2002 Group Annual Report Eng3

Independent auditors’ report on the Consolidated financial statements

BERGAMO Piazza Vecchia

Consolidated financial statements

MODENA Duomo. Ghirlandina Tower

Consolidated financial statements

CONSOLIDATED BALANCE SHEET ASSETS (in thousands of euros)

31-12-2002

31-12-2001 pro-forma

336,041

364,523

-28,482

-7.8%

TREASURY BILLS AND OTHER BILLS ELIGIBLE FOR REFINANCING WITH CENTRAL BANKS

1,166,883

2,286,648

-1,119,765

-49.0%

30

DUE FROM BANKS a) on demand b) other loans

6,063,184 380,718 5,682,466

8,599,151 1,220,647 7,378,504

-2,535,967 -839,929 -1,696,038

-29.5% -68.8% -23.0%

40

DUE FROM CUSTOMERS of which: - loans with third party assets under administration

31,949,244

31,254,781

694,463

2.2%

101,554

10,648

90,906

853.7%

3,633,256 1,091,249 1,485,285

3,229,605 471,002 1,814,221

403,651 620,247 -328,936

12.5% 131.7% -18.1%

45,719 577,543 479,179

70,008 528,929 415,453

-24,289 48,614 63,726

-34.7% 9.2% 15.3%

10 20

50

CASH AND FUNDS WITH CENTRAL BANKS AND POST OFFICES

BONDS AND OTHER DEBT SECURITIES a) government b) banks of which: - own securities c) financial institutions d) other issuers

Changes

60

SHARES AND OTHER EQUITY SECURITIES

197,152

89,793

107,359

119.6%

70

EQUITY INVESTMENTS a) valued along the equity method b) other

417,239 175,313 241,926

345,998 168,371 177,627

71,241 6,942 64,299

20.6% 4.1% 36.2%

80

EQUITY INVESTMENTS IN GROUP COMPANIES a) valued along the equity method b) other

111,675 59,234 52,441

97,913 41,874 56,039

13,762 17,360 -3,598

14.1% 41.5% -6.4%

90

POSITIVE CONSOLIDATION DIFFERENCES

353,892

333,681

20,211

6.1%

-

735

110 INTANGIBLE ASSETS of which: - start-up costs - goodwill

197,955

274,432

-76,477

-27.9%

21,264 55,328

16,073 90,752

5,191 -35,424

32.3% -39.0%

120 TANGIBLE ASSETS

823,386

916,580

-93,194

-10.2%

2,478,761

2,467,708

11,053

0.4%

518,822 499,207 19,615

543,315 521,355 21,960

-24,493 -22,148 -2,345

-4.5% -4.2% -10.7%

48,247,490

50,804,863

-2,557,373

-5.0%

100 POSITIVE DIFFERENCES FROM EQUITY METHOD

150 OTHER ASSETS 160 ACCRUED INCOME AND PREPAID EXPENSES a) accrued income b) prepaid expenses TOTAL ASSETS

78

-735 -100.0%

Consolidated financial statements

CONSOLIDATED BALANCE SHEET LIABILITIES (in thousands of euros)

31-12-2002

31-12-2001 pro-forma

Changes

10

DUE TO BANKS a) on demand b) term or with notice

6,055,868 1,822,320 4,233,548

9,077,044 1,056,232 8,020,812

-3,021.176 766,088 -3,787,264

-33.3% 72.5% -47.2%

20

DUE TO CUSTOMERS a) on demand b) term or with notice

21,435,359 16,438,325 4,997,034

21,193,862 15,962,627 5,231,235

241,497 475,698 -234,201

1.1% 3.0% -4.5%

30

DEBT SECURITIES IN ISSUE a) bonds b) certifications of deposit c) other

12,693,334 9,782,016 2,740,239 171,079

12,979,189 9,713,630 2,898,917 366,642

-285,855 68,386 -158,678 -195,563

-2.2% 0.7% -5.5% -53.3%

40

THIRD PARTY ASSETS UNDER ADMINISTRATION

14,601

10,836

3,765

34.7%

50

OTHER LIABILITIES

2,178,953

2,070,201

108,752

5.3%

60

ACCRUED EXPENSES AND DEFERRED INCOME a) accrued expenses b) deferred income

367,221 292,101 75,120

451,457 380,624 70,833

-84,236 -88,523 4,287

-18.7% -23.3% 6.1%

70

PROVISION FOR TERMINATION BENEFITS

331,212

314,007

17,205

5.5%

80

PROVISIONS FOR RISKS AND CHARGES a) retirement fund and similar obligations b) tax provisions d) other provisions

650,399 2,054 443,471 204,874

585,136 15,172 402,254 167,710

65,263 -13,118 41,217 37,164

11.2% -86.5% 10.2% 22.2%

90

LOAN LOSS RESERVES

-

854

58,265

58,265

-

-

1,084,562

953,881

130,681

13.7%

-

6,703

33,673

34,128

-455

-1.3%

147,436

180,188

-32,752

-18.2%

1,332,174

1,323,359

8,815

0.7%

162,008

97,798

64,210

65.7%

1,185,739 259,331 508,094 418,314

1,065,246 231,699 51,646 373,890 408,011

87,473

85,099

2,374

2.8%

429,213

317,610

111,603

35.1%

48,247,490

50,804,863

-2,557,373

-5.0%

100 ALLOWANCE FOR GENERAL BANKING RISKS 110 SUBORDINATED LIABILITIES 120 NEGATIVE CONSOLIDATION DIFFERENCES 130 NEGATIVE DIFFERENCES FROM EQUITY METHOD 140 MINORITY INTEREST 150 SHARE CAPITAL 160 SHARE PREMIUMS 170 RESERVES a) legal reserve b) reserve for treasury shares c) statutory reserves d) other reserves 180 REVALUATION RESERVES 200 NET INCOME (LOSS) FOR THE YEAR TOTAL LIABILITIES

-854 -100.0%

-6,703 -100.0%

120,493 11.3% 27,632 11.9% -51,646 -100.0% 134,204 35.9% 10,303 2.5%

79

Consolidated financial statements

CONSOLIDATED BALANCE SHEET GUARANTEES AND COMMITMENTS (in thousands of euros)

10

20

80

31-12-2002

31-12-2001 pro-forma

GUARANTEES ISSUED of which: - acceptances - other guarantees

3,775,724

3,468,697

307,027

8.9%

79.893 3,695,831

79,352 3,389,345

541 306,486

0.7% 9.0%

COMMITMENTS of which: - sales with repurchase obligation

3,064,345

2,842,195

222,150

7.8%

-

1,433

Changes

-1,433 -100.0%

Consolidated financial statements

CONSOLIDATED INCOME STATEMENT (in thousands of euros)

10

20

30

40 50 60 70 80

90 100 110 120 130 140 150 160 170 180 190 200 210 230 240 250 260

INTEREST INCOME AND SIMILAR REVENUES of which: - on due from customers - on debt securities INTEREST EXPENSE AND SIMILAR CHARGES of which: - on due to customers - on debt securities in issue DIVIDENDS AND OTHER EQUITY PROFITS a) on shares and other equity securities b) on equity investments c) on equity investments in Group companies COMMISSION INCOME COMMISSION EXPENSE PROFITS FROM FINANCIAL TRANSACTIONS OTHER OPERATING INCOME OPERATING COSTS a) personnel expenses of which: - salaries and wages - social security charges - termination benefits - retirement funds and similar obligations b) other administrative expenses AMORTIZATION AND DEPRECIATION OF TANGIBLE AND INTANGIBLE ASSETS PROVISIONS FOR RISKS AND CHARGES OTHER OPERATING EXPENSES WRITE-DOWN OF LOANS AND PROVISIONS FOR GUARANTEES AND COMMITMENTS WRITE-BACK OF LOANS AND PROVISIONS FOR GUARANTEES AND COMMITMENTS PROVISIONS TO LOAN LOSS RESERVES WRITE-DOWN OF FINANCIAL FIXED ASSETS WRITE-BACK OF FINANCIAL FIXED ASSETS INCOME (LOSS) ON EQUITY INVESTMENTS VALUED ALONG THE EQUITY METHOD INCOME (LOSS) BEFORE EXTRAORDINARY ITEMS EXTRAORDINARY REVENUES EXTRAORDINARY CHARGES EXTRAORDINARY INCOME CHANGES IN THE ALLOWANCE FOR GENERAL BANKING RISKS INCOME TAXES MINORITY INTEREST NET INCOME (LOSS) FOR THE YEAR

2001 pro-forma

2002

Changes

2,345,483

2,699,236

-353,753

-13.1%

1,795,686 221,833 -1,084,018

2,011,535 289,063 -1,485,686

-215,849 -67,230 -401,668

-10.7% -23.3% -27.0%

-355,226 -462,302 15,261 968 13,225 1,068 771,687 -72,563 67,148 234,555 -1,287,754 -815,492

-468,965 -526,048 15,775 2,378 10,114 3,283 788,022 -70,738 53,538 197,611 -1,261,011 -814,687

-113,739 -63,746 -514 -1,410 3,111 -2,215 -16,335 1,825 13,610 36,944 26,743 805

-24.3% -12.1% -3.3% -59.3% 30.8% -67.5% -2.1% 2.6% 25.4% 18.7% 2.1% 0.1%

-518,161 -151,866 -42,564 -18,878 -472,262

-558,492 -164,294 -44,689 -17,895 -446,324

-40,331 -12,428 -2,125 983 25,938

-7.2% -7.6% -4.8% 5.5% 5.8%

-213,266 -38,930 -11,393

-201,716 -18,015 -16,075

11,550 20,915 -4,682

5.7% 116.1% -29.1%

-288,188

-214,643

73,545

34.3%

117,381 -

66,562 -705

-4,263

-10,319

-

261

20,275 571,415 223,847 -35,032 188,815

7,918 550,015 54,252 -19,669 34,583

-314,014 -17,003 429,213

190 -258,330 -17,609 308,849

50,819 76.3% 705 -100.0% -6,056

-58.7%

-261 -100.0% 12,357 21,400 169,595 15,363 154,232

156.1% 3.9% 312.6% 78.1% 446.0%

-190 -100.0% 55,684 21.6% -606 -3.4% 120,364 39.0%

81

Notes to the consolidated financial statements

VENICE Doge’s Palace

84

Notes to the consolidated financial statements

Introductory note STRUCTURE AND CONTENTS OF THE CONSOLIDATED FINANCIAL STATEMENTS The consolidated financial statements were drawn up in application of Law Decree n. 87 of 27 January 1992 and in compliance with the Bank of Italy’s requirements set forth on 30 July 1992 and following amendments, while with regard to what does not fall under the above special laws, in application of the civil code regulations, in keeping with the national accounting principles. The consolidated financial statements are comprised by the consolidated Balance sheet, the consolidated Income statement, this Note to the accounts, and it is complemented with the Directors’ report on operations and on the Group. The following documents are attached to the notes to the financial statements: statement of changes in the consolidated shareholders’ equity; consolidated statement of cash flows; composition of item 70 “Equity investments”.

