Interim financial report as at and for the half year ended 30 th June 2010

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Interim

financial report

as at and for the

half year ended

30

th

_{June 2010}

Translation from the Italian original

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Joint stock co-operative company Registered office: Bergamo, Piazza Vittorio Veneto 8 Operating offices: Bergamo, Piazza Vittorio Veneto 8; Brescia, Via Cefalonia 74 Member of the Interbank Deposit Protection Fund and the National Guarantee Fund Tax Code, VAT No. and Bergamo Company Registration No. 03053920165 ABI (Italian Banking Association) 3111.2 Register of Banks No. 5678 Register of banking groups No. 3111.2 Parent of the Unione di Banche Italiane Banking Group Share capital as at 30th_{June 2010: euro 1.597.864.755,00 fully paid up}

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UBI Banca: company officers

Honorary Chairman Giuseppe Vigorelli

Supervisory Board

Chairman Corrado Faissola

Senior Deputy Chairman Giuseppe Calvi

Deputy Chairman Alberto Folonari

Deputy Chairman Mario Mazzoleni

Battista Albertani Giovanni Bazoli Luigi Bellini Mario Cattaneo Silvia Fidanza Enio Fontana Carlo Garavaglia Alfredo Gusmini

Pietro Gussalli Beretta

Giuseppe Lucchini Italo Lucchini Federico Manzoni Toti S. Musumeci Sergio Orlandi Alessandro Pedersoli Giorgio Perolari Sergio Pivato Roberto Sestini Giuseppe Zannoni Management Board

Chairman Emilio Zanetti

Deputy Chairman Flavio Pizzini

Chief Executive Officer Victor Massiah

Giampiero Auletta Armenise

Giuseppe Camadini

Mario Cera

Giorgio Frigeri

Gian Luigi Gola (*)

Guido Lupini

Andrea Moltrasio

Franco Polotti

General Management

General Manager Riccardo Sora

Joint General Manager Graziano Caldiani

Deputy General Manager Rossella Leidi

Deputy General Manager Giovanni Lupinacci

Deputy General Manager Ettore Medda

Deputy General Manager Pierangelo Rigamonti

Senior Officer Responsible in accordance with

Art. 154 bis of the Consolidated Finance Act Elisabetta Stegher

Independent auditors KPMG Spa

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UBI Banca Group:

Principal figures and performance

indicators

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1 The indicators have been calculated using the reclassified figures contained in the section “Reclassified consolidated financial

statements, reclassified income statement net of the most significant non-recurring items and reconciliation schedules” in the

Management Report on the condensed interim consolidated financial statements as at and for the half year ended 30th June 2010.

Information on the share is given in the section “Information concerning share capital, the shares, dividends paid and earnings per share” in that same report.

(*) Part time employees have been calculated within total average personnel numbers according to convention on a 50% basis.

30.6.2010 31.12.2009 30.6.2009

STRUCTURAL INDICATORS

Net loans to customers /total assets 75,8% 80,1% 79,5%

Direct funding from customers /total liabilities 78,2% 79,5% 78,9%

Net loans to customers /direct funding from cus tom ers 96,9% 100,8% 100,7%

Equity (including profit for the period)/total liabilities 8,3% 9,3% 9,1%

Assets under management / indirect funding from private customers 54,2% 53,2% 53,3%

Leverage ratio (total assets -goodwill-other intangible assets)/(equity+m inority interests-intangible assets) 20,2 17,8 18,2

PROFIT INDICATORS

ROE (Profit for the period / equity excluding profit for the period) annualis ed 1,9% 2,4% 2,3%

ROA (Profit for the period / total ass ets ) annualised 0,15% 0,22% 0,21%

The cost/incom e ratio (operating expenses / operating income) 72,8% 64,4% 62,1%

Personnel expenses / operating incom e 43,4% 37,5% 37,2%

Net im pairment los ses on loans / net loans to cus tomers (cost of credit) annualised 0,64% 0,88% 0,82%

Net interest income/operating income 61,0% 61,5% 63,4%

Net comm iss ion incom e / operating incom e 35,3% 31,1% 29,2%

Net res ult on financial activities / operating income -0,3% 3,2% 3,3%

RISK INDICATORS

Net non performing loans / net loans to customers 1,62% 1,36% 1,14%

Net im pairment los ses on non performing loans / gros s non performing loans (coverage for non

performing loans) 50,23% 51,57% 51,70%

Net non performing + net impaired loans / net loans to customers 3,56% 3,24% 2,68%

Net im pairment los ses on non performing and impaired loans / gross non perform ing loans+impaired

loans (coverage) 35,39% 35,93% 35,34%

Net non performing loans / equity excluding profit for the period 14,96% 11,96% 10,05%

CAPITAL RATIOS Basel 2 standard

Tier 1 ratio (tier 1 capital / total risk weighted as sets) 7,86% 7,96% 7,76%

Core tier I ratio (tier 1 capital before specific deductions net of preference s hares/total ris k weighted as sets) 7,50% 7,59% 7,38% Core tier I ratio after specific deductions to tier 1 capital

(tier 1 capital net of preference shares/total ris k weighted assets) 7,34% 7,43% 7,24%

Total capital ratio (s upervis ory capital+tier 3/total ris k weighted assets) 11,86% 11,91% 11,63%

Supervisory capital (in thousands of euro) 10.300.489 10.202.555 10.118.458

of which: Tier one capital after the application of prudential filters and specific deductions 6.831.999 6.816.876 6.750.370

Ris k weighted as sets 86.869.263 85.677.000 87.023.850

INCOME STATEMENT, STATEMENT OF FINANCIAL POSITION FIGURES (in thousands of euro), OPERATING AND STRUCTURAL DATA (num bers)

Profit 102.074 270.099 125.937

Normalis ed profit 63.501 173.380 130.423

Comprehensive income (item 140.) (281.838) 575.418 226.683

Operating income 1.723.010 3.906.247 2.002.192

Operating expens es (1.254.908) (2.514.347) (1.243.933)

Net loans to customers 100.157.746 98.007.252 96.830.116

of which: net non-perform ing loans 1.625.370 1.332.576 1.099.468

net impaired loans 1.935.873 1.845.073 1.494.281

Direct funding from customers 103.362.434 97.214.405 96.135.357

Indirect funding from customers 78.476.237 78.791.834 75.478.319

of which: assets under m anagem ent 42.544.703 41.924.931 40.240.522

Total funding from cus tom ers 181.838.671 176.006.239 171.613.676

Equity (excluding profit for the period) 10.867.923 11.141.149 10.942.579

Total ass ets 132.099.415 122.313.223 121.843.571

Branches in Italy 1.884 1.955 1.939

Total pers onnel at the end of period (actual employees in s ervice + workers on agency leasing contracts ) 20.260 20.285 20.926 Average total personnel (actual employees in s ervice + workers on agency leasing contracts ) (*) 19.633 20.183 20.269

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The Rating

The tables presented below summarise the ratings assigned to the Group by the international agencies, Standard & Poor’s, Moody’s and Fitch Ratings.

