Contents
Shareholders . . . 7
Boards and Officials . . . 9
Distribution Network . . . 11
General Meeting Agenda . . . 19
2001 Accounts: Highlights . . . 21
Board Report . . . 23
Financial Statements. . . 45
Balance Sheet . . . 46
Contingent Liabilities and Commitments . . . 48
Profit and Loss Account . . . 49
Notes to the Financial Statements. . . 51
General Introduction . . . 52
Part A: Accounting criteria . . . 52
Part B: Notes to the Balance Sheet . . . 56
Part C: Notes to the Profit and Loss Account . . . 85
Part D: Other Information . . . 92
Additional Statements. . . 93
Reclassified Balance Sheet . . . 94
Reclassified Profit and Loss Account . . . 96
Statement of Changes in Shareholders’ Funds . . . 97
Cash Flow . . . 98
Statutory Auditors’ Report . . . . 101
Independent Auditors’ Report . . . 103
Shareholders
COMPAGNIA ASSICURATRICE UNIPOL S.p.A. 81.068%
FINSOE S.p.A. 11.790%
COOP ESTENSE S.c.r.l. 6.511%
FINPAR S.p.A. 0.624%
C.G.I.L. F.I.L.T. REG. LOMBARDIA 0.004%
Boards and Officials
Board of Directors Chairman SACCHETTI Ivano
Vice Chairman and Managing Director CONSORTE Giovanni
Board Members ALBERTINI Claudio
BERTI Gian Carlo BETTAZZONI Maria CIMBRI Carlo DALL’AGLIO Stefano DI DIODORO Marcella GALANTI Vanes GELMI Giampiero GIULIANI Franco GUIDETTI Oscar ROFFINELLA Lorenzo
Board of Statutory Auditors
Chairman MELLONI Umberto Standing Members BOLLETTINARI Stefano DE CAROLIS Paolo Alternate Members CAFFAGNI Omer CHIUSOLI Roberto
Distribution Network
103 BANK COUNTERS 3 1 6 1 11 4 1 1 3 3 41 10 18 6 3 2 10 5 1 2 1 4 3 7 5 5 2 3Our Bank Counters
12
Emilia Romagna
BOLOGNA Via Saffi, 6
BOLOGNA Via Stalingrado, 59/A
BOLOGNA Piazza Mickiewicz, 6
BOLOGNA Via Bentini, 31
BOLOGNA Via Mezzofanti, 89
BOLOGNA Via Farini, 28/2
BOLOGNA Via Indipendenza, 8/h
BOLOGNA Via Stoppato, 5/d
CASTEL SAN PIETRO (BO) Via Mazzini, 204
IMOLA (BO) Via Appia, 86/88
IMOLA (BO) Via Bentivoglio, 36
SAN GIORGIO DI PIANO (BO) Via Fariselli, 1
SAN LAZZARO DI SAVENA (BO) Via Emilia, 1
SASSO MARCONI (BO) Via della Stazione, 33-35
CESENA (FC) Viale Carducci, 79
CESENA (FC) Via Finali, 62 angolo Via Piave
FORLI’ (FC) Via Hercolani, 2
FORLI’ (FC) Via Cignani, 44
ARGENTA (FE) Piazza Mazzini, 1
FERRARA Via Bologna, 110
FERRARA Largo Castello, 32/34
CARPI (MO) Via Cantina della Pioppa, 1
MIRANDOLA (MO) Via Agnini, 94
MODENA Via Zucchi, 21/E
MODENA Via Emilia Ovest, 698
MODENA Via Nonantolana, 685/B
SASSULO (MO) Via Gramsci, 14
VIGNOLA (MO) Via Belluci, 28
CASTELL’ARQUATO (PC) Piazza San Carlo, 13
PARMA Via La Spezia, 75/b
PARMA Via Venezia, 46/a
ALFONSINE (RA) Piazza Gramsci, 26
FAENZA (RA) Viale Baccarini, 31
RAVENNA Via Faentina, 67-69
RAVENNA Via Ravegnana, 217/c
RAVENNA Piazza Kennedy, 14
REGGIO EMILIA Via Toschi, 10/d
REGGIO EMILIA Via Martiri di Cervarolo, 19
REGGIO EMILIA Via Fratelli Cervi, 5
SCANDIANO (RE) Corso Vallisneri, 17/R
Telebanking Services
Liguria
GENOA Via L. Dalmazia, 75/r
GENOA Via De Marini, 15
GENOA Via Napoli, 139/b-r
GENOA Via Cantore, 238-240
LA SPEZIA Via del Prione, 15
SARZANA (SP) Via Brigata Partigiana Muccini, 20
Piedmont
TURIN Corso De Gasperi 20/a
TURIN Via Pomaretto, 6/b
TURIN Via Principi D’Acaja, 65/c
Lombardy
BRESCIA Corso Martiri della Libertà, 15
BRESCIA Via Fratelli Lechi, 52
CREMONA Piazza Cadorna, 9
MILAN Piazza Buonarroti, 25
MILAN Via Binda, 56
MILAN Via Mercantini, 4
MILAN Viale Papiniano angolo Via Calco, 23
MILAN Via Traversi angolo Via Gazzoletti
MANTOVA Via Principe Amedeo, 9
SUZZARA (MN) Via Guido, 3/a
VOGHERA (PV) Via Emilia, 16
Veneto
PADUA Via Rezzonico, 12
ROVIGO Via Minelli, 1 angolo Corso del Popolo
VERONA Via Pisano, 69
Friuli Venezia Giulia
TRIESTE Via Milano, 3
Umbria
CITTÀ DI CASTELLO (PG) Via Luca della Robbia, 55
PERUGIA Via Fontivegge, 454
PERUGIA - PONTE SAN GIOVANNI Via Quintina, 50
Latium
ROME Via Saturnia, 21
ROME Viale di Porta Tiburtina, 46
ROME Via Nomentana Nuova, 713
ROME Via Gasperina, 263
ROME Via Zenodossio, 33
ROME Via G. Chiabrera, 53
ROME Via Crispolti, 15/I
ROME Piazza Scotti, 22
TERRACINA (LT) Via Tripoli, 2
CIVITA CASTELLANA (VT) Via Nepesina, 7
Abruzzi
AVEZZANO (AQ) Via Muzio Febonio, 32
PESCARA Via Caduta del Forte, 14
Campania
SANTA MARIA CAPUA VETERE (CE) Piazza Mazzini, 35
NAPLES Via Dell’Epomeo, 83
NAPLES Piazzetta Arenella, 12
NAPLES Via Riviera Di Chiaia, 14
NAPLES Corso Vittorio Emanuele, 678
SAN GIUSEPPE VESUVIANO (NA) Via Passanti, 243/2450
SALERNO Via Orofino, 6
Apulia
TRANI (BA) Via Napoli, 20
Sardinia
CAPOTERRA (CA) Via Diaz, 124 angolo Via Mameli
IGLESIAS (CA) Via XX Settembre angolo Via Crocifisso
NUORO Piazza Italia, 3
ORISTANO Via Mazzini, 32-34
TERRALBA (OR) Viale Sardegna, 27
Our Financial Counters
Emilia Romagna
ALTEDO (BO) Via Nazionale, 112/A
BOLOGNA Centro Commerciale Vialarga Galleria Vialarga, 49
BOLOGNA Via della Barca, 5
BOLOGNA Piazza XX Settembre, 6
BOLOGNA Via San Felice, 11/E
BORGO TOSSIGNANO (BO) Piazza Unità d’Italia, 10
CASALECCHIO (BO) Via Marconi, 6
CASTEL BOLOGNESE (RA) Via Garavini, 13
CASTELMAGGIORE (BO) Via Lirone, 9
CONSELICE (RA) Piazza Foresti, 12
FIDENZA (PR) Via Bacchini, 39
MODENA Via Carlo Zucchi, 31/H
MODENA Centro Commerciale I Portali Via Dello Sport, 50/31
RAVENNA Via Faentina, 106
SAN GIOVANNI IN PERSICETO (BO) Via Pellegrini, 3 SAN LAZZARO DI SAVENA (BO) Via Carlo Iussi, 16/M
NONANTOLA (MO) Via Vittorio Veneto, 25/2
CASTELNUOVO RANGONE (MO) Via Zanasi
Liguria
CHIAVARI (GE) Via della Cittadella, 26
Piedmont
OVADA (AL) Corso Italia, 43
Lombardy
Trentino Alto Adige
TRENTO Via Roma, 7
Tuscany
FOLLONICA (GR) Via Della Pace, 42/A
GROSSETO Via De Barberi, 108
LUCCA Via Jacopo Della Quercia, 25
MASSA MARITTIMA (GR) Via Cappellini, 25
PIOMBINO (LI) Via del Fosso, 28
SIENA Via Zani, 7 angolo Viale Toselli
Marches
PESARO Via Pontevecchio, 41
RECANATI (MC) Via Ceccaroni, 1
SENIGALLIA (AN) Viale G. Bruno, 26
Umbria
SPOLETO (PG) Via Fratelli Cervi, 9
TERNI Via Tre monumenti, 34/38 angolo Via Dentato
Abruzzi
PIANE D’ARCHI (CH) Via Nazionale
Latium
RIETI Via Fratelli Sebastiani, 197
GUIDONIA (RM) Via U. Maddalena, 9/A
LATINA Via Villafranca angolo Via Palestro
