensure maximum
transparency in disclosures to markets, a constant and traditional trait of the Group, and to
dialogue with operators in the sector.
The following deserve mention in this respect:
• conference calls2 organised when annual and interim results were approved;
• the participation of UBI Banca as a speaker at seven international conferences in Milan,
   London and San Francisco to promote knowledge of the Group among institutional “equity”
   and “debt” investors and representatives of the international financial community;
• periodic meetings with Italian and international investors and with the analysts who cover
   the UBI share (the share is currently followed by 26 brokerage houses, including 18
   international, while the remainder are Italian).
   Altogether senior management and/or the investor relations officer met more than 150
   institutional investors during the year, sometimes on more than one occasion;
• the very many occasions on which analysts and investors were provided with information in
   response to telephone or email queries, especially in view of the intense reporting activity
   required by the situation on markets.
Work continued during the year on updating and improving the corporate website
www.ubibanca.it, in both the Italian and English version, also in the light of the ever-
increasing importance of online communications, both in terms of use and regulations.
The efforts and investments made to improve online financial communication resulted in UBI
Banca achieving 14th position in the Italian league table compiled annually by the specialist
web ranking company Hallvarsson & Halvarsson, and it again held second position in the
Italian banking sector.




2   With a view to encouraging the fullest participation of those potentially concerned, all the invitations (prepared in the English
    language) are not only sent to a mailing list of analysts and investors, but are also communicated to Consob and Borsa Italia Spa
    through NIS (the Borsa Italia network information service) and published on the corporate website at the same time. A copy of the
    presentation is made available on the Bank’s website, in good time beforehand.


                                                                193
PRESS RELATIONS
Communication activity was performed as always in 2010 with a maximum of transparency
and co-operation with each publication and with each journalist in order to ensure an
accurate perception of the distinguishing features and values of the Group.
The network banks were in involved in the issue of press releases at local level in order to
attain widespread distribution of information to the public.
This was also underlined in the particular focus of the Group’s press releases on agreements
with associations of different types in the single local areas in which it is present, designed to
enhance the value of being “close to local communities” and to give further visibility to the
Parent. As a result the network banks increased their visibility in local publications providing
further visibility to the Parent.
In 2010 UBI Banca obtained visibility in the Italian press in 9.501 articles, 24,4% of which
described it in detail, with a readership (an estimate of the number of people who read these
articles) of more than one billion readers (+21,8% compared to 2009).
The percentage of positive articles out of total high standing articles was 29,2%, while negative
articles accounted for 14,2%.
In this context UBI Banca demonstrated that it was able to maintain a significant presence in
the national and local media, underlining its corporate and capital soundness, especially when
faced with the challenges of stress tests, the implications of Basel 3 and the new Payment
Services Directive regulations. It has consolidated its closeness to local communities which
goes hand in hand with its highly recognised concrete approach to business.

EVENTS AND SPONSORSHIPS
In order to enhance its brand and support commercial advertising the Group has always
promoted a series of events on its local markets.
More specifically, UBI Banca organised a road show in important towns and cities to present
the XV Rapporto Einaudi (Einaudi report) on the global economy and Italy, the result of a
study performed by the Einaudi Centre and supported by UBI Banca.
The “U will be International” event, already mentioned, lasted two days during which firms
were offered the opportunity to meet international specialists of the Group, to see the services
it provides on foreign markets and to take part in specialist workshops.
A seminar was held in 16 Italian towns and cities on the Scudo Ter (third version of the “tax
shield” for the repatriation of capital), on an analysis of the economic scenario, on
interpretation of it and on practical solutions.
Sponsorships performed in 2010 can be divided into two categories: social, recreational and
sports activities and cultural activities.
With regard to the former, partnerships continued with the Goggi Ski Club in Bergamo and the
Bergamo international tennis tournament.
A sponsorship of the cycling team TX Active Bianchi was launched. The team is led by Felice
Gimondi and dedicated to the mountain bike and cross country fields. The sponsorship
supports a sport close to nature out in the fresh air.
Co-operation continued in the cultural field with the “Popotus a scuola” project, organised by
the daily newspaper Avvenire. UBI Banca has supported this initiative for some years. The
objective is to help children to read and understand newspapers by using a specific tool to
attract them.
The Parent sponsored the publication of the seventh edition of the Federculture Annual
Report entitled “Culture is needed today. Creativity and knowledge for social well-being and the
future of the country”. The Annual Federculture Report provides the most complete photograph
of the world of culture in Italy today and it is the most important source of analyses and up-
to-date information on cultural heritage and activity.
Finally, co-operation with Mediaset was commenced to support a master in marketing,
communication and sales management provided by Publitalia ’80.




