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Ubi, single bank project completed largely ahead of business plan expectations

in Banche/Economia/ENGLISH/UBi by
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UBI Banca S.p.A. reports that, following the signing of the relevant  merger deeds on 2nd February last and their filing with the competent offices of the Company Registrar, with effect with regard to third parties from today, the merger by incorporation of Banca Popolare di Bergamo S.p.A. (“BPB”), Banca Popolare di Ancona S.p.A. (“BPA”), Banca Carime S.p.A. (“Carime”), Banco di Brescia San Paolo CAB S.p.A. (“BBS”) and Banca Valle Camonica S.p.A. (“BVC”) into UBI Banca was completed. The mergers will take effect for accounting and tax purposes from 1st January 2017.

  1. Capital

Following the issuance of new UBI Banca shares at the service of the exchange of the shares of BPA, Carime and BVC (all the shares of BPB and BBS were, on the other hand, cancelled without being exchanged because they were held by the Parent UBI Banca) the share capital of UBI Banca has increased to Euro 2,443,092,155.00 (divided into n. 977,236,862 shares with no nominal value), not considering a further increase and a higher number of shares – but of immaterial amount – which might be determined when the exchange transactions are completed, due to the application of specific rounding procedures in compliance with the provisions of the merger project pursuant to Art. 2501-ter of the Italian Civil Code.

With effect from today, article 5.1 of the articles of association of UBI Banca was therefore amended so as to reflect the new amount of the share capital and the new number of shares.

  1. Migrations

From an operational point of view, the migrations of all 5 Network Banks (BPB, Carime, BPA, BBS and BVC) onto UBI Banca’s IT system were completed successfully. Right from the first day of activity, full operation of branches migrated was guaranteed.

The IT migrations concerned a total of approx. 1,150 branches and customer facilities, 8,300,000 customers, 2,450,000 current accounts and 1,470,000 custody accounts, and involved approx. 6,000 employees both in the preparatory stage and post migration.

With the merger by incorporation and the migration of the 5 Network Banks, which follow the integration in November 2016 of BPCI and BRE (please see press release dated 22 November 2016), the “Single Bank Project” was substantially completed today, in large advance by about 4 months compared to Business Plan expectations.

SIGNING OF THE DEEDS FOR THE MERGER BY INCORPORATION INTO UBI BANCA OF BANCA POPOLARE COMMERCIO E INDUSTRIA AND BANCA REGIONALE EUROPEA

in ENGLISH by
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THE SINGLE BANK PROJECT: SIGNING OF THE DEEDS FOR THE MERGER BY INCORPORATION INTO UBI BANCA OF BANCA POPOLARE COMMERCIO E INDUSTRIA AND BANCA REGIONALE EUROPEA, WITH EFFECT FROM 21ST NOVEMBER 2016. ON THAT SAME DATE UBI BANCA’S FULLY LOADED CET1 RATIO WILL RISE, AS ANNOUNCED, BY APPROX. 30 BPS.

Bergamo, 15th November 2016 – UBI Banca S.p.A. (“UBI Banca”) reports that today two merger deeds pursuant to Art. 2504 of the Italian Civil Code (the “Merger Deeds”) have been signed relating respectively to the merger by incorporation of Banca Popolare Commercio e Industria S.p.A. (“BPCI”) and of Banca Regionale Europea S.p.A. (“BRE”) into their Parent, UBI Banca.

The merger deeds state that both mergers shall come into effect with regard to third parties from 21st November 2016 (the “Date of Effect”), subject to their being filed with the competent offices of the Company Registrar. The mergers will take effect for accounting and tax purposes, on the other hand, from 1st January 2016.

With effect from the Date of Effect, all shares of BPCI and BRE held by shareholders other than UBI Banca will be cancelled and exchanged with new UBI Banca shares, the number of which will be determined by multiplying the number of BRE and BPCI shares held by the aforementioned shareholders by the following exchange ratios:
0.2522 shares of UBI Banca for every single share of BPCI
0.2402 shares of UBI Banca for every single ordinary share of BRE
0.4377 shares of UBI Banca for every single savings share of BRE
with the result rounded up to the nearest whole number. There will be no settlements of balances in cash.
On the other hand, the shares of BPCI and BRE held by UBI Banca will be cancelled without exchange.

At the Date of Effect, the new UBI Banca shares will be made available through the intermediaries adhering to Monte Titoli and will be perfectly fungible with the other listed shares. They will therefore have normal dividend entitlement and, on a par with those already outstanding as at the Date of Effect, they will be listed on the Mercato Telematico Azionario (electronic stock exchange) operated by Borsa Italiana S.p.A. and will be managed in centralised, dematerialised form by Monte Titoli S.p.A..

Therefore, from the Date of Effect, the share capital of UBI Banca will be increased by €186,378,597.50 by means of the issue of 74,551,439 shares, rising therefore to €2,440,750,027.50 (976,300,011 shares with no nominal value), unless there is a further increase – but of immaterial amount – due to the application of the rounding procedure mentioned above as part of the administration of the exchange transactions by the depository intermediaries.

From the viewpoint of regulatory capital, the merger by incorporation of BPCI and BRE will result in growth in the fully loaded CET1 ratio of approximately 30 bps compared with the ratios at the end of September 2016.

Again with effect from the Date of Effect, in addition to article 5 of the articles of association of UBI Banca (share capital), articles 1, 27, 28, 32, 33, 34, 35, 38, 40, 42, 43 and 44 of those same articles of association will also be amended and all the transition measures contained in the articles of association will be eliminated in compliance with the provisions of the merger project pursuant to Art. 2501-ter of the Italian Civil Code.

UBI Banca also informs that, at the same time as the BRE merger deed was signed, UBI Banca concluded the purchase of the saving shares and the privileged shares of BRE held by the Fondazione Cassa di Risparmio di Cuneo, in compliance with the provisions of the aforementioned merger project and of the preliminary sale and purchase agreement communicated to the market on 27th June 2016. As for the other BRE shares held by UBI Banca, those shares will also be cancelled entirely without exchange.

Finally, UBI Banca confirms that the merger by incorporation into UBI Banca of the other banks involved in the “Singe Bank” project (Banca Popolare di Bergamo S.p.A., Banco di Brescia S.p.A., Banca di Valle Camonica S.p.A., Banca Popolare di Ancona S.p.A. and Banca Carime S.p.A., all controlled by UBI Banca) will be concluded, in one or more stages, by the end of the first half of 2017, as indicated in the Merger Project.

Ubi, the third quarter of 2016 ends with a profit of €32.5 million

in Economia/ENGLISH by
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The third quarter of 2016 ends with a profit of €32.5 million compared with:

– a profit of €48.1 million recorded in the first 6 months of 2016 (net of the impact of up- 1

front recognition of costs to implement the Business Plan );
– a profit of €37.6 million recorded in the third quarter of 2015, which included a

contribution to the Deposit Guarantee Scheme lower by nearly €10 million compared to

2 3Q 2016 .

Overall a third quarter showing improvement year on year, consistent with Business Plan forecasts.

If the impacts of the costs for the implementation of the Business Plan recognised up front from June 2016 are included (€840 million net approx.), the first nine months of 2016 end

with a loss of €754.5 million, an improvement compared with the loss recorded for the first half of the year (€787 million approx.), thanks to the good results recorded in the third quarter of 2016 reported above.

The first nine months of 2016 saw confirmation of the positive trends already partially recorded during the year:

1) The solidity of capital ratios is confirmed:

  • –  the phased-in CET1 ratio returned to growth, standing at 11.68% at the end of

    September 2016 (compared with 11.43% in June 2016, affected by the up-front recognition of Business Plan costs). The fully loaded CET1 ratio stood as a consequence at 11.28% compared with 11.02% in June 2016.
    As a reminder, the announced repurchase of network bank minority interests, achieved mainly through the issue of UBI shares, and the effect of the tax deductibility of the increased loan loss provisions recognised, will progressively generate a benefit estimated at approximately +70 bps on the fully loaded CET1. This benefit is not included in the September figure;

  • –  the CET1 ratio includes the calculation of a pro rata dividend equal to at least that declared in 2015;
  • –  a “phased-in” total capital ratio of 14.55% (14.47% in June 2016);
  • –  a phased-in leverage ratio of 5.9% and a fully loaded ratio of 5.7%;
  • –  NSFR and LCR >1;

    2) Average loans stable year on year, after absorbing the impact of the launch of an activity to select and close EVA negative loan positions;

    1 These costs include impairment losses on loans that determined the corresponding absorption of the “shortfall”, redundancy

    expenses, impairment losses on brands and project expenses for the “Single Bank Project” (altogether approximately €835 million

    net in June 2016 and approximately €5 million net in September 2016).

    2
    In 2015, the estimate of the contribution to the Single Resolution Fund amounting to €22.8 million gross (€13.2 million net of tax

    and non-controlling interests) was recognised in 2Q2015, while the semi-annual contribution to the Deposit Guarantee Scheme, amounting to €11.3 million (€7.1 net of tax and non-controlling interests), was recognised in 3Q2015. Both amounts had been recognised within “provisions for risks and charges” and therefore not within “operating expenses”.
    In 2016, the contribution to the Single Resolutìon Fund (€32 million gross and €21.11 million net) was recognised in 1Q, whilst the contribution to the Deposit Guarantee Scheme (€26.4 million gross and €17.9 million net) was recognized in 3Q, both in the item “operating expenses”.

