Bper Banca — Interim / Quarterly Report 2019

Nov 7, 2019

PRESS RELEASE

Consolidated interim report on operations as at 30 September 2019 approved

July completion of the strategic operations involved in the acquisition of:

• Unipol Banca1 , with the simultaneous sale of approximately € 1 billion of bad loans;
• minority interests in Banco di Sardegna;
• another stake in Arca Holding, reaching 57.1% of its share capital.

As a result, Unipol Banca and Arca Holding entered the BPER Group's scope of consolidation from 1 July 20192

Profit for the period of € 522.9 million, a figure that is not directly comparable with the result for the same period last year (€ 358.1 million which included non-recurring gains on debt securities). The profit for the nine months was affected by significant non-recurring items, including:

• the provisional badwill generated by the acquisition of Unipol Banca of € 353.8 million3 and higher loan loss provisions in line with the expected acceleration of the de-risking process in the third quarter;
• other negative items in the first half for a total of € 22.9 million4

Net operating income of € 572.0 million in the period, as a result of the difference between operating profit of € 1,643.8 million and operating costs of € 1,071.8 million

The Group's high capital strength is confirmed even after the completion of extraordinary transactions, with a Fully Phased CET1 ratio of 12.36%, up by 3 bps compared with June 2019 and by 41 bps on December 2018. Phased In CET1 ratio5 of 14.24%, far higher than the SREP requirement set at 9% by the ECB for 2019

The improvement in asset quality is continuing, with the gross NPE ratio down to 11.6% compared with 13.7% in June and an annualised default rate of 1.6%. The annualised cost of credit is 78 bps, up compared with June, due to higher provisions in view of the expected acceleration of the de-risking process. The BPER Group has in fact started work on a new bad loan securitisation, which is expected to be completed by the end of the first half of 2020, with the aim of reaching the target gross NPE ratio of less than 9% laid down in the Business Plan for 2021 a year ahead of schedule.

Total funding, including bancassurance, amounts to € 172.1 billion, a very strong increase mainly due to the expansion of the Group's scope of consolidation: direct deposits amount to € 58.2 billion, indirect deposits to € 107.4 billion, of which € 38.0 billion of assets under management and € 69.4 billion of assets under custody; life insurance premiums amount to € 6.5 billion. Loans to customers have grown with new mortgage loans up by 5.9% on the same period of 2018 on a consistent basis, with residential mortgages segment up by more than 40%

BPER Banca S.p.A., head office in Modena, via San Carlo, 8/20 - Tax Code and Modena Companies Register no. 01153230360 – Company belonging to the BPER BANCA GROUP VAT, VAT no. 03830780361 – Share capital Euro 1,542,925,305 - ABI Code 5387.6 - Register of Banks no. 4932 - Member of the Interbank Deposit Guarantee Fund and of the National Guarantee Fund - Parent Company of the BPER Banca S.p.A. Banking Group - Register of Banking Groups no. 5387.6 - Tel. 059.2021111 - Telefax 059.2022033 - e-mail: servizio.clienti@bper.it - Certified email (PEC): bper@pec.gruppobper.it - bper.it – istituzionale.bper.it

The Board of Directors of BPER Banca has examined and approved the separate results of the Bank and the consolidated results of the Group at 30 September 2019.

Alessandro Vandelli, Chief Executive Officer of BPER Banca, commented: "The third quarter of the year saw an important phase of expansion for the BPER Group, with Unipol Banca and Arca Holding entering the scope of consolidation following completion of their acquisitions in July. Together with the benefit deriving from the purchase of the minority interests in Banco di Sardegna, both companies make a significant contribution to the Group's consolidated net profit, which comes to € 522.9 million for the first nine months of the year. This amount includes some significant non-recurring items, such as the badwill generated by the acquisition of Unipol Banca, provisionally amounting to € 353.8 million, and higher loan loss provisions, given the target of further accelerating the de-risking process after the positive outcome of the sale of € 1 billion bad loan portfolio, also completed last July. This context includes the new securitisation of bad loans, which is expected to be completed before the end of the first half of next year, so as to achieve the target of a gross NPE ratio of less than the 9% threshold set by the Business Plan for 2021 a year earlier than planned. This new securitisation, which follows the positive experience of the previous 4Mori Sardegna and AQUI securitisations, represents a decisive step forward in the BPER Group's de-risking process. The figures for the period confirm the improvement in asset quality, with a gross NPE ratio at 11.6%, down by more than 2 percentage points compared with 13.7% in June, and an annualised default rate at a very low level of 1.6%. We are very satisfied for having succeeded in combining a growth strategy, through the extension of the Group scope, with a clear improvement in asset quality, while maintaining a strong capital position with a fully phased CET1 ratio of 12.36% in September, compared with 12.33% in June and 11.95% at the end of 2018. The latter part of the year will see us heavily involved in integrating Unipol Banca with the Parent Company, scheduled for completion by the end of November, and taking further steps to simplify and improve the efficiency, as envisaged in the Business Plan".

Consolidated income statement6 : key figures

Net interest income amounts to € 862.1 million; based on the same scope of consolidation, the figure comes to € 814.5 million compared with € 850.1 million, a 4.2% decline y/y mainly due to the accounting effects of IFRS 9 and IFRS 167 , net of which the reduction would be significantly lower, at 1.1% y/y. Net interest income for the third quarter of the year amounts to € 315.9 million; the quarterly figure, based on the same scope of consolidation, comes to € 268.3 million, down by 1.5% q/q, due to the accounting effects of IFRS 9 and IFRS 16, net of which third quarter net interest income would show an increase of 0.5% q/q.

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Net commission income amounts to € 656.1 million; on a comparable basis, the figure is € 585.2 million, up by 1.4% y/y with a particularly positive performance in bancassurance (+19.0% y/y) and assets under management (+2.9% y/y), whereas there was a reduction in the commissions relating to loans and guarantees (-3.1% y/y). The figure for the third quarter of 2019 amounts to € 268.3 million; based on the same scope of consolidation, it comes to € 197.5 million, up by 1.2% q/q (+5.0% compared with the third quarter of 2018), mainly due to increases in assets under management and bancassurance (+2.4% q/q) and cards, collections and payments (+2.0% q/q).

Dividends for the period amount to € 13.6 million (€ 13.8 million in the same period of 2018).