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Social and environmental responsibility

By progressively integrating social responsibility objectives, UBI Banca pursues the
convergence of corporate strategies, policies and objectives with its values and principles and
with the expectations of its stakeholders. The objective is to create sustainable value through
the control of reputational risk, to establish a strong and distinctive corporate identity and to
develop a climate of trust with its personnel, its shareholder base and markets
All the organisational units in the Group are involved in defining and achieving social
responsibility objectives, with support from the Corporate Social Responsibility Function,
which formulates proposals for policies and guidelines, contributes to the management and
control system, supports the involvement of stakeholders and manages reporting activities.
A summary of the main traits of social responsibility at UBI Banca is given below, while the
Social Report may be consulted for further information and in-depth analysis.

CORPORATE GOVERNANCE (Code of Ethics)
On conclusion of joint activity involving management, consisting of a series of interviews and a
working group composed of different functions formed by UBI Banca, the network banks and
the principal product companies, on 13th and 14th December 2010 the Supervisory Board and
the Management Board of UBI Banca approved the Code of Ethics, which is as an integral part
of the “Organisational, Management and Control Model pursuant to Legislative Decree
231/01”. All the banks and Group member companies adopted the text approved by UBI
Banca – with amendments to it, where necessary, required by the specific regulations
governing their business sectors and/or the foreign country in which they are incorporated –
through the official approval of it by their respective management bodies.
The document incorporates the Group Charter of Values and makes reference to the universal
principles of the Global Compact. It defines the manner in which UBI Banca and the
companies in the Group intend to pursue their mission and act in dealings with their various
stakeholders, by basing their management and operating activities on observance of moral and
legal obligations contained in the code. The document identifies significant stakeholders in the
Bank’s activities, defines general ethical principles and standards of conduct in dealings with
stakeholders and it gives details for the implementation and monitoring of the Code itself,
including the procedures for reporting suspected violations, how to treat them and the
imposition of penalties where applicable.
The Code applies to all organisational units and geographical areas in which UBI Banca
operates and it is communicated to stakeholders through a variety of channels. It will be the
subject of a training and internal communication programme in 2011 designed for all Group
personnel and will be updated shortly with the issue of a Code of Conduct for personnel,
currently being prepared in accordance with the guidelines contained in the current Art. 8.3 -
Attachment C, which will form an integral part of it.

THE MARKET
Business management is oriented towards innovation in products and services, marketing
approaches and distribution processes consistent with the ethical, social and environmental
expectations of stakeholders and in implementation of the mutual and community vocation of
the Group.
Intense activity was performed during the year to plan and develop initiatives for the weaker
groups in society and for nonprofit organisations. More specifically, in addition to the action
taken to assist families and businesses reported in the section on commercial activity, the
most important initiatives were as follows:
• the launch of a project to define a service model for third sector organisations and Church
    and religious entities with a special range of products and services. Project work included a
    series of meetings with representatives of both Church and other organisations in order to
    discover their specific needs;
• the continuation of the partnership with PerMicro (a leading player in the Italian sector) to
    develop micro-credit for social inclusion and to support employment. PerMicro doubled its
    volumes of businesses in 2010 with the grant of 530 micro-loans to families and 105
    micro-loans to start micro-businesses, for a total of 2,9 million euro;
• the development of a range of products and services for immigrants, as part of the
    programme to acquire new customers on the retail market.


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SOCIAL ASSISTANCE
Depending on the companies to which they belong, Group employees can benefit from the
following: supplementary forms of pension and health care, insurance policies covering death
or permanent disablement, gifts on important occasions such as marriages, births and
adoptions, high school and university graduation, scholarship grants for children, paid leave
to care for disabled family members, the emergency hospitalisation of family members, the
birth or adoption of children and when they start nursery schooling. We also make extra
payments to single income families or those with disabled members.
  Services: in addition to company crèches, these include eight company cultural and
  recreational clubs, holiday accommodation facilities at tourist locations (available to
  personnel and their families under special terms) and shuttle bus services provided for travel
  to and from work. Favourable terms and conditions are granted on charges and commissions
  for banking services along with loans at special rates for the purchase of homes and
  automatic credit on easy terms in line with the best market conditions.
  Solidarity: the Group has supported the Clematis Onlus since 2002. It is an association
  formed by employees and former employees of the former Banca Popolare di Bergamo-
  Credito Varesino. The association was formed to give support to the families of employees,
  whether in service or retired, who have non self sufficient, disabled children.