As part of a general analysis of Italian banks, on 23rd_{April 2010 Standard & Poor’s confirmed} its short and long term counterparty rating for UBI Banca, with a deterioration in credit quality that was less than that of the average for the sector. At the same time, the Outlook was revised from Stable to Negative in relation to a perceived decrease in the Group’s ability – in the current situation of particularly low interest rates and uncertain economic prospects for Italy in the two year period 2010-2011 – to absorb a cost of credit that is greater than expected if the fragile recovery in progress should run into difficulties.

(i) The ability to repay debt maturing in less than one year.

(A-1: best rating – D: worst rating)

(ii) With reference to debt maturing after one year, it indicates the

ability to pay interest and repay principal, together with any sensitivity to the adverse effects of changes in circumstances or economic conditions.

(AAA: best rating – D: worst rating)

(I) The ability to repay long-term debt (maturing after one year) in

local currency. By using the JDA method (Joint Default Analysis), this rating associates the financial strength rating (BFSR – Bank Financial Strength Rating) with the probability of intervention if needed by external support (shareholders, the group to which it belongs or official institutions). (Aaa: prime quality – Baa3: medium quality)

(II) The ability to repay debt in local currency maturing in the short

term (due in less than one year).

(Prime -1: highest quality – not prime: speculative grade)

(III) This rating does not relate to the ability to repay debt but

considers the bank’s intrinsic financial strength (by analysing factors such as its geographical market presence, the diversification of its activities, the financial basics) in the absence of external support. (A: best rating – E: worst rating).

(1) The capacity to repay debt in the short term (less than 13 months)

(F1: best rating – D: worst rating)

(2) The ability to meet financial commitments in the long term,

independently of the maturity of individual bonds. This rating is an indicator of the probability that an issuer will default. (AAA: best rating – D: worst rating)

(3) An assessment of a bank’s intrinsic strength (profitability, balance

sheet strength, commercial network, ability of management, operational environment and outlook), on the assumption that the bank cannot rely on external support (possible intervention by a lender of last resort, support from shareholders, etc.). (A: best rating - E: worst rating)

(4) A rating of the possibility of concrete and timely external support

(from the state or large institutional investors) if the bank finds itself in difficulty. (1: best rating – 5: worst rating)

(5) This rating gives additional information, closely linked to the

Support Rating, in that for each level of the Support Rating it identifies the minimum level which the Issuer Default Rating could reach if negative events were to occur.

STANDARD & POOR’S

Short-term Counterparty Credit Rating (i) A-1

Long-term Counterparty Credit Rating (ii) A

Outlook Negative

_{RATINGS ON ISSUES}

Senior unsecured debt A

Subordinated debt (Lower Tier 2) A-

_{Preference shares} _BBB

French Certificats de Dépôt Programme A-1

MOODY'S

Long-term debt and deposit rating (I) A1

Short-term debt and deposit rating (II) Prime-1

Bank Financial Strength Rating (BFSR) (III) C

Baseline Credit Assessment (BCA) A3

Outlook (deposit ratings) Stable

Outlook (Bank Financial Strength Rating) Negative

RATINGS ON ISSUES

Senior unsecured LT A1

Lower Tier 2 subordinated A2

Preference shares

(former BPB-CV and Banca Lombarda) Baa3

Euro Commercial Paper Programme Prime-1

French Certificats de Dépôt Programme Prime-1

Covered Bond Programme Aaa

FITCH RATINGS

Short-term Issuer Default Rating (1) F1

Long-term Issuer Default Rating (2) A+

Bank Individual Rating (3) B/C

Support Rating (4) 2

Support Rating Floor (5) BBB

Outlook for Long-term Issuer Default Rating Stable

RATINGS ON ISSUES

Senior unsecured debt A+

Lower Tier 2 subordinated A

Preference shares A-

Euro Commercial Paper Programme F1

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MANAGEMENT REPORT ON THE

CONDENSED INTERIM

CONSOLIDATED FINANCIAL

STATEMENTS AS AT AND FOR THE

HALF YEAR ENDED

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The macroeconomic scenario

The economic situation continues to be affected by factors of uncertainty, especially in advanced economies, consisting of: the effects of the temporary nature of anti-crisis expansionary policies on domestic demand, the high levels of unemployment and, more recently, the sovereign debt crisis of some countries in the euro area affecting primarily Greece, but also Portugal, Ireland and Spain1_.

In the second quarter concerns over the sustainability of public debt were reflected in strong turbulence on financial markets: share prices fell, risk premiums on corporate bonds rose and yields on government bonds issued by countries considered less risky decreased. Tensions also re-appeared on interbank markets in May connected with an increase in perceived counterparty risk due to uncertainty over the exposure of banks to some sovereign debtors. On 11th_{April the member countries of the euro area reached an initial agreement on a three} year programme of bilateral loans to Greece, to be implemented with the participation of the International Monetary Fund (FMI). When it found that it could no longer gain access to capital markets, at the end of April the Athens government officially asked for the programme to be implemented in order to be able to refinance its government debt2

.

In response to the further increase in tensions on financial markets, on 10th_{May the} European Union launched a further plan, again jointly with the IMF, involving up to a maximum of 750 billion euro, designed to guarantee the financing requirements of the other European countries with high levels of debt3_.

In order to address the problem of the risks connected with public finance, advanced economies announced a commitment during the G20 at Toronto in June to halve their deficits by 2013 and to stabilise or reduce their debt to GDP ratio by 2016. They also acknowledged the need to accelerate the process of fiscal consolidation in countries in the most serious conditions.

In this respect, on 30th_{June the European Commission made an announcement in which it} outlined the guidelines for strengthening the stability pact and for dealing with macroeconomic and competitive imbalance in the euro area. This announcement is to be followed by an official proposal for reform between next September and October4_.

At the same time, on the monetary front, the main central banks continued to support liquidity by revising the time schedules for exit strategies from non conventional intervention and by committing to maintain reference interest rates at levels very close to zero in many cases5_.