TERRACINA (LT) Via Roma, 127
ROME Via di Baccanello, 288
Campania
SALERNO Via C. Mauro, 17
TELESE (BN) Via Roma, 36/38/40
CASTELLAMARE (NA) Via Principe Amedeo, 77/79
Apulia
FASANO (BR) Via Contardo Ferrini
LECCE Viale Libertà, 133
MAGLIE (LE) Corso Cavour
MELENDUGNO (LE) Corso Cavour, 26/A
Sardinia
NUORO Via Biasi, 10
SERRAMANNA (CA) Viale Matteotti, 3
Sicily
CATANIA Viale Mario Rapisardi, 507
MILAZZO (ME) Via Tre Monti, 78
PALERMO Via Ausonia, 120
SIRACUSA Viale Teracati, 182
Ordinary General Meeting
Bologna, 29 April 2002AGENDA
1. Board of Directors’ Report on business performance, Board of Statutory Auditors’ Report, relevant decisions
2. Accounts as at 31 December 2001, relevant decisions
3. Appointment of the Board members, after decision on their number and remuneration 4. Appointment of the Board of Statutory Auditors’ members and of its Chairman and
2001 Accounts: Highlights
Highlights 2001 2000
Assets and Liabilities (€‘000)
Total Assets 1,587,073 673,747
Loans and advances to customers 739,063 364,274
of which: net bad and doubtful debts 5,652 3,914
Securities 83,529 73,566
Customer deposits and funds 7,396,265 3,629,356
Direct customer deposits 1,120,890 483,618
of which: current accounts 1,046,506 437,189 debts evidenced by certificates 74,384 46,429
Customer funds 6,275,375 3,145,738
of which: assets under management 512,292 241,702 assets under administration 5,763,083 2,904,036
Net interbanking balance 412,356 164,982
Shareholders’ funds 286,868 130,300
Economic results (€‘000)
Net interest income 29,994 14,428
Operating income 55,497 25,659
Gross operating result 12,528 3,763
Profit on ordinary activities 1,647 1,220
Net profit 1,554 162
Organisation
No. staff as at 31 December 665 287
No. counters as at 31 December 95 36
No. financial counters as at 31 December 60 17
NATIONAL AND
INTERNATIONAL
ECONOMIC CLIMATE
Our review of the economic-financial situation in 2001 must inevitably allude to the tragic events of September 11, a date that will become symbolic of one of the worst years in recent decades. The cause and effect relationship between the general economic situation andthese tragic events is, however, rather ephemeral. The shock waves of the Twin Towers tragedy, causing widespread fear and loss of confidence, tended to accentuate an already sombre economic scenario in which recovery still flagged, world stock exchanges had already accumulated significant losses, and the unemployment rate continued to climb. 2001 may, therefore, be termed the year of blighted expectations during which the new economy remained sluggish and, on the whole, financial markets failed to identify any effective means of recovering, even partially, their losses from the opening months of the year. Hopes of an upswing have had to be postponed to 2002, although the pundits seem undecided as to whether this can be expected in the spring or autumn. For the current year, the latest IMF, OECD, and European Commission
estimates anticipate growth of 1% in the United States, with the European economy expanding at a faster rate but nevertheless unable to act as a driving force for the world economy, and the Japanese economy still bearing the brunt of the latest recession.
In 2001, the American economy failed to have its usual driving effect, with a consequent tail-off of growth in the European Union due to the rapid
deterioration of the German economy, which has always played a leading role in Europe.
The general slackness of the world economic cycle seems to have impacted less on emerging countries, despite their innate fragility. With the exception of certain countries (where the situation is however dramatic, as in Argentina which has been forced to suspend payments), the so-called emerging economies maintained their growth rate in line with 2000 levels. Overall, the general international economic scenario is still beset by uncertainty, suggesting that recovery will not be achieved even in 2002. The American economy will continue to record disappointing growth rates, Europe is expected to grow at a slightly faster pace, and Japan will have to come to grips with a further deterioration of its economic situation.
Board Report
24
Price trends in 2001 were in line with the previous year and the increase in the inflation rate remained above 2%. Due consideration must be given in this regard to the effects of the changeover to the Euro, an event viewed with great public trepidation due to the possibility of another bout of inflation resulting from the fear that companies and traders could take advantage of this occasion to round their prices up rather than down.
Italy
On the home front, GDP is expected to grow by a modest 1.8%, a shortfall compared with expectations that can however be viewed with a certain satisfaction as it places Italy above the Euro zone average. This will help reduce the long-term negative gap on the unemployment front where the Italian index continues to drop.
Expansion was driven not only by the supply of labour, stimulated by flexibility measures, but also by demand. The Government is expected to close its accounts with a deficit of 1.2%, while price trends in Italy were aligned with those of the other countries in the area and the consumer goods price index rose by 2.7%.
Currencies
The new European Union currency failed to achieve a long overdue recovery in 2001, sliding by 4.62% against the dollar,
stock exchange listings and high tech securities. The worst performance was that of the Italian Stock Exchange which lost 25% of its capitalization during the year. This was accompanied by a considerable tail-off in trading with volumes on the Italian market falling to
€683 billion compared with €885 billion in 2000.
Monetary
and credit
policies
As regards monetary policy, the ECB adopted a wait-and-see attitude during the first part of the year, with a more expansive outlook in the closing months. As a result, investors tended to overhaul their portfolios, opting for more liquid forms of investment.
