2015 Annual Reports - Banca IMIac466a66-c419-4caa-bddf-1d84d… · 2015 Annual Reports This is an...

2015 Annual Reports

Bank of

2015 Annual Reports

This is an English translation of the Italian language original “Bilanci 2015” that has been prepared solely for the convenience of the reader. The Italian language original “Bilanci 2015” was approved by the Shareholders’ Meetings of Banca IMI on 31 March, 2015 and is available on the above mentioned website.

Banca IMI S.p.A.Largo Raffaele Mattioli 3 - 20121 Milan (Italy) – Share capital Euro 962,464,000 – Registered with the Milan Business Registry – Registration number and tax ID 04377700150 – ABI Code 3249.0 – Member of the Intesa Sanpaolo banking group – Member of the Interbank Deposit Protection Fund – GIIN (Global Intermediary Identification Number) – Head office (Italy) D9I1IN.00011.ME.380 – London branch (UK) D9I1IN.00011.BR.826 – E-mail: [email protected] – www.bancaimi.com – Telephone +39 02.72611

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Contents

Officers and boards

Banca IMI S.p.A. – Financial highlights and alternative performance ratios

Banca IMI Group – Financial highlights and alternative performance ratios

Executive summary

SEPARATE FINANCIAL STATEMENTS OF BANCA IMI

Directors’ Report on the Bank’s position and on the operations:The macroeconomic outlook and capital markets Results by business area Results in 2015 Equity and financial aggregates Subsidiaries and equity investments Capital adequacy and prudential supervision Operational governance, organisational evolution and product development Human resources Management and coordination by Intesa Sanpaolo The control system Related party transactions Business outlook Proposals to the Shareholders’ Meeting

Separate financial statements of Banca IMI Statement of financial position Income statement Statement of comprehensive income Statements of changes in equity Statement of cash flows

Notes to the separate financial statements Part A – Accounting policies 72

- A.1 – General criteria 72- A.2 – Main financial statement captions 75- A.3 – Information on transfers between financial assets portfolios 86- A.4 – Information on fair value 86- A.5 – Information on day one profit/loss 94

Part B – Information on the Statement of Financial Position 95Part C – Information on the Income Statement 123Part D – Comprehensive income 138Part E – Information on risks and related hedging policies 139Part F – Equity 205Part H – Related party transactions 212Part I – Equity-settled share based payment agreements 217Part L – Segment reporting 219

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Statement of the Manager in charge of financial reporting 221 Independent Auditors’ Report 225

Report of the Board of Statutory Auditors 229

Attachments 235Reconciliation between the separate financial statements and the reclassified financial statements 237Audit fees 240Highlights of the subsidiaries and associates 241Details of bond issues 249Report on Corporate Governance and Shareholder Structure 253

CONSOLIDATED FINANCIAL STATEMENTS OF THE IMI GROUP

Consolidated report on operations 295

Consolidated financial statements of Banca IMI Consolidated statement of financial position 306Consolidated income statement 307Consolidated statement of comprehensive income 308Statements of changes in consolidated equity 309Consolidated statement of cash flows 310

Notes to the consolidated financial statements Part A – Accounting policies 315Part B – Information on the Consolidated Statement of Financial Position 323Part C – Information on the Consolidated Income Statement 348Part D – Consolidated Comprehensive income 361Part E – Information on risks and related hedging policies 362Part F – Consolidated equity 396Part H – Related party transactions 399Part I – Equity-settled share based payment agreements 401Part L – Segment reporting 402

Independent Auditors’ Report on the Consolidated Financial Statements 403

Attachments 407Reconciliation between the consolidated financial statements and the reclassified financial statements 409Consolidated audit fees 412List of international financial reporting standards (IFRS) 413IMI Group and Corporate Governance 415

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Officers and boards

Board of Directors(in office for the three-year period 2013-2015)

Chairman Fabio Alberto ROVERSI MONACO

Deputy Chairman Gaetano MICCICHÈ (1)

Giangiacomo NARDOZZI TONIELLI

Managing Director Mauro MICILLO (2)

Directors Aureliano BENEDETTI Luigi Arturo BIANCHI Fabio BUTTIGNON Vincenzo DE STASIO Stefano DEL PUNTA (3)

Paolo Maria Vittorio GRANDI Massimo MATTERA Francesco PAPADIA

Board of Statutory Auditors and Surveillance Body pursuant to Legislative Decree 231/2001(in office for the three-year period 2013-2015)

Chairman Gianluca PONZELLINI

Statutory auditors Stefania MANCINO Riccardo ROTA

Substitute auditors Alessandro COTTO Carlo Maria Augusto BERTOLA

General Manager Mauro MICILLO

Manager in charge Angelo BONFATTIof financial reporting

Independent auditors KPMG S.p.A.(in office for the nine-year period 2012-2020)

(1) Managing Director until 14 April 2015; Deputy Chairman since 28 July 2015(2) Co-opted by the Board of Directors on 2 April 2015; Managing Director since 14 April 2015; confirmed in office by the Shareholders’ Meeting and the Board of Directors on 24 April 2015 (3) In office until 1 April 2015

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Banca IMI S.p.A. – Financial highlights and alternative performance ratios

(in millions of euro)

2015 2014 Changes

amount %

Income statement

Core business profit 1,398.9 1,283.4 115.5 9.0%

Non-recurring income (expense) 5.9 22.8 (16.9)

Total income 1,404.8 1,306.2 98.6 7.5%

Net operating costs (430.2) (391.2) (39.0) 10.0%

of which: - personnel expenses (147.5) (131.5) (16.0) 12.2%

Operating profit 974.6 915.0 59.6 6.5%

Impairment losses, provisions, other operating income (expenses) (175.4) (146.5) (28.9) 19.7%

Income tax expense (277.2) (264.4) (12.8) 4.8%

Profit for the year 522.0 504.1 17.9 3.6%

Statement of financial position

Owned securities (HFT, AFS and L&R) 28,294.3 22,853.2 5,441.1 23.8%

Repurchase agreements and Securities lending 15,284.0 16,000.0 (716.0) -4.5%

Structured finance assets 6,574.3 6,174.2 400.1 6.5%

Total assets 153,797.1 147,230.0 6,567.1 4.5%

Net inter-bank position (2,598.2) 4,309.1 (6,907.3)

Bond issues 13,866.8 21,482.6 (7,615.8) -35.5%

Guarantees given and commitments to lend 4,681.8 4,411.5 270.3 6.1%

Notional amount of financial derivatives 2,704,872.0 2,625,697.3 79,174.7 3.0%

Notional amount of credit derivatives 111,964.1 119,846.8 (7,882.7) -6.6%

Equity (1) 3,160.6 3,541.6 (381.0) -10.8%

Profitability and risk ratios

Cost / Income ratio (2) 30.6% 29.9%

Average VaR for the period of the AFS and HFT portfolio 81.7 39.3 42.4 107.9%

Non-performing loans/Total credit exposures 13.5% 17.7%

Net impairment on loans/Performing loans 1.3% 1.5%

Profit/Average equity (ROE) (3) 15.9% 15.2%

Profit/Total assets (ROA) 0.3% 0.3%

Profit/Capital absorbed (4) 27.7% 27.2%

Basic earnings per share (EPS basic) - euros (5) 0.542 0.524

EVA ® (5) 186.9 154.9 32.0 20.7%

Capital ratios

Total Tier Capital 10.67% 12.40%

Operating structure

Total dedicated resources (6) 832 823 9

Ratings

Moody's Baa1

Fitch BBB+

Standard & Poors BBB-

1) Including profit for the year, net of any interim dividends2) Operating costs in relation to Total income3) Profit for the year in relation to the weighted average capital, fair value reserves and other reserves4) Profit for the year in relation to the weighted average quarterly equity requirements5) Excluding those effects which impact the comprehensive income of the year6) It includes seconded resources proportionately

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Consolidated BANCA IMI - Financial highlights and alternative performance ratios


2015 2014 Changes

amount %

Income statement

Core business profit 1,435.9 1,314.0 121.9 9.3%

Non-recurring income (expense) 7.0 15.7 (8.7)

Total income 1,442.9 1,329.7 113.2 8.5%

Net operating costs (449.8) (405.3) (44.5) 11.0%

of which: - personnel expenses (159.6) (139.5) (20.1) 14.4%

Operating profit 993.1 924.4 68.7 7.4%

Impairment losses, provisions, other operating income (expenses) (175.4) (146.5) (28.9) 19.7%

Income tax expense (284.0) (272.0) (12.0) 4.4%

Profit for the year 533.7 505.9 27.8 5.5%


Owned securities (HFT, AFS and L&R) 28,345.1 22,898.9 5,446.2 23.8%

Repurchase agreements and Securities lending 15,393.8 16,078.9 (685.1) -4.3%

Structured finance assets 6,574.3 6,174.2 400.1 6.5%

Total assets 154,040.8 147,393.6 6,647.2 4.5%

Bond issues 13,866.8 21,482.6 (7,615.8) -35.5%

Guarantees given and commitments to lend 4,681.8 4,370.3 311.5 7.1%

Notional amount of financial derivatives 2,704,872.0 2,625,697.3 79,174.7 3.0%

Notional amount of credit derivatives 111,964.1 119,846.8 (7,882.7) -6.6%

Equity (1) 3,293.0 3,649.4 (356.4) -9.8%

Profitability and risk ratios

Cost / Income ratio (2) 31.2% 30.5%

Profit/Average equity (ROE) (3) 15.7% 14.8%

Profit/Total assets (ROA) 0.3% 0.3%

Basic earnings per share (EPS basic) - euros (4) 0.555 0.526

Operating structure

Total dedicated resources (5) 886 872 14

1) Including profit for the year, net of any interim dividends 2) Operating costs in relation to Total income 3) Profit for the year in relation to the weighted average capital, fair value reserves and other reserves 4) Excluding those effects which impact the comprehensive income of the year 5) It includes seconded resources proportionately

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Executive summary

At the end of a year marked by far-reaching events for the financial markets, global economic performance and the banking industry, Banca IMI reported a consolidated profit of 534 million euro. Banca IMI S.p.A. alone had a profit of 522 million euro.

These are remarkable results, representing growth of 5.5% and 3.6% on the previous year, respectively, even after 142 million euro of charges for intervention in the resolution of four Italian banks.Net of the ordinary and extraordinary contributions paid in connection with that intervention, consolidated profit would have amounted to 630 million euro (618 million euro for Banca IMI S.p.A.), an increase of 25% compared to 31 December 2014 (+23% for Banca IMI S.p.A.).

The first half of the year was characterised by quantitative easing, which steered market activity and drove an increase in trading volumes. This period was followed by an abrupt correction of expectations concerning global rates, with a significant increase in volatility and decline in liquidity. The second half of the year began with tensions relating to Greece and China, followed by the effects of expectations of a gap between U.S. and European rates and an expansion of the ECB’s purchasing programme. In this diverse scenario, the Global Markets area succeeded in achieving a positive performance (+10%) compared to the previous year and constant revenue growth tied to business with customers.

Management and diversification of the proprietary portfolio, which increased in absolute value to 12 billion euro, with a decline in the weight of Italian government securities to below 30%, contributed to this performance with profits on sales of approximately 270 million euro and supported net interest income. Overall, net interest income decreased by approximately 16% due to lower interest rate levels and smaller profit margins.

In Investment Banking, the Bank consolidated its leadership position on the primary equity market, overseeing, among other transactions, the privatisation of Poste Italiane and the IPOs of OVS, Massimo Zanetti Beverage Group and Inwit. In capital increases, a pre-guarantee was provided to Veneto Banca, to be concluded in 2016. In take-over bids and de-listing processes, the Bank led the takeover-bids by ChemChina for Pirelli, by Dufry for World Duty Free and by Italia Online for Seat. In its M&A transaction supporting activity, the Bank assisted clients in a number of sectors and segments of the economy, while on the primary debt market the Bank acted as bookrunner in the issuance of over 25 billion euro of securities. This latter activity included the dual tranche issuance for Atlantia, the BTP linked to European inflation and the tier-2 bonds issued by Assicurazioni Generali. Banca IMI also engaged in liability management and participated in loan syndication transactions of international scope.

In a scenario characterised by lower spreads and intense competition, the business model adopted by Structured Finance focused on an asset-light and service-based approach, which resulted in a sharp increase in fee and commission income (+32%), due to intensive sales efforts, cross-selling and synergies with the Divisions of the Intesa Sanpaolo Group and the Global Markets area. On the Italian market, the Bank assisted clients in sectors such as infrastructure, real estate, motorways and transport, while international business continued to expand robustly, with particularly significant deals closed in North America and EMEA.

Consolidated revenue of 1,443 million euro (1,405 million euro for Banca IMI S.p.A. alone) was thus attributable to the Global Markets area (1,045 million euro) and, within the Corporate & Strategic Finance area, Structured Finance (278 million euro) and Investment Banking (120 million euro). In 2015 a new organisational model was devised and gradually implemented for the entire Bank, involving a revamped role for the Managing Director and General Manager, the consolidation of the pre-existing business areas into two separate “public” and “private” categories, the introduction of the role of the Chief Operating Officer and the concurrent reformulation of operating support functions.

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Management efforts focused on expanding and diversifying investments, within the broader framework of the indications provided by the Group’s RAF, with work done on improving credit quality - the carrying amount of unlikely to pay positions declined by 14% in the course of the year - and the composition of the loan portfolio.The strategic avenues of growth outlined in the 2014-2017 plan saw the launch of the trading of physical gas and the continuation of initiatives aimed at further diversification of investments, looking towards private-equity, private-debt and hedge funds.

All of the Group’s management indicators improved compared to 31 December 2014, contributing to the robust net profit with increases of +8.5% in total income, of +7.4% in operating profit and of +5.1% in the pre-tax profit.

Operating profit climbed to 993 million euro at consolidated level, after operating costs of 450 million euro, up by 45 million euro compared to the previous year, an increase that was in line with the forecasts formulated at the beginning of the year and the trends observed on a quarterly basis.

At the level of “personnel costs” (+20 million euro for the Group), there continued to be a greater weight of human resource incentive and retention mechanisms, in terms of both strictly monetary components and those represented by financial instruments, shares and the Group investment plan known as LECOIP. The revision and expansion of the service levels received from the Ultimate Parent and the consortium company - in the latter case inclusive of the charge-back of amortisation charges for IT investments - resulted in an increase in costs of 14 million euro among the remaining “administrative expenses”.These were in addition to the increase in expenses more directly linked with operations - market access, infoproviders, and consulting in support of the growth initiatives outlined in the Plan - and in expenses of a mandatory and regulatory nature.

The cost/income ratio stood at 31.2% compared to the 30.5% recorded in all of 2014. There was a similar increase in the cost/income ratio of Banca IMI alone.

Net adjustments, provisions and other charges amounted to 175 million euro. This figure includes the 142 million euro paid in December as ordinary and extraordinary contribution to the National Resolution Fund, following the measures taken for four Italian banks. The amount is included amongst administrative costs in the statutory income statement according to the interpretative view taken by international financial reporting standards and adopted by the Bank of Italy. Given the mandatory nature of participation and the lack of a connection with the Bank’s operations, such charges are not included in operating profit in the reclassified income statement. The cost of credit decreased compared to 2014, thanks to the improvement in the credit standing of positions repaid in full or for which the financial performance or improved capitalisation levels of the borrowers created the conditions for reclassifying the positions as performing. Collective adjustments continued to provide significant coverage at 1.3%.

The consolidated profit of 534 million euro is after income taxes of 284 million euro, resulting in a modest decline in the tax rate to 34.7%, which reflects the deductibility of personnel costs for the purposes of IRAP (regional tax on production). Following the revision of the IRES (corporate income tax) base introduced by the Stability Law, the tax rate will decline by approximately one percentage point starting in 2017, despite the presence of the 3.5% IRES surtax applicable to financial institutions.

The ability to generate value for the shareholder yielded an EVA® for Banca IMI of 187 million euro and a return on capital of 15.9%.

Total consolidated assets amounted to 154 billion euro, up from 147 billion euro at 31 December 2014, after a peak of 158 billion euro reached at the end of the first quarter. The trend in the aggregate reflects a constant increase in securities held for trading and the proprietary portfolio (of over 5 billion euro) and in net interbank loans (+12 billion euro), in the form of deposits and loans with the Ultimate Parent’s Treasury.

This phenomenon should be viewed in conjunction with the development of interbank borrowings (+20 billion euro of new loans contracted), resulting in a net imbalance in intragroup funding due firstly to the reduction in bond funding volumes, which fell from 21.5 billion euro in December 2014 to the current 14 billion euro. This was followed by new funding needs for investments in securities, offset by a decrease in requirements of 3 billion euro due to the cash collateral provided in accordance with the CSA agreements.

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The constant calibration of maturities required by the treasury policy, with particular regard to the indicator NSFR, and the changes in periodic treasury imbalances resulted in increases in the absolute values of both interbank assets and liabilities.

The underlying tendency described above was accompanied during the various quarters by fluctuation in the fair value aggregates for OTC derivatives, which were periodically influenced by the performance of the interest rate curve, to which the models for determining the positive and negative values refer. The year ended with a decrease of 8 billion euro in positive valuations of off-balance sheet transactions. There was a similar decrease in overall negative valuations, with the net decrease offset by securitised derivatives, which increased on a net basis from the previous 6.2 billion euro to the current 8 billion euro.

The alternating development of asset and liability balances did not entail any change to the credit risk profile: counterparty risk remained unchanged compared to the beginning of the year, whereas the CVA charge requirement even decreased, as result of the development of the related models to reflect negative rate scenarios.

At the level of capital requirements, the total capital ratio - consisting solely of Common Equity Tier 1 capital - was 10.7%. The ratio reflects the proposed distribution of a dividend of 500 million euro by Banca IMI S.p.A. Considering the probable allocation of the profit for the year and the evidence that the Bank’s financial performance and financial position at 30 September 2015 already so permitted, an interim dividend of 308 million euro was distributed in December.

Returning to the subject of the total capital ratio, the decrease compared to 12.4% at 31 December 2014 was due to the increase in risk-weighted assets, which rose to 24.6 billion euro in the fourth quarter, essentially as a result of market risks (VaR and stressed VaR) and of the decline in own funds. The decrease from the previous 2.7 billion euro to the current 2.6 billion euro is not of a structural nature, but rather is tied to the investments in subordinated debt instruments undertaken near the end of the year and the performance of AFS reserves.

Separate financial statementsof Banca IMI

Directors’ Reporton the Bank’s positionand on operations

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The macroeconomic outlook and capital markets

In 2015 the performance of the global economy was characterised by moderate growth, low inflation, a sharp decline in commodity prices and accommodating monetary conditions in advanced economies. The confidence climate was shaken in spring by a rekindling of the Greek crisis, subsequently resolved, and then by the collapse of Chinese equity markets. Throughout the year, there were signs of a sharp slowdown of economic activity in various emerging nations. In some cases, such developments were accompanied by significant currency-related tensions. The situation gradually stabilised from September to December, although there still were not any convincing signs of a recovery.

The increased uncertainty surrounding global economic prospects and signs of difficulty in the U.S. manufacturing sector, against the backdrop of a stronger dollar, led the Federal Reserve to postpone the expected official rate increase until December. In the United States, domestic demand is solid and increased employment allowed for a fall in the unemployment rate to 5%. Consequently, the U.S. Federal Reserve continued to indicate its intention to raise official rates gradually in 2016.

In the Eurozone, economic growth accelerated from 0.9% in 2014 to approximately 1.5%, increasingly driven by domestic demand, and in particular by household consumption. At the sector level, the increase in activity was more significant in services than in industry, which was affected by slowing global demand. In November, the year-on-year increase in industrial production was slightly above 1%. The positive consequences of the recovery on employment reduced the unemployment rate from 11.2% at the beginning of the year to 10.5% in November. Inflationary pressure remained non-existent, due above all to the exceptional decline in oil prices that began in 2014: average inflation was nil and at year-end still amounted to 0.2%.

In March, the European Central Bank launched a securities purchasing programme (the PSPP or Public Sector Purchase Programme), in addition to the two existing programmes dedicated to covered bonds and ABSs. At the end of the year, the duration of the programme, initially planned to end in September 2016, was extended until March 2017. At 31 December, purchases of government securities alone totalled 364 billion euro, of which 59 billion euro of Italian bonds. The ECB’s president announced that the central bank was ready to modify the com-position, scope and characteristics of the purchasing programme, if necessary. In addition, the ECB cut the rate on deposits to -0.30% and extended full allocation of primary refinancing transactions and quarterly refinancing transactions until 2017.

On monetary markets, the negative deposit rate and increased reserve surplus further reduced interest rate levels, driving them into negative territory.The one-month Euribor rate, which had begun 2015 at 0.016%, fell to -0.205% on 31 December. During the same period, the three-month rate declined from 0.08% to -0.13%.

The German sovereign debt yield curve flattened dramatically in conjunction with the launch of the ECB’s pur-chasing programme, resulting in negative rates even for medium-/long-term securities. The ten-year yield reached a low of 0.08% in April. Rates then bounced back sharply until mid-June, after which they began to fall once more. Italian ten-year yields underwent similar fluctuations, accentuated by the tensions that surrounded Greek debt until July. The yield on the ten-year BTP declined to 1.14% in March, then recovered to above 2.3% between in late June and early July. The decrease in the third quarter and stabilisation in the fourth quarter resulted in a year-end level of 1.595%.

The annual average spread with the Bund narrowed from 165 basis points in 2014 to 119 basis points. Italian debt outperformed Spanish debt, which late in the year was penalised by the increase in political risk. Italy benefited from a more favourable environment for institutional investors, owing both to the signs of an economic recovery and progress in the area of structural reforms.

The euro depreciated swiftly against the U.S. dollar early in the year, reaching a low for 2015 of 1.0460. The cur-rency then regained ground to close the year at 1.0887, a level nonetheless far below the 1.2141 recorded at the end of 2014.

Report on Operations - The macroeconomic outlook and capital markets

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In Italy, the recovery of economic activity was further confirmed. In the fourth quarter, gross domestic product increased by 1% compared to the same period of 2014, whereas average annual growth was 0.7%. The increase was due more to domestic demand than foreign trade performance, which continued to be penalised by weak demand from emerging countries. Fixed investments resumed growth, but at a very slow pace, and only for the component relating to vehicles. The rate of growth of industrial production remains modest, but growth has be-come increasingly widespread at the sector level.Employment continued to improve in the third quarter (+0.1%), following on a robust increase in the second quar-ter (+0.5%), driving consumption spending together with the recovery of real salaries. The unemployment rate declined significantly from January to November, reflecting the one-off effects of the reforms and tax incentives on labour demand.

In 2015, international equity market performance was uneven, reflecting concerns regarding the growth of several emerging nations, weak commodity prices, uncertainty surrounding the Federal Reserve’s monetary policy measures and a further flare-up of sovereign risk in the Euro Area in mid-year. The depreciation of the euro on cur-rency markets, which intensified in March with the launch of the ECB’s quantitative easing programme, primarily favoured Euro Area equity markets, particularly export-oriented sectors doing business with the U.S. dollar area. The currency factor was in addition to the sharp decline in oil prices, with a positive effect on consumers’ disposa-ble income and, in future, on industrial company margins. Macro-economic data in the first quarter also provided visibility for the economic recovery.

After reaching a high for the period in April, Eurozone equity indices lost momentum following the gradual inten-sification of the political and financial crisis in Greece. Political risk returned to centre stage due to the advance of anti-EU political forces in a number of European countries. At the end of June, the deadlock in negotiations between Greece and international institutions triggered a sharp correction on equity markets, accompanied by a temporary increase in bond yields, the widening of spreads in peripheral countries and renewed aversion to risk among investors.

In August and September, the decline in international equity markets intensified: firstly, due to increasing concerns about the stability of growth in China and the weakness of commodity prices, then due to uncertainties surroun-ding the timeframe of rate increases by the Federal Reserve, and finally due to the impact of the Volkswagen scandal on the European automotive industry.

In late 2015, equity markets entered a sideways trend, awaiting clearer signs of growth in the Eurozone and Far East, as well as the monetary policy decisions of the Federal Reserve and ECB. Moreover, renewed geopolitical risk, following the terrorist attacks in Paris, also weighed down market performance during the period.

The EuroStoxx index closed 2015 with a gain of 8.5%. Slightly stronger performances at the end of December were reported by the DAX 30 (+9.6%) and the CAC 40 (+9.5%). The Spanish equity market underperformed its counterparts, with the IBEX 35 down by 6.2% at 31 December. Outside the Euro Area, the benchmark index for the Swiss market, SMI, was down slightly during the period (-1.8%), whereas the FTSE 100 index on the UK market closed the twelve months down by 4.5%.

The S&P 500 index closed 2015 essentially unchanged (+0.2%). The main equity markets in Asia performed well: the Chinese benchmark index SSE A-Share was up by 10.5%, while the Nikkei 225 closed with a gain of 9.1% at 31 December.

The Italian equity market outperformed the major Eurozone benchmark indices due to the gradual launch of the economic recovery, the favourable foreign exchange effect due to exports to the dollar area, falling yields and, more generally, a decreased aversion to Italy country risk amongst investors. The FTSE MIB index closed with a gain of 12.7% at 31 December (+18.1% at the end of June), while the FTSE Italia All Share recorded a slightly stronger performance (+15.4%) at the end of the period. Mid-cap shares continued to perform far better than blue-chip stocks: the FTSE Italia STAR index rose 39.8% during the period.

European corporate bond markets closed 2015 in negative territory, with risk premiums on the rise and better performances, in relative terms, by the riskiest asset classes than investment grade securities. At the same time, the constant search for yields by investors partly offset by the gradual increase in spreads, allowing implied yields to close 2015 with a slightly positive total return.

Report on Operations - The macroeconomic outlook and capital markets

18

In the first half of 2015, the announcement of the launch of the ECB’s purchasing programme had resulted in an extensive, general decline in yields. The uncertainty surrounding the situation in Greece, concerns relating to the international macroeconomic scenario, particularly the possible slowdown in China, and events involving several individual issuers (e.g., Volkswagen, RWE and Glencore) caused an increase in volatility and negatively influenced the performance of spreads, which in September reached a high for the year, with an increase in risk premiums of approximately 30% from August to September.

After a sharp recovery of prices in October, in the remainder of 2015 the main market driver was the wait for monetary policy decisions by central banks. Investors’ disappointment with the ECB’s decisions in December, the further decline in oil prices and new concerns about international economic growth resulted in a general re-inten-sification of aversion to risk in the first half of the month of December. At the level of iTraxx indices - indices of CDSs (credit default swaps) that summarise the level of risk perceived by the market - 2015 was also characterised by a high degree of volatility, with the costs of hedging against the risk of default on the rise, with the sole exception of the crossover index, which closed with essentially no change.

In new issuance, the favourable financing conditions and search for yields were reflected in the continuation of very robust volumes in line with the levels reached in 2014. During the year, the primary market also benefited from issues in euro by U.S. companies, such as Apple and Coca-Cola, aimed at exploiting the low euro interest rates. The low interest rates also favoured an increase in transactions aimed at optimising financial structure undertaken by individual companies, through the repurchase of outstanding securities and their replacement with securities with longer maturities and more favourable conditions.

In 2015 the Italian credit system saw bank rates continue to decline to new lows due to the combined effects of the decrease in the average rate on deposits and the lower weight of bonds. Rates on new loans to non-financial companies continued to fall, with the average rate declining to below 2% starting in August, to then reach all-time lows in the following months. Bank spreads remained under pressure to due low and falling rates. After recovering until early 2015, the spread then narrowed slightly due to the acceleration of the decline in lending rates, which nonetheless remained in line with the annual average for 2014.

The performance of bank loans to the private sector continued to improve, with indications of a return to growth in several business segments, driven by medium-term loans, which resumed growth early in the year, accelerating to double-digit levels from June onwards.The rate of increase of the amount of gross doubtful loans continued to decline. Even more significant is the de-crease in the rate of new non-performing loans, and in particular of new doubtful loans, as a percentage of total loans outstanding, due to the gradual improvement of economic activity. On the funding side, events in 2015 confirmed the previous trends, in particular as regards the growth of deposits, driven by the strong performance of current accounts. The growth of deposits continued to be in contrast to the sharp decline in the amount of bank bonds, the performance of which was affected by customer portfolio reallo-cation processes.

Overall, customer funding continued to decline moderately, in a manner not dissimilar to that observed on the average one year earlier.

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Results by business area

GLOBAL MARKETS

TradingThe interest rates market was characterised by a substantial divergence between Europe and the U.S., with the European economy improving but still not able to make a full recovery, and with a sharp slowdown in emerging countries pointing to a scenario of global economic contraction.On the price front, plummeting commodities prices continue to exert downwards pressure on inflation, while the U.S. economy has now reached “full employment” and does not seem to be affected by the global slowdown. The different economic scenarios on the two shores of the Atlantic resulted in divergence of the monetary policies implemented by central banks: the ECB decided to adopt a negative rate policy, while the Federal Reserve decided to raise rates.

The credit market, which was affected by the macroeconomic issues described above, was further impacted near the end of the year by an element that resulted in idiosyncratic volatility: resolution measures for four Italian regional banks. This had two distinct effects: the foreseeable process of convergence of senior and subordinated assets and a sharp fall in the prices of securities in this latter category issued by the weakest banks, primarily due to flows from retail and private customers.

In the foreign exchange arena, the EUR/USD exchange rate fell by approximately 10% during the year. Widespread support for the dollar triggered a market movement that was further intensified by the anxiety surrounding the economic and political situation in Greece and summer concerns of an equity bubble in China. Preference for the U.S. dollar was particularly evident in emerging markets, where a constant flight-to-quality accompanied specific events, such as the elections in Turkey and the corruption scandals in Brazil, driving the dollar index to all-time highs (approximately +8% compared to the beginning of the year). The autumn was marked by severe geopolitical tensions and news events that further expedited the trend favouring the dollar, which only ended after the ECB meeting held in December. Volatility proved particularly reactive, showing a general upwards trend for all currency pairs, with the sole exception of the rouble, which “normalised” after the tensions in Ukraine, while remaining in a highly volatile phase.

The downtrend for all commodities continued throughout the year, with lows not seen in many years: U.S. natural gas was down 45%, nickel 43%, WTI 42%, Brent 32%, coffee 30% and aluminium 20%. Cereals posted declines of 15% to 10%. Gold, after having tested the psychological barrier of 1,000 dollars an ounce in the wake of speculation concerning a possible U.S. rate increase, has now entered a period of sideways movement, with volatility on the rise.

The European equity market saw the Eurostoxx50 index close the year with growth of more than 10%, recovering the losses recorded in the third quarter as a result of the collapse of the Chinese market and the uncertainties surrounding the increase in rates by the U.S. Federal Reserve. The Italian market reported an even stronger performance, with a gain of approximately 20%, due in part to the positive fund-raising performance, which continued without interruption in 2015.

The U.S. equity indices performed less brilliantly: the performance of the S&P500 index was essentially unchanged, largely driven by high-tech blue chips, which outperformed the market. The recovery of the markets near the end of the year fostered a reduction of volatility, with the VIX index (which measures volatility expectations for the U.S. S&P500 index) up by 15% at the beginning of the year, rising to 50% at the height of the Chinese crisis, to then fall back to around 15% at the end of the year.

Report on Operations - Results by business area

20

Finance & InvestmentsManagement of the proprietary portfolio, with regard to both the trading book and medium-term investments, was guided by adaptation to global market performance in 2015, in pursuit of strategic efforts aimed at diversification within the risk appetite framework defined for Banca IMI. The abundant liquidity and search for yields by investors early in the year steered choices accordingly, with a constructive vision of the market that allowed highly satisfactory economic results to be achieved.

The risk profile gradually declined, beginning in the second quarter of the year, anticipating volatility and risk aversion movements tied to uncertainty in the Euro Area, provoked by the Greek crisis and, subsequently, the decreased liquidity of fixed-income markets. These negative tendencies were further intensified by signs from the Chinese economy and events affecting individual issuers - Volkswagen and Glencore - with increases in credit spreads and a further decline in market liquidity. The approach in the second part of 2015 was essentially tactical, aimed at taking advantage of investment opportunities in the near term.

The AFS portfolio was subject to a constant process of diversification, with a focus on government securities from the entire Euro Area, Great Britain, Sweden, the U.S., Canada, Australia and New Zealand, in addition to a selected basket of emerging country securities in hard currencies. Italy’s share of the total government security portfolio thus declined below 40%, essentially half the level at the end of 2014.

The Market Treasury desk was responsible for managing the liquidity position, with the aim of optimising net interest income in accordance with the rules of the liquidity policy, updated in May to incorporate the new definition of the net stable funding ratio. The Bank joined Eurex Repo as a Direct Clearing Member in September, as part of its strategy of expanding and diversifying its sources of funding.

Credit Treasury oversaw the process of measuring and quantifying counterparty risk in support of the distribution of OTC derivatives, and the XVA platform continued to be expanded, through the development of features for managing contingent liquidity risk. In 2016 counterparty risk management will be extended, according to a specific service model, to the corporate derivatives portfolio of Intesa Sanpaolo’s CIB Division.

The Macro Risk Management & Portfolio Analysis desk continued the process of managing the tail risk associated with all of Banca IMI’s trading portfolios. In the high-volatile scenario of late in the year, the macro-hedge book provided effective protection for risk positions.

In 2015 Secured Financing & Strategic Transactions concluded total secured financing transactions of 3 billion euro and position refinancing transactions of over 1 billion euro. In particular, a medium-/long-term refinancing transaction for part of the ABS portfolio (350 million euro) was finalised, with the aim of reducing the net stable funding ratio and the average cost of funding.

Sales & DistributionFor Domestic Networks, the scenario in 2015, characterised by declining interest rates and narrowing spreads, resulted in a number of significant transactions on the secondary market, involving recurring repurchase flows for the most traditional bonds and for certificates, in addition to a decline in opportunities on the primary market, with new issues through traditional channels of 600 million euro. Securitised derivatives continued to meet with interest, with new certificates of approximately 5 billion euro issued, primarily indexed on equity markets.

There was significant activity aimed at hedging financial risks by the business customer segment, with a particular focus on managing interest rate risk and the trading of currencies: high exchange rate volatility contributed to an increase in the perception of risk for both importers and exporters.

In the case of Foreign Networks, there was further intensification of commercial action, which resulted in the enhancement of relations with customers and the generation of additional revenues. Intesa Sanpaolo’s Slovakian subsidiary, VUB, placed its first protected capital certificate issued by Banca IMI.

The volumes brokered by the Market Hub responded to the extreme market volatility with an increase in cash equity volumes (to the detriment of the fixed-income component) and renewed interest in listed derivative products with rates as their underlying. The gradual approach of central clearing obligations for OTC derivatives allowed a significant number of contracts to be concluded with Italian banking counterparties. Commercial expansion is focusing on the international arena, where important agreements have recently been signed with German and Spanish clients of high standing for listed fixed-income markets.


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Corporate Risk Solutions saw a rise in its forex business and an increase in its market share due to the quality and quantity of its interactions with customers and strategic hedging transactions on M&A operations. The result was improved profitability, also driven by plain-vanilla derivative products, which accounted for one-third of the total. In the rates arena, the most significant transactions related to extraordinary finance deals in the field of M&A and Project Finance, while adequate coverage of flow activity was still maintained.

In the commodities arena, 2015 may be recalled as the year of the end of the commodities price “super-cycle”, with a marked decline in price levels, spread evenly across all segments. The Iranian issue, the possible reduction of shale oil extraction, OPEC production estimates and the global growth scenario contributed to heightened uncertainty and aversion to risk amongst investors and corporate customers, driving ICE Brent prices to the lows of 2008, with a resulting explosion of volatility. Dealing in physical gas began in the summer, with the first contracts closed, resulting in positive comments on Banca IMI’s entry into this market, both in Italy and amongst the international community.

Credit Solutions GroupThe Credit Solutions Group team structured trade receivable securitisation deals of over 600 million euro for corporate customers as part of the Agri-Food Programme (Granarolo, Marr, Ambrosi, GSI and others) and of over 450 million euro as part of the Automotive, Electronics and Mechanics Programme (Marcegaglia, CLN Group and others). The desk also acted as arranger in the structuring of a securitisation transaction for a portfolio of automotive industry loans originated by FCA Bank of 800 million euro.

In addition, as sole arranger the desk finalised the securitisation of consumer loans of over 2 billion euro (IBL Banca, Dynamica Retail and others), in addition to placing the senior tranche of a securitisation of leasing receivables structured for Alba Leasing. As arranger, the desk successfully completed various sales of non-performing loans originated by small banks in the context of a multiple originator programme that reached the amount of over 850 million euro.

CORPORATE & STRATEGIC FINANCE

Debt MarketsOn the primary bond market, approximately 1,074 billion euro was originated in the EMEA area in 2015: of this amount, 82.3 billion euro referred to the Italian market (source: Thomson Reuters). This performance was driven by the ECB’s policy of keeping interest rates at minimum levels, with the aim of reducing the sensitivity of credit spreads to risks of slowing global growth, thereby reducing the cost of funding and improving debt sustainability.In this scenario, Banca IMI continued to play a leading role on the domestic market and intensified its growth at theinternational level due to its significant track record and collaboration with relationship structures, acting as bookrunner in the origination of over 14 billion euro in Europe and of over 11.3 billion euro in Italy (source: Thomson Reuters).

In the Financial Institutions segment, mention should be made of the Intesa Sanpaolo transactions (senior unsecured, in CNH, offshore Chinese yuan, covered bonds and subordinated notes) of over 8 billion euro. Banca IMI also acted as bookrunner in the issuance of covered bonds by Banca Popolare dell’Emilia Romagna, Unicredit, BPCE SFH, HSBC SFH France and Société Générale, of the senior unsecured bond issued by Danske Bank, the hybrid bond issued by Assicurazioni Generali and in private placements by Mediocredito Trentino, Mediobanca, Banca Sella, CredemVita, Banca Popolare di Vicenza and Sace BT.

At the international level, it acted as joint lead manager for the senior unsecured bonds issued by Goldman Sachs (1.30 billion euro), the subordinated bonds issued by BNP Paribas, HSBC Holdings, Credit Agricole Assurances, Société Générale and Credit Agricole totalling 7.50 billion euro, and the subordinated bonds issued by Wells Fargo, UBS and Barclays of 4.7 billion USD and 1 billion GBP.

The Bank strengthened its presence in the ABS segment through the securitisation of a portfolio of consumer loans originated by Agos Ducato S.p.A. (1.1 billion euro) and the placement of the senior tranche of the Alba 7 securitisation of a receivables portfolio of 785 million euro of lease payments originated by Alba Leasing.

In business with corporate customers, the Bank acted as joint lead manager and bookrunner in the origination of over 19 billion euro and 7.4 billion USD of bonds with medium- and long-term maturities for issuers of high standing based both in Italy - such as ENI, ENAV, A2A, Prysmian, Ansaldo Energia, Terna, Iren, Snam, Exor and


22

Autostrade per L’Italia - and abroad - such as FCA Capital, Deutsche Bahn, Carrefour, Cellnex, FCE Bank, APRR, Sabine Pass Liquefaction, CEMEX, Enagas, Kering, UCB, ZF North America, Senvion, Unibail-Rodamco, Klepierre, RCI Banque and Metro de Lima.

Banca IMI also stood out for its role as joint lead manager and bookrunner in the issuance by Autostrada Brescia-Verona-Vicenza-Padova of the first public bond (of 600 million euro) under the new project bond legislation (Decree 133/2014), and it acted as lead manager of the public subscription offer for the bond issued by Autostrade per l’Italia intended for the retail investing public, in the total amount of 750 million euro, the underwriting syndicate for which was composed of 65 Italian banks of high standing.

In the emerging markets segment, mention should be made of the role of joint lead manager and bookrunner played in the issues by Gazprom of 1 billion and HEP (Hrvatska Elektroprivreda) of 550 million USD. This latter issue was placed concurrently with the buyback of a previous 2012 issuance of 500 million USD with a 6% coupon, maturing in 2017, over 80% of which was repurchased.

In the high-yield segment, Banca IMI acted as joint lead manager and bookrunner in the Wind issuance of 400 million euro and in the increase of the issuance of 375 million euro maturing in 2020 with a coupon of 4%. It also acted as joint lead manager and bookrunner in the issuance by International Game Technology of 850 million euro and in the multi-tranche issuance by Altice of the respective total amounts of 1.25 billion euro and 3.92 billion USD.

In liability management, the Bank acted as dealer manager in particularly significant transactions, such as the cash tender offer by Engie (GDF Suez) for a total purchase amount of approximately 750 million euro, and by Atlantia for a total purchase amount of approximately 1 billion euro, the intermediated tender offer by Iberdrola for a total purchase amount of approximately 0.5 billion euro, and the buy-back by Intesa Sanpaolo of subordinated bonds totalling 738 million euro. It also acted as dealer manager and bookrunner in the exchange offer between own bonds and newly issued bonds by Enel of approximately 1.4 billion euro.

In business with issuers in the Sovereign, Supranational & Agencies segment, Banca IMI stood out for its role as lead manager of the public subscription offer for seven-year retail bonds issued by Cassa Depositi e Prestiti, the first successful issuance by the institution intended for the retail public and distributed through banking networks, with demand of approximately 4 billion euro, resulting in a final amount issued of 1.5 billion euro. The Bank also acted as joint lead manager and bookrunner for the Italian Republic in the BTP Italia issue, for a total amount issued of approximately 9.4 billion euro, and in the BTPei issue linked to European inflation, for a total amount issued of 3.5 billion euro, in addition to having acted as co-lead manager in the issue by the German Federal Republic, in two issues by the European Financial Stability Facility (EFSF) and in four issues by the European Stability Mechanism (ESM).

Equity Capital MarketsPrimary market activities in the EMEA region saw an approximately 8% fall in volumes compared to 2014, for a total of approximately 256 billion euro. The activity breaks down into around 52% ABB and follow-on, 25% IPOs, 14% capital increases and 9% equity-linked issues.

In this scenario, Banca IMI continued to provide its customary coverage of the domestic market, acting as joint global coordinator, joint bookrunner and lead manager for the IPOs by Poste Italiane (3.3 billion euro), Inwit (875 million euro), OVS (445 million euro), Massimo Zanetti Beverage Group (135 million euro) and Aeroporto di Bologna (70 million euro). It also acted as co-bookrunner in the capital increase by Banca Monte dei Paschi di Siena (3 billion euro) and placing agent in the capital increase by MolMed.

In capital increase business, the Bank is the global coordinator of the upcoming capital increase by Veneto Banca (1 billion euro), in which it also provided a pre-guarantee, and joint bookrunner for the capital increase by Saipem (3.5 billion euro). These transactions will be finalised in 2016, along with the mandates already acquired.

In its accelerated bookbuilding business, Banca IMI acted as joint bookrunner for the sale of 6% of the share capital of La Doria, 1.3% of Hera, 7.4% of Biesse and 7.1% of Moleskine. The Bank also retained its position of leadership in the take-over bid segment, acting as broker responsible for coordinating acceptance notices for bids for Pirelli (5.6 billion euro), World Duty Free (966 million euro) and Seat Pagine Gialle (114 million euro).

At the international level, in capital increases, mention should be made of the Bank’s roles as joint bookrunner for Credit Suisse (5 billion CHF), co-lead manager for Telefonica (3 billion euro), and placing agent for Eurocommercial


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Properties NV (165 million euro). Worthy of mention in IPO business were the Steilmann and Bank of Qinqdao transactions (607 million USD).

In the domestic issuance of equity-linked instruments, the most significant transactions were the placements of convertible bonds issued by FCT-Iren (150 million euro), Beni Stabili (200 million euro), Unibail-Rodamco (500 million euro) and America Movil, the largest transaction of the year in the segment considered (2.5 billion euro), involving conversion into KPN shares. At the end of the year, Banca IMI was acting as specialist or corporate broker to approximately 40 companies listed on the Italian exchange, confirming its leadership in this segment of the market.

Mergers & AcquisitionsDuring the year, there was a recovery in M&A activity throughout EMEA, and in particular in Italy, where Banca IMI achieved particularly positive results, remaining the leader by number of transactions completed (source: Thomson Reuters).Business was especially intense in the Energy sector, where services were rendered to: Enel, in the sale to SEL of 40% of SE Hydropower and of 33.3% of SF Energy, in addition to the sale of 49% of Hydro Dolomiti to the Macquarie fund; the F2i fund in the acquisition of Cogipower and the establishment of a joint venture in the photovoltaic sector with Enel Green Power; SEL in the reorganisation of the equity structure of Edipower and in the acquisitions by Edison of 40% of Hydros and of 42% of Seledison, and then in the merger with AEW; Snam, in the acquisition from Statoil of a 20% interest in the Trans Adriatic Pipeline and in the acquisition by the subsidiary Italgas of a 51% interest in ACAM Gas; and ERG in the acquisition of the Terni hydroelectric power plant from E.ON.

In the TMT sector, the Bank assisted Wind in the sale to Albertis Telecom of 90% of Galata, a vehicle to which a portfolio of approximately 7,400 towers was transferred, and RCS in the sale of a 44.5% interest in the Finelco radio group. In the Consumer & Retail sector, the Bank assisted Edizione in the sale of a 50.1% interest in World Duty Free to the Dufry group; the private-equity funds Clessidra and 21Investimenti, respectively in the acquisition of Cavalli and in the sale of Pittarosso, in addition to Yoox in the merger with Net-A-Porter; and Giorgetti in the sale of 100% of the share capital of the fund Progressio; and Conserve Italia in the sale of the French “St Mamet” operations to the Florac fund. In the pharma sector, Banca IMI assisted Poli Group in the sale of a 100% interest to the Almirall group.

In the Industrial sector, the Bank acted as advisor to Pirelli, Maire Tecnimont, Sematic, Gruppo Bocchiotti and PM & Partners. In business with financial institutions, Banca IMI assisted Fondazione Carige in the sale of 10.5% of Banca Carige to Malacalza Investimenti; the Centerbridge fund in the acquisition of Farmafactoring; Cassa di Risparmio di Bolzano in a significant capital enhancement through the issuance of equity and hybrid instruments; and the Ultimate Parent, Intesa Sanpaolo, in its first transaction aimed at the sale of shares of the Bank of Italy.

Structured FinanceIn a scenario characterised by continuing volatility, considerable liquidity on the financing market, constantly falling spreads and very aggressive competition, the area’s business model focused increasingly on developing fee and commission revenue in order to offset the downtrend in net interest income. The enabling factors were constant sales efforts and cross-selling synergies with the structures of the CIB Division and Global Markets area.

On the domestic market, the entire Group’s focus on the real economy saw efforts devoted to infrastructure, real estate, motorways and transport, as well as to a number of small and medium enterprises of reference for the Banca dei Territori Division, within the framework of the service models introduced in 2015.

In the international arena, the Group participated in the conclusion of some of the most important deals at the global level, in particular in North America and the EMEA area, confirming an integrated approach that identifies synergies with the use of the instruments typical of capital markets, such as the issuance of bonds or CMBSs.

The Energy & Industry Specialized Lending desk closed deals of approximately 4 billion euro, primarily in the energy, TMT and shipping sectors. In particular, Banca IMI acted as:– Mandated lead arranger for a pool loan of a total of 1.8 billion euro for Acciona;– Structuring, coordinating & documentation bank, mandated lead arranger, facility agent and hedging bank in a loan

to Ital Gas Storage S.p.A. of 1.1 billion euro aimed at building a natural gas storage facility in the province of Lodi;– Mandated lead arranger and bookrunner in the refinancing of 500 million euro of the existing debt of Trans

Austria Gasleitung, the company that owns and is the exclusive manager of the natural gas transport capacity of the Austrian segment of the gas pipeline that carries gas from Russia to Italy through Ukraine, Slovakia and Austria.


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In Public & Social Infrastructure, efforts continue in support of initiatives in the sectors of motorway infrastructure in Italy, healthcare and water. In particular, Banca IMI submitted the winning bid to structure project financing, partly in the form of project bonds, for Autostrada Pedemontana Lombarda, of a total of 1.8 billion euro to 2.6 billion euro, and completed its consulting work in support of Autostrada Brescia Verona Vicenza Padova S.p.A. in the context of the process of placing a bond issue of 600 million euro, also acting as global coordinator, joint lead manager and bookrunner.

Financing of 580 million euro was also finalised for the refinancing and completion of Line 5 of the Milan underground railway network, consisting of a bank loan of 430 million euro and the issuance of a project bond of 150 million euro. Banca IMI was also one of the arrangers of the financing of a total of 880 million euro for the construction and subsequent management under concession of the Etlik Integrated Health Campus in Ankara.

In response to the improvements in the macroeconomic scenario, and in particular in the liquidity conditions of the market of reference, in the Leveraged & Acquisition Finance segment Banca IMI continued to take a selective approach to the pursuit of new business opportunities and to the structuring of new financing transactions from a financial and legal standpoint. New transactions of over 2.5 billion euro were finalised, the most important of which included: – 155 million euro for Coin Group and 475 million euro for OVS aimed at refinancing their debt exposure in

conjunction with the listing of OVS S.p.A.;– 660 million euro aimed at refinancing the debt of Cerved Group S.p.A. (a provider of credit information services),

controlled by the private-equity fund CVCM;– 175 million euro aimed at supporting the acquisition of the B&B group, an Italian designer furniture manufacturer,

by the private-equity fund Investindustrial;– 165 million euro intended to support the acquisition of the Acetum group, a Balsamic vinegar producer, by the

private equity fund Clessidra;– 157 million euro for Stroili Oro, a major Italian jewellery retailer, aimed at refinancing its existing debt;– 140 million euro aimed at supporting the acquisition of the PittaRosso S.p.A. group, a leading distributor and

retailer of footwear and leather goods, by the private-equity fund Lion Capital.

The Real Estate desk maintained intensive origination activity with an asset-light and geographical diversification approach to delivering credit facilities for investment in the sector, offering a full range of dedicated real estate financial products and providing specialist advisory services to the industry both in Italy and abroad. Credit facilities of over 3.5 billion euro were structured, in both euro and GBP, with direct assumption of risk for approximately 1 billion euro. More specifically: – 1.7 billion euro for Merlin Properties, a Spanish real-estate investment company listed on the Madrid exchange;– 244 million GBP in support of the project to build a 52-storey residential tower in Principal Place, in the City of

London, promoted by Brookfield Property Partners and Concord Group;– 312 million euro in support of the refinancing of the existing debt carried by the Core Nord Ovest Fund managed

by Ream SGR, owner of a portfolio of office properties;– 255 million euro in support of the cash needs of the borrower and refinancing of the real-estate portfolio of eight

assets owned by Beni Stabili SIIQ;– 225 million euro for IDeA Real Estate SpA, a real-estate investment company promoted by the De Agostini group.

In its advisory activity, the Bank successfully completed the process of providing assistance in the sale of shares of a real-estate fund that owns a shopping centre located in the Naples area. The Bank continues to provide financial advice to a listed Italian group of high standing concerning the development of its head office property under construction in Milan.

In 2015, the Corporate Loan Structuring unit organised and structured, in close collaboration with the relationship structures, financing of over 35 billion euro for the Group’s customers, both in Italy and abroad. The modulation of technical forms steered acquisitions, debt restructuring in capital structure or liability restructuring transactions, term loans and revolving credit facilities in support of ordinary financial needs. Major projects in which the desk participated include Saipem, Exor, Erg, GTECH, Ferrari NV, Arnoldo Mondadori Editore, Carrefour, Gruppo FCA, Pirelli, Gruppo Autogrill, Ferrovie dello Stato, Terna, Fincantieri, Gruppo Feltrinelli, Maire Tecnimont, TotalErg, and Valentino Fashion Group.

Loan Agency confirmed its ability to compete on the domestic market with the major international players in performing super partes representative duties, safeguarding the various participants in deals in compliance with


25

internal, Bank of Italy and ECB regulations, in domestic and cross-border transactions. Its activity is appreciated and in demand both from the banks in the syndicates without a similar internal department and customers.The business scope was expanded to include the public finance sector, with the desk acting as agent in debt restructuring plans and accepting assignments on deals of an international nature. In such international business, the desk received a mandate from Turkcell, a leading Turkish mobile telephony operator. In December, Banca IMI also acted as agent in the context of the financing of a total of 4 billion euro provided for the National Resolution Fund within the framework of the interventions in the resolution of four Italian banks.

At the international level there was constant intensification of the Group’s activities in a variety of sectors of the economy, with broad geographical diversification.

The specialist support provided by Banca IMI to commercial presences and investors resulted, in the EMEA area, in the closing of financing transactions with the role of mandated lead arranger of over 5 billion euro, in addition to a number of transactions in USD, GBP and other currencies. In the Asia Pacific area, 2015 saw growth of 12% compared to the previous year, with a number of deals closed, including project financing of a total of 4.4 billion USD for the development, construction and operation of one of the world’s largest gold and copper mines (Oyu Tolgoi), located in Mongolia.In the New York – Americas area, the New York Structured Finance desk closed financing transactions of over 4 billion USD in roles of high standing.

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Results in 2015

For the year ended 31 December 2015, Banca IMI recorded a profit of 522 million euro, up 3.6% compared to the previous year, after recognising an expense of 142 million euro for ordinary and extraordinary contributions to the National Bank Resolution Fund.

In the interest of a more complete analysis of the Bank’s performance, a reclassified income statement is presented below, allowing for a better understanding and representation of the main aggregates relating to core business profit, non-recurring income and expenses, cost items associated with the management and development of infrastructure and the establishment of provisions and credit coverage.

Reclassified Income Statement(in millions of euro)

2015 2014 changes

amount %

Net interest income 579.1 688.6 (109.5) -15.9

Net fee and commission income 339.6 289.1 50.5 17.5

Profits from financial transactions 480.2 305.7 174.5 57.1

Core business profit 1,398.9 1,283.4 115.5 9.0

Net non-recurring income (expense) 5.9 22.8 (16.9)

Total income 1,404.8 1,306.2 98.6 7.5

Net administrative expenses: (429.9) (390.8) (39.1) 10.0

of which: - personnel expenses (147.5) (131.5) (16.0) 12.2

- other administrative expenses (282.4) (259.3) (23.1) 8.9

Amortisation and depreciation (0.3) (0.4) 0.1

Operating costs (430.2) (391.2) (39.0) 10.0

Operating profit 974.6 915.0 59.6 6.5

Impairment losses, provisions, other operating income (expenses) (175.4) (146.5) (28.9) 19.7

Profit from continuing operations 799.2 768.5 30.7 4.0

Income tax expense (277.2) (264.4) (12.8) 4.8

Profit for the year 522.0 504.1 17.9 3.6

In particular:– dividends and manufactured dividends received from shares held for trading and commissions for the placement

of financial instruments in the HFT portfolio are shown among the financial profits;– revenue and costs associated with strategic operations or of a non-recurring nature are presented on a separate

line within total income as net non-recurring income (expense);– personnel expenses reflect the results of the transfer to beneficiaries of Intesa Sanpaolo shares supporting the

Banca IMI and Group incentive system;– other administrative expenses are shown net of expense and recharges arising from the contributions to the

National Resolution Fund;– the latter, together with the results of the sale of non-performing loans, are shown under the item “Impairment

losses, provisions, other operating income (expenses)”.

In its essential terms, the year saw continuing robust performance at the level of operating profit, primarily driven by the increase in revenue, which was only lower in absolute terms than in 2012, marked by higher net interest income and several significant trading transactions.Conversely, 2015 saw a higher incidence of operating costs due to the investments undertaken on the capital markets and structured finance technology platforms, the increase in the number of resources (+6% in numerical terms compared to 2012) and the expansion of the operating structure.

Report on Operations - Results in 2015

27

1,600.0

1,400.0

1,200.0

1,000.0

800.0

600.0

400.0

200.0

–2011 2012 2013 2014 2015

Total costs

Continuing operations

Tota

l inc

ome

As mentioned above, profit was particularly affected by the charges deriving from the resolution process for four Italian regional banks. Excluding the charges recognised in the 2015 income statement for ordinary and extraordinary contributions, as well as the associated tax effects, profit would amount to 618 million euro (+22.6% compared to 31 December 2014).

700

600

500

400

300

200

100

02011 2012 2013 2014 2015 2015

(net ofResolution Fund)

(A)

Profit (millions)

(A) Profit of 400 million euro, net of impairment of goodwill and the extraordinary corporate income surtax

Total income of 1,405 million euro, up +7.5% on the previous year, was attributable to the areas Global Markets (1,019 million euro) and Corporate & Strategic Finance (386 million euro).

Total income(in millions of euro)

2015 2014

Amount Share Amount Share

Global Markets 1,018.9 72.5% 938.9 71.9%

Corporate & Strategic Finance

Investment banking 111.2 7.9% 116.2 8.9%

Structured Finance 274.7 19.6% 251.1 19.2%

Total income 1,404.8 1,306.2

It included a significant proportion of net profits from financial transactions, driven by profit from proprietary trading in securities, derivatives and currencies, income on the sale of the AFS portfolio, and the cost of the buy-back of Banca IMI bonds on the secondary market.


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Profits from financial transactions(in millions of euro)

2015 2014 changes

amount %

Securities and derivatives HFT 244.9 213.6 31.3 14.7

Investments AFS 273.0 188.6 84.4 44.8

Currencies 17.0 12.1 4.9 40.5

Issues (54.7) (108.6) 53.9 -49.6

Total 480.2 305.7 174.5 57.1

In absolute terms, the aggregate amounted to 480 million euro, up from the previous 306 million, as a result of the increase in revenue generated by business with customers, profit-taking as a result of attentive management of diversification of the AFS portfolio, and the structuring and distribution of investment products through banking networks.

The derecognition of the Banca IMI bonds following their repurchase on the secondary market, in the context of ordinary market-maker and liquidity-provider activities, also had a more moderate effect.The losses on the buy-back fell from the previous 109 million euro to the current 55 million euro. Those charges, recognised immediately upon repurchase, will be followed in the medium and long term by the benefits on net interest income due to the transformation of fixed-maturity funding with short-term bank funding.

Profits on the sales of the AFS portfolio amounted to 273 million euro, inclusive of charges associated with unwin-ding any hedging derivatives, occurred primarily in the first part of the year. On the other hand, valuation at market prices of year-end balances affected equity reserves, which at 31 December 2015 included net unrealised capital gains of approximately 75 million euro.

Income on services increased by 51 million euro. In this case as well, a crucial role was played by a business mo-del increasingly focused on a service-based, asset-light approach, particularly in the structured finance business, where, thanks to the important deals closed, the fees earned increased by 36 million euro, offsetting the decrease in income on interest-bearing loans. The strong growth in the fourth quarter was noteworthy, driven by constant commercial coverage of market opportunities and the finalisation of new transactions without risk.

Net fee and commission income(in millions of euro)

2015 2014 changes

amount %

Dealing and consultancy

Dealing and acceptance of trading instructions 11.7 26.3 (14.6) -55.5

Currency dealing 54.3 19.4 34.9

Placement of equity and debt 76.6 96.4 (19.8) -20.5

Structured finance 151.0 114.7 36.3 31.6

Advisory & specialist 53.9 36.9 17.0 46.1

Other 5.8 12.9 (7.1) -55.0

353.3 306.6 46.7 15.2

Management and services

Custody and administration of securities (10.8) (11.9) 1.1 -9.2

Collection and payment services (3.5) (6.0) 2.5 -41.7

Other services 0.6 0.4 0.2 50.0

(13.7) (17.5) 3.8 -21.7

Total 339.6 289.1 50.5 17.5

For Global Markets, expansion to new customer and market segments at the international level resulted in an increase in brokered volumes through the subsidiary IMI Securities, due in part to the strong volatility that marked the second half of the year. The reduction presented in the separate financial statements of Banca IMI was primarily


29

due to the increased fee rebates to the subsidiary. From the consolidated standpoint, the “Dealing and acceptance of trading instructions” segment stood at the same levels as in 2014.At the same time, the needs of corporate customers for hedging of foreign exchange risk, deriving from scenarios of appreciation of the U.S. dollar and other currencies against the euro, resulted in almost triple the income on currency trading.

Net fee and commission by business segment

60

50

40

30

20

10

0

Structured Finance Global Markets Investment Banking

4Q15 3Q15 2Q15 1Q15 4Q14 3Q14 2Q14 1Q14

Millions of euro

The Bank continued to occupy a position of leadership on the domestic primary market, participating in the most significant transactions and acquiring new mandates in ECM business - such as the Poste Italiane IPO and the Pirelli and World Duty Free public take-over bids - and in DCM business, such as the Autostrada Brescia-Verona-Padova issuance, the first Cassa Depositi e Prestiti issuance on banking networks and the placement of over 9 billion euro in the BTP Italy issuance. In capital increases, Banca IMI acted as global coordinator and bookrunner for Veneto Banca. It also provided a pre-guarantee for placement in that same transaction. However, the overall decline in the Italian bond market compared to 2014, with volumes of new issuances falling from the previous 106 billion euro to 82 billion euro in 2015, and a lower average level of ECM transactions did not allow the level of revenues recorded in the previous year to be equalled.

The only revenue aggregate that decreased, net interest, is representative of the different scenario that marked 2015 overall compared to 2014: a sharp decline in the yield curve - which entered negative territory for the three-month maturities - and narrower credit spreads.

Net interest(in millions of euro)

2015 2014 changes

amount %

Bonds and repos 446.6 511.6 (65.0) -12.7

Structured finance 199.5 238.8 (39.3) -16.5

Deposits, funding and treasury 206.3 417.1 (210.8) -50.5

Bonds issued (263.1) (482.9) 219.8 -45.5

Other (10.2) 4.0 (14.2)


Narrower margins affected all areas of the Bank.


30

The contribution of the interest received and accrued in structured finance business fell to 200 million euro from the previous 239 million euro, despite the slowdown of the pace of deleveraging of on-balance sheet loans wit-nessed in recent years. Global Markets profitability also decreased by 13%, despite greater average investments of 2 billion euro in securities.

200

150

100

50

04Q15 3Q15 2Q15 1Q15 4Q14 3Q14 2Q14 1Q14

Structured Finance

Global Markets

On the funding side, the decline in bonds issued, which decreased from 21.5 billion euro at the end of December 2014 to the current 13.9 billion euro, resulted in a decrease in retail funding costs of approximately 46%. At the same time, measures aimed at recalibrating interbank lending and funding on the various maturities, with the goal of best positioning the Bank in light of the most recently introduced liquidity standards (the NSFR or net stable funding ratio), resulted in a decrease of an extent essentially similar to the surplus interest from treasury management operations with the Group’s centralised treasury department.

Non-recurring income include 5.9 million euro of dividends collected from the associates Epsilon and EuroTLX. At 31 December 2014 the aggregate included approximately 10 million euro of gains on disposals and the extra-ordinary dividend paid by SIA S.p.A., as part of the transaction to reorganise the investee’s ownership structure.

Net non-recurring income (expense)(in millions of euro)

2015 2014 changes

amount %

Dividends on investments 5.9 14.4 (8.5)

Gains on disposals 0.0 8.4 (8.4)


Turning to operating costs, which totalled 430 million euro (+10%), there were increases in both “personnel expen-ses” (+16 million euro) and “other administrative costs” (+23 million euro).

The first cost item was affected to a greater degree (approximately 12 million euro) by the charges deriving from mechanisms for motivating and retaining human resources, with respect to both the cash and equity instrument components, including the effects associated with the Group investment plan LECOIP.The plan had its first accounting effects in December 2014, following the assignment of shares to employees, and thus only affected one month of the previous year, out of the total of 40 covered by the plan.

Ordinary remuneration items presented a structural increase of approximately 4%. This increase was in line with the projections for 2015, in reference to both the change in the number of resources employed and changes made to remuneration levels.

As at 31 December 2015, the employees on Banca IMI’s payroll came to 828 resources (811 as at 31 December 2014), of whom 77 were executives (75), 541 middle managers (535), and 210 members of the remaining professional categories (201).


31

(in milions of euro)

Number of employees 31.12.2015 31.12.2014 changes

amount %

Registered employees 828 811 17 2.1

Seconded from other companies and expatriates 13 15 (2) -13.3

Seconded to other companies and expatriates (9) (3) (6)

Total dedicated resources 832 823 9 1.1

of which: Italian subsidiaries 753 749 4 0.5

of which: Foreign branches 79 74 5 6.8

The increase in “Other administrative expenses” was affected by the revision and expansion of the service levels provided by the Ultimate Parent and the consortium company - including the recharge of amortisation charges for IT investments - with an increase in costs of 14 million euro compared to the previous year. These costs were in addition to the increase in charges more directly related to operations: market connectivity and info-provider expenses; increased investments in advice in support of the growth initiatives outlined in the plan, with particular regard to the international expansion of Sales & Distribution activities; and expenses of a mandatory and regulatory nature.

Administrative expenses(in millions of euro)

2015 2014 changes

amount %

Outsourcing costs (183.2) (169.5) (13.7) 8.1

Compulsory compliance costs (5.6) (3.9) (1.7) 43.6

Logistics and functioning costs (11.5) (10.2) (1.3) 12.7

Databases and market information costs (50.4) (45.4) (5.0) 11.0

Legal and consulting expenses (10.9) (10.2) (0.7) 6.9

Other expenses (20.8) (20.1) (0.7) 3.5

Total Other administrative expenses (282.4) (259.3) (23.1) 8.9

Expenses more directly dependant on the core business, or functional to the development of such business, conti-nued to account for a much greater share of the total than general operating and corporate costs, the stability of which over time is also borne out by the quarterly analysis of the composition of “other administrative expenses”.

Administrative expenses breakdown

Outsourcing

Business driven

Management and functioning


32

Other administrative expenses quarterly breakdown

80

70

60

50

40

30

20

10

04Q15 3Q15 2Q15 1Q15 4Q14 3Q14 2Q14 1Q14

Millions of euro

Business drivenOutsourcing Management and functioning

The cost/income ratio stood at 30.6% compared to 29.9% in 2014.

The operating profit of 975 million euro (+6.5% compared to 2014) gives a profit of 522 million euro, after impairment losses and net provisions of 33 million euro, and the contribution to the National Bank Resolution Fund of 142 million euro and income tax of 277 million euro.

Profit for the year(in millions of euro)

2015 2014 changes

amount %


Net impairment losses (35.0) (144.0) 109.0

Provisions for risks and charges 1.7 (3.0) (4.7)

Contribution to the National Resolution Fund (141.8) - (141.8)

Other non-operating income 0.5 0.9 (0.4)

Other non-operating expense (0.8) (0.4) (0.4)

Profit from ordinary activities 799.2 768.5 30.7 4.0



The introduction with effect from 1 January 2015 of the Single Resolution Mechanism provided for in Directive 2014/59/EU - the Bank Recovery and Resolution Directive (BRRD) resulted in the payment by Banca IMI in the first year of application of an ordinary contribution of 35.4 million euro. The calculation methodology contemplates the relationship between the total statement of financial position liabilities of individual intermediaries, net of own funds and protected deposits, and total liabilities, determined congruently, of all authorised entities in the territory of reference (with a gradual shift from the strictly national level to that of the 19 members of the Eurozone).The amount determined by reference to financial aggregates is then subject to adjustment according to coefficients to take account of the peculiarities of the individual institution (such as financial position, the incidence of trading activities and financial leverage).

The ordinary contribution levied by the Bank of Italy was in addition to the maximum annual extraordinary contribution (106.4 million euro) deriving from the enactment on 23 November of Law Decree 183 for the resolution of four banks in extraordinary administration (Banca delle Marche, Banca Popolare dell’Etruria e del Lazio, Cassa di Risparmio di Ferrara and Cassa di Risparmio di Chieti).


33

Net impairment losses on the loan portfolio amounted to 29 million euro, for both direct disbursements and risks assumed synthetically, while impairment losses on closed-end funds classified to the AFS portfolio amounted to 6 million euro.The cost of credit improved sharply compared to 2014, due to pro-active management of non-performing positions, which for some debtors resulted in an improvement in credit standing, full or partial repayment of the loans granted, enhancement of financial position and turnaround from an industrial standpoint. The conditions were thus created for the reclassification of such positions as performing or the revision of the associated loss projections.

Net releases from provisions for risks and charges included the release to the income statement of 1.7 million euro of liabilities no longer committed to servicing staff retirement incentive plans.

Income taxes affect the formation of the net result with a tax rate of 34.7%, in line with the rate recorded at 31 December 2014. During the current year, direct taxation improved due to the effects on the tax base for IRAP (regional tax on production) of the deductibility of personnel expenses. In the annual comparison of tax levels, this change is not evident inasmuch as the taxable profit for 2014 benefited to a greater extent from the exemption of investment income under the participation exemption scheme.

For a further analysis of profit growth for the periods being compared, the income statement of Banca IMI is presented on a quarterly basis.

The statement of reconciliation of the statutory income statement scheme with the corresponding reclassified scheme is provided among the attachments.

Reclassified Income Statement by quarter(in millions of euro)

4Q15 3Q15 2Q15 1Q15 4Q14 3Q14 2Q14 1Q14

Net interest income 142.2 144.6 165.1 127.2 154.9 159.5 194.9 179.3

Net fee and commission income 95.0 58.4 105.1 81.1 93.0 51.6 79.1 65.4

Profits from financial transactions 51.5 25.2 120.1 283.4 5.6 9.3 117.8 173.0

Core business profit 288.7 228.2 390.3 491.7 253.5 220.4 391.8 417.7

Net non-recurring income (expense) - 0.1 5.8 - - - 21.9 0.9

Total income 288.7 228.3 396.1 491.7 253.5 220.4 413.7 418.6

Net administrative expenses: (119.2) (101.4) (103.5) (105.8) (115.2) (96.2) (85.7) (93.7)

of which: - personnel expenses (51.5) (32.2) (29.5) (34.3) (43.0) (36.9) (23.0) (28.6)

- other administrative expenses (67.7) (69.2) (74.0) (71.5) (72.2) (59.3) (62.7) (65.1)

Amortisation and depreciation (0.1) - (0.1) (0.1) (0.1) (0.1) (0.1) (0.1)

Operating costs (119.3) (101.4) (103.6) (105.9) (115.3) (96.3) (85.8) (93.8)

Operating profit 169.4 126.9 292.5 385.8 138.2 124.1 327.9 324.8Impairment losses, provisions, other operating income (expenses)

(73.2) (28.6) (36.8) (36.8) (16.8) (33.9) (52.5) (43.3)

Profit from continuing operations 96.2 98.3 255.7 349.0 121.4 90.2 275.4 281.5

Income tax expense (37.2) (35.0) (79.0) (126.0) (31.4) (35.0) (95.0) (103.0)

Profit for the year 59.0 63.3 176.7 223.0 90.0 55.2 180.4 178.5

34

Equity and financial aggregates

Presented below is the statement of financial position of Banca IMI at 31 December 2015 and 2014, aggregated on the basis of the nature of the underlying relationship and portfolio.

Condensed reclassified statement of financial position


Assets 31.12.2015 31.12.2014 changes

amount %

1. Due from banks and customers

- Repurchase agreements 12,587.2 12,680.7 (93.5) -0.7

- Securities lending 2,696.8 3,319.3 (622.5) -18.8

- Fixed income securities 693.2 1,824.6 (1,131.4) -62.0

- Collateral deposited 9,553.0 12,603.8 (3,050.8) -24.2

- Structured finance assets 6,574.3 6,174.2 400.1 6.5

- Interbank deposits 47,038.4 34,180.8 12,857.6 37.6

- Checking accounts and other accounts 4,952.0 5,519.1 (567.1) -10.3

2. Financial assets held for trading

- Fixed income securities 14,814.3 11,932.9 2,881.4 24.1

- Shares, quotas and loans 1,230.1 1,070.8 159.3 14.9

- Measurement of off-balance sheet trading transactions 40,859.4 48,570.8 (7,711.4) -15.9

- Measurement of off-balance sheet hedging transactions 203.2 323.9 (120.7) -37.3

3. Investments

- Fixed income AFS securities 11,556.7 8,024.9 3,531.8 44.0

- Equity investments, equities and UCI AFS 116.4 111.0 5.4 4.9

4. Other assets

- Property, equipment and intangible assets 0.6 0.6 -

- Other assets 921.5 892.6 28.9 3.2

Total Assets 153,797.1 147,230.0 6,567.1 4.5

Report on Operations - Equity and financial aggregates

35


Liabilities 31.12.2015 31.12.2014 changes

amount %

1. Due to banks and customers

- Repurchase agreements 20,919.4 19,611.3 1,308.1 6.7


- Collateral received 5,588.9 5,980.9 (392.0) -6.6

- Loans and deposits 53,949.5 33,299.1 20,650.4 62.0

- Checking accounts and other accounts 639.1 2,091.7 (1,452.6) -69.4

2. Financial liabilities held for trading


- Short selling 2,960.4 1,960.9 999.5 51.0


3. Issues

- other 13,866.8 21,482.6 (7,615.8) -35.5

4. Provisions 32.8 40.3 (7.5) -18.6

5. Other liabilities 921.2 615.7 305.5 49.6

6. Equity

- Share capital and reserves 2,638.6 3,037.5 (398.9) -13.1

- Profit for the year 522.0 504.1 17.9 3.6

Total Liabilities and equity 153,797.1 147,230.0 6,567.1 4.5


Off-balance sheet transactions 31.12.2015 31.12.2014 changes

amount %

Guarantees given and commitments to lend 4,681.8 4,411.5 270.3 6.1

Financial derivatives 2,704,872.0 2,625,697.3 79,174.7 3.0

Credit derivatives 111,964.1 119,846.8 (7,882.7) -6.6

Investments in securities increased by over 5 billion euro overall compared to 31 December 2014. The service portfolio represented by financial assets held for trading saw an increase in government securities, but a decrease in investments in financial and corporate securities.

Trading securities portfolio(in millions of euro)

31.12.2015 30.06.2015 31.12.2014 changes on 31 Dec 2014

amount %

– Government and government agencies 7,087.4 6,020.0 2,633.0 4,454.4

– Bonds and other debt securities 7,726.9 8,747.7 9,299.9 (1,573.0) -16.9

– Equities 1,230.1 1,214.6 1,070.8 159.3 14.9

- Shares 905.2 921.5 796.2 109.0 13.7

- Quotas of UCI 324.9 293.1 274.6 50.3 18.3

Total 16,044.4 15,982.3 13,003.7 3,040.7 23.4

The debt securities in the AFS portfolio amounted to 11.6 billion euro, after reaching a high of 12.6 billion euro at the end of the third quarter. The portfolio is leading the strategy of making bond investments with a medium to long-term holding period aimed at maximising the Bank’s strong capital position and proven fund-raising capacity in terms of profitability, while at the same time limiting the volatility on the income statement caused by price fluctuations in the short term.


36

A part of these securities was hedged through interest-rate swap agreements to protect the portfolio from fluctuations in interest rates.

The securities traditionally eligible for the above portfolio are Euro Area government bonds, securities issued by the UK, US, Canadian and Australian governments or backed by guarantees from those governments, as well as bank covered bonds and securities issued by companies belonging to the Intesa Sanpaolo Group. In 2015 the scope of instruments authorised for the available-for-sale portfolio was further expanded to include securities issued or guaranteed by the governments of New Zealand, Sweden and Ireland, in addition to a basket of government securities issued by selected emerging countries denominated in hard currencies.

Italy - OtherGovernment Euro Area

Italian Republic Europe and America - Other

ISP Group

Government Emerging

Unites States

Government Other

The goal of the continuing diversification is to further reduce the portfolio’s concentration risk by laying the foundation for investments decorrelated from Italian bonds. Another strategic decision is related to the currency of denomination of the underlying assets, with the aim of seeking profitability, while also taking account of the compression of the yield curve for highly rated countries. Available-for-sale instruments also include interests in market companies, investments in real estate funds by the real-estate desk, and Intesa Sanpaolo shares for the staff incentive plan. In view of diversification of the portfolio in the medium term, the Principal Investments desk began to deal in closed-end funds specialised in debt instruments. A breakdown by area of reference is provided below.


AFS equity investments % Investment Initial investment

Revaluation Carrying amount

Corporate & Strategic Finance

Fondo Anastasia 10.680 15.0 1.7 16.7

Fondo HB-FCC 8.770 2.3 0.0 2.3

Fondo Venti 13.590 13.3 2.5 15.8

Omicron 2.120 5.7 0.0 5.7

Fondo HIVAF-Hines Italia Value Added Fund 8.459 5.2 0.3 5.5

Eracle-Fondo Immobili Strumentali 2.990 9.9 0.6 10.5

Global Markets

LCH.Clearnet Group Ltd 0.550 2.5 1.6 4.1

Chicago Mercantile Exchange 0.010 0.0 0.7 0.7

Anthilia Bond 5.0 0.0 5.0

Muzinich Italia 6.2 0.0 6.2

Direct Lending Fun 5.0 0.0 5.0

Corporate Center

Intesa Sanpaolo 0.009 6.1 2.9 9.0

Total 76.2 10.3 86.5


37

The SFP - equity financial instruments - acquired in the context of the restructuring of credit positions have also been allocated to the Corporate Center. Recognition at fair value yielded a nil value.

Repayments resulted in a decrease (0.7 billion euro at year-end) in the balance of bonds held with a more long-term focus and carried among loans and receivables, which include the residual share of senior, highly-rated RMBSs previously reclassified from the held-for-trading category, of the original amount of 721 million euro. The following movements in this portfolio category took place during the year:

L&R Portfolio - reclassified debt securities: dynamics(in millions of euro)

2H2015 1H2015 2H2014 1H2014 2H2013 1H2013

Initial Amount 141.7 166.7 188.4 190.1 203.2 221.0

Reimbursements (30.5) (26.5) (32.7) (12.0) (16.9) (19.8)

Accruals and amortized cost 2.0 1.5 11.0 10.2 3.8 2.0

Collective impairment losses 0.6 0.0 0.0 0.1 0.0 0.0

Final Amount 113.8 141.7 166.7 188.4 190.1 203.2

Fair value 116.0 146.7 171.7 193.1 183.3 183.7

The corporate loan portfolio is solely attributable to the Structured Finance segment and includes the Risk Participation Agreements profiting the Ultimate Parent for loans written by the latter. The increase in loans resulted in a rise in on-balance sheet positions to 6.5 billion euro from 5.8 billion euro at 31 March 2015 and from 6.2 billion euro at 31 December 2014. The increase of 0.9 billion euro in credit facilities granted but not yet disbursed confirms the reversal of the downtrend recorded in 2013-2014. Continuing the asset-light approach to new opportunities, credit management is focused on segment diversification and a lower concentration for the overall portfolio, with an increase in credit quality.

Loans to customers(in milions of euro)

31 December 2015 31 December 2014

Gross exposure

Impairment losses

Net exposure

Coverage Gross exposure

Impairment losses

Net exposure

Coverage

On-balance sheet exposure

- performing loans 5,731.0 (105.7) 5,625.3 1.84% 5,148.9 (100.6) 5,048.3 1.95%

- unlikely to pay 1,181.7 (276.9) 904.8 23.43% 1,420.6 (323.3) 1,097.3 22.76%

- doubtful loans 87.5 (43.3) 44.2 49.49% 61.3 (32.7) 28.6 53.34%

Guarantees given (*)

- performing loans 504.8 (3.8) 501.0 0.75% 725.1 (5.6) 719.5 0.77%

- unlikely to pay 345.7 (37.4) 308.3 10.82% 375.6 (44.5) 331.1 11.85%

Irrevocable commitments to lend 1,964.1 (0.5) 1,963.6 0.03% 1,019.1 (0.3) 1,018.8 0.03%

Total 9,814.8 (467.6) 9,347.2 8,750.6 (507.0) 8,243.6

(*) the commitments to lend on non-performing positions have been excluded

Net non-performing loans (doubtful and unlikely to pay categories) decreased by 200 million euro, due to pro-active management of positions, through restoration to performing status, repayments or sale on the secondary market. At 31 December 2015 these accounted for 13.5% of total loans, down from 17.7% at 31 December 2014, thanks to the expansionary phase for the portfolio in question.

Allowances for impairment amounted to 468 million euro and include collective impairment losses of approxima-tely 109 million euro, with total coverage of on-balance sheet loans and commitments to lend of 1.3%, and IAS adjustments of 55 million euro, relating to impairment losses due to the effect of the discounting of expected re-payment flows of non-performing loans.


38

These latter impairment losses will be gradually released to the income statement over time.

Turning to securities funding, redemptions at maturity and repurchases resulted in a decrease in outstanding ba-lances of approximately 8 billion euro during the year, concentrated in plain-vanilla securities and, more generally, in inflation-indexed securities. The new investment products issued followed the distribution networks’ sales policies, which already in the previous year had focused on offering advanced investment products, including the certificates sold by Banca IMI.

Bond Issues


31.12.2015 30.06.2015 31.12.2014 Changes on 31 Dec 2014

amount %

- Bond issues: rate indexed 10,322.6 11,503.0 17,212.7 (6,890.1) -40.0

- Bond issues: currency indexed 2,880.7 2,807.2 2,747.2 133.5 4.9

- Bond issues: equity indexed 663.5 760.6 1,522.7 (859.2) -56.4

Total 13,866.8 15,070.8 21,482.6 (7,615.8) -35.5

There was continuing interest in securities denominated in foreign currencies offered both on the MOT channel and through traditional Italian banking networks. Interbank position, understood as the net imbalance between maturing deposits and loans and liquidity ac-counts is entirely intragroup. The item underwent significant change in 2015, falling from a net positive balance of 4.3 billion euro in December 2014 to the current net negative balance of 2.6 billion euro.Deposits held by the Bank of approximately 7 billion euro, funded by bonds, reached maturity. Funding maturi-ties then continued to be calibrated to match the development of Banca IMI’s assets, with the aim of positioning the Bank to best meet the most recently introduced liquidity standards (net stable funding ratio), resulting in an increase in term positions by absolute value.

Net interbank position


31.12.2015 30.06.2015 31.12.2014 Changes on 31 Dec 2014

amount %

Net interbank position on demand 4,312.9 4,668.9 3,427.4 885.5 25.8

Net term interbank position:

- time deposits 47,038.4 40,111.3 34,180.8 12,857.6 37.6

- loans (53,949.5) (50,806.3) (33,299.1) (20,650.4) 62.0

(6,911.1) (10,695.0) 881.7 (7,792.8) -883.8

Net interbank balance (2,598.2) (6,026.1) 4,309.1 (6,907.3) -160.3

Derivative operations saw 112 billion euro of trades of notional amounts of credit derivatives, in line with the figure recorded at 30 June 2015, down by 8 billion euro compared to 31 December 2014. Approximately 64% is represented by index products.


39

Credit derivatives


Sector of the reference entity 31 December 2015 30 June 2015 31 December 2014

Protection purchases

Protection sales


Protection sales


Protection sales

Governments 5,285.4 5,299.5 5,283.5 5,287.1 6,068.5 5,898.3

Banking and Financials 7,858.3 7,544.1 6,251.8 5,838.7 6,571.2 6,184.0

Insurance companies 1,647.2 1,570.7 1,107.6 1,029.1 989.6 916.1

Corporates 5,651.9 5,709.5 5,855.6 5,945.7 7,055.9 7,388.7

Indices 35,864.7 35,532.8 39,095.6 38,226.5 39,652.7 39,121.8

Total 56,307.5 55,656.6 57,594.1 56,327.1 60,337.9 59,508.9

Financial derivatives saw a total increase in notional amounts of 3% compared to 31 December 2014, including the contribution of various instruments, to the benefit of those listed on regulated markets or subject to clearing by central counterparties.

The following pages present the value of outstanding contracts at 31 December 2015, whereas fair value at that same date is shown below. The decrease in positive values of over 7 billion euro was due to long-term market interest rate trends, since the valuation models adopted refer to such long-term interest rates. The net decrease in absolute values is also attributable to the negative fair values, confirming the configuration typical of financial dealing.The net increase in securitised derivatives originated from the sale of new premiums during the period and was mirrored by the cash collected.

Measurement of off-balance sheet trading transactions


Positive fair value of: 31.12.2015 31.12.2014 Changes

amount %

Derivatives on debt securities and interest rates 34,027.3 41,851.2 (7,823.9) -18.7

Derivatives on equities and indexes 1,058.6 1,212.0 (153.4) -12.7

Derivatives on currencies 3,428.5 3,153.1 275.4 8.7

Credit derivatives 1,091.7 1,498.0 (406.3) -27.1

Derivatives on commodities 1,252.7 856.0 396.7 46.3

Securitised derivatives and forwards 0.6 0.5 0.1 20.0

Total 40,859.4 48,570.8 (7,711.4) -15.9

Negative fair value of: 31.12.2015 31.12.2014 Changes

amount %


Derivatives on equities and indexes 1,154.6 1,227.4 (72.8) -5.9



Derivatives on commodities 552.5 267.7 284.8

Securitised derivatives and forwards (*) 8,033.9 6,245.2 1,788.7 28.6

Total 48,693.1 54,978.5 (6,285.4) -11.4

(*) Securitised derivatives include 5,060.4 million of certificates with total or partial redemption. In the Notes to the financial statements these are included in structured trading liabilities.


40

Almost all OTC derivative contracts were subject to netting arrangements. Such arrangements are often accompa-nied by CSAs, involving the mutual payment of cash collateral to mitigate the residual risk associated with the net exposure. The total positive fair value not subject to netting arrangements was 1.4 billion euro.

OTC Derivatives - netting arrangements


Positive fair value of: 31.12.2015 no netting netting

Derivatives on debt securities and interest rates 34,027.3 383.2 33,644.1

Derivatives on equities and indexes 1,058.6 723.9 334.7

Derivatives on currencies 3,428.5 213.2 3,215.3

Credit derivatives 1,091.7 0.0 1,091.7

Derivatives on commodities 1,252.7 42.8 1,209.9

Securitised derivatives and forwards 0.6 x x

Total 40,859.4 1,363.1 39,495.7

Negative fair value of: 31.12.2015 no netting netting

Derivatives on debt securities and interest rates 33,764.0 161.9 33,602.1

Derivatives on equities and indexes 1,154.6 931.5 223.1

Derivatives on currencies 4,134.4 56.0 4,078.4

Credit derivatives 1,053.7 2.6 993.8


Securitised derivatives and forwards 8,033.9 x x

Total 48,693.1 1,196.2 39,405.7

Breakdown by risk category of outstanding derivatives at the year end - trading book


Contracts 31.12.2015 31.12.2014

Interest rates

Exchange rates

Shares and

indices

Other Total Interest rates

Exchange rates

Shares and

indices

Other Total

Unlisted 2,374,951.7 72,850.4 16,783.6 10,354.7 2,474,940.4 2,362,359.6 66,661.2 22,221.9 5,471.0 2,456,713.7

Forwards (*) - 8,597.1 - - 8,597.1 - 8,871.3 - - 8,871.3

FRAs 1,519.1 34.5 25.8 - 1,579.4 30,938.0 90.1 50.9 - 31,079.0

Swaps 625,061.3 43,254.4 301.6 4,683.2 673,300.5 614,823.7 37,726.0 356.7 4,584.1 657,490.5 Swaps and FRAs - Swapclear margins

1,609,785.1 - - - 1,609,785.1 1,546,732.1 - - - 1,546,732.1

Options purchased 72,084.8 10,180.5 3,270.9 1,901.6 87,437.8 89,423.4 9,208.2 7,692.1 454.0 106,777.7

Options sold 66,501.4 10,783.9 13,185.3 3,769.9 94,240.5 80,442.4 10,765.6 14,122.2 432.9 105,763.1

Listed 158,510.6 345.1 50,223.9 3,403.2 212,482.8 98,607.5 234.8 47,290.3 2,925.8 149,058.4

Futures purchased 44,054.8 0.6 821.6 2,650.0 47,527.0 52,150.2 3.3 498.6 2,266.8 54,918.9

Futures sold 99,041.2 333.2 600.9 490.0 100,465.3 37,563.8 231.5 797.3 437.2 39,029.8

Options purchased 3,998.1 - 24,422.5 132.9 28,553.5 3,212.7 - 27,862.7 77.1 31,152.5

Options sold 11,416.5 11.3 24,378.9 130.3 35,937.0 5,680.8 - 18,131.7 144.7 23,957.2

Total 2,533,462.3 73,195.5 67,007.5 13,757.9 2,687,423.2 2,460,967.1 66,896.0 69,512.2 8,396.8 2,605,772.1

(*) Commitments for currencies to receive and to deliver appear at the contractual exchange rate; regular way contracts are excluded


41

Breakdown by risk category of outstanding derivatives at the year end - banking book


Contracts 31.12.2015 31.12.2014

Interest rates

Exchange rates

Shares and

indices

Other Total Interest rates

Exchange rates

Shares and

indices

Other Total

Unlisted 16,426.6 1,022.2 - - 17,448.8 19,925.2 - - - 19,925.2

Forwards (*) - - - - - - - - - -

FRAs - - - - - - - - -

Swaps 8,562.1 1,022.2 - - 9,584.3 18,495.6 - - - 18,495.6 Swaps and FRAs - Swapclear margins

7,755.0 - - - 7,755.0 1,429.6 - - - 1,429.6

Options purchased 109.5 - - - 109.5 - - - - -

Options sold - - - - - - - - - -

Listed - - - - - - - - - -

Futures purchased - - - - - - - - - -

Futures sold - - - - - - - - - -

Options purchased - - - - - - - - - -

Options sold - - - - - - - - - -

Total 16,426.6 1,022.2 - - 17,448.8 19,925.2 - - - 19,925.2

Total assets rose to 154 billion euro from 147 billion euro at 31 December 2014, after peaking at 158 billion euro at the end of the first quarter. The trend in the aggregate reflects a constant increase in the trading and proprietary portfolio (of over 5 billion euro) and in interbank lending balances (+12 billion euro), due to deposits and loans with the Ultimate Parent’s Treasury, as commented on above.

The alternating development of asset and liability balances did not entail any change to the credit risk profile: counterparty risk remained unchanged compared to the beginning of the year, whereas the CVA charge require-ment even decreased, as result of the development of the related models to reflect negative rate scenarios.

In these financial statements, pursuant to IAS 32.42, the positive and negative fair values of derivatives subject to clearing on Swapclear (totalling 37 billion euro) have continued to be set off against one another. No other items have been set off against assets and liabilities relating to daily margins, which continue to be carried among colla-teral paid (4.6 billion euro) and received (0.4 billion euro).In the absence of such offsetting, total assets would have come to 191 billion euro as at 31 December 2015 (190 billion euro as at 31 December 2014).

Net of assets relating to the Intesa Sanpaolo Group, total assets fell to 96 billion euro, including the positive fair value of OTC derivative contracts. If positive fair values are set off against negative fair values, and cash collateral received set off against cash collateral paid, total interest-bearing and risk assets show an even more significant decrease to within the region of 50 billion euro.

Lastly, in the interest of providing an overview of the trends during the two years compared, the following tables contain a quarterly presentation of the main aggregates in the statement of financial position.

The reconciliation between the reclassified statement of financial position and the corresponding statutory sche-mes is shown among the attachments.


42

Quarterly reclassified statement of financial position(in milions of euro)

Assets 31.12.2015 30.09.2015 30.06.2015 31.03.2015 31.12.2014 30.09.2014 30.06.2014 31.03.2014

1.Due from banks and customers

- Repurchase agreements 12,587.2 11,194.4 12,202.4 13,635.6 12,680.7 11,859.6 12,431.7 12,512.3

- Securities lending 2,696.8 2,780.2 2,923.4 3,564.3 3,319.3 3,539.2 3,571.3 3,893.5

- Fixed income securities 693.2 505.0 549.1 1,820.0 1,824.6 2,387.3 2,405.3 2,564.7

- Collateral deposited 9,553.0 11,265.8 9,908.0 14,048.6 12,603.8 11,365.2 10,210.6 10,233.6

- Structured finance assets 6,574.3 6,506.8 6,414.7 5,762.8 6,174.2 5,963.8 6,473.8 6,843.6

- Interbank and other accounts 51,990.4 46,137.3 45,678.7 36,720.1 39,699.9 34,022.4 37,103.8 40,015.8


- Fixed income securities 14,814.3 14,783.6 14,767.7 14,586.2 11,932.9 16,771.4 15,523.3 18,455.2

- Stocks, quotas and loans 1,230.1 1,184.8 1,214.6 1,188.7 1,070.8 1,216.2 1,132.3 1,285.6 - Measurement of off–balance sheet transactions

41,062.6 43,413.1 42,584.7 54,412.4 48,894.7 45,705.4 42,314.8 40,298.1

3. Investments

- Fixed income AFS securities 11,556.7 12,612.6 12,235.6 11,148.3 8,024.9 6,946.2 4,148.4 6,995.9

- Equity investments, equities and UCI AFS 116.4 115.3 110.5 112.4 111.0 106.2 106.5 106.8

4. Other assets

- Property, equipment and intangible assets 0.6 0.5 0.5 0.5 0.6 0.6 0.7 0.8

- Other assets 921.5 1,050.8 1,304.3 1,109.2 892.6 973.8 788.7 1,222.1

Total Assets 153,797.1 151,550.2 149,894.2 158,109.1 147,230.0 140,857.3 136,211.2 144,428.0


Liabilities 31.12.2015 30.09.2015 30.06.2015 31.03.2015 31.12.2014 30.09.2014 30.06.2014 31.03.2014


- Repurchase agreements 20,919.4 21,189.7 20,706.8 22,870.3 19,611.3 21,404.0 17,806.8 22,896.2

- Securities lending 2,900.7 3,089.3 111.8 3,372.8 3,164.2 3,460.7 3,413.8 3,679.5

- Collateral received 5,588.9 6,423.5 5,604.2 6,745.5 5,980.9 5,587.5 5,210.3 5,159.7

- Loans and deposits 53,949.5 47,780.7 50,806.3 38,229.7 33,299.1 29,603.4 29,550.7 28,235.1

- Checking accounts and other accounts 639.1 478.4 898.5 775.9 2,091.7 1,109.5 806.8 341.3

2. Financial liabilities held for trading - Measurement of off–balance sheet transactions

48,857.7 50,578.8 49,991.5 61,488.4 55,441.7 52,541.1 48,568.5 46,881.0

- Short selling 2,960.4 3,081.5 2,683.7 3,867.7 1,960.9 2,358.3 2,555.1 3,576.2

3. Issues

- other 13,866.8 14,504.7 15,070.8 15,992.3 21,482.6 20,680.7 24,064.3 29,206.8

4. Provisions 32.8 52.2 53.3 43.5 40.3 38.2 38.0 37.9

5. Other liabilities 921.2 997.6 791.7 913.0 615.7 620.8 826.7 1,085.1

6. Equity

- Share capital and reserves 2,638.6 2,910.8 2,775.9 3,587.0 3,037.5 3,039.0 3,011.3 3,150.7

- Profit for the year 522.0 463.0 399.7 223.0 504.1 414.1 358.9 178.5

Total Liabilities and equity 153,797.1 151,550.2 149,894.2 158,109.1 147,230.0 140,857.3 136,211.2 144,428.0


Off-Balance Sheet Transactions 31.12.2015 30.09.2015 30.06.2015 31.03.2015 31.12.2014 30.09.2014 30.06.2014 31.03.2014

Financial derivatives (notional amount) 2,704,872.0 2,639,011.2 2,682,311.8 2,746,181.1 2,625,697.3 2,698,069.7 2,771,853.0 2,764,880.9

Credit derivatives (notional amount) 111,964.1 121,247.6 113,921.2 120,764.4 119,846.8 125,575.3 123,660.6 135,017.7

Guarantees given and commitments to lend 4,681.8 8,077.0 5,043.8 7,248.2 4,411.5 7,123.6 5,933.4 9,821.5

43

Subsidiaries and equity investments

The work done by the operations departments and product desks based at the Milan office are supported by the international units: the London branch, which engages primarily in Structured Finance and commercial distribution on behalf of non-Italian institutional clients, and the subsidiaries based in the Grand Duchy of Luxembourg and the United States.

IMI SecuritiesUSA

Banca IMIMilan

IMI InvestmentsLuxembourg

IMI Capital USA

IMI Finance Luxembourg

100%

100% 100%

100%

The following is an overview of the financial performance of the Banca IMI Group, which once again saw the Parent account for the majority of profits.

Report on Operations - Subsidiaries and equity investments

44

BANCA IMI AND SUBSIDIARIES / ASSOCIATES(in milions of euro)

Company Currency Profit/(loss) Exchange rate (*)

2015 2014

Profit/(loss) Eur

Share Profit/(loss) Eur

Share

BANCA IMI (**) Eur 516.3 516.3 96.74% 491.1 97.07%

IMI Investments (**) Eur (0.1) (0.1) -0.02% (0.2) -0.04%

IMI Finance Eur 0.0 0.0 0.00% 0.1 0.02%

IMI Capital Usd 0.0 1.1130 0.0 0.00% 0.0 0.00%

IMI Securities Usd 11.9 1.1130 10.7 2.01% 9.0 1.78%

Epsilon SGR 6.3 1.18% 5.6 1.11%

EuroTLX SIM (***) 0.5 0.09% 0.3 0.06%

Total 533.7 505.9

(*) Financial statements in foreign currency are translated using the average exchange rate for the period(**) Profit has been rectified for the dividends received from subsidiaries(***) Equity ratio 15% from the third quarter of 2013

Banca IMI Securities Corp. - IMI Capital Markets USAThe U.S. conglomerate recorded a net profit of 11.9 million USD, in line with the previous year. Operating revenues remained stable at 41 million USD, with a shift in composition towards sales and distribution activity, which contributed 67% of the subsidiary’s total income (compared to 53%). Operating costs increased by 17% (+3 million), concentrated in the items most closely tied to revenue generation, as well as in the ordinary component of personnel expenses, in keeping with the higher headcount.

IMI Investments S.A.The holding company essentially reached break-even for the year ended 31 December 2015, in the absence of dividends from its subsidiary IMI Finance.

IMI Finance LuxembourgThe finance and investment company reached break-even for the year ended 31 December 2015, recording fees for services essentially equal to operating costs.

The Banca IMI Group has had a 15% interest in EuroTLX SIM, the company that manages the EuroTLX regulated market and Multilateral Trading Facility, since September 2013. The company falls into the consolidation scope under the governance agreements which confirm the continuing existence of significant influence. During the year, the investee generated a profit of 3.2 million euro, contributing 0.5 million euro to the consolidated income statement.

The 49% interest in Epsilon SGR derives from the partnership with Eurizon Capital for the development of new investment products, through the pooling of both partners’ capital markets and wealth management expertise.At 31 December 2015 the SGR had generated a profit of 12.9 million euro (compared to 11.4 million euro), with a 12% increase in assets under management, primarily those internally managed and outsourced to third parties. The contribution to Banca IMI’s consolidated profit was 6.3 million euro.

Equity investments also include the interest in Sirti S.p.A., carried at 1 euro, its fair value upon initial recognition, acquired through the conversion of a convertible bonds issued as part of the company’s restructuring plan, and the interest in MerMec, acquired in December 2014 following the restructuring of the credit exposure to the Rapido group.

The remaining interests in consortium companies created by the Intesa Sanpaolo Group are of strategic importance and allow Banca IMI access to IT, post-trading, tax and corporate advisory services, debt recovery management and administrative human resource management.

45

Capital adequacy and prudential supervision

At the end of the year, Banca IMI had equity of 3.2 billion euro, including the net profit for the period, but net of the distribution to the Ultimate Parent of an interim dividend of 308 million euro.The following table shows the changes in equity since 31 December 2013:

Changes in equity(in milions of euro)

Share capital

Share premium

Reserves and profits to be

allocated

Fair value reserves

Other valuation

reserves

Interim dividends

Profit Total equity

Equity as at 31 December 2013 962.4 581.3 1,444.0 11.0 (0.5) 0.0 144.7 3,142.9

Allocation of profit 0.3 (144.7) (144.4)

IFRS 2 Reserve 0.4 0.4

Fair value adjustment of AFS investments 39.0 39.0

Attuarial gains (losses) on defined benefit plans (0.4) (0.4)

Profit for the year 504.1 504.1



IFRS 2 Reserve adjustment 4.6 4.6

Fair value adjustment of AFS investments (99.4) (99.4)

Attuarial gains (losses) on defined benefit plans 0.2 0.2

Interim dividends (308.0) (308.0)


Equity as at 31 December 2015 962.4 581.3 1,453.0 (49.4) (0.7) (308.0) 522.0 3,160.6

At 31 December 2015 fair value reserves were a negative 49 million euro. They derive from the measurement at year-end prices of the securities in the AFS portfolio and are calculated net of the associated tax effect.As commented on above, impairment tests resulted in the recognition in the income statement of impairment los-ses of 6 million euro on real estate UCITS. Impairment losses on the portfolio of fixed income securities continued to be absent.