1 On 24th_{March the international credit rating agency Fitch downgraded its rating for Portugal from AA to AA– and on 9}th_{April that of}

Greece from BBB+ to BBB-. Following the third upwards revision of the Greek deficit to GDP ratio for 2009 (from 12,9% to 13,6%)

performed by Eurostat, on 22nd April Moody’s performed a first downgrade of its sovereign rating for Greece from A2 to A3. On 27th

April Standard & Poor’s reduced its sovereign long term rating for Greece from BBB+ to BB+ with a negative outlook and its rating for Portuguese government securities from A+ to A-. It also reduced the long term credit rating for Spanish debt from AA+ to AA with

a negative outlook. On 28th May Fitch also reduced its Spanish rating from AAA to AA+ with a stable outlook. In the middle of June

Moody’s made a further drastic cut in its long term rating for Greece from A3 to Ba1 and downgraded the short term rating from “Prime-1” to “not-Prime”. In July that same agency also firstly reduced its rating for Portugal from A1 to Aa2 with a stable outlook and then that for Ireland from Aa1 to Aa2 with a stable outlook.

2 The programme, which was agreed by the countries in the euro area, involves the grant of bilateral loans totalling 80 billion euro

over three years in addition to 30 billion euro granted by the IMF.

3 The financial stabilisation mechanism allows countries in the euro area to obtain a loan under conditions similar to those practiced

by the IMF in the presence of serious economic or financial difficulties, resulting from exceptional circumstances. The maximum amount in the event of need could reach 750 billion euro, consisting of 60 billion euro from the European Union, 440 billion euro

from the European Financial Stability Facility (EFSF – a special body formed on 7th June, which will obtain funds from the market by

issuing securities backed by countries in the euro area) and 250 billion euro from the IMF. This package is designed to be large enough to meet the combined refinancing requirements, should they be needed, of Spain, Portugal and Ireland over the next three years.

While it should restrict its operations to sovereign finance, the EFSF may also take indirect action to support banks in difficulty on request by a country, should the country show that its needs are also dictated by the recapitalisation of its banks.

4 The European Commission intends to introduce more stringent supervisory regulations for public accounts which include

assessments of changes in public debt and also the ex ante sanctions to be applied if deficits are not reduced sufficiently (ranging

from interest bearing deposits to cuts in structural funds). Some countries, including Italy, have been successful in their requests

for the start of excessive debt procedures and the relative fines to be subject to an assessment of trend for debt and the overall sustainability of debt and therefore including the private sector component.

5 As part of the action formulated in February to progressively reduce banking reserves and normalise conditions on monetary

markets, in June the Federal Reserve removed its term asset-backed loan facilities, which were the main measure used in previous months to support mortgage securitisation activities. In order to counter the slowdown in economic growth, in August the Federal

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Action taken to introduce reforms to prevent new financial crises from re-occurring continued during the first half. In detail:

y in May a reform to regulate the supervision of the financial system was also approved by the senate in the United States. It grants greater powers to the Federal Reserve over major financial groups of companies and provides for the creation of a financial stability council by regulatory authorities, including the Federal Reserve itself, called upon to oversee systemic risks. One of the most significant changes introduced is the “Volcker rule” which restricts the freedom of banks to invest their own funds directly in speculative activities6_;

y in Europe on the other hand, although the architecture of the new supervisory system has been identified7_{, debate over the powers to control and sanction to be granted to the newly} formed authorities is still in progress.

In the first six months of 2010 the recovery in the world economy occurred at differing degrees of intensity with the high levels of growth which continue to be seen in emerging economies, and in Asian economies in particular, accompanied by more moderate recoveries by advanced countries.

In May and June the strengthening of the dollar, fears over the business cycle in advanced countries and signs of a slowdown in supplies to China brought a halt to the increase in international raw materials prices that had been in progress for about a year with immediate effects on inflation. More specifically, the price of Brent oil which had reached almost 90 dollars per barrel in April, returned to fluctuate between 70 and 80 dollars per barrel to end the first half at 75,01 dollars per barrel (77,93 dollars at the end of 2009).

On foreign exchange markets, the consequences of the Greek crisis translated into a strong depreciation of the euro against major international currencies. After falling below 1,20 against the US currency at the beginning of June, the single European currency recovered partially to around 1,30 dollars per euro. At the same time the yen continued to strengthen against the United States currency to reach 85 yen per dollar.

Finally, in the light of the gradual recovery in the world economy, in June the People’s Bank of China announced a reform of its exchange rate policy

with the return to a fluctuating regime pegged to a basket of currencies. At the same time it restored the daily range of fluctuation of between -0,5% to +0,5% with respect to the central parity rate of the yuan against the dollar, which was suspended in 2008. However, in the weeks that followed, the hoped for appreciation of the Chinese currency against the dollar was marginal.

Reserve announced that it would reinvest amounts redeemed when mortgage backed securities matured in long term treasury securities and at the same time it confirmed its commitment to renew existing investments in treasury securities when they matured.

While in a context of the gradual removal of action no longer considered indispensible, which was started in December, the ECB

nevertheless adopted a series of measures in a meeting of 10th May to safeguard the proper functioning of the mechanisms for

implementing monetary policies and the stability of the financial system in the area. More specifically, it commenced a programme of purchasing private sector and government securities issued by the EMU to support market segments particularly hard hit by the crisis (Securities Markets Programme), taking action to neutralise the effect by means of transactions to mop up the liquidity. It also

extended its longer term refinancing operations initially until June and then until September. Finally on 1st_{July the huge twelve}

month operation performed in June 2009 (440 billion euro) came to maturity. The residual funding requirement was met with three month auctions held the day before and by means of a weekly fine tuning operation performed on the same day. As concerns the requirements for the eligibility of assets as collateral for refinancing transactions in the Eurosystem, after having decided in April to extend the minimum credit rating of BBB-/Baa3 for collateral instruments even until after the end of 2010 (with the exception of

securitised assets which must continue to have an AAA rating), limited to Greece only, on 3rd May the ECB removed all limits on the

quality of the securities eligible for use in refinancing transactions. Finally, as scheduled, at the end of June the programme for purchases of covered bonds for 61 billion euro, which had been in progress since July 2009, was terminated.

From the viewpoint of reference interest rates, in 2010 the central bank of India made its monetary policy less expansionary by

increasing its “repurchase rate” four times in March and April and twice in July from 4,75% to 5,75%, in order to keep expectations for inflation under control. Canada, on the other hand, was the first G8 country to raise its interest rates since the start of the recession, increasing them by 25 b.p. both in June and in July to 0,75%. In February 2010 the Federal Resave raised its official discount rate by 25 b.p. from 0,50% to 0,75%.

6 Should banks intend to invest more than 3% of their tier one capital in hedge funds and private equity, they may only do so by

specially separating the capital.

7 The project involves the creation of a European board to perform general prudential supervision (European Systemic Risk Board),

while the supervision of individual institutions will be the responsibility of the European System of Financial Supervisors, consisting of national supervisory agencies and of three new authorities which will supervise banks, insurance companies and financial markets respectively.

