Table of contents. Directors Report on the Group. Consolidated financial statements and exhibits. Notes to the consolidated financial statements

(1)

(2)

Banca CR Firenze Group - Summary data

188

Reclassified consolidated profit and loss account

189

Reclassified consolidated balance sheet

190

Directors’ Report on the Group

Composition of the Group 191

Comments on consolidated results 196

The Group’s position 201

Participating interest 211

Outlook for the future 217

Consolidated financial statements and exhibits

Consolidated balance sheet 219

Consolidated profit and loss account 221

Notes to the consolidated financial statements

Part A - Valuation methods and accounting principles 222

Section 1 • Description of valuation methods and accounting principles 222

Section 2 • Fiscal adjustments and provisions 226

Part B - Information on the consolidated balance sheet 227

Section 1 • Loans 227

Section 2 • Securities 232

Section 3 • Participating interests 236

Section 4 • Property and equipment, and intangible assets 243

Section 5 • Other assets 245

Section 6 • Borrowings 247

Section 7 • Provisions 249

Section 8 • Share capital, reserves, reserve for general banking risks and subordinated debt 253

Section 9 • Other liabilities 258

Section 10 • Guarantees and commitments 259

Section 11 • Concentration and distribution of assets and liabilities 262

Section 12 • Asset management, custody and administration 266

Part C - Information on the consolidated profit and loss account 271

Section 1 • Interest 271

Section 2 • Commissions 273

Section 3 • Gains and losses on financial transactions 275

Section 4 • Administrative expenses 277

Section 5 • Value adjustments, value re-adjustments and provisions 279

Section 6 • Other consolidated profit and loss components 283

Section 7 • Other information on the consolidated profit and loss account 285

Part D - Other information on the consolidated profit and loss account 286

Section 1 • Directors and Statutory Auditors 286

Exhibits to the consolidated financial statements

Consolidated statement of changes in capital, reserves, negative differences on consolidated and equity-valued holdings,

reserve for general banking risks and net profit for the year 287

Consolidated statement of changes in financial position 288

Reconciliation between equity and net profits as appearing in the parent company and consolidated financial statements

of Banca CR Firenze SpA 290

Report on the Independent Auditors

292

Listing of Branches

294

Table of contents

Banca CR Firenze Group at 31 December 2003

Banca CR

Firenze SpA CR CR CR CR

direct Pistoia e Civitavecchia Orvieto Mirandola Infogroup Info2B

Companies in the Banking Group holding Pescia SpA SpA SpA SpA SpA SpA Total

CR Mirandola S.p.A. 94.870% 5.000% 99.870%

CR Orvieto S.p.A. 73.570% 73.570%

CR Pistoia e Pescia S.p.A. 51.000% 51.000%

CR Civitavecchia S.p.A. 51.000% 51.000%

Centro Riscossione Tributi –

CERIT S.p.A. 100.000% 100.000%

CR Firenze Gestion Internationale S.A. 80.000% 80.000%

Perseo Finance S.r.l. 60.000% 60.000%

Infogroup S.p.A. 94.000% 4.000% 1.000% 1.000% 100.000%

Data Centro S.p.A. 82.474% 15.710% 1.816% 100.000%

Info2b S.p.A. 60.000% 40.000% 100.000%

Informatica Casse Toscane S.p.A.

in liquidazione 49.700% 11.000% 60.700% Mirafin S.p.A. 100.000% 100.000% Tebe Tours S.r.l. 90.000% 90.000% Other subsidiaries Centro di Telemarketing S.r.l. 100.000% 100.000% Il Nocciolo S.r.l. 100.000% 100.000% Citylife S.p.A. 98.496% 98.496%

Centrovita Assicurazioni S.p.A. 43.000% 8.000% 51.000%

Banking and finance companies held at least 20%

Findomestic Banca S.p.A. (*) 47.170% 2.830% 50.000%

CFT Finanziaria S.p.A. 46.978% 46.978%

Centro Factoring S.p.A. 40.863% 5.729% 0.033% 0.004% 46.629%

Centro Leasing S.p.A. 25.847% 7.084% 0.561% 1.182% 0.006% 34.680%

Sviluppo Industriale S.p.A. 29.964% 29.964%

Other companies held at least 20%

Beta S.r.l. 47.000% 47.000%

Arval Service Lease Italia S.p.A.(**) 22.500% 22.500%

Ce.Spe.Vi. S.r.l. 20.000% 20.000%

ET Group S.p.A. 42.724% 42.724%

(*) Company consolidated on the proportional method at 50%.

(**) Taking into account the interest held by Findomestic Banca SpA, which is consolidated on the proportional method, in Arval Service Lease Italia SpA, the Banca CR Firenze Group’s interest comes to a total of 30.000 %.

(5)

Banca CR Firenze Group at 29 February 2004

Banca CR

Firenze SpA CR CR CR CR CR

direct Pistoia e Civitavecchia Orvieto Mirandola La Spezia Infogroup Info2B

Compan ies in the Banking Group holding Pescia SpA SpA SpA SpA SpA (*) SpA SpA Total

CR Mirandola S.p.A. 94.870% 5.000% 99.870%

CR Orvieto S.p.A. 73.570% 73.570%

CR Pistoia e Pescia S.p.A. 51.000% 51.000%

CR Civitavecchia S.p.A. 51.000% 51.000%

Centro Riscossione Tributi –

CERIT S.p.A. 100.000% 100.000%

CR Firenze Gestion

Internationale S.A. 80.000% 80.000%

Perseo Finance S.r.l. 60.000% 60.000%

Infogroup S.p.A. 94.000% 4.000% 1.000% 1.000% 100.000%

Data Centro S.p.A. 82.474% 15.710% 1.816% 100.000%

Info2b S.p.A. 60.000% 40.000% 100.000%

Informatica Casse Toscane S.p.A.

in liquidazione 49.700% 11.000% 60.700%

Mirafin S.p.A. 100.000% 100.000%

Tebe Tours S.r.l. 90.000% 90.000%

CR La Spezia S.p.A.

(through Carinord 2 S.p.A.)(*) 68.093% 68.093%

S.R.T. S.p.A.(*) 100.000% 100.00%

Other subsidiariess

Centro di Telemarketing S.r.l. 100.000% 100.000%

Il Nocciolo S.r.l. 100.000% 100.000%

Citylife S.p.A. 98.496% 98.496%

Centrovita Assicurazioni S.p.A. 43.000% 8.000% 51.000%

Banking and finance companies held at least 20%

Carinord 2 S.p.A.(*) 58.952% 58.952%

Findomestic Banca S.p.A.(**) 47.170% 2.830% 50.000%

CFT Finanziaria S.p.A. 46.978% 46.978%

Centro Factoring S.p.A. 40.863% 5.729% 0.033% 0.004% 0.163% 46.792%

Centro Leasing S.p.A. 25.847% 7.084% 0.561% 1.182% 0.006% 0.790% 35.470%

Sviluppo Industriale S.p.A. 29.964% 29.964%

Other companies held at least 20%

Beta S.r.l. 47.000% 47.000%

Arval Service Lease Italia S.p.A.(***) 22.500% 22.500%

Ce.Spe.Vi. S.r.l. 20.000% 20.000%

ET Group S.p.A. 42.724% 42.724%

(*) Awaiting to be formally included in the Group.