PRO-FORMA CONSOLIDATED FINANCIAL STATEMENTS AS OF 31-12-2001 As described above, the Banking Group Popolare di Verona e Novara was incorporated on June 1st, 2002. In order to provide comparable data on the performance of the new Group, it was necessary to draw up pro-forma balance sheets and income statements referring to December 31st, 2001.

Criteria adopted to draw up pro-forma data The reason for drawing up the pro-forma consolidated balance sheet, income statement and notes to the accounts is that of representing the effects of the above merger on the financial position of Gruppo Banco Popolare di Verona e Novara, along valuation criteria that are consistent with historical data and in compliance with the relevant regulations, as if the merger had virtually occurred on December 31st, 2001 and – with reference to the profit and loss impact alone – at the beginning of financial year 2001. As a result, the pro-forma data is shown as the summation of the consolidated balance sheet and income statement of the two former Groups, adjusted to eliminate intercompany relations, to harmonize the valuation criteria and to represent the distribution of part of the share premium reserve of the former Banca Popolare di Novara s.c. r.l., the cancellation of the shareholders’ equity of the two entities and the formation of the share capital and reserves of Banco Popolare di Verona e Novara. In particular, the pro-forma consolidated balance sheet as of December 31st, 2001 were drawn up along the methodology and the assumptions described below: •

the consolidated balance sheet items derived from the consolidated financial statements of BPV and BPN were aggregated;

85

Notes to the consolidated financial statements

•

•

•

the main intercompany transactions outstanding between the companies of the BPV Group and the companies of the BPN group were eliminated, in compliance with the standard consolidation method; BPN’s “below par issue” shown in its consolidated financial statements under prepaid expenses was directly deducted from item “Debt securities in issue” in order to harmonize the classification criteria adopted by the two Groups; With reference to the equity interests held by both BPN and BPV Groups (“Banca Centrale per il Leasing delle Banche Popolari – Italease S.pA.”, “Factorit S.p.A. Società di Factoring delle Banche Popolari Italiane” and “Istituto Centrale delle Banche Popolari Italiane S.p.A.”), that in the aggregate exceed the 20% equity interest, the necessary adjustments were carried out to adapt the relevant book values to the equity method valuation, as described below: a)

b)

c)

•

With regards to shareholders’ equity, based upon the account balances at the end of the accounting periods concerned and the number of shares outstanding on said dates, the following actions were carried out: a)

b)

c)

86

Italease: Gruppo BPN in the past already valued the company along the equity method; whereas since Gruppo BPV held a lower than 20% stake, it recognized its shareholding at cost. When drawing up the pro-forma accounts, the aggregate shareholding was valued under the equity method; Factorit: similarly to what described above for Italease (Gruppo BPN already valued the company under the equity method, whereas Gruppo BPV recognized it at cost), also in this case the aggregate shareholding of the two Banks was valued along the equity method; Istituto Centrale delle Banche Popolari Italiane: in both Banks’ consolidated financial statements the company was valued at cost. However, having taken in both BPN’s (15%) and BPV’s (7.09%) interest, to date Banco Popolare holds an aggregate stake of 22.09%. As a result, when drawing up the pro-forma accounts the equity method was adopted;

record the effect deriving from the distribution to BPN shareholders of part of the share premiums amounting to Euro 1.72 per BPN share in existence at the time of payment, while posting an assumed debt of 478.4 million Euro under “due to banks”; cancel the shareholders’ equities of the two Banks and state the share capital of Banco Popolare based upon the exchange ratio determined in 1 share of Banco at a par value of Euro 3.60 per BPV share with a nominal value of Euro 2.58 and 0.48 Banco shares at a par value of Euro 3.60 per BPN share with a nominal value of Euro 2.58, or 12 Banco shares every 25 BPN shares – still having a nominal value of Euro 2.58; compute Banco’s reserves.

Notes to the consolidated financial statements

It should be noted, that the share capital of Banco was computed by taking into consideration only BPV and BPN shares outstanding on December 31st, 2001, without assuming any early conversion of bonds and warrants in existence on such date. The 2001 pro-forma consolidated income statement was drawn up along the methodology and assumptions described below: • •

•

•

The income statements derived from the 2001 consolidated financial statements of BPV and BPN were aggregated; the main intercompany transactions occurred in 2001 between companies of the BPV group and the companies of the BPN group were eliminated, along the standard consolidation methodology; the assumed financial charges were calculated, referring to a theoretical indebtedness equal to BPN’s total distributed share premium reserve. The computation of the above charges was based upon a rate equal to the one month Euribor average; with reference to the above described adjustments of the valuations of the equity investments in “Banca Centrale per il Leasing delle Banche Popolari – Italease S.pA.”, “Factorit S.p.A. Società di Factoring delle Banche Popolari Italiane” and “Istituto Centrale delle Banche Popolari Italiane S.p.A.”, the following actions were carried out: a)

the percentage interest in the profit generated in 2001 by the above mentioned investee companies was credited to the pro-forma consolidated income statements; b) an amount equal to the dividends cashed in and recognized by BPV and BPN in 2001 referring to the above equity investments was debited to the pro-forma consolidated income statements; c) when calculating income taxes, the fiscal effect deriving from the deductibility of the above assumed financial charges was taken into account.

87

Notes to the consolidated financial statements

Effect of pro-forma adjustments to the 2001 consolidated net income and on the consolidated shareholders’ equity as of December 31st, 2001 The reconciliation between the consolidated net income as of December 31st, 2001 of BPV and BPN and the pro-forma consolidated net income of the BPVN Group is shown below: (in thousands of euros)

BPV consolidated net income for the year 2001

208,881

BPN consolidated net income for the year 2001

108,729

Grand total

317,610

Effect of valuing the equity investments in Istituto Centrale delle Banche Popolari Italiane S.p.A., Banca per il Leasing - Italease S.p.A. and Factorit S.p.A. along the equity method

3,639

Accounting of assumed financial charges relating to the distribution of part of the share premiums net of the relevant fiscal effect

-12,400

Pro-forma consolidated net income for the year 2001

308,849

The reconciliation between the consolidated shareholders’ equity as of December 31st, 2001 of BPV and BPN and the pro-forma consolidated shareholders’ equity of the BPVN Group is shown below: (in thousands of euros)

BPV consolidated shareholders’ equity as of 31-12-2001

1,936,962

BPN consolidated shareholders’ equity as of 31-12-2001

1,518,721

Grand total

3,455,683

Effect of valuing the equity investments in Istituto Centrale delle Banche Popolari Italiane S.p.A., Banca per il Leasing - Italease S.p.A. and Factorit S.p.A. along the equity method Effect of distributing part of the share premiums and of canceling own shares held Pro-forma consolidated shareholders’ equity as of 31-12-2001

88

10,937

-478,412 2,988,208

Notes to the consolidated financial statements

Consolidation criteria The consolidation criteria applied are in accordance with Law Decree n° 87 of January 27th, 1992, as well as the requirements expressed by the Governor of the Bank of Italy on January 16th, 1995, with its latest amendment on July 30th, 2002.

Consolidation area The full consolidation area coincides with the Banking Group Banco Popolare di Verona e Novara registered in the relevant Register under art. 64 of Law Decree n. 385 of September 1st, 1993 – that includes the Parent company and all the companies where the latter holds either directly or indirectly the majority of voting rights, as well as companies controlled as a result of bylaw provisions or shareholders’ agreements, that operate in the banking or financial sectors or whose sole or main activity is instrumental to the Group, with the exception of a few minor subsidiaries whose financial and operating results do not have any material effect on the consolidated financial statements, or that are under liquidation or being disposed: Aletti Fiduciaria S.p.A. Aletti Gestielle SGR S.p.A. Aletti Gestielle Alternative SGR S.p.A. Aletti International S.A. Aletti Invest SIM S.p.A. Aletti Merchant S.p.A. Aletti Private Equity SGR S.p.A. Banca Aletti & C. S.p.A. Banca Aletti & C. (Suisse) S.A. Banca Popolare di Novara S.p.A. Banco Popolare di Verona e Novara (France) S.A. Banco Popolare di Verona e Novara (Luxembourg) S.A. BPVN Immobiliare S.r.l. Compagnie d’Angely S.A. Credito Bergamasco S.p.A. Holding di Partecipazioni Finanziarie Popolare di Verona – S.Geminiano e S.Prospero S.p.A. Immobiliare BPV S.r.l. Leasimpresa S.p.A. Novara Immobiliare S.r.l. Novara Invest SIM S.p.A. SA.RI. Sannitica Riscossioni S.p.A. Sestri S.p.A. Società Gestione Servizi – BPVN S.p.A. Included in the consolidation area, but accounted for using the equity method are: •

Equity investments in companies controlled directly or indirectly, or under joint control, other than banks, financial companies or companies instrumental to the Group:

89

Notes to the consolidated financial statements

•

Arena Broker S.r.l. Assisebino S.r.l. BPV Vita S.p.A. Novara Vita S.p.A. Tecmarket Servizi S.p.A.