The reallocation process adopted by Italian households also resulted in a reduction in assets managed with a consequent shrinkage in the total deposits of collective savings investment institutions, already negative in 2000. There was a decline of 11% in the total assets of Italian and foreign investment funds.
With regard to debt securities, there was an increase in medium and long term bond issues, stimulated not only by the increase in issues of Government securities but also by bonds placed by companies to cover new investments and extraordinary operations. In 2001, there was a 6.66% increase in the Board Report
term. The proportion of loans to non-banking companies remained high, particularly compared to the European average, thus confirming the effective support the banking system provides to companies.
There was an improvement over last year in the ratio of net doubtful loans, which levelled out at 2.43%.
Interest rates fell generally during the year, with an average year-end rate of 5.94% on loans and of 1.48% on deposits, bringing the spread at the end of the year to 4.46%, a reduction on the previous year.
With regard to earning capacity, there was an increase in net interest income accompanied however by a reduction in the operating income. This was due to the shortfall in proceeds from services and in particular to net banking charges on financial operations and assets managed. Operating expenses also increased during the year, with an upswing in particular in personnel costs. Given that the number of employees is
stable, the increase was exclusively due to the upswing in the unit cost of labour.
YOUR BANK
To the Shareholder,The acquisitions made during the year substantially increased the size of your Bank.
Major acquisitions included 51 bank counters from the IntesaBCI Group and the acquisition of its individual portfolio management arm from Unipol SGR S.p.A. As a result, your Bank now operates in 16 regions and 46 provinces and has increased total assets managed (direct customer deposits + customer funds) to
€7,397 million (ITL14,323 billion). The Bank has therefore fully complied with the deadlines set for achievement of the expansion targets established in the 2000-2003 business plan.
In view of the rapid changes in the size of the Bank, the 2001 operating and financial data cannot be compared on a consistent basis with those of the previous year. Board Report
Board Report
OVERVIEW OF
THE BANK’S
OPERATING
PERFORMANCE
The accounts for the financial year ended 31 December 2001 highlight an increase in all operating and financial sectors. Assets soared to €1,587 million, a 135% increase over last year. In particular, a comparison with the previous year’s data highlights a 103% increase in loans to customers and a 160% upswing in loans to banks. Intangible fixed assets also increased following disclosure of the goodwill on the acquisitions made during the year.
A breakdown of operating sectors shows a 109% upswing in net interest income and an increase of 125% in non-interest income. As a result, the operating income, which measures the trend of core business, increased by 116%.
The sharp upswing (111%) in administrative expenses, also including amortization of goodwill which accounted for 9.5%, was however lower than the growth of the operating income; the ratio of administrative expenses to operating income fell therefore to 93% from a previous year figure of 95%.
With regard to other operating sectors, provisions for bad and doubtful loans increased by €1.7 million and other provisions for liabilities and charges by
€1.6 million, due to the significant write-down of the Eptaconsors item.
According to the above data, Unipol Banca closed the 2001 financial year with a pre-tax profit of €3.6 million compared to
€1.2 million in the previous year. It should be noted that part of the deferred taxes calculated in 1999, of around 1 million euros, as envisaged by the three-year Plan and submitted to the Supervisory Authorities and the relevant IRAP (the Regional Tax on Productive Activity) for 2001 have been charged to the profit and loss account, bringing the net profit for the year to €1,554 million (a year-on-year increase of 859%).
COMMENTARY
ON THE MAIN ITEMS
OF THE BALANCE
SHEET AND PROFIT
AND LOSS ACCOUNT
Balance Sheet
Direct customer deposits
The 2001 financial year closed with direct customer deposits of €1,121 million. The considerable increase in this item was due principally to the acquisition of 51 bank counters, to the higher liquidity conferred by the Unipol Group, and to the broadening of the ordinary customer base following the ongoing expansion of the Bank’s sales network.
Direct customer deposits
Group products 283.9 228.3 third-party products Board Report 28 177.5 135.2 103.5 45.2
UCITS SICAV pmf pms unipol fondi
50.8 An analysis of direct customer deposits
as shown in the accompanying graph also highlights an increase in the average data, confirming the continued increase in volumes over the previous year, when an average of €324 million was reported compared to the 2001 average of €678 million, an upswing of 109%. The most significant increase was recorded in the more liquid components, i.e. current accounts and savings deposits, which rose to 928 million euros, with less significant increases in technical forms of deposits (such as bonds, deposit
certificates and repo agreements). Development of the Banks’ specific distribution model (integration with the Unipol Group agency network in order to promote customer synergies) continued with positive results, although effective exploitation of the sales potential arising from achieved synergies is still in its early stages.
Customer funds
As at 31 December 2001, customer funds amounted to €6,276 million, an increase of 99.5% over the previous year.
1999 2000 2001
137 242
513
2904
2104 5763
assets under administration assets under management Customer funds
(in €m)
Breakdown of assets under management
(in €m)
Specifically, this item comprises funds administered (€5,763 million), stated at last market price, and includes the contribution of the Unipol Group,
together with managed funds (€513 million) consisting of portfolio management, mutual funds and Sicav.
Board Report
The Financial Advisers network which is being created has the same characteristics as the Bank’s own network. Growth continues slowly but the Financial Advisers are closely linked to Unipol insurance agencies. Our aim is therefore to set up a network characterized by a high level of loyalty. Furthermore, in view of the quality of the service the Bank intends to provide, a “Personal Banker” is now being deployed at bank counters in order to guarantee the high level professional expertise required to increase customer assets managed and to provide Financial Advisers with technical support.
Lending activities
In 2001, the Bank continued to focus particular attention on developing this activity, emphasising small and medium sized companies. The synergies now being forged with Group undertakings will make it possible to focus on establishing commercial relationships with their customers and as a result with the latter’s employees.
At 2001 year-end, loans to customers totalled €739 million.
The most significant improvement in this asset category was due to the acquisition of 51 bank counters, producing an increase of €281 million, of which 81% related to mortgage loans.
There was a noteworthy increase during
Careful, constant monitoring of risk positions makes it possible to reduce the possibility of default.
Loan and decision-making regulations were constantly updated during the year to ensure that the loan disbursement process keeps pace with the growth of the Bank and with specific control requirements.
Bad and doubtful debts
As at 31 December 2001, this item amounted to €21.2 million with, net of the related provisions of €15.5 million and including overdue interest, a net figure of €5.7 million compared with
€3.9 million at year-end 2000. Despite the increase in absolute value of bad and doubtful debts, there was an evident improvement in the ratio of this item to total loans, from 1.07% in 2000 to the current 0.76%.
Bad and doubtful debts generated overdue interest of €421,000 during the year, posted entirely to the related provision. Bad and doubtful debts are constantly monitored by the Bank’s Legal Unit in order to maximize the results of credit recovery operations.
An analysis of banking system indicators reveals that net banking bad and doubtful debts stood at 2.43% at year-end. Therefore, the current ratio of bad and doubtful debts of your Bank is even more significant.
The actions for revocation that were set in motion following the bankruptcy of
Board Report
30
return from coupons and interest generated by these investments was 3.98%, in line with the figures for 2000. Adding income from coupons and interest to trading gains, the overall financial return of liquid assets invested in securities amounted to €8.1 million. Trading gains were generated through the purchase and sale of trading securities. As at 31 December 2001, the Bank’s securities portfolio was worth €83.5 million, of which €57.5 million is bonds
held for trading, €25.8 million long-term investment securities and €203,000 is shares.
Valuation of non-fixed investments at the average prices of December showed a capital loss of €151,569.