1

  1. 3)  The decrease in net interest income has slowed down in 9M 2016 to 9% and does not include the benefits of TLTRO2. The inclusion of these benefits, amounting to approx. 10 million, would have confirmed the 3Q 2016 Net interest margin at the same level as that of 2Q 2016;
  2. 4)  The progressive growth in assets under management and insurance products is continuing, amounting to +7.7% and +11.6% respectively compared with the end of December 2015 (+4.2% and +2.9% compared with June 2016), to reach a stock of €36.7 billion and €16.1 billion respectively;
  3. 5)  As a result of significant growth in indirect funding, net fee and commission income rose 2% compared with 9M 2015 to €989 million. In 3Q 2016 net fee and commission income rose 7% compared with 3Q 2015, to stand at €321 million;
  4. 6)  Control over operating expenses, which came to €1,553 million over the nine-month

    period, is continuing. They grew by only €11 million (+0.7%) y/y and succeeded in

    absorbing almost all of the €58.4 million cost of the ordinary contributions to the Single

    Resolution Fund and the Deposit Guarantee Scheme, not present in 2015 in the same

    2
    line . Staff costs fell 1.9% y/y and 1.4% compared with 2Q 2016;

  5. 7)  The natural improvement in credit quality is continuing:
    • –  notwithstanding the almost complete absence of disposals , at the end of September

      2016 total gross non-performing loans fell further to €13,231 million (down 1.5% on December 2015), which, together with greater recognition of provisions, helped to reduce total net non-performing loans to €8,333 million (down 14% on December 2015);

    • –  the formation of new non-performing loans reduced further, with new inflows from performing to non-performing status contracting by 51% compared with 9M 2015. Compared with the record peak reached in the first nine months of 2013, inflows from performing to non-performing status have fallen by 70% approx.;

      4

    • –  coverage for total non-performing exposures, inclusive of write-offs , has risen further

      to reach 45.1% (44.3% in June 2016 and 37.6% in December 2015), while coverage

      for bad loans is 58.55% (58.25% in June 2016 and 52.25% in December 2015);

  6. 8)  Inflows into sight deposits remained high (the total amounted to €50.3 billion in September 2016 compared with €49.1 billion in June 2016 and €47.7 billion in

    December 2015).

    ***

9M 2016 vs 9M 2015

  • Net interest income fell 9% to €1,133.1 million as a result of a reduction and change in the

    mix of the securities portfolio, a significant decrease in unlikely to pay loans (yoy, -€34.9 million in terms of interest income) and further decrease in market interest rates. Net interest income does not include the benefits of TLTRO2

  • Net fee and commission income of €988.8 million (+2%)
  • A finance result of €106.3 million (€138.9 million in 9M 2015)
  • Staff costs of €953.8 million (approx. -2%)
  • Total operating expenses of €1,553.2 million (inclusive of €58.4 million for the annual

    ordinary contributions to the Single Resolution Fund and to the Deposit Guarantee

    5
    Scheme, not present in 2015 in the same item), up slightly by 0.7% compared with 9M

    2015

    3
    Disposals came to approx. €25 million in 9M 2016.

    4 5

3

Write-offs amounted to approximately €2 billion. Please see note 2

2

  • Loan losses, net of Business Plan impacts6, of €522.9 million compared with €557.6 million in 2015
  • Net impairment losses on other assets of €50.9 million (€6.4 million in 2015), primarily “one-off”, relating to the virtual elimination of residual credit risk connected with financial instruments resulting from one non-performing loan positions, recognised in 2Q 2016.

    3Q 2016 vs 2Q 2016

  • Net interest income of €368 million, down 2.8% compared with €378 million in 2Q 2016,

    does not include the benefits of TLTRO2, estimated at €10 million

  • Net fee and commission income of €321 million, down compared with €330.3 million in 2Q

    2016 due to seasonal factors, but up 7% on the same quarter of 2015

  • A finance result of €24 million (€67 million in 2Q 2016)
  • Staff costs of €315 million, down 1.4% compared with €319.3 million in 2Q 2016
  • Total operating expenses of €515 million, largely unchanged compared with €511 million

    in 2Q 2016, notwithstanding the inclusion of €26.4 million for the ordinary contribution to

    the Deposit Guarantee Scheme, not present in 2Q 2016

  • Loan losses of €167 million, down compared with €200.1 million net of Business Plan 6

    ***

    th

    June 2016 (-€840 million), ended with a net loss of -€754.5 million, an improvement compared with the result for June 2016 (-€787 million) thanks to the profit earned in the third quarter of the year, amounting to €32.5 million. The result for 9M 2016 compares with a profit of €162 million

    achieved in the first 9M 2015.

    As a reminder, the impacts of the implementation of the Business Plan, recognised primarily in the second quarter of the year, came to a total of approximately -€840 million net and they regard the following:

    • an increase in loan provisions, of which approximately €851 million (€586 million net of taxes and non-controlling interests) consisting of provisions already deducted from the regulatory capital (the “shortfall”), attributable also to the objective of reducing the ratio of net non-performing exposures to tangible equity (the “Texas ratio”) over the course of the Business Plan;
    • redundancy expenses of €323 million (€207 million net of tax and non-controlling interests) designed to progressively reduce staff numbers in the Group;
    • impairment losses on brands (€63 million, €38 million net of tax and non-controlling interests) and part of project expenses (€12 million approx., €8 million net of tax and non- controlling interests booked in 2Q and 3Q2016), in relation to the “Single Bank Project”.

      6 One strategic goal of the Group’s 2019-2020 Business Plan is to reduce the ratio of net non-performing exposures to tangible equity (the “Texas ratio”). In order to achieve that result the Group decided to adopt an even more prudential approach in its management of problem loans, by increasing coverage with greater provisions, which determined a partial absorption of the provision shortfall (€851 million), already deducted from the fully loaded CET1. This will generate an improvement in the CET1 ratio estimated at approximately an additional 40 basis points which will manifest progressively in coming years starting from 2017. The figure for loan losses is shown net of that component.

impacts recognisedin2Q2016.

th
Banca) has approved the consolidated results for the first nine months of 2016, which, after the

Bergamo, 10

November 2016 – The Management Board of Unione di Banche Italiane Spa (UBI

recognition of the “one-off” impacts of the new Business Plan presented on 27

3

Results for the first nine months of 2016 compared with first nine months of 2015

The first nine months of the year ended with operating income of €2,334 million, compared with €2,467 million in the first nine months of 2015, characterised by a lower contribution from net interest income and finance, while the contribution from net fee and commission income recorded growth.

In detail, net interest income of €1,133 million fell compared with €1,246 million in the same period of 2015, due in almost equal measure to a reduction in the contribution from the securities portfolio – for which action is in progress to reduce it and change the mix, in accordance with the Business Plan – and to a contraction in the result for ordinary banking business with customers in a scenario of large reductions in market interest rates (the nine-month average for the one-month Euribor fell to -33 basis points from -5 basis points before).

More specifically, the securities portfolio generated net interest income of approximately €172 million compared with €227.8 million before – in the presence of investments in debt securities which fell over twelve months by €1.3 billion (-€3.2 billion for the Italian government securities portfolio). Net interest income generated by ordinary banking business with customers came to €966.8 million, down compared with €1,026.5 million before, mainly due to the impact of changes in market interest rates, which was not offset by growth in volumes of lending (which remained stable in average terms), nor by the progressive reduction in progress in the cost of funding.

The performance of net interest income was also affected by a reduction in interest income (-€34.9 million year on year) from non performing exposures, in relation to the significant contraction in unlikely to pay volumes.

Net fee and commission income totalled €988.8 million, up 2% compared with the same period of 2015, notwithstanding the smaller contribution from performance fees (-€4.6 million). Commissions on management, trading and advisory services, which account for approximately 56% of total fees and commissions, came to €555.3 million, up 7.1% on 2015. Fees and commissions from ordinary banking business stood at €433.5 million and recorded a decline of 3.9% compared with the previous year.

The result for financial activities came to €106.3 million (€138.9 million in the first nine months of 2015) and was comprised of the following:

  • –  €23.5 million from trading activity (€57.3 million in 9M 2015);
  • –  €89.1 million from the disposal of financial assets (€70.6 million in 9M 2015), mainly attributable,

    as in the previous period, to the disposal of Italian government securities. In 2016 the item also

    includes proceeds from shares of Visa Europe Ltd, totalling €15.2 million, recognised in 2Q 2016;

  • –  -€7.2 million from fair value movements in financial assets (+€3.8 million in 9M 2015);
  • –  €1 million from hedging activities (+€7.3 million in 9M 2015).

    On the expenses front, notwithstanding the inclusion of ordinary contributions to the Single

    Resolution Fund (€32 million in 1Q 2016) and to the Deposit Guarantee Scheme (€26.4 million in

    7
    3Q 2016), not present in 2015 , operating expenses in the first nine months of the year stood at

    €1,553.2 million, with an increase of just €11.1 million compared with 2015.

    Operating expenses do not include extraordinary costs in relation to the new Business Plan, which have been reclassified under separate items, in order to allow a clear examination of ordinary operating trends.

    7
    See note 2.

4

In detail:
– staff costs recorded a further reduction of €18.9 million (-1.9%) compared with 9M 2016, to total

€953.8 million. These savings came mainly from a reduction in average staff numbers (-285 over twelve months), from staff turnover in relation to incentivised exits, from lower payments for labour services provided in the various forms set out in the trade union agreements signed from time to time, from extraordinary leaves and from the impact of new part-time positions;

– other administrative expenses, amounting to €493.4 million, included, a total of €58.4 million in relation to ordinary contributions to the Single Resolution Fund and to the Deposit Guarantee

8
Scheme reported above, not present in 2015 within this item , and they compare with €454.6

million in 2015. Net of those contributions, other administrative expenses fell by 4.3% compared

with 2015, as a result of the containment of almost all expense items;
– finally, depreciation, amortisation and net impairment losses on property, plant and

equipment and intangible assets totalled €106 million, down €8.7 million compared with 9M 2015, as a result of lower depreciation and amortisation on IT and real estate items, but also due to a smaller purchase price allocation following the recognition of impairment on brands as part of the implementation of the Business Plan.

Net impairment losses on loans recognised in the first nine months of the year amounted to

th

€1,373.8 million, (€557.6 million in 9M 2015). The higher provisions announced on 27 constituting the baseline for Business Plan projections, resulted in the partial reabsorption of the “shortfall” and that is the difference between expected losses and provisions, already deducted from regulatory capital, amounting to approximately €851 million. Net of that amount, provisions for the period came to approximately €522.9 million.
As a result of the provisions made, total coverage for non-performing exposures increased to 45.1% inclusive of write-offs (44.3% in June 2016 and 37.2% in December 2015).