SOCIAL INTERVENTION
The management of social intervention is designed to strengthen and support those large
numbers of nonprofit organisations which work in the following fields: social, recreational and
sport; welfare and solidarity; education and training; culture: university and research;
restoration of artistic heritage and the protection of the environment.
In 2010 the Group, with contributions from the Parent, the network banks, the main product
companies and its foundations, disbursed a total of approximately 16,2 million euro (-18,6%
compared to 2009) in the form of donations and sponsorships. Each entity in the Group
operates independently in response to the demands it encounters and considers consistent
with its own values and social responsibility objectives.
Important initiatives include the longstanding partnership with CESVI (one of the main Italian
NGOs operating in the field of humanitarian emergencies throughout the world) as part of
which UBI Banca supported the initiative “CESVI sUBIto for Pakistan” in 2010 for people in
Pakistan hit by severe floods in the summer of 2010. UBI Banca made its 1.900 branches
available to receive donations from customers ,which amounted to 30 thousand euro. This was
then doubled with a contribution of an equal amount made by the Group for a total donation
of 60 thousand euro.

ENVIRONMENTAL RESPONSIBILITY
In addition to its pursuit of full and substantial compliance with regulations in force, it is
Group policy to contribute to sustainable economic development, thereby also concretely
implementing the principles of the Global Compact.
The environmental policy approved in December 2008 commits the Group to reducing its
environmental impact through the intelligent and responsible management of both direct
impacts (i.e. impacts generated by its own operating activities through the consumption of
resources, the production of waste and harmful emissions) and also indirect impacts (i.e.
impacts generated by the conduct of third parties with whom the Bank does business, such as
its customers and suppliers).
With regard to direct impacts the most important objective achieved in 2010 was the exclusive
use of electricity certified as from renewable sources (RECS certificates) and this made it
possible to reduce total CO2 emissions by 46,6%, compared to 2009. Energy consumption
amounted to 26.129 TOE3 and waste production remained virtually stable (+2,5% for a total of
2.153 tonnes).
As concerns indirect impacts, the Group has been active for some time in its commercial
activities with “green” products, and that is credit lines provided for investments in energy
savings and in the diversification of energy sources, with particular attention given to

3   A tonne of oil equivalent is a unit or measurement which represents the quantity of energy released by burning a tonne of crude oil
    and is equal approximately to 42 GJ (billion joules). The value is set by convention, because different types of oil have different
    values for the heat of combustion and there are many conventions currently in use.


                                                                 196
renewable sources or those with a low environmental impact. The New Energy product line is
for businesses. It comes in two versions, Renewables and Photovoltaic, with approximately 700
loans granted in 2010 for a total amount of 300 million euro, while the line Sun Strength is for
private individual customers with over 500 loans granted in 2010 for approximately 12 million
euro.

ECONOMIC REPORT
In 2009 the UBI Banca Group generated economic value of 3.048 billion euro (-0,5% compared
to 2008), 6,4% of which is retained by the Group with the remainder distributed to
stakeholders as follows: 47,6% to       employees, 23,2% to suppliers, 18,8% to public
administrations, 3,2% to registered and unregistered shareholders, 0,4% to third parties and
0,4% to the community and the environment (see the 2010 Social Report for further details).

REPORTING AND CONTROL
The Corporate Social Responsibility Report, together with the social responsibility section of
the Group corporate website, is the main instrument for integrated reporting on the economic
aspects (the economic value generated and distributed), social aspects (commitments,
objectives and results achieved in terms of satisfying the legitimate expectations of
stakeholders) and environmental aspects (commitments, objectives and results for controlling
direct and indirect impacts) of operations.
The Group Social Report is prepared annually in compliance with the 2006 Sustainability
Reporting Guidelines (G3) and the Financial Services Sector Supplement of the Global
Reporting Initiative4 (the 2010 edition again achieved an intermediate B+ level of application)
and it is subjected to an independent audit. It is printed in 3,000 copies, published and
distributed to shareholders on the occasion of the Annual General Meeting together with the
Annual Report entitled “Reports and Accounts”. The 2010 edition has been audited by the
independent auditors, KPMG Spa.
As occurred last year, for a greater and broader readership of the report, two summary
versions will be produced again in 2010. One version for the public with approximately
100.000 copies printed and distributed as a supplement to the weekly Vita Non Profit
magazine and in the branches of the Group and another distributed exclusively in electronic
format on the corporate intranet of the Group. Both the full and the summary versions are
available to the public (the former also in the English language) in the social responsibility
section of the corporate website.
Six meetings were held in the second half of 2010 with representatives of trade associations
and nonprofit organisations, conducted by an independent company using the focus group
method, in order to verify the level of awareness and agreement with the social responsibility
policies of the Group and the quality of the reporting provided in the communities concerned
and to survey expectations and acquire recommendations for improvement. The work
performed in 2010 concluded a three year cycle of meetings, which involved all the main
provinces in which the Group network banks are present.




