Banco BPM : Nine-month 2017 results (.pdf - 499.2 KB)

NEWS RELEASE

1 The operating figures commented in this News Release are derived from the reclassified income statement, where revenues and costs contributed by the subsidiary Aletti Gestielle SGR have been consolidated on a line by line basis. Attached is also the reclassified income statement where the contribution of the SGR, classified as non-current asset held for sale and discontinued operations under the accounting standard IFRS 5, is reported under the line-item "Gain (Loss) of disposal groups net of tax", and the comparative data have been restated, in compliance with the requirements of the above standard. For further details, please refer to the Explanatory Notes (item 1) of this News Release.

2 "Adjusted net income" refers to the income for the period net of effects attributable to non-recurring items and the related taxation, illustrated in the Explanatory Notes (item 11) of this News Release. The aggregate does not include the badwill, amounting to € 3,076.1 million, credited to income upon completing the Purchase Price Allocation (PPA) of the business combination between former Gruppo Banco Popolare and former Gruppo BPM, which took place on 1 January 2017. Including the non-recurring items and the badwill, the 9M 2017 net income added up to € 3,128.9 million.

3 "Core total income" combines the P&L items "net interest income" and "net fees and commissions".

4 For greater details on the accounting treatment of write-offs please refer to the Explanatory Notes, item 6, of this News Release.

5 Management data as at 7 November 2017.

• Customer loans of € 107.9 billion, of which performing -0.5% and non-performing - 13.7% compared to 31 December 2016;

• Direct customer funds of € 107.4 billion7 (€ 110 billion at the end of December 2016), where the decline has been driven by the reduction of more expensive funding sources (term deposits and bonds), while "core" funding through checking accounts and demand deposits is surging (+€ 7.2 billion y/y);

• Indirect customer funds8 of € 100.3 billion (compared to € 97.2 billion at 31 December 2016), up by 3.2%, of which:

  • Assets under management € 62.4 billion

  • Assets under administration € 37.9 billion.

    Key P&L items

• "Core" total income of € 3,162 million (€ 3,135 million net of non-recurring items of

  € 27 million9), up by 5.3% (+4.4% "adjusted") compared to the 9M 2016 aggregate;

• Net fees and commissions of € 1,577 million (+13.3% y/y);

• Operating costs € 2,316 million (€ 2,290 million net of non-recurring items), down by 9.9% (-2.5% "adjusted") compared to the 9M 2016 aggregate of € 2,570 million;

• Gross operating income of € 1,156 million, up by 20.1% from € 963 million in the same period of 2016;

• Loan loss provisions of € 988 million, well below € 1,929 million in 9M 2016;

• Net income of € 3,129 million, which, net of a "badwill" of € 3,076 million, comes in at € 53 million, as compared to a loss of € 633 million reported in the same period of 2016.

  Capital position:

• Pro-forma phase-in CET 1 ratio of 12.82%

• Pro-forma fully-loaded CET 1 ratio of 12.49%

• Phase-in CET 1 ratio of 11.01% (11.65% net of the impact from the put option exercise by Unipol Sai on Popolare Vita and Aviva on Avipop)

• Fully-loaded CET 1 ratio of 10.32% (11.22% net of the impact from the above- mentioned put options exercise);

  6 Comparative data at 30 September 2016 and 31 December 2016 reflect the sum of the data resulting from the financial statements of former Gruppo Banco Popolare and former Gruppo BPM, net of intercompany relationships and write-downs illustrated in the Explanatory Notes (item 2) of this News Release.

  7 Direct Customer Funds include certificates with unconditional capital protection (€4.2 billion at 30 September 2017 compared to € 4.6 billion at year-end 2016), but are net of repos.

  8 Net of certificates with unconditional capital protection included in "direct customer funds".

  9 For more details on non-recurring items, please refer to the Explanatory Notes (item 11) of this News Release. P&L aggregates net of these items are defined as "adjusted".

• Additional benefits expected from the rollout of AIRB model to former Gruppo BPM and from the completion of the bancassurance reorganization project.