(**) Company consolidated on the proportional method at 50%.

(***) Taking into account the interest held by Findomestic Banca SpA, which is consolidated on the proportional method, in Arval Service Lease Italia SpA, the Banca CR Firenze Group’s interest comes to a total of 30.000%.

(6)

The most important changes during the year in the Group’s participating interests, and its configuration, concerned the following com-panies:

Cassa di Risparmio di Mirandola SpA

After the Public Purchase Offer made by Banca CR Firenze SpA from 2 to 20 December 2002 on 13.104% of CR Mirandola SpA’s share capital had closed with a 98.966% adherence, on 2 January 2003, 971,931 CR Mirandola SpA shares were purchased, equal to 12.968% of its share capital.

The Banca CR Firenze SpA Group’s holding rose to 73.832%.

In the course of 2003 a further 435 shares were purchased from private shareholders (0.0058% of the share capital).

On 13 June 2003, following Fondazione CR Mirandola’s exercising its option to sell the remaining 26.032% held by it to Banca CR Firenze SpA, the Group’s interest rose to 99.870% and Fondazione CR Mirandola definitively ceased being a shareholder.

Info 2B SpA

Starting from 27 March 2003, Info2B SpA became part of the Banca CR Firenze Group, as communicated to the Bank of Italy in a letter dated 30 July 2003.

Centro di Telemarketing Srl (Centro di Telemarketing SpA in 2002)

On 3 June 2003 Banca CR Firenze SpA acquired 50% in Centro di Telemarketing SpA from Banque Cortal SA, thus raising its interest from 50% to 100%.

The Shareholders’ Meeting, which approved the 2002 financial statements, resolved to transform Centro di Telemarketing into an Srl-type company with share capital of Euro 10,000.

Il Nocciolo Srl

On 18 December 2003, Banca CR Firenze SpA acquired 100% in Il Nocciolo Srl from Fondiaria - SAI SpA.

This company, which was formed on 4 June 1990, owns a land site in Florence in the Novoli area where Banca CR Firenze SpA’s new headquarters will be built.

Citylife SpA

With the disengagement of Accenture SpA, which up to 31 December 2003 had the beneficial ownership of 48.547% in Citylife, Banca CR Firenze SpA as from 1 January 2003 went back to having full ownership of the entire holding of 97.094% in the company’s share capital. This percentage at the year-end had risen to 98.496% following action taken to replenish losses.

Centro Factoring SpA

The subsidiary CR Pistoia e Pescia SpA in May 2003, in connection with the sale to the Intesa Group of its holding in Intesa Asset Management SpA, acquired 42,688 shares in Centro Factoring SpA belonging to Biverbanca, Carisap, CR Alessandria, CR Viterbo, CR Terni e Narni and CR Foligno, equalling 0.677% of the share capital, which raised the Banca CR Firenze Group’s interest from 45.952% to 46.629%.

Centro Leasing SpA

Banca CR Firenze SpA on 30 April 2003 sold 2,087,707 shares in Centro Leasing SpA (6.674%), bringing down its interest at Group level to 34.291%. Following the purchase by the subsidiary CR Pistoia e Pescia SpA in May 2003 of 121,814 share in Centro Leasing (0.389%) belonging to Biverbanca, Cr Alessandria and Carisap, the Banca CR Firenze Group’s holding went up to 34.680%.

Beta Srl

Within the context of the partnership set up with Partecipazioni Real Estate, which in 2002 had become a shareholder in CFT Finanziaria SpA, Banca CR Firenze SpA had acquired a 49% holding in Beta Srl whose objects are to buy and sell real estate.

To duplicate in Beta Srl, a CFT Finanziaria SpA service company, the same shareholder structure as in CFT Finanziaria SpA itself, Banca CR Firenze SpA sold 2% of Beta Srl to CR San Miniato SpA.

(7)

The changes which have taken place after the end of 2003 are described hereunder: Carinord 2 SpA

As is explained in detail in the Directors' Report on the parent company in the section Significant events after the year-end, in order to exe-cute the agreements signed on 16 July 2003 between Banca CR Firenze SpA and Banca Carige SpA, as buyers, and Banca Intesa SpA, Fondazione CR La Spezia and Fondazione CR Carrara, as sellers, Banca CR Firenze SpA on 16 January 2004 acquired 125,562,151 shares in Carinord 2 SpA, equal to 58.95% of this holding company’s share capital, as part of an operation which involved gaining control over CR La Spezia SpA (through this company Banca Carige SpA, which is also a shareholder in Carinord 2 SpA, will control CR Carrara SpA pursuant to the agreements in place).

On receiving authorisation from the Bank of Italy for the formal entry of CR La Spezia SpA into the Banca CR Firenze Group, the Group will also be joined by SRT SpA, a tax-collection company entirely held by CR La Spezia SpA.

As an effect of the shares held by CR La Spezia SpA in Centro Factoring SpA and Centro Leasing SpA, at Group level the interest in these companies rises to 46.792% and 35.470% respectively.

(8)

In connection with the changes which have taken place in the consolidation area during the first half of 2003, following the purchase of a further stake in CR Mirandola SpA, a pro forma consolidated profit and loss account for the year ended 31 December 2003 has been prepared in order to facilitate a meaningful comparison on a similar basis with the 31 December 2002 data. The pro forma consolidat-ed profit and loss account has been drawn up notionally back-dating the effects of the above-mentionconsolidat-ed change to 1 January 2003. In particular, this acquisition caused an increase in amortisation of goodwill arising on consolidation and a decrease in the portion of net profit pertaining to minority shareholders, amounting to Euro 5.3 million and Euro 0.7 million respectively. The pro forma consolidat-ed profit and loss account has not been auditconsolidat-ed.

Again in 2003, the Group was engaged in sales action aimed at meeting the objectives indicated in the budget and industrial plan and on identifying more efficient modes of organisation in order to improve customer service and contain costs.

The effort put in led to the attainment of significant results, both in terms of earnings and in the increase in overall borrowing and lend-ing, with much attention always being paid to achieving a better and more efficient allocation of risk capital, while maintaining returns and creating value.

Comments on overall earnings

Financial year 2003 closed with a consolidated net profit of Euro 95.5 million, rising 22.4% over 2002 using the same consolidation area. We report the following on the individual margins.