“Reserves and profits to be allocated” included 30 million euro covering the trading of Intesa Sanpaolo shares. That amount was determined by the Shareholders’ Meeting of 2 April 2015, which set purchasing limits at 10 million shares, with a validity of 18 months. The goal of the Buy-back Programme is to satisfy financial risk hedging needs arising from the Bank’s usual ope-rations and to meet any operational needs of a technical nature that require the use of the proprietary account in the presence of limited or zero risk positions.

The above amount also includes the share of reserves covering investments in Intesa Sanpaolo shares in support of the Group incentive system based on financial instruments. In particular:

– on 22 May 2012, Banca IMI’s Shareholders’ Meeting authorised the purchase of ordinary Intesa Sanpaolo shares up to a maximum of 1.4 million euro. The purchase, which was settled on 29 June 2012, involved 1,380,140 shares at a price of 0.97862 euro for a value of approximately 1,350,000 euro;

– on 31 July 2013, it authorised the purchase of additional ordinary Intesa Sanpaolo shares. The purchase, which was settled on 7 October 2013, involved 2,081,111 shares at an average price of 1.72788 euro each, for a total value of approximately 3,596,000 euro;

Report on Operations - Capital adequacy and prudential supervision

46

– on 15 May 2014, Banca IMI’s Shareholders’ Meeting authorised the purchase of an additional 2,248,185 ordi-nary Intesa Sanpaolo shares. These shares were purchased in October at an average price of 2.22887 euro, for a total of approximately 5,011,000 euro. On 1 December, 2,134,807 shares were assigned to employees, in accordance with the provisions of the Group’s share plan LECOIP);

– on 24 April 2015, it authorised the purchase of ordinary shares of the Ultimate Parent up to a maximum amount given by dividing the sum, inclusive of 2,200,000 euro, by the official price as at 27 April 2015 (3.11 euro per share); on 9 October 2015, the purchase of 677,481 shares was carried out at the average price of 3.1942051, and thus for a total of 2,164,013 euro.

All of the above shares were included in the AFS portfolio. The unrealised capital gain amounted to 2.9 million euro at the end of the year.The following table presents changes in all IAS portfolios during the year:

Intesa Sanpaolo shares’ dynamics

Securities Initial Purchases Sales Valuation Final

Amount (no.

shares)

Value (in euros)

Amount (no.

shares)

Value (in euros)

Amount (no.

shares)

Value (in euros) Value

(in euros)

Amount (no.

shares)

Value (in euros)

Ordinary shares - HFT 2,090,654 5,048,929 1,886,400 5,525,188 1,564,196 4,570,740 841,190 2,412,858 7,455,731

Ordinary shares - AFS 3,282,020 7,926,078 677,481 2,164,013 1,050,611 3,368,259 2,894,841 2,908,890 8,988,470

Savings shares - HFT – – 3,098 7,088 3,098 7,088 – – –

At the end of 2014 a new incentive plan was drawn up for Intesa Sanpaolo Group employees (LECOIP), in keeping with the term of the 2014-2017 Business Plan. The LECOIP may be classified as equity-settled and is recognised in accordance with IFRS 2, based on the recognition of the costs of services rendered by employees on a pro-rata basis amongst personnel expenses through an equity reserve. The rationale for this treatment lies in the fact that the Ultimate Parent contributes capital for the benefit of Banca IMI by bearing the cost of remunerating the latter’s employees. The IFRS 2 reserve, recognised for the first time on 31 December 2014 at 0.4 million euro, increased by 4.6 million euro during the year, on the basis of the costs accrued during the 12 months.

Moving on to regulatory capital levels, Banca IMI had own funds of 2,623.5 million euro at 31 December, down compared to the end of September 2015 due to:– a greater deduction of shortfalls on loans, i.e. the difference between the expected losses under the model on

the banking portfolio compared to the allowance for impairment recognised;– the deduction of investments in banking and insurance subordinated securities, undertaken in the course of

ordinary trading activity, but deducted directly from regulatory capital because they exceed 10% of own funds;– the change in the AFS fair value reserves referring to securities other than those issued by the Italian Republic

and other European Union Member States.

The effects described here, of a negative approximately 140 million euro, were mitigated by the changes in the aggregates referring to the prudential filters applicable to CET1 (in particular for the DVA and impairment losses on assets at fair value, i.e. “prudent valuation”).

The Bank’s capitalisation1 presented a total capital ratio of 10.7%, which does not reflect the 2015 profit, above the minimum regulatory requirement of 8.625% for 2014-2016.

1 As members of the Intesa Sanpaolo Banking Group, Banca IMI and its subsidiaries are not subject to statistical or prudential supervision on a consolidated basis. Intesa Sanpaolo discharges such obligations at the level of Intesa Sanpaolo Banking Group.

Report on Operations - Capital adequacy and prudential supervision

47

The decrease from 12.4% at 31 December 2014 and the previous 12.1% in September 2015 was due to the aforementioned decrease in own funds and the increase in risk-weighted assets, which rose to 24.6 billion euro, essentially due to market risks (VaR and stressed VaR).

Own funds and capital requirements(in milions of euro)

31.12.2015 30.09.2015 30.06.2015 31.03.2015 31.12.2014

Own funds

Common Equity Tier 1 (CET1) 2,623.5 2,729.1 2,690.8 2,834.0 2,733.5

Additional Tier 1 (AT1) 0.0 0.0 0.0 0.0 0.0

Tier 2 (T2) 0.0 0.0 0.0 0.0 0.0

Total capital 2,623.5 2,729.1 2,690.8 2,834.0 2,733.5

Capital requirements

Credit and counterparty risks (not OTC derivatives) 765.7 803.5 748.5 769.6 683.4

Counterparty risk: internal model OTC derivatives 117.3 140.2 125.6 129.9 111.4

CVA charge OTC derivatives 46.7 75.0 75.7 64.2 80.2

Market risks: securitisation risk 109.2 113.2 142.8 165.6 122.7

Market risks: concentration risk 0.0 0.0 0.0 0.0 0.0

Market risks: UCITS position risk (*) 1.8 1.5 1.4 1.2 1.7

Market risks: internal model VaR 162.7 136.7 111.0 122.8 74.9

Market risks: stressed VaR 489.5 273.5 314.5 386.4 266.3

Market risks: Incremental Risk Charge 106.4 93.2 139.0 182.3 178.0

Market risks: other 58.1 59.1 71.7 82.7 119.8

Operating risks 109.7 109.7 109.7 125.7 125.6

Total capital requirements 1,967.1 1,805.6 1,839.9 2,030.4 1,764.0

Risk weighted assets 24,588.8 22,570.0 22,998.8 25,380.0 22,050.0

Total capital ratio 10.67% 12.09% 11.70% 11.17% 12.40%

(*) Standard requirement

Total capital requirements at 31 December 2015 (1,967 million euro) were almost evenly divided (47%) into credit risks and market risks, whereas operational risk requirements amounted to 6%.

48

Operational governance, organisational evolution and product development

The Intesa Sanpaolo Group’s 2014-2017 Business Plan is aimed at pursuing solid value creation on both the Italian and international markets.In this context, Banca IMI has been tasked with contributing significantly to the plan targets.In order to respond to this challenge, in early 2015 it became advisable to revamp the Bank’s organisational struc-ture with the aim of fully exploiting the wealth of skills at the bank’s disposal, in order to:– simplify the organisational structure overall, while establishing clear lines of responsibility;– optimise the operating structure, with unitary oversight of all planning, including expansion and international

diversification of the business; – achieve more efficient management of costs and demand management activities;– preserve the profitability of trading activities, with full use of specific professional skills and efficient monitoring

of market risks;– enhance business with Italian and international clients, with sales activities focused on various segments and

products in order to foster cross-selling;– maximise the effectiveness - and related synergies - of investment banking and structured finance activities, in

accordance with the asset-light approach.

The rationalisation of direct reporting to the Managing Director and General Manager calls for the five following lines of responsibility:

– the Global Markets Business Unit, charged with all of the investment bank’s activities relating to the markets area, including risk management for institutional and corporate clients and the trading and distribution of finan-cial instruments, both on own account and on account of third parties; the BU remains responsible for capital markets operations of a more structural nature (treasury and funding, investment and management portfolio, and bond issues) and monitoring the Bank’s overall risk profiles;

– the Corporate & Strategic Finance Business Unit, responsible for all investment banking activities, defined as primary market origination of both equity and debt instruments and advisory business, of all of which have a service component, limited direct risk positions and essential absence of allocated capital, along with structured finance activities, including the assumption and management of credit risks, on-balance sheet loans, commit-ments to lend and investments in debt instruments, equity instruments and UCITS;

– the Operational Governance Area, charged with centralising all operational activities in support of deve-lopment of the business, as well as oversight of the associated risks and controls;

– Personnel, responsible for managing and administering the Bank’s personnel;

– Loan and Portfolio Monitoring, which is responsible for centralised monitoring and all level-one loan mo-nitoring and management activities relating to all of the Bank’s lines of business, including monitoring of the external service for non-performing loans.

The functions of greatest importance from a managerial and corporate standpoint lie within Banca IMI, reporting to the General Manager from a hierarchical perspective and to the Intesa Sanpaolo departments from a functional perspective. Control and execution functions are outside the bank and provide services under outsourcing contracts. In orga-nisational terms, they are part of the Ultimate Parent (Internal Audit, Risk Management, Compliance, and Non-Performing Loan Management) or the consortium company (development and operation of IT systems, post-trading activity, real-estate, logistics and insurance services, and payroll and social-security contribution management). The second half of the year saw the completion of the process of opening the Rome branch, which unifies local market activities under common administrative, operational and logistical governance. The branch does not have independent accounting

Report on Operations - Operational governance, organisational evolution and product development

49

As mentioned above, Banca IMI’s operating model provides for extensive use of specialised outsourced services. As regards information technology systems, application management and the development of new software are entrusted to the Information Technology Systems Department, a part of the consortium company Intesa Sanpaolo Group Services.

The main initiatives in support of the business in 2015 related to: – the launch of the migration project from the MX2 platform to the MX3 platform by the equity desk and of

dealing in inflation (phase 2 of the “architecture project”);– direct participation in Cassa di Compensazione e Garanzia by Banca IMI; – revision of the pricing models for forex derivatives;– development of implementations in the reporting and records area associated with EMIR; – completing the Clearing programme with the aim of complying with EMIR.

Innovation projects included continuing implementations of the physical trading of natural gas, an initiative for which an internal division of Banca IMI is to be set up with its own dedicated application chain.In 2015 a feasibility analysis was launched for the management of storage capacity and order and execution re-porting in the context of REMIT (European regulations concerning the integrity and transparency of the wholesale energy market).

During the entire year, work continued on the Fast Closing project, in response to the new harmonised regulatory framework, which establishes new, more stringent informational content and timetables for the generation of reporting flows to the EBA (European Banking Authority).

The goals were to achieve compliance with the new regulations (changes to current supervisory reporting and addition of new reporting requirements in accordance with the strict timeframe imposed by the regulations) and implementation of changes to processes and systems to complete financial reports and supervisory reporting on a reduced timeframe (42 calendar days).

Banca IMI pursued the above goals as part of a specific analysis initiative. Project initiatives aimed at implementing new regulatory requirements impacting the investment bank’s business also continue. In particular, mention may be made of the G-20 OTC Derivatives Regulation initiative, in continuity with 2014, consisting of:– EMIR implementations: The project is aimed at enhancing the set of controls of operations and at implemen-

ting the requirements for the central clearing of OTC derivatives for both proprietary positions and as a service to be offered to customers;

– Dodd Frank – Title VII: with the aim of implementing all operational, ICT and business requirements relating to registration with the CFTC regulator of Intesa Sanpaolo and Banca IMI as swap dealers under U.S. legislation;

– Dodd Frank – Title VI (Volcker Rule): given the limits and constraints on proprietary trading and investment in covered funds, the initiative aims to reinforce the reporting and control framework and ensure the implemen-tation of the additional requirements that are to enter into force in 2016.

In accordance with Legislative Decree No. 196 of 30 June 2003 - Personal Data Protection Code, the Policy Docu-ment on Security was updated with regards to the minimum security measures to be adopted for handling data.

Research and development of new products to be included in the catalogue are promoted by the commercial areas or by the individual trading desks. When the distribution objectives have been defined and the expected volumes and revenue measured, the “spon-sor” activates the analyses and validations by the corporate functions, with particular reference to the documen-tary, legal and compliance aspects; risk management and monitoring; the operating model and treatment in the IT system; administrative, accounting, tax and supervisory management.

Report on Operations - Operational governance, organisational evolution and product development

50

Following a positive outcome of the functional analyses and gathering of restrictions and requirements, the New Product Committee gives its formal and unanimous approval. Any IT implementations will then be made. With the aim of increasing the efficiency of the R&D process, a restricted new scoring process and a Pre-clearing Committee have been instituted. The Committee expresses an advance opinion, in open dialogue with the sponsor, of new elements and the complexities inherent in instruments for which the process described above is potentially to be initiated.

Thirteen new products and/or operating models were authorised during the year, while implementation projects have been launched or are being started up for five others. An additional six ideas were authorised and implemen-ted on an evolutionary basis.

The innovation of products and pricing models also involves the Financial Engineering team. The main activities during the year focussed on: – evolution of models for pricing and the hedging of hybrid “credit-interest rate” products;– implementation of prototype tools for analysis and managing the risk-overlay, with regard to techniques that seek to

reduce to a minimum the impact of unfavourable movements on currency, equity, bond and commodity markets on investment portfolios;

– establishment of a methodological framework for managing individual constant proportion portfolio insurance pro-ducts;

– development of fixed-income modelling, for use in managing near-zero or negative interest rate scenarios; – extension of the forex models, with a revision of the frameworks used and the extension of the pricing opportunities

to new contractual forms to service investment products on new currencies;– study of virtual currencies for possible operational applications;– technologies to consolidate financial analysis tools to support the business and to find innovative solutions aimed at

improving the calculation performances.

.

51

Human resources

As at 31 December 2015, the Banca IMI’s registered employees came to 828 resources (811 as at 31 December 2014).

Demographic statistics at the end of the year were as follows:

Breakdown by age group of personnel enrolled in the payroll register

Age Total

< 30 30-40 41-50 > 50

Women 30 86 99 32 247

Men 53 200 222 106 581

Total 2015 83 286 321 138 828

Incidence 10.02% 34.54% 38.77% 16.67%

Total 2014 85 297 327 102 811

Incidence 10.48% 36.62% 40.32% 12.58%

Average age of employees

Professional area Average age 2015 Average age 2014

Global Markets 41.3 40.6

Corporate & Strategic Finance 40.5 40.5

Operational Governance 41.3 42.2

Other structures 43.9 41.3

Deployments out 49.3 53.1

Average age Banca IMI 41.7 41.1

Many training initiatives were planned and executed together with the Ultimate Parent’s Training Service and the Corporate & Investment Banking Department. Training was provided through both traditional classroom sessions and remotely via the e-learning platform, as well as in the form of the Ultimate Parent’s Free18 initiative (training outside working hours) through access to physical books or e-books at the employee’s choice.The presentations involved most of the personnel and were positively welcomed, with over 9,950 training man/days (including distance training and those outside of working hours).

Worth mentioning are:– Banca IMI Master School: the initiative also continued in 2015. Participation in the Master School, which is

sub-divided into the two Core and Advanced modules, is proposed to junior resources with less than three years of professional experience;

– Imagine: the initiative developed for young people (aged 31 or under) continued in 2015, with the aim of deve-loping cohesion within the Group and facilitating a higher level of mutual knowledge as a way to enhance trust among individuals.

– English language: as in previous years, in 2015 an online individual English language course was made avai-lable to all bank employees who enrolled. The course is organised as an integrated system of virtual classrooms and telephone sessions, overcoming the limitations of traditional classroom methods;

– National Anti-money Laundering and Embargo Management (mandatory AML plan training): in con-junction with the remote training of all Bank employees, classroom training continued in 2015 for employees assigned to business departments in direct contact with Italian and international clients. Courses were adapted

Report on Operations - Human resources

52

as completely as possible to suit the activities performed by Banca IMI, and each edition had specific focal points on Global Markets or Structured Finance and Investment Banking activities;

– Market Abuse: refresher courses provided in an e-learning format addressed to all of the Bank’s employees assigned to the business departments;

– Volcker Rule (Proprietary Trading & Covered Fund): a two-hour training initiative during which the Group’s Compliance function provided a classroom illustration of the Volcker Rule provisions, laid down in the broader reform known as the Dodd-Frank Wall Street Reform and Consumer Protection Act;

– CIB Industry Training: the training project for the CIB Division, created to support the Division’s new business model with one-day seminars on the fashion, energy, power and utilities, telecom and media industries, continued;

– Law 231 administrative liability, Risk and control culture, Worker health and safety, Elements of company privacy, and the Volcker Rule (generic): refresher courses in an e-learning format addressed to all employees.

53

Management and coordination by Intesa Sanpaolo

The coordinated governance of the Group, summarised in the “Regulations of the Intesa Sanpaolo Group” updated on 23 September 2014, is assured by the management, governance, servicing and supporting role of the competent functions within Intesa Sanpaolo.

The purpose of the above Regulations is to regulate the operating modes, the Group’s institutional mechanisms and the relations with the Ultimate Parent and other Group companies, which consist of rights and duties in line with the guidelines and the growth and development objectives.

In compliance with the provisions set forth in the supervisory regulations, the corporate operating modes followed by the Intesa Sanpaolo Group and the intragroup relations aim to (i) ensure levels of integration consistent with the achievement of a shared strategic design, with the aim of maximising value and ensuring the legal autonomy of the various companies within the Group and the proper management thereof and (ii) optimising the synergies resulting from membership in the Group while fully exploiting the characteristics of the various entities.

The Regulations define the functions assigned to departments of Intesa Sanpaolo responsible for (i) guidance and governance, which are provided on a general basis for Group companies, (ii) service and support activities, which, where necessary, may be provided under specific agreements with the companies and (iii) the functions assigned to Intesa Sanpaolo Group Services S.c.p.A., which is responsible for providing supporting services and activities for the Ultimate Parent and Group companies that represent ISGS’ shareholders.

The Intesa Sanpaolo Group pursues sustainable growth and the creation of value, to be achieved by developing the relationship of trust with its stakeholders, making the best possible use of the available skills and maintaining effective oversight of management levers.

The Intesa Sanpaolo Group’s structure, organised according to a division-based scheme, is broken down into:- Business units, responsible for generating revenue, to which all the Group customers were entrusted on the

basis of precise, explicit segmentation; and- Head Office Departments and Staff Units, which are responsible for specific aspects of strategy, coordination,

control, support and service that correspond to precise missions and functional characteristics.

The coordinated operational management of Intesa Sanpaolo and the Group is ensured by the Managing Director, within the context of the strategic guidelines, the Supervisory Board and the Management Committee, and under the supervision of the Boards and their Chairmen.

In accordance with applicable provisions of law, Intesa Sanpaolo, as Ultimate Parent of the Banking Group of the same name, exercising the management and coordination of group companies pursuant to article 2497 of the Italian Civil Code, issues provisions to Group members, including as regards the execution of instructions provided by the Bank of Italy. The Banking Group companies must comply with such provisions.The Ultimate Parent also verifies the compliance of individual members of the Banking Group with the provisions issued by the Bank of Italy to ensure observance of regulatory and prudential reporting regulations, without prejudice to the responsibility of the Subsidiaries’ corporate bodies for ensuring the accuracy of information flows, the adequa-cy of production procedures and the control of the figures provided.

54

The control system

The Intesa Sanpaolo Group and Banca IMI attach strategic importance to the Internal Controls System, since it represents:

– a fundamental element of the overall governance system of the Intesa Sanpaolo Group, which ensures that the company’s activities are in line with company strategies and policy and consistent with rules of sound and prudent management;

– a fundamental element of knowledge for the Company Bodies, which enables full awareness of the situation, to ensure effective defence against corporate risks and their interrelations, to orient changes to corporate policies and strategies and to adapt the organisational context consistently;

– an important element for safeguarding compliance with the prudent supervision bodies and for promoting the diffusion of a correct risk culture.

The control culture does not apply solely to the company’s control functions but involves the entire company organisation (Company Bodies, Control Functions, Business Functions etc. at all hierarchical levels) in the development and application of methods to identify, measure, communicate and manage the risks.

The XV up-date of the Bank of Italy2 Circular 263/2006 “New prudent supervisory provisions for banks” introduced the new Sections 7 - “The internal controls system”, 8 - “The information system” and 9 - “Business continuity”. In this context, Banca IMI has launched its own Action Plan, as part of which the Bank has formally drafted its own Integrated Control System Rules, a document that lays down the reference principles, outlines the responsibilities of the bodies and the functions assigned control duties and identifies the methods of coordination and the information streams promoting the integration of the Internal Control System.

In a manner consistent with the Intesa Sanpaolo Group’s model, the Bank’s Internal Control System is divided into three levels, responsible for the following types of controls:

– Level I: line controls which seek to ensure operations are conducted correctly (e.g. hierarchical, systematic and sampling controls) and which are incorporated, as much as possible, into the IT procedures.

These are carried out by the same operational and business structures (so-called ‘Level I Functions’), including through units tasked solely with control duties, which report to the managers of the structures, or conducted within middle or back office structures outsourced at other entities within the Group on the basis of specific service agreements.

The business structures bear primary responsibility for the risk management process and are backed by operating functions – typically the middle and back office functions at Intesa Sanpaolo Group Services – to which Banca IMI has outsourced the management of the administrative, regulatory, collection and payment phases for the Bank’s typical operations. These functions, as part of the activities in their own areas of responsibility, perform the role of level I control (or line controls), with the objective of both ensuring prior verification of the correctness and consistency of the transactions and instructions originating with the business functions so as to ensure the efficacy and validation of the transaction by the counterparty, and conducting controls and reconciliation aimed at guaranteeing that complete, accurate information is provided for the Bank’s accounting and reporting procedures and that transactions with counterparties are represented consistently.

Under a specific service agreement, Banca IMI has assigned certain level I control activities to the CIB Control Office, a part of Intesa Sanpaolo’s Strategies and Resources Department, Corporate and Investment Banking Division.

The office monitors that business structures have performed the controls for which they are responsible and carries out level I controls in specific compliance areas, such as market abuse checks (specific regulations of reference for organised markets).

2 Provisions in full effect transposed into Circular 2815

Report on Operations - The control system

55

Lastly, several Operational Governance functions are tasked with level I controls regarding some of the characteristic risks to which the Bank is exposed.

– Level II: risk and compliance controls, the purpose of which is to ensure: (i) proper implementation of the risk management process; (ii) observance of the operational limits assigned to the various functions; and (iii) compliance of company operations with laws and regulations, including corporate governance rules, to the extent applicable.

The functions responsible for such controls are distinct from production functions and contribute to defining risk governance policies and the risk management process; in cases of outsourced activities, such structures are classified entirely to this level under specific service agreements.

In particular, these are:– the Compliance Department, to which Banca IMI has assigned the role of “compliance function”;– the Anti-Money Laundering Service, to which Banca IMI has outsourced this role;– the Risk Management Department, Credit Quality Control Service and Internal Validation Service,

which Banca IMI has entrusted, within their respective areas of responsibility, with the duties allocated to the “risk management function”.

– Level III: internal auditing controls, tasked with identifying breaches of procedures and regulations, as well as periodically assessing the completeness, suitability, functionality (in terms of efficiency and effectiveness) and reliability of the organisational structure of the other components of the Internal Control System and IT system (ICT audit). Currently, the bank’s internal auditing activities are outsourced and carried out by the Internal Auditing Department of the Ultimate Parent, under specific service agreements.

56

Related party transactions

For the purposes of the disclosure provided below, Intesa Sanpaolo Group companies are defined as those included in the consolidation scope of the Ultimate Parent.

In most cases intragroup transactions fall within the normal course of business and are consistent with the opportunities and means offered by the Group of which Banca IMI is a part. Dealings between the various entities that comprise the Intesa Sanpaolo Group are inspired by criteria of centrality as pertains to fundamental governance, control, guidance and assistance in the form of advisory activities on legal, economic and organisational issues. Dealings with the Ultimate Parent fall within the usual course of business of a Group organised according to a multi-functional model. The effects of such dealings on the income statement are normally settled at the arm’s-length conditions and governed by a specific agreement between the parties called a Service Level Agreement.

Cost and income positions during the year are summarised below:

Costs and income with Intesa Sanpaolo group companies (in milions of euro)

Ultimate parent

Banca IMI subsidiaries

Intesa Sanpaolo

subsidiaries

Percentageof caption

Caption

Interest income

Fee and commission income 91.2 0.3 21.1 23.7% 474.6

Interest expense (284.8) – (5.2) 32.5% (891.4)

Fee and commission expense (77.7) (26.4) (70.7) 69.0% (253.5)

Administrative expenses and recovered amounts (177.3) – (17.2) 33.9% (573.3)

The asset and liability figures at year-end are summarised as follows:

Assets and liabilities with group companies (in milions of euro)

Ultimate parent

Banca IMI subsidiaries

Intesa Sanpaolo

subsidiaries

Percentage of caption

Caption

Due from banks and customers

Due to banks and customers 57,911.1 7.4 1,520.1 70.8% 83,997.6

Financial assets - Fixed income securities 5,488.7 119.0 20.7% 27,064.2

- of which L&R – 3.9 0.6% 693.2

- of which AFS 320.2 48.0 3.2% 11,556.7

- of which HFT 5,168.5 67.1 35.3% 14,814.3

Financial liabilities - Securities issued 2,973.3 12.4 21.5% 13,866.8

Financial derivatives (notional amount) 367,718.0 37,881.0 15.0% 2,704,872.0

Financial derivatives - Net Fair Value 1,060.9 1,611.4

Credit derivatives (notional amount) 6,599.0 468.0 6.3% 111,964.1

Credit derivatives - Net Fair Value 118.0 54.6

Report on Operations - Relations with Group companies

57

Dealings with the Ultimate Parent relate primarily to financial transactions, as detailed in the following table:

Relations with Intesa Sanpaolo as at 31 December 2015(in milions of euro)

Assets Amount Liabilities Amount

Checking accounts 3,654.7 Checking accounts 3,297.6

Deposits 45,079.2 Loans and deposits 51,869.1

Repurchase agreements 405.7 Repurchase agreements 2,333.8

Invoices and other assets 33.4 Invoices and other payables 410.6

Fixed income securities 5,488.7 Securities issued 2,973.3

Total assets 54,661.7 Total liabilities 60,884.4

In December 2011 Intesa Sanpaolo’s Management Committee approved the “Rules for Managing the Group’s Own Securities”. These “Rules” tend to summarise a number of operating practices and procedures already established in existing service agreements, and more generally in the bank’s regulations, with regard to the origination of, and secondary market transactions concerning securities issued by Intesa Sanpaolo or other Group companies (the “Issuers”).

In keeping with the provisions on the “Group’s Organisational Structure” and the “Regulations of the Intesa Sanpaolo Group”, Capital Market activities, including Market Making activities, continue to be the responsibility of Banca IMI.

The “Rules” essentially supplement the mandate to act in the interest of the Issuers to support secondary market liquidity and as market maker for retail issues and for institutional customers. With the aim of optimising securities funding and liquidity management, absolute and relative parameters are established for keeping repurchased securities in the portfolios of Banca IMI, and maximum nominal amounts that can be held by the latter are determined for the purposes of market making and ALM. These nominal amounts are updated quarterly by the Group’s Financial Risks Committee.

Once the threshold amounts as periodically determined in this manner are exceeded, the excess is to be immediately transferred to the Issuer at a price equivalent to the average cost incurred for the purchase. The rationale for the use of a cost structure in the form of a transfer price instead of using exact market prices is implied in the approach of the mandate specified in the “Rules”.

In the course of 2015 bonds issued by Intesa Sanpaolo for a nominal value of around 583 million euro, all within the HFT portfolio, have been transferred in successive phases by Banca IMI to Intesa Sanpaolo. The use of a cost structure in the form of a transfer price has had negligible effects on Banca IMI’s income statement (less than 2% of the nominal amount transferred) compared with those that would have resulted from using the fair value on the trade date.

58

Business outlook

In 2016 the economic growth phase is expected to continue, with possible signs of stabilisation in China following the slowdown in previous quarters, whereas in advanced countries the further decline in commodities prices will foster increased consumption over exports. Markets are pricing in a minimum increase in official rates in the United States, and pressure on medium- and long-term rates in dollars will remain modest.

In the Eurozone, the ECB has suggested the adoption of new monetary policy measures that could be announced in the near future. The possibility will keep the rate curve in the Eurozone compressed. European economic growth should continue at an essentially unchanged pace, driven more by the expansion of services than manufacturing activity. In Italy, the signs of a recovery that characterised 2015 are expected to be consolidated.

The prospects for the Italian banking industry call for additional gradual improvement of lending activity, thanks to highly favourable monetary conditions, reduced supply and increased demand from both companies and families, in a context of consolidating economic recovery. Loans to companies could finally make a clear return to growth, albeit at a contained level, and loan levels will continue to grow at a moderate pace in 2016, driven by rates at historical lows and the gradual recovery of the real-estate market.

On the funding side, growth in deposits will continue, while the overall dynamic will continue to be affected by the process of household portfolios being reallocated towards managed assets. On the other hand, banks’ funding needs are expected to remain limited, given lending trends and the ample liquidity available. These factors will continue to foster a contained cost of funding. In a market of very low, if not negative, interest rates, the relaxed lending rate scenario is expected to continue.

The main risks and uncertainties to which the Bank is exposed are described in the context of this Report and in more details in the chapters describing the macroeconomic scenario and the business areas. Further information can be found in the sections dedicated to risk management of the Notes.

The initiatives and investment policies aimed at maintaining strong, sustainable financial performance, including the dividend distribution policy, are illustrated in this Report and Section F of the Notes.

There were no significant events after 31 December 2015 requiring disclosure in these financial statements.

59

Proposals to the Shareholders’ Meeting

Dear Shareholders,

We submit for your approval the financial statements as at and for the year ended December 2015, which com-prise the statement of financial position, the income statement, statement of comprehensive income, statement of changes in equity, statement of cash flows and notes, and are also accompanied by this Report on operations. In particular, we submit the following for approval.

The net negative change of 99,394,675 euro in the “reserves from valuation of available-for-sale assets”, deter-mined as follows:– decrease: the fair value measurement of the balance of debt securities recognised at 31 December 2015 in the

“Available For Sale” portfolio totalling 69,631,446 euro;– increase: the fair value measurement of the Ultimate Parent shares purchased in support of the incentive system

based on financial instruments totalling 1,711,309 euro;– decrease: the fair value measurement of the real-estate funds units held in the “Available For Sale” portfolio at

31 December 2015 totalling 525,399 euro;– increase: the fair value measurement of the interest held in CME – Chicago Mercantile Exchange totalling

249,976 euro;– decrease: the positive net valuation of debt and equity securities classified among available-for-sale financial

assets as at 31 December 2014 and subject to subsequent transfer during 2015 totalling 31,219,252 euro.– increase: the transfer to the income statement, following impairment, of the negative fair value reserve for the

units of a real-estate fund held in the available-for-sale portfolio totalling 20,137 euro.

The net increase of 214,850 euro in fair value reserves for defined-benefit plans resulting from the initial applica-tion of IAS 19, which calls for the recognition of actuarial gains and losses in equity.

The increase of 4,628,753 euro in “other” reserves due to the recognition, in accordance with IFRS 2, of the per-sonnel incentive plan designated “LECOIP”.

The proposed allocation of the profit for the year amounting to 521,984,384 euro as follows:– to dividends: 0.52 euro for each of the 962,464,000 shares, for a total of 500,481,280 euro, of which

307,988,480 euro already distributed as an interim dividend on 30 December 2015;– to the extraordinary reserve: the remaining 21,503,104 euro.

If the financial statements and the aforesaid proposals are approved, Banca IMI S.p.A.’s equity at the approval date of the financial statements will be broken down as follows:


Share capital 962,464,000

Share premium reserve 581,259,962

Legal reserve 192,492,800

Extraordinary reserve 1,256,952,773

Reserve for the purchase of Ultimate Parent’s shares (2359-bis Italian Civil Code) 38,982,653

Revaluation reserves (50,060,568)

Reserve from extraordinary “Under Common Control” transaction (7,057,725)

IFRS 2 equity reserve 5,010,311

Other reserves (11,891,326)

Total 2,968,152,880

Milan, 23 February 2016The Board of Directors

Separate financial statementsof Banca IMI

Separate financial statements of Banca IMI S.p.A.

62

STATEMENT OF FINANCIAL POSITION

(amounts in euro)

Assets 31.12.2015 31.12.2014 Changes

amount %

10. Cash and cash equivalents 2,567 2,247 320 14.2

20. Financial assets held for trading 56,903,823,193 61,574,478,445 (4,670,655,252) -7.6

40. Available-for-sale financial assets 11,643,235,608 8,106,026,529 3,537,209,079 43.6

60. Due from banks 60,797,925,589 53,914,062,235 6,883,863,354 12.8

70. Loans to customers 23,296,950,288 22,388,450,187 908,500,101 4.1

80. Hedging derivatives 203,227,757 323,864,065 (120,636,308) -37.2

100. Equity investments 29,900,230 29,900,230 -

110. Property and equipment 532,031 547,238 (15,207) -2.8

120. Intangible assets 23,621 32,901 (9,280) -28.2

130. Tax assets: 500,994,317 453,826,757 47,167,560 10.4

a) current 292,394,789 261,349,422 31,045,367 11.9

b) deferred 208,599,528 192,477,335 16,122,193 8.4

- of which as per Law no. 214/2011 126,686,008 132,761,202 (6,075,194) -4.6

150. Other assets 420,502,990 438,851,432 (18,348,442) -4.2

Total Assets 153,797,118,191 147,230,042,266 6,567,075,925 4.5

Manager in charge of financial reporting – Angelo Bonfatti Managing Director – Mauro Micillo


63

(amounts in euro)

Liabilities and equity 31.12.2015 31.12.2014 Changes

amount %

10. Due to banks 68,073,694,571 53,046,793,990 15,026,900,581 28.3

20. Due to customers 15,923,862,024 11,100,437,905 4,823,424,119 43.5

30. Securities issued 13,866,782,715 21,482,602,909 (7,615,820,194) -35.5

40. Financial liabilities held for trading 51,653,544,368 56,939,377,748 (5,285,833,380) -9.3

60. Hedging derivatives 164,567,948 463,170,189 (298,602,241) -64.5

80. Tax liabilities 342,174,427 364,202,086 (22,027,659) -6.0

a) current 325,869,155 327,760,620 (1,891,465) -0.6

b) deferred 16,305,272 36,441,466 (20,136,194) -55.3

100. Other liabilities 579,028,546 251,506,204 327,522,342

110. Post-employment benefits 8,743,251 9,780,193 (1,036,942) -10.6

120. Provisions for risks and charges 24,074,661 30,488,914 (6,414,253) -21.0

a) pension and similar obligations 12,319 12,319 -

b) other provisions 24,062,342 30,476,595 (6,414,253) -21.0

130. Fair value reserves (50,060,568) 49,119,257 (99,179,825)

160. Reserves 1,452,986,382 1,444,704,637 8,281,745 0.6

165. Interim dividends (-) (307,988,480) - (307,988,480)

170. Share premium reserve 581,259,962 581,259,962 -

180. Share capital 962,464,000 962,464,000 -

200. Profit for the year 521,984,384 504,134,272 17,850,112 3.5

Total liabilities and equity 153,797,118,191 147,230,042,266 6,567,075,925 4.5



64

INCOME STATEMENT

(amounts in euro)

2015 2014 Changes

amount %

10. Interest and similar income 1,469,445,888 2,040,537,698 (571,091,810) -28.0

20. Interest and similar expense (891,426,506) (1,323,402,182) 431,975,676 -32.6

30. Net interest income 578,019,382 717,135,516 (139,116,134) -19.4

40. Fee and commission income 474,618,666 453,150,804 21,467,862 4.7

50. Fee and commission expense (253,473,147) (275,402,379) 21,929,232 -8.0

60. Net fee and commission income 221,145,519 177,748,425 43,397,094 24.4

70. Dividends and similar income 46,781,579 49,546,994 (2,765,415) -5.6

80. Profits (Losses) on trading 329,274,265 296,684,993 32,589,272 11.0

90. Profits (Losses) on hedging 7,796,763 56,392 7,740,371

100. Profits (Losses) on disposal or repurchase of: 184,890,269 37,196,642 147,693,627

a) loans and receivables (34,912,027) (16,504,472) (18,407,555)

b) available-for-sale financial assets 274,519,296 188,639,769 85,879,527 45.5

c) held-to-maturity investments - - -

d) financial liabilities (54,717,000) (134,938,655) 80,221,655 -59.5

120. Total income 1,367,907,777 1,278,368,962 89,538,815 7.0

130. Impairment losses / reversals of impairment losses on: 2,941,666 (125,237,740) 128,179,406

a) loans and receivables (420,687) (123,807,578) 123,386,891

b) available-for-sale financial assets (5,850,363) (627,657) (5,222,706)


d) other financial assets 9,212,716 (802,505) 10,015,221

140. Net financial income 1,370,849,443 1,153,131,222 217,718,221 18.9

150. Administrative expenses: (576,636,684) (393,426,464) (183,210,220) 46.6

a) personnel expenses (150,036,727) (132,639,342) (17,397,385) 13.1

b) other administrative expenses (426,599,957) (260,787,122) (165,812,835) 63.6

160. Net accruals to provision for risks and charges 1,700,000 (3,000,000) 4,700,000

170. Depreciation and net impairment losses on property and equipment (183,689) (218,267) 34,578 -15.8

180. Amortisation and net impairment losses on intangible assets (9,280) (23,934) 14,654 -61.2

190. Other operating income (expenses) 3,264,594 3,303,214 (38,620) -1.2

200. Operating expenses (571,865,059) (393,365,451) (178,499,608) 45.4

210. Net gains on sales of equity investments - 8,368,501 (8,368,501)

250. Pre-tax profit from continuing operations 798,984,384 768,134,272 30,850,112 4.0

260. Income tax expense (277,000,000) (264,000,000) (13,000,000) 4.9

270. Post-tax profit from continuing operations 521,984,384 504,134,272 17,850,112 3.5




65

STATEMENT OF COMPREHENSIVE INCOME

(amounts in euro)

2015 2014 Changes

amount %


Other comprehensive income, net of income taxes that may not be reclassified to the income statement

20. Property and equipment -

30. Intangible assets -

40. Defined benefit plans 214,850 (433,418) 648,268

50. Non-current assets held for sale -

60. Portion of valuation reserves of equity - accounted investees -

Other comprehensive income, net of income taxes that may be reclassified to the income statement

70. Hedges of investments in foreign operations -

80. Exchange rate gains (losses) -

90. Cash flows hedges -

100. Available-for-sale financial assets (99,394,675) 39,046,776 (138,441,451)

110. Non-current assets held for sale -

120. Portion of valuation reserves of equity - accounted investees -

130. Total other comprehensive income (expense), net of income taxes (99,179,825) 38,613,358 (137,793,183)

140. Comprehensive income (Caption 10 + 130) 422,804,559 542,747,630 (119,943,071) -22.1



66

STATEMENT OF CHANGES IN EQUITY AS AT 31 DECEMBER 2014

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Share capital:

a) ordinary shares 962,464,000 962,464,000 962,464,000

b) other 0 0 0

Share premium reserve 581,259,962 581,259,962 581,259,962

Reserves:

a) income - related 1,443,991,815 1,443,991,815 331,264 1,444,323,079

b) other 0 0 381,558 381,558

Fair value reserves 10,505,899 10,505,899 38,613,358 49,119,257

Equity instruments 0 0 0

Treasury shares (-) 0 0 0

Profit for the year 144,700,864 144,700,864 (331,264) (144,369,600) 504,134,272 504,134,272

Equity 3,142,922,540 0 3,142,922,540 0 (144,369,600) 0 0 0 0 0 0 381,558 542,747,630 3,541,682,128



67

STATEMENT OF CHANGES IN EQUITY AS AT 31 DECEMBER 2015

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Share capital:

a) ordinary shares 962,464,000 962,464,000 962,464,000

b) other 0 0 0

Share premium reserve 581,259,962 581,259,962 581,259,962

Reserves:

a) income - related 1,444,323,079 1,444,323,079 3,652,992 1,447,976,071

b) other 381,558 381,558 4,628,753 5,010,311

Fair value reserves 49,119,257 49,119,257 (99,179,825) (50,060,568)

Equity instruments 0 0 0

Interim dividends (-) 0 0 (307,988,480) (307,988,480)

Treasury shares (-) 0 0 0

Profit for the year 504,134,272 504,134,272 (3,652,992) (500,481,280) 521,984,384 521,984,384

Equity 3,541,682,128 0 3,541,682,128 0 (500,481,280) 0 0 0 (307,988,480) 0 0 0 4,628,753 422,804,559 3,160,645,680



68

STATEMENT OF CASH FLOWS - INDIRECT METHOD

Amount

2015 2014

A. OPERATING ACTIVITIES

1. Cash flow from operations 1,422,085,585 1,480,817,462

Profit for the year (+/-) 521,984,384 504,134,272

Gains/Losses on financial assets held for trading and on financial assets/liabilities at fair value through profit or loss (-/+)

1,012,093,788 876,815,874

Gains/Losses on hedging activities (-/+) (7,796,763) (56,392)

Net impairment losses/reversals of impairment losses (+/-) (2,941,666) 125,237,740

Net impairment losses/reversals of impairment losses on property, equipment and intangible assets (+/-) 192,969 242,201

Net accruals to provisions for risks and charges and other costs/revenue (+/-) (1,700,000) 3,000,000

Taxes and duties to be settled (+) 799,727 12,654,856

Other adjustments (+/-) (100,546,854) (41,247,089)

2. Cash flow from / used by financial assets (7,725,535,124) (10,504,205,503)

Financial assets held for trading 3,515,839,014 (7,139,776,446)

Available-for-sale financial assets (3,855,755,994) (1,875,139,148)

Due from banks: repayable on demand 1,140,840,675 3,748,411,522

Due from banks: other (7,990,814,330) (3,257,869,434)

Loans to customers (875,352,489) (2,202,736,286)

Other assets 339,708,000 222,904,289

3. Cash flow from / used by financial liabilities 7,106,398,101 9,144,003,255

Due to banks: repayable on demand (1,731,757,820) (3,599,824,975)

Due to banks: other 16,746,176,534 11,669,213,081

Due to customers 4,823,216,202 (1,207,494,925)

Securities issued (7,472,079,422) (7,378,324,066)

Financial liabilities held for trading (5,144,089,401) 9,921,952,084

Other liabilities (115,067,992) (261,517,944)

Net cash flow from (used in) operating activities 802,948,562 120,615,214

The statement of cash flows has been prepared using the indirect method, according to which cash flows from operating activities are represented by adjusting profit for the year for the effects of non-cash transactions.

In the statement, cash flows generated during the year are presented without a sign, whereas cash used is shown in brackets.


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STATEMENT OF CASH FLOWS - INDIRECT METHOD

Amount

2015 2014

B. INVESTING ACTIVITIES

1. Cash flow generated by 5,690,000 23,843,974

Sales of equity investments 0 9,255,661

Dividends collected on equity investments 5,690,000 14,588,313

Sales of held-to-maturity investments 0 0

Sales of property and equipment 0 0

Sales of intangible assets 0 0

Sales of business units 0 0

2. Cash flow used for (168,482) (89,619)

Purchases of equity investments 0 0

Purchases of held-to-maturity investments 0 0

Purchases of property and equipment (168,482) (88,836)

Purchases of intangibles assets 0 (783)

Purchases of business units 0 0

Net cash flow from (used in) investing activities 5,521,518 23,754,355

C. FINANCING ACTIVITIES

Issues / repurchases of treasury shares 0 0

Share capital increases 0 0

Dividend distribution and other (808,469,760) (144,369,600)

Net cash flow from (used in) financing activities (808,469,760) (144,369,600)

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 320 (31)

RECONCILIATION

Amount

2015 2014

Cash and cash equivalents at beginning of the year 2,247 2,278

Net increase (decrease) in cash and cash equivalents 320 (31)

Cash and cash equivalents: foreign exchange effect 0 0

Cash and cash equivalents at the end of the year 2,567 2,247

LEGEND: (+) cash flow from (–) cash flow used in


Notes to the separate financial statements

72

Part A – Accounting policies

A.1 – GENERAL CRITERIA

SECTION 1 – STATEMENT OF COMPLIANCE WITH INTERNATIONAL FINANCIAL REPORTING STANDARDSThe Banca IMI separate financial statements have been prepared in compliance with Legislative Decree No. 38 of 28 February 2005, according to the IFRS issued by the International Accounting Standards Board (IASB), endorsed and in force at 31 December 2015, and the interpretations designated SIC and the interpretations of the International Financial Reporting Interpretations Committee (IFRIC), as established in EC Regulation No. 1606 of 19 July 2002. These standards have been used for the preparation of the comparative data and the opening balances at 1 January 2015.

The standards in force at 31 December 2015, the instructions issued by Bank of Italy in its Measure of 22 December 2005, the concurrent Circular No. 262 and the subsequent updates (the last of which on 15 December 2015), as well as the explanatory notes, along with the general regulations of the Italian Civil Code and other relevant rules and regulations have been applied when preparing the separate financial statements.

The specific accounting standards adopted have been applied consistently throughout.There were no exceptions to the application of the international financial reporting standards (IAS/IFRS).

An audit was performed on the financial statements by KPMG S.p.A.

SECTION 2 – GENERAL BASIS OF PREPARATIONThe financial statements comprise:– the Statement of Financial Position– the Income Statement– the Statement of Comprehensive Income – the Statement of Changes in Equity– the Statement of Cash Flows – the Notes.

They also include a Directors’ Report on the bank’s situation and operations.

The Attachments required under specific legislative provisions, segment regulations and accounting practice have also been included.

In accordance with the provisions of Article 5 of Legislative Decree No. 38/05, the separate financial statements have been drawn up using the Euro as the functional currency. The amounts in the Financial Statements are expressed in euro, while the figures in the Notes are expressed in thousands of euro. The tables accompanying the Directors’ Report on Operations are expressed in millions of euro, unless otherwise indicated.

The separate financial statements have been prepared in accordance with the general policies of IAS 1 and the specific standards endorsed by the European Commission and illustrated in Part A.2 of these notes, as well as in compliance with the general assumptions set forth by the Framework for the Preparation and Presentation of Financial Statements issued by the IASB.

In the cases specified by the above Circular, or whenever considered appropriate for the purpose of a more comprehensive understanding of the changes in the income statement and statement of financial position items, the tables also include the comparative figures for the previous year or are accompanied by detailed tables.

Notes to the separate financial statements - Part A - Accounting policies

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Content of the tables

Statement of Financial Position and Income StatementThe statement of financial position and income statement consist of items, sub-items and other detailed information (“of which” in the items and sub-items). Compared with the tables drawn up by Bank of Italy the items with zero amounts for the year of the financial statements and the previous year have been omitted. In the income statement, revenue is shown without a sign, and costs are shown in brackets.

Statement of comprehensive incomeThe statement of comprehensive income comprises items containing changes in the carring amount of the assets recognised during the year as balancing entries to the valuation reserves, net of related taxes. In Regulation No. 475/2012 the European Commission endorsed some amendments to IAS 1 aimed at increasing the clarity of the Statement of Other Comprehensive Income (OCI), by grouping together captions that in future will not be reclassi-fied to the income statement and those that may be reclassified to the income statement under specific conditions.It also includes items with zero amounts for the year of the financial statements and the previous year.

Statement of changes in equityThe statement of changes in equity shows the composition and changes in the equity accounts, divided into share capital, equity-related, income-related reserves, assets and liabilities valuation reserves and the profit/(loss).

Statement of Cash FlowsThe statement of cash flows has been prepared using the indirect method, according to which cash flows from operating activities are represented by adjusting profit for the year for the effects of non-cash transactions.Cash flows have been divided according to whether they are generated by operating, investing or funding activities.

Content of the NotesThe Notes include the information required by Bank of Italy Circular No. 262/2005, as mentioned above, and the additional information required under the IFRS and other Italian regulations.

The separate financial reporting have been prepared in accordance with the general principles of IAS and present the figures for the period alongside the comparative figures at 31 December 2014, for the statement of financial position, or the corresponding period of the previous year, for the income statement.

SECTION 3 – EVENTS AFTER THE REPORTING DATEAs at the date of this report, the value of the AFS reserves is confirmed as negative at about 60 million.In February the capital increase of SAIPEM S.p.A. was concluded for 3.5 billion; the operation was assisted definitively by a placement and guarantee commitment assumed by a consortium of 11 banks, including Banca IMI. At the end of the offer period, a portion of the capital increase - approximately 12.2% of the newly issued ordinary shares - was subscribed by consortium members with settlement on 23 February 2016; the portion attributed to Banca IMI is 148,218,544 shares, representing approximately 1.446% of the new share capital. The amount paid, about 53 million, is roughly in line with the market fair value on that date.

No further significant events occurred after 31 December 2015.

SECTION 4 – OTHER ASPECTSWith reference to the Bank of Italy/Consob/IVASS Document No. 6 of 8 March 2013 ‘Accounting Treatment of long-term structured repos’, the analysis of the new transactions during the year has excluded the relevance of the instructions provided by the regulators.

With reference to the Bank of Italy Circular No. 1034598/14 of 21 October 2014 concerning the recognition of financial derivatives that at maturity require the repayment of all or part of the premiums paid, we also proceeded in this statement of financial position with the classification within the “structured securities” of instruments of this type. These appear within the item “Financial liabilities held for trading” having as its reference the followed business model and the turnover of new originated instruments, early redemptions and repurchases on the secondary market.


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Within the conceptual framework of hedge accounting, the method of hedging through cross-currency swaps (derivatives which summarise the fixing of interest and exchange rate parameters) of bonds issued by Banca IMI in a currency other than the Euro, was implemented in 2015. This method is used as an alternative to the dynamic management of loans in the same currency as that of funding, typically through interbank deposits.

Within the framework of the strategic guidelines for growth envisaged in the Group’s Business Plan for 2014-2017, Banca IMI has developed a series of new operations on commodities, by extending the range of products it offers to futures on physical gas. The Bank does not operate in this market in order to meet the retail demand, but to profit from the margins from fluctuations in commodity prices in trading. In light of this business model and bearing in mind IAS 39 Paper No. 2 IEAF (International Energy Accounting Forum), in these financial statements, the gas contracts which have not yet been physically delivered or withdrawn are recognized and measured at fair value in the income statement.

Amendments to IAS 39

On 24 July 2014, the IASB issued IFRS 9 “Financial Instruments”, substantially completing the process of total revi-sion of IAS 39 “Financial Instruments: Recognition and Measurement”, divided into three phases:

1. Classification and Measurement2. Impairment3. General Hedge Accounting

The standard in question, scheduled for compulsory adoption with effect from 1 January 2018, is still subject to the endorsement process by the European Commission, after receiving the endorsement from EFRAG in May 2015. The approval of the standard is expected by the first half of the year 2016.

As regards the first area, IFRS 9 exceeds the existing concepts of “IAS portfolios” introducing a model for the clas-sification of financial assets guided, on one side, by the characteristics of the contractual cash flows of the instru-ment itself and, on the other, by the management intention (business model) with which the instrument is held. So there are three intended categories: (i) financial assets measured at amortised cost, (ii) financial assets measured at fair value through profit or loss and, finally, (iii) financial assets measured at fair value through equity. In this last case, the reserve is transferred to profit or loss in the event of transfer of the instrument.

With regard to financial liabilities, no substantial changes are introduced - in terms of classification and measure-ment - compared with the current IAS 39. The only new element is the way that own credit risk (i.e. value changes induced by the creditworthiness of the Company itself) is treated in the accounts as regards financial liabilities designated in fair value option: the new standard provides that the portion of changes in fair value for such instru-ments are recognised in equity in that last title, keeping the remaining fair value changes induced by other financial factors (interest rate, exchange rate, etc.) to profit or loss.

With regard to the second area (impairment), for instruments recognized at amortized cost and at fair value with a counter entry through equity, a model is introduced based on the concept of “expected loss” instead of the current “incurred loss”; the new model is intended to allow prompter recognition of impairment losses to profit and loss. More specifically, IFRS 9 requires companies to record expected losses in the following 12 months (stage 1) right from the initial recognition of the financial instrument. The time frame for calculating the expected loss extends to the entire remaining life of the asset from the moment the credit quality of the financial instrument suffers a “significant” deterioration compared with the initial measurement (stage 2).

Lastly, with reference to hedge accounting, the new model concerning specific hedges aims to align accounting elements with risk management activities and to strengthen the disclosure of risk management activities underta-ken by the reporting entity.

In view of the pervasive impact of IFRS 9, both on the business, the organizational model and reporting, the Intesa Sanpaolo Group undertook a special project in the fourth quarter of 2015 – driven by the CRO and CFO areas – aimed at gaining a greater insight into the standard’s different areas of influence, at defining its qualitative and quantitative impacts and also at identifying and implementing the organizational and application actions required for an adoption in the different companies that it consists of.


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1 A financial instrument is regarded as listed on an active market if the list prices are readily and regularly available from an exchange, dealer, broker, industry company, pricing service or authorized entity, and those prices represent effective, regularly occurring market transactions on an arm’s-length basis over a normal reference period.

Banca IMI plays an active part in this plan with reference to its own corporate area and in support of the Corporate and Investment Banking Division.

The main expected impacts of applying the new accounting standard include:− the change in the accounting portfolios where nowadays financial instruments are classified according to IAS 39

and there is an expected increase in financial instruments measured at fair value;− greater volatility in profit and loss due to the passage of financial instruments from stage 1 to stage 2 or vice

versa, due to the different procedures for determining impairment and reversals of impairment compared to the current ones, and to greater convergence in the use of fair value through profit and loss;

− the greater the impact on the measurement of impairment in determining the expected “lifetime” loss on per-forming loans classified in stage 2, the greater the duration of each individual relationship;

− the redefinition of the mission of certain operating units - with the resulting implications on governance of portfolios, control procedures, measuring risk and the related limits and ceilings.

As required by IAS 12, these separate financial statements will be published in accordance within the require-ments of law.

A.2 – MAIN FINANCIAL STATEMENT CAPTIONS

This section sets out the Accounting policies adopted by Banca IMI for the preparation of the separate financial statements at 31 December 2015. The presentation is made by reference to the phases of classification, recogni-tion, measurement and derecognition of the various asset and liability items.

1. FINANCIAL ASSETS HELD FOR TRADINGThis category includes debt securities, equity securities, UCITS units and the positive value of derivative contracts held for trading. Derivative contracts include those embedded in complex financial instruments which are separa-tely recognised when the following conditions are met:– the economic risks and characteristics are not closely related to those of the host contract;– the embedded derivative, even if separated, would meet the definition of a derivative; – the hybrid instrument to which they belong is not measured at fair value with changes in fair value recognised

through profit or loss.

Reclassification to another category of financial instrument is not allowed except in rare circumstances that are unlikely to recur in the short term.In such cases non-derivative financial instruments no longer held for trading may be reclassified to other categories as specified by IAS 39 should the conditions for their recognition exist (held-to-maturity investments, available-for-sale financial assets and loans and receivables). The transfer value is represented by the fair value at the time of reclassification. At that point an assessment is also made as to whether there are any embedded derivative contracts to be separated.

Financial assets are initially recognised on the date of settlement, for debt and equity securities, and on the transac-tion date, for derivative contracts and other off-statement of financial position transactions. On initial recognition, held-for-trading financial assets are taken at fair value, meaning the cost of the instrument, not including transaction costs or revenue directly attributable to the instrument itself, which are immediately recognised in profit or loss.

Subsequent to initial recognition, financial assets held for trading are measured at fair value with changes recogni-sed in profit or loss. Market prices (demand-supply or average prices) are used to determine the fair value of finan-cial instruments listed on an active market1. In the absence of an active market, estimation and valuation models are used that take into account all the risk factors and that are based on data seen in the market such as: methods based on the valuation of listed instruments with similar characteristics, discounted cash flow calculations, models for determining option prices and values recorded in recent comparable transactions.

The models used to determine the fair value of derivative contracts, including for the purposes of the financial statements, are validated beforehand and regularly reviewed by the Intesa Sanpaolo Group’s Risk Management


76

department, which is independent for the departments responsible for drawing up the models. These models may also include factors requiring the use of estimates and parameters not directly observable on the market.

In order to safeguard against the risks inherent in the assumptions made in the models used and for the most innovati-ve financial instruments, the fair value measured using the measurement techniques is prudently reduced by applying a correction factor determined according to the level of complexity of the valuation model used and the degree of liquidity of the financial instrument. As ‘liquidity risks’ tend to diminish as the instrument’s maturity approaches, the corresponding correction factor is reviewed and may be reduced based on the residual life of the financial product.An additional correction factor is applied in the determination of fair value, in order to take into account the bid-offer spread and credit risks inherent in some categories of instruments.

Financial assets are derecognised when the contractual rights to cash flows from the assets expire, or when the financial asset is disposed of, and substantially all the related rights and benefits are transferred. Conversely, when the latter have been essentially retained, the financial assets continue to be fully recognised in the financial state-ments, even if the legal ownership of the assets may to all intents and purposes have been transferred.

2. AVAILABLE-FOR-SALE FINANCIAL ASSETS This category includes non-derivative financial assets not classified as ‘Financial assets held for trading’, ‘Held-to-maturity investments’ or ‘Loans and receivables’.

Initial recognition takes place on the date of settlement and is measured at fair value, generally the cost of the instrument, including any transaction costs or revenues directly attributable to the instrument itself.

Subsequent to initial recognition, available-for-sale financial assets are measured at fair value, determined accor-ding to the criteria indicated in point 1 above, with the actual interest value recognised in profit or loss and the changes in fair value assigned to a specific equity reserve; this reserve is maintained until the financial asset is derecognised or a permanent impairment loss is recognised. When the asset is disposed of or an impairment loss recognised, the cumulative profit or loss is reversed to the income statement.

Financial assets are derecognised when the contractual rights to cash flows from the assets expire, or when the financial asset is disposed of, and all the related risks and benefits are transferred.

Available-for-sale financial assets are regularly tested in order to identify any objective evidence of impairment. If there is such evidence, the amount of the loss is measured as the difference between the purchase cost (net of previous impairment losses and of amortisation) and the present fair value of the assets measured according to specific valuation methods, and is recognised in the income statement.Any subsequent reversals of impairment losses on debt securities classified as available for sale will be recognised in the income statement if and to the extent to which they are effectively linked to events that took place after measurement of the impairment loss. Reversals of impairment losses on equity securities on the other hand are recognised in equity.

The impairment testing process involves checking for specific indicators and deciding on their impairment loss if necessary.Impairment indicators can essentially be divided into two categories: (i) indicators based on factors external to the company being valued, and therefore of a qualitative type; (ii) for equity securities: external indicators of a quanti-tative type based on the company’s market value. The following factors are considered relevant for the first category of indicators: – negative economic results or in any case a significant gap compared to budget objectives or objectives under

long-term plans announced to the market;– announcement/initiation of insolvency procedures or restructuring plans; – downward revision of rating by more than two classes, expressed by a specialized company.

For the second category a significant or prolonged reduction in fair value to below the initial recognition value is important. More specifically, a significant reduction is considered as one of more than 30% in fair value and a prolonged reduction in fair value is considered as one lasting for more than 24 months.If one of these thresholds is exceeded, the instrument is impaired. If they are not exceeded but there are other indications of impairment, the impairment loss has to be corroborated by the result of specific analyses of the security and the investment.


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4. LOANS AND RECEIVABLESThis category contains non-derivative financial assets consisting of trade receivables from customers and banks, whether granted directly or purchased by third parties or contributed, with fixed or determinable payments that are not quoted in an active market and not otherwise classified.

This category also includes ‘repurchase agreements’ which include a contract to sell the securities on maturity, and ‘securities lending agreements’ which involve the payment of collateral in the form of cash. Both types are reco-gnised in the financial statements as loans (similarly, they are recognised as amounts due to customers and banks if there is a commitment to purchase on maturity or if collateral is received in the form of cash) and they do not change the stock of securities held. They also include trade receivables arising from the provision of financial services and advances on the transfers of ownership of “green certificates”.They cannot be reclassified to other categories of financial assets provided for under IAS 39.

Initial recognition of loans and receivables takes place on the date the contract is signed, which normally coincides with the date the amount is paid. Should the above dates not be the same, when the contract is signed a com-mitment to lend funds is signed which is valid until the date the funds are paid. Recognition is at fair value. This is generally the amount paid or the price of the underlying financial instrument, including the directly related costs/revenues, even if paid at a later date.

It does not include costs with the above characteristics that will be reimbursed or which come under ordinary in-ternal costs of an administrative nature.If, in the event of rare circumstances, recognition in this category takes place due to the reclassification of ‘Availa-ble-for-sale financial assets’ or ‘Financial assets held for trading’, the fair value of the asset on the date of reclassi-fication is taken as the new amortised cost of the asset itself on that date.

After initial recognition, loans and receivables are measured at amortised cost, which is the value of initial reco-gnition minus/plus capital repayments and amortisation – calculated using the effective interest rate method – of the difference between the amount loaned and the amount repayable on maturity, which typically consists of the costs/revenues directly attributed to the individual loan or receivable. The effective interest rate is identified by calculating the rate which equates the present value of the loan or recei-vable’s projected cash flows, of capital and interest, with the amount loaned, including the costs/revenues of the loan or receivable. This method of accounting uses a financial logic and allows the economic effect of the costs/revenues to be spread over the expected residual life of the loan or receivable.

The carrying amount of loans and receivables is regularly subject to checks for impairment losses, which are deter-mined taking into account both the specific solvency of debtors having problems making payments, and difficulties in the individual sectors or countries of residence of the debtor, as well as any guarantees.

Using analytical methods, this check is conducted on non-performing loans (doubtful loans, unlikely to pay and past-due loans), or loans for which it is believed the Bank will probably not be able to recover the full amount due, based on the original contractual terms, or an equivalent amount. The analytical method may include determining the expected loss for categories of the same kind and its subsequent precise attribution to each position.

Downstream of the analytical process for determining impairment losses to the principal and interest, additional adjustments are recorded that direct the temporal effects of the recovery of on-balance sheet non-performing loans. The amount of the impairment loss for each loan is equal to the difference between its carrying value at the time of valuation and the present value of estimated future cash flows, calculated by applying the original effective interest rate.The original effective interest rate of each loan remains unchanged over time even if the restructuring involves a change in the contractual rate and if the loan effectively becomes non-interest-bearing according to the contract.The impairment loss is recognised in the income statement.

The carrying amount of “performing” loans is adjusted collectively. These include debt securities, loans and gua-rantees (or equivalent instruments) issued to entities that, as at the date of the financial statements, have not yet shown specific risks of insolvency. The valuation is carried out using risk management tools developed by Intesa Sanpaolo Group for loan categories that are similar in terms of their credit risk and the percentages of loss are estimated taking into account historical figures, based on elements that can be measured on the date of valuation, which allow estimation of the value of the latent loss in each category of loan.


78

The original value of the loans is written back in the following years if the reasons for the impairment no longer exist.Loans and receivables are derecognised on repayment or, in the case of their sale, when all the relative risks and benefits have been transferred. Any economic effects arising from the sale, that correspond to the difference between the contract price and the value of the sold loans and receivables according to the latest balance sheet values, are recorded in total income.

With the update on 15 December 2015 of Circular 262, the disclosure on “credit quality” in the Notes was adjusted to the new definitions of non-performing financial assets; these definitions were already introduced in regulatory reporting for 2015 and are in line with the concepts of non-performing exposures and forborne expo-sures established by the European Commission with Regulation No. 2015/227 upon a proposal from the European Banking Authority.

Three different types of credit restructuring have been identified:– true restructuring (as defined by Bank of Italy Circular No 272);– renegotiation;– cancellation of the debt by replacement of the debtor or by a debt-for-equity swap.

In line with Bank of Italy regulations, debt restructuring (credit exposure) means a transaction in which the Bank grants the debtor a concession for economic reasons, based on the latter’s financial difficulties, which it would not otherwise have granted, and which causes a loss for the creditor. The banks’ concession consists in it waiving some contractually agreed rights, which translates into an immediate or deferred benefit for the debtor and a correspon-ding loss for the Bank. The effects of this waiver are measured by the negative (positive) change in the economic value of the asset (liability) compared with the carrying amount of the asset (liability) before restructuring. Loans that come under the above are classified as non-performing loans.

The renegotiation of credit exposures agreed by the Bank with performing customers is essentially the same as opening a new position to the extent that the renegotiation is granted essentially for commercial reasons, which are therefore different from reasons relating to a debtor’s financial difficulties, and provided that a market interest rate is applied on the date of renegotiation. As an alternative to the solutions described above (restructuring and renegotiation), the Bank and the debtor may agree to cancel the original debt by:– replacement or takeover by another debtor (transfer);– change to the type of contract into a debt-for-equity swap.

These last events involve a substantive change to the terms of the contract, and from an accounting point of view result in the cancellation of the existing agreement and recording of the new account at fair value, recognising the gain or loss between the carrying value of the old loan and the fair value of the assets received in the income statement.

6. HEDGING TRANSACTIONSHedging transactions aim to neutralise the potential losses attributable to certain types of risk by means of the gains that can be made on hedging instruments.

Based on its risk management policies and hedging strategies, the bank has identified hedging relationships and has designated:– interest rate derivatives as hedges of the fair value of its bond issues;– interest rate derivatives as hedges of the fair value of bonds recognised in the ‘Available-for-sale financial assets’

portfolio;– exchange rate and interest rate derivatives as hedging instruments of the fair value of its own bond issues in

currencies other than the Euro;

Like all derivatives, derivative financial instruments used as hedges are initially recognised and subsequently measured at fair value.

In order for a financial instrument to be classified as a hedge, the relationship between the hedging instrument and the hedged item are formally documented with the inclusion of the risk management objectives, the strategy for undertaking the hedge - which must be in line with the management policy identified by Risk Control - and the methods that will be used to assess the hedging instrument’s effectiveness.


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Consequently, the Bank will check, at the beginning of the hedging relationship and for its entire duration, that the hedging derivative is effective in offsetting changes in the fair value of the hedged item.

A hedge is considered to be effective if during its life the changes in the fair value or cash flows of the hedged item, resulting from the hedged risk, are offset by the changes in the fair value of the hedging derivative.

Fair value hedge accounting involves recognition of the effects in profit or loss of the changes in fair value of the hedging instrument and the changes in fair value attributable to the same kind of risk inherent in the hedged assets/liabilities.

The ineffectiveness of a hedge is measured by the difference between the changes in the fair value of the hedging instrument and the change in the fair value of the hedged item, both of which are recognised under the income statement caption ‘Profits (losses) on hedging’, if they are fair value hedges.

The Bank ceases to consider transactions as hedges, and therefore to perform hedge accounting if: (i) the hedging provided by the derivative ceases or is no longer highly effective, (ii) the derivative expires, is sold, terminated or exercised, (iii) the hedged item expires or is totally or partly repaid in advance.

In the event that hedging ceases for reasons other than the hedged item being realised, the overall change in its fair value, already recognised in the financial statements while the hedge is effective, is recognised in profit or loss using the amortised cost method. For these purposes one should refer to the values expressed in the last successful effectiveness test before termination of the hedging.

7. EQUITY INVESTMENTS‘Equity investments’ are stakes in subsidiaries, jointly-controlled companies or companies subject to significant influence.

Jointly-controlled companies (joint ventures) are considered to be those entities which, under the terms of a con-tract, have the control over them shared between Banca IMI and/or Companies of the Intesa Sanpaolo Group and one or more other parties, or where decisions about relevant activities require the unanimous consent of all parties sharing control.Companies subject to significant influence (associates) are considered to be those entities in which the Bank di-rectly or indirectly holds at least 20% of the voting rights (including “potential” voting rights), or where – albeit with a lower percentage of voting rights – it has the power to participate in determining the investee’s financial and operating policies, by way of specific legal arrangements such as the participation in voting trusts.

Subsidiaries are considered to be those companies in which Banca IMI is exposed to variable returns, or has rights over such returns, arising from its relationship with such companies, and at the same time has the ability to affect the returns by exercising its power over such entities.Control can only be confirmed when all of the following items exist at the same time: – the power to direct the relevant activities of the investee; – the exposure to or rights over the variable returns ensuing from the relationship with the investee;– the ability to exercise its power over the investee in order to have an effect on the level of returns.

Equity investments in subsidiaries and companies subject to significant influence are valued at cost, adjusted for impairment if necessary.

For the purposes of the disclosure regarding equity investments made in Part B of these Notes, only those investments that equal at least 5% of the Equity Investments caption are considered significant, in addition to those held in companies that are fully consolidated by the Ultimate Parent Intesa Sanpaolo.


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8. PROPERTY AND EQUIPMENT Property and equipment are accounted for at purchase cost, plus accessory costs and any additional expenses, and recognised net of any impairment and of depreciation, which is carried out on a straight-line basis from the time they become part of the production process.

Maintenance and repair costs not involving an increase in the asset’s carrying amount are recognised in the income statement for the year.Paintings and other artistic assets, considered valuable assets without a limited useful life-span, are traditionally included among Property and equipment used in operations.

9. INTANGIBLE ASSETSIntangible assets, represented principally by software and the rights to use intellectual property rights, trademarks and other intangible assets, are recognised at purchase cost including accessory costs, with the consent of the board of statutory auditors when required by law.

Assets are only recognised when they are identifiable and originate from legal or contractual rights. If this is not the case the cost of the intangible asset is recognised in the income statement in the financial year in which it was incurred.

The cost of assets with a finite useful life is amortised on a straight-line basis or by the reducing balance method depending on the asset’s estimated economic benefits. Assets with an indefinite useful life, if they exist, are not subject to systematic amortisation, but are regularly tested to check the suitability of their carrying amount.If there is any indication that an asset has suffered an impairment lost, the recoverable amount is estimated. The amount of the loss, recognised in the income statement, is the difference between the carrying amount of the asset and its recoverable amount.The value of intangible assets is systematically amortised from their actual introduction into the production process.

An intangible asset is derecognised at the time of sale, its total amortisation and whenever future economic be-nefits are no longer expected.

11. CURRENT AND DEFERRED TAXESProvisions for income tax are determined on the basis of the estimated current tax expense, future tax expense and deferred tax assets and liabilities and also taking into account the fact that the Bank is included in the Intesa Sanpaolo “tax consolidation”. Specifically, deferred tax assets and liabilities are determined on the basis of the temporary differences - without time limits - between the carrying amount attributed to an asset or liability and their tax base. There are no recor-ded deferred tax assets attributable to tax losses that can be carried forward. Deferred tax assets and liabilities are calculated based on the tax brackets provided for by current legislation during the reversal periods. They are recognised in the income statement, with the exception of those amounts (temporary differences) rela-ting to items normally directly charged or credited to equity, in accordance with the IFRS. Changes due to adjustments to tax brackets are treated in the same way.

Deferred tax liabilities on untaxed equity reserves are not recognised, as it is reasonable to suppose that no deci-sions will be taken to carry out operations that will lead to their taxation.

12. PROVISIONS FOR RISKS AND CHARGES

Provisions for pensions and similar obligationsAllowances for pensions are set up in accordance with bank internal agreements and are considered defined bene-fit plans. The liabilities relating to such plans and relative social security costs for current employment services are determined based on actuarial assumptions applying the projected unit credit cost method, which involves projec-ting future costs based on historical statistical analyses and the demographic curve and the financial discounting of these costs based on a market interest rate. The contributions paid in each year are considered separate units, recognised and valued separately for the purpose of determining the Bank’s obligations. The discount rate is de-termined as an average of the market rates applicable to the valuation dates. The present value of the liability on the reporting date is also adjusted by the fair value of any assets used to service the plan.


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Other Provisions for risks and chargesProvisions for risks and charges include legal reserves relating to employment or disputes brought about by a past event. They consist of liabilities of uncertain amounts or expiry dates and are recognised in the financial statements for the following reasons:– the Bank has a current (legal or implicit) obligation due to a past event;– financial resources will probably have to be paid in order to meet the obligation;– it is possible to reliably estimate the probable future payment.

Where the time element is significant, provisions are discounted. Accruals to provisions are recognised in the inco-me statement, as is any interest expense on the provisions which are discounted.

When liabilities are only potential and not probable, no provisions are recognised, but a description of the type of liability is included in the Notes.

Provisions set aside are re-examined at every reporting date and adjusted to reflect the best current estimate. When it seems improbable that it will be necessary to use resources to meet the obligation, the provision is reversed.

13. LIABILITIES AND SECURITIES ISSUEDAmounts due to customers and to banks and securities issued include the various types of funding, in the form of loans, repurchase agreements, securities lending and bonds. They include operating amounts due, with the excep-tion of that due to providers of goods and services. Initial recognition of these financial liabilities takes place on the contractual date of settlement, which is normally the time the funds are received or the debt securities are issued.

Initial recognition is based on the fair value of the liabilities, which normally corresponds to the amount collected or the issue price, adjusted by any additional costs/revenue directly related to the individual funding or issue tran-saction. Internal administrative costs are not included.

Liabilities are recognised at amortised cost.Securities issued are valued at amortised cost using the effective interest rate method and recorded in the financial statements net of any repurchased amount. If they are subject to “fair value” hedging through derivative con-tracts, the carrying amount is further updated according to hedge accounting metrics.

In the case of operations involving own securities, the difference between the cost of repurchasing securities is-sued and the amortised cost is recognised in the income statement. Any subsequent sale of securities, previously repurchased, is for accounting purposes a new placement, and the average carrying amount of the liabilities and the corresponding effective interest is adjusted accordingly.

Liabilities are derecognised when they expire or are repaid.

14. FINANCIAL LIABILITIES HELD FOR TRADINGThe item includes the negative value of derivatives held for trading measured at fair value and the liabilities, also valued at fair value, originating from uncovered short positions generated by securities trading, certificates and more generally securitised derivatives.

Changes in fair value are recognised in the income statement under caption 80 ‘Profits (losses) on trading’.

16. FOREIGN EXCHANGE TRANSACTIONS Foreign exchange transactions are recognised at the time of their settlement, by applying the transaction exchange rate to the amount in the original currency.Assets and liabilities in foreign currency are translated at the closing spot exchange rates (official ECB average).


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Off-balance-sheet transactions are valued:– at the closing spot exchange rate, if still unregulated spot transactions;– at the forward exchange rate on the above date for expiry dates corresponding to that of the transactions being

valued, if these are forward transactions.

Exchange rate differences deriving from the settlement of monetary elements or the translation of monetary elements at different rates from the initial translation rates, or the translation rates of the previous financial state-ments, are recognised in the income statement of the period in which they arise.

17. OTHER INFORMATION

Embedded derivatives A derivative may be embedded in a host contract. These combinations, known as hybrid instruments, mainly began with the issue of structured debt securities.

An embedded derivative is separated from the host contract and accounted for as a derivative when, and only when:– the economic risks and characteristics of the embedded derivative are not closely related to those of the

host contract;– the embedded instrument, even if separated, meets the definition of a derivative;– the hybrid contract to which it belongs is not measured at fair value with changes in fair value recognised

in profit or loss.

Share-based paymentsThese are payments that are made to employees as compensation for their services, consisting of shares representing capital, that may involve the allotment of:– rights to subscribe to paid capital increases (i.e. stock options);– rights to receive shares upon achieving quantitative and qualitative goals (so-called performance shares);– shares subject to unavailability provisions (so-called restricted shares).

The fair value of payments settled through the issuance of shares is recognised as an expense in the income statement under caption 150 a) “Administrative expenses: personnel expenses” against caption 160 “Reserves” under liabilities and equity, according to the pro tempore principle in proportion to the actual period of service.

With regard to share-based payments that are settled in cash, the services obtained and liabilities assumed are measured at the fair value of the latter and posted to caption 100 “Other liabilities”. Until the liability is discharged, the fair value is recalculated on each reporting date until the settlement date, and all changes in fair value are recorded under caption 150 a) “Administrative expenses: personnel expenses.”

Coinciding with the launch of the Business Plan for 2014-2017, the Intesa Sanpaolo Group had defined an incentive scheme for employees, featuring innovative ways of motivating employees and increasing their loyalty, by providing them with the opportunity of taking part in the diffuse share scheme (Investment Plan) enabling every employee to “invest” the shares they receive in a long-term investment instrument (LECOIP), aligned to the business plan, which on the one hand guarantees a certain minimum return at maturity, and on the other, allows the holders to participate in the hoped-for growth in the Group’s share value.

Post-employment benefitsFollowing the introduction of Legislative Decree No. 252 of December 2002, post-employment benefits are no longer considered a defined benefit plan, but a defined contribution plan. The consequence of this new structure, which shifts the actuarial risk and investment risk from the Bank making the payments to a supplementary pension, or the INPS Treasury Fund, lies in the new regulations that apply to accruals from 1 January 2007.

Since the post-employment benefit was a “defined benefit plan” with the actuarial and investment risk borne by the Bank, the benefits vested to 31 December 2006 continue to be valued in actuarial terms using the “Projected Unit Credit” method, without applying the pro-rata current service cost.

The rate used for discounting is the weighted average of the Euro-Swap (IRS zero coupon) and Credit Spread rates of benchmark Italian government bonds on the date of valuation, weighted according to the percentage of the


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amount paid and paid in advance, for each due date, with respect to the total to be paid and paid in advance until the entire obligation has been met.

Benefits accrued after 1 January 2007 constitute a defined contribution plan, which shifts the actuarial and investment risk away from the Bank making the payments, whether the employee opts for a supplementary pension or for the contributions to be paid into the INPS Treasury Fund.As the Bank’s obligation is restricted to the payments made only, there is no longer a need for revaluation with specific actuarial methods of calculation, so the amount of the payments accounted for under personnel expenses is determined solely on the basis of the contributions paid.

The revised of IAS 19, endorsed by EC Regulation 475/2012, applies from the financial statements of 2013. This aims to make financial statements more comprehensible and comparable, especially as regards defined benefit plans. The most important change is the elimination of the ‘corridor method’, with immediate recognition in the statement of comprehensive income of changes to the value of obligation and the plan assets.The elimination of this method has affected and will affect the Bank’s equity, as actuarial profits and losses not previously recognised due to the application of the ‘corridor method’ will now be recognised.

Leasehold improvementsThe costs of restructuring property not owned by the Bank are capitalised based on the fact that for the duration of the lease agreement the bank can derive future economic benefits from them and has full control over them, including the power to restrict access by third parties. The above costs, classified as ‘Other assets’ in accordance with Bank of Italy instructions, are amortised for a period in any case not exceeding the length of the lease.

Recognition of revenuesRevenues are recognised on receipt or, once the transactions that have generated them are complete, when it is probable that the future benefits will be received and can be reliably quantified.

In particular: – interest income is recognised on a pro-rata basis using the contractual interest rate; - trading securities dividends are recognised to the income statement in the financial year in which they are paid, which

is normally the same as the year when the decision to distribute them is made;- based on contractual arrangements, commission on income from services is recognised during the period in which

the services have been provided, unless it has been included in the amortised cost;- revenue from brokerage of financial instruments held for trading are recognised in the income statement when the

transaction is completed according to the terms of the contract.

Use of estimates and assumptions in preparation of the financial statementsPreparation of the financial statements also involves the use of estimates and assumptions that can have significant effects on the amounts recognised in the statement of financial position and the income statement, as well as on the disclosure of the contingent assets and liabilities recorded in the financial statements. The preparation of these estimates involves using the information available and adopting subjective assessments made on the basis of historical experience, which are used for formulating reasonable assumptions for recognising the events that took place during the year. By their very nature the estimates and assumptions used may vary from one year to the next, and therefore it may be that the actual values recorded in the financial statements may vary significantly following changes in the subjective valuations used.

The main cases in which it is most necessary for the bank management to use subjective valuations are:– to quantify the impairment losses on loans and other financial assets in general;– in valuation models for measuring the fair value of complex financial instruments not quoted in active markets;– to quantify personnel expenses and provisions for risks and charges;– estimates and assumptions on the recoverability of deferred tax assets.

The fair value of financial instrumentsFair value is the price that would be received to sell an asset or paid to transfer a liability in a orderly transaction (i.e. not a forced liquidities or distress sale) between market partecipants at the measurement date. Fair value is a market valuation criterion, not specific to the entity. An entity shall measure the fair value of an asset or liability by adopting the assumptions that market operators would use to determine the price of an asset or liability, presuming that market operators act to meet their own best financial interests.


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The fair value of financial instruments is determined through the use of prices derived from the markets, in the case of instruments listed on active markets, or through the use of valuation models, in the case of other instruments. A market is considered active if quoted prices representing effective, regular market transactions undertaken during an appropriate reference period are readily and regularly available from stock exchanges, dealers, brokers, industry companies, listing services or authorised entities. The valuation method defined for a financial instrument is adopted consistently over time and modified solely in response to significant changes in the market.

Open mutual funds2 and equivalent investment instruments, spot and forward forex transactions, futures, options and securities listed on a regulated market are considered to be listed on an active market. Bonds which have at least two prices of a kind that can be ‘executed’ on a listing service and that can be measured continuously, and for which there is a difference between the demand-supply price which is below a level that is considered to be appropriate, are also considered to be listed on an active market. lnstruments not classifiable according to the above categories are not considered to be listed on an active market.

Reference prices or official closing or contract settlement prices are used for financial instruments listed on active markets (always measured on the last day the market is open during the reference period). The list prices of mutual funds and similar instruments are valued based on the list prices provided by the relevant asset management companies on the dates that coincide with the prices of the underlying financial instruments.

In the event that there is no active, liquid market, the fair value of financial instruments is mainly calculated using measurement techniques with the aim of establishing the price of a hypothetical arm’s-length transaction, motivated by ordinary market considerations, on the valuation date. In incorporating all the factors taken into consideration by operators when setting the price, the valuation models developed take into account the financial value of the time at a risk-free rate, insolvency risks, advance payment and redemption, the volatility of the financial instrument, as well as the forex rate if relevant, the price of raw materials and the price of shares.

Valuation models have been prepared for bonds and derivative contracts based on the current market values of similar instruments, financial value of the time and option pricing models, with reference to specific elements of the entity being valued and considering market parameters. The identification and application of the latter takes into account the liquidity, depth and observability of the reference market, and variations in the credit rating for counterparties and issuers.

In consideration of their number and complexity, a systematic reference framework has been developed for derivatives. This framework provides the common elements (calculation algorithms, processing models, market data used, basic assumptions of the model and best practice) that are used to measure all similar categories.

Impairment loss measurement - Financial assetsAt each reporting date, financial assets not classified as ‘Financial assets held for trading’ and ‘Financial assets carried at fair value’ are impairment tested in order to see whether there is objective evidence that their carrying amount might not be fully recoverable.They are impaired if there is objective evidence of a reduction in future cash flows compared with those originally estimated following specific events. It must be possible to quantify the loss reliably and to link it to actual events rather than merely to expected ones.

Impairment testing is carried out case-by-case for financial assets with specific evidence of impairment losses, and collectively for financial assets not requiring case-by-case valuation, or for which case-by-case valuation did not lead to an impairment loss. Collective valuation is based on the identification of comparable classes of risk of financial assets, in terms of the type of debtor/issuer, business sector, geographical area, guarantees if any and other relevant factors.In the case of loans to customers and due from banks, once they have been attributed the status of non-performing and probable default (according to the Bank of Italy’s definitions in line with the IFRS), these are analysed on a case-by-case basis.The amount of the impairment loss for each loan is equal to the difference between its carrying amount at the time of valuation (amortised cost) and the present value of estimated future cash flows, calculated by applying the

2 This means the exclusion, therefore, of closed-end real estate funds, for which trading takes place on an OTC basis and only the NAV is available published by its Management Companies, and of units of UCITS specialising in Private Equity and Private Debt, for which reference should be made to the information provided in the investor reports and the bank’s valuation models.


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original effective interest rate.The estimated cash flows take into account the expected recovery times, the estimated realisable value of any guarantees and the estimated costs that will be incurred for recovery of the loan. The cash flows of loans expected to be recovered in the short term are not discounted, as the financial factor is not significant.

Loans for which there is no individual objective evidence of impairment are subjected to collective impairment testing. The assessment is carried out using loan categories that are similar in terms of their credit risk and the relative percentages of impairment are estimated taking into account historical figures, based on elements that can be measured on the date of valuation, which allow estimation of the value of the unrealised loss in each category of loan. The valuation also takes into account the risks associated with the counterparty’s country of residence.

Allowances for impairment for performing loans are determined according to a model based on the probability of future loss. Specifically, the parameters of PD (probability of default) and the LGD (loss-given default) are also taken into account in valuations for the financial statements. The ratio between the two parameters is the starting-point for credit segmentation, as they incorporate the factors that the IFRS consider relevant for determining similar categories, and for calculating allowances. The period of one year used for assessing the probability of default is considered to approximate the notion of incurred loss, i.e. a loss based on actual events which have not yet been included by the bank in its assessment of the level of risk of each customer required by the IFRS.

For information about the impairment testing methods for ‘Available-for-sale assets’, see the description already provided in the relevant paragraph.


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A.3 – INFORMATION ON TRANSFERS BETWEEN FINANCIAL ASSETS PORTFOLIOS

A.3.1 RECLASSIFIED FINANCIAL ASSETS: CARRYING AMOUNT, FAIR VALUE AND EFFECTS ON COMPREHENSIVE INCOME

(in thousands of euro)

Category of financial instrument

Original portfolio

Destination portfolio

Carrying amount at31.12.2015

Fair value at31.12.2015

Income or expense in absence of transfer

(before taxes)

Income or expense for the year

(before taxes)

Fair value gain/loss

Other Fair value gain/loss

Other

Debt Securities HFT L&R 113,813 115,963 1,540 1,289 610 2,792

The financial assets referred to here have been subject to reclassification with reference to the fair value at 1 July 2008. For more details on the evolution of the portfolio, reference should be made to the Directors’ Report on Operations.

There have been no transfers between portfolios in this year.

A.3.3 TRANSFER OF FINANCIAL ASSETS HELD FOR TRADINGAt 30 September 2008, following changes to IFRS, specifically the amendments to IAS 39 on the reclassification from the trading category of securities for which it was not possible to forecast orderly trading in the short term due to the change in market conditions, the Bank reclassified 721 million of securities to “Loans and receivables” with the intention of creating a high-yield portfolio, essentially made up of Italian issues and with a loan-to-value ratio of less than 50%.

A.3.4 EFFECTIVE INTEREST RATE AND CASH FLOW EXPECTED FROM THE RECLASSIFIED ASSETSThe portfolio’s internal rate of return (IRR) is 1.57%. Although the contractual maturity of the bonds is long-term, as is typical of instruments that originate from securitisation operations, during the years since 2008, partial redemptions have been received for an overall sum of 664 million, showing the positive performance of the underlying operations. Therefore the bank expects that the reclassified bond securities are likely to be redeemed in full in advance of the contractual maturity date.

A.4 – INFORMATION ON FAIR VALUE

Qualitative information

A.4.1 FAIR VALUE LEVELS 2 AND 3: MEASUREMENT TECHNIQUES AND INPUT USED The IFRS require that financial products classified in the trading book or recognised in the Available-for-sale portfolio be measured at fair value.

The existence of official prices on an active market3 represents the best evidence of a financial instrument’s fair value. The fair value of instruments not quoted on an active market is determined by using measurement techni-ques that aim to establish the price that the product would have had on the reference date in a free exchange based on normal commercial factors, taking into account the market values of products with similar risk characteristics. In the absence of the foregoing, the fair value of such securities is determined through the use of estimates and assumptions formulated by the valuer on the basis of inputs drawn from parameters not directly observable on the market.

From 1 January 2013, the application of IFRS 13, which regulates the measurement of fair value and relative disclo-sure, is mandatory. This standard does not extend the scope of fair value measurement. In this way, the aim was to incorporate in a single standard the rules for measuring fair value, that exist in various standards, sometimes with conflicting requirements.

3 A financial instrument is regarded as listed on an active market if quoted prices are readily and regularly available from an exchange, dealer, broker, industry company, pricing service or authorized entity, and those prices represent effective, regularly occurring market transactions on an arm’s-length basis over a normal reference period.


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Fair value is the price that would be received to sell an asset or paid to transfer a liability in a orderly transaction (i.e. not a forced liquidities or distress sale) between market partecipants at the measurement date. Fair value is a market valuation criterion, not specific to the entity. An entity must measure the fair value of an asset or liability by adop-ting the assumptions that market operators would use to determine the price of an asset or liability, presuming that market operators act to meet their own best financial interests.

In determining the fair value of a financial instrument, IFRS 13 sets out a hierarchy based on the origin, type and quality of information used in the measurement. This classification aims to establish a hierarchy in terms of the reliability of fair value based on the degree of subjectivity applied by enterprises, giving precedence to the use of parameters that can be observed on the market and which reflect the assumptions that market participants would use in pricing assets and liabilities. The purpose of the hierarchy is to increase consistency and comparability in the measurement of fair value.

There are three different levels of input:– Level 1: input comprising quoted prices (unadjusted) in active markets for identical assets or liabilities that the

entity can access at the measurement date;– Level 2: inputs other than quoted prices included with Level 1 that are observable, either directly or indirectly,

for the assets and liabilities to be measured;– Level 3: unobservable inputs for the asset or liability.

These approaches are not chosen on an optional basis but on a hierarchical basis: top priority is given to the official prices available on active markets for the assets and liabilities to be valued (level 1) or for assets and liabilities va-lued according to measurement techniques that refer to observable market parameters other than the listed prices of the financial instruments (level 2), and the lowest priority to assets and liabilities whose fair value is calculated according to measurement techniques that refer to parameters that cannot be observed in the market, and thus involve a greater element of discretion (level 3).The valuation method defined for a financial instrument is adopted consistently over time and modified solely in response to significant changes in the market or subjective conditions of the issuer of the financial instrument.

Transfers between fair value levels are based on the empirical observation of intrinsic factors of the instrument taken into consideration or of the markets on which they are traded.The transfer from level 1 to level 2 is the result of there being an insufficient number of contributors, or of a limited number of investors holding the securities issued. This situation often arises as instruments near their maturity dates.Conversely, securities with low liquidity and trading levels on issue − which are therefore classified as Level 2 - are transferred to Level 1 when the market is active.

A.4.2 MEASUREMENT PROCESSES AND SENSITIVITY The process of valuing financial instruments (known as the “Fair Value Policy”) consists of various steps, summa-rised below:– identification of the measurement sources: for each asset class, the Market Data Reference Guide indicates the

processes required to identify market parameters and the methods for incorporating and using such data;– certification and treatment of market data used for valuation: this step consists of a thorough review of the

market parameters used (checking the accuracy of the data stored on the proprietary platform against the contributing source), a probability test (consistency of each figure with similar or comparable figures) and an examination of the actual conditions of application;

– validating pricing models and the Risk Assessment Model: this step involves assessing the consistency and com-pliance of the various valuation methods used by the Bank with current market practice, in order to highlight any critical issues inherent in the pricing models used and to determine any adjustments that need to be made to the valuation;

– monitoring of the consistency of the pricing models over time: regular monitoring of compliance with the market of the pricing model used for valuation allows for the timely detection of any discrepancies and the implementation of the necessary checks and corrective measures.

The Fair Value Policy also calls for possible adjustments to reflect model risk and other valuation-related uncertain-ties. In particular, model risk consists of the possibility that the measurement of a complex security is materially sensitive to the choice of a model. It is indeed possible that various models yield different prices for exotic instru-ments, despite pricing elementary instruments in the same way. In such cases, where possible, the alternative mo-dels are compared and, where necessary, the model inputs are subjected to stress, thereby obtaining information useful in quantifying fair value adjustments, expressed in terms of measurable financial quantities (vega, delta and correlation shift) and subject to periodic review. These fair value adjustments due to model risks are part of a Mark-to-Market Adjustment Policy adopted in order to contemplate other factors that may have an impact on


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measurement, in addition to the model risk illustrated above. These other factors are, essentially: (i) a high and/or complex risk profile; (ii) the illiquidity of positions determined by temporary or structural market conditions or in relation to the amount of the values held (in the case of excessive concentration) and (iii) difficulty in measurement owing to the absence of available liquid market parameters.

IFRS 13 provides clarification with regard to the measurement of non-performance risk in determining the fair va-lue of OTC derivatives. This risk includes both changes in counterparty creditworthiness and changes in the issuer’s own credit risk.In order to meet the requirements of the new standard, a Bilateral Credit Value Adjustment (BCVA) model was de-veloped, which measures in full not only the effects of changes in counterparty creditworthiness (formerly subject to the credit risk adjustment measurement model). but also changes in own credit risk (Debit Value Adjustment − DVA), and has introduced a series of refinements to the existing methodology.

The BCVA consists of two addenda, which are calculated based on the possibility that both counterparties default and are called Credit Value Adjustment (CVA) and Debit Value Adjustment (DVA).– The (negative) CVA applies to scenarios in which the Counterparty defaults before the Bank and the Bank has

positive exposure towards the Counterparty. In such circumstances the Bank loses an amount equal to the cost of replacing the derivative in question.

– The (positive) DVA applies to scenarios in which the Bank defaults before the Counterparty and the Bank has negative exposure towards the Counterparty. In such circumstances the Bank gains an amount equal to the cost of replacing the derivative in question.

The BCVA depends on the exposure, the probability of default and the loss given default of counterparties.

A sensitivity analysis was carried on the level 3 financial instruments applying percentage and absolute changes to the unobservable parameters, in order to measure the relative effects on the positive and negative fair values. The analysis showed that the changes in value due to changes in the unobservable parameters are not material.

Financial asset/liability Unobservable parameters Sensitivity(in thousands of euro)

Change in Unobservable

parameter

Held for trading and available-for-sale securities Credit spread -94.00 1 bp

Held for trading and available-for-sale securities Correlation -4.00 1%

Held for trading and available-for-sale securities CPR -113.00 -1%

Held for trading and available-for-sale securities Recovery Rate -26.00 -1%

OTC Derivatives - Interest Rates Correlation for spread options between swap rates -642.80 0.1

OTC Derivatives - Equity Correlation between underlying equity baskets -179.05 0.1


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Financial instruments Valuation technique Main unobservable input (Level 3)

Minimum value of range

of changes

Maximum value of range

of changes

Unit Favourable changes in FV

Unfavourable changes in FV

Securities Discounting Cash Flows Credit Spread -27.0% 25.0% % 782 -845

Structured securities Two-factor model Correlation -32.0% 10.0% % 48 -84

CLO Cash Discounting Cash Flows

Credit spread -29.0% 28.0% % 4,254 -4,165

Recovery rate -25.0% 10.0% % 15 -38

CPR -10.0% 10.0% % 1,131 -1,131

CDO Gaussian copula

Credit Spread -25.0% 25.0% % 924 -924

Joint default correlation -10.0% 10.0% % 78 -78

Recovery rate -25.0% 10.0% % 248 -621

OTC Derivatives - Equity Basket Option

Black - Scholes modelCorrelation betweenunderlying equity baskets

2.75% 96.07% % 612 -354

OTC Derivatives - Spread Options on Swap Rates

Black - Scholes modelCorrelation between swap rates

-10.78% 97.35% % 2,848 -3,626

OTC Derivatives subject to FV adjustment for CVA/DVA

CVAPD based on counterparty's internal rating

CCC BBBrating

interno350 -72

OTC Derivatives subject to FV adjustment for CVA/DVA

CVA Loss Given Default Rate (LGD) 0.0% 100.0% % 449 -538

A.4.3 FAIR VALUE HIERARCHY The hierarchy of measurement models, i.e. the approaches adopted to determine fair value, attributes absolute priority to official prices available on active markets for the assets and liabilities to be measured (effective market quotes) or for similar assets and liabilities (comparable approach). A lower priority is assigned to unobservable, and hence more highly discretionary inputs (mark-to-model approach).

1. Effective market quotes (level 1) The indicator of reference is the market price of the security being measured, which is obtained on the basis of quotes registered on an active market.

2. Comparable approach (level 2) Measurement is based on the prices or credit spreads drawn from official bid prices for financial instruments sub-stantially similar in terms of risk factors through the use of a predetermined method of calculation (pricing model).The use of this approach translates into the search for transactions on active markets involving securities that are comparable in terms of risk factors with the security being measured.Pricing models employed in the comparable approach allow the reproduction of the prices of financial instru-ments listed on active markets (calibration of the model) without the inclusion of discretionary parameters that may have a significant impact on the final measurement price.

3. Mark-to-model approach (level 3) Measurements are conducted by using various inputs, not all of which are drawn directly from parameters observable on the market, and therefore require the use of estimates and assumptions by the valuer.In particular, the financial instruments are measured by using a predetermined calculation method (the pricing model) based upon specific hypotheses about the trend in future cash flows, taking account of those future events or potential forms of behaviour that previous experience leads the Bank to believe probable.Parameters material to the measurement of the instrument are included in the model. In estimating these pa-rameters, the Bank gives precedence to information obtained from the market concerning prices and spreads, but also makes use of historical data regarding the specific underlying risk factor or specialist studies (e.g. re-ports by rating agencies or leading market players where the former are not available).


90

Quantitative information

A.4.5 FAIR VALUE HIERARCHY

A.4.5.1 Assets and liabilities measured at fair value on a recurring basis: breakdown according to fair value levels


Financial assets/liabilities at fair value 31 December 2015 31 December 2014

L1 L2 L3 L1 L2 L3

1. Financial assets held for trading 10,190,402 46,241,282 472,139 6,565,733 54,221,239 787,506

2. Financial assets at fair value through profit or loss - - - - - -

3. Available-for-sale financial assets 10,468,908 978,422 195,906 7,253,103 784,472 68,452

4. Hedging derivatives - 203,228 - - 323,864 -

5. Property and equipment - - - - - -

6. Intangible assets - - - - - -

Total 20,659,310 47,422,932 668,045 13,818,836 55,329,575 855,958

1. Financial liabilities held for trading 10,462,070 40,997,123 194,351 3,914,574 52,773,951 250,853

2. Financial liabilities at fair value through profit or loss - - - - - -


Total 10,462,070 41,161,691 194,351 3,914,574 53,237,121 250,853

Legend: L1 = Level 1 L2 = Level 2 L3 = Level 3

At 31 December 2015, the impact of non-performance risk (Credit Value Adjustment and Debit Value Adjustment) in determining the fair value of financial instruments, financial derivatives and credit derivatives amounted to 16 million with a reduction in positive fair value and to 29.3 million with an increase in negative fair value. This last amount includes the DVA over the entire scope of the certificates.