  Credit quality

• Net NPL stock of € 14.0 billion, down by € 3.0 billion y/y and by € 2.2 billion over year-end 2016 (-13.7%).

• Coverage10:

  • NPLs: 49.1% vs 37.5% in 2016 (50.7% and 47.9%, respectively, including write- offs);

  • Bad loans: 60.0% vs 45.7% in 2016 (62.0% and 60.0%, respectively, including write-offs).

  Liquidity profile

• Unencumbered eligible assets of € 18.2 billion at 30 September 2017 (11% of total assets), of which 89% are Italian Government bonds, guaranteeing an ample flexibility when managing funding sources.

- LCR >150% and NSFR >100%11.

Milan, 9 November 2017 - In today's meeting, the Board of Directors of Banco BPM, chaired by Mr. Carlo Fratta Pasini, has approved the financial and operating situation of Gruppo Banco BPM at 30 September 2017.

The first nine months of the year have been characterized by a progressively improving macroeconomic scenario, yet interest rates have remained at their lowest levels in several years (3- month Euribor at -0.33%), weighed down by the persistent low inflation. Against this backdrop, Gruppo Banco BPM was still able to perform well in terms of "core" revenues (Net interest income + Net fees and commissions), which went up by 5.3% over the same period last year, and achieved a significant operating cost containment (-9.9% on an annual basis; -2.5% net of non-recurring items). These factors contributed to building up a net income as at 30 September 2017 of € 53 million, which rises to € 143 million net of the non-recurring items reported in the period.

Thanks to the improved macroeconomic environment and the constant de-risking activities through material bad loan disposals (secured and unsecured), as well as to the strong momentum of recovery activities (known as workout), to the lower NPL inflows and the increase in total coverage (49.1% and 50.7% including write-offs), the Group is ahead of schedule with respect to the Plan targets, also given the reduction of total net NPLs by roughly € 3 billion on an annual basis.

On the balance-sheet side, demand deposits also kept on growing (checking accounts and on-call deposits increased by € 7.2 billion on an annual basis), as did assets under management (€ 5.0 billion increase y/y), with material effects in terms of commission streams.

In 9M 2017, the Group launched and completed the activities aimed at achieving the operational integration, through a capital contribution, that gave rise to the new BPM Spa, and a merger, which

10 For more details on the accounting treatment of write-offs see the Explanatory notes, item 6, of this News Release.

11 NSFR as at 30 June 2017, latest available data.

gave rise to the Parent company Banco BPM Spa, together with the various steps along the IT migration process of BPM Spa onto the target operating system as of 24 July.

In 9M 2017, actions aimed at reorganizing the Group in keeping with the strategic plan have progressed, and have led to the signing of an agreement with Anima Holding to sell the entire stake in the share capital of Aletti Gestielle SGR. To this regard, we announce that today the final agreements have been signed regarding the sale of 100% of Aletti Gestielle SGR S.p.A.'s capital to Anima Holding, along terms and conditions that follow those communicated on 4 August 2017.

Over the period, also the Bancassurance reorganization process forged ahead, leading to the termination of the partnerships with Gruppo Unipol and Gruppo Aviva, and the attendant exercise by Unipolsai of its put option on the shareholding in Popolare Vita and by Aviva of its put option on the shareholding in Avipop Assicurazioni.

After Q3 closing, Banco BPM and Cattolica Assicurazioni announced their agreement covering the sale of a 65% stake in Popolare Vita and in Avipop Assicurazioni for a total price of € 853.4 million; the agreement also sets out a 15-year strategic partnership between Banco BPM and Cattolica.

Following the news releases dated 17, 31 October and 3 November 2017, it is communicated that today the agreement between Banco BPM and Cattolica Assicurazioni has been perfected through the signing of the legal documentation.

The asset management and bancassurance reorganization actions, on the one hand, bring about an important business value, by strengthening our presence in sectors that are considered strategic, and, on the other hand, they generated positive capital effects, bolstering our capital ratios, in line with the Strategic Plan targets.

Operating performance