The interest margin

Directors’ Report on the Group

Comments on consolidated results

2003 2002 Change

pro-forma 2003-2002 pro-forma Euro million %

Interest margin 612.2 588.4 23.8 4.0%

Overall business margin 1,009.5 982.2 27.3 2.8%

Operating profit 333.5 323.1 10.4 3.2%

Profit from ordinary activities 200.5 199.8 0.7 0.4%

Gross profit 211.7 195.2 15.5 8.5% Net profit 95.5 78.0 17.5 22.4% millions of euros 2003 2002 Change pro-forma 2003-2002 pro-forma Euro million %

Interest charged to customers 831.7 851.3 -19.6 -2.3%

Interest paid to customers -84.4 -114.0 29.6 -26.0%

Net interest from customers 747.3 737.3 10.0 1.4%

Interest earned on securities 49.4 -69.7 -20.3 -29.1%

Interest paid on securities -133.4 -150.7 17.3 -11.5%

Net interest on securities -84.0 -81.0 -3.0 3.7%

Interest received from banks 37.5 36.0 1.5 4.2%

Interest received from banks -88.6 -103.9 15.3 -14.7%

Net interest from banks -51.1 -67.9 16.8 -24.7%

Interest margin 612.2 588.4 23.8 4.0%

(9)

The 4.0% increase in the interest margin over 2002 is basically due to growth in Net interest from customers and in particular to the good performance in the consumer credit sector, which lessened the effects of the reduction in the spread between lending and borrowing rates in retail banking. It was also due to the significant improvement in the interbank position through using the cash deriving from the securitisation of regular loans and the issue of hybrid capitalisation instruments by the parent company.

The overall business margin

Compared with the preceding year, the overall business margin has increased Euro 27.3 million (+2.8%) despite the presence, in the December 2002 data, of an extraordinary dividend of Euro 27.4 million (Euro 17.6 million not counting the tax credit) paid by Eptaconsors SpA in November 2002. Excluding this dividend, the increase would have been 5.7%. In relation to the other components of the overall business margin, Group synergies have led to a significant improvement in commissions earned (+11.0%), and net gains from financial transactions more than doubled, benefiting substantially from the better situation in the financial markets.

2003 2002 Change

Interest margin 612.2 588.4 23.8 4.0%

Net commissions and other income 347.3 323.6 23.7 7.4%

Commissions earned 319.9 288.1 31.8 11.0%

Commissions expense -71.3 -57.9 -13.6 23.5%

Other operating income 127.9 123.9 4.0 3.2%

Other operating costs -29.0 -30.5 1.5 -4.9%

Net gains on financial transactions and share dividends 25.7 10.0 15.7 157.0%

Dividends from participating interests 9.3 45.2 -35.9 -79.4%

Profits of companies recorded on the equity method 15.0 15.0 0.0 0.0%

Overall business margin 1,009.5 982.2 27.3 2.8%

millions of euros 38,9% 3 9,8% 38,6% 28,8% 27,5% 28,6% 21,8% 20,5% 21,7% 8,3% 9,9% 8,6% 0% 20% 40% 60% 80% 100% 2001 2002 2003 Guarantee Issued Other services

Tax collection and lotteries service

Management, trading and advisory services Collection and payment services

2,3% 2,2% 2,5%

(10)

Operating results

In 2003 the action taken to rationalise and increase the efficiency of our operational structures led to the containment of Group compa-nies’ costs, even though activities were continuously expanding, with the increase in administrative expenses being limited to 3.5% and value adjustments to property and equipment and intangible assets coming down 6.1% from the preceding year.

The circumstances described above led to an improvement in operating results of Euro 10.4 million over 2002 (+3.2%). Again exclud-ing the above-mentioned Eptaconsors dividend, the improvement in operatexclud-ing results would amount to 12.8%.

Consolidated net profit

The amount of loan provisions and net value adjustments is 11.7% over the preceding year as a result of recording significant loan value adjustments connected with positions which had unexpectedly deteriorated.

Compared with 2002, the profit from ordinary activities shows an increase of 0.4% (+16.3% without counting the extraordinary divi-dend paid by Eptaconsors SpA in the preceding year) and the consolidated net profit for the year, which in the previous year had been hit by a loss of Euro 17.6 million on the subsequent sale of this company, is Euro 95.5 million (+22.4%).

2003 2002 Change

Overall business margin 1,009.5 982.2 27.3 2.8%

Administrative expenses -614.7 -593.8 -20.9 3.5%

Staff costs -378.7 -370.1 -8.6 2.3%

Other administrative expenses -236.0 -223.7 -12.3 5.5%

Value adjustments to property and equipment and intangible assets (excluding amortisation of goodwill arising on consolidation and on

equity-valued holdings) -61.3 -65.3 4.0 -6.1% Operating profit 333.5 323.1 10.4 3.2% millions of euros 2003 2002 Change pro-forma 2003-2002 pro-forma Euro million % Operating profit 333.5 323.1 10.4 3.2%

Amortisation of goodwill arising on consolidation and on

equity-valued holdings -26.2 -26.2 0.0 0.0%

Loan provisions and net value adjustments -104.7 -93.7 -11.0 11.7%

Net value adjustments to non-current financial assets -2.1 -3.4 1.3 -38.2%

Profit from ordinary activities 200.5 199.8 0.7 0.4%

Gain (Loss) on exceptional items 11.2 -4.6 15.8 n.s.

Gross profit 211.7 195.2 16.5 8.5%

Income taxes for the year -102.6 -103.9 1.3 -1.3%

Profit pertaining to minority interests -13.6 -13.3 -0.3 2.3%

Consolidated net profit for the year 95.5 78.0 17.5 22.4%

(11)

Return on equity and Ratios

The Group’s return on equity, calculated as the net profit for the year over average shareholders’ equity excluding accruing net profit, is 13.0% (11.1% at 31 December 2002) without taking account of amortisation on goodwill arising on consolidation, or 10.2% after deduc-tion of such amortisadeduc-tion. In this connecdeduc-tion, it should be noted that in the period from 1 January 2002 to 31 December 2003, consoli-dated shareholders' equity has risen Euro 68.7 million (+7.2%).

With regard to the trend in economic ratios representing the Group’s structural costs compared with the preceding year, the following aspects should be noted:

• the substantial stability in the cost/income ratio, which passes from 65.5% al 65.7%, calculated by comparing (a) administrative expenses (net of expense recoveries), depreciation and amortisation (net of amortisation of goodwill arising on consolidation and equity-valued holdings) and the provision made for risks and charges on staff relating to the Supplementary Pension Fund and (b) the overall business margin (net of expense recoveries);

• the reduction in the incidence of staff costs on the overall business margin and on total assets, which has fallen from 37.68% to 37.50%, and from 2.10% to 2.04% respectively.

4%

6%

8%

10%

12%

14%

2001

2002

2003

40

50

60

70

80

90

100

Consolidated net profit ROE

4%

6%

8%

10%

12%

14%

2001

2002

2003

800

900 1000

1100

Consolidated shareholders' equity ROE

Consolidated Net profit and ROE

(12)

60% 61% 62% 63% 64% 65%

2001

2002

2003

900 920 940 960 980 1000 1020

Overall business margin Cost/income

Cost/income and

(13)

Borrowing

Compared with the preceding year, borrowing from Group company customers registered an increase of 5.9%, mainly due to the growth in direct borrowing (+7.7%). The positive change in indirect borrowing, which saw a recovery in customers’ liking for this kind of investment, is 4.2%.

Direct borrowing

Again in 2003, the aggregate under examination, in line with the tendency common to the whole banking system, shows growth in bonds and in sight borrowing, particularly in relation to current accounts. Particular note should be given to the increase in subordi-nated bonds, following the issues made principally by the parent company, also on the euromarket. It should be noted that bonds include an amount of Euro 39.9 million (Euro 34.8 million at 31 December 2002) for securities reacquired by Group companies.

