H. 8:53 - UBI Banca: Consolidated results as at 30 September 2017

• Consolidated CET1 ratio:
  • Fully loaded ratio of 11.54% (11.32% as at 30th June 2017) (includes no benefit from DTAs, etc.)
  • Phased-in ratio of 11.65% (11.42% as at 30th June 2017) It should be recalled that the 3 Acquired Banks are included under the standardised approach; roll-out of the IRB model is expected in 2018
• LCR and NSFR > 100%
• Phased-in leverage ratio of 5.82% and fully loaded ratio of 5.77% (5.66% and 5.61% respectively as at 30th June 2017)

  Positive economic results in the first nine months of 2017 (UBI Banca 9M + 3 Acquired Banks 6M):

• profit net of non-recurring items of €167.3 million1, of which:
  • UBI Stand-Alone profit of €190.1 million (-€500.8 million in the first nine months of 2016)
  • net result for the 3 Acquired Banks of -€22.9 million (net of the reversal of PPA of +€56.7 million)

    3Q 2017 / 2Q 2017: the progressive results for UBI Banca+3 Acquired Banks show good performance for revenues, the continuing maintenance of control over costs and a reduction in impairment losses on loans:

• 3Q profit net of non-recurring items2 of €37.3 million compared with €43.7 million in 2Q 2017
• Net interest income of €402.5 million, +1.1% compared with €398 million in 2Q 2017, the aggregate result of increases for both UBI Stand-Alone and the 3 Acquired Banks, notwithstanding the decrease in the contribution from the financial assets portfolio
• Net fee and commission income of €389.8 million compared with €410.5 million in 2Q 2017, with the usual seasonal factors related to slower business in the summer
• Operating expenses of €631.3 million, -0.8% compared with €636.2 million in 2Q 2017, notwithstanding the recognition of the contribution to the Deposit Guarantee Scheme amounting to €25.2 million in 3Q 2017

  1 The main non-recurring items in the first nine months of the year, net of taxes and non-controlling interests are as follows: a profit of €37.4 million on the disposal of held-to-maturity investments; costs of €21.2 million for the project to integrate the three acquired banks; costs of €6.5 million for the Single Bank Project; write-down of the Atlante Fund investment amounting to €64.7 million; Interbank Deposit Protection Fund intervention expenses of €22.6 million, badwill of €616.2 million.

  2 3Q 2017 includes extraordinary expenses for intervention by the Interbank Deposit Protection Fund to assist banks in difficulty, classified within net impairment losses on other financial assets and liabilities, amounting to €32.4 million gross and €22.6 million

  net.

• Net impairment losses on loans of €135.1 million compared with €147.8 million in 2Q 2017, also benefiting from the reversal of the PPA3

  Balance sheet figures (UBI Banca+3 Acquired Banks) compared with 31st December 2016:

• Performing loans of €85.5 billion (+1.1% vs €84.5 billion as at 31st December 2016)
• Net non-performing loans of €8.4 billion (-9.1% vs €9.3 billion as at 31st December 2016)
• An overall annualised loan loss rate of 67 basis points
• Annualised default rate of 1.8%, expected to decrease in 2018
• Coverage for non-performing loans of 48.6% including write-offs (40.01% excluding write-offs); 44.6% and 35.6% respectively at the end of December 2016
• Indirect funding of €98.8 billion, +10% vs €89.8 billion as at 31st December 2016
• Total funding from ordinary Group customers4 (direct and indirect) of €181.4 billion (€176.1 billion in December 2016)

Bergamo, 10th November 2017 - The Management Board of UBI Banca has approved the consolidated results for the first nine months of 2017, which, from the 1st April 2017 and therefore for two quarters, include the three recently acquired banks.

The results for the first nine months of 2017 include the impact of the allocation of badwill5, which was provisionally determined as amounting overall to €995 million as at 1st April 2017.