Net income from financial activities comes to € 77.2 million (€ 190.9 million in the first nine months of 2018, which included non-recurring gains realised on debt securities) after having expensed the full non-recurring writedown of BPER's share of the support given by the IDPF Voluntary Scheme to Banca Carige of € 13.3 million (on a comparable basis, this item amounts to € 62.3 million for the period). It includes realised net gains on sale of financial assets and loans of € 69.1 million, net gains on securities and derivatives of € 3.4 million and other positive elements of € 4.7 million.

Operating income comes in at € 1,643.8 million. Based on the same scope of consolidation, this figure is € 1,508.5 million compared with € 1,662.6 million in the same period of 2018 (the two results are not comparable, mainly because of the non-recurring gains realised on debt securities in 2018, as mentioned previously, and the significant difference in the impact of the "IFRS 9 reclassification" on net interest income in the two periods).

Operating costs amount to € 1,071.8 million; on a comparable basis, they come to € 998.9 million, down 1.2% y/y. In detail, personnel expenses amount to € 657.7 million; based on the same scope of consolidation, the figure stands at € 615.5 million, more or less stable compared with the same period of last year. Other administrative expenses amount to € 305.4 million (€ 313.3 million on a comparable basis and pro-forma without considering the effects of applying IFRS 168 , down by 1.0% y/y on a like-for-like basis) and net adjustments to property, plant and equipment and intangible assets amount to € 108.7 million (€ 70.7 million on a comparable basis and pro-forma without considering the effects of applying IFRS 169 , not directly comparable with the figure for the same period last year which included net non-recurring adjustments to property, plant and equipment for € 13.5 million).

The net operating income (operating income, net of operating costs) amounts to € 572.0 million; on a like-for-like basis, this figure comes to € 509.6 million. In the third quarter, net operating income amounts to € 267.5 million (€ 205.1 million on a comparable basis).

Net impairment losses for credit risk amount to € 309.1 million (€ 291.3 million based on the same scope of consolidation), almost entirely referable to net adjustments to financial assets at amortised cost, including higher provisions for loans, partly due to the expected acceleration in the de-risking process through a new securitisation of a significant amount of bad loans to be completed in the first half of 2020. Net impairment losses for credit risk in the third quarter amount to € 161.1 million (€ 143.3 million on a like-for-like basis). The annualised cost of credit stands at 78 bps with respect to 47 bps in 2018.

Net provisions for risks and charges for the period amount to € 9.2 million.

Contributions to system funds recognised during the period total € 58.4 million (€ 56.8 million on a like-for-like basis compared with € 52.4 million in the same period of 2018). More specifically: the BPER Group's ordinary contribution to the Single Resolution Fund (SRF) for 2019 of € 23.0 million in the first quarter; the additional contribution for 2017 of € 9.6 million in the second quarter; the estimated amount of the ordinary contribution to the Deposit Guarantee Scheme (DGS) of € 25.8 million in the third quarter, of which € 1.6 million relating to Unipol Banca. Note that, in the interests of clarity, these contributions are shown on a separate line in the reclassified income statement, whereas in the Bank of Italy's schedule they are included in item 190 b) "Other administrative expenses".

A reminder that the first provisional accounting for the acquisition of Unipol Banca was carried out at 30 September 2019 in accordance with IFRS 3 "Business Combinations". The negative difference between the purchase price and consolidated equity attributable to the acquired group was € 353.8 million. The total benefit of the acquisition, € 353.8 million, was therefore recognised as income in caption 275 of the income statement ("badwill") as at 30 September 2019.

Gains on equity investments and on disposal of investments amount to € 8.8 million (€ 8.6 million on a like-forlike basis, compared with € 9.0 million in the same period last year).

The profit from current operations before tax is € 557.9 million (€ 162.0 million on a comparable basis). Income taxes for the period are € 19.9 million.

Profit for the period stands at € 538.0 million and includes a profit for the period attributable to minority interests of € 15.1 million (€ 153.9 million and € 10.2 million respectively on a like-for-like basis). The profit attributable to the Parent Company therefore comes to € 522.9 million (€ 143.7 million on a comparable basis).

Consolidated balance sheet10: key figures

Direct funding from customers (amounts due to customers, debt securities issued and financial liabilities designated at fair value through profit or loss) amounts to € 58.2 billion, of which € 9.0 billion relating to Unipol Banca. Ordinary customer deposits amount to € 55.0 billion, mainly including current accounts and sight deposits for € 46.8 billion, time deposits and certificates of deposit for € 2.4 billion and bonds for € 2.3 billion. Institutional funding amounts to € 3.2 billion, made up entirely of bonds.

Indirect deposits from customers, valued at market prices, come to € 107.4 billion, significantly higher than the 2018 figure mainly due to the expansion of the Group's scope of consolidation. In particular, assets under management amount to € 38.0 billion, of which € 2.5 billion relating to Unipol Banca and € 14.8 billion to Arca Holding, net of the portion of funds placed by the BPER Group network. Assets under administration amount to € 69.4 billion, of which € 50.6 billion relating to Unipol Banca, for the most part consisting of administered deposits of a leading insurance company. The portfolio of life insurance premiums, not included in indirect deposits, amounts to € 6.5 billion, of which about € 1.0 billion relating to Unipol Banca.

Gross loans to customers amount to € 56.0 billion. Gross performing loans amount to € 49.5 billion, whereas gross non-performing loans (bad, unlikely-to-pay and past due loans) amount to € 6.5 billion, with a percentage on total gross loans of 11.6%. Looking at the various components, gross bad loans amount to € 3.5 billion; gross unlikely-to-pay loans amount to € 2.9 billion; gross past due loans amount to € 102.5 million. The quality of performing loans remains high, with a percentage of low-risk ratings of 63.6%, a further improvement compared with 61.7% in June 2019.

Net loans to customers amount to € 52.5 billion. Net performing loans amount to € 49.3 billion, whereas net nonperforming loans (bad, unlikely-to-pay and past due loans) amount to € 3.2 billion, with a percentage on total net loans of 6.1% and a coverage ratio of 51.1%. Looking at the various components, net bad loans amount to € 1.3 billion, with a coverage ratio of 63.7%; net unlikely-to-pay loans amount to € 1.8 billion, with coverage of 37.2%; net past due loans amount to € 87.2 million with coverage of 15.0%.