Equity investments in affiliated companies, under article 36 of Law Decree 87/1992, subject to significant influence: -

Aosta Factor S.p.A. Banca Centrale per il Leasing – Italease S.p.A. Factorit S.p.A. G.I. Holding S.p.A. Gema Magazzini Generali BPV – BSGSP S.p.A. Istituto Centrale delle Banche Popolari Italiane S.p.A. Società Cooperativa fra le Banche Popolari “L. Luzzatti” S.c.r.l.

The consolidation area does not include, and neither are they accounted for along the equity method, equity investments that: •

were out of operation at the time of account;

•

had no material effect on the true and fair representation of the consolidated financial statements, under art. 29, paragraph 1, of Law Decree 87/1992: -

•

FINERT Finanziaria Esattorie Tesorerie e Ricevitorie S.p.A. under liquidation Novara Foar S.r.l. under bankruptcy procedure Novara Promuove S.r.l. Servizi Riscossione Imposte SE.RI. S.p.A. under liquidation Sinergia S.r.l. under liquidation Teliber S.A.

were under liquidation: -

Compagnia Finanziaria Ligure Piemontese S.p.A. Seefinanz AG

Equity investments acquired as part of the Group’s merchant banking activities were valued at cost.

90

Notes to the consolidated financial statements

Reference date of the accounts and of the financial statements under consolidation All the companies falling under the consolidation area are consolidated according to their financial statement drafts as of December 31st, 2002, as approved by their Board of Directors, with the exception of Holding di Partecipazioni Finanziarie Popolare di Verona - S.Geminiano e S.Prospero S.p.A. and Aletti International S.A. whose financial year closed on June 30th and October 31st, 2002, respectively. The consolidation of said companies was based upon an interim report specifically drawn up for this purpose. The statutory financial statements of consolidated companies, that were drawn up along accounting principles differing from those governing banks, have been duly conformed. Wherever necessary, financial statements and accounts have been suitably adjusted and restated to be consistent with the Group’s accounting principles. Money of account The money of account is the euro. All the financial statements of the consolidated companies are euro-denominated, with the exception of Banca Aletti & C. (Suisse) S.A. whose money of account is the Swiss franc. In drawing up the consolidated financial statements, accounts that were denominated in currencies other then the Euro were converted into Euro, applying the following principles: • •

• •

assets and liabilities at the official exchange rate upon closing of the accounting period; equity and reserves at the official exchange rate on the day they were set up, or at the historical exchange rate before inclusion in the consolidation area; revenues and expenses at the daily average of the official exchange rates recorded throughout the financial period; translation differences arising from applying the above exchange rates are charged/credited directly to net equity.

All amounts shown in the financial statements, unless otherwise specified, are expressed in thousands of Euros. Consolidation methods Consolidation of equity investments The book value of equity investments consolidated along the full consolidation method is offset against the corresponding stake of net equity held. The compensation is based upon the book value upon acquisition, or that outstanding on the date of their first consolidation. Any differences resulting from compensations are stated, where possible, under

91

Notes to the consolidated financial statements

assets or liabilities of the subsidiary to which they pertain. Any further assets and liabilities differences are entered in the consolidated balance sheet under "positive differences upon consolidation" or "negative differences upon consolidation". However, positive differences upon consolidation are offset against negative differences upon consolidation until the final balance is reached. Residual positive differences upon consolidation are then amortized on a straight-line basis over five years or over a limited longer period if justified by the type of difference. The consolidated shareholders’ equity and net income attributable to minority interest are shown under "Minority interests" and "Income/loss attributable to minority interests" in the consolidated balance sheet and income statement, respectively ". Intercompany eliminations Assets and liabilities, “off-balance sheet” transactions, revenues and charges associated with transactions carried out over the period of account between companies under full consolidation were eliminated, with the exception of profits and losses from financial transactions and revenues and charges similar to interest referring to “off-balance sheet” transactions negotiated within the Group under normal market conditions, as provided for under article 34 of Law Decree 87/1992. Any possible residual difference was stated in the income statement or in the balance sheet, in compliance with the provisions issued by the Bank of Italy on July 30th, 1992 and following amendments and supplements. Elimination of duplications arising from the accounting of intercompany dividends or of write-downs or write-ups of consolidated equity investments Intercompany dividends stated in the accounts of the parent company in the financial year subsequent to that in which the corresponding profits were registered by the subsidiary companies, are written off the income statement and included in net equity. Any write-ups or downs of equity investments in consolidated companies are eliminated. Valuation of non consolidated equity investments Subsidiary companies not consolidated along the full consolidation method and companies over which the Parent company, either directly or indirectly, exercises a considerable control, are valued based upon the corresponding stake of net equity of the investee companies. Any positive or negative differences emerging from replacing the actual equity stake value with the above valuation are shown under "positive differences on application of the equity method " and "negative differences on application of the equity method". However, positive differences on application of the equity method are offset against the negative differences on application of the equity method, until the final balance is reached.

92

Notes to the consolidated financial statements

Residual positive differences on application of the equity method are amortized on a straight-line basis over five years or a limited longer period if justified by the type of difference. The portion of the subsidiary’s net income corresponding to the stake of net equity held is shown under the relevant item of the consolidated income statement. Tax adjustments Adjustments to assets and provisions carried out in the financial statements of companies included in the consolidation area that have been made exclusively to comply with tax regulations are eliminated from the consolidated financial statements, the original value of the above assets is reinstated, provisions set aside are written off and the relevant deferred tax liability is posted. Lease transactions Lease transactions are recognized in the consolidated financial statements along the so called financial method (i.e., theoretical substance). The net value of transactions carried out with consolidated companies are posted under the relevant assets items after determining the original costs o the assets and their depreciation until the end of the financial year.

93

Notes to the consolidated financial statements

Chapter A - Accounting criteria SECTION 1 – DESCRIPTION The financial statements are drawn up in compliance with the general evaluation criteria stated below: •

•

• •

• •

•

evaluation consistency: the same criteria used in drawing up the annual report have been consistently applied over time, unless otherwise expressly stated; substance prevails over form: to provide a true and fair view of the financial situation, the annual report was drawn up in such a way that, whenever possible, substance prevails over form, with settlement prevailing over trading; going concern: valuations of items in the financial statement are made on the assumption that the company will continue its business; prudence: the annual report shows only actually realized profits, unless otherwise stated in the specific evaluation criteria. In addition, all predictable losses are included, comprising those which came to light after the closure of the administrative period. Provisions for risks and charges are intended only to cover losses, debts or defined charges that are either probable or definite but whose amount or date of occurrence are not yet known at the date of accounting; accrual accounting: revenues are recognized when earned and expenses when incurred; separate evaluation: on- and off-balance sheet assets and liabilities are valued separately, i.e., not on an aggregate basis, except for what stated below; evaluation uniformity: correlated on- and off-balance sheet assets and liabilities are valued by means of a consistent approach, i.e. using homogeneous criteria.

1 - Loans receivable and payable, guarantees and commitments Due from and to customers Cash credit lines to customers are recognized upon execution. Loans under finance contracts are shown under the balance sheet item "Due from customers" inasmuch as they have actually been granted. Financial lease contracts are stated according to the finance method. With regard to discount factoring, loans shown in the balance sheet take into account the portfolio risk relating to receivables still due at the time of accounting. The portfolio risk is shown net of deferred income relating to interest not accrued at the time of accounting. Loans, including overdue interest and the consequent interest on arrears, are recorded at their estimated realizable value.

94

Notes to the consolidated financial statements

The estimated realizable value of non-performing loans, watch-list loans, restructured loans and loans under restructuring is calculated on the basis of analytical evaluations. Performing loans are written-down by a lump-sum percentage calculated by taking account the number of loans turning into NPLs and losses suffered in previous years, and taking also into consideration the expected credit risk evolution. Loans granted to residents in countries at risk are subject to a further lump-sum write-down. The estimated realizable value is calculated separately with regard to the loan portion relating to interest on arrears. Write-downs - calculated as described above - are directly deducted from loans. The full value of the loans is reinstated whenever the reasons for their original write-down no longer apply. Deposits are stated at face value. Other due to and due from Transactions with lending institutions in the form of deposits and finance operations are recognized upon settlement. Loans receivable, inclusive of interest accrued, are evaluated at their estimated realizable value. Loans payable are evaluated at face value inclusive of interest due at the date of accounting. Guarantees and commitments Guarantees issued are stated at a value equal to the commitment taken. Commitments to loan funds are entered at a value equal to the amount to be settled. Commitments to purchase securities are stated at a value equal to the forward price agreed upon by the parties.

2 - Securities and “off-balance sheet” transactions (other than foreign currency transactions) Securities transactions are recognized upon settlement. Repurchase agreements on trading assets subject to the obligation to repurchase or resell at a stated time are treated as due to/due from items with no posting in the trading account. The cost of funding/loan revenues generated from expired coupons on securities sold or purchased spot and the spread between the sale/purchase spot price and the resale/repurchase forward price are charged to the income statement on an accrual basis under "Interest expense and similar charges" or "Interest income and similar revenues".

95

Notes to the consolidated financial statements

Investment securities Securities held for non trading purposes, presumably until their expiry dates, represent financial investment securities and are valued at cost, adjusted for any difference between the cost and any higher or lower redemption value accrued as of the date of accounting. The purchase cost is calculated along the daily “continuous weighted average cost” method. The difference between the securities' issue price and redemption price is recognized as a higher interest on the securities in compliance with the accrual principle. The difference between the purchase cost, net of any withdrawal for the issue discount accrued by the date of purchase, and the higher or lower redemption price of fixed-income securities treated as investment securities are recognized respectively as a higher or lower securities interest in line with the accrual principle. Trading securities Securities that are not considered investment securities, are valued: -

at market value, if listed on organized markets; at the lower between cost or market value, if not listed on organized markets. Unlisted securities correlated to listed derivative contracts or to derivative contracts linked to listed parameters are however marked to market, in line with the valuation of such contracts.

The cost is calculated along the daily “continuous weighted average cost” method, adjusted by the difference between the issue price and the redemption price of the securities. The market value is calculated: -

for securities listed on organized market by referring to the official price reported in the last day of the accounting period; for securities that are not listed on organized markets, by referring to the price of securities that have similar characteristics and that are listed on organized markets, to the discounting of future flows based upon the expected market returns, and, if not available, by referring to other objective elements.

