LOS ODS Y LA RELACIÓN CON LOS INSTRUMENTOS DE PLANEACIÓN

at the Bank (15,500) (14,855)

Total (76,421) (74,734)

Quarterly performance by financial activities

Figures in thousands of euro 2nd Quarter 1st Quarter

Financial assets held for trading 9,381 18,593 Financial liabilities held for trading 3,595 6,464 Other financial liabilities: exchange rate differences (1,340) 1,012

Derivative instruments (1,859) 556

Net trading income 9,777 26,625 Net hedging loss (1,827) (1,648)

Financial assets 64,194 33,421

Financial liabilities (1,803) (1,277)

Profit from disposal or repurchase 62,391 32,144 Net income (loss) on financial assets and

liabilities designated at fair value (871) 599

Net income 69,470 57,720

services (-€4.2 million, partly due to the absence of costs connected with the validation of capital requirements using advanced internal models); the tenancy of premises (-€0.4 million, related to decreased accounts for heating and electricity due to the mild winter); and advertising (-€0.7 million, in relation to the sponsorship of the 2013 Assiom Forex event). These actions to contain costs which also continued in relation to the remaining items, were partially offset by higher association membership fees (+€0.6 million mainly to the Consob – Italian securities market authority – due to a rate increase and the centralisation at the Parent of the issuance of bonds destined to network bank customers) and costs for outsourced services (+€0.9 million, from the adoption of a new payment card system, despite lower costs incurred for the 2014 Shareholders’ Meeting).

Furthermore, the first half of 2013 included a non-recurring item of €3.6 million consisting of the service fee for the migration of Centrobanca onto the target IT system (recognised within the service fees paid to UBI.S);

• depreciation, amortisation and net impairment losses on property, plant and equipment and intangible assets

came to €11 million compared with €11.6 million in the same period of 2013.

In quarterly terms, operating expenses of

€84.8 million in the second quarter compared with €97.4 million in the same period of 2013 and and with approximately €82 million in the first three months of the year. The item was up by €2.8 million compared with the previous quarter due

mainly to the trend for other administrative

expenses (+€2 million), explained partly by the different timing of invoices in the two periods, given the continuation of the rigorous spending policies pursued, but also as a result of the start of a new advertising campaign entitled “Flexible

Mortgages”, which involved both

conventional and new innovative media and the launch of new projects (the “New Digital

Bank”, “Single European Supervision” and “Cost Optimisation”). As concerns other expense items on the

other hand, staff costs increased by €0.9 million (mainly due to an increase in reimbursements to other

companies for employees on secondment at UBI Banca), while depreciation, amortisation and net

impairment losses on property, plant and equipment and intangible assets remained stable at €5.5 million.

As a result of the performance reported above, net operating income increased to €334.5

million (+53.4% compared with 2013).

On a quarterly basis, ordinary operations in the second quarter gave rise to net operating income of

€69.2 million, compared with €120.2 million in the same period of 2013 and of €265.3 million in the first three months of the current year.

The following was also recognised in the first half of 2014:

• €52.9 million (down by €2.4 million compared with 2013) of net impairment losses on loans

relating to the former B@nca 24-7 and former Centrobanca portfolios. As shown in the table, the amount was composed of €66 million of specific net impairment losses (which benefited from reversals – not including present value discounts – amounting to €24.2 million, that included €5.6 million relating to the second quarter from the closure of

positions relating to United States companies in the Lehman Group7_{) and of €13.1 million}

of net reversals on the performing portfolio (partly due to a fall in volumes of lending business);

7 See in this respect the information reported in the section “Financial activities” of the Interim management report on consolidated

operations.

Other administrative expenses: composition

Figures in thousands of euro 1H 2014 1H 2013

A. Other administrative expenses (75,940) (83,771)

Rent payable (3,691) (4,849)

Professional and advisory services (10,198) (14,364)

Rentals on hardware, software and other assets (1,873) (1,978)

Maintenance of hardware, software and other assets (270) (356)

Tenancy of premises (3,349) (3,751)

Property and equipment maintenance (1,281) (1,576)

Counting, transport and management of valuables 0 (1)

Membership fees (1,752) (1,141)

Information services and land registry searches (338) (278)

Books and periodicals (208) (297)

Postal (985) (1,341)

Insurance premiums (2,075) (2,734)

Advertising (1,962) (2,696)

Entertainment expenses (420) (518)

Telephone and data transmission expenses (5,371) (5,369)

Services in outsourcing (4,172) (3,308)

Travel expenses (1,669) (2,012)