4   An independent nonprofit foundation located in Amsterdam which was formed from a project started in 1997 by CERES of Boston (a
    coalition of investors, environmental organisations and public interest groups which came together to promote corporate social
    responsibility by addressing businesses directly on social and environmental issues). Its mission is to produce global standards for
    sustainability reporting, thanks to the contribution of hundreds of experts in a large number of countries throughout the world


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Legislation on the protection of personal data

In compliance with Art. 34 of Legislative Decree No. 196 of 30th June 2003 – legislation on the
protection of personal data – the companies of the Group subject to that legislation performed
the periodic update of security programme documents on time and in compliance with the
recommendations contained in the Attachment B, Technical Regulations, of that decree (rule
19).
In order to ensure the accurate and proper preparation of that document – standardising
operational practices where possible and at the same time defining the scope of responsibility
of each actor concerned – the Parent prepared specific corporate guidelines to regulate the
process at UBI Banca, UBI Sistemi e Servizi and in the network banks. These guidelines were
also used as a standard reference for other banks and companies in the Group required to
comply with the legislation.




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Principal risks and uncertainties to which
the UBI Banca Group is exposed

Risks

The UBI Banca Group attributes primary importance to the measurement, management and
monitoring of risk, as activities necessary to the sustainable creation of value over time and to
the consolidation of its reputation on its markets.
In compliance with the regulations in force for the prudential supervision of banks (Bank of
Italy Circular No. 263/2006), the Group has put a process in place to calculate its capital
adequacy requirement – for the present and the future – to meet all significant risks to which
the Group is or might be exposed (ICAAP - Internal Capital Adequacy Assessment Process).

In this respect very careful identification is performed on a continuous basis of the risks
subject to measurement. Risk identification activity is designed to verify the magnitude of
Group risks already subject to measurement and to detect signals of other types of risk which
may manifest. Identification involves precise conceptual definition of the risks to which the
Group is exposed, an analysis of the factors which combine to generate them and a description
of the relative manner in which they manifest. This activity was achieved by means of a
centralised process of analysis supplemented by self assessment conducted on all the entities
of the Group.

Once the activity to identify significant risks is completed, the ICAAP process involves the
measurement of the risks identified and the calculation of the capital required to meet it
(capital adequacy), both at present and in the future. Use is also made of specific and global
stress tests (by assessing impacts on a single risk and on all risks respectively) to perform a
better assessment of exposure to risk and of systems for mitigating and monitoring them and
calculating capital requirements.

The UBI Banca Group has a system of risk governance and management in place which takes
account of organisation, regulations and methods in order to ensure consistency in its
operations and its relative propensity to risk.

In consideration of its mission, the operations of the Group and also the market context in
which it operates, the risks to be subjected to measurement in the ICAAP assessment process
were identified and divided into first pillar and second pillar risks, as required by the relative
regulations.

First pillar risks – already managed under the requirements of supervisory regulations – are as
follows:
• credit risk (including counterparty risk): the risk of incurring losses resulting from the
    default of a counterparty with whom a position of credit exposure exists;
• financial risks: risk of changes in market value or in financial instruments held due to
    unexpected changes in market conditions and the credit rating of the issuer;
• operational risk: the risk of incurring losses resulting from the inadequacy or malfunction
    of procedures, human resources and internal events or from exogenous events. These
    include losses resulting from fraud, human error, business disruption, system failure, non
    performance of contracts and natural disasters and it comprises legal risk.




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In addition to first pillar risks, second pillar risks were identified, consisting of the following:
• risks defined as measurable, for which established quantitative methods have been
   identified, which lead to the determination of internal capital or for which useful
   quantitative thresholds or limits can be defined which, combined with qualitative
   measurements, allow allocation and monitoring processes to be defined;
   risks defined as non measurable, for which policies and measures for control, reduction or
   mitigation are considered more appropriate because no established approaches exist for the
   measurement of internal capital that are useful for allocation purposes.