Finally, in the first nine months of 2016 the income statement recorded net impairment losses on other financial assets/liabilities of €50.9 million (€6.4 million in the 2015), attributable primarily to a one-off amount (€43.4 million gross) relating to the virtual elimination of residual credit risk connected with financial instruments resulting from a non-performing loan position.

***

After the net loss of €829 million recorded in 2Q 2016 (following the recognition in June of the

impacts resulting from the implementation of the Business Plan, reported above, amounting to

9
approximately €835 million net and the “one-off” recognition of impairment losses on financial

instruments resulting from one non-performing loan position amounting to €39.4 million net), 3Q 2016 ended with a profit of €32.5 million, very close to the profit of €37.6 million achieved in 3Q 2015, notwithstanding the recognition in 2016 of an amount higher by €10 million relating to the ordinary yearly contribution to the Deposit Guarantee Scheme.

In terms of ordinary operations, the second quarter of 2016 recorded the following performance:

Results for 3Q 2016 compared with 2Q 2016

8

9
See note 1

net interest income contracted by 2.8% (€10.4 million) 3Q 2016-on-2Q 2016. The reduction is attributable to a further reduction in the securities portfolio (-€1.2 billion Q-on-Q), to lower interest income recognised in relation to a reduction in unlikely to pay loans and to a further

June 2016

See note 2.

5

reduction in market interest rates (from an average one-month Euribor of -35 bps in 2Q 2016 to -38 bps in 3Q 2016), which affected customer spreads. The advantage from TLTRO2 financing (€10 million) was not recognised in net interest income for the period, and would have brought 3Q2016 net interest income to the same level as in 2Q2016;

  • –  net fee and commission income came to €321 million, affected by the usual seasonal factors, compared with €330.3 million in 2Q 2016, but up 7% on the figure for 3Q 2015 (€300 million);
  • –  the result for financial activities fell to €23.8 million compared with €66.9 million for 2Q 2016, mainly the result of fewer disposals of AFS securities (-€53 million). 2Q 2016 also included proceeds from the Visa Europe Ltd shares totalling €15.2 million, no longer present in 3Q 2016.

    Operating expenses totalled €515 million, largely unchanged compared with 2Q 2016 (€510.5 million), notwithstanding the inclusion of €26.4 million for the ordinary contribution to the Deposit Guarantee Scheme.

Compared with the preceding quarter:
– staff costs, amounting to €314.7 million, were down compared with both 2Q 2016 (€319.3

million) and the same period of 2015 (€318 million), the aggregate result of savings achieved from the application of trade union agreements signed from time to time and also of the trend for variable components of remuneration (down after the one-off payments recognised in the second quarter);

– other administrative expenses amounted to €166.1 million, an increase of only €10.6 million compared with 2Q 2016, notwithstanding the inclusion of €26.4 million for the contribution to the DGS. Net of that contribution, other administrative expenses would in fact have contracted by €15.8 million;

– net impairment losses on property, plant and equipment and intangible assets came to €34.3 million (-€1.4 million) due to the lower impact of the purchase price allocation, following the write-down of brands recognised among the “one-off” costs due to the start of the Business Plan in June.

Net impairment losses on loans amounting to €167.4 million were recognised in the third quarter of the year, to give an annualised loan loss rate of 0.82%.
As a reminder, the impairment losses on loans came to €1,051 million in 2Q 2016 and they included

th

June 2016 as a baseline for Business Plan projections which led to a partial re-absorption of the provision “shortfall” and that is the difference between expected losses and provisions, already deducted from regulatory capital, amounting to approximately €851 million. Net of that amount, impairment losses on loans for 2Q 2016 came to approximately €200

million.
Provisions recognised resulted in a further increase in total coverage for non-performing loans, which, inclusive of write-downs, rose in September 2016 to 45.1% compared with 44.3% in June 2016.

Finally, as announced when the Business Plan was presented, additional “one-off” costs were recognised in relation to the Single Bank project amounting to approximately €4.5 million net of tax and non-controlling interests.

greater provisions announced on 27

The balance sheet
Loans to customers as at 30

th
in June 2016 (€84.6 billion at the end of December 2015).

***

September 2016, stood at €82.0 billion compared with €83.9 billion

6

In detail, the item is the aggregate result of the following changes:

10

  • –  performing loans to customers amounted to €73.4 billion (-1.6% compared with June 2016,

    -0.3% compared with December 2015) and reflect the stability of average medium to long-term loan volumes in June and September (approximately €55.7 billion compared with €54.9 billion in December 2015), since new grants now fully succeed in offsetting loans in run-off (approximately -€200 million each quarter). Short-term loans, however, contracted in September compared with June (-€1.1 billion), due to certain seasonal factors present in the September-June period every year, but also as a result of a revision begun when the Business Plan was launched, which is gradually eliminating positions with a negative EVA. This elimination involved a reduction of approximately €0.5 billion in short-term loans in 3Q 2016, with no impact on net interest income, but with advantages in terms of lower risk weighted assets and additions to collective provisions;

  • –  exposure to the CCG amounted to €0.2 billion (€0.8 billion in June 2016 and €1.2 billion in December 2015);
  • –  net non-performing loans fell further to €8.3 billion (-2.1% compared with June 2016, -14.0% compared with December 2015).

    As concerns credit quality, at the end of September 2016 total gross non-performing exposures stood at €13,231 million (down further compared with €13,280 million in June 2016 and €13,434

    11

million in December 2015), in the virtual absence of loan disposals
Flows of performing loans to non-performing status again contracted significantly, reducing by a further 50.7% compared with the first nine months of 2015.

The results at the end of September 2016 show a further improvement in coverage. If loan write- offs are included, coverage for total non-performing loans rose to 45.1% (44.3% in June 2016 and 37.2% in December 2015).
Net of loan write-offs, coverage for total non-performing loans was 37% (an increase compared with 35.9% in June 2016 and 27.9% in December 2015).

As a result of the combined effect of the reduction in total gross loans and greater coverage, total net non-performing loans fell further to €8,333 million (€8,512 million in June 2016 and €9,689 million in December 2015).
In detail:

  • –  total net bad loans amounted to €3,913 million (€3,849 million in June 2016 and €4,288 million in December 2015).
    If loan write-offs are included, coverage for total bad loans rose in September 2016 to 58.55% (58.25% in June 2016 and 52.25% in December 2015).

    Net of loan write-offs, coverage for bad loans stands at 47.77% (an increase compared with

    46.66% in June 2016 and 38.64% at the end of 2015).

  • –  the “unlikely to pay” category amounted to €4,258 million net (€4,470 million in June 2016 and

    €5,147 million in December 2015), with coverage of 23.54%.

  • –  net positions past due and/or in arrears amounted to €162 million, compared with €194 million in

    June 2016 and €254 million in December 2015, with coverage of 4.97%.

    Direct funding from ordinary customers, amounting to €69.3 billion in September 2016 (€69.8 billion in June 2016, €72.5 billion last December) was down, primarily as a result of the progressive maturity of bonds which had been placed in time to third party networks’ customers (down €1.3 billion from December 2015 to September 2016, down €0.3 billion from June to September 2016).

    10
    Net of the CCG, as reported below.

    11
    Please see note 3.

.

7

The trends already recorded for Group customers were confirmed:

  • –  the constant increase in current accounts was confirmed, up to €50.3 billion in September 2016

    from €49.1 billion in June 2016 and from €47.7 billion in December 2015;

  • –  total bonds placed with customers decreased as a result of fewer placements made in accordance with the Business Plan also in consideration of bail-in regulations (down €4.4 billion over nine

    months to approximately €16 billion).
    Indirect funding from ordinary customers performed well reaching €80.1 billion. In detail assets under management in the narrow sense reached €36.7 billion (+7.7% compared with December 2015 and +4.2% compared with June 2016) and insurance products came to €16.1 billion (+11.6% compared with December 2015 and +2.9% compared with June 2016), while assets under custody, amounting to €27.2 billion, were down 12.1% compared with December 2015 mainly as a result of market performance, but were unchanged compared with June 2016.

    Direct funding from institutional customers amounted to €15.3 billion in September 2016, down compared with €17.7 billion in June 2016 (€19 billion at the end of 2015), due to a reduction in repurchase agreements with the CCG (-€4 billion approx. vs December 2015), while volumes of covered bonds (€9.5 billion) and EMTNs (€3.5 billion) were largely unchanged. In October issuances of covered bonds and EMTNs totalled over €1 billion.

    Group exposure to the ECB consisted of a total of €10 billion of TLTRO2, recognised under “due to banks” and therefore not included in direct funding.

    The solidity of the Group’s liquidity position is again confirmed with liquidity ratios (Net Stable

Funding Ratio and Liquidity Coverage Ratio) now higher than one for some years and total assets th

eligible for refinancing as at 30 September 2016 of €29,3 billion (of which €16.6 billion available), already net of haircuts.

At the end of September 2016, the Group’s financial assets had a mark-to-market value of €18.4 billion, of which €15 billion relating to Italian government securities. The latter item had fallen compared with June 2016 (€16.2 billion), in line with the provisions of the Business Plan.

th

The consolidated equity of the UBI Banca Group as at 30 compared with €9,982 million at the end of December 2015.

September 2016, inclusive of profit for the period, stood at €8,890 million compared with €8,842 million at the end of June 2016 and

Capital ratios at the end of September 2016 recorded growth compared with June 2016 and confirm the solidity of the UBI Banca Group.

th

September 2016 stood at 11.68% compared with 11.43% in June 2016. The estimated fully loaded CET1 ratio was 11.28% compared with 11.02% in June 2016. As a reminder, the announced repurchase of network bank minority interests, achieved mainly

through the issue of UBI shares, and the effect of the tax deductibility of the increased loan loss provisions recognised, will progressively generate a benefit estimated at approximately +70 bps on the fully loaded CET1. This benefit is not included in the September figure.
The “phased in” Total Capital Ratio was 14.55% (14.47% in June 2016 and 13.93% as at 31 December 2015).