A.4.5.2 Annual changes in financial assets at level 3 fair value on a recurring basis(in thousands of euro)

Financial assets held for trading

Financial assets at fair

value through profit or loss

Available-for-sale

financial assets

Hedging derivatives

Property and equipment

Intangible assets

1. Initial amounts 787,506 - 68,452 - - -

2. Increases 437,195 - 173,633 - - -

2.1 Purchases 383,079 - 172,340 - - -

2.2 Gain recognised in:

2.2.1 Profit or loss 39,367 - 126 - - -

– of which: Gains from disposals 30,515 - 30 - - -

2.2.2 Equity X X 223 - - -

2.3 Transfers from other levels 12,740 - - - - -

2.4 Other increases 2,009 - 944 - - -

3. Decreases (752,562) - (46,179) - - -

3.1 Sales (228,125) - (17,844) - - -

3.2 Reimbursements (176,694) - (20,811) - - -

3.3 Losses recognised in:

3.3.1 Profit or loss (289,011) - (5,851) - - -

– of which: Losses from disposals (19,652) - (5,850) - - -

3.3.2 Equity X X (1,673) - - -

3.4 Transfers to other levels (56,567) - - - - -

3.5 Other decreases (2,165) - - - - -

4. Final amounts 472,139 - 195,906 - - -


91

A.4.5.3 Annual changes in financial liabilities at level 3 fair value on a recurring basis(in thousands of euro)

Financial liabilities held

for trading

Financial liabilities at

fair value through profit

or loss

Hedging derivatives

1. Initial amounts 250,853 - -

2. Increases 47,819 - -

2.1 Issues - - -


2.2.1 Profit or loss 33,947 - -

– of which: Losses from disposals 33,947 - -

2.2.2 Equity X X -

2.3 Transfers from other levels 13,872 - -

2.4 Other increases - - -

3. Decreases (104,321) - -

3.1 Reimbursements - - -

3.2 Repurchases - - -

3.3 Gains recognised in: -

3.3.1 Profit or loss (104,100) - -

– of which: Gains from disposals (14,154) - -

3.3.2 Equity X X -

3.4 Transfers to other levels (221) - -

3.5 Other decreases - - -

4. Final amounts 194,351 - -

Financial liabilities at level 3 refer mostly to derivatives with a negative fair value, and consist mainly of rate options.


92

Transfers of assets and liabilities measured at fair value (levels 1 and 2)

Transfers between fair value levels are based on the empirical observation of intrinsic factors of the instrument taken into consideration or of the markets on which they are traded.The transfer from level 1 to level 2 is the result of there being an insufficient number of contributors, or of a limi-ted number of investors holding the securities issued. This situation often arises as instruments near their maturity dates.

Conversely, securities with low liquidity and trading levels on issue − which are therefore classified as Level 2 − are transferred to Level 1 when the market is active.


31 December 2015

Level 1 Level 2

Transfers from Level 2 Transfers from Level 1

A. Financial assets at fair value

1. Financial assets held for trading 444,634 103,080

2. Financial assets at fair value through profit or loss - -

3. Available-for-sale financial assets - 41,986

4. Hedging derivatives - -

Total A 444,634 145,066

B. Financial liabilities at fair value

1. Financial liabilities held for trading 2,954,429 74,627

2. Financial liabilities at fair value through profit or loss - -

3. Hedging derivatives - -

Total B 2,954,429 74,627

Liabilities held for trading transferred from level 1 to level 2 relate to certificates traded on the EuroTLX. In accordance with the provisions of the Fair Value Policy, this is considered to be an active market.

A.4.5.4 Assets and liabilities not measured at fair value or measured at fair value on a non-recurring basis: breakdown according to fair value levels


Assets and liabilities not measuredat fair value or measured at fair value on a non-recurring basis


Carrying amount

L1 L2 L3 VB L1 L2 L3

1. Held-to-maturity investments - - - - - - - -

2. Due from banks 60,797,926 - 43,745,876 17,328,294 53,914,062 - 13,653,104 40,813,497

3. Loans to customers 23,296,950 - 19,928,819 3,637,365 22,388,450 - 16,665,070 6,055,013

4. Investment property - - - - - - - -

5. Non-current assets held for sale and discontinued operations

- - - - - - - -

Total 84,094,876 - 63,674,695 20,965,659 76,302,512 - 30,318,174 46,868,510

1. Due to banks 68,073,695 - 16,518,182 51,630,436 53,046,794 - 26,010,784 27,100,147

2. Due to customers 15,923,862 - 15,864,814 59,045 11,100,438 - 10,987,476 112,444

3. Securities issued 13,866,783 2,723,273 11,052,757 - 21,482,603 3,961,297 17,218,136 -

4. Liabilities associated with non-current assets

- - - - - - - -

Total 97,864,340 2,723,273 43,435,753 51,689,481 85,629,835 3,961,297 54,216,396 27,212,591


The items not valued at fair value and considered to be level 1 only include bond issues traded on active markets, such as the MOT electronic bond market.


93

Classification in levels 2 and 3 takes into account the existence or otherwise of directly or indirectly observable parameters for the assets and liabilities to be measured, taking into account the original duration and residual life of the individual transactions, factors that influence the variability in time and actual liquidity of the parameters.

Level 2 includes assets and liabilities whose carrying amount is the result of changes in the fair value of other items (such as cash collateral given and received under CSA agreements for OTC derivatives), which take the fair value of an underlying financial instrument as reference (e.g. repo transactions and securities lending, with the exception of long-term repos) and debt securities in the loans & receivables portfolio or for which Banca IMI acts as liquidity provider.

Interbank lending and funding are also classified in level 2 or level 3 bearing in mind the residual life of the transactions. The calibration of funding with deadlines over 12 months has therefore led to a greater concentration in the L3 class of amounts due to banks.

Accounts where the credit risk profile is higher than that of the market (such as non-performing and sub-standard loans) are classified under Level 3, as are Medium-to-Long-term loans including those with the Ultimate Parent Intesa Sanpaolo.


94

A.5 INFORMATION ON “DAY ONE PROFIT/LOSS”

The fair value of financial instruments in non-active market situations is determined, using the valuation technique dictated by the provisions of IFRS 13. The same standard also states that the best evidence of an instrument’s fair value is provided when the transaction price (e.g. the fair value of the payment made or received) is initially reco-gnised, unless the conditions set forth in paragraph AG76 of IAS 39 are met.

The potential consequence, which is accentuated in certain market situations and for especially complex or illiquid products, is the existence of a difference between the fair value of the financial asset or liability at initial recognition and the amount that would have been determined on the same date by using the chosen measurement technique. This difference leads to the immediate recognition of a profit (loss) on first measurement after initial recognition, and the phenomenon is referred to as day one profit or loss.

This concept does not apply to profits on the core intermediation operations of investment banks where arbitrage between different markets and products, in the presence of risk positions that are modest and managed ‘on-the-book’, results in a commercial margin (having the nature of a trading fee) aimed at compensating the intermediary for the service rendered and the assumption of financial and credit risks.

In this report, the above described cases concern instruments characterized by a particular financial complexity or illiquidity of the product or which are tailor made. The valuation techniques associated with such instruments introduce corrections to fair value aimed at capturing factors not envisaged in financial models or the breadth of the bid-ask spread observable on the market. The constant application of such techniques results in the gradual release of profit (loss) over the lifetime of individual instruments or as a result of development of the portfolios to which such corrections refer.

There were approximately 0.9 million in day one profits at 31 December 2015 (9.6 million at 31 December 2014). The following table shows changes during the year:


Day one profit as at 31 December 2014 9.6

Decrease (8.7)

Increase -

Movements arising from changes in FV level -

Day one profit as at 31 December 2015 0.9

The decreases were mainly caused by early repayments of the transactions underlying the day one profits. In particular, the residual day one profits on bonds, amounting to 1.3 million at 31 December 2014 are fully accredited to the 2015 income statement, having been cashed at issuance and directly related to the costs of funding, recognized “pro rata temporis” over the legal contractual duration of the individual instrument.During 2015, at the outcome of operations, there were no earnings to be deferred in the initial recognition.

For further information about the valuation techniques effectively applied, see Part E of the Notes.

95

Part B – Information on the Statement of Financial Position

ASSETS

SECTION 1 – CASH AND CASH EQUIVALENTS – CAPTION 10

1.1 Cash and cash equivalents: breakdown


a) Cash 3 2

b) On demand deposits with Central Banks - -

Total 3 2

SECTION 2 – FINANCIAL ASSETS HELD FOR TRADING – CAPTION 20

2.1 Financial assets held for trading: breakdown


Level 1 Level 2 Level 3 Level 1 Level 2 Level 3

A. Assets

1. Debt securities

1.1 structured securities 658,208 312,957 6,089 424,123 446,243 128,330

1.2 other debt securities 7,613,538 5,955,616 267,845 4,449,355 6,270,180 214,648

2. Equities 904,691 - 452 795,676 - 481

3. Quotas of UCI 324,943 - - 274,604 - -

4. Loans

4.1 repurchase agreements - - - - - -

4.2 other - - - - - -

Total A 9,501,380 6,268,573 274,386 5,943,758 6,716,423 343,459

B. Derivatives

1. Financial derivatives

1.1 trading 689,022 38,826,203 197,526 621,975 45,906,360 444,047

1.2 associated with fair value option - - - - - -

1.3 other - 54,778 227 - 100,444 -

2. Credit derivatives

2.1 trading - 1,091,728 - - 1,498,012 -


2.3 other - - - - - -

Total B 689,022 39,972,709 197,753 621,975 47,504,816 444,047

Total (A+B) 10,190,402 46,241,282 472,139 6,565,733 54,221,239 787,506

Structured securities at 31 December 2015 included 528 million euro of equity-linked instruments and 6 million euro of convertible instruments. The remainder consists of mixed-income securities (fixed-rate, index-linked and transfor-mable), of which only 128 million euro refers to securities with complex options (reverse floaters, step-up securities and step-down securities).The fair value of forward contracts in physical gas is included for about 14 million among the “Financial derivatives

Notes to the separate financial statements - Part B - Information on the Statement of Financial Position - Assets

96

held for trading” (approximately 16 million in negative fair value recorded in table 4.1 of the balance sheet liabilities).The economic contribution of the new business, taking into account the start-up phase, was not relevant for 2015.

2.2 Financial assets held for trading: borrower/issuer breakdown


A. ASSETS

1. Debt securities

a) Governments and Central Banks 7,000,657 2,615,844

b) Other government agencies 11,420 14,887

c) Banks 6,039,652 7,044,070

d) Other issuers 1,762,524 2,258,078

2. Equities

a) Banks 43,249 51,642

b) Other issuers

- insurance companies 83,486 74,909

- financial institutions 54,612 28,976

- non-financial companies 723,796 640,630

- other - -

3. Quotas of UCI 324,943 274,604

4. Loans

a) Governments and Central Banks - -

b) Other government agencies - -

c) Banks - -

d) Other counterparties - -

Total A 16,044,339 13,003,640

B. DERIVATIVES

a) Banks 31,609,469 38,616,015

b) Customers 9,250,015 9,954,823

Total B 40,859,484 48,570,838

Total (A+B) 56,903,823 61,574,478

Quotas of UCI, held in the portfolio at year-end included a total of 258 million euro of bond fund and balanced fund units and 54 million euro of equity fund units. The remainder consisted of investments totalling 5 million euro in listed real estate funds and 8 million euro in SICAVs.


97

SECTION 4 – AVAILABLE-FOR-SALE FINANCIAL ASSETS – CAPTION 40

4.1 Available-for-sale financial assets: breakdown



1. Debt securities

1.1 Structured securities - - - - - -

1.2 Other debt securities 10,459,197 974,324 123,207 7,244,538 780,374 -

2. Equities

2.1 Measured at fair value 9,711 4,098 - 8,565 4,098 -

2.2 Measured at cost - - - - - -

3. Quotas of UCI - - 72,699 - - 68,452

4. Loans - - - - - -

Total 10,468,908 978,422 195,906 7,253,103 784,472 68,452

4.2 Available-for-sale financial assets: borrower/issuer breakdown


1. Debt securities



c) Banks 968,748 1,266,020

d) Other issuers 1,021,420 447,136

2. Equities

a) Banks 8,983 7,926

b) Other issuers

- insurance companies - -

- financial institutions 4,826 4,737

- non-financial companies - -

- other - -

3. Quotas of UCI 72,699 68,452

4. Loans



c) Banks - -


Total 11,643,236 8,106,027

Equities carried under “a) Banks” consist of Intesa Sanpaolo shares held to service the staff incentive plan.


98

SECTION 6 – DUE FROM BANKS – CAPTION 60

6.1 Due from banks: breakdown


Carrying amount

Fair Value Carrying amount

Fair Value


A. Due from Central Banks

1. Time deposits - X X X - X X X

2. Compulsory reserve - X X X - X X X

3. Repurchase agreements - X X X - X X X

4. Other 5,529 X X X 19,341 X X X

B. Due from banks

1. Loans

1.1 Checking accounts and demand deposits 8,336,069 X X X 11,641,240 X X X

1.2 Time deposits 45,086,395 X X X 33,536,175 X X X

1.3 Other loans:

Repurchase agreements 7,252,969 X X X 7,454,115 X X X

Finance leases - X X X - X X X

Other 116,964 X X X 60,124 X X X

2. Debt securities

2.1 Structured - X X X - X X X

2.2 Other - X X X 1,203,067 X X X

Total 60,797,926 - 43,745,876 17,328,294 53,914,062 - 13,653,104 40,813,497

“Checking accounts and demand deposits” included a total of 4.5 billion euro in assets pledged as collateral for CSA agreements (6.8 billion euro at 31 December 2014). They are classed as level 2 assets as their fair value is tied directly to changes in the fair value of OTC derivatives portfolios.The compulsory reserve, the obligation for which has been discharged indirectly, is carried among “Time de-posits” in the amounts of 29 million euro at 31 December 2015 and 31 million euro at 31 December 2014.


99

SECTION 7 – LOANS TO CUSTOMERS – CAPTION 70

7.1 Loans to customers: breakdown


Carrying amount Fair value Carrying amount Fair value

Performing Non-performing L1 L2 L3 Performing Non-performing L1 L2 L3

Purchased Other Purchased Other

Loans

1. Checking accounts 904,819 - - X X X 493,988 - - X X X

2. Repurchase agreements 8,030,996 - - X X X 8,545,823 - - X X X

3. Mortgages - - - X X X - - - X X X

4. Credit card loans, personal loans and salary-backed loans

- - - X X X - - - X X X

5. Finance leases - - - X X X - - - X X X

6. Factoring - - - X X X - - - X X X

7. Other 12,718,988 - 948,970 X X X 11,636,844 - 1,090,266 X X X

Debt securities

8. Structured securities - - - X X X - - - X X X

9. Other debt securities 693,177 - - X X X 621,529 - - X X X

Total 22,347,980 - 948,970 - 19,928,819 3,637,365 21,298,184 - 1,090,266 - 16,665,070 6,055,013

Assets pledged as collateral for CSA agreements were carried under “Other” for a total of 5 billion euro, of which 4.6 billion euro solely referring to the Swapclear. They are classed as level 2 assets as their fair value is tied directly to changes in the fair value of OTC derivatives portfolios.

7.2 Loans to customers: borrower/issuer breakdown


Performing Non-performing Performing Non-performing


1. Debt securities

a) Governments 190,127 - - 186,214 - -

b) Other government agencies - - - - - -

c) Other issuers

- non-financial companies 253,333 - - 79,720 - -

- financial institutions 249,717 - - 355,595 - -

- insurance companies - - - - - -

- other - - - - - -

2. Loans

a) Governments - - - - - -

b) Other government agencies 3 - - 3 - -

c) Other counterparties

- non-financial companies 7,348,231 - 890,239 7,785,955 - 962,977

- financial institutions 14,297,263 - 58,731 12,878,857 - 127,289

- insurance companies 8,437 - - 11,262 - -

- other 869 - - 578 - -

Total 22,347,980 - 948,970 21,298,184 - 1,090,266


100

SECTION 8 – HEDGING DERIVATIVES – CAPTION 80

8.1 Hedging derivatives: breakdown by type of hedge and hierarchical levels

Fair value 31 December 2015 Notional amount

31.12.2015


31.12.2014 Level 1 Level 2 Level 3 Level 1 Level 2 Level 3

A. Financial derivatives

1) Fair value - 203,228 - 12,543,127 - 323,864 - 11,510,973

2) Cash flows - - - - - - - -

3) Investments in foreign operations - - - - - - - -

B. Credit derivatives

1) Fair value - - - - - - - -

2) Cash flows - - - - - - - -

Total - 203,228 - 12,543,127 - 323,864 - 11,510,973

The reduction in the notional amounts of hedging derivatives reflects the evolution of the different strategies and needs regarding interest rate risk management.

8.2 Hedging derivatives: breakdown by hedged portfolio and type of hedge

Fair value Cash flows

Inve

stm

ents

in

fo

reig

n

op

erat

ion

s

Specific

Gen

eric

Spec

ific

Gen

eric

Interest rate risk

Currency risk

Credit risk

Price risk Various risks

1. Available-for-sale financial assets 5,619 - - - - X - X X

2. Loans - - - X - X - X X

3. Held-to-maturity investments X - - X - X - X X

4. Portfolio X X X X X X X

5. Other - - - - - X - X -

Total assets 5,619 - - - - - - - -

1. Financial liabilities 154,517 - - X 43,092 X - X X

2. Portfolio X X X X X - X - X

Total liabilities 154,517 - - - 43,092 - - - -

1. Forecast transactions X X X X X X - X X

2. Financial assets and liabilities portfolio X X X X X - X - -

Hedging derivatives are designated to cover interest rate risk on AFS portfolio investments and interest rate and currency risks on bonds issued by the Bank.Within the conceptual framework of hedge accounting, the method of hedging through cross-currency swaps (derivatives which summarise the fixing of interest and currency parameters) of bonds issued by Banca IMI in a currency other than the Euro, was implemented in 2015. This method is used as an alternative to the dynamic management of loans in the same currency as that of funding, typically through interbank deposits.


101

SECTION 10 – EQUITY INVESTMENTS – CAPTION 100

10.1 Equity investments: information on equity stakes

Registered office

Head office % held Votes available %

Carrying amount

A. Fully-owned subsidiaries

1. IMI Investments S.A. Luxembourg Luxembourg 100.00% 100.00% 23,077

C. Companies subject to significant influence

1. Consorzio Studi e Ricerche Fiscali Rome Rome 7.50% 7.50% 19

2. Intesa Sanpaolo Group Services Turin Turin 0.010% 0.010% 50

3. Infogroup Florence Florence 0.003% 0.003% 1

4. Epsilon Milan Milan 49.00% 49.00% 5,560

5. SIRTI Milan Milan 26.84% 26.84% -

6. EuroTLX Sim Milan Milan 15.00% 15.00% 1,193

7. Mer Mec Monopoli (BA) Monopoli (BA) 30.00% 30.00% -

10.2 Significant equity investments: carrying value, fair value and dividends received

Carrying amount Fair value Dividends received


1. IMI Investments S.A. 23,077 35,428


1. Consorzio Studi e Ricerche fiscali 19 19 -

2. Intesa Sanpaolo Group Services 50 50 -

3. Infogroup 1 1 -

4. Epsilon 5,560 10,953 5,390

5. EuroTLX Sim 1,193 5,109 300

Total 29,900 51,560 5,690

Significant equity investments are considered those where the stakes consist of at least 5% of the total equity investments, as well as those held in companies that are fully consolidated by the Ultimate Parent Intesa Sanpaolo.For the assessment of the stake in EuroTLX SIM, reference was made to the contractual provisions defined at the time of sale to the Borsa Italiana of a 35% ownership share in 2013. The other investments are measured using the pro-quota carrying amount.


102

10.3 Significant equity investments: accounting information

Cash and cash

equivalents

Financial assets

Non-Financial

assets

Financial liabilities

Non-Financial liabilities

Total revenue

Net interest income

Depreciation, amortisation

and net impairment

losses

Pre-tax profit (loss) from

continuing operations

Post-tax profit (loss) from

continuing operations

Post-tax profit

(loss) from discontinued

operations

Profit(loss)

for the year

(1)

Othercom-

prehensi-ve income

(net of tax) (2)

Comprehensive Income

(3) =

(1) + (2)


1. IMI Investments S.A. - 2,865 24,345 - 33 2 2 - (94) (112) - (112) - (112)


1. Consorzio Studi e Ricerche fiscali X 992 28 269 493 1,976 X X 55 - - - - -

2. Intesa Sanpaolo Group Services X 2,346 1,629,859 324,752 704,980 - X X 5,163 - - 5,163 - 5,163

3. Infogroup X 45,039 18,629 33,652 731 69,649 X X 2,206 1,328 - 1,328 - 1,328

4. Epsilon X 30,803 1,076 4,799 4,737 26,577 X X 19,467 12,923 - 12,923 8 12,931

5. EuroTLX Sim X 10,117 683 - 2,176 14,626 X X 4,977 3,214 - 3,214 (30) 3,184

The figures in the table are taken from the draft financial statements for 2015. For financial companies it is assu-med that total revenue is equal to total income, when positive.

10.4 Non-significant equity investments: accounting information

Carrying amount

Total assets

Totalliabilities

Totalrevenue

Post-tax profit

(loss) from continuing operations

Post-tax profit (loss)

from di-scontinued operations

Profit(loss) for the year

(1)

Othercomprehensive income (net of

tax) (2)


(3) =

(1) + (2)

A. Fully-owned subsidiaries - - - - - - - - -


1. Sirti - 733,072 693,447 608,700 (2,561) - (2,561) - (2,561)

2. Mer Mec - 230,648 133,860 82,687 6,751 - 6,751 (56) 6,695

The financial figures are taken from the 2014 financial statements of the investees.


103

10.5 Equity investments: annual changes


A. Initial amount 29,900 30,787

B. Increases - -

B.1 Purchases - -

B.2 Reversals of impairment losses - -

B.3 Revaluations - -

B.4 Other increases - -

C. Decreases - (887)

C.1 Sales - (887)

C.2 Impairment losses - -

C.4 Other decreases - -

D. Final amount 29,900 29,900

E. Total revaluations - -

F. Total impairment losses - -

Sales for the year 2014 referred to the sale of the equity investment in SIA to Fondo Strategico Italiano.

SECTION 11 – PROPERTY AND EQUIPMENT – CAPTION 110

11.1 Property and equipment used in operations: breakdown of assets measured at cost


1. Property and equipment owned

a) land - -

b) buildings - -

c) furniture 345 363

d) electronic equipment 185 181

e) other 2 3

2. Property and equipment acquired under financial lease

a) land - -

b) buildings - -

c) furniture - -

d) electronic equipment - -

e) other - -

Total 532 547


104

11.5 Property and equipment used in operations: annual changes

Land Buildings Furniture Electronic equipment

Other Total

A. Gross initial carrying amount - - 442 262 3 707

A.1 Total net impairment losses - - (79) (81) - (160)

A.2 Net initial carrying amount - - 363 181 3 547

B. Increases - - 74 95 - 169

B.1 Purchases - - 74 95 - 169

B.2 Capitalised improvement costs - - - - - -

B.3 Reversals of impairment losses - - - - - -

B.4 Fair value gains recognised in

a) equity - - - - - -

b) profit or loss - - - - - -

B.5 Exchange rate gains - - - - - -

B.6 Transfers from investment property

B.7 Other increases - - - - - -

C. Decreases - - (92) (91) (1) (184)

C.1 Sales - - - - - -

C.2 Depreciation - - (92) (91) (1) (184)

C.3 Impairment losses recognised in

a) equity - - - - - -


C.4 Fair value losses recognised in

a) equity - - - - - -


C.5 Exchange rate losses - - - - - -

C.6 Transfer to

a) investment property - - - - - -

b) non-current assets held for sale - - - - - -

and discontinued operations - - - - - -

C.7 Other decreases - - - - - -

D. Net final carrying amount - - 345 185 2 532

D.1 Total net impairment losses - - (171) (171) (1) (343)

D.2 Gross final carrying amount - - 516 356 3 875

E. Measurement at cost - - 345 185 2 532


105

SECTION 12 – INTANGIBLE ASSETS – CAPTION 120

12.1 Intangible assets: breakdown by type of activity


Finiteuseful life

Indefinite useful life

Finiteuseful life


A.1 Goodwill X - X -

A.2 Other intangible assets 24 - 33 -

A.2.1 Assets measured at cost

a) Internally generated intangible assets - - - -

b) Other assets 24 - 33 -

A.2.2 Assets measured at fair value


b) Other assets - - - -

Total 24 - 33 -


106

12.2 Intangible assets: annual changes

Goodwill Other intangible assets:internally generated

Other intangible assets: other

Total

Finiteuseful life

Indefiniteuseful life

Finiteuseful life


A. Gross initial carrying amount - - - 57 - 57

A.1 Total net impairment losses - - - (24) - (24)

A.2 Net initial carrying amount - - - 33 - 3

B. Increases - - - - - -

B.1 Purchases - - - - - -

B.2 Increases of internally generated intangible assets X - - - - -

B.3 Reversals of impairment losses X - - - - -


– equity X - - - - -

– profit or loss X - - - - -

B.5 Exchange rate gains - - - - - -


C. Decreases - - - (9) - (9)

C.1 Sales - - - - - -

C.2 Impairment losses

– Amortisation X - - (9) - (9)

– Impairment losses recognised in

+ equity X - - - - -

+ profit or loss - - - - - -


– equity X - - - - -


C.4 Transfer to non-current assets held for sale and discontinued operations

- - - - - -



D. Net final carrying amount - - - 24 - 24

D.1 Total net impairment losses - - - (33) - (33)

E. Gross final carrying amount - - - 57 - 57

F. Measurement at cost - - - 24 - 24

12.3 Other informationIn accordance with IAS 38, intangible assets have not been revalued and no intangible asset was acquired in whole or in part by way of a government grant. At year-end, no commitments existed for the purchase of new intangible assets, nor did third parties hold rights to the intangible assets recognised in these separate financial statements.


107

SECTION 13 – TAX ASSETS AND LIABILITIES – ASSET CAPTION 130 AND LIABILITY CAPTION 80Amounts recognised “Current tax assets” at 31 December 2015 totalled approximately 292 million euro. The figure included advance payments on income taxes (IRES and IRAP) totalling 258 million euro and withholding taxes on income from foreign sources and dividends totalling 28 million euro. The remainder referred to advance payments of substitute and indirect taxes and tax credits for which a refund has been requested.

“Current tax liabilities” totalled 326 million euro and referred primarily to direct taxes payable but not settled at the reporting date; they also include provisions for contingent tax liabilities of the Bank, described further on.

13.1 Deferred tax assets: breakdown

13.2 Deferred tax liabilities: breakdownDeferred tax assets and liabilities are recognised with counter entries in profit or loss in connection with all tempo-rary differences that arise from increases and decreases in the taxable base, without any time limits.

The deductible temporary differences arising from operations resulted in deferred tax assets being recognised on adjustments to on-balance sheet loans and commitments to lend (101 million and 11 million euro respectively), personnel expenses recognised on an accruals basis (16 million euro) and provisions for risks and charges (7 million).Deferred tax assets of 32 million are also to be added, referring to tax savings to be achieved in years subsequent to 2015 deriving from the achieved redemption in tax terms with the payment of substitute tax for goodwill.

Deferred tax assets and liabilities recognised in equity essentially refer to measurements of AFS financial instru-ments (42 million and 16 million euro, respectively).

13.3 Changes in deferred tax assets (recognised in profit or loss)


1. Initial amount 180,913 167,506

2. Increases 16,365 44,833

2.1 Deferred tax assets recognised in the year

a) related to previous years - -

b) due to changes in accounting policies - -

c) reversals of impairment losses - -

d) other 16,365 44,833

2.2 New taxes or tax rate increases - -

2.3 Other increases - -

3. Decreases (30,604) (31,426)

3.1 Deferred tax assets derecognised in the year

a) reversals (24,371) (31,426)

b) impairment due to non-recoverability - -

c) due to changes in accounting policies - -

d) other - -

3.2 Tax rate reductions - -

3.3 Other decreases

a) conversion into tax assets,

as per Law no. 214/2011 - -

b) other (6,233) -

4. Final amount 166,674 180,913


108

13.3.1 Changes in deferred tax assets as per Law no. 214/2011 (recognised in profit or loss)


1. Initial amount 132,761 122,630

2. Increases 343 33,228

3. Decreases (6,418) (23,097)

3.1 Reversals (6,418) (23,097)

3.2 Conversion into tax assets

a) from losses for the year - -

b) from fiscal losses - -

3.3 Other - -

4. Final amount 126,686 132,761

13.4 Changes in deferred tax liabilities (recognised in profit or loss)


1. Initial amount 41 41

2. Increases 105 -

2.1 Deferred tax liabilities recognised in the year

a) related to previous years 6 -


c) other - -


2.3 Other increases 99 -

3. Decreases (99) -

3.1 Deferred tax liabilities derecognised in the year

a) reversals - -


c) other (99) -


3.3 Other decreases - -

4. Final amount 47 41


109

13.5 Changes in deferred tax assets (recognised in equity)


1. Initial amount 11,564 28,662

2. Increases 41,029 10,482

2.1 deferred tax assets recognised in the year



c) other 41,029 10,482



3. Decreases (10,667) (27,580)

3.1 deferred tax assets derecognised in the year

a) reversals (10,318) (27,580)



d) other (349) -



4. Final amount 41,926 11,564

13.6 Changes in deferred tax liabilities (recognised in equity)



2. Increases 14,419 34,230




c) other 14,419 34,230



3. Decreases (34,561) (31,536)


a) reversals (34,230) (31,536)


c) other (331) -



4. Final amount 16,258 36,400


110

SECTION 15 – OTHER ASSETS – CAPTION 150

15.1 Other assets: breakdown


Amounts to be debited - deriving from securities transactions 324,881 320,464

Accrued income and deferred expenses 17,746 28,733

Leasehold improvements 240 346

Various tax assets 47,947 16,898

Other 29,689 72,410

Total 420,503 438,851

The majority of the items recognised as “Other” consisted of dealing on its own account and on behalf of third parties conducted by the cash generating unit “Global Markets”. Given their nature, account balances at the re-porting date were affected by the trading calendars of clearing platforms.Accrued income and deferred expenses relate mainly to the management of accruals for personnel expenses ari-sing from the Group’s incentive schemes.

Various tax items include the VAT credit balance which will be settled in January with the VAT debit balance – which are substantially equivalent – and recorded under “Other liabilities”. Both balances relate to the business of the “physical commodities” division that operates under a domestic reverse charge system within the business unit specifically identified for accounting and tax purposes.

Notes to the separate financial statements - Part B - Information on the Statement of Financial Position - Liabilities

111

LIABILITIES

SECTION 1 – DUE TO BANKS – CAPTION 10

1.1 Due to banks: breakdown


1. Due to Central Banks 299,957 75,001

2. Due to banks

2.1 Checking accounts and demand deposits 6,426,455 7,399,237

2.2 Time deposits 2,433,417 39,994

2.3 Loans

2.3.1 Repurchase agreements 9,051,959 12,371,400

2.3.2 Other 49,447,074 32,900,824

2.4 Commitments to repurchase own equity instruments - -

2.6 Other payables 414,833 260,338

Total 68,073,695 53,046,794

Fair value – level 1 - -

Fair value – level 2 16,518,182 26,010,784

Fair value – level 3 51,630,436 27,100,147

Total Fair value 68,148,618 53,110,931

“Due to central banks” consisted of cash invested on the money market by the ECB. Such investments are not part of medium/long-term funding strategies for the debt securities portfolio.“Checking accounts and demand deposits” included amounts due for collateral received under the CSA totalling 4.6 billion euro, of which 1.6 billion euro referred to the Ultimate Parent Intesa Sanpaolo.


112

SECTION 2 – DUE TO CUSTOMERS – CAPTION 20

2.1 Due to customers: breakdown


1. Checking accounts and demand deposits 480,442 224,614

2. Time deposits - -

3. Loans

3.1 Repurchase agreements 14,468,204 10,329,080

3.2 Other 2,413 -

4. Commitments to repurchase own equity instruments - -

5. Other payables 972,803 546,744

Total 15,923,862 11,100,438


Fair value – level 2 15,864,814 10,987,476

Fair value – level 3 59,045 112,444

Total Fair value 15,923,859 11,099,920

“Other payables” mainly refer to collateral received under the CSA agreements.

SECTION 3 – SECURITIES ISSUED – CAPTION 30

3.1 Securities issued: breakdown


Carrying amount

Fair value Carrying amount

Fair value


A. Securities

1. bonds

1.1 structured 5,632,771 514,395 5,070,190 - 10,266,629 1,684,034 8,338,954 -

1.2 other 8,234,012 2,208,878 5,982,567 - 11,215,974 2,277,263 8,879,182 -

2. other

2.1 structured - - - - - - - -

2.2 other - - - - - - - -

Total 13,866,783 2,723,273 11,052,757 - 21,482,603 3,961,297 17,218,136 -

The fair value of the structured securities shown above excludes the fair value of the embedded derivatives sepa-rated from their hosts in accordance with the IFRS. At 31 December 2015, separated embedded derivatives recognised under “financial liabilities held for trading” totalled 105 million euro, compared to 220 million euro at 31 December 2014 (a nominal 0.7 billion euro was connected with equity issues in 2015 versus a nominal 1.5 billion euro in 2014).


113

3.3 Securities issued: covered by a specific hedge


1. Securities with specific fair value hedges 9,957,544 15,110,006

a) interest rate risk 9,957,544 15,110,006

b) currency risk - -

c) more than one risk - -

2. Securities with specific cash flow hedges - -

a) interest rate risk -


c) other - -

SECTION 4 – FINANCIAL LIABILITIES HELD FOR TRADING – CAPTION 40

4.1 Financial liabilities held for trading: breakdown


Nominal or

notional amount

Fair Value Fair Value

(*)

Nominal or

notional amount


(*)

Leve

l 1

Leve

l 2

Leve

l 3

Leve

l 1

Leve

l 2

Leve

l 3

A. Liabilities

1. Due to banks 2,664,345 2,819,585 140,848 - 2,960,433 1,719,821 1,929,572 31,308 - 1,960,880

2. Due to customers - - - - - - - - - -

3. Debt securities

3.1 Bonds

3.1.1 Structured - - - - X - - - - X

3.1.2 Other bonds - - - - X - - - - X

3.2 Other

3.2.1 Structured 5,245,140 4,532,825 527,608 - X 4,624,865 353,603 4,259,889 - X

3.2.2 Other - - - - X - - - - X

Total A 7,909,485 7,352,410 668,456 - 2,960,433 6,344,686 2,283,175 4,291,197 - 1,960,880

B. Derivatives


1.1 Trading X 3,099,455 39,186,062 188,205 X X 1,631,399 46,689,992 250,853 X

1.2 Associated with fair value option

X - - - X X - - - X

1.3 Other X - 99,075 6,146 X X - 220,042 - X


2.1 Trading X 10,205 1,043,530 - X X - 1,572,720 - X


X - - - X X - - - X

2.3 Other X - - - X X - - - X

Total B X 3,109,660 40,328,667 194,351 X X 1,631,399 48,482,754 250,853 X

Total (A+B) 7,909,485 10,462,070 40,997,123 194,351 2,960,433 6,344,686 3,914,574 52,773,951 250,853 1,960,880

(*) = fair value calculated excluding changes in creditworthiness of the issuer after issue date


114

By convention, amounts due to banks include short positions in securities.Other structured securities include 5.1 billion for fair value of securitised derivatives that require repayment at matu-rity of all or part of the premiums paid, pursuant to the Bank of Italy Circular No. 1034598/14 of 21 October 2014.

The fair value of derivatives held for trading as at 31 December 2015 included the net balance of 4.1 billion from the fair value losses of trading derivatives and the fair value gains (52 million) of hedging derivatives subject to clearing by Swapclear.The offsetting logic of IAS 32 was applied together with the related provisions of Circular 262 by the Bank of Italy.

The negative fair value of futures on physical gas is included in point B.1.1 and amounts to about 16 million euro.



Fair Value 31 December 2015 Notional amount

31.12.2015


31.12.2014Level 1 Level 2 Level 3 Level 1 Level 2 Level 3


1) Fair value - 164,568 - 4,905,699 - 463,170 - 8,414,250

2) Cash flows - - - - - - - -



1) Fair value - - - - - - - -

2) Cash flows - - - - - - - -

Total - 164,568 - 4,905,699 - 463,170 - 8,414,250


Fair Value Cash flows

Inve

stm

ents

in

fore

ign

o

per

atio

ns

Specific

Gen

eric

Spec

ific

Gen

eric

Interest rate risk

Currency risk

Credit risk

Pricerisk

Various risks


2. Loans - - - X - X - X X


4. Portfolio X X X X X - X - -

4. Other - - - - - X - X -

Total assets 23,295 - - - - - - - -






Hedging derivatives cover interest rate risk on AFS portfolio investments and on bonds issued by the Bank.In 2015, within the framework of hedge accounting, a hedging method was adopted by means of cross-currency swaps (derivatives which package the fixing of interest rate and exchange rate parameters) of bonds issued by Banca IMI in currencies other than the euro. This method is used as an alternative to the dynamic management of loans in the same currency as the funding, generally via interbank deposits.


115

SECTION 8 – TAX LIABILITIES – CAPTION 80Please refer to section 13 of the assets side for information on tax liabilities.

SECTION 10 – OTHER LIABILITIES – CAPTION 100

10.1 Other liabilities: breakdown


Due to suppliers 45,042 54,783

Due to employees 50,866 46,415

Due to social security institutions 3,660 8,631

Amounts to be paid - deriving from securities transactions 283,909 25,050

Other creditors for other items 12,141 10,510

Various tax liabilities 45,589 18,713

Suspense items 73,950 15,656

Allowances for guarantees impairment 41,191 50,403

Accrued expenses and deferred income 22,681 21,345

Total 579,029 251,506

Most items shown as “Other liabilities” comprised dealing on its own account and on behalf of third parties conducted by the Global Markets cash generating unit. Given their nature, balances at the reporting date were affected by the trading calendars of clearing platforms.

SECTION 11 – POST-EMPLOYMENT BENEFITS – CAPTION 110

11.1 Post-employment benefits: annual changes

Following reforms of supplementary pension schemes introduced by Legislative Decree No. 252 of 5 December 2005, employees may elect to have post-employment benefits accruing after 1 January 2007 paid into a supple-mentary pension scheme or transferred to the national pension fund managed by INPS. As a result, as of that date the relative amounts no longer appear in the table below.



B. Increases (496) 1,618

B.1 Accruals (525) 961

B.2 Other increases 29 657

C. Decreases (541) (407)

C.1 Benefits paid (164) (95)

C.2 Other decreases (377) (312)

D. Final amounts 8,743 9,780


116

For IFRS purposes, post-employment benefits were calculated on the basis of the following parameters:

– discount rate 2.03%; – inflation rate 1.5%; – expected rate of salary increase 2.76%.

Other increases and decreases refer to the transfer of personnel within the Intesa Sanpaolo Group.

11.2 Other informationIn accordance with Article 2424-bis of the Italian Civil Code, statutory liabilities at year-end for post-employment benefits totalled 8.4 million euro (8.7 million euro at 31 December 2014).

SECTION 12 – PROVISIONS FOR RISKS AND CHARGES – CAPTION 120

12.1 Provisions for risks and charges: breakdown


1. Internal pension funds 12 12

2. Other provisions for risks and charges

2.1 legal disputes - -

2.2 personnel expenses 1,570 5,419

2.3 other 22,493 25,058

Total 24,075 30,489

Accruals to the provisions for risks and charges are made to cover legal or judicial liabilities and offset the potential impact on earnings that may arise from the forced settlement of OTC derivative contracts due to events beyond the Bank’s control. On the whole the risks were different from those of a credit nature and already included in the determination of the fair value.

12.2 Provisions for risks and charges: annual changes

Pension funds

Otherprovisions

Total

A. Initial amount 12 30,477 30,489

B. Increases - - -

B.1 Accruals - - -

B.2 Changes due to passage of time - - -

B.3 Changes due to discount rate variations - - -

B.4 Other increases - - -

C. Decreases - (6,414) (6,414)

C.1 Uses in the year - (4,714) (4,714)

C.2 Changes due to discount rate variations - - -

C.3 Other decreases - (1,700) (1,700)

D. Final amount 12 24,063 24,075

“Other decreases” refer to the release of provisions from new estimates of liabilities.


117

12.3 Internal pension fundsThe actuarial values of supplementary defined benefit pension funds were measured in accordance with IAS 19 “Employee Benefits” by an independent actuary using the “projected unit credit method.”

As a result of the transfer of personnel from the “Structured Finance” unit, Banca IMI is jointly liable for the “Cassa di Previdenza Integrativa per il Personale dell’Istituto Bancario San Paolo di Torino”, an external fund with legal entity status which independently holds and manages its assets. The obligation (with reference to a single member) entails joint liability for the fund’s commitments towards employees that are fund members, pensioners and third parties.

SECTION 14 – EQUITY OF BANCA IMI – CAPTIONS 130, 150, 160, 165, 170, 180, 190 AND 200

14.1 “Share capital” and “Treasury shares”: breakdownThe share capital is divided into 962,464,000 shares of no stated nominal value.Banca IMI does not hold treasury shares in portfolio.

14.2 Share capital – Number of shares: annual changes

Ordinary Other

A. Initial number of shares

– fully paid-in 962,464,000

– not fully paid-in

A.1 Treasury shares (-)

A.2 Outstanding shares: initial number 962,464,000 -

B. Increases - -

B.1. New issues

– for consideration

- business combinations

- conversion of bonds

- exercise of warrants

- other

– for bonus issue

- in favour of employees

- in favour of directors

- other

B.2 Sale of treasury shares

B.3 Other increases

C. Decreases - -

C.1 Cancellations

C.2 Repurchase of treasury shares

C.3 Disposal of entities

C.4 Other decreases

D. Outstanding shares: final number 962,464,000 -

D.1 Treasury shares (+)

D.2 Final number of shares

– fully paid-in 962,464,000 -



118

14.4 Income-related reserves: other informationIncome-related reserves are held in accordance with the Italian Civil Code and the Articles of Association or as in-structed by shareholders’ resolutions adopted concerning the allocation of profit for the year. The purpose of the reserves is to reinforce the Bank’s capital structure.

A portion of these reserves - 30 million at 31 December 2015 - includes the amount that protects trading on Intesa Sanpaolo shares. That amount was determined by the Shareholders’ Meeting of 2 April 2015, which set purchasing limits at 10 million shares, with a validity of 18 months. These purchases are made in the context of the trading operations on stock indices and listed options, or in return for orders from customers which require the temporary intervention of proprietary accounts.

On 22 May 2012, Banca IMI’s Shareholders’ Meeting authorised the purchase of ordinary Intesa Sanpaolo shares for a maximum financial commitment of 1.4 million euro to service the share-based incentive system, as described in section I of the Notes.

On 31 July 2013, Banca IMI’s Shareholders’ Meeting also authorised the purchase of ordinary Intesa Sanpaolo shares within the framework of the above incentive scheme. The purchase, which was settled on 7 October 2013, involved 2,081,111 shares at an average price of 1.72788 euro each, for a total value of approximately 3,596,000 euro.

On 15 May 2014, Banca IMI’s Shareholders’ Meeting also authorised the purchase of additional 2,248,185 ordinary Intesa Sanpaolo shares in support of the LECOIP incentive plan; the purchase was made in October at an average price of EUR 2.22887 for a value of approximately 5,011,000 euro; on 1 December 2014, 2,134,807 shares were assigned to employees in accordance with the provisions of the Group’s share plan.

On 24 April 2015, Banca IMI’s Shareholders’ Meeting finally authorised the purchase of ordinary shares of the Ultimate Parent Intesa Sanpaolo, up to the maximum limit of ordinary shares determined by dividing the all-inclusive amount of 2,200,000 euro by the official price recorded by the Intesa Sanpaolo share on 27 April 2015 (3.11 euro/share); on 9 October 2015, the purchase of 677,481 shares was concluded at an average price of 3.1942051 euro for a total value of 2,164,013 euro.

Company Law ReformIn accordance with article 2427.7-bis of the Italian Civil Code, a breakdown of equity is provided below, with indica-tion given of the availability of amounts carried and any amounts used in the past three years.

Equity

Amount Portion usable (*)

Portion available

Uses in the past three years

loss coverage other

Share capital 962,464 -

Share premium reserve 581,260 A, B -

Reserves:

a) legal reserve 192,493 B -

b) reserves for treasury shares (**) 38,983 A, B, C 22,539

c) statutory reserves 1,235,450 A, B, C 1,235,426 - -

d) restricted reserve under Article 6 of Legislative Decree no. 38/05

- A, B, C -

e) other reserves (***) (13,940) -

Interim dividends (-) (307,988)

Valuation reserves (50,061)

Profit for the year 521,984 A, B, C 213,996

Equity 3,160,645

(*) A = capital increase; B = loss coverage; C = distribution to shareholders(**) Amount authorised for the purchase of Ultimate Parent shares included in the financial statements under the caption “Reserves”(***) It includes FTA reserves, reserves for extraordinary transactions between entities “Under Common Control” and IFRS 2 reserves

With the acquisition of the equity investment in Epsilon SGR S.p.A., a negative reserve of approximately 7 million euro was recognised under “e) other reserves” for transactions between entities “Under Common Control”.


119

OTHER INFORMATION

1. GUARANTEES AND COMMITMENTS

31 Dcember 2015 31 December 2014

1) Financial guarantees given

a) Banks - -

b) Customers 861,766 1,042,169

2) Commercial guarantees given

a) Banks - -

b) Customers 695 19,593

3) Irrevocable commitments to lend funds

a) Banks

i) of certain use 1,813,453 1,835,602

ii) of uncertain use - -

b) Customers

i) of certain use 2,006,656 2,145,568

ii) of uncertain use 1,607,151 764,301

4) Commitments underlying credit derivatives: protection sales 55,604,389 59,435,153

5) Assets pledged as collateral for third party commitments - -

6) Other commitments 1,994,430 731,091

Total 63,888,540 65,973,477

The “Commitments underlying credit derivatives: protection sales” are covered by protection purchases of roughly equivalent amounts, as more clearly detailed in the Directors’ Report on Operations.The increase in other commitments is related to the securities to be received from the sale of put options.

The item “Other commitments” includes the placement and guarantee commitment of 159 million as part of the capital increase of SAIPEM S.p.A., as a fee for participating in the consortium led by Goldman Sachs International and J.P. Morgan, acting as Joint Global Coordinators.

In November 2015, Banca IMI signed a pre-guarantee agreement with Veneto Banca worth 1 billion euro.Under the pre-guarantee agreement relating to the share capital increase by option of Veneto Banca following a series of obligations, including some of a corporate nature, Banca IMI undertook, according to the usual terms and conditions for such operations, to ensure the subscription of the capital increase for any portion not subscribed at the outcome of the offer and to promote the establishment of an underwriting consortium.The underwriting consortium - comprising 10 national and international banks - was set up on 23 December 2015, a few days after the Extraordinary Shareholders’ Meeting of Veneto Banca which approved the transformation of the Group into a plc, as well as the rights issue and the listing on the stock exchange, expected to take place in Q2 2016. Banca IMI will act as Sponsor in relation to the listing and as Sole Global Coordinator and Bookrunner for the share capital increase.


120

2. ASSETS PLEDGED AS COLLATERAL FOR LIABILITIES AND COMMITMENTS


1. Financial assets held for trading 6,013,934 5,024,607

2. Financial assets at fair value - -

3. Available-for-sale financial assets 6,579,409 5,522,414

4. Held-to-maturity investments - -

5. Due from banks 4,612,722 7,437,564

6. Loans to customers 7,354,750 6,851,694

7. Property and equipment - -

Total 24,560,815 24,836,279

The amounts refer primarily to the carrying amount of securities owned and pledged as collateral for repurchase agreements for funding purposes and on derivatives trading.

4. MANAGEMENT AND DEALING ON BEHALF OF THIRD PARTIES

Amount

1. Trading in financial instruments on behalf of third parties

a) purchases

1) settled 754,352,436

2) to be settled 13,391,058

b) sales

1) settled 766,583,137

2) to be settled 91,483

2. Portfolio management

a) individual -

b) collective -

3. Custody and administration of securities

a) third party securities held on deposit: related to depositary bank activities (excluding individual portfolio management schemes)

1. securities issued by the reporting bank -

2. other securities -

b) other third party securities held on deposit (excluding individual portfolio management schemes): other


2. other securities 17,649,994

c) third party securities deposited with third parties 17,649,994

d) portfolio securities deposited with third parties 27,336,922

4. Other 289,915,395

The caption “Other” consisted of the receipt and collection of orders and placements.

Netting framework arrangementsAs from 2013, in accordance with the provisions of Circular No. 262 of 22 December 2005 updated on 21 January 2014, and confirmed by the subsequent updates, there is a requirement to present specific tables in the notes to financial statements showing those financial assets and liabilities set off against each other under netting agree-ments in accordance with IAS 32.42, regardless of whether they have actually been offset in the accounts.

The tables below refer to framework agreements currently in place at Banca IMI, specifically (i) 525 CSAs covering OTC derivatives; (ii) 136 GMRAs covering repurchase agreements; and (iii) 107 GSMLAs covering securities lending transactions.


121

The agreements are of material relevance for the monitoring and measurement of risks and related capital requi-rements, although they have not entailed the offsetting of assets and liabilities.

5. FINANCIAL ASSETS SUBJECT TO OFFSETTING IN THE FINANCIAL STATEMENTS OR SUBJECT TO NETTING FRAMEWORK AGREEMENTS OR SIMILAR AGREEMENTS

Grossamount of

financial assets

(a)

Amount of financial

liabilities offset in

statement of financial

position (b)

Net amount of financial

assets presented in


position (c=a-b)

Amounts available to be offset but not offset in the statement

of financial position

Net amount 31 December 2014

(f=c-d-e)


Financial instruments

(d)

Cashcollateral

(e)

1. Derivatives 76,893,473 (37,194,514) 39,698,959 31,101,810 4,271,284 4,325,865 4,825,937

2. Repurchase agreements 14,337,792 - 14,337,792 13,896,958 9,986 430,848 8,162

3. Securities lending - - - - - - 90,270

4. Other - - - - - - -

Total 31 December 2015 91,231,265 (37,194,514) 54,036,751 44,998,768 4,281,270 4,756,713 X

Total 31 December 2014 104,427,384 (43,325,492) 61,101,892 51,788,434 4,389,089 X 4,924,369

Nevertheless, in consideration of current accounting and market practice and the prevailing guidance on offset-ting, it was decided, in line with policies adopted in previous statements of financial position and following legal advice, that OTC derivatives traded over the SwapClear platform satisfy requirements for the offsetting in accounts of positive and negative gross balances. Thus, at 31 December 2015, the financial liabilities held for trading included a net offset negative amount of 4.1 billion euro referring to the fair value of OTC derivatives traded on SwapClear, resulting from the offsetting of a total of 37.2 billion euro of financial assets against a total of 41.3 billion euro of financial liabilities.More specifically, the net loss amounting to 4.1 billion for derivatives on SwapClear relates to 3.8 billion in transac-tions on own account (including the positive balance of 0.1 billion related to hedging derivatives) and 0.3 billion to operations originated from customers and Group companies. The offsetting of the balances is performed sepa-rately on own account and for third parties.

Consequently, from the above the total positive fair value of all derivatives recognised in amounted to 39.7 billion euro.

6. FINANCIAL LIABILITIES SUBJECT TO OFFSETTING IN THE FINANCIAL STATEMENTS OR SUBJECT TO NETTING FRAMEWORK AGREEMENTS OR SIMILAR AGREEMENTS.

Gross amount of

financial liabilities

(a)

Amount of financial

assets offset in statement


(b)


liabilities presented in


position (c=a-b)




(f=c-d-e)


Financial instruments

(d)

Cash collateral

(e)

1. Derivatives 76,764,651 (37,194,514) 39,570,137 30,719,428 8,556,466 294,243 183,155



4. Other - - - - - - -

Total 31 December 2015 98,071,068 (37,194,514) 60,876,554 51,864,133 8,647,702 364,719 X

Total 31 December 2014 102,760,893 (43,325,492) 59,435,401 48,498,541 10,603,341 X 333,519

Figures for “Amounts available to be offset but not offset in the statement of financial position” show the fair value of financial instruments and payables (receivables) for guarantees received (provided) stated separately as


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gross assets and liabilities in the statement of financial position, but which are available to be offset against gross assets and liabilities under the aforementioned framework agreements.

Exposure to counterparty risk was further mitigated by collateral (securities) totalling 0.5 billion euro.

With reference to repurchase and securities lending agreements, the “Amounts available to be offset but not offset in the statement of financial position” take account of the fair value of the securities underlying the transac-tions and of the supplementary daily margining in cash.

7. SECURITIES LENDING TRANSACTIONS

Securities lending transactions always involve Banca IMI acting according to the “principal by principal” procedure, by making use of the accounts of the owners, with objectives aimed at contributing to revenue margins and service and support margins for typical capital market activities.The first area includes investment services offered to the banks of the Group in the Private and Banca dei Territori Divisions and for the enhancement of indirect funding and trading with market counterparties; the second area covers the refinancing of securities positions and the management of materiality for uncovered short positions.

The underlying instruments are Government Bonds, bank bonds and securities listed on regulated and organized markets which are eligible for refinancing with the European Central Bank (bond lending); as regards stock len-ding, the shares are those listed in Italy and the main European markets, in the USA and Canada in addition to the ETFs - Exchange Traded Funds with underlying equity.The reference counterparties are Italian and European banks, traditional and online trading SIM and global market players with which GMSLA agreements have been signed for the purposes of credit risk mitigation.

All transactions are secured by collateral, mainly in the form of cash collateral subject to daily adjustment on the basis of the trends in value of the lent securities. Such cash collateral is included in the statement of financial po-sition under loans/receivables and payables to banks and customers for the amount of the sums actually paid and received.Conversely, loans where the collateral consists of securities, appear “below the line”for the value of the lent secu-rities. Securities received or given as collateral are usually Government bonds or bonds guaranteed by the State.

The duration of loans can range from one day up to a few months or years; the parties may partly or wholly extin-guish loans with a simple notification according to the times established in the contract. These operating procedu-res resulted in a turnover, in terms of new loans opened, of 10 billion in 2015. In particular:

securities borrowed shares 3.9 billion bonds 1.3 billion

securities lent shares 4.4 billion bonds 0.4 billion

At the end of the year, the outstanding securities lending and borrowing, were 2.9 billion and 2.7 billion respecti-vely in the component assisted by cash collateral.

In economic terms, the remuneration from loans is represented by the commission and fee income and expenses, presented in section C of the Notes.The cash collateral exchanged between the parties is subject to remuneration and has the EONIA rate as its re-ference (with the possible application of a positive or negative spread); interest paid (earned) on the collateral received (paid) are intended to compensate the lender (borrower) for the non-unavailability of the funds and not to remunerate the actual lending of securities.

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Part C – Information on the Income Statement

SECTION 1 – INTEREST – CAPTIONS 10 AND 20

1.1 Interest and similar income: breakdown

Debtsecurities

Loans Other 2015 2014

1. Financial assets held for trading 248,925 - - 248,925 313,850

2. Available-for-sale financial assets 166,227 - - 166,227 148,914

3. Held-to-maturity investments - - - - -

4. Due from banks 15,977 635,503 - 651,480 929,198

5. Loans to customers 13,542 251,857 - 265,399 292,496

6. Financial assets at fair value through profit and loss - - - - -

7. Hedging derivatives X X 131,801 131,801 351,132

8. Other assets X X 5,614 5,614 4,948

Total 444,671 887,360 137,415 1,469,446 2,040,538

Interest income included 36 million euro from on-balance sheet loans to customers subject to (forborne) granting, managed as part of the structured finance portfolio. Of this interest, 15 million is related to performing loans.

1.2 Interest and similar income: differentials on hedging transactions

2015 2014

A. Gains on hedging transactions 181,138 568,824

B. Losses on hedging transactions (49,337) (217,692)

C. Net gains (A - B) 131,801 351,132

1.3 Interest and similar income: other information

2015 2014

1.3.1 Interest income on foreign currency financial assets 183,325 83,391

Notes to the separate financial statements - Part C - Information on the Income Statement

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1.4 Interest and similar expense: breakdown

Payables Debt securities

Other 2015 2014

1. Due to central banks (9) X - (9) (280)

2. Due to banks (425,038) X - (425,038) (453,304)

3. Due to customers (21,959) X - (21,959) (15,389)

4. Securities issued X (444,209) - (444,209) (854,332)

5. Financial liabilities held for trading - - - - -

6. Financial liabilities at fair value through profit and loss - - - - -

7. Other liabilities and allowances X X (212) (212) (97)

8. Hedging derivatives X X - - -

Total (447,006) (444,209) (212) (891,427) (1,323,402)

Interest paid to central banks refers to money market investments, as described in Part B above.

1.6 Interest and similar expense: other information

2015 2014

1.6.1 Interest expense on foreign currency financial liabilities (181,242) (105,917)


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SECTION 2 – FEES AND COMMISSIONS – CAPTIONS 40 AND 50

2.1 Fee and commission income: breakdown

2015 2014

a) guarantees given 12,209 18,475

b) credit derivatives - -

c) management, dealing and consultancy services

1. dealing in financial instruments 67,604 56,895

2. dealing in foreign currency 54,296 19,397

3. portfolio management

3.1 individual - -

3.2 collective - -

4. custody and administration of securities 34 73

5. depositary bank - -

6. placement of securities 124,788 186,936

7. acceptance and transmission of trading instructions 1,244 1,142

8. consultancy services

8.1 on investments - -

8.2 on structured finance 61,474 37,511

9. distribution of third party services

9.1 portfolio management

9.1.1 individual - -

9.1.2 collective - -

9.2 insurance products - -

9.3 other products - -

d) collection and payment services 2,511 143

e) servicing related to securitisations - -

f) services related to factoring - -

g) tax collection services - -

h) management of multilateral exchange systems - -

i) management of checking accounts - -

j) other services 142,965 110,165

k) securities lending transactions 7,494 22,414

Total 474,619 453,151

Amounts carried under “j) other services” in 2015 refer to fees for arrangement (115 million euro), underwriting (3 million euro), agency (9 million euro), and unused services (11 million euro) rendered in the course of Structured Finance operations.

It should be noted that securities lending transactions (originating net commissions of approximately 0.6 million euro) are conducted by Banca IMI in its role as intermediary.


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2.2 Fee and commission income: distribution channels of products and services

2015 2014

a) Branches - -

1. portfolio management - -

2. placement of securities - -

3. third party services and products - -

b) “Door-to-door” sales 124,788 186,936




c) Other distribution channels - -


2. placement of securities - -


Total 124,788 186,936

2.3 Fee and commission expense: breakdown

2015 2014

a) guarantees received (1,521) (1,906)


c) management and dealing services

1. dealing in financial instruments (55,730) (30,851)

2. dealing in foreign currency - -


3.1 own customers - -

3.2 delegated - -

4. custody and administration of securities (10,861) (12,012)

5. placement of financial instruments (166,640) (202,086)

6. “door-to-door” sale of financial instruments, products and services - -

d) collection and payment services (6,149) (6,244)

e) other services (5,673) (1,079)

f) securities lending transactions (6,899) (21,224)

Total (253,473) (275,402)

Fee and commission expense is originated primarily by operations involving the primary market placement of financial instruments issued by third parties and by the distribution of certificates sold by Banca IMI. The corresponding income item is given by fee and commission income from the placement of securities – item c.6 of table 2.1 above, and by income from derivatives dealing on own account, recognised as ‘profits from financial transactions’.


127

SECTION 3 – DIVIDENDS AND SIMILAR INCOME – CAPTION 70

3.1 Dividends and similar income: breakdown

2015 2014

Dividends Income from UCI quotas


A. Financial assets held for trading 34,760 755 30,622 1,265

B. Available-for-sale financial assets 160 5,417 196 3,071

C. Financial assets at fair value through profit or loss - - - -

D. Equity investments 5,690 X 14,393 X

Total 40,610 6,172 45,211 4,336

SECTION 4 – PROFITS (LOSSES) ON TRADING – CAPTION 80

4.1 Profits (Losses) on trading: breakdown

Revaluations (A)

Profits on trading

(B)

Write-downs (C)

Losseson trading

(D)

Net profit (loss) (A+B ) - (C+D)


1.1 Debt securities 17,613 401,136 (89,565) (469,931) (140,747)

1.2 Equities 19,942 188,808 (41,777) (172,065) (5,092)

1.3 Quotas of UCI 2,597 12,776 (1,439) (8,140) 5,794

1.4 Loans - - - - -

1.5 Other - 22,526 - (22,743) (217)


2.1 Debt securities 13,529 649,527 (6,655) (763,325) (106,924)

2.2 Payables - - - - -

2.3 Other 221,534 196,716 (85,686) (277,451) 55,113

3. Financial assets and liabilities: exchange rate gains (losses) X X X X 583,265

4. Derivatives

4.1 Financial derivatives

– On debt securities and interest rates 17,716,115 24,609,345 (17,009,277) (24,397,220) 918,963

– On equities and stock indices 980,576 5,506,852 (2,359,552) (3,969,394) 158,482

– On currencies and gold X X X X (991,318)

– Other 1,064,286 1,372,605 (1,023,728) (1,545,999) (132,836)

4.2 Credit derivatives 560,844 2,972,686 (529,640) (3,019,099) (15,209)

Total 20,597,036 35,932,977 (21,147,319) (34,645,367) 329,274

Exchange differences on cash financial assets and liabilities are considered in conjunction with the results in the financial derivatives sector, both on currencies and gold and for debt securities and interest rate securities.


128

SECTION 5 – PROFITS (LOSSES) ON HEDGING – CAPTION 90

5.1 Profits (Losses) on hedging: breakdown

2015 2014

A. Income from

A.1 Fair value hedging derivatives 452,596 297,530

A.2 Hedged financial assets (fair value) 7,888 173,998

A.3 Hedged financial liabilities (fair value) 139,390 301,127

A.4 Cash flow hedging derivatives - -

A.5 Foreign currency assets and liabilities - -

Total (A) 599,874 772,655

B. Expenses for

B.1 Fair value hedging derivatives (196,794) (548,426)

B.2 Hedged financial assets (fair value) (350,875) (50,486)

B.3 Hedged financial liabilities (fair value) (44,408) (173,687)

B.4 Cash flow hedging derivatives - -

B.5 Foreign currency assets and liabilities - -

Total (B) (592,077) (772,599)

C. Total (A - B) 7,797 56

SECTION 6 – PROFITS (LOSSES) ON DISPOSALS OR REPURCHASES – CAPTION 100

6.1 Profits (Losses) on disposals or repurchases: breakdown

2015 2014

Profits Losses Net result Profits Losses Net result

Financial assets

1. Due from banks - - - - - -

2. Loans to customers 6,964 (41,876) (34,912) 2,879 (19,383) (16,504)

3. Available-for-sale financial assets

3.1 Debt securities 757,931 (484,995) 272,936 193,914 (5,643) 188,271

3.2 Equities 1,518 - 1,518 369 - 369

3.3 Quotas of UCI 65 - 65 - - -

3.4 Loans - - - - - -

4. Held-to-maturity investments - - - - - -

Total assets 766,478 (526,871) 239,607 197,162 (25,026) 172,136


1. Due to banks - - - - - -

2. Due to customers - - - - - -

3. Securities issued 12,884 (67,601) (54,717) 5,054 (139,993) (134,939)

Total liabilities 12,884 (67,601) (54,717) 5,054 (139,993) (134,939)

Losses on financial assets – loans to customers – refer to about 38 million in sales of corporate loans in the secon-dary market. The final entry recorded in this caption in the income statement is in accordance with Circular 262, as an alternati-ve to caption 130 - “Impairment losses”, which prior to the sale had included in the quarterly financial reports the charges for increases in impairment provisions.


129

SECTION 8 – IMPAIRMENT LOSSES/REVERSALS OF IMPAIRMENT LOSSES – CAPTION 130

8.1 Net impairment losses on loans and receivables: breakdown

Impairment losses (1) Reversals of impairment losses (2) 2015 2014

Individual Collective Individual Collective

Derecognition Other A B A B

A. Due from banks

- Loans - - - - - - - - -

- Debt securities - - - - - - - - -

B. Loans from customers

Purchased non-performing due

- Loans - - X - - - X - -

- Debt securities - - X - - - X - -

Other due

- Loans - (75,709) (6,007) - 79,343 - - (2,373) (123,296)

- Debt securities - - - - - - 1,952 1,952 (512)

C. Total - (75,709) (6,007) - 79,343 - 1,952 (421) (123,808)

(1) – (2)

Legend: A = from interest B = other reversals

8.2 Net impairment losses on available-for-sale financial assets: breakdown

Impairment losses (1) Reversals of impairment losses (2)

2015 2014

Individual Individual

Derecognition Other A B

A. Debt securities - - - - - -

B. Equities - - X X - -

C. Quotas of UCI - (5,850) X - (5,850) (628)

D. Loans to banks - - - - - -

E. Loans to customers - - - - - -

F. Total - (5,850) - - (5,850) (628)

(1) – (2)


8.4 Net impairment losses on other financial assets: breakdown

Impairment losses (1) Reversals of impairment losses (2) Totale2015

Totale2014



A. Guarantees given - (6,919) - - 14,077 - 2,055 (9,213) (803)

B. Credit derivatives - - - - - - - - -

C. Commitments to lend - - - - - - - - -

D. Other - - - - - - - - -

E. Total - (6,919) - - 14,077 - 2,055 (9,213) (803)

(1) – (2)



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SECTION 9 – ADMINISTRATIVE EXPENSES – CAPTION 150

9.1 Personnel expenses: breakdown

2015 2014

1) Personnel employed

a) wages and salaries (102,050) (93,976)

b) social security charges (27,135) (26,233)

c) post-employment benefits (406) (392)

d) pension costs - -

e) accruals for post-employment benefits 525 (961)

f) accruals for pension and similar provisions

– defined contribution plans - -

– defined benefit plans - -

g) payments to external pension funds

– defined contribution plans (4,303) (3,662)


h) costs of share-based payment plans (10,351) (909)

i) other benefits in favour of employees (3,336) (4,790)

2) Other personnel (226) (175)

3) Directors and statutory auditors (1,074) (1,013)

4) Retired personnel - -

5) Recoveries for seconded personnel 1,161 790

6) Reimbursements for seconded personnel (2,842) (1,318)

Total (150,037) (132,639)

The costs shown in point 1) letter h) relate to the personnel incentive scheme known as LECOIP.

9.2 Average number of employees by categoryAt 31 December 2015, the employees on the Bank’s payroll came to 828 resources (811 at 31 December 2014). The average number of employees for the year was 830, including part-time staff.

Category 2015 2014

Personnel employed

a) managers 77 76

b) officers 539 524

c) other employees 206 203

Other personnel 8 5

Total 830 808

9.3 Company-defined benefit pension funds: costsNo actuarial losses on internal or external pension plans were recognised for the year.


131

9.5 Other administrative expenses: breakdown

2015 2014

Taxes and duties

– other taxes and duties - Italy (5,652) (5,419)

– other taxes and duties - Abroad (522) (406)

Total taxes and duties (6,174) (5,825)

Information technology, processing and data processing services (205,236) (185,907)

Expenses for consultancy fees (35,415) (32,504)

Telephone, on-line and transmission expenses (1,363) (1,162)

ICT services: maintenance (243) (168)

Real estate rental and management expenses (7,361) (7,058)

Data base subscriptions (1,388) (1,162)

Advertising and promotional expenses (5,617) (6,585)

Associations and subscriptions (4,707) (3,366)

Reimbursements to personnel and business trips (2,906) (2,646)

Legal expenses (6,435) (7,121)

Training and other personnel expenses (1,307) (1,445)

Lighting, central heating and air conditioning (130) (299)

Expenses for maintenance of furniture and equipment (448) (60)

Security services (149) (129)

Maintenance of real estate (315) (47)

Cleaning services (305) (292)

Rentals of other property and equipment (120) (117)

Printing, stationery and consumables (167) (178)

Insurance premiums (1,693) (1,686)

Data storage and document processing (85) (82)

Postal and telegraphic (96) (67)

Transport and other connected services (393) (206)

Contribution to the National Contribution Fund (141,829) -

Other (2,718) (2,675)

Total (426,600) (260,787)

Following the abolition of the “stock exchange transaction tax,” the Bank remains liable for Italian Tobin Tax, substi-tute tax on loans (which may be passed on), other indirect taxes (such as TARSU and TOSAP) and non-deductible VAT.This last cost item is shown separately for the London office; for the Milan office it is instead included in the indi-vidual captions of the income statement.

The entry “expenses for consultancy fees” includes outsourcing services of the Group amounting to 28.1 million and 27.6 million euro respectively in the two years under comparison.

Contributions to the National Resolution Fund amounting to 141.8 million are included within other administrative expenses as clarified by the Bank of Italy on 19 January 2016.


132

SECTION 10 – NET ACCRUALS TO PROVISIONS FOR RISKS AND CHARGES – CAPTION 160

10.1 Net accruals to provisions for risks and charges: breakdown

2015 2014

Accruals for legal disputes - -

Accruals for other risks and charges 1,700 (3,000)

Total 1,700 (3,000)

SECTION 11 – DEPRECIATION AND NET IMPAIRMENT LOSSES ON PROPERTY AND EQUIPMENT – CAPTION 170

11.1 Depreciation on property and equipment: breakdown

Depreciation (a)

Impairmentlosses (b)

Reversals ofimpairment

losses (c)

Carrying amount

(a + b - c)

A. Property and equipment

A.1 Owned

– operating assets (184) - - (184)

– investment property - - - -

A.2 Acquired under finance leases

– operating assets - - - -


Total (184) - - (184)

SECTION 12 – AMORTISATION AND NET IMPAIRMENT LOSSES ON INTANGIBLE ASSETS – CAPTION 180

12.1 Amortisation on intangible assets: breakdown

Amortisation (a)

Impairmentlosses (b)

Reversals ofimpairment

losses (c)

Carrying amount

(a + b - c)

A. Intangible assets

A.1 Owned

– internally generated - - - -

– other (9) - - (9)

A.2 Acquired under finance leases - - - -

Total (9) - - (9)


133

SECTION 13 – OTHER OPERATING (EXPENSES) INCOME – CAPTION 190

13.1 Other operating expenses: breakdown

2015 2014

Prior year expense and items to be reconciled (295) (1,494)

Amortisation of leasehold improvements (122) (165)

Other (617) (360)

Total (1,034) (2,019)

13.2 Other operating income: breakdown

2015 2014

Prior year income and items to be reconciled 428 2,329

Recovery of taxes 2,934 2,109

Recovery of other expenses 853 839

Other 84 45

Total 4,299 5,322

SECTION 14 – NET GAINS ON SALES OF EQUITY INVESTMENTS – CAPTION 210

14.1 Net gains on sales of equity investments: breakdown

2015 2014

A. Gains - 8,369

1. Fair value gains - -

2. Profits on disposal - 8,369

3. Reversals of impairment losses - -

4. Other - -

B. Losses - -

1. Fair value losses - -

2. Impairment losses - -

3. Losses on disposal - -

4. Other - -

Net Gains - 8,369


134

SECTION 18 – INCOME TAX EXPENSE – CAPTION 260

18.1 Income tax expense: breakdown

2015 2014

1. Current taxes (-) (269,087) (277,407)

2. Changes in current taxes of previous years (+/-) - -

3. Reduction in current taxes of the year (+) - -

3.bis Reduction in current taxes of the year for tax assets, as per Law no. 214/2011 (+) - -

4. Changes in deferred tax assets (+/-) (8,006) 13,407

5. Changes in deferred tax liabilities (+/-) 93 -

6. Taxes expense for the year (-) (-1+/-2+3+/-4+/-5) (277,000) (264,000)


135

18.2 Reconciliation of theoretical tax expense to total income tax expense for the year

31 Dcember 2015 31 December 2014

Amount Tax rate Amount Tax rate

MAIN TAX

Profit befor tax 798,984 27.5% 768,134 27.5%

Theoretical tax expense (219,721) 27.5% (211,237) 27.5%

– positive permanent differences:

- other 47,150 27.5% 61,755 27.5%

– negative permanent differences:

- exempt gains 0 27.5% (7,950) 27.5%

- other (19,304) 27.5% (49,506) 27.5%

– tax losses carried forward 0 27.5% 0 27.5%

– positive temporary differences 42,798 27.5% 142,636 27.5%

– negative temporary differences (76,931) 27.5% (102,798) 27.5%

Taxable income 792,697 812,271

Current IRES (217,991) (223,375)

SECONDARY TAX

Profit before tax 798,984 5.57% 768,134 5.57%


– positive permanent differences

- impairment losses 0 5.57% 0 5.57%

- other 113,055 5.57% 211,052 5.57%

– negative permanent differences

- impairment losses 0 5.57% (623) 5.57%

- other (29,084) 5.57% (42,146) 5.57%

– positive temporary differences

- impairment losses 0 5.57% 100,689 5.57%

- other 0 5.57% 0 5.57%

– negative temporary differences

- impairment losses 0 5.57% (47,822) 5.57%

- other (23,787) 5.57% (19,601) 5.57%


Current IRAP (47,855) (54,011)

Taxes paid abroad (16,241) 21% (8,073) 21%

– changes in deferred tax asset (8,006) 13,407

– changes in deferred tax liabilites 93 0

– changes in tax rate 0 0

Deferred tax assets and liabilities (7,913) 13,407

Recovery of taxes paid abroad 13,000 8,052

Income tax (277,000) (264,000)


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Tax situationTax audits by Italian Inland Revenue refer to the years from 2003 to 2006 for the former Banca d’Intermediazio-ne Mobiliare IMI, and years 2004 to 2006 for the former Banca Caboto.

2008, 2009 and 2010 were subject to tax audits by the Guardia di Finanza [Tax Police]. In general terms, the in-spections covered issues raised against other Italian banks, i.e. types of assessment demands that have become routine in some operational sectors. Specifically, the matters concerned accusations of “abuse of process” over alleged links between futures and cash instruments tied to listed equities. For the years in question up to the end of 2012, the audit investigated the application of substitute tax to a very small number of medium and long-term corporate loans.

In addition, the Inland Revenue Agency conducted inspections – by sending questionnaires – directed towards the analysis of expenses incurred for parties living in so-called “black-list” countries and reported in tax returns for 2006, 2007 and 2008. These are charges mainly related to differentials paid on derivatives listed on Asian regulated markets and OTC derivatives entered into with leading banking counterparts. To a lesser extent, they refer to commissions on securities trading and other financial instruments awarded to brokers participating in markets dealing in cash instruments.

In February 2015 the Large Taxpayers Division of the Guardia di Finanza asked for data and information (again using a questionnaire) with reference to certain decreases in tax returns made for the years 2010-2013.

At the date of drafting these separate financial statements – subsequent to the settlements reached in 2015 through recourse to the so-called “alternative dispute resolution mechanisms” referred to later in these Notes – these would refer to residual tax assessments for the period 2003-2006 for approximately 39 million for taxes, penalties and interest. Litigation primarily concerns equities trading and other matters connected with typical capital market and investment banking transactions, and to a much lesser degree corporate governance. The Bank has appealed against the tax assessments, challenging findings that are groundless or based on dispu-ted interpretations of tax law, or which in some cases conflict with the letter of those laws. At the reporting date, no final ruling had been handed down on any of the years disputed.

At the end of December 2015, a settlement was reached, in accordance with the events that occurred for 2008 and 2009 regarding the assessment made by the Guardia di Finanza referring to 2010, entailing payment of approximately 2 million euro compared to a tax claim of some 89 million euro (for taxes, withholdings and fines). Although fully convinced of the groundlessness of the claims, the decision to settle the various disputes was taken with a view to avoiding long and costly litigation over specific matters plagued by marked uncertainty.

As for the substitute tax regarding a claim of about 10 million, the Inland Revenue ordered the cancellation in self-defence of the settlement notice challenged by the Bank, as a result of its further investigations.Therefore, the Milan Provincial Tax Commission declared the proceedings extinct since there was no longer any dispute; this will be followed by the reimbursement of amounts paid as a provisional deposit (2.8 million as tax; amount to be gained back from financed parties). A total of approximately 13 million euro in provisional deposits was paid in relation to tax litigation pending at 31 December 2015; the entire amount was deducted from tax provisions allocated, with no credit entry charged. The provisional deposits were paid in compliance with specific legislative provisions governing tax litigation. The amounts will be deducted from the final claim awarded in the event of defeat, or refunded in the event of a ruling in favour of Banca IMI.

Additional provisions allocated to the relative fund cover the contingent tax liability estimated and residual tax credits recognised in accounts in relation to taxes and withholdings for which a refund has been requested.

As at the date of this report, there is an ordinary tax assessment in progress (compliance check) by Her Majesty’s Revenues & Customs regarding direct taxation of the London branch for the year 2013.


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SECTION 20 – OTHER INFORMATION

The Milan office accounted for 94.8% of operating income in 2014 (96.1% in 2014); the remaining 5.2% (3.9% in 2013) was generated by the London office.

Given the particular nature of operations, a significant portion of which is carried out through remote access to organised trading systems or multilateral trading circuits, the geographical breakdown of income is not directly correlated to the geographical location of the Bank’s branches.

SECTION 21 – EARNINGS PER SHARE

Earnings per share came to 0.542 euro in 2015 and 0.524 euro in 2014. EPS was determined as a ratio of profit for each year to the number of ordinary shares outstanding in the same year.

21.1 Average number of ordinary shares (fully diluted)The weighted average number of shares for the year totalled 962,464,000.

21.2 Other informationEarnings per share, as stated above, refers exclusively to the sole shareholder Intesa Sanpaolo. In 2015, no equity transactions were performed and no outstanding debt securities convertible into shares existed such as to affect the EPS ratio reported.

See the Directors’ Report on Operations for information concerning the proposed allocation of profit for the year.

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Part D – Comprehensive income

STATEMENT OF COMPREHENSIVE INCOME

Gross Amount Income tax Net Amount

10. Profit for the year X X 521,984

Other comprehensive income, net of income taxes, that may not be reclassified to the income statement

20. Property and equipment - - -

30. Intangible assets - - -

40. Defined benefit plans 215 - 215

50. Non-current assets held for sale - - -

60. Portion of valuation reserves of equity - accounted investees - - -

Other comprehensive income, net of income taxes, that may be reclassified to the income statement

70. Hedges of investments in foreign operations:

a) fair value gains (losses) - - -

b) reclassification to profit or loss - - -

c) other changes - - -

80. Exchange rate gains (losses):




90. Cash flows hedge:




100. Available-for-sale financial assets:

a) fair value losses (103,301) 35,107 (68,194)

b) reclassification to profit or loss

– impairment losses 30 (10) 20

– gains/losses on sales (46,645) 15,425 (31,220)


110. Non-current assets held for sale:




120. Portion of valuation reserves of equity-accounted investees:



– impairment losses - - -

– gains/losses on sales - - -


130. Total other comprehensive income (expense) (149,701) 50,522 (99,179)

140. Comprehensive Income (Caption 10+130) (149,701) 50,522 422,805

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Part E – Information on risks and related hedging policies

RISK MONITORING AND CONTROL SYSTEM

Banca IMI has always attached great importance to risk monitoring and control and viewed these as essential to:– Ensuring the reliable, sustainable creation of value in a context of controlled risk.– Protecting the Bank’s financial solidity and reputation.– Permitting a transparent representation of the degree of risk associated with the Bank’s portfolios.

It is in this light that one ought to interpret the initiatives aimed at obtaining validation from the Supervisory Authori-ties, also for regulatory purposes, of the internal models on market risk, credit/counterparty risk and operational risk, and at further increasing the efficacy of the monitoring tools included in the internal processes.

The definition of operational limits linked to risk indicators such as VaR and the management’s use of the measure-ment of ‘capital at risk’ implicit in various portfolios represent some of the steps taken in accordance with the strate-gic and decision-making guidelines laid down by the Board of Directors.Risk monitoring, which is spread along the Bank’s entire decision-making chain, extends all the way to individual operating units and desks. The functions of the Ultimate Parent responsible for risk management and internal audit activities are Risk Management, Internal Audit and Compliance.

Within the system of controls, these periodically meet with the departments of the Bank entrusted with monitoring the line controls and also with the heads of the operational units, both in the course of day-to-day operations and in specific committees, particularly the Risk Committee and Loans & Receivables Committee. Risk management activity aims to ensure constant monitoring of the main risks, regulatory compliance and effective support for the decision-making process. This entails:– the rigorous and timely measurement of risks: the analyses are conducted primarily on effective positions with

respect to normal and historical market conditions and are enriched by portfolio analyses, stress test estimates, and what-if and scenario simulations;

– the definition of the rules and parameters for measuring contracts subject to mark-to-market and fair value, and direct structuring and measurement where this may not be achievable through the standard tools available to business units;

– the interaction with the Supervisory Authority for the validation and development of internal models;– the provision of information in support of company planning and to the top management to enable measurement

of value generation;– support to communication to pursue goals of transparency towards customers and the market.

The scope of the risks identified may be broken down as follows:– credit risk and counterparty risk;– market risk, including position- settlement and concentration risk on the trading portfolio;– the financial risk on the banking book, primarily due to interest and exchange rates.– operational risk, including legal risk, with which ‘insurance risk’ is associated.– liquidity and forex risks.

Notes to the separate financial statements - Part E - Information on risks and related hedging policies

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SECTION 1 – CREDIT RISKS


1. GENERAL ASPECTSCredit risk results from the possibility that a counterparty may not fulfil the obligations it has undertaken in the course of the Bank’s typical business operations, owing in particular to the disbursement of on-balance sheet loans, the provision of endorsement loans and transactions in financial instruments and derivative products.

In accordance with the Group’s lending policies, Banca IMI pursues strategies aimed at:– coordinating action to achieve a sustainable and consistent objective, reconciling risk appetite and value creation;– diversifying the portfolio, limiting the concentration of exposures on single counterparties/groups and on single

sectors or geographical areas;– efficiently selecting single borrowers via an attentive creditworthiness analysis aimed at containing default risk,

privileging commercial lending or loans to support new production capacity with respect to merely financial interventions; and

– monitoring loan performance through information technology procedures and systematic surveillance of those that present irregularities, both of which are aimed at rapidly identifying any signs of deterioration in risk exposures.

The quality of the loan portfolio is constantly monitored through specific operating checks for all the phases of loan management (analysis, approval, monitoring and non-performing loans).

The management of credit risk profiles of the loan portfolio is assured, beginning with the analysis and approval phases, by:– applying the regulations on Credit Policies;– checks on the existence of the necessary conditions for creditworthiness, with particular focus on the client’s

current and prospective capacity to produce satisfactory income and appropriate cash flows;– the assessment of the nature and size of proposed loans, considering the actual requirements of the counter-

party requesting the loan, the course of any lending relationship already in progress and the presence of any relationship between the client and other borrowers.

Credit risk exposures originating in Structured Finance operations may be divided into two categories:

a. on-balance sheet and endorsement loans: for market transactions (usually through participation as mandated lead arranger, arranger and/or underwriter), typically for loans to international customers.

b. indirect endorsement risks: guarantees provided and equivalent agreements, as a way for Banca IMI to share in credit risk, to the profit of the Ultimate Parent and the other investees in the Banche dei Territori Division, which hold direct on-balance sheet and endorsement exposures to end borrowers in their capacities as fronting banks.

This more traditional technical method is governed by specific agreements and envisages, inter alia, support services for the distribution network such as the analysis of potential transactions, the structuring of transac-tions (including the preparation of offers for customers), the coordination of external advisers and, where necessary, negotiation support.

The credit risk attributable to transactions in financial instruments (counterparty risk) is mitigated by extensive use of netting and collateralisation agreements (CSA, GMRA and GMSLA).


141

2. CREDIT RISK MANAGEMENT POLICIES

2.1 Organisational aspectsWithin the powers delegated by the Board of Directors, the monitoring of credit risk has been attributed to the Credit and Portfolio Monitoring Department, both during the loan authorisation phase and the management and monito-ring of credit risk. This latter activity aims to identify possible deterioration of the customer’s credit profile to ensure it is properly measured, and define the strategy best suited to protecting the Bank’s claims.

The Department benefits in this regard from the coordination provided by the Ultimate Parent, Intesa Sanpaolo. Loans are authorised by resolution of the Board of Directors and/or the Decision-making Bodies to which the former has delegated its authority according to a system of internal operational powers and of proxies authority. Since 30 June 2014, the authorisation competence limits have been based on RWA metrics rather than on the size of the loan, so as to define the authorisation competence based on risk-weighted indicators and make the credit process more efficient.

The process of managing and monitoring credit risk conforms to the criteria and parameters established by the Ultimate Parent within which framework Banca IMI’s loan-authorisation autonomy is determined and exercised. Where the loan autonomy limits are exceeded, authorisation of the loan is subject to the issuance of an advance “Conformity Opinion” by the Ultimate Parent.

Credit exposures are tested case-by-case for impairment testing and collective adjustments are estimated in accordance with the Ultimate Parent’s risk management policies.

Loans for which separate objective evidence of impairment has not been identified are tested collectively for impai-rment in categories of loans similar in terms of credit risk, by associating them with percentage losses ‘weighted’ according to historical time-series, founded on observable factors at the date of testing, that allow for an estimate of the amount of the unrealised loss in each of the categories over a period of one year.

In further detail, the method developed by the competent risk management departments calls for the incurred loss to be calculated on the basis of the expected loss under Basel 2 rules, obtained by applying the parameters of probability of default (PD) and loss given default (LGD) estimated using the AIRB approaches required by supervisory regulations, in some cases supplemented by external evaluations or average segment/portfolio figures.

Expected loss is then transformed into incurred loss by applying factors that capture:

– LCP (Loss Confirmation Period), factor representing the time period between the date of an event that generates default and the date when the default becomes apparent;

– cyclicity, an adjustment coefficient that is required inasmuch as ratings are calibrated on the medium term and thus only partially reflect fluctuations in the economic cycle.

In the fourth quarter of 2015 the incurred loss calculation model was revised in relation to the portfolio concentration factor for the Large Corporate segment.The incurred loss thus calculated is aggregated at the level of the individual counterparty and the type of transaction.

The positions are classified, as necessary, as non-performing financial assets according to the input from the de-partments in charge of the commercial relationship or loan control and management departments.


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2.2 Management, measurement and control systemsCounterparty risk is monitored for management purposes through applications into which data from the posi-tion keeping systems are entered, and which are capable of reflecting the effects of the transactions undertaken in real time.The operational limits approved and the uses for individual positions are managed by a specific software program that permits the exposure to customers and counterparties to be displayed. Where agreements for collateralisa-tion and mutual payment of guarantee margins exist, the exposure is entered net of the collateral provided by counterparties.

The internal measurement method of counterparty risk, based on the estimation of the evolution over time of the Mark-to-Market of OTC derivatives (which may or may not be collateralised) is in line with market best practices. When the underlying risk factors vary, the method considers a large number of simulations (average of the Effec-tive Potential Future Exposure to the 95th percentile) in advanced mode based on future projections of market risk factors to describe the possible changes in the market value of the underlying instrument and the derivative, taking into consideration the particular features of any existing collateralisation agreement. In line with regulatory requirements, the new risk assessment method takes into account the so-called “margin period of risk”, which is the period between the last exchange of collateral and close-out of the various positions in the event of default by the counterparty. Overruns, in terms of amount and duration, are monitored on a daily basis.

As regards structured finance activities, where the majority of credit risk is concentrated, Banca IMI is flanked by the central departments of the Ultimate Parent for the measurement and control of exposures, the evaluation of creditworthiness and for the purpose of calculating any impairment.

The mission of the portfolio monitoring desk is to ensure the timely monitoring and first-level analysis of the loan portfolio by identifying and periodically classifying potential risky transactions. The criteria adopted comply with principles of objectivity and quantitative analysis supported by reports from reporting functions, product specialists and other control departments. The duties assigned include proposing the most suitable classification of loans with the involvement of the appropriate departments whenever internal rules require this.

2.3 Credit risk mitigation techniquesCredit risk mitigation techniques are those factors that contribute to reducing loss given default, such as guaran-tees and facility techniques. The lending policies adopted provide incentives for a greater presence of mitigating factors for counterparties classified by the system as non-investment grade.

The Bank uses (bilateral) netting agreements that, in the event of default, permit the offsetting of all receivable and payable positions in connection with outstanding derivatives, repurchase agreements and securities lending transactions. The ISDA (International Swaps & Derivatives Association) (for derivatives transactions) and ISMA (International Securities Market Association) (for securities transactions) protocols are generally adopted. Both of these protocols allow for the management and mitigation of credit risk. In certain circumstances, they may contri-bute to the reduction of the absorption of regulatory capital.

There are currently 768 collateral contracts: 136 GMRA (Global Master Repurchase Agreement) to hedge repo operations, 107 GMSLA (Global Master Securities Lending Agreement) to hedge securities lending operations and 525 CSA (Credit Support Annex) to hedge OTC derivative operations.

With reference to the “physical commodities” division, operations start following the signing of the EFET agree-ment, an industry-specific framework contract which allows additional mitigation of credit risks - in particular with respect to mutually-claimed loans and receivables relating to actual delivered, natural gas consignments - and also defines a reference framework for the resolution and definition of obligations undertaken between the parties in case of default.

The entry into force of the European Market Infrastructure legislation Regulation (EMIR) has contributed to the increase in the number of Credit Support Annexes, signed by the Bank. The EMIR in fact provides for the obligation of offsetting with CCPs for products managed by these and the collateralisation for all the other OTC derivative operations with all counterparties identified as “Financial” and “Non-Financial Counterparties +”1.

1 Non-Financial Counterparty +: all non-financial counterparties with significant operational thresholds for purposes other than hedging, fall within this definition


143

Securities lending transactions are always undertaken following the signature of a Global Master Securities Len-ding Agreement, which calls for daily exchanges of collateral equal to the notional amount of the individual loan, plus a percent increase (varying between 2% and 5%).Another mitigation technique employed by the Bank is participation in the SwapClear service. This service provides clearing (executed by LCH Clearnet Ltd. for the professional interbank market) for the most standard types of over-the-counter derivatives contracts (plain-vanilla IRSs).

Individual transactions previously undertaken by participants in the service are subsequently transferred to the central counterparty which, similarly to the case of listed derivatives, becomes the counterparty to the original contracting parties through the legal mechanism of novation. SwapClear calls for the payment of daily margins of change on individual transactions so that mutual receivable and payable positions are automatically offset against one another.

Participation in the CLS - Continuous Linked Settlement - circuit and the corresponding settlement services in payment-versus-payment mode (a mechanism which aims to ensure that a currency is only definitively transferred on condition that the simultaneous transfer of the counterparty’s currency takes place) also permits the further mitigation of settlement risk.

2.4 Non-performing financial assetsTo classify non-performing assets in the various risk categories, the Bank applies regulations issued by the supervisory authority, supplemented by internal provisions that establish criteria and automatic rules for the transfer of loans to the various risk categories.

The process of managing non-performing loans involves entrusting them to the Intesa Sanpaolo departments already charged with their management at Group level, in accordance with the relevant Service Agreement. Under this pro-cess these same departments also authorise the reclassification of non-performing loans to performing loans once the criteria for their non-performing status cease to apply.


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A. CREDIT QUALITY

A.1 PERFORMING AND NON-PERFORMING EXPOSURES: AMOUNTS, IMPAIRMENT LOSSES, CHANGES AND BREAKDOWN BY BUSINESS SEGMENT AND GEOGRAPHICAL SEGMENT

A.1.1 Breakdown of financial assets by portfolio classification and credit quality (carrying amount)

Doubtful loans

Unlikely to pay

Non performing

past due loans

Performing past due loans

Other performing

loans

Total

1. Available-for-sale financial assets - - - - 11,556,728 11,556,728


3. Due from banks - - - - 60,797,926 60,797,926

4. Loans to customers 44,186 904,784 - 6,790 22,341,190 23,296,950


6. Financial assets held for sale - - - - - -

Total 2015 44,186 904,784 - 6,790 94,695,844 95,651,604

Total 2014 28,258 1,062,008 - 175,594 83,061,564 84,327,424

On-balance sheet net structured finance exposures total 6.6 billion. Performing loans include 0.6 billion of expo-sures defined as “forborne”.

A.1.2 Breakdown of credit exposures by portfolio classification and credit quality (gross amount and carrying amount)

Non-performing assets Performing assets Total (carrying amount)

Gro

ss

exp

osu

re

Ind

ivid

ual

im

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Car

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Gro

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t

1. Available-for-sale financial assets - - - 11,556,728 - 11,556,728 11,556,728

2. Held-to-maturity investments - - - - - - -

3. Due from banks - - - 60,797,926 - 60,797,926 60,797,926

4. Loans to customers 1,278,371 (329,401) 948,970 22,454,712 (106,732) 22,347,980 23,296,950

5. Financial assets at fair value through profit or loss - - - X X - -

6. Financial assets held for sale - - - - - - -

Total 2015 1,278,371 (329,401) 948,970 94,809,366 (106,732) 94,702,634 95,651,604

Total 2014 1,457,197 (366,931) 1,090,266 83,340,314 (103,156) 83,237,158 84,327,424


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Assets of evidently low credit quality Other assets

Cumulative write-downs Carrying amount Carrying amount

1. Financial assets held for trading (9,724) 70,863 55,602,874

2. Hedging derivatives - - 203,228

Total 2015 (9,724) 70,863 55,806,102

Total 2014 (3,604) 290,796 60,536,785

A figure of 57 million of the financial assets held for trading, of evidently low credit quality, refer to government securities (such as issues from Argentina and Greece, for which there is still a secondary market in which IMI itself acts as intermediary serving its customers), and also to bank, financial and corporate securities.The remaining exposure refers to derivatives with customers.

Disclosure details on performing loans - IFRS 7.7 and IG 28In accordance with Bank of Italy communication (‘Roneata’ No 0159710/11 of 22 February 2011) the following table provides details of ‘performing exposures’ on on-balance sheet loans at 31 December 2015.

Performing loans Exposures renegotiated under collective agreements

Other exposures

Net exposure Net exposure

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Ass

ets

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ets

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Performing loans (installments due) - - - X - - - 6,790 X 6,790

Performing loans (installments related repayment plan) - - - X -

- - - X -

Performing loans not yet past due X X X - - X X X 94,695,844 94,695,844

Total Net exposures - - - - - - - 6,790 94,695,844 94,702,634

Performing loans Total

Net exposure

Ass

ets

pas

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ue

up

to

3 m

on

ths

Ass

ets

pas

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ue

fro

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to

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on

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Ass

ets

pas

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Ass

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Performing loans (installments due) - - 6,790 X 6,790

Performing loans (installments related repayment plan)

- - - X -

Performing loans not yet past due - - - 94,695,844 94,695,844

Total Net exposures - - 6,790 94,695,844 94,702,634

Banca IMI’s specific type of customers and its focus on investment banking mean that there are no exposures renegotia-ted under collective agreements (e.g. ABI-MEF framework agreement).


146

A.1.3 On- and off-balance sheet loans and receivables with banks: gross amounts and carrying amounts and past due time bracket

Gross amount Individualimpairment

Collectiveimpairment

Carrying amount

Non-performing assets Performing assets

Up

to

3 m

on

ths

Bet

wee

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an

d 6

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on

ths

Bet

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mo

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s an

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r

Ove

r 1

year

A. On-balance sheet exposures

a) Doubtful loans - - - - X - X -

- of which: forbearance exposures - - - - X - X -

b) Unlikely to pay - - - - X - X -


c) Non performing past due loans - - - - X - X -


d) Performing past due loans X X X X - X - -

- of which: forbearance exposures X X X X - X - -

e) Other performing loans X X X X 67,806,326 X - 67,806,326


Total A - - - - 67,806,326 - - 67,806,326

B. Off-balance sheet exposures

a) Non-performing - - - - X - X -

b) Performing X X X X 47,983,662 X - 47,983,662

Total B - - - - 47,983,662 - - 47,983,662

Total A+B - - - - 115,789,988 - - 115,789,988

The table includes the assets with banks regardless of the registration portfolio.

A.1.4 On-balance sheet loans and receivables with banks: changes in gross non-performing loans

Doubtful loans Unlikely to pay Non performing past due loans

A. Initial gross exposure 6 - 44

of which positions transferred not derecognised - - -

B. Increases - - -

B.1 transfers from performing loans - - -

B.2 transfers from other non-performing loans categories - - -

B.3 other increases - - -

C. Decreases (6) - (44)

C.1 transfers to performing loans - - -

C.2 write-offs - - -

C.3 repayments - - -

C.4 credit disposals - - -

C.5 losses from disposals - - -

C.6 transfers to other non-performing loans categories - - -

C.7 other decreases (6) - (44)

D. Final gross exposure - - -



147

A.1.5 On-balance sheet non-performing loans and receivables with banks: changes in total impairment losses


A. Initial total impairment


B. Increases - - -

B.1 impairment losses - - -

B.2 losses on disposal - - -

B.3 transfers from other non-performing loans categories - - -


C. Decreases - - -

C.1 recoveries on impairment losses - - -

C.2 recoveries on repyments - - -

C.3 profits on disposal - - -

C.4 write-offs - - -

C.5 transfers to other non-performing loans categories - - -

C.6 other decreases - - -

D. Final total impairment - - -


No changes were made to impairment losses regarding loans towards banks as their carrying amount is in line with the estimated realisable value.


148

A.1.6 On- and off-balance sheet loans and receivables with customers: gross amounts and carrying amounts and past due time bracket



Carrying amount


Up

to

3 m

on

ths

Bet

wee

n 3

an

d

6 m

on

ths

Bet

wee

n 6

m

on

ths

and

1 y

ear

Ove

r 1

year


a) Doubtful loans - - - 96,674 X (52,488) X 44,186

- of which: forbearance exposures - - - 26,794 X (10,706) X 16,088

b) Unlikely to pay 1,181,697 - - - X (276,913) X 904,784

- of which: forbearance exposures 1,023,678 - - - X (249,404) X 774,274



d) Performing past due loans X X X X 8,078 X (1,288) 6,790


e) Other performing loans X X X X 41,809,215 X (105,444) 41,703,771

- of which: forbearance exposures X X X X 635,469 X (36,246) 599,223

Total A 1,181,697 - - 96,674 41,817,293 (329,401) (106,732) 42,659,531


a) Non-performing 352,864 - - - X (37,351) X 315,513

b) Performing X X X X 27,766,597 X (3,840) 27,762,757

Total B 352,864 - - - 27,766,597 (37,351) (3,840) 28,078,270

Total A + B 1,534,561 - - 96,674 69,583,890 (366,752) (110,572) 70,737,801

The table includes the assets with customers regardless of the registration portfolio.

A.1.7 On-balance sheet loans and receivables with customers: changes in gross non-performing exposures


A. Initial gross exposure 72,659 1,385,338 33,343


B. Increases 26,827 241,460 -

B.1 transfers from performing loans - 191,840 -

B.2 transfers from other non-performing loans categories 26,827 - -

B.3 other increases - 49,620 -

C. Decreases (2,812) (445,101) (33,343)

C.1 transfers to performing loans - (142,298) -

C.2 write-offs - (70,891) -

C.3 repayments (1,787) (135,488) -

C.4 credit disposals - - -

C.5 losses from disposals - (38,425) -

C.6 transfers to other non-performing loans categories - (26,827) -

C.7 other decreases (1,025) (31,172) (33,343)

D. Final gross exposure 96,674 1,181,697 -


The non-performing, past due exposures present at 31 December 2014 refer to securities in the HFT portfolio.


149

A.1.8 On-balance sheet loans and receivables with customers: changes in total impairment losses


A. Initial total impairment (43,601) (323,330) -


B. Increases (10,707) (109,979) -

B.1 impairment losses (4,155) (71,554) -

B.2 losses on disposal - (38,425) -

B.3 transfers from other non-performing loans categories (6,552) - -


C. Decreases 1,820 156,396 -

C.1 recoveries on impairment losses 30 58,216 -

C.2 recoveries on repyments 1,425 19,412 -

C.3 profits on disposal - - -

C.4 write-offs - 70,891 -

C.5 transfers to other non-performing loans categories - 6,552 -

C.6 other decreases 365 1,325 -

D. Final total impairment (52,488) (276,913) -


A.2 CLASSIFICATION OF EXPOSURES BASED ON EXTERNAL AND INTERNAL RATINGS

A.2.1 Breakdown of on- and off-balance sheet loans and receivables by external rating classes

External rating classes Unrated Total

AAA/AA- A+/A- BBB+/BBB- BB+/BB- B+/B- Under a B-

A. On-balance sheet exposures 7,600,666 10,250,963 57,281,239 1,210,729 12,883,173 973,678 20,663,051 110,863,499

B. Derivatives

B.1 Financial derivatives 246,963 787,009 6,659,891 304,192 129,695 3,620 2,211,727 10,343,097

B.2 Credit derivatives - - - - - - 171 171

C. Guarantees given - - - - - 310,255 552,206 862,461

D. Commitments to lend funds 8,452,630 17,414,779 20,099,185 2,067,655 922,720 196,022 13,714,088 62,867,079

E. Other - - - - - - 1,989,124 1,989,124

Total 16,300,259 28,452,751 84,040,315 3,582,576 13,935,588 1,483,575 39,130,367 186,925,431

The table also includes exposures relating to securities - UCITS (on-balance sheet loans and receivables).