The second pillar risks subject to analysis are as follows:

Measurable risks:
- concentration risk: risk resulting from exposures in the banking portfolio to counterparties,
  or groups of counterparties in the same economic sector or counterparties which carry on
  the same business or belong to the same geographical area. Concentration risk can be
  divided into two types: single name concentration risk and sector concentration risk;
- interest rate risk: current or future risk of a change in net interest income and in the
  economic value of the Bank following unexpected changes in interest rates which have an
  impact on the banking portfolio;
- business risk: the risk of adverse and unexpected changes in profits and margins with
  respect to forecasts, connected with volatility in volumes of business due to competitive
  pressures and market conditions;
- equity risk: the risk of losses incurred in the equity investments portfolio.
- property risk: risk of changes in the value of property assets.

By convention measurable risks also include those risks for which, although no well
established approaches exist for the estimate of internal capital, operational limits of a
quantitative nature, for which there is a consensus in the literature, can be set to measure,
monitor and mitigate them. These risks are:
- liquidity risk: the risk of the failure to meet payment obligations which can be caused either
   by an inability to raise funds or by raising them at higher than market costs (funding
   liquidity risk), or by the presence of restrictions on the ability to sell assets (market liquidity
   risk) with losses incurred on capital account;
- structural liquidity risk: the risk resulting from inadequate matching of maturities for
   assets and liabilities.

Non measurable risks:
- risks resulting from securitisations: the risk that the underlying economic substance of a
  securitisation is not fully reflected in decisions made to measure and manage risk;
- compliance risk: the risk of incurring legal or administrative penalties, substantial financial
  losses or damage to reputation resulting from violations of laws and mandatory external
  regulations or internal regulations (by-laws, codes of conduct and voluntary codes);
- reputational risk: the risk of incurring losses resulting from a negative perception of the
  image of the Bank by customers, counterparties, shareholders of the Bank, investors, the
  supervisory authority or other stakeholders;
- residual risk: the risk of incurring losses resulting from the unforeseen ineffectiveness of
  established methods of mitigating risk used by the Bank (e.g. mortgage collateral);
- strategic risk: the current or future risk of a fall in profits or in capital resulting from
  changes in the operating context, inadequate decision-making, failure to react to changes in
  a competitive environment.

                                               * * *

Credit risk constitutes the most important characteristic risk of the UBI Banca Group:
historically this risk accounts for approximately 90% of the supervisory risk capital.
The economic recovery in the year just ended was basically weak, after the substantial
decreases in growth in 2008 and 2009. While timid signs of recovery have been seen, the
protracted difficulties of the economy in general and the related consumer crisis have


                                                 200
continued to have a negative impact on the ability of businesses and individuals to meet their
commitments and this has held credit risk at high levels along with increases in problem loans
and the relative provisions.
It is considered that again in 2011 there will only be a slow recovery in the causes of risk in
the financial system and in particular in levels of activity in relation to company earnings and
household income.

As concerns structural liquidity risk, the relationship between sources of funding and those of
lending could be subject to difficulties because on the one hand it will be difficult to reduce
volumes of lending and on the other hand, the need to replace maturing securities and the
progressive impoverishment of households will stifle funding markets. However, given the
maturities of its own bonds, the UBI Banca Group has prepared a structured programme of
new issues which has been fully implemented to-date.

As concerns liquidity risk, problems of trust persist on international and interbank markets,
due above all to fears over the solvency of some sovereign states, in a context of a slowdown in
traditional funding due to the lower available income of households. The country risk effect is
penalising Italian banks with their funding on wholesale markets heavily compared to banks
in other European countries.

Risks other than those just reported, which are of marginal importance within the UBI Banca
Group, are not expected to change during the course of the year.

Detailed information on financial risk management objectives and policies and also on the
exposure of the Group to price risk, credit risk, liquidity risk and the risk of changes in cash
flows – pursuant to article 2428 of the Italian Civil Code – is given in Part E of the notes to the
consolidated financial statements, which may be consulted.




Uncertainties

An uncertainty is defined as a possible event for which the potential impact, attributable to one
of the risk categories just mentioned, cannot be determined and therefore quantified at present.

The scenario unfolding for the Group is one of volumes of business recovering moderately, low
profit margins and high credit risk. While the economic recovery has started, it is progressing
quite differently in different countries: vigorously in emerging economies and slowly in
advanced economies. Other potential vulnerabilities remain: the rapid growth of debt in some
countries in the euro area could trigger doubts over the sustainability of public finances;
markets are still highly volatile and difficulties could arise over the refinancing of huge
quantities of banking debt in competition with sovereign states and businesses.
The elements of uncertainty identified could manifest with impacts attributable basically to
credit risk, interest rate risk and liquidity risk.