The net interbank position is negative for € 8.6 billion and is the result of the imbalance between amounts due from banks of € 3.7 billion and amounts due to banks of € 12.4 billion. The BPER Group's total amount of refinancing with the European Central Bank (ECB) amounts to € 9.7 billion, entirely attributable to participation in TLTRO 2 with a four-year maturity. Financial instruments, which can be used as collateral for refinancing operations on the market, amount to € 20.9 billion, net of the haircut, of which € 10.6 billion is available, to which € 2.2 billion of deposits available at the ECB must be added.

Financial assets come to a total of € 18.8 billion and amount to 23.3% of total assets. Debt securities amount to € 17.8 billion and represent 94.8% of the total portfolio: of these, € 8.2 billion refer to government securities and other public entities, of which € 6.4 billion of Italian government securities.

Total shareholders' equity at 30 September 2019 amounts to € 5.4 billion, with a portion pertaining to minority interests of € 0.2 billion. The Group's consolidated shareholders' equity, including the result for the period, amounts to € 5.2 billion.

The Liquidity Coverage Ratio (LCR) and the Net Stable Funding Ratio (NSFR) are both over 100%; at 30 September 2019, the LCR index is 163.9%, while the NSFR is estimated to be over 100% (it was 112.6% at 30 June 2019).

Capital ratios

The capital ratios at 30 September 2019, calculated taking into account the AIRB methodology for credit risk requirements, are based on Own Funds including the portion of profit realised during the period, net of the expected dividend:

• Common Equity Tier 1 Ratio (Phased In)11 of 14.24% (14.33% at 30 June 2019 and 14.27% at 31 December 2018). This ratio calculated on a fully phased basis comes to 12.36% (12.33% at 30 June 2019 and 11.95% at 31 December 2018);
• Tier 1 ratio (Phased in) of 14.68% (14.42% at 30 June 2019 and 14.37% at 31 December 2018);
• Total Capital Ratio (Phased In) of 17.24% (17.32% at 30 June 2019 and 17.25% at 31 December 2018).

Main structure data at 30 September 2019

The Group is present in nineteen regions of Italy with 1,429 bank branches, of which 258 relating to Unipol Banca, in addition to the Luxembourg office of BPER Bank Luxembourg S.A.

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The Group employs 13,910 people, of whom 2,145 are employed by Unipol Banca (11,615 at the end of 2018).

Significant subsequent events that took place after 30 September 2019

Agreement on the 2019-2021 Business Plan signed by the BPER Group and the Trade Unions

With reference to the 2019-2021 Business Plan presented on 28 February 2019, featuring a strong focus on cost containment, also by optimising the size of the workforce, BPER Banca has announced the signing of an Agreement between the BPER Group and the Trade Unions in relation to the trade union procedure launched with the communication dated 28 June 2019.

The Agreement envisages:

• voluntary termination from 31 March 2020 of personnel who have accrued or who will have accrued the right to receive a pension by 1 January 2022, with the payment of an incentive;
• the possibility of applying to the Sector Solidarity Fund, from 1 April 2020 up to the date that pension payments commence, for those who will meet these requirements between 1 January 2021 and 31 December 2025, with payment of an incentive;
• that these early retirement plans will lead to the resignation of 1,289 members of staff;
• hiring 645 people, who will bring new skills and a degree of generational turnover;
• a reduction in the workforce that will make it possible to achieve the target for the end of the Business Plan (a workforce of 12,739) and contribute towards the overall decrease of 1,300 people with respect to the workforce at the beginning of the Plan.

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Page 5

Outlook for operations

In the latter part of the year, operating costs will include both the charges relating to the personnel retirement plan as a result of the trade union agreement signed at the end of October and the non-recurring costs incurred for the integration of Unipol Banca, while revenues are expected to remain substantially stable, bolstered, in particular, by commission income from the asset management and bancassurance businesses.

With reference to the regulatory provisions that were introduced with the amendment to Legislative Decree 25 of 15 February 2016, which followed the European Directive 2013/50/EU (Transparency II) and the subsequent Consob Resolution 19770 of 26 October 2016, it should be noted that BPER Banca decided on a voluntary basis, in continuity with the past, to publish the Group's consolidated interim report on operations at 31 March and 30 September of each year. The consolidated interim report on operations of the BPER Group at 30 September 2019 is reviewed by the Independent Auditors only for the purpose of calculating the amount of consolidated profit to be included in CET 1 capital for regulatory purposes.

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The document will soon be available at the Bank's head office, on the websites of the Bank and of the Group (www.bper.it and https://istituzionale.bper.it/), of Borsa Italiana S.p.A. and of the authorised storage system ().

To supplement the information provided in this press release, we attach the consolidated balance sheet and income statement (also quarterly and reclassified) at 30 September 2019, as well as a summary of the key financial indicators.

Modena, 7 November 2019

The Chief Executive Officer Alessandro Vandelli

The Manager responsible for preparing the Company's financial reports, Marco Bonfatti, declares, pursuant to art. 154-bis, paragraph 2, of Legislative Decree no. 58/1998 (Consolidated Finance Act), that the accounting information contained in this press release agrees with the supporting documentation, books of account and accounting entries.

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Modena, 7 November 2019

The Manager responsible for preparing the Company's financial reports Marco Bonfatti

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A conference call will be held on 8 November 2019 at 9.30 a.m. (CET), to explain the consolidated results of the BPER Group at 30 September 2019.

The conference call will be held in English and will be chaired by Alessandro Vandelli, the Chief Executive Officer.

To join the conference call, dial the following telephone number:

ITALY: +39 02 8020911 UK: +44 1212 818004 USA: +1 718 7058796

A set of slides to support the presentation will be available the same day, before the start of the presentation and the conference call, in the Investor Relations area of the Bank's website https://istituzionale.bper.it.

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This press release is also available in the storage device.