Finally, the leverage ratio calculated on the basis of Commission Delegated Regulation EU 2015/62 recommendations was 5.86% “phased in” and 5.68% “fully loaded”.

***

The “phased-in” CET 1 ratio as at 30

8

st

th

Human resources of the UBI Banca Group totalled 17,573 as at 30
17,716 at the end of 2015. The branch network at the end of the period consisted of 1,532 branches in Italy (1,531 in June 2016) and six abroad.

***

Statement of the Senior Officer Responsible for the preparation of corporate accounting documents

Elisabetta Stegher, as the Senior Officer Responsible for preparing the corporate accounting documents of Unione di Banche Italiane Spa, hereby declares, in compliance with the second paragraph of article 154 bis of the Testo unico delle disposizioni in materia di intermediazione finanziaria (Consolidated Finance Act), that the financial information contained in this press release is reliably based on the records contained in corporate documents and accounting records.

***

Outlook for ordinary operations (net of non-recurring items)

The overall trend for operating income is forecast to grow compared with the third quarter, with an improvement in core revenues and a smaller contribution from trading and hedging activity.
The actions undertaken starting from 2015 allow us to confirm the objective of containing recurring operating expenses for the year 2016 in line with those of the previous year, absorbing the increase in costs relating to the ordinary contributions to the Single Resolution Fund and the Deposit Guarantee Scheme.

The particularly low risk attaching to the performing portfolio and the continuation of the reduction in inflows of new non-performing loans, should confirm the expected reduction in loan losses in the fourth quarter of 2016 compared with the same period in 2015.

***

Ubi, the single bank project moves ahead

in Economia/ENGLISH by
o-369503

Bergamo, 6th September 2016 – The Management Board and the Supervisory Board of UBI Banca S.p.A. (“UBI Banca”) met today to resolve the continuation of the corporate procedures for the “Single Bank” project (the “Operation”), following the issue of the required authorisation by the Bank of Italy. As already reported to the market, the Operation involves the merger by incorporation into the Parent Bank, UBI Banca, of the following Network Banks: Banca Regionale Europea S.p.A., Banca Popolare Commercio e Industria S.p.A., Banca Carime S.p.A., Banca Popolare di Ancona S.p.A., Banca Popolare di Bergamo S.p.A., Banco di Brescia San Paolo CAB S.p.A. and Banca di Valle Camonica S.p.A. Therefore, following those board meetings a notice to convene an Extraordinary General Meeting of the Shareholders of UBI Banca will be published according to the procedures and to the terms set by the regulations in force in order to approve the merger and any additional resolutions connected or related to it. The Meeting is expected to take place on 14th October 2016 at 2:30 p.m.. The competent bodies of the network banks will pass their own resolutions concerning the merger in compliance with the terms set by the regulations in force, and at the latest by the date of the UBI Banca Extraordinary Shareholders’ Meeting. Please refer to the press release issued by the Bank on 27th June 2016 for further details on: (i) the procedures, terms and timing of the Operation; (ii) exchange ratios; (iii) date of effect of the Operation; (iv) UBI Banca shareholders post Operation; and (v) related parties involved in the Operation.

***** The merger project, the financial statements of UBI Banca and the Network Banks pursuant to Art. 2501-quater of the Italian Civil Code, the illustrative reports drawn up by UBI Banca and the Network Banks pursuant to Art 2501-quinquies of Italian Civil Code, the report of the expert on the fairness of the exchange ratio calculated in accordance with Art. 2501-sexies of Italian Civil Code and the remaining documentation for the Shareholders’ Meeting will be made available to the public by depositing them at the registered offices of UBI Banca and publishing them on its corporate website at www.ubibanca.it (in the Shareholders section) as well as through the authorised storage facility entitled “1info” (www.1info.it). The financial statements of UBI Banca and the Network Banks for the financial years 2015, 2014 and 2013 will also be deposited within the legal time limits at the registered offices of UBI Banca and published in the aforementioned section of UBI Banca’s corporate website. The information document drawn up by UBI Banca in accordance with Art. 5 of the “Regulations for Related Party Transactions” approved by the Consob with Resolution No.

17221 of 12th March 2010 will be made available to the public with the same procedures indicated above for the merger project and for the remaining documentation for the Shareholders’ Meeting, by 13th September 2016.

The A2A S.p.A. Board of Directors has examined and approved the Half year financial report at 30 June 2016

in ENGLISH by
A2A

At today’s meeting of the Board of Directors of A2A S.p.A., chaired by Mr. Giovanni Valotti, the Board examined and approved the Half year financial report at 30 June 2016.

The energy and climatic scenario in first half of 2016 was particularly penalising, still characterized at national level by a downturn in the electricity demand (-2%) as well as a considerable, generalized reduction in the price of commodities (oil -31%; gas -37%; PUN Baseload -26%).

Despite this unfavourable energy scenario, which, with respect to the previous financial year, had a negative impact of around 40 million euros on the margins of the generation plants portfolio, the Group’s industrial performance in all BUs in the first half of 2016 was excellent and made it possible, together with the adjustment obtained, relating to the recognition of previous tariff items (for the financial years 2007-2011) in the water cycle business, to completely neutralize the negative effects 2 caused by the aforementioned scenario and achieve a Gross Operating Margin of 614 million euros (that is 534 million euros net of the non-recurring items).

The “Ordinary” Net Profit, amounting to 212 million euros, was up by 60 million euros compared to that of the previous financial year (152 million euros). This Ordinary Net Profit excludes the extraordinary items that can be associated with the effects produced by the partial, non-proportional demerger of Edipower with the assignment of the complex comprising the hydroelectric plants of the Udine unit (apart from Ampezzo and Somplago) and its associated assets and liabilities, to Cellina Energy S.r.l. (a full subsidiary of Società Elettrica Altoatesina – SEL S.p.A), with effect as of 1 January 2016.

The “reported” net profit, amounting to 254 million euros, was up by 67% compared to the first six months of the previous year.

The Net Financial Position, down by 65 million euros, came to 2,832 million euros, net of the outlay associated with the buyback of own shares (37 million euros) and the payment of dividends in the month of June (126 million euros).

Approved the New Shareholders’ Agreement between State of Montenegro and A2A

in Economia/ENGLISH by
GIOVANNI VALOTTI A2A

A2A Group and the State of Montenegro have reached an agreement on the new Shareholders Agreement for the management of the Montenegrin company EPCG.

A2A became EPCG’s Shareholder in 2009 under an international tender process, and all over the years the company has demonstrated a strong commitment for the development of Montenegro by acquiring a leading role in delivering innovation and welfare in the country as well as efficiency and modernization in EPCG.

On July 29th, 2016 the Parliament of Montenegro has approved the new Shareholders’ Agreement between the State of Montenegro and A2A Group for the management of Energy Company EPCG, valid until December, 31st 2016.

Key points of this new agreement are the extension of the current A2A’s management rights in EPCG, the right to appoint the key managerial figures, definition of reserved matters relevant for the EPCG’s corporate management, the ability to exercise a put-option on the entire A2A’s shares in the company to the State of Montenegro, for a value defined in 250 million euro, at the new contract expiration and exercisable by March 31st, 2017, and no opposition of A2A in the project of construction of the new Pljevlja Thermal Power Plant.

The negotiations that led to the finalization of these new agreement have been carried out with the utmost transparency in order to reach a full consensus and protecting the interests of all parties involved.

Ubi Bank, business plan: press release

in Economia/ENGLISH by
ubi

PRESS RELEASE BUSINESS PLAN 2019/2020

  •   A strong baseline starting point that enables the objectives of the Plan to be achieved
    • –  the creation of a Single Bank has been approved with the merger by incorporation of 7 network banks into UBI Banca by the first half of 2017, with gross savings at regime of over €80 million added to by the tax benefits on the transfer of intragroup dividends;
    • –  the purchase of minority stakes held in the network banks has been agreed with the Foundations to be completed primarily by means of the exchange of the shares they hold with newly issued UBI Banca shares, with a benefit in terms of the CET1 fully loaded ratio of approximately 30 basis points. The maximum dilution from the purchase of all the minority stakes, including some marginal stakes, comes to 7.8% against a benefit in terms of profit that is more than proportional over the course of the Plan;
    • –  the pro-forma coverage for non-performing exposures (or “NPEs”) as at 31st December 2015, inclusive of write-offs, immediately rises from 37.8% to 43.3% (that for bad loans from 52.6% to 58% approx.) as a result of the partial use of the shortfall (€850 million1) which moreover allows capital to be freed up for the CET1 ratio which increases by approximately 40 basis points. This action, which increases coverage without consuming capital, but by actually freeing it up, has been made possible by the traditional conservative approach pursued by the Group. Consistently with Business Plan targets, the action also makes it possible to reduce the Texas ratio2 to around 100%, already expected for the end of 2016.
  •   The objectives of the Plan are equally distributed over three components: expenses, revenues and credit
    • –  growth in operating income from approximately €3.4 billion in 2015 to €3.6 billion in 2019 and €3.8 billion in 2020, in large part attributable to the different funding mix;
    • –  a further reduction in operating expenses down from €2.3 billion in 20153 to approximately €1.98 billion, stable in 2019-2020, notwithstanding investments during the course of the Business Plan of approximately €540 million, 72% of which to support growth in revenues;
      . strong generation turnover: approximately 2,750 staff leaving4 and around 1,100 new recruits over the course of the Plan, with a strong training programme, increased

      flexible working, reinforcement of the variable component of remuneration, etc.
      . rationalisation of the distribution model enabled by the transition to a Single Bank and by greater multi-channel service provision with the closure of nearly 280 points of sale