Principal end of period exchange rates

Jun-10 Dec-09 % change

Euro/Dollar 1,2234 1,4316 -14,5%

Euro/Yen 108,15 133,08 -18,7%

Euro/Yuan 8,2972 9,7726 -15,1%

Dollar/Yen 88,39 92,90 -4,9%

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The recovery of the United States economy also continued in the spring, although not so strongly, with GDP up by 2,4% (annualised) compared to the previous quarter (+3,7% in the first three months of the year and +5% in the fourth of quarter 2009). The contribution from consumption fell, affected by unfavourable market conditions, but fixed investments made a greater contribution to GDP assisted by a partial recovery of the residential component, while the performance for inventories was in the opposite direction. However, it was above all the progressive deterioration of the balance of payments which had the greatest impact, penalised by the appreciation of the dollar against the euro.

As concerns employment, the situation recorded limited progress after signals of improvement in the first few months of the year, with the unemployment rate stable at 9,5% in June and July, partly the result of decreased investment in the labour market.

After peaking at the end of 2009 (2,7%), the falling trend for inflation accelerated sharply down to 1,1% from 2% in the previous month.

As concerns the “twin deficits”, however, the negative balance of trade rose from 170,9 billion dollars to 247,5 billion dollars (+44,8%) between January and June, an increase of 76,6 billion euro, of which approximately 27 billion euro attributable to trade with OPEC countries. The federal deficit on the other hand fell by more than 18% to 616 billion dollars.

In the second quarter Japanese GDP increased by just 0,1% compared to the previous period (+1,1% in the first quarter) – being overtaken for the first time in history by China – due to the weakness of consumption and investment, only partially offset by the performance of foreign trade, which was still favourable, but slowing. Exports, primarily to the United States and the euro area, continued to drive the economy in the spring (+9,5% the quarterly increase), even if the monthly figure for June recorded a decrease for the first time in the last sixteen months. Domestic demand on the other hand has been affected mainly by the progressive reduction of the fiscal stimuli which had supported it in prior months.

After remaining unchanged in May, industrial output recorded its greatest fall in June since February 2009 (-1,5%), despite the general improvement in the climate of business confidence, summarised by the Tankan report.

In that same month the unemployment rate climbed back up to 5,3%, the highest level since August 2009, while on the prices front, the country is trying to escape from a situation of persistent deflation (-0,7% in June; -1,7% in December).

China confirmed its strong pace of growth in the second quarter, although it was not so strong as in the previous quarter, and set out to

become the second largest economy in the world. In fact GDP increased by 10,3% year-on-year after a rise of +11,9% in the first three months of the year (+11,1% the year-on-year increase between January and June). Growth during the first half benefited

from strong domestic demand: +25% for fixed investments; +18,2% retail sales of consumer goods; and industrial output also increased by 17,6%. The balance of trade made a positive contribution on aggregate of 55,3 billion dollars (+35,2% for exports and +52,7% for imports)

Actual and forecast data: industrialised countries

Percentages

2009 2010(1) 2011(1) 2009(2) Jun-10(3) 2010(1) (2) 2009(2) Jun-10(3) 2010(1) (2) 2009 2010(1) 2011(1) Dec-09 Aug-10

United States -2,6 2,8 2,5 -0,4 1,1 2,1 9,4 9,5 9,2 10,4 9,9 8,1 0-0,25 0-0,25 Japan -5,2 2,1 1,5 -1,4 -0,7 0,1 5,2 5,3 5,2 7,5 8,2 7,6 0,10 0,10 Euro Area -4,1 0,9 1,5 0,3 1,4 1,5 9,4 10,0 10,3 6,2 6,4 5,2 1,00 1,00 Italy -5,0 0,8 1,4 0,8 1,5 1,6 7,8 8,5 10,4 5,3 5,7 4,4 -Germany -4,9 1,2 1,6 0,2 0,8 1,4 7,5 7,0 7,0 3,3 4,7 4,0 -France -2,6 1,3 1,5 0,1 1,7 1,5 9,4 10,0 9,9 7,5 7,7 6,5 -Portugal -2,6 0,5 0,7 -0,9 1,1 1,6 9,6 10,8 10,9 9,4 8,1 7,5 -Ireland -7,1 -0,9 3,0 -1,7 -2,0 1,2 11,9 13,3 13,0 14,3 10,7 9,1 -Greece -2,0 -3,0 -0,5 1,3 5,2 2,9 9,5 11,0 12,3 13,6 8,2 6,3 -Spain -3,6 -0,4 0,8 -0,2 1,5 1,0 18,0 20,0 20,0 11,2 9,7 7,2 -United Kingdom -4,9 1,2 2,1 2,2 3,2 3,7 7,6 7,8 8,3 11,5 10,5 8,5 0,50 0,50

(1) Forecasts Source: Prometeia and official statistics

(2) Average annual rate

(3) The latest available information has been used, where data had not been published as at 30th June 2010.

Gross domestic product Consumer prices Unemployment Reference interest rates Public Sector Deficit (% of GDP)

Actual and forecast data: the principal emerging countries

Percentages 2009 2010(1) 2011(1) Dec-09 Aug-10 China 9,1 10,0 8,6 5,31 5,31 India 5,7 8,4 7,6 4,75 5,75 (1) Forecasts

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which brought foreign currency reserves up to 2.454,3 billion dollars, of which 843,7 billion dollars were held in United States treasury securities in June.

Inflation, which rose again to 3,1% in May, mainly as a result of the increase in food prices, stood at 2,9% in June before reaching a new peak of 3,3% in July.

In order to halt growth in lending, the People’s Bank of China raised the ratio for the compulsory reserve requirements of banks by 50 basis points in January, February and May and it now stands at 17%.

After the modest increase of +0,2% in the first quarter, estimates for the spring forecast a 1% increase in GDP over the previous period for the euro area – the largest increase since the second quarter of 2006 – thanks to strong performance by Germany (+2,2%). This growth benefited from the recovery in world demand on the one hand and from the substantial depreciation in the euro on the other, which favoured countries with high market shares outside the area. Despite a substantial improvement in the second quarter in the confidence indicator produced by the European Commission, the progressive fall in the €-coin indicator since April suggests that there will be a slowdown during the summer.

The industrial production index fell by 0,1% in June compared to May after three consecutive rises (+8,2% the year-on-year increase).

As concerns the labour market, the unemployment rate had remained stable at 10% since March (9,8% in December), while, with regard to inflation, the consumer price index, which was affected by the impact of energy products, stood at 1,4% in June (0,9% in December) and rose again to 1,7%, according to preliminary estimates for July.