In detail, the main uncertainties identified for 2011 are linked to the following aspects:
-   development of the macroeconomic situation: statistics published since the start of 2011
    have confirmed the continuation of world growth which would suggest that the recovery will
    be consolidated in the current year. Nevertheless temporary slowdowns in growth rates are
    not to be excluded.
    More specifically emerging countries – the growth drivers throughout 2010 – should
    continue to make a positive contribution to the performance of the macroeconomic
    scenario, despite the monetary tightening decided by central banks, including those of India
    and China, to dampen inflation.
    In this international context, Italian GDP grew in real terms in 2010 by 1,2%, driven to a
    considerable extent by the boost in exports, although net of exports the balance of foreign
    trade decreased. A significant contribution to growth in the economy also came from




                                               201
    domestic demand net of inventories. Encouraging signs also arrived from industry, with an
    average annual increase in output of 5.3% and in manufacturing orders of 13.9%.
    With regard to inflation, consumer prices have been affected in recent months, in the euro
    area above all, by the sharp increase in raw materials, and in oil prices in particular, in
    light of the stronger global economic situation and the geopolitical instability in North Africa
    and the Middle East. Trends for commodities prices are also being affected “upstream” with
    pressures on production prices.
    In any event inflation in Italy in 2010 increased to 1,6%, fuelled mainly by prices for goods
    rather than services:
-  performance of financial markets and the yield curve: the process of the strategy to exit from
   the expansionary monetary policies pursued by the ECB to address the market and credit
   crises of previous years continued. In this respect the principal longer term (six and twelve
   month) refinancing auctions were not renewed, but were replaced by shorter three month
   operations. Last year saw growth in pressures connected with the sovereign debt of
   peripheral countries in the euro area (Greece, Spain, Portugal and Ireland in particular).
   The increases in interbank rates that occurred at the end of 2010 followed the process of
   normalisation determined by the gradual removal of extraordinary measures put in place by
   the European Central Bank during the last recession, while swap rates fell sharply.
   Finally, the risk of high volatility in the yields and therefore in the prices of the portfolio of
   owned bonds remains, the result of uncertainties over the solvency of some sovereign states
   and the normalisation of monetary policies.
The periodic testing of the recoverability of goodwill is to be set against the background
described. It is based on parameters and information that is significantly affected by the
macroeconomic context and related to difficulties on financial markets. Consequently it is
susceptible to rapid changes;
-   changes in the regulatory context: the legislative environment is subject at present to various
    changes. These are the result of both enactments at EU and national level, with the relative
    regulatory provisions to implement them, regarding the provision of banking services (e.g.
    relating to payment services and consumer credit) and also decisions in the courts (e.g.
    relating to the form of contracts, interest and other items of remuneration for banking
    services). This scenario which has introduced discontinuities in operations, could directly
    affect the profits of banks, requiring particular effort both in terms of interpretation and
    implementation.

                                               * * *

The risks and uncertainties described above were subject to a process of assessment designed,
amongst other things, to examine the impacts of changes in market parameters and conditions
on corporate performance. The Group does in fact possess instruments to measure the possible
impacts of risks and uncertainties on its operations (sensitivity analysis and stress tests in
particular), which allow it to rapidly and continuously adapt its strategies – in terms of its
distribution, organisation and cost management systems – to changes in the operating context.
Risks and uncertainties are also under constant observation through the implementation of the
policies and regulations to govern risk adopted by the Group: policies are updated in relation to
changes in strategy, context and market expectations. Periodic monitoring of policies is designed
to verify their state of implementation and their adequacy. The findings of the analyses
performed show that the Group is able to meet the risks and uncertainties to which it is exposed,
which therefore confirms the assumption that it is a going concern.




Risks relating to health and safety at the workplace
(Legislative Decree No. 81 of 9th April 2008)


To complete compulsory activity required for compliance with general obligations concerning
health and safety at the workplace, the new risk assessment documents prepared by the
Prevention and Protection Service were approved by the Official Employers of Group
companies in December. These documents were prepared in accordance with articles 28 and


                                                202
29 of Legislative Decree No. 81/2008, on the basis of methodological recommendations made
by the Permanent Consultative Commission for Health and Safety at the Workplace (Art. 6 of
Legislative Decree No. 81/2008) for the assessment of work-related stress risks, published by
the Ministry of Labour in a circular letter of 18th November 2010.

The obligation to also assess work-related stress risk, as part of workplace risks, had in fact
been postponed repeatedly because that risk is different from “traditional” accident risks,
where “automatic” techniques of measurement have existed for some time (e.g. noise levels,
number of hours spent using a video terminal). It had therefore been underlined by all trade
unions and associations that there was a need for practical guidelines to follow. The
Commission also stated that the date of 31st December 2010, contained in the article 28
mentioned above, is to be considered the date on which assessment activity commences and
not the date on which it is to be completed by firms subject to the obligation.