Contacts:

Investor Relations Manager Responsible External Relations Gilberto Borghi Marco Bonfatti Eugenio Tangerini Tel: (+39) 059/202 2194 Tel: (+39) 059/202 2713 Tel: (+39) 059/202 1330 gilberto.borghi@bper.it marco.bonfatti@bper.it eugenio.tangerini@bper.it www.bper.it – https://istituzionale.bper.it/

Footnotes

1 By entering the share capital of Unipol Banca, the Group also acquired indirect control of Finitalia S.p.A.

² July 2019 saw completion of the extraordinary transactions announced in February, namely the acquisition of an additional shareholding in Arca Holding, the acquisition of the minority interests in Banco di Sardegna and the acquisition of 100% of Unipol Banca with the simultaneous sale to UnipolReC of bad loans for a gross carrying amount of around € 1 billion. These transactions took effect for accounting purposes from 1 July 2019; Unipol Banca and ARCA Holding Spa were included in the scope of consolidation of the BPER Group from the same date; the balance sheet figures at 30 September include the assets and liabilities of the new companies forming part of the Group scope, while their income statement figures have been included from the 3rd quarter onwards. It should also be noted that as a result of these transactions, the accounting figures at 30 September 2019 are not comparable with those of the corresponding period of the previous year, which also included non-recurring gains realised on debt securities. Furthermore, the consolidated result at 30 September 2019 includes significant non-recurring items, including the "badwill" generated by the acquisition of Unipol Banca of € 353.8 million (booked in the third quarter), the additional contribution to the European Single Resolution Fund for € 9.6 million (booked in the 2nd quarter) and the charges deriving from the total write-down of the share of the IDPF Voluntary Scheme's

intervention in Banca Carige for € 13.3 million (booked in the 1st quarter). 3 Provisional badwill of € 353.8 million, calculated as the difference between the shareholders' equity at current values with the acquisition of Unipol Banca and Finitalia for € 573.8 million (net of the value of the Finitalia investment held by Unipol Banca) and the cash cost for its acquisition of € 220 million. 4 More specifically: the additional contribution to the European Single Resolution Fund for a total of € 9.6 million in the second quarter of 2019; the charge deriving

from the total write-down of our share of the IDPF Voluntary Scheme's intervention in Banca Carige for € 13.3 million in the first quarter of 2019. ⁵ Reg. 2395/2017 "Transitional provisions for mitigating the impact of the introduction of IFRS 9 on own funds" introduced the transitional regime (the so-called "phased-in") for the impact of IFRS 9 on own funds, giving banks a chance to spread the effect on own funds over a period of 5 years (from March 2018 to December 2022), sterilizing the impact in CET1 by applying decreasing percentages over time. The BPER Banca Group has chosen to adopt the so-called "static approach" to be applied to the impact resulting from comparison between the IAS 39 adjustments at 31/12/2017 and the IFRS 9 adjustments at 1/1/2018. ⁶ The figures refer to the Group's new scope of consolidation, unless otherwise indicated.

⁷ For details relating to the application of the 5th and 6th update of Bank of Italy Circular 262/2005 from 1 January 2018 and 1 January 2019 respectively, see the

tables of the reclassified consolidated income statement at 30 September 2019 and the quarterly version attached. 8 See Note 7. ⁹ See Note 7. ¹⁰ Figures relating to the new scope of consolidation of the Group and including the sale of a portfolio of bad loans for a gross carrying amount of around € 1 billion to UnipolReC, unless otherwise indicated.

¹¹ See Note 5.

Reclassified financial statement as at 30 September 2019

For greater clarity in the presentation of the results for the period, the accounting schedules envisaged by the 6th update of Bank of Italy Circular no. 262/2005 have been reclassified as follows.

In the balance sheet:

• Debt securities valued at amortised cost (caption 40 "Financial assets measured at amortised cost") have been reclassified under caption "Financial assets";
• "Other assets" include captions 110 "Tax assets", 120 "Non current assets and disposal groups classified as held for sale" and 130 "Other assets";
• "Other liabilities" include captions 60 "Tax liabilities", 80 "Other liabilities", and 90 "Employee termination indemnities" and 100 "Provisions for risks and charges".

In the income statement:

• "Net income from financial activities" includes captions 80, 90, 100 and 110 in the standard reporting format;
• Indirect tax recoveries, allocated for accounting purposes to caption 230 "Other operating expense/income", have been reclassified as a reduction in the related costs under "Other administrative expenses" (Euro 100,051 thousand at 30 September 2019 and Euro 94,974 thousand at 30 September 2018);
• "Net adjustments to property, plant, equipment and intangible assets" include captions 210 and 220 in the standard reporting format;
• "Gains (Losses) on equity investments, disposal investments and impairment losses on goodwill" include captions 250, 270 and 280 in the reporting format;
• "Contributions to the SRF, DGS and IDPF-VS funds" has been shown separately from the specific accounting technical forms to give a better and clearer representation, as well as to leave the "Other administrative expenses" as a better reflection of the trend in the Group's operating costs. In particular, at 30 September 2019, this caption represents the component allocated to administrative costs related to:
  • the 2019 ordinary contribution to the SRF (European Single Resolution Fund) for Euro 23,043 thousand;
  • the additional contribution required by SRF to the Italian Banks for the year 2017 equal to Euro 9,587 thousand;
  • the 2019 ordinary contribution to the DGS (Deposit Guarantee Scheme) for Euro 25,784 thousand as estimation of how much it will be required at the end of the year.
• appropriate specifications ("of which") have been included in "Net interest income", "Other administrative expenses" and "Net adjustments to property, plant, equipment and intangible assets" captions in order to highlight the impacts of IFRS 16 application (from 1 January 20191 ) and in "Net interest income" caption in order to highlight the impacts of IFRS 9 application (from 1 January 2018).

It should be noted that the reclassified consolidated balance sheet and income statement show the contribution of Unipol Banca and Arca Holding to the BPER Banca Group consolidation.

¹ The "of which interest expense lease liabilities IFRS 16" and "of which depreciation right of use IFRS 16" captions show a value at 30 September 2018 referred to the interests and depreciations of "Property, plant and equipment" recognized as financial leases.