The Italian economy was one of the most dynamic within the euro area with an increase in

GDP of 0,4% quarter-on-quarter both in the first and the second quarters8_{, due mainly to} higher world demand and the weak euro with a consequent increase in competitiveness for products made in Italy. Household consumption, however, stagnated in the first few months of the year, partly due to the weakness of the labour market, although new government incentives were introduced in April for the purchase of some durable goods to support it. The industrial production index (seasonally adjusted), which had been positive since February, increased on an annual basis in June by 8,2%. It summarised general growth, which recorded differing intensities in different economic sectors. The most significant improvements were seen in the machinery sector (+27,1%), favoured by incentives introduced in July 2009, and in the “electrical equipment manufacturing” sector (+22,6%), while the “manufacture of coke and oil refinery products” (+12,1%), the metallurgy (+10,3%) and the transport vehicles sectors (+8,1%) also performed particularly well.

Having remained stable at 8,6% for three months, the unemployment rate stood at 8,5% in June (8,4% in December) yet again lower than the European average (10%) due to the use of state income benefits. The use of state redundancy benefits increased between February and April, but then fell back again in June. A total of 636,1 million hours was authorised in the first half (+71,2% compared to 371,5 million hours in the same period of 2009) with increasingly greater use being made of the “extraordinary” benefits.”.

After reaching 1,6% in April and May – the highest level since the end of 2008 – Italian inflation, as measured by the harmonised consumer price index, remained stable in June at 1,5%. The figure for July rose again to 1,8%, in line with European trends.

The balance of trade deficit increased substantially during the first half to 14,2 billion euro from 4,8 billion euro in the same period the year before. This deterioration was caused mainly by the return to deficit for intermediate products and by a further increase in the energy deficit. In the context of a recovery in international trade, the increase in imports (+18,5%) exceeded that for exports (+12,6%).

As concerns public finances, at the end of May the Government approved a set of corrective measures for the next three years which should lead to a reduction in net debt, in terms of year-on-year amounts, of 12 billion euro in 2011 and approximately 25 billion euro in 2012 and 2013. The reduction is to be achieved by cuts in spending for two thirds of the decrease and on increased revenues for the remaining third, largely the result of the fight against tax evasion. This action should make it possible to bring the deficit to GDP ratio below 3%, as agreed at European level.

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United States and European yield curves shifted sharply downwards with respect to

December for maturities of longer than one year, in line with the continuation of particularly expansionary monetary policies in the two areas and the consequent postponement of expectations of a rise in interest rates. For both curves the return of a negative slope on the one to two year part reflects expectations of a slower and more fragile economic recovery following announcements of plans to reduce public deficits.

After a partial recovery by prices in the first quarter, the volatility of equity markets returned to higher levelsresulting in a generalised fall on all the main financial centres which coincided with the progressive deterioration of the Greek crisis and the spread of fears of contagion by other economies with large public indebtedness.

The performance of the principal stock market indices, (in local currency) at the end of June was as follows: +0,1% the Xetra Dax of Frankfurt; -6,3% the DJ Industrial of New York; -7% the Nasdaq Composite of New York; -7,6% the S&P 500 of New York; -8,7% the Topix of Tokyo; 9,2% the Ftse 100 of London; 12,5% the Cac 40 of Paris; 12,8% the Nikkei 225 of Tokyo; -16,9% the Ftse Mib of Milan.

The MSCI equity index for major emerging economies had also fallen at the end of June by 7,2%.

Shares in the financial sector contributed more than other sectors to the fall in share indices as markets started, amongst other things, to incorporate into prices both uncertainties over the impact of regulatory reforms for the banking industry and also the results of stress tests for major European banks.

0,00 0,50 1,00 1,50 2,00 2,50 3,00 3,50 4,00 4,50

5,00 United states yield curves (*)

30th June 2009 31st December 2009 30th June 2010

1-6m1y 2y 5y 10y 30y

0,00 0,50 1,00 1,50 2,00 2,50 3,00 3,50 4,00 4,50

European yield curves (*)

30th June 2009 31st December 2009 30th June 2010

1-6m1y 2y 5y 10y 30y

(*) Interbank interest

rates up to 1 year; government

securities for yields longer than one year

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As concerns assets under management, the Assogestioni figures (national association of asset management companies)9_{do not reveal any clear trend for the}_{mutual funds}_{sector, which in} the second quarter in particular was affected by the difficult economic context. Although the trend has been again negative since May, total net inflows for the first half were positive amounting to 2,5 billion euro, the aggregate result of continuing divergent performance by foreign registered funds (+12,7 billion euro) and funds registered in Italy (-10,2 billion euro) – still penalised by a less favourable tax treatment – which decreased again as a percentage of total assets under management to 46,3%. As concerns different types of funds, performance was particularly positive for bond funds (+11 billion euro) and also for flexible funds (+4,1 billion euro) and balanced funds (+2,5 billion euro), compared to appreciable reductions for monetary funds (-13,7 billion euro) and more modest decreases for hedge funds (-0,8 billion euro) and for equity funds (-0,6 billion euro).

Assets under management had fallen in June compared to March (from 450,9 billion euro to 441,3 billion euro), partly as a result of the negative performance by equity markets, while the change since December (435,3 billion euro) was still positive (+1,4%). The composition of the aggregate changed over the six month period with an increase in bond funds (up from 38,1% to 40,9%) and, to a lesser extent, in flexible funds (from 13,1% to 14,1%) and balanced funds (from 3,9% to 4,4%), against a reduction in the proportion of monetary funds (from 20% to 16,5%), hedge funds (from 3,7% to 3,1%) and equity funds (from 21,2% to 20,9%).

The banking system experienced a further progressive slowdown in funding from customers.

Lending business, on the other hand, although in a context of protracted weakness, is showing some signs of recovery, while the deterioration of credit quality in progress seems to be slowing.

On the basis of statistics published by the Bank of Italy10_,_{direct funding}_{(deposits of residents} and bonds) had increased year-on-year at the end of June by 5,7% (+9,2% in December, +10,9% in June 2009), the aggregate result of a sharp slowdown in the bond component (-0,1% from +11,2% in December and from +15,6% in June 2009), compared to positive performance by other types of funding (+9,9%; +7,8% in December and +7,7% in June 2009) and by repurchase agreements in particular (+49,6%).

As, on the other hand, concerns lending to private sector residents, the trend over twelve months (+2,4%), appears to be basically stable compared to March and recovering compared to December (+1,7%). With regard to the type of borrower, within the item loans to households and non financial companies, which grew overall by 1,7% (+0,5% in December 2009), the negative trend for businesses continued (-1,5% compared to -2,3% in December), while loans to households recovered (+7,5% compared to +5,9% in December), driven by home purchase loans (+8,5%), while the contribution from the various types of consumer lending was more modest (+1,3%).