The difference between the securities’ issue price and redemption price is recognized as securities interest in line with the accrual principle. The original value of the securities is reinstated in following financial years whenever the reasons for their original write-down in previous years no longer apply.

96

Notes to the consolidated financial statements

The valuation of securities takes into due account the creditworthiness of the borrower, and any possible debt servicing difficulties encountered by the borrower’s Country of residence. “Off-balance sheet” transactions (other than foreign currency transactions) Derivative instruments representing “off-balance sheet” transactions outstanding at the end of the financial year are valued as follows: a)

b)

securities purchased to hedge assets or liabilities or otherwise underlying other on- or off-balance sheet assets or liabilities: a.1 spreads are accounted for on an accrual basis as interest expense or income depending upon the revenues or costs generated by the hedged assets or liabilities, or with reference to the contract term in case of underlying securities or general hedges; a.2 hedging derivative instruments outstanding at the end of the accounting period are valued according to the assets or liabilities hedged or underlying, as described below: at market value, if used to hedge securities belonging to the trading portfolio; at cost if used to hedge interest bearing assets/liabilities other than investment securities, accordingly to the stake under hedging; securities underlying trading transactions b.1 spreads are accounted for under “profits (losses) from financial transactions"; b.2 listed derivatives are marked to market with reference to the service’s last day of operation. Any expected profits or losses generated by the aggregate transactions outstanding at the time of year-end accounting are therefore credited/debited to income as profits/losses from financial transactions, with “other assets”/”other liabilities” as offset accounts; b.3 unlisted derivatives that are associated to prices, quotations or indices that can be derived from prevalent information circuits at international level, and that in any case can be fairly calculated, are marked to market according to the current values of the base parameters on the market; b.4 the remaining unlisted derivatives are valued at cost or market value, whichever is lower. Only losses expected from the aggregate transactions outstanding at the date of accounting are charged to income as losses from financial transactions, with “other liabilities” as offset account.

Premiums paid or earned in options trading are held in abeyance and reported accordingly under “other assets” or “other liabilities”. These same premiums are debited or credited to income if the option is not exercised. The value of the

97

Notes to the consolidated financial statements

premium of exercised options is added to or subtracted from the cost or proceed generated by the security sale or purchase. Off-balance sheet transactions represented by securities due-in as a result of contracts completed but not yet settled at the time of year-end accounting are valued along the criteria defined for the portfolios of destination. Off-balance sheet transactions represented by securities due-out as a result of contracts completed but not yet settled at the time of year-end accounting are valued at book value or at the forward price agreed upon, whichever is lower.

3 - Equity investments Equity investments that are not included in the consolidated financial statements, according to what described under the consolidation criteria, are valued at cost, plus any write-up in accordance with Law n. 408 of December 29, 1990. Equity investments are written down in case of permanent value loss. The original value of the equity investment is reinstated in following years should the reasons for the write-down no longer apply. Equity investments in companies under liquidation are valued at cost or at the value stated by the same investee companies in the 2001 consolidated annual report of Banca Popolare di Novara s.c. a r.l.. Said equity investments are subject to write-downs in case the shareholders’ equity resulting from the liquidation account statement is lower than the investee company’s carrying value, due to the recognition of greater losses. Dividends are accounted for in the financial year in which they are collected and are shown pre-tax credit.

4 - Assets and liabilities in foreign currency (including off-balance sheet transactions) Foreign currency transactions are accounted for upon settlement. This principle is applied also to Euro-denominated opposite transactions in case of Euro against currency swaps. Costs and revenues in foreign currency are recognized at the exchange rate in effect at the time of accounting. Specifically, the following items are stated under “profits (losses) from financial transactions": -

98

profits and losses from currency trading; positive and negative differences on foreign currency derivative contracts; the difference between the current value of assets and liabilities and of off-

Notes to the consolidated financial statements

balance sheet transactions in foreign currency at the end of the accounting period and their book value. Assets and liabilities in foreign currency Assets and liabilities in foreign currency are stated at the spot exchange rate in effect at year-end, as reported by the Bank of Italy. Off-balance sheet transactions Spot off-balance sheet transactions are stated at the spot exchange rate in effect at year-end. Forward off-balance sheet transactions carried out to hedge against exchange risks or in any case underlying other on- or off-balance sheet assets or liabilities are valued at the spot exchange rate in force at year-end, in that in line with the valuation criteria adopted for such assets or liabilities. Any forward off-balance sheet transactions carried out for reasons other than to hedge against exchange risks or in any case not underlying other on- and offbalance sheet assets or liabilities, are valued at the forward exchange rate in force at year-end for similar maturities to those of the transactions under valuation. Premiums paid or collected from currency options trading whose exercise date falls beyond the year-end accounting period are held in abeyance, and are reported accordingly under “other assets” or “other liabilities”.

5 - Tangible and intangible fixed assets Tangible assets Property and equipment is carried at cost including ancillary charges and incremented by the write-ups defined by the relevant law. Part of the properties acquired through mergers underwent a revaluation at the time of acquisition based upon article 123 of Presidential Decree n° 917 of December 22, 1986, within the values assessed by the relevant surveys produced by experts. A residual portion of the original revaluation amount could not be realized because of subsequent alienations and/or of the depreciation of the re-valued fixed assets. Such outstanding portion is posted under “Revaluation reserves”. Technical fixed assets are entered net of depreciation. They are depreciated on

99

Notes to the consolidated financial statements

a straight-line basis over their estimated useful life and in any case for no longer a period than indicated in the following table: Categories Buildings Loading, unloading and hoisting equipment Light equipment Ordinary office furniture and machines Safety systems and safes Furnishings Armored counters or with armored glass Fork-lift trucks and internal vehicles Electromechanical and electronic office machines Cars, motor vehicles and similar Internal communications and remote signaling systems Alarm systems and closed circuit TV and camera systems

Years 34 12 8 7 7 5 3 3 3 3 3 3

Maintenance and repair expenses that do not increase the value of property are charged to income for the period, while capital improvements are capitalized under the specific technical fixed assets they apply to. Intangible assets Copyrights and licenses are stated at cost, including ancillary charges. They are systematically amortized over their estimated useful life and in any case for no longer than five years. The portions of positive differences arising on consolidation of Banco S.Geminiano e S.Prospero and of Banca Sannitica, allocated to goodwill following their merger into the Parent company, are amortized on a straight-line basis over ten years. The portion of positive differences arising on consolidation of Cliam Gestioni S.p.A., allocated to goodwill following its merger into Gestielle Asset Management SGR S.p.A. (now Aletti Gestielle SGR S.p.A.), is amortized on a straightline basis over ten years. The above goodwill amortization periods are based on the consideration that the benefits from the excess cost paid for the acquisition will manifest themselves over an estimated ten year period. Organization and start-up costs and other deferred charges are amortized over a five year period, with the following exceptions: -

100

costs incurred for the furnishing of third party property leased before January 1st, 1993, are amortized throughout the life of the relevant lease contracts;

Notes to the consolidated financial statements

-

costs incurred to purchase or produce software products, as well as IT and organizational procedures are amortized on a straight-line basis over three to five years.

6 - Other Positive differences arising on consolidation and on application of the equity method These are amortized on a straight-line basis over a five year period or a limited longer period if justified by the type of difference. The positive difference arising from the consolidation of the equity investment in Credito Bergamasco S.p.A. is being amortized on a straight-line basis starting from year 1998 over 20 years, by then - this being the underlying rationale - the benefits from the excess cost paid for the acquisition will have manifested themselves. The positive difference arising from the consolidation of the equity investment in Banca Aletti & C. S.p.A. is amortized on a straight-line basis starting from year 2000 over 10 years. Accrued and deferred assets and liabilities Accrued and deferred assets and liabilities are calculated in such a way as to ensure the allocation of costs and revenues extending over more accounting periods, and accruing proportionally over time, according to the accrual principle. Third party assets under administration These are entered at a value expressing the outstanding liability towards the third party holders. Provision for termination benefits The above provision is set aside in order to provide for total liabilities against employees, as required under the law and the labor contracts in force. Tax provisions Tax provisions provide for current taxes, deferred tax liabilities and the risk deriving from outstanding tax disputes. The allowance for current taxes represents a reasonable forecast of the net income tax burden, calculated according to the tax laws currently in force. Deferred taxation is recorded by applying the balance sheet liability method

101

Notes to the consolidated financial statements

defined in IAS 12 in compliance with the specific regulations set forth by the Bank of Italy. In particular, tax provisions provide for deferred tax liabilities originated by temporary taxable differences that are likely to be incurred. No provision has been set aside for deferred taxes on capital reserves under tax moratorium, since, as things stand, no such transactions are expected to be carried out that will give rise to taxation. Any deferred tax assets, originated by temporary deductible differences that are likely to be recovered based upon expected future taxable income, is entered under “other assets”. Other provisions for risks and charges Other provisions for risks and charges are set aside in view of predictable losses on guarantees issued and commitments made, as well as other probable or definite liabilities whose amount or date of occurrence are not predictable at the date of accounting. Allowance for general banking risks This provision is set aside to provide for corporate global risk and therefore should be posted under equity. Internal deals The Group adopted an organizational structure where Banca Aletti represents the only specialist operating desk authorized to trade given derivative products on the market. This organizational structure is essentially the result of operational efficiency considerations, to better manage market and counterpart risks and to optimize the distribution and allocation of specialized human resources. To this end, Banca Aletti acts as a counterpart for the other companies of the Group by way of internal sales and purchases of derivative contracts (internal deals) at market prices. As regards the valuation of derivative contracts outstanding on December 31st, 2002, it should be noted that: -

-

internal derivative contracts outstanding on December 31st, 2002 have been classified by “Banca Aletti” as trading contracts and are therefore marked to market; the same internal contracts are however classified by the “other companies of the Group” as trading contracts or hedging contracts, depending upon the specific aims for which they were carried out. Consequently, the valuation of these contracts is consistent with said aims.