Fees for services provided by Group companies (UBI.S) (30,594) (30,418)

Credit recovery expenses (4,059) (4,836)

Forms, stationery and consumables (245) (532)

Transport and removals (193) (242)

Security (773) (663)

Other expenses (462) (511)

B. Indirect taxes (3,453) (3,700)

Indirect taxes and duties (389) (422)

Stamp duty (3,272) (3,185)

IMU/ICI (municipal property taxes) (2,869) (2,869)

Other taxes (578) (1,064)

Reclassification of "tax recoveries" 3,655 3,840

Net impairment losses on loans: composition

Figures in thousands of euro

A. Loans and advances to banks - - - - - - B. Loans and advances to customers (65,999) 13,132 (52,867) (31,997) 4,776 (27,221)

C. Total (65,999) 13,132 (52,867) (31,997) 4,776 (27,221)

Figures in thousands of euro

A. Loans and advances to banks - 217 217 - 217 217 B. Loans and advances to customers (69,096) 13,637 (55,459) (45,893) 14,975 (30,918)

C. Total (69,096) 13,854 (55,242) (45,893) 15,192 (30,701)

Impairment losses/reversals of

impairment losses, net _{1H 2013} Impairment losses/reversals of impairment losses, net 2nd Quarter 2013

Specific Portfolio Specific Portfolio

2nd Quarter 2014

Specific Portfolio Specific Portfolio

Impairment losses/reversals of

impairment losses, net _{1H 2014} Impairment losses/reversals of impairment losses, net

• €1.4 million of net impairment losses on other financial assets/liabilities (compared with

€34.1 million before8_{) consisting of -€1.8 million of impairment losses on guarantees and of}

+€0.4 million (non-recurring) of reversals on securities and funds held in the AFS

portfolio (-€0.8 million relating to

impairment losses, mainly on units in UCITS, and +€1.2 million to the recovery in value of a bond held in portfolio);

• €0.9 million as the aggregate result of

provisions for revocation (clawback) actions and litigation, due to legal action taken by

different types of counterparty, more than offset by the release of a provision for risks and

charges made in prior years amounting to €2.4 million, due to the conclusion of the relative litigation.

In 2013 the item included -€1.5 million of provisions connected with the liquidation of an equity investment and +€0.8 million for the release of a provision of a tax nature, set aside in relation to old litigation with a banking counterparty, which now no longer exists.

• €0.6 million of net losses on equity investments, as a result of the settlement of the balance

on the price made necessary by the subsequent disposal of the Swiss subsidiary BDG (-0.9 million normalised), partially offset by the profit realised on the winding up of the Delaware companies that had been formed for the issuance of preference shares (+€0.3 million).

Profit on continuing operations before tax more than doubled to €280.6 million, compared

with €127.8 million in the first half of 2013.

On a quarterly basis, profit in the second quarter came to approximately €42 million compared with the

€55.1 million in the same period of 2013 and €238.6 million in the first three months of the year.

In line with the trend for the tax base, the first half recorded taxes on income for the period

from continuing operations of €35.9 million, attributable to the positive performance of pre-tax profit, although it was net of dividends which benefit from a partial non-taxation regime for both corporate income tax (IRES) and regional production tax (IRAP) purposes.

The amount nevertheless includes a non-recurring expense item of €17.9 million.

The conversion into law of Decree Law No. 66/2014 finally reduced (from 4.65% to 4.20%) the IRAP rate from the financial year 2014, nevertheless without effect on the surtax of 0.92% on some companies, including banks (the rate for UBI Banca therefore fell from 5.57% to 5.12%). This change had positive impacts on the amount of taxation due for the year, but at same time it reduced assets for prepaid taxes (“deferred tax assets”) already recognised in the financial

8 The amount consisted of €17.5 million of non-recurring impairment losses on instruments held in the AFS portfolio as follows: €9.4

million relating to a financial security previously held in the Centrobanca portfolio, €3.9 million relating to the Centrobanca Sviluppo Impresa fund, €4 million to units in UCITS and the remainder to equity instruments. It also included impairment losses of €16.5 million recognised on unsecured guarantees (item 130d “impairment losses on other financial transactions”), of which €17.3 million due to the enforcement in June 2013 of a guarantee that had been issued by the Parent to UBI Banca International on the Pescanova position.

Net provisions for risks and charges

Figures in thousands of euro 1H 2014 1H 2013

Net provisions for revocation clawback risks (600) -

Net provisions for litigation (887) (284)

Other net provisions for risks and charges 2,353 (707)