That allocation, which results from the restatement at fair value of the assets and liabilities acquired as at the date of the first consolidation, led to the write-down mainly of non-performing loans (by means of an increase in the loan provisions of €560 million gross6), while the value of medium to long-term performing loans was in line with the stated value. Much smaller write-downs were recognised on medium to long-term funding, on software and on contracts relating to real estate property funds, while slightly positive values were found for assets under management.

Following that allocation, the quota remaining relating to the "bargain purchase" recognised totally through profit and loss came to €616.2 million7.

The adjustments carried out on balance sheet items as a consequence of the purchase price allocation have already given rise, in the second and third quarters of the year, to both positive and negative reversals for a total net amount of +€56.7 million.

3 Reversal of the PPA amounted to €39.7 million in the third quarter of 2017.

4 Direct funding is calculated net of institutional funding and repurchase agreements with the Cassa di Compensazione e Garanzia. 5 As already reported, IFRS 3 (R) allows final allocation of badwill to be carried out in any case within 12 months from the acquisition

6 €339.1 mln net, following PPA reversal in 3Q2017

7 Following the allocation of badwill, which is still provisional, the portion of the "bargain purchase" recognised through profit and

loss stands at €616.2 million net in accounts as at 30 Sept 2017 (in progressive definition compared to €612.9 million net recognised in 2Q2017

8 See note 1

If non-recurring items are included, the first nine months of 2017 ended for the enlarged Group with a net profit of €702 million, which includes the UBI Banca Stand-Alone result of €112.6 million and that for the 3 Acquired Banks of -€26.5 million (including PPA reversal of +€56.7 million), in addition to the "bargain purchase" mentioned above amounting to €616.2 million.

In detail, in the first nine months of the year the enlarged Group recorded operating income of approximately €2,595 million of which €2,359.5 million attributable to UBI Stand-Alone (+1.2% compared with the first nine months of 2016).

Within the aggregate, net interest income came to €1,147.7 million and was composed as follows:

• €112.3 million relating to the 3 Acquired Banks and resulting almost totally from general banking business with customers. For the period ended 30th September 2017, the result for the 3 Acquired Banks already partially included the benefits of an initial progressive reduction of approximately 40 bps in the cost funding, which occurred throughout the April-September 2017 period. That reduction allowed an improvement to be recorded in this item in 3Q 2017 compared with 2Q 2017 (up to €57.8 million compared with €54.5 million in 2Q 2017);

• €1,035.4 million resulting from UBI Stand-Alone (€1,133.1 million in 2016). A smaller contribution from the securities portfolio contributed to the decrease (-€40 million) as a result of a decrease in investments in debt securities - the sale of which, however, generated significant profits on disposals in the first 9 months (€112.8 million approx.) - and a decrease in the margin for general banking business with customers (-€58 million), over half of which due to a reduction in interest received on unlikely-to-pay loans, down by over €32 million compared with the same period in 2016. As will be recalled, net interest income does not include the benefits of the TLTRO, which will be recognised in the fourth quarter of the year.

  It should be noted that UBI Stand-Alone also recorded an increase in net interest income to €344.7 million in 3Q 2017 from €343.5 million in 2Q 2017, of which €307 million due to general banking business with customers, compared with €302 million before.

  Net fee and commission income came to €1,151.2 million, of which €95.1 million relating to the 3 Acquired Banks. Approximately 74% of the latter amount relates to general banking business with customers, and the rest to management, trading and advisory services for securities business, which together with the composition of net interest income, confirms the greater focus of the 3 Acquired Banks on funding and lending business with customers. Nevertheless, the composition is changing on a quarterly basis, in line with the placement of asset management products, towards a greater proportion of fees and commissions related to securities business.

  As concerns the contribution from UBI Stand-Alone, this rose to €1,056.2 million, up 6.8% compared with €988.8 million in 2016, the result of the positive contribution from management, trading and advisory services (up 8.3% to €601 million) - driven by a substantial increase in assets under management and insurance business - and also in that from fees and commissions earned on general banking business (up 4.9% to €455 million).

