BMPS: board approves preliminary results as at 31 December 2016

• Pre-provision profit for the year equal to EUR 1,635 million, with net interest income down Y/Y, impacted by the dwindling interest rates and reduced volumes of interest- bearing assets, stable fees and continuing focus on operating costs
• Net loss for the year, equal to EUR -3,380 million, includes loan loss provisions for c. EUR -2,592 million due to the revision of methodologies and parameters of the policy for the evaluation of non-performing exposures and non-operating items for EUR - 411 million. Moreover, EUR 861 million DTAs on tax losses were not booked and a EUR -276 million partial write-down of DTAs related to previous tax losses was effected
• Net non-performing exposures reduced by c. EUR 4 billion from the beginning of 2016, mainly an effect of increased provisioning due to the new credit policy
• Coverage of unlikely-to-pay loans at 40.3% (c. +1,110bps Y/Y) and of bad loans at 64.8% (c. +130bps Y/Y)
• Direct funding equal to EUR 104.6 billion, down by EUR 14.7 billion from 2015, owing to the decrease in commercial funding. Preliminary data for the month of January sets funding at the same level as the end of 2016, indicating a halt in these outflows
• On 25 January 2017 the Bank issued bonds for EUR 7 billion, guaranteed by the Italian State and fully retained by the Bank, to be distributed on the market, or used as collateral for funding operations, in the course of 2017

Siena, 9 February 2017 - The Board of Directors of Banca Monte dei Paschi di Siena S.p.A. has reviewed and approved the results as at 31 December 2016.

• Net interest income at EUR 2,021 million, down 10.5% Y/Y, primarily impacted by the decrease of interest-bearing assets and related returns, only partially offset by the reimbursement of New Financial Instruments (NFIs) and by the reduced cost of funding. Fourth quarter contribution amounts to c. EUR 503 million (+4.0% Q/Q).

• Net fees and commissions at c. EUR 1,839 million, up 1.6% Y/Y, primarily driven by the resurgence of traditional banking fees (particularly payment services and client expense recovery) and of non-commercial components. 4Q16 contributed for c. EUR 437 million, down 5.3% Q/Q, mainly as a result of the decline in placement fees.

• Dividends, similar income and gains (losses) on investments amount to c. EUR 78 million (mainly the contribution of AXA-MPS).

• Net profit (loss) from trading-valuation-repurchase of financial assets/liabilities for 2016 totals c. EUR 415 million, down from the previous year, which had benefited from the restatement of the so-called "Alexandria" transaction (c. EUR +608 million at 31 December 2015).

• Operating expenses at EUR 2,621 million, down 0.3% Y/Y and up 6.3% Q/Q due to the rise in other administrative expenses, adversely affected by the recognition of expenses connected with the unsuccessful capital strengthening transaction.

• Net impairment losses on loans and financial assets amount to EUR 4,501 million, up c. EUR 2,508 million Y/Y on account of non-recurring components (EUR 2,592 million) related to the update of the methodologies and parameters used in the evaluation of loans1. Without these components, total impairment losses would have amounted to EUR 1,909 million. Net impairment losses for the fourth quarter 2016 amount to c. EUR 2,482 million (EUR +1,180

  million Q/Q) and include c. EUR 1,842 million provisions related to the credit policy review. Coverage of non-performing exposures, equal to 55.6%, is up by 716bps Y/Y (+500bps Q/Q), mainly for loan loss provisions booked in the second half of 2016.

• Non-operating items are negative for EUR -411 million, including, amongst other items:

  • about EUR 142 million for fees on DTAs (Deferred Tax Assets), convertible into tax credits both for 2015 (c. EUR 70 million) and 2016 (c. EUR 72 million);

  • about EUR 241 million for provisions for risks and charges connected to SRF, DGS and similar schemes, of which c. EUR 30 million relating to the ordinary contribution to DGS,

    c. EUR 71 million for the ordinary contribution to the Single Resolution Fund booked in the first quarter of 2016 and c. EUR 140 million contribution to the National Resolution Fund, represented by two additional annual instalments, requested and booked in the fourth quarter of 2016.

• Income taxes amount to approximately EUR -62 million and include a EUR -276 million partial write-down of DTAs related to previous tax losses stemming from the results of the probability test. Moreover, also on account of probability test results, DTAs for EUR 861 million on tax losses arising from the current economic situation were not recorded.

• Net loss for the period, amounting to EUR -3,380 million, reflects a negative contribution of c. EUR -2,592 million arising from the changes in credit policy and non-operating items for EUR - 411 million

  Main consolidated Balance Sheet results:

• Loans to customers at EUR 107 billion, reduced by almost EUR 5 billion vs. December 2015, with a decrease in all aggregates with the exception of repurchase agreements with financial counterparts, impacted, from the fourth quarter of 2016, by MPS CS's classification of new

1Changes in credit policy reflecting the instructions contained in the "Draft guidance to banks on non-performing loans", published by the ECB in September 2016 and internal valuations.

repos in the banking book (repos were previously recorded in the trading book2, in view of the diverse operational rationale). The fourth quarter of 2016 shows an increase of c. EUR 2 billion.