There were no changes during the year in long-term investment securities. Valuation by the criterion adopted for trading securities would have shown capital losses of €1.1 million as at 31 December 2001.
30.9%
trading securities long-term investment securities
69.1% 87.79% 7.20% foreign government securities Italian government securities
bonds stocks and shares 0.24%
4.77%
Securities portfolio
Total long-term investment securities comply with the parameters established by the framework resolution of the Board of Directors.
With regard to long-term investment securities (€25.8 million), bonds for a total of €7.5 million will mature by 2 May 2002. To complete the analysis of resources used by the Bank for financial management, the average liquidity invested in interbanking activities of around €276 million (with a year-on-year increase of €194 million) produced an average return of 4.2%.
Participating interests
In 2001, there was a reduction of
€482,000 in equity investments following the sale of the entire participating interest in the subsidiary Immobiliare Pietramellara S.r.l. The disposal was provoked by Unipol Banca’s transfer of its registered office, as the building owned was no longer required for corporate business; net capital gains amounted to €2.9 million.
Contingent liabilities
and commitments
Guarantees issued by the Bank decreased by 45% compared to 2000 and amounted to €333 million, mainly
Board Report
due to a decline in guarantees given to co-operative enterprises against loans from members.
Commitments increased by 79.5% to
€1.5 million, due in particular to the increase of the ‘securities to be received’ item.
Profit and loss
account
Operating income
In 2001, the operating income, consisting of net interest income and non-interest income, amounted to €55.5 million, with a noteworthy year-on-year increase of 116%. A breakdown shows that net interest income bordered on €30 million while non-interest income stood at
€25.5 million.
With regard to net interest income, the 0.43% increase in the difference between lending and borrowing rates, which brought spread to 3.5%, should be noted. A considerable deviation (of around one percentage point) still exists
with regard to market data. This difference, which is being gradually reduced, stems from relationships with both consumer co-operatives and Group undertakings.
The increase in spread was partially offset by the issue of a subordinated loan during the second half of the year, which was necessary to increase capital to the required level for supervisory purposes.
There was also a noteworthy upswing in non-interest income which, however, compared with the previous year, failed to achieve the level forecast due to negative market factors that tended to impede its growth.
The aggregate increase was brought about by net banking commissions of €8.9 million, an upswing of 72%, due to the increase in the customer base stimulated in particular by the acquisition of 51 counters, and the 69% increase, equal to
€2.4 million, in net commissions generated by placement of managed savings products is due in particular to the management fee for the acquired portfolio.
net commissions and income net interest income
20.9%
gains/(losses) on financial transactions 30% 4.5%
Board Report
32
employees in 2001.
The 94.8% increase in other administrative expenses, equal to €19.1 million, was due to the extension of the distribution network and the consequent adjustments to the management structure.
Amortization and depreciation increased by 240% to €8.5 million, reflecting the considerable resources invested to promote rapid growth of the Bank in line with the objectives of the industrial project launched in 1999.
Approximately 82% of the increase in the amortization charge is due to the disclosure of the year’s portion of goodwill (€196.3 million) referring to the acquisition of 51 counters from the IntesaBCI Group. This goodwill has been stated under assets amongst intangible fixed assets and will be amortized over a period of twenty years.
As mentioned in the section of the Notes to the Financial Statements on accounting standards, the duration of the amortization is due to the exceptional nature of the transaction and its consequent longer impact on the Bank’s business, and is in line with the policy adopted by other credit institutions in similar cases.
Value adjustments –
Provisions
Valuation of loans as at 31 December 2001 has evidenced the need to allocate provisions for doubtful and substandard loans to a total of €1.7 million. On the other hand, value readjustments of
€298,000, deriving from credit recovery, were posted during the year.
The provisions for credit risks were increased by €100,000 and €1.5 million was allocated to the provision for liabilities.
This second provision refers to the further write-down of the loan to Eptaconsors S.p.A. as the judgement of first instance was negative for the Bank. In view of the laconic nature of the grounds set out in the judgement, despite the complex legal matters expounded during the proceedings which, in the opinion of the Bank’s legal consultants, were not fully explored, the Bank considers that the conditions exist to mount an appeal.
Although the Bank considers that grounds for appeal from the judgment can reasonably be presented, it has decided to write down almost the entire loan, recording it at a value of
€500,320 against an original amount of €5 million.
Income taxes
As established in 1999 for the recovery of advance taxes, calculated during that year, the direct tax liability for the 2001 financial year has been calculated as
€902,000 which will reduce the credit towards the Inland Revenue for advance taxes accrued in 1999. Income tax amounted to €1.1 million and consists entirely of IRAP (Regional tax on productive activity).
OPERATING
PERFORMANCE
The current rapid development of the Bank meant that cost rationalization was only partially achieved. However, a review of operating processes, aimed at achieving substantial savings, continued. In the first half of the year, attention was dedicated mainly first to acquisition of the individual portfolio management business of Unipol SGR and then to laying the bases for computer system ‘migration’ of the business volumes of
the 51 bank counters, which involved the wide-scale commitment of the management and partly also of certain specific components of the network structure. This activity was carried out in cooperation with IntesaBCI information systems and with the team provided by CSE, the Bank’s IT outsourcer.
Both operations were completed without any problems with IT or procedure-related activities.
In relation to the above activities, considerable attention was dedicated to organizing training courses for the employees of the 51 counters acquired prior to their integration in the structure of the Bank.
During the second half of the year, activities were mainly focused on adjusting management and operating procedures for the acquired bank counters.
These activities did not, however, impede development of the Bank’s own sale channels. During the year, 8 new bank counters integrated with insurance agencies, 43 new financial advisers offices (financial counters) were opened and 100 new Financial Advisers were assigned.
In the last quarter of the year, a ‘securitization’ operation was carried out on performing residential mortgage loans to a total of €180.8 million. These loans were sold to the special purpose vehicle company in two tranches, the first of which, amounting to
€
(Class A) will be rated AAA/AAA, while Class B (7%) will be rated AA/A. The Junior Bonds (Class C – approximately
€17 million) are not rated and will be subscribed entirely by your Bank and inserted in its own portfolio of long-term investment securities.
This transaction will provide the Bank with fresh liquidity at an advantageous cost in order to finance new residential mortgage loan transactions.
Furthermore, the entire transaction generated a gain of approximately
€11.5 million, recorded partly in the year under review while the other part will be recorded in the 2002 accounts. Your Bank will also act as ‘servicer’, against payment of a fee, on behalf of the vehicle company, i.e. the Bank will continue to manage the loans sold and will also keep its accounting records and corporate books.
In August 2001, the Bank transferred its Registered and Head Office to new, specifically refurbished premises in Via Stalingrado 53, adjacent to the offices of its holding company, Unipol Assicurazioni.