Financial derivative exposures are shown net of netting arrangements.Commitments to lend funds mainly refer to bilateral financial contracts, which are settled using the delivery versus payment method. Specifically, the unrated cluster includes commitments to purchases to be settled.


150

A.2.2 Breakdown of on- and off-balance sheet loans and receivables by internal rating classes

Internal rating classes Unrated Total

AAA/AA- A+/A- BBB+/BBB- BB+/BB- B+/B- Undera B-

Non-perfor-ming

exposures

A. On-balance sheet exposures 8,578,053 16,138,902 59,078,075 3,766,142 14,085,962 185,819 948,970 7,683,934 110,465,857

B. Derivatives

B.1 Financial derivatives 260,310 1,142,532 6,819,994 319,314 261,847 14,812 - 1,524,288 10,343,097

B.2 Credit derivatives - - - - - - - 171 171

C. Guarantees given - - 15,461 41,666 14,503 8,875 310,255 471,701 862,461

D. Commitments to lend funds 10,657,933 20,039,419 17,608,582 3,141,005 1,372,006 1,081,536 5,258 8,961,340 62,867,079

E. Other - - - - - - - 1,989,124 1,989,124

Total 19,496,296 37,320,853 83,522,112 7,268,127 15,734,318 1,291,042 1,264,483 20,630,558 186,527,789

For the purposes of this table on-balance sheet exposures in UCITS and similar securities are excluded.This table has been prepared with reference to all the internal ratings even when these are not within the regula-tory scope of the internal models.

A.3 Breakdown of guaranteed exposures by type of guarantee

A.3.1 Guaranteed loans and receivables with banks

Car

ryin

g a

mo

un

t Collateral (1) Guarantees (2) Total (1)+(2)

Rea

l est

ate

asse

ts -

Mo

rtg

ages

Rea

l est

ate

asse

ts -

Fin

ance

leas

es

Sec

uri

ties

Oth

er c

olla

tera

l Credit derivatives Guarantees given

Cre

dit

lin

ked

no

tes Other

derivatives

Go

vern

men

ts a

nd

Cen

tral

Ban

ks

Oth

er g

ove

rnm

ent

agen

cies

Ban

ks

Oth

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ou

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rpar

ties

Go

vern

men

ts a

nd

Cen

tral

Ban

ks

Oth

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agen

cies

Ban

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Oth

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ou

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rpar

ties

1. On- balance sheet guaranteed loans and receivables:

1.1. totally guaranteed 7,252,969 - - 7,252,969 - - - - - - - - - - 7,252,969

– of which impaired - - - - - - - - - - - - - - -

1.2. partially guaranteed - - - - - - - - - - - - - - -


2. Off- balance sheet guaranteed loans and receivables:

2.1. totally guaranteed 3,879,439 - - 248,742 3,630,697 - - - - - - - - - 3,879,439


2.2. partially guaranteed 1,275,368 - - - 997,170 - - - - - - - - - 997,170


Exposures guaranteed by securities consist of repurchase and securities lending agreements. “Collateral - securi-ties” acquired to protect “off-balance sheet” exposures refer to net counterparty risk, calculated on the basis of CSA and netting agreements, implicit in OTC derivatives.


151

A.3.2 Guaranteed loans and receivables with customers

Car

ryin

g a

mo

un

t Collateral (1) Guarantees (2) Total (1) + (2)

Rea

l est

ate

asse

ts -

Mo

rtg

ages

Rea

l est

ate

asse

ts -

Fin

ance

leas

es

Sec

uri

ties

Oth

er c

olla

tera


Cre

dit

lin

ked

no

tes Other

derivatives

Go

vern

men

ts a

nd

Cen

tral

Ban

ks

Oth

er g

ove

rnm

ent

agen

cies

Ban

ks

Oth

er c

ou

nte

rpar

ties

Go

vern

men

ts a

nd

Cen

tral

Ban

ks

Oth

er g

ove

rnm

ent

agen

cies

Ban

ks

Oth

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ou

nte

rpar

ties


1.1. totally guaranteed 10,683,161 2,114,994 - 8,287,872 153,310 - - - - - - - - 126,985 10,683,161

– of which impaired 565,033 334,016 - 12,544 145,401 - - - - - - - - 73,072 565,033

1.2. partially guaranteed 1,066,785 3,328 - 197,990 88,259 - - - - - - - - 120,000 409,577

– of which impaired 383,936 - - 191,279 19,616 - - - - - - - - - 210,895


2.1. totally guaranteed 1,344,470 141,700 - 1,128,856 39,839 - - - - - - - - 34,075 1,344,470

– of which impaired 1,266 1,266 - - - - - - - - - - - - 1,266

2.2. partially guaranteed 1,167,034 - - 339,783 518,047 - - - - - - - - 54,197 912,027



152

B. BREAKDOWN AND CONCENTRATION OF CREDIT EXPOSURES

B.1 Breakdown of on- and off-balance sheet loans and receivables with customers by business segment (carrying amount)

Governments Other government agencies

Car

ryin

g a

mo

un

t

Ind

ivid

ual

im

pai

rmen

t lo

sses

Co

llect

ive

imp

airm

ent

loss

es

Car

ryin

g a

mo

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t

Ind

ivid

ual

im

pai

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Co

llect

ive

imp

airm

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loss

es

A. ON-BALANCE SHEET EXPOSURES

A.1 Non-performing loans - - X - - X

of which: forbearance exposures - - X - - X

A.2 Unlikely to pay - - X - - X


A.3 Non performing past due loans - - X - - X


A.4 Other performing loans 16,757,344 X (126) 11,423 X -

of which: forbearance exposures - X - - X

TOTAL A 16,757,344 - (126) 11,423 - -

B. OFF-BALANCE SHEET EXPOSURES

B.1 Non-performing loans - - X - - X

B.2 Unlikely to pay - - X - - X

B.3 Other non performing assets - - X - - X

B.4 Performing loans 3,548,639 X - 16,243 X -

TOTAL B 3,548,639 - - 16,243 - -

TOTAL (A+B) 31 DECEMBER 2015 20,305,983 - (126) 27,666 - -



153

B.1 Breakdown of on- and off-balance sheet loans and receivables with customers by business segment(carrying amount)- contd.

Financial institutions Insurance companies

Car

ryin

g a

mo

un

t

Ind

ivid

ual

im

pai

rmen

t lo

sses

Co

llect

ive

imp

airm

ent

loss

es

Car

ryin

g a

mo

un

t

Ind

ivid

ual

im

pai

rmen

t lo

sses

Co

llect

ive

imp

airm

ent

loss

es


A.1 Non-performing loans - (9,164) X - - X


A.2 Unlikely to pay 58,731 (71,193) X - - X

of which: forbearance exposures 53,882 (70,732) X - - X



A.4 Other performing loans 16,930,166 X (25,235) 35,434 X -

of which: forbearance exposures 154,013 X (5,922) - X -

TOTAL A 16,988,897 (80,357) (25,235) 35,434 - -



B.2 Unlikely to pay 3,787 - X - - X


B.4 Performing loans 20,580,737 X (544) 144,423 X -

TOTAL B 20,584,524 - (544) 144,423 - -

TOTAL (A+B) 31 DECEMBER 2015 37,573,421 (80,357) (25,779) 179,857 - -



154

B.1 Breakdown of on- and off-balance sheet loans and receivables with customers by business segment(carrying amount)- contd.

Non-financial companies Other counterparties

Car

ryin

g a

mo

un

t

Ind

ivid

ual

im

pai

rmen

t lo

sses

Co

llect

ive

imp

airm

ent

loss

es

Car

ryin

g a

mo

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t

Ind

ivid

ual

im

pai

rmen

t lo

sses

Co

llect

ive

imp

airm

ent

loss

es


A.1 Non-performing loans 44,186 (43,324) X - - X








TOTAL A 8,796,910 (249,044) (81,371) 69,523 - -



B.2 Unlikely to pay 311,726 (37,351) X - - X


B.4 Performing loans 3,020,433 X (3,296) - X -

TOTAL B 3,332,159 (37,351) (3,296) - - -


TOTAL (A+B) 31 DECEMBER 2014 10,654,570 (322,405) (66,501) - - -


155

B.2 Breakdown of on- and off-balance sheet loans and receivables with customers by geographical segment (carrying amount)

Italy Other European countries America

Carryingamount

Total impairmens

Carryingamount

Total impairmens

Carryingamount

Total impairmens


A.1 Non-performing loans 44,186 (43,324) - (844) - (8,320)

A.2 Unlikely to pay 865,641 (248,883) 39,143 (28,030) - -

A.3 Non performing past due loans - - - - - -

A.4 Other performing loans 23,246,528 (104,794) 15,737,448 (1,729) 2,045,424 -

TOTAL 24,156,355 (397,001) 15,776,591 (30,603) 2,045,424 (8,320)


B.1 Non-performing loans - - - - - -

B.2 Unlikely to pay 315,513 (37,351) - - - -

B.3 Other non performing assets - - - - - -

B.4 Performing loans 8,300,112 (3,433) 17,396,130 (407) 1,277,492 -

TOTAL 8,615,625 (40,784) 17,396,130 (407) 1,277,492 -

TOTAL 31 DECEMBER 2015 32,771,980 (437,785) 33,172,721 (31,010) 3,322,916 (8,320)

TOTAL 31 DECEMBER 2014 29,342,431 (489,304) 30,473,735 (21,101) 1,445,757 (10,085)

Asia Rest of the World Total

Carryingamount

Total impairmens

Carryingamount

Total impairmens

Carryingamount

Total impairmens


A.1 Non-performing loans - - - - 44,186 (52,488)

A.2 Unlikely to pay - - - - 904,784 (276,913)


A.4 Other performing loans 278,393 (209) 402,768 - 41,710,561 (106,732)

TOTAL 278,393 (209) 402,768 - 42,659,531 (436,133)



B.2 Unlikely to pay - - - - 315,513 (37,351)


B.4 Performing loans 312,330 - 24,411 - 27,310,475 (3,840)

TOTAL 312,330 - 24,411 - 27,625,988 (41,191)

TOTAL 31 DECEMBER 2015 590,723 (209) 427,179 - 70,285,519 (477,324)

TOTAL 31 DECEMBER 2014 437,560 - 367,256 - 62,066,769 (520,490)


156

B.3 Breakdown of on-and off-balance sheet loans and receivables with banks by geographical segment (carrying amount)


Carrying amount

Total impairmens

Carrying amount

Total impairmens

Carrying amount

Total impairmens


A.1 Non-performing loans - - - - - -

A.2 Unlikely to pay - - - - - -


A.4 Other performing loans 61,508,249 - 5,699,212 - 519,397 -

TOTAL 61,508,249 - 5,699,212 - 519,397 -



B.2 Unlikely to pay - - - - - -


B.4 Performing loans 5,113,601 - 34,680,867 - 6,482,974 -

TOTAL 5,113,601 - 34,680,867 - 6,482,974 -

TOTAL 31 DECEMBER 2015 66,621,850 - 40,380,079 - 7,002,371 -

TOTAL 31 DECEMBER 2014 59,289,313 - 44,135,780 - 8,455,238 -


Carrying amount

Total impairmens

Carrying amount

Total impairmens

Carrying amount

Total impairmens





A.4 Other performing loans 42,140 - 37,328 - 67,806,326 -

TOTAL 42,140 - 37,328 - 67,806,326 -





B.4 Performing loans - - 169,378 - 46,446,820 -

TOTAL - - 169,378 - 46,446,820 -

TOTAL 31 DECEMBER 2015 42,140 - 206,706 - 114,253,146 -

TOTAL 31 DECEMBER 2014 22,819 - 224,360 - 112,127,510 -

B.4 Large exposures

a) Carrying amount 121,032,735

b) Weighted amount 6,857,981

c) Number 32

The “Carrying amount” of large exposures includes exposures towards the Ultimate Parent Intesa Sanpaolo of around 62 billion, not including weighting, and 21 billion towards the London Stock Exchange Group.This amount mainly refers to OTC derivatives from clearing at the central counterparty Swapclear, exposures measured by EPE supervisory metrics (that refer to netted fair values, the paid margins and projections on future exposures). An additional 25 billion refers to exposures to EU and US Governments and Central Departments.


157

C. SECURITISATIONS


Banca IMI traditionally operates in securitised instruments as part of its primary market activity - structuring and/or placing originated securitisations - and its intermediation on secondary markets. The risks relating to temporary positions are monitored by the risk management department as part of its market risk assessment.


C.1. Breakdown of exposures deriving from main “originated” securitisations by type of securitised asset and type of exposure

On-balance sheet exposures

Senior Mezzanine Junior

Carrying amount

Impairment losses /

reversals of impairment

losses

Carrying amount

Impairment losses /


losses

Carrying amount

Impairment losses /


losses

A. Fully derecognised

A.1 TIBET CMBS S.R.L. 19,805 (2) 8,905 (19) 5 -

- Other loans

A.2 HAYWAVE SPV S.R.L. 27,800 - - - - -

- Other loans

Total 47,605 (2) 8,905 (19) 5 -

Tibet SecuritisationIn 2015, Banca IMI proceeded to securitise a loan of 203 million euro guaranteed by a mortgage granted in 2014 for the acquisition of a prestigious property in Milan. The vehicle used in the operation was Tibet CMBS Srl. The issued securities have the following ratings: Senior AA, 1st Mezzanine A, 2nd Mezzanine A-, Junior BB.

Haywave SecuritizationIn December 2015, Banca IMI sold part of a loan to a customer, totalling 37 million euro, which had been granted in 2014 in connection with the acquisition of a portfolio of commercial real estate properties. The customer made this purchase through Haywave SPV Srl which issued two classes of notes, a senior class and a junior class. The issued securities are unrated.


158

C.2 Breakdown of exposures deriving from main “third party” securitisations by type of securitised asset and type of exposure

Type of underlying asset / Exposure On-balance sheet exposures


Carrying amount

Impairment losses/reversals

of impairment losses

Carrying amount



Carrying amount



A.1 ACA EURO CLO 2007-1 PLC Business loans (included PMI) - - 2,978 - - -

A.2 ADAGIO II CLO PLC Business loans (included PMI) 5,860 - - - - -

A.3 ADAGIO III CLO PLC Business loans (included PMI) 2,547 - - - - -

A.4 AIRE VALLEY MORTGAGES Residential mortgage loans 17,266 - 1,831 - 4,023 -

A.5 AIRE VALLEY MORTGAGES 2004-1 PLC

Residential mortgage loans - - 4,627 - - -

A.6 AIRE VALLEY MORTGAGES PLC Residential mortgage loans 11,946 - 1,307 - - -

A.7 ALBA 2006-2 PLC Residential mortgage loans 2,084 - - - - -

A.8 ALBA 2007-1 PLC Residential mortgage loans - - 5,751 - - -

A.9 ALBA 3 SPV S.R.L. Lease 6,046 - - - - -

A.10 ALBA 5 SPV S.R.L. Lease 5,228 - - - - -

A.11 ALPSTAR CLO 2 PLC Business loans (included PMI) 7,202 - - - - -

A.12 APULIA FINANCE 2 Residential mortgage loans 719 - - - - -

A.13 APULIA FINANCE 4 SRL Residential mortgage loans 14,025 - - - - -

A.14 APULIA MORTGAGES FINANCE N. 3 S.R.L.

Residential mortgage loans 9,974 - - - - -

A.15 ARES EURO CLO I BV Residential mortgage loans 3,957 - - - - -

A.16 ARES EURO CLO III BV Residential mortgage loans 4,836 - - - - -

A.17 ARGO MORTGAGE 2 SRL Residential mortgage loans 161 - 5,061 - - -

A.18 ARIANNA SPV S.R.L. Consumer credit 32,420 - 3,144 - - -

A.19 ASTI FINANCE SRL Residential mortgage loans 97,730 - 2,507 - - -

A.20 ASTI RMBS SRL Residential mortgage loans 30,744 (37) - - - -

A.21 ATLANTE FINANCE SRL Commercial mortgages loans 60 - 11,594 - - -

A.22 ATLANTES MORGAGE N.6 PLC Business loans (included PMI) 594 - - - - -

A.23 ATLANTES MORTGAGE N.1 PLC Residential mortgage loans 23,874 - - - - -

A.24 AVOCA 10X A Business loans (included PMI) 9,984 - - - - -

A.25 AVOCA CLO III-X Business loans (included PMI) - - 1,217 - - -

A.26 AVOCA CLO V PLC Business loans (included PMI) - - 3,273 - - -

A.27 AVOCA CLO VI PLC Business loans (included PMI) 2,078 - - - - -

A.28 AVOCA CLO VII PLC Residential mortgage loans - - 5,672 - - -

A.29 AVOCA CLO XI LIMITED Business loans (included PMI) 2,985 - - - - -

A.30 AVOCA CLO XII LIMITED Business loans (included PMI) 10,822 - 1,757 - - -

A.31AYT CEDULAS CAJAS GLOBAL FTA

Other loans 7,302 - - - - -

A.32 AYT CEDULAS CAJAS V FTA Other loans - - 3,272 - - -

A.33 AYT HIPOTECARIO III FTH Residential mortgage loans 3,872 - - - - -

A.34 BABSON EURO CLO 2014-1 B.V. Business loans (included PMI) 4,971 - - - - -

A.35BABSON EURO CLO 2014-2 B.V.

Commercial mortgages loans - - 3,919 - - -

A.36 BACCHUS 2007 1 PLC Business loans (included PMI) 6,292 - - - - -

A.37BANCAJA 4 FONDO DE TITULIZAC ION HIPOTECARIA


A.38BANKINTER 3, FONDO DE TITULI ZACION HIPOTECARIA

Residential mortgage loans 550 - - - - -

A.39 BAVARIAN SKY SA Other loans 2,785 - - - - -

A.40 BCC MORTGAGES Residential mortgage loans 32,254 - 2,653 - - -

A.41BERICA 5 RESIDENTIAL MBS SRL


A.42 BERICA ABS 3 S.R.L. Residential mortgage loans - - 36,540 - - -

A.43 BERICA ABS SRL Residential mortgage loans 31,785 - - - - -


159



Carrying amount



Carrying amount



Carrying amount



A.44 BERICA MBS SRL Residential mortgage loans 10,201 - - - - -

A.45 BIPIELLE RESIDENTIAL SRL Residential mortgage loans - - 4,585 - - -

A.46 BNPP IP EURO CLO 2015 1 B.V. Business loans (included PMI) - - 381 - - -

A.47 BOSPHORUS CLO I LIMITED Business loans (included PMI) 63,913 - - - - -

A.48 BOYNE VALLEY BV Lease - - 8,692 - - -

A.49 BP MORTGAGES Residential mortgage loans 14,821 - 4,121 - - -

A.50 BPM SECURITISATION 2 Residential mortgage loans - - 1,976 - - -

A.51 BPM SECURITISATION SRL Residential mortgage loans 3,528 - - - - -

A.52BRUNEL RESIDENTIAL MORTGAGES SECURITISATION 1 PLC


A.53CARTESIAN RESIDENTIAL MORTGA GES 1 SA

Residential mortgage loans - - - - 5,090 -

A.54CASSA CENTRALE SECURITISATIO N


A.55 CASTORO RMBS SRL Residential mortgage loans 8,705 - 2,913 - - -

A.56 CEDULAS TDA A-1 Other loans 3,536 - - - - -

A.57 CELF LOAN PARTNERS I PLC Business loans (included PMI) 3,787 - - - - -

A.58 CELF LOAN PARTNERS II PLC Business loans (included PMI) - - 3,280 - - -

A.59 CLARIS ABS 2011 SRL Residential mortgage loans 50,375 - - - - -

A.60 CLARIS FINANCE 2005 SRL Residential mortgage loans 1,483 - - - - -

A.61 CLARIS FINANCE 2008 S.R.L. Residential mortgage loans 39,475 - - - - -

A.62 CLARIS FINANCE SRL Residential mortgage loans 7,064 - - - - -

A.63 CLAVIS SECURITIES PLC Residential mortgage loans 1,782 - - - - -

A.64 CLAVOS EURO CDO LTD Business loans (included PMI) 2,708 - 3,535 - - -

A.65 COLOMBO SRL Residential mortgage loans - - - - 3,416 -

A.66 CORDATUS CLO II PLC Business loans (included PMI) - - 2,389 - - -

A.67 CORDUSIO 2 RMBS SRL Residential mortgage loans - - 11,563 - - -

A.68 CORDUSIO 3 RMBS Residential mortgage loans - - 830 - - -

A.69 CORDUSIO RMBS SRL Residential mortgage loans 10,354 (6) 1,881 - - -

A.70CORK STREET CLO DESIGNATED A CTIVITY COMPANY

Business loans (included PMI) 2,993 - - - - -

A.71 CREDICO FINANCE Residential mortgage loans 30,409 - - - - -

A.72 CREDICO FINANCE 4 S.R.L. Residential mortgage loans - - 13,582 - - -

A.73 CREDICO FINANCE 5 S.R.L. Residential mortgage loans 9,391 - 2,275 - - -

A.74 CRESO 2 S.R.L. Residential mortgage loans 35,218 - - - - -

A.75DALRADIAN EUROPEANCLO IV B. V.

Business loans (included PMI) - - 957 - - -

A.76 DECO 2014 - GONDOLA S.R.L. Commercial mortgages loans 1,815 - 2,476 - 3,274 -

A.77 DECO 2014 - TULIP LTD Commercial mortgages loans 2,653 - - - - -

A.78 DECO 2014-BONN LIMITED Commercial mortgages loans 2,899 - 2,908 - - -

A.79 DILOSK RMBS NO. 1 LIMITED Residential mortgage loans 3,588 - - - - -

A.80 DRYDEN 32 EURO CLO 2014 B Business loans (included PMI) 4,977 - - - - -

A.81 DUCHESS I CDO SA Business loans (included PMI) - - 2,904 - - -

A.82 EDDYSTONE FINANCE PLC Residential mortgage loans 11,014 - - - - -

A.83 EGRET FUNDING CLO I PLC Business loans (included PMI) 4,828 - 1,453 - - -

A.84 ELM BV Other loans - - - - 1,278 -

A.85 ETOILE FINANCE S.R.L. Other loans 1,063 - - - - -

A.86ETRURIA SECURITIZATION SPV SRL



160



Carrying amount



Carrying amount



Carrying amount



A.87 EURO GALAXY CLO BV Business loans (included PMI) - - 4,879 - - -

A.88 EUROCREDIT CDO VI PLC Business loans (included PMI) 982 - - - - -

A.89FADE-FONDO DE AMORTIZACION D EL DEFICIT ELECTRICO

Other loans 1,366 - - - - -

A.90 FASTNET SECURITIES 9 Residential mortgage loans 5,379 - - - - -

A.91 F-E GOLD SRL Lease 5,829 - - - - -

A.92 F-E MORTGAGES SRL Residential mortgage loans 138 - 7,682 - - -

A.93 FIP FUNDING SRL Commercial mortgages loans 119,767 (112) - - - -

A.94 FIRST FLEXIBLE N. 6 PLC Residential mortgage loans - - 9,920 - - -

A.95 FIRST FLEXIBLE NO.7 PLC Residential mortgage loans - - 305 - - -

A.96FONDO DE TITULIZACION DE ACT IVOS UCI 9


A.97 GALLERIE 2013 SRL Commercial mortgages loans 22,603 - - - - -

A.98GAMMA - SOCIEDADE DE TITULAR IZACA0 DE CREDITOS


A.99GERMAN RESIDENTIAL FUNDING 2 013-1 LIMITED


A.100 GIOVECCA MORTGAGES SRL Residential mortgage loans 3,210 - - - - -

A.101GRANITE MORTGAGES 03-2 PLC

Residential mortgage loans - - 643 - - -

A.102GRANITE MORTGAGES 03-3 PLC


A.103 GRANITE MORTGAGES PLC Residential mortgage loans - - - - 2,106 -

A.104GREAT HALL MORTGAGES N.1 PL C


A.105 GRECALE ABS Residential mortgage loans 1,212 - - - - -

A.106 GRECALE RMBS 2011 S.R.L. Residential mortgage loans 12,109 - - - - -

A.107 GROSVENOR PLACE CLO II BV Business loans (included PMI) 6,634 - - - - -

A.108 GROSVENOR PLACE CLO III BV Business loans (included PMI) - - 965 - - -

A.109 GSC EUROPEAN CDO II S.A. Business loans (included PMI) - - 2,314 - - -

A.110 GSC EUROPEAN CDO I-R S.A. Business loans (included PMI) - - 1,124 - - -

A.111 GUERRIERO SPV S.R.L Commercial mortgages loans 26,589 - - - - -

A.112HALCYON LOAN ADVISORS EUROPE AN FUNDING 2014 BV


A.113HALCYON STRUCTURED ASSET MAN AGEMENT EUROPEAN CLO 2

Business loans (included PMI) - - 3,874 - - -

A.114 HARBOURMASTER CLO 8 B.V. Business loans (included PMI) - - 3,928 - - -

A.115 HARVEST CLO II SA Business loans (included PMI) - - - - 41 -

A.116 HARVEST CLO III PLC Business loans (included PMI) - - 6,474 - - -

A.117 HARVEST CLO IV PLC Business loans (included PMI) 4,908 - - - - -

A.118 HARVEST CLO X LIMITED Business loans (included PMI) - - 1,862 - - -

A.119 HARVEST CLO XI LIMITED Business loans (included PMI) 25,237 - - - 781 -

A.120HARVEST CLO XIV DESIGNATED A CTIVITY COMPANY


A.121 HAYWAVE SPV S.R.L. Other loans 27,800 - - - - -

A.122 HELICONUS SRL Residential mortgage loans - - 6,529 - - -

A.123 HIPOCAT Residential mortgage loans 4,681 - - - - -

A.124 IM CEDULAS 9 FTA Other loans 208 - - - - -

A.125 INFINITY CLASSICO 06-24 CL.C Commercial mortgages loans 2,084 - 6,275 - 2,348 -

A.126 INTESA SEC3 SRL Residential mortgage loans - - 37,013 - 3,914 -

A.127 ITALFINANCE SECURITISATION V Lease - - 8,098 - - -

A.128ITALFINANCE SECURITISATION V EHICLE SRL

Lease 14,530 - 15 - - -

A.129 JUBILEE CDO VI BV Business loans (included PMI) 4,857 - - - - -


161



Carrying amount



Carrying amount



Carrying amount



A.130 JUBILEE CDO XI BV Business loans (included PMI) - - 1,974 - - -

A.131 JUBILEE CLO 2014-XI B.V. Business loans (included PMI) 2,488 - - - - -

A.132 LANA TRADE RECEIVABLES S.A.R .L.

Other loans 1,388 - - - - -

A.133 LEASIMPRESA SPA Lease 1,816 - - - - -

A.134 LEVERAGED FINANCE EUROPE CAP ITAL II BV


A.135 LIGHTPOINT PAN EUROPEAN CLO 2007-1


A.136 LOCAT SECURITISATION VEHICLE SRL

Lease - - 21,342 - - -

A.137 LOMBARD STREET CLO I PLC Residential mortgage loans 2,840 - - - - -

A.138 MADELEINE SPV SRL Consumer credit 11,531 - 6,133 - - -

A.139 MAGELLAN MORTGAGES PLC Residential mortgage loans 2,255 - - - - -

A.140 MARCHE MUTUI SRL Residential mortgage loans 18,052 - - - - -

A.141 MARS 2600 SRL Residential mortgage loans 39,028 - - - - -

A.142 MECENATE Residential mortgage loans 24,934 - 4,863 - - -

A.143 MEDIA FINANCE SRL Residential mortgage loans 22,528 - - - - -

A.144 MERCATOR CLO II PLC Loans (included PMI) - - 7,121 - - -

A.145 MODA 2014 S.R.L. Commercial mortgages loans 9,968 - 4,405 - - -

A.146 MOORGATE FUNDING 2014-1 PLC


A.147 MSF UCI 10 FTH Residential mortgage loans 852 - - - - -

A.148 NAVIGATOR MORTGAGE FINANCE N . 1 PLC


A.149 PARAGON MORTAGE PLC N 9 Residential mortgage loans - - 1,381 - 1,283 -

A.150 PARAGON MORTAGES (NO.7) PLC

Residential mortgage loans 7,148 - 4,926 - - -

A.151 PARAGON MORTGAGES N. 22 PLC


A.152 PARAGON MORTGAGES N.11 Residential mortgage loans 4,247 - 2,029 - - -

A.153 PARAGON MORTGAGES N.12 Residential mortgage loans - - 2,730 - 2,318 -

A.154 PARAGON MORTGAGES N.13 Residential mortgage loans 3,431 - - - 937 -

A.155 PARAGON MORTGAGES N.18 PLC


A.156 PARAGON MORTGAGES N.8 Residential mortgage loans 10,571 - 6,634 - - -

A.157 PARAGON MORTGAGES N.9 Residential mortgage loans 10,609 - - - - -

A.158 PARAGON PERSONAL E AUTO FINA NCE N.3 PLC

Other loans 9,405 - - - - -

A.159 PATRIMONIO UNO Commercial mortgages loans 2,507 - 5,301 (2) - -

A.160 PEGASO SPV SRL Residential mortgage loans 4,720 - - - - -

A.161 PELICAN MORTGAGES Residential mortgage loans - - - - 2,333 -

A.162 PELICAN MORTGAGES NO.2 PLC


A.163 PENATES FUNDING NV Residential mortgage loans 4,010 - - - - -

A.164 POSILLIPO FINANCE II Other loans 1,311 - - - - -

A.165 PREFERRED RESIDENTIAL SECS Residential mortgage loans 91 - - - - -

A.166 PYME TDA CAM 4 A2 Business loans (included PMI) 3,548 - - - - -

A.167 PYMES BANESTO 2 FTA Business loans (included PMI) 2,357 - - - - -

A.168 QUADRIVIO RMBS 2011 S.R.L. Residential mortgage loans 64,596 (201) - - - -

A.169 QUADRIVIO SME 2014 S.R.L. Business loans (included PMI) 29,907 - - - - -

A.170 QUARZO CQS SRL Other loans 5,000 - - - - -

A.171 QUEEN STREET CLO I B.V. Business loans (included PMI) 3,712 - 2,643 - - -

A.172 REGENTS PARK CDO BV Business loans (included PMI) 2,278 - - - - -


162



Carrying amount



Carrying amount



Carrying amount



A.173 RMAC 2005-NSP2 PLC Residential mortgage loans 1,302 - - - - -

A.174 RMAC SECURITIES PLC Residential mortgage loans 833 - - - - -

A.175 SESTANTE FINANCE SRL Residential mortgage loans 201 - - - - -

A.176 SIENA MORTGAGES 02 3 SRL Residential mortgage loans 40,805 - - - - -

A.177 SIVIGLIA SPV SRL Residential mortgage loans 12,954 (2) - - - -

A.178 SKELLING ROCK BV Business loans (included PMI) - - 1,738 - - -

A.179 SPOLETO MORTGAGES Residential mortgage loans - - 1,112 - - -

A.180 SUNRISE SRL Consumer credit 203 - 21,187 - - -

A.181 TAURUS 2013 (GMF1) PLC Commercial mortgages loans - - 7,748 - - -

A.182 TAURUS 2015-1 IT S.R.L. Commercial mortgages loans - - 2,907 - - -

A.183 TAURUS CMBS (UK) 2006-2 PLC

Commercial mortgages loans 4,068 - 1,966 - - -

A.184 TDA 18-MIXTO Residential mortgage loans 1,191 - - - - -

A.185 TDA CAJMAR 2 FTA Residential mortgage loans 73 - - - - -

A.186 TDA CAM 3 FONDO DE TITULIZAC ION DE ACTIVOS


A.187 TDA CAM 4 FTA Residential mortgage loans 21,879 - - - - -

A.188 TDA IBERCAJA 3 Residential mortgage loans 1,166 - - - - -

A.189 TDA PASTOR CONSUMO 1, FONDO DE TITULIZACION DE ACT


A.190 TORO EUROPEAN CLO I LTD Business loans (included PMI) - - 4,232 - - -

A.191 TRADE RECEIVABLES IN-VESTMENT VEHICLE SARL

Trade receivables 28,948 - 8,161 - - -

A.192 TRICOLORE 2014 SPV SRL Consumer credit - - 14,315 - - -

A.193 TRINITY SQUARE 2015-1 PLC Residential mortgage loans 1,344 - - - - -

A.194 UCI-UNION DE CREDITOS IMM Residential mortgage loans 3,016 - - - - -

A.195 VELA ABS Residential mortgage loans 21,469 - - - - -

A.196 VELA HOME SRL Residential mortgage loans 60,612 (2) 4,631 - - -

A.197 VOBA FINANCE SRL Residential mortgage loans 20 - - - - -

A.198 VOBA N. 3 S.R.L. Residential mortgage loans 34,963 (46) - - - -

A.199 VOBA N.5 SRL Residential mortgage loans 34,613 - - - - -

A.200 WHINSTONE 2 CAPITAL MANAGEME NT LTD

Residential mortgage loans - - - - 2,014 -

A.201 WOOD STREET CLO IV BV Business loans (included PMI) - - 5,816 - - -

A.202 ZOO ABS II BV Other loans 1,244 - - - - -

A.203 ZOO ABS IV Other loans 5,134 - 1,606 - - -

Total 1,680,493 (406) 481,971 (2) 35,156 -


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D. INFORMATION ON UNCONSOLIDATED STRUCTURED ENTITIES (OTHER THAN SECURITISATION VEHICLES)


Vehicle’s (other than those for securitisation)Banca IMI is arranger of bond issues by Dunia Capital BV, a Dutch SPV umbrella. For each operation, which is a segregated fund, Dunia has issued a debt security to institutional investors and then used the relative funds to purchase Government bonds. With respect to each issue, Dunia agreed a swap contract with IMI Bank to make the financial profiles of the bond issues consistent with those of the loans made. In some cases, the derivative concluded between Dunia and Banca IMI is assisted by a bilateral collateral agreement.The entire nominal amount of the securities issued by Dunia is held by third parties outside the IMI Group. As a result, the vehicle is not consolidated.

Closed-end real estate fundsBanca IMI also subscribed units of closed-end real estate funds included in the Available-For-Sale portfolio, totalling 56.5 million. The units in these funds are maintained under the thresholds identified for connection, and their related evalua-tion (based on the NAV that is periodically published by the reference SGRs or on the share transfer values taken from recent transactions), led to the recognition in connection with the HB Fund of cumulated impairment losses (amounting to 7.7 million, of which 3.5 million in 2015) and impairment losses on the Omicron Fund (equivalent to 2.4 million recognised in full in 2015).Relations with closed-end real estate funds can sometimes be extended to the provision of loans (Fondo Anasta-sia), within the framework of structured finance operations. The maximum potential exposure is therefore linked to the value of the subscribed units and to the level of financial support provided.

Investment in private debt fundsIn addition to the above, as of 31 December 2015, the investments in three private debt funds amounted to 16.2 million and are classified in the Available-For-Sale portfolio. Private debt funds perform direct and indirect, financial support operations and measures, in favour of unlisted SMES; the investments are directed primarily towards debt instruments of SMES.The units in private debt funds are maintained under the thresholds identified for connection, and their related evaluation is based on the NAV that is periodically published by the reference SGRs. At the date of these separate financial statements, there is no evidence of permanent impairment.

The above relationships are represented in the quantitative measurements referred to in the following Table.


Caption / Type of structured entity

Porfolios under assets

Total assets (A)

Porfolios under

liabilities

Total liabilities

(B)

Carrying amount (C=A-B)

Maximum exposure

to risk of loss (D)

Difference between

exposure to risk of loss

and carrying amount (E=D-C)

1. DUNIA HFT 53,518 HFT 5,172 48,346 48,346 -

2. O.I.C.R. AFS 72,699 - - 72,699 72,699 -


164

Other companiesThrough its London branch, Banca IMI provides administrative services and financial advice in favour of the vehicle Duomo Funding, which together with Romulus Funding Corporation is controlled by Intesa Sanpaolo. Both veichles are included in the scope of consolidation of the Ultimate Parent. It concerns asset-backed commer-cial paper conduits, initially set up in order to respond to the strategy of Intesa Sanpaolo to provide its customers with an alternative funding channel through access to the international market of commercial papers. The customer-originated assets are concentrated on the vehicle Duomo, while the vehicle Romulus is involved solely in raising funds in the market. The services of an administrative nature for the benefit of Duomo Funding include:– supervision of the administrative functions, including payment of fees, expenses, debts, and other administrative

duties;– the preparation of disclosures and any communications as required;– the exchange of information with the corresponding Administrator of Romulus Funding;– the fulfilment of tax and regulatory obligations;– reporting on trends, the collection of payments and the rating of the assets held by the vehicle;– assistance in requesting liquidity. if required.

As Investment Advisor to the vehicle, Banca IMI provides advisory services with particular reference to the mana-gement of the asset portfolio, which includes:– the provision of information about the most suitable choices of investment or disinvestment for the implemen-

tation of relevant securitisation transactions, in accordance with predefined policies;– assistance in the preparation of the documentation required for the completion of investment or disinvestment

operations or changes to existing operations;– negotiations, on behalf of the vehicle, of the economic conditions of each operation carried out by the vehicle;– monitoring the economic and financial position of the vehicle, to ensure that the performance of the asset

portfolio is adequate to fulfil the obligations assumed;– the provision of advisory services with respect to requests for extension or modification of financing contracts

entered into for the purchase of assets from customers.

Fee and commission income earned during the year 2015 amounted to 16 million euro.


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E. TRANSFERS OF ASSETS

A. Financial assets transferred not fully derecognised

Qualitative informationAt 31 December 2015, there are no transferred assets that would need to be partially recognised as provided by the partial maintenance of the associated risks and benefits.


E.1 Financial assets transferred not derecognised: carrying amount and whole value


Available-for-sale financial assets

Due from banks

A B C A B C A B C

A. ASSETS

1. Debt securities 5,387,650 - - 6,374,655 - - - - -

2. Equities - - - - - - X X X

3. UCI - - - - - - X X X

4. Loans - - - - - - - - -

B. DERIVATIVES - - - X X X X X X

TOTAL AT 31 DECEMBER 2015 5,387,650 - - 6,374,655 - - - - -

of which impaired

TOTAL AT 31 DECEMBER 2014 2,530,158 - - 6,708,485 - - 682,821 - -

of which impaired

Loans to customers Total

A B C 2015 2014

A. ASSETS

1. Debt securities 304,213 - - 12,066,518 10,317,549

2. Equities X X X - -

3. UCI X X X - -

4. Loans - - - - -

B. DERIVATIVES X X X - -

TOTAL AT 31 DECEMBER 2015 304,213 - - 12,066,518 X

of which impaired X

TOTAL AT 31 DECEMBER 2014 396,085 - - X 10,317,549

of which impaired X

A = financial assets transferred totally derecognised (carrying amount) B = financial assets transferred partially derecognised (carrying amount)C = financial assets transferred partially derecognised (total amount)


166

E.2 Financial liabilities corresponding to financial assets transferred not derecognised:carrying amount

Financial assets heldfor trading

Financial assets at

fair value through

profit and loss

Available-for-sale

financial assets

Held-to-maturity

investments

Due from banks

Loans to customers

Total

1. Due to customers

a) for fully recognised assets 4,366,286 - 2,714,193 - - - 7,080,479

b) for partially recognised assets -

2. Due to banks

a) for fully recognised assets 1,320,172 - 3,657,218 - - 321,268 5,298,658

b) for partially recognised assets -

TOTAL AT 31 DECEMBER 2015 5,686,458 - 6,371,411 - - 321,268 12,379,137

TOTAL AT 31 DECEMBER 2014 4,968,870 - 5,423,658 - 600,013 295,913 11,288,454

F. CREDIT RISK MEASUREMENT MODELS

Since 30 June 2012, Banca IMI has been authorised to adopt the internal model “credit risks - AIRB”, included under the item “credit risk and counterparty” which refers to the Corporate and Specialised Lending portfolio. This model is based on specialised rating models and on expected losses, defined as the product of exposure to risk (EAD-exposure at default) multiplied by the probability of default (PD) and the size of the expected losses (LGD-loss given default).

The model associates differentiated PD with performing exposure, while for positions classified as in default (non-perfor-ming past-due exposures, unlikely to pay exposures and doubtful loans) the possibility is traditionally assumed to be 1. At the end of 2015 the LGD was 0.45% of the amount loaned to customers.

The internal rating and LGD models for performing loans are validated internally and undergo a level-three check by the Internal Audit department. The control functions produce a conformity report for Bank of Italy, on the models’ compliance with the Regulatory rules, which also includes a check on the difference between the initial estimates and the final values.The report is approved by the Intesa Sanpaolo Management and Supervisory Boards, and certifies that compliance re-quirements have been met also for Banca IMI.

STRUCTURED CREDIT PRODUCTS

The Banca IMI transactions in structured credit products are part of its proprietary trading activites; in the past it was also undertaken with a typical carry-trade approach aimed at generating appreciable returns on assets deemed of good credit quality. This activity has always been conducted within operational limits appropriate to ensuring that outstanding volumes were consistent with the Bank’s overall risk appetite, without ever employing an originate-to-distribute type business model.

The table below shows the data relating to risk exposure at 31 December 2015 for securities that broadly fall within the category of structured credit products. The majority of the investments are in Italian and European ABS, almost entirely within the senior class.The table shows the profit and loss items (sum of realized expenses and income, impairment losses and reversals of impairment losses).


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ABS/CDO funded exposures(in milions of euro)

IFRS Category Position as at 31.12.2015 Income statement for 2015

Result of trading activity

After reclassification

Nominal amount

Risk exposure(after

impairment losses and


losses)

Realisedgains/losses

Impairment losses and


losses

Total

Year of which 4Q15

European ABS/CDO funded HFT 1,100 1,072 6 -7 -1 2

AFS 758 750 1 - 1 1

Loans 125 121 1 -2 -1 -1

CDO unfunded super senior Corporate Risk

Loans - - - - - -

Long Positions 1,983 1,943 8 -9 -1 2


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EXPOSURE TO SOVEREIGN CREDIT RISKIn accordance with the IFRS (specifically IAS 1 and IFRS 7), as regards in particular the disclosures to be made con-cerning exposures to sovereign credit risk (as the issuer of debt securities, counterparty to OTC derivatives contracts and reference entity for credit derivatives), the following breakdown is provided of the Banca IMI’s exposures at 31 December 2015.

Sovereign risk exposure (issuer, counterparty, reference entity)(in milions of euro)

Debt securities Financial derivatives Credit derivatives

HFT Fair Value (1)

AFS Fair Value

L&RAmortized cost

Notional amount

Net Positive Value

Notional amount (2)

Gross Positive Value

Notional amount (2)

Gross Negative Value

Total exposure

EU Countries 6,833.0 7,450.9 190.1 7,225.0 3,548.6 4,831.8 215.4 5,300.4 (187.1) 18,050.9 - Austria 6.3 44.1 0.4 53.3 (0.4) 6.3

- Belgium 1.7 142.4 1.1 142.4 (1.1) 1.7

- Croatia 3.6 12.4 18.4 1.9 17.9

- Finland 0.0 50.9 50.9

- France 190.9 944.0 1,455.9 4.0 1,470.6 (4.1) 1,134.8

- Germany 524.0 1,691.0 197.5 0.2 91.9 (0.2) 2,215.0

- Greece 0.6 0.6

- Ireland 7.2 141.2 23.0 0.7 23.0 (0.7) 148.4 - Italy (3) 5,848.6 2,619.1 190.1 7,225.0 3,548.6 1,343.8 195.5 1,414.0 (163.5) 12,238.4

- Latvia 5.0 9.2 0.1 9.2 (0.1) 5.0

- Lithuania 25.1 9.2 0.1 9.2 (0.1) 25.1

- Netherlands 2.9 4.6 4.6 2.9

- Poland 23.9 67.2 9.2 0.1 9.2 (0.1) 91.1

- Portugal 14.4 109.5 0.6 60.6 (0.5) 14.5

- United Kingdom 209.4 9.2 (0.1) 209.3

- Czech Republic 9.2 0.1 9.2 (0.1) 0.0

- Romania 7.9 7.9

- Slovenia 9.2 0.1 9.2 (0.1) 0.0

- Spain 190.7 1,569.9 1,413.6 10.3 1,956.4 (15.6) 1,755.3

- Sweden 0.6 115.7 116.3

- Hungary 9.7 33.0 0.2 28.4 (0.4) 9.5

Other Countries 167.6 2,115.6 0.0 0.0 0.0 231.3 7.1 222.2 (7.2) 2,283.1 - Argentina 60.4 60.4

- Australia 0.2 267.5 267.7

- Brazil 4.2 11.5 15.7

- Canada 0.1 17.8 17.9

- Chile 9.0 9.0

- Colombia 22.7 22.7

- Philippines 38.2 38.2

- Iceland 0.1 0.1

- Israel 34.8 34.8

- Indonesia 79.3 79.3

- Kazakhstan 2.3 4.6 4.6 2.3

- Malaysia 4.4 4.4

- Morocco 9.2 18.4 0.0

- Mexico 7.0 87.5 36.7 0.4 27.6 (0.3) 94.6

- Norway 0.4 0.4

- New Zealand 59.4 59.4

- Peru 2.0 28.2 30.2

- Republic of Serbia 0.5 0.5

- Russia 0.1 9.5 73.5 3.8 68.9 (3.5) 9.9

- South Africa 52.3 13.8 1.1 23.0 (1.8) 51.6

- South Korea 4.5 4.5

- Turkey 0.1 31.2 73.5 1.8 59.7 (1.6) 31.5

- Ukraine 1.6 1.6

- USA 88.5 1,357.8 20.0 20.0 1,446.3

- Venezuela 0.1 0.1

Total 7,000.6 9,566.5 190.1 7,225.0 3,548.6 5,063.1 222.5 5,522.6 (194.3) 20,334.0

(1) It escludes the short positions of the HFT porftolio but includes interest accrued as at 31 December 2015.(2) Absolute amount of purchases and sales of protection.(3) The short positions of the HFT portfolio amount to 1,953.5 million euro.


169

The ‘Total exposure’ column represents net total assets attributable to an individual sovereign country included in the statement of financial position. Any derivative contracts listed on regulated markets are excluded since the earnings impact from these is directly recognised as a balancing entry to liquid assets as a result of the settlement of margins of change on a daily basis.

At 31 December 2015 there are loans and receivables towards GME amounting to 208 million.Overall, the exposure to sovereign credit risk came to 20.3 billion euro, about 60% of which is represented by the Italian Republic, about 11% by Germany, approximately 9% by Spain, around 7% by the USA and approximately 6% by France.


170

SECTION 2 – MARKET RISKS

The comment set out below regarding market risks – i.e. interest rate and price risk − though broadly in line with the Bank of Italy’s provisions on financial statement formats, is consistent with the internal risk assessment models used, also as regards the quantitative aspects.

2.1 INTEREST RATE RISK AND PRICE RISK - REGULATORY TRADING BOOK


The quantification of trading risks is founded on a daily and periodic analysis of the vulnerability of trading books to adverse market developments in connection with the following risk factors:– interest rates;– equities and indices;– investment funds;– exchange rates;– implied volatilities;– spreads on credit default swaps;– spreads on bonds;– correlation instruments;– dividend derivatives;– asset-backed securities; and– commodities.

For some of the above risk factors, the Supervisory Authority has validated the internal models for capital absorp-tion reporting.

Specifically, with regard to market risk the validated risk profiles are: (i) generic/specific on debt securities and ge-neric/specific on equity securities; (ii) position risk on UCITS units with reference only to the units in CPPI (Constant Proportion Portfolio Insurance); (iii) position risk on dividend derivatives; (iv) position risk in commodities.

The stressed VaR requirement has also been included since 31 December 2011 for monitoring in order to intercept the impact of a period of market stress on VaR.

Based on the indications in the “Revisions to the Basel II Market Risk Framework”, the period is identified taking into account the following guidelines:– it must constitute a stress scenario for the portfolio;– it must significantly impact on the main risk factors of the Intesa San Paolo and Banca IMI portfolios;– it must allow the use of real historical series for all the portfolio risk factors.

As from the reporting of 30 September 2014, the capital requirement has benefited from the reduction in the prudential multipliers following the methodological and supply chain enhancements recognised by the Supervisory Board.

In line with the historical simulation approach used to calculate the VaR, the historical period is an important cri-terion in selecting the time horizon. In fact, in order to ensure the effectiveness of the scenario adopted and avoid the use of drivers or comparable factors, this time horizon must guarantee that the market data is available.

The analysis of market risk profiles relative to the trading book uses various quantitative indicators, of which VaR is the most important. Since VaR is a synthetic indicator that does not fully capture all possible types of potential losses, risk monitoring has been expanded to include additional measures, in particular simulation measures for quantifying risks arising from illiquid parameters (dividends, correlation, ABSs and hedge funds).The VaR estimates are computed on a daily basis using historical simulations, a 99 percentile confidence interval and a one-day period.

The Incremental Risk Charge (IRC) is the maximum potential loss in the credit trading book due to upgrades, downgrades and bankruptcy of issuers, for a period of a year, with a confidence interval of 99.9%. This measu-rement is in addition to the VaR and allows the specific risk on debt securities and credit securities to be correctly shown because, in addition to the idiosyncratic risk, it also includes event and default risks.


171

Stress tests measure the change in value of instruments or portfolios when there are changes in risk factors of unexpected intensity or correlation/extreme changes, as well as changes indicative of expectations on the future evolution in market variables. Stress tests are carried out on a weekly basis on exposures to market risk, by adopting scenarios based on a histo-rical analysis of risk factors in order to identify the worst cases of the past, and to define a deterministic grid of change in order to highlight pin risk, directionality or implied views.

Sensitivity analyses make risk profiles more accurate, particularly where there are non-linear components. They measure the risk due to changes in the theoretical value of a financial position when there is change in a defined quantity of the related risk factors. The main sensitivity indicators used are the PV01 (1 basis point change in the interest rate curve), Vega01 (1 percentage point change in the implied volatility) and Cr01 (1 basis point change in the credit spread).

Level assessments are risk indicators based on the assumption that there is a direct link between the size of a financial position and its risk profile. They are used to monitor issuer/industry/country risk exposures for the purpo-ses of concentration analysis, by identifying the notional value, market value or conversion of the position of one or more benchmark instruments (known as an equivalent position).

From an operational point of view Banca IMI’s operations can be categorised based on the following risk factors:– Equity risks: taken on view of equity and listed derivative trading, as well as the management of positions ac-

quired in equity origination. Risk management and structuring operations for more innovative products are more complex as they use dyna-

mic hedging with cash instruments and listed derivatives.– Credit risks: managed in primary and secondary market transactions on the bond market (for both mature and

emerging markets), especially bond issues of corporate and financial institutions, mainly in the Eurozone, with the risk profile mainly managed by regulated derivatives and credit derivatives.

– Interest rate risk: concentrated in the euro rate area, this originates from risks assumed in trading on the finan-cial markets (driven by the products distributed by the Group to its clients) and the directional and discretionary strategies on the interest rate and volatility markets. Risk management uses dynamic hedging on the OTC derivative markets (to manage volatility and interest rate risks) and listed derivative instruments (futures).

– Commodities risk: when trading for customers, deriving from the trading of listed and OTC derivatives.


Regulatory trading book: internal models and other sensitivity analysis methods

Composition and risk capitalThe quantitative information below refers to the operational scope of the trading book subject to market risks1. In the section that follows, capital subject to market risk is estimated by adding the operating VaR and the simulations on illiquid parameters, as described above.

The development of risk capitalFor operating purposes risk monitoring using the VaR method also extends to positions on securities classified as AFS. In the fourth quarter of 2015 market risks originated by Banca IMI were on the decrease compared to the previous quarter.

1 Il perimetro regolamentare di applicazione del modello interno è un sottoinsieme del modello interno gestionale sui rischi di mercato; questo è funzione sia del diverso stato di avanza-mento delle metodologie utilizzate, la cui estensione non è ancora autorizzata ai fini della vigilanza prudenziale, sia della normativa vigente che disciplina l’esclusione dal perimetro dei modelli interni di alcune voci di rischio trattate con il metodo standard (quali gli investimenti in OICR).


172

Daily operating trading VaR for Banca IMI - comparison between the 2015 quarters(in milions of euro)

average4Q

minimum4Q

maximum4Q

average3Q

average2Q

average1Q

Banca IMI 85.0 70.7 94.7 104.7 71.1 64.6

The development of daily operating VaR, as shown in the table, has been calculated on Banca IMI quarterly historical series.

Conversely, the overall risk profile for 2015 (81.7 million euro) was higher than the average levels in 2014 (39.3 million euro).

Daily operating trading VaR for Banca IMI

(minimum, average and maximum for the period) (in milions of euro)

2015 2014

average minimum maximum average minimum maximum

Banca IMI 81.7 54.0 116.3 39.3 23.8 66.4

The development of daily operating VaR, as shown in the table, has been calculated on Banca IMI annual historical series.

The following graph shows the operating VaR trend over the last 12 months. During the first quarter of 2015 in-creasing risks were evident due to the increase in Banca IMI exposures on Italian and Spanish government bonds (taken within the limits approved by the Risk Appetite Framework). In the second quarter the risk measures recor-ded peaks as a result of the volatility in the financial markets (in particular of government credit spreads), linked to the uncertainty related to the Greek debt crisis. The decrease during the month of September was due entirely to a sliding technical effect of the VaR scenarios (time decay of the more extreme scenarios).

Daily evolution of market risk - operating VaR

Jan-15 Feb-15 Mar-15 May-15 Jun-15 Aug-15 Sep-15 Oct-15 Dec-15

120

110

100

90

80

70

60

50

40

30

20

10

Mill

ions

VaR Evolution Banca IMI (TRD + AFS)

In the last quarter the VaR dynamics was due to operations within the Italian government sector, which first saw an increase and then a reduction in sales and for sales made and lower volatility in reference to historical scenarios of the spread. In the latter part of the year, also in the wake of further involvement by the ECB, there is a marked


173

higher incidence of the interest rate component (due to market movements and trading book operations). Use of the operating VaR limit was on average around 83%, with maximum use of 116%. These measures also include the AFS component with the aim of maintaining constant control of implicit risks in the banking book.

In the fourth quarter of 2015, the composition of the risk profile by factor showed a prevalence of risk linked to credit spread volatility, representing 67% of the total.

Contribution of risk factors to daily operating VaR

(percentage of the total area for the period)

4Q 2015 Equity Hedgefund

Interest Rates

Creditspread

Currency Otherparameters

Commodities

Banca IMI 4% 0% 24% 67% 1% 3% 1%

The table showns the contribution of risk factors considering the overall VaR 100%

Issuer risk associated with the trading portfolio is subject to fair value analysis through the aggregation of ex-posures by rating class and is monitored using a system of operational limits founded on both rating classes and concentration indicators.

The use of the IRC limits (maximum 330 million) at year-end amounted to 29.5%.

Breakdown of exposures by type of issuer for Banca IMI

(percent values of the total area at year end, excluding government securities and the Group’s securities and including hedging CDS)

Total of which

Corporate Financial Emerging Covered Securitisations Government

2015 100% 16% 5% 3% 12% 63% 1%

2014 100% 8% 18% -1% 21% 55% -1%

There is a prevalence of exposures in the securitisation sector. The composition of the trading book by rating is mainly investment grade.

The effectiveness of the VaR calculation model must be monitored on a daily basis using backtesting, which allows comparison within the regulatory scope of:– daily estimates of value-at-risk;– daily measurements of profits/losses based on backtesting, which are calculated using the daily operating

reports of the effective profit and loss made by each desk, excluding the components that are not relevant to backtesting (such as fees and intraday trading).

Backtesting checks the model’s capacity to correctly measure variations in the daily valuation of trading positions from a statistical point of view, covering a one-year observation period (around 250 estimates). Critical issues in the internal model’s suitability arise when the daily backtesting measurements of profits/losses show more than three instances over the year of observation, in which the daily loss is higher than the value-at-risk estimate. Current legislation requires backtesting to be carried out on both the effectively recorded and the theoretical P&L series. This latter is based on revaluation of the portfolio value using the pricing models adopted in calculating the VaR measure. The number of significant backtesting exceptions is determined as the maximum amount between those in the effective P&L and the theoretical P&L.

The two backtesting exceptions of Banca IMI refer to the figure of effective P&L, due to the variability in Italian equity prices in the second quarter of 2015.


174

-25.0

-20.0

-15.0

-10.0

-5.0

0.0

5.0

10.0

15.0

20.0

25.0

30.0

dec-15sep-15jun-15mar-15jan-15

Mill

ions

Effective P&L Daily VaR

The monitoring of risks in Banca IMI’s trading operations also involves the use of scenario analyses and stress tests. The following table provides an overview of the impact of selected scenarios involving trends in equity prices, in-terest rates, credit spreads and exchange rates on the income statement.


EQUITY INTEREST RATES CREDIT SPREAD CURRENCY COMMODITIES

volatility +10% and prices -5%

volatility -10% and prices +5%

+40bp lower rate

-25bp +25bp -10% +10% -20% +20%

Total -7.4 -2.5 -117.3 51.0 226.5 -224.3 2.6 -1.3 3.1 -0.4

In particular, as at 31/12/2015:– for equity market positions, a rise in prices of 5% and an ensuing fall in volatility of 10% would have resulted

in a loss of approximately 2.5 million. Even a fall in equity prices and a 10% rise in volatility would result in a loss of 7.4 million euro.

– on interest rate exposures, a parallel +40 basis point shift would lead to a 117 million euro loss; – for exposures sensitive to changes in credit spreads, a 25 basis point widening in spreads would have led to a

224 million loss;– in terms of foreign-exchange exposures, a 10% rise in the euro would result in a loss of 1.3 million; – as for exposures to commodities, a 20% rise in prices would result in a loss of 0.4 million euro.

The structure of operational limits reflects the level of risk deemed acceptable for individual business areas in ac-cordance with the management and strategic guidelines laid down by the top management. Limits are set and monitored at the various hierarchical levels by assigning powers to the various managers of the business units, with the aim of achieving the optimal trade-off between a controlled risk environment and the requirements of operational flexibility.


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The effective operation of the system of limits and delegated powers is founded on the basic concepts of hierarchy and interaction, the application of which led to the definition of a structure organised into:– first level limits (VaR): these are approved by the Management Board of the Ultimate Parent at the same time as

the approval by the Financial Risks Committee. The trend in the absorption of these limits and the assessment of the adequacy thereof is the subject of periodic analysis by the Group’s Financial Risks Committee; and

– second level limits (sensitivity and greeks): their aim is to control the operations of individual desks on the basis of measures differentiated according to the specific nature of the securities treated and operational strategies, such as sensitivities, the greeks and equivalent exposures.

Counterparty risk is measured in terms of the cost of replacing derivative contracts and monitored in terms of both future exposure and aggregations by sector and class of risk. Banca IMI’s typical counterparties on the OTC market are lending institutions, financial and insurance companies and, to a small extent, by corporate counterpar-ties. The model adopted for distributing derivatives to non-institutional customers (mainly IRSs and currency trades) involves maintaining the credit risk on the commercial bank books, and transferring the market risks to Banca IMI.

The internal counterparty risk model project led to the use of the PFE (Potential Future Exposure) measure in order to monitor exposures on the lines of credit for dealing in OTC derivative instruments and Securitised Financing Transactions – SFT (Repo and Security Lending).

At the beginning of the first quarter of 2014, this model was used to calculate regulatory requirements for OTC and listed derivatives (central counterparties). The authorization process for the SFT is still ongoing as of 31 De-cember 2015.

The internal model is applied according to the guidelines of Basel III. It follows that the requirement vis-à-vis counterparty risk is the sum of the risk of default and CVA risk. The risk of default is established from an EAD that is the higher than the EAD calculated according to current risk parameters and the EAD calculated in accordance with risk parameters calibrated on a stress period.The CVA Capital Charge is calculated as the sum of the CVA VaR calculated on the credit spread movements of the counterparties registered in the past year and the CVA VaR calculated on the movements of a stress period that currently has been identified as the 2011-2012 period.

Following the adoption of the internal method, the following company processes have been activated: – definition and periodic calculation of stress tests on market scenarios and joint market/credit scenarios on

counterparty risk measures;– definition and periodic analysis of Wrong-Way Risk, i.e. the risk of a positive correlation between the future

exposure to a counterparty and that counterparty’s probability of default;– definition and monitoring of management limits at the portfolio level, authorised by the Group’s Financial Risks

Committee for derivatives transactions;– contribution of collateral inflow/outflow risk measures, calculated on the basis of the internal counterparty risk

model, for OTC derivative transactions with collateral agreement (CSA);– backtesting: in order to test the validity of the model. The tests are carried out on the risk factors, financial

instrument and netting set;– reporting to the various committees on the advanced risk measures, capital requirement, level of use of mana-

gement limits, results of stress tests and analyses of wrong-way risk.


176

OTC derivative contracts entered into with approximately 400 counterparties, are over 70,000: they have an ave-rage maturity of 5 years and 79% are interest rate instruments. The collateralized deals are 65% of the total. The chart below shows the distribution of contracts by type of payoff.

IRS

FX

Commodity

Average Option

Cap e Floor

FRA

Other

Swaption

CDS

OIS

CCS

Payoff distribution by contracts number

2. Regulatory trading book: breakdown of exposures in equities and equity indices by main listing countries

Listed Unlisted

Italy USA France United Kingdom Germany Other

A. Equities

– long positions 487,575 47,850 137,552 61,336 51,651 443,670 452

– short positions 54,852 15,120 277 2,462 14,135 6,340 -

B. Unsettled transactions involving equities

– long positions 15,466 779 725 796 - 550 -

– short positions 962 1,010 2,706 823 - 647 -

C. Other derivatives on equities

– long positions 1,588,321 220,735 4,778 9,871,326 7,160,790 - -

– short positions 1,789,383 147,225 - 2,887,756 6,330,069 - 267,107

D. Derivatives on equity indices

– long positions 84,198 8,024 - 1,330 85,504 - -

– short positions 1,701,723 331 - 120 32,443 - 307,843

Securitised derivatives with total or partial redemption are not included


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DETERMINING THE FAIR VALUE OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES

General principles This chapter contains a concise account of the criteria used by the Intesa Sanpaolo Group to determine the fair value of financial instruments.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in a orderly transaction (i.e. not a forced liquidities or distress sale) between market partecipants at the measurement date. Fair value is a market valuation criterion, not specific to the entity. An entity shall measure the fair value of an asset or liability by adopting the assumptions that market operators would use to determine the price of an asset or liability, presu-ming that market operators act to meet their own best financial interests.

The fair value of financial instruments is determined through the use of prices derived from the financial markets, in the case of instruments listed on active markets, or through the use of internal valuation models, in the case of other instruments. A market is considered active if quoted prices representing effective, regular market transactions undertaken during an appropriate reference period are readily and regularly available from stock exchanges, dealers, brokers, industry companies, listing services or authorised entities. In the absence of quotation on an active market or in the absence of regular market operation, i.e. when the mar-ket does not present a sufficient number of continuous transactions, and there are large movements in bid-offer spreads and volatility, the fair value of financial instruments is determined chiefly through the use of valuation techniques aimed at establishing the price of a hypothetical arm’s-length transaction motivated by normal market considerations at the valuation date. Such techniques include:– reference to market values indirectly associated with the instrument to be valued, drawn from similar products

in terms of risk characteristics (comparable approach); and– valuations conducted using, in whole or in part, inputs not derived from observable market parameters, but

instead based on estimates and assumptions formulated by the valuer (mark-to-model).

These approaches are not chosen on an optional basis, since they are applied on a hierarchical basis: top priority is to be given to official prices available on active markets for the assets and liabilities to be valued (Effective market quotes - level 1), then to assets and liabilities measured according to valuation techniques that refer to observable reference market parameters other than the quoted prices of financial instruments (Comparable approach - level 2), and lower priority to assets and liabilities whose fair value is calculated according to valuation techniques that take reference parameters that are not drawn from the market, and thus involve a greater element of discretion (Mark-to-Model Approach - level 3).

The following are considered quoted on an active market (level 1): equities traded on a regulated market; bonds quoted on the EuroMTS circuit or for which at least three executable prices are available from the main international price contribution platforms on a continuous basis; investment funds listed on a harmonised mar-ket; spot currency trades and derivative contracts for which quotations are available on an active market (such as exchange-traded futures and options).

For financial instruments quoted on active markets, the “current” bid price is used for financial assets and the current price requested by the seller is used for financial liabilities, as drawn from the most advantageous market available at the end of the reference period.In the case of financial instruments for which the bid-offer spread is immaterial, or for financial assets and financial liabilities the characteristics of which result in offsetting positions for market risk, the average market price (as above, for the final day in the reference period) is used instead of the bid price or offer price.

In the absence of active market prices, the fair value of a financial instrument is determined through the “Compara-ble Approach” (level 2), which uses valuation models based on market parameters. In this case, valuation is based not on price quotations for the financial instrument being valued, but rather through the use of a given calculation method (pricing model) based on prices or credit spreads derived from the official quotations of instruments that are essentially similar in terms of risk factors. The use of this approach translates into the search for transactions on active markets involving securities comparable in terms of risk factors with the security being measured.

The calculation methods used in the comparable approach allow the valuer to reproduce the prices of financial instru-ments quoted on active markets (calibration of the model), without including parameters, the value of which cannot be derived from quotations of financial instruments on active markets or which may not be fixed at levels that would replicate quotations on active markets, which would have a decisive impact on the amount of the final valuation.


178

The fair value of bonds without official quotations on an active market is determined through the use of an ap-propriate credit spread, identified based on liquid contributed financial instruments with similar characteristics of contribution and liquidity. Credit spread sources are liquid contributed securities attributable to the same issuer, credit default swaps on the same reference entity and liquid contributed securities attributable to issuers with the same rating and from the same industry. The differing seniority of the security to be priced with respect to the issuer’s debt structure is also taken into account.

In consideration of their number and complexity, a systematic reference framework has been developed for deri-vatives. This framework provides the common elements (calculation algorithms, processing models, market data used and basic assumptions of the model) that are used to measure all categories of derivatives. The valuation of interest-rate, exchange-rate, equity, inflation and commodity derivatives that are not traded on regulated markets - over-the-counter (OTC) instruments -, traded bilaterally with market counterparties, takes place by using specific pricing models, driven by input parameters such as rate curves, exchange rates, volatilities derived from the market.The fair value takes into account the credit risk of the counterparty (through CVA and DVA measures) and future expo-sures of the contract (PFE).

With regard to structured credit products, such as ABSs, if significant prices are not available, the valuer applies valuation techniques that refer to parameters derived from the market (comparable approach), such as spreads drawn from newly issued securities and/or obtained from major investment firms, supported by a qualitative analysis of the performance of the underlying based on periodic investor reports and subject to back-testing against effective sale prices.

Financial instruments, the fair value of which is determined through the comparable approach also include equities va-lued on the basis of direct transactions, i.e. significant transactions involving the security over a period of time deemed sufficiently short in relation to the valuation date and under constant market conditions. “Relative” valuation models based on multipliers are used in these cases, according to the comparable companies approach or the comparable transactions approach. In the former case, reference is made to a sample of comparable quoted companies and thus to market prices used to derive multiples for valuing the subsidiary. In the latter case, reference is made to the prices of trades undertaken on the market involving comparable companies over a period deemed sufficiently short in relation to the valuation date and under constant market conditions.

Finally, financial instruments valued according to the comparable approach include most of the lending assets and lia-bilities. Specifically, medium and long term assets and liabilities are valued by actualising future cash flows based on the discount rate adjustment approach, which involves adding risk factors linked to the provision of loans at the rate used for actualising future cash flows.

In order to determine the fair value of some types of financial instruments, the valuer must rely upon valuation models that involve the use of parameters that may not be observed directly on the market and thus entail estimates and as-sumptions by the valuer (level 3 – mark-to-model approach). In further detail, such financial instruments are valued using a given calculation method based on specific assumptions concerning:– future cash flow performance, where appropriate, conditioned by future events to which probabilities may be assi-

gned on the basis of historical experience or behavioural hypotheses;– the level of certain input parameters not quoted on active markets, the estimation of which nonetheless privileges

information derived from market prices and spreads. If such market prices and spreads are not available, the valuer relies upon historical data for the specific underlying risk factor or specialised research on the subject (e.g. reports by rating agencies or top market players).

The following are valued according to a mark-to-model approach:– debt securities and complex credit derivatives (CDOs) that fall within the category of structured credit products

and index credit derivatives;– equity interests and other equity instruments valued according to models based on discounted cash flow models;– certain derivative transactions related to securitisations and certain structured equity risk options.

The fair value of debt securities and complex credit derivatives (funded and unfunded CDOs) is determined accor-ding to a quantitative model that estimates the losses on the collateral through an approach that simulates the associated cash flow according to copula functions. The most significant factors considered in the simulation - for


179

individual items of collateral - are the risk neutral default probabilities derived from market spreads, recovery rates, correlations between the values of collateral present in the structure and the expected residual lives of contracts. In order to ensure that valuations reflect the strong degree of market dislocation and severe conditions of illiqui-dity, a series of adjustments to those valuations based on the main input parameters have been prepared. This valuation is followed by a qualitative credit review, which consists of a thorough analysis of credit issues pertaining to both the ABS/CDO structure itself and the associated collateral. The purpose of this process is to identify any present or future weaknesses emerging from the characteristics of the underlying that might not be incorporated by rating agencies and thus fail to be fully considered in the valuations discussed above. The results of this analysis, integrated with elements of an objective nature (for example, past due, weighted average delinquency, etc.) are summarised in the form of an indicator representative of credit quality that gives rise to downward revisions of the rating, conducted in such a way as to lead to a matching adjustment to the previous valuation. Lastly, this class of products may be subject to a further adjustment at the management’s discretion according to prices derived from counterparties and experts’ opinions.For index credit derivatives, off-the-run series (no longer being issued) are measured as level 3 where reliable quo-tations that can be certified by the Risk Management Department are not available. The fair value of on-the-run series is determined according to quotations adjusted to account for the diversity of the underlying.

Equities that are not valued according to the “relative” models discussed in regards to level 2 are instead measured according to “absolute” valuation models. In further detail, these are cash flow models that essentially call for the value of a security to be defined according to an estimate of the cash or income flows that it is capable of genera-ting over time, discounted at an appropriate rate according to the instrument’s risk level, balance sheet models or mixed balance sheet/income statement models.

The valuation method defined for a financial instrument is adopted consistently over time and modified solely in response to significant changes in the market or subjective conditions of the issuer of the financial instrument.The process of valuing financial instruments (known as the “fair value policy”) consists of a various steps, summa-rised in the following macro activities:– identification of the measurement sources: for each asset class, the Market Data Reference Guide indicates the

processes required to identify market parameters and the methods for incorporating and using such data;– certification and treatment of market data used for valuation: this step consists of a thorough review of the

market parameters used (checking the accuracy of the data stored on the proprietary platform against the contributing source), a probability test (consistency of each figure with similar or comparable figures) and an examination of the actual conditions of application; In further detail:- the asset classes are distinguished by the various types of market parameters;- the reference requirements for determining the official revaluation sources are established;- the fixing conditions for official data are determined; and- data certification conditions are determined;

– validating pricing models and the Risk Assessment Model: this step involves assessing the consistency and com-pliance of the different valuation methods used by the Bank with current market practice, in order to highlight any critical issues inherent in the pricing models used and to determine any adjustments that need to be made to the valuation; The validation process is particularly important when the Bank begins to deal in a new financial instrument, requiring the development of additional pricing models, as well as when the Bank decides to use a new model to assess pay-offs previously managed using models deemed less adequate. All models used for valuation are subject to an internal validation process that involves various competent units or external firms, in cases of great complexity or particular turbulence;

– monitoring of the consistency of the pricing models over time: regular monitoring of compliance with the pri-cing model used for valuation allows for the timely detection of any discrepancies and the implementation of the necessary checks and corrective measures.

The fair value policy also calls for possible adjustments to reflect model risk and other valuation-related uncertain-ties. In particular, model risk consists of the possibility that the measurement of a complex security is materially sensitive to the choice of a model. It is indeed possible that various models may yield different prices for exotic instruments, despite pricing the elementary instruments of a similar quality. In such cases, where possible, the al-ternative models are compared and, where necessary, the model inputs are subjected to stress, thereby obtaining information useful in quantifying fair value adjustments, expressed in terms of measurable financial quantities (vega, delta and correlation shift) and subject to periodic review. These fair value adjustments due to model risks are part of a Mark-to-Market Adjustment Policy adopted in order to contemplate other factors that may have an impact on measurement, in addition to the model risk illustrated above.


180

These other factors are, essentially:– a high and/or complex risk profile;– the illiquidity of positions determined by temporary or structural market conditions or in relation to the amount

of the values held (in the case of excessive concentration); and– difficulty in measurement due to the absence of available liquid market parameters.


181

2.2 INTEREST RATE RISK AND PRICE RISK - BANKING BOOK


A. General aspects, management processes and methods of measuring interest rate and price risksBanca IMI’s qualified banking book operations consist of bond issues and an asset portfolio classified under AFS and Loans & Receivables.

The Banca IMI issues at 31 December 2015 and 31 December 2014 are recognised at “amortised cost”: this category includes bonds with yield linked to interest rates, exchange rates and/or the evolution of equity basket. These bonds are recorded under caption 30 of the liabilities, “securities issued”.Regarding the AFS portfolio, all the assets are recognised at the fair value on the date of settlement; interest is char-ged to the income statement according to the effective interest rate method. They are measured at fair value as a balancing entry to the equity reserves.

From an operational point of view, all the risks from the type of operations described are hedged using financial in-struments prepared for the purpose with third parties.It is also important to note that the Bank adopts an integrated approach for monitoring interest rate exposure risk for both the regulatory trading book and the regulatory banking book.

B. Fair value hedgesFrom an accounting point of view, the Bank set itself the objective of mitigating the volatility of the economic results caused by the interest rate risk. Therefore, the accounting treatment adopted for a portion of the bonds recognised at amortised cost and part of the debt securities belonging to the AFS portfolio involves the designation of specific hedging relationships and the consequent application of the hedge accounting solely to the changes in fair value relating to interest rates and exchange rates.

When the bonds are issued, or a security is purchased for the AFS portfolio, the derivative contract created to cover the specific risk profile must meet the requirements set by IAS 39 in order to be designated as a hedging instrument. The effectiveness of the relationship is measured on a quarterly basis by the Ultimate Parent’s Risk Management department, also prospectively.If the effectiveness tests have a positive outcome, the balancing entry of the revaluation of the hedged items and underlying derivative is recognised under caption 90 “Profits (losses) on hedging”.

With regard to bond issues, if the effectiveness tests have a negative outcome, the following alternatives are possible:1. extinguishment of the hedged instrument - The changes in fair value of the derivative from the date on which

the effectiveness was measured to the date of extinguishment are recorded under caption 80 of the income statement “Profits (losses) on trading”;

2. non-extinguishment of the hedged instrument - Amortisation is carried out on the adjustments to the value of the issued security (adjustments carried out during the hedge period based on the internal yield rate). This amortisation runs from the date the last effectiveness test is passed and applied to the value adjustment pro-gressively recognised on the same date.

In both cases the derivatives, previously classified as hedging derivatives, are considered as trading derivatives.

C. Cash flow hedgesAs at 31 December 2015, the Bank has no cash flow hedges or hedge of net investment in a currency other than the Euro.


182


1. Banking book: breakdown by residual maturity (repricing date) of financial assets and liabilities

Currency: EUR

On demand

Up to 3 months

Between3 and

6 months

Between 6 months

and 1 year

Between 1 and

5 years

Between 5 and

10 years

Over 10 years

Unspecified maturity

1. On-balance sheet assets 16,031,847 43,356,128 15,669,548 1,235,923 3,915,816 5,405,218 2,609,003 -

1.1 Debt securities

- early repayment option 42,555 628,941 39,627 - 10,243 5,114 45,296 -

- other 74,325 1,060,759 101,098 33,922 627,776 5,264,339 1,712,009 -

1.2 Due from banks 7,892,253 33,725,736 12,495,264 1,195,437 968,655 93,023 821,842 -

1.3 Due from customers

- checking accounts 835,749 - - - - - - -

- other

- early repayment option 330,316 2,375,555 2,330,000 3,475 9,013 - 11,767 -

- other 6,856,649 5,565,137 703,559 3,089 2,300,129 42,742 18,089 -

2. On-balance sheet liabilities 7,778,726 67,983,747 6,151,940 2,929,794 3,041,848 341,737 1,061,925 -

2.1 Due to customers

- checking account 370,667 - - - - - - -

- other

- early repayment option - - - - - - - -

- other 557,043 13,915,758 2,413 54,000 4,779 1,993 2,204 -

2.2 Due to banks

- checking account 6,197,759 - - - - - - -

- other 592,103 52,166,118 2,079,198 - 1,032,756 267,099 1,059,721 -

2.3 Debt securities

- early repayment option - - - - 18,983 - - -

- other 61,154 1,901,871 4,070,329 2,875,794 1,985,330 72,645 - -

2.4 Other liabilities


- other - - - - - - - -

3. Financial derivatives - 11,861,039 3,515,693 2,038,670 6,279,592 4,779,855 1,519,600 -

3.1 With underlying security

- Options

+ Long positions - - - - - - - -

+ Short positions - - - - - - - -

- Other derivatives



3.2 Without underlying security

- Options

+ Long positions - - - - 409,255 45,000 - -

+ Short positions - - - - 409,255 45,000 - -

- Other derivatives

+ Long positions - 3,866,735 3,115,333 1,995,004 4,253,311 223,876 66,500 -

+ Short positions - 7,994,304 400,360 43,666 1,207,771 4,465,979 1,453,100 -

4. Other off-balance sheet transactions

23,445,408 20,233,474 374,808 3,800 1,379,210 132,012 170,092 -

+ Long positions 17,760,346 3,049,134 374,808 3,800 1,379,210 132,012 170,092 -

+ Short positions 5,685,062 17,184,340 - - - - - -


183

Currency: Other currencies

On demand

Up to 3 months

Between3 and

6 months

Between 6 months

and 1 year

Between 1 and

5 years

Between 5 and

10 years

Over 10 years


1. On-balance sheet assets 944,017 2,443,194 1,363,866 35,503 332,954 1,886,125 422,464 -

1.1 Debt securities

- early repayment option 414 - - - 5,004 17,046 7,967 -

- other 20,018 - 1 - 305,818 1,853,648 393,986 -

1.2 Due from banks 616,514 1,775,248 1,184,081 909 7,579 11,081 10,305 -


- checking accounts 69,070 - - - - - - -

- other

- early repayment option 3,417 210,029 63,382 33,992 - - - -

- other 234,584 457,917 116,402 602 14,553 4,350 10,206 -

2. On-balance sheet liabilities 830,909 3,059,139 1,453,506 371,050 2,122,948 595,869 141,201 -



- other


- other 419,673 469,484 - - - 8,041 8,033 -

2.2 Due to banks


- other 13,653 2,463,857 1,313,296 - 269,494 256,775 133,168 -

2.3 Debt securities


- other 59,113 125,798 140,210 371,050 1,853,454 331,053 - -



- other - - - - - - - -

3. Financial derivatives - 2,368,037 263,093 592,045 2,992,788 1,398,289 22,963 -


- Options



- Other derivatives




- Options

+ Long positions - - - - 27 - - -

+ Short positions - - - - - 27 - -

- Other derivatives

+ Long positions - 1,057,708 170,410 347,965 2,690,633 574,075 - -

+ Short positions - 1,310,329 92,683 244,080 302,128 824,187 22,963 -

4. Other off-balance sheet transactions

894,938 894,565 16 - 357 - - -

+ Long positions 553,108 341,457 16 - 357 - - -

+ Short positions 341,830 553,108 - - - - - -


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2.3 CURRENCY RISK


A. General aspects, management processes and methods of measuring currency risk“Currency risk” applies to the possibility that variations in market currency could produce significant positive or negative changes in the Bank’s equity counter values expressed in euro, which is the fair value of the risk positions managed.

The organisational changes in the Intesa Sanpaolo Group concentrated the specialist and product departments responsible for operating on the spot and forward currency and derivative markets into Banca IMI. As well as the trading and banking books, these departments also operate on the Ultimate Parent’s books on the basis of specific agreements with the CIB Division. They also guarantee the liquidity of the prices proposed to the Group’s remai-ning domestic commercial units, thus supporting management of the risks generated by the latter in their business with customers.

The qualitative part of the trading book is included under the above market risks caption.

B. Currency hedgingThe currency risk from securities and derivatives trading is managed by each single operating unit, using both cash and derivative instruments. Any “open” positions are transferred by the individual units to the “Treasury” desk in order to optimise overall currency risk management.

Currency risk on fee and commission income and expense, especially for investment banking and structured finan-ce, is managed by trading the individual items collected immediately with the euro. Currency risk on the spread of structured finance loans is sterilised in terms of the gross interest flows collected from customers or paid on loans.

No cases have occurred so far that require the hedging of future transactions that is relevant from an accounting point of view.

The primary risk mitigation strategy is funding in the same currency as the assets, through payments from the Ultimate Parent, or alternatively the synthetic conversion of funding into Euro.

Currency risk mitigation needs with reference to issues in the Bank’s currency induced the use of CCS as hedging instruments for them, within the scope of accounting fair value hedge relationships.

Currency risk on the spread of structured finance loans is sterilised in terms of the gross interest flows collected from customers or paid on loans.


185


1. Breakdown of assets, liabilities and derivatives by currency of denomination

Currencies

US dollar Poundsterling

Yen Canadian dollar

Swiss franc Other currencies

A. Financial assets

A.1 – Debt securities 2,176,003 318,962 - 18,154 94 671,040

A.2 – Equities 90,220 30,030 107 - 22,670 24,269

A.3 – Due from banks 3,286,743 63,852 38,728 1,645 11,388 203,364

A.4 – Loans to customers 561,202 394,019 9,015 2,748 92,730 162,288

A.5 – Other financial assets - - - - - -

B. Other assets 31,019 1,663 - 187 210 2,359

C. Financial liabilities

C.1 – Due to banks 3,393,368 230,802 64,361 24,088 117,988 943,935

C.2 – Due to customers 937,643 49,960 6,309 203 20,591 6,064

C.3 – Debt securities 1,524,830 57,301 - 52,559 6,923 1,331,242

C.4 – Other financial liabilities - - - - - -

D. Other liabilities 93,351 2,391 1 199 277 52,270

E. Financial derivatives

– Options

+ long positions 2,807,056 69,142 59,959 - 154,407 483,963

+ short positions 3,556,089 25,642 54,162 - 63,509 621,038

– Other derivatives

+ long positions 22,081,261 3,582,770 170,564 78,493 836,275 3,970,271

+ short positions 21,749,652 4,264,576 164,112 19,112 930,212 2,590,712

Total assets 31,033,504 4,460,438 278,373 101,227 1,117,774 5,517,554

Total liabilities 31,254,933 4,630,672 288,945 96,161 1,139,500 5,545,261

Difference (+/-) (221,429) (170,234) (10,572) 5,066 (21,726) (27,707)

There were no significant economic effects from the changes in exchange rates after the year end.The following table shows the exchange rates with the euro of the main currencies of denomination of assets and liabilities at the year end and as at 23 February 2016.

Currency Code 31.12.2015 23.02.2016 Change

US Dollar USD 1.0887 1.1002 0.01150

POUND Sterling GBP 0.7340 0.7799 0.04590

SWISS Franc CHF 1.0835 1.0921 0.00860

JAPANESE Yen JPY 131.0700 123.1200 (7.95000)

CZECH REPUBLIC Koruna CZK 27.0230 27.0280 0.00500

HUNGARIAN forint HUF 315.9800 307.6300 (8.35000)

POLISH Zloty PLN 4.2639 4.3668 0.10290

TURKISH New Lira TRY 3.1765 3.2298 0.05330

SOUTH AFRICAN Rand ZAR 16.9530 16.6401 (0.31290)


186

2.4 DERIVATIVES

A. FINANCIAL DERIVATIVES

A.1 Regulatory trading book: reporting date notional amounts

2015 2014

Over the counter Clearing house Over the counter Clearing house

1. Debt securities and interest rates

a) Options 138,834,531 15,414,571 169,865,820 8,893,432

b) Swaps 2,240,033,169 - 2,192,478,672 -

c) Forwards - - - -

d) Futures - 143,096,015 - 89,713,974

e) Other - - - -

2. Equities and indices

a) Options 14,656,996 48,801,418 14,962,678 45,994,354

b) Swaps 301,588 - 356,737 -

c) Forwards 25,787 - 50,886 -

d) Futures - 1,422,484 - 1,295,872

e) Other - - - -

3. Currencies and gold

a) Options 19,955,998 11,344 18,601,867 -

b) Swaps 44,281,967 - 37,683,393 -

c) Forwards 8,411,508 - 9,158,324 -

d) Futures - 333,804 - 234,872

e) Other 1,142,835 - 1,140,663 -

4. Commodities 10,354,758 3,403,244 5,361,384 2,925,878

5. Other underlying assets - - - -

Total 2,477,999,137 212,482,880 2,449,660,424 149,058,382

The notional amounts set out in the “Over the counter” column include OTC derivatives regulated through clea-ring house for about 1.6 billion euro (1.5 billion at 31 December 2014).


187

A.2 Banking book: reporting date notional amounts

A.2.1 Hedging

2015 2014



a) Options 109,487 - - -

b) Swaps 16,317,130 - 19,925,223 -

c) Forwards - - - -

d) Futures - - - -

e) Other - - - -


a) Options - - - -

b) Swaps - - - -

c) Forwards - - - -

d) Futures - - - -

e) Other - - - -


a) Options - - - -

b) Swaps 1,022,210 - - -

c) Forwards - - - -

d) Futures - - - -

e) Other - - - -

4. Commodities - - - -


Total 17,448,827 - 19,925,223 -

The notional amounts set out in the “Over the counter” column include OTC derivatives regulated through clea-ring house for about 7.8 billion euro (1.4 billion at 31 December 2014).

Currency risk mitigation needs with reference to bank’s foreign currency issues induced the use of CCS as hedging instruments for them, within the scope of accounting fair value hedge relationships.


188

A.2.2 Other derivatives

2015



a) Options - - - -

b) Swaps - - - -

c) Forwards - - - -

d) Futures - - - -

e) Other - - - -


a) Options 1,552,751 - 2,964,455 -

b) Swaps - - - -

c) Forwards - - - -

d) Futures - - - -

e) Other - - - -


a) Options 61,165 - 95,820 -

b) Swaps - - - -

c) Forwards - - - -

d) Futures - - - -

e) Other - - - -



Total 1,613,916 - 3,060,275 -

The table refers to the fair value of derivatives separated from the Banca IMI issues.

The two following tables (A.3 and A.4) cover the fair value of all outstanding contracts, whether on margin or not on margin.


189

A.3 Financial derivatives: gross positive fair value - breakdown by product

Positive fair value

2015 2014


A. Regulatory trading book

a) Options 4,572,451 688,463 5,531,889 624,630

b) Interest rate swaps 30,239,724 - 37,071,269 -

c) Cross currency swaps 2,881,673 - 2,552,994 -

d) Equity swaps 14,060 - 7,357 -

e) Forwards 276,739 - 358,758 -

f) Futures - - - 107,011

e) Other 1,039,640 - 828,139 -

B. Banking book - hedging

a) Options 4,046 - - -

b) Interest rate swaps 156,090 - 323,864 -

c) Cross currency swaps 43,092 - - -

d) Equity swaps - - - -

e) Forwards - - - -

f) Futures - - - -

e) Other - - - -

C. Banking book - other derivatives

a) Options 55,005 - 100,444 -

b) Interest rate swaps - - - -

c) Cross currency swaps - - - -


e) Forwards - - - -

f) Futures - - - -

e) Other - - - -

Total 39,282,520 688,463 46,774,714 731,641


190

A.4 Financial derivatives: gross negative fair value - breakdown by product

Negative fair value

2015 2014



a) Options 7,394,421 715,100 6,879,213 532,095



d) Equity swaps 9,354 - 7,280 -

e) Forwards 206,419 - 235,588 -

f) Futures - - - 501,141

e) Other 253,246 - 265,740 -


a) Options - - - -




e) Forwards - - - -

f) Futures - - - -

e) Other - - - -


a) Options 105,220 - 220,042 -




e) Forwards - - - -

f) Futures - - - -

e) Other - - - -

Total 42,028,408 715,100 48,736,397 1,033,236

The values set out in the “Over the counter” column include the net fair value of OTC derivatives regulated through central counterparties for about 4.1 billion euro (4.8 billion at 31 December 2014).


191

A.5 OTC financial derivatives - regulatory trading book: notional amounts, gross positive and negative fair values by counterparty - contracts not included in netting arrangements

Governments and Central

Banks

Othergovernment

agencies

Banks Financial institutions

Insurance companies

Non-financial companies

Other

1) Debt securities and interest rates

– notional amount - - 2,626,653 829,600 503,040 1,521,601 -

– positive fair value - - 152,470 59,801 24,961 145,675 -

– negative fair value - - (92,851) (66,796) (83) (1,932) -

– future exposure - - 10,088 5,443 2,564 8,888 -

2) Equities and indices

– notional amount - - 3,349,034 204,166 1,271,344 29,972 -

– positive fair value - - 559 2,721 36 481 -

– negative fair value - - (2,973,507) (7,007) (130,837) (245) -

– future exposure - - - 271,298 1,146 4,832 -

3) Currencies and gold

– notional amount 367,411 - 1,023,670 244,989 - 21,705 -

– positive fair value - - 169,112 44,070 - 51 -

– negative fair value (50,669) - (1,649) - - (1,921) -

– future exposure 27,556 - 13,308 12,249 - 828 -

4) Other

– notional amount - - 68,890 43,232 - 277,247 -

– positive fair value - - - 2,666 - 17,681 -

– negative fair value - - - (2,208) - (17,156) -

– future exposure - - 6,889 4,830 - 29,421 -

A.6 OTC financial derivatives - regulatory trading book: notional amounts, gross positive and negative fair values by counterparty - contracts included in netting arrangements


Banks

Othergovernment

agencies


Insurance companies


Other


– notional amount 7,225,000 - 698,328,610 1,665,567,799 686,451 1,578,946 -

– positive fair value 3,553,750 - 27,388,404 2,518,181 22,967 160,850 -

– negative fair value (5,111) - (26,478,407) (7,006,341) (8,288) (103,914) -


– notional amount - - 8,462,847 1,412,063 250,145 4,800 -

– positive fair value - - 220,130 112,685 - 1,924 -

– negative fair value - - (132,744) (75,785) (14,553) - -


– notional amount - - 53,791,917 15,824,848 594,332 1,923,436 -

– positive fair value - - 1,860,700 1,235,831 104,602 14,135 -

– negative fair value - - (3,728,502) (243,442) (1,877) (104,534) -

4) Other

– notional amount - - 6,492,890 2,834,315 - 638,184 -


– negative fair value - - (288,113) (213,706) - (6,442) -


192

A.7 OTC financial derivatives - banking book: notional amounts, gross positive and negative fair values by counterparty - contracts not included in netting arrangements


Banks

Othergovernment

agencies


Insurance companies


Other


– notional amount - - - - - - -

– positive fair value - - - - - - -

– negative fair value - - - - - - -

– future exposure - - - - - - -


– notional amount - - 1,552,751 - - - -

– positive fair value - - 55,005 - - - -

– negative fair value - - (103,439) - - - -

– future exposure - - 20,822 - - - -


– notional amount - - 61,165 - - - -




4) Other





A.8 OTC financial derivatives - banking book: notional amounts, gross positive and negative fair values by counterparty - contracts included in netting arrangements


Banks

Othergovernment

agencies


Insurance companies


Other


– notional amount - - 8,393,588 8,033,029 - - -

– positive fair value - - 155,130 5,006 - - -

– negative fair value - - (87,078) (17,460) - - -






– notional amount - - 988,646 33,564 - - -

– positive fair value - - 42,243 849 - - -


4) Other





193

A.9 Residual maturity of OTC financial derivatives: notional amounts

Up to 1 year Between 1 and 5 years

Over 5 years Total


A.1 Financial derivatives on debt securities and interest rates 812,096,788 835,735,408 731,035,504 2,378,867,700

A.2 Financial derivatives on equities and indices 3,992,685 10,141,885 849,801 14,984,371

A.3 Financial derivatives on currencies and gold 23,574,414 25,635,990 24,581,904 73,792,308

A.4 Financial derivatives - other 5,994,694 4,360,064 - 10,354,758

B. Banking book

B.1 Financial derivatives on debt securities and interest rates 2,474,425 6,728,481 7,223,711 16,426,617

B.2 Financial derivatives on equities and indices 108,883 1,398,868 45,000 1,552,751

B.3 Financial derivatives on currencies and gold 73,263 840,211 169,901 1,083,375

B.4 Financial derivatives - other - - - -

Total 31 December 2015 848,315,152 884,840,907 763,905,821 2,497,061,880

Total 31 December 2014 816,335,621 1,017,352,466 638,957,835 2,472,645,922

A.10 OTC financial derivatives: counterparty/financial risk – Internal modelsThe scope of regulatory validation of the internal models adopted by Banca IMI has been extended to counterparty risk for OTC derivatives since 2014. Reference should be made to the previous section 2.1.


194


B.1 Credit derivatives: reporting date notional amounts

Regulatory trading book Banking book

single counterparty

various counterparties

(basket)

single counterparty


(basket)

1. Protection purchases

a) Credit default products 20,442,855 35,864,652 - -

b) Credit spread products - - - -

c) Total rate of return swaps - - - -

d) Other - - - -

TOTAL 31 DECEMBER 2015 20,442,855 35,864,652 - -

TOTAL 31 DECEMBER 2014 20,685,204 39,652,743 - -

2. Protection sales




d) Other - - - -

TOTAL 31 DECEMBER 2015 20,123,818 35,532,803 - -

TOTAL 31 DECEMBER 2014 20,313,375 39,121,779 - -

B.2 OTC credit derivatives: gross positive fair value - breakdown by product

Positive fair value

2015 2014


a) Credit default products 1,091,728 1,451,608

b) Credit spread products - -

c) Total rate of return swaps - 46,404

d) Other - -

B. Banking book

a) Credit default products - -


c) Total rate of return swaps - -

d) Other - -

Total 1,091,728 1,498,012


195

B.3 OTC credit derivatives: gross negative fair value - breakdown by product

Negative Fair value

2015 2014





d) Other - -

B. Banking book




d) Other - -

Total 1,053,735 1,572,720

B.4 OTC credit derivatives: gross (positive and negative) fair values by counterparty - contracts not included in netting arrangements


Banks

Other government

agencies


Insurance companies


Other

Regulatory trading book

1) Protection purchases

– notional amount - - 815,000 - - - -



– future exposure - - 40,750 - - - -

2) Protection sales

– notional amount - - 52,232 - - - -



– future exposure - - - 5,223 - - -

Banking book





2) Protection sales





196

B.5 OTC credit derivatives: gross (positive and negative) fair values by counterparty - contracts included in netting arrangements


Banks

Other government

agencies


Insurance companies


Other



– notional amount - - 39,155,066 16,337,441 - - -



2) Protection sales

– notional amount - - 39,871,938 15,732,451 - - -



Banking book





2) Protection sales




B.6 Residual maturity of credit derivatives: notional amounts


Over 5 years Total


A.1 Credit derivatives with "qualified reference obligation" 28,148,942 70,206,047 2,056,055 100,411,044

A.2 Credit derivatives with "unqualified reference obligation" 1,480,128 9,512,396 560,560 11,553,084

B. Banking book

B.1 Credit derivatives with "qualified reference obligation" - - - -

B.2 Credit derivatives with "unqualified reference obligation" - - - -

TOTAL 31 DECEMBER 2015 29,629,070 79,718,443 2,616,615 111,964,128

TOTAL 31 DECEMBER 2014 21,668,668 95,383,858 2,720,575 119,773,101


197

C. Credit and financial derivatives

C.1 OTC credit and financial derivatives: net fair values and future exposure by counterparty


Banks

Other government

agencies


Insurance companies


Other

1) Bilateral agreements on financial derivatives

– positive fair value 3,548,639 - 2,737,754 202,310 119,117 306,112 -

– negative fair value - - (395,202) (4,148,668) (16,266) (161,433) -

– future exposure 106,033 - 814,907 3,793,223 41,904 129,769 -

– net counterparty risk 3,654,672 - 1,832,978 3,848,213 161,021 334,323 -

2) Bilateral agreements on credit derivatives

– positive fair value - - - 171 - - -


– future exposure - - 842 3,610 - - -

– net counterparty risk - - 842 3,635 - - -

3) "Cross product" agreements

– positive fair value - - 1,429,562 635,851 - - -

– negative fair value - - (3,802,462) (317,026) - - -

– future exposure - - 3,465,345 869,958 - - -

– net counterparty risk - - 3,519,538 883,907 - - -


198

SECTION 3 – LIQUIDITY RISK


A. General aspects, management processes and methods of measuring liquidity risk“Liquidity risk” is the risk that the Bank is unable to maintain its payment commitments because of an inability (i) to source new funds (funding liquidity risk), or (ii) to sell assets on the market (market liquidity risk) to pay any imbalance that required funding, or that it is in any case forced to incur high costs in order to meet its commitments.

Bank Resource Management in the Finance & Investments section of Banca IMI is responsible for managing and monitoring the Bank’s treasury flows and for compliance with liquidity ratios. It also manages and develops the securities portfolio refinancing in conjunction with the heads of the other trading units and manages the re-hedging of materiality in the settlement of securities. In order to optimise overall liquidity management, the desk also monitors cash and debt security guarantees trades with OTC derivative counterparties.

The only party dealing with technical forms of funding on the unsecured money market is the Ultimate Parent’s Central Treasury Management department. The guidelines in the liquidity policy adopted by Intesa Sanpaolo include definition and approval of Banca IMI’s liquidity policy, which takes into account the specific requirements of the investment bank. The policy is periodically updated in order to incorporate changes introduced by the regulators, the market and the Group’s liquidity policy.

Intesa Sanpaolo is also the depositary bank for settling all securities transactions, OTC derivatives and derivatives listed on the IDEM market originating from the markets, both on its own account and on behalf of third parties. In the ETD business, the management of the liquidity flows originating from clients and towards clearing houses is also supported by the Ultimate Parent’s global network.