Reclassified consolidated balance sheet as at 30 September 2019

								(in thousands)
Assets	30.09.2019	Arca Holding contribution	Unipol Banca contribution	30.09.2019 on a like-for like basis	30.06.2019	31.12.2018	Change 30.09.2019 - 31.12.2018	% Change on a like for-like basis
							on a like-for like basis
Cash and cash equivalents	493,538	3	81,662	411,873	395,525	459,782	(47,909)	-10.42
Financial assets	18,777,522	92,197	1,242,212	17,443,113	17,159,152	17,152,084	291,029	1.70
a) Financial assets held for trading b) Financial assets designated at fair	328,291	-	466	327,825	270,204	247,219	80,606	32.61
value	131,594	-	-	131,594	219,702	218,662	(87,068)	-39.82
c) Other financial assets mandatorily measured at fair value d) Financial assets measured at fair value through other comprehensive	662,663	92,197	23,311	547,155	557,815	662,744	(115,589)	-17.44
income	6,911,141	-	41,444	6,869,697	7,808,130	8,560,568	(1,690,871)	-19.75
e) Debt securities measured at amortised cost	10,743,833	-	1,176,991	9,566,842	8,303,301	7,462,891	2,103,951	28.19
- banks	2,641,906	-	-	2,641,906	2,384,640	1,766,169	875,737	49.58
- customers	8,101,927	-	1,176,991	6,924,936	5,918,661	5,696,722	1,228,214	21.56
Loans	56,244,776	64,461	7,155,184	49,025,131	49,158,263	48,594,875	430,256	0.89
a) Loans to banks	3,722,040	89,720	343,931	3,288,389	2,616,439	1,540,509	1,747,880	113.46
b) Loans to customers c) Financial assets measured at fair	52,496,061	(25,259)	6,784,578	45,736,742	46,541,824	47,050,942	(1,314,200)	-2.79
value	26,675	-	26,675	-	-	3,424	(3,424)	-100.00
Hedging derivatives	65,401	-	-	65,401	53,567	35,564	29,837	83.90
Equity investments	251,613	(202,838)	-	454,451	453,046	446,049	8,402	1.88
Property, plant and equipment	1,356,757	15,840	87,323	1,253,594	1,261,800	1,063,273	190,321	17.90
Intangible assets	612,235	179,558	307	432,370	431,922	445,689	(13,319)	-2.99
- of which: goodwill	434,758	170,018	-	264,740	264,740	264,740	-	-
Other assets	2,893,584	27,983	162,001	2,703,600	2,669,393	2,437,451	266,149	10.92
Total assets	80,695,426	177,204	8,728,689	71,789,533	71,582,668	70,634,767	1,154,766	1.63

								(in thousands)
Liabilities and shareholders'	30.09.2019	Arca	Unipol	30.09.2019	30.06.2019	31.12.2018	Change	%
equity		Holding	Banca	on a like			30.09.2019	Change
		contribution	contribution	for-like			-	on a
				basis			31.12.2018 on a like	like-for like basis
							for-like
							basis
Due to banks	12,353,388	-	(1,274,555)	13,627,943	12,504,749	13,126,248	501,695	3.82
Direct deposits	58,166,847	-	8,962,993	49,203,854	51,029,054	49,996,419	(792,565)	-1.59
a) Due to customers	51,769,432	-	7,810,361	43,959,071	45,465,848	44,594,863	(635,792)	-1.43
b) Debt securities issued	6,397,415	-	1,152,632	5,244,783	5,563,206	5,401,556	(156,773)	-2.90
Financial liabilities held for trading	247,347	-	170	247,177	220,086	143,824	103,353	71.86
Hedging derivatives	419,671	-	-	419,671	306,649	92,374	327,297	354.32
Other liabilities	4,075,781	77,644	664,525	3,333,612	2,572,406	2,379,334	954,278	40.11
Minority interests	176,160	92,854	-	83,306	505,929	507,457	(424,151)	-83.58
Shareholders' equity pertaining to the
Parent Company	5,256,232	6,706	375,556	4,873,970	4,443,795	4,389,111	484,859	11.05
a) Valuation reserves	(39,838)	26	(5,249)	(34,615)	15,130	949	(35,564)	--
b) Reserves	2,088,106	(25)	8,252	2,079,879	1,961,433	1,619,469	460,410	28.43
c) Equity instruments	150,000	-	-	150,000	-	-	150,000	n.s.
d) Share premium reserve	999,373	-	-	999,373	930,073	930,073	69,300	7.45
e) Share capital	1,542,925	-	-	1,542,925	1,443,925	1,443,925	99,000	6.86
f) Treasury shares	(7,259)	-	-	(7,259)	(7,258)	(7,258)	(1)	0.01
g) Profit (Loss) for the period	522,925	6,705	372,553	143,667	100,492	401,953	(258,286)	-64.26
Total liabilities and shareholders'
equity	80,695,426	177,204	8,728,689	71,789,533	71,582,668	70,634,767	1,154,766	1.63

Reclassified consolidated income statement as at 30 September 2019

									(in thousands)
Captions		30.09.2019	Arca Holding contribution	Unipol Banca contribution	First-time consolidation impact of Unipol Banca	30.09.2019 on a like for-like basis	30.09.2018	Change 30.09.2019 – 30.09.2018 on a like for-like basis	% Change on a like-for like basis
10+20	Net interest income	862,093	(37)	47,646		814,484	850,092	(35,608)	-4.19
	of which IFRS 9 components* of which interest expense lease	40,183	-	2,063		38,120	63,970	(25,850)	-40.41
	liabilities IFRS 16	(1,305)	-	(197)		(1,108)	(49)	(1,059)	--
40+50	Net commission income	656,070	27,492	43,331		585,247	577,081	8,166	1.42
70	Dividends	13,650	-	4		13,646	13,786	(140)	-1.02
80+90+100+110	Net income from financial activities	77,186	(1)	14,852		62,335	190,944	(128,609)	-67.35
230	Other operating expense/income	34,771	(74)	2,032		32,813	30,657	2,156	7.03
	Operating income	1,643,770	27,380	107,865		1,508,525	1,662,560	(154,035)	-9.26
190 a)	Staff costs	(657,676)	(4,275)	(37,900)		(615,501)	(614,987)	(514)	0.08
190 b)	Other administrative expenses	(305,357)	(7,001)	(17,413)		(280,943)	(316,589)	35,646	-11.26
	of which rental expenses	(13,524)	-	(1,097)		(12,427)	(47,038)	34,611	-73.58
210+220	Net adjustments to property, plant, equipment and intangible assets of which depreciation right of use IFRS	(108,741)	(798)	(5,466)		(102,477)	(79,258)	(23,219)	29.30
	16	(38,417)	(285)	(4,361)		(33,771)	(2,200)	(31,571)	--
	Operating costs	(1,071,774)	(12,074)	(60,779)		(998,921)	(1,010,834)	11,913	-1.18
	Net operating income	571,996	15,306	47,086		509,604	651,726	(142,122)	-21.81
130 a)	Net impairment losses to financial assets at amortised cost Net impairment losses to financial	(308,021)	-	(17,850)		(290,171)	(155,206)	(134,965)	86.96
130 b)	assets at fair value	582	-	44		538	2,054	(1,516)	-73.81
140	Gains (Losses) from contractual modifications without derecognition	(1,618)	-	2		(1,620)	(2,719)	1,099	-40.42
	Net impairment losses for credit risk	(309,057)	-	(17,804)		(291,253)	(155,871)	(135,382)	86.86
200	Net provisions for risks and charges	(9,202)	-	(1,034)		(8,168)	(49,130)	40,962	-83.37
###	Contributions to SRF, DGS, IDPF - VS Gains (Losses) on equity investments,	(58,414)	-	(1,626)		(56,788)	(52,400)	(4,388)	8.37
250+270+280	disposal investments and impairment losses on goodwill	8,810	224	-		8,586	8,953	(367)	-4.10
275	Gain on a bargain purchase	353,805	-	-	353,805	-	-	-	n.s.
290	Profit (Loss) from current operations
	before tax Income taxes on current operations for	557,938	15,530	26,622	353,805	161,981	403,278	(241,297)	-59.83
300	the period	(19,945)	(3,949)	(7,874)		(8,122)	(23,974)	15,852	-66.12
330	Profit (Loss) for the period	537,993	11,581	18,748	353,805	153,859	379,304	(225,445)	-59.44
340	Profit (Loss) for the period pertaining to minority interests Profit (Loss) for the period	(15,068)	(4,876)	-		(10,192)	(21,178)	10,986	-51.87
350	pertaining to the Parent Company	522,925	6,705	18,748	353,805	143,667	358,126	(214,459)	-59.88