SALES
AND MARKETING
ACTIVITIES
The main feature of business in 2001 was the significant increase in the Bank’s size: from 36 to 95 counters, from 17 to 60 financial counters and from 269 to 373 financial advisers. The increase in Board Report
• migration of all accounts, providing customers with the same economic conditions and quality of service provided by the original banks; • the migrated accounts included
insurance cover (by the Unipol Group) existing with the previous bank, improving conditions wherever possible at no additional cost to customers;
• distribution agreements were stipulated with the Banca Intesa Group managed savings companies and with those with which Banca Intesa maintains commercial relationships; • all of the payment cards available to
former Banca Intesa customers prior to migration, in particular the ‘Cartasi multifunzione’, were issued;
• cash management activities, which are new for your Bank, on behalf of 14 Government or similar bodies were launched at Unipol Banca without encountering any particular problems; • contacts were made with loan
guarantee consortia (mainly referring to CNA and Confesercenti) that operate in cities covered by the branches network. This resulted in the stipulation of 8 new agreements and the reactivation of another 4. This activity will continue also in 2002 in order to cover all the provinces and regions where the Bank operates. The main innovations as regards the range of Bank products and services included:
• the design and launching of the new version of the package account called ‘Conto Completo’. The account includes four lines for private customers (young people, seniors and families) and a line directed at small businesses, with a monthly charge that varies according to the range of
servi-ces offered to and/or requested by customers. In the closing months of the year, more than three thousand customers opened a current account of this type;
• participation in placing the BNL Portfolio Immobiliare Crescita real estate closed-end fund;
• completion of the range of telematic services (a sector in which the Bank is already involved with internet banking and online trading for private customers), with the introduction of: ° ‘Internet small business’, the Internet
banking service for small-sized enterprises and small businesses, ° ‘RB 2000’, the remote banking
service for medium and large enterprises.
With regard to sales activities, as at 31 December 2001, 5,479 virtual current accounts were in operation and the call centre handled approximately 32,000 calls from customers and/or the sales networks during the year.
• an agreement was signed with Consum.it (an MPS Group company that specializes in consumer credit) for placement of their products through the Bank’s sales networks;
• an agreement was signed for placement of Ducato investment funds (MPS Group);
• an agreement was entered into with COOPFOND S.p.A. to establish a Fund for the development of the small and/or medium-sized enterprises of the ‘Lega delle Cooperative’ amounting to approximately €21 million, half of which was paid by Coopfond itself into a specific low-risk and high liquidity portfolio and the other half made available by your Board Report
Bank. However, the loans will be granted only on the basis of an analysis of the creditworthiness of each applicant and according to the opinion of a special technical committee. During 2001, a number of sales initiatives were launched, in cooperation with Unipol Assicurazioni:
• a sales procedure for channelling payments to the Company’s consul-tants (loss adjusters, doctors, lawyers) at Unipol Banca branches to promote the opening of bank accounts; • the PAC account, a special no-charge
current account, intended for customers of the Company who underwrite an insurance accumulation plan;
As adoption of the Euro loomed ever closer, Confesercenti, CNA, and CIA organized several conferences for their members. During these meetings, the Bank’s representatives presented the innovations resulting from the introduction of the Euro as regards relationships with the Bank and the solutions proposed by Unipol Banca. To take advantage of sales opportunities arising from the introduction of the Euro, campaigns were launched in the closing months of the year to promote wider use of POS and payment cards.
An initial set of professional training courses was held by Sales Department to provide more effective support for new product launches. This first training module, focused on the ‘Complete Board Report
financial markets, and the Italian in particular. However, the decline in new production levels can be considered encouraging when compared with the data on the banking system which shows a fall of more than 25% between the 2001 and 2000 results.
Overall production consisted of €36.3 million from the branches network and
€56.5 million from the financial advisers network.
LOANS AREA
ACTIVITIES
The lending activities of the Bank are increasingly directed towards private customers. Within an increase of 50% in the number of loans disbursed in 2001 compared with 2000, the private segment increased by around 85% compared with an upswing of 15% in the small business and corporate segments, with a consequent increase in the ratio of the private customers to total loans disbursed, from 48% in 2000 to 58% in the financial year just ended. During 2001, the Loans Service was involved in migrating the loan positions of the 51 counters acquired. Major attention was dedicated to the mortgage loans sector, which underwent a more than threefold increase in loan positions. A major overhaul of the structure of the service was undertaken in the course of the year, the most important aspects of which included reorganization of the mortgage and special loans department, for branch management and to provide assistance in this important sector of the Bank’s business, and the introduction of new decision-taking bodies at the Head Office (based on areas) that further extended the decisional levels launched towards the end of the previous year with the creation of the ‘reference branch’.
Exposure regulations were updated several times in line with the growth of the Bank in order to improve loan quality, the main goal of your Bank.
INTERNAL AUDIT
ACTIVITIES
The activities of the Internal Audit function primarily concerned fact-finding/organizational inspections, particularly of new counters, and reorganizing and upgrading the structure in order to implement and improve supervisory measures.
During the year under review, 33 ‘full’ inspections were made to as many branches.
The first inspections of the branches acquired from the IntesaBCI Group were made towards the end of the year. Other inspections of a ‘co-operative’ type were also carried out in particular at the newly established branches to assure correct, uniform implementation of the main operating procedures.
A number of Head Office departments were also audited.
As regards the financial adviser network, drafting of the ‘Auditing-operating manual for doorstep selling through financial advisers’ was completed as part of plans to review and upgrade the internal control system.
As regards portfolio management, analysis of regulatory aspects was completed and an assets management auditing system was designed by the Unipol Banca Internal Audit team, with Unione Fiduciaria acting as consultants. Following the appointment of two staff members as personal data protection officers, the relevant notification was submitted to the office of the Data Protection Board.
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Board Report
RISKS CONTROL
OFFICE ACTIVITIES
The Loan Risks Control Office was set up during the year under review, taking over and extending the control activities carried out previously by the Internal Audit function.For this purpose, an Automatic Risk Evaluation procedure has been
implemented to obtain an overall rating for each customer that takes into account not only relationships with the Bank but also data from the Risks Central Office and any prejudicial information. Continuous monitoring has been activated of unpaid and outstanding cheques, prejudicial reports (mention in judicial registers, bankruptcies, etc.), overdue loan instalments, the use of credit cards above the established limit, c/a overdrafts, overdue import-export transactions and invoices, the customers’ internal score, and the Risks Central Office black list. Despite the increased volumes following the acquisition of 51 former IntesaBCI counters, constant monitoring of positions, an intense program of out-of-court recovery and an analytical evaluation of individual positions have made it possible to contain the increase in irregular positions, particularly in terms of amount, compared with the previous year; in particular, there was a reduction of almost 20% in substandard loans.
Type 2000 2001
Number Amount Euro Number Amount Euro
Monitored 354 10,604,041 482 17,301,973
Substandard loans 32 9,475,567 295 8,017,603
Total 386 20,079,609 777 25,319,576
The office has continued with the development of the internal rating project being developed by CSE in
LEGAL DEPARTMENT
ACTIVITIES
of the 51 branches from the IntesaBCI Group, scrutinizing the terms of the contract for problems relating to the acquired loans. The department helped to draft the individual portfolio management contract, which the Bank initiated during the year. It was closely involved in the legal analysis of the contracts relating to the complex securitization transaction undertaken towards the end of the year.
With regard to litigation, as at 31 December 2001, positions managed by the Legal department totalled 470, of which: • 286 positions classified as ‘bad and
doubtful’;
• 44 positions including collective credit recovery actions (‘large groups’) and revocation actions;
• 140 positions already posted to losses but with legal proceedings still pen-ding.
For credit recovery operations through the courts, the Department acted through external lawyers, who were instructed as to actions to be taken. These external lawyers worked in close cooperation with internal staff, keeping them constantly informed of the progress of each cases.
The work of external lawyers is constantly monitored by the Bank’s Legal Department, which managed almost all negotiations regarding possible out-of-court settlements, as well as expressing its opinions to decision-making bodies and drawing these up in legal form. Out-of-court settlements represented one of the main aspects of the Legal Department activity, thus enabling the recovery of credits comparable in value to those that could have been obtained through legal proceedings but in a much shorter time.