From the viewpoint of risk, at the end of the first half non performing loans to the private sector gross of impairment losses increased on an annual basis by 39,8% (+42% loans to businesses and +36,3% loans to households) and by 15,7% since the end of 2009 (+15,9% for businesses and +15,5% for households). The ratio of gross non performing loans to the private

sector to gross lending to the private sector therefore increased to 4,35% (3,81% in December).

On the other hand, net non performing loans, which had started to grow significantly again in terms of the total aggregate, recorded an annual increase of 47,9% and an increase of +9,5% since December. The ratio of net non performing loans to total loans therefore rose to 2,20% from 2,03% in December. The ratio of net non performing loans to capital and reserves fell, on

9 Trend Mensile sui Fondi Aperti (Monthly trends on open funds) June 2010.

10 Bank of Italy, supplement to the statistics bulletin Moneta e Banche, August 2010. As a result of ECB Regulation 2008/32 and

some changes in supervisory reporting of statistics, since June 2010 there has been a discontinuity in the historical data for loans, deposits and securities held in portfolio and as a consequence in the historical data for the total statement of financial position assets and liabilities of banks. More specifically, the historical data for loans includes all securitised loans, or loans transferred by other means, which do not meet the derecognition criteria set by international accounting standards (IFRS), along the same lines as the criteria for the preparation of financial statements. The application of those criteria involved the reinstatement in the financial statements of assets previous derecognised, with a consequent increase in some of the amounts in the historical data. From that same date, the securities held in portfolio include those securities, repurchased by the banks themselves, issued against securitisations of loans “transferred but not derecognised”, which previously were only partially included in the historical data. Again since June 2010, deposit accounts have included sums within the item “deposits with predetermined duration of more than two yeas” arising from securitisations and other transfers of loans used to finance “assets transferred and not derecognised” and the purchase of securities from own securitisations not derecognised. In order to allow comparability with prior periods, the changes

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18

the other hand, to 10,96% (12,25% at the end of 2009), partly as a result of action taken currently in progress to strengthen capital in the banking system.

As a result of the various trends affecting banking business with customers, securities issued by residents in Italy held in the portfolios of Italian banks recorded a year-on-year increase in June of 14,4%, attributable mainly to government securities: primarily to medium-to-long term securities (CCTs and BTPs, +36,8%; BOTs and CTZs, +48,3%) and to a residual extent to the item “other certificates” (+3,6%) and to bank bonds in particular (which accounted for 72,5%). As a consequence, the ratio of securities to private sector loans rose to 30,7% (28,3% at the end of 2009).

At the end of June the average interest rate on bank funding from customers calculated by the Italian Banking Association11_{(which includes the yield on deposits, bonds and repurchase} agreements in euro for households and non financial companies) stood at 1,44% (1,59% in December) while the average weighted interest rate on loans to households and non financial

companies showed signs of recovery with respect to the record low reached in May, returning

to 3,66% (3,76% at the end of 2009), in line with the changes in the conditions on the interbank market.

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Significant events

in the first half of 2010

Action undertaken on the branch network of the Group

“Branch switches” and specialisation by geographical area of the network

banks

As already reported in detail in the 2009 annual report, which should be consulted, the project to optimise the branch networks of the network banks, approved on 30th_{September 2009, was} completed on 25th_{January 2010.}

The objective of the project, which involved Banca Popolare di Bergamo, Banco di Brescia, Banca Popolare Commercio e Industria, Banca Regionale Europea and Banco di San Giorgio1_, was to increase the focus of the network banks on their respective geographical markets, by grouping together branches under a single brand name in the same geographical area. Technically it involved the intragroup transfer of 316 branches through contributions of 14 sets of operating assets, as summarised in the table.

The table below, on the other hand, gives details of the employees affected by the branch transfers.

The restoration of the original ownership interests held by UBI Banca (with the repurchase of the minority shareholdings acquired by each network bank following the contributions performed), together with the already announced reorganisation of the shareholdings of the foundations, was completed on 27th_{July 2010 (see the section “The consolidation scope”).} At the same time as the optimisation operation was performed in January, 37 Group branches, both existing branches and those resulting from the “switches”, were transformed into mini-branches reporting to a parent branch, based on a “cluster” structure. This action involved 16 branches belonging to the BPCI, 14 to the BPB, six to BRE and one to BBS.

1 Banca Popolare di Ancona, Banca Carime and Banca di Valle Camonica were not involved in the operation.

Branches involved

Transferring Bank (from) BPB BBS BPCI BRE BSG

Banca Popolare di Bergamo Spa - 18 37 31 4 90

Banco di Brescia Spa 24 - 2 1 1 28

Banca Popolare Commercio e Industria Spa 63 9 - 13 - 85

Banca Regionale Europea Spa 10 10 93 - - 113

TOTAL 97 37 132 45 5 316

Receiving Bank (to)

TOTAL

Personnel involved

Transferring Bank (from) BPB BBS BPCI BRE BSG

Banca Popolare di Bergamo Spa - 108 253 180 42 583

Banco di Brescia Spa 133 - 10 18 9 170

Banca Popolare Commercio e Industria Spa 567 90 - 95 - 752

Banca Regionale Europea Spa 58 63 578 - - 699

TOTAL 758 261 841 293 51 2.204

Receiving Bank (to)

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20

Streamlining action under the trade union agreement of 20

th

_{May 2010}

Action was implemented with effect from 21st_{June 2010 under the Group Framework}

Agreement signed on 20th_{May (see the relative sub-section).}

Once the specialisation by geographical area of the network banks was completed with the “switching” operations in January, a series of actions could be undertaken to streamline the distribution networks of those banks designed to:

- eliminate overlaps;

- rationalise market presence in areas with limited margins for growth and with insufficient current and/or potential profitability of the branches concerned;

- expand those branches close to those subject to intervention as a function, amongst other things, of the migration of customer accounts;

- support the expansion of branches with the best growth prospects. This resulted in:

- the closure of 44 branches2_{and of 37 mini-branches (including one in-house company} branch)3_{. Furthermore, four of these closures related to specialist units not included in the} summary of the branch network of the Group;

- the transformation of 101 small branches into “mini-branches”, on the basis of the

“cluster”4_{structure already mentioned;}

- the change of the parent reporting branch for five of the mini-branches5_.

The reorganisation of the distribution model under the agreement also involved UBI Banca Private Investment with the closure of six branches (already included in the 84 closures already mentioned), partly in relation to the creation in July of a back office centre in Milan for some operating activities previously performed by branches to support financial advisors (e.g. customer surveys and opening of new accounts, data entry and first level controls, problem positions for assets under management, under custody and insurance products).