      1 On top of €59 million already recognized in 1Q2016. The shortfall was allocated both to bad loans and to unlikely to pay.
      2 Calculated as the ratio of net non-performing exposures to tangible equity (net of profit and inclusive of non- controlling interests).
      3 Including redundancy expenses, impairment losses on tangible assets and ordinary and extraordinary contributions to the Resolution Fund and to the Deposit Guarantee Scheme.
      4 of which approx. 1,300 through access to the solidarity fund

1

over the course of the Plan (130 in relation to the Single Bank Project) and the redesign

of above 40% of the branch network with a strong drive towards cashless branches;
– the achievement of a cost/income ratio of 54% in 2019 and 52% in 2020; a progressive reduction in loan losses as a result of a further decrease in new inflows to non-performing exposure status and a decrease in stocks, expected starting from 2016;
. the loan loss rate: down from 0.95% in 2015 to approximately 0.54% in 2019 and 0.50% in 2020;
. an increase in coverage for non-performing loans, inclusive of write-offs, from 43.3% in March 2016 (pro-forma to include the reabsorption of the shortfall) to 49% in 2019-2020 (from 58% to over 60% for bad loans);

  •   Moderate growth in asset items
    • –  net loans to customers up from approx. €85 billion at the end of 2015 to approx. €89 billion in 2019 and €92 billion in 2020 (CAGR: 1.3% and 1.7%);
    • –  total funding from ordinary customers (direct and indirect) up from €152.1 billion at the end of 2015 to approx. €166 billion in 2019 and €172 billion in 2020, within which migration is expected out of direct bond funding and assets under custody into assets under management;
    • –  an increase in wholesale funding from approximately €13 billion at the end of 2015 to over €23 billion in 2019 and to approximately €26 billion in 2020, also with a view to the progressive repayment of TLTROs.
  •   The Group’s growth plan is supported by the consolidation of all solidity indicators
    • –  the “fully loaded” CET1 ratio is expected to rise from 11.6% at the end of 2015 to over 12% in 2019 and to approximately 12.8% in 2020, primarily due to the generation of profits over the course of the Plan;
    • –  the Total Capital Ratio rises from 13.9% at the end of 2015 to 15.7% in the 2019 and to 16.3% in the 2020;
    • –  the fully loaded Leverage Ratio of 5.8% at the end of 2015, stands at over 6% in both 2019 and 2020;
    • –  the Net Stable Funding Ratio and Liquidity Coverage Ratio confirmed >100
    • –  MREL >15% in 2019 and 2020
    • –  the Texas ratio, at approximately 112% at the end of 2015, is expected to fall to 92% in 2019 and to 84% in 2020
  •   A strong Dividend policy
    • –  payout >40% of profit each year
    • –  dividend per share increasing constantly
  •   Impact of the Plan on the income statement to 30th June 2016
    Most5 of the one-off non-recurring impacts of the new Organisational Baseline and of the 2019-2020 Business Plan will be recognised in the income statement for the end of June 2016 which will therefore close with a loss. A dividend is nevertheless planned also for 2016, at least in line with that for 2015, given that the CET1 ratio remains well above SREP requirement.
  •   As a consequence of these actions, balanced and distributed over all components, profit for 2019 will be approximately €730 million with an ROTE of 9.4%, while profit for 2020 should stand at over €870 million with an ROTE of 10.6% 5 The expenses relating to the Single Bank operation, for a total of approx. €43M, will be booked as follows: €5M in 2Q2016 and the remaining amount in 2H2016

2

The importance of these results, which show growth of profitability and consolidation of capital strength, becomes even more important considering the economic scenario used for the plan period which forecasts negative market interest rates until 2019 and very moderate economic growth due in part also to the most recent developments

***

Bergamo, 27th June 2016 – In a meeting held today the Supervisory Board of UBI Banca approved the Group’s Business Plan proposed by the Management Board containing strategic guidelines and economic, financial and capital objectives for the period 2015-2019/2020.

The new Business Plan involves the adoption of a simpler and more efficient “Single Bank” baseline operating structure, a one-off re-absorption of the shortfall with a consequent increase in coverage for non performing exposures, a revision of the commercial range of products and services based on the new post- crisis fundamental needs of individual customers and a greater ability to recognise changes in industrial sectors and in the virtual supply chains in which firms operate.

***
1. Simplification of the Group’s baseline organisational structure

a) The Single Bank operation: in order to achieve the strategic objectives of a further simplification of the decision-making and management processes within the Group and significant savings on costs, the Supervisory Board of UBI Banca and the Boards of Directors of the Network Banks passed resolutions for the merger by incorporation of Banca Popolare di Bergamo, Banco di Brescia, Banca Popolare Commercio e Industria, Banca Regionale Europea, Banca Popolare di Ancona, Banca Carime and Banca di Valle Camonica into UBI Banca.

In order to make this merger possible, UBI Banca will proceed to the purchase of stakes held by minority shareholders in the Network Banks – to be completed primarily by means of the exchange of the shares they hold with newly issued UBI Banca shares – and in particular, within end 2016, of those minority stakes held by the Fondazione Cassa di Risparmio di Cuneo in Banca Regionale Europea and by the Fondazione Banca del Monte di Lombardia in Banca Popolare Commercio e Industria (see the press release attached on this subject).

The purchase of all the minority stakes, including the marginal stakes, will involve the issue of a maximum of €75.8 million shares with a maximum dilution of UBI Banca’s share capital of 7.8% against a more than proportional recovery in profitability. The benefit in terms of CET1 fully loaded ratio is estimated at approximately 30 basis points.

The Single Bank will allow optimisation of the operating structure, enabling the freeing up of approximately 600 staff and the closure of approximately 130 points of sale. The gross benefits in terms of operating costs fully phased-in are estimated at approximately €80 million – added to by the tax benefits on the transfer of intragroup dividends – against one-off project expenses (redundancy fund and other project costs) of approximately €198 million.

The corporate use of brands will cease, with recognition of €40 million of net impairment losses (approx. €60 million gross). The brands will continue to be used in an opportunistic way on the Network.

The operation is subject to the necessary authorisations and is expected to be fully completed, inclusive of IT migrations, within the first half of 2017.

3

b) The increase in loan provisions

The Business Plan confirms the high quality of the loan portfolio as a distinguishing feature of the Group; this portfolio shows a low risk performing loan component, one of the lowest non-performing exposures component, high levels of collateralisation and low loan to value ratios and, as borne out by the AQR, adequate granting, management and classification processes.

One of the strategic factors in the Group’s 2019/2020 Business Plan is the objective to reduce the ratio of net non-performing exposures to tangible equity (the “Texas ratio”), bringing it down to below 100%, in line with European best practices which consider a value lower than that threshold to be an indicator of solidity. In consideration of recent regulatory provisions, still at the assessment stage, designed to speed up the recovery of non-performing exposures, in order to achieve that result the Group has decided to adopt an even more prudential approach in its management of problem loans, by increasing coverage with partial re-absorption of the provision shortfall (€850 million1), already deducted from the fully loaded CET1.

This initiative, which reduces the amount of net non-performing exposures, makes it possible to bring the Texas ratio down to close to 100% already in 2016 and makes further reductions possible during the course of Plan (84% expected in 2020).

As concerns coverage levels, the higher impairment losses recognised determined in this manner represent an increase, on figures as at 31st March 2016, in coverage for non-performing exposures, inclusive of write-offs, from 37.8% to 43.3% and for bad loans in particular from 52.6% to 58%.

Re-absorption of the shortfall involves a tax effect which will have a positive impact on the CET1, generating a benefit estimated at approximately 40 additional basis points6.

Finally the strong reduction in new inflows of NPEs which has now been in progress for three years and which was confirmed again in the first quarter of 2016 (40% year-on-year) represents a strong enabling factor for the reduction in gross outstanding loans starting from the current year.

***

2. The 2019/2020 Business Plan Introduction

The business plan projections have been developed on the basis of a prudent economic scenario, which involves predominantly negative interest rates over the course of the plan and modest growth in GDP, affected by both a lower contribution from population trends and by recent political events. Account was also taken of the regulatory context, again more complex and developing, which requires increased rigour in terms of capital, liquidity and investments in staff and IT.

Finally, the economic crisis and strong progress in technology have changed individual and business customer need priorities structurally, and these are still not yet satisfied by the current range of products and services provided by banks.

6 Seen that all the extraordinary items relating to the new organisational baseline of the business plan and the Plan itself will be recognised in 2016 accounts, the year 2016 will end in a loss; it will therefore not be possible to include the tax benefit resulting from the use of the shortfall in the CET1 in 2016, but this will represent a positive component when profits are earned from 2017 onwards.

The Business Plan reference scenario

2015 2016 2017 2018 2019 2020

GDP (year on year change) 0.6% 0.9% ~1% ~1% ~1% ~1%

3 months EURIBOR (yearly average) 0.0% -0.3% -0.3% -0.3% -0.1% 0.3%

4

The 2019/2020 Business Plan

The Business Plan estimates growth in net profit to approximately €730 million in 2019 and to over €870 million in 2020. The value creation objective will bring ROTE, net of non-recurring items, up from 2.4% in 2015 (net of non recurring items) to 9.4% in 2019 and to 10.6% in 2020.

As part of the forecast growth in profits, the Business Plan includes a dividend distribution with a payout constantly greater than 40% of profit each year and a dividend per share that grows constantly during the whole of the business plan period.
The growth in profits forecast over the course of the Plan is enabled by all the main components of the income statement (revenues, expenses and credit) and is based on the following cornerstones:

(i) Development of the commercial approach by customer segment

Segment reporting has identified areas with potential for significant improvement in the “Persons and Households” sector in particular where the Group has a particularly large number of customers (2.7 million), in the “Business” segment where UBI has approximately 300,000 clients and in the “Affluent and Private Banking” areas (approx. 500,000 customers) where consolidation and development will bring substantial growth.

Under the plan, the Product Companies will play the role of excellence centres at the service of the customer segment development.