* The "of which IFRS 9 components" caption includes the time value of bad loans and the write-down of part of the interest charged on nonperforming exposures.

Reclassified consolidated income statement by quarter as at 30 September 2019

									(in thousands)
Captions		1st quarter 2019	2nd quarter 2019	3rd quarter 2019 on a like-for like basis	3rd quarter 2019	1st quarter 2018	2nd quarter 2018	3rd quarter 2018	4th quarter 2018
10+20	Net interest income	273,896	272,288	268,300	315,909	293,234	280,268	276,590	272,345
	of which IFRS 9 components*	13,352	15,083	9,685	11,748	25,637	20,757	17,576	12,397
	of which interest expense lease liabilities IFRS 16	(361)	(381)	(366)	(563)	(18)	(15)	(16)	(15)
40+50	Net commission income	192,544	195,210	197,493	268,316	198,120	190,936	188,025	199,184
70	Dividends	539	9,687	3,420	3,424	584	12,877	325	20,553
80+90+100+110	Net income from financial activities	22,062	5,403	34,870	49,721	153,634	16,431	20,879	(86,922)
230	Other operating expense/income	6,337	8,923	17,553	19,511	11,485	8,174	10,998	13,552
	Operating income	495,378	491,511	521,636	656,881	657,057	508,686	496,817	418,712
190 a)	Staff costs	(213,631)	(213,109)	(188,761)	(230,936)	(207,534)	(212,900)	(194,553)	(206,507)
190 b)	Other administrative expenses	(90,930)	(96,204)	(93,809)	(118,223)	(102,285)	(109,981)	(104,323)	(125,842)
	of which rental expenses	(4,692)	(4,007)	(3,728)	(4,825)	(15,615)	(15,540)	(15,883)	(15,994)
210+220	Net adjustments to property, plant and equipment and intangible assets	(33,172)	(35,380)	(33,925)	(40,189)	(21,339)	(34,986)	(22,933)	(39,681)
	of which depreciation right of use IFRS 16	(11,249)	(11,135)	(11,387)	(16,033)	(726)	(733)	(741)	(741)
	Operating costs	(337,733)	(344,693)	(316,495)	(389,348)	(331,158)	(357,867)	(321,809)	(372,030)
	Net operating income	157,645	146,818	205,141	267,533	325,899	150,819	175,008	46,682
130 a)	Net impairment losses to financial assets at amortised cost	(72,485)	(74,551)	(143,135)	(160,985)	(26,141)	(58,793)	(70,272)	(70,566)
130 b)	Net impairment losses to financial assets at fair value	421	(392)	509	553	1,763	141	150	12
140	Gains (Losses) from contractual modifications without derecognition	(891)	(76)	(653)	(651)	-	(1,183)	(1,536)	(237)
	Net impairment losses for credit risk	(72,955)	(75,019)	(143,279)	(161,083)	(24,378)	(59,835)	(71,658)	(70,791)
200	Net provisions for risks and charges	(1,995)	(9,698)	3,525	2,491	(11,663)	(25,376)	(12,091)	23,936
###	Contributions to SRF, DGS, IDPF - VS	(23,184)	(9,459)	(24,145)	(25,771)	(20,282)	(8,670)	(23,448)	75
250+270+280	Gains (Losses) on equity investments, disposal investments and impairment losses on goodwill	3,809	4,586	191	415	2,827	2,591	3,535	(57,654)
275	Gain on a bargain purchase	-	-	-	353,805	-	-	-	-
290	Profit (Loss) from current operations before tax	63,320	57,228	41,433	437,390	272,403	59,529	71,346	(57,752)
300	Income taxes on current operations for the period	(12,266)	987	3,157	(8,666)	(6,918)	(2,850)	(14,206)	124,238
330	Profit (Loss) for the period	51,054	58,215	44,590	428,724	265,485	56,679	57,140	66,486
340	Profit (Loss) for the period pertaining to minority interests	(3,083)	(5,694)	(1,415)	(6,291)	(14,462)	183	(6,899)	(22,659)
350	Profit (Loss) for the period pertaining to the Parent Company	47,971	52,521	43,175	422,433	251,023	56,862	50,241	43,827

* The "of which IFRS 9 components" caption includes the time value of bad loans and the write-down of part of the interest charged on nonperforming exposures.