As a result of the application of the above criteria, derivative contracts internal to the Group are material to the accounting of the consolidated financial statement only with regard to contracts entered into by “other companies of the Group” for hedging purposes. It should be noted, that in compliance with cur-

102

Notes to the consolidated financial statements

rent regulations, the related income and charges from internal sales and purchases of derivative contracts are not eliminated from the consolidated financial statements. In Chapter B of the Notes to the accounts more information shall be provided with regard to the value of internal deals outstanding on December 31st, 2002 and on potential capital gains/losses from hedging transactions.

SECTION 2 – TAX ADJUSTMENTS AND PROVISIONS Write-downs and provisions carried in the financial statements of consolidated companies exclusively to comply with tax regulations have been eliminated in order to provide an orderly representation of the Group’s operating and financial position according to statutory criteria; deferred taxes have been recognized along the same line. As a result, in these consolidated financial statements there are no items that have been posted for purely fiscal purposes.

SECTION 3 – OTHER Changes to accounting criteria In 2002, the criteria used to account for trading securities and derivative products were changed compared to those used in drawing up the Interim report on operations of the first half of 2002, the Quarterly report of September 30th, 2002 and the pro-forma consolidated financial statements as of December 31st, 2001. In particular, with regard to the valuation of listed securities in the trading portfolio, the “lower of cost or market value” principle was replaced by the “market value” principle. The market value was estimated based upon the official quotation on the last day of the accounting period, instead of the arithmetic mean of the values registered over the last month. The same principle was adopted for listed derivatives and unlisted securities underlying derivative contracts. In addition, for the entire trading securities portfolio, the annual L.I.F.O. method was replaced by the daily weighted average cost method. The introduction of the new valuation principle is explained by the need to: -

ensure the conformity of the accounting criteria across the whole Group; simplify the accounting of the operating results generated by the finance area; bring the accounting principles in line with the operating principles of the finance area, with ensuing operational benefits on the portfolio risk management and on the assessment of the global performance.

In compliance with the directives of the Bank of Italy and Consob’s recommendations, and in accordance with the Accounting principle n. 29 of the National

103

Notes to the consolidated financial statements

Council of Charted Accountants (Consiglio Nazionale dei Dottori Commercialisti) and of the National Council of Accountants (Consiglio Nazionale dei Ragionieri), the retrospective component ensuing from the effects of the change to the valuation criteria was determined.

(in thousands of euros)

Securities Asset swaps Derivative contracts Gross effect Fiscal effect Net effect

Retrospective effect

Current effect

Total

1,075 1,016 2,192

2.967 1,448 28,382

4,042 2,463 30,575

4,283 -1,747

32,798 -13,538

37,081 -15,285

2,536

19,259

21,795

All in all, the change to the valuation principle produced a positive variation in the consolidated income statement equal to €37,081 thousand (€21,795 thousand net of the fiscal effect), of which €4,283 thousand were stated under “extraordinary income”, as it is a retrospective component, while the remaining €32,798 thousand were stated under “profits/losses from financial transactions”. The change in income before taxes and in net income carries the same sign and value. A similar effect was produced on the consolidated shareholders’ equity.

Changes to classification criteria With regard to classification principles, the stake representing 50% of the equity of Novara Vita S.p.A. shown in the consolidated financial statement of December 31st, 2002 was posted under item 80 “Equity investments in companies of the Group”, because based upon the shareholders’ agreements in force, the Parent company holds a controlling interest under art. 2359 of the civil code. To permit a direct comparison with the previous year, the pro-forma balance sheet as of December 31st, 2001 was restated with the equity investment value, equal to €30,129 thousand, reclassified from item 70 “Equity investments valued along the equity method” to item 80 “Equity investments in companies of the Group valued along the equity method”. With regard to item 80 “Equity investments in companies of the Group”, the values as of December 31st, 2001 referring to the subsidiaries under liquidation Seefinanz S.A. (€44,261 thousand) and Compagnia Finanziaria Ligure e Piemontese S.p.A. (€7,544 thousand) were reclassified from sub-item “a) valued along the equity method” to sub-item “b) other”, to bring them in line with the approach adopted on December 31st, 2002.

104

Notes to the consolidated financial statements

In addition, expenses payable by third parties charged on deposits and checking accounts, amounting to €29,544 thousand, were reclassified in the 2001 proforma consolidated income statement from item 40 “Commissions income” to item 70 “Other operating income”, to bring them in line with the approach adopted on December 31st, 2002.

105

Notes to the consolidated financial statements

Chapter B – Notes to the consolidated balance sheet SECTION 1 – LOANS

1.1 – Breakdown of item 30 "Due from banks"

(in thousands of euros)

a) b) c) d) e) f)

31-12-2002

31-12-2001 pro-forma

Changes

repurchase agreements deposits due from central banks current accounts financing facilities other

2,517,840 2,480,102 338,530 308,869 131,795 286,135

2,764,320 -246,480 4,454,774 -1,974,672 660,445 -321,915 450,367 -141,498 190,797 -59,002 78,644 207,491

-8.92% -44.33% -48.74% -31.42% -30.92% 263.84%

Total - write-downs

6,063,271 -87

8,599,347 -2,536,076 -196 -109

-29.49% -55.61%

Total

6,063,184

8,599,151 -2,535,967

-29.49%

1.2 – Due from banks – Cash credit lines

31-12-2002 (in thousands of euros)

A Impaired loans A.1. NPLs A.2. watchlist loans A.3. loans under restructuring A.4. restructured loans A.5. unsecured loans to Countries at risk B

106

Gross exposure

Total writedowns

Net exposure

5,724 -

-87 -

5,637 -

5,724

-87

5,637

Performing loans

6,057,547

-

6,057,547

Total

6,063,271

-87

6,063,184

Notes to the consolidated financial statements

31-12-2001 pro-forma (in thousands of euros)

A Impaired loans A.1. NPLs A.2. watchlist loans A.3. loans under restructuring A.4. restructured loans A.5. unsecured loans to Countries at risk B

Total writedowns

Gross exposure

Net exposure

18,760 -

-196 -

18,564 -

18,760

-196

18,564

Performing loans

8,580,587

-

8,580,587

Total

8,599,347

-196

8,599,151

1.3 – Due from banks – Changes in impaired loans Loans Unsecured under Restructured loans to Total restructuring loans Countries at risk

NPLs

Watchlist loans

A. Initial gross exposure A.1. of which: - for default interest

-

-

-

-

18,760

18,760

-

-

-

-

-

-

B. Increments B.1. from performing loans B.2. default interest B.3. transfer from other impaired loan classes B.4. other increments

-

-

-

-

5,612 33 -

5,612 33 -

-

-

-

-

5,579

5,579

C. Decrements C.1. back to performing loans C.2. write-offs C.3. collections C.4. proceeds from disposals C.5. transfer to other impaired loans classes C.6. other decrements

-

-

-

-

-18,648 -7 -

-18,648 -7 -

-

-

-

-

-18,641

-18,641

D. Final gross exposure D.1. of which: - for default interest

-

-

-

-

5,724

5,724

-

-

-

-

-

-

31-12-2002 (in thousands of euros)

107

Notes to the consolidated financial statements

1.4 – Due from banks – Changes in total loan value adjustments

31-12-2002 (in thousands of euros)

Watchlist loans

-

-

-

-

196

-

196

-

-

-

-

-

-

-

-

-

-

-

10 5

-

10 5

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

5

-

5

C. Dcreases C.1. valuation write-backs C.1.1. of which: - for default interest C.2. collection write-backs C.2.1. of which: - for default interest C.3. write-offs C.4. transfer to other loans classes C.5. other decreases

-

-

-

-

-119 -24

-

-119 -24

-

-

-

-

-1

-

-1

-

-

-

-

-

-

-

-

-

-

-

-94

-

-94

D. Final total adjustments D.1. of which: - for default interest

-

-

-

-

87

-

87

-

-

-

-

-

-

-

A. Initial total adjustments A.1. of which: - for default interest B. Increases B.1. increases B.1.1. of which: - for default interest B.2. drawdown on loans loss reserves B.3. transfer from other loans classes B.4. other increases

108

Loans Unsecured Restructure loans to under loans restructuring Countries

NPLs

Performing loans

Total

Notes to the consolidated financial statements

1.5 – Breakdown of item 40 "Due from customers" (in thousands of euros)

a) b) c) d) e)

checking accounts mortgages financing operations and other subsidies nonperforming loans loans for financial lease contracts f) repurchase agreements g) portfolio risks of which: - bills eligible for refinancing with central banks h) securities lending i) other

31-12-2002

31-12-2001 pro-forma

Changes

11,587,145 10,394,436 4,716,754 1,603,359

12,261,490 9,650,751 4,477,954 1,719,042

-674,345 743,685 238,800 -115,683

-5.50% 7.71% 5.33% -6.73%

924,848 481,381 303,977

1,139,455 134,589 315,464

-214,607 346,792 -11,487

-18.83% 257.67% -3.64%

44,961 2,853,661

65,714 2,540,505

-20,753 313,156

-31.58%

Total - write-downs

32,865,561 -916,317

32,239,250 -984,469

626,311 -68,152

1.94% -6.92%

Total

31,949,244

31,254,781

694,463

2.22%

12.33%

The decrease in loans from financial lease contracts is due to the securitization transaction by Leasimpresa regarding loans from lease contracts amounting to about €680 million. 1.6 – Secured loans to customers 31-12-2002

31-12-2001 pro-forma

a) mortgages

7,844,382

7,035,338

809,044

11.50%

b) pledges 1. on cash deposits 2. on securities 3. other

1,257,907 583,177 559,782 114,948

609,244 122,025 375,918 111,301

648,663 461,152 183,864 3,647

106.47% 377.92% 48.91% 3.28%

c) guarantees 1. Governments 2. other public agencies 3. banks 4. other

4,965,238 10,273 2,113 479,235 4,473,617

4,853,139 14,401 6,732 439,291 4,392,715

112,099 -4,128 -4,619 39,944 80,902

2.31% -28.66% -68.61% 9.09% 1.84%

14,067,527

12,497,721

1,569,806

12.56%

(in thousands of euros)

Total

Changes

As shown in the above table, total secured loans account for 42.80% of customer loans, including write-downs, compared to 38.77% in the previous year.