  Net profit from trading and hedging activity came to €185 million, of which €177.6 million attributable to UBI Stand-Alone.

  The latter was composed as follows:

• €54.1 million from trading activity (€23.5 million in 9M 2016);

• €112.8 million from the disposal of financial assets, including Italian government securities (€89.1 million in 9M 2016);

• €11.5 million from fair value movements in financial assets designated at fair value (-€7.2 million in 9M 2016);

• hedging activity recorded a loss of €0.8 million (+€1 million in 9M 2016).

  Other operating income came to approximately €76 million, of which €8.6 million earned by the 3 Acquired Banks.

  Operating expenses totalled €1,789.5 million, of which €1,522.4 million relating to UBI Stand-Alone (the latter was down 2% compared with €1,553.2 million in 9M 2016):

  • staff costs amounted to €1,096.7 million, of which €942.7 million relating to UBI Stand-Alone, where the reduction already in progress for several years continued (down a further 1.1% compared with 9M 2016 as a result of a reduction in average staff numbers, -267 staff), and €154 million relating to the 3 Acquired Banks.

    It should be noted that staff costs were down in the third quarter compared with the second quarter of the year both for UBI Stand-Alone (to €308 million from €314 million before) and for the 3 Acquired Banks (to €71 million from €83 million before).

  • administrative expenses totalled €577.9 million, of which €474.8 million relating to UBI Stand- Alone, where the reduction in progress is continuing (-3.8% compared with 9M 2016);

  • net impairment losses on property, plant and equipment and intangible assets amounted to €114.9 million, of which 104.9 relating to UBI Stand-Alone.

  Net impairment losses on loans amounted to €417.7 million, to give an annualised loan loss rate of 67 basis points.

  The reversal of the PPA allocated to non-performing loans contributed to this result, determining net reversals of impairment on the 3 Acquired Banks (net impairment losses on loans of the 3 Acquired Banks totalled €18 million, more than offset by the benefit resulting from the reversal of the PPA allocated to adjust the value of non-performing loans, amounting to +€54.2 million).

  Coverage for non-performing loans as at 30th September 2017, for the enlarged Group, stood at 48.6% inclusive of write-offs (40.01% excluding write-offs).

  Approximately €130 million of net impairment losses on other financial assets and liabilities were recognised over the period, connected primarily with the write-down by €89.3 million of the investment in the Atlante Fund and to the expenses of €32.4 incurred for the intervention of the Interbank Deposit Protection Fund in favour of CR Cesena, Rimini and S. Miniato, all non-recurring.

  Tax for the period stood at €112.2 million, to give a tax rate of 45.16% (40.75% net of non recurring items), and it included no benefit from the recognition of DTAs on the prior year losses of the 3 Acquired Banks, which may start to be recorded following the legal incorporation of these banks.

  Finally, expenses of approximately €31.2 million net of taxes and non-controlling interests incurred for the Business Plan (Single Bank Project, project to integrate the 3 Acquired Banks, redundancy incentives) were recognised in the first 9 months of the year.

  * * *

  Income statement results for 3Q 2017 compared with 2Q 2017 (UBI Banca + 3 Acquired Banks)

  In quarterly terms, operating income totalled €856.3 million compared with €941 million generated in the second quarter.

  The follow occurred within the item:

• net interest income rose to €402.5 million from €398 million before and recorded growth both for the UBI Stand-Alone perimeter (+€1.1 million to €344.7 million) and to a greater extent for the perimeter of the 3 Acquired Banks (+€3.4 million to €57.8 million) as a result of action taken to reduce funding costs, which impacted both interest rates and volumes.

  Note should also be taken here of the recovery in the result for general banking business with customers in the UBI Stand Alone perimeter, which rose to €307 million from €302 million before.

• net fee and commission income came to €390 million, compared with €411 million in 2Q 2016, with the usual seasonal factors related to slower business in the summer months. UBI Stand-Alone recorded fee and commission income of €342 million, down compared with €363 million in 2Q 2017, but significantly up on €321 million recorded in 3Q 2016.