Departmental staffing grew in line with the
Bank’s growth during the year, with an increase of two, thus promoting improved rationalization and differentiation of tasks and also assuring more appropriate, effective achievement of the specific objectives of the Department.
INFORMATION
SYSTEMS AND
PROCEDURES
SERVICE ACTIVITIES
2001 was a year of particularly challenging commitments for the Service, with, however, positive results.The main projects in which the Service was involved, in cooperation with the other user offices of the Bank, reflect the considerable growth of the Bank during the year and are summarized below. Following the granting of authorization to conduct portfolio management business, the corresponding company arm of Unipol SGR was acquired, which involved the Service as regards both organization and information technology in organizing the portfolio management placement and administrative processes and migrating customers’ positions from the original information system to that of the Bank.
With regard to the acquisition of bank counters from the IntesaBCI Group, the Service drew up the method of data migration, new staff technical-operating training methods and how to replace the entire IT stock of the 51 counters in the course of one weekend.
In August 2001, the Head Office of the Bank transferred to its present premises. The Service designed the Head Office local networks and the new server distribution (fax server, mail server, printers, etc.) while also saving, transporting and re-activating data held in PCs without interrupting daily business activities.
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Board Report
In cooperation with Bank departments and external parties (Banca d’Italia - ABI), the Service participated in drawing up its Euro introduction plan and related testing. Particular attention was dedicated to the changeover of Automatic Cash Dispensers and to providing support to the branches.
In cooperation with the Loan Service, the Service was actively engaged in the mortgage loan securitization transaction, providing all the data required to set up the underlying portfolio and to assist the vehicle company with IT.
Efforts to update call centre operations continued with a view to improving effective customer management. Various IT/telematic projects are now underway, including video conferencing
with branches, Stock Exchange data for branches via the corporate Intranet, and the new budget and management control system. These projects are expected to come on stream during 2002.
PERSONNEL
DEPARTMENT
ACTIVITIES
With the acquisition of 51 bank counters from the IntesaBCI Group, between 1 July 2001 and the end of the year, the Bank’s workforce increased from 292 to 665 persons with considerable repercussions on the personnel administration sector as regards both numbers and the careful analysis and conversion of the clauses and figures of four different labour supplementary agreements.
1999 2000 2001
118 178 459
114
111 206
head office bank counters
229 292
665 Staff
New staff were recruited during the first half of the year to augment Head Office structures, consolidating in particular roles that are decisive in supporting the
hiring new staff.
During the year, 2,850 training days were held for training in procedures and for courses with a more pronounced
Distance learning on optical media was also used for training, particularly for courses involving all of the Bank’s human resources (such as Privacy, Money Laundering Prevention, Law 626, the Euro).
To comply with C.C.N.L. (National Collective Labour Contract) requirements and to obtain as objective information regarding employees as possible, the Board of Directors approved the establishment of a performance evaluation system. Courses were organized to train Head Office and Branch managers in order to achieve assessments that met with the general criteria. In the near future, it will be possible to link individual assessments, together with business performance, to a rewards system.
2001 was also a year of intense Trade Union relationships.
Negotiations were carried out before, during and after the acquisition of the 51 counters, all intended to preserve the same conditions as enjoyed by these employees at their former bank. Agreements satisfactory to both parties were reached. The current size of the Bank, also as regards staff, means that Trade Union relations will become ever more frequent and intense; our goal is to maintain these relations at an unfailingly positive level of discussion.
FINANCE SERVICE
ACTIVITIES
In 2001, the structure of the finance service was remodelled and extended. In particular, the portfolio management service was set up through acquisition of the Unipol SGR business arm; a customer service desk for foreign exchange and exchange rate derivatives was also set up, while the securities negotiation and cash management/ foreign and business functions were upgraded with the recruitment of new highly qualified staff.
The acquisition of Unipol SGR’s business arm brought 600 new customers to the Service with total assets managed of over
€134 million.
With the sale of the business arm, some of the employees of Unipol SGR transferred to Unipol Banca, forming the core of the portfolio management service, which was subsequently upgraded by recruitment of additional qualified staff.
The customer service desk was set up during the last quarter of the year under review, with the task of broadening the range of services offered to customers, including the area of foreign exchange trading. The network of correspondent banks was also extended in order to optimise the efficiency of the service. Board Report
40
courses on IT and procedures law 626 privacy
-money laundering
technical courses sales courses management courses cross company courses
67 3 7 21 1 1 Personnel training
Board Report
Operations with customers started in October and gradually increased over the following months.
In 2001, the Collection of Sales and Purchases Orders service extended and upgraded the range of services offered to branches. In particular, the type and number of financial instruments offered and/or notified to the branches was broadened in order to allow further diversification opportunities.
Lastly, dealings in market listed financial derivatives were started. This made it possible for the branches to acquire new customers that operate mainly with this type of instrument and to increase the volume of operations with existing customers.
GENERAL BUSINESS
AND COMPLAINTS
SERVICE ACTIVITIES
Beyond its normal activities, the General Business and Complaints Service was actively involved in activities related to the fast pace of growth of the Bank. Particular attention was dedicated to the acquisition of the former Banca Intesa counters and to the structural acquisitions and developments mentioned elsewhere in this report, in order to comply with particular administrative and authorization requirements.These activities were carried out without having to increase staff except for one person in the area of general services, which saw a considerable upswing in
relative accounts and contracts, thus confirming that a strong bond exists between customers and their reference Bank.
This would seem to confirm that, in operations of this type, considerable attention must be paid to the information provided to the public, apart from that required by law and by the supervisory authorities, in order to produce positive returns in terms of sales and image.
Customers were particularly interested in the conditions applied to the various accounts. Precise application of regulations concerning transparency made it possible to demonstrate the absolute correctness of the Bank. Cases submitted to the Banking Ombudsman have so far been resolved in the Bank’s favour.
Although rare in terms of the vast number of accounts and activities transferred, there were cases in which, on the basis of ascertained but occasional shortcomings in performing certain instructions, the Bank paid minor compensation for damages at the request of the customers concerned.
SIGNIFICANT EVENTS
AFTER THE CLOSING
OF THE FINANCIAL
YEAR
On 1 January 2002, the EURO officially became the new European currency in 13 European Countries. Implementation
managed jointly with the security and valuables transportation company used by the Bank (Coopservice), whose unfailing efforts to minimize the problems that emerged, in particular in the opening month of the year, must be acknowledged.
In January, Banca d’Italia authorized the opening of 15 new counters in the first half of the year. Work therefore started on activating the new sales points and, at the date of approval of these annual accounts, seven new bank counters integrated with insurance agencies had been opened, bringing the number of branches to one hundred and two. In particular, branches were opened at Civita Castellana, Avezzano, Trani, and Pescara together with an additional branch in Rome, Forlì and Ravenna. Also in January 2002, Unipol Banca acquired the entire participating interest of Unipol Fondi Ltd from Unipol Assicurazioni, its holding company. Therefore, as of the date of acquisition, the Unipol Banca Banking Group was established.
In February, the business arm relating to personal loans to employees of co-operative enterprises was acquired from Fidicoop Spa of the Fincooper Group.
This acquisition should be seen within the framework of a much broader sales strategy aimed at increasing the potential customer base to which Bank products and services can be offered.