  1. a)  The “Persons and Families” segment: the crisis has brought out new needs which have intensified during the years of the recession, highlighting gaps in the available range of products and services in terms, amongst other things, of pension and health cover.The Group has therefore divided customers into additional segments with the purpose of serving demands that arise during the various stages of the life-cycle with a targeted, specialist and simplified product range (pension, family planning, digitalised loans, mortgages, personal loans, insurance wrappers, etc.), with a one-stop shop perspective in order to increase funding and indirect funding in particular, to reinforce the Group’s positioning in terms of loans and to enhance customer loyalty.

    The Group will leverage on new technologies (big data and advanced analytics) in order to ensure accurate commercial propositions: for example, in the first 5 months of 2016, the application of these technologies has determined a more correct allocation of approx. 15,000 customers out of the “Persons and Families” segment and into the “Affluent” segment.

    Finally, simplification of customer relationships is planned by means of digital processes and increased contact time as a result of integrated multi-channel services (approximately €20 million have already been invested in digital innovation and further €60 million investments are planned over the course of the Plan), which already allow profitability per customer that is 78% higher than that for “non-multichannel” customers.

  2. b)  The “Affluent & Private Banking” segment groups together customers looking for higher returns, but at the same time seeking refuge in the more solid banks.The Group has a high potential for development and growth here enabled by a significant stock of funding in the form of bonds issued by the bank which, also in view of the recent bail-in regulations, may be progressively converted into investment and insurance products, leveraging on UBI Pramerica’s excellence, on a greater range of investment products (inclusive of an evolved advisory service) and on innovative solutions (succession plans, welfare plans, insurance wrappers, etc.).

5

(ii)

c)

Opportunities will also be grasped, relating to the “flight to quality” phenomenon, which has already brought substantial inflows of deposits to the Group. The customer service structure will be reinforced with the planned recruitment of new private bankers (who will join the network of approximately 300 specialists already working in the Group) and also through the IW Bank Private Investments platform (which will benefit from approximately 200 new advisors over the course of the Plan in addition to the over 800 already in operation).

The “Businesses” segment.

The development of relationships with business clients, previously based on the mere negotiation of terms and conditions, requires the Bank to provide staff with a full knowledge of the sectors to which business clients belong and an assessment of individual businesses not only on the basis of the form of company, but also in terms of the virtual supply chain in which they operate (approximately 300 virtual supply chains have been identified in the system, with an average of 100 firms in each chain).

UBI Banca has a substantial Business client base (over 300,000), over 40% of which are low risk and have high potential for an increase in the share of wallet.

The Group aims at the following:

  • –  a strengthening of the relationship with clients in local markets, which already generate positivevalue for the Bank (around 3,000 businesses have already been identified on which to launch a

    new commercial proposition)

  • –  leveraging on long-standing relationships in local markets, the specialisation of the corporatedivision with a sector/virtual supply chain specialist approach.
    To achieve this,
    ‣ priority sectors have already been identified on which to focus commercial efforts
    ‣ industry specialist training has been commenced
    ‣ investments have already been planned for dedicated tools to support the virtual supply chains (reverse factoring and IT)
  • –  to provide the necessary support to businesses in their growth abroad and internationalisation
  • –  making use of expertise already present in the Group, to become the reference bank on evolved services for medium to small-size businesses, seen that the Group already has good positioning on medium-size clients (the Group’s market share for M&A transactions for medium to large- size companies is 10% and the Group is the fourth largest player in Italy in terms of volumesand number of transactions on the corporate lending and structured finance market).

    The Group intends to maintain a prudent risk profile over the course of the Plan, with a percentage of low risk performing loans over total performing loans higher than 75%.

    The new distribution model

    Implementation of the 2019/2020 Business Plan includes development of the Group’s distribution model in the direction of an integrated multi-channel organisation (80% of which completed by the end of 2018), which on the one hand will allow customers to access the bank continuously and operate without distinction on all the available channels, and on the other hand it will allow the bank to reach customers with targeted commercial proposals.

    Simplification of the branch network is planned as a consequence, enabled initially by the transition to a Single Bank: approx. 280 points of sale will be closed over the course of the plan (of which 130 in relation to the Single Bank operation), with a decrease in the number of network bank branches from 1,529 at the end of 2015 to 1,250 at the end of 2019.

6

Over 40% of the branch network will also be refurbished with a strong drive towards cashless branches (350 of the 500 refurbished) and a consequent freeing up of commercial time; and a new branch concept will also be introduced.

(iii) Trends in volumes of business

The balance sheet

CAGR CAGR Figures in €B 2015 2019 2020 15-19 15-20

Net loans to customers 84.6 88.9 92.0 1.3% 1.7%

of which performing loans 74.9 81.7 85.1 2.2% 2.6%

of which non performing exposures 9.7 7.2 6.9 -7.0% -6.5%

Direct funding from customers 72.5 65.3 64.1 -2.6% -2.5%

Indirect funding from customers 79.5 100.4 107.9 6.0% 6.3%

of which assets under custody 31.0 28.1 28.8 -2.4% -1.5%

of which assets under management and
insurance products 48.6 72.3 79.1 10.4% 10.3%

Total funding (direct + indirect) 152.1 165.6 172.0 2.2% 2.5%

Institutional funding (excl. CCG) 12.9 23.2 25.6 15.8% 14.7%

Proprietary securities portfolio ~19 ~16 ~13

The new commercial approach will allow the following moderate growth in volumes of business:

  • –  growth in net loans from €84.6 billion in 2015 to approximately €89 billion in 2019 and approximately €92 billion in 2020 with average annual growth rates close to forecast growth in GDP;
  • –  in terms of financing of growth, this will be supported by the partial replacement of retail bond funding with wholesale funding and recourse to TLTRO, which in 2016 will reach €12.5 billion7 and will then fall to €8.5 billion in 2020. Wholesale funding8 will rise over the course of the Plan from €12.9 billion at the end of 2015 to approximately €26 billion at the end of 2020, partly with a view to the progressive repayment of TLTROs;
  • –  in order to guarantee the availability of additional liquidity over the whole course of the Plan, unencumbered eligible assets will always be greater than €11 billion;
  • –  total funding from customers (direct and indirect) is expected to increase from €152.1 billion at the end of 2015 to approx. €166 billion in 2019 and €172 billion in 2020. Within the item, assets under management and insurance funding are expected to increase significantly from €48.6 billion in 2015 to approximately €72 billion in 2019 and approximately €79 billion in 2020, enabled as follows: from the partial transformation of direct funding (bank bonds) into assets under management, also with a view to protecting customers consistent with the new bail-in rules;

     by the conversion of assets under custody into managed assets;

    7 With value date 29 June 2016, the Group has repaid €8,1 billion of TLTRO1, replacing it with €10.1 billion of TLTRO2.
    8 Excluding Cassa di Compensazione e Garanzia.

7

  •   by an increase in distribution capacity in the “Affluent & Private Banking” segment as a result, amongst other things, of the recruitment of new private bankers in addition to the 300 already in service;
  •   by leveraging on the IW Bank Private Investments distribution network which will be reinforced (+200 financial advisors over the course of the plan);
  •   by focusing on the insurance/pension component in the “Persons and Families” and “Affluent and Private Banking” segments;
  •   by the use of new technologies (big data and advanced analytics) to determine a targeted range of products and services.finally, the Group’s proprietary securities portfolio will be further reduced in parallel with growth in lending and it will be furthered diversified, falling from €19 billion at the end of 2015 to approximately €13 billion at the end of 2020, with the proportion of Italian government securities falling from approximately 95% in 2015 to around 46% at the end of the Business Plan.

    Trends for the income statement

(iv)

The income statement

CAGR CAGR Figures in €M 2015 2019 2020 15-19 15-20

Operating income 3,371 3,633 3,844 1.9% 2.7%

of which Net interest margin 1,631 1,801 1,886 2.5% 2.9%

of which Net fees and commissions 1,300 1,553 1,662 4.5% 5.0%

Operating expenses* (2,277) (1,967) (1,982) -3.6% -2.7%

of which Staff costs (1,392) (1,181) (1,207) -4.0% -2.8%

of which other administrative expenses**

(628) (559) (550) -2.9% -2.6%

Net operating income 1,094 1,665 1,862 11.1% 11.2%

Net impairment losses on loans (803) (484) (460) -11.9% -10.5%

Net Profit 117 732 874 58.2% 49.6%

Cost/income 68% 54% 52%

Cost of credit 0.95% ~0.54% ~0.50%

*Inclusive of redundancy expenses, net impairment losses on property, ordinary and extraordinary contributions to Resolution Fund and Deposit Guarantee Scheme.
**Excluding ordinary and extraordinary contributions to the Resolution Fund.

The increase in Group profitability will be achieved through the contribution of three income statement components:

  • –  growth in operating income is expected, both as a result of a decrease in the cost of funding, (including the contribution of the TLTRO) which will have a favourable impact on net interest income, but also due to the effect of the contribution from fees and commissions in relation to growth in indirect funding;
  • –  as a result, amongst other things, of the transition to a Single Bank, operating expenses are forecast to further reduce to below €2 billion at the end of the plan, notwithstanding the inclusion of a strong investment programme amounting to approximately €540 million, 72% of which will support the generation of revenues (integrated multi-channel services, new platforms for corporate clients and tools for private bankers, refurbishment of approximately 500 branches, etc.).

8

In detail:

a) staff costs are expected to fall constantly to reach a level of approx. €1.2 billion at the end of the Plan. Strong generation turnover is planned with approximately 2,750 staff leaving9, of which around 600 as part of the Single Bank project, and approximately 1,100 new recruits to ensure an influx of new expertise to support the evolving commercial approach;

staff costs also include important action to enhance and develop human resources including, but not only, a drive on training (almost half a million man/days are planned over the course of the Plan), an increase in flexible working already successfully experimented in recent years (smartworking and work-life balance measures) and an increase in variable remuneration in relation to the increase in the Group’s profitability;

b) other administrative expenses, also expected to decrease during the course of the Plan, will benefit from savings connected with the Single Bank project, quantifiable in terms of a decrease by around €30 million per year. In addition to this, among other, savings will be made above all from the optimisation of operating processes and the renegotiation of supply contracts, which will offset natural growth in costs over the course of the Plan.