109

Notes to the consolidated financial statements

1.7 – Due from customers – Cash credit lines

31-12-2002 (in thousands of euros)

A Impaired loans A.1. NPLs A.2. watchlist loans A.3. loans under restructuring A.4. restructured loans A.5. unsecured loans to Countries at risk B

-734,348 -623,703 -94,496 -645 -14,399

1,773,715 979,656 718,747 1,507 69,372

5,538

-1,105

4,433

Performing loans

30,357,498

-181,969

30,175,529

Total

32,865,561

-916,317

31,949,244

A Impaired loans A.1. NPLs A.2. watchlist loans A.3. loans under restructuring A.4. restructured loans A.5. unsecured loans to Countries at risk

110

Rettifiche Esposizione di valore netta complessive

2,508,063 1,603,359 813,243 2,152 83,771

31-12-2001 pro-forma (in thousands of euros)

B

Esposizione lorda

Esposizione lorda

Rettifiche Esposizione di valore netta complessive

2,538,960 1,719,042 707,961 97,392

-800,171 -712,363 -69,125 -16,595

1,738,789 1,006,679 638,836 80,797

14,565

-2,088

12,477

Performing loans

29,700,290

-184,298

29,515,992

Total

32,239,250

-984,469

31,254,781

Notes to the consolidated financial statements

1.8 – Due from customers – Changes in impaired loans 2002 (in thousands of euros)

A. Initial gross exposure A.1. of which: - for default interest B. Increments B.1. from performing loans B.2. default interest B.3. transfer from other impaired loan classes B.4. other increments C. Decrements C.1. back to performing loans C.2. write-offs C.3. collections C.4. proceeds from disposals C.5. transfer to other impaired loans classes C.6. other decrements D. Final gross exposure D.1. of which: - for default interest

Loans Unsecured under Restructured loans to restructuring loans Countries at risk

Watchlist loans

NPLs

Total

1,719,042

707,961

-

97,392

14,565

2,538,960

296,461 379,431 134,451 33,203

5,779 733,259 665,012 6,122

2,329 -

21,577 65,060 40,513 -

356 11 -

323,817 1,180,435 839,987 39,325

184,338 27,439 -495,114 -1,580 -306,959 -181,917 -2,700

62,125 -627,977 -242,800 -1,052 -64,340 -

2,329 -177 -177 -

21,765 2,782 -78,681 -10,177 -234 -53,635 -

206,103 345 95,020 -9,383 -1,211,332 - -254,557 -755 -309,000 -108 -300,177 -2,700

-1,958 1,603,359

-199,272 -120,513 813,243

2,152

-6,831 -7,804 83,771

-8,520 5,538

-206,103 -138,795 2,508,063

251,966

7,499

-

17

-

259,482

1.9 – Due from customers – Changes in total loan value adjustments

2002 (in thousands of euros)

A. Initial total adjustments A.1. of which: - for default interest B. Increases B.1. increases B.1.1. of which: - for default interest B.2. drawdown on loan loss reserves B.3. transfer from other loan classes B.4. other increases C. Decreases C.1. valuation write-backs C.1.1. of which: - for default interest C.2. collection write-backs C.2.1. of which: - for default interest C.3. write-offs C.4. transfer to other loan classes C.5. other increases D. Final total adjustments D.1. of which: - for default interest

Loans Unsecured under Restructured loans to Performing restructuring loans Countries at risk loans

NPLs

Watchlist loans

712,363

69,125

-

16,595

2,088

184,298

984,469

245,243 204,028 152,268

2,160 76,669 74,845

645 645

1,627 8,944 8,172

2,163 149

798 11,026 9,510

249,828 303,475 245,589

23,128

2,085

-

1,893

-

503

27,609

18,645

-

-

-

-

-

32,484 631 -292,688 -18,144

42 1,782 -51,298 -10,102

-

772 -11,140 -102

2,014 -3,146 -65

600 916 -13,355 -4,760

18,645 33,898 5,343 -371,627 -33,173

-183 -27,147

-1 -3,247

-

-7,867

-55 -1,117

-9 -463

-248 -39,841

-7,969 -211,677

-2,454

-

-1,627 -253

-

-385 -6,544

-9,981 -220,928

-157 -35,563 623,703

-30,234 -5,261 94,496

645

-2,918 14,399

-1,964 1,105

-589 -999 181,969

-33,898 -43,787 916,317

192,265

2,043

-

17

-

963

195,288

Total

111

Notes to the consolidated financial statements

Non-performing loans (inclusive of default interest) Non-performing loans, net of write-downs, break down as follows:

(in thousands of euros)

a) b)

31-12-2002

31-12-2001 pro-forma

Changes

principal interest

919,955 59,701

974,598 32,081

-54,643 27,620

-5.61% 86.09%

Total

979,656

1,006,679

-27,023

-2.68%

Including write-downs, they amounted to €1,603,359 thousand, down 6.7% from the previous year (€1,719,042 thousand). The gross NPLs to total gross cash loans ratio, i.e., including write-downs, accounted for 4.88% from 5.33% in the previous year. Net of write-downs, the NPL to loans ratio stood at 3.07% from 3.22% in the previous year.

Due from default interest The chart’s bottom-line shows total default interest posted under the assets side of the balance sheet, further to direct loan write-downs.

(in thousands of euros)

a) b)

112

31-12-2002

31-12-2001 pro-forma

Changes

nonperforming loans other loans

59,701 5,456

32,081 5,529

27,620 -73

86.09% -1.32%

Total

65,157

37,610

27,547

73.24%

Notes to the consolidated financial statements

SECTION 2 - SECURITIES

Own securities reported under items 20, 50 and 60 of the consolidated balance sheet’s assets amount to €4,997,291 thousand and break down as follows:

(in thousands of euros)

20 Treasuries and similar bills eligible to refinancing with central banks 50 Bonds and other debt securities 60 shares, and other equity securities Total of which: - investment securities - trading securities

31-12-2002

31-12-2001 pro-forma

Changes

1,166,883 3,633,256 197,152

2,286,648 -1,119,765 3,229,605 403,651 89,793 107,359

-48.97% 12.50% 119.56%

4,997,291

5,606,046

-608,755

-10.86%

1,052,241 3,945,050

1,631,243 3,974,803

-579,002 -29,753

-35.49% -0.75%

2.1 – Investment securities (in thousands of euros)

Book valure 31-12-2002 31-12-2001 pro-forma

1.

1,040,472

1,619,919

1.1. Treasuries - listed - unlisted

242,792 142,792 100,000

679,195 474,217 204,978

245,789 143,709 102,080

681,561 474,145 207,416

1.2. other securities - listed - unlisted

797,680 518,830 278,850

940,724 568,223 372,501

709,695 470,142 239,553

851,888 522,482 329,406

11,769 11,769

11,324 11,324

16,984 16,984

19,726

1,052,241

1,631,243

2.

Debt securities

Equity securities - listed - unlisted Total

Market value 31-12-2002 31-12-2001 pro-forma

955,484 1,533,449

19,726

972,468 1,553,175

At year-end, the investment portion of the securities portfolio stood at 21.06%, compared with 29.10% in the previous year. It is made up of securities specifically picked to become long term investments further to specific resolutions. As of December 31st, 2002, investment securities, valued at cost, showed a €79.773 thousand liability spread between book value and market value.

113

Notes to the consolidated financial statements

2.2 – Annual changes in investment securities 2001 pro-forma

(in thousands of euros)

2002

A. Opening balance

1,631,243

1,633,475

85,952 35,680 59

75,377 51,007 -

19,473 30,740

24,370

-664,954 -12,018 -400,777 -2,805

-77,609 -20,309 -36,752 -4,937

-2,796

-4,937

-195,891 -53,463

-1,062 -14,549

1,052,241

1,631,243

B.

Increments B.1. purchase B.2. write-backs B.3. transfers from trading portfolio B.4. other changes

C. Decrements C.1. sales C.2. redemptions C.3. write-downs of which: - write-offs C.4. transfers to trading portfolio C.5. other changes D. Final balance

Transfers to the trading portfolio carried out in 2002 are explained by the decision to review investment profiles made in December 2001 by the Board of Directors of the former Banca Popolare di Novara s.c.r.l.. Out of the above transfers, the main portion is represented by fixed income securities, amounting to a total nominal value of €200 million.

2.3 – Trading securities Book value 31-12-2002 31-12-2001 pro-forma

Market value 31-12-2002 31-12-2001 pro-forma

3,759,667

3,896,334

3,761,010 3,934,705

1.1. treasuries - listed - unlisted

1,866,409 1,866,395 14

1,585,146 1,354,224 230,922

1,866,417 1,592,221 1,866,396 1,356,227 21 235,994

1.2. other securities - listed - unlisted

1,893,258 1,225,433 667,825

2,311,188 1,236,254 1,074,934

1,894,593 2,342,484 1,225,484 1,258,899 669,109 1,083,585

185,383 17,340 168,043

78,469 18,885 59,584

3,945,050

3,974,803

(in thousands of euros)

1. Debt securities

2. Equity securities - listed - unlisted Total

114

189,793 17,361 172,432

82,367 21,772 60,595

3,950,803 4,017,072

Notes to the consolidated financial statements

2.4 – Annual changes in trading securities The changes in the portfolio under examination occurred during the year are summarized in the chart below: 2001 pro-forma

(in thousands of euros)

2002

A. Opening balance

3,974,803

4,629,374

42,158,671 41,851,714 40,182,575 32,647,211 7,535,364 1,669,139 45,575

36,665,192 36,598,498 32,492,115 25,748,576 6,743,539 4,106,383 9,436

201,107 60,275

1,062 56,196

-42,188,424 -42,109,645 -40,568,680 -32,608,900 -7,959,780 -1,540,965 -25,255

-37,319,763 -37,291,316 -33,157,032 -26,672,306 -6,484,726 -4,134,284 -17,817

-19,473 -34,051

-10,630

3,945,050

3,974,803

B.