With regard to the methodology, the assessment process will be completed in 2011 in close co-operation
with the official Occupational Doctors and with the involvement of a significant sample of employees. It
consists of two stages, one which is necessary and preliminary (the “objective” stage) and a second
potential stage (the “subjective” stage) to be implemented only if the preliminary stage reveals elements of
stress risk.
The preliminary stage consists of measuring numerically appreciable objective factors, relating to: (i)
events in employment relationships (absences, accidents, employment figures, training hours, work-
related litigation, etc.); (ii) the contents of the relationships (work loads and rhythms, hours and shifts,
etc.); (iii) the context (decision-making autonomy, career development, role in the organisations, etc.).
These are then to be used as possible indicators of stress. This is performed to analyse and identify the
organisational antecedents of work-related stress, by acquiring comparative quantitative data, using a
benchmarking process, which also uses data for the sector.
If the findings of the first analysis reveal the presence of stress indicators high enough to
require corrective action, then appropriate preventative action must be planned in addition to
measures already present and in use, independently of the formal obligation to measure stress
recently introduced5.

With regard to the more traditional aspects of regulations governing health and safety at the
workplace, the positive trend for work-related accidents and illnesses in the banking sector
continued. It was again placed in the lowest class both in terms of absolute severity and the
frequency and seriousness of accidents. “Accidents while travelling” which occur while
travelling to and from work were again the most prevalent of total accidents. In this respect
the data for the UBI Banca Group is not only perfectly in line with those for the sector, but
Group also pursues special policies designed to reduce road accident risks at the source, by
encouraging, where possible, the use of public transport even for work activities, or by making
collective transport facilities available, where restructuring processes result in significant
travelling requirements for personnel

As concerns the remaining potential sources of accident risk normally present at the
workplace, such as those connected with ordinary and extraordinary maintenance work
performed at the operating premises of the group (termed “interference risks”) the virtuous
process started in 2009 for the safety management of contracted work continued. This
included greater involvement of the personnel of the Group’s consortium service company
which manages relations with Group suppliers directly, while the practice of ensuring the
participation of members of the Parent’s Prevention and Protection services in meetings for co-
operation and co-ordination with contractors, as well as to provide support and advice, was
consolidated.
Much time was also dedicated to safety management for contracted work in the training day
organised for all personnel assigned to emergency management in the local operating units of
the network banks.

Similarly, co-operation between the Prevention and Protection Service of the Parent and the
operating units of the consortium service company responsible for property management also
included accident prevention within its scope along with security issues. It was designed for

5   Examples include the following: the continuous refinement of communication tools in companies; a significant investment in both
    commercial and behavioural training; numerous welfare initiatives with supplementary insurance, pensions and health care to
    which the company makes a significant financial contribution; the provision, either directly or indirectly, of children’s nurseries;
    collective transport facilities, where restructuring processes may result in significant travelling requirements for personnel.


                                                                 203
joint analysis of health and safety issues for personnel, right from the design stages of
buildings, and also to find the most appropriate operational and management solutions.

The risk of robbery in the banking sector and in business units in the distribution network in
particular, where cash is present, remains an important issue, although the number of events
in absolute terms has fallen constantly and substantially. The project for the widespread
distribution of automatic systems for cash management has produced an appreciable
reduction in the quantity of immediately available cash, which is the main objective of bank
robbers.
Nevertheless, there has been a certain increase, compared to the past, of robberies no longer
carried out by single individuals or pairs of robbers, but by organised gangs, who aim to steal
large sums. These have not hesitated to remain in bank premises for long periods, keeping
personnel hostage under threat until timer operated safes open. The phenomenon is not just
significant in terms of the financial damage, but also in terms of prevention risks, because the
long duration of the robberies raises the level of stress to which employees are exposed as a
result of the threats received.
In this respect, the useful psychological assistance provided for years for branch network
personnel was increased and the classroom training programme furnished by specialist
psychologists was continued. In addition, further online training has now been provided to
supplement classroom training, which simulates the real dynamics of the different types of
robbery and as a result of its very interactive nature, provides personnel with a useful means
of learning the correct behaviour to employ on those occasions.

