The Funding of Sustainable Development

EMN Annual ConferenceMilan - 5 June 2009

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1888Birth of the Banca San

Paolo di Brescia (BSPB)

1883Birth of the

Credito Agrario Bresciano

(CAB)

1963BSPB acquires Banca di Valle

Camonica (BVC)

1992Acquisition of Banco di San Giorgio (BSG)

by CAB

1998Merger of CAB and

BSPB with the creation of Banca

Lombarda as parent company and contribution of

branch network of CAB and BSPB to Banco di Brescia

2000Acquisition of Banca Regionale Europea* by Banca Lombarda. The Group takes the

name of Banca Lombarda e

Piemontese Group

Birth of the Banca Mutua Popolare della

Città e Provincia di Bergamo then renamed Banca

Popolare di Bergamo (BPB)1869

Birth of the Società per la Stagionatura e l’Assaggio delle Sete ed Affini (later renamed Banca

Popolare Commercio e

Industria BPCI)1888

Merger of BPB and Credito

Varesino (BPB-CV)

1992

Acquisition of Banca Popolare

di Ancona (BPA) by BPB-CV. Birth of the BPB-CV Group

1996

Acquisition of Centrobanca by BPB-CV,

Birth of Banca 24-7 (BPB-CV

Group)2000

Acquisition of Banca

Carime by BPCI2001

Birth of the BPU Banca Group

from the integration of BPB-CV and

BPCI2003

1st April 2007

Birth of UBI Banca following

the merger of the BPU Banca

Group and the Banca Lombarda

e Piemontese Group

*Banca Regionale Europea was created in 1994 following the merger between Cassa di Risparmio di Cuneo and Banca del Monte di Lombardia

UBI Banca was formed on 1 April 2007 following the merger of the Banche Popolari Unite Group and the Banca Lombarda e Piemontese Group

The UBI Group: Predominant Retail Business and Strong Northern Italian Franchise

Mkt Share >= 15%

5% <= Mkt Share < 15%

2% <= Mkt Share < 5%

Market share < 2%

58

18

43

124

103

56

12

121

888

113

6

222

122

8

2

22

1 44

Northern Italy:** 71% deposits 84% loans 65% branches

Group activity focussed on the Retail segment

4 million clients**, mainly retail; at network bank level approx. 77% of revenues are generated by retail customers, 17% by corporate customers and 6% by private banking clients

As at 31 March 2009:

Total loans : 96,9 bln€ (96,4 as at 31.12.2008)

Total direct funding: 95,7 bln€ (97,2 as at 31.12.2008)

Total indirect funding : 73,4 bln € (74 as at 31.12.2008)

Good credit quality: as at 31st March 09, NPL/total loans: 0,98%, net impaired loans /total loans: 1,3% - cost of credit 66 bps

Low risk profile:

Funding mainly from customer base (86%) and limited recourse to international financial markets (14%)

Defensive business mix: focus on commercial customer business, with a non aggressive commercial policy

No exposure to subprime mortgages and related instruments

* As at 26 May 2009** As at 30 September 2008

1.964 branches in Italy + 9 branches abroad

First Italian cooperative banking Group by market capitalization (6,3 bln€*), organized as a federal model, comprising nine network banks and several highly specialized product companies, offering a wide range of financial services and products.

1

Number of branches as at 24 March 2009Market shares as at Sept 2008

3

4

Close to 4 Million Clients with a Very Large Retail Component***

* Calculated as Net Interests + Net Commissions by market over Markets Total (Retail + Corporate + Private)** Includes other Retail clients *** Commercial segmentation: Private: Assets > 500k Euro, Mass Market: Assets < 50k Euro, Affluent: Assets of 50 – 500k Euro; Small Business turnover < 5 Euro Million, Corporate Core: Turnover 5 – 150 Euro Million, Large: Turnover > 150 Euro Million

5

The Group structure (1/2): Multi-functional Federal Model, Highly Integrated at Commercial, Organizational and Financial Level with Centralised Risk Monitoring

Mission

Presence in reference markets

Distinctive capability to understand and serve local economies

Drivers

Service model differentiated by customer segment

Sharing of the same organizational structure

Sharing of tools and services provided by parent company

Mission

Competitive product and services offering, in line with market best practice

Drivers

Continuous product innovation

Ability to listen to distribution network requirements

Mission

Management, co-ordination and control

Leading business functions

Provision of key support services

Centralised risk monitoring

9 Network Banks

Product companies

Parent Bank:

UBI Banca

6

361 branches

358 branches

216 branches

291 branches

259 branches

318 branches

59 branches

52 branches

38 branches924 financial advisors (7)

9 NETWORK BANKS

ASSET MANAGEMENT UBI Pramerica (partnership with Prudential US)

CONSUMER CREDIT B@nca 24-7

CORPORATE BANKING Centrobanca

FACTORING UBI Factor

LEASING UBI Leasing

NON-LIFE BANCASSURANCE UBI Assicurazioni

LIFE BANCASSURANCE Aviva Vita (Partnership with Aviva) Lombarda Vita (Partnership with Cattolica)

ON LINE TRADING IW Bank (listed company)