Increments: B.1. purchases - debt securities - treasuries - other securities - equity securities B.2. write-backs and write-ups B.3. transfers from investment portfolio B.4. other changes

C. Decrements: C.1. sales and redemptions - debt securities - treasuries - other securities - equity securities C.2. write-downs C.3. transfer to investment portfolio C.4. other changes D. Closing balance

115

Notes to the consolidated financial statements

SECTION 3 – EQUITY INVESTMENTS 3.1 – Significant equity investments

(in thousands of euros)

A.

Head office

Type Shareholders’ Income of relation equity (Loss) (a) (b)

Shareholding rrelation Company Share %

Votes in general meetings %

Book value

Imprese incluse nel consolidamento Banco Popolare di Verona e Novara S.c.r.l.

Verona

3,129,034 233,595

Parent Company

A.1 Full consolidation 1 2

Aletti Fiduciaria S.p.A. Aletti Gestielle SGR S.p.A.

Milano Milano

(1) (1)

123 29,951

4 -104

3

Aletti Gestielle Alternative SGR S.p.A.

Milano

(1)

1,616

-291

4 5

Aletti International S.A. Aletti Invest SIM S.p.A.

Lussemburgo Bergamo

(1) (1)

422 11,537

391 -1,042

6

Aletti Merchant S.p.A.

Verona

(1)

17,791

-3,974

7

Aletti Private Equity SGR S.p.A.

Verona

(1)

1,055

-291

8

Banca Aletti & C. S.p.A.

Milano

(1)

107,161

12,550

9 10 11 12 13

Banca Aletti & C. (Suisse) S.A. Banca Popolare di Novara S.p.A. BPVN (France) S.A. BPVN Immobiliare S.r.l. BPVN (Luxembourg) S.A.

CH - Lugano Novara F - Parigi Verona Lussemburgo

(1) (1) (1) (1) (1)

8,338 865,642 37,379 22,311 37,771

-453 83,974 475 -63 333

14 Compagnie D'Angely S.A. F - Parigi 15 Credito Bergamasco S.p.A. Bergamo 16 Holding di Partecipazioni Finanziarie Popolare di Verona - S.Geminiano e S.Prospero S.p.A. Verona 17 Immobiliare BPV S.r.l. Verona 18 Leasimpresa S.p.A. Torino

(1) (1)

45 753,448

5 85,066

(1) (1) (1)

123,201 3,651 56,580

10,092 98 8,084

19 Novara Immobiliare S.p.A. 20 Novara Invest SIM S.p.A.

Novara Novara

(1) (1)

374 895

144 -2,203

21 SA.RI Sannitica Riscossioni S.p.A. 22 Sestri S.p.A. 23 Società Gestione Servizi - BPVN S.p.A.

Novara Novara Verona

(1) (1) (1)

2,742 3,633 108,440

160 -1,065 4,011

A.2 Proportional method

116

Banca Aletti 50.000% BPVN 32.612% Creberg 19.591% Holding 47.797% Holding 70.800% Creberg 29.200% Aletti Merchant 99.677% BPVN 50.000% Creberg 50.000% BPVN 60.000% Creberg 40.000% Aletti Merchant 99.867% Holding 0.133% BPVN 74.225% Creberg 25.775% BPV Int. 100.000% BPVN 100.000% BPVN 99.977% BPVN 100.000% BPVN 99.966% Holding 0.034% BPVN France 99.440% BPVN 81.252%

50.000% 32.612% 19.591% 47.797% 70.800% 29.200% 99.677% 50.000% 50.000% 60.000% 40.000% 99.867% 0.133% 74.225% 25.775% 100.000% 100.000% 99.977% 100.000% 99.966% 0.034% 99.440% 81.252%

BPVN BPVN Holding Creberg BPVN Immob. BPVN Aletti Gestielle BPVN BPVN BPVN Creberg

100.000% 100.000% 66.660% 33.340% 100.000% 99.000% 1.000% 99.950% 100.000% 75.490% 24.510%

100.000% 100.000% 66.660% 33.340% 100.000% 99.000% 1.000% 99.950% 100.000% 75.490% 24.510%

xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx

Notes

Notes to the consolidated financial statements

(in thousands of euros)

B.

Head office

Type Shareholders’ Income of relation equity (Loss) (a) (b)

Shareholding relation Company Share %

Votes in general meetings %

Book Notes value

Equity investments carried at equity B.1 Subsidiaries 1 2

Arena Broker S.r.l. Assisebino S.r.l.

Verona Bergamo

(1) (1)

858 19

84 2

3

BPV Vita S.p.A.

Verona

(4)

45,348

5,041

4 5

Novara Vita S.p.A. Tecmarket Servizi S.p.A.

Novara Verona

(4) (1)

69,978 1,532

2,586 548

Holding Arena Broker Creberg BPVN Creberg BPVN BPVN SGS-BPVN

51.000% 51.000% 9.000% 35.000% 15.000% 50.000% 47.500% 52.500%

51.000% 51.000% 9.000% 35.000% 15.000% 50.000% 47.500% 52.500%

xxx xxx xxx xxx xxx xxx xxx xxx

BPVN BPVN Holding BPVN Holding

20.000% 27.626% 10.534% 30.474% 3.356%

20.000% 27.626% 10.534% 30.474% 3.356%

xxx xxx xxx xxx xxx

BPVN

33.333%

33.333%

xxx

BPVN Holding

15.000% 7.089%

15.000% 7.089%

xxx xxx

(c) (d)

B.1 Affiliates 6 7

Aosta Factor S.p.A. Banca per il Leasing - Italease S.p.A.

Aosta Milano

(8) (8)

15,399 282,213

1,032 7,302

8

Factorit S.p.A.

Milano

(8)

54,451

5,323

9

GEMA Magazzini Generali BPV-BSGSP S.p.A.

Castelnovo Sotto (RE)(8)

3,850

-140

(c)

10 Istituto Centrale delle Banche Pop. Italiane S.p.A.

Roma

(8)

191,872

34,362

11 Soc. Coop. fra le Banche Pop. "L.Luzzatti" S.c.r.l.

Roma

(8)

254

-11

BPVN

25.100%

25.100%

xxx

Milano

(1)

14,960

1,996

BPVN

100.000%

100.000%

7.545

Marano (NA) CH - Lugano

(1) (1)

-2,946 67,793

-54 -19,652

SE.RI. BPVN

100.000% 100.000%

100.000% 100.000%

44.896

(e)

Napoli Novara CH - Lugano

(1) (1) (1)

-31 -50 42

-3 -61 -18

Sestri BPVN Seefinanz

80.000% 100.000% 100.000%

80.000% 100.000% 100.000%

-

(e) (e) (e)

Arzignano (VI) Milano Novara Foggia Rovereto (TN) Lussemburgo

(8) (8) (8) (8) (8) (8)

59,358 1,800 76

20.000% 25.050% 49.000% 30.000% 24.000% 37.150%

20.000% 25.050% 49.000% 30.000% 24.000% 37.150%

16.026 467 1.216 28

(f) (g) (e) (e) (f)

C.

Other significant equity investments C.1 Subsidiaries 1 2 3 4 5 6

Compagnia Fin. Ligure Piemontese S.p.A. (in liq.) FIN.E.R.T. Fin. Esatt. Tesor. e Ricev. S.p.A. (in liq.) Seefinanz S.A. (in liq.) Servizi Riscossione Imposte SE.RI. S.p.A. (in liq.) Sinergia S.r.l. (in liq.) Teliber S.A.

C.1 Affiliates 7 8 9 10 11 12

Conceria Mastrotto S.p.A. G.I. Holding S.p.A. Novara Promuove S.r.l. Nuova Foar S.r.l. (in fallimento) Pama S.p.A. Veronagest S.A.

5,000 16,442

7,821 Aletti Merchant n.d. Aletti Merchant 2 BPN COFILP n.d. Aletti Merchant 73 Aletti Merchant

(a) Type of relation: (1) Control under art. 2359 civil code, paragraph 1, n. 1, (majority of voting rights at general meetings) (2) Control under art. 2359 civil code, paragraph 1, n. 2, (dominant influence at general meetings) (3) Control under art. 23 T.U., paragraph 2, n. 1, (agreements with other shareholders) (4) Other types of control (5) Independent management under art. 26, paragraph 1, of Law Decree n. 87 of 27 January 1992 (6) Independent management under art. 26, paragraph 2, of Law Decree n. 87 of 27 January 1992 (7) Joint control (8) Affiliated company (b) Inclusive of net income for the year (c) Shareholders’ equity and net income refer to financial statements (d) Shareholders’ equity and net income refer to financial statements as on 30/09/2001 (e) The company is not material to a true and fair view of the financial statements under art. 29, par. 1, Law dec. 87/1992 (f) Shareholders’ equity and net income refer to the 2001 consolidated financial statements (g) The company was turned into an S.p.A. (joint stock co.) during the year; the shareholders’ equity is represented by share capital. 117

Notes to the consolidated financial statements

3.2 – Assets and liabilities towards companies of the Group The main assets and liabilities outstanding at the date of accounting with non consolidated investee companies of the Group are shown below: (in thousands of euros)

a)

b)

c)

assets 1. due from banks of which: - subordinated 2. due from financial institutions of which: - subordinated 3. due from other customers of which: - subordinated 4. bonds and other debt securities of which: - subordinated liabilities 1. due to banks 2. due to financial institutions 3. due to other customers 4. debt securities in issue 5. subordinated liabilities guarantees and commitments 1. guarantees issued 2. commitments

31-12-2002

31-12-2001 pro-forma

Changes

37,196 -

20,034 -

17,162 -

86.00%

37,121

17,236

19,885

115.00%

15,494 75

15,494 2,798

-2,723

-

-

-

81,526 80,475 1,051 4,852 1,736 3,116

84,716 23,371 61,345 4,488 1,906 2,582

-3,190 57,104 -60,294 364 -170 534

-4.00% 244.00% -98.00% 8.00% -9.00% 21.00%

3.3 – Assets and liabilities towards affiliated companies The main assets and liabilities outstanding at the date of accounting with affiliates other than companies of the Group are shown below: (in thousands of euros)

a)

b)

c)