Consolidated balance sheet as at 30 September 2019

					(in thousands)
Assets		30.09.2019	31.12.2018	Change	% Change
10.	Cash and cash equivalents	493,538	459,782	33,756	7.34
20.	Financial assets measured at fair value through profit or loss	1,149,223	1,128,625	20,598	1.83
	a) financial assets held for trading	328,291	247,219	81,072	32.79
	b) financial assets designated at fair value	131,594	218,662	(87,068)	-39.82
	c) other financial assets mandatorily measured at fair value	689,338	662,744	26,594	4.01
30.	Financial assets measured at fair value through other comprehensive income	6,911,141	8,563,992	(1,652,851)	-19.30
40.	Financial assets measured at amortised cost	66,961,934	56,054,342	10,907,592	19.46
	a) loans to banks	6,363,946	3,306,678	3,057,268	92.46
	b) loans to customers	60,597,988	52,747,664	7,850,324	14.88
50.	Hedging derivatives	65,401	35,564	29,837	83.90
70.	Equity investments	251,613	446,049	(194,436)	-43.59
90.	Property, plant and equipment	1,356,757	1,063,273	293,484	27.60
100.	Intangible assets	612,235	445,689	166,546	37.37
	of which:
	- goodwill	434,758	264,740	170,018	64.22
110.	Tax assets	1,960,020	1,885,616	74,404	3.95
	a) current	390,182	457,838	(67,656)	-14.78
	b) deferred	1,569,838	1,427,778	142,060	9.95
120.	Non current assets and disposal groups classified as held for sale	5,346	2,800	2,546	90.93
130.	Other assets	928,218	549,035	379,183	69.06
	Total assets	80,695,426	70,634,767	10,060,659	14.24

	(in thousands)
	Liabilities and shareholders' equity		31.12.2018	Change	% Change
10.	Financial liabilities measured at amortised cost	70,520,235	63,122,667	7,397,568	11.72
	a) due to banks	12,353,388	13,126,248	(772,860)	-5.89
	b) due to customers	51,769,432	44,594,863	7,174,569	16.09
	c) debt securities issued	6,397,415	5,401,556	995,859	18.44
20.	Financial liabilities held for trading	247,347	143,824	103,523	71.98
40.	Hedging derivatives	419,671	92,374	327,297	354.32
60.	Tax liabilities	89,467	62,644	26,823	42.82
	a) current	29,538	3,966	25,572	644.78
	b) deferred	59,929	58,678	1,251	2.13
80.	Other liabilities	3,234,769	1,663,946	1,570,823	94.40
90.	Employee termination indemnities	200,512	182,793	17,719	9.69
100.	Provisions for risks and charges	551,033	469,951	81,082	17.25
	a) commitments and guarantees granted	58,206	63,059	(4,853)	-7.70
	b) pension and similar obligations	169,465	131,126	38,339	29.24
	c) other provisions for risks and charges	323,362	275,766	47,596	17.26
120.	Valuation reserves	(39,838)	949	(40,787)	--
140.	Equity instruments	150,000	-	150,000	n.s.
150.	Reserves	2,088,106	1,619,469	468,637	28.94
160.	Share premium reserve	999,373	930,073	69,300	7.45
170.	Share capital	1,542,925	1,443,925	99,000	6.86
180.	Treasury shares (-)	(7,259)	(7,258)	(1)	0.01
190.	Minority interests (+/-)	176,160	507,457	(331,297)	-65.29
200.	Profit (Loss) for the period (+/-)	522,925	401,953	120,972	30.10
	Total liabilities and shareholders' equity	80,695,426	70,634,767	10,060,659	14.24

Consolidated income statement as at 30 September 2019

					(in thousands)
Captions		30.09.2019	30.09.2018	Change	Change %
10.	Interest and similar income	1,057,644	1,044,587	13,057	1.25
	of which: interest income calculated using the effective interest method	1,039,265	1,029,728	9,537	0.93
20.	Interest and similar expense	(195,551)	(194,495)	(1,056)	0.54
30.	Net interest income	862,093	850,092	12,001	1.41
40.	Commission income	720,079	603,652	116,427	19.29
50.	Commission expense	(64,009)	(26,571)	(37,438)	140.90
60.	Net commission income	656,070	577,081	78,989	13.69
70.	Dividends and similar income	13,650	13,786	(136)	-0.99
80.	Net income from trading activities	(23,554)	25,217	(48,771)	-193.41
90.	Net income from hedging activities	(4,178)	1,992	(6,170)	-309.74
100.	Gains (Losses) on disposal or repurchase of:	110,205	152,809	(42,604)	-27.88
	a) financial assets measured at amortised cost	39,458	(11,915)	51,373	-431.16
	b) financial assets measured at fair value through other comprehensive income	70,311	164,452	(94,141)	-57.25
	c) financial liabilities	436	272	164	60.29
110.	Net income on financial assets and liabilities measured at fair value through profit or loss	(5,287)	10,926	(16,213)	-148.39
	a) financial assets and liabilities designated at fair value	(6,965)	(5,010)	(1,955)	39.02
	b) other financial assets mandatorily measured at fair value	1,678	15,936	(14,258)	-89.47
	120. Net interest and other banking income	1,608,999	1,631,903	(22,904)	-1.40
130.	Net impairment losses for credit risk relating to:	(307,439)	(153,152)	(154,287)	100.74
	a) financial assets measured at amortised cost	(308,021)	(155,206)	(152,815)	98.46
	b) financial assets measured at fair value through other comprehensive income	582	2,054	(1,472)	-71.67
140.	Gains (Losses) from contractual modifications without derecognition	(1,618)	(2,719)	1,101	-40.49
	150. Net income from financial activities	1,299,942	1,476,032	(176,090)	-11.93
	180. Net income from financial and insurance activities	1,299,942	1,476,032	(176,090)	-11.93
190.	Administrative expenses:	(1,121,498)	(1,078,950)	(42,548)	3.94
	a) staff costs	(657,676)	(614,987)	(42,689)	6.94
	b) other administrative expenses	(463,822)	(463,963)	141	-0.03
200.	Net provisions for risks and charges	(9,202)	(49,130)	39,928	-81.27
	a) commitments and guarantees granted	6,837	18,843	(12,006)	-63.72
	b) other net provisions	(16,039)	(67,973)	51,934	-76.40
210.	Net adjustments to property, plant and equipment	(69,649)	(43,900)	(25,749)	58.65
220.	Net adjustments to intangible assets	(39,092)	(35,358)	(3,734)	10.56
230.	Other operating expense/income	134,822	125,631	9,191	7.32
	240. Operating costs	(1,104,619)	(1,081,707)	(22,912)	2.12
250.	Gains (Losses) of equity investments	10,539	8,806	1,733	19.68
275.	Gain on a bargain purchase	353,805	-	353,805	n.s.
280.	Gains (Losses) on disposal investments	(1,729)	147	(1,876)	--
	290. Profit (Loss) from current operations before tax	557,938	403,278	154,660	38.35
300.	Income taxes on current operations	(19,945)	(23,974)	4,029	-16.81
	310. Profit (Loss) from current operations after tax	537,993	379,304	158,689	41.84
	330. Profit (Loss) for the period (+/-)	537,993	379,304	158,689	41.84
340.	Profit (Loss) for the period pertaining to minority interests	(15,068)	(21,178)	6,110	-28.85
	350. Profit (Loss) for the period pertaining to the Parent Company	522,925	358,126	164,799	46.02

The "Interest and similar income" and "Interest and similar expense" captions at 30 September 2018 have been restated with respect to the Consolidated interim report as at 30 September 2018, due to reclassification of interest on hedging derivatives pursuant to the 5th update to Bank of Italy Circular 262/2005.