2003 2002 Change 2003-2002 Euro million %

Direct borrowing 13,294.5 12,340.2 954.3 7.7%

Indirect borrowing 14,543.3 13,956.2 587.1 4.2%

Total borrowing from customers 27,837.8 26,296.4 1,541.4 5.9%

millions of euros

Deposits, Certificates of deposit and bonds 12,410.1 11,353.2 1,056.9 9.3%

Sight borrowing (current account overdrafts, savings deposits and

third party funds under administration) 7,391.8 6,861.0 530.8 7.7%

Certificates of deposit 351.8 429.1 -77.3 -18.0%

Bonds (including subordinated bonds) 4,666.5 4,063.1 603.4 14.9%

Repurchase agreements 822.6 924.7 -102.1 -11.0%

Other securities and bank drafts 61.8 62.3 -0.5 -0.8%

Direct borrowing 13,294.5 12,340.2 954.3 7.7%

(14)

Indirect borrowing

Compared with the preceding year, indirect borrowing, which comprises funds managed under various forms and other financial assets held by customers on administered deposit accounts, showed an increase of 4.2%, following the notable growth in asset management (+20.5%) and insurance products (+23.1%), partly offset by a slight drop in the other sectors.

935 -2.000 4.000 6.000 8.000 10 .000 12 .000 14 .000 2001 2002 2003 3.391 6.160 925 4.063 6.861 823 4.667 7.392

Direct borrowing

2003 2002 Change 2003-2002 Euro million % Administered funds 5,700.2 5,758.0 -57.8 -1.0% Managed funds 8,843.1 8,198.2 644.9 7.9%

Asset management (assets managed with any destination - “GPM”; assets managed placed in open-end investment companies - “GPS”;

assets managed placed only with funds run by related or associated banks - “GPF”) 2,347.4 1,948.4 399.0 20.5%

Funds 4,305.7 4,471.1 -165.4 -3.7%

Insurance (actuarial reserves) 2,190.0 1,778.7 411.3 23.1%

Indirect borrowing 14,543.3 13,956.2 587.1 4.2%

millions of euross

-Sight borrowing

Bonds (included subordinated bonds) Other securities and bank drafts

-Certificates of deposit Repurchase agreements -1.0 0 0 2.0 0 0 3.0 0 0 4.0 0 0 5.0 0 0 6.0 0 0 7.0 0 0 8.0 0 0 9.0 0 0 Asset management Funds Insurance (technical reserves) Total

Managed funds

2001 2002 2003

(15)

Customer loans

Customer loans have increased by Euro 868 million (+7.1%). In this connection it should be noted that good performance in the sector of mortgage loans and loans to Public Entities is continuing (+13.6%), and that within the current accounts and loans sector, which has risen 4.5% on the preceding year, consumer loans have made a significant contribution.

Current accounts and loans 8,599.1 8,232.3 366.8 4.5%

Discounted bills 134.3 155.9 -21.6 -13.9%

Mortgage loans 4,162.8 3,663.7 499.1 13.6%

State Treasury Area Office 6.1 10.4 -4.3 -41.3%

Other lending 199.1 171.1 28.0 16.4% Customer loans 13,101.4 12,233.4 868.0 7.1% millions of euros 267 -14.000 12.000 10.000 8.000 6.000 4.000 2.000 2001 2002 2003

Current accounts and loans Mortgage loans Other lending

3.564 7.472 171 3.664 8.232 199 4.163 8.599

(16)

Risk positions

The overall coverage level for risk positions has risen 0.8 percentage points as compared with the preceding year.

In particular, after taking into account also the Provisions for loan losses (line 90 of liabilities in the balance sheet), the coverage level for doubtful loans at 31 December 2003 would rise to 61.6%.

Compared with the preceding year, the incidence of net risk positions on net loans has dropped from 2.66% to 2.55%, thus demon-strating the careful policy adopted by all the Group banks for loan pay-outs, control and merit evaluation.

Securities

During 2003 there was a notable reduction in the investment securities portfolio, following the transfer to the trading-account securi-ties category for Euro 199.0 million, redemptions for Euro 73.6 million and sales for Euro 12.8 million.

Gross deoubtful loans 320.8 284.3 36.5 12.8%

Amounts written off -171.3 -154.6 -16.7 10.8%

Net doubtful loans 149.5 129.7 19.8 15.3%

Doubtful loans coverage ratio 53.4% 54.4% -1.0%

Non-performing and restructured loans 235.7 248.7 -13.0 -5.2%

Amounts written off -49.1 -52.8 3.7 -7.0%

Net non-performing and restructured loans 186.6 195.9 -9.3 -4.7%

Non performing and restructured loans coverage ratio 20.8% 21.2% -0.4%

Gross risk positions 556.5 533.0 23.5 4.4%

Total amounts written off -220.4 -207.4 -13.0 6.3%

Net risk positions 336.1 325.6 10.5 3.2%

Risk positions coverage ratio 39.6% 38.9% 0.7%

millions of euros

Refinanceable treasury bonds 181.3 304.3 -123.0 -40.4%

Bonds and other debt securities 1,638.2 1,546.8 91.4 5.9%

Shares and other equity securities 37.1 44.1 -7.0 -15.9%

Total securities 1,856.6 1,895.2 -38.6 -2.0%

including: investment securities 96.1 376.4 -280.3 -74.5%

(17)

Consolidated shareholders’ equity

(*) in pro-forma terms the increase would be 22.4%.

Compared with the preceding year, shareholders’ equity which at 31 December 2003 amounted to Euro 1,024.2 million as shown above, has risen mainly as a result of the allocation of a portion of the 2002 profits to reserves. The increase in shareholders' equity and the emergence of the share premium account occurred on the partial execution of the incentives stock option plan decided by the parent company Board of Directors on 16 October 2000 on the specific mandate of the Shareholders’ Meeting.

At 31 December 2003, consolidated shareholders’ equity also includes a reserve of about Euro 0.2 million in respect of own shares, relat-ing to the shares in the parent company held at that date by fully consolidated companies, for a total nominal value Euro 0.1 million. In the notes to the consolidated financial statements included in this report information is given on the operations of fully consolidat-ed companies on the parent company shares.

Share capital 620.2 619.2 1.0 0.2%

Share premium account 0.4 0.0 0.4 100.0%

Reserves 240.5 208.6 31.9 15.3%

Revaluation reserve 1.4 2.2 -0.8 -36.4%

Reserve for general banking risks 65.6 65.6 0.0 0.0%

Negative differences arising on consolidation 0.6 0.6 0.0 0.0%

Net profit for the year(*) 95.5 82.6 12.9 15.6%

Consolidated shareholders’ equity 1,024.2 978.8 45.4 4.6%

(18)

Regulatory capital and requirements

Compared with 2003, supplementary capital increased substantially as a result of the issue by the parent company of hybrid capitali-sation instruments for Euro 200 million.

The solvency ratio at 31 December 2003, calculated according to the rules set by the Regulatory Authorities, is 10.86% and is accord-ingly 2.86 points above the 8% limit set for banking groups.