One of the main events in the first months of 2002 was launching the reorganization and re-scaling of the network of bank counters, with Accenture S.p.A. acting as advisor. This will require adoption of a new commercial specialization model, dedicated to our target customer segment.
March marked the sale of the second tranche of the mortgage loans involved in the securitization transaction and the bonds underlying the transaction were placed by Grecale S.r.l. vehicle company. Settlement of items still outstanding with IntesaBCI in relation to the acquisition of 51 counters is now at an advanced stage. In particular, the agreement concerning the loan positions not correctly posted by the assignor, which your Bank was authorized by contract to return to the assignor, is now being defined. The proposal, agreed with IntesaBCI, of obtaining from the latter a consideration equal to the presumed losses that emerged from the evaluation of the Risk Board Report
Board Report
Control and Legal departments is being pursued. Various commercial projects have been launched which will have major repercussions on operations; in particular the ‘corporate project’ relating to sales to companies and their employees that are customers of the Insurance Companies of the Unipol Group, and also the ‘progetto vita’ (life project) for placement of life insurance policies at the Bank’s counters. The 2002 budgeting project has been aligned with the new size of the Bank and progress in achieving the sales targets assigned to the sales network in its channel-based configuration is being monitored and checked periodically. The branch budget monitoring information system has been tuned with a consequent extension of the sales targets assigned to the branches and other sales channels. In addition to increasing the number of current accounts, the main aim in 2002 is to propose the Bank’s services and products to affluent customers in order to increase assets managed and administered.
2002 will mark the first effective year of business of the Bank following completion of the first development stage of its sales channels. However, the Bank will continue to open new integrated branches, although at a slower pace than in 2001. The goal the Bank intends to achieve by the end of the year envisages 120 bank counters and around 100 financial counters,
laying the basis for future transformation into integrated banking branches and around 400 financial advisors.
We would remind you the three-year term of the Board of the Directors expires with the approval of the annual accounts for the year ended 31 December 2001 and, therefore, a new Board of the Directors must be appointed for the three-year period 2002-2004.
On behalf of the Board of the Directors, we wish to thank the Shareholders for the confidence shown in the outgoing Directors. Our thanks also go to the Supervisory Authority for the constructive cooperation provided in solving the problems that emerged during the development of the Bank’s industrial project.
PROPOSED
ALLOCATION OF
THE PROFIT FOR
THE YEAR
Shareholders,
The financial statements herewith presented for your approval have been audited by Reconta Ernst & Young S.p.a. The year closed with a net profit of
€1,553,852 which, in accordance with Article 24 of the Bank’s by-laws, we propose be allocated as follows: • 10% to the Legal Reserve,
• the remaining amount to the Extraordinary Reserve.
46
Financial Statements
Assets Financial year 2001 Financial year 2000 Changes
10 Cash and balances at central banks and post offices 18,405,679 4,332,104 14,073,575
20 Treasury bills and other eligible bills
for refinancing with central banks 21,639,361 18,176,365 3,462,996
30 Loans and advances to banks: 460,953,821 177,121,411 283,832,410
a) receivable on demand 350,167,974 151,895,795 198,272,179
b) other receivables 110,785,847 25,225,616 85,560,231
40 Loans and advances to customers 739,063,416 364,274,263 374,789,153
50 Bonds and other debt securities issued by: 61,685,024 55,212,305 6,472,719
a) public bodies 49,130,222 51,702,525 (2,572,303) b) credit institutions 6,713,324 141,153 6,572,171 of which: - own securities 4,589,194 141,153 4,448,041 c) financial institutions 330,304 876,526 (546,222) d) other issuers 5,511,174 2,492,101 3,019,073
60 Stocks, shares and other equity securities 205,643 177,106 28,537
70 Participating interests: 2,562,670 3,045,030 (482,360)
valued by the equity method - 482,360 (482,360)
other shareholdings 2,562,670 2,562,670 -
90 Intangible fixed assets 201,234,979 7,396,989 193,837,990
of which:
- start-up costs 5,853,427 3,701,840 2,151,587
- goodwill 194,009,115 2,453,559 191,555,556
100 Tangible fixed assets 9,561,622 5,482,910 4,078,712
130 Other assets 68,810,384 36,798,198 32,012,186
140 Prepayments and accrued income: 2,950,757 1,730,795 1,219,962
a) accrued income 2,619,449 1,608,888 1,010,561
b) prepayments 331,308 121,907 209,401
Total assets 1,587,073,356 673,747,476 913,325,880
BALANCE SHEET
Financial Statements
Liabilities Financial year 2001 Financial year 2000 Changes
10 Deposits by banks: 48,598,252 12,139,131 36,459,121
a) repayable on demand 26,180,038 701,391 25,478,647
b) with agreed maturity dates or periods of notice 22,418,214 11,437,740 10,980,474
20 Deposits by customers: 1,046,506,096 437,188,920 609,317,176
a) repayable on demand 958,952,399 393,079,949 565,872,450
b) with agreed maturity dates or periods of notice 87,553,697 44,108,971 43,444,726
30 Debts evidenced by certificates: 74,383,878 46,428,915 27,954,963
a) bonds 47,154,685 32,434,444 14,720,241
b) certificates of deposit 15,394,427 2,502,919 12,891,508
c) other securities 11,834,766 11,491,552 343,214
50 Other liabilities 91,278,367 40,896,480 50,381,887
60 Accruals and deferred income: 1,335,743 732,446 603,297
a) accruals 1,030,834 497,014 533,820
b) deferred income 304,909 235,432 69,477
70 Provision for staff-leaving indemnity 7,029,716 991,105 6,038,611
80 Provisions for liabilities and charges: 7,260,763 4,244,620 3,016,143
b) tax and duties provision 2,756,090 1,233,594 1,522,496
c) other provisions 4,504,673 3,011,026 1,493,647
90 Provisions for credit risks 929,622 826,331 103,291
110 Subordinated liabilities 22,883,000 - 22,883,000
120 Share capital 284,200,000 129,178,782 155,021,218
140 Reserves: 1,114,067 959,062 155,005
a) legal reserve 112,075 95,906 16,169
c) statutory reserves 1,001,992 863,156 138,836
170 Profit (Loss) for the financial year 1,553,852 161,684 1,392,168
BALANCE SHEET
48
Financial Statements
Items Financial year 2001 Financial year 2000 Changes
10 Contingent liabilities 333,209,571 613,219,718 (280,010,147) of which: - acceptances 53,865 71,467 (17,602) - other guarantees 333,155,706 613,148,251 (279,992,545) 20 Commitments 1,456,732 810,924 645,808 of which:
- for sales with obligation of re-purchase 953,885 - 953,885
CONTINGENT LIABILITIES AND COMMITMENTS
Financial Statements
Items Financial year 2001 Financial year 2000 Changes
10 Interest receivable and similar income 52,005,192 25,314,493 26,690,699
of which:
- on loans and advances to customers 36,625,457 18,441,370 18,184,087
- on debt securities 3,617,347 3,315,108 302,239
20 Interest payable and similar charges (22,015,338) (11,023,664) (10,991,674)
of which:
- on customer deposits (18,906,499) (9,064,014) (9,842,485)
- on deposits represented by securities (2,671,515) (1,095,894) (1,575,621)
30 Dividends and other income: 3,571 23,642 (20,071)
a) on stocks, shares and other equity securities 3,571 16,633 (13,062)
b) on shareholdings - 7,009 (7,009)
40 Fees and commissions receivable 20,432,656 14,427,867 6,004,789
50 Fees and commissions payable (9,107,603) (7,750,678) (1,356,925)
60 Net profits (losses) on financial operations 4,530,044 3,323,375 1,206,669
70 Other operating income 9,651,186 1,344,247 8,306,939
80 Administrative expenses: (42,968,654) (21,895,726) (21,072,928)
a) staff costs (23,846,815) (12,079,936) (11,766,879)
of which:
- wages and salaries (16,748,903) (8,431,062) (8,317,841)
- social security costs (4,509,043) (2,311,294) (2,197,749)
- staff-leaving indemnities (1,251,865) (643,992) (607,873)
- retirement pensions and similar costs (459,751) (159,118) (300,633)