MAIN PRODUCT COMPANIES

(listed cooperative Bank) provides management, co-ordination, control

and supply of centralized services to the network

(1) and 19.98% by Fondazione Cassa di Risparmio di Cuneo and 19.98% by Fondazione Banca del Monte di Lombardia and the rest by minority shareholders; (2) and 16.64% by Aviva SpA; (3) and the rest by minority shareholders; (4) and 14.15% by Aviva SpA and the remaining by minority shareholders; (5) and (6) by minority shareholders. Data as at 30 September 2008(7) Number of financial advisors as at 31 Dec 2008

100.00%

100.00%

83.36%(2)

59.95%(1)

100.00%

99.29%(3)

85.83%(4)

82.96%(5)

91.16%(6)

The Group structure (2/2)

Number of branches updated as at 24 March 2009

7

Distribution Model Specialized by Market as Enabling Factor of Commercial Approach Differentiated by Segment

Main Characteristics

Private Corporate

Commercial Area Parent Bank

RetailBranch

Network Bank

Retail CorporatePrivate

Private Banking Unit

Corporate Banking Unit

Retail TerritorialArea

Retail

Distribution Structure

Commercial Area

Divisional model (Retail, Private, Corporate) with customer segmentation (Mass Market, Affluent, Small Business, Private, Corporate)

2

Linearity of commercial processes by market between the Parent Company and the Network Banks

3

Relationship with the customers focused by segment with “specialized” account managers (Mass Market, Affluent and Small Business Account Managers, Corporate Account Managers and Private Bankers)

4

Commercial targets by Market and with differentiated KPIs according to the segment’s characteristics

5

Clear separation between commercial and lending processes

1

Commercial Area Parent Bank

General Management

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Microcredit: Italy in the European context

In recent years Italy has become a high immigration rate Country and according to a recent World Bank Study, the ratio of exclusion from financial services reaches 25% of the population, one of the highest the European Union.

Nevertheless services in microfinance (especially microcredit) are under developed.

Source: Overview of the Microcredit Sector in the European Union 2006-2007EMN Working Paper n. 5

Absence of dedicated regulation

Misinterpretation of the meaning: often considered as a social mean of support (redistribution of wealth – preferential and assistential welfare regime) instead of creation of new entrepreneurial opportunities.

The problems of microcredit in Italy

Political/Regulatory ContextPolitical/Regulatory Context

Microfinance organizationsMicrofinance organizations

General Fragmentation (limited size and geographic distribution)

Difficulty in working with commercial banks (due to the compulsory regulation which must be respected)

Reliance especially on donations / guarantee funds and volunteer activities

Welfare model (very low or no interest rates and reduced attention to default rates)

Difficulty in raising funds

Low medium/long term economic sustainability

Limited results (in terms of credit facilities granted and beneficiaries reached)

Skill fragmentation and lack of scoring models

MFIs from Italy

Context of Activity/ Legal Status

MicrocreditPersonal Loans

FinancingMicrofinance activity

International 6 66,7%NonProfit   4 44,4%Profit   2 22,2%Domestic 2 6,7% 1 11,1%NonProfit 1 3,3%  Profit 1 3,3% 1 11,1%Local 28 93,3% 2 22,2%NonProfit 25 83,3% 2 22,2%Profit 3 10,0%  Overall Total 30 100,0% 9 100,0%

Source: www.microfinanza-italia.org

Mostly small initiatives promoted on a local level by Public Administration or Banking Foundations.

Almost none grants credit directly, the majority promote Guarantee Funds, leaving the loan facilities to Banking Institutions

Funding model and terms are the biggest weaknesses of MFIs from both Eastern and Western Europe.

Not only lack of funding, but also missing strategy

Funding related needs: Funding related needs:

• Developing fund raising and long term funding strategies

• Funding operational costs relating to growth and to increase outreach

• Funding of incentives to scale up operations

Scale from “1“ – weak to “4“ – strong.

EIF Market Study Microlending (1/3)

Survey Results - FundingSurvey Results - Funding

Operational Model (1/2)

Different funding needs and sourcesDifferent funding needs and sources

• Financing of start-up costs,

• Equity capital,

• Temporary and over-time-decreasing subsidies for operational costs,

• Budget to co-finance specific capacity building activities (Training, MIS, Mutual Exchange, etc.)

Micro-entrepreneur

Micro-entrepreneur

Micro-entrepreneur

Micro-entrepreneur

Microloans non-financialservices

Income subsidies fromnational social welfare

Funding fornon-financial services

(e.g. ESF)

Refinancing Facility(e.g. ERDF/ESF)

Guarantee Facility(e.g. CIP/ERDF/ESF/National

Guarantee Schemes)

MFI

Key findings from the EIF Market Study Microlending: Potential Funding Model for MFIs in the EU

Operational Model Proposal

• Funds for structural investments

• Funds for supporting activity

• Guarantee Funds

• Target Individuation• Communication• Selection and

Support• Territorial Network

•Equity•Territorial Network•Complementary Products and Services

The Expected Partnership Benefits

Equity

Support to the development of the territorial network

Network Banks (“corner in” branches)

Collateral Products and Services for Income Statement integration

Product Companies

Cost Control (synergies)

Institutional Recognition

Specialized Financial Intermediary Financial PartnerSpecialized Financial Intermediary Financial Partner

Positioning in a sector of high social value

Bespoken products focused on the defined target (ex. InItaly for immigrants)

Potential acquisition of new clientele

New bankable subjects

Partners of relevant social organizations