Group organisational activities

Action on Group Integration and Governance was directed, again in 2003, to centralising functions further so as to improve overall Group coordination, efficiency and utilisation of human resources, aiming at the same time to boost sales efficiency.

Together with the Civitavecchia, Orvieto and Mirandola savings banks, a project for the integration of the Loans Recovery Area has been prepared and put into operation, which has involved rendering the process more efficient, both in terms of human resources, as well as for the fact that, going alongside this, a new electronic system for handling positions has been set up at the parent company, which can be used by every Group bank to obtain information.

To sum up, the new procedure brings about the centralised handling of problem loans, for which the parent company attends to the procedural and administrative aspects, issuing periodic reports.

Servicing activities are performed by Banca CR Firenze SpA in the name and for the account of the subsidiary banks, following a uni-fied recovery procedure based on the practices and powers delegated to the parent company.

During 2003 work continued on integrating the Finance Area, which provides for the following areas being reserved to the parent com-pany:

• Management of the owned securities portfolio – which means in substance taking on and handling the financial positions, within the powers delegated, in order to arrive at Group integrated handling of securities investment and market risk and to obtain scale eco-nomies. Decisions as to the size of the owned-securities portfolio is accordingly decided by the parent company in relation to the posi-tion in the liquidity structure of the entire Group, and the related market risk.

• Treasury – management of the interest rate, liquidity and exchange risk, aiming at maximising attainable results while complying with the limits defined in the internal regulations, and acting consistently with the strategic directions for corporate strategy. The Treasury activity also comprises the integrated handling of the Bank’s and Group’s liquidity, aiming at containing risks and optimi-sing the handling of flows.

• Customer Finance – this develops and manages relations and business with institutional customers and with accredited business and private customers, supporting the supply of financial products, and ensuring a high level of customer service through the Group banks belonging.

With regard to Treasury matters, the parent company is the sole direct member in the "New Bi-Rel" with authorisation to represent the subsidiaries.

Primary capital (Tier 1) 895.6 896.5 -0.9 -0.1%

Supplementary capital (Tier 2) 816.7 608.5 208.2 34.2%

Deductions -92.0 -114.6 22.6 -19.7% Regulatory capital 1,620.3 1,390.4 229.9 16.5% Credit risk 1,191.6 1,117.2 74.4 6.7% Market risk 50.3 23.8 26.5 111.3% Other requirements 18.4 13.7 4.7 34.3% Total requirements 1,260.3 1,154.7 105.6 9.1% Risk-weighted assets 15,753.4 14,434.0 1,319.4 9.1%

Primary capital/Risk-weighted assets 5.68% 6.21% -0.53%

Regulatory capital/Risk-weighted assets 10.60% 9.80% 0.80%

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Group sales activities

As already described in the relative section of the parent company annual report, many marketing initiatives were extended to the sub-sidiary banks with a view to strengthening the Group’s identity and developing synergies.

Again during 2003 the primary objective was to tend customer relations, with fidelity programs to boost customer loyalty and the sup-ply of products responding to the changed and more detailed requirements of customers.

The positive results registered up to 31 December 2003 are summarised below:

• the stock of current accounts, which have been enhanced with banking and extra-banking services with the launching of the new Giotto Accounts Line, totals 189,856, of which 147,124 are with Banca CR Firenze SpA, 25,098 with CR Pistoia e Pescia, 11,496 with CR Civitavecchia and 6,138 with CR Orvieto. Sales in the sector posted an increase of 16,239 accounts;

• the stock of payment cards totals 152,952, comprising: 114,445 with Banca CR Firenze SpA, 22,381 with CR Pistoia e Pescia, 4,958 with CR Civitavecchia, 3,483 with CR Orvieto and 7,685 with CR Mirandola. The Group banks represent an approximately 2% share of the entire CartaSì system; Bancomat Pagobancomat-VisaElectron cards number 371,954;

• in the private customers mortgage loans sector, amounts totalling Euro 424.4 million have been approved, of which Euro 274.8 lion are with Banca CR Firenze SpA, Euro 82.3 million with CR Pistoia, Euro 17.7 million with CR Pistoia CR Orvieto, Euro 23.4 mil-lion with CR Civitavecchia, and Euro 26.2 milmil-lion with CR Mirandola.

The Group made 68 bond issues on the domestic market placing a total of about Euro 708.1 million (Banca CR Firenze SpA: 23 issues for Euro 364.2 million, of which Euro 30 million was in subordinated Tier II loans and Euro 28.7 million was placed privately with Institutional parties; CR Pistoia e Pescia: 17 issues for Euro 187.1 million; CR Mirandola: 10 issues for Euro 51 million; CR Civitavecchia: 9 issues for Euro 51 million; CR Orvieto: 9 issues for Euro 54.8 million).

During 2003 the collection of gross premiums went particularly well in the bankinsurance sector, coming to Euro 585.7 million at Group level (+71% on the preceding year), of which Euro 77 million derived from contracts with recurring premiums.

Assets managed under Individual Portfolio Management arrangements at 31 December 2003 amounted to about Euro 2,347 million val-ued at market price including the positions of Banca CR Firenze SpA, CR Pistoia, CR Orvieto, CR Civitavecchia and CR Mirandola (Euro 1,596.5 on their own mandates, Euro 153 million on those delegated to BNP Paribas SA; CR Pistoia e Pescia: Euro 480 million; CR Mirandola: Euro 111 million, CR Orvieto: Euro 2 million; CR Civitavecchia: Euro 5 million), compared with Euro 1,948 million at 31 December 2002, with an increase of about 19%.

Placements with the CR Firenze Previdenza Open-End Pension Fund had 6,081 members at the year-end and capital of Euro 6.8 mil-lion (Banca CR Firenze SpA 4,275 members and Euro 4.9 milmil-lion capital; CR Pistoia e Pescia 1,183 members and Euro 1.2 milmil-lion capi-tal; CR Civitavecchia 500 members and Euro 0.5 million capicapi-tal; CR Orvieto 123 members and Euro 0.2 million capital).

The development of integrated Multichannel arrangements enabled the Group to reduce operating costs (shifting low-return banking operations to new channels) and increasing services revenues.

In 2003 there was a 14.7% increase in the number of Liberamente Via Telefono contracts entered into by Group customers:

The Liberamente.net portal at the end of 2003 numbered 79,761 customers (+12%), as follows:

In BtoC Internet sales, the Group consolidated its position arriving at having over 300 concerns active on line with about 25,000 trans-actions for over Euro 3 million of business.

Banca CR Firenze S.p.A. CR Civitavecchia S.p.A. CR Orvieto S.p.A. CR Pistoia e Pescia S.p.A. Total

75,143 558 556 5,677 81,934

+9,682 +180 +102 +574 +10,538

Banca CR Firenze S.p.A. CR Civitavecchia S.p.A. CR Orvieto S.p.A. CR Pistoia e Pescia S.p.A. Total

61,162 3,468 2,119 13,012 79,761

(20)

The ATM cash machines network at Group level reached 502, with 13 new devices going into operation.