Performance ratios 2

Financial ratios	30.09.2019	2018 (*)
Structural ratios
Net loans to customers/total assets	65.05%	66.61%
Net loans to customers/direct deposits from customers	90.25%	94.11%
Financial assets/total assets	23.27%	24.28%
Fixed assets 3 /total assets	1.99%	2.14%
Goodwill/total assets	0.54%	0.37%
Direct deposits/total assets	87.39%	89.36%
Indirect deposits under management/indirect deposits	35.38%	53.32%
Financial assets/tangible equity4	3.90	3.85
Total tangible assets 5 /tangible equity	16.61	15.77
Net interbank position (in thousands of Euro)	(8,631,348)	(11,585,739)
Number of employees6	13,910	11,615
Number of national bank branches	1,429	1,218
Profitability ratios
ROE7	16.03%	9.06%
ROTE 8	18.25%	10.15%
ROA9 (net profit/total assets)	0.89%	0.63%
Cost to income ratio10	65.20%	60.80%
Net impairment losses on loans to customers/net loans to customers	0.58%	0.33%
Basic EPS11	1.069	0.745
Diluted EPS12	1.050	0.745

(*) The comparative patrimonial ratios, together with ROE, ROTE and ROA, have been calculated on figures at 31 December 2018 as per the Consolidated financial statements as at 31 December 2018, while economical ratios have been calculated on figures at 30 September 2018 as per the Consolidated interim report as at 30 September 2018.

12 See previous note.

² To construct ratios, reference was made to the balance sheet and income statement figures of the reclassified statements prepared from a management point of view as per the present Press Realease.

³ Fixed assets include both Equity investments and Property, plant and equipment.

⁴ Tangible equity: total shareholders' equity, including minority interests, net of intangible assets.

⁵ Total tangible assets = total assets net of intangible assets.

⁶ The number of employees (point figures) does not include the expectations.

⁷ ROE at 30 September 2019 has been calculated on an annual basis replicating the profit (loss) for the period for the rest of the year.

⁸ ROTE at 30 September 2019 has been calculated on an annual basis replicating the profit (loss) for the period for the rest of the year.

⁹ ROA at 30 September 2019 has been calculated on an annual basis replicating the profit (loss) for the period for the rest of the year.

¹⁰ The cost/income ratio has been calculated on the basis of the layout of the reclassified income statement (operating costs/operating income); when calculated on the basis of the layouts provided by Circular no. 262 of the Bank of Italy the cost/income ratio is at 68.65% (66.29% at 30 September 2018 as per the Consolidated interim report as at 30 September 2018).

¹¹ EPS has been calculated net of treasury shares in portfolio.

		(cont.)
Financial ratios	30.09.2019	2018 (*)
Risk ratios
Net non-performing loans/net loans to customers	6.07%	6.81%
Net bad loans/net loans to customers	2.41%	3.08%
Net unlikely to pay loans/net loans to customers	3.49%	3.60%
Net past due loans/net loans to customers	0.17%	0.13%
Impairment provisions for non-performing loans/gross non-performing loans	51.08%	54.52%
Impairment provisions for bad loans/gross bad loans	63.71%	66.62%
Impairment provisions for unlikely to pay loans/gross unlikely to pay loans	37.23%	35.73%
Impairment provisions for past due loans/gross past due loans	14.98%	12.33%
Impairment provisions for performing loans/gross performing loans	0.42%	0.37%
Texas ratio13	79.96%	84.97%
Own Funds (Phased in) (in thousands of Euro)14
Common Equity Tier 1 (CET1)	4,957,756	4,367,711
Own Funds	6,001,478	5,278,852
Risk-weighted assets (RWA)	34,811,483	30,606,171
Capital and liquidity ratios
Common Equity Tier 1 Ratio (CET1 Ratio) - Phased in	14.24%	14.27%
Tier 1 Ratio (T1 Ratio) - Phased in	14.68%	14.37%
Total Capital Ratio (TC Ratio) - Phased in	17.24%	17.25%
Common Equity Tier 1 Ratio (CET1 Ratio) - Fully Phased	12.36%	11.95%
Leverage Ratio - Phased in15	6.1%	6.0%
Leverage Ratio - Fully Phased16	5.3%	5.0%
Liquidity Coverage Ratio (LCR)	163.9%	154.3%
Net Stable Funding Ratio (NSFR)17	n.a.	106.8%
Non-financial ratios	30.09.2019	2018 (*)
Productivity ratios (in thousands of Euro)
Direct deposits per employee	4,181.66	4,304.47
Loans to customers per employee	3,773.98	4,050.88
Assets managed per employee	2,732.79	1,664.31
Assets administered per employee	4,991.27	1,457.29
Core revenues18 per employee	109.14	122.75
Net interest and other banking income per employee	115.67	140.35
Operating costs per employee	79.41	93.03

(*) The comparative patrimonial ratios have been calculated on figures at 31 December 2018 as per the Consolidated financial statements as at 31 December 2018, while economical ratios have been calculated on figures at 30 September 2018 as per the Consolidated interim report as at 30 September 2018.

13 The texas ratio is calculated as the relationship between total gross non-performing loans and net tangible equity increased by impairment provisions for non-performing loans.

¹⁴ Items have been calculated according to the provisions of Regulation (EU) 575/2013 (CRR), as amended by the Commission Delegated Regulation (EU) 2395/2017.

¹⁵ The ratio has been calculated according to the provisions of Regulation (EU) 575/2013 (CRR), as amended by the Commission Delegated Regulation (EU) 62/2015.

¹⁶ See previous note.

¹⁷ The NSFR, not yet available, is in any case estimated to exceed 100% (112.6% as at 30 June 2019).

¹⁸ Core revenues = net interest income + net commission income.