199


1. Breakdown of financial assets and liabilities by residual contractual maturity

Currency: EUR

On demand

Between1 and

7 days

Between7 and 15

days

Between15 days and

1 month

Between1 and

3 months

Between3 and

6 months

Between 6 months

and 1 year

Between 1 and

5 years

Over 5 years


On-balance-sheet assets 16,106,693 5,327,139 475,988 1,918,218 10,565,616 13,972,002 9,516,547 31,030,972 13,547,340 71,556

A.1 Government bonds 6,373 1,745 252 27,593 84,140 2,241,848 1,663,216 2,078,466 6,740,783 40,980

A.2 Other debt securities 111,082 1,452 8,591 126,219 107,365 223,395 607,556 5,519,348 3,311,646 1,101

A.3 Quotas of UCI 396,895 - - - - - - - - -

A.4 Loans

– Banks 7,709,626 3,260,055 366,775 1,274,076 7,532,781 10,548,284 5,876,597 18,770,707 2,212,195 29,475

– Customers 7,882,717 2,063,887 100,370 490,330 2,841,330 958,475 1,369,178 4,662,451 1,282,716 -

On-balance-sheet liabilities 10,542,060 18,662,692 1,361,392 1,703,536 8,598,345 9,436,829 15,061,377 29,341,492 2,600,977 -

B.1 Deposits and checking accounts

– Banks 6,197,670 162,983 1,203,109 1,044,664 8,215,327 8,847,195 11,802,111 17,118,229 1,264,222 -

– Customers 373,078 - - - - - - - - -

B.2 Debt securities 1,354 93 - 90,959 64,428 577,225 3,194,154 11,234,460 745,893 -

B.3 Other liabilities 3,969,958 18,499,616 158,283 567,913 318,590 12,409 65,112 988,803 590,862 -

Off-balance sheet transactions 93,993,385 21,913,226 431,631 1,826,178 13,304,748 6,484,621 9,379,272 47,763,205 29,969,601 -

C.1 Financial derivatives with exchange of principal

– Long positions 1,060,622 917,545 245,735 1,488,182 6,027,025 1,303,697 1,775,912 11,164,806 12,340,840 -

– Short positions 1,251,518 1,056,761 185,514 324,853 4,964,547 1,439,765 1,839,567 11,408,289 12,041,807 -

C.2 Financial derivatives without exchange of principal

– Long positions 33,882,010 - 3 3,909 11,667 21,674 96,357 - - -

– Short positions 33,620,496 2,174 379 9,234 30,009 32,308 56,929 - - -

C.3 Deposits and loans to be settled

– Long positions 17,184,340 - - - - - - - - -

– Short positions - 17,184,340 - - - - - - - -

C.4 Irrevocable commitments to lend funds

– Long positions 61,672 2,752,406 - - - 120,017 288,807 1,613,236 654,153 -

– Short positions 5,685,061 - - - - - - - - -

C.5 Financial guarantees given - - - - - 38,160 - 8,894 263,201 -

C.6 Financial guarantees received - - - - - - - - - -

C.7 Credit derivatives with exchange of principal

– Long positions - - - - 1,135,750 1,764,500 2,660,850 11,783,990 2,334,800 -

– Short positions - - - - 1,135,750 1,764,500 2,660,850 11,783,990 2,334,800 -

C.8 Credit derivatives without exchange of principal

– Long positions 647,081 - - - - - - - - -

– Short positions 600,585 - - - - - - - - -


200

Currency: Other currencies

On demand

Between1 and

7 days

Between7 and 15

days

Between15 days and

1 month

Between1 and

3 months

Between3 and

6 months

Between 6 months

and 1 year

Between 1 and

5 years

Over 5 years


On-balance-sheet assets 937,804 164,111 27,769 21,858 37,644 1,261,660 808,472 1,448,324 3,341,051 14,074

A.1 Government bonds 134 60 587 1,183 7,477 12,740 25,484 314,654 2,310,461 14,025

A.2 Other debt securities 18,815 414 13,803 6,131 11,088 9,478 11,308 207,350 220,473 49

A.3 Quotas of UCI 747 - - - - - - - - -

A.4 Loans

– Banks 614,068 161,732 2,676 - 619 1,206,220 638,832 564,342 461,649 -

– Customers 304,040 1,905 10,703 14,544 18,460 33,222 132,848 361,978 348,468 -

On-balance-sheet liabilities 856,861 2,066,185 71,472 15,727 11,900 1,419,522 748,648 2,622,671 1,060,449 -


– Banks 228,692 300,854 7,527 276 3,275 1,228,512 634,688 233,533 42,248 -

– Customers 109,773 - - - - - - - - -

B.2 Debt securities - - - 15,363 8,412 179,242 113,678 2,119,644 612,180 -

B.3 Other liabilities 518,396 1,765,331 63,945 88 213 11,768 282 269,494 406,021 -



– Long positions 86,283 179,056 345,529 653,982 2,915,249 2,383,702 3,168,157 12,839,613 10,392,758 -

– Short positions 244,931 963,511 412,790 1,809,090 3,206,055 2,689,638 3,517,228 10,576,330 10,535,090 -


– Long positions 2,320,043 33 67 9,019 5,769 16,189 21,121 - - -

– Short positions 1,599,072 32 150 7,287 7,268 14,675 25,302 - - -


– Long positions 553,108 - - - - - - - - -

– Short positions - 553,108 - - - - - - - -


– Long positions - - 1,031 - - - - 5,014 1,792 -

– Short positions 108,094 - - - - - - - - -

C.5 Financial guarantees given - - - - - - - - - -

C.6 Financial guarantees received - - - - - - - - - -


– Long positions - - - - 675,117 160,742 362,818 4,911,914 9,185 -

– Short positions - - - - 675,117 160,742 362,818 4,911,914 9,185 -


– Long positions 118,311 - - - - - - - - -

– Short positions 125,341 - - - - - - - - -


201

SECTION 4 – OPERATIONAL RISKS


A. General aspects, management processes and methods of measuring operational risk

Operational risk may be defined as the risk of suffering losses due to the inadequacy or failure of processes, human resources and internal systems, or as a result of external events. Operating risk includes legal risk, i.e. the risk of losses deriving from a breach of laws or regulations, contractual or out-of-contract responsibilities or other disputes; ICT (Information and Communication Technology) risk and the model risk; conversely, strategic and reputational risks are not included.

The Ultimate Parent Intesa Sanpaolo has defined an overall framework for managing operational risks by establishing rules and organisational procedures for assessing, managing and controlling these risks.

Governance of operational risks is attributed to the Board of Directors, which identifies the strategic orientations and management policies for risk and ensures the operation, efficiency and effectiveness of the risk management and control system. The General Manager and Managing Director ensures the accuracy and completeness of information flows with the aim of integrating the system used to measure, manage and control operational risks into the Bank’s decision-making processes and management of operations.

Banca IMI has implemented an operational risk management function, the Decentralised Operational Risk Manager (ORMD), currently placed within the IT&OPS and Project Management Function of the Operational Governance Area.The latter, in coordination with the Ultimate Parent’s Operational Risk Management function, is responsible for collecting and updating information on operational risks, surveying exposure to risks of this kind and generating regular reports, which provide the management with the information needed to manage and/or mitigate the risks assumed. In accordance with the requirements of applicable legislation, individual organisational units have been involved in the process of surveying, managing and reporting operational events.

The Integrated Self-assessment Process, which is conducted annually, allows the Group to:– identify, measure, monitor and mitigate operational risks through the identification of key, critical operational

areas and the identification of the most appropriate mitigation measures;– create significant synergies with the other specialised functions with control tasks, especially Personnel

Management and Organisation that supervises the planning of operational processes and business continuity issues, with the Administration and Financial Governance and with the control functions (Compliance and Internal Audit) that supervise specific regulations and issues (Legislative Decree no. 231/01, Law no. 262/05) or conduct tests on the effectiveness of controls over internal processes.

– the process is assigned to the decentralised function responsible for Operational Risk Management (ORMD) processes, supported by the Ultimate Parent’s Operational Risk Management Service.

The self-diagnosis procedure of Banca IMI indicated the existence of good overall protection against operational risks and contributed to the spreading of an internal culture aimed at constantly averting such risks.

The process of gathering information on operational events (especially operating losses obtained by both internal and external sources) provides significant information on past exposure, and also contributes to the knowledge and comprehension of exposure to operational risk on the one hand and the evaluation of the effectiveness of, or potential weaknesses in, the internal control system on the other hand, in addition to highlighting the areas that require possible actions to mitigate open risks.The internal model used to calculate capital absorption developed by the Ultimate Parent was conceived in such a way as to combine all the main sources of information of a quantitative (operational losses) and qualitative nature (self-assessment).The quantitative component is based on an analysis of historical data concerning internal events (recorded by organisational units, appropriately verified by the central function and managed by a dedicated IT system) and external events (the Operational Riskdata eXchange Association).


202

The qualitative component (scenario analyses) focuses on the forward-looking assessment of the risk profile and is based on the structured, organised collection of subjective estimates expressed directly by management with the aim of assessing the potential economic impact of particularly serious operational events.

Value-at-risk is therefore identified as the minimum amount at Group level required to address the maximum potential loss (worst loss); value-at-risk is estimated using a Loss Distribution Approach model (actuarial statistical model to calculate the Value-at-Risk of operational losses), applied on quantitative data and the results of the scenario analysis assuming a one-year estimation period, with a confidence level of 99.90%; the methodology also applies a corrective factor, which derives from the qualitative analyses of the risk level of the business environment and internal control factors, to take account of the effectiveness of internal controls in the various business units.

Operational risks are monitored through an integrated reporting system that provides management with the information required to manage and/or mitigate the risks assumed. In order to provide constant support for the process of managing operational risk, Banca IMI with the support of the Ultimate Parent has launched a structured training programme for personnel involved in this process.

In addition to the above, the Intesa Sanpaolo Group and Banca IMI have implemented a traditional operational risk transfer policy (to protect against illegal acts such as the disloyalty of employees, theft and damages, the movement of securities, IT fraud, falsification, cyberisk, fires and earthquakes and third party liability) that contributes to its abatement. At the end of June 2013, the Group took out an insurance policy called the Operational Risk Insurance Programme. This enables optimal use of the instruments available for transferring operating risk and the enjoyment of the ensuing benefits on the statement of financial position while complying with regulation requirements.It offers additional coverage to traditional policies, significantly increasing the limit of liability, effectively transferring the risk of significant operational losses to the insurance market. The insurance mitigation component of the internal model was authorised by Bank of Italy in June 2013 and its operating and equity benefits became effective from that date.


For the determination of the capital requirement the Bank uses the advanced method AMA.The integrated reporting system provides management with the information required to manage and/or mitigate the risks assumed.

The quantitative data recorded by the business units are analysed by the Operational Risk Management function.The reports show the main operational events recorded in the period in question, as well as an analysis of the risk exposure over time and a comparison with the estimated losses in the previous year’s scenario analysis.

The table used to classify operational events is compliant with the one required by the supervisory authority:

– Internal unlawful acts: events attributable to voluntary actions involving at least one resource internal to the Bank and which lead to damage (monetary losses) to the same.

– External unlawful acts: events attributable to voluntary actions performed solely by resources not qualified as internal resources, generally perpetrated for the purpose of personal gain.

– Relations with personnel and safety in the workplace: events attributable to relations with personnel or the non-compliance of the workplace with health and safety regulations; this includes liabilities for accidents to employees in the Bank’s offices or with the Bank’s own vehicles.

– Business practices: events related to the provision of services and supply of products to customers performed in an improper or negligent manner (including fiduciary requirements and adequate information on investments); or again, due to defects in the nature or characteristics of products, models or contracts. This includes bankruptcy revocation and liabilities for breach of public safety rules or laws not specific to the banking sector.

– Disasters or other events: deriving from natural causes or human actions that cause damage to bank resources (property and equipment or intangible assets, people, etc.) and/or interruption to services; or other events (including improper conduct and/or inappropriate acts by third party companies that damage the Bank).

This includes liabilities from political, legislative and taxation changes with retrospective effect.– Technological systems and services: events resulting from malfunctions, logical or structural faults in the

technology systems or other support systems.


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– Execution, delivery and management of processes: events due to unintentional errors in the management of operations and support activities, or caused by counterparties other than customers and suppliers. This includes events linked to the pricing models used.

LEGAL RISKSRisks relating to legal disputes, potential disputes and claims are regularly analysed. Where there are legal obligations where it is likely that there will be a need to make payments, and it is possible to make a reliable estimate of the relative amount, appropriate accruals are made to the provisions for risks and charges. The size of these accruals is consequently adjusted to take into account changes in the underlying risks.The main legal disputes are indicated below.

In the first half of 2014 Banca IMI was sued by an Albanian company at the Court of Tirana in connection with an alleged pre-contractual liability with regard to the non-funding of a hydroelectric project in Albania. The writ of summons was challenged regarding jurisdiction, due to the alleged lack of jurisdiction of the Albanian courts. The objection on the lack of jurisdiction was rejected in the decision of the court of first instance and appeal. The case was then returned to the court of first instance, and the merits hearing is currently in progress.

In July 2014, the Fondazione Monte Paschi di Siena sued the former members of the same Foundation’s administrative organ and all the banks, including Intesa Sanpaolo and Banca IMI, which had participated in 2011 in a pooled funding in favour of the Foundation intended to provide the latter with the resources required to subscribe the capital increase arranged by its subsidiary Banca Monte Paschi di Siena. The Foundation, in support of its claim for damages, jointly for all the defendants, alleged liability of a contractual nature against the previous directors and the advisor for having violated the statutorily-established limit regarding the debt-to-equity ratio, and liability of a non-contractual nature against the lending banks for knowingly providing assistance in the alleged violation committed by the former. It is believed that the claim, as presented against the defendant banks, is groundless for a variety of reasons including: technically incorrect assessment of items in the financial statements from which the violation of the statutory limit is alleged, non-existence of the causal link between the censured conduct and the harmful event and finally incorrect quantification of the items of damages on which the civil claim rests.

At the end of December 2014 and in the early months of 2015, Banca IMI was sued, together with Petroleo Brasileiro S.A. - Petrobras, Petrobras Global Finance B.V. and corporate officers of the same companies and other leading financial and banking intermediaries in a class action and various individual actions brought in the US district courts in New York in connection with the issuance and distribution - including on the US market - of financial instruments issued and/or guaranteed by Petroleo Brasileiro S.A.- Petrobras and/or Petrobras Global Finance B.V. The proceedings at first instance are underway at the competent US District Courts in New York.


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INFORMATION ON DEALING IN DERIVATIVES AND FORWARD TRADING TRANSACTIONS WITH CLIENTS

The direct clients of Banca IMI consist primarily of institutional entities (UCITS, pension funds, insurers, etc.), banks and other intermediaries authorised to render investment services, and corporate clients. In certain business seg-ments, subject to specific agreements, Banca IMI’s desks operate on the Ultimate Parent’s behalf or nevertheless create products for the Group companies.

In particular, in the area of dealing in OTC derivatives, which include forward currency trades, there are two diffe-rent service models according to the type of Intesa Sanpaolo Group client in question, depending on whether the client is attributable to the Banca dei Territori Division or the Corporate and Investment Banking Division.

With respect to the business client segment, under the responsibility of the Banca dei Territori Division, network personnel, derivative specialists or the Manager i/c of relations with businesses originate and close deals with clients, while Banca IMI is responsible for structuring products and determining prices in accordance with the exe-cution policy agreed with the Division itself. The financial risk associated with each derivative contract entered into by network personnel is held by Banca IMI, whereas credit risk exposure is always assumed by the bank that has the direct relationship with the client.

For customers of the Corporate and Investment Banking Division, for which Banca IMI acts on Intesa Sanpaolo’s be-half, the operating model for OTC derivatives and forward currency trades assigns responsibility for the relationship with the client to the manager from Intesa Sanpaolo, by including the definition and management of credit lines, and also responsibility for classifying and profiling customers for MiFid purposes. Banca IMI carries out the product structuring and assesses the appropriateness of the operation with respect to the customer profile. The credit risk associated with contracts entered into with clients remains with Intesa Sanpaolo.

In dealings with large corporate clients, Banca IMI may also operate directly on a proprietary trading basis. Considering only dealings with the latter category (non-financial clients, with the exclusion of public bodies), at 31 December 2015 Banca IMI had a positive fair value of 632 million, 89% of which was attributable to the top 10 clients by exposure. The notional amount of such derivatives was 3,102 million. With reference to the same, the notional value of the contracts with underlying interest rate risk came to 1,847 million, with underlying commodity risk to 726 million, underlying currency risk to 524 million and with underlying equity risk to 5 million.

The gross negative fair value for the same counterparty category – again at 31 December 2015 – was 235 million euro (of which 85% was for 4 counterparties) on a notional amount of 2,109 million. The notional value of the contracts with underlying interest rate risk came to 528 million, with underlying currency risk to 1,415 million and with underlying commodity risk to 166 million.

The offset net exposure to the above entities having contracts with both positive and negative fair value came to a positive fair value of 184 million and a negative fair value of 163 million.

The credit risk implicit in the above derivative financial instruments is monitored, as for all the other OTC derivati-ves, through adjustments to fair value (known as Bilateral Credit Value Adjustment) to account for the individual counterparties’ creditworthiness and any auxiliary guarantees acquired.

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Part F – Equity

SECTION 1 – THE BANK’S EQUITY

A. QUALITATIVE INFORMATIONThe objectives pursued in the management of the Bank’s equity are based on the provisions of prudential regulation, and are aimed at maintaining appropriate levels of capital adequacy in order to take the typical risks in structured finance, capital markets and investment banking. Risks that can – among other things – involve temporary absorption of regulatory capital following placement operations performed on primary markets or due to concentration requirements for certain issuers or business groups.

The earnings appropriation policy aims to reinforce the Bank’s capital structure, with a particular emphasis on tier 1 regulatory capital, to value the economic capital and to ensure a properly balanced financial position.

Credit risk mitigation techniques (netting) and internal market risk models have been introduced with the aim of optimising the use of regulatory capital.

Notes to the separate financial statements - Part F - Equity

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B. QUANTITATIVE INFORMATION

B.1 Equity: breakdown


1. Share capital 962.464 962.464

2. Share premium reserve 581,260 581,260

3. Reserves

– income-related

a) legal 192,493 192,493

b) statutory 1,235,450 1,112,830

c) treasury shares 38,983 157,949

d) other (11,891) (11,891)

– other (2,049) (6,676)

3.5 Interim dividends (-) (307,988) -

4. Equity Instruments - -

5. (Treasury shares) - -

6. Valuation reserves:

– Available-for-sale financial assets (49,360) 50,035

– Property and equipment - -

– Intangible assets - -

– Hedges of investments in foreign operations - -

– Cash flow hedges - -

– Exchange rate gains (losses) - -

– Non-current assets held for sale - -

– Actuarial gains and losses on defined benefit pension plans (705) (920)

– Portion of valuation reserves of equity-accounted investees - -

– Special revaluation laws 4 4

7. Profit for the year 521,984 504,134

Total 3,160,645 3,541,682

The “Reserves: - other” include 5 million of positive amounts pursuant to IFRS 2 for the LECOIP plan. In December an interim dividend of 308 million was paid to the Ultimate Parent, from the profit in 2015, under Art. 2433-bis of the Italian Civil Code.The distribution of interim dividends is covered by the Articles of Association and is made, in accordance with the aforesaid legal provisions, based on the financial statements that show that the Bank’s financial position can allow it.

B.2 Fair value reserves of available-for-sale financial assets: breakdown


Fair value gains Fair value losses Fair value gains Fair value losses

1. Debt securities 25,188 (83,040) 63,402 (20,862)

2. Equities 5,006 - 3,504 -

3. UCI quotas 3,486 - 4,011 (20)

4. Loans - - - -

Total 33,680 (83,040) 70,917 (20,882)


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B.3 Fair value reserves of available-for-sale financial assets: annual changes

Debt securities Equities UCI quotas Loans

1. Initial amount 42,540 3,504 3,991 -

2. Increases

2.1 Fair value gains 28,224 1,234 111 -

2.2 Reclassification of fair value losses to profit or loss:

– impairment - - 20 -

– disposal 1,811 - - -

2.3. Other increases - 728 - -

3. Decreases

3.1 Fair value losses (97,855) - (636) -

3.2 Impairment losses - - - -

3.3 Reclassification of fair value gains to profit or loss:

– disposal (32,572) (460) - -

3.4. Other decreases - - - -

4. Final amount (57,852) 5,006 3,486 -

B.4 Fair value reserves on defined benefit pension plans: annual changes

1. Initial amount (920)

2. Increases

2.1 Fair value gains 144


– impairment -

– disposal -

2.3. Other increases 71

3. Decreases

3.1 Fair value losses -

3.2 Impairment losses -


– disposal -

3.4. Other decreases -

4. Final amount (705)


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SECTION 2 – OWN FUNDS AND CAPITAL RATIOS

2.1 OWN FUNDS

Qualitative informationOwn funds, risk-weighted assets and solvency ratios are determined according to the new harmonised banks and investment company regulations contained in Directive 2013/36/EU (CRD IV) and Regulation (EU) No. 575/2013 (CRR) of 26 June 2013, and based on the Bank of Italy Circulars no. 285 and 286 (issued in 2013 and 2014) and the update of Circular 154.

The regulations governing own funds involve the introduction of the new regulatory framework in a gradual man-ner, involving a transition period, generally up until 2017, during which only a percentage of some elements that will eventually be accounted for or deducted entirely under Common Equity, will have an impact on the Common Equity Tier 1 (the so-called Phase In).

Under the regulations the residual non-applicable percentage is accounted for/deducted from the additional Tier 1 capital (AT1) and Tier 2 capital (T2) or included under risk-weighted assets. When the aggregates AT1 and T2 are insufficient for those deductions, which is the case of Banca IMI, which presents only class 1 assets, the resulting deficits increase the erosion to the CET1 level.

The prudential ratios at the reporting date, therefore, take account of the adjustments required by the transitional provisions for 2015.

In light of the information provided by the EBA (6 February 2015) it is possible to include the result of the end of the year or, in the case of interim reports, the result that is being created, based on two major assumptions:– formal request to the European Banking Authority and consequent authorisation;– external certification.

The conditions must be verified by the date of submission of the related Reports. In any case, the result of the pe-riod should be reduced by the expected distribution of dividends or any other charges that would affect the result. This must be done on the basis of official, internal or external evidence.With reference to Banca IMI, for which the payout ratio is approximately 100%, its Own Funds as at 31 December 2015 do not fully include the profit or loss for period.

1. Common Equity Tier 1 – CET1Banca IMI only has Common Equity, composed primarily of equities, share premiums, income-related reserves, revaluation reserves in addition to items in deduction and prudential filters.

The relevant items to Banca IMI to be deducted from Common Equity Tier 1, in absolute terms or on exceeding a certain threshold, are the following:– goodwill, intangible assets and residual intangible assets;– excess of expected loss compared to overall adjustments (shortfall reserve) for the weighted positions according

to the IRB methods;– non significant investments in CET1 instruments issued by companies in the financial sector (reduced for the

part that exceeds the allowance provided for by legislation).

Some prudential filters are also provided for with effect on Common Equity; those relevant to Banca IMI are:– filter on profits or losses due to liabilities at fair value (derivatives and non derivatives) related to changes in their

creditworthiness;– adjustments on assets at fair value related to the so-called “Prudent valuation”.

2. Additional Tier 1 – AT1This category generally includes the equity instruments other than ordinary shares (which are Computable in Com-mon Equity) complying with the regulatory requirements for inclusion in this level of Own Funds (e.g. savings shares).

Banca IMI does not have the Additional Tier 1 capital as at 31 December 2015.


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3. Tier 2 Capital (Tier 2 – T2).Tier 2 Capital is composed mostly of calculable subordinated liabilities and any excesses in value adjustments com-pared to the expected losses (excess reserve) for the weighted positions according to the IRB methods.

As at 31 December 2015 Banca IMI has not issued any Tier 2 Capital instruments.


The new regulatory framework is being introduced gradually over a transitional period - generally until 2017 - where some of the elements that would be calculable or deductible in full from the Common Equity have an effect on the common equity Tier 1 for only a certain percentage, then affecting the remaining levels of capital – to the extent that their capacity allows.

The following items:– unrealised gains or losses from instruments measured at Fair Value;– negative amounts resulting from the calculation of expected loss amounts (shortfall reserve);– non-significant investments exceeding 10% of the specific CET1 threshold therefore, in the first instance, affected the AT1 and T2 levels, that were down respectively by 104 and 82

million, before being charged again to the Bank’s own funds in their entirety.


A. Common Equity Tier 1 (CET1) before the application of prudential filters 3,002,061 3,061,039

of which: instruments of CET1 subject to transitional adjustments - -

B. Prudential filters of CET1 (+ / -) (89,056) (73,483)

C. CET1 gross of items to be deducted and effects of transitional adjustments (A +/- B) 2,913,005 2,987,556

D. Items to be deducted from CET 1 (264) (378)

E. Transitional adjustments - Effects on CET1 (+/-) (103,225) (61,271)

F. Total Common Equity Tier 1 (CET1) (C-D +/-E) 2,809,516 2,925,907

G. Additional Tier 1 (AT1) before items to be deducted and effects of transitional adjustments - -

of which: instruments of AT1 subject to transitional adjustments - -

H. Items to be deducted from AT1 (20,388) (13,774)

I. Transitional adjustments - Effects on AT1 (+/-) (83,650) (89,408)

L. Total Additional Tier 1 (AT1) (G - H +/- I) (104,038) (103,182)

M. Tier 2 (T2) before items to be deducted and effects of transitional adjustments - -

of which: instruments of T2 subject to transitional adjustments - -

N. Items to be deducted from T2 (31,601) (16,043)

O. Transitional adjustments - Effects on T2 (+ / -) (50,341) (73,276)

P. Total Tier 2 (T2) (M - N +/- O) (81,942) (89,319)

Q. Total Own Funds (F + L + P) 2,623,536 2,733,406

Own funds have benefited from the rule which allows the effects arising from the application of the revised IAS 19 to be recognised gradually in the regulatory capital. The amount of the “prudential filters” applied to the negative actuarial reserve, is about 1 million.

Furthermore, according to Article 467.2 of the CRR, implemented by the Bank of Italy in Circular no. 285, Banca IMI has adopted the option of excluding from its own funds the unrealised profits or losses from exposure to central governments classified as Available for Sale assets (AFS); as at 31 December 2015 this figure was positive at about 26 million before tax.


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2.2 CAPITAL ADEQUACY

A. Qualitative information

Capital adequacy is assessed by taking into account the planned development of activities in Global Markets and Corporate & Strategic Finance.

In the strategic management of capital adequacy, which is a critical factor to support the expansion of assets and consolidating earnings profiles, adequate consideration is given to the expected or prospective developments of prudential regulatory provisions.

B. Quantitative information

Unweighted amounts Weighted amounts/requirements

31 December 2015 31 December 2014 31 December 2015 31 December 2014

A. RISK ASSETS

A.1 CREDIT AND COUNTERPARTY RISK

1. Standard methodology 83,256,348 78,279,572 4,129,624 4,165,693

2. Internal ratings based methodology

2.1 Base - - - -

2.2 Advanced 9,782,255 9,898,778 6,638,953 5,537,458

3. Securitisations 1,023,389 782,439 269,063 232,653

B CAPITAL REQUIREMENTS

B.1 CREDIT AND COUNTERPARTY RISK 883,011 794,864

B.2 CVA CHARGE OTC DERIVATIVES 46,705 80,165

B.3 SETTLEMENT RISK - -

B.4 MARKET RISK

1. Standard methodology 169,078 244,094

2. Internal models 758,592 519,205

3. Concentration risk - -

B.5 OPERATIONAL RISK

1. Basic indicator approach (BIA) - -

2. Traditional standardised approach (TSA) - -

3. Advanced measurement approach (AMA) 109,724 125,632

B.6 OTHER ITEMS - -

B.7 TOTAL CAPITAL REQUIREMENTS 1,967,111 1,763,960

C. RISK-WEIGHTED ASSETS AND CAPITAL RATIOS

C.1 Risk-weighted assets 24,588,882 22,049,499

C.2 Common equity Tier 1 / Risk-weighted assets (CET1 capital ratio)

C.3 Tier 1 / Risk-weighted assets (Tier 1 capital ratio) 10.67% 12.40%

C.4 Total own funds / Risk-weighted assets (Total capital ratio) 10.67% 12.40%

On the basis of the provisions of prudential supervision for banks (Bank of Italy circular No. 285 of 17 December 2013 and subsequent updates), which implement the directives in respect of regulatory capital measurement and capital ratios (Basel 3), own funds must be at least 10.5% of total risk-weighted assets (Total capital ratio) resulting from typical risks of banking and finance activities (credit risk, counterparty risk, market risk, and operational risks), weighed according to regulatory segmentation of the debtor counterparties and taking into account the techniques for mitigating credit risk and reducing operational risk as a result of insurance coverage.


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The adjustment path at an individual level for Banks belonging to Banking groups is set to be fully completed in 2019, starting with the minimum requirement of 8.625% for the period 2014-2016 with the gradual increase (from 0.625% to 2.5%) of the required ratio for the “Capital conservation Buffer”.

With regard to credit risks, the Group has received permission to use its internal ratings-based methods for the Corporate portfolio report starting from 31 December 2008. Subsequently, the scope has been gradually extended to SME Retail and Mortgage portfolios and other Italian and foreign companies in the Group.It was adopted by Banca IMI on 30 June 2012, therefore, after the conferral of the “structured finance” business unit (September 2009).

Banks are also required to comply with capital requirements with regard to market risks calculated on the whole trading portfolio but separately for the different types of risk: position risk on debt securities and on capital securities for concentration risk. With reference to the entire financial situation, one must also determine currency risk, settlement risk and the risk of commodity position.

The use of internal models is allowed for determining the capital requirement for market risks; in particular, Banca IMI applies the internal model for calculating generic position risk (price volatility risk) and specific position risk (issuer risk) for equities and generic position risk (interest rate risk) on debt securities.

As from the report as at 30 September 2012 the scope was extended also to the specific risk on debt securities. The extension of the model was based on the current methodology (full historical simulation evaluation) and required the integration of the Incremental Risk Charge in the context of the calculation of the capital requirement for market risks; the internal model also includes for Banca IMI the position risk in UCI quotas (for the Constant Proportion Portfolio Insurance-CPPI component) and for dividend derivatives, as well as position risk on commodities.

Since December 2011 the Stressed VaR has been used for the calculation of the requirement as regards market risks.

With regard to counterparty risk, this is calculated independently from the allocation portfolio. With effect from the report dated 31 March 2014, authorisation was received from the Bank of Italy for the use of the internal model for counterparty risk for regulatory purposes. As from that reporting date, the internal models have also been used for the purposes of calculating the new requirement of CVA capital charge.

With regard to operational risks, it should be noted that the Group obtained permission to use the advanced method AMA (internal model) for determining its capital requirement from the report as at 31 December 2009. The methodology has been progressively extended to Banca IMI, as an alternative to the calculation of the requirement on the basis of the simplified methodology based on a percentage of total income.As from June 2013 the model has included among the mitigating devices the stipulation of an appropriate insurance policy to cover “operational risks”.

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Part H – Related party transactions

1. INFORMATION ON THE COMPENSATION OF KEY MANAGEMENT PERSONNEL

In accordance with IAS 24, the Bank has decided to include within the scope of “key management personnel” (he-reinafter “officers”) the directors, statutory auditors, general manager, the Heads of Global Markets, Corporate & Strategic Finance and of Operational Governance, and the manager in charge of financial reporting.

The table below shows the main benefits paid by the Bank to officers in 2015 (figures in thousands of euro). The figures include the maximum amount of variable compensation that will be paid in cash and/or shares by the Ultimate Parent under Group compensation and incentive policies. In accordance with the incentive plan, the actual payment of variable compensation will be deferred over a number of years and is subject to the achievement of assigned tar-gets and approval by the appropriate bodies in the Ultimate Parent.

Short-term benefits 4,271

Post-employment benefits 259

Other long-term benefits 1,382

Termination benefits -

Stock option plans 1,478

Total 7,390

2. INFORMATION ON RELATED PARTY TRANSACTIONS

The economic and financial relations with entities considered “related parties” essentially consist of standard financial dealing and investment services. In most cases, such relations, also assessed according to the potential conflict of interest, are carried out as arm’s-length transactions.

For the aggregates included in the income statement and balance sheet figures of the two periods under review, one should refer to the following tables (figures in thousands of euro), which show the accounting effects of transactions with related parties other than companies in the Intesa Sanpaolo Group. As regards the latter, one should refer to the Report on Operations - Relations with Group companies).

Income Statement Related party transactions

(no intercompany) 31.12.2015

Related party transactions


Net interest income 13,096 20,431

Net fee and commission income 13,331 19,873

Administrative expenses (2,984) (4,405)

Provisions and impairment losses (4,590) (28,350)

Net other operating income (expenses) 139,861 180,831

Total 158,714 188,380

Notes to the separate financial statements - Part H - Related-party transactions

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Other operating income (expenses) are mainly attributable to income (expenses) from trading

Statement of financial position Related party transactions


Related partytransactions

(no intercompany)31.12.2014

Financial assets 206,000 289,359

Loans 364,176 314,265

Equity investments - -

Other assets 757 72

570,933 603,696

Due 5,575 7

Financial liabilities 17,920 88,190

Other liabilities 32,838 37,874

56,333 126,071

Guarantees and commitments 411,397 518,981

Consistently with IAS 24, the Bank identified its related parties and fulfils its disclosure obligations on transactions with these parties.

As regards the procedural aspects, from 31 December 2012, the Bank has applied the ‘Group’s Regulations for the management of transactions with Related Parties of Intesa Sanpaolo S.p.A. and Affiliated Entities of the Group’ and the relevant supplementary Addendum (hereafter Regulation), approved in June 2012 by the Board of Directors, subject to the favourable opinion of the Audit Technical Committee and the Board of Statutory Auditors.

The Regulation complies with Consob rules, in accordance with Article 2391-bis of the Italian Civil Code, and the supervisory provisions introduced by Bank of Italy on 12 December 2011 governing exposures and conflicts of interests of banks and banking groups with “related parties”, implementing Article 53.4, et seq. of the Consolidated Law on Banking and complying with resolution 277 of 29 July 2008 of the Interministerial Committee for Credit and Savings (CICR).

The overall scope of the parties considered relevant by the Regulations includes the Bank’s related parties identified pursuant to IAS 24.The Regulations govern the aspects below:

– The criteria for identifying related parties and affiliated entities.– The process of analysis, decision-making and information for Corporate Bodies in connection with transactions

with Related Parties and Affiliated Entities.– Market disclosure for transactions with Related Parties.– The prudential limits and obligations of periodic reporting to the Bank of Italy for risk in relation to Affiliated

Entities. – The rules governing controls and organisational safeguards.– The general rules for disclosure and abstention for the management of the personal interests of officers,

employees and company staff, including other than Affiliated Entities.

In addition, Banca IMI has adopted an addendum to the Group Regulations, which governs the decision-making rules and processes for the Bank and supplements the framework for conducting transactions with related parties.Pursuant to this Regulation the following are considered to be Related Parties of Intesa Sanpaolo: parties that exercise control or significant influence, subsidiaries and associates, joint ventures, pension funds of the Group, Officers and Key Managers of Intesa Sanpaolo and their close family members and significant investees.


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The set of Affiliated Entities of the Group consists of the Affiliated Entities of each bank of the Group (including Banca IMI) and each significant intermediary monitored with regulatory capital greater than 2% of the consolidated equity. As regards each significant bank or monitored intermediary in the Group Affiliated Entities are: i) shareholders that exercise control or significant influence or that are required to request authorisation pursuant to Article 19 of the Consolidated Law on Banking or that may appoint a member of the management or strategic supervisory body and the relative corporate groups; ii) subsidiaries, subsidiaries under joint control and associates, as well as the companies controlled by the latter, also jointly with others; iii) company officers and their close family members up to the second degree and significant investees.As a form of self-regulation, the Ultimate Parent has extended the regulations in terms of transactions with Related Parties, as well as those on activities involving risks and conflicts of interest with respect to Affiliated Entities, to shareholders of Intesa Sanpaolo and to the relative corporate groups with an equity investment in the Ultimate Parent’s voting capital of over 2%, calculated only based on shares owned or under management. This approach allows closer monitoring of transactions with the main shareholders of Intesa Sanpaolo - by subjecting them to the same requirements for assessment, approval and subsequent disclosure to the Corporate Bodies and the market as for transactions with Related Parties and Affiliated Entities - and by keeping the risk activities carried out by the Group with said parties within the prudential limits set by the Bank of Italy.

The Regulations set forth the assessment processes that must be followed by the Bank’s units when carrying out transactions with Related Parties of Intesa Sanpaolo and Affiliated Entities of the Group, to ensure appropriateness of the transactions. The Regulations also require detailed examination of the reasons, interests and economic, financial and equity effects and the conditions of the transaction.

In line with the regulations implemented by Consob and by the Bank of Italy, a regime of full and partial exemptions from the application of the regulations is also envisaged.With regard to decision-making, the process distinguishes between:– small transactions: those with a value of less than or equal to 250,000 euro for individuals and 1 million euro

for entities (excluded from application of the regulations).– transactions of lower significance: those with a value higher than the small-amount thresholds (250,000 euro

for individuals and 1 million euro for entities) but lower than or equal to the most significant thresholds indicated below.

– transactions of major significance: those with a value higher than the threshold of 5% of the indicators defined by Consob and by the Bank of Italy (approximately 2 billion euro for the Intesa Sanpaolo Group).

– strategic transactions pursuant to the Articles of Association of Intesa Sanpaolo S.p.A. – transactions attributed to the Shareholders’ meeting by law or the Articles of Association.

The Audit Technical Committee, established within the Board of Directors of the Bank and consisting of three directors who meet the necessary independence requirements, plays an important role in the approval process for the transactions with Related Parties of Intesa Sanpaolo and Affiliated Entities of the Group. The Committee can make use of independent experts, where considered appropriate, according to the degree of importance of the transaction, its specific economic or structural characteristics and the nature of the related party or affiliated entity.For more significant transactions, the Committee must be promptly involved in the analysis and negotiation phases, receiving a complete and timely flow of information, with the right of the Committee to request additional information and make observations.The transactions undertaken by the Bank with a Related Party or Affiliated Entity (which are not exempt based on the Regulations) are usually subject to the approval of the Ultimate Parent and submitted to the decision power of the Board of Directors, based on the opinion of the Audit Technical Committee.The Regulations envisage specific controls in case the Board of Directors approves a more or less significant transaction, despite the negative opinion of the Independent Committee.

The Regulations also define the general criteria for the information to be provided to the Board of Directors and the Board of Statutory Auditors, at least quarterly, regarding transactions with Related Parties completed in the reference period by the Bank. All of the above is aimed at providing a complete overview of the transactions of greater importance, as well as the volumes and the main features of all those delegated. Reports must include all transactions, even if exempt from the decision-making process, for amounts greater than the small-amount thresholds. Bank funding transactions carried out at market or standard conditions and intragroup loans and bank funding are excluded from this requirement (provided they do not regard a subsidiary with significant interests of another related party or affiliated entity and do not present market or standard conditions). For ordinary intragroup transactions at market conditions, reporting is on an aggregate annual basis.


215

For the sake of completeness, it should be noted that the Bank is required to apply Article 136 of the Consolidated Law on Banking. This requires the adoption of a more thorough decision-making process (unanimous decision by the management body and favourable vote of the members of the control body) in order to allow the officers to contract obligations, directly or indirectly, with the Bank.

The special decision-making process set forth in Article 136 of the Consolidated Law on Banking, even when regarding Related Parties or Affiliated Entities, requires a prior resolution adopted unanimously by the Board of Directors and the favourable vote of all the members of the Board of Statutory Auditors. Without the approval of all the members of the control body, it is strictly prohibited for the transaction in question to go ahead.

Furthermore, the requirements envisaged by the Italian Civil Code regarding the interests of directors are confirmed, pursuant to Article 2391 of the Italian Civil Code.


216

PARENT COMPANY

Intesa Sanpaolo S.p.A. Registered office: Piazza S. Carlo, 156 – 10121 TurinSecondary division: Via Monte di Pietà, 8 – 20121 Milan

Article 2497-bis of the Civil Code requires companies managed and coordinated by of another company to disclose financial highlights of the Parent in their financial reports. The financial highlights reported below are taken from the last approved financial statements.

INTESA SANPAOLO - FINANCIAL HIGHLIGHTS


2014 2013 Changes

amount %

Income statement

Net interest income 2,181 1,865 316 16.9

Net fee and commission income 2,514 2,324 190 8.2

Profits (Losses) on trading 218 661 -443 -67.0

Net operating income 7,307 7,027 280 4.0

Operating costs -3,715 -3,609 106 2.9

Operating profit 3,592 3,418 174 5.1

Net impairment losses on loans and receivables -1,684 -2,706 -1,022 -37.8

Profit from discontinued operations - - - -

Profit for the year 1,213 -3,874 5,087


Loans to customers 168,631 174,066 -5,435 -3.1

Direct customer deposits 220,836 225,739 -4,903 -2.2

Indirect customer deposits 156,729 146,919 9,810 6.7

of which: assets under management 90,576 74,678 15,898 21.3

Total assets 400,750 399,202 1,548 0.4

Equity 40,382 39,763 619 1.6

Operating structure

Number of employees 27,991 27,351 640

- Italy 27,468 26,831 637

- Abroad 523 520 3

Number of branches 1,956 1,889 67

- Italy 1,942 1,876 66

- Abroad 14 13 1

Figures restated on a consistent basis.

217

Part I – Equity-settled share based payment agreements

Incentive scheme reserved for risk takersOn 22 May 2012 the Shareholders’ Meeting of Banca IMI voted to approve a new share-based incentive scheme as contemplated by Article 84-bis of the Issuer Regulations.

This plan is an integral part of the system of remuneration of the management in the Intesa Sanpaolo Group and is part of remuneration policies approved by the Supervisory Board on 20 July 2011. The plan aims to retain personnel staff and support their motivation towards achieving the bank’s long-term objectives and promoting the alignment of interests between employees and shareholders. The plan targets the Intesa Sanpaolo Group’s key staff, i.e. key management personnel who may assume significant risks for the Group.

The accrual of the entire bonus due for each period is subject to the achievement of Group earnings targets in terms of the amount of earnings, the containment of risk and sustainability, and are measured using an economic indicator adjusted for risk (EVA).

Based on the general rules for the incentive plan, 50% of the bonus will be made up of cash and 50% will consist of ordinary Intesa Sanpaolo shares. In addition, 40% of the bonus will be paid to beneficiaries in the year following the reporting year, while the remainder will be allocated pro-rata in the following three financial years using the following breakdown: the first third will be paid in cash, the second with shares and the third equally between cash and shares.

To ensure the implementation of the plan in the aforementioned Shareholders’ Meeting, the Shareholder authorized the purchase of ordinary shares of Intesa Sanpaolo, also through several tranches.For details of purchases, one should refer to Part B - Section 14 of the Notes.

LECOIP share investment schemeCoinciding with the launch of the Business Plan for 2014-2017, the Intesa Sanpaolo Group has defined an incentive scheme for employees, featuring innovative ways of motivating employees and increasing their loyalty, alongside the more traditional assignment of shares with a view to “broad-based ownership”. A new element is the provision to all employees of an Investment Plan - inclusive of reserved capital increases, additional allocation of Intesa Sanpaolo shares and preservation of invested capital - which provides the opportunity for each employee to “transform” the shares they have received into an investment instrument (LECOIP) with legal duration aligned with the business plan allowing them to take part in the hoped-for growth in stock market capitalization of the Group.

The Investment Plan was submitted for approval to the ordinary Shareholders’ Meeting of Intesa Sanpaolo on 8 May 2014, also called to deliberate initially on the repurchase of treasury shares (pursuant to art. 2357.2 of the Italian Civil Code) that would be required to allocate Free Shares to all Group employees (so-called Free Share).

The Extraordinary Shareholders’ Meeting of Intesa Sanpaolo was also convened on 8 May 2014, for the purpose of resolving to authorise the Management Board:– to increase the capital (bonus capital increase) for the allocation of additional free shares to employees (so-

called Matching Shares), and– to increase the capital by payment with exclusion of option rights for employees, by issuing shares at a discount

price compared to the market price of ordinary ISP shares.

The Investment Plan was approved by the Bank of Italy on the following 30 September 2014; subsequent to this decision, the Management Board - on 2 October 2014 - passed the necessary resolutions to implement the plan.

Notes to the separate financial statements - Part I - Equity-settled share based payment agreements

218

As an enabler of the entire plan, on 15 May 2014 the Shareholders’ Meeting of Banca IMI had authorized the purchase of 2,248,185 ordinary shares of Intesa Sanpaolo; the purchase was made in the following month of October at an average price of 2.22887 euro for a total of about 5,011,000 euro. On 1 December, 2,134,807 shares were assigned to employees in accordance with the provisions of the stock plan in question.

As regards the accounting of the income and capital effects arising from the allocation of shares to employees and the issue of the “LECOIP”, reference was made to the guidance provided by IFRS 2 “Share-based payments”, which provides instructions on processing payments in kind (shares) in return for services received (in this case, the services of employees). The technique of IFRS 2 provides two distinct methods for recognising share-based payment plans in the statement of financial position, distinguishing between “cash-settled” methods (with the cash immediately recorded by Banca IMI) and the “equity-settled” methods (with no direct obligation to regulate the stock plan with its employees).

Specifically, taking into account the internal formalities (corporate resolutions) and external formalities (press releases) or contractual formalities, both types are actually used:– for the part relating to the Free Shares, Banca IMI purchased the shares of the Ultimate Parent directly on the

market, with the subsequent assignment to its employees on 1 December 2014: this component of the Plan is therefore created as cash-settled. With regard to share-based payments that are settled in cash, the services obtained and liabilities assumed are measured at the fair value of the latter and recognised in amounts due to personnel.

Until the liability is discharged, the fair value is recalculated on each reporting date until the settlement date, recognising all the changes in fair value under personnel expenses. In these financial statements, the relevant cost recognised against the cash-settled plan amounted to about 5.7 million;

– for the part relating to the Discounted Shares and Matching Shares, the Ultimate Parent Intesa Sanpaolo assumes the obligation to allocate shares to employees of all Group companies (including Banca IMI); this component of the Plan is set up as equity-settled. The related accounting treatment requires recognition at fair value, determined only on the date of assignment with no subsequent re-measurement of the value of the shares. In these financial statements, the recognised cost of the equity-settled plan amounted to about 4.6 million euro.

The value of the consideration is in principle made to coincide with the fair value of the shares or the assigned financial instruments, plus accessory charges (such as the reimbursement of the tax on the assignees or social charges) with allocation of the total amount over the so-called “vesting period”, i.e. over the period of the plan, in a way that does not respond to the simple logic of accruals and payables, but refers to the periodic estimate of the liability to account for the population trends of those holding the LECOIP (e.g. permanence of the employee in the Group). The amounts are recognised in the income statement under “personnel expenses”, balancing the entry under equity reserves of the “equity-settled” component.

The rationale behind this representation assumes that the Ultimate Parent Intesa Sanpaolo has made an enrichment of the subsidiary, represented as a capital contribution, taking charge of the cost for the remuneration of the latter’s employees. On redemption of the instruments, or the periodic recharging of the expense, the equity reserve will be reduced by the offsetting with the cash outlay.

For the residual employees, who only opted to join the Stock Ownership Plan, without signing up for the LECOIP plans (and, therefore, only received the Free Shares) the cost was fully accounted for on the date of assignment, because the shares are not subject to vesting conditions (vesting period).

The shares of the Ultimate Parent remaining in portfolio for 31 December 2015 and earmarked to serve the above incentive schemes, are classified in the AFS portfolio of 9 million. The relevant net positive reserve came to approximately 2.7 million euro as at 31 December 2015.

An unavailable reserve has been recorded for the shares purchased according to the provisions and restrictions of Article 2359-bis of the Italian Civil Code - Purchase of Shares of the Ultimate Parent.

219

Part L – Segment reporting

Banca IMI’s segment reporting is based on the elements that its management uses on a daily and periodic basis to monitor profit margins, allocate resources and make its operational decisions (known as “management appro-ach”). It is thus compliant with the disclosure requirements set forth in IFRS 8.

The organisational model is divided into two business areas over three business segments with specific operational responsibilities: Global Markets, Investment Banking and Structured Finance.

HIGHLIGHTS BY BUSINESS SEGMENT


Global Markets

Investment Banking

Structured Finance

Total

Financial assets held for trading 56,903.8 56,903.8

Available-for-sale financial assets 11,586.7 56.5 11,643.2

Due from banks and customers 77,520.6 6,574.3 84,094.9

Financial liabilities held for trading 51,653.5 51,653.5

Bond Issues 13,866.8 13,866.8

Due to banks and customers 78,173.3 5,824.3 83,997.6

Guarantees given and commitments to lend (*) 2,212.9 2,468.9 4,681.8

Total income 1,018.9 111.2 274.7 1,404.8

Operating costs (314.8) (55.4) (60.0) (430.2)

Impairment losses and provisions, other income and expense (**) (46.8) (47.2) (81.4) (175.4)

Income tax (228.4) (3.1) (45.7) (277.2)


Cost / income 30.9% 49.8% 21.8% 30.6%

Number of employees (***) 502 149 181 832

Risk Weighted Assets 15,827.5 108.8 8,652.5 24,588.8

(*) Excluding commitments underlying credit derivatives (protection sales)(**) The expense for the National Resolution Fund was divided equally between segments(***) Includes pro-quota the staff employees

Aggregates are allocated to business segments on the basis of management figures for total income and operating costs, appropriately reconciled with accounting records, and according to the specific allocation and distribution of financial statements aggregates, including risk-weighted exposures, for the remaining captions.

For the measurement of revenue and costs deriving from inter-segment transactions, the application of a contribution model at multiple Internal Transfer Rates for the various maturities permits the correct attribution of net interest income to the individual areas.

Statement of the Manager in charge of financial reporting

223

Statement pursuant to Art. 154-bis of Legislative Decree 58/1998 1. The undersigned Mauro Micillo, in role of Managing Director and Angelo Bonfatti, in role of

Manager in charge of financial reporting at Banca IMI, do hereby attest, in accordance with the provision of Art. 154-bis 3/4 of Legislative Decree 58 dated 24 February 1998: - the adequacy in relation to the Bank’s characteristics and - the actual application of the administrative and accounting procedures implemented to

prepare Banca IMI’s financial statements during the year 2015. 2. The adequacy and actual application of the above-mentioned administrative and accounting

procedures have been assessed based on methodologies defined by Intesa Sanpaolo Group, in accordance with the COSO and – with respect to the IT components - COBIT, which represent internationally accepted framework for internal control systems1. These methodologies have been tailored to the current organisational set-up of Banca IMI with specific reference to all service models agreements.

3. The undersigned also certify that: 3.1 The financial statements at 31 December 2015:

- have been prepared according to the applicable IFRS endorsed by the European Community, pursuant to European Parliament and Council Regulation no. 1606/2002 dated 19 July 2002;

- are consistent with the results of books and accounting ledgers; - are suitable to provide a true and fair view of the issuer’s financial position at 31 December

2015 and the results of operations and cash flows for the year then ended.

3.2 The report on operations includes a reliable analysis of the performance and results, as well as of Banca IMI’s overall financial position, along with a description of the main risks and uncertainties to which the Bank is exposed.

Milan, 23 February 2016

Mauro Micillo Angelo Bonfatti

Managing Director Manager in charge of financial reporting

(signed on the original) (signed on the original)

1 COSO Framework has been elaborated by the Committee of Sponsoring Organizations of the Treadway Commission, an organization established in the US, with the aim to improve the quality of the corporate reporting, through the definition of ethical standards and through an efficient system of corporate governance. COBIT Framework - Control Objectives for IT and related technology is a set of rules established by the IT Governance Institute, a US organization that fixed these rules trying to define and to improve the company’s standards in the company’s standards in the IT area.

Independent Auditors’ Report

227

KPMG S.p.A. è una società per azioni di diritto italiano e fa parte del network KPMG di entità indipendenti affiliate a KPMG International Cooperative (KPMG International), entità di diritto svizzero

ABCD

Ancona Aosta Bari Bergamo Bologna Bolzano Brescia Catania Como Firenze Genova Lecce Milano Napoli Novara Padova Palermo Parma Perugia Pescara Roma Torino Treviso Trieste Varese Verona

Società per azioni Capitale sociale Euro 9.179.700,00 i.v. Registro imprese Milano e Codice Fiscale N. 00709600159 R.E.A. Milano N. 512867 Partita IVA 00709600159 VAT number IT00709600159 Sede legale: Via Vittor Pisani, 25 20124 Milano MI

KPMG S.p.A. Revisione e organizzazione contabile Via Vittor Pisani, 25 20124 MILANO MI

Telefono +39 02 6763.1 Telefax +39 02 67632445 e-mail [email protected] PEC [email protected]

(Translation from the Italian original which remains the definitive version) Independent auditors’ report pursuant to articles 14 and 16 of Legislative decree no. 39 of 27 January 2010 and article 165 of Legislative decree no. 58 of 24 February 1998

To the sole shareholder of Banca IMI S.p.A.

Report on the separate financial statements We have audited the accompanying separate financial statements of Banca IMI S.p.A. (the “bank”), which comprise the statement of financial position as at 31 December 2015, the income statement and statements of comprehensive income, changes in equity and cash flows for the year then ended and notes thereto.

Directors’ responsibility for the separate financial statements The bank’s directors are responsible for the preparation of separate financial statements that give a true and fair view in accordance with the International Financial Reporting Standards endorsed by the European Union and the Italian regulations implementing article 9 of Legislative decree no. 38/05.

Independent auditors’ responsibility

Our responsibility is to express an opinion on these separate financial statements based on our audit. We conducted our audit in accordance with the International Standards on Auditing (ISA Italia) promulgated pursuant to article 11.3 of Legislative decree no. 39/10. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the separate financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the separate financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the separate financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity’s preparation of separate financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal controls. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the separate financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

228

Banca IMI S.p.A.

Independent auditors’ report 31 December 2015

2

ABCD

Opinion In our opinion, the separate financial statements give a true and fair view of the bank’s financial position as at 31 December 2015 and of its financial performance and cash flows for the year then ended in accordance with the International Financial Reporting Standards endorsed by the European Union and the Italian regulations implementing article 9 of Legislative decree no. 38/05.

Other matters As required by the law, the bank disclosed the key figures from the latest financial statements of the company that manages and coordinates it in the notes to its own separate financial statements. Our opinion on the separate financial statements of Banca IMI S.p.A. does not extend to such data.

Report on other legal and regulatory requirements

Opinion on the consistency of the directors’ report and certain information presented in the report on corporate governance and ownership structure with the separate financial statements We have performed the procedures required by Standard on Auditing (SA Italia) 720B in order to express an opinion, as required by the law, on the consistency of the directors’ report and the information presented in the report on corporate governance and ownership structure required by article 123-bis.2.b) of Legislative decree no. 58/98, which are the responsibility of the bank’s directors, with the separate financial statements at 31 December 2015. In our opinion, the directors’ report and the information presented in the report on corporate governance and ownership structure referred to above are consistent with the separate financial statements of Banca IMI S.p.A. as at and for the year ended 31 December 2015.

Milan, 2 March 2016

KPMG S.p.A.

(signed on the original)

Luca Beltramme Director of Audit

Report of theBoard of Statutory Auditors

231

1

BANCA IMI S.P.A.

Registered office in Milan – Largo Raffaele Mattioli 3

Share capital: 962,464,000 euro

Milan Companies Register, tax code and VAT registration: 04377700150

Subject to management and coordination by Intesa Sanpaolo S.p.A., as sole shareholder, a member of

the Intesa Sanpaolo Banking Group, registered in the Roll of Banking Groups.

* * * *

BOARD OF STATUTORY AUDITORS' REPORT

To the Shareholders' Meeting of Banca IMI S.p.A. – Intesa Sanpaolo Banking Group.

To the sole shareholder.

The Board of Statutory Auditors, was appointed for the 2013-2015 three-year period, with the

mandate for institutional supervision pursuant to Art. 2403 of the Civil Code and with the functions of

the Supervisory Body pursuant to Legislative Decree 231/2001.

In 2015 the Board of Statutory Auditors conducted its supervisory tasks on the basis of the provisions

in the Civil Code, the instructions contained in CONSOB Communication No. DEM/1025564 of 6

April 2001 and the Rules of Conduct for Statutory Auditors recommended by the National Council of

Chartered Accountants and Accounting Experts.

The Board of Statutory Auditors:

• attended all the meetings of the Board of Directors and was suitably informed by the Directors of

the Bank’s business, both within the group and with related parties, and of the most relevant

economic, financial and equity transactions carried out by the Bank;

• ensured that the transactions approved and conducted by the Board of Directors complied with

law and the articles of association and were not manifestly imprudent or unwise, in potential

conflict of interest or in contrast with the resolutions adopted by the Shareholders’ Meeting, or

detrimental to the rights of the shareholder and third parties;

• verified that intragroup transactions fell within the normal course of business and were in line with

the opportunities and resources made available by the Group, of which the Bank is a member.

In fact, the dealings between the various entities that comprise the Intesa Sanpaolo Group are

inspired by criteria of centrality as pertains to fundamental governance, control, guidance and

assistance in the form of advisory activities on legal, economic and organisational issues. Dealings

with the Parent Company, therefore, fall within the normal course of business of a group organised

232

2

according to a multifunctional model and predominantly refer to services provided; they are also

characterised by mutual interaction to provide and/or manage the financial resources to be used in

the Bank’s ordinary business. The economic effects of such dealings are normally settled at the

arm’s-length conditions applied by the Parent Company to all the subsidiaries and are primarily

governed by a specific Service Level Agreement between the parties.

In partial derogation to the principle mentioned above, also during 2015 securities issued by Intesa

Sanpaolo were transferred to the Parent Company Intesa Sanpaolo for a total of approximately

Euro 583 million. The transfer price corresponded to the average cost incurred for their purchase.

If the transfer price had been aligned to the fair value of the securities, it would have generated

negligible economic effects;

• consistently acquired knowledge and supervised, within its area of responsibility, to ensure that the

Bank’s procedures, operating policies, organisational and management structure continued to be

adequate in relation to the corporate purpose, the extent of the operations and the other objectives

to achieve. It supervised compliance with the principles of fair administration through direct

assessments, by gathering information from the Managers in charge of the various functions and

during meetings with the Independent Auditors, in order to exchange data and relevant

information.

It examined the management processes and the methods used to measure risks affecting the Bank’s

activity, as well as their suitability to seize the opportunities offered by credit, bond, interest rate

and commodity futures markets. It supervised the compliance activity carried out by the Parent

Company Intesa Sanpaolo and its integration with corporate activities. In addition, it assessed and

supervised the adequacy of the administrative–accounting system and its reliability in correctly

representing the management events by acquiring and obtaining the necessary information from

the Managers in charge of the Bank’s various functions;

In the light of these assessments, the Board of Statutory Auditors deems that the quality of the

Bank’s internal control system is appropriate for the type of operations and the risks it is exposed

to, taking into account the ongoing functional updates to the development of the activities of the

regulatory innovations introduced;

• acknowledges that no complaints were received pursuant to Article 2408 of the Civil Code, nor

were complaints submitted;

• has viewed the audit report on the individual and consolidated financial statements of Banca IMI at

31 December 2015 issued by the Independent Auditors KPMG S.p.A. on 2 March 2016, which

found nothing of note to report, and did not call for any limitations or additional disclosures to be

made.

233

3

It has also taken note of a separate declaration made by Auditors of KPMG that during their audit

on the financial statements and bookkeeping no significant deficiencies in the internal control

system came to light.

During the year, the Board of Statutory Auditors checked that KPMG auditors satisfied the

independence requirements for its engagement by the Bank.

It also determined (pursuant to Art. 149-duodecies of the Consob Regulation cited above) that the

Bank, in accordance with the most recent resolution of the Ordinary Shareholders' Meeting of 10

February 2015 and of the Board of Directors on 14 October 2015, had agreed on the following

compensation (in thousands of euro) with KPMG S.p.A. for the assignments given in 2015:

Auditing 852

Other statements 65

917

The above compensation for the Audit activities include amounts paid to KPMG SpA for their

work at the London Branch.

One should add to the above amounts the fees paid to other companies belonging to the KPMG

SpA network for auditing activities performed through the Reporting Package of the Subsidiaries,

IMI Investments SA and IMI Finance Luxembourg (11,000 euro) and IMI Capital Market USA

and Banca IMI Securities Corp. (Euro 23,000) and another Auditor 185,000 euro for the Auditing

of Banca IMI Securities Corp.;

• took note of activities carried out by the Internal Auditing department of Intesa Sanpaolo at the

Bank’s offices, ascertaining that the former gradually adjusted to the changing and growing

supervision needs for Banca IMI;

• reports that the Board of Statutory Auditors held 15 meetings in 2015, nine of which in its capacity

as Supervisory Body, and that its members attended, except in the case of justified absence, the 19

meetings held by the Bank’s Board of Directors and the 10 meetings held by the Technical Audit

Committee;

• verified with the management and auditors from KPMG S.p.A. that the accounting choices made

were performed in compliance with the statutory requirements and the reference accounting

standards;

• acknowledges that the consolidated financial statements, obtained on the basis of the appropriate

information provided by the subsidiaries, was submitted together with the Bank's individual

financial statements during the Board of Directors' meetings of 5 and 23 February 2016.

234

4

The supervisory activity performed by the Board of Statutory Auditors did not result in the detection

of omissions, censurable circumstances or irregularities worthy of being reported to supervisory bodies

or mentioned to the Shareholder.

In the light of the above, and within the areas of its responsibility, the Board of Statutory Auditors

expresses its favourable opinion to the Shareholders’ Meeting in relation to the following proposals:

(i) approval of the financial statements at 31 December 2015;

(ii) the allocation of the profit for the year, totalling 521,984,384 euro, to the extraordinary

reserve (for 21,503,104 euro) and as dividends (0.52 euro per share, amounting to

500,481,280 euro), as proposed by the Board of Directors (resolution proposal as per the

financial statements).

The dividend paid to the Shareholder will be reduced by the advance payments already made on 30

December 2015 amounting to 307,988,480 euro.

Milan, 7 March 2016

The Board of Statutory Auditors

(Signed on the original)

235

Attachments

Reconciliation between the separate financial statements and the reclassified financial statements

Audit fees

Highlights of the subsidiaries and associates

Details of bond issues

Report on Corporate Governance and Shareholder Structures

Attachments

237

Reconciliation between the reclassified income statement for the year ended 31 December 2015 and the income statement included in the separate financial statements


INCOME STATEMENT - SEPARATE FINANCIAL STATEMENTS

Reclassified income statement

Net interest income

Netfee and

commission income

Dividends Net trading income

Net hedging income

(expense)

Profits on disposal

Net impairment

losses

Personnel expenses

Other administrative

expenses

Amortisation and

depreciation

Accrual to provisions

for risks and charges

Other operating

income (expense)

Income taxes

TOTAL

Net interest income 575.6 3.5 579.1

Net fee and commission income

339.6 339.6

Profits from financial transactions

2.4 (118.5) 40.9 329.3 7.8 218.3 480.2

Non-recurring income (expense)

5.9 5.9

Personnel expenses 1.5 (149.0) (147.5)

Administrative expenses (1.0) (284.8) 3.4 (282.4)

Amortisation and depreciation

(0.2) (0.1) (0.3)

Impairment losses, provisions, other operating income (expenses)

(38.4) 2.9 (141.8) 1.7 0.2 (175.4)

Income taxes (0.2) (277.0) (277.2)

TOTAL 578.0 221.1 46.8 329.3 7.8 184.9 2.9 (150.0) (426.6) (0.2) 1.7 3.3 (277.0) 522.0

The reclassified income statement aims to better represent management phenomena, highlighting the economic connection of some financial statements items with the economic trends of non-recurring items.

Specifically:– the dividends and manufactured dividends received on trading and fees for the placement of HFT financial instru-

ments are recognised under profits from financial transactions;– other administrative expenses are net of reimbursements and recovered amounts.

Attachments

238

Reconciliation between the reclassified statement of financial position as at 31 December 2015 and the statement of financial position included in the separate financial statements - Assets


ASSETS Financial assets held for trading

Available-for-sale financial

assets

Due from banks

Loans to customers

Hedging derivatives

Equityinvestments

Tax assets Other assets Statement of financial

position -Assets -

Other

Condensed reclassified statement

of financial positions - Assets -

1. Loans

– Repurchase agreements 4,642.8 7,944.4 12,587.2

– Securities lending 2,610.2 86.6 2,696.8

– Fixed income securities 0.0 693.2 693.2

– Collateral deposited 4,533.1 5,019.9 9,553.0

– Structured finance assets 7.2 6,567.1 6,574.3

– Deposits 45,160.5 1,877.9 47,038.4

– Checking accounts and other accounts 3,844.1 1,107.9 4,952.0

2. Financial assets

– Fixed income securities 14,814.3 14,814.3

– Shares, quotas and loans 1,230.1 1,230.1

– Positive fair value of OTC derivatives 40,859.4 203.2 41,062.6

– Positive fair value of CCP and listed derivatives

-

3. Investments

– Fixed income AFS securities 11,556.7 11,556.7

– Equity investments, equities and UCI AFS 86.5 29.9 116.4

4. Other assets 501.0 420.5 0.6 922.1

Total Assets 56,903.8 11,643.2 60,797.9 23,297.0 203.2 29.9 501.0 420.5 0.6 153,797.1

Attachments

239

Reconciliation between the reclassified statement of financial position as at 31 December 2015 andthe statement of financial position included in the separate financial statements - Liabilities


LIABILITIES Due to banks

Due tocustomers

Securities issued

Financial liabilities held

for trading

Hedging derivati-

ves

Taxliabilities

Post-employment

benefits

Provi-sions for risks and charges

Other liabili-

ties

Fair value reserves

and Other reserves

Share capital and Share premium

reserve

Profit for the year

Condensed reclassified statement

of financial positions - Liabilities -

1. Payables



– Collateral received 4,627.9 961.0 5,588.9

– Loans and deposits 53,949.5 53,949.5

– Bonds issued and subordinated loans

13,866.8 13,866.8

– Checking accounts and other accounts

144.4 494.7 639.1

2. Financial liabilities

– Negative fair value of OTC derivatives

36,582.7 164.6 36,747.3

– Negative fair value of CCP and listed derivatives

4,076.5 4,076.5

– Certificates and warrants 8,033.9 8,033.9

– Short selling 2,960.4 2,960.4

3. Other liabilities and provisions 342.2 8.7 24.1 579.0 954.0

4. Equity

– Share capital, share premium and reserves

1,094.9 1,543.7 2,638.6

– Profit for the year 522.0 522.0

Total Liabilities 68,073.7 15,923.9 13,866.8 51,653.5 164.6 342.2 8.7 24.1 579.0 1,094.9 1,543.7 522.0 153,797.1

Attachments

240

Fees for audit and other services in accordance with Article 149-duodecies of Consob Regulation No.11971

Following amendment of the Consolidated Finance Law - contained in Law No. 262 of 28 December 2005, supplemented by Legislative Decree No. 3032 of 29 December 2006 – the regulations governing the incompatibility of audit firms were changed, with new requirements for the disclosure of audit fees introduced in accordance with section 160.1-bis.

Article 149-duodecies of the Consob Issuer Regulations implemented the provisions contained in this section of the Law. The implementation Decree established that companies appointing auditors must disclose fees paid in their financial statements for the periods after 30 June 2006.

The following table lists the fees contractually agreed for 2015 pertinent to Banca IMI. The amounts are net of VAT, costs and ISTAT adjustments.


Type of service KPMG KPMG Network

Audit 852 -

Attestation services 65 -

Tax consulting services - -

Other:

appraisals - -

social report - -

other - -

Total 917 -

Attachments

241

Highlights of the subsidiaries and associates

IMI INVESTMENTS S.A.

STATEMENT OF FINANCIAL POSITION(in thousands of euro)

ASSETS 31.12.2015 31.12.2014

60 Due from banks 2,865 3,072

100 Equity investments 24,304 24,304

140 Tax assets

a) current 27 31

160 Other assets 14

TOTAL ASSETS 27,210 27,407

LIABILITIES AND EQUITY 31.12.2015 31.12.2014

90 Tax liabilities

a) current 18 59

110 Other liabilities 15 60

180 Reserves 5,629 5,768

200 Share capital 21,660 21,660

230 Profit (loss) for the year (112) (140)

TOTAL LIABILITIES AND EQUITY 27,210 27,407

INCOME STATEMENT(in thousands of euro)

2015 2014

10 Interest and similar income 2 15

20 Interest and similar expense - (1)

30 Net interest income 2 14

50 Fee and commission expense (53) (51)

60 Net fee and commission expense (53) (51)

130 Total income (51) (37)

150 Net financial income (51) (37)

190 Administrative expenses: (43) (44)

b) other administrative expenses (43) (44)

250 Operating expenses (43) (44)

280 Pre-tax profit (loss) from continuing operations (94) (81)

290 Income tax expense (18) (59)

330 Profit (loss) for the year (112) (140)

Attachments

242

IMI FINANCE LUXEMBOURG S.A.


ASSETS 31.12.2015 31.12.2014

60 Due from banks 12,410 12,135

140 Tax assets

a) current 121 416

160 Other assets 16 2



90 Tax liabilities

a) current 101 85

110 Other liabilities 15 37

180 Reserves 12,331 12,217

200 Share capital 100 100

230 Profit (loss) for the year - 114



2015 2014

10 Interest and similar income 19 25

30 Net interest income 19 25

40 Fee and commission income 146 241

50 Fee and commission expense (27) (28)

60 Net fee and commission income 119 213

130 Total income 138 238

150 Net financial income 138 238

190 Administrative expenses: (42) (43)

b) other administrative expenses (42) (43)

240 Other operating income (expenses) (3) 15

250 Operating expenses (45) (28)

280 Pre-tax profit (loss) from continuing operations 93 210

290 Income tax expense (93) (96)

330 Profit (loss) for the year - 114

Attachments

243

IMI CAPITAL MARKETS

STATEMENT OF FINANCIAL POSITION(in thousand of USD) (in thousands of euro)

ASSETS 31.12.2015 31.12.2014 31.12.2015 31.12.2014

60 Due from banks 987 989 906 814

100 Equity investments 105,034 105,034 96,477 86,512

TOTAL ASSETS 106,021 106,023 97,383 87,326

LIABILITIES AND EQUITY 31.12.2015 31.12.2014 31.12.2015 31.12.2014

180 Reserves (1,980) (1,928) (1,819) (1,588)

190 Share premium reserve 107,998 107,998 99,199 88,953

200 Share capital 5 5 5 4

230 Profit (loss) for the year (2) (52) (2) (43)

TOTAL LIABILITIES AND EQUITY 106,021 106,023 97,383 87,326

The subsidiary prepares the financial statements in USD. The translation into euro has occurred using the spot exchange rate as at 31 December 2015 of 1.0887 euro and as at December 2014 of 1.2141 euro.

INCOME STATEMENT(in thousand of USD) (in thousands of euro)

2015 2014 2015 2014

50 Fee and commission expense - (2) - (2)

60 Net fee and commission expense (1) (2) - (2)

190 Administrative expenses: (1) - (2) -

b) other administrative expenses (1) - (2) -

250 Operating expenses (1) - (2) -

280 Pre-tax profit (loss) from continuing operations (2) (2) (2) (2)

290 Income tax expense - (50) - (41)

330 Profit (loss) for the year (2) (52) (2) (43)


Attachments

244

BANCA IMI SECURITIES CORP.

STATEMENT OF FINANCIAL POSITION(in thousand of USD) (in thousands of euro)

ATTIVO 31.12.2015 31.12.2014 31.12.2015 31.12.2014

10 Cash and cash equivalents 1 1 1 1

20 Financial assets held for trading 55,259 55,480 50,757 45,696

60 Due from banks 119,220 60,371 109,507 49,725

70 Loans to customers 62,022 63,734 56,969 52,495

120 Property and equipment 377 588 346 484

130 Intangible assets 286 357 263 294

140 Tax assets 1,184 1,005 1,088 828

a) current 1,184 1,005 - -

160 Other assets 35,310 28,542 32,432 23,509

TOTAL ASSETS 273,659 210,078 251,363 173,032

LIABILITIES AND EQUITY 31.12.2015 31.12.2014 31.12.2015 31.12.2014

10 Due to banks - 48 - 39

20 Due to customers 120,177 70,260 110,386 57,870

110 Other liabilities 8,984 7,125 8,252 5,869

180 Reserves (13,905) (25,781) (12,772) (21,235)

190 Share premium reserve 102,000 102,000 93,690 84,013

200 Share capital 44,500 44,500 40,874 36,653

230 Profit (loss) for the year 11,903 11,926 10,933 9,823

TOTAL LIABILITIES AND EQUITY 273,659 210,078 251,363 173,032


Attachments

245

INCOME STATEMENT(in thousand of USD) (in thousands of euro)

2015 2014 2015 2014

10 Interest and similar income 723 658 664 542

20 Interest and similar expense (311) (165) (286) (136)

30 Net interest income 412 493 378 406

40 Fee and commission income 45,348 61,005 41,653 50,247

50 Fee and commission expense (4,152) (20,458) (3,814) (16,850)

60 Net fee and commission expense 41,196 40,547 37,839 33,397

80 Profits (losses) on trading (544) (601) (500) (495)

130 Total income 41,064 40,439 37,717 33,308

150 Net financial income 41,064 40,439 37,717 33,308

190 Administrative expenses: (21,324) (18,248) (19,587) (15,030)

a) personnel expenses (13,372) (10,599) (12,283) (8,730)

b) other administrative expenses (7,952) (7,649) (7,304) (6,300)

210 Depreciation and net impairment losses on property and equipment (324) (309) (298) (255)

220 Amortisation and net impairment losses on intangible assets (71) (70) (65) (58)

240 Other operating income (expenses) (63) 29 (56) 24

250 Operating expenses (21,782) (18,598) (20,006) (15,319)

280 Pre-tax profit (loss) from continuing operations 19,282 21,841 17,711 17,989

290 Income tax expense (7,379) (9,915) (6,778) (8,166)

330 Profit (loss) for the year 11,903 11,926 10,933 9,823


Profit for the year at 31 December 2015 calculated according to US GAAP is the same as the profit calculated according to IFRS.

Attachments

246

EUROTLX SIM


ASSETS 31.12.2015 31.12.2014

60 Loans 10,117 7,886

100 Property and equipment 518 965

110 Intangible assets 120 157

120 Tax assets

a) current - 1,314

b) deferred 27 4

140 Other assets 18 77



70 Tax liabilities

a) current 561 1,279

90 Other liabilities 1,347 1,302

100 Post-employment benefits 268 119

120 Share capital 5,000 5,000

160 Reserves 439 304

170 Fair value reserves (29) 2

180 Profit (loss) for the year 3,214 2,397



2015 2014

50 Fee and commission income 14,626 15,381

70 Interest and similar income - 4

Total income 14,626 15,385

110 Administrative expenses: (9,079) (11,228)

a) personnel expenses (2,809) (3,068)

b) other administrative expenses (6,270) (8,160)

120 Depreciation and net impairment losses on property and equipment (377) (411)

130 Amortisation and net impairment losses on intangible assets (85) (108)

160 Other operating income (expenses) (108) (6)

Operating expenses 4,977 3,632

Pre-tax profit (loss) from continuing operations 4,977 3,632

190 Income tax expense (1,763) (1,235)

Profit (loss) for the year 3,214 2,397

Attachments

247

EPSILON SGR


ASSETS 31.12.2015 31.12.2014

10 Cash and cash equivalents 2 -

20 Financial assets held for trading 3,875 3,876

30 Financial assets at fair value through profit and loss 398 458

40 Available-for-sale financial assets 7,533 7,540

60 Loans 18,995 16,989

a) asset management 13,886 12,361

b) other 5,109 4,628

100 Equity investments 10 -

110 Property and equipment 10 8

120 Tax assets

a) current 12 -

b) deferred 473 492

140 Other assets 581 1,036



10 Due to banks 4,799 5,151

70 Tax liabilities

a) current - 1,690

b) deferred 24 24

90 Other liabilities 2,961 1,345

100 Post-employment benefits 116 128

110 Provisions for risks and charges

b) other provisions 1,636 1,701

120 Share capital 5,200 5,200

160 Reserves 4,249 3,819

170 Fair value reserves (19) (32)

180 Profit (loss) for the year 12,923 11,373


Attachments

248


2015 2014

10 Interest and similar income 53,707 43,725

20 Interest and similar expense (27,267) (19,995)

Net interest income 26,440 23,730

30 Dividends and similar income 7 11

60 Profits (losses) on trading (1) 19

80 Profits (losses) on financial assets and liabilities

at fair value trough profit and loss 131 150

90 Profits (losses) on disposal of financial assets - 21

Total income 26,577 23,931

110 Administrative expenses: (7,212) (6,504)

a) personnel expenses (3,855) (3,667)

b) other administrative expenses (3,357) (2,837)

120 Depreciation and net impairment losses on property and equipment (2) (2)

150 Net accruals to provisions for risks and charges 112 (223)

160 Other operating income (expenses) (8) 3

Operating expenses 19,467 17,205

Pre-tax profit (loss) from continuing operations 19,467 15,718

190 Income tax expense (6,544) (5,832)

Profit (loss) for the year 12,923 11,373

Attachments

249

Details of bond issues

ISIN Description Category Issue Date Expiry Date Currency Nominal amount Carrying amount Structured/ Non

structured

Inflation Yes/No

IT0005012817 B IMI 14-19 LK CURRENCY 30-May-2014 30-May-2019 EUR 29,900,000.00 28,086,157.71 Structured NO

IT0005042194 B IMI 14-20 LK CURRENCY 15-Oct-2014 15-Oct-2020 EUR 39,990,000.00 38,118,167.36 Structured NO

XS0529330218 BCA IMI TM 2016 EMTN CURRENCY 30-Sep-2010 30-Sep-2016 EUR 4,866,000.00 5,042,300.10 Structured NO

XS0782588023 BCA IMI 5.75TM2018 CURRENCY 29-Jun-2012 29-Jun-2018 EUR 41,544,000.00 38,413,142.28 Structured NO

TOTAL 109,659,767.45


structured

Inflation Yes/No

IT0004532179 B IMI 09/16 ONE COUP EQUITY 30-Oct-2009 30-Oct-2016 EUR 958,000.00 946,282.46 Structured NO

IT0004532195 BANCA IMI 09/16 2,0% EQUITY 30-Oct-2009 30-Sep-2016 EUR 751,000.00 745,038.81 Structured NO

IT0004893928 BCA IMI 13/19 OC EQUITY 5-Mar-2013 5-Mar-2019 EUR 7,914,000.00 7,378,629.49 Structured NO

IT0004923972 BCA IMI 13/19 TV EQUITY 31-Jul-2013 31-Jul-2019 EUR 61,732,000.00 58,624,283.12 Structured NO

IT0004940745 BCA IMI 13/19 TV EC EQUITY 30-Sep-2013 30-Sep-2019 EUR 65,723,000.00 59,727,555.18 Structured NO

IT0004953284 BCA IMI 9/10/19 TV EQUITY 9-Oct-2013 9-Oct-2019 EUR 9,719,000.00 8,788,191.87 Structured NO

IT0004980485 B IMI 14-20 LK EQUITY 31-Jan-2014 31-Jan-2020 EUR 79,192,000.00 79,739,745.26 Structured NO

IT0004982176 B IMI 14-20 LK EQUITY 6-Mar-2014 6-Mar-2020 EUR 48,877,000.00 45,259,055.24 Structured NO

IT0004997927 B IMI 14-20 LK EQUITY 7-May-2014 7-May-2020 EUR 54,043,000.00 50,115,846.62 Structured NO

XS0366925377 BANCA IMI FR 23 EUR EQUITY 12-Jun-2008 12-Jun-2023 EUR 15,000,000.00 13,686,258.13 Structured NO

XS0376935028 BANCA IMI FR 08 EUR EQUITY 30-Jul-2008 31-Jul-2023 EUR 30,000,000.00 27,147,690.55 Structured NO

XS0460472904 IMI ONE COUPON 2016 EQUITY 18-Dec-2009 18-Dec-2016 EUR 2,296,000.00 2,280,733.80 Structured NO

XS0476375380 BANCA IMI TM 2016 EQUITY 29-Jan-2010 29-Jan-2016 EUR 15,347,000.00 15,450,891.58 Structured NO

XS0564619814 BANCA IMI TM 2017 EQUITY 19-Jan-2011 19-Jan-2017 EUR 139,975,000.00 138,480,691.15 Structured NO

XS0619675837 B IMI FR MEDP 2017 EQUITY 31-May-2011 31-May-2017 EUR 4,949,000.00 4,638,410.97 Structured NO

XS0631820957 BC IMI 4,5% 2017 EQUITY 30-Jun-2011 30-Jun-2017 EUR 19,103,000.00 18,983,448.84 Structured NO

XS0644381583 BCA IMI 11/16 FR EQUITY 1-Aug-2011 1-Aug-2016 EUR 279,000.00 276,576.70 Structured NO

XS0683704000 BCA IMI TM 11/17 EUR EQUITY 17-Nov-2011 17-Nov-2017 EUR 31,138,000.00 29,397,848.74 Structured NO

XS0702208066 BCA IMI TM 11/17 EQUITY 28-Dec-2011 28-Dec-2017 EUR 13,612,000.00 13,765,170.46 Structured NO

XS0736029553 BCA IMI 5 03/30/17 EQUITY 30-Mar-2012 30-Mar-2017 EUR 909,000.00 862,351.73 Structured NO

XS0789510012 BANCA IMI FR 12/18 EQUITY 10-Jul-2012 10-Jul-2018 EUR 901,000.00 695,877.75 Structured NO

XS0891667486 BCA IMI CERT TELECOM EQUITY 30-Apr-2013 30-Apr-2019 EUR 88,177,000.00 86,495,536.73 Structured NO

TOTAL 663,486,115.18

Attachments

250


structured

Inflation Yes/No

IT0001271003 BIM 98/18 STEP DOWN INTEREST RATE 4-Nov-1998 4-Nov-2018 ITL 157,605,000,000.00 122,471,031.62 NS NO

IT0001304341 BIM 99/24 FIX ZERO INTEREST RATE 1-Feb-1999 1-Feb-2024 EUR 22,905,000.00 47,887,707.96 NS NO

IT0001349023 BIM 99/24 TV INTEREST RATE 5-Jul-1999 5-Jul-2024 EUR 5,000,000.00 5,232,713.59 NS NO

IT0004532187 BCA IMI 09/16 TV INTEREST RATE 30-Oct-2009 30-Oct-2016 EUR 718,584,000.00 730,076,239.90 Structured NO

IT0004572811 B IMI 2010/2017 TV INTEREST RATE 4-Mar-2010 4-Mar-2017 EUR 71,387,000.00 73,544,142.22 Structured NO

IT0004586472 B IMI 10/16 TV INTEREST RATE 12-Apr-2010 12-Apr-2016 EUR 136,263,000.00 139,814,064.86 Structured NO

IT0004591795 BCA IMI 10/16 TV INTEREST RATE 4-May-2010 4-May-2016 EUR 146,055,000.00 149,800,431.17 Structured NO

IT0004611932 BCA IMI SPA 10/17 TV INTEREST RATE 30-Jun-2010 30-Jun-2017 EUR 342,274,000.00 340,357,710.81 Structured NO

IT0004614654 BCA IMI SPA 10/17 TV INTEREST RATE 30-Jun-2010 30-Jun-2017 EUR 9,388,000.00 9,745,328.90 Structured NO

IT0004614696 BCA IMI 10/16 TV INTEREST RATE 30-Jun-2010 30-Jun-2016 EUR 5,627,000.00 5,615,503.38 Structured NO

IT0004626914 BCA IMI 10/17 TV INTEREST RATE 1-Sep-2010 1-Sep-2017 EUR 454,284,000.00 469,788,712.90 Structured NO

IT0004628050 BCA IMI 10/17 TV INTEREST RATE 3-Sep-2010 3-Sep-2017 EUR 29,241,000.00 30,294,428.29 Structured NO

IT0004648694 BCA IMI 10/17 TM INTEREST RATE 10-Nov-2010 10-Nov-2017 EUR 11,517,000.00 11,305,909.13 NS NO

IT0004650740 BCA IMI SPA 10/17 TV INTEREST RATE 10-Dec-2010 10-Dec-2017 EUR 37,760,000.00 38,617,048.06 Structured NO

IT0004654171 BANCA IMI 10/16 TV INTEREST RATE 21-Dec-2010 21-Dec-2016 EUR 3,639,000.00 3,659,257.90 Structured NO

IT0004655970 BCA IMI 10/16 TV INTEREST RATE 17-Dec-2010 17-Dec-2016 EUR 6,189,000.00 6,260,005.08 Structured NO

IT0004676992 BCA IMI 11/16 TM INTEREST RATE 4-Mar-2011 4-Mar-2016 EUR 1,366,000.00 1,372,715.06 NS NO

IT0004677008 BCA IMI 11/17 TM INTEREST RATE 21-Feb-2011 21-Feb-2017 EUR 16,998,000.00 16,725,811.01 Structured NO


IT0004708274 BCA IMI TV 11/16 EUR INTEREST RATE 16-Jun-2011 16-Jun-2016 EUR 56,772,000.00 57,361,386.42 Structured NO

IT0004709892 BCA IMI 11/18 S/U INTEREST RATE 21-Apr-2011 21-Apr-2018 EUR 6,417,000.00 6,645,661.04 NS NO

IT0004712565 BCA IMI 11/16 TV INTEREST RATE 1-Jun-2011 1-Jun-2016 EUR 17,617,000.00 18,150,395.53 Structured NO

IT0004727662 BCA IMI 11/16 TM INTEREST RATE 30-Jun-2011 30-Jun-2016 EUR 25,767,000.00 25,649,244.80 Structured NO

IT0004733769 BCA IMI 11/16 TM INTEREST RATE 30-Jun-2011 30-Jun-2016 EUR 4,634,000.00 4,724,208.89 Structured NO

IT0004745581 BCA IMI 11/17 4,2% INTEREST RATE 3-Aug-2011 3-Aug-2017 EUR 31,197,000.00 33,042,923.59 NS NO

IT0004747538 BCA IMI 11/16 TM INTEREST RATE 5-Aug-2011 5-Aug-2016 EUR 10,929,000.00 10,938,365.20 Structured NO

IT0004766587 BCA IMI 11/21 OC INTEREST RATE 9-Nov-2011 9-Nov-2021 EUR 11,045,000.00 12,485,577.25 NS SI

IT0004796451 BCA IMI 12/18 S/U INTEREST RATE 6-Mar-2012 6-Mar-2018 EUR 32,499,000.00 35,147,130.18 NS NO

IT0004826449 BCA IMI 0 07/31/17 INTEREST RATE 31-Jul-2012 31-Jul-2017 EUR 6,442,000.00 6,433,127.46 Structured NO

IT0004841513 BCA IMI 12/16 S/U INTEREST RATE 31-Aug-2012 31-Aug-2016 EUR 4,830,000.00 4,871,981.48 NS NO

IT0004842677 BCA IMI 12/17 5% INTEREST RATE 13-Sep-2012 13-Sep-2017 EUR 11,128,000.00 11,319,634.40 NS NO

IT0004842685 BCA IMI 12/17 5% INTEREST RATE 12-Sep-2012 12-Sep-2017 EUR 238,002,000.00 243,145,514.43 NS NO

IT0004842701 BCA IMI 12/17 INTEREST RATE 11-Sep-2012 11-Sep-2017 EUR 30,721,000.00 31,380,432.15 NS NO

IT0004842719 BCA IMI 12/17 TV INTEREST RATE 12-Sep-2012 12-Sep-2017 EUR 21,966,000.00 21,828,636.61 NS NO

IT0004845084 BCA IMI 28/09/18 TV INTEREST RATE 28-Sep-2012 28-Sep-2018 USD 38,092,000.00 33,542,892.45 Structured NO

IT0004845225 BCA IMI 12/17 TV INTEREST RATE 17-Oct-2012 17-Oct-2017 EUR 51,905,000.00 52,688,879.22 Structured NO

IT0004863723 BCA IMI 12/19 4,10 INTEREST RATE 18-Oct-2012 18-Oct-2019 EUR 16,406,000.00 17,152,057.76 NS NO

IT0004863731 BCA IMI 4,40% 12/19 INTEREST RATE 18-Oct-2012 18-Oct-2019 USD 68,848,000.00 62,551,890.83 NS NO

IT0004865033 BCA IMI 12/16 3,0 INTEREST RATE 30-Nov-2012 30-Nov-2016 EUR 4,798,000.00 4,808,610.97 NS NO

IT0004872765 BCA IMI 13/17 3% DIG INTEREST RATE 18-Jan-2013 18-Jan-2017 EUR 238,019,000.00 245,061,730.50 NS NO

IT0004882764 BCA IMI 13/17 TM INTEREST RATE 31-Jan-2013 31-Jan-2017 EUR 4,601,000.00 4,557,171.34 NS NO

IT0004892755 BCA IMI 3,4 2018 USD INTEREST RATE 12-Feb-2013 12-Feb-2018 USD 71,108,000.00 66,475,916.74 NS NO

IT0004894462 BCA IMI 13/19 TV INTEREST RATE 28-Mar-2013 28-Mar-2019 EUR 29,150,000.00 28,246,685.28 NS NO


IT0004906308 BCA IMI 13/19 TM INTEREST RATE 31-May-2013 31-May-2019 EUR 177,874,000.00 174,646,134.00 Structured NO

IT0004918402 BCA IMI 13/18 2,30 INTEREST RATE 19-Apr-2013 19-Apr-2018 CHF 7,292,000.00 6,923,218.82 NS NO

IT0004918410 BCA IMI 13/16 7,40 INTEREST RATE 19-Apr-2013 19-Apr-2016 TRY 317,754,000.00 103,238,474.37 NS NO

IT0004923071 BIMI 13/18 TV INTEREST RATE 30-May-2013 30-May-2018 EUR 37,060,000.00 36,671,395.06 NS NO

IT0004923097 BCA IMI 13/16 1.7% INTEREST RATE 30-May-2013 30-May-2016 EUR 31,740,000.00 32,052,682.35 NS NO

IT0004923113 BCA IMI 13/16 2% INTEREST RATE 30-May-2013 30-May-2016 EUR 48,410,000.00 49,020,590.97 NS NO

IT0004936545 BCA IMI 13/19 S/U-D INTEREST RATE 30-Aug-2013 30-Aug-2019 EUR 209,246,000.00 217,951,776.52 NS NO

IT0004937675 BCA IMI 13/16 S/U INTEREST RATE 16-Jul-2013 16-Jul-2016 EUR 3,486,000.00 3,517,817.93 NS NO

Attachments

251


structured

Inflation Yes/No

IT0004938129 BCA IMI 8.30% 16 RUB INTEREST RATE 28-Jun-2013 28-Jun-2016 RUB 2,665,500,000.00 35,426,197.71 NS NO

IT0004938269 BCA IMI 6.40% 18 AUD INTEREST RATE 28-Jun-2013 28-Jun-2018 AUD 212,426,000.00 150,560,768.98 NS NO

IT0004940026 BCA IMI 2.35% 13-16 INTEREST RATE 7-Aug-2013 7-Aug-2016 EUR 168,800,000.00 170,576,082.16 NS NO

IT0004940042 BCA IMI 2.70% 13-16 INTEREST RATE 7-Aug-2013 7-Aug-2016 EUR 353,600,000.00 358,572,517.51 NS NO

IT0004953151 BCA IMI 13/19 TM INTEREST RATE 31-Oct-2013 31-Oct-2019 EUR 173,995,000.00 174,820,606.23 Structured NO

IT0004953292 BCA IMI 09/10/19 TV INTEREST RATE 9-Oct-2013 9-Oct-2019 EUR 18,742,000.00 17,479,025.51 Structured NO

IT0004953821 BCA IMI 0 10/18/19 INTEREST RATE 18-Oct-2013 18-Oct-2019 EUR 41,800,000.00 40,498,268.33 NS NO

IT0004957020 B IMI 13-19 4.55 INTEREST RATE 31-Oct-2013 31-Oct-2019 EUR 199,869,000.00 207,871,576.40 NS NO

IT0004960354 BANCA IMI 13/09/2013 INTEREST RATE 13-Sep-2013 13-Sep-2017 NOK 583,740,000.00 62,063,176.22 NS NO

IT0004960362 BIMI TF 4,50% 13/09 INTEREST RATE 13-Sep-2013 13-Sep-2019 USD 144,994,000.00 134,544,978.69 NS NO

IT0004961360 BCA IMI 13/19 TM INTEREST RATE 4-Nov-2013 4-Nov-2019 EUR 296,176,000.00 298,466,625.17 Structured NO



IT0004966229 BANCA IMI TM 10/2020 INTEREST RATE 18-Oct-2013 18-Oct-2020 USD 217,926,000.00 192,578,725.65 NS NO

IT0004967623 BIMI STUP 02/01/14-2 INTEREST RATE 2-Jan-2014 2-Jan-2020 EUR 52,139,000.00 54,171,789.09 NS NO

IT0004977671 BIMI COLLEZIONE TF R INTEREST RATE 29-Nov-2013 29-Nov-2016 ZAR 448,740,000.00 26,610,467.31 NS NO

IT0004977739 BIMI COLLEZIONE TF D INTEREST RATE 29-Nov-2013 29-Nov-2019 CAD 78,198,000.00 52,558,666.22 NS NO

IT0004983125 BIMI TVMM 10/02/2018 INTEREST RATE 10-Feb-2014 10-Feb-2018 EUR 73,750,000.00 74,811,616.15 Structured NO

IT0004990161 B IMI 14-19 5.3 INTEREST RATE 28-Jan-2014 28-Jan-2019 AUD 183,484,000.00 130,570,584.46 NS NO

IT0004990302 BCA IMI TM 19.02.14- INTEREST RATE 19-Feb-2014 19-Feb-2019 EUR 5,026,000.00 4,869,979.44 NS NO

IT0004990310 B IMI 14-19 3.55 INTEREST RATE 28-Jan-2014 28-Jan-2019 NOK 319,665,000.00 35,617,832.28 NS NO

IT0004990971 B IMI 14-18 2 INTEREST RATE 10-Mar-2014 10-Mar-2018 EUR 118,530,000.00 120,151,824.39 Structured NO

IT0005000218 B IMI 14-20 2.75 INTEREST RATE 30-Apr-2014 30-Apr-2020 EUR 52,886,000.00 55,039,982.68 NS NO

IT0005001372 B IMI 14-18 1.5 INTEREST RATE 9-Apr-2014 9-Apr-2018 EUR 6,000,000.00 5,931,644.91 NS NO

IT0005001422 B IMI 14-19 3.1 INTEREST RATE 13-Mar-2014 13-Mar-2019 USD 99,472,000.00 90,851,121.73 NS NO

IT0005001521 B IMI 14-19 6 INTEREST RATE 13-Mar-2014 13-Mar-2019 NZD 59,935,000.00 38,932,314.30 NS NO

IT0005009680 B IMI 14-18 1.4 INTEREST RATE 15-May-2014 15-May-2018 EUR 24,740,000.00 24,930,650.24 Structured NO

IT0005012825 B IMI 14-18 9.67 INTEREST RATE 30-May-2014 30-May-2018 TRY 104,994,000.00 30,810,613.36 NS NO

IT0005012932 B IMI 14-19 3.25 INTEREST RATE 14-May-2014 14-May-2019 GBP 6,052,000.00 8,194,207.57 NS NO

IT0005023699 B IMI 14-20 3 INTEREST RATE 3-Jun-2014 3-Jun-2020 EUR 10,390,000.00 10,219,168.62 Structured NO

IT0005023970 B IMI 14-20 2.25 INTEREST RATE 3-Jun-2014 3-Jun-2020 EUR 21,450,000.00 21,251,954.81 Structured NO

IT0005026825 B IMI 14-19 4.2 INTEREST RATE 17-Jun-2014 17-Jun-2019 AUD 136,426,000.00 94,488,728.90 NS NO

IT0005026833 B IMI 14-17 9 INTEREST RATE 17-Jun-2014 17-Jun-2017 TRY 148,428,000.00 47,003,839.62 NS NO

IT0005029100 B IMI 14-17 1 INTEREST RATE 31-Jul-2014 31-Jul-2017 EUR 25,020,000.00 24,971,977.29 NS NO

IT0005029134 B IMI 14-19 TV INTEREST RATE 31-Jul-2014 31-Jul-2019 EUR 12,500,000.00 12,289,294.71 NS NO

IT0005029175 B IMI 14-20 1.75 INTEREST RATE 31-Jul-2014 31-Jul-2020 USD 47,810,000.00 44,260,865.52 NS NO

IT0005030702 B IMI 14-14 3 INTEREST RATE 31-Jul-2014 31-Jul-2020 EUR 5,000,000.00 4,894,728.20 Structured NO

IT0005038630 B IMI 14-21 2.5 INTEREST RATE 22-Sep-2014 22-Sep-2021 EUR 7,349,000.00 7,437,201.61 NS NO

IT0005039794 B IMI 14-20 1.5 INTEREST RATE 16-Sep-2014 16-Sep-2020 USD 89,490,000.00 83,204,579.84 NS NO

IT0005042087 B IMI 14-21 1.25 INTEREST RATE 5-Nov-2014 5-Nov-2021 EUR 143,535,000.00 141,428,038.04 Structured NO

IT0005042160 B IMI 14-18 7.1 INTEREST RATE 30-Sep-2014 30-Sep-2018 TRY 149,876,000.00 43,260,256.58 NS NO

IT0005042640 B IMI 14-20 1.8 INTEREST RATE 5-Nov-2014 5-Nov-2020 USD 45,400,000.00 40,681,657.71 NS NO

IT0005045221 B IMI 14-20 4.3 INTEREST RATE 8-Sep-2014 8-Sep-2020 AUD 208,344,000.00 142,012,646.07 NS NO

IT0005045247 B IMI 14-18 5 INTEREST RATE 8-Sep-2014 8-Sep-2019 NZD 205,642,000.00 133,042,491.85 NS NO

IT0005047045 B IMI 14-18 2 INTEREST RATE 14-Oct-2014 14-Oct-2018 GBP 10,220,000.00 13,787,613.19 NS NO

IT0005047052 B IMI 14-20 2 INTEREST RATE 14-Oct-2014 14-Oct-2020 USD 29,600,000.00 26,678,192.39 Structured NO

IT0005055071 B IMI 14-20 1.8 INTEREST RATE 23-Dec-2014 23-Dec-2020 USD 92,184,000.00 81,491,717.70 NS NO

IT0005055444 B IMI 14-19 2.5 INTEREST RATE 23-Oct-2014 23-Oct-2019 NOK 114,090,000.00 11,763,274.20 NS NO

IT0005056608 B IMI 14-20 2 INTEREST RATE 7-Nov-2014 7-Nov-2020 USD 33,780,000.00 30,684,562.40 NS NO



IT0005068090 B IMI 14-16 10.5 INTEREST RATE 27-Nov-2014 27-Nov-2016 BRL 165,860,000.00 37,648,927.17 NS NO

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structured

Inflation Yes/No

IT0005068116 B IMI 14-21 2.9 INTEREST RATE 27-Nov-2014 27-Nov-2021 USD 122,404,000.00 113,300,695.83 NS NO

IT0005069627 BCA IMI 29/12/2014-2 INTEREST RATE 19-Dec-2014 19-Dec-2018 EUR 1,000,000,000.00 986,640,879.07 NS NO

IT0005069635 BCA IMI 29/12/2014-2 INTEREST RATE 19-Dec-2014 19-Dec-2017 EUR 1,000,000,000.00 991,146,192.55 NS NO

IT0005069668 BCA IMI 29/12/2014-2 INTEREST RATE 19-Dec-2014 19-Dec-2016 EUR 999,970,000.00 995,610,693.33 NS NO

IT0005071755 B IMI 15-21 1.65 INTEREST RATE 27-Feb-2015 27-Feb-2021 USD 36,320,000.00 33,090,868.70 NS NO

IT0005071938 B IMI 15-21 1 INTEREST RATE 27-Feb-2015 27-Feb-2021 EUR 5,360,000.00 5,265,992.16 NS NO

IT0005075509 B IMI 15-20 4.9 INTEREST RATE 22-Jan-2015 22-Jan-2020 NZD 153,858,000.00 101,441,924.56 NS NO

IT0005075517 B IMI 15-18 8 INTEREST RATE 22-Jan-2015 22-Jan-2018 TRY 120,780,000.00 39,081,523.60 NS NO

IT0005086811 B IMI 15-20 1.7 INTEREST RATE 31-Mar-2015 31-Mar-2020 USD 21,990,000.00 20,119,497.10 NS NO

IT0005089336 B IMI 15-21 3 INTEREST RATE 7-Apr-2015 7-Apr-2021 USD 118,404,000.00 107,391,273.60 Structured NO

IT0005107120 B IMI 15-20 TV INTEREST RATE 4-Jun-2015 4-Jun-2020 EUR 18,530,000.00 18,112,532.21 NS NO

IT0005114357 B IMI 15-22 3.25 INTEREST RATE 14-May-2015 14-May-2022 GBP 25,637,000.00 35,318,693.61 NS NO

IT0005114365 B IMI 15-22 3.6 INTEREST RATE 14-May-2015 14-May-2022 USD 85,748,000.00 79,258,441.86 NS NO

XS0415157592 BCA IMI FR 06/3/2018 INTEREST RATE 6-Mar-2009 6-Mar-2018 EUR 9,000,000.00 9,928,848.79 Structured NO

XS0460430142 BANCA IMI FR 2016 INTEREST RATE 18-Dec-2009 18-Dec-2016 EUR 576,278,000.00 583,158,887.37 Structured NO

XS0463026210 BANCA IMI FR14 INTEREST RATE 26-Nov-2009 26-Nov-2017 EUR 4,500,000.00 4,543,431.95 Structured NO

XS0468849814 BCA IMI FR 22/12/17 INTEREST RATE 22-Dec-2009 22-Dec-2017 EUR 1,400,000.00 1,411,035.21 Structured NO

XS0483710355 BANCA IMI FR 10-17 INTEREST RATE 17-Mar-2010 17-Mar-2017 EUR 129,343,000.00 134,869,093.42 Structured NO

XS0508527842 BANCA IMI STEP 2020 INTEREST RATE 30-Jun-2010 30-Jun-2020 EUR 3,910,000.00 2,575,649.99 NS NO

XS0514557973 BANCA IMI TM 2017 INTEREST RATE 12-Jul-2010 12-Jul-2017 EUR 62,035,000.00 63,312,533.11 Structured NO

XS0573073235 BANCA IMI FR 11/16 INTEREST RATE 11-Mar-2011 11-Mar-2016 EUR 33,609,000.00 33,999,029.79 Structured NO

XS0596124767 BANCA IMI FR17 INTEREST RATE 13-Apr-2011 13-Apr-2017 EUR 49,792,000.00 49,242,072.53 Structured NO

XS0596947159 BK IMI 4,6% 2018 EUR INTEREST RATE 10-Mar-2011 10-Mar-2018 EUR 5,000,000.00 5,173,924.04 NS NO

XS0620627033 BANCA IMI FR 2017 INTEREST RATE 31-May-2011 31-May-2017 EUR 3,941,000.00 3,913,393.74 Structured NO

XS0695633767 BCA IMI 5 12/09/17 INTEREST RATE 9-Dec-2011 9-Dec-2017 EUR 19,910,000.00 19,391,853.43 NS NO

XS0707705983 BANCA IMI FR 11/31 INTEREST RATE 17-Nov-2011 19-Dec-2031 EUR 25,000,000.00 25,727,003.97 NS NO

XS0735543653 B.IMI TM 02/2017 INTEREST RATE 28-Feb-2012 28-Feb-2017 EUR 346,064,000.00 329,503,107.26 Structured NO

XS0736025056 BCA IMI TM 12/17 EUR INTEREST RATE 30-Mar-2012 30-Mar-2017 EUR 4,377,000.00 4,454,212.67 NS SI

XS0750396383 BCA IMI TM 2016 INTEREST RATE 30-Mar-2012 30-Mar-2016 EUR 1,294,000.00 1,289,829.90 NS NO

XS0757385280 BCA IMI 05/04/17 INTEREST RATE 4-May-2012 4-May-2017 EUR 6,726,000.00 6,788,988.94 Structured NO

XS0779213627 BCA IMI FR18 EUR INTEREST RATE 11-Jun-2012 11-Jun-2018 EUR 53,241,000.00 49,513,597.46 Structured NO

XS0787655009 BCA IMI 4,5% 12/16 INTEREST RATE 4-Jul-2012 4-Jul-2016 EUR 104,270,000.00 107,116,470.14 NS NO

XS0787655181 BCA IMI FR 2017 INTEREST RATE 4-Jul-2012 4-Jul-2017 EUR 10,419,000.00 10,408,094.60 NS NO

XS0789996328 BANCA IMI FR 12/18 INTEREST RATE 29-Jun-2012 29-Jun-2018 EUR 26,290,000.00 23,723,596.21 Structured NO

XS0789997649 BCA IMI FR 12/17 EUR INTEREST RATE 29-Jun-2012 29-Jun-2017 EUR 5,108,000.00 5,101,055.43 Structured NO

XS0857702095 BCA IMI 3,3% SW 2016 INTEREST RATE 31-Dec-2012 31-Dec-2016 EUR 942,000.00 938,517.26 NS NO

XS0900877209 BCA IMI 5Y EUR TV INTEREST RATE 18-Mar-2013 19-Mar-2018 EUR 4,000,000.00 3,936,653.83 NS NO

XS1251080088 B IMI 15-22 3.55 INTEREST RATE 26-Jun-2015 26-Jun-2021 USD 132,652,000.00 121,566,984.06 NS NO

XS1251080831 B IMI 15-21 4.3 INTEREST RATE 26-Jun-2015 26-Jun-2021 AUD 98,528,000.00 67,668,183.54 NS NO

XS1251926967 B IMI 15-20 2.5 INTEREST RATE 28-Jul-2015 28-Jul-2020 USD 28,774,000.00 26,179,239.63 NS NO

XS1252215485 B IMI 15-20 TV INTEREST RATE 28-Jul-2015 28-Jul-2020 EUR 34,200,000.00 33,472,721.51 NS NO

XS1254411736 B IMI 15-22 2 INTEREST RATE 31-Jul-2015 31-Jul-2022 EUR 7,821,000.00 7,690,758.39 Structured NO

XS1259647706 B IMI 15-22 2 INTEREST RATE 7-Aug-2015 7-Aug-2022 EUR 10,000,000.00 9,807,262.67 Structured NO

XS1298740314 B IMI 15-22 2 INTEREST RATE 11-Nov-2015 11-Nov-2022 EUR 11,994,000.00 11,682,241.60 Structured NO

TOTAL 13,093,636,832.64

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Report on Corporate Governance and Shareholder Structure in accordance with Article 123-bis of Legislati-ve Decree No. 58 of 24 February 1998

INTRODUCTION The Report on Corporate Governance is prepared in accordance with Legislative Decree No. 58 of 24 February 1998 - “Consolidated Law on provisions regarding financial intermediation” Banca IMI is an issuer of non-share-based financial instruments admitted to trading on regulated markets or mul-tilateral trading systems.