During the 2002 we continued to follow the strategy of rationalising virtual channels based on the expansion of the io-impresa portal which at the year-end had 5,152 business customer members.

There are 11,485 members with the Home Banking BtoB and B@B service (+4.4% on 2002).

Risk Management

During 2003, the individual banks’ Risks Committees were centralised at Group level, to ensure uniformity in risk management poli-cies. In all the Group banks the restrictions set by regulations have been constantly complied with, and consequently also the value lim-its, in terms of credit, market and liquidity risk.

There has been an increase in customer loans with a rise in those secured over assets. The unfavourable economic situation has led to a slight increase in anomalous positions (non-performing and doubtful loans), whereas the incidence of “dangerous-type credits” has fallen.

The measurement of financial risks using internal models has been extended to all the banks with a unified information system. In 2003 the Group adhered to the Italian Database for Operative Losses, setting up monitoring procedures in all the banks.

Human resources

The Group Human Relations Area, which was set up in 2002, coordinates and integrates the functions of Group banks relating to staff management issues, with the aim of increasing consistency in conduct and methods.

In particular, Banca CR Firenze SpA has directly conducted an assessment of the personnel of CR Mirandola SpA to list functions con-sistently with the method adopted by the parent company. This survey, which was carried out following methods which were shared with CR Mirandola SpA, was accompanied by an analysis of organisation aimed at identifying possible areas for efficiency improve-ments.

Thereafter a number of measures have been implemented (new organisation chart and a review of access passwords), and others are nearing completion (outsourcing archives, issue of regulations, EDP forms, credit process), and others are being defined within the spe-cific work groups (listing of expertise, new distribution model).

Group Banks workforce 31 December 2003

Workforce Average length Average age % in sales of service channels

Banca CR Firenze S.p.A. 3,337 18.8 44.9 72.3

CR Pistoia e Pescia S.p.A. 712 18.3 43.4 75.1

CR Orvieto S.p.A. 167 15.0 40.8 79.0

CR Civitavecchia S.p.A. 199 14.3 41.7 80.9

CR Mirandola S.p.A. 189 12.6 39.4 70.9

Business customers at 31 December 2003

Banca CR Firenze S.p.A. 3,982 77%

CR Civitavecchia S.p.A. 382 7.3%

CR Orvieto S.p.A. 281 5.7%

CR Pistoia e Pescia S.p.A. 508 10%

(21)

In 2003 we continued to work on the staff’s professional development, extending our action to the subsidiary banks by providing in-house seminars and programming periods during which their personnel can operate alongside their colleagues at the parent company departments. The staff enjoyed the benefits of the training modules also through the remote training platform which was available to all the banks (except CR Mirandola SpA) and CERIT SpA.

Overall 22,461 man-days were spent on in-house training, as follows:

PARTICIPATING IN GROUP TRAINING COURSES (training in office hours)

Participants Differences % on 2002 Man-days Difference % on 2002

Banca CR Firenze S.p.A. 17,018 +51.2 18,987 +29.8

CR Pistoia e Pescia S.p.A. 1,452 +104.5 1,411 -29.6

CR Orvieto S.p.A. 522 +83.2 529 -25.3

CR Civitavecchia S.p.A. 1,086 +64.8 890 +15.1

CR Mirandola S.p.A. 162 -27.0 209 +75.6

CERIT S.p.A. 217 -64.2 148 -77.6

Other Group companies 207 +23.9 287 -18.7

Total for Group 20,664 +48.6 22,461 +16.7

Staff and area network

GROUP EMPLOYEES

31/12/2003 31/12/2002 Change

Fully consolidated

Banca CR Firenze S.p.A. 3,337 3,401 -64

CR Pistoia e Pescia S.p.A. 712 749 -37

CR Civitavecchia S.p.A. 199 197 2

CR Orvieto S.p.A. 167 168 -1

CR Mirandola S.p.A. 189 193 -4

Infogroup S.p.A. 342 338 4

Data Centro S.p.A. 48 49 -1

CERIT S.p.A. 213 222 -9

CR Firenze Gestion Internationale S.A. 2 1 1

Total 5,209 5,318 -109

Companies consolidated on proportional method

Gruppo Findomestic 876 824 52

Total 876 824 52

Other subsidiaries

Centrovita Assicurazioni S.p.A. 31 24 7

Info2b S.p.A. 5 4 1

Total 36 28 8

(22)

The Group distribution network at 31 December 2003 comprised 15 financial spaces and 438 branches as follows:

* including one office for loans under pawn.

With CR La Spezia coming into the Group, the distribution network will increase by 62 branches, of which 51 are located in the La Spezia area, 8 in the Massa Carrara area, and 1 each in the Parma, Lucca and Pistoia areas.

Communications

During the year we started on making a review of our corporate identity which will be concluded in 2004. The aim is to boost a Group identity. The new logo, which is inspired from the design of a Ghiberti panel, has replaced the old one on all hard and electronic mate-rial of Group banks and is also used on all advertising matemate-rial for products in common.

Area Banca CR CR Pistoia e CR Civitavecchia CR Orvieto CR Mirandola Group Firenze .S.p.A.* Pescia S.p.A.* S.p.A.* S.p.A. S.p.A.

Arezzo 35 35 Bologna 1 6 7 Florence 131 4 135 Grosseto 16 16 Leghorn 8 8 Lucca 13 8 21 Mantua 8 8 Massa Carrara 10 10 Modena 18 18 Perugia 14 3 17 Pisa 13 13 Pistoia 2 48 50 Prato 11 4 15 Rome 6 24 30 Siena 18 18 Terni 23 23 Verona 1 1 Viterbo 3 10 13 TOTAL 278 70 27 36 27 438

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Fully consolidated companies

Cassa di Risparmio di Pistoia e Pescia SpA

This company closed the year with a net profit of Euro 17,115 million, down 6.2% on 2002, but Euro 0.30 million, or 1.8%, over budget. ROE dropped to 8.3% (9% in 2002).

The results were affected also by the already-mentioned bad economic situation which penalised the productive structure in the area covered by the bank.

The 3% drop in the interest margin was caused basically by the fall in rates. Lending, although on the increase, did not manage to com-pensate the reduction in conditions.

The overall business margin dropped 1.7% (Euro 113.8 million against Euro 115.9 million in 2002).

Gains on financial transactions had a slight increase due to the rise in trading and year-end quotations. There was growth (+ Euro 3.46 million) in commissions coming from bankinsurance products, with an increase in absolute value of premiums taken of over Euro 56.6 million. There was a notable rise (+7.4%) also in commissions on collection and payment services.

Borrowing came to Euro 3,795 million overall, up 3.9% on 31 December 2002. Direct borrowing amounted to Euro 1,748 million (+2.6%) and indirect borrowing stood at Euro 2,047 million (+5.1%).

Overall loans, before adjustments, amounted to Euro 1,565.6 million, with total growth of 10.5% on 2002. Medium/long-term financing went up 10.6%. reaching Euro 968.6 million. Short-term loans rose 10.2% (Euro 631 million, against a drop of 15% registered last year). In 2003 three new branches were opened at Vergato, Sasso Marconi and Casalecchio di Reno.