• Direct funding at EUR 105 billion, down 14.7 billion vs. December 2015, impacted by the c. EUR 28 billion decline in the commercial component resulting from the outflows recorded in the course of the year, largely as an effect of tensions ensuing the negative results of the stress test and of the unsuccessful recapitalisation transaction. This drop is partly compensated by the mentioned classification of new repos. The fourth quarter of 2016 is down by c. EUR -0.9 billion, impacted by a c. EUR -10.6 billion decrease of commercial funding, partially offset by the surge in repos with financial counterparts, affected by the new classification. Preliminary data for the month of January sets funding at the same level as the end of 2016, indicating a halt in these outflows.

• Indirect funding at EUR 98.2 billion, down c. EUR 8 billion from December 2015, entirely attributable to the downturn in assets under custody, partly compensated by the growth of assets under management. The aggregate is essentially in line with 30 September 2016.

• Unencumbered counterbalancing capacity at c. EUR 7 billion, down by c. EUR 17 billion from December 2015, due to the tensions on commercial funding recorded during the year. On 25 January 2017, BMPS issued bonds for EUR 7 billion, guaranteed by the Italian State under Law Decree no. 237/2016. These bonds were fully retained by the issuer and are to be distributed on the market, or used as collateral for funding operations, in the course of 2017.

• Gross non-performing exposures equal to c. EUR 45.8 billion, down by EUR 1.1 billion vs. December 2015 mainly for the partial write-off of interests in arrears on bad loans and for reduced inflows from performing loans compared to the previous year. The aggregate is slightly up (EUR +0.2 billion) from September 2016. The stock of net impaired loans is down by c. EUR 4 billion from December 2015 and by EUR 2.2 billion from September 2016, due to higher provisioning resulting from revised credit policies. More specifically, the coverage of unlikely-to- pay loans was increased to 40.3% (29.2% at 31 December 2015) and that of bad loans was increased to 64.8% (63.4% at 31 December 2015).

• Transitional Common Equity ratio is 8.0% (12% at December 2015), mainly as an effect of the loss for the period, partly offset by the reduced risk-weighted assets.

Results for the period include valuation effects that, in some cases, are determined having regard for the provisions of business plans or for law Decree no. 237/2016. In this respect, any changes made in view of the definition of the Restructuring Plan or any amendments to the Decree introduced by the Italian parliament in the course of its conversion into law, which should arise before the approval of the draft financial statement, will be evaluated and, if material, reflected in the draft FY2016 financial statement scheduled to be approved on 2 March 2017.

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As per Consob's request of 8 November 2016, pursuant to art. 114, paragraph 5, of Legislative Decree no. 58/1998, the following is stated:

2 Starting in the last quarter of 2016, MPS Capital Services has classified new repurchase agreements in the banking book, since their main purpose is to raise funds to finance Global Market operations. These transactions were previously classified in the trading book, having been set up as part of a wider trading strategy

"On October 24, 2016, the Board of Directors of the parent company approved the 2016-2019 Business Plan, based on the disposal of bad loans and simultaneous market recapitalisation. On 23 December the parent company, after having acknowledged the impossibility of completing the capital strengthening transaction, presented the ECB with a request for extraordinary and temporary financial support for access to the "precautionary recapitalisation" measure. Subsequently, the Bank received from the Italian Ministry of Economy and Finance two letters, which had been drafted by the ECB and addressed to the same Ministry and which, in addition to confirming that the requirements for accessing the "precautionary recapitalisation" measure in accordance with current regulations had been met, highlighted a capital shortfall of EUR 8.8 billion, inclusive of all the components of own funds, as required by current legislation. The completion of "precautionary recapitalisation" is conditional upon the submission of a "Restructuring Plan" by national authorities (Ministry of Economy and Finance) to the European Commission. At the date of this Report, drafting of the "Restructuring Plan" is in progress, maintaining, in continuity with the 2016-2019 Business Plan, the main strategic guidelines focused on reducing the Bank's risk profile."

2016 Group profit and loss results

In 2016, the Group's Total Revenues stand at c. EUR 4,256 million, a -18.4% Y/Y decrease, due to a contraction in net interest income and profit from trading (in 2015, the latter had benefited from the restatement of the so-called "Alexandria" transaction for about EUR +608 million). Compared to 30 September 2016, 4Q16 total revenues are reduced by -21.9% Q/Q, mainly due to a slowdown in net profit from trading/valuation of financial assets and hedging.

Dividends, similar income and profit (loss) on investments amount to approximately EUR 78 million, mainly due to the contribution of AXA-MPS3, and are down compared both to the same period of last year and to the previous quarter (respectively approx. EUR -22 million and EUR -12 million).

3 AXA-MPS is consolidated at net equity.