The combined effect of growth in the revenues and reduced costs is expected to produce an improvement in the cost/income ratio from around 68% in 2015 to approximately 54% in 2019 and to 52% in 2020.

– credit quality and loan losses

The Group has high credit quality which will be further enhanced over the course of the Plan as a result of:

  1. a)  a focus on the organisational structure, assisted also by the Single Bank project, with a further improvement in credit recovery capacities:
    • –  with regard to bad loans, centralised management already in place since 2009 with over130 staff is confirmed
    • –  with regard to the other problem loans, organisational changes are planned with theintroduction of a problem loan account manager reporting directly to the Chief Lending

      Officer with over 200 staff inclusive of the central department and network resources

  2. b)  the reinforcement of monitoring tools with the introduction of evolved behaviouralinformation (e.g. big data)
  3. c)  the creation of a ReoCo to support the value of real estate collateral.

This action, together with the reduction in new inflows of non-performing exposures now in progress for three years in the Group, will lead to an improvement in the already historically high level of credit quality to allow the following to be achieved during the Plan period:

  • –  a reduction in gross non-performing exposures from €13.4 billion in 2015 to approximately €11 billion in2020, with the peak reached in 2015
  • –  a decrease in the ratio of impairment losses on loans to total loans to customers from 0.95% in 2015 toapprox. 0.50% in 2020
  • –  coverage for non-performing exposures is expected to stand at around 49% (inclusive of write-offs) in2020, up compared with approximately 43% in March 2016 (after the re-absorption of the shortfall)
  • –  a reduction in the Texas ratio from 112% in 2015 to approximately 84% in 2020.

9 Please see note 4

9

The Business Plan presents harmonious growth for the Group. The objectives of the Plan will allow sustainable profitability over time and a strengthening of capital ratios attributable primarily to growth in profits, with structural balance and risk indicators well above existing and expected regulatory requirements and the targets set by Group policies.

Structural balance and profitability indicators

2015 2019 2020

CET1 ratio (fully loaded) 11.6% 12.1% 12.8%*

Total Capital Ratio (fully loaded) 13.9% 15.7% 16.3%

Leverage ratio (fully loaded) 5.8% 6.0% 6.4%

MREL >15% >15% >15%

Net Stable Funding Ratio >100 >100 >100

Liquidity Coverage ratio >100 >100 >100

Texas ratio 112% ~92% ~84%

Return on Tangible Equity 2.4%** 9.4% 10.6%

*The estimated impacts of the new regulations (IFRS9, Default LGD, etc.) and the update of models, included in the calculation of the capital ratios, are expected to balance out with a neutral effect.
** Normalised data.

Impact of the Plan on the income statement to 30th June 2016

More than 95% 10 of the one-off non-recurring impacts of the new Organisational Baseline and of the 2019- 2020 Business Plan, as shown in the table below, will be recognised in the income statement for the end of June 2016, which will therefore close with a loss. A dividend is nevertheless planned also for 2016, at least in line with that for 2015, given that the CET1 ratio remained well above SREP requirement.

Figures in €M

gross impact

fiscal impact

net impact

Increase in coverage of NPEs through reabsorption of shortfall

Contribution to the solidarity fund for the staff exits over the Business Plan period11

Brands impairment
Single Bank Project (excluding staff exits)

909

323

60 5

300

106

20 1.5

609

217

40 3.5

Total

1,297

427.5

869.5

Implementation of the Business Plan

The level of detail achieved in the preparation of the Business Plan for each individual customer segment made it possible to produce a “transformation plan” which involves around 40 key projects that define the individual quantitative and qualitative objectives that must be achieved and the relative timing with extreme accuracy.

The Management Board will receive progress reports on the Plan in all of its meetings in order to maintain a total focus on its implementation over the whole period involved. Periodic updates will also be provided to the market.

10 Please see note 5 11 Please see note 4

10

For further information please contact:
UBI Banca
Investor Relations – Tel. +39 035 3922217 – 02 77814931
Media Relations – Tel. +39 02 77814213 – 02 77814932
e-mail: investor.relations@ubibanca.it; media.relations@ubibanca.it Copy of this press release is available on the website www.ubibanca.it

11

THE UBI GROUP APPROVES THE “SINGLE BANK” PROJECT

Bergamo, 27th June 2016 – The Supervisory Board of UBI Banca S.p.A. (“UBI Banca”), which met today, has approved the “Single Bank” Project (the “Operation”), which involves the integration into the Parent, UBI Banca, of the following network banks (the “Network Banks”): Banca Popolare di Bergamo S.p.A., Banco di Brescia San Paolo CAB S.p.A., Banca Popolare Commercio e Industria S.p.A., Banca Regionale Europea S.p.A., Banca Popolare di Ancona S.p.A., Banca Carime S.p.A., Banca di Valle Camonica S.p.A., to be achieved through the merger by incorporation of these companies into the Parent. A similar resolution has also been approved by the competent bodies of the Network Banks.

Purposes of the Operation

The Operation is designed to achieve a further simplification of the decision-making and operational processes in the Group and to achieve significant savings on costs.

Procedures, terms and timing of the Operation

Today the Supervisory Board of UBI Banca approved the merger project (the “Project”) for the purposes, amongst other things, of submitting an application for authorisation of the Operation to the competent supervisory authorities.

Following authorisation from the supervisory authority, the procedures for the Operation will resume in the last quarter of 2016 with the approval by the competent governing bodies of a report to illustrate the Project and other documents required by the regulations in force to be submitted, with the relative proposal of a resolution, to the shareholders’ meeting.

UBI Banca will make prompt disclosures to the market on those activities as well as providing further information required by the legislation and regulations in force. It is

envisaged that the overall procedure for the Operation will be completed by the end of the first half of 2017.

The Project that will be submitted to the supervisory authority states that, on completion of the Operation, the share capital of UBI Banca will have been increased by a maximum total of €189,444,377.50, by means of the issue of a maximum of 75,777,751 ordinary shares with no nominal value. In detail, the Project states that the share capital of UBI Banca will have been increased as follows:

  •   by a maximum of €96,024,597.50 at the service of the merger of Banca Regionale Europea S.p.A. (“BRE”), through the issue of a maximum of 38,409,839 shares to be allotted to the shareholders of BRE, with the exception of UBI Banca, on the basis of a share exchange ratio of (i) 0.2402 UBI Banca shares for every single BRE ordinary share and (ii) 0.4377 UBI Banca shares for every single BRE savings share;
  •   by €91,078,612.50 at the service of the merger of Banca Popolare Commercio e Industria S.p.A. (“BPCI”), through the issue of 36,431,445 shares to be allotted to the shareholders of BPCI, with the exception of UBI Banca, on the basis of an exchange ratio of 0.2522 UBI Banca shares for every single BPCI share;
  •   by €1,543,650.00 at the service of the merger of Banca Popolare di Ancona S.p.A. (“BPA”), through the issue of 617,460 shares to be allotted to shareholders of BPA, with the exception of UBI Banca, on the basis of an exchange ratio of 6.0815 UBI Banca shares for every single BPA share;
  •   by €60,042.50 at the service of the merger of Banca Carime S.p.A. (“Carime”), through the issue of 24,017 shares to be allotted to shareholders of Carime, with the exception of UBI Banca, on the basis of an exchange ratio of 0.1651 UBI Banca shares for every single Carime share;
  •   by €737,475.00 at the service of the merger of Banca di Valle Camonica S.p.A. (“BVC”), through the issue of 294,990 shares to be allotted to shareholders of BVC, with the exception of UBI Banca, on the basis of an exchange ratio of 7.2848 UBI Banca shares for every single BVC share.There will be no settlements of balances in cash.

    On the other hand, the merger of Banca Popolare di Bergamo S.p.A. (“BPB”) and that of Banco di Brescia San Paolo CAB S.p.A. (“BBS”) will not produce any effect on the share capital and the number of shares of UBI Banca, because the share capital of BPB and BBS is wholly owned by UBI Banca and will therefore be fully cancelled with no share exchange.

Moreover, UBI Banca has today signed an agreement with the Fondazione Cassa di Risparmio di Cuneo (the “Fondazione Cuneo”), the holder of 24.904% of the share capital social of BRE, for the purchase of all the privileged shares not held by UBI Banca (50,473,189 BRE privileged shares) and 18,240,680 BRE savings shares owned by Fondazione Cuneo for a total price of €120,000,000, with effect on the date of signing the deed for the merger of BRE into UBI Banca (the “BRE Merger”) and subject to the signing of that deed.

As a consequence of this, no share exchange ratio regarding the privileged shares is set for the BRE Merger, while a share exchange ratio is set in relation to the savings shares.

Under that agreement – with which UBI Banca has also agreed with Fondazione Cuneo the maintenance of certain of the latter’s prerogatives relating to BRE and the local area in which it operates – the Fondazione Cuneo has agreed to vote in favour of the BRE Merger both in the BRE’s Extraordinary Shareholders’ Meeting and in the special shareholders’ meetings for the privileged and savings shareholders of BRE, subject to the circumstance that the General Council of Fondazione Cuneo votes in favour of that merger.

The share exchange ratios have been approved, on the basis of a proposal by the Management Board, by the Supervisory Board on the basis of criteria and methodology commonly applied in relation to operations of this nature.

The holders of BRE savings shares (except for those subject to the agreement with Fondazione Cuneo mentioned above) who do not vote in favour of the proposal for the merger of BRE in UBI Banca will have the right of withdrawal (the “Right of Withdrawal”) in accordance with Art. 2437, paragraph 1, letter g) of the Italian Civil Code. The liquidation value of the shares subject to withdrawal will be calculated according to the criteria laid down in Art. 2437-ter of the Italian Civil Code and will be made available to BRE shareholders in accordance with the relative terms and conditions of the law.

The liquidation of the shares which may be subject to withdrawal will take place in accordance with Art. 2437-quater of the Italian Civil Code.