Cassa di Risparmio di Orvieto SpA

The net profit for the year came to Euro 3 million, up 168% on 2002. ROE increased to 7.9%.

The good results were the consequence of the increase in commissions, the centralisation of the finance area at the parent company, and the improved quality of the loans portfolio, which required lower provisions. These positive effects compensated the contraction in the interest margin.

Total borrowing was over Euro 681 million (+1.9%). Direct borrowing reached Euro 441.7 million (+3.5%) and indirect borrowing amounted to Euro 239.7 million (-0.8%). Funds collected for management, which rose 11%, reached 63.9% of indirect borrowing, against 57.1% for 2002.

Net loans exceeded Euro 336 million (+21%), thanks to a notable increase in mortgage loans and short-term financing.

The interest margin showed a 5.3% drop deriving from the fall in rates and the drop in financial interest which was not compensated by the average lending volumes. The overall business margin went up Euro 1.071 million (+4.1%) following the increase in services rev-enues. The drop in amortisation and depreciation also affected the operating profit, which amounted to Euro 6.7 million (+3.1%). During the year the head office and the sales network were reorganised to increase sales efficiency and effectiveness, with Group inte-gration in mind. The bank continued with its middle-term policy aimed at repositioning itself in terms of the quality of the assets it has in its balance sheet, an increase in commissions revenues, and a restructuring of the composition of borrowings towards medium/long-term forms, and of lending.

In 2003 it opened two new branches at Terni and Civita Castellana. There are 36 branches in operation, in the Perugia, Terni and Viterbo areas. Cassa di Risparmio di Civitavecchia SpA

Net profit reached Euro 5.0 million, up 28.7% on 2002.

Direct borrowing rose Euro 72.9 million (+16.4% on 31 December 2002). Lending registered an increase of Euro 79.9 million (+24.6%). The results achieved in direct borrowing were caused by an increase in short-term deposits (+ Euro 40.5 million), in the medium/long-term sector (+ Euro 26.9 million) and in repurchase agreements (+ Euro 5.4 million).

The increase in lending, despite the reduction in corporate positions transferred to the parent company for about Euro 10.7 million, was achieved thanks to the heavy increase in the medium/long-term sector (+25.4%) and to a lesser extent in short-term loans (+15.5%) and the important growth in advances on commercial collection orders (+83,8%).

Indirect borrowing shows a balance of Euro 309.9 million, up 7.9% on 31 December 2002. Within this sector, there was a notable rearrangement in quality, with a drop in administered deposits of Euro 4.3 million (-2.6%) and a rise in funds collected for management of Euro 27 million (+22.2%). The drop continued in asset management positions, which amounted to Euro 4.9 million (down Euro 42.8 million on 31 December 2002). The rise in indirect borrowing is mainly due to the strong increase in Funds, which registered a balance of Euro 115.7 million, and in insurance products (+15%). Total borrowing, overall, has therefore increased by Euro 95.6 million. Gross doubtful loans came to Euro 12 million, up Euro 1.5 million on 31 December 2002.

The overall business margin rose over the preceding year by about 13%. The interest margin increased by about Euro 2.7 million (+13%), thanks to the heavy growth in interest received from customers and to maintaining the level of the cost of borrowing, despite the impor-tant reduction in the contribution made by financial interest due to the higher growth in lending as against direct borrowing, the reduc-tion in rates and the redempreduc-tion of investment securities. Services revenues rose about 13%.

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In order to boost sales activities, important action was taken on the sales network, with two branches being restructured, another two being transferred and a new one being opened in the EUR Torrino district of Rome, with a total investment of about Euro 1.7 million. Cassa di Risparmio di Mirandola SpA

At 31 December 2003 the total amount of direct borrowing increased 4.76% over the preceding year, (from Euro 440.5 million to Euro 461.5 million): performance in this area was pushed mainly by bond and current account borrowing; repurchase agreements went down, as a result of corporate decisions.

Indirect borrowing had a drop of 3.8%, going from Euro 560.8 million to Euro 539.3 million. There was good performance in “Managed” deposits, which despite a negative trend in the market, registered an increase of Euro 54.8 million, bringing the incidence of funds col-lected for management on total indirect borrowing from 42.8% to 54.7%.

Overall borrowing from customers, both direct and indirect, amounted to Euro 1,000.7 million as against Euro 1,001.4 million in the pre-ceding year.

At the year-end, customer loans amounted to Euro 459.2 million, up over 15% on the preceding year.

Commercial loans registered a decrease of Euro 42,408 thousand, going from Euro 112,588 to Euro 70,180 thousand. This came about through a change effected in the bank’s strategic lines following the centralisation of the finance area at the parent company.

The trends in borrowing and lending, and in interest rates, generated an increase in the interest margin of 5.3% (from Euro 17.1 million to Euro 17.9 million).

The overall business margin rose by over Euro 2 million (+7.20%) on the preceding year. Besides growth in the interest margin, there was also a rise in net commissions and other operating revenues. Gains on financial transactions remained stable. Following a curtail-ment in investcurtail-ments from Euro 5.1 million to Euro 4.7 million there was a fall in dividends.

Fixed costs have risen 1.8% over 2002. Staff costs remained unchanged, whereas the other administrative expenses increased 5.5%. Depreciation of property and equipment and amortisation of intangible assets remained stable.

Net value adjustments and provisions came to Euro 5.3 million, up Euro 1.3 million on 31 December 2002. Net profit for the year amounted to Euro 2.4 million, up Euro 410,000 over the preceding year; roe is 3,8%. CERIT SpA

This company, which is 100% held, runs the tax collection service for the areas of Florence and Massa Carrara. In 2003 it continued its activities which commenced on 1 January 2002 with the business segment spin-off from Banca CR Firenze SpA.

The business of collecting taxes registered on the rolls is going through a difficult phase, with changes in regulations which are having a negative impact on the efficiency of productive processes and are making it awkward to arrive at a state of financial equilibrium. In particular, during the year, facilitated arrangements for settling past tax issues came into force which involved the company in heavy organisational work, also limiting the possibility of coercive recovery for tax bills on the rolls falling under the arrangements. The new procedures set up for executing the recovery of tax bills, such as the seizure of assets or mortgage registrations, led to the recovery and definition of a significant number of tax bills on the rolls.

Financial year 2003 closed with a loss of Euro 1.7 million, down about 30% on the preceding year. This result is mainly due to the increase in commissions earned on the collection of expenses attaching to forced collection proceedings and to extraordinary gains relat-ing to interest collected on Government bonds assigned by the Ministry of the Economy and Finance.

CR Firenze Gestion Internationale SA

This company, which was formed on 25 October 2000, operates solely on running the sectionalised Luxembourg common investment fund entitled the Giotto Lux Fund.

At 31 December 2003, the company was managing assets in the Giotto Lux Fund common funds worth Euro 4.183 billion. The overall business margin came to Euro 7.9 million and the interest margin to Euro 0.1 million.

The financial statements closed with a net profit for the year after tax of Euro 6.5 million. Infogroup SpA

This company operates in informatics for finance companies and banks. With Euro 34.2 million of turnover, it ranks 52nd among Italian software and service companies in its field.