For the smaller banks the model involved the development of their distribution models through the creation of geographical retail areas, where this was necessary for better market coverage. At present only Banca di Valle Camonica has taken advantage of this opportunity in relation to the expansion in progress, by acquiring two new areas as from June.

Expansion of the branch network

Although priority was given in the first half to the reorganisation of the branch network, as just reported, the Group does not intend to abandon endogenous growth.

As can be seen from the summary table, six new branches were opened in the first six months of the year, in addition to six transformations of existing treasury branches into mini-branches (which related primarily to Banca di Valle Camonica), which provides more rapid expansion. Expansion of the branch network will continue in the second half when approximately fifteen branches will be opened including two already completed at the date of publishing this report.

2 In detail: 12 branches of BPB, 10 of BPCI, seven of BBS, six of UBI BPI, four of BPA plus one for institutional customers, two of

Banca Carime plus one for institutional customers, two of BRE, one of BSG and one of UBI Banca for institutional customers.

3 In detail: 17 mini-branches of BPCI including one in-house company branch, plus one advisory branch, 12 of BPB, six of BPA and

two of BBS.

4 This is involved 65 branches of Banca Carime, 11 of BPA, nine of BRE, six of BSG, five of BPCI, three of BPB, one of BBS and one of

the Parent UBI Banca.

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The training programme for branch managers

In a particularly difficult and competitive economic context, awareness of the crucial role played by branch managers in maintaining market share and growth of business on the complex retail market led the UBI Banca Group to approve an important strategic training project designed to boost and enhance the professional skills of personnel already filling that role with the objective of improving commercial productivity and risk management.

Activity therefore commenced in the first half consisting of analysis and workshops to design the contents of the courses with the objective of identifying the best “virtuous behaviours” (commercial, credit, organisational and HR management) expected of the role, to be instilled in all the branch managers of the Group by means of classroom training planned for the second half of the year.

At the same time a new compulsory training programme was introduced for potential new branch managers to qualify for the role. Candidates participate in two separate types of classroom training for a total of ten days organised as follows:

1) improvement and certification of technical and professional knowledge (six days in the classroom + individual study and a final qualification examination);

2) managerial training to develop management skills (3,5 days in the classroom).

The first two “pilot” sessions organised in the period May-July 2010 led to the qualification of 53 potential new branch managers.

The trade union agreement of 20

th

_{May 2010}

The trade union negotiations commenced on 26th_{March 2010, designed to reduce costs and} structural personnel costs in particular, were concluded on 20th_May.

The Group Framework agreement was signed by the following trade union organisations: DIRCREDITO, FABI, FIBA/CISL, FISAC/CGIL, UGL Credito, UIL.CA, SINFUB and FALCRI. The agreement acknowledges the indispensible need to reduce costs at consolidated level, by reducing personnel numbers and the relative unit costs, supported at operating level by the adoption across the board for the whole Group of appropriate organisational and management measures designed to increase efficiency and productivity.

Action taken in the first half of 2010 on the branch network of the Group

UBI Banca Scpa - - - - 1

Banca Popolare di Bergamo Spa 3 7 1 25 17

Banco di Brescia Spa - 9 - 9 2

Banca Popolare Commercio e Industria Spa - 47 - 27 21

Banca Regionale Europea Spa 1 -68 - 2 15

Banca Popolare di Ancona Spa 1 - 1 11 11

Banca Carime Spa - - - 2 65

Banca di Valle Camonica Spa - - 4 -

-Banco di San Giorgio Spa - 5 - 1 6

UBI Banca Private Investment Spa 1 - - 6

-TOTAL 6 - 6 83 138

Branches/mini-branches opened

Net effect of branch switches Transformation of treasury branches into mini-branches Closures Transformation of branches into

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22

As concerns personnel expenses in particular, the agreement involves a reduction in total

Group personnel numbers by 895 to be implemented for 500 employees through a

redundancy incentive scheme – completion of which is already in progress at the time of publishing this report – while the remaining personnel reductions will be achieved through normal personnel management mechanisms, including the partial replacement of personnel normally leaving the Group.

The redundancy incentive scheme involves all employees who will have attained the right to a

pension by 31st_{December 2011.}

The voluntary applications received (497) allowed the target set to be met virtually completely without the need to resort to the use of Law No. 223/1991 as permitted under the agreement6_. Group banks and companies contributed jointly in reaching the Group target, accepting applications received in excess of the quota set at individual company level and using these to compensate for other companies where targets were not fully met.

The first Group of personnel to leave (321) occurred at the end of first half, with effect from 1st July. The remaining group is scheduled for the 30th_{September (effective from 1}st_{October), as} reported in the table.

Redundancy programme in implementation of the Framework Agreement of 20th_{May 2010}

Banks/Companies involved _{effect from 1}Personnel leaving with _st_{July 2010}

Personnel scheduled to leave by 30th_September

2010 Total

Banca Popolare di Bergamo 62 25 87

Banco di Brescia 41 33 74

Banca Popolare di Ancona 58 18 76

Banca Popolare Commercio e Industria 26 16 42

Banca Regionale Europea 23 8 31

Banco di San Giorgio 6 2 8

Banca di Valle Camonica 4 2 6

Banca Carime 58 54 112

Centrobanca 6 3 9

UBI Banca 31 12 43

UBI Sistemi e Servizi 6 6 12

Total 321 179 500

The cost total of the operation is 33,2 million euro – inclusive of the provisions contained in Decree Law No. 78/2010 converted into Law No. 122/2010 – recognised in the income statement for the first half divided between incentives for those who have already acquired the right to retire and use of the “solidarity fund” pursuant to Ministerial Decree No. 158 of 2000. When fully phased in, as a whole the agreement, together with the other personnel management mechanisms which will be employed, will allow personnel expense synergies of approximately 70 million euro to be achieved, including 10-15 million euro, net of the cost of the leaving incentives, to be recognised already in 2010.

To balance the personnel leaving under the agreement reported here and in order to guarantee the necessary operational continuity for those business units affected by the organisational

changes, a commitment was made, in conjunction with the agreement, to convert the

temporary employment contracts of 550 personnel to permanent contracts for young people

already working for the Group. There were a total of approximately 900 personnel working for the Group on temporary contracts on the date on which the agreement was signed. The conversion of the contracts (in addition to the total of 170 already scheduled under the previous trade union agreement of 23rd_{January 2010 for the branch network optimisation} project) will take place in parallel with the personnel leaving under the redundancy incentive scheme.