As such, in accordance with Article 123-bis.5, the main features of the risk management and internal control sy-stems regarding the financial reporting process are described below.

Also described are some aspects of Governance deemed significant in order to provide a better understanding of the company framework and control systems, pursuant to the CONSOB template.

1. Issuer profileBanca IMI is the investment bank of Intesa Sanpaolo, a leading Banking Group in Italy with a strong international presence. Banca IMI has the main aim of assisting its clients - institutional investors, financial networks, corpo-rations and public administrations - by offering products and services that aim for excellence. Through the pro-fessionalism and skills of over 800 people, Banca IMI works in investment banking, in structured finance and in capital markets on leading national and international markets, with offices in Milan, branches in London and Milan and the subsidiary Banca IMI Securities Corporation of New York. It is a point of reference for Italian investment banking and M&A Advisory activities with a strong involvement in the placement of shares and securities.

Banca IMI is the historical leader in the Italian structured finance market with a solid international track record, utilising the relationships built up by the Intesa Sanpaolo Group in Italy and the rest of the world. Banca IMI is one of the most important players in the brokerage of shares and securities, and has relations with listed companies, providing an efficient Corporate Brokering service and specialist consulting services to customers for the manage-ment of financial risks. It places at the disposal of customers a complete range of investment analyses, forecasts and strategies relating to financial markets, through cooperation with the Research Department of Intesa Sanpa-olo. Banca IMI is well-known for its skills in structuring and creating investment products for retail customers and, through Market Hub, the innovative proprietary platform for market access, carries out the dynamic research of the best execution of MiFID compliant orders, providing over 350 Italian and foreign institutional customers with access to more than 70 domestic and foreign markets (shares, securities and derivatives). Via Intesa Sanpaolo struc-tures, it provides a range of supplementary services such as post trading, regulatory, custodial and administration services for securities.

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2. Information on Ownership (pursuant to Art. 123-bis.1, of the Consolidated Law on Finance [TUF]

a) Structure of share capital (pursuant to Art. 123-bis.1.a) of TUF)Paid-up share capital amounts to 962,464,000 euro, broken down into 962,464,000 ordinary shares. Shares are nominal and indivisible. Each ordinary share carries one right to vote. In addition to ordinary shares, other shares with different voting issues and securities may be issued. The share capital can be increased by cash conferrals within statutory limits.

b) Restrictions to the transfer of shares (pursuant to Art. 123-bis.1.b) of TUF) There are no limits to, or restrictions on, the transfer of shares.

c) Significant equity investments (pursuant to Art. 123-bis.1.c) of TUF)Intesa Sanpaolo S.p.A. holds a direct 100% stake in the Issuer, equal to 962,464,000 euro, fully paid-up, broken down into 962,464,000 ordinary shares. Shares are nominal and indivisible. Each ordinary share carries one right to vote. Banca IMI S.p.A. is managed and coordinated of its sole shareholder, Intesa Sanpaolo, and is a member of the Intesa Sanpaolo Group, of which Intesa Sanpaolo S.p.A. is the Ultimate Parent.

d) Shares conferring special rights (pursuant to Art. 123-bis.1.d) of TUF)In line with the dispositions of the Ultimate Parent, Intesa Sanpaolo, there are no Banca IMI shares conferring spe-cial rights of control on their owners.

e) Restrictions to voting rights (pursuant to Art. 123-bis.1.f) of TUF)For Banca IMI, there are no restrictions to voting rights.

3. Board of DirectorsThe bank is administered by a Board of Directors appointed by the Shareholders’ Meeting

3.1. Members (pursuant to Art. 123-bis.2.d) of TUF)The Board of Directors comprises at least 7 members and a maximum of 11, as decided by the Shareholders’ Meeting, including at least one - or two, where the Board of Directors has more than seven members - who is independent.

For the above purpose, non-independent Directors include Directors who:

(a) work for the bank or a company controlled by it or a company which controls it or a company under shared control with it on a continuous basis either as employee or consultant or is paid for his/her services including payment in equity, which compromise the Director’s independence;

(b) are executive Directors of the bank or a bank controlled by it or a company that controls it or a company under shared control with it;

(c) are kin to the second degree with anyone in position b). .

Independence is guaranteed in writing by the Director on his/her appointment or acceptance of the appointment. Any fact or circumstance that leads to the loss of independence must be notified in writing to the Board of Direc-tors and the Chairman of the Board of Statutory Auditors and leads to loss of the position on the Board. However, if a Director no longer complies with the requirement for independence, the Director does not full from office if the minimum number of Directors, as specified above, meet the requirement.

During its first meeting the Board of Directors verifies the independence of all Directors. The Directors shown to be independent after this verification process are subject to the conditions set out in the second and third conditions of the previous paragraph.

Directors are appointed, according to the determination of the Shareholders’ Meeting, for no more than three ye-ars and may be re-elected; they remain in office until the Shareholders’ Meeting convened to approve the financial statements for the last period of their appointment.

Where less than the maximum possible number of Board members are appointed, the Shareholders’ Meeting may increase the number of members within the limits established by paragraph 2 of the previous article. The new Directors so appointed leave office with the other Board members.

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Where, through resignation or any other reason, half or the majority of the Board appointed by the Shareholders’ Meeting leaves office, the entire Board leaves office at the moment a new Board is appointed.

Appointments of Directors in other companiesThe Board of Directors decides how many other appointments Directors may accept in other companies, in light of the nature of the appointment, the type and size of the company and compatibility with the policies established by the Ultimate Parent.

3.2. Role of the Board of Directors (pursuant to Art. 123-bis.2.d) of TUF)The Board of Directors has all the powers for the ordinary and extraordinary management of the bank. Excluded are the powers specifically reserved for the Shareholders’ Meeting.

In addition to the powers that cannot be delegated due to the law or Regulations, the Board of Directors has sole power to pass resolutions relating to:

a) strategic lines and operations, business and financial plans and the overall organization of the bank; b) the appointment of the General Manager and Managers, establishing their powers;c) with the approval of the Board of Statutory Auditors, the appointment and dismissal of managers of the

internal control functions including internal audit, compliance with regulations and the management of risks, according to statutory and regulatory requirements;

d) acquiring, modifying and disposing of equity investments, except as specified in Art. 2361.2, of the Italian Civil Code;

e) setting up, transferring and closing branches and offices; f) granting powers-of-attorney for the management of credit;g) approving and modifying internal regulations; h) implementing Group regulations as established by the Ultimate Parent for the Group as a whole; i) setting up within the Board itself special committees with pro-active, consultative and investigative roles, esta-

blishing their members and powers; j) approving internal employment agreements, and general Trade Union agreements; k) taking disciplinary action against managers; l) purchasing and selling real estate.

Where required, the Board of Directors also appoints the Supervisory Body pursuant to Legislative Decree No. 231 of 8 June 2001, establishing its members and the participation, if any, of bank employees.

Without prejudice to the functions of the Shareholders’ Meeting, the Board of Directors also has the following functions, which may not be delegated, as well as the functions established by the law and these Articles of Asso-ciation, pursuant to Art. 20:

a) merger in the cases set out in Art. 2505 and 2505 bis of the Italian Civil Code and demerger in the cases set out in Art. 2506 ter of the Italian Civil Code;

b) setting up and closing secondary headquarters;c) providing some Directors with the power to represent the bank; d) reducing share capital where a shareholder withdraws from the bank;e) updating the Articles of Association according to regulatory changes;f) transferring the bank headquarters to another location in Italy;g) reducing the share capital following losses pursuant to section 2446 of the Italian Civil Code where the bank

has issued shares without nominal value, the Board of Directors may issue bonds.

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3.3. Appointments

Managing Director In compliance with statutory requirements and these Articles of Association, the Board of Directors may delegate its powers to a Managing Director, establishing the limits and powers of the appointment.Establishing the limits of the appointment, the Board may also delegate its powers in relation to the granting of credit and day-to-day management to employees of the bank based on their functions and seniority, individually or in committees.

The decisions taken in relation to the granting by credit of the above appointees shall be notified to the Board of Directors and regular reports shall be submitted to the Board by appointees indicating total lending.

During the meetings and at least every quarter, the Board of Directors and the Board of Statutory Auditors shall be informed by appointees of the overall performance and likely developments, as well as in relation to the most significant transactions due to their size or nature carried out by the bank and its subsidiaries. The Chairman of the Board of DirectorsIf the Shareholders’ Meeting has not already done so, the Board of Directors elects the Chairman from among its members and may also elect a Deputy Chairman and Managing Director.

The Chairman or Director taking his/her place pursuant to Art. 23.4, convenes a meeting of the Board of Directors generally once a month or whenever he/she sees fit or a written request is made by at least a quarter of the Direc-tors in office or by the Board of Statutory Auditors, indicating the agenda for the meeting. The notice convening the meeting shall specify the date of the meeting, the time and place, which may be other than bank headquarters, provided it is in the European Union. Notice shall be given to all Directors and executive members of the Board of Statutory Auditors in writing and communicated by whatever suitable means, including e-mail, provided receipt can be demonstrated, at least four days before the scheduled meeting or, in the event of urgency, at least twenty-four hours before the meeting.

The Chairman of the Board of Directors provides impetus and coordinates the activities of bank bodies in which he/she is a member, convenes their meetings and establishes the agenda for the meetings. He/she supervises im-plementation of the resolutions and the general progress of the bank. He/she ensures that sufficient information is provided to all the Directors on matters on the agenda.

In the event of urgency, the Chairman of the Board of Directors or, if absent or unable to attend, the Deputy Chairman or, where two Deputy Chairmen have been appointed, the Deputy Chairman chosen by the Directors to fulfil the function, or where he/she is absent or unable to attend, the second Deputy Chairman, in agreement with the Managing Director, if appointed, or if not appointed or absent or unable to attend, the eldest member of the Board, may adopt resolutions in relation to any transaction or dealing over which the Board has powers, except those on which the Board must decide pursuant to Art. 20 and 21 above. The decisions taken in this manner shall be notified to the relevant bank body at its next meeting.

Without prejudice to paragraph 2 regarding urgent resolutions, where the Chairman of the Board is absent or unable to attend, his/her functions are fulfilled by the Deputy Chairman or where two Deputy Chairmen have been appointed, the Deputy Chairman chosen by the Board, unless he/she is also absent or unable to attend, in which case the second Deputy Chairman shall fulfil the functions. If the Second Deputy Chairman is also absent or unable to attend, the functions shall be carried out by the Mana-ging Director, if appointed, or if not appointed or absent or unable to attend, by the longest-serving Director or, if the terms of service are equal, by the eldest of the longest-serving Directors.In relation to third parties, the signature of the Director fulfilling the functions of the Chairman shall serve as proof of the absence or inability of the Chairman to take part in the meeting.

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4. Internal control system

Banca IMI has drawn up a formal document entitled “Rules of the Integrated Internal Controls System” to define the guidelines for the internal control system of Banca IMI by outlining the reference principles and by defining the responsibilities of the Bodies and functions in charge of control tasks, which contribute, in various ways, to the proper functioning of the Internal Control System, as well as to identification of the coordination procedures and information flows which enable the integration of the system.

These Rules - formalised in accordance with the provisions set out in Chapter 7 of Bank of Italy Circular 263 dated 27 December 2006 - represent the framework for the Banca IMI Internal Control System, which enshrines the control guidelines and rules informing and shaping the regulatory documents within the Group with reference to specific areas of prudent supervision.

The Regulations set out:

(i) the general principles of the Internal Control System of the Bank; (ii) the duties and responsibilities of the various stakeholders in the Bank’s Internal Controls System (Company

Bodies, Committees established within the Bodies, the Bank’s internal governance structures, corporate control functions and other Ultimate Parent Functions with control responsibilities, to whom the activities for Banca IMI are outsourced, the Independent Auditor);

(iii) how control Functions are coordinated and interact; (iv) the management model adopted by the Bank and the strategy and coordination procedures of any Internatio-

nal Branches;(v) the main information flows between the various stakeholders in the Bank’s Internal Control System.

Considering that one of the main objectives of the Internal Controls System is to ensure effective defence against the bank’s risks and their interrelations, the Regulations document focuses on the risk management process, with particular reference to the identification of the various phases into which the process is organised and the main integration parameters.

In addition, since it is believed that thorough defence against risks is based on a corporate culture founded on integrity (honesty, probity, responsibility) and a set of values to be recognised and shared at all levels of the orga-nisation, the Intesa Sanpaolo Group has drawn up a Code of Ethics for the purposes of voluntary self-regulation; this code seeks to guide the bank’s choices on the basis of these values, promoting a responsible attitude at all levels of its organisation.

In order to create an Integrated Control System at the Group level, Banca IMI implemented Integrated Control System Regulations as established by the Ultimate Parent.

In particular, the Bank – as the direct recipient of Circular 263 at individual level – has drafted its own coordination document for the controls, in line with the specific nature and characteristics of its own operations and according to the principles and rules defined in the Ultimate Parent’s integrated Internal Control System Regulations.

This Regulations document has been approved by the Bank’s Board of Directors and is subject to review should any significant events occur which require modification and/or amendment, including to take account of changes in the regulatory framework and/or organisational structure of the Bank or Ultimate Parent.

General principles

Banca IMI and the Intesa Sanpaolo Group attach strategic importance to the Internal Control System, since it represents:

– a fundamental element of the overall governance system of the Intesa Sanpaolo Group, which enables ensu-ring that the bank’s activities are in line with corporate strategies and policy and marked by rules of sound and prudent management;

– a fundamental element of knowledge for the internal Bodies, which enables full awareness of the situation, to ensure effective defence against corporate risks and their interrelations, to orient changes to corporate policies and strategies and to adapt the organisational context consistently;

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– an important element for safeguarding compliance with the prudent supervision bodies and for promoting the diffusion of a correct risk culture.

The control culture does not apply solely to the bank’s control Functions but involves the entire organisation (internal Bodies, Control Functions, Business Functions etc. at all hierarchical levels) in the development and appli-cation of methods to identify, measure, communicate and manage the risks.

The Bank adopts its own Internal Controls System, structured over three levels, in accordance with the legislative and regulatory provisions in force.

This model provides for the following types of control:

– Level I: line controls which seek to ensure operations are conducted correctly (e.g. hierarchical, systematic and sampling controls), incorporated, as far as possible, into IT procedures. They are carried out by the operational structures and business structures themselves (so-called ‘Level I Functions’), including through units tasked solely with control duties, which report to the managers of the structures, or conducted within middle or back office structures outsourced to other entities within the Group on the basis of specific service agreements. The operational and business structures take a leading role in being responsible for the risk management process; during day-to-day operations, these structures, in cooperation with the Level II Functions and the Organisation Function (where applicable) must identify, measure and assess, monitor and control, mitigate and communicate the risks arising from the bank’s ordinary activities, in accordance with the risk management process. They must adhere to the operating limits allocated to them, in line with the risk objective and the procedures into which the risk management process is structured.

– Level II: risk and compliance controls, the purpose of which is to ensure, among other things:- the correct implementation of the risk management process;- compliance with the operating limits assigned to the various functions;- compliance of the bank’s activities with regulations, including self-regulation, as applicable.

The functions established for such controls are distinct from the productive functions and contribute to the definition of risk governance policies and the risk management process; when the activities are outsourced, the structures which carry them out fall into the Level II bracket (so-called ‘Level II Control Functions’). Thus, the following Ultimate Parent structures, to which activities have been outsourced for Banca IMI, are of Level II:

– Compliance Department, which Banca IMI has entrusted with the role of ‘compliance with the rules fun-ction’, as defined in the reference regulations with appropriate Service Agreements;

– Anti-Money Laundering Department, to which Banca IMI has outsourced the role of ‘anti-money laun-dering function’, as defined in the reference regulations with appropriate Service Agreements;

– Risk Management Department, Credit Quality Control Service and Internal Validation Service, which Banca IMI has entrusted, within their field of responsibility, with the duties allocated to the ‘risk ma-nagement function’, as defined in the reference regulations with dedicated Service Agreements.

– Level III: internal audit controls (so-called ‘Level III Functions’), tasked with identifying breaches of procedures and regulations, as well as periodically assessing the competence, suitability, functionality (in terms of efficiency and effectiveness) and reliability of the organisational structure of the other components of the Internal Control System and the information system (ICT audit) at Group level, with a timetable set according to the nature and intensity of the risks. When the activities have been outsourced, the structures conducting them will fall into the Level III bracket.

Currently, the internal audit activities for the Bank are outsourced and carried out by the Internal Audit Department of the Ultimate Parent, on the basis of appropriate Service Agreements.

As part of the functions and responsibilities attributed to the Manager in charge of financial reporting of Banca IMI, the information flows produced by the control functions can be used, as explained in more detail below.

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Stakeholders in the internal controls system

Internal Bodies, Ultimate Parent internal governance structures and Bank Functions, or, in the case of outsourcing, those of Intesa Sanpaolo and Intesa Sanpaolo Group Services S.c.p.a., ensuring – each within its own area of re-sponsibility -– that Internal Control Systems are complete, suitable, functional and reliable, include:

Corporate Bodies:

– Board of Directors

– Technical Audit Committee

– Managing Director

– Board of Statutory Auditors and Supervisory Body pursuant to Legislative Decree No. 231/2001

General Manager

Manager in charge of financial reporting (pursuant to art. 154-bis of the TUF (Consolidated Law on Finance))

– Financial and Administrative Governance Control

Banca IMI internal governance structures

– Risk Committee

– Credit Committee

– New Product Committee

– RetLots Exchange Market Management Committee

– Management Committee

– Controls Coordination Committee

Ultimate Parent internal governance structures (hereinafter “Managerial Committees”):

– Coordination Committee

– Group Risk Governance Committee

– Group Financial Risks Committee

– Group Controls and Operational Risks Coordination Committee

– Group Credit Committee

– Committee for the Coordination of the Group’s International Markets

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Ultimate Parent Corporate Control Functions:

– Ultimate Parent Chief Risk Officer– Ultimate Parent Compliance Department– Ultimate Parent Anti-Money Laundering Service– Ultimate Parent Risk Management Department– Ultimate Parent Credit Quality Control Service– Ultimate Parent Internal Validation Service

– Ultimate Parent Internal Audit Department

Group Business Continuity Plan Manager

Other Functions with control duties

– IT Security Function

– Business Continuity Function

– Specialist Functions

Operational, business and support functions

The Independent Auditor also contributes to the controls system; roles and responsibilities are described below.

Corporate Bodies

Banca IMI adopts a traditional administration and control model, based on the presence of a Board of Directors and a Board of Statutory Auditors, in accordance with the provisions of sections 2380-bis and seq. of the Italian Civil Code. This choice takes into account the organisational context of the Group, the ownership structure of the Bank and the market in which it operates and, finally, the managerial requirements related to the specific activities carried out.

The adoption, by the subsidiaries, of a unitary corporate governance model was taken as a precondition for the most efficient exercising of the management and coordination activities by the Ultimate Parent.

In view of the governance model adopted and in accordance with Bank of Italy Circular No. 285 dated 17 Decem-ber 2013 concerning corporate organisation and governance, the Board of Directors of the Bank shall perform both the strategic supervision and management functions – with the latter understood to mean day-to-day mana-gement of the implementation of the general, planning and strategic policy decisions – with the contribution of the Managing Director and General Manager.

The Board of Statutory Auditors carries out control functions.

The Bank’s Board of Directors shall have sole competence for decisions concerning strategic guidelines and ope-rations, business and financial plans, appointing the Managing Director and General Manager, approving and modifying the main internal regulations, appointing and dismissing the managers of the structures with internal audit and compliance duties and any other decision of strategic important in view of the activities actually carried out by the bank.

In the remaining fields, the Board may delegate some of its powers: in such an eventuality, at the same time as the allocation of the powers, the Board will specifically identify the procedures through which the appointed entities will be required to inform the executive body of the activities carried out and the main concrete decisions made, in order to enable the Board to exercise its own tasks and any relative powers to issue directives and assume responsibilities.

Within the context of the Board of Directors, a Technical Audit Committee has been established, comprising three independent board members who will perform supervisory duties, provide advisory and make proposals with re-gard to the internal control and risk management system.

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This Committee, together with the Intesa Sanpaolo Committee for Transactions with Related Parties, also per-forms the functions of Related Parties Committee, pursuant to the “Group’s Regulations for the management of transactions with Related Parties of Intesa Sanpaolo S.p.A. and affiliated Entities of th Group”, in accordance with the CONSOB Regulations adopted by Ruling 17221 dated 12 March 2010 as subsequently amended, as well as Heading V, Chapter 5 of the ‘New Prudent Supervisory Provisions for Banks’ (Circular no. 263 dated 27 December 2006, 9th update dated 12 December 2011), and is tasked, among other things, with issuing a reasoned opinion in the approval process for the transactions in question.

Considering their membership of the Intesa Sanpaolo Banking Group, the Bank’s Bodies act within the fra-mework of the strategies and policies defined by the Ultimate Parent, including when performing management and coordination tasks.

In this regard, in order to achieve an integrated and consistent risk management and control policy, strategic decisions at Group level concerning risk management and the Internal Controls System are taken by the Super-visory and Management Boards of Intesa Sanpaolo, the Ultimate Parent, each within their specific and distinct areas of responsibility. During this process, they assess the Group’s overall operations and the risks to which it is exposed as a result.

In this context, the said Bodies define the strategic positioning, risk management policies and procedures and internal control guidelines for each important area of activity for the Group in its entirety, monitor its actual fun-ctioning, check all of its functionality and how it is addressing the requirements laid down by the regulations. They pay particular attention to the processes, functions and other profiles which become important in the event of adoption – subject to authorisation by Bank of Italy – of internal measurement systems with regard to credit, market operating and counterparty risks.

Intesa Sanpaolo internal Bodies define and approve, at Group level, (i) the strategic policy, including the business model, (ii) the industrial and/or financial plans and budgets, (iii) the RAF, (iv) the guidelines for the Internal Controls System (v) the risk management process policies and (vi) the strategic guidelines, design and organisation of the ICAAP process.

Within the framework of the strategic guidelines and business model decided on by the Supervisory Board and Management Board and under the supervision of the Boards themselves and their Chairmen, the coordinated operational management of the Group is provided by the Managing Director and CEO of the Ultimate Parent.

Intesa Sanpaolo has suitable procedures in place (including Group Regulations and Internal Governance Docu-ments applicable to the Group) to ensure that the Corporate Bodies of Group Companies (i) are fully aware of the strategic positioning and risk management policies defined by the Intesa Sanpaolo internal Bodies and (ii) take steps to implement – each according to its field of responsibility, in line with the internal operations and taking account of the interests of the Bank – the risk management strategies and policies defined and approved by the Intesa Sanpaolo internal Bodies.

In this context, specifically, Intesa Sanpaolo internal Bodies define and approve various Internal Governance Do-cuments applicable to the Group, the subject of which is management and control for the various types of risks, which set out the general organisational principles, roles and responsibilities of Internal Bodies and Functions (including control), the macro-processes which govern the various corporate activities and information flows, and management and coordination activities provided by the Ultimate Parent for the Companies within the Group.

Board of Directors

With reference more specifically to the Internal Control System, the Banca IMI Board of Directors performs the following functions: A) strategic supervision and B) management.

A) Strategic Supervision Functions

With reference to the RAF, the Ultimate Parent shall take steps to develop and approve it on a Group-wide basis. In this context, the Bank’s RAF is defined in detail for examination and adoption by the Board of Directors.

Ultimate Parent Bodies define the business model at Group level. The Board of Directors of the Bank shares the strategic approach of the Ultimate Parent and the Bank’s business model, as well as the risk profile to which this business model exposes the Bank.

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When approving the annual budget, the Board of Directors of the Bank adopts the objectives assigned by the Ultimate Parent and becomes responsible for the implementation of the business model in line with bank opera-tions. In the Bank’s Articles of Association, the decisions concerning the examination and approval of the strategic guidelines and business and financial plans are reserved for the remit of the Board of Directors which will make them periodically, in line with the relevant decisions adopted by the Bodies of the Ultimate Parent.

The Bodies of the Ultimate Parent shall identify risk targets and limits at Group level, compliance with which will then be required of the business and operational risk management functions at Group level (for example, indivi-dual Divisions and the Chief Lending Officer).

The Bank, in accordance with its area of activity and responsibility, shall implement suitable managerial actions, pursuant to the risk management guidelines issued by the Ultimate Parent and adopted by the internal Bodies. The Group’s risk rules indicate the internal information flows between the internal Bodies and the functions tasked with control duties. The Bank’s Board of Directors then acts in accordance with such targets and limits, taking re-sponsibility for their implementation as regards aspects relating to the bank’s operations.

In line with the risk management policies defined by the Ultimate Parent for the Group (and taking into account any regulations applicable on an individual basis), the Board of Directors of the Bank shall take steps to adopt an internal control system suitable for identifying, measuring and verifying the risks inherent in internal activities (as defined in the business model), including through the outsourcing of all or part of corporate control functions. For this purpose, the Board also adopts the Governance Documents issued in this regard by the Ultimate Parent.

With specific reference to the ICAAP process, the Board shall adopt the Group’s regulations.

With reference to credit risk mitigation techniques, the Board of Directors of the Bank adopts the relevant Gover-nance documents, which should be referred to for further details.

Within the context of activities relating to setting up corporate control functions, in order to ensure the effective-ness and integration of the controls at Group level, the Bodies of the Ultimate Parent have adopted a model which includes centralisation of Level II and Level III corporate control functions for the Bank.

The Bank’s Board of Directors shall provide for the implementation within its operations of the guidelines of the Internal Control System defined by the Ultimate Parent, in order to promote integration within the framework of the Group’s controls. In this context, it has approved centralisation at the Ultimate Parent of the corporate control functions without, however, providing for their establishment within the Bank itself. Centralisation is governed, in qualitative/quantitative terms, by suitable outsourcing contracts – subject to annual approval by the Bank’s Board of Directors – which also stipulate the agreed service levels and the information flows to the Board of Directors. The latter also approves the company’s regulations in terms of controls and, in particular, the Governance Documents issued by the Ultimate Parent which, in the event of outsourcing, set out the roles and responsibilities of Ultimate Parent control functions, coordination and cooperation procedures, and information flows between these fun-ctions and the Corporate Bodies of the Bank.As regards defence against the liquidity risk, the Liquidity Policy allocates the Bank operating limits consistent with the Risk Appetite Framework at Group level. The Ultimate Parent’s Treasury ensures compliance with the liquidity ratios at consolidated level.

With reference to the process for approving new products and services, launching new activities, introducing them into new markets, the Bank’s Board of Directors has approved the new product coordination process to be implemented in the event of introducing a new product or substantial reviewing an existing product defined by the Ultimate Parent.

The Ultimate Parent has approved, at group level, the process for the development and validation of the internal risk measurement systems in order to determine the capital requirements, setting the essential characteristics and assuming the responsibility for carrying out the project, as well as the supervision of the correct operation of such systems and their continuous adaptation in methodological, organisational and procedural terms.

In the exercise of its management and coordination responsibilities, the Ultimate Parent is responsible for defining the company scope affected by the development and creation of the internal systems. The Bank’s Bodies are re-quired to acknowledge the Ultimate Parent’s strategic decision to adopt the internal system and, in line with the

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specific nature and characteristics of the bank’s operations, to decide on the measures necessary for implementing risk management strategies and policies as decided by the Bodies of the Ultimate Parent. The Bank must also con-nect with the competent structures at the Ultimate Parent in order to recognise the methodology and operating labour standards by adopting the regulations issued by the Ultimate Parent.

In this context, the Bank’s Board shall approve the adoption of the internal models for regulatory purposes and periodically check their correct use by means of the corporate control functions.

The Bank’s Board of Directors receives a continuous and regular flow of reports from Ultimate Parent functions to which certain activities have been outsourced, including second- and third-level control functions. The purpose of these information flows is to enable the Board of Directors to: (i) regularly check existing control systems to make sure they are complete, suitable, functional and reliable, (ii) systematically check that the risk management processes are compatible and consistent with the strategic positioning and with risk governance policies, as well as the business model and (iii) analyse annual and (where applicable) multi-annual plans. In the event of any failings or anomalies, take steps to identify, in conjunction with the relevant structures of the Ultimate Parent, the appro-priate measures to adopt.

The Bank’s Board shall ensure that the Bank structure is consistent with the activities carried out and the business model. In this context, it shall approve the bank’s organisational chart and the related functional chart (which de-fines the tasks and responsibilities of the various internal functions), as drafted by the Organisational Department and Project Management of the IT&OPS Function as well as Project Management in the Operational Governance Area, as is their maintenance over time, reflecting the development of the business model and, consequently, the organisation of the Bank itself, with regular representation of any updates decided by the Board of Directors.

In order to mitigate operating and reputational risks at Group level and its individual components, while promoting the dissemination of a culture of internal controls, the Ultimate Parent has issued a Code of Ethics, with which the components of the internal Bodies and the employees of all Companies within the Group are required to comply. The Bank’s Board of Directors shall promote its dissemination among the staff, together with the Group’s Internal Code of Conduct.

B) Management Functions

The Board of Directors, as a Body which also has managerial missions, shall be responsible for:

– understanding all the internal risks, the mutual relations between them and with the developing external context, based on information received from the various corporate control functions at the Ultimate Parent;

– the efficient implementation, together with any entity it may have appointed, of the entire Internal Control System, guaranteeing its completeness, suitability, functionality and reliability over time, as well as – in the event of any failings or anomalies – promoting the timely adoption of corrective measures, in coordination with the relevant structures of the Ultimate Parent.

Technical Audit Committee

With reference to the governance and control model adopted, the Bank has a Technical Audit Committee establi-shed within the framework of the Board of Directors.

In particular, the Technical Audit Committee assists and supports the Board of Directors in activities pertinent to the configuration of the Internal Control System, in order to ensure their suitability and correct operation.

The Technical Audit Committee, in accordance with the Group Regulations for the management of transactions with Related Parties of Intesa Sanpaolo S.p.A. and Affiliated Entities of the Group, also performs the functions of the Related Parties Operations Committee, which, together with the Intesa Sanpaolo Committee for Transactions with Related Parties, plays a qualifying role in the process aimed at the approval of operations with related parties (of lesser importance, of greater importance and strategic).

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For operations not exempt from the decision-making process, the Committee is required to provide a prior and reasoned opinion:

– concerning the Bank’s interests in the execution of the operation;

– concerning the convenience and substantial fairness of the relative conditions.

In operations with related parties of greater importance, the Committee – or one or more of its members ap-pointed for the purpose – takes part in the negotiation and investigation phase through receipt of complete and updated information with the option of requesting information and making remarks to the delegated Bodies and entities tasked with guiding the negotiations and investigation.

Managing Director

The Managing Director of the Bank contributes to the management function and is allocated a series of manage-rial and operational, as well as representational, powers and functions by the Board of Directors.

Specifically, in addition to his/her duties under the law and these Articles of Association, the Managing Director:

(i) supervises the Bank organisation in line with the policies established by the Board of Directors, recommen-ding to the Board the overall organisation of the Bank;

(ii) submits to the Board of Directors for its approval the annual budget, investment plan and other programme documents for overall management purposes.

Board of Statutory Auditors and Supervisory Body pursuant to Legislative Decree no. 231/2001

See the dedicated section of this document.

General Manager

The General Manager contributes to the management function and represents the Bank’s executive top management.

The Board of Directors determines the content, limits and procedures for executing the powers granted to the General Manager, within the framework of the functions allocated to him/her by the Bank’s Articles of Association.

With reference to the Bank’s organisational structure, the Bank’s organisational chart, provides more details on the departments that report directly to the General Manager.

The General Manager prepares, in accordance with the guidelines established by the Board of Directors and Ma-naging Director, the detailed organisational structure of the Bank. With regard to the management of human resources, s/he defines the human resources development and management policies, in accordance with the gui-delines established by the Ultimate Parent, the Board of Directors and the Managing Director.

In particular, the General Manager is allocated (i) the task of implementing the decisions adopted by the Board of Directors and monitoring the organisation of the various structures of the Bank and (ii) the power to supervise the corporate management in order to ensure it is consistent with the nature and size of the bank and to assume operational responsibility for the structures thereof.

Through participation in the meetings of the Board, with propositional and other powers, the General Manager is able to have an integrated vision of all the Bank’s activities and existing projects and, consequently, the related risks and all the internal or external problems which could arise.

In order to facilitate the development and dissemination at all levels of a risk culture integrated with regard to the va-rious types of risks and extended across the whole bank, the General Manager shall ensure that the company policies, internal regulations, codes of conduct and related procedures are promptly communicated to all the staff affected.

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Manager in charge of financial reporting (pursuant to art. 154-bis of the TUF - Consolidated Law on Finance)

Banca IMI, as the issuer of widely circulated financial instruments, must fulfil certain requirements related to public law (such as, for example, the drafting of the consolidated financial statements), market information (press relea-ses, filing the financial statements with the Italian Stock Exchange and drafting half year reports) and Governance on financial reports. This latter field requires the establishment of a Manager in charge of financial reporting, as an initial consequence of the direct deposits resulting from the placing of financial products on the primary market by Banca IMI.

The position of Manager in charge of financial reporting was introduced by Law 262/2005 ‘Provisions for protec-ting savings and governing financial markets (the so-called ‘savings law’), which included – among other things – the insertion into Legislative Decree no. 58/98 “Consolidated Act on Financial Brokerage” of Art. 154 bis.

The “Manager in charge of financial reporting” in compliance with section 154-Bis of the Consolidated Finance Act, is appointed by the Board of Directors of Banca IMI, after consultation with the Board of Statutory Auditors. The Board of Directors ensures that the Manager in charge of financial reporting is endowed with suitable powers and resources for exercising the tasks allocated to him/her, as well as compliance with the administrative and ac-counting procedures.

Pursuant to the Articles of Association, the Board of Directors at Banca IMI also establishes the fees of the Manager in charge of financial reporting.

Pursuant to the Articles of Association of Banca IMI, the Manager in charge of financial reporting must be a Bank’s Manager, listed in the register of auditors and meet all the requirements for professionalism and specific skills in the field of a) financial and accounting information, regarding issuers listed on regulated markets or their subsidiaries and b) the management or control of the related administrative procedures, with at least five years experience in positions of responsibility for operating structures within the Company, Group or other companies or entities com-parable in terms of activities and organisational structure. The Manager in charge of financial reporting must also meet the requirements for integrity established for members of the control bodies of listed companies set out in the Regulation adopted in accordance with section 148, paragraph 4 of Legislative Decree No. 58 of 24 February 1998. The Board of Directors shall ascertain the existence of all the aforementioned requirements when designa-ting the Manager in charge of financial reporting.

The Manager in charge of financial reporting shall be responsible for safeguarding the Internal Control System with regard to the accounting and financial information. In accordance with the aforementioned art. 154-bis,s/he must certify:

– that the deeds and reports of the Company disseminated on the market and concerning accounting infor-mation, including interim documents, match the accounting documentation, books and records;

– jointly with the Managing Director, by means of an appropriate report appended to the annual financial statements and the interim condensed financial statements, (i) the adequacy and actual application of the administrative and accounting provisions, (ii) that the company’s accounting documents match the results of the accounting books and records, (iii) their suitability for providing a true and accurate representation of the financial position and performance of the Bank and all the businesses included in the consolidation, and (iv) that the Directors’ Report on Operations includes a reliable analysis of performance and results, as well as the position of the issuer and all the companies included the consolidation scope, together with a description of the main risks and uncertainties to which they are exposed.

The Management Board and Supervisory Board of Intesa Sanpaolo have approved the document ‘Administrative and Financial Governance Guidelines’, which covers:

– the governance model enabling the Ultimate Parent’s Manager in charge of financial reporting to check continuously the adequacy and effective application of the administrative and accounting procedures at Group level and the Bank’s Manager in charge of financial reporting to exercise the same role with reference to his/her specific company scope;

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– the system of information flows the bank must transfer to the Ultimate Parent Manager to strengthen the level of monitoring of information useful for the representation, on a consolidated basis, of the assets and liabilities of the Group, its economic and financial situation and the main risks and uncertainties to which the Group is exposed;

– the system of reporting to the Managing Director, CEO and the Manager in charge of financial reporting by Ultimate Parent functions and the functions of subsidiaries, in relation to verified compliance with statutory requirements and company regulations, each within their own sphere of responsibilities;

– the communication flows from the Manager in charge of financial reporting to the internal Bodies and the exchanges of information with the Independent Auditor; the same information requirement applies to the Manager in charge of financial reporting of the Bank with regard to the various internal Bodies and the Independent Auditor.

The guidelines have been adopted by Banca IMI with reference to the functional requirements necessary for the certifications for the consolidated financial statements of the Intesa Sanpaolo Group.

The same guidelines defined the financial and administrative governance model which supports the Banca IMI Manager in charge of financial reporting.

The Manager in charge of financial reporting of the Ultimate Parent exercises a management and coordination role for the companies within the Group in administrative and accounting matters and protects the System of Internal Controls instrumental to the Group’s financial reporting process.

To this end, s/he defines the programme of activities which the Group is required to carry out; those of particular relevance for Banca IMI are:

– the coordination of the indications for the correct and homogeneous application of the accounting policies in the consolidated reports, rules assessment and criteria;

– the development of administrative and accounting procedures for the drafting of financial statements and consolidated financial statements, as well as the coordination of developments to procedures to meet the obligations to provide financial information to national and supranational Bodies;

– checking the adequacy and effective application within the year of the administrative and accounting proce-dures through a structured assessment process, at the end of which the results are formalised in the Report on the Internal Control System for the financial reporting process;

– monitoring the process for acquiring the data and information necessary for the presentation of the finan-cial position and performance of the Group, in particular with reference to the main risks and uncertainties to which the companies are exposed;

– supervising the tasks allocated to the Independent Auditor to ensure the independence and objectivity of the auditor, in accordance with the legal provisions and the procedures covered by the Group’s Regu-lations, in implementation of which, information will periodically be sent to the Management Board and Control Committee.

Banca IMI has adopted the Intesa Sanpaolo model and has gradually contextualised it and adapted it to the specific operational and Business context.

The definition and contextualisation of requirements under Financial and Administrative Governance at Banca IMI involved the following phases:

– designation of the Manager in charge of financial reporting;

– adoption of the Sanpaolo Regulations ‘Financial and Administrative Governance Guidelines’;

– gradual modification and definition of the Banca IMI Financial and Administrative Governance Model, adap-ted over the years to changes in operations and the overall structure.

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When applying the Group’s methodologies to Banca IMI, consideration has always been given to the business set-up which makes ample use of external services, provided by structures at Intesa Sanpaolo or Consortium Compa-nies, with homogeneous organisational models and operating procedures across the entire Group but outsourced by Banca IMI itself. With specific reference to the processes instrumental to the drafting of the Banca IMI financial reports, the following are of relevance:

– the administrative and accounting procedures followed by Intesa Sanpaolo Group Services, responsible for the complete and correct integration of all the transactions in the divisions which complete the general accounts;

– the monitoring and certification of the assessment parameters and prices of the financial instruments, the determination of the collective adjustments to the portfolio and the determination of the capital require-ments originating from the internal models of the Intesa Sanpaolo Risk Management Department;

– the management, classification and assessment of credit exposures to RIO, unlikely to pay and doubtful loans carried out by the Doubtful Loans and Credit Recovery Departments of Intesa Sanpaolo and Intesa Sanpaolo Group Services, respectively;

– the accounting and financial flows control procedures, the assessment processes for the purposes of ac-counting for the assets and liabilities, adjustment entries pertaining to the cycle of drawing up the financial reports by the Administration of Banca IMI S.p.A.

Moreover, the Banca IMI Governance model introduces important synergies with other key areas for financial reporting, such as:

– monitoring outsourcing;

– demand management in the Administration area, aimed at progressive maintenance of the IT systems, in-cluding in response to regulatory developments;

– analysis of the administrative/financial impact of the structuring and development of new products and new Business and project initiatives;

– active participation in Banca IMI and Group projects which are important for financial reporting;

– monitoring the areas of improvement and anomalies in the administrative field, with specific reference to outsourced processes.

With regard to outsourcing management, in particular, the areas of control concern (i) coordination in the con-clusion of service contracts, (ii) the identification of the SLA/KPI, (iii) monitoring the service levels, (iv) the supplier assessment processes, with regard to processes with an administrative/financial impact.

In view of the responsibilities allocated, the Banca IMI Manager in charge of financial reporting shall be endowed by the Board of Directors with adequate powers and resources to perform the functions; in particular, the Banca IMI Manager in charge of financial reporting shall make use of a dedicated organisational structure, the Admini-strative and Financial Governance Control Office, with staff linked organisationally to the Manager in charge of financial reporting but distinct as regards operating units, continuously checking the adequacy and effective ap-plication of the administrative and accounting procedures. The Manager in charge of financial reporting may also make use of the support of other corporate control functions at the Bank or operating services, based on suitable service contracts, to carry out specific checks aimed at giving an opinion on the effective application of the admi-nistrative and accounting procedures.

In order to allow the Board of Directors to monitor the adequacy of the powers and resources conferred, as well as compliance with the administrative and accounting procedures, the Manager in charge of financial reporting shall provide periodic information to the Bank Bodies.

Further specifics concerning the control model of the Manager in charge of financial reporting are outlined in the organisational procedure ‘Managing FAG requirements’ and the detailed operational guidelines of Banca IMI, which should be referred to if necessary.

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Financial and Administrative Governance Control

In order to comply with the above regulatory requirements, the Banca IMI Manager in charge of financial reporting shall make use of the Administrative and Financial Governance Control Office.The model applied at Banca IMI replicates Group Regulations and contributes to the certification of Banca IMI Financial Statements and certification by the Group Manager in charge of financial reporting, in relation to the Consolidated Financial Statements of the Ultimate Parent.

With regard to Administrative and Financial Governance requirements in the strictest sense, this model involves coordination of the work programme to assess the financial reporting process, through:

– the identification of the scope of application, based on the budgetary aggregates and the processes which determine their creation and are considered significant;

– checking the operating, administrative and accounting processes and the related risks and controls through walkthrough tests (activities carried out directly by the FAG structure at Banca IMI or appointee, via coordi-nation with the counterpart structure at the Ultimate Parent for external services);

– subsequent review of the procedures based on the verification activities carried out;

– assessment of the risks and adequacy of the controls intended to reduce their scale (Risk & Control Assessment);

– checking of the effective and continuous application of the controls, under the responsibility of the struc-tures which implement the processes themselves (Test of Effectiveness);

– the definition and monitoring of any corrective measures to be implemented as a result of the checks carried out;

– the final assessment of the control system and its effective application.

In strict operational coordination with the Administrative and Financial Governance Control function, the Manager in charge of financial reporting at Banca IMI, together with the Administrative Managers of the Branches and Subsidiaries, shall ensure:

– the bi-annual assessment of the adequacy and effective application of administrative and accounting pro-cedures (Law no. 262/2005);

– the bi-annual assessment of the System of Internal Controls for the financial reporting process (Law 262/2005 and Decree no. 39/2010);

– the annual assessment of the adequacy and effective application of the tax validation process, pursuant to the requirements of US law (Foreign Account Tax Compliance Act);

– the annual assessment of the findings of the Independent Auditor (Management Letter), coordinating the drafting of company conclusions;

In line with the defined model, the Administrative and Financial Governance Control structure shall also carry out further activities in key areas for Financial Reporting, such as Outsourcing Management, the Capital Budget for the Administration area and projects with an administrative/financial impact.

Banca IMI internal governance structures

Banca IMI has established the following managerial Committees, whose operations are described within the rele-vant Regulations approved by the Board of Directors.

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Risks Committee

The Risks Committee is a technical body with instructional, propositional and informative powers, established in order to ensure the supervision and coordinated management of issues pertaining to the management of market, credit, liquidity and operational risks. The Committee adheres to the policies of the Risk Governance Committee of the Ultimate Parent.

The Risk Committee is also responsible for supervising the projects/actions required to ensure regulatory complian-ce, particularly as regards prudential supervisory provisions.

Credits Committee

The Credits Committee is a technical body with decision-making and consultative powers, established in order to ensure the coordinated management of issues pertaining to credit risks, within the framework of the mandates allocated to it.

New Product Committee

The New Product Committee is a technical body with powers to establish regulations and make recommendations, set up in order to assess the impact of the introduction of a new product or service or the substantial review of an existing product, the launching of new activities or introduction onto new markets, in relation to risks, processes, operating procedures and the accounting system, as well as in terms of tax and compliance and for the approval of new products.In the case of new products structured and marketed by Banca IMI for clients in the Corporate and Investment Banking Division at Intesa Sanpaolo, an ‘Enlarged’ New Product Committee will also be set up, including the Intesa Sanpaolo structures participating obligatorily in a similar process established at the Ultimate Parent.

RetLots® Exchange Market Management Committee

The Market Management Committee establishes the organisation and operation arrangements for the RetLots Exchange®. In particular, the Market Management Committee makes general decisions concerning:

– the conditions and procedures for admitting, cancelling and suspending financial instruments to/from ne-gotiations;

– the conditions and procedures for conducting negotiations and for the functioning of the services depen-dent on them;

– the procedures for assessing, publishing and disseminating information.

Management Committee

The Management Committee acts as consultant, provides information and coordinates business and gover-nance areas. Among other things, the Management Committee shares facts regarding the status of the Bank’s characteristic risks.

Controls Coordination Committee

Technical body with an informative and consultative role geared towards the coordination of controls at the Bank, with the goal of reinforcing coordination and the interfunctional cooperation mechanisms pertaining to the Inter-nal Control System and promoting the integration of the risk management process.

The Controls Coordination Committee is allocated the function of supervising the ongoing maintenance of the integrated Internal Control System, coordinating comparison with the assessments expressed by the control fun-ctions and, in the event of critical issues identified by several corporate control functions, bringing such matters to the attention of the Managing Director and General Manager.

The Committee shares the planning of the corporate control functions, promoting the coordination of these functions in defining the methodological framework regarding cross-functional control sectors, with the goal of integrating the risk control process.

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In the event of critical aspects identified by several corporate control functions or pertaining to the same operating and risk areas, the Committee shall direct the relevant topics and monitor the stage of completion of the related remedial actions.

The Committee shall also identify matters of greatest importance to be brought to the attention of the Managing Director and the Director General - without prejudice to the independence of individual corporate control fun-ctions - so that they can assess what actions to take and, if necessary, request their implementation.

Furthermore, the Committee will be responsible for revising these Rules for the Integrated Internal Control System.

The Controls Coordination Committee is responsible for preparing any documentation regarding the activities car-ried out, which must be sent periodically to the Group’s Controls Coordination and Operational Risks Committee – Ultimate Parent Integrated Internal Control System session.

Ultimate Parent internal governance structures

Intesa Sanpaolo has established its own internal managerial Committees which handle the various risk profiles; their operation is described in the ‘Regulations of the Intesa Sanpaolo Group Committees’.

In defining the Regulations for managerial Committees, the Ultimate Parent shall make efforts (i) not to alter the primary responsibilities of the internal Bodies over the Internal Control System and (ii) not to undermine the prero-gatives of the risk control functions, ensuring full independence in taking on risks.

Coordination Committee

A Group Body with a consultative role, aimed at promoting efficiency and top-level communication between the Ultimate Parent’s structures, with a view to sharing and coordinating the main corporate decisions.

Group Risk Governance Committee

A Group Body established in order to ensure the supervision and management of risks and the safeguarding of corporate value at Group level, including the internal control system, in implementation of the strategic guidelines and management policies defined by the corporate bodies.

Group Financial Risks Committee

A technical body with a decision-making and informative role, focused on banking and trading book financial ownership risks and Active Value Management risks; the functions of the Group Financial Risks Committee are structured into two appropriate and distinct sessions: Risk Assessment and ALCO.

Group Controls and Operational Risks Coordination Committee

A technical body with a decision-making, informative and consultative role, established to coordinate the Bank and Group’s controls, through two dedicated sessions:

– Integrated Internal Controls System Session: established to reinforce the coordination and interfunctional cooperation mechanisms with regard to the Internal Control System and promote the integration of the risk management process;

– Operational Risk Session: established to reinforce coordination and inter-functional cooperation mechani-sms with regard to the operational risks, fostering effective management.

The decision-making role is only allocated to the Operational Risk Session.

Group Credit Committee

A technical body with a decision-making and consultative role, established to ensure the coordinated management of issues pertaining to credit risks, within the framework of mandates allocated to it.

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Committee for the Coordination of the Group’s International Markets

Group Body with an informative and consultative role, established to promote synergy and adequate sharing of information between the Management and the business structures of the Bank and Group active in international markets, as well as reinforce coordination and interfunctional communication between the business structures and Governance Areas.

Corporate control functions outsourced to the Ultimate Parent

Intesa Sanpaolo has established the following organisational structures, which will carry out, based on specific outsourcing contracts, including for the Bank, the activities laid down for the following corporate control functions:

– Compliance Department;

– Anti-Money Laundering Service;

– Risk Management Department;

– Credit Quality Control Service;

– Internal Validation Service;

– Internal Audit Department.

These Functions are organisationally separate; the respective roles and responsibilities are described the relevant Intesa Sanpaolo Functional Chart and more details are provided in the Governance Documents developed by the Ultimate Parent and subsequently adopted by the Bank as a framework for the Group’s control model for the various risk areas.

In order to ensure their independence, these Functions:

– shall possess the authority, resources and competence necessary for carrying out the tasks allocated to them;

– shall possess a budget that may be used autonomously;

– shall have access to all company and external data (e.g. concerning outsourced activities);

– shall possess suitable staff in terms of numbers, technical/professional skills and ongoing training. In order to ensure the training of cross-functional skills and to acquire a global and integrated vision of the control ac-tivities carried out by the function, resource rotation programmes between the corporate control functions will be formalised and promoted.

As regards individuals appointed as managers of the Bank’s corporate control functions:

– they shall possess the necessary professionalism requirements;

– they shall be placed in a suitable hierarchical/functional position;

– they shall not have direct responsibility for operating areas subject to control nor be hierarchically subordi-nate to the managers of such areas;

– they shall be nominated and dismissed by the Board of Directors, after consultation with the Board of Sta-tutory Auditors, acting on a proposal from the Internal Control Function of the Ultimate Parent;

– they shall report directly to the Bank’s Internal Bodies; in particular, these individuals shall have, in any event, direct access to the Board of Directors and the Board of Statutory Auditors and shall communicate with them without any restrictions or intermediaries.

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The staff working in the corporate control functions shall not be involved in the operating activities which these Functions are required to control; the relevant remuneration criteria will not compromise the objectivity and con-tribute to the creation of an incentives system in line with the purposes of the function performed.

For each Internal Control Function, the internal regulations will define the roles and responsibilities, tasks, opera-ting procedures, information flows and planning arrangements for the control activities, at Ultimate Parent and Group level.In particular:

– the compliance, anti-money laundering and risk control functions shall present, each based on their relative fields of responsibility, an annual activities programme to the Bank’s internal Bodies, which identifies and assesses the main risks to which the Bank is exposed and plans the relevant management tasks. The pro-gramming of these tasks shall take account both of any deficiencies revealed during the controls and of any new risks identified;

– the internal audit function shall submit an annual audit plan to the Bank’s Corporate Bodies, which will indicate the control activities planned, taking into account the risks of the various internal activities and structures; the plan will contain a specific section concerning the ICT auditing activities. At the same time, the function shall submit a multi-annual plan for its own activities.

At the end of the management cycle (and therefore at least once a year), the aforementioned functions shall:

– submit to the Bank’s Corporate Bodies a report on the activities carried out, the results obtained and any weaknesses revealed, suggesting the steps to take for their removal;

– shall report, each for its area of responsibility, on the completeness, adequacy, functionality and reliability of the Internal Control System.

This information, or parts thereof, will also be used by the Ultimate Parent to produce a summary report concerning investigations conducted into the subsidiaries and the Group as a whole, which will be sent to the Bank of Italy.

In any event, the corporate control functions shall inform the Bank’s Corporate Bodies in good time of any brea-ches or major deficiencies detected.

Ultimate Parent Chief Risk Officer

The Chief Risk Officer Governance Area shall report directly to the Managing Director and CEO and its responsibi-lities are described in the Functional Chart.

The following functions are operational within the Area:

– Compliance Department;

– Anti-Money Laundering Service;

– Risk Management Department;

– Credit Quality Control Service;

– Internal Validation Service.

The following paragraphs lay out the macro-responsibilities allocated to each of the above functions.

Ultimate Parent Compliance Department

The reference model for supervising compliance with Group regulations is outlined in the ‘Group Compliance Gui-delines’ developed by the Ultimate Parent and subsequently adopted by the Bank, which define the particular roles, responsibilities and duties of the Compliance Department and all internal units involved in compliance activities.

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In line with this model:

– the Compliance Department shall directly perform all the tasks allocated to the Compliance Function by the Supervisory Provisions of the Bank of Italy and the joint Bank of Italy /CONSOB Regulations with reference to the regulatory areas considered of greatest importance by the Supervisory Authorities or where, in any event, centralised management of the risk of non-compliance is deemed necessary, in line with indications from trade associations and common market practice or in the absence of a company function established for specialist supervision in this field;

– for all the legislative fields applicable to the Group, which are subject to risks of non-compliance and where Specialised Group Functions have been identified, endowed with the necessary responsibilities, the tasks allocated to the Compliance Function shall be entrusted to such structures, with no prejudice to the respon-sibility of the Compliance Department to assess the adequacy of the specialised controls for managing the non-compliance risk profile, defining, in cooperation with the Specialised Functions of the Ultimate Parent, the risk assessment methods and the procedures for their mitigation. Including for such regulatory fields, the Compliance Department shall guarantee to provide integrated information of the results to the Bank’s Company Bodies.

The regulatory scope and the related oversight procedures – identified on the basis of a prompt and detailed analysis of the fields considered to present appreciable risks for the Group and subject to approval by the relevant internal Bodies – are defined in the Compliance Guidelines and continuously kept up to date.

Monitoring the risk of non-compliance with the regulations is ensured by the Compliance Department and the Specialist Functions of the Ultimate Parent, with the support of the relevant company functions, through the go-vernance of so-called compliance macro-processes, which consist, briefly, of the following main activities:

– risk assessment, through the identification and assessment of non-compliance risks and the supervision and planning of the necessary mitigation measures;

– regulatory alignment, consisting of the identification of applicable regulations, the assessment of the re-lative impact on the internal processes and procedures and the resulting proposal for organisational and procedural modifications to ensure suitable oversight of risks of non-compliance;

– advisory and clearing, consisting in assistance to other internal structures in all matters where there is a serious risk of non-compliance and in assessing compliance with the regulations applicable to innovative projects, including the launching of new activities and introduction onto new markets, operations and new products and services to be commercialised. The advisory and assistance activities include the prior verifica-tion, conducted by the Compliance Department, of the consistency of the company rewards system, with the objectives of complying with regulations, the Articles of Association, the Code of Ethics and standards of conduct applicable to the Bank, as well as the RAF;

– assurance, or the subsequent verification of the adequacy and effective application of the internal processes and procedures and organisational requirements suggested for the prevention of the risk of non-compliance and, in general, the checks of compliance with the external and internal regulations by the company struc-tures. The activities include the examination of indicators and performance data, the analysis of the results of the first-level checks conducted by the operational structures and the conducting of direct second-level checks. The activities are also carried out using the results from other corporate control functions and the Internal Auditing Department. The main existing weaknesses and their developments are introduced to the Compliance Tableau de Bord, highlighting ongoing mitigation measures and the relative responsibilities and deadlines, in order to facilitate systematic monitoring;

– the dissemination of a corporate culture of compliance, through the establishment of effective communi-cation channels and training instruments, identifying training needs with regard to skills and preparing the content of the training initiatives for all the Bank’s resources;

– identifying and implementing actions to be taken to make up the organizational and/or procedural gap.

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The Compliance Department defines the statements indicated in the Risk Appetite Framework (RAF) concerning the non-compliance risk, monitoring adherence to and cooperation with the Risk Management Department in the identification of the quantitative parameters, within the RAF, of the limits relating to operating losses and, in the event that such limits are breached, the identification/analysis of any events attributable to the non-compliance with regulations and the identification of suitable corrective actions.

Central Compliance Management also has the task of supporting the Bank’s Supervisory Body 231 in carrying out control activities, as described in more detail in the paragraph dedicated to the “Board of Statutory Auditors and the Supervisory Body pursuant to Legislative Decree no. 231/2001” in this Regulations document and, more generally, in the “Organization, Management and Control Model of the Bank, pursuant to Legislative Decree no. 231 of 8 June 2001.”

The Compliance Department shall periodically, and where necessary, submit its findings to the internal Bodies of Banca IMI.

Ultimate Parent Anti-Money Laundering Service

The roles, responsibilities and duties of the Anti-Money Laundering Service are set out in the Functional Chart and the ‘Guidelines for combating the phenomena of money laundering and the funding of terrorism and managing embargoes’ developed by the Ultimate Parent and subsequently adopted by the Bank; these govern, among other things, the following aspects:

– the roles and responsibilities of the internal Bodies of the Ultimate Parent, the corporate structures of the Ultimate Parent and of Intesa Sanpaolo Group Services involved in the monitoring of fields pertaining to anti-money laundering, the tackling of the funding of terrorism and the management of embargoes;

– macro-processes for combatting the phenomena of money laundering and the funding of terrorism;

– positioning and coordination of the Group’s Companies.

Lastly, the Anti-Money Laundering Service cooperates with other internal structures in order to develop risk mana-gement methods which are consistent with corporate strategies and operations, supporting the design of proces-ses which comply with the regulations and providing advice and assistance.

With regard to the risk management process, the Anti-Money Laundering Service takes part with the Risk Mana-gement Department and the Compliance Department, within their field of responsibility, in managing:

– operating risks in the Legal and Compliance field: to this end, the methodological and control frame of reference of the Anti-Money Laundering Service identifies the procedures for using the information deri-ved from the operational risk management models with regard to non-compliance risks connected with regulations to tackle the phenomena of money laundering and the funding of terrorism and for managing embargoes, providing its own specialised contribution for their management;

– reputational risks, with specific reference to those arising from breaches in relevant regulatory areas.

The Anti-Money Laundering Department shall periodically, and where necessary, submit its findings to the internal Bodies of Banca IMI.

Ultimate Parent Risk Management Department

The Risk Management Department, acting as a distinct function, independent from the company functions tasked with the ‘operational management’ of risks:

– shall cooperate in the definition and implementation of the RAF and the relative risk governance policies, through a suitable risk management process;

– shall guarantee the measuring and control, both current and for the future, of the Group’s exposure to va-rious types of risk, in particular market, credit, interest rate, liquidity, operational, Country and insurance; in measuring the risks it shall take account, in general, of the model risk (i.e. the possible risks of malfunctions in the internal measurement systems) and any uncertainty in the assessment of certain types of financial

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instruments; it shall develop and apply parameters able to highlight situations of irregularity and inadequacy in measuring and risk control systems;

– shall monitor the absorption of capital (capital requirement), supporting the Planning, Strategic ALM and Capital Management Department of the Ultimate Parent in active capital management activities;

– shall propose to the Ultimate Parent’s Top Management the definition of the structure of the operating limits, in keeping with the RAF and allocated capital;

– shall adhere to regulatory developments and ensure that the information requested by the regulations in force concerning internal models is sent to the Supervisory Authorities;

– shall develop and maintain risk measurement, management and control systems, in line with international best practice, interacting for this purpose with the functions responsible for the relevant company processes.

Among the other activities within the remit of the Risk Management Department, the following are of particular relevance:

– quantifying the overall exposure structured by individual risk factors and the relative capital absorption (with reference to the risk profiles validated for indication with internal models);

– assessing the impact of various market scenarios, including extreme scenarios (stress tests), on the risk pro-file, capital absorption and profitability.

In order to avoid excessive distance from the operational context and thus ensure continuous critical interaction with the business units, the Risk Management Department, with regard to the various risks monitored, shall be responsible for:

– supporting the Business Units with assessments of the riskiness and risk adjusted pricing of the products offered to clients;

– monitoring the correct operation of the decentralised operational risk management system, defining any corrective actions and supporting their implementation;

– supporting the Business Units in the management of data, in the execution of the decentralised processes and the definition of internal regulations in line with the Group’s standards.

In addition, the Risk Management Department shall set out the quantitative and qualitative parameters necessary for the definition of the RAF, which also refer to stress scenarios and, in the event of changes inside and outside the bank, the review of these parameters in light of the new situation.

The Risk Management Department verifies the adequacy of the RAF and identifies the measures able to improve/optimise the Risk Appetite, taken into consideration the direct impacts on the budget/plan.

The Risk Management Department is responsible for:

– continuously checking the adequacy of the risk management process, without prejudice to the tasks alloca-ted in relation to the Credit Quality Control Service, and operating limits;

– and verifying the adequacy and effectiveness of the measures taken to remedy any deficiencies encountered in the risk management process.

The Risk Management Department defines common risk assessment metrics in line with the RAF, coordinating with the compliance function, the ICT function, the business continuity function and the IT security function at the Ultimate Parent. Group Operating Risk Governance Guidelines developed by the Ultimate Parent and subsequently adopted by the Bank cover the roles and responsibilities (at Ultimate Parent level and, as applicable to their fields of responsibility, Group Companies) of internal Bodies and other Organisational Units for various reasons in manage-ment and control processes, such as the Compliance and Personnel and Organisation Departments at Intesa Sanpa-olo Group Services (IT and physical security, fraud prevention and business continuity risks).

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The Risk Management Department is responsible for defining the reputational risk assessment and control proce-dures and methods in cooperation, for matters connected with the breach of standards and regulations, with the Compliance Department.

The strategic risk is quantified under the responsibility of the Risk Management Department when determining the economic capital; this structure reports any developments to the top management, along with the outcomes of the monitoring of the Risk Appetite Framework.

The Risk Management Department ensures the consistency of the risk measurement and control systems with the assessment processes and methods of the internal activities, coordinating with the internal structures concerned. Moreover, the prudential regulations stipulate that internal risk measurement, management and control systems should be consistent with their managerial use (use test rule). In this context the active participation of the Risk Management Department in the statistical assessment of impaired loans, the quantification of the incurred loss to calculate the collective reserve for performing loans, the determination of the fair value of the credit portfolio and market instruments, including derivatives, are of particular importance.

With reference to the risks of new products and services and those derived from the entry into new operating and market segments, the Risk Management Department shall cooperate with structures active in the planning phase and assess impacts in terms of market risks (including interest rate and exchange rate risks), liquidity and credit risks.

Furthermore, the Risk Management Department:

– shall provide prior judgements on consistency with the RAF of the most important transactions, acquiring, depending on the nature of the transaction, the opinions of other functions involved in the risk manage-ment process;

– shall constantly monitor the actual risk assumed by the Bank and its consistency with the risk objectives, as well as compliance with the operating limits assigned to the operational structures regarding the as-sumption of various types of risk.

The main existing weaknesses and their developments are included in the Tableau de Bord of the critical issues highlighted by risk management, with indications of the ongoing risk mitigation and containment measures and the relative responsibilities and deadlines, in order to facilitate systematic monitoring.

The duties and responsibilities of the Risk Management Department are governed within the Guidelines concer-ning the various risk areas developed by the Ultimate Parent and subsequently adopted by the Bank, to which reference should be made for further details.

The Risk Management Department shall periodically, and where necessary, submit its findings to the Company Bodies of Banca IMI.

Ultimate Parent Credit Quality Control Service

The Credit Quality Control Service was set up to continuously monitor the quality, composition and development of the loan portfolio at Ultimate Parent and Group level, ensuring the absolute independence of the structures tasked with operational management.

It conducts its mission through structured monitoring of the various processes for granting and managing credit, adhering to the phases for each administrative risk status – performing, non-performing and impaired – as well as through specific control activities of individual exposures or clusters of exposures characterised by signs of ano-malies. It also carries out monitoring and control activities on the processes for allocating and updating ratings.

In general terms, the development of the control activities requires preliminary examination of the individual credit processes at the same time as their development in order to verify the correct existence of level I control safeguards, their disclosure and traceability in the information systems, their inclusion in a regulatory framework, if necessary, and their execution procedures. The Service contributes to managing information databases and the instruments necessary for effective oversight of the loan and cooperates with the operating structures to identify and implement these activities, monitoring their correct execution.

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Based on these analyses, the Level II control safeguards are identified and implemented, together with their detec-tion and ongoing traceability procedures and their regulatory framework.

To this end, the Service identifies, defines and coordinates the development and creation of suitable methodolo-gies and instruments established to support the Level II monitoring and control activities and takes responsibility for their subsequent ongoing maintenance.

It bases the verification activities of individual exposures or clusters of exposures on ‘risk-based’ criteria, using procedures refined over time and periodically subject to internal verification in order to improve their effectiveness and swiftness in highlighting the occurrence of anomalies.

The Service assesses the consistency of the classifications of the various administrative risk statuses, the consistency of the allocations, including for the purposes of drafting the financial statements, and the adequacy of the credit recovery process, with reference also to individual exposures; checks the execution of the measures guaranteeing the quality of credit also in terms of status variations and, in the event of non-consistent assessment, takes steps to ensure regularisation, enforcing its decisions; subsequently it also carries out follow-up activities to check the resolution of the critical issues.

Furthermore, it monitors the correct adoption of the regulations concerning the protection of credit quality by companies within the Group, both Italian and international, and takes responsibility for extending to them, in accordance with their fields of responsibility, the best practices to follow for the Level II controls.

It ensures the drafting, management and adjustment of the periodic reports concerning the development and quantitative and qualitative composition of the Group’s loan portfolio, as well as the processes for allocating and managing credit, with particular attention paid to developments in non-performing and impaired loans. It perio-dically reports the results of the monitoring and control activities performed to the Bank’s internal and Control Bodies, reporting on any remediation activities requested and conducted.The duties and responsibilities of the Credit Quality Control Service are set out in the appropriate Functional Chart, which should be referred to for further details.

Ultimate Parent Internal Validation Service

The Internal Validation Service was established to validate internal risk measurement systems and operates inde-pendently of the units which manage the development of these systems.

The Internal Validation Service has the task of ensuring the validation of the internal models, whether already in operation or under development, for all the risk profiles handled by the first and second pillars of the Basel Accords and managing the internal validation process at Group level.

In particular, with reference to the Pillar 1 risks, the service assesses on a continual basis the risk management and measurement systems in terms of models, processes, IT infrastructure and their compliance over time with regulatory provisions, internal requirements and the development of the reference market, developing adequate methods, instruments and operational solutions.

As regards the Pillar 2 risks, the Internal Validation Service conducts analyses of the methodologies, verifying, in particular, the economic/statistical consistency of the measurement or assessment metrics adopted in the quanti-fication of the relevant risks, the robustness of the methods adopted and the estimates produced for measuring/assessing the relevant risks and making a comparison with alternative methods in order to measure and aggregate the individual risks.

The Internal Validation Service of the Ultimate Parent adopts a centralised model, validating internal models di-rectly where Companies have no local validation function. The Internal Validation Service of the Ultimate Parent, in order to provide an annual attestation of the Internal Systems’ compliance with the regulatory requirements by the relevant Company Bodies of the Ultimate Parent, drafts a validation report for each risk profile, class or subclass of exposure, which summarises the findings of the validation processes for the Internal Systems adopted by the Ultimate Parent and the Group Companies.

The Internal Validation Service regularly analyses the coherence of corrective measures with critical issues/areas of improvement for internal systems, and also regularly analyses performance and the proper operation of internal

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systems, including through backtesting and benchmarking analyses, whenever necessary issuing recommenda-tions to development functions in relation to performance, operations and the use of internal systems.

The duties and responsibilities of the Internal Validation Service are covered the appropriate Functional Chart, which should be referred to for further details.

Ultimate Parent Internal Audit Department

The Internal Audit Department at Intesa Sanpaolo reports directly to the Chairman of the Management Board and the Chairman of the Supervisory Board, with a functional link to the Control Committee and no direct responsibi-lity for operating areas.

The Internal Audit Department has responsibility, on the one hand, for controlling, as part of third level controls, including through on-the-spot checks, the correct functioning of the operations and the development of the risks and, on the other, to assess the completeness, adequacy, functionality and reliability of the organisational structu-re and other components of the Internal Control System, bringing possible improvements to the attention of the Bank’s internal Bodies, with particular reference to the RAF, the risk management processes and the risk measure-ment and control instruments.

On the basis of the results of its controls, it makes recommendations to the internal Bodies of the Bank. In parti-cular, the Department assesses the completeness, adequacy, functionality and reliability of the components of the Internal Control System, the risk management process and the company processes, while taking into consideration the capacity to identify and prevent errors and irregularities. In this context, it verifies, among other things, the internal Risk Control and Compliance with Regulations Functions.

The assessments of the internal control systems derived from the investigations conducted are periodically brought to the attention of the Board of Statutory Auditors, the Board of Directors, the Managing Director and the General Manager of the Bank, as well as the relevant Bodies and Committees of the Ultimate Parent, since this constitutes a prerogative of the Audit.

The Management is also responsible for assessing the effectiveness of the process for defining the bank’s Risk Appetite Framework, the internal consistency of the framework and the compliance of internal operations with the RAF itself.

In carrying out its tasks, the Internal Audit Department employs structured risk assessment methods to identify existing areas requiring the most attention and new risk factors and preparatory activities for the definition of the Annual Audit Plan.

The weaknesses revealed during the course of the control activities are indicated systematically to the internal functions concerned in order to ensure a concerted improvement effort with adequate follow-up activities by the Management suitable for checking its effectiveness.

The outcomes of the investigations concluded with a negative opinion or which highlight important deficiencies are transmitted in full to the Board of Directors, the Board of Statutory Auditors, the Managing Director and the General Manager of the Bank.

The main weaknesses encountered and their developments are introduced to the Audit Tableau de Bord, highligh-ting ongoing mitigation measures and the relative responsibilities and deadlines, in order to conduct systematic monitoring.

Lastly, the Internal Audit Department supports the Supervisory Body 231 of the Bank, ensuring constant and independent supervision of the proper functioning of operations and processes, in order to prevent or detect irregularities and risky situations, overseeing compliance and the adequacy of the regulations enshrined in the Model, as described in more detail under the heading ‘Organizational, Management and Control Model pursuant to Legislative Decree no. 231/2001 dated 08 June 2001’ for the Bank.

The Internal Auditing Department shall periodically, and where necessary, submit its findings to the corporate Bodies of Banca IMI.

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Group Business Continuity Plan Manager

The Group Business Continuity Plan Manager holds a hierarchical/functional position; in compliance with the sti-pulations of Circular 263, Chapter 9, s/he shall:

– be responsible for the development of the business continuity plan, ensuring its continuous updating and checking its adequacy;

– report to the corporate Bodies at the Ultimate Parent concerning the results of the controls carried out;

– make contact with the Bank of Italy in the event of a crisis.

Since the responsibilities set out by the Supervisory Authorities for the Group Business Continuity Plan Manager require constant, continuous management and control, these activities are carried out with the assistance of the Security Governance and Business Continuity Department at Intesa Sanpaolo Group Services.

The roles and responsibilities of the Business Continuity Plan Manager, the Business Continuity Function and the other structures involved in the business continuity process are described in more detail in the appropriate Guide-lines developed by the Ultimate Parent and subsequently adopted by the Bank.

Other Functions with Group control responsibilities

Security Governance and Business Continuity Service – Intesa Sanpaolo Group Services Personnel and Organisation Department

The Security Governance and Business Continuity Service, in compliance with the stipulations of Chapters 8 and 9 of Circular 263, shall carry out the tasks allocated to the IT security function and provide support to the Manager of the Group’s Business Continuity Plan, as explained in more detail in the following paragraphs.

IT Security Function

The IT Security Function is tasked with carrying out special tasks with regard to the security of ICT resources and cooperates with the company functions responsible for operational management in this field. In particular:

– it drafts and updates the regulatory framework, models and methods for the Group’s IT security; manages the operating guidelines necessary for their implementation and guides their conversion into operational instructions;

– it plans and executes controls of the consistency of the security safeguards with the approved policies;

– it participates in the planning, execution and maintenance of the safeguarding of the ICT assets from IT security threats, ensuring certified email address and the positioning of security tests before the commissio-ning of a new or modified system;

– coordinates and guides risk assessment and the identification of IT security safeguards as part of IT risk analysis and risk treatment, in line with the risk acceptance priorities and strategies established by the company;

– is responsible for the ongoing monitoring of threats applicable to the various IT resources in coordination with the IT threat monitoring activities performed by the relevant structures.

With regard to the risk management process, the IT security function contributes to the management of operating risks, coordinating with the Risk Management Department and the Compliance Department, within their own areas of responsibility:

– in defining the methodological and control framework concerning the management of the IT security risk;

– in the global identification, measurement and assessment, monitoring and control of risks within its remit.

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The roles and responsibilities relating to IT security risk management of the various control functions are defined in the regulatory framework.

Business Continuity Function

As part of the support provided to the Manager of the Group’s Business Continuity Plan, the Security Governance and Business Continuity Service carries out the following tasks:

– defining Business Continuity guidelines, regulations and methods for the Group, controlling and monitoring their level of compliance with the standards and regulations defined;

– governing, at Group level, the processes for defining, maintaining and verifying the Business Continuity Plan;

– carrying out controls of existing solutions in line with the critical nature of the processes and the findings regarding the adequacy of the Plan;

– drafting the documentation for the Manager of the Plan and supporting him/her in crisis management, ensuring integration with the functions tasked with the management of incidents.

With regard to the risk management process, the Business Continuity function shall contribute to the management of operating risks concerning External Events and Systems, coordinating with the Risk Management Department and the Compliance Department, integrated with the global management of operating risks, including the fol-lowing functions:

– defining the methodological and control framework regarding the management of business continuity;

– the identification, measurement and assessment, monitoring and control of risks within its remit;

– notifying the corporate Bodies, supporting the Manager of the Group’s Business Continuity Plan in the re-sponsibilities assigned to him/her.

The roles and responsibilities of the Business Continuity Plan Manager, the Business Continuity Function and the other structures involved in the business continuity process are described in more detail in the appropriate Guide-lines developed by the Ultimate Parent and subsequently adopted by the Bank.

Specialised Functions

The Specialised Functions are all structures which, under specific allocations governed by external regulations and/or tasks conducted within the Ultimate Parent and/or Group, carry out, at least in part, specific control tasks within the risk management process.

More detail about the roles and responsibilities, tasks, methods of interaction and information flows of the Spe-cialised Functions is supplied in the Governance Documents/Group Rules related to the various fields of prudent supervision developed by the Ultimate Parent and subsequently adopted by the Bank.

Representatives of the corporate control functions

The Bank shall appoint an internal representative for corporate control functions centralised at the Ultimate Parent.

Representatives are identified and appointed by the Board of Directors of the Bank, after consultation with the Board of Statutory Auditors and with the respective internal Control Function at the Ultimate Parent, and must meet the same requirements as managers of corporate control functions.

The Bank’s Board of Directors, having consulted the Board of Statutory Auditors, may dismiss a representative, by duly submitting the reasons for so doing, subject to the opinion of the respective Company Control Function at the Ultimate Parent.

The representatives for the internal auditing activities report to the internal Audit Department of the Ultimate Parent and, in any event, report directly to the corporate Bodies of the Bank which perform the strategic super-vision function.

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Neither the representatives for the internal auditing activities nor the representatives for the risk control and com-pliance with regulations functions have direct responsibility for operational areas subject to control.

Within the context of their own remits, the representatives are also responsible for:

– supporting the outsourced company control function, by participating in meetings with the Company Bo-dies;

– providing timely notification of particular events or situations, likely to modify the risks generated by the Bank, both to the relevant Company Bodies and to the respective Company Control Function at the Ultimate Parent;

– raising the awareness of its own Management and the Top Management of the ‘risk mitigation’ activities, both ongoing and scheduled;

– contributing to the resolution of issues, by directing them to the relevant structure.

Operational, business and support functions

The operational, business and support functions form an integral part of the Internal Control System and constitu-te, within their respective areas of responsibility, Level I control.

The roles, responsibilities and duties of such functions are defined within the respective Functional Charts.

Business functions

The business functions of the BU Global Markets and Corporate & Strategic Finance of Banca IMI comprise part of Level I controls, since, in their day-to-day operations, they are required to ensure the monitoring of the risks to which the Bank and the operations carried out are inherently exposed. These functions make reference, for the control activities in question, to the internal regulations (defined in the Rules documents or Operating Guides), as well as using the supporting reports produced by the support functions of the Bank and the Group (defined below) and the corporate control functions outsourced to the Ultimate Parent.

Operating functions

These business functions are backed by operating functions – typically the middle and back office functions at Intesa Sanpaolo Group Services – to which Banca IMI has outsourced the management of the administrative, re-gulatory, collection and payment phases for the Bank’s typical operations. These functions, as part of the activities in their own area of responsibility, perform the role of level I control (or line controls), with the objective both of ensuring prior verification of the correctness and consistency of the transactions and instructions provided by the business functions in order to ensure the effectiveness of the operation and the validation thereof by the counter-party to the transaction, and conducting controls – known as reconciliations – suitable for guaranteeing the supply of correct information to the accounting and supervisory branch of the Bank, as well as the correct representation of the operations with regard to the counterparties to the transactions. For further details, refer to the Functional Chart of the Structures relating to Intesa Sanpaolo Group Services, to which these structures must report.

These functions, under the framework of the CIB Division of the Ultimate Parent, are supported by the CIB Controls Office of the Operations Coordination and Monitoring Service of the Strategies and Resources Department, to which Banca IMI has entrusted certain Level I control activities, through an appropriate Service Agreement.

In this case, the above office monitors the carrying out by the business structures of the controls within their remit and carries out Level I controls, with particular reference both to specific areas of compliance (activities linked to the analysis of the data from Eagle diagnostics, with reference to the operations where market abuse is suspected), and to cross-functional areas (e.g. administrative controls), verifying that operations comply with the regulatory framework.

Lastly, there are Banca IMI support functions, tasked with Level I controls regarding some of the characteristic risks faced by the Bank.

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Support Functions

Product Control

The Product Control Function in the Operational Governance Area is mainly responsible for ensuring and certifying the quality and accuracy of the financial data present in Front Office systems for the proper management of the Front to End operational chain.

Management Planning and Control

The Planning and Control Function in the Operational Governance Area comprises various units which, in their day-to-day operations, carry out Level I controls relating to daily reporting of the management results in the Banca IMI Operating Units (Financial Control Office), alignment of all managerial findings with the data present in the accounting systems during scheduled closures (Managerial and Accounting Controls Office).

Loan and Portfolio Monitoring

This Function is mainly responsible for:

– carrying out Level I controls for loans, as regards operations relating to BU Global Markets and Corporate & Strategic Finances, ensuring daily monitoring of the credit lines allocated to clients and counterparties with whom these business lines interact. In addition, the Function monitors the registration phase for resolutions and guarantees relating to the structured finance business line;

– supporting the Structured Financial Unit of Corporate & Strategic Finance BU in carrying out Level I controls of the quality of credit related to the structured loan portfolio of this business line.

Coordination and cooperation procedures for functions with control responsibilities according to the main phases of the risk management process

The following sets forth the Bank’s risk management process and the coordination and cooperation procedures adopted to adhere to an effectively integrated controls system. The maintenance and updating of these elements of the Internal Controls System are supervised according to the needs of the corporate control functions of the Ultimate Parent, with coordinating momentum also provided by the Controls Coordination Committee at Banca IMI, pursuant to the guidelines dictated by the Ultimate Parent.

In accordance with these guidelines, the following missions are allocated to the Banca IMI Controls Coordination Committee:

– the implementation and on-going maintenance of the integrated internal control system, through coordi-nation between the control functions and the purposes of the common actions launched for this purpose;

– sharing the planning of the activities by the corporate control functions and the results and remedial action, promoting the standardised assessment of common evidence;

– managing less complex critical issues and monitoring related progress and identifying the most important issues to be brought to the attention of the Managing Director – without prejudice to the independence of individual control functions – for the definition and implementation of suitable solutions;

– coordinating the control functions in defining/updating the cross-sectional control methods for the control functions (e.g. risk assessment, taxonomies).

As part of their services to the Bank, the corporate control functions of the Ultimate Parent foster cooperation and the exchange of information during meetings; the outcomes of this cooperation may also be reflected in the informa-tion produced for the Corporate Bodies of the Bank and – where relevant – may be brought to the attention of the Group Internal Controls and Operational Risk Committee – the Integrated Internal Controls System session.

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Risk management process

The Bank’s risk management process is structured into the following phases:

– identification;– measurement and assessment (methods and instruments);– monitoring and control;– mitigation;– communication.

Within the framework of each phase, every Level I, II and III function will have specific responsibilities.

To this end, the following paragraphs provide, for each phase of the process, the macro-responsibilities allocated to each control level.

Identification

Level I

The operating and business functions are responsible for risks connected with their own operations and identify the said risks in conjunction with the control functions. Within its own sphere of responsibilities and after consul-tation and cooperation with control functions, and other support functions (i.e. Central IT Functions Management at Intesa Sanpaolo Group Services) , the Organizational and Project Management Department of the Operational Governance Area defines, designs and maintains processes which must include the controls necessary for mitiga-ting all the risks identified, clearly identifying the structures responsible for the controls, which must possess suita-ble staff in terms of number, technical/professional skills and ongoing training, as well as an independent budget.

Level I carries out these activities in implementation of and in accordance with the methodological and control fra-me of reference defined with the contribution of the Level II control functions for the various risk areas formalised under the responsibility of the Ultimate Parent in the Governance Documents and/or Regulations subsequently adopted by the Bank; in this context, the controls and, more generally, operating risk management processes and procedures are updated by the Organizational Department after consultation and cooperation with operating and business functions and other support functions, due to changes inside the Bank (e.g. modification of operations, launch of new products/services) or outside the Bank (e.g. issuing of new regulations by the Supervisory Authori-ties) or after request by Level II and III control functions. To this end, the operating and business functions shall take part in the Banca IMI Controls Coordination Committee as non-permanent members, when it deals with important issues regarding the risks connected with their operations.

Level II

The Level II control functions define and participate in the implementation of the methodological and control fra-me of reference, each for the field of risk within its remit, to be used at company and Group level.

The methodological and control framework:

– constitutes the reference for the risk management activities performed by Level I functions; this reference may also be provided through the indication of control targets;

– indicates the procedures through which the Level I functions must request the prior opinions of the Level II control functions regarding specific operating or risk areas;

– guides the subsequent risk management activities for the said Level II control functions.

The Level II control functions provide, as part of their activities and in line with the strategic positioning and risk management policies and processes, advisory and assistance services to the Level I functions in the design phase for the control safeguards, also in order to promote a correct application of the methodological and control frame of reference defined.

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What is more, the Level II control functions provide advisory and assistance services to the corporate Bodies in the field of risk management.

Level II control functions regularly analyse data aimed at identifying/updating priority risk areas, directing their acti-vities, and at ensuring the continuous monitoring of developments inside and outside the Bank as well as verifying the impact on its activities and making recommendations about how to develop the Level I control system.

Level III

The internal audit function is responsible for conducting an overall assessment of the Internal Control System and the global risk management, taking into account the methodological and control frame of reference defined by the Level II control function and its application by the Level I functions.

For the purposes of its risk management activities, it shall take responsibility for defining the audit process, i.e. the set of elements (e.g. processes, organisational structures etc.) which are subject to verification.

Furthermore, the internal audit department will provide advisory to the company functions which tend to provide added value and to improve the governance, risk management and control processes.

Measurement and assessment (methods and instruments)

Level I

Based on the operating processes and procedures defined during the ‘identification’ phase, the Level I functions, with the assistance of the support functions, shall contribute to the measuring and assessment of the risks poten-tially generated in their operations.

The arrangements, methods and procedures through which the Level I functions must contribute to the asses-sment and measurement of the risks, are laid down in the company and/or Group regulations, or within the me-thodological and control frame of reference.

Level II

The Level II control functions, each for their own area of responsibility, shall:

– define their own criteria and methods for the measurement and assessment of identified risks to be applied in the risk assessment phase, including the procedures, methods and instruments through which Level I functions contribute to the assessment and measuring phase;

– identify and define the criteria for assessing the completeness, adequacy, functionality and reliability of the Internal Control System, with specific reference to the aspects within their area of responsibility;

– conduct, based on criteria and methods defined upstream, an assessment of the impact of the risks prior to the subsequent phases of management thereof. These assessments may be quantitative or qualitative depending on the type and nature of the risks treated and will also take into account the outcomes of the risk management process for previous periods and aspects of the internal (e.g. business model, strategic plan, RAF) and external context (e.g. legislative and regulatory developments);

– carry out regular risk assessment analyses useful for coming to an opinion on the risk management capacity of Level I functions and the planning of its activities, as well as communicating the findings to corporate Bodies.

Level III

The internal audit function shall:

– define the criteria and methods for assessing risks and the related control safeguards to apply during the risk assessment phase and individual audits;

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– identify and define the criteria for assessing the completeness, adequacy, functionality and reliability of the overall Internal Control System.

The function is responsible for:

– conducting, based on criteria and methods defined upstream, an assessment of the risks and related control safeguards relating to the elements which make up the auditing process, aimed at defining measures to be inserted into the Audit Plan. These assessments are based on methods which take into account the outco-mes of the risk management process in previous periods and aspects inside the Bank (e.g. business model, strategic plan, RAF) and outside the Bank (e.g. legislative and regulatory developments);

– carry out regular analyses of risk assessment useful for coming to an opinion about efficiency and effec-tiveness as detected by Level I and II control systems and for the annual and multi-annual planning of its activities, as well as communicating findings to corporate Bodies.

Monitoring and control

Level I

The operating and business functions take a leading role in being responsible for the line safeguards necessary for mitigating risks identified in the operating and business areas in their field of responsibility. To this end, they shall conduct, in particular:

– Line controls, carried out continuously and always – in principle – on individual transactions, defined in con-junction with control functions and the Organization and Project Management Department of the Operatio-nal Governance Area within their remit, must ensure that checks are traceable and can be reviewed. These controls arise from direct and persistent input concerning the operating process and ensure adherence to the operating limits established and the procedures into which the risk management process is structured, constituting the initial safeguard thereof;

– Managerial analysis, i.e. a systematic surveillance of the positions and, specifically, of the phenomena cha-racterised by a high level of anomalies for which a prompt solution and/or renewal is necessary with regard to operational and managerial regularity. As a rule, these analyses are carried out according to a specific schedule or originating from specific signals unrelated to the operating process, highlighting irregularities and inefficient production processes, and directing business policy.

Level II

The Level II control functions are responsible both for monitoring and measuring the risk and the control itself, pro-moting the approach most consistent with the mission and prerogatives allocated to each Level II control function by external sources (legislative and regulatory indications), as well as from its own risk assessment.

These responsibilities are structured as:

– Monitoring and measuring risk: for all significant risks for the Group, analysis of the risk profile, ensuring that risk exposure is kept to within the desired level (risk appetite).

– Control: managing the correct application of the methodological and control frame of reference by the Le-vel I functions, through checks of both the design of the processes, procedures and controls – including by promoting the identification of IT applications to mitigate risks – and the effective and correct application of the controls, including through reporting flows received from the Level I control functions and the internal audit department, identifying the most suitable verification procedures, including controls which seek to verify individual risk positions.

With regard to the development of internal models, the validation thereof also falls into this phase.

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Level III

The internal auditing function is responsible for guiding the surveillance activities, in line with the model adopted and ensuring, including through the acquisition and analysis of complete and accurate information, the correct-ness of the operations and compliance with the company strategies and regulations, through:

– verifications of the effectiveness of the controls, the independence profiles and the quality of the methodo-logical and control frame of reference applied by the other control functions;

– verifications of the business, support, governance units and the other control functions (entities which, together, constitute the Scope of the Audit) to observe the overall functioning of the Internal Control System. In this context, the function takes into account the results of the checks conducted by the other control functions.

More particularly, the surveillance and observation activities conducted by the internal audit department seek to:

– provide overall assurance regarding the design and functioning of the Internal Control System, through independent assessments;

– assess the completeness, adequacy, functionality and reliability of the organisational structure and the other components of the Internal Control System with regard to corporate strategies;

– verify the regularity of the company’s activities, including those outsourced, and the development of the risks both in the central structures, and in the branches and other local offices;

– assess: the monitoring of compliance with regulations; the adherence of the various operating sectors with the limits laid down by the proxy mechanisms; the full and correct use of the information available in the va-rious activities; the effectiveness of the powers of the risk control functions in providing preventive opinions of the consistency with the RAF of the most important operations; the adequacy and correct functioning of the assessment processes and methods and the company’s activities and, in particular, the financial instru-ments; the adequacy, global reliability and security of the information system (ICT audit);

– observe the regularity of conduct, making investigations with regard to specific irregularities encountered.

Mitigation

Level I

The operating and business structures take a leading role in being responsible for managing the risks in the operating and business areas within their remit, including the implementation of managerial actions aimed at their mitigation.

Operating and support structures are also responsible for the swift execution of corrective actions identified inde-pendently and/or resulting from the reporting of critical issues by Level II and III control functions, upgrading pro-cedures, processes and controls, implementing adequate managerial measures and seeking to constantly improve the efficiency and effectiveness of risk supervision through mitigation.

In this regard, depending on their importance attributed to them by the Level II and III control functions, the ope-rating and support structures:

– identify the owner(s) responsible for providing a proper and prompt solution;

– shall periodically update the Level II and III control functions about the progress of the corrective actions.

Level II

Level II control functions are responsible for reporting on critical issues and situations of inadequacy detected in operating and business functions, providing consultation for the identification of suitable corrective actions and the functions requiring their implementation. Level II control functions monitor the status of corrective actions

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to the relevant functions and verify their impact, including through specific follow-up activities; when faced with significant problems or where the actions taken by Level I are ineffective, Level II control functions guide the reso-lution of critical issues, including by launching suitable escalation measures.

In turn, the Level II control functions shall receive any findings from the Level III function relating to the same Level II control functions or to processes directly managed by it and shall take steps to:

– identify, within themselves, the owner(s) responsible for the implementation of the corrective actions;

– launch the solution activities, periodically updating the Level III function regarding the progress thereof.

Level III

The internal audit function is responsible for reporting to Level I functions and or Level II control functions any irre-gularities and inadequacies detected, identifying the Level I and/or Level II functions to which the findings should be sent. The internal audit function monitors the resolution status of the findings for the relevant functions and verifies the impact, including through specific follow-up measures.

Communication

Level I

As part of the management activities for the findings from the Level II and III control functions, the operating and business structures are responsible for:

– reporting periodically to the Level II and III control functions on the progress of the corrective actions and communicating the solutions for the findings;

– highlighting any difficulties encountered during implementation activities, when deemed appropriate.

With regard to its own safeguards (line controls and/or managerial analyses), the Level I functions shall commu-nicate the outcomes to the Level II control functions in accordance with the procedures defined by them in the respective methodological and control frames of reference.

Level II

As part of the management activities for the findings from the Level III function, the Level II control functions are responsible for:

– reporting periodically on the progress of the corrective actions and communicating the solutions for the findings;

– highlighting any difficulties encountered during implementation activities, when deemed appropriate.

With regard to the verifications carried out, the Level II control functions shall identify the recipients who will re-ceive the reports produced.

Furthermore, these functions shall periodically prepare appropriate reports for the corporate Bodies, including a final report on the activities performed, which will contain, among other things, an assessment of the comple-teness, adequacy, functionality and reliability of the Internal Control System, as regards the aspects within their respective remits.

Level III

With regard to the verifications carried out, the internal audit function shall identify the recipients who will receive the audit reports produced.

Furthermore, the internal audit function shall periodically prepare appropriate reports for the corporate Bodies, including a final report on the activities performed, which will contain, among other things, an assessment of the completeness, adequacy, functionality and reliability of the organisational structure and other components of the Internal Control System.

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5. Independent auditors

For Intesa Sanpaolo, the Ultimate Parent of Banca IMI (a Public Interest Entity pursuant to regulations), the activity of independent auditing is carried out, as specified by the law, exclusively by a Audit Firm (statutory auditors), whose duties are to ensure, during the reporting period, that the bank accounts are kept properly and manage-ment events properly recorded in the accounts, and to express an opinion, in dedicated Reports, on the financial statements and consolidated financial statements of the bank, as well as the interim financial statements at 30 June, after checking that these statements are a true reflection of the Company accounts and the findings of the Independent Auditor, and meet statutory requirements.

The Independent Auditor KPMG S.p.A. was appointed by the Shareholders’ Meeting on 10 May 2011 upon the recommendation of the Supervisory Committee, for the period 2012-2020.

Partly for the purposes of monitoring compliance with statutory requirements by the Independent Auditor of Group companies, safeguarding the independence of the Auditor, Intesa Sanpaolo has adopted a specific Group Regulation setting up a supervisory system for the audit function and other services requested by the Ultimate Parent and Group companies of the audit firms, their networks and related subjects, in compliance with the poli-cies adopted by the Management Committee and the Supervisory Committee.

On the basis of current regulations, the appointments by the Ultimate Parent and Group companies of audit firms for services relating to the audit of company accounts requires the prior examination by the Appointed Ultimate Parent Executive and subsequently by the Internal Control Committee of the Ultimate Parent and the Board of Statutory Auditors of the companies involved. The Appointed Ultimate Parent Executive is also responsible for re-gular reporting to the Control Committee, the Supervisory Committee and Management Committee - as well as to Consob, according to current regulations - in relation to the appointments made in the period by the Group of the Independent Auditor of the Ultimate Parent and other Group auditors, specifying the fees paid during the period.

6. Statutory Auditors (pursuant to Art. 123-bis.2.d) of TUF)

The role of the Board of Statutory Auditors is to monitor compliance with the law and the Articles of Association, compliance with the principles of sound administration and, in particular, the adequacy of the administrative and accounting organisational structure and the way it actually functions.

Members of the Board of Statutory Auditors, comprising three effective Statutory Auditors and two alternate Sta-tutory Auditors, are appointed for three years and may be re-elected.

They leave office at the date of the Shareholders’ Meeting convened for approval of the financial statements for the third period, effective as from the appointment of the new Board of Statutory Auditors.

The Statutory Auditors take part in the meetings of the Board of Directors and the Executive Committee, and also Shareholders’ Meetings.