Again in 2003 investment continued to be sluggish in information technology services. Despite the difficulties in the sector, the com-pany continued to amplify its supply of banking applications with innovative solutions, obtaining a sharp improvement in orders and increased business in the second half of the year.

Production value came to Euro 35 million, up 2.14%.

In 2003 its contract to supply the Banca CR Firenze Group with applications maintenance expired. Considering the good results attained, it has been decided to extend the contract for a year, with the intention of redefining and boosting Infogroup SpA’s role and responsibility. Its financial statements for 2003 closed with a net profit for the year, after tax, of over Euro 2 million.

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Data Centro SpA

This fully-owned Group company continued in the business of providing EDP services. During the year its collaboration on various projects coordinated by the parent company was very significant. The company’s revenues amounted to Euro 18.8 million, cost of serv-ices Euro 11.9 million, depreciation and amortisation Euro 1.5 million and financial charges Euro 12,814.

It closed the year with a result of Euro 266,240 compared with Euro 197,204 at 31 December 2002.

Companies consolidated on the proportional method

Findomestic Banca SpA

This company, in which the Group holds a 50% interest, closed the year with loans issued of Euro 4.6 billion, for 11.2 million transac-tions made in the year (+24.5%), thus consolidating its position as leader in the consumer credit business in Italy, with market penetra-tion of 13.4%.

It closed the year with a net profit of Euro 90.6 million (+45% on 31 December 2002). Return on equity was 25.7%.

With regard to the composition of its turnover, the Carta Aura card represented Euro 1,310 million (+16.3%) or 28% of the total. This card is held by over 2.3 million Italians and is accepted by 70,000 registered stores (ranking third in Italy for the number of card-hold-ers and first for revolving cards). In the year, loans were also made on vehicles, for Euro 1,137 million (+12.1%), on electrical household appliances, furniture, HI-FIs and television sets for Euro 1,202 million, and Euro 968 million (+15.9%) was disbursed on personal loans.

Unconsolidated subsidiaries recorded on the equity method because of the nature of their activities

Centrovita Assicurazioni SpA

This subsidiary is 51%-held by the Group. It is in the insurance business and for this reason is not consolidated. It is recorded in the consolidated financial statements on the equity method pursuant to article 36, paragraph 3 of Legislative Decree 87 of 1992.

During the year, in order to arrange for its growing financial needs, Centrovita issued a subordinated loan of Euro 10 million, taken up for 51% by the parent company with the remaining 49% being taken by the French Group BNP Paribas SA.

As a result of the difficult cycle in the economy during the year, savers went towards forms of financial investment with a low-risk con-tent. The company accordingly amplified its products range, adding policies intended to cover specific customer requirements, through protected capital insurance contracts and with Total Return arrangements, in addition to policies with minimum guaranteed rates. Collections rose 71% over 31 December 2002 (Euro 604 million as against Euro 353 million for gross premiums recorded in the preced-ing year).

Financial investments came to Euro 2,235 million (against Euro 1,776 million at 31 December 2002), up 26%.

Improvement continued to take place in its financial and asset management. In accordance with the asset allocation policies adopted in the past, Centrovita faced the year with a strongly defensive securities portfolio. Of the bonds component, 93% had a rating of or above “AA”. During the year action taken to contain costs led to moderating the increase in operating costs and in depreciation and amortisation, despite expansion in activities.

The net profit for the year was Euro 9.3 million, compared with Euro 6.9 million at 31 December 2002, with an increase of 35%. Perseo Finance Srl

This company, which was formed in 1999 pursuant to Law 130 of 30 April 1999, engages according to its objects exclusively in securi-tisation arrangements.

During 2003, it handled cash flows relating to collections, expenses and revenues, as well as payments to investors of portions of prin-cipal and interest resulting from the securitisation of doubtful loans effected by the parent company Banca CR Firenze in 1999. At pres-ent, the company has no plans to engage in further securitisation operations. Its future business will accordingly be to continue on the present securitisation.

Net profit for the year was Euro 2,039. Info2B SpA

This company’s objects are to study, design, create and sell software products and services for e-business to small and middle-sized businesses and public administrations. It closed its fourth year of operation with a profit of Euro 4,111.

During the year it consolidated the insourcing of e-Procurement within the CR Firenze Group, launched the Self-Invoicing project in which Info2B will work on the Suppliers project as chief designer, and completed e-government projects for the Region of Tuscany, the running and development of the ioImpresa portal, training on e-business subjects for the Banca CR Firenze Group and providing oper-ational support to the ET Group / Textiles Pages.

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Associated companies recorded on the equity method

We briefly indicate hereunder the key data relating to the associated companies operating in the sectors of major interest to the Group. Centro Leasing SpA

This company, in which the Group holds 34.68% makes finances businesses through leasing contracts.

In 2003 the company felt the impact of general market conditions, albeit to a lesser extent than other companies in the sector. The drop in new production from 2002 was -11%, as against -16% for the market. During the year 38,359 applications for leasing arrangements were received, for over Euro 2,397 million (-13% compared with 2002), many of which were not accepted following the information which had been gathered on the related credit risk. Over 25,000 new leasing contracts were made (-0.7% on the preceding year) for about Euro 1,188 million (-Euro 11.8 million on 2002), the average amount of the contracts being around Euro 47 thousand. Notwithstanding these difficulties, the company stands at a 4% share of the market, which is slightly lower than in the past. Centro Leasing’s market share in the instrumental goods and industrial vehicles sectors was significant.

The year closed with a net profit of Euro 16.4 million, up 6.3% on 2002. Centro Factoring SpA

In 2003, against a substantially stagnating market, the company continued on the sales development plan it had commenced already in 2002 which aims at increasing business through expanding its presence in the territory. Agreements were made with important banks to offer services which were more appropriate to business requirements, and a network of credit brokers has been set up addressed to market segments and businesses of specified dimensions for acceptable customers in the areas covered.

In line with the company’s programmes and its activities, results at 31 December 2003 confirm the company’s programmed growth trend. Loans acquired amounted to Euro 2,294 million, up 21.3% on 2002.

Loans with recourse for Euro 1,597 million were engaged, and for Euro 697 million without recourse. In the domestic sector the com-pany acquired loans for Euro 2,215 million, and for Euro 78.6 million in the international sector. At 31 December 2003 open loans amounted to Euro 746 million including advances amounting to Euro 558 million.

The year closed with a profit of Euro 2.4 million, up 10% on 2002. Arval Service Lease Italia SpA

Within the global economic crisis which was running, the fleet of cars run by all the operators registered growth, in 2003, of about 16% over the preceding year. At national level the long-term leasing market continued in 2003 to show a growth trend which stemmed not only from the recourse to long-term leases by middle/large firms and the public sector, but also from rising interest on the part of small and medium-sized businesses.

At 31 December 2003 the company closed with a net profit of Euro 9.5 million. Equity amounted to Euro 36.3 million. The vehicles for hire fleet grew 23% passing from 60,374 to 74,609, and the overall fleet operated (including "fleet management") rose 10%, going from 69,474 to 76,822 vehicles.

In order to expand its customer target, the company created a new business sales structure to develop the medium-small businesses segment.