118

asstes 1. due from banks of which: - subordinated 2. due from financial institutions of which: - subordinated 3. due from other customers of which: - subordinated 4. bonds and other debt securities of which: - subordinated liabilities 1. due to banks 2. due to financial institutions 3. due to other customers 4. debt securities in issue 5. subordinated liabilities guarantees and commitments 1. guarantees issued 2. commitments

31-12-2002

31-12-2001 pro-forma

Changes

734,410 230,222

330,154 152,842

268,980 77,380

81.47% 50.63%

280,980

117,239

163,741

139.66%

72,776

49,644

23,132

46.60%

15,156

10,429

4,727

45.33%

9,059 550,804 297,710 155,379 61,082 36,633 81,287 42,172 39,115

1,877 327,267 908 41,853 106,628 99,357 78,521 70,001 25,200 44,801

7,182 382.63% 223,537 68.30% 296,802 32687.44% 113,526 271.25% -45,546 -42.71% -62,724 -63.13% -78,521 -100.00% 11,286 16.12% 16,972 67.35% -5,686 -12.69%

Notes to the consolidated financial statements

3.4 – Composition of item 70 "Equity investments" The chart below shows a synoptic breakdown of item “Equity investments”, based upon the companies’ business sector:

(in thousands of euros)

a)

in banks 1. listed 2. unlisted

31-12-2002

31-12-2001 pro-forma

256,273 77 256,196

172,209 172,209

55,787 55,787

47,046 1 47,045

Changes

84,064 77 83,987

48.82% 48.77%

b)

in financial institutions 1. listed 2. unlisted

8,741 18.58% -1 -100.00% 8,742 18.58%

c)

other 1. listed 2. unlisted

105,179 6 105,173

126,743 6 126,737

-21,564 -21,564

-17.01%

Total

417,239

345,998

71,241

20.59%

-17.01%

3.5 – Composition of item 80 "Equity investments in companies of the Group" The chart below shows a synoptic breakdown of non consolidated companies of the Group based upon their business sector:

(in thousands of euros)

a)

b)

c)

31-12-2002

31-12-2001 pro-forma

Changes

in banks 1. listed 2. unlisted

44,896 44,896

44,261 44,261

635 635

1.43%

in financial institutions 1. listed 2. unlisted

65,043 65,043

7,587 7,587

57,456 57,456

757.30%

1,736 1,736

46,065 46,065

-44,329 -44,329

-96.23%

111,675

97,913

13,762

14.06%

other 1. listed 2. unlisted Total

1.43%

757.30%

-96.23%

119

Notes to the consolidated financial statements

3.6 – Annual changes in equity investments

3.6.1 – Equity investments in companies of the Group 2001 pro-forma

(in thousands of euros)

2002

A. Opening balance

97.913

88.739

B.

Increments B.1. purchases B.2. write-backs B.3. write-ups B.4. other changes

18.235 14.551 3.684

11.476 9.072 2.404

C. Decrements C.1. sales C.2. write-downs of which: - write-off C.3. other changes

-4.473 -4.235 -

-2.302 -10

-238

-10 -2.292

111.675

97.913

-

-

35.592

32.271

D. Closing balance E.

Total write-ups

F.

Total write-downs

3.6.2 – Other equity investments

(in thousands of euros)

120

2001 pro-forma

2002

A. Opening balance

345.998

291.344

B.

Increments B.1. purchases B.2. write-backs B.3. write-ups B.4. other changes

133.854 106.700 27.154

138.473 84.429 9.106 44.938

C. Decrements C.1. sales C.2. write-downs of which: - write-offs C.3. other changes

-62.613 -53.603 -684

-83.819 -76.923 -5.372

-684 -8.326

-5.218 -1.524

D. Closing balance

417.239

345.998

1

1

26.744

26.412

E.

Total write-ups

F.

Total write-downs

Notes to the consolidated financial statements

SECTION 4 – TANGIBLE AND INTANGIBLE FIXED ASSETS

Tangible assets (item 120 of assets)

(in thousands of euros)

a) b) c) d)

31-12-2002

31-12-2001 pro-forma

Changes

buildings plant and equipment furniture and fittings goods pending to be under finance lease

509,343 49,163 18,311 246,569

660,388 64,908 21,194 170,090

-151,045 -15,745 -2,883 76,479

-22.87% -24.26% -13.60% 44.96%

Total

823,386

916,580

-93,194

-10.17%

Intangible assets (item 110 of assets)

(in thousands of euros)

a) b) c) d)

goodwill software purchase costs organization costs other Total

31-12-2002

31-12-2001 pro-forma

Changes

55,328 63,728 21,264 57,635

90,752 78,104 16,073 89,503

-35,424 -14,376 5,191 -31,868

-39.03% -18.41% 32.30% -35.61%

197,955

274,432

-76,477

-27.87%

Goodwill costs are mainly represented by: •

€52,356 thousand for the portion of negative difference on consolidation of Banco S.Geminiano e S.Prospero still to be amortized, that was not allocated to increase the value of the property. The amortization portion charged to income for the year amounted to €34,903 thousand;

•

€2,941 thousand for the portion of negative difference upon consolidation of Cliam Gestioni S.p.A. in Aletti Gestielle SGR S.p.A., still to be amortized. The amortization portion charged to income for the year amounted to €490 thousand.

The other intangible assets include the residual net book value of the charge incurred by the former Banca Popolare di Novara s.c.r.l., equal to €36,783 thousand, to implement the early retirement plan with access to the industry Solidarity Fund.

121

Notes to the consolidated financial statements

The original charge incurred in 2001, for a total of €61,305 thousand was posted under intangible assets – as sanctioned in the relevant regulations, overriding what provided for by the relevant accounting principles that require said charge to be fully charged to income in the year in which the liability was generated. Said charge is amortized on a straight-line basis over five years starting from 2001. The amortization portion for the year amounted to €12.261 thousand.

4.1 – Annual changes in tangible assets

2002 (in thousands of euros)

Furniture

Goods Equipment pending fin. lease

Total

A. Opening balance

660,388

21,194

64,908

170,090

916,580

B. Increments B.1. purchases B.2. write-backs B.3. write-ups B.4. other changes

50,961 14,816 36,145

5,992 5,709 283

28,555 21,144 7,411

194,288 192,381 1,907 -

279,796 234,050 1,907 43,839

-202,006 -3,898 -25,206 -25,206 -172,902

-8,875 -10 -4,229 -4,229 -4,636

D. Closing balance

509,343

18,311

49,163

246,569

823,386

E. Total write-ups

344,108

-

-

-

344,108

F. Total write-downs a) depreciation b) write-offs

350,057 350,057 -

78,653 78,648 5

221,029 224,253 -3,224

-

649,739 652,958 -3,219

C. Decrements C.1. sales C.2. write-downs a) depreciations b) write-offs C.3. other changes

122

Buildings

-44,300 -117,809 -372,990 -830 -4,738 -36,320 - -65,755 -36,320 - -65,755 -7,150 -117,809 -302,497

Notes to the consolidated financial statements

4.2 – Annual changes in intangible assets 2002 (in thousands of euros)

Organization costs

Goodwill

Other fixed asstes

Total

A.

Opening balance

16,073

90,752

167,607

274,432

B.

Increments B.1. purchases B.2. write-backs B.3. write-ups B.4. other changes

15,984 9,254 6,730

-

75,301 42,150 33,151

91,285 51,404 39,881

C.

Decrements C.1. sales C.2. write-downs a) amoritzation b) write-offs C.3. other changes

-10,793 -10,789 -10,789 -4

-35,424 -35,424 -35,424 -

-121,545 -73,994 -73,994 -47,551

-167,762 -120,207 -120,207 -47,555

D.

Closing balance

21,264

55,328

121,363

197,955

E.

Total write-ups

-

-

-

-

F.

Total write-downs a) amortization b) write-offs

30,262 30,262 -

380,244 380,244 -

45,493 45,493 -

455,999 455,999 -

123

Notes to the consolidated financial statements

SECTION 5 – OTHER ASSETS 5.1 - Composition of item 150 "Other assets"

(in thousands of euros)

a) b) c) d) e) f) g)

tax items pending items due for advances tax collection service deferred tax assets cash and other valuables held by the cashier items deriving from off-balance sheet transactions other items Total

31-12-2002

31-12-2001 pro-forma

Changes

689,333 462,144 357,065 187,152

552,601 432,662 379,091 212,540

136,732 29,482 -22,026 -25,388

24.74% 6.81% -5.81% -11.95%

165,206

260,446

-95,240

-36.57%

100,900 516,961

17,880 612,488

83,020 -95,527

464.32% -15.60%

2,478,761

2,467,708

11,053

0.45%

5.2 - Composition of item 160 "Accrued income and prepaid expenses"

(in thousands of euros)

a)

b)

accrued income 1. interest accrued on derivative contracts 2. interest on interbank loans 3. interest on customer loans 4. interest income on securities 5. other prepaid expenses 1. non-accrued interest on derivative contracts 2. G/A expenses 3. other Total

31-12-2002

31-12-2001 pro-forma

Changes

499,207

521,355

-22,148

-4.25%

310,223 17,485 57,250 96,460 17,789

171,812 46,224 91,478 89,493 122,348

138,411 -28,739 -34,228 6,967 -104,559

80.56% -62.17% -37.42% 7.78% -85,46%

19,615

21,960

-2,345

-10.68%

4,015 8,846 6,754

844 9,786 11,330

3,171 -940 -4,576

375.71% -9.61% -40.39%

518,822

543,315

-24,493

-4.51%

5.3. – Adjustments for accrued income and prepaid expenses Accrued interest on “zero coupon” securities present in the proprietary portfolio and on issue differences was partly allocated to increase the securities value, and partly posted under “due from Inland Revenue”, by specific instruction of the Bank of Italy. No company of the Group availed itself of the possibility put forth by art. 12, paragraph 2, of Law decree n. 87, of January 27th, 1992, according to which, whenever technically correct, accrued income and prepaid expenses may be directly credited or debited to their relevant asset or liability items.

124