A basic requirement for the conversion of contracts is the positive assessment of workers, with priority given to those with the greatest length of service in the Group, compatible with

6 The completion of the redundancy plan for 500 personnel was implemented by proceeding, until the target was reached, to terminate

the employment contracts of senior management who had acquired the right to a pension and had not voluntarily applied for retirement under the scheme, through application of the relative law and clauses in contracts.

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requirements which emerge on local markets and in individual banks and companies on the basis of their dimension objectives.

The provisions already laid down in the memorandum of 14th_{August 2007 were renewed with} the decision to continue to recruit the children of workers who present applications for early retirement with 6% of new appointments reserved for those candidates, to be performed by the end of 2011.

The agreement also covers a series of lines of action to be implemented at an operating and organisational level to reduce personnel and other expenses.

The most important action concerns the branch network of the Group.

This action, reported in detail in the previous sub-section, was virtually fully completed in June along with the consequent activity to change the composition of customer portfolios. In order to strengthen support for the commercial activities of the network banks and to improve contacts with customers, with particular reference to the retail and small business segments, a project to develop Contact Centre activities was confirmed as part of the agreement, to be implemented gradually, thereby contributing to more effective and contained management of geographical mobility.

Further action planned for general increases in efficiency which will include Group companies, relates to:

- the Business Process Re-engineering for Loans project, with organisational impacts on UBI Banca, the network banks and UBI.S, designed to improve the lending process within the Group with particular reference to the grant and monitoring of loans and credit recovery7_;

- SILF, with the reorganisation of activities on different local centres.

-This company has now been concentrated on two centres, one at Cuneo and one at

Bergamo. All the SILF activities complementary to B@nca 24-7, previously performed in Milan, have been located on the latter centre, created in June, in order to improve costs as a result of more effective operations;

- Centrobanca, with a revision of the scope of its activities in order to increase the focus of the company on transactions with a higher specialist content (e.g. specialised lending, acquisition finance, project financing, leveraged finance, pool financing and industrial credit operations with non standard and/or complex structures including the monitoring of covenants).

-As a consequence, the authorisation ceilings for the company in the industrial credit sector were raised from 2010, with the network banks now responsible for all non secured loan transactions of less than 15 million euro, non operating asset mortgage loans below four million euro and all transactions pursuant to the Sabatini Law.

The transfer of depository banking and correspondence

banking operations

On 31st_{May 2010 the agreement with RBC Dexia Investor Services}8_{(RBC Dexia), signed on} 28th_{September 2009, was concluded – one of the largest suppliers in the world of services to} institutional investors – involving the following:

▪ the transfer to RBC Dexia of a business unit consisting of the depositary banking

business of the UBI Banca Group (more than 19 billion euro of assets administered,

relating mainly to mutual fund management activities performed by the subsidiary UBI Pramerica SGR);

▪ the transfer of correspondent banking operations through the sale of contracts held

by BPCI for the supply of paying agent services in Italy to Luxembourg Sicavs and Irish UCITS;

7 See the sub-section on it for details.

8 RBC Dexia Investor Services is a joint venture between the Royal Bank of Canada and Dexia which provides a full range of services

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24

▪ the supply to UBI Banca of custody and settlement services for foreign securities activities relating to customer and proprietary business.

As a result of this transaction, by making use of the services of a global specialist able to guarantee a high standard of service in the depositary banking sector, UBI Banca will be able to further optimise its operational risk and continue to invest in and focus on its core business of supplying products and services to its customers.

The transaction is worth 93 million euro. A contract was also signed, with a life of ten years, for the supply, under market conditions, of depositary banking services to UBI Pramerica by RBC Dexia.

No guarantee was issued in this respect by UBI concerning the minimum level of assets under management present in the business unit contributed. The agreements signed nevertheless contain some adjustment mechanisms to the transfer price, if certain events occur – including withdrawal from the contract and renegotiation of the consideration – connected with the performance for the two main contracts with UBI Pramerica falling within the scope of the business opertions contributed: (i) the depositary banking contract and (ii) the contract for the outsourced provision of administrative services.

In terms of profit and loss, the contribution of the depositary banking operations generated a net gain of 83,4 million euro which was recognised within item 310 “after tax profit from discontinued operations”.

The transfer of the contracts, however, gave rise to proceeds of 957 thousand euro for BPCI, recognised within item 220 “other operating income/(expense)”.

The positive impact on capital was of approximately 10 basis points, both on the consolidated core tier one and total capital ratios.

From an operational viewpoint the IT migrations for the depositary banking and the correspondence banking systems were completed in June. The migration of the retail and institutional customers’ assets was performed and the processes were defined for the final migration from the software managed by Unione Fiduciaria to Dexia for the calculation of NAVs which should be competed by the end of the year.

The action taken to invest in Italian government securities

With a view to providing support for net interest income – in consideration, amongst other things, of the yields provided by short term Italian government securities after the Greek crisis, the contagion from which spread to affect the sovereign debt of some other European countries – on 25th_{May 2010 the Management Board took the decision to invest in Italian} government securities with maturities of less than 18 months for a total nominal amount of six billion euro.

The investment – funded by transactions in repurchase agreements with the Cassa di

Compensazione e Garanzia (central counterparty clearing) – was made between the end of May and 15th_{June and it involved:}

y a nominal amount of 0,5 billion euro recognised within “financial assets held for trading”,

with the purchase of CTZs and BTPs maturing in September 2011;

y a nominal amount of 5,5 billion euro recognised within “available-for-sale financial assets”

with the purchase of:

‐ three billion euro of BTPs maturing in September 2011, hedged by IRSs;

‐ 2,5 billion euro of CTZs and BTPs, again maturing in September 2011, with no hedges. On aggregate the average return that the action should provide under current conditions, with account taken of the cost of funding, is around one hundred basis points.

Interim financial report as at and for the half year ended 30 th June 2010

Interim

financial report

as at and for the

half year ended

30

th

June 2010

Translation from the Italian original

Contents

UBI Banca: company officers

UBI Banca Group:

Principal figures and performance

indicators

1

The Rating

MANAGEMENT REPORT ON THE

CONDENSED INTERIM

CONSOLIDATED FINANCIAL

STATEMENTS AS AT AND FOR THE

HALF YEAR ENDED

The macroeconomic scenario

Significant events

in the first half of 2010

Action undertaken on the branch network of the Group

“Branch switches” and specialisation by geographical area of the network

banks

Streamlining action under the trade union agreement of 20

May 2010

Expansion of the branch network

The training programme for branch managers

The trade union agreement of 20

May 2010

The transfer of depository banking and correspondence

banking operations

The action taken to invest in Italian government securities

_{June 2010}

_{May 2010}

_{May 2010}