Upon its appointment, the Ordinary Shareholders’ Meeting establishes the fees for each effective Statutory Audi-tor throughout their appointment; statutory auditors are also reimbursed for documented expenses incurred for reasons of their appointment.

Meetings of the Board of Statutory Auditors may take place by conference call.

The Board of Statutory Auditors for Banca IMI, in compliance with civil requirements, pays particular attention to the appropriateness of the Bank’s organisational, administrative and accounting structure.

The Board of Statutory Auditors participates in meetings of the Board of Directors, acquiring the appropriate do-cumentation, and meets:

– with the Managers of the corporate control functions at the Ultimate Parent, as part of the periodic checks;

– periodically with the top management, in order to draw their attention to matters deemed important for the functionality and effectiveness of the Internal Control System.

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The Board of Statutory Auditors has supervisory functions in relation to the auditing of financial statements (pur-suant to section 19 of Legislative Decree no. 39/2010 which refer to: a) the financial reporting process, b) the ef-fectiveness of the control, internal auditing and risk management systems, c) the auditing of the annual accounts, d) the independence of the statutory Auditor, with particular reference to the provision of services to the bank other than auditing.

The Board of Statutory Auditors has independent initiative and control powers and may, at any moment, carry out inspections and controls of the structures of the Bank.

In the performance of its tasks, the Board of Statutory Auditors shall have unrestricted access – directly or through internal structures appointed for the purposes – to all the Bank’s internal functions, with no need to request any prior consent from the management of such functions.

The Board of Statutory Auditors may, in any event, seek assistance from any of the Bank’s structures, inviting them to cooperate in the performance of its tasks, under its direct supervision.

In carrying out its functions, the Board of Statutory Auditors receives adequate information flows from the other corporate Bodies and corporate Functions, including control functions; in this context, the Board of Statutory Au-ditors must also be sent, under the responsibility of the relevant corporate Functions, periodic information flows pertaining to risk management and control, as well as – under the responsibility of the Corporate Secretariat of the Bank and/or the other structures involved from time to time – a copy of any correspondence received from the Supervisory Authorities concerning matters which fall within the remit of the Board of Statutory Auditors.

The Board of Statutory Auditors shall inform the Board of Directors of any deficiencies detected, request the adop-tion of suitable corrective measures and check their effectiveness over time.

In this regard, the Board of Statutory Auditors, if the direct recipient of specific requests, will be authorised to provide the aforementioned Authorities with the data and information of interest, notifying the Board of Directors in good time.

The Board of Statutory Auditors is also asked to carry out the duties and functions of the Supervisory Body (hereafter the “Body”), as stipulated in Legislative Decree no. 231/2001 concerning the administrative responsibility of entities, which supervises the operation, effectiveness and compliance with the Organisationed, management and control model (hereafter “the Model”) adopted by the Bank to prevent crimes as specified in the Legislative Decree.

The Supervisory Body is endowed with independent initiative and control powers over the activities performed by the individual organisational units in sensitive areas and ordinarily uses the Bank’s structures for the execution of its supervision and control duties.

In carrying out its ordinary activities, the Body generally supervises:

– the efficiency, effectiveness and adequacy of the Model in preventing and tackling the commissioning of crimes acts, pursuant to Legislative Decree no. 231/2001;

– compliance with the provisions contained within the Model on the part of the recipients, noting consistency and any deviations in current behaviour, through the analysis of information flows and the reporting requi-red from the managers of the various company functions;

– updating the Model when there is a need for adjustment, making proposals to the relevant corporate Bodies, should any modifications and/or amendments prove appropriate;

– the existence and effectiveness of the bank’s prevention and protection system in the field of health and safety in the workplace;

– the implementation of the Staff training plan, including through the information flows from the Ultimate Parent’s Compliance Function, to which such activities for the Bank have been outsourced;

– the launch and development of the procedure for imposing disciplinary measures, following an acknowled-ged violation of the Model;

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– compliance with the provisions concerning the prevention of the use of the financial system for the purpo-ses of laundering the proceeds of criminal activities and funding terrorism, pursuant to Legislative Decree No. 231 of 21 November 2007, providing the resulting internal and external notifications stipulated by Art. 52 of the same Legislative Decree;

– adherence to the principles and values contained within the Code of Conduct of the Intesa Sanpaolo Group. Ordinarily, the Body shall use the Bank’s structures for the performance of its supervisory and control duties and, initially, the Internal Audit function of the Ultimate Parent, to which the internal audit activities of the Bank have been outsourced and which:

– ensures, in general, continuous and independent supervision to guarantee that the operations and proces-ses are carried out properly, in order to prevent or detect the occurrence of anomalous and risky behaviour or situations, assessing the functioning of the overall Internal Control System and its suitability for ensuring the efficiency and effectiveness of the company processes;

– supports the Body in monitoring compliance and the adequacy of the rules contained within the Model by involving, when faced with any critical issues encountered, the functions relevant from time to time for executing the appropriate mitigation measures.

The Body is also supported by the Compliance function of the Ultimate Parent, with a relevant role in ensuring the ongoing presence of operating regulations, procedures and practices which effectively prevent violations and infringements of current regulations and assists the Body in carrying out control activities through:

– the definition and updating of the Model, in cooperation with the Legal and Organisational functions of the Ultimate Parent, in line with the development of the regulatory framework and modifications to the bank’s organisational structure;

– ongoing monitoring of the effectiveness of the Model with reference to the rules and principles of beha-viour for the prevention of ‘sensitive offences’;

– examination of the information from the Ultimate Parent’s Internal Audit function concerning critical issues encountered during verification activities;

– analysis of the results of the self-assessment and certification process of the organisational units as regards adherence to the control and conduct principles laid down in the Model.

For the safeguarding of the specialised regulatory matters, the Body shall also use the internal structures or those of the Ultimate Parent with functional competence and the corporate roles established in accordance with the law or in implementation of specific regulations in the sector (e.g. Manager in charge of financial reporting, Employer, Manager of the Anti-Money Laundering Function etc.).

In order to fulfil its functions, the Supervisory Body receives information flows (at regular intervals and whenever special events make it necessary) and is required to provide adequate information to the Board of Directors; see the ‘Organisation, Management and Control Model, pursuant to Legislative Decree No. 231 of 8 June 2001’.

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7. Shareholders’ Meetings (pursuant to Art. 123-bis.2.c) of TUF)

The Shareholders’ Meeting, lawfully convened and constituted, represents all shareholders. Its resolutions, pas-sed in compliance with the law and these Articles of Association, are binding on all shareholders, including those absent or in disagreement.

Without prejudice to the powers to convene the Shareholders’ Meeting under specific statutory requirements, the Shareholders’ Meeting is convened by the Board of Directors in the bank’s headquarters or another place specified in the notice convening the meeting, provided it is in the European Union, by written notice communicated to shareholders, by a means providing evidence of receipt, at least eight days before the scheduled meeting.

The notice convening the meeting shall specify the date, time and place of the meeting, and the agenda; the no-tice may also specify a second date in the event that on the first date the meeting is unattended.

The law governs how shareholders take part in the Shareholders’ Meeting or appoint a representative. Sharehol-ders with voting rights who have deposited their shares at the company headquarters or the banks specified in the notice convening the Meeting may attend the Shareholders’ Meeting. Shares may be deposited at any time before the Meeting. The Shareholders’ Meeting may take place via conference call or other suitable remote means of communication provided all shareholders in attendance can take an active part in the Meeting, can be identified and it can be ascertained which shareholders are represented by any appointed representatives and their powers-of-attorney can also be verified, and Meetings take place in an orderly fashion, enabling all shareholders to take part in discussions of items on the agenda in real time, and are able to vote, the votes can be recorded and the person recording the proceedings in the minutes is able properly to do so. In the above event, the location of the Meeting shall be deemed the place where the Chairman and Secretary are both located.

Shareholders’ Meetings may be Ordinary or Extraordinary, as established by the law.

Ordinary Shareholders’ Meetings are convened at least once a year, within 120 days of the end of the reporting period.

Shareholders’ Meetings approve the policy for paying fees to Directors and consultants without employment con-tracts with the Companies, as well as salaries to employees, and also approve plans based on financial instruments, in compliance with the law and current regulations.

Shareholders’ Meetings are chaired by the Chairman of the Board of Directors or, if absent, by the Director repla-cing him/her pursuant to section 4 of Art. 23 below, or in the event of his/her absence, by a person appointed by the Shareholders’ Meeting.

The Chairman shall verify the rights of shareholders to take part in the Meeting, its lawful constitution, shall direct and conduct the Meeting, establish how votes shall be cast, and shall count the votes and declare the results of voting.

The Chairman shall be assisted by a Secretary appointed by the Shareholders’ Meeting and, if desired, by two people counting the votes, chosen from among those present.

In the cases stipulated by the law, or whenever he/she sees fit, the Chairman shall notarize the minutes of the Meeting.

Consolidated financial statements of the IMI Group

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Consolidated report on operations

The Group Banca IMI recorded a profit of 534 million for the year, up 5.5% on the previous year.

The contribution of the US conglomerate was substantially unchanged on 2014, at 2% of total income and profit. Later on in this report, frequent reference will be made to the comments already expressed in relation to the sepa-rate financial statements of Banca IMI Sp.A., given its importance for the Group's results.

For the purpose of analysing the Group's performance, provided below is a reclassified income statement, which allows for a better representation of the main items making up the group's core business as well as items of a non-recurring nature.

Reclassified Income Statement (in millions of euro)

2015 2014 changes

amount %


Net fee and commission income 376.7 319.8 56.9 17.8

Profits from financial transactions 479.7 305.2 174.5 57.2

Core business profit 1,435.9 1,314.0 121.9 9.3


Total income 1,442.9 1,329.7 113.2 8.5

Net administrative expenses: (449.2) (404.7) (44.5) 11.0

of which: - personnel expenses (159.6) (139.5) (20.1) 14.4

- other administrative expenses (289.6) (265.2) (24.4) 9.2

Amortisation and depreciation (0.6) (0.6) 0.0

Operating costs (449.8) (405.3) (44.5) 11.0


Impairment losses, provisions, other operating income (expenses) (175.4) (146.5) (28.9) 19.7

Profit from continuing operations 817.7 777.9 39.8 5.1



In particular:– dividends and manufactured dividends received from shares held for trading and commissions for the place-

ment of financial instruments in the HFT portfolio are shown among the profits from financial transactions;– revenue and costs associated with strategic operations or of a non-recurring nature are presented on a sepa-

rate line within total income as net non-recurring income (expense);– personnel expenses reflect the results of the transfer to beneficiaries of Intesa Sanpaolo shares supporting the

Banca IMI and Group incentive system;– other administrative expenses are shown net of expenses and recharges arising from the contributions to the

National Resolution Fund;– the latter, together with the results of the sale of non-performing loans, are shown under the item “Impai-

rment losses, provisions, other operating income (expenses)”.

The reconciliation statement with the income statement included in the consolidated financial statements is pro-vided among the attachments.

Consolidated Financial Statements - Report on Operations

296

Total income is up to 1,443 million (+8.5%). This figure includes 1,045 million from Global Markets areas and 398 million from Corporate & Strategic Finance.

Net interest at the consolidated level confirm the trend discussed in relation to the separate financial statements of Banca IMI.

Net interest(in millions of euro)

2015 2014 changes

amount %

Bonds and repos 447.0 512.0 (65.0) -12.7

Structured finance 199.5 238.8 (39.3) -16.5

Funding and interbank market 206.3 417.1 (210.8) -50.5

Bonds issued (263.1) (482.9) 219.8 -45.5

Other (10.2) 4.0 (14.2)


On the other hand, the growth in absolute terms of income from services rendered (up 57 million on the pre-vious balance) is higher than in the separate financial statements of Banca IMI, due to the greater contribution of IMI Securities for order collection and currency trading.

Net fee and commission income(in millions of euro)

2015 2014 changes

amount %

Dealing and consultancy

Dealing and acceptance of trading instructions 32.1 41.7 (9.6) -23.0

Currency dealing 60.3 21.5 38.8

Placement of equity and debt 85.2 108.2 (23.0) -21.3

Structured finance 151.0 114.7 36.3 31.6

Advisory & specialist 56.6 38.9 17.7 45.5

Other 5.9 12.8 (6.9) -53.9

391.1 337.8 53.3 15.8

Management and services

Custody and administration of securities (11.4) (12.4) 1.0 -8.1

Collection and payment services (3.5) (6.0) 2.5 -41.7

Other services 0.5 0.4 0.1 25.0

(14.4) (18.0) 3.6 -20.0

Total 376.7 319.8 56.9 17.8

Profits from financial transactions were almost entirely attributable to Banca IMI, where the Group’s trading exposures are concentrated. The securities portfolio of IMI Securities, at 51 million, comprises investments of the liquidity and assets of the investee. For the relevant details, see the separate financial statements.


297

Profits from financial transactions(in millions of euro)

2015 2014 changes

amount %

Securities and derivatives HFT 244.4 213.1 31.3 14.7

Investments AFS 273.0 188.6 84.4 44.8

Currencies 17.0 12.1 4.9 40.5

Issues (54.7) (108.6) 53.9 -49.6

Total 479.7 305.2 174.5 57.2

Core business profit amounts to 1,436 million. Added to this is the net non-recurring income (expense) coming from the profit of associates (Dividends on investments).

Net non-recurring income (expense)Administrative expenses

2015 2014 changes

amount %

Dividends on investments 7,0 7,3 (0,3)

Profits on disposals 0,0 8,4 (8,4)

Net non-recurring income (expense) 7,0 15,7 (8,7)

The overall increase in operating costs, “Personnel expenses” (+14.4%) and “Other administrative expenses” (+9.2%) reflect the fundamentals of the incentive system and cost items more directly associated with generating revenue. The increase recorded by IMI Securities is also due to new hirings.

Administrative expenses(in millions of euro)

2015 2014 changes

amount %

Outsourcing costs (184.6) (171.0) (13.6) 8.0

Compulsory compliance costs (5.8) (4.1) (1.7) 41.5

Logistics and functioning costs (13.6) (12.3) (1.3) 10.6

Databases and market information costs (51.7) (46.3) (5.4) 11.7

Legal and consulting expenses (11.0) (10.3) (0.7) 6.8

Other expenses (22.9) (21.2) (1.7) 8.0

Total administrative expenses (289.6) (265.2) (24.4) 9.2

As at 31 December 2015, the resources working for the Group amounted to 886. 15% were located outside Italy.

Operating profit amounted to 993 million euro, up 7.4% on 31 December 2014. The cost-income ratio stood at 31.2%, compared to 30.5% for the previous year.

The operating profit gives a profit of 534 million, after impairment losses and net provisions of 33 million, the contribution to the National Bank Resolution Fund of 142 million and income tax of 284 million.


298

Profit for the year(in millions of euro)

2015 2014 changes

amount %


Net impairment losses (35.0) (144.0) 109.0

Provisions for risks and charges 1.7 (3.0) (4.7)

Contribution to the National Resolution Fund (141.8) - (141.8)

Other non-operating income 0.5 0.9 (0.4)

Other non-operating expense (0.8) (0.4) (0.4)

Profit from ordinary activities 817.7 777.9 39.8 5.1


Profit for the year 533.7 505.9 27.8 -5.5

Among the subsidiaries, the greatest direct tax was once again levied on IMI Securities.

For a further analysis of income statement trends, the following table gives a quarterly breakdown.

The following pages show reclassified asset and liability items as at 31 December 2015 and 31 December 2014.

Reclassified Income Statement by quarter(in millions of euro)

4Q15 3Q15 2Q15 1Q15 4Q14 3Q14 2Q14 1Q14

Net interest income 142.3 144.6 165.2 127.4 155.0 159.6 194.8 179.6

Net fee and commission income 100.4 64.1 120.6 91.6 100.4 58.7 88.4 72.3

Profits from financial transactions 51.1 25.3 120.2 283.1 5.4 9.2 117.6 173.0

Core business profit 293.8 234.0 406.0 502.1 260.8 227.5 400.8 424.9

Net non-recurring income (expense) 2.4 1.1 2.2 1.3 2.8 1.4 10.7 0.8

Total income 296.2 235.1 408.2 503.4 263.6 228.9 411.5 425.7

Net administrative expenses: (125.1) (105.9) (108.2) (110.0) (119.6) (99.5) (88.8) (96.8)

of which: - personnel expenses (55.8) (34.9) (32.2) (36.7) (45.5) (38.9) (24.8) (30.3)

- other administrative expenses (69.3) (71.0) (76.0) (73.3) (74.1) (60.6) (64.0) (66.5)

Amortisation and depreciation (0.1) (0.1) (0.2) (0.2) (0.1) (0.2) (0.1) (0.2)

Operating costs (125.2) (106.0) (108.4) (110.2) (119.7) (99.7) (88.9) (97.0)

Operating profit 171.0 129.1 299.8 393.2 143.9 129.2 322.6 328.7

Impairment losses, provisions, other operating income (expenses)

(73.2) (28.5) (36.9) (36.8) (16.8) (33.9) (52.5) (43.3)

Profit from continuing operations 97.8 100.6 262.9 356.4 127.1 95.3 270.1 285.4

Income tax expense (37.2) (34.1) (83.9) (128.8) (32.6) (36.8) (97.7) (104.9)

Profit for the year 60.6 66.5 179.0 227.6 94.5 58.5 172.4 180.5


299

Condensed reclassified statement of financial position(in millions of euro)

Assets 31.12.2015 31.12.2014 changes

amount %

1. Due from banks and customers

- Repurchase agreements 12,587.2 12,680.7 (93.5) -0.7


- Fixed income securities 693.2 1,824.6 (1,131.4) -62.0

- Collateral deposited 9,553.0 12,603.8 (3,050.8) -24.2

- Structured finance assets 6,574.3 6,174.2 400.1 6.5

- Interbank deposits 47,038.4 34,180.8 12,857.6 37.6

- Checking accounts and other accounts 5,024.8 5,557.7 (532.9) -9.6


- Fixed income securities 14,864.9 11,978.6 2,886.3 24.1

- Stocks, quotas and loans 1,230.3 1,070.8 159.5 14.9



3. Investments

- Fixed income AFS securities 11,556.7 8,024.9 3,531.8 44.0

- Equity investments, equities and UCI AFS 99.8 93.3 6.5 7.0

4. Other assets

- Property, equipment and intangible assets 1.2 1.4 (0.2) -14.3

- Other assets 947.8 909.9 37.9 4.2

Total Assets 154,040.8 147,393.6 6,647.2 4.5


Liabilities 31.12.2015 31.12.2014 changes

amount %


- Repurchase agreements 20,919.4 19,611.3 1,308.1 6.7


- Collateral received 5,588.9 5,980.9 (392.0) -6.6

- Loans and deposits 53,949.5 33,299.1 20,650.4 62.0

- Checking accounts and other accounts 742.1 2,091.7 (1,349.6) -64.5



- Short selling 2,960.4 1,960.9 999.5 51.0


3. Issues

- other 13,866.8 21,482.6 (7,615.8) -35.5

4. Provisions 32.8 40.3 (7.5) -18.6

5. Other liabilities 929.5 613.6 315.9 51.5

6. Equity

- Share capital and reserves 2,759.3 3,143.5 (384.2) -12.2

- Profit for the year 533.7 505.9 27.8 5.5

Total Liabilities and equity 154,040.8 147,393.6 6,647.2 4.5


Off-balance sheet transactions 31.12.2015 31.12.2014 changes

amount %

Guarantees given and commitments to lend 4,681.8 4,370.3 311.5 7.1

Financial derivatives 2,704,872.0 2,625,697.3 79,174.7 3.0

Credit derivatives 111,964.1 119,846.8 (7,882.7) -6.6


300

The financial assets held for trading portfolio is almost entirely related to Banca IMI; the debt securities of IMI Securities, even if belonging to the HFT portfolio, have a liquidity investment nature and are not managed as short-term profit taking interests.The increase is due to Government bonds, whilst corporate bonds and bonds from financial companies are down.

Trading securities portfolio(in millions of euro)

31.12.2015 30.06.2015 31.12.2014 changes on 31 Dec 2014

amount %

– Government and government agencies 7,111.2 6,031.6 2,643.7 4,467.5

– Bonds and other debt securities 7,753.7 8,785.7 9,334.9 (1,581.2) -16.9

– Equities 1,230.3 1,214.6 1,070.8 159.5 14.9

- Shares 905.4 921.5 796.2 109.2 13.7

- Quotas of UCI 324.9 293.1 274.6 50.3 18.3

Total 16,095.2 16,031.9 13,049.4 3,045.8 23.3

Investments in debt securities for a longer holding period are classified among loans and receivables and available-for-sale assets, and refer entirely to Banca IMI S.p.A.

Loans to customers at the end of 2015 included assets allocated to and managed by the Structured Finance segment; at year-end they are all recognised in Banca IMI. Please refer to the separate financial statements for information on performance and credit quality.

Loans to customers(in milions of euro)


Gross exposure

Impairment losses

Net exposure

Coverage Gross exposure

Impairment losses

Net exposure

Coverage

On-balance sheet exposure

– performing loans 5.731.0 (105.7) 5.625.3 1.84% 5.148.9 (100.6) 5.048.3 1.95%

– unlikely to pay 1.181.7 (276.9) 904.8 23.43% 1.420.6 (323.3) 1.097.3 22.76%

– doubtful loans 87.5 (43.3) 44.2 49.49% 61.3 (32.7) 28.6 53.34%

Guarantees given (*)

– performing loans 504.8 (3.8) 501.0 0.75% 725.1 (5.6) 719.5 0.77%

– unlikely to pay 345.7 (37.4) 308.3 10.82% 375.6 (44.5) 331.1 11.85%

Irrevocable commitments to lend 1.964.1 (0.5) 1.963.6 0.03% 1.019.1 (0.3) 1.018.8 0.03%

Total 9.814.8 (467.6) 9.347.2 8.750.6 (507.0) 8.243.6

(*) the commitments to lend on non-performing positions have been excluded


301

Securities funding fully refers to IMI, while funding for the remaining subsidiaries is obtained through bank loans.

Bond Issues(in millions of euro)

31.12.2015 30.06.2015 31.12.2014 changes on 31 Dec 2014

amount %

– Bond issues: rate indexed 10,322.6 11,503.0 17,212.7 (6,890.1) -40.0

– Bond issues: currency indexed 2,880.7 2,807.2 2,747.2 133.5 4.9

– Bond issues: equity indexed 663.5 760.6 1,522.7 (859.2) -56.4

Total 13,866.8 15,070.8 21,482.6 (7,615.8) -35.5

The derivatives are fully managed in the markets by IMI Milano, where the processes and control structures, regulation, accounts management and reporting are active. The foreign units only have relationship structures, the distribution of financial products and trade promotion; the subsequent execution is carried out by the foreign subsidiaries of the Ultimate Parent or directly by Banca IMI.

As at 31 December 2015, there were no derivative transactions between IMI and its subsidiaries.

Measurement of off-balance sheet trading transactions(in millions of euro)

Positive fair value of: 31.12.2015 31.12.2014 changes

amount %


Derivatives on equity and indexes 1,058.6 1,212.0 (153.4) -12.7



Derivatives on commodities 1,252.7 856.0 396.7 46.3

Securitised derivatives and forwards 0.6 0.5 0.1 20.0

Total 40,859.4 48,570.8 (7,711.4) -15.9

Negative fair value of: 31.12.2015 31.12.2014 changes

amount %


Derivatives on equity and indexes 1,154.6 1,227.4 (72.8) -5.9




Securitised derivatives and forwards (*) 8,033.9 6,245.2 1,788.7 28.6

Total 48,693.1 54,978.5 (6,285.4) -11.4

(*) Securitised derivatives include 5,060.4 million of certificates with total or partial redemption. In the Notes to the financial statements these are included in structured trading liabilities.

Please refer to the separate financial statements for an analysis of notional stocks at the end of the year and their performance.


302

The quarterly development in the reclassified statement of financial position is shown below. The reconciliation betwe-en the reclassified financial position and the corresponding statutory schemes is shown among the attachments.

Quarterly reclassified statement of financial position(in millions of euro)

Assets 31/12/2015 30/09/2015 30/06/2015 31/03/2015 31/12/2014 30/09/2014 30/06/2014 31/03/2014

1.Due from banks and customers

– Repurchase agreements 12,587.2 11,333.7 12,358.1 13,635.6 12,680.7 11,859.6 12,431.7 12,512.3

– Securities lending 2,806.6 2,780.2 2,923.4 3,702.6 3,398.2 3,762.5 3,977.4 4,290.1

– Fixed income securities 693.2 505.0 549.1 1,820.0 1,824.6 2,387.3 2,405.3 2,584.1

– Collateral deposited 9,553.0 11,265.8 9,908.0 14,048.6 12,603.8 11,365.2 10,210.6 10,233.6

– Structured finance assets 6,574.3 6,506.8 6,414.7 5,762.8 6,174.2 5,963.8 6,473.8 6,843.6

– Interbank and other accounts 52,063.2 46,207.9 45,733.8 36,803.3 39,738.5 34,038.1 37,146.0 40,031.4


– Fixed income securities 14,864.9 14,833.1 14,817.3 14,637.8 11,978.6 16,811.7 15,560.5 18,492.9

– Stocks, quotas and loans 1,230.3 1,184.8 1,214.6 1,188.7 1,070.8 1,216.2 1,132.3 1,285.6

– Measurement of off-balance sheet transactions

41,062.6 43,413.1 42,584.7 54,412.4 48,894.7 45,705.4 42,314.8 40,298.1

3. Investments

– Fixed income AFS securities 11,556.7 12,612.6 12,235.6 11,148.3 8,024.9 6,946.2 4,148.4 6,995.9

– Equity investments, equities and UCI AFS 99.8 96.3 90.5 95.9 93.3 85.7 84.6 88.2

4. Other assets

– Property, equipment and intangible assets 1.2 1.1 1.2 1.3 1.4 1.9 1.5 1.6

– Other assets 947.8 1,081.2 1,320.1 1,140.9 909.9 1,004.0 806.0 1,270.4

Total Assets 154,040.8 151,821.6 150,151.1 158,398.2 147,393.6 141,147.6 136,692.9 144,927.8


Liabilities 31/12/2015 30/09/2015 30/06/2015 31/03/2015 31/12/2014 30/09/2014 30/06/2014 31/03/2014


– Repurchase agreements 20,919.4 21,313.0 20,800.0 22,870.3 19,611.3 21,404.0 17,806.8 22,896.2

– Securities lending 2,900.7 3,089.3 111.8 3,372.8 3,222.1 3,640.0 3,413.8 3,682.5

– Collateral received 5,588.9 6,423.5 5,604.2 6,745.5 5,980.9 5,587.5 5,210.3 5,159.7

– Loans and deposits 53,949.5 47,780.7 50,806.3 38,229.7 33,299.1 29,603.4 29,550.7 28,235.1

– Checking accounts and other accounts 742.1 488.0 931.4 875.7 2,091.7 1,109.5 1,191.1 681.2


– Measurement of off-balance sheet transactions

48,857.7 50,578.8 49,991.5 61,488.4 55,441.7 52,541.1 48,568.5 46,881.0

– Short selling 2,960.4 3,081.5 2,683.7 3,867.7 1,960.9 2,358.3 2,555.1 3,576.2

3. Issues

– other 13,866.8 14,504.7 15,070.8 15,992.3 21,482.6 20,680.7 24,064.3 29,206.8

4. Provisions 32.8 52.2 53.3 43.5 40.3 38.2 38.0 37.9

5. Other liabilities 929.5 1,009.1 798.4 975.6 613.6 632.3 836.0 1,146.7

6. Equity

– Share capital and reserves 2,759.3 3,027.7 2,893.1 3,709.1 3,143.5 3,141.2 3,105.4 3,244.0

– Profit for the year 533.7 473.1 406.6 227.6 505.9 411.4 352.9 180.5

Total Liabilities and equity 154,040.8 151,821.6 150,151.1 158,398.2 147,393.6 141,147.6 136,692.9 144,927.8


Off-balance sheet transactions 31/12/2015 30/09/2015 30/06/2015 31/03/2015 31/12/2014 30/09/2014 30/06/2014 31/03/2014

Financial derivatives (notional amount) 2,704,872.0 2,639,011.2 2,682,311.8 2,746,181.1 2,625,697.3 2,698,069.7 2,771,853.0 2,764,880.9

Credit derivatives (notional amount) 111,964.1 121,247.6 113,921.2 120,764.4 119,846.8 125,575.3 123,660.6 135,017.7

Guarantees given and commitments to lend 4,681.8 8,077.0 5,043.8 7,201.7 4,370.3 7,083.9 5,896.8 9,785.2


303

The changes in consolidated equity over the two years were as follows:

Changes in equity(in millions of euro)

Share capital

Share premium

Reserves and profits to be

allocated

Fair value reserves

Other valuation

reserves

Interim dividends

Profit Total equity



IFRS 2 Reserve 0.4 0.4

Fair value adjustment of AFS investments 39.0 39.0

Attuarial gains (losses) on defined benefit plans (0.4) (0.4)

Translation of foreign currency financial statements and other changes

12.7 12.7




IFRS 2 Reserve adjustment 4.6 4.6

Fair value adjustment of AFS investments (99.4) (99.4)

Attuarial gains (losses) on defined benefit plans 0.2 0.2

Translation of foreign currency financial statements and other changes

13.0 13.0

Interim dividends (308.0) (308.0)


Equity as at 31 December 2015 962.4 581.3 1,573.7 (49.4) (0.7) (308.0) 533.7 3,293.0

Banca IMI and its subsidiaries belong to the Intesa Sanpaolo Banking Group. Consolidated prudential regulatory obligations are carried out by the Ultimate Parent. In 2015, the consolidation scope was unchanged. No disposition act concerned the shares of Banca IMI or its investees over the 12 months.

Provided below is the statement of reconciliation between the equity and profit of Banca IMI at 31 December 2015 and the corresponding aggregates in the consolidated financial statements:


Equity of which: profit for the year

Separate financial statements of Banca IMI at 31 December 2015 3,160,645 521,984

Effects of consolidation of subsidiaries 125,858 10,819

Effect of measurement at equity of companies subject to joint control 6,501 1,150

Dividends collected in the year - -

Other changes - (238)

Consolidated financial statements at 31 December 2015 3,293,004 533,715

All entities included in the consolidation scope have just one office, with the sole exception of Banca IMI, which has branches in London and Rome.

The main risks and uncertainties to which the Group is exposed, the relative hedging policies, the initiatives adopted to protect profits and achieve targets – including research and development, the control system, the profit distribu-tion policy and the planning for regulatory capital (Own Funds) – are described in the various sections of this report and in particular in Parts E and F of the Notes to the separate and consolidated financial statements.

The Group's performance in 2016 is closely related to the aims enshrined in the Business Plan, which includes business and regulatory initiatives.

Milan, 23 February 2016The Board of Directors

Consolidatedfinancial statementsof Banca IMI

Consolidated financial statements of Banca IMI

306

CONSOLIDATED STATEMENT OF FINANCIAL POSITION


Assets 31.12.2015 31.12.2014 changes

amount %

10. Cash and cash equivalents 4 3 1 33.3

20. Financial assets held for trading 56,954,580 61,620,174 (4,665,594) -7.6

40. Available-for-sale financial assets 11,643,236 8,106,027 3,537,209 43.6

60. Due from banks 60,923,615 53,979,092 6,944,523 12.9

70. Loans to customers 23,353,892 22,440,904 912,988 4.1

80. Hedging derivatives 203,228 323,864 (120,636) -37.2

100. Equity investments 13,324 12,175 1,149 9.4

120. Property and equipment 878 1,031 (153) -14.8

130. Intangible assets 287 327 (40) -12.2

140. Tax assets 502,230 455,103 47,127 10.4

a) current 292,543 261,796 30,747 11.7

b) deferred 209,687 193,307 16,380 8.5

- of which as per Law no. 214/2011 126,686 132,761 (6,075) -4.6

160. Other assets 445,523 454,874 (9,351) -2.1

Total assets 154,040,797 147,393,574 6,647,223 4.5


Liabilities and equity 31.12.2015 31.12.2014 changes

amount %

10. Due to banks 68,073,695 53,046,794 15,026,901 28.3

20. Due to customers 16,026,878 11,158,308 4,868,570 43.6

30. Securities issued 13,866,783 21,482,603 (7,615,820) -35.5

40. Financial liabilities held for trading 51,653,544 56,939,378 (5,285,834) -9.3

60. Hedging derivatives 164,568 463,170 (298,602) -64.5

80. Tax liabilities 342,293 364,346 (22,053) -6.1

a) current 325,988 327,905 (1,917) -0.6

b) deferred 16,305 36,441 (20,136) -55.3

100. Other liabilities 587,215 249,266 337,949

110. Post-employment benefits 8,743 9,780 (1,037) -10.6

120. Provisions for risks and charges 24,074 30,489 (6,415) -21.0

a) pension and similar obligations 12 12 -

b) other provisions 24,062 30,477 (6,415) -21.0

140. Fair value reserves (50,076) 49,105 (99,181)

170. Reserves 1,573,629 1,550,686 22,943 1.5

175. Interim dividends (-) (307,988) - (307,988)

180. Share premium reserve 581,260 581,260 -

190. Share capital 962,464 962,464 -

210. Equity attributable to non-controlling interests (+/-) - - -

220. Profit for the year 533,715 505,925 27,790 5.5

Total liabilities and equity 154,040,797 147,393,574 6,647,223 4.5


307

CONSOLIDATED INCOME STATEMENT


2015 2014 changes

amount %

10. Interest and similar income 1,470,106 2,041,034 (570,928) -28.0

20. Interest and similar expense (891,695) (1,323,488) 431,793 -32.6

30. Net interest income 578,411 717,546 (139,135) -19.4

40. Fee and commission income 488,754 477,787 10,967 2.3

50. Fee and commission expense (230,529) (269,288) 38,759 -14.4

60. Net fee and commission income 258,225 208,499 49,726 23.8

70. Dividends and similar income 41,092 36,550 4,542 12.4

80. Profits (Losses) on trading 328,785 296,232 32,553 11.0

90. Profits (Losses) on hedging 7,797 56 7,741

100. Profits (Losses) on disposal or repurchase of: 184,890 37,197 147,693

a) loans and receivables (34,912) (16,504) (18,408)

b) available-for-sale financial assets 274,519 188,639 85,880 45.5


d) financial liabilities (54,717) (134,938) 80,221 -59.5

120. Total income 1,399,200 1,296,080 103,120 8.0

130. Impairment losses / reversals of impairment losses on: 2,942 (125,238) 128,180

a) loans and receivables (421) (123,807) 123,386

b) available-for-sale financial assets (5,850) (628) (5,222)


d) other financial assets 9,213 (803) 10,016

140. Net financial income 1,402,142 1,170,842 231,300 19.8

170. Net banking and insurance income 1,402,142 1,170,842 231,300 19.8

180. Administrative expenses: (595,882) (407,281) (188,601) 46.3

a) personnel expenses (162,051) (140,636) (21,415) 15.2

b) other administrative expenses (433,831) (266,645) (167,186) 62.7

190. Net accruals to provision for risks and charges 1,700 (3,000) 4,700

200. Depreciation and net impairment losses on property and equipment (475) (451) (24) 5.3

210. Amortisation and net impairment losses on intangible assets (73) (77) 4 -5.2

220. Other operating income (expenses) 3,204 3,340 (136) -4.1

230. Operating expenses (591,526) (407,469) (184,057) 45.2

240. Net gains on sales of equity investments 6,840 14,225 (7,385) -51.9

280. Pre-tax profit from continuing operations 817,456 777,598 39,858 5.1

290. Income tax expense (283,741) (271,673) (12,068) 4.4

300. Post-tax profit from continuing operations 533,715 505,925 27,790 5.5

320. Profit for the year 533,715 505,925 27,790 5.5

330. Profit (loss) attributable to non-controlling interests - - -

340. Profit attributable to the owners of the parent 533,715 505,925 27,790 5.5

Basic Earnings per share (basic EPS) - euro 0.555 0.526

Diluted Earnings per share (diluted EPS) - euro 0.555 0.526


308

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME


2015 2014 changes

amount %

10. PROFIT FOR THE YEAR 533,715 505,925 27,790 5.5

Other comprehensive income, net of income taxes that may not be reclassified to the income statement



40. Defined benefit plans 215 (442) 657



Other comprehensive income, net of income taxes that may be reclassified to the income statement

70. Hedges of investments in foreign operations - - -

80. Exchange rate gains (losses) 22,361 11,869 10,492

90. Cash flows hedges - - -

100. Available-for-sale financial assets (99,396) 39,050 (138,446)



130. Total other comprehensive income (expense), net of income taxes (76,820) 50,477 (127,297)

140. COMPREHENSIVE INCOME (CAPTION 10 + 130) 456,895 556,402 (99,507) -17.9

150. Comprehensive income attributable to non-controlling interests - - -

160. Comprehensive income attributable to the owners of the parent 456,895 556,402 (99,507)


309

STATEMENT OF CHANGES IN CONSOLIDATED EQUITY AS AT 31 DECEMBER 2014


Share Capital

Share premium

reserve

Reserves Fair value reserves

AFS

Fair value reserves

Post-employmentbenefits

Profit for the

year

Equity

ordinary shares

income - related

other

EQUITY AS AT 31.12.2013 962,464 581,260 1,534,957 - 10,997 (500) 146,895 3,236,073

Changes in opening balances -

EQUITY AS AT 01.01.2014 962,464 581,260 1,534,957 - 10,997 (500) 146,895 3,236,073

ALLOCATION OF PREVIOUS YEAR PROFIT

Reserves 2,525 (2,525) -

Dividends and other allocations (144,370) (144,370)

CHANGES IN THE YEAR

Changes in reserves and exchange rate gains (losses)

953 382 - 1,335

Comprehensive income for the year 11,869 39,050 (442) 505,925 556,402

EQUITY AS AT 31.12.2014 962,464 581,260 1,550,304 382 50,047 (942) 505,925 3,649,440

STATEMENT OF CHANGES IN CONSOLIDATED EQUITY AS AT 31 DECEMBER 2015


Share Capital

Share premium

reserve

Reserves Fair value reserves

AFS

Fair value reserves Post-em-

ployment benefits

Interim dividends

Profit for the

year

Equity

ordinary shares

income - related

other

EQUITY AS AT 31.12.2014 962,464 581,260 1,550,304 382 50,047 (942) 505,925 3,649,440

Changes in opening balances -

EQUITY AS AT 01.01.2015 962,464 581,260 1,550,304 382 50,047 (942) 505,925 3,649,440

ALLOCATION OF PREVIOUS YEAR PROFIT

Reserves 5,444 (5,444) -

Dividends and other allocations (500,481) (500,481)

CHANGES IN THE YEAR

Changes in reserves and exchange rate gains (losses)

(9,491) 4,629 (4,862)

Interim dividends (307,988) (307,988)

Comprehensive income for the year 22,361 (99,396) 215 533,715 456,895

EQUITY AS AT 31.12.2015 962,464 581,260 1,568,618 5,011 (49,349) (727) (307,988) 533,715 3,293,004


310

CONSOLIDATED STATEMENT OF CASH FLOWS


31.12.2015 31.12.2014

A. OPERATING ACTIVITIES

1. Cash flow from operations 1,442,478 1,477,039

- Profit for the year (+/-) 533,715 505,925

- Gains/Losses on financial assets held for trading and on Assets/liabilities at fair value through profit or loss (-/+)

1,012,094 876,852

- Gains/Losses on hedging activities (-/+) (7,797) (56)

- Net impairment losses/reversals of impairment losses (+/-) (2,942) 125,238

- Net impairment losses/reversals of impairment losses on property, equipment and intangible assets (+/-)

468 528

- Net accruals to provisions for risks and charges and other costs/revenue (+/-) (1,700) 3,000

- Taxes and duties to be settled (+) 8,179 12,655

- Other adjustments (+/-) (99,539) (47,103)

2. Cash flow from / used by financial assets (7,798,869) (10,336,608)

- Financial assets held for trading 3,510,778 (7,159,101)

- Available-for-sale financial assets (3,855,756) (1,875,139)

- Due from banks: repayable on demand 1,146,531 3,761,408

- Due from banks: other (8,051,474) (3,054,374)

- Loans to customers (879,841) (2,228,419)

- Other assets 330,893 219,017

3. Cash flow from / used by financial liabilities 7,165,136 8,988,403

- Due to banks: repayable on demand (1,731,758) (3,599,825)

- Due to banks: other 16,746,177 11,669,213

- Due to customers 4,868,362 (1,370,476)

- Securities issued (7,472,079) (7,378,324)

- Financial liabilities held for trading (5,144,091) 9,921,952

- Financial liabilities at fair value through profit or loss - -

- Other liabilities (101,475) (254,137)

Net cash flow from (used in) operating activities 808,745 128,834


311

CONSOLIDATED STATEMENT OF CASH FLOWS


31.12.2015 31.12.2014

B. INVESTING ACTIVITIES

1. Cash flow generated by - 16,065

- Sales of equity investments - 14,258

- Dividends collected on equity investments - 1,592

- Sales/repayments of held-to-maturity investments - -

- Sales of property and equipment - 187

- Sales of intangible assets - 28

- Sales of subsidiaries and business units - -

2. Cash flow used for (275) (528)

- Purchases of equity investments - -

- Purchases of held-to-maturity investments - -

- Purchases of property and equipment (275) (451)

- Purchases of intangible assets - (77)

- Purchases of subsidiaries and business units - -

Net cash flow from (used in) investing activities (275) 15,537

C. FINANCING ACTIVITIES

- Issues / repurchases of treasury shares - -

- Share capital increases - -

- Dividend distribution and other (808,469) (144,370)

Net cash flow from (used in) financing activities (808,469) (144,370)

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1 1

RECONCILIATION

31.12.2015 31.12.2014

Cash and cash equivalents at beginning of the year 3 2

Net increase (decrease) in cash and cash equivalents 1 1

Cash and cash equivalents: foreign exchange effect - -

CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR 4 3

Legend: (+) cash flow from (–) cash flow used in

Notes to theconsolidated financial statements

315

Part A – Accounting policies

A.1 - GENERAL CRITERIA

SECTION 1 – STATEMENT OF COMPLIANCE WITH INTERNATIONAL FINANCIAL REPORTING STANDARDSThe consolidated financial statements have been prepared in accordance with Legislative Decree No. 38 of 28 February 2005, according to IFRS issued by the International Accounting Standards Board (IASB), endorsed and in force at 31 December 2015, and the interpretations designated SIC and the interpretations of the International Financial Reporting Interpretations Committee (IFRIC), as established in Regulation (EC) No. 1606 of 19 July 2002. These standards were used for the drafting of the comparative data and opening balances at 1 January 2015.

Financial reporting instructions as issued by the Bank of Italy in the Measure of 22 December 2005, Circular no. 262/05 with the same date, and subsequent updates on 18 November 2009, 21 January 2014, 22 December 2014, and 15 December 2015 were followed in drafting the consolidated financial statements. In order to ensure the consistency of the information presented from year to year in the Intesa Sanpaolo Group consolidated financial statements, the figures of the investees are taken from the reporting packages prepared for this purpose. These reporting packages are prepared on the basis of Intesa Sanpaolo Group accounting policies, which comply with the IFRS. As such, no effect on the equity and profit of Banca IMI Group can be attributed to the application of different accounting policies.

An audit was performed on the consolidated financial statements at 31 December 2015 by KPMG S.p.A..

SECTION 2 - GENERAL BASIS OF PREPARATIONThe consolidated financial statements comprise the statement of financial position, the income statement, statement of comprehensive income, statement of changes in equity, statement of cash flows and notes and are also accompanied by a Directors' report on the operations, performance and financial position of Banca IMI and its subsidiaries and associates.

The consolidated financial statements were drafted in compliance with the general principles of the IFRS and set out the figures for the year with the previous year comparative figures.

In accordance with the provisions of Article 5 of Legislative Decree no. 38/2005, the consolidate financial statements have been drawn up using the Euro as the functional currency. Amounts in the financial statements and the Notes are expressed in thousands of euro, unless otherwise indicated, whereas those stated in the Directors' Report on Operations are in millions of euro, unless otherwise indicated.

The consolidate financial statements were drafted in compliance with the general policies of IAS 1 and the specific standards endorsed by the European Commission, as illustrated in Part A.2 of these Notes, and in compliance with the general assumptions set out in the Framework for the Preparation and Presentation of Financial Statements issued by the IASB.

The specific accounting standards adopted have been applied consistently over the year.There were no exceptions to the application of international financial reporting standards (IFRS).

The Directors' Report on Operations and the Notes disclose all the information required by the IFRS, the laws, Bank of Italy and Consob, in addition to further information that is not compulsory but is nonetheless deemed necessary for a true and fair presentation of the Group’s situation.

Consolidated notes - Part A - Accounting policies

316

SECTION 3 – CONSOLIDATION SCOPE AND CONSOLIDATION METHODS

Consolidation scope The consolidated financial statements include Banca IMI and its direct or indirect subsidiaries and associates.

Subsidiaries are considered to be those companies in which Banca IMI is exposed or has rights to variable returns, from its involved with the investee, and at the same time has the ability to affect those returns through its power over the investee.Control can only be confirmed when all of the following items exist at the same time: – the power to direct the relevant activities of the investee; – exposure or rights to the variable returns from its involvement the investee;– the ability to use its power over the investee to affect the amount of the investor's returns.

Specifically, the Bank considers the following factors to evaluate the existence of control:– the purpose and design of the investee, in order to identify the entity's objectives, its relevant activities (i.e.

those that most influence its returns), and how such activities are directed;– the rights, in order to understand whether the Bank has contractual rights that give it the current ability to

direct the relevant activities; – exposure to variable returns from its involvement with the investee, in order to assess whether the return recei-

ved by the Bank may potentially vary depending on the results achieved by the investee.

IFRS 10 identifies as “relevant activities” only the activities that significantly affect the investee's returns. In general terms, when relevant activities are directed via voting rights, the following factors are evidence of con-trol: – possession, directly or indirectly through its subsidiaries, of more than half of the voting rights of an entity unless,

in exceptional circumstances, it can be clearly demonstrated that such possession does not constitute control;– possession of half or less of the voting rights in the Shareholders' Meeting and the practical ability to direct the

relevant activities unilaterally through;– control over more than half of the voting rights by virtue of an agreement with other investors;– the power to determine the financial and operating policies of the entity by virtue of statutory provisions or

an agreement;– the power to appoint or remove the majority of the members of the board of directors or equivalent corporate

governance body;– the power to exercise the majority of voting rights in the meetings of the board of directors or equivalent cor-

porate governance body.

To exercise power, the rights claimed by the Bank over the investee must be substantive; to be substantive such rights must be exercisable in practice when decisions on relevant activities must be taken.The existence and effect of potential voting rights, if substantive, are taken into account when assessing whether or not there is the power to direct the financial and operating policies of another entity.

It may happen sometimes that the Group exercises “de facto control” over certain entities when, even in the absence of the majority of the voting rights, rights are held that allow it to exercise unidirectional policy-making over the relevant activities of the investee entity.

Companies are considered as subject to joint control when the voting rights and the control of the economic acti-vities of the company are equally shared by Banca IMI, directly or indirectly, and another entity.

Companies subject to significant influence (associates) are considered to be those entities in which the Bank di-rectly or indirectly holds at least 20% of the voting rights (including “potential” voting rights), or where – albeit with a lower percentage of voting rights – it has the power to participate in determining the investee's financial and operating policies, by way of specific legal arrangements such as the participation in voting trusts.

The consolidation scope compared to the situation as at 31 December 2014 was unchanged. The equity in-vestments included in the consolidation scope at 31 December 2015 are shown below.


317

Equity investments in fully controlled companies

Company Registered Office

Relationship Investment relationship Voting rights %

Parent Share%

A. CONTROLLING EQUITY INVESTMENTS

Parent

Banca IMI S.p.A. Milan

Share capital 962,464,000 Euro distributed in shares with no expressed nominal value

A.1 FULLY CONSOLIDATED COMPANIES

IMI Investments S.A. Luxembourg (1) Banca IMI 100% 100%

Share capital 21,660,000 Euro

IMI Finance S.A. Luxembourg (1) IMI Investments 100% 100%

Share capital 100,000 Euro

IMI Capital Markets Delaware (1) IMI Investments 100% 100%

Capitale sociale USD 5.000

Banca IMI Securities Corp. New York (1) IMI Capital 100% 100%

hare capital 44,500,000 Usd

(1) Majority of voting rights in ordinary Shareholders' meeting


318

Consolidation methods

Line-by-line consolidationThis method involves the “line-by-line” aggregation of the individual amounts reported in the statements of fi-nancial position and income statements of the subsidiaries concerned. Following the allocation to non-controlling interests, in a specific caption, of both equity and profit for the year, the amount of the equity investment is dere-cognised along with the residual equity of the subsidiaries concerned.Any positive consolidation differences, after the allocation to the assets and liabilities of the subsidiary, are reco-gnised under “intangible assets” as goodwill or other intangible assets. Negative differences are charged to the income statement.All assets, liabilities, income and expenses between consolidated companies are derecognised.Business combinations must be accounted for using the “acquisition method” in accordance with IFRS 3, as modi-fied by Regulation no. 495/2009, whereby identifiable assets acquired or liabilities assumed (including contingent liabilities) are recognised at their fair value at the acquisition date. In addition, for each business combination, any non-controlling interests in the acquiree may be recognised at fair value or in proportion to the non-controlling interests in the acquiree's identifiable net assets. If the consideration paid (represented by the fair value of the assets transferred, liabilities assumed and equity instruments issued) and fair value of the non-controlling interests exceed the fair value of the assets and liabilities acquired, the difference is recognised as goodwill. If the price is lower, the difference is charged to the income statement.

The “acquisition method” is applied from the acquisition date, that is from the moment in which control of the acquiree is actually obtained. Accordingly, the profit or loss of a subsidiary acquired during the reporting period is included in the consolidated financial statements from the acquisition date. Likewise, the profit or loss of a subsi-diary that has been sold is included in the consolidated financial statements until the date control ceases. The difference between the sale price and carrying amount at the date of disposal (including exchange rate differences recorded in equity on consolidation, over time) is accounted for in the income statement.

Once a year (or whenever there is evidence of impairment losses), goodwill is tested for impairment. This process requires the cash-generating unit, to which the goodwill is to be allocated, to be identified. Any impairment losses are determined on the basis of the difference between the carrying amount and recoverable amount of goodwill, if the latter is lower. This recoverable amount is equal to the greater of the fair value of the cash-generating unit less any costs to sell and the relative value in use. The ensuing adjustments are recognised in the income statement.The financial statements of Banca IMI and the other companies used to prepare the consolidated financial state-ments have the same reporting date.

Consolidation according to the equity methodAssociates, companies subject to joint control and those subject to significant influence are consolidated according to the equity method. The equity method requires the initial recognition of the equity investment at cost and its subsequent adjustment based on the interest in the investee’s equity.Any difference between the carrying amount of the investment and the equity of the investee is included in the carrying amount of the investment.The measurement of the Group's share of the investee's equity does not consider any potential voting rights. The Group’s interest in the investee's earnings for the year is recognised in a specific caption of the consolidated inco-me statement.Where there is evidence of impairment, the recoverable amount of the investment is estimated, considering the present value of the future cash flows that may be generated by the investment, including the final disposal va-lue. If the recoverable amount is less than the carrying amount, the difference between them is recognised in the income statement.For consolidation of investments in associates or companies subject to joint control, drafts of (annual or interim) financial statements that are in the process of being approved have been used.

The following table shows the consolidation scope with the inclusion of equity-accounted investees. Investments arising from the conversion of credit exposures are represented in the dashed area.


319

Translation of financial statements in currencies other than the euroThe financial statements of companies that operate outside the Eurozone are translated into euro by applying the spot exchange rate at year-end to assets and liabilities and the average exchange rates for the year to captions in the income statement.Exchange rate differences on the translation of the financial statements of investees are recognised under “inco-me-related reserves”. All foreign exchange rate differences are reversed in the income statement of the year in which the equity investment is sold.

SECTION 4 – EVENTS AFTER THE REPORTING DATEThere have been no further events worth mentioning in these Notes in addition to what is already presented in the financial statements of Banca IMI.

A.2 – MAIN FINANCIAL STATEMENT CAPTIONS

The accounting policies adopted in preparing the consolidated financial statements were the same as those utilised to prepare the separate financial statements, to which the reader is referred.

A.4 – INFORMATION ON FAIR VALUE

Please refer to the separate financial statements for information on transfers between portfolios, conducted exclusively by Banca IMI.

A.4.5 FAIR VALUE HIERARCHYPlease refer to the separate financial statements for general information on the fair value hierarchy and its application to assets and liabilities measured at fair value on either a recurring or non-recurring basis.

IMI SecuritiesUSA

Banca IMIItaly

IMI InvestmentsLuxembourg

IMI Capital USA

IMI Finance Luxembourg

EpsilonItaly

EuroTLX SimItaly

SirtiItaly

MermecItaly

100%

100% 100%

49%

15%

26.84%

30%

100%


320

A.4.5.1 Asset and liabilities measured at fair value on a recurring basis: breakdown by fair value levels(in thousands of euro)

Financial assets/liabilities at fair value 31 December 2015 31 December 2014

L1 L2 L3 L1 L2 L3

1. Financial assets held for trading 10,214,172 46,268,090 472,318 6,576,444 54,256,167 787,563


3. Available-for-sale financial assets 10,468,908 978,422 195,906 7,253,103 784,472 68,452


5. Property and equipment - - - - - -

6. Intangible assets - - - - - -

Total 20,683,080 47,449,740 668,224 13,829,547 55,364,503 856,015

1. Financial liabilities held for trading 10,462,070 40,997,123 194,351 3,914,574 52,773,951 250,853

2. Financial liabilities at fair value through profit or loss - - - - - -


Total 10,462,070 41,161,691 194,351 3,914,574 53,237,121 250,853


At 31 December 2015, the impact of non-performance risk (Credit Value Adjustment and Debit Value Adjustment) in determining the fair value of financial instruments, financial derivatives and credit derivatives amounted to 16 million with a reduction in positive fair value and to 29.3 million with an increase in negative fair value. This last amount includes the DVA over the entire scope of the certificates.

A.4.5.2 Annual changes in financial assets at level 3 fair value on a recurring basis(in thousands of euro)


Financial assets at fair

value through profit or loss

Available-for-sale

financial assets

Hedging derivatives

Property and

equipment

Intangible assets

1. Initial amounts 787,563 - 68,452 - - -

2. Increases 437,308 - 173,633 - - -

2.1 Purchases 383,079 - 172,340 - - -

2.2 Gain recognised in:

2.2.1 Profit or loss 39,480 - 126 - - -

– of which: Gains from disposals 30,628 - 30 - - -

2.2.2 Equity X X 223 - - -

2.3 Transfers from other levels 12,740 - - - - -

2.4 Other increases 2,009 - 944 - - -

3. Decreases (752,553) - (46,179) - - -

3.1 Sales (228,125) - (17,844) - - -

3.2 Reimbursements (176,694) - (20,811) - - -


3.3.1 Profit or loss (289,011) - (5,851) - - -

– of which: Losses from disposals (19,652) - (5,850) - - -

3.3.2 Equity X X (1,673) - - -

3.4 Transfers to other levels (56,567) - - - - -

3.5 Other decreases (2,156) - - - - -

4. Final amounts 472,318 - 195,906 - - -


321

A.4.5.3 Annual changes in financial liabilities at level 3 fair value on a recurring basis(in thousands of euro)

Financial liabilities held for trading

Financial liabilities at fair value through

profit or loss

Hedging derivatives

1. Initial amounts 250,853 - -

2. Increases 47,819 - -

2.1 Issues - - -


2.2.1 Profit or loss 33,947 - -

– of which: Losses from disposals 33,947 - -

2.2.2 Equity X X -

2.3 Transfers from other levels 13,872 - -

2.4 Other increases - - -

3. Decreases (104,321) - -

3.1 Reimbursements - - -

3.2 Repurchases - - -

3.3 Gains recognised in: -

3.3.1 Profit or loss (104,100) - -

– of which: Gains from disposals (14,154) - -

3.3.2 Equity X X -

3.4 Transfers to other levels (221) - -

3.5 Other decreases - - -

4. Final amounts 194,351 - -

A.4.5.4 Assets and liabilities not measured at fair value or measured at fair value on a non-recurring basis: breakdown according to fair value levels


Assets and liabilities not measured at fair value or measured at fair value on a non-recurring basis


Carrying amount

L1 L2 L3 Carrying amount

L1 L2 L3

1. Held-to-maturity investments - - - - - - - -

2. Due from banks 60,923,615 - 43,798,821 17,401,037 53,979,092 - 13,678,511 40,853,119

3. Loans to customers 23,353,892 - 19,985,761 3,637,365 22,440,904 - 16,717,565 6,055,013

4. Investment property - - - - - - - -

5. Non-current assets held for sale and discontinued operations

- - - - - - - -

Total 84,277,507 - 63,784,582 21,038,402 76,419,996 - 30,396,076 46,908,132

1. Due to banks 68,073,695 - 16,518,182 51,630,436 53,046,794 - 26,010,784 27,100,147

2. Due to customers 16,026,878 - 15,967,830 59,045 11,158,308 - 11,045,346 112,444

3. Securities issued 13,866,783 2,723,273 11,052,757 - 21,482,603 3,961,297 17,218,136 -

4. Liabilities associated with non-current assets

- - - - - - - -

Total 97,967,356 2,723,273 43,538,769 51,689,481 85,687,705 3,961,297 54,274,266 27,212,591



322

A.5. INFORMATION ON DAY-ONE PROFIT

Where the transaction price paid or received on the sale of financial instruments is different from the fair value of the instrument, the resulting gain is recognised in the income statement upon recognition of the transaction, providing that the fair value of the instrument can be measured with reference to observable current transactions on the same market on which the instrument was traded. If such data are not readily observable or the market lacks liquidity, the financial instrument is recognised at the transaction price less any commercial margin; any greater gains or losses are suspended.At 31 December 2015, net gains yet to be recognised in the income statement totalled approximately 0.9 million euro, and referred entirely to Banca IMI S.p.A. Please refer to the separate financial statements for further details.

323

Part B – Information on the Consolidated Statementof Financial Position

ASSETS

SECTION 1 – CASH AND CASH EQUIVALENTS – CAPTION 10

1.1 Cash and cash equivalents: breakdown


a) Cash 4 3

b) On demand deposits with Central Banks - -

Total 4 3

SECTION 2 – FINANCIAL ASSETS HELD FOR TRADING – CAPTION 20

2.1 Financial assets held for trading: breakdown



A. Assets

1. Debt securities

1.1 structured securities 658,208 312,957 6,089 424,123 446,243 128,330

1.2 other debt securities 7,637,308 5,982,424 267,845 4,460,066 6,305,108 214,648

2. Equities 904,691 - 631 795,676 - 538

3. Quotas of UCI 324,943 - - 274,604 - -

4. Loans

4.1 repurchase agreements - - - - - -

4.2 other - - - - - -

Total A 9,525,150 6,295,381 274,565 5,954,469 6,751,351 343,516

B. Derivatives


1.1 trading 689,022 38,826,203 197,526 621,975 45,906,360 444,047


1.3 other - 54,778 227 - 100,444 -


2.1 trading - 1,091,728 - - 1,498,012 -


2.3 other - - - - - -

Total B 689,022 39,972,709 197,753 621,975 47,504,816 444,047

Total (A+B) 10,214,172 46,268,090 472,318 6,576,444 54,256,167 787,563

Structured securities at 31 December 2015 included 528 million euro of equity-linked instruments and 6 million euro of convertible instruments. The remainder consists of mixed-income securities (fixed-rate, index-linked and transfor-mable), of which only 128 million euro refers to securities with complex options (reverse floaters, step-up securities and step-down securities).

Notes to the consolidated financial statements - Part B - Information on the Statement of Financial Position - Assets

324

The fair value of forward contracts in physical gas is included for about 14 million euro among the “Financial deriva-tives held for trading” (approximately 16 million of negative fair value recorded in table 4.1 of the liabilities). The economic contribution of new business, taking into account the start-up phase, was not relevant for 2015.

2.2 Financial assets held for trading: borrower/issuer breakdown


A. ASSETS

1. Debt securities


b) Other government agencies 11,420 14,887

c) Banks 6,048,080 7,055,856

d) Other issuers 1,780,904 2,281,220

2. Equities

a) Banks 43,249 51,642

b) Other issuers

– insurance companies 83,486 74,909

– financial institutions 54,791 29,033

– non-financial companies 723,796 640,630

– other - -

3. Quotas of UCI 324,943 274,604

4. Loans



c) Banks - -


Total A 16,095,096 13,049,336

B. DERIVATIVES

a) Banks 31,609,469 38,616,015

– fair value

b) Customers 9,250,015 9,954,823

– fair value

Total B 40,859,484 48,570,838

Total (A+B) 56,954,580 61,620,174

Quotas of UCI held in the portfolio at year-end included a total of 258 million euro of bond fund and balanced fund units and 54 million euro of equity fund units. The remainder consisted of investments totalling 8 million euro in SICAVs and 5 million euro in listed real estate funds.


325

SECTION 4 – AVAILABLE-FOR-SALE FINANCIAL ASSETS – CAPTION 40

4.1 Available-for-sale financial assets: breakdown



1. Debt securities

1.1 Structured securities - - - - - -

1.2 Other debt securities 10,459,197 974,324 123,207 7,244,538 780,374 -

2. Equities

2.1 Measured at fair value 9,711 4,098 - 8,565 4,098 -

2.2 Measured at cost - - - - - -

3. Quotas of UCI - - 72,699 - - 68,452

4. Loans - - - - - -

Total 10,468,908 978,422 195,906 7,253,103 784,472 68,452

4.2 Available-for-sale financial assets: borrower/issuer breakdown


1. Debt securities



c) Banks 968,748 1,266,020

d) Other issuers 1,021,420 447,136

2. Equities

a) Banks 8,983 7,926

b) Other issuers

– insurance companies - -

– financial institutions 4,826 4,737

– non-financial companies - -

– other - -

3. Quotas of UCI 72,699 68,452

4. Loans



c) Banks - -


Total 11,643,236 8,106,027

Equities carried under “a) Banks” consist of Intesa Sanpaolo shares held to service the staff incentive plan.


326

SECTION 6 – DUE FROM BANKS – CAPTION 60

6.1 Due from banks: breakdown


Carrying amount

Fair Value Carrying amount

Fair Value


A. Due from Central Banks

1. Time deposits - X X X - X X X

2. Compulsory reserve - X X X - X X X

3. Repurchase agreements - X X X - X X X

4. Other 5,529 X X X 19,341 X X X

B. Due from banks

1. Loans

1.1 Checking accounts and demand deposits

8,408,715 X X X 11,679,942 X X X

1.2 Time deposits 45,086,395 X X X 33,536,175 X X X

1.3 Other loans:

Repurchase agreements 7,305,915 X X X 7,479,522 X X X

Finance leases - X X X - X X X

Other 117,061 X X X 61,045 X X X

2. Debt securities

2.1 Structured - X X X - X X X

2.2 Other - X X X 1,203,067 X X X

Total 60,923,615 - 43,798,821 17,401,037 53,979,092 - 13,678,511 40,853,119

“Checking accounts and demand deposits” included a total of 4.5 billion euro in assets pledged as collateral for CSA agreements (6.8 billion euro at 31 December 2014); of these around 0.1 billion euro is attributable to the Ultimate Parent Intesa Sanpaolo. They are classed as level 2 assets as their fair value is tied directly to changes in the fair value of OTC derivatives portfolios.The compulsory reserve, the obligation for which has been discharged indirectly, is carried among “Time de-posits” in the amounts of 29 million euro at 31 December 2015 and 31 million euro at 31 December 2014.


327

SECTION 7 – LOANS TO CUSTOMERS – CAPTION 70

7.1 Loans to customers: breakdown


Carrying amount Fair value Carrying amount Fair value

Performing Non-performing L1 L2 L3 Performing Non-performing L1 L2 L3


Loans

1. Checking accounts 904,819 - - X X X 493,988 - - X X X

2. Repurchase agreements 8,087,965 - - X X X 8,598,318 - - X X X

3. Mortgages - - - X X X - - - X X X

4. Credit card loans, personal loans and salary-backed loans

- - - X X X - - - X X X

5. Finance leases - - - X X X - - - X X X

6. Factoring - - - X X X - - - X X X

7. Other 12,718,961 - 948,970 X X X 11,636,803 - 1,090,266 X X X

Debt securities

8. Structured securities - - - X X X - - - X X X

9. Other debt securities 693,177 - - X X X 621,529 - - X X X

Total 22,404,922 - 948,970 - 19,985,761 3,637,365 21,350,638 - 1,090,266 - 16,717,565 6,055,013

Assets pledged as collateral for CSA agreements were shown under “Other loans” for a total of 5 billion euro, 4.6 billion euro referring solely to the Swapclear. They are classed as level 2 assets as their fair value is tied directly to changes in the fair value of OTC derivatives portfolios.

7.2 Loans to customers: borrower/issuer breakdown


Performing Non-performing Performing Non-performing


1. Debt securities

a) Governments 190,127 - - 186,214 - -

b) Other government agencies - - - - - -

c) Other issuers

– non-financial companies 253,333 - - 79,720 - -

– financial institutions 249,717 - - 355,595 - -

– insurance companies - - - - - -

– other - - - - - -

2. Loans

a) Governments - - - - - -

b) Other government agencies 3 - - 3 - -

c) Other counterparties

– non-financial companies 7,348,231 - 890,239 7,785,955 - 962,977

– financial institutions 14,354,205 - 58,731 12,931,311 - 127,289

– insurance companies 8,437 - - 11,262 - -

– other 869 - - 578 - -

Total 22,404,922 - 948,970 21,350,638 - 1,090,266


328




31.12.2015


31.12.2014 Level 1 Level 2 Level 3 Level 1 Level 2 Level 3


1) Fair value - 203,228 - 12,543,127 - 323,864 - 11,510,973

2) Cash flows - - - - - - - -



1) Fair value - - - - - - - -

2) Cash flows - - - - - - - -

Total - 203,228 - 12,543,127 - 323,864 - 11,510,973

The reduction in the notional amounts of hedging derivatives reflects the evolution of management strategies and needs regarding interest rate risk.

8.2 Hedging derivatives: breakdown by hedged portfolio and type of hedge (carrying amount)

Fair value Cash flows

Inve

stm

ents

in

fore

ign

op

erat

ion

s

Specific Generic

Spec

ific

Gen

eric

Inte

rest

ra

te r

isk

Cu

rren

cy

risk

Cre

dit

ri

sk

Pric

e ri

sk

Var

iou

s ri

sks


2. Loans - - - X - X - X X


4. Portfolio X X X X X X X

5. Other - - - - - X - X -

Total assets 5,619 - - - - - - - -






Hedging derivatives cover interest rate risk on AFS portfolio investments and on interest and currency risk on cor-porate bonds issued by the Bank.In 2015, within the framework of hedge accounting, a hedging method was adopted by means of cross-currency swaps (derivatives which summarise the fixing of interest rate and currency parameters) of bonds issued by Banca IMI in a currency other than the euro. This method is used as an alternative to the dynamic management of loans in the same currency as the funding, generally via interbank deposits.


329

SECTION 10 – EQUITY INVESTMENTS – CAPTION 100

10.1 Equity investments: information on equity stakes

Registered office

Head office Type ofrelationship

Equity relationship Votes available

%

Carrying amount

Investor held %

B. Companies subject to significant influence

1. Consorzio Studi e Ricerche Fiscali Rome Rome Significant influence Banca IMI 7.50% 7.50% 19

2. Intesa Sanpaolo Group Services Turin Turin Significant influence Banca IMI 0.010% 0.010% 50

3. Infogroup Florence Florence Significant influence Banca IMI 0.003% 0.003% 1

4. Epsilon Milan Milan Significant influence Banca IMI 49.00% 49.00% 11,942

5. SIRTI Milan Milan Significant influence Banca IMI 26.84% 26.84% -

6. EuroTLX Sim Milan Milan Significant influence Banca IMI 15.00% 15.00% 1,312

7. Mer Mec Monopoli (BA) Monopoli (BA) Significant influence Banca IMI 30.00% 30.00% -

10.2 Significant equity investments: carrying value, fair value and dividends received

Carrying amount Fair value Dividends received


1. Consorzio Studi e Ricerche fiscali 19 19 -

2. Intesa Sanpaolo Group Services 50 50 -

3. Infogroup 1 1 -

4. Epsilon 11,942 10,953 5,390

5. EuroTLX Sim 1,312 5,109 300

Total 13,324 16,132 5,690

Significant equity investments are considered those where the stakes consist of at least 5% of the total equity investments, as well as those held in companies that are fully consolidated by the Ultimate Parent Intesa Sanpaolo.For the assessment of the stake in EuroTLX SIM, reference was made to the contractual provisions defined at the time of sale to the Borsa Italiana of a 35% ownership share in 2013. The other investments are measured using the pro-quota carrying amount.

10.3 Significant equity investments: accounting information

Cash and cash

equivalents

Financial assets

Non-Financial

assets


Non-Financial liabilities

Total revenue

Net interest income

Depreciation, amortisation

and net impairment

losses

Pre-tax profit


Post-tax profit



from discontinued

operations


(1)

Other comprehen-sive income (net of tax)

(2)


(3) =

(1) + (2)


1. Consorzio Studi e Ricerche fiscali X 992 28 269 493 1,976 X X 55 - - - - -

2. Intesa Sanpaolo Group Services X 2,346 1,629,859 324,752 704,980 - X X 5,163 - - 5,163 - 5,163

3. Infogroup X 45,039 18,629 33,652 731 69,649 X X 2,206 1,328 - 1,328 - 1,328

4. Epsilon X 30,803 1,076 4,799 4,737 26,577 X X 19,467 12,923 - 12,923 8 12,931

5. EuroTLX Sim X 10,117 683 - 2,176 14,626 X X 4,977 3,214 - 3,214 (30) 3,184

The figures in the table are taken from the draft financial statements for 2015.For financial companies it is assumed that total revenue corresponds to total income, if positive.


330

10.4 Non-significant equity investments: accounting information

Carrying amount

Total assets

Total liabilities

Total revenue

Post-tax profit



from discontinued

operations


(1)

Other comprehensive income (net of

tax) (2)


(3) =

(1) + (2)


1. Sirti - 733,072 693,447 608,700 (2,561) - (2,561) - (2,561)

2. Mer Mec - 230,648 133,860 82,687 6,751 - 6,751 (56) 6,695

The financial figures are taken from the 2014 financial statements of the investees.

10.5 Equity investments: annual changes



B. Increases 6,839 5,851

B.1 Purchases - -

B.2 Reversals of impairment losses - -

B.3 Revaluations

– consolidation with the equity method 6,839 5,851

– other - -

B.4 Other increases - -

C. Decreases (5,690) (5,884)

C.1 Sales - (887)


– consolidation with the equity method - -

– other - -

C.4 Other decreases (5,690) (4,997)

D. Final amount 13,324 12,175

E. Total revaluations 18,398 11,559

F. Total impairment losses - -


331

SECTION 12 – PROPERTY AND EQUIPMENT – CAPTION 120

12.1 Property and equipment used in operations: breakdown of assets measured at cost


1. Property and equipment owned

a) land

b) buildings - -

c) furniture 495 520

d) electronic equipment 381 508

e) other 2 3

2. Property and equipment acquired under financial lease - -

a) land

b) buildings - -

c) furniture - -

d) electronic equipment - -

e) other - -

Total 878 1,031

12.5 Property and equipment used in operations: annual changes

Land Buildings Furniture Electronic equipment

Other Total

A. Gross initial carrying amount - - 667 1,637 3 2,307

A.1 Total net impairment losses - - (147) (1,129) - (1,276)

A.2 Net initial carrying amount - - 520 508 3 1,031

B. Increases - - 118 209 - 327

B.1 Purchases - - 100 175 - 275

B.2 Capitalised improvement costs - - - - - -

B.3 Reversals of impairment losses - - - - - -


a) equity - - - - - -


B.5 Exchange rate gains - - 18 34 - 52

B.6 Transfers from investment property - - - - - -


C. Decreases - - (143) (336) (1) (480)

C.1 Sales - - - - - -

C.2 Depreciation - - (143) (331) (1) (475)

C.3 Impairment losses recognised in

a) equity - - - - - -



a) equity - - - - - -



C.6 Transfer to

a) investment property - - - - - -

b) non-current assets held for sale and discontinued operations

- - - - - -

C.7 Other decreases - - - (5) - (5)

D. Net final carrying amount - - 495 381 2 878

D.1 Total net impairment losses - - (290) (1,460) (1) (1,751)

D.2 Gross final carrying amount - - 785 1,841 3 2,629

E. Measurement at cost - - 495 381 2 878


332

SECTION 13 – INTANGIBLE ASSETS – CAPTION 130

13.1 Intangible assets: breakdown by type of activity


Finite useful life


Finite useful life


A.1 Goodwill X - X -

A.1.1 attributable to the owners of the parent X - X -

A.1.2 attributable to non-controlling interests X X

A.2 Other intangible assets 199 88 248 79

A.2.1 Assets measured at cost


b) Other assets 199 88 248 79

A.2.2 Assets measured at fair value


b) Other assets - - - -

Total 199 88 248 79

13.2 Intangible assets: annual changes

Goodwill Other intangible assets: internally generated

Other intangible assets: other

Total

Finiteuseful life


Finiteuseful life


A. Gross initial carrying amount - - - 517 79 596

A.1 Total net impairment losses - - - (269) - (269)

A.2 Net initial carrying amount - - - 248 79 327

B. Increases - - - 24 9 33

B.1 Purchases - - - - - -

B.2 Increases of internally generated intangible assets X - - - - -

B.3 Reversals of impairment losses X - - - - -


– equity X - - - - -


B.5 Exchange rate gains - - - 24 9 33


C. Decreases - - - (73) - (73)

C.1 Sales - - - - - -


– Amortisation X - - (73) - (73)

– Impairment losses recognised in

+ equity X - - - - -

+ profit or loss - - - - - -


– equity X - - - - -


C.4 Transfer to non-current assets held for sale and discontinued operations

- - - - - -



D. Net final carrying amount - - - 199 88 287

D.1 Total net impairment losses - - - (342) - (342)

E. Gross final carrying amount - - - 541 88 629

F. Measurement at cost - - - 199 88 287


333

13.3 Other informationIn accordance with IAS 38, intangible assets have not been revalued and no intangible asset was acquired in whole or in part by way of a government grant. At year-end, no commitments existed for the purchase of new intangible assets, nor did third parties hold rights to the intangible assets recognised in these consolidated financial statements.

SECTION 14 – TAX ASSETS AND LIABILITIES – ASSET CAPTION 140 AND LIABILITY CAPTION 80

14.1 Deferred tax assets: breakdown

14.2 Deferred tax liabilities: breakdownDeferred tax assets and liabilities refer to all the temporary differences arising from increases and decreases in the tax base, without time limits.

The figures for Banca IMI, a breakdown of which is provided in the separate financial statements, are increased by 1.1 million in deferred tax assets of to IMI Securities, arising primarily from personnel expenses recognised on an accruals basis.

14.3 Changes in deferred tax assets (recognised in profit or loss)


1. Initial amount 181,743 167,904

2. Increases 16,622 45,265

2.1 Deferred tax assets recognised in the year



c) reversals of impairment losses - -

d) other 16,492 45,178


2.3 Other increases 130 87

3. Decreases (30,604) (31,426)

3.1 Deferred tax assets derecognised in the year

a) reversals (24,371) (31,426)



d) other - -


3.3 Other decreases

a) conversion into tax assets, as per Law no. 214/2011 - -

b) other (6,233) -

4. Final amount 167,761 181,743

14.3.1 Changes in deferred tax assets as per Law no. 214/2011 (recognised in profit or loss)


1. Initial amount 132,761 122,630

2. Increases 343 33,228

3. Decreases (6,418) (23,097)

3.1 Reversals (6,418) (23,097)

3.2 Conversion into tax assets

a) from losses for the year - -

b) from fiscal losses - -

3.3 Other - -

4. Final amount 126,686 132,761


334

14.4 Changes in deferred tax liabilities (recognised in profit or loss)


1. Initial amount 41 41

2. Increases 105 -


a) related to previous years 6 -


c) other - -


2.3 Other increases 99 -

3. Decreases (99) -


a) reversals - -


c) other (99) -



4. Final amount 47 41

14.5 Changes in deferred tax assets (recognised in equity)



2. Increases 41,029 10,482

2.1 deferred tax assets recognised in the year



c) other 41,029 10,482



3. Decreases (10,667) (27,580)

3.1 deferred tax assets derecognised in the year

a) reversals (10,318) (27,580)



d) other (349) -



4. Final amount 41,926 11,564


335

14.6 Changes in deferred tax liabilities (recognised in equity)



2. Increases 14,419 34,230




c) other 14,419 34,230



3. Decreases (34,561) (31,536)


a) reversals (34,230) (31,536)


c) other (331) -



4. Final amount 16,258 36,400

SECTION 16 – OTHER ASSETS – CAPTION 160

16.1 Other assets: breakdown


Amounts to be debited - deriving from securities transactions 332,236 320,544

Accrued income and deferred expenses 18,166 29,301

Leasehold improvements 240 346

Margins on behalf of third parties 11,128 8,962

Various tax assets 47,949 16,901

Other 35,804 78,820

Total 445,523 454,874

Most of the items under “Other” comprise dealing on its own account and on its behalf of third parties by the Glo-bal Markets cash generating unit. Given their nature, balances at the reporting date were affected by the trading calendars of clearing platforms.Accrued income and deferred expenses refer mainly to the management of accruals for personnel expenses arising from the Group's incentive schemes.

The various tax items include the balance of VAT receivables to be paid in January and VAT payable - an essentially equivalent amount - shown under “Other liabilities”. Both balances related to the business of the “physical commodities” division that operate under a domestic reverse charge system within the business unit specifically identified for accounting and tax purposes.

Notes to the consolidated financial statements - Part B - Information on the Statement of Financial Position - Liabilities

336

LIABILITIES

SECTION 1 – DUE TO BANKS – CAPTION 10

1.1 Due to banks: breakdown


1. Due to Central Banks 299,957 75,001

2. Due to banks

2.1 Checking accounts and demand deposits 6,426,455 7,399,237

2.2 Time deposits 2,433,417 39,994

2.3 Loans

2.3.1 Repurchase agreements 9,051,959 12,371,400

2.3.2 Other 49,447,074 32,900,824

2.4 Commitments to repurchase own equity instruments - -

2.6 Other payables 414,833 260,338

Total 68,073,695 53,046,794


Fair value – level 2 16,518,182 26,010,784

Fair value – level 3 51,630,436 27,100,147

Total Fair value 68,148,618 53,110,931

“Due to central banks” consisted of cash invested on the money market by the ECB. Such investments are not part of medium/long-term funding strategies for the debt securities portfolio.“Checking accounts and demand deposits” included amounts due for collateral received under the CSA totalling 4.6 billion euro, of which 1.6 billion euro referred to the Ultimate Parent Intesa Sanpaolo. “Loans: other” consisted entirely of intragroup transactions at index-linked rates for medium-term maturities, and at fixed rates for maturi-ties of less than one year.


337

SECTION 2 – DUE TO CUSTOMERS – CAPTION 20

2.1 Due to customers: breakdown


1. Checking accounts and demand deposits 480,442 224,614

2. Time deposits - -

3. Loans

3.1 Repurchase agreements 14,578,590 10,386,950

3.2 Other 2,413 -

4. Commitments to repurchase own equity instruments - -

5. Other payables 965,433 546,744

Total 16,026,878 11,158,308


Fair value – level 2 15,967,830 11,045,346

Fair value – level 3 59,045 112,444

Total Fair value 16,026,875 11,157,790

“Other payables” included payables for collateral received under the CSA totalling 0.9 billion euro.

SECTION 3 – SECURITIES ISSUED – CAPTION 30

3.1 Securities issued: breakdown


Carrying amount

Fair value Carrying amount

Fair value


A. Securities

1. bonds

1.1 structured 5,632,771 514,395 5,070,190 - 10,266,629 1,684,034 8,338,954 -

1.2 other 8,234,012 2,208,878 5,982,567 - 11,215,974 2,277,263 8,879,182 -

2. other

2.1 structured - - - - - - - -

2.2 other - - - - - - - -

Total 13,866,783 2,723,273 11,052,757 - 21,482,603 3,961,297 17,218,136 -

The fair value of the structured securities shown above excludes the fair value of the embedded derivatives sepa-rated from their hosts in accordance with th IFRS. At 31 December 2015, separated embedded derivatives recognised under “financial liabilities held for trading” totalled 105 million euro, compared to 220 million euro at 31 December 2014 (a nominal 0.7 billion euro was connected with equity issues in 2015 versus 1.5 billion euro in 2014).


338

3.3 Securities issued: covered by a specific hedge


1. Securities with specific fair value hedges 9,957,544 15,110,006

a) interest rate risk 9,957,544 15,110,006


c) more than one risk - -

2. Securities with specific cash flow hedges - -

a) interest rate risk - -


c) other - -

SECTION 4 - FINANCIAL LIABILITIES HELD FOR TRADING - CAPTION 40

4.1 Financial liabilities held for trading: breakdown


Nominal or

notional amount


(*)

Nominal or

notional amount


(*)Level 1 Level 2 Level 3 Level 1 Level 2 Level 3

A. Liabilities

1. Due to banks 2,664,345 2,819,585 140,848 - 2,960,433 1,719,821 1,929,572 31,308 - 1,960,880

2. Due to customers - - - - - - - - - -

3. Debt securities

3.1 Bonds

3.1.1 Structured - - - - X - - - - X

3.1.2 Other bonds - - - - X - - - - X

3.2 Other

3.2.1 Structured 5,245,140 4,532,825 527,608 - X 4,624,865 353,603 4,259,889 - X

3.2.2 Other - - - - X - - - - X

Total A 7,909,485 7,352,410 668,456 - 2,960,433 6,344,686 2,283,175 4,291,197 - 1,960,880

B. Derivatives


1.1 Trading X 3,099,455 39,186,062 188,205 X X 1,631,399 46,689,992 250,853 X


X - - - X X - - - X

1.3 Other X - 99,075 6,146 X X - 220,042 - X


2.1 Trading X 10,205 1,043,530 - X X - 1,572,720 - X


X - - - X X - - - X

2.3 Other X - - - X X - - - X

Total B X 3,109,660 40,328,667 194,351 X X 1,631,399 48,482,754 250,853 X

Total (A+B) 7,909,485 10,462,070 40,997,123 194,351 2,960,433 6,344,686 3,914,574 52,773,951 250,853 1,960,880

(*) fair value calculated excluding changes in creditworthiness of the issuer after issue date

By convention, amounts due to banks include short positions in securities.Other structured securities include 5.1 billion fair value of for securitised derivatives that require repayment at matu-rity of all or part of the premiums paid, pursuant to the Bank of Italy Circular No. 1034598/14 of 21 October 2014.


339

The fair value of derivatives held for trading as at 31 December 2015 included the net balance of 4.1 billion from the fair value losses of trading derivatives and the fair value gains (52 million) of hedging derivatives subject to clearing by Swapclear.The offsetting logic of IAS 32 was applied together with the related provisions of Circular 262 by the Bank of Italy.

The negative fair value of forward transactions with physical gas is included under point B1.1 and amounts to about 16 million euro.

SECTION 6 - HEDGING DERIVATIVES - CAPTION 60



31.12.2015


31.12.2014Level 1 Level 2 Level 3 Level 1 Level 2 Level 3


1) Fair value - 164,568 - 4,905,699 - 463,170 - 8,414,250

2) Cash flows - - - - - - - -



1) Fair value - - - - - - - -

2) Cash flows - - - - - - - -

Total - 164,568 - 4,905,699 - 463,170 - 8,414,250


Fair Value Cash flows

Inve

stm

ents

in

fo

reig

n

op

erat

ion

s

Specific

Gen

eric

Spec

ific

Gen

eric

Interest rate risk

Currency risk

Credit risk

Price risk

Various risks


2. Loans - - - X - X - X X


4. Portfolio X X X X X - X - -

Total assets 23,295 - - - - - - - -






Hedging derivatives cover interest rate risk on AFS portfolio investments and bonds issued by the Bank.In 2015, within the framework of hedge accounting, a hedging method was adopted by means of cross-currency swaps (derivatives which package the fixing of interest rate and exchange rate parameters) of bonds issued by Banca IMI in currencies other than the euro. This method is used as an alternative to the dynamic management of loans in the same currency as the funding, generally via interbank deposits.


340

SECTION 8 – TAX LIABILITIES – CAPTION 80Current tax liabilities refer essentially to direct taxes payable but not settled at the reporting date.Please refer to section 14 of the assets side for information on deferred tax liabilities.

SECTION 10 – OTHER LIABILITIES – CAPTION 100

10.1 Other liabilities: breakdown


Due to suppliers 45,042 54,783

Due to employees 53,809 48,610

Due to social security institutions 3,660 8,631

Amounts to be paid - deriving from securities transactions 283,909 25,050

Other creditors for other items 16,783 5,099

Various tax liabilities 45,589 18,713

Suspense items 73,950 15,656

Allowances for guarantees impairment 41,191 50,403

Accrued expenses and deferred income 23,282 22,321

Total 587,215 249,266

Most items shown as “Other liabilities” comprised dealing on its own account and on behalf of third parties conducted by the Global Markets cash generating unit. Given their nature, balances at the reporting date were affected by the trading calendars of clearing platforms.

SECTION 11 - POST-EMPLOYMENT BENEFITS - CAPTION 110

11.1 Post-employment benefits: annual changesFollowing reforms of supplementary pension schemes introduced by Legislative Decree No. 252 of 5 December 2005, employees may elect to have post-employment benefits accruing after 1 January 2007 paid into a supple-mentary pension scheme or transferred to the national pension fund managed by INPS. As a result, as of that date the relative amounts no longer appear in the table above.



B. Increases (496) 1,618

B.1 Accruals (525) 961

B.2 Other increases 29 657

C. Decreases (541) (407)

C.1 Benefits paid (164) (95)

C.2 Other decreases (377) (312)

D. Final amounts 8,743 9,780

For IFRS purposes, post-employment benefits were calculated on the basis of the following parameters: – discounting rate 2.03%; – inflation rate 1.5%; – expected rate of salary increase 2.76%;

Other increases and decreases refer to the transfer of personnel within the Intesa Sanpaolo Group.


341

11.2 Other informationIn accordance with Article 2424-bis of the Italian Civil Code, statutory liabilities at year-end for post-employment benefits totalled 8.4 million euro (8.7 million euro at 31 December 2014).

SECTION 12 – PROVISIONS FOR RISKS AND CHARGES – CAPTION 120

12.1 Provisions for risks and charges: breakdown


1. Internal pension funds 12 12

2. Other allowances for risks and charges

2.1 legal disputes - -

2.2 personnel expenses 1,570 5,419

2.3 other 22,492 25,058

Total 24,074 30,489

Accruals to the provisions for risks and charges are made to cover legal or judicial liabilities and offset the potential impact on earnings that may arise from the forced settlement of OTC derivative contracts due to events beyond the Bank’s control. On the whole the risks were different from those of a credit nature and already included in the determination of the fair value.

12.2 Provisions for risks and charges: annual changes

Pension funds

Otherprovisions

Total

A. Initial amount 12 30,477 30,489

B. Increases - - -

B.1 Accruals - - -

B.2 Changes due to passage of time - - -

B.3 Changes due to discount rate variations - - -

B.4 Other increases - - -

C. Decreases - (6,415) (6,415)

C.1 Uses in the year - (4,715) (4,715)

C.2 Changes due to discount rate variations - - -

C.3 Other decreases - (1,700) (1,700)

D. Final amount 12 24,062 24,074

“Other decreases” refer to the release of provisions from new estimates of liabilities.

12.3 Internal pension fundsThe actuarial values of supplementary defined benefit pension funds were measured in accordance with IAS 19 “Employee Benefits” by an independent actuary using the “projected unit credit method.” Material amounts re-ferred exclusively to Banca IMI.


342

SECTION 15 – GROUP'S EQUITY – CAPTIONS 140, 160, 170, 175, 180, 190, 200 AND 220

15.1 “Share capital” and “Treasury shares”: breakdownThe share capital of Banca IMI S.p.A. is divided into 962,464,000 shares of no stated nominal value. The Group does not hold treasury shares in portfolio.

15.2 Share capital – Number of shares: annual changes

Ordinary Other

A. Initial number of shares

– fully paid-in 962,464,000


A.1 Treasury shares (-)

A.2 Outstanding shares: initial number 962,464,000 -

B. Increases - -

B.1. New issues

– for consideration

- business combinations

- conversion of bonds

- exercise of warrants

- other

– for bonus issue

- in favour of employees

- in favour of directors

- other

B.2 Sale of treasury shares

B.3 Other increases

C. Decreases - -

C.1 Cancellations

C.2 Repurchase of treasury shares

C.3 Disposal of entities

C.4 Other decreases

D. Outstanding shares: final number 962,464,000 -

D.1 Treasury shares (+)

D.2 Final number of shares

– fully paid-in 962,464,000 -


15.4 Income-related reserves: other informationIncome-related reserves are held in accordance with the Italian Civil Code and the Articles of Association or as instructed by shareholders’ resolutions adopted concerning the allocation of the profit for the year. The purpose of the reserves is to reinforce the Bank’s capital structure.

A part of these reserves, 30 million, as at 31 December 2015, includes a sum for the trading of Intesa Sanpaolo shares. This amount was established by the Shareholders Meeting on 2 April 2015, which fixed the purchasing limit at 10 million shares for 18 months; the acquisitions were carried out within the framework of the brokerage activities with share indices and listed options or to offset customer orders requiring the temporary use of proprietary accounts.

On 22 May 2012, Banca IMI's Shareholders’ Meeting authorised the purchase of ordinary Intesa Sanpaolo shares for a maximum financial commitment of 1.4 million euro to service the share-based incentive system, as described in section I of the Notes.

On 31 July 2013, Banca IMI's Shareholders' Meeting also authorised the purchase of ordinary Intesa Sanpaolo shares within the framework of the above incentive scheme. The purchase, which was settled on 7 October 2013, involved 2,081,111 shares at an average price of 1.72788 euro each, for a total value of approximately 3,596,000 euro.


343

On 15 May 2014, Banca IMI's Shareholders' Meeting authorised the purchase of a further 2,248,185 ordinary Intesa Sanpaolo shares in support of the LECOIP incentive plan; the purchase was made in October at an average price of EUR 2.22887 for a value of approximately 5,011,000 euro; on 1 December 2,134,807 shares were assigned to employees in accordance with the provisions of the Group's share plan.

On 24 April 2015, Banca IMI's Shareholders' Meeting finally authorised the purchase of ordinary shares of the Ultimate Parent Intesa Sanpaolo, up to the maximum limit of ordinary shares determined by dividing the all-inclusive amount of 2,200,000 euro by the official price recorded by the Intesa Sanpaolo share on 27 April 2015 (3.11 euro/share); on 9 October 2015, the purchase of 677,481 shares was concluded at an average price of 3.1942051 euro for a total value of 2,164,013 euro.

OTHER INFORMATION

1. GUARANTEES AND COMMITMENTS


1) Financial guarantees given

a) Banks - -

b) Customers 861,766 1,000,986

2) Commercial guarantees given

a) Banks - -

b) Customers 695 19,593

3) Irrevocable commitments to lend funds

a) Banks

i) of certain use 1,813,453 1,835,602

ii) of uncertain use - -

b) Customers

i) of certain use 2,005,352 2,144,802

ii) of uncertain use 1,607,151 764,301

4) Commitments underlying credit derivatives: protection sales 55,604,389 59,435,153

5) Assets pledged as collateral for third party commitments - -

6) Other commitments 1,994,430 731,091

Total 63,887,236 65,931,528

The “Commitments underlying credit derivatives: protection sales” are covered by protection purchases of roughly equivalent amounts, as more clearly detailed in the Directors' Report on Operations.The increase in other commitments is related to the securities to be received on put options sold.

The item “Other commitments” includes the placement and guarantee commitment of 159 million as part of the capital increase of SAIPEM S.p.A., as a fee for participating in the consortium led by Goldman Sachs International and J.P. Morgan, acting as Joint Global Coordinators.

In November 2015, Banca IMI signed a pre-guarantee agreement with Veneto Banca worth 1 billion euro.Under the pre-guarantee agreement relating to the share capital increase by option of Veneto Banca following a series of obligations, including some of a corporate nature, Banca IMI undertook, according to the usual terms and conditions for such operations, to ensure the subscription of the capital increase for any portion not subscribed at the outcome of the offer and to promote the establishment of an underwriting consortium.The underwriting consortium - comprising 10 national and international banks - was set up on 23 December 2015, a few days after the Extraordinary Shareholders' Meeting of Veneto Banca which approved the transformation of the Group into a plc, as well as the rights issue and the listing on the stock exchange, expected to take place in Q2 2016. Banca IMI will act as Sponsor in relation to the listing and as Sole Global Coordinator and Bookrunner for the share capital increase.


344

2. ASSETS PLEDGED AS COLLATERAL FOR LIABILITIES AND COMMITMENTS


1. Financial assets held for trading 6,013,934 5,024,607

2. Financial assets at fair value - -

3. Available-for-sale financial assets 6,579,409 5,522,414

4. Held-to-maturity investments - -

5. Due from banks 4,612,722 7,437,564

6. Loans to customers 7,354,750 6,851,694

7. Property and equipment - -

Total 24,560,815 24,836,279

The amounts refer primarily to the carrying amount of securities owned and pledged as collateral for repurchase agreements for funding purposes and on derivatives trading.

5. MANAGEMENT AND DEALING ON BEHALF OF THIRD PARTIES

Amount

1. Trading in financial instruments on behalf of third parties

a) purchases

1) settled 754,352,436

2) to be settled 13,391,058

b) sales

1) settled 766,583,137

2) to be settled 91,483

2. Portfolio management

a) individual -

b) collective -

3. Custody and administration of securities

a) third party securities held on deposit: related to depositary bank activities (excluding individual portfolio management schemes)


2. other securities -

b) other third party securities held on deposit (excluding individual portfolio management schemes): other


2. other securities 17,649,994

c) third party securities deposited with third parties 17,649,994

d) portfolio securities deposited with third parties 27,387,679

4. Other 289,915,395

The caption “Other” consisted of the receipt and collection of order and placements.

Netting framework arrangements

As from 2013, in accordance with the provisions of Circular No. 262 of 22 December 2005 updated on 21 January 2014, and confirmed by the subsequent updates, there is a requirement to present specific tables in the notes to financial statements showing those financial assets and liabilities set off against each other under netting agree-ments in accordance with IAS 32.42, regardless of whether they have actually been offset in the accounts.


345

The tables below refer to the ongoing framework agreements of Banca IMI. These agreements are of material relevance for the monitoring and measurement of risks and related capital requirements, based on internal models, although they have not entailed any offsetting of assets and liabilities.

6. FINANCIAL ASSETS SUBJECT TO OFFSETTING IN THE FINANCIAL STATEMENTS OR SUBJECT TO NETTING FRAMEWORK ARRANGEMENTS OR SIMILAR AGREEMENTS

Gross amount of financial

assets(a)

Amount of financial

liabilities offset in

statement of financialposition

(b)


assets presented in


position(c=a-b)



Net amount 31 December

2014 (f=c-d-e)


2013

Financialinstruments

(d)

Cash collateral

(e)

1. Derivatives 76,893,473 (37,194,514) 39,698,959 31,101,810 4,271,284 4,325,865 4,825,937



4. Other - - - - - - -

Total 31 December 2015 91,231,265 (37,194,514) 54,036,751 44,998,768 4,281,270 4,756,713 X

Total 31 December 2014 104,427,384 (43,325,492) 61,101,892 51,788,434 4,389,089 X 4,924,369

Nevertheless, in consideration of current accounting and market practice and the prevailing guidance on offset-ting, it was decided, in line with policies adopted in previous statements of financial position and following legal advice, that OTC derivatives traded over the SwapClear platform satisfy requirements for the offsetting in accounts of positive and negative gross balances. Thus, at 31 December 2015, the financial liabilities held for trading included a net offset negative amount of 4.1 billion euro referring to the fair value of OTC derivatives traded on SwapClear, resulting from the offsetting of a total of 37.2 billion euro of financial assets against a total of 41.3 billion euro of financial liabilities.More specifically, the net loss amounting to 4.1 billion for derivatives on SwapClear relates to 3.8 billion in transac-tions on own account (including the positive balance of 0.1 billion related to hedging derivatives) and 0.3 billion to operations originated from customers and Group companies. The offsetting of the balances is performed sepa-rately on own account and for third parties.

Consequently, from the above the total positive fair value of all derivatives recognised in accounts amounted to 39.7 billion euro.


346

7. FINANCIAL LIABILITIES SUBJECT TO OFFSETTING IN THE FINANCIAL STATEMENTS OR SUBJECT TO NETTING FRAMEWORK ARRANGEMENTS OR SIMILAR AGREEMENTS

Gross amount of financial

liabilities(a)

Amount of financial

assets offset in statement

of financialposition

(b)


liabilities presented in


position(c=a-b)




2014 (f=c-d-e)


2013

Financialinstruments

(d)

Cash collateral

(e)

1. Derivatives 76,764,651 (37,194,514) 39,570,137 30,719,428 8,556,466 294,243 183,155



4. Other - - - - - - -

Total 31 December 2015 98,071,068 (37,194,514) 60,876,554 51,864,133 8,647,702 364,719 X

Total 31 December 2014 102,760,893 (43,325,492) 59,435,401 48,498,541 10,603,341 X 333,519

Figures for “Amounts available to be offset but not offset in the statement of financial position” show the fair value of financial instruments and payables (receivables) for guarantees received (provided) stated separately as gross assets and liabilities in the statement of financial position, but which are available to be offset against gross assets and liabilities under the aforementioned framework agreements.

Exposure to counterparty risk was further mitigated by collateral (securities) totalling 0.5 billion euro.

With reference to repurchase and securities lending agreements, the “Amounts available to be offset but not offset in the statement of financial position” take account of the fair value of the securities underlying the transac-tions and of the supplementary daily margining in cash.

8. SECURITIES LENDING TRANSACTIONS:

Securities lending transactions always involve Banca Imi acting according to the “principal by principal” procedure, by making use of the accounts of the owners, with objectives aimed at contributing to revenue margins and service and support margins for typical capital market activities.The first area includes investment services offered to the banks of the Group in the Private and Banca dei Territori Divisions and for the enhancement of indirect funding and trading with market counterparties; the second area covers the refinancing of securities positions and the management of materiality for uncovered short positions.

The underlying instruments are Government Bonds, bank bonds and securities listed on regulated and organized markets which are eligible for refinancing with the European Central Bank (bond lending); as regards stock len-ding, the shares are those listed in Italy and the main European markets, in the USA and Canada in addition to the ETFs - Exchange Traded Funds with underlying equity.The reference counterparties are Italian and European banks, traditional and online trading SIM and global market players with which GMSLA agreements have been signed for the purposes of credit risk mitigation.

All transactions are secured by collateral, mainly in the form of cash collateral subject to daily adjustment on the ba-sis of the trends in value of the lent securities. Such cash collateral is included in the statement of financial position under loans/receivables and payables to banks and customers for the amount of the sums actually paid and received.Conversely, loans where the collateral consists of securities, appear “below the line”for the value of the lent secu-rities. Securities received or given as collateral are usually Government bonds or bonds guaranteed by the State.

The duration of loans can range from one day up to a few months or years; the parties may partly or wholly extin-guish loans with a simple notification according to the times established in the contract. These operating procedu-res resulted in a turnover, in terms of new loans opened, of 10 billion in 2015. In particular:

securities borrowed shares 3.9 billion bonds 1.3 billion

securities lent shares 4.4 billion bonds 0.4 billion


347

At the end of the year, the outstanding securities lending and borrowing, were 2.9 billion and 2.8 billion respecti-vely in the component assisted by cash collateral.