b) other administrative expenses (19,121,839) (9,815,790) (9,306,049)
90 Value adjustments on intangible
and tangible fixed assets (8,511,048) (2,502,737) (6,008,311)
100 Provisions for liabilities and charges (1,502,751) (9,104) (1,493,647)
110 Other operating expenses (3,570) - (3,570)
120 Value adjustments on receivables and provisions
for contingent liabilities and commitments (1,748,619) (716,938) (1,031,681)
130 Value re-adjustments on receivables and provisions
for contingent liabilities and commitments 276,494 407,832 (131,338)
140 Provisions for credit risks (103,291) (154,937) 51,646
PROFIT AND LOSS ACCOUNT
Notes to the Financial Statements
General Introduction . . . . 52
Part A - Accounting criteria . . . . 52
Section 1 - Significant accounting criteria . . . . 52
Section 2 - Value adjustments and tax provisions . . . . 55
Part B - Notes to the Balance Sheet . . . . 56
Section 1 - Loans . . . . 56
Section 2 - Securities . . . . 61
Section 3 - Participating interests . . . . 64
Section 4 - Tangible and intangible fixed assets . . . . 67
Section 5 - Other assets . . . . 69
Section 6 - Liabilities . . . . 71
Section 7 - Provisions . . . . 72
Section 8 - Capital, equity reserves, provision for general
banking risks, subordinated liabilities . . . . 74
Section 9 - Other liabilities . . . . 75
Section 10 - Contingent liabilities and commitments . . . . 77
Section 11 - Concentration and distribution
of assets and liabilities . . . . 79
Section 12 - Asset management and dealing for third parties . . . . 84
Part C - Notes to the Profit and Loss Account . . . . 85
Section 1 - Interest income . . . . 85
Section 2 - Fees and commissions . . . . 86
Section 3 - Net profits (losses) on financial operations . . . . 88
Section 4 - Administrative expenses . . . . 88
Section 5 - Value adjustments, value re-adjustments and provisions . . . . 89
Section 6 - Other items of the profit and loss account . . . . 90
Section 7 - Other information on the profit and loss account . . . . 92
Part D - Other information . . . . 92
Section 1 - Directors and Statutory Auditors . . . . 92
52
General Introduction
Basis of presentation
The financial statements of Unipol Banca S.p.A. as at 31 December 2001 consist of the balance sheet, profit & loss account and notes to the financial statements and are accompanied by the Board Report . The financial statements have been presented clearly and provide a true and fair view of the Company’s operating and financial position, also indicating the profit for the year, and have been prepared in accordance with Law 87 of 27 January 1992 and according to the deeds referred to under Article 5 of said decree, represented by the instructions set down in the Banca d’Italia measures 100 of 15 July 1992 and 14 of 16 January 1995, implementing the EEC directives on the annual accounts of credit institutions.
The financial statements of Unipol Banca S.p.A are audited by Reconta Ernst & Young in accordance with the decision of the Shareholders’ Meeting of 20 April 2000 which appointed the firm for the three-year period 2000-2002.
Part A
ACCOUNTING CRITERIA
Section 1 - Significant accounting criteria
In accordance with Article 15 of Law 87 of 27 January 1992, the accounting criteria adopted in preparing the financial statements and in stating the individual items, agreed with the Board of Statutory Auditors, are set forth below.
All amounts are stated according to the principles of prudence and going concern.
Risks and losses relating to the financial year have been taken into account even if they became known only after the end of the year. Income and expenses are shown on an accruals basis and according to the principle of prudence, stating therefore only the result at the end of the financial year.
Unless specifically permitted by the regulations, items are not set off against each other.
Items are disclosed giving precedence to substance over form and to the date at which transactions are settled rather than when they were contracted.
Assets are written down in accordance with the valuation criteria set out below for individual assets items and amortized by adjustments to reduce their value. Such adjustments are written back if the reasons for making them no longer hold.
1. Loans, guarantees and commitments
Loans are stated on the balance sheet at estimated realizable value, calculated taking into account the solvency of the debtors and making adjustments where necessary directly to the asset accounts. Adjustments to the value of both capital and accrued interest are calculated on the basis of a specific analysis of doubtful and substandard loans and are written off directly against the corresponding items. In subsequent years, the original values may be restored if the reasons for the write-down no longer apply.
Guarantees given are recorded at the total value of the exposure.
Commitments to grant finance to third parties are booked at the full amount.
Guarantees and commitments are valued on the same criteria as those applied to loans. Expected losses are covered by the corresponding provisions.
As required by Banca d’Italia, the criteria adopted in classifying non-performing loans are set out below:
- a loan is classified as substandard when the borrower finds himself in difficulties judged to be of a temporary nature, and when there is a prospect of the loan being readmitted to the category of performing loans;
- a loan is classified as doubtful when creditors have started proceedings or when the Bank or another creditor has started recovery proceedings. In addition the Bank considers a loan to be doubtful if the debtor is in grave financial crisis not of a temporary nature which is likely to lead to proceedings for recovery even if these have not yet been started;
- the Bank considers as restructured or in course of restructuring loans to enterprises or groups where the terms of the loans have been altered to enable the borrower to restore his financial situation.
Doubtful loans are valued on the basis of a case-by-case analysis of the likely loss of capital and interest. A similar analysis is carried out for the larger substandard loans.
Loans that have been restructured or are in course of restructuring are valued analytically by reference to the individual position or group, taking into account the related financial losses.
Our entire business of granting and managing loans is monitored constantly and systematically by our internal audit and by our risks control team.
2. Securities and off-balance sheet transactions (other than foreign currency transactions) Transactions in bills and other transferable securities are booked at the time of settlement.
The instruments concerned are Treasury bills and similar securities eligible for refinancing with central banks, bonds and other debt securities and equities, as adjusted for both positive and negative issue spreads in accordance with legal and fiscal regulations.
2.1 Long-term investment securities
Instruments held as long-term investment securities are valued at historic purchase cost. Apart from participating interests, such investment securities are written down if there is a lasting deterioration in the issuer’s solvency. Investment securities are restored to their original value when the reasons for any write-downs cease to apply. The difference between purchase cost and redemption value for fixed interest securities is charged to the interest account for the same securities on an accruals basis taking into account their residual life. The securities here booked under this heading were included among long-term investment securities in the 1999 accounts. Their allocation is the result of a decision by the Board of Directors and is handled within a framework also agreed by the Board of Directors. They account for 30.88% of the Bank’s securities portfolio.
These securities, if valued by the same criteria as trading securities, would have shown a capital loss of €1,074,000 as at 31 December 2001. The market value of the long-term investment portfolio is determined on the basis of the arithmetical average of quotations during the six months preceding the end of the financial year (see Part B, Section