An analysis of the risks and uncertainties to which the UBI Banca Group is exposed in the
application of health and safety legislation must necessarily consider the relationship of that
legislation (which as is known requires those occupying the positions of Official Employer,
senior manager and company officers to act as guarantors and therefore to be personally
liable) to Legislative Decree No. 231/2001, which regulates the administrative liability of legal
entities.
The key connection between Legislative Decree No. 231/2001 and Legislative Decree No.
81/2008 is article 30 of Legislative Decree No. 81, which gives the adoption and
implementation of a management and organisation system for health and safety based on a
specific series of parameters as effective justification for the administrative liability of legal
entities. If that system is defined in compliance with UNI-INAIL guidelines (SGLS 2001) or with
the 2007 OHSAS 18001 British Standard, conformity is presumed under the legislation.
Although the adoption of a system based on the standards just mentioned is not compulsory,
nor can it in any case guarantee absolute “immunity” from penalties in the event of an
accident, it is considered that the progressive adoption of a system based in the UNI-INAIL
guidelines by all the companies in the Group should constitute a concrete objective to be
achieved. Consequently, an external advisory firm has already been commissioned to
implement the relative project.
The unification of the system of accident prevention appointments (appointment of a member of
senior management of each company as an “Official Employer” and the grant of functional
powers by the Official Employer” to senior managers operating in the areas more directly
involved in the operational management of workplace health and safety issues for workers) can
be considered the first and most important step to take in the introduction of the principles
indicated in the legislation in question.
Furthermore, as part of governance activities conducted by the Parent, the protocols for the
assessment of risks, internal procedures, training programmes and procedures for the
management of relations with occupational doctors who work for the UBI Banca Group have
now been standardised, again with a view to consistency and compliance with the
requirements of paragraph 1 of Art. 30 of Legislative Decree No. 81/2008.




                                               204
Subsequent events and the business outlook
for consolidated operations

Part A, Section 4 of the Notes to the Financial Statements may be consulted for significant
events occurring after the end of the year.

                                              ***

With regard to the business outlook, we report the forecasts given below on the basis of
information currently available.

The substantial increase in the cost of funding should not compromise the effect on interest
income of repricing action already put in place from the second half of 2010. The general level
of operating income is expected to improve as a result, amongst other things, of repricing
action taken on commission items, partly inherited from the last quarter of 2010 and partly
introduced in the first quarter of the current year.

Operating expenses as a whole are expected to fall slightly compared to 2010. It should
nevertheless be considered that the achievement of this forecast is dependent on the outcome
of national labour contract negotiations. Constant measures are being taken to contain
administrative expenses.

An improvement is also forecast for the quality of credit which should enable an annual level
for the cost of credit to be achieved that is lower than that recorded in 2010, but which will
still be conditioned by the unfavourable economic situation.

Consequently, an improvement in profits on ordinary activities is expected for 2011.




Bergamo, 28th March 2011



                                                                  THE MANAGEMENT BOARD




                                             205
      STATEMENT OF THE CHIEF
EXECUTIVE OFFICER AND OF THE
  SENIOR OFFICER RESPONSIBLE
  FOR PREPARING THE COMPANY
       ACCOUNTING DOCUMENTS




            206
207
Certification of the consolidated financial statements pursuant to Art. 81-ter of the
Consob Regulation 14th May 1999, No.11971 and subsequent modifications and
integrations

1. The undersigned Victor Massiah, Chief Executive Officer, and Elisabetta Stegher, Senior Officer Responsible for
preparing the company accounting documents of UBI Banca Scpa, having taken account of the provisions of
paragraphs 3 and 4 of article 154 bis of Legislative Decree No. 58 of 24th February 1998, hereby certify:

    the adequacy in relation to the characteristics of the company and
    the effective application

of the administrative and accounting procedures for the preparation of the consolidated financial statements during
the course of 2010.

2. The model employed

The assessment of the adequacy of the administrative and accounting procedures for the preparation of the
consolidated financial statements as at and for the year ended 31st December 2010 was based on an internal model
defined by UBI Banca Scpa and developed in accordance with the framework drawn up by the Committee of
Sponsoring Organisations of the Treadway Commission (COSO) and with the framework Control Objectives for IT
and related technology (COBIT) which represent the generally accepted international standards for internal control
systems.

3.Furthermore, it is certified that:

3.1 the consolidated financial statements:
         a) were prepared in compliance with the applicable international financial reporting standards recognised
             by the European Community in accordance with the Regulation No. 1606/2002 (EC) issued by the
             European Parliament on 19th July 2002;
         b) correspond to the records contained in the accounting books;
         c) give a true and fair view of the capital, operating and financial position of the issuer and of the group
             of companies included in the consolidation.

3.2 the management report comprises a reliable analysis of the performance, operating results and position of the
    issuer and of the companies included in the consolidation, together