In economic terms, the remuneration from loans is represented by the commission and fee income and expenses, presented in section C of the Notes.The cash collateral exchanged between the parties is subject to remuneration and has the EONIA rate as its re-ference (with the possible application of a positive or negative spread); interest paid (earned) on the collateral received (paid) are intended to compensate the lender (borrower) for the non-unavailability of the funds and not to remunerate the actual lending of securities.

348

Part C – Information on the Consolidated Income Statement

SECTION 1- INTEREST - CAPTIONS 10 AND 20

1.1 Interest and similar income: breakdown

Debt securities Loans Other 2015 2014

1. Financial assets held for trading 249,513 - - 249,513 314,292

2. Financial assets at fair value through profit and loss - - - - -

3. Available-for-sale financial assets 166,227 - - 166,227 148,914

4. Held-to-maturity investments - - - - -

5. Due from banks 15,977 635,585 - 651,562 929,253

6. Loans to customers 13,542 251,847 - 265,389 292,495

7. Hedging derivatives X X 131,801 131,801 351,132

8. Other assets X X 5,614 5,614 4,948

Total 445,259 887,432 137,415 1,470,106 2,041,034

Interest income included 36 million euro from on-balance sheet loans to customers, managed as part of the struc-tured finance portfolio. The interest also included 15 million for performing loans.

1.2 Interest and similar income: differentials on hedging transactions

2015 2014

A. Gains on hedging transactions 181,138 568,824

B. Losses on hedging transactions (49,337) (217,692)

C. Net gains (A - B) 131,801 351,132

1.3 Interest and similar income: other information

2015 2014

1.3.1 Interest income on foreign currency financial assets 183,976 83,850

Notes to the consolidated financial statements - Part C - Information on the Income Statement

349

1.4 Interest and similar expense: breakdown

Payables Debt securities

Other 2015 2014

1. Due to central banks (9) X - (9) (280)

2. Due to banks (425,317) X - (425,317) (453,392)

3. Due to customers (21,948) X - (21,948) (15,387)

4. Securities issued X (444,209) - (444,209) (854,332)

5. Financial liabilities held for trading - - - - -

6. Financial liabilities at fair value through profit and loss - - - - -

7. Other liabilities and allowances X X (212) (212) (97)

8. Hedging derivatives X X - - -

Total (447,274) (444,209) (212) (891,695) (1,323,488)

Interest paid to central banks refers to money market investments, as described in Part B above.

1.6 Interest and similar expense: other information

2015 2014

1.6.1 Interest expense on foreign currency financial liabilities (181,520) (106,000)


350

SECTION 2 – FEES AND COMMISSIONS – CAPTIONS 40 AND 50

2.1 Fee and commission income: breakdown

2015 2014

a) guarantees given 12,173 18,414


c) management, dealing and consultancy services

1. dealing in financial instruments 74,372 78,203

2. dealing in foreign currency 60,352 21,490


3.1 individual - -

3.2 collective - -

4. custody and administration of securities 34 73

5. depositary bank - -


7. acceptance and transmission of trading instructions 1,244 1,142

8. consultancy services

8.1 on investments - -

8.2 on structured finance 64,130 39,559

9. distribution of third party services

9.1 portfolio management

9.1.1 individual - -

9.1.2 collective - -

9.2 insurance products - -

9.3 other products - -

d) collection and payment services 2,511 143

e) servicing related to securitisations - -

f) services related to factoring - -

g) tax collection services - -

h) management of multilateral exchange systems - -

i) management of checking accounts - -

j) other services 142,877 110,180

k) securities lending transactions 7,467 22,230

Total 488,754 477,787

Amounts in 2015 shown under “j) other services” refer to fees for arrangement (115 million euro), underwriting (3 million euro), agency (9 million euro), and unused services (11 million euro) rendered in the course of Structured Finance operations.

It should be noted that securities lending transactions (originating net commission of approximately 0.6 million euro) are carried out by Banca IMI in its role as intermediary.


351

2.2 Fee and commission expense: breakdown

2015 2014

a) guarantees received (1,521) (1,906)


c) management and dealing services

1. dealing in financial instruments (42,100) (38,333)

2. dealing in foreign currency - -


3.1 own customers - -

3.2 delegated - -

4. custody and administration of securities (11,482) (12,550)

5. placement of financial instruments (156,788) (187,857)

6. “door-to-door” sale of financial instruments, products and services - -

d) collection and payment services (6,149) (6,244)

e) other services (5,660) (1,316)

f) securities lending transactions (6,829) (21,082)

Total (230,529) (269,288)

Fee and commission expense is originated primarily by investment banking operations involving the primary market placement of financial instruments issued by third parties and by the distribution of Banca IMI certificates. The corresponding income item is given by fee and commission income from the placement of securities – item c.6 of table 2.1 above, and by income from derivatives dealing on own account, recognised as ‘profits from financial transactions’.

SECTION 3 - DIVIDENDS AND SIMILAR INCOME - CAPTION 70

3.1 Dividends and similar income: breakdown

2015 2014



A. Financial assets held for trading 34,760 755 30,622 1,265

B. Available-for-sale financial assets 160 5,417 196 3,071

C. Financial assets at fair value through profit or loss - - - -

D. Equity investments - X 1,396 X

Total 34,920 6,172 32,214 4,336


352

SECTION 4 - PROFITS (LOSSES) ON TRADING - CAPTION 80

4.1 Profits (Losses) on trading: breakdown

Revaluations(A)

Profits on trading

(B)

Write-downs (C)

Losses on trading

(D)

Net profit (loss) (A+B ) - (C+D)


1.1 Debt securities 17,613 401,170 (89,565) (470,222) (141,004)

1.2 Equities 19,942 188,850 (41,777) (172,065) (5,050)

1.3 Quotas of UCI 2,597 12,776 (1,439) (8,140) 5,794

1.4 Loans - - - - -

1.5 Other - 22,526 - (22,743) (217)


2.1 Debt securities 13,529 649,527 (6,655) (763,325) (106,924)

2.2 Payables - - - - -

2.3 Other 221,534 196,716 (85,686) (277,451) 55,113

3. Financial assets and liabilities: exchange rate gains (losses)

X X X X 582,991

4. Derivatives

4.1 Financial derivatives

- On debt securities and interest rates 17,716,115 24,609,345 (17,009,277) (24,397,220) 918,963

- On equities and stock indices 980,576 5,506,852 (2,359,552) (3,969,394) 158,482

- On currencies and gold X X X X (991,318)

- Other 1,064,286 1,372,605 (1,023,728) (1,545,999) (132,836)

4.2 Credit derivatives 560,844 2,972,686 (529,640) (3,019,099) (15,209)

Total 20,597,036 35,933,053 (21,147,319) (34,645,658) 328,785

SECTION 5 - PROFITS (LOSSES) ON HEDGING - CAPTION 90

5.1 Profits (Losses) on hedging: breakdown

2015 2014

A. Income from

A.1 Fair value hedging derivatives 452,596 297,530

A.2 Hedged financial assets (fair value) 7,888 173,998

A.3 Hedged financial liabilities (fair value) 139,390 301,127

A.4 Cash flow hedging derivatives - -

A.5 Foreign currency assets and liabilities - -

Total (A) 599,874 772,655

B. Expenses for

B.1 Fair value hedging derivatives (196,794) (548,426)

B.2 Hedged financial assets (fair value) (350,875) (50,486)

B.3 Hedged financial liabilities (fair value) (44,408) (173,687)

B.4 Cash flow hedging derivatives - -

B.5 Foreign currency assets and liabilities - -

Total (B) (592,077) (772,599)

C. Total (A - B) 7,797 56


353

SECTION 6 - PROFITS (LOSSES) ON DISPOSALS OR REPURCHASES - CAPTION 100

6.1 Profits (Losses) on disposals or repurchases: breakdown

2015 2014

Profits Losses Net result Profits Losses Net result

Financial assets

1. Due from banks - - - - - -

2. Loans to customers 6,964 (41,876) (34,912) 2,879 (19,383) (16,504)

3. Available-for-sale financial assets

3.1 Debt securities 757,931 (484,995) 272,936 193,913 (5,643) 188,270

3.2 Equities 1,518 - 1,518 369 - 369

3.3 Quotas of UCI 65 - 65 - - -

3.4 Loans - - - - - -


Total assets 766,478 (526,871) 239,607 197,161 (25,026) 172,135


1. Due to banks - - - - - -

2. Due to customers - - - - - -

3. Securities issued 12,884 (67,601) (54,717) 5,055 (139,993) (134,938)

Total liabilities 12,884 (67,601) (54,717) 5,055 (139,993) (134,938)

SECTION 8 - IMPAIRMENT LOSSES / REVERSALS OF IMPAIRMENT LOSSES - CAPTION 130

8.1 Net impairment losses on loans and receivables: breakdown




A. Due from banks

– Loans - - - - - - - - -

– Debt securities - - - - - - - - -

B. Loans from customers

Purchased non-performing due

– Loans - - X - - - X - -

– Debt securities - - X - - - X - -

Other due

– Loans - (75,709) (6,007) - 79,343 - - (2,373) (123,295)

– Debt securities - - - - - - 1,952 1,952 (512)

C. Total - (75,709) (6,007) - 79,343 - 1,952 (421) (123,807)

(1) – (2)Legend: A = from interest B = other reversals


354

8.2 Net impairment losses on available-for-sale financial assets: breakdown


Individual Individual

Derecognition Other A B

A. Debt securities - - - - - -

B. Equities - - X X - -

C. Quotas of UCI - (5,850) X - (5,850) (628)

D. Loans to banks - - - - - -

E. Loans to customers - - - - - -

F. Total - (5,850) - - (5,850) (628)

(1) – (2)


8.4 Net impairment losses on other financial assets: breakdown




A. Guarantees given - (6,919) - - 14,077 - 2,055 9,213 (803)

B. Credit derivatives - - - - - - - - -

C. Commitments to lend - - - - - - - - -

D. Other - - - - - - - - -

E. Total - (6,919) - - 14,077 - 2,055 9,213 (803)

(1) – (2)



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SECTION 11 - ADMINISTRATIVE EXPENSES - CAPTION 180

11.1 Personnel expenses: breakdown

2015 2014

1) Personnel employed

a) wages and salaries (113,289) (101,057)

b) social security charges (29,093) (27,501)

c) post-employment benefits (406) (392)

d) pension costs - -

e) accruals for post-employment benefits 525 (961)

f) accruals for pension and similar provisions

– defined contribution plans - -


g) payments to external pension funds

– defined contribution plans (4,363) (3,675)


h) costs of share-based payment plans (10,351) (909)

i) other benefits in favour of employees (3,774) (4,953)

2) Other personnel (226) (175)

3) Directors and statutory auditors (1,074) (1,013)

4) Retired personnel - -

Total (162,051) (140,636)

The costs shown in point 1) letter h) relate to the personnel incentive scheme known as LECOIP.

11.2 Average number of employees by category

Category 2015 2014

Personnel employed

a) managers 78 77

b) officers 579 562

c) other employees 216 213

Other personnel 8 5

Total 881 857

11.3 Company-defined benefit pension funds: total costsNo actuarial losses on internal or external pension plans were recognised for the year.


356

11.5 Other administrative expenses: breakdown

2015 2014

Taxes and duties

– other taxes and duties - Italy (5,652) (5,419)

– other taxes and duties - Abroad (525) (409)

Total taxes and duties (6,177) (5,828)

Information technology, processing and data processing services (206,531) (186,835)

Expenses for consultancy fees (35,652) (32,679)

Telephone, on-line and transmission expenses (1,694) (1,394)

ICT services: maintenance (922) (652)

Real estate rental and management expenses (8,384) (7,918)

Data base subscriptions (2,559) (2,026)

Advertising and promotional expenses (5,967) (6,918)

Associations and subscriptions (4,707) (3,366)

Reimbursements to personnel and business trips (2,906) (2,646)

Legal expenses (6,528) (7,243)

Training and other personnel expenses (1,759) (2,104)

Lighting, central heating and air conditioning (131) (299)

Expenses for maintenance of furniture and equipment (448) (60)

Security services (149) (129)

Maintenance of real estate (325) (70)

Cleaning services (305) (292)

Rentals of other property and equipment (120) (117)

Printing, stationery and consumables (241) (223)

Insurance premiums (1,736) (1,723)

Data storage and document processing (85) (82)

Postal and telegraphic (107) (84)

Transport and other connected services (394) (206)

Contribution to the National Contribution Fund (141,829) -

Other (4,175) (3,751)

Total (433,831) (266,645)

Following the abolition of the “stock exchange transaction tax,” the Bank remains liable for Italian Tobin Tax, substi-tute tax on loans (which may be passed on), other indirect taxes (such as TARSU and TOSAP) and non-deductible VAT.This last cost item is shown separately for the London office; for the Milan office it is instead included in the individual captions of the income statement.

Contributions to the National Resolution Fund of 141.8 million are included within other administrative expenses, as clarified by the Bank of Italy on 19 January 2016.

SECTION 12 - NET ACCRUALS TO PROVISIONS FOR RISKS AND CHARGES - CAPTION 190

12.1 Net accruals to provisions for risks and charges: breakdown

2015 2014

Accruals for legal disputes - -

Accruals for other risks and charges 1,700 (3,000)

Total 1,700 (3,000)


357

SECTION 13 - DEPRECIATION AND NET IMPAIRMENT LOSSES ON PROPERTY AND EQUIPMENT - CAPTION 200

13.1 Depreciation on property and equipment: breakdown

Depreciation (a)

Impairmentlosses

(b)

Reversals ofimpairment losses

(c)

Carrying amount (a+b-c)

A. Property and equipment

A.1 Owned

– operating assets (475) - - (475)


A.2 Acquired under finance leases

– operating assets - - - -


Total (475) - - (475)

SECTION 14 - AMORTISATION AND NET IMPAIRMENT LOSSES ON INTANGIBLE ASSETS - CAPTION 210

14.1 Amortisation on intangible assets: breakdown

Amortisation (a)

Impairmentlosses

(b)

Reversals ofimpairment losses

(c)

Carrying amount (a+b-c)

A. Intangible assets

A.1 Owned

– internally generated - - - -

– other (73) - - (73)

A.2 Acquired under finance leases - - - -

Total (73) - - (73)

SECTION 15 - OTHER OPERATING INCOME (EXPENSES) - CAPTION 220

15.1 Other operating expenses: breakdown

2015 2014

Prior year expense and items to be reconciled (295) (1,494)

Amortisation of leasehold improvements (122) (165)

Other (697) (360)

Total (1,114) (2,019)

15.2 Other operating income: breakdown

2015 2014

Prior year income and items to be reconciled 428 2,329

Recovery of taxes 2,934 2,109

Recovery of other expenses 853 854

Other 103 67

Total 4,318 5,359


358

SECTION 16 - NET GAINS ON SALES OF EQUITY INVESTMENTS - CAPTION 240

16.1 Net gains on sales of equity investments: breakdown

2015 2014

1) Jointly controlled companies

A. Gains - -

1. Fair value gains - -

2. Profits on disposal - -


4. Other - -

B. Losses - -




4. Other - -

Net Gains - -

2) Companies subject to significant influence

A. Gains 6,840 14,225

1. Fair value gains 6,840 5,856

2. Profits on disposal - 8,369


4. Other - -

B. Losses - -




4. Other - -

Net Gains 6,840 14,225

Total 6,840 14,225

SECTION 20 - INCOME TAX EXPENSE - CAPTION 290

20.1 Income tax expense: breakdown

2015 2014

1. Current taxes (-) (275,955) (285,425)

2. Changes in current taxes of previous years (+/-) - -

3. Reduction in current taxes of the year (+) - -

3.bis Reduction in current taxes of the year for tax assets, as per Law no. 214/2011 (+) - -

4. Changes in deferred tax assets (+/-) (7,879) 13,752

5. Changes in deferred tax liabilities (+/-) 93 -

6. Taxes expense for the year (-) (-1+/-2+3+/-4+/-5) (283,741) (271,673)


359

20.2 Reconciliation of theoretical tax expense to total income tax expense for the year


Amount Tax rate Amount Tax rate

MAIN TAX

Profit befor tax 798,984 27.5% 768,134 27.5%


– positive permanent differences:

- other 47,150 27.5% 61,755 27.5%

– negative permanent differences:

- exempt gains 0 27.5% (7,950) 27.5%

- other (19,304) 27.5% (49,506) 27.5%

– tax losses carried forward 0 27.5% 0 27.5%

– positive temporary differences 42,798 27.5% 142,636 27.5%

– negative temporary differences (76,931) 27.5% (102,798) 27.5%


Current IRES (217,991) (223,375)

SECONDARY TAX

Profit before tax 798,984 5.57% 768,134 5.57%


– positive permanent differences

- impairment losses 0 5.57% 0 5.57%

- other 113,055 5.57% 211,052 5.57%

– negative permanent differences

- impairment losses 0 5.57% (623) 5.57%

- other (29,084) 5.57% (42,146) 5.57%

– positive temporary differences

- impairment losses 0 5.57% 100,689 5.57%

- other 0 5.57% 0 5.57%

– negative temporary differences

- impairment losses 0 5.57% (47,822) 5.57%

- other (23,787) 5.57% (19,602) 5.57%


Current IRAP (47,855) (54,011)

Taxes paid abroad (23,109) 21% - 48% (16,091) 27% - 48%

– changes in deferred tax asset (7,879) 13,752

– changes in deferred tax liabilites 93 0

– changes in tax rate 0 0

Deferred tax assets and liabilities (7,786) 13,752

Recovery of taxes paid abroad 13,000

Other expenses 8,052

Income tax (283,741) (271,673)

Tax litigationNo tax assessments or audits are underway over and above that reported in the separate financial statements of Banca IMI, to which the reader is referred.


360

SECTION 23 – OTHER INFORMATION

Banca IMI S.p.A. (Milan office and London Branch) was responsible for 97.8% of total income (98.6% in 2014).

Given the particular nature of operations, a significant portion of which is carried out through remote access to organised trading systems or multilateral trading circuits, the geographical breakdown of revenue is not directly correlated to the geographical location of the Group’s branches.

SECTION 24 – EARNINGS PER SHARE

Earnings per share came to 0.555 euro in 2015 and 0.526 euro in 2014. EPS was determined as a ratio of profit for each year to the number of ordinary shares outstanding in the same year.

24.1 Average number of ordinary shares (fully diluted)The weighted average number of shares for the year totalled 962,464,000.

361

Part D – Consolidated Comprehensive Income

STATEMENT OF CONSOLIDATED COMPREHENSIVE INCOME

Gross Amount Income tax Net Amount

10. Profit for the year X X 533,715

Other comprehensive income, net of income taxes, that may not be reclassifiedto the income statement



40. Defined benefit plans 215 - 215

50. Non-current assets held for sale - -


Other comprehensive income, net of income taxes, that may be reclassified to the income statement

70. Hedges of investments in foreign operations:




80. Exchange rate gains (losses):

a) fair value gains (losses) 22,361 - 22,361



90. Cash flows hedge:




100. Available-for-sale financial assets:

a) fair value losses (103,099) 35,039 (68,060)


– impairment losses 30 (10) 20

– gains/losses on sales (46,849) 15,493 (31,356)


110. Non-current assets held for sale:




120. Portion of valuation reserves of equity-accounted investees:



– impairment losses - - -

– gains/losses on sales - - -


130. Total other comprehensive income (expense) (127,342) 50,522 (76,820)

140. Comprehensive Income (Caption 10+130) (127,342) 50,522 456,895

150. Comprehensive income attributable to non-controlling interests - - -

160. Comprehensive income attributable to the owners of the parent (127,342) 50,522 456,895

362

Part E – Information on risks and relatedhedging policies

SECTION 1 – BANKING GROUP RISKS

1.1 CREDIT RISKS


General aspects

Credit risk management policiesCredit risk results from the possibility that a counterparty may not fulfil the obligations it has contracted in the course of the Group’s normal business operations, owing in particular to the disbursement of on-balance sheet loans, the provision of commitments to lend and transactions in financial instruments and derivative products. With regard to (i) organisational aspects, (ii) management, measurement and control systems, (iii) credit risk mitigation techniques and (iv) identification and management of non-performing financial assets, please refer to the controls and methods already described in the notes to the separate financial statements.

In particular:– credit facilities granted by the subsidiaries are subject to prior review by Banca IMI and the Ultimate Parent

Intesa Sanpaolo;– the monitoring of on-balance sheet and endorsement exposures effectively undertaken is carried out centrally;– implicit credit risk mitigation techniques in Banca IMI Securities capital market transactions are the same as

those used by Banca IMI S.p.A.;– individual or collective impairment losses are determined according to the methods and under the supervision

of the units in charge of credit collection, problem loan management and risk management.

Notes to the consolidated financial statements - Part E - Information on risks and related hedging policies

363


A. CREDIT QUALITY

A.1 Performing and non-performing loans: amounts, impairment losses, changes and breakdown by business segment and geographical segment

A.1.1 Breakdown of financial assets by portfolio classification credit quality (carrying amount

Doubtful loans Unlikely to pay Non performing past

due loans

Performing past

due loans

Other performing

loans

Total

1. Available-for-sale financial assets - - - - 11,556,728 11,556,728


3. Due from banks - - - - 60,923,615 60,923,615

4. Loans to customers 44,186 904,784 - 6,790 22,398,132 23,353,892


6. Financial assets held for sale - - - - - -

Total 2015 44,186 904,784 - 6,790 94,878,475 95,834,235

Total 2014 28,258 1,082,956 - 175,594 83,179,048 84,465,856

On-balance sheet net structured finance exposures total 6.6 billion. Performing loans include 0.6 billion of expo-sure defined as “forborne”.


364

A.1.2 Breakdown of credit exposures by portfolio classification and credit quality (gross amount and carrying amount)

Non-performing assets Performing assets Total (carrying amount) Gross

exposure Individual

impairments Carrying

amount Gross

exposure Individual

impairments Carrying

amount

1. Available-for-sale financial assets - - - 11,556,728 - 11,556,728 11,556,728

2. Held-to-maturity investments - - - - - - -

3. Due from banks - - - 60,923,615 - 60,923,615 60,923,615

4. Loans to customers 1,278,371 (329,401) 948,970 22,511,654 (106,732) 22,404,922 23,353,892

5. Financial assets at fair value through profit or loss

- - - X X - -

6. Financial assets held for sale - - - - - - -

Total 2015 1,278,371 (329,401) 948,970 94,991,997 (106,732) 94,885,265 95,834,235

Total 2014 1,457,197 (366,931) 1,090,266 83,457,798 (103,156) 83,354,642 84,444,908

Assets of evidently low credit quality Other assets

Cumulativewrite-downs

Carrying amount

Carrying amount

1 Financial assets held for trading (9,724) 70,863 55,653,452

2. Hedging derivatives - - 203,228

Total 2015 (9,724) 70,863 55,856,680

Total 2014 (3,604) 290,796 60,582,424

Financial assets held for trading with evidently low credit quality include 57 million for government, financial and corporate bonds, and the remainder comprises derivatives with customers.


365

A.1.3 Banking group: on- and off-balance sheet loans and receivables with banks: gross amount and carrying amounts and past due time bracket



Carrying amount


Up

to

3 m

on

ths

Bet

wee

n

3 an

d 6

mo

nth

s

Bet

wee

n

6 m

on

ths

and

1 y

ear

Ove

r 1

year


a) Doubtful loans - - - - X - X -


b) Unlikely to pay - - - - X - X -




d) Performing past due loans X X X X - X - -


e) Other performing loans X X X X 67,940,443 X - 67,940,443


Total A - - - - 67,940,443 - - 67,940,443


a) Non-performing - - - - X - X -

b) Performing X X X X 47,983,662 X - 47,983,662

Total B - - - - 47,983,662 - - 47,983,662

Total A+B - - - - 115,924,105 - - 115,924,105

The table includes the assets with banks regardless of the registration portfolio.


366

A.1.4 Banking group on-balance sheet loans and receivables with banks: changes in gross non-performing loans


A. Initial gross exposure 6 44


B. Increases - - -

B1. transfers from performing loans - - -

B2. transfers from other non-performing loans categories - - -

B3. other increases - - -

C. Decreases (6) - (44)

C1. transfers to performing loans - - -

C2. write-offs - - -

C3. repayments - - -

C4. credit disposals - - -

C5. losses from disposals - - -

C6. transfers to other non-performing loans categories - - -

C7. other decreases (6) - (44)

D. Final gross exposure - - -


A.1.5 Banking group: on- balance sheet non-performing loans and receivables with banks: changes in total impairment losses


A. Initial total impairment - - -


B. Increases - - -

B1. impairment losses - - -

B2. losses on disposal - - -

B3. transfers from other non-performing loans categories - - -


C. Decreases - - -

C1. recoveries on impairment losses - - -

C2. recoveries on repyments - - -

C3. profits on disposal - - -

C4. write-offs - - -

C5. transfers to other non-performing loans categories - - -

C6. other decreases - - -

D. Final total impairment - - -



367

A.1.6 Banking group: on- and off-balance sheet loans and receivables with customers: gross amount and carrying amount and past due time bracket



Carrying amount


Up

to

3 m

on

ths

Bet

wee

n

3 an

d 6

mo

nth

s

Bet

wee

n 6

mo

nth

s an

d 1

yea

r

Ove

r 1

year


a) Doubtful loans - - - 96,674 X (52,488) X 44,186

– of which: forbearance exposures - - - 26,794 X (10,706) X 16,088

b) Unlikely to pay 1,181,697 - - - X (276,913) X 904,784

– of which: forbearance exposures 1,023,678 - - - X (249,404) X 774,274


– of which: forbearance exposures - - - - X - X -

d) Performing past due loans X X X X 8,078 X (1,288) 6,790

– of which: forbearance exposures X X X X - X - -

e) Other performing loans X X X X 41,908,307 X (105,444) 41,802,863

– of which: forbearance exposures X X X X 635,469 X (36,246) 599,223

Total A 1,181,697 - - 96,674 41,916,385 (329,401) (106,732) 42,758,623


a) Non-performing 352,864 - - - X (37,351) X 315,513

b) Performing X X X X 27,765,293 X (3,840) 27,761,453

Total B 352,864 - - - 27,765,293 (37,351) (3,840) 28,076,966

Total A+B 1,534,561 - - 96,674 69,681,678 (366,752) (110,572) 70,835,589

The table includes the assets with customers regardless of the registration portfolio.

A.1.7 Banking group: on-balance sheet loans and receivables with customers: changes in gross non-performing exposures


A. Initial gross exposure 72,659 1,385,338 33,343


B. Increases 26,827 241,460 -

B1. transfers from performing loans - 191,840 -

B2. transfers from other non-performing loans categories 26,827 - -

B3. other increases - 49,620 -

C. Decreases (2,812) (445,101) (33,343)

C1. transfers to performing loans - (142,298) -

C2. write-offs - (70,891) -

C3. repayments (1,787) (135,488) -

C4. credit disposals - - -

C5. losses from disposals - (38,425) -

C6. transfers to other non-performing loans categories - (26,827) -

C7. other decreases (1,025) (31,172) (33,343)

D. Final gross exposure 96,674 1,181,697 -


The non-performing, past due exposures present at 31 December 2014 refer to securities in the HFT portfolio.


368

A.1.8 Banking group: on-balance sheet loans and receivables with customers: changes in total impairment losses


A. Initial total impairment (43,601) (323,330) -


B. Increases (10,707) (109,979) -

B1. impairment losses (4,155) (71,554) -

B2. losses on disposal - (38,425) -

B3. transfers from other non-performing loans categories (6,552) - -


C. Decreases 1,820 156,396 -

C1. recoveries on impairment losses 30 58,216 -

C2. recoveries on repyments 1,425 19,412 -

C3. profits on disposal - - -

C4. write-offs - 70,891 -

C5. transfers to other non-performing loans categories - 6,552 -

C6. other decreases 365 1,325 -

D. Final total impairment (52,488) (276,913) -


A.2 Classification of exposures based on external and internal ratings A.2.1 Banking group - Breakdown of on- and off-balance sheet loans and receivables by external rating classes

External rating classes Unrated Total

AAA/AA- A+/A- BBB+/BBB- BB+/BB- B+/B- Under B-

A. On-balance sheet exposures 7,697,023 10,324,836 57,281,337 1,210,729 12,883,173 973,678 20,725,932 111,096,708

B. Derivatives

B.1 Financial derivatives 246,963 787,009 6,659,891 304,192 129,695 3,620 2,211,727 10,343,097

B.2 Credit derivatives - - - - - - 171 171

C. Guarantees given - - - - - 310,255 552,206 862,461

D. Commitments to lend funds 8,452,630 17,414,779 20,099,185 2,067,655 922,720 196,022 13,712,784 62,865,775

E. Other - - - - - - 1,989,124 1,989,124

Total 16,396,616 28,526,624 84,040,413 3,582,576 13,935,588 1,483,575 39,191,944 187,157,336

The table also includes exposures relating to securities - UCITS (on-balance sheet loans and receivables).

Financial derivative exposures are shown net of netting arrangements.Commitments to lend funds mainly refer to bilateral financial contracts, which are settled using the delivery versus payment method. Specifically, the unrated cluster includes commitments to purchases to be settled.


369

A.2.2 Banking group - Breakdown of on- and off-balance sheet loans and receivables by internal rating classes

Internal rating classes Unrated Total

AAA/AA- A+/A- BBB+/BBB- BB+/BB- B+/B- Under B- Non-performing

exposures

A. On-balance sheet exposures 8,674,410 16,212,775 59,078,172 3,766,142 14,085,962 185,819 948,970 7,746,816 110,699,066

B. Derivatives

B.1 Financial derivatives 260,310 1,142,532 6,819,994 319,314 261,847 14,812 - 1,524,288 10,343,097

B.2 Credit derivatives - - - - - - - 171 171

C. Guarantees given - - 15,461 41,666 14,503 8,875 310,255 471,701 862,461

D. Commitments to lend funds 10,657,933 20,039,419 17,608,582 3,141,005 1,372,006 1,081,536 5,258 8,960,036 62,865,775

E. Other - - - - - - - 1,989,124 1,989,124

Total 19,592,653 37,394,726 83,522,209 7,268,127 15,734,318 1,291,042 1,264,483 20,692,136 186,759,694

For the purposes of this table on-balance sheet exposures in UCITS and similar securities are excluded.This table has been prepared with reference to all the internal ratings even when these are not within the regula-tory scope of the internal models.

A.3 Breakdown of guaranteed exposures by type of guarantee

A.3.1 Banking group - Guaranteed loans and receivables with banks

Car

ryin

g a

mo

un

t Collateral (1) Guarantees (2) Total (1) + (2)

Rea

l est

ate

asse

ts -

Mo

rtg

ages

Rea

l est

ate

asse

ts -

Fin

ance

leas

es

Sec

uri

ties

Oth

er c

olla

tera


Cre

dit

lin

ked

no

tes Other derivatives

Go

vern

men

ts a

nd

Cen

tral

Ban

ks

Oth

er g

ove

rnm

ent

agen

cies

Ban

ks

Oth

er c

ou

nte

rpar

ties

Go

vern

men

ts a

nd

Cen

tral

Ban

ks

Oth

er g

ove

rnm

ent

agen

cies

Ban

ks

Oth

er c

ou

nte

rpar

ties


1.1. totally guaranteed 7,252,969 - - 7,252,969 - - - - - - - - - - 7,252,969


1.2. partially guaranteed 52,946 - - 51,211 - - - - - - - - - - 51,211



2.1. totally guaranteed 3,879,439 - - 248,742 3,630,697 - - - - - - - - - 3,879,439


2.2. partially guaranteed 1,275,368 - - - 997,170 - - - - - - - - - 997,170


Exposures guaranteed by securities consist of repurchase and securities lending agreements. “Collateral - securities” acquired to protect “off-balance sheet” exposures refer to net counterparty risk, calculated on the basis of CSA and netting agreements, implicit in OTC derivatives.


370

A.3.2 Banking group - Guaranteed loans and receivables with customers

Car

ryin

g a

mo

un

t Collateral (1) Guarantees (2) Totale (1) + (2)

Rea

l est

ate

asse

ts -

Mo

rtg

ages

Rea

l est

ate

asse

ts -

Fin

ance

leas

es

Sec

uri

ties

Oth

er c

olla

tera


Cre

dit

lin

ked

no

tes Other derivatives

Go

vern

men

ts a

nd

Cen

tral

Ban

ks

Oth

er g

ove

rnm

ent

agen

cies

Ban

ks

Oth

er c

ou

nte

rpar

ties

Go

vern

men

ts a

nd

Cen

tral

Ban

ks

Oth

er g

ove

rnm

ent

agen

cies

Ban

ks

Oth

er c

ou

nte

rpar

ties


1.1. totally guaranteed 10,683,161 2,114,994 - 8,287,872 153,310 - - - - - - - - 126,985 10,683,161

– of which impaired 565,033 334,016 - 12,544 145,401 - - - - - - - - 73,072 565,033

1.2. partially guaranteed 1,123,754 3,328 - 253,439 88,259 - - - - - - - - 120,000 465,026

– of which impaired 383,936 - - 191,279 19,616 - - - - - - - - - 210,895


2.1. totally guaranteed 1,344,470 141,700 - 1,128,856 39,839 - - - - - - - - 34,075 1,344,470

– of which impaired 1,266 1,266 - - - - - - - - - - - - 1,266

2.2. partially guaranteed 1,167,034 - - 339,783 518,047 - - - - - - - - 54,197 912,027



371

B. BREAKDOWN AND CONCENTRATION OF CREDIT EXPOSURES

B.1 Banking group - Breakdown of on- and off-balance sheet loans and receivables with customers by business segment (carrying amount)

Governments Other government agencies

Car

ryin

g

amo

un

t

Ind

ivid

ual

imp

airm

ent

Loss

es

Co

llect

ive

imp

airm

ent

Loss

es

Car

ryin

g

amo

un

t

Ind

ivid

ual

imp

airm

ent

Loss

es

Co

llect

ive

imp

airm

ent

Loss

es


A.1 Non-performing loans - - X - - X


A.2 Unlikely to pay - - X - - X




A.4 Other performing loans 16,781,114 X (126) 11,423 X -

of which: forbearance exposures - X - - X -

TOTAL A 16,781,114 - (126) 11,423 - -



B.2 Unlikely to pay - - X - - X


B.4 Performing loans 3,548,639 X - 16,243 X -

TOTAL B 3,548,639 - - 16,243 - -




372

B.1 Banking group - Breakdown of on- and off-balance sheet loans and receivables with customers by business segment (carrying amount) - contd.

Financial institutions Insurance companies

Car

ryin

g

amo

un

t

Ind

ivid

ual

im

pai

rmen

t lo

sses

Co

llect

ive

imp

airm

ent

loss

es

Car

ryin

g

amo

un

t

Ind

ivid

ual

im

pai

rmen

t lo

sses

Co

llect

ive

imp

airm

ent

loss

es


A.1 Non-performing loans - (9,164) X - - X








TOTAL A 17,048,595 (80,357) (25,235) 35,434 - -



B.2 Unlikely to pay 3,787 - X - - X


B.4 Performing loans 20,579,433 X (544) 144,423 X -

TOTAL B 20,583,220 - (544) 144,423 - -




373

B.1 Banking group - Breakdown of on- and off-balance sheet loans and receivables with customers by business segment (carrying amount) - contd.

Non-financial companies Other counterparties

Car

ryin

g

amo

un

t

Ind

ivid

ual

im

pai

rmen

t lo

sses

Co

llect

ive

imp

airm

ent

loss

es

Car

ryin

g

amo

un

t

Ind

ivid

ual

im

pai

rmen

t lo

sses

Co

llect

ive

imp

airm

ent

loss

es


A.1 Non-performing loans 44,186 (43,324) X - - X








TOTAL A 8,812,534 (249,044) (81,371) 69,523 - -



B.2 Unlikely to pay 311,726 (37,351) X - - X


B.4 Performing loans 3,020,433 X (3,296) - X -

TOTAL B 3,332,159 (37,351) (3,296) - - -


TOTAL (A+B) 31 DECEMBER 2014 10,668,612 (322,405) (66,501) - - -

B.2 Banking group - Breakdown of on- and off-balance sheet loans and receivables with customers by geographical segment (carrying amount)


Carrying amount

Total impairmens

Carrying amount

Total impairmens

Carrying amount

Total impairmens


A.1 Non-performing loans 44,186 (43,324) - (844) - (8,320)

A.2 Unlikely to pay 865,641 (248,883) 39,143 (28,030) - -


A.4 Other performing loans 23,246,528 (104,794) 15,737,448 (1,729) 2,144,516 -

TOTAL 24,156,355 (397,001) 15,776,591 (30,603) 2,144,516 (8,320)



B.2 Unlikely to pay 315,513 (37,351) - - - -


B.4 Performing loans 8,300,112 (3,433) 17,396,130 (407) 1,276,188 -

TOTAL 8,615,625 (40,784) 17,396,130 (407) 1,276,188 -

TOTAL 31 DECEMBER 2015 32,771,980 (437,785) 33,172,721 (31,010) 3,420,704 (8,320)

TOTAL 31 DECEMBER 2014 29,342,431 (489,304) 30,473,735 (21,101) 1,532,065 (10,085)


374

B.2 Banking group - Breakdown of on- and off-balance sheet loans and receivables with customers by geo-graphical segment (carrying amount) - contd.


Carrying amount

Total impairmens

Carrying amount

Total impairmens

Carrying amount

Total impairmens


A.1 Non-performing loans - - - - 44,186 (52,488)

A.2 Unlikely to pay - - - - 904,784 (276,913)


A.4 Other performing loans 278,393 (209) 402,768 - 41,809,653 (106,732)

TOTAL 278,393 (209) 402,768 - 42,758,623 (436,133)



B.2 Unlikely to pay - - - - 315,513 (37,351)


B.4 Performing loans 312,330 - 24,411 - 27,309,171 (3,840)

TOTAL 312,330 - 24,411 - 27,624,684 (41,191)

TOTAL 31 DECEMBER 2015 590,723 (209) 427,179 - 70,383,307 (477,324)

TOTAL 31 DECEMBER 2014 437,590 - 367,256 - 62,153,077 (520,490)


375

B.3 Banking group - Breakdown of on-and off-balance sheet loans and receivables with bank by geo-graphical segment (carrying amount)


Carrying amount

Totalimpairmens

Carrying amount

Totalimpairmens

Carrying amount

Totalimpairmens





A.4 Other performing loans 61,508,346 - 5,714,487 - 638,142 -

TOTAL 61,508,346 - 5,714,487 - 638,142 -





B.4 Performing loans 5,113,601 - 34,680,867 - 6,482,974 -

TOTAL 5,113,601 - 34,680,867 - 6,482,974 -

TOTAL 31 DECEMBER 2015 66,621,947 - 40,395,354 - 7,121,116 -

TOTAL 31 DECEMBER 2014 59,289,516 - 44,150,987 - 8,516,643 -


Carrying amount

Totalimpairmens

Carrying amount

Totalimpairmens

Carrying amount

Totalimpairmens





A.4 Other performing loans 42,140 - 37,328 - 67,940,443 -

TOTAL 42,140 - 37,328 - 67,940,443 -





B.4 Performing loans - - 169,378 - 46,446,820 -

TOTAL - - 169,378 - 46,446,820 -

TOTAL 31 DECEMBER 2015 42,140 - 206,706 - 114,387,263 -

TOTAL 31 DECEMBER 2014 22,819 - 224,360 - 112,204,325 -

B.4 Large exposures

Banca IMI and subsidiaries do not comprise a Banking Group, but are part of the Intesa Sanpaolo Banking Group.


376

C. SECURITISATIONS

C.1 Securitisations

Qualitative informationSee the matching section in the Notes to Banca IMI S.p.A.'s separate financial statements.

Quantitative informationSee the matching section in the Notes to Banca IMI S.p.A.'s separate financial statements.The Group does not have interests in vehicles.

D. INFORMATION ON STRUCTURED ENTITIES (OTHER THAN SECURITISATION COMPANIES)

D.1 Consolidated structured entities

At 31 December 2015, transactions which the Banca IMI Group has with structured entities are not such as to determine consolidation.

D.2 Structured entities not consolidated in accounting terms

With respect to transactions with SPVS other than securitisation and investments in real estate UCITS, reference should be made to the comments made with reference to Banca IMI S.p.A..Fee and commission income earned during the year for the activities carried out on benefit of Duomo and Romulus amount to 18 million for the Group.

D.2.1. Structured entities consolidated for supervisory purposes

At 31 December 2015, there are no structured entities subject to consolidation for supervisory purposes.

Qualitative informationSee the matching section in the Notes to Banca IMI S.p.A.'s separate financial statements.

Quantitative informationSee the matching section in the Notes to Banca IMI S.p.A.'s separate financial statements.

E. TRANSFERS OF ASSETSSee the matching section in the Notes to Banca IMI S.p.A.'s separate financial statements.

F. BANKING GROUP – CREDIT RISK MEASUREMENT MODELSSee the matching section in the Notes to Banca IMI S.p.A.'s separate financial statements.

STRUCTURED CREDIT PRODUCTSSee Banca IMI S.p.A.'s separate financial statements for the relevant information.

EXPOSURES TO SOVEREIGN CREDIT RISKIn addition to the exposures held by Banca IMI, IMI Securities has investments in U.S. Treasury, with an amount of about 26 million USD.


377

1.2 – BANKING GROUP - MARKET RISKS

1.2.1 INTEREST RATE RISK AND PRICE RISK REGULATORY TRADING BOOK

Qualitative informationSee the separate financial statements of Banca IMI S.p.A.


2. Regulatory trading book: breakdown of exposures in equities and equity indices by main listing countries

Listed Unlisted

Italy USA France United Kingdom

Germany Other

A. Equities

– long positions 487,575 47,850 137,552 61,336 51,651 443,670 631

– short positions 54,852 15,120 277 2,462 14,135 6,340 -

B. Unsettled transactions involving equities

– long positions 15,466 779 725 796 - 550 -

– short positions 962 1,010 2,706 823 - 647 -

C. Other derivatives on equities

– long positions 1,588,321 220,735 4,778 9,871,326 7,160,790 - -

– short positions 1,789,383 147,225 - 2,887,756 6,330,069 - 267,107

D. Derivatives on equity indices

– long positions 84,198 8,024 - 1,330 85,504 - -

– short positions 1,701,723 331 - 120 32,443 - 307,843

The table does not include securitised derivatives with partial/full reimbursement of the premium.

1.2.2 INTEREST RATE RISK AND PRICE RISK – BANKING BOOK


A. General aspects, management processes and methods of measuring interest rate and price riskThe Group’s qualified banking book operations consist of bond issues and an asset portfolio classified under AFS. Both types in these consolidated financial statements refer to Banca IMI S.p.A. Equity aggregates include cash and cash equivalents, assets and liabilities connected with treasury management and SFTs.


378


Banking book: Breakdown by residual maturity (repricing date) of financial assets and liabilities

Currency: EUR

On demand

Up to 3 months

Between3 and

6 months

Between 6 months and

1 year

Between 1 and

5 years

Between 5 and

10 years

Over 10 years


1. On-balance sheet assets 16,033,935 43,356,128 15,684,138 1,235,923 3,915,816 5,405,218 2,609,003 -

1.1 Debt securities

– early repayment option 42,555 628,941 39,627 - 10,243 5,114 45,296 -

– other 74,325 1,060,759 101,098 33,922 627,776 5,264,339 1,712,009 -

1.2 Due from banks 7,894,368 33,725,736 12,509,854 1,195,437 968,655 93,023 821,842 -


– checking accounts 835,749 - - - - - - -

– other

- early repayment option 330,316 2,375,555 2,330,000 3,475 9,013 - 11,767 -

- other 6,856,622 5,565,137 703,559 3,089 2,300,129 42,742 18,089 -

2. On-balance sheet liabilities 7,777,122 67,983,747 6,151,940 2,929,794 3,041,848 341,737 1,061,925 -


– checking account 370,667 - - - - - - -

– other


- other 555,439 13,915,758 2,413 54,000 4,779 1,993 2,204 -

2.2 Due to banks

– checking account 6,197,759 - - - - - - -

– other 592,103 52,166,118 2,079,198 - 1,032,756 267,099 1,059,721 -

2.3 Debt securities

– early repayment option - - - - 18,983 - - -

– other 61,154 1,901,871 4,070,329 2,875,794 1,985,330 72,645 - -


– early repayment option - - - - - - - -

– other - - - - - - - -

3. Financial derivatives - 11,861,039 3,515,693 2,038,670 6,279,592 4,779,855 1,519,600 -


– Options







– Options

+ Long positions - - - - 409,255 45,000 - -

+ Short positions - - - - 409,255 45,000 - -


+ Long positions - 3,866,735 3,115,333 1,995,004 4,253,311 223,876 66,500 -

+ Short positions - 7,994,304 400,360 43,666 1,207,771 4,465,979 1,453,100 -

4. Other off-balance sheet transactions 23,445,408 20,233,474 374,808 3,800 1,379,210 132,012 170,092 -

+ Long positions 17,760,346 3,049,134 374,808 3,800 1,379,210 132,012 170,092 -

+ Short positions 5,685,062 17,184,340 - - - - - -


379

Currency: OTHER CURRENCIES

On demand

Up to 3 months

Between3 and

6 months

Between 6 months and

1 year

Between 1 and

5 years

Between 5 and

10 years

Over 10 years


1. On-balance sheet assets 1,109,502 2,443,194 1,364,334 35,503 332,954 1,886,125 422,464 -

1.1 Debt securities

– early repayment option 414 - - - 5,004 17,046 7,967 -

– other 20,018 - 1 - 305,818 1,853,648 393,986 -

1.2 Due from banks 725,030 1,775,248 1,184,549 909 7,579 11,081 10,305 -


– checking accounts 69,070 - - - - - - -

– other

- early repayment option 3,417 210,029 63,382 33,992 - - - -

- other 291,553 457,917 116,402 602 14,553 4,350 10,206 -

2. On-balance sheet liabilities 935,529 3,059,139 1,453,506 371,050 2,122,948 595,869 141,201 -



– other


- other 524,293 469,484 - - - 8,041 8,033 -

2.2 Due to banks


– other 13,653 2,463,857 1,313,296 - 269,494 256,775 133,168 -

2.3 Debt securities


– other 59,113 125,798 140,210 371,050 1,853,454 331,053 - -



– other - - - - - - - -

3. Financial derivatives - 2,368,037 263,093 592,045 2,992,788 1,398,289 22,963 -


– Options







– Options

+ Long positions - - - - 27 - - -

+ Short positions - - - - - 27 - -


+ Long positions - 1,057,708 170,410 347,965 2,690,633 574,075 - -

+ Short positions - 1,310,329 92,683 244,080 302,128 824,187 22,963 -

4. Other off-balance sheet transactions 894,938 894,565 16 - 357 - - -

+ Long positions 553,108 341,457 16 - 357 - - -

+ Short positions 341,830 553,108 - - - - - -


380

1.2.3 – CURRENCY RISK


A. General aspects, management processes and methods of measuring currency risk“Currency risk” applies to the possibility that variations in market exchange rates could produce significant positive or negative changes in the Group’s equity, which is the fair value of the risk positions managed.

B. Currency hedgingThe currency risk from securities and derivatives trading is managed by each single operating unit, using both cash and derivative instruments. Any “open” positions are transferred by the individual units to the “Treasury” desk in order to optimise overall currency risk management.

Currency risk on fee and commission income and expense, especially for investment banking and structured finance, is managed by trading the individual items collected immediately with the euro.

No cases have occurred so far that require the hedging of future transactions that is relevant from an accounting point of view.

Due to the need to reduce currency risk, with reference to Bank issues in foreign currency, CCSs have been used as a hedging instrument within the framework of fair value hedging.

The primary risk mitigation strategy is funding in the same currency as the assets, through payments from the Ultimate Parent, or alternatively the synthetic conversion of funding into Euro.

Currency risk on the spread of structured finance loans is sterilised in terms of the gross interest flows collected from customers or paid on loans.


381


1. Breakdown of assets, liabilities and derivatives by currency of denomination

Currencies

US dollar Poundsterling

Yen Canadian dollar

Swissfranc

Other currencies

A. Financial assets

A.1 - Debt securities 2,226,581 318,962 - 18,154 94 671,040

A.2 - Equities 90,399 30,030 107 - 22,670 24,269

A.3 - Due from banks 3,395,190 63,923 38,728 1,670 11,488 203,715

A.4 - Loans to customers 618,171 394,019 9,015 2,748 92,730 162,288

A.5 - Other financial assets - - - - - -

B. Other assets 31,997 1,610 - 187 210 2,359

C. Financial liabilities

C.1 - Due to banks 3,393,368 230,802 64,361 24,088 117,988 943,935

C.2 - Due to customers 1,042,263 49,960 6,309 203 20,591 6,064

C.3 - Debt securities 1,524,830 57,301 - 52,559 6,923 1,331,242

C.4 - Other financial liabilities - - - - - -

D. Other liabilities 93,351 2,391 1 199 277 52,270

E. Financial derivatives

– Options

+ long positions 2,807,056 69,142 59,959 - 154,407 483,963

+ short positions 3,556,089 25,642 54,162 - 63,509 621,038


+ long positions 22,081,261 3,582,770 170,564 78,493 836,275 3,970,271

+ short positions 21,749,652 4,264,576 164,112 19,112 930,212 2,590,712

Total assets 31,250,655 4,460,456 278,373 101,252 1,117,874 5,517,905

Total liabilities 31,359,553 4,630,672 288,945 96,161 1,139,500 5,545,261

Difference (+/-) (108,898) (170,216) (10,572) 5,091 (21,626) (27,356)


382

1.2.4 FINANCIAL DERIVATIVES


A.1 Regulatory trading book: reporting date notional amounts

2015 2014



a) Options 138,834,531 15,414,571 169,865,820 8,893,432

b) Swaps 2,240,033,169 - 2,192,478,672 -

c) Forwards - - - -

d) Futures - 143,096,015 - 89,713,974

e) Other - - - -


a) Options 14,656,996 48,801,418 14,962,678 45,994,354

b) Swaps 301,588 - 356,737 -

c) Forwards 25,787 - 50,886 -

d) Futures - 1,422,484 - 1,295,872

e) Other - - - -


a) Options 19,955,998 11,344 18,601,867 -

b) Swaps 44,281,967 - 37,683,393 -

c) Forwards 8,411,508 - 9,158,324 -

d) Futures - 333,804 - 234,872

e) Other 1,142,835 - 1,140,663 -

4. Commodities 10,354,758 3,403,244 5,361,384 2,925,878


Total 2,477,999,137 212,482,880 2,449,660,424 149,058,382

The notional amounts shown in the “Over the counter” column include OTC derivatives regulated via clearing house for about 1.6 billion euro (1.5 billion at 31 December 2014).


383

A.2 Banking book: reporting date notional amounts

A.2.1 Hedging

2015 2014



a) Options 109,487 - - -

b) Swaps 16,317,130 - 19,925,223 -

c) Forwards - - - -

d) Futures - - - -

e) Other - - - -


a) Options - - - -

b) Swaps - - - -

c) Forwards - - - -

d) Futures - - - -

e) Other - - - -


a) Options - - - -

b) Swaps 1,022,210 - - -

c) Forwards - - - -

d) Futures - - - -

e) Other - - - -



Total 17,448,827 - 19,925,223 -

The notional amount shown in the “Over the counter” column include OTC derivatives regulated through clearing house for about 7.8 billion euro (1.4 billion at 31 December 2014). Currency risk mitigation needs with reference to bank's foreign currency issues induced the use of CCS as hedging instruments for them, within the scope of accounting fair value hedge relationships.


384

A.2.2 Other derivatives

2015 2014



a) Options - - - -

b) Swaps - - - -

c) Forwards - - - -

d) Futures - - - -

e) Other - - - -


a) Options 1,552,751 - 2,964,455 -

b) Swaps - - - -

c) Forwards - - - -

d) Futures - - - -

e) Other - - - -


a) Options 61,165 - 95,820 -

b) Swaps - - - -

c) Forwards - - - -

d) Futures - - - -

e) Other - - - -



Total 1,613,916 - 3,060,275 -

The table refers to the fair value of derivatives separated from the Banca IMI issues.

The two following tables (A.3 and A.4) cover the fair value of all outstanding contracts, whether on margin or not on margin.


385

A.3 Financial derivatives: gross positive fair value - breakdown by product

Positive fair value

2015 2014



a) Options 4,572,451 688,463 5,531,889 624,630



d) Equity swaps 14,060 - 7,357 -

e) Forwards 276,739 - 358,758 -

f) Futures - - - 107,011

e) Other 1,039,640 - 828,139 -


a) Options 4,046 - - -




e) Forwards - - - -

f) Futures - - - -

g) Other - - - -


a) Options 55,005 - 100,444 -




e) Forwards - - - -

f) Futures - - - -

e) Other - - - -

Total 39,282,520 688,463 46,774,714 731,641


386

A.4 Financial derivatives: gross negative fair value - breakdown by product

Negative fair value

2015 2014



a) Options 7,394,421 715,100 6,879,213 532,095



d) Equity swaps 9,354 - 7,280 -

e) Forwards 206,419 - 235,588 -

f) Futures - - - 501,141

e) Other 253,246 - 265,740 -


a) Options - - - -




e) Forwards - - - -

f) Futures - - - -

e) Other - - - -


a) Options 105,220 - 220,042 -




e) Forwards - - - -

f) Futures - - - -

e) Other - - - -

Total 42,028,408 715,100 48,736,397 1,033,236

The notional values shown in the “Over the counter” column include OTC derivatives regulated via central counter-parties in the amount of about 4.1 billion (4.8 billion at 31 December 2014).


387

A.5 OTC financial derivatives - regulatory trading book: notional amounts, gross positive and negative fair values by counterparty - contracts not included in netting arrangements


Banks

Other government

agencies


Insurancecompanies


Other


– notional amount - - 2,626,653 829,600 503,040 1,521,601 -

– positive fair value - - 152,470 59,801 24,961 145,675 -

– negative fair value - - (92,851) (66,796) (83) (1,932) -

– future exposure - - 10,088 5,443 2,564 8,888 -


– notional amount - - 3,349,034 204,166 1,271,344 29,972 -

– positive fair value - - 559 2,721 36 481 -

– negative fair value - - (2,973,507) (7,007) (130,837) (245) -

– future exposure - - - 271,298 1,146 4,832 -


– notional amount 367,411 - 1,023,670 244,989 - 21,705 -

– positive fair value - - 169,112 44,070 - 51 -

– negative fair value (50,669) - (1,649) - - (1,921) -

– future exposure 27,556 - 13,308 12,249 - 828 -

4) Other

– notional amount - - 68,890 43,232 - 277,247 -

– positive fair value - - - 2,666 - 17,681 -

– negative fair value - - - (2,208) - (17,156) -

– future exposure - - 6,889 4,830 - 29,421 -

A.6 OTC financial derivatives - regulatory trading book: notional amounts, gross positive and negative fair values by counterparty - contracts included in netting arrangements


Banks

Other government

agencies


Insurance companies


Other


– notional amount 7,225,000 - 698,328,610 1,665,567,799 686,451 1,578,946 -

– positive fair value 3,553,750 - 27,388,404 2,518,181 22,967 160,850 -

– negative fair value (5,111) - (26,478,407) (7,006,341) (8,288) (103,914) -


– notional amount - - 8,462,847 1,412,063 250,145 4,800 -


– negative fair value - - (132,744) (75,785) (14,553) - -


– notional amount - - 53,791,917 15,824,848 594,332 1,923,436 -

– positive fair value - - 1,860,700 1,235,831 104,602 14,135 -

– negative fair value - - (3,728,502) (243,442) (1,877) (104,534) -

4) Other

– notional amount - - 6,492,890 2,834,315 - 638,184 -


– negative fair value - - (288,113) (213,706) - (6,442) -


388

A.7 OTC financial derivatives - banking book: notional amounts, gross positive and negative fair values by counterparty - contracts not included in netting arrangements


Banks

Other government

agencies


Insurance companies


Other







– notional amount - - 1,552,751 - - - -

– positive fair value - - 55,005 - - - -


– future exposure - - 20,822 - - - -


– notional amount - - 61,165 - - - -




4) Other





A.8 OTC financial derivatives - banking book: notional amounts, gross positive and negative fair values by counterparty - contracts included in netting arrangements


Banks

Other government

agencies


Insurance companies


Other


– notional amount - - 8,393,588 8,033,029 - - -








– notional amount - - 988,646 33,564 - - -

– positive fair value - - 42,243 849 - - -


4) Other





389

A.9 Residual maturity of OTC financial derivatives: notional amounts


Over 5years Total


A.1 Financial derivatives on debt securities and interest rates 812,096,788 835,735,408 731,035,504 2,378,867,700

A.2 Financial derivatives on equities and indices 3,992,685 10,141,885 849,801 14,984,371

A.3 Financial derivatives on currencies and gold 23,574,414 25,635,990 24,581,904 73,792,308

A.4 Financial derivatives - other 5,994,694 4,360,064 - 10,354,758

B. Banking book

B.1 Financial derivatives on debt securities and interest rates 2,474,425 6,728,481 7,223,711 16,426,617

B.2 Financial derivatives on equities and indices 108,883 1,398,868 45,000 1,552,751

B.3 Financial derivatives on currencies and gold 73,263 840,211 169,901 1,083,375

B.4 Financial derivatives - other - - - -

Total 31 december 2015 848,315,152 884,840,907 763,905,821 2,497,061,880

Total 31 december 2014 816,335,621 1,017,352,466 638,957,835 2,472,645,922

A.10 OTC financial derivatives: counterparty/financial risk – Internal modelsThe scope of regulatory validation of the internal models adopted by Banca IMI was extended to counterparty risk for OTC derivatives in 2014.


B.1 Credit derivatives: reporting date notional amounts

Regulatory trading book Banking book

single counterparty


(basket)

single counterparty


(basket)

1. Protection purchases




d) Other - - - -

TOTAL 31 DECEMBER 2015 20,442,855 35,864,652 - -

TOTAL 31 DECEMBER 2014 20,685,204 39,652,743 - -

2. Protection sales




d) Other - - - -

TOTAL 31 DECEMBER 2015 20,123,818 35,532,803 - -

TOTAL 31 DECEMBER 2014 20,313,375 39,121,779 - -


390

B.2 OTC credit derivatives: gross positive fair value - breakdown by product

Positive Fair value

2015 2014





d) Other - -

B. Banking book




d) Other - -

Total 1,091,728 1,498,012

B.3 OTC credit derivatives: gross negative fair value - breakdown by product

Negative Fair value

2015 2014





d) Other - -

B. Banking book




d) Other - -

Total 1,053,735 1,572,720


391

B.4 OTC credit derivatives: gross (positive and negative) fair values by counterparty - contracts not in-cluded in netting arrangements


Banks

Other government

agencies


Insurance companies


Other



– notional amount - - 815,000 - - - -



– future exposure - - 40,750 - - - -

2) Protection sales

– notional amount - - 52,232 - - - -



– future exposure - - - 5,223 - - -

Banking book





2) Protection sales




B.5 OTC credit derivatives: gross (positive and negative) fair values by counterparty - contracts included in netting arrangements


Banks

Other government

agencies


Insurance companies


Other



– notional amount - - 39,155,066 16,337,441 - - -



2) Protection sales

– notional amount - - 39,871,938 15,732,451 - - -



Banking book





2) Protection sales





392

B.6 Residual maturity of credit derivatives: notional amounts


Over 5 years Total


A.1 Credit derivatives with "qualified reference obligation" 28,148,942 70,206,047 2,056,055 100,411,044

A.2 Credit derivatives with "unqualified reference obligation" 1,480,128 9,512,396 560,560 11,553,084

B. Banking book

B.1 Credit derivatives with "qualified reference obligation" - - - -

B.2 Credit derivatives with "unqualified reference obligation" - - - -

TOTAL 31 DECEMBER 2015 29,629,070 79,718,443 2,616,615 111,964,128

TOTAL 31 DECEMBER 2014 21,668,668 95,383,858 2,720,575 119,773,101

C. Credit and financial derivatives

C.1 OTC credit and financial derivatives: net fair values and future exposure by counterparty


Banks

Other government

agencies


Insurance companies


Other

1) Bilateral agreements on financial derivatives

– positive fair value 3,548,639 - 2,737,754 202,310 119,117 306,112 -

– negative fair value - - (395,202) (4,148,668) (16,266) (161,433) -

– future exposure 106,033 - 814,907 3,793,223 41,904 129,769 -

– net counterparty risk 3,654,672 - 1,832,978 3,848,213 161,021 334,323 -

2) Bilateral agreements on credit derivatives

– positive fair value - - - 171 - - -


– future exposure - - 842 3,610 - - -

– net counterparty risk - - 842 3,635 - - -

3) "Cross product" agreements

– positive fair value - - 1,429,562 635,851 - - -

– negative fair value - - (3,802,462) (317,026) - - -

– future exposure - - 3,465,345 869,958 - - -

– net counterparty risk - - 3,519,538 883,907 - - -

1.3 - BANKING GROUP - LIQUIDITY RISK


A. General aspects, management processes and methods of measuring liquidity risk“Liquidity risk” is the risk that the Group is unable to maintain its payment commitments because of an inability (i) to source new funds (funding liquidity risk), or (ii) to sell assets on the market (market liquidity risk) to pay the imbalance that required funding, or that it is in any case forced to incur high costs in order to meet its commitments.


393


1. Breakdown of financial assets and liabilities by residual contractual maturity

Currency: EUR

On demand Between1 and

7 days

Between7 and 15

days

Between15 day and

1 month

Between1 and

3 months

Between3 and

6 months

Between 6 months

and 1 year

Between 1 and

5 years

Over 5 years


On-balance-sheet assets 16,111,614 5,327,139 475,988 1,918,218 10,565,616 13,983,752 9,516,547 31,030,972 13,547,340 71,556

A.1 Government bonds 6,373 1,745 252 27,593 84,140 2,241,848 1,663,216 2,078,466 6,740,783 40,980

A.2 Other debt securities 111,082 1,452 8,591 126,219 107,365 223,395 607,556 5,519,348 3,311,646 1,101

A.3 Quotas of UCI 396,895 - - - - - - - - -

A.4 Loans

– Banks 7,714,574 3,260,055 366,775 1,274,076 7,532,781 10,560,034 5,876,597 18,770,707 2,212,195 29,475

– Customers 7,882,690 2,063,887 100,370 490,330 2,841,330 958,475 1,369,178 4,662,451 1,282,716 -

On-balance-sheet liabilities 10,540,457 18,662,692 1,361,392 1,703,536 8,598,345 9,436,829 15,061,377 29,341,492 2,600,977 -


– Banks 6,197,670 162,983 1,203,109 1,044,664 8,215,327 8,847,195 11,802,111 17,118,229 1,264,222 -

– Customers 373,078 - - - - - - - - -

B.2 Debt securities 1,354 93 - 90,959 64,428 577,225 3,194,154 11,234,460 745,893 -

B.3 Other liabilities 3,968,355 18,499,616 158,283 567,913 318,590 12,409 65,112 988,803 590,862 -



– Long positions 1,060,622 917,545 245,735 1,488,182 6,027,025 1,303,697 1,775,912 11,164,806 12,340,840 -

– Short positions 1,251,518 1,056,761 185,514 324,853 4,964,547 1,439,765 1,839,567 11,408,289 12,041,807 -


– Long positions 33,882,010 - 3 3,909 11,667 21,674 96,357 - - -

– Short positions 33,620,496 2,174 379 9,234 30,009 32,308 56,929 - - -


– Long positions 17,184,340 - - - - - - - - -

– Short positions - 17,184,340 - - - - - - - -


– Long positions 61,672 2,752,406 - - - 120,017 288,807 1,613,236 654,153 -

– Short positions 5,685,061 - - - - - - - - -

C.5 Financial guarantees given - - - - - 38,160 - 8,894 263,201 -

C.6 Financial guarantees received

- - - - - - - - - -


– Long positions - - - - 1,135,750 1,764,500 2,660,850 11,783,990 2,334,800 -

– Short positions - - - - 1,135,750 1,764,500 2,660,850 11,783,990 2,334,800 -


– Long positions 647,081 - - - - - - - - -

– Short positions 600,585 - - - - - - - - -


394

Currency: OTHER CURRENCIES

On demand Between1 and

7 days

Between7 and 15

days

Between15 day and

1 month

Between1 and

3 months

Between3 and

6 months

Between 6 months

and 1 year

Between 1 and

5 years

Over 5 years


On-balance-sheet assets 1,103,293 164,111 30,525 21,858 37,644 1,271,376 818,838 1,476,680 3,341,051 14,074

A.1 Government bonds 134 60 587 1,183 7,477 12,740 25,484 338,424 2,310,461 14,025

A.2 Other debt securities 18,815 414 16,559 6,131 11,088 18,724 21,674 211,936 220,473 49

A.3 Quotas of UCI 747 - - - - - - - - -

A.4 Loans

– Banks 722,588 161,732 2,676 - 619 1,206,690 638,832 564,342 461,649 -

– Customers 361,009 1,905 10,703 14,544 18,460 33,222 132,848 361,978 348,468 -

On-balance-sheet liabilities 961,480 2,066,185 71,472 15,727 11,900 1,419,522 748,648 2,622,671 1,060,449 -


– Banks 228,692 300,854 7,527 276 3,275 1,228,512 634,688 233,533 42,248 -

– Customers 220,159 - - - - - - - - -

B.2 Debt securities - - - 15,363 8,412 179,242 113,678 2,119,644 612,180 -

B.3 Other liabilities 512,629 1,765,331 63,945 88 213 11,768 282 269,494 406,021 -



– Long positions 86,283 179,056 345,529 653,982 2,915,249 2,383,702 3,168,157 12,839,613 10,392,758 -

– Short positions 244,931 963,511 412,790 1,809,090 3,206,055 2,689,638 3,517,228 10,576,330 10,535,090 -


– Long positions 2,320,043 33 67 9,019 5,769 16,189 21,121 - - -

– Short positions 1,599,072 32 150 7,287 7,268 14,675 25,302 - - -


– Long positions 553,108 - - - - - - - - -

– Short positions - 553,108 - - - - - - - -


– Long positions - - 1,031 - - - - 5,014 1,792 -

– Short positions 108,094 - - - - - - - - -

C.5 Financial guarantees given - - - - - - - - - -

C.6 Financial guarantees received

- - - - - - - - - -


– Long positions - - - - 675,117 160,742 362,818 4,911,914 9,185 -

– Short positions - - - - 675,117 160,742 362,818 4,911,914 9,185 -


– Long positions 118,311 - - - - - - - - -

– Short positions 125.341 - - - - - - - - -


395

1.4 BANKING GROUP - OPERATIONAL RISKS


A. General aspects, management processes and methods of measuring operational riskSee the Notes to the separate financial statements.

396

Part F – Consolidated equity

SECTION 1 – CONSOLIDATED EQUITY

A. QUALITATIVE INFORMATIONThe objectives pursued in the management of the equity of the Bank are based on the provision of prudential supervision, and are aimed at maintaining suitable levels of capital adequacy in order to take on the risks inherent in structured finance, capital markets and investment banking. Risks that can – among other things – involve temporary absorption of regulatory capital following placement operations performed on primary markets or due to concentration requirement on certain issuers or business groups.The earnings appropriation policy aims to reinforce the Bank's capital structure, with a particular emphasis on tier 1 regulatory capital, to value the economic capital and to ensure a properly balanced financial position. Credit risk mitigation techniques (netting) and internal market risk models have been introduced with the aim of optimising the use of regulatory capital.

B. QUANTITATIVE INFORMATION

B.1 Consolidated equity: breakdown by type of company

Banking Group

Insurance Companies

Other Eliminations and consolidation adjustments

Total

Share Capital 962,464 962,464

Share premium reserve 581,260 581,260

Reserves 1,573,629 1,573,629

Interim dividends (-) (307,988) (307,988)

Equity Instruments -

(Treasury shares) -

Valuation reserves: -

- Available-for-sale financial assets (49,355) (49,355)

- Property and equipment -

- Intangible assets -

- Hedges of investments in foreign operations -

- Cash flow hedges -

- Exchange rate gains (losses) -

- Non-current assets held for sale -

- Actuarial gains and losses on defined-benefit plans (725) (725)

- Portion of valuation reserves of equity-accounted investees -

- Special revaluation laws 4 4

Profit for the year 533,715 533,715

Total 3,293,004 - - - 3,293,004

Reserves include 5 million for positive effects pursuant to IFRS 2 of the LECOIP plan.On 30 December, Banca IMI distributed to the Ultimate Parent an interim dividend of 308 million.

Notes to the consolidated financial statements - Part F - Consolidated equity

397

B.2 Fair value reserves of available-for-sale financial assets: breakdown

Banking Group Insurance Companies

Other Eliminations and consolidation adjustments

Total 31 December 2015

Fair value gains

Fair value losses

Fair value gains

Fair value losses

Fair value gains

Fair value losses

Fair value gains

Fair value losses

Fair value gains

Fair value losses

1. Debt securities 25,193 (83,040) 25,193 (83,040)

2. Equities 5,006 - 5,006 -

3. UCI quotas 3,486 - - - - - - - 3,486 -

4. Loans - - - - - - - - - -

Total 33,685 (83,040) - - - - - - 33,685 (83,040)

Total 31 december 2014 70,923 (20,882) - - - - - - 70,923 (20,882)

Data for UCI show the effects of the consolidation of Epsilon SGR using the equity method.

B.3 Fair value reserves of available-for-sale financial assets: annual changes

Debt securities Equities UCI quotas Loans

1. Initial amount 42,546 3,504 3,991 -

2. Increases

2.1 Fair value gains 28,224 774 111 -


– impairment - - 20 -

– disposal 1,811 - - -

2.3. Other increases - 728 - -

3. Decreases

3.1 Fair value losses (97,856) - (636) -

3.2 Impairment losses - - - -


– disposal (32,572) - - -

3.4. Other decreases - - - -

4. Final amount (57,847) 5,006 3,486 -

Notes to the consolidated financial statements - Part F - Consolidated equity

398

B.4 Fair value reserves on defined benefit pension plans: annual changes

1. Initial amount (940)

2. Increases

2.1 Fair value gains 144


– impairment -

– disposal -

2.3. Other increases 71

3. Decreases

3.1 Fair value losses -

3.2 Impairment losses -


– disposal -

3.4. Other decreases -

4. Final amount (725)

Increases and decreases include the effects of the implementation of IAS 19 by companies measured at equity.

SECTION 2 – OWN FUNDS AND CAPITAL RATIOS

Banca IMI is not the parent of a banking group. As such, no disclosures are required of regulatory capital and capital ratios.

399

Part H – Related party transactions

1. INFORMATION ON THE COMPENSATION OF KEY MANAGEMENT PERSONNEL

In accordance with IAS 24, “key management personnel” (hereinafter “officers”) includes the Directors and Statutory Auditors, where appointed, of each Group company.Also included are the Director General and Managers in the Global Market, Corporate & Strategic Finance and Operational Governance areas and the Manager in charge of financial reporting of Banca IMI. all of whom hold functional responsibility for the Group’s foreign subsidiaries.

The following table shows the main benefits paid by the Group to its officers in 2015 (figures in thousands of euro).

Short-term benefits 4,271

Post-employment benefits 259

Other long-term benefits 1,382

Termination benefits -

Stock option plans 1,478

Total 7,390

2. INFORMATION ON RELATED PARTY TRANSACTIONS

As of 31 December 2012, the Group adopted the “Group's Regulation for the Management of Transactions with Related Parties of Intesa Sanpaolo S.p.A. and Affiliated Entities to the Group” and a relative addendum (hereinafter the “Regulation”), approved in June 2012 by the Board of Directors, following their approval of the Technical Audit Committee and the Board of Statutory Auditors.

The Regulation complies with Consob rules, in accordance with Article 2391-bis of the Italian Civil Code, and the supervisory provisions introduced by Bank of Italy on 12 December 2011 governing exposures and conflicts of interests of banks and banking groups towards “related parties”, implementing Article 53.4, et seq. of the Consolidated Law on Banking and complying with resolution 277 of 29 July 2008 of the Interministerial Committee for Credit and Savings (CICR).

The entities considered relevant for the purposes of the Regulation include related parties of the Group, identified in accordance with IAS 24.

The Regulations govern the aspects below:– The criteria for identifying related parties and affiliated entities.– The process of analysis, decision-making and information for Corporate Bodies in connection with transactions

with Related Parties and Affiliated Entities.– Market disclosure for transactions with Related Parties.– The prudential limits and obligations of periodic reporting to the Bank of Italy for risk in relation to Affiliated

Entities. – The rules governing controls and organisational safeguards.– The general rules for disclosure and abstention for the management of the personal interests of officers,

employees and company staff, including other than Affiliated Entities.

In addition, Banca IMI and its subsidiaries adopted an “Addendum” to the Group Regulation, governing the decision-making rules and procedures. Together, the addendum and Group Regulation provide the full framework for conducting transactions with Related Parties.

Notes to the consolidated financial statements - Part H - Related-party transactions

400

Financial and business relations with entities considered “related parties” essentially consist of standard financial dealing and investment services.

Where such dealings exist, they are reviewed for potential conflicts of interest and are conducted at arm’s-length conditions.

Assets and liabilities with group companies(in millions of euro)

Ultimate parent

Intesa Sanpaolo subsidiaries


Caption

Due from banks and customers 49,174.0 3,020.9 62.4% 83,584.3

Due to banks and customers 57,911.1 1,520.1 70.7% 84,100.6

Financial assets - Fixed income securities HFT 5,168.5 67.1 35.2% 14,864.9

Financial assets - Fixed income securities AFS 320.2 48.0 3.2% 11,556.7

Financial assets - Fixed income securities L&R - 3.9 0.6% 693.2

Financial liabilities - Securities issued 2,973.3 12.4 21.5% 13,866.8

Financial derivatives (notional amount) 367,718.0 37,881.0 15.0% 2,704,872.0

Financial derivatives - Net Fair Value 1,060.9 1,611.4

Credit derivatives (notional amount) 6,599.0 468.0 6.3% 111,964.1

Credit derivatives - Net Fair Value 118.0 54.6

Relations with Intesa Sanpaolo refer principally to Banca IMI within the scope of financial dealings, as reported below.

Relations with Intesa Sanpaolo as at 31 December 2015 (in millions of euro)

Assets Amount Liabilities Amount

Checking accounts 3,654.7 Checking accounts 3,297.6

Deposits 45,079.2 Loans and deposits 51,869.1

Repurchase agreements 405.7 Repurchase agreements 2,333.8

Invoices and other assets 33.4 Invoices and other payables 410.6

Fixed income securities 5,488.7 Securities issued 2,973.3

Total assets 54,661.7 Total liabilities 60,884.4

Costs and incomes with Intesa Sanpaolo Group are reported below:

Costs and income with Intesa Sanpaolo group companies (in millions of euro)

Ultimate parent

Intesa Sanpaolo subsidiaries


Caption

Interest income 671.2 30.0 47.7% 1,470.1

Fee and commission income 97.3 23.7 24.8% 488.8

Interest expense (285.1) (5.2) 32.6% (891.7)

Fee and commission expense (77.7) (70.8) 64.4% (230.5)

Administrative expenses and recovered amounts (178.1) (17.2) 33.0% (592.7)

Relations with related parties that are not key managers or Intesa Sanpaolo Group companies all refer to Banca IMI. As regards the related disclosure, one should refer to the separate financial statements.

401

Part I – Equity-settled share based payment agreements

Incentive scheme reserved for risk takers

The incentive scheme based on financial instruments has been set up for so-called “risk takers”, whose identification follows from the analysis of the attributed responsibilities and the assigned independent management powers, irrespective of their geographical location within the IMI Group.

For details of the plan, see the information included in the separate financial statements, with the clarification that the Intesa Sanpaolo ordinary shares servicing the plan were purchased exclusively by Banca IMI.

LECOIP share investment scheme

Coinciding with the launch of the Business Plan for 2014-2017, the Intesa Sanpaolo Group has defined an incentive scheme for employees, featuring innovative ways of motivating employees and increasing their loyalty, alongside the more traditional assignment of shares with a view to “broad-based ownership”.

The main technical specifications and authorisation procedures, internal and external, are described in section H of the Notes to Banca IMI's separate financial statements, to which reference should be made.

402

Part L – Segment reporting

Banca IMI’s segment reporting is based on the elements that its management uses on a daily and periodic basis to monitor profit margins, allocate resources and make its operational decisions (known as “management appro-ach”). It is thus compliant with the disclosure requirements set forth in IFRS 8.

The organisational model breaks down into three business segments with specific operational responsibilities: Global Markets, Investment Banking and Structured Finance.

CONSOLIDATED HIGHLIGHTS BY BUSINESS SEGMENT


Voci GlobalMarkets

Investment Banking

Structured Finance

Total

Financial assets held for trading 56,954.6 56,954.6

Available-for-sale financial assets 11,586.7 56.5 11,643.2

Due from banks and customers 77,703.2 6,574.3 84,277.5

Financial liabilities held for trading 51,653.5 51,653.5

Bond Issues 13,866.8 13,866.8

Due to banks and customers 78,276.3 5,824.3 84,100.6

Guarantees given and commitments to lend (*) 2,212.9 2,468.9 4,681.8

Total income 1,044.9 120.0 278.0 1,442.9

Operating costs (327.9) (60.1) (61.8) (449.8)

Impairment losses and provisions, other income and expense (**) (46.8) (47.2) (81.4) (175.4)

Income tax (233.3) (4.5) (46.2) (284.0)


Cost / income 31.4% 50.1% 22.2% 31.2%

Number of employees (***) 538 162 186 886

Risk Weighted Assets 15,827.5 108.8 8,652.5 24,588.8

(*) Excluding commitments underlying credit derivatives (protection sales)(**) The expense for the National Resolution Fund was divided equally between segments(***) Includes pro-quota the staff employees

Aggregates are allocated to business segments on the basis of management figures for total income and operating costs, appropriately reconciled with accounting records, and according to the specific allocation and distribution of financial statements aggregates, including risk-weighted exposures, for the remaining captions.

For the measurement of revenue and costs deriving from inter-segment transactions, the application of a contribution model at multiple Internal Transfer Rates for the various maturities permits the correct attribution of net interest income to the individual areas.

Independent Auditors’ Report on the ConsolidatedFinancial Statements

405

KPMG S.p.A. è una società per azioni di diritto italiano e fa parte del network KPMG di entità indipendenti affiliate a KPMG International Cooperative (KPMG International), entità di diritto svizzero

ABCD

Ancona Aosta Bari Bergamo Bologna Bolzano Brescia Catania Como Firenze Genova Lecce Milano Napoli Novara Padova Palermo Parma Perugia Pescara Roma Torino Treviso Trieste Varese Verona

Società per azioni Capitale sociale Euro 9.179.700,00 i.v. Registro imprese Milano e Codice Fiscale N. 00709600159 R.E.A. Milano N. 512867 Partita IVA 00709600159 VAT number IT00709600159 Sede legale: Via Vittor Pisani, 25 20124 Milano MI

KPMG S.p.A. Revisione e organizzazione contabile Via Vittor Pisani, 25 20124 MILANO MI

Telefono +39 02 6763.1 Telefax +39 02 67632445 e-mail [email protected] PEC [email protected]

(Translation from the Italian original which remains the definitive version) Independent auditors’ report pursuant to articles 14 and 16 of Legislative decree no. 39 of 27 January 2010 and article 165 of Legislative decree no. 58 of 24 February 1998

To the sole shareholder of Banca IMI S.p.A.

Report on the consolidated financial statements We have audited the accompanying consolidated financial statements of the Banca IMI Group (the “group”), which comprise the statement of financial position as at 31 December 2015, the income statement and statements of comprehensive income, changes in equity and cash flows for the year then ended and notes thereto.

Directors’ responsibility for the consolidated financial statements The parent’s directors are responsible for the preparation of consolidated financial statements that give a true and fair view in accordance with the International Financial Reporting Standards endorsed by the European Union and the Italian regulations implementing article 9 of Legislative decree no. 38/05.

Independent auditors’ responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with the International Standards on Auditing (ISA Italia) promulgated pursuant to article 11.3 of Legislative decree no. 39/10. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity’s preparation of consolidated financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal controls. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

406

Banca IMI Group

Independent auditors’ report 31 December 2015

2

ABCD

Opinion In our opinion, the consolidated financial statements give a true and fair view of the group’s financial position as at 31 December 2015 and of its financial performance and cash flows for the year then ended in accordance with the International Financial Reporting Standards endorsed by the European Union and the Italian regulations implementing article 9 of Legislative decree no. 38/05.

Report on other legal and regulatory requirements

Opinion on the consistency of the consolidated report on operations and certain information presented in the report on corporate governance and ownership structure with the consolidated financial statements We have performed the procedures required by Standard on Auditing (SA Italia) 720B in order to express an opinion, as required by the law, on the consistency of the consolidated report on operations and the information presented in the report on corporate governance and ownership structure required by article 123-bis.2.b) of Legislative decree no. 58/98, which are the responsibility of the parent’s directors, with the consolidated financial statements at 31 December 2015. In our opinion, the consolidated report on operations and the information presented in the report on corporate governance and ownership structure referred to above are consistent with the consolidated financial statements of Banca IMI S.p.A. as at and for the year ended 31 December 2015.

Milan, 2 March 2016

KPMG S.p.A.

(signed on the original)

Luca Beltramme Director of Audit

407

Attachments

Reconciliation between the consolidated financial statementsand the reclassified financial statements

Consolidated audit fees

List of international financial reporting standards (IFRS)

IMI Group and Corporate Governance

Attachments

409

Reconciliation between the riclassified income statement for the year ended 31 December 2015 and the income statement included in the consolidated financial statements


INCOME STATEMENT - CONSOLIDATED FINANCIAL STATEMENTS

RECLASSIFIED INCOME STATEMENT

Net

inte

rest

inco

me

Net

fee

and

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mm

issi

on in

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e

Div

iden

ds

Net

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Net

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se)

Profi

ts o

n di

spos

al

Net

impa

irm

ent

loss

es

Pers

onne

l ex

pens

es

Oth

er

adm

inis

trat

ive

expe

nses

Am

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depr

ecia

tion

Acc

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an

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L

Net interest income 576.0 3.5 579.5

Net fee and commission income 376.7 376.7

Profits from financial transactions

2.4 (118.5) 40.9 328.8 7.8 218.3 479.7

Non-recurring income (expense) 0.2 6.8 7.0

Personnel expenses 1.5 (161.1) (159.6)

Administrative expenses (1.0) (292.0) 3.4 (289.6)

Amortisation and depreciation (0.6) (0.6)

Impairment losses, provisions, other operating income (expenses) (38.4) 2.9 (141.8) 1.7 0.2 (175.4)

Income taxes (0.2) (283.8) (284.0)

TOTAL 578.4 258.2 41.1 328.8 7.8 184.9 2.9 (162.1) (433.8) (0.6) 1.7 3.4 6.8 (283.8) 533.7

The riclassified income statement aims to better represent management phenomena, highlighting the economic connection of some financial statements items with the economic trends of non-recurring items.

Specifically:– the dividends and manufactured dividends received on trading and fees for the placement of HFT financial

instruments are recognised under profits from financial transactions;- other administrative expenses are net of reimbursements and recovered amounts.

Attachments

410

Reconciliation between the reclassified statement of financial position as at 31 December 2015 and the statement of financial position included in the consolidated financial statements - Assets


ASSETS

Fina

ncia

l ass

ets

held

for

tra

ding

Ava

ilabl

e-fo

r-sa

le

fina

ncia

l ass

ets

Due

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anks

Loan

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Equi

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nves

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ts

Tax

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ts

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Stat

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ther

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stat

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fi

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ial p

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ions

- A

sset

s

1. Loans



– Fixed income securities 693.2 693.2

– Collateral deposited 4,533.1 5,019.9 9,553.0

– Structured finance assets 7.2 6,567.1 6,574.3

– Deposits 45,160.5 1,877.9 47,038.4


3,916.9 1,107.9 5,024.8

2. Financial assets

– Fixed income securities 14,864.9 14,864.9

– Shares, quotas and loans 1,230.3 1,230.3

– Positive fair value of OTC derivatives

40,859.4 203.2 41,062.6

– Positive fair value of CCP and listed derivatives -

3. Investments

– Fixed income AFS securities 11,556.7 11,556.7

– Equity investments, equities and UCI AFS 86.5 13.3 99.8

4. Other assets 502.2 445.6 1.2 949.0

Total Assets 56,954.6 11,643.2 60,923.6 23,353.9 203.2 13.3 502.2 445.6 1.2 154,040.8

Attachments

411

Reconciliation between the reclassified statement of financial position as at 31 December 2015 and the statement of financial position included in the consolidated financial statements - Liabilities


LIABILITIES

Due

to

bank

s

Due

to

cust

omer

s

Secu

riti

es is

sued

Fina

ncia

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bilit

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held

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and

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of

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ns

- Lia

bilit

ies

1. Payables



– Collateral received 4,627.9 961.0 5,588.9

– Loans and deposits 53,949.5 53,949.5

– Bonds issued and subordinated loans 13,866.8 13,866.8


144.4 597.7 742.1

2. Financial liabilities

– Negative fair value of OTC derivatives

36,582.7 164.6 36,747.3

– Negative fair value of CCP and listed derivatives 4,076.5 4,076.5

– Certificates and warrants 8,033.9 8,033.9

– Short selling 2,960.4 2,960.4

3. Other liabilities and provisions 342.3 8.7 24.1 587.2 962.3

4. Equity

– Share capital, share premium and reserves

1,215.6 1,543.7 2,759.3

– Profit for the year 533.7 533.7

Total Liabilities 68,073.7 16,026.9 13,866.8 51,653.5 164.6 342.3 8.7 24.1 587.2 1,215.6 1,543.7 533.7 154,040.8

Attachments

412

Fees for audit and other services in accordance with Article 149-duodecies of Consob Regulation No. 11971

Following amendment of the Consolidated Finance Law - contained in Law 262 dated 28 December 2005, supplemented by Legislative Decree no. 3032 dated 29 December 2006 – the regulations governing the incompatibility of audit firms were changed, with new requirements for the disclosure of audit fees introduced in accordance with section 160.1-bis.

Section 149-duodecies of the Consob Issuer Regulations implemented the provisions contained in this section of the Law. The implementation Decree established that companies appointing auditors must disclose fees paid in their financial statements for the periods after 30 June 2006.

The following table lists the fees for 2015 pertinent to Banca IMI Group.


Type of service KPMG KPMG Network

Other independent auditors

Audit 852 34 185

Attestation services 65 -

Tax consulting services - - -

Other:

appraisals - - -

social report - - -

other - - -

Total 917 34 185

Attachments

413

List of the IFRS endorsed as at 31 December 2015

ACCOUNTING STANDARDS Endorsement regulation

IFRS 1 First-time Adoption of International Financial Reporting Standards 1126/2008 mod. 1260/2008 - 1274/2008 - 69/2009 - 70/2009 -254/2009 - 494/2009 - 495/2009 - 1136/2009 - 1164/2009 - 550/2010 - 574/2010 - 662/2010 - 149/2011 - 1205/2011 - 475/2012 - 1254/2012 - 1255/2012 - 183/2013 - 301/2013 -1174/2013 - 2173/2015 (**) - 2343/2015 (**) - 2441/2015 (**)

IFRS 2 Share-based Payment 1126/2008 mod. 1261/2008 - 495/2009 - 243/2010 - 244/2010 - 1254/2012 - 1255/2012 - 28/2015 (*)

IFRS 3 Business Combinations 1126/2008 mod. 495/2009 - 149/2011 - 1254/2012 - 1255/2012 - 1174/2013 - 1361/2014 - 28/2015 (*)

IFRS 4 Insurance Contracts 1126/2008 mod. 1274/2008 - 494/2009 - 1165/2009 - 1255/2012

IFRS 5 Non-current Assets Held for Sale and Discontinued Operations 1126/2008 mod. 1274/2008 - 70/2009 - 494/2009 - 1142/2009 - 243/2010 - 475/2012 - 1254/2012 - 1255/2012 - 2343/2015 (**)

IFRS 6 Exploration for and Evaluation of Mineral Resources 1126/2008

IFRS 7 Financial Instruments: Disclosures 1126/2008 mod. 1274/2008 - 53/2009 - 70/2009 - 495/2009 - 824/2009 - 1165/2009 - 574/2010 - 149/2011 - 1205/2011 - 475/2012 - 1254/2012 - 1255/2012 - 1256/2012 - 1174/2013 - 2343/2015 (**) - 2406/2015 (**)

IFRS 8 Operating Segments 1126/2008 mod. 1274/2008 - 243/2010 - 632/2010 - 475/2012 - 28/2015 (*)

IFRS 10 Consolidated Financial Statements 1254/2012 mod. 313/2013 - 1174/2013

IFRS 11 Joint Arrangements 1254/2012 mod. 313/2013 - 2173/2015 (**)

IFRS 12 Disclosure of Interests in Other Entities 1254/2012 mod. 313/2013 - 1174/2013

IFRS 13 Fair Value Measurement 1255/2012 mod. 1361/2014

IAS 1 Presentation of Financial Statements 1126/2008 mod. 1274/2008 - 53/2009 - 70/2009 - 494/2009 - 243/2010 - 149/2011 - 475/2012 - 1254/2012 - 1255/2012 - 301/2013 - 2113/2015 (**) - 2406/2015 (**)

IAS 2 Inventories 1126/2008 mod. 70/2009 - 1255/2012

IAS 7 Statement of Cash Flows 1126/2008 mod. 1260/2008 - 1274/2008 - 70/2009 - 494/2009 - 243/2010 - 1254/2012 - 1174/2013

IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors 1126/2008 mod. 1274/2008 - 70/2009 - 1255/2012

IAS 10 Events after the Reporting Period 1126/2008 mod. 1274/2008 - 70/2009 - 1142/2009 - 1255/2012

IAS 11 Construction Contracts 1126/2008 mod. 1260/2008 - 1274/2008

IAS 12 Income Taxes 1126/2008 mod. 1274/2008 - 495/2009 - 475/2012 - 1254/2012 - 1255/2012 - 1174/2013

IAS 16 Property, Plant and Equipment 1126/2008 mod. 1260/2008 - 1274/2008 - 70/2009 - 495/2009 - 1255/2012 - 301/2013 - 28/2015 (*) - 2113/2015 (**) - 2231/2015 (**)

IAS 17 Leases 1126/2008 mod. 243/2010 - 1255/2012 - 2113/2015 (**)

IAS 18 Revenue 1126/2008 mod. 69/2009 - 1254/2012 - 1255/2012

IAS 19 Employee Benefits 1126/2008 mod. 1274/2008 - 70/2009 - 475/2012 - 1255/2012 - 29/2015 (*) - 2343/2015 (**)

IAS 20 Accounting for Government Grants and Disclosure of Government Assistance

1126/2008 mod. 1274/2008 - 70/2009 - 475/2012 - 1255/2012

IAS 21 The Effects of Changes in Foreign Exchange Rates 1126/2008 mod. 1274/2008 - 69/2009 - 494/2009 - 149/2011 - 475/2012 - 1254/2012 - 1255/2012

IAS 23 Borrowing costs 1126/2008 mod. 1260/2008 - 70/2009 - 2113/2015 (**)

IAS 24 Related Party Disclosures 1126/2008 mod. 1274/2008 - 632/2010 - 475/2012 - 1254/2012 - 1174/2013 - 28/2015 (*)

IAS 26 Accounting and Reporting by Retirement Benefit Plans 1126/2008

IAS 27 Consolidated and Separate Financial Statements 1126/2008 mod. 1274/2008 - 69/2009 - 70/2009 - 494/2009 - 1254/2012 - 1174/2013 - 2441/2015 (**)

IAS 28 Investments in Associates 1126/2008 mod. 1274/2008 - 70/2009 - 494/2009 - 495/2009 - 1254/2012 - 1255/2012 - 2441/2015 (**)

IAS 29 Financial Reporting in Hyperinflationary Economies 1126/2008 mod. 1274/2008 - 70/2009

IAS 32 Financial Instruments: Presentation1126/2008 mod. 1274/2008 - 53/2009 - 70/2009 - 494/2009 - 495/2009 - 1293/2009 - 475/2012 - 1254/2012 - 1255/2012 - 1256/2012 - 301/2013 - 1174/2013

IAS 33 Earnings per Share 1126/2008 mod. 1274/2008 - 494/2009 - 495/2009 - 475/2012 - 1254/2012 - 1255/2012

IAS 34 Interim Financial Reporting 1126/2008 mod. 1274/2008 - 70/2009 - 495/2009 - 149/2011 - 475/2012 - 1255/2012 - 301/2013 - 1174/2013 - 2343/2015 (**) - 2406/2015 (**)

IAS 36 Impairment of Assets 1126/2008 mod. 1274/2008 - 69/2009 - 70/2009 - 495/2009 - 243/2010 - 1254/2012 - 1255/2012 - 1374/2013 - 2113/2015 (**)

IAS 37 Provisions, Contingent Liabilities and Contingent Assets 1126/2008 mod. 1274/2008 - 495/2009 - 28/2015 (*)

IAS 38 Intangible Assets 1126/2008 mod. 1260/2008 - 1274/2008 - 70/2009 - 495/2009 - 243/2010 - 1254/2012 - 1255/2012 - 28/2015 (*) - 2231/2015 (**)

IAS 39 Financial Instruments: Recognition and Measurement (except for certain rules on hedge accounting)

1126/2008 mod. 1274/2008 - 53/2009 - 70/2009 - 494/2009 - 495/2009 - 824/2009 - 839/2009 - 1171/2009 - 243/2010 - 149/2011 - 1254/2012 - 1255/2012 - 1174/2013 - 1375/2013 - 28/2015 (*)

IAS 40 Investment Property 1126/2008 mod. 1274/2008 - 70/2009 - 1255/2012 - 1361/2014 - 2113/2015 (**)

IAS 41 Agriculture 1126/2008 mod. 1274/2008 - 70/2009 - 1255/2012 - 2113/2015 (**)

(*) Companies apply this Regulation at the latest as of the first annual period beginning on or after 1 February 2015.(**) Companies apply this Regulation at the latest as of the first annual period beginning on or after 1 January 2016.

Attachments

414

INTERPRETATIONS Endorsement regulation

IFRIC 1 Changes in Existing Decommissioning, Restoration and Similar Liabilities

1126/2008 mod. 1260/2008 - 1274/2008

IFRIC 2 Members' Shares in Cooperative Entities and Similar Instruments 1126/2008 mod. 53/2009 - 1255/2012 - 301/2013

IFRIC 4 Determining whether an Arrangement contains a Lease 1126/2008 mod. 254/2009 - 1255/2012

IFRIC 5 Rights to Interests arising from Decommissioning, Restoration and Environmental Rehabilitation Funds

1126/2008 mod. 1254/2012

IFRIC 6 Liabilities arising from Participating in a Specific Market - Waste Electrical and Electronic Equipment

1126/2008

IFRIC 7 Applying the Restatement Approach under IAS 29 - Financial Reporting in Hyperinflationary Economies

1126/2008 mod. 1274/2008

IFRIC 9 Reassessment of Embedded Derivatives 1126/2008 mod. 495/2009 - 1171/2009 - 243/2010 - 1254/2012

IFRIC 10 Interim Financial Reporting and Impairment 1126/2008 mod. 1274/2008

IFRIC 12 Service Concession Arrangements 254/2009

IFRIC 13 Customer Loyalty Programmes 1262/2008 mod. 149/2011 - 1255/2012

IFRIC 14 The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction

1263/2008 mod. 1274/2008 - 633/2010 - 475/2012

IFRIC 15 Agreements for the Construction of Real Estate 636/2009

IFRIC 16 Hedges of a Net Investment in a Foreign Operation 460/2009 mod. 243/2010 - 1254/2012

IFRIC 17 Distributions of Non-cash Assets to Owners 1142/2009 mod. 1254/2012 - 1255/2012

IFRIC 18 Transfers of Assets from Customers 1164/2009

IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments 662/2010 mod. 1255/2012

IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine 1255/2012

IFRIC 21 Levies 634/2014

SIC 7 Introduction of the Euro 1126/2008 mod. 1274/2008 - 494/2009

SIC 10 Government Assistance - No Specific Relation to Operating Activities 1126/2008 mod. 1274/2008

SIC 15 Operating Leases - Incentives 1126/2008 mod. 1274/2008

SIC 25 Income Taxes - Changes in the Tax Status of an Entity or its Shareholders

1126/2008 mod. 1274/2008

SIC 27 Evaluating the Substance of Transactions in the Legal Form of a Lease

1126/2008

SIC 29 Service Concession Arrangements: Disclosures 1126/2008 mod. 1274/2008 - 254/2009

SIC 31 Revenue - Barter Transactions Involving Advertising Services 1126/2008

SIC 32 Intangible Assets - Web Site Costs 1126/2008 mod. 1274/2008

415

IMI Group and Corporate GovernanceBanca IMI S.p.A.Largo Raffaele Mattioli, 320121 Milan (Italy)

Chamber of Commerce registration number and tax ID code 04377700150

GIIN (Global Intermediary Identification Number) D9I1IN.00011.ME.380

LEI (Legal Entity Identification) number QV4Q8OGJ7OA6PA8SCM14

Banca IMI London Branch90 Queen Street EC4N 1SALondon, United Kingdom

VAT Number GB654042163

GIIN (Global Intermediary Identification Number) D9I1IN.00011.BR.826

Banca IMI Securities Corp.1 William Street – 9th floorNew York, NY 10004 USA

TIN 13-3380760

LEI (Legal Entity Identification) number V48XYRSNOB3HY0J4NK61

IMI Capital Markets USA Corp.1 William Street – 9th floorNew York, NY 10004 USA

TIN 53-0257352

IMI Investments S.A.11-13, Boulevard de la FoireL-1528 Luxembourg

Numéro fiscal LU19962205162

LEI (Legal Entity Identification) number 222100ECVDB4RTLS8E02

IMI Finance Luxembourg S.A.11-13 Boulevard de la FoireL-1528 Luxembourg

Numéro fiscal LU20022235290

LEI (Legal Entity Identification) number 222100010JWE1Q5MJ171

For information on Group Governance, see the Directors' Report on Operations and the “Report on Corporate Governance and Ownership Structures” in the separate financial statements of Banca IMI.

Prepress and printing: Agema® S.p.A.

The Intesa Sanpaolo skyscraper.Innovation and reinvention in the Bank and the city.

Designed to bring together the central offices and the main management departments of the Bank in a single location, the Intesa Sanpaolo skyscraper is a new meeting point in the city of Turin. Built in a strategic position, at the edge of the city centre in a high traffic area, the building is an original example of “relational architecture”. Designed by Renzo Piano Building Workshop and constructed by the most qualified Italian companies at the global level, the skyscraper embodies the values of growth, architectural innovation, social and environmental sustainability and integration between workspaces and areas open to the public. The base and the top of the building have areas that can be accessed by the public, such as the Auditorium and the bioclimatic greenhouse with a restaurant, an exhibition room and a panoramic café. These spaces make the skyscraper a public attraction, contribute to integrating the building in the social fabric of the city, and consolidate the historic bond between the Bank and the territory, which has been innovating and reinventing itself since 1563.

m high

m2 basement surface area

floors above ground (27 devoted to offices)

m2 photovoltaic panels

m3 greenhouse

new trees to redevelop the “Grosa” public garden

seats in the multi-purpose Auditorium

children cared for in the company crèche

workers and technicians employed to construct the tower

specialist studios involved in the planning phases

young graduates involved at the worksite

166.267,000

381,600

15,000175364

49500

3035

ENVIRONMENTAL CERTIFICATION

Thanks also to the “double skin” facade, the use of geothermal energy and the LED lighting system, the skyscraper manages, controls and optimises its overall energy consumption. For this reason it was the first tall building in Europe to be awarded LEED (Leadership in Energy & Environmental Design) Platinum, the highest level of certification awarded by the Green Building Council, the most authoritative international body for the environmental assessment of buildings.

Cover: Intesa Sanpaolo skyscraper Turin - Bioclimatic greenhouse - detailPhotos: Enrico Cano, Andrea Cappello, Fabio Polosa

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