Effect of the Operation

The overall effects of the Operation, for each of the mergers, will take effect from the date indicated in the merger deed (or in the respective merger deeds), which may be the

same as or later than that on which the last of the documents are filed pursuant to article 2504-bis of the Italian Civil Code. Network bank transactions will be recognised in the financial statements of UBI Banca from the first day of the financial year in progress at the time in which the respective merger operations come into effect, in accordance with Art. 2504-bis of the Italian Civil Code. They will take effect for tax purposes on that same date.

UBI Banca shareholdings post Operation

On the basis of information available as of today, following the Operation the holders of shares accounting for more than 3% of the share capital of UBI Banca will be as follows:

  •   Fondazione Cassa di Risparmio di Cuneo: 5.90%
  •   Fondazione Banca del Monte di Lombardia: 5.20%The percentages reported above been calculated assuming that: (a) the current ownership structure of UBI Banca and the network banks does not undergo any changes before the completion of the Operation; and (b) the share capital increase takes place in terms of the maximum amounts reported above.

    Related parties

    In accordance with Art. 6 of Consob Regulation No. 17221 of 12th March 2010 (the “Consob Regulation”), it is also underlined that prudentially and in application of particularly rigorous principles of interpretation given the importance of the Operation, UBI Banca has considered Fondazione Cassa di Risparmio di Cuneo and Fondazione Banca del Monte di Lombardia who are shareholders of BRE and BPCI respectively, as related parties of UBI Banca, holders of significant interests in the aforementioned Network Banks involved in the Operation. Because those foundations are also related parties of UBI Banca, the provisions governing transactions with related parties of “greater importance” laid down in the “Regulations for transactions with related parties of UBI Banca S.p.A.” adopted in accordance with the aforementioned Consob regulation apply to the Operation.

    On the basis of those regulations, the Related and Connected Parties Committee of UBI Banca, within their duties, seen the unitary nature of the operation, also to the purpose of allowing the UBI Group to achieve significant synergies as indicated by management, has expressed opinion in favour of the Operation and, in particular, with

regard to UBI Banca’s interest in implementing the merger by incorporation into UBI Banca of BRE and BPCI and in purchasing the privileged shares and the saving shares from Fondazione CRC in the terms described above, and on the substantial fairness and advantageous nature the same.

UBI Banca will disclose an information document to the public on the transactions of “greater significance” with related parties pursuant to the aforementioned Consob Regulation, within seven days following the convening of the Shareholders’ Meeting to approve the Terms. That opinion was issued by the Committee also in accordance with supervisory provisions concerning related-party transactions pursuant to Bank of Italy Circular No. 263 of 27th December 2006.

******
UBI Banca has been assisted by Morgan Stanley as its financial advisor.

The Related and Connected Parties Committee of UBI Banca was assisted by Citigroup Global Market Limited as an independent financial advisor.

For further information please contact:

UBI Banca
Investor Relations – Tel. +39 035 3922217 – 02 77814931
Media Relations – Tel. +39 02 77814213 – 02 77814932
e-mail: investor.relations@ubibanca.it; media.relations@ubibanca.it Copy of this press release is available on the website www.ubibanca.it

Franco Gussalli Beretta defends the family-run gunmaking company

in Armi/Economia/ENGLISH/Manifatturiero by
Franco Gussalli Beretta
(DAL FINANCIAL TIMES) Telephoning the Lombardy headquarters of Beretta, the world’s oldest gun manufacturer, I am blasted with the familiar first bars of “Take My Breath Away” by Berlin, the theme song from the film Top Gun.

“My father chose it a long time ago and we have never changed it,” says Franco Gussalli Beretta, 51, when we meet at his penthouse apartment in a fortress-like palazzo in Brescia, near Milan. As president of Fabbrica d’Armi Pietro Beretta, which has been doing business since the 1500s, Beretta perhaps knows something about deferring to the wisdom of his forefathers.

In fairness, Top Gun is fitting, given that since 1985 the company has had the lucrative privilege of supplying the US military with its standard issue side arm. Beretta Holding, the umbrella company, which includes accessory lines and other arms brands such as Benelli, makes about 2,500 guns a day, bringing in €623m in revenue in 2014. It employs 3,000 people worldwide.

The ritzy apartment, where Beretta lives with his wife, Umberta, is a showcase for both big game trophies, including a zebra hide in the hall, and contemporary art, often with references to the family business. We sit on striped sofas, facing a drawing of a pistol by Andy Warhol.

Beretta, a bit of a dandy in a chequered, bright-blue suit with a gaucho-style belt, recalls the family’s history furnishing Europe’s warring armies with guns and ammunition.

The company can trace its origins to 1526, when Master Bartolomeo Beretta received payment of 296 ducats for 185 arquebus barrels from the Doge of Venice, a musket so heavy it had to be propped up with supports. When Napoleon occupied Venice in 1797 the family helped supply his arsenals, and when he was defeated in 1815, Austria provided a new market. “The history of Beretta has followed the history of the world, really,” he says.

It was Beretta’s father, Ugo, who made the “great leap” of entering the US market in 1977, securing the contract that would make the Model 92 one of the most widely produced guns in history. Ugo also transformed the company into a lifestyle brand, selling hunting attire and binoculars, a far-sighted move in the 1980s.

Beretta and his brother Pietro began managing the business about 15 years ago, although their father stood down as president only last year. They have since expanded into wine and high-end hunting lodges, selling a range of products from spaniel-head bottle stoppers to safari skirts. Their London boutique is in Jermyn Street, but there is also a Harrods concession, next to Shoe Heaven on the fifth floor of the department store. “He goes there and I go to Shoe Heaven,” says Umberta.

The couple married in 1994. Their backgrounds are well matched. Umberta, an enthusiastic contemporary art collector, was educated in Switzerland, Rome and London, but her family factory is in the next valley and at one time made swords.

Beretta was first taught to shoot aged 15, by his great-uncle Carlo. He studied political science in Urbino, before doing military service with the Carabinieri police, where he says he acquitted himself “respectably” during firearms training with the state-issued Beretta.

He prefers clay pigeon shooting and target practice to hunting, and rarely accepts the frequent invitations he receives to shoots. “I’m more of a sailor than a hunter.” His third-floor bedroom, wood-panelled and resembling a ship’s cabin, is testament to this passion, filled with pictures and models of boats, mostly gifts.

The Beretta family own the entire 1940s palazzo in the centre of Brescia, built by the same architect in the same grey stone as their home next to the factory in Gardone, 20km away. As a boy, Beretta dreamt of having the top-storey apartment, with views over the city’s cathedral and castle, and was given it when he married.

After the birth in 1997 of their son Carlo, now 19 and a student in Milan, the couple acquired the apartment below and knocked them together to create “an inspired combination” of the homes that he and Umberta grew up in, Beretta says. “We took the architect to see both our parents’ houses.” The columned staircase is a tribute to the Siena yellow marble staircase at Gardone. The dining room, panelled in dark wood, with four nudes by the British painter Lucian Freud, was inspired by Umberta’s family house.

Touring the apartment with Umberta is like visiting a mini-Saatchi Gallery. A negative print of a $100 bill by the photographer David LaChapelle adorns the staircase. A Tracey Emin light installation reading “Be Brave” was an 18th-birthday present to Carlo, who is in turn immortalised listening to his iPod in a life-size, white resin sculpture by the Italian artist Fabio Pietrantonio. A photograph by Terry O’Neill of the actress Raquel Welch, wearing little more than a gun and holster, sits opposite a portrait of the family by the fashion photographer Miles Aldridge. A laughing Beretta is shown loading a rifle surrounded by cream cake, while Umberta drinks champagne.

Beretta prizes the master craftsmen who engrave his customised rifles “just as much” as the artists that hang in his home. Their work can be equally costly, too. A pair of engraved hunting rifles can fetch €200,000 to €300,000. One pair, in seven different shades of gold, a gift for Ugo Beretta’s 70th birthday, would cost €1m were they replicated.

The sitting room, with a wood fire, is more hunting lodge than art gallery, with ivory tusk lamps and a corner bar. On one shelf is the entire collection of Bond films. “In the early Ian Fleming books, Bond has a Beretta,” he points out, although these days 007 prefers a Walther PPK.

Berettas have appeared in numerous films, but have also attracted negative attention. In 2014 Jaylen Ray Fryberg, 15, used his father’s Beretta pistol to shoot and kill four high school students in Marysville, Washington. Jiverly Wong, 41, killed 13 people in Binghamton, New York, with two Beretta handguns in 2009. And Terry Michael Ratzmann used a Beretta handgun to kill seven members of a church congregation before committing suicide in 2005.

Yet according to Beretta, arms manufacturers bear no responsibility for mass shootings like these. “[Our] philosophy”, he says, is that “it is up to every population in a democratic country to decide what it thinks is right in its territory”. He adds: “We just follow the rules.” In Europe there are countries with a higher density of guns than the US, such as Finland and Switzerland, “and nothing happens”, he argues. (Reliable data on gun ownership is scant, but the Small Arms Survey of 2007 calculated that the number of guns per 100 residents was close to 90 in the US, almost double that in Switzerland and Finland.)

Beretta insists that shootings are a “psychological problem”, citing President Barack Obama. “That’s freedom. It’s understandable that a weapon can be dangerous in the hands of someone who isn’t from the right culture. But in the hands of someone who is familiar with guns and does not have mental problems, it’s fine.”

Umberta chips in. “Those kids are all on pharmaceutical drugs. Maybe if I were American I would be more worried about that.” Beretta is vehemently opposed to further gun control in the US, saying it would violate the rights of those living in isolated places to defend themselves from “criminals” or even — strangely — “jaguars and bears”.

In April Beretta opened a new factory in Tennessee, which will allow the company to manufacture “handbag guns” and assault weapons that cannot legally be imported into the US. The previous factory in Maryland was “in the wrong place”, Beretta says. “The south is the natural home of the gun lobby and the huntsman.”

(ARTICOLO ORIGINALE: FINANCIAL TIMES)

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