4) OBJETIVOS
4.2 OBJETIVOS ESPECIFICOS
The Corporate Centre is responsible for direction, coordination and control of the whole Group, as well as for Treasury.
The Corporate Centre Departments (essentially the Treasury Department) generated operating income of 45 million euro in the first half of 2012, compared to a loss of 55 million euro for the corresponding period of the previous year. This improvement was mainly the result of profits on trading, which benefited from the buyback of subordinated notes that generated income of 274 million euro. Income before tax from continuing operations amounted to -364 million euro (-245 million euro in the first six months of 2011) mainly as a result of the recognition of adjustments to loans related to the worsening of the economic situation and due to the absence of the capital gains realised in first six months of 2011 (sale of CR La Spezia and other branches to Crédit Agricole). Net income amounted to a loss of 293 million euro, compared to a loss of 189 million euro posted in the same period of the previous year.
Treasury services
The Treasury Department includes treasury services in euro and foreign currencies, and the integrated management of liquidity requirements/surpluses, financial risks and settlement risks. In the first half of 2012 Intesa Sanpaolo maintained its Target2 market share in Italy and Europe. The Bank's key role in the payments area was again confirmed by the request made by the Bank of Italy to the ECB for the status as "critical participant" in the system. In the area of Target2-Securities, the new Eurosystem platform securities settlement which will be launched in June 2015, Intesa Sanpaolo is launching an internal implementation project in which it will be a leading player in the first migration window along with the Italian banking system. Lastly, in relation to the elimination of settlement risk in foreign exchange transactions, Fideuram Bank Luxembourg has been included as one of the banks intermediated by Intesa Sanpaolo within the Continuous Linked Settlement (CLS) system.
The money market was characterised in the first half of the year by the unconventional monetary policy actions of the ECB (with two extraordinary three-year refinancing auctions for a total amount of over a trillion euro) and by the resulting strong market recovery, whereas the second quarter of the year saw renewed periods of strain, due both to the worsening situation in Spain and the continued political instability in post-election Greece. The risk of contagion to Italy brought the BTP/Bund spread at the end of June close to record highs, just below the level of 500 basis points. In this environment of renewed risk aversion, the Bank strengthened its capacity for funding in the traditional short-term securities markets, despite further downgrades of ISP’s rating by Moody’s in May. Overall there was no deterioration in funding, only a reduction in its duration. The increase in excess liquidity in the system, through the injections of liquidity by the ECB, failed to specifically boost the interbank market, where exchanges remained largely confined to overnight trades. At the end of June, despite its participation in both 3-year financing auctions, Intesa Sanpaolo's debt with the ECB, substituting both the lower securities and interbank funding lost in the summer of 2011, stood at the same levels as the end of 2011 and the end of March 2012 (36 billion euro).
For the securities portfolio, the first half of the year was marked by the high volatility of returns and the spread of Italian government bonds against the Bund. In this context, the Bank continued to buy short-term Italian government paper (maximum 3 years), with a substantial increase in the existing banking book. The lower activity in the primary market due to the lower funding needs of European banks reduced investment opportunities in the covered securities segment.
Measures implemented on the secondary market were aimed, on one hand, at reducing the risk profile through the sale of securities (in the first part of the year, of Italian covered bonds with 5-7 year maturity and, in the second part, of Spanish issuers) and, on the other hand, greater diversification with an increase in the exposure to English issuers. In the corporate segment the portfolio was increased slightly to exploit the moderate widening of credit spreads.
Operating ACM and Structured Operations
With regard to Asset & Liability Management, operational management of the interest rate risks of the Group’s banking book – in the segment over 18 months – is handled by the ALM structure under the supervision of the Risk Management Department. Interest rate risk is monitored and managed mainly by examining the sensitivity of the market value of the various positions in the banking book to parallel shifts in the interest rate curve at the various maturities; moreover specific scenario analysis techniques on rate developments are used, as well as performance scenarios for specific positions. The strategic choices on interest rate risk are made by the Group’s Financial Risks Committee, within limits established by the Management Board. The ALM structure actively supports the Committee’s decision-making activity by formulating analyses and proposals. Despite the sharp drop in short-term interest rates over the last few months, the reduction in mark-down on demand deposits was significantly offset by the decisions made to protect the interest margin, benefiting the business units. The structural component of liquidity risk is managed by identifying expected liquidity mismatches by maturity bands, on the basis of liquidity policies defined internally at the Group level. Mismatch analysis on medium-/long-term maturities provides input for planning bond funding, in order to anticipate possible pressures on short-term funding.
Funding
Medium-/long-term funding transactions were affected by the general situation described above. The Group has continued to adopt a more cautious funding policy on both the domestic and international markets due to the ongoing strains in relation to European sovereign risk, the lowering of the Republic of Italy’s rating and the downgrade of the Italian banking system with resulting high costs of international funding.
In the domestic market, the total issues of Group securities placed in the first half of 2012 through its own and third-party networks amounted to 9.2 billion euro, 77% of which through plain vanilla securities and the remaining 23% through structured
Explanatory notes – Breakdown of consolidated results by business area and geographical area
bonds (mainly structured interest rate securities). A breakdown by average maturity shows a concentration of 2-year maturities (with a weight of 56%), whilst 25% is represented by 3- and 4-year securities and 19% by 5- and 6-year bonds.
In the first half of the year, approximately 3.2 billion euro of unsecured funding transactions were completed in the form of senior bond issues on the Euromarket. A transaction was arranged for the repurchase of 3 subordinated notes (innovative and non-innovative Tier 1 capital instruments) issued by Intesa Sanpaolo with a total percentage subscription of 32.7%. In recent months access to international capital markets has been particularly cautious and selective due to the intensification of strains in the markets.
In view of the recent downgrades of both Italy and Intesa Sanpaolo, the Group has initiated a rationalisation of its securitisations. In structured funding, in June the new multi-originator CB issue programme was launched, secured by mortgages totalling 30 billion euro. The programme, aimed at retained issues, does not have a rating. The inaugural issues, for a total of 11.75 billion euro, are at floating rate with an approximate 2 year duration, listed on the Luxembourg Stock Exchange and eligible for transactions on the Eurosystem. The programme is collateralised by mortgages granted by Intesa Sanpaolo, as well as by mortgages granted by Banco di Napoli, primarily originating from the dismantling of the Adriano Finance 2 RMBS.
Explanatory notes – Breakdown of consolidated results by business area and geographical area