Exhibit 99.6

 

M E D I O B A N C A

  

  

Annual Accounts and Report

as at 30 June 2024

 

 

 

 

M E D I O B A N C A

  

LIMITED COMPANY

SHARE CAPITAL €444,515,142.5

HEAD OFFICE: PIAZZETTA ENRICO CUCCIA 1, MILAN, ITALY

 

REGISTERED AS A BANK.

PARENT COMPANY OF THE MEDIOBANCA BANKING GROUP.

REGISTERED AS A BANKING GROUP

 

 

Financial Statements

Mediobanca Group

30 June 2024

 

 

 

 

Mediobanca S.p.A. 

Registered Office: Piazzetta Enrico Cuccia, 1 - Milan, Italy

Tel. +39 02 88291 – Fax +39 02 8829.550 

Enrolled in the Bank of Italy Register of Banks as No. 4753

Parent Company of Mediobanca Banking Group 

Enrolled in the Register of Banking Groups with ABI code No. 10631.0

http://www.mediobanca.com;

Tax identification number and Milan-Monza-Brianza-Lodi Companies’

Register Enrolment No. 00714490158

VAT No. 10536040966

Fully paid-up share capital: €444,515,142.5

Member of the Interbank Deposit Guarantee Fund and the National Guarantee

Fund Ordinary shares listed on MTA Market

 

This document, in PDF format, does not constitute the fulfilment of the obligations laid down in Directive 2004/109/EC (“Transparency Directive”) and in Delegated Regulation (EU) 2019/815 (“ESEF Regulation” – European Single Electronic Format) for which a special XHTML format has been developed.

 

www.mediobanca.com

 

translation from the Italian original which remains the definitive version

 

 

 

 

BOARD OF DIRECTORS

 

       Term 
       of office 
         
Renato Pagliaro  Chairman   2026 
Sabrina Pucci  Deputy Chairman   2026 
Vittorio Pignatti Morano  Deputy Chairman   2026 
Alberto Nagel  Chief Executive Officer   2026 
Francesco Saverio Vinci  General Manager   2026 
Mana Abedi  Director   2026 
Virginie Banet  Director   2026 
Laura Cioli  Director   2026 
Angela Gamba  Director And Lead Independent Director   2026 
Marco Giorgino  Director   2026 
Valérie Hortefeux  Director   2026 
Maximo Ibarra  Director   2026 
Sandro Panizza  Director   2026 
Laura Penna  Director   2026 
Angel Vilà Boix  Director   2026 

 

STATUTORY AUDIT COMMITTEE

 

Mario Matteo Busso  Chairman   2026 
Elena Pagnoni  Standing Auditor   2026 
Ambrogio Virgilio  Standing Auditor   2026 
Angelo Rocco Bonissoni  Alternate Auditor   2026 
Anna Rita de Mauro  Alternate Auditor   2026 
Vieri Chimenti  Alternate Auditor   2026 

 

* * *

 

Massimo Bertolini Secretary of the Board of Directors
Emanuele Flappini Head of Company Financial Reporting

 

 

Company officers | 3

 

 

CONTENTS

 

Consolidated accounts    
Review of the Mediobanca Group’s operations as at 30 June 2024   9 
Declaration by Financial Reporting Officer   84 
External auditors’ report   86 
Consolidated financial statements   97 
Notes to the accounts   106 
Part A - Accounting policies   109 
Part B - Notes to the consolidated balance sheet   166 
Part C - Notes to the consolidated income statement   227 
Part D - Consolidated comprehensive income   247 
Part E - Information on risks and related hedging policies   248 
Part F - Information on consolidated capital   351 
Part G - Combinations involving Group companies or business units   358 
Part H - Related-party transactions   360 
Part I - Share-based payment schemes   362 
Part L - Segment reporting   366 
Part M - Disclosure on leasing   373 

 

* * *

 

4 | Consolidated financial statements as at 30 June 2024

 

 

Accounts of the Bank    
Review of the Bank’s operations as at 30 June 2024   378 
Declaration by Financial Reporting Officer   399 
External auditors’ report   401 
Individual financial statements   411 
Notes to the accounts   420 
Part A - Accounting policies   423 
Part B - Notes to the balance sheet   474 
Part C - Notes to the income statement   515 
Part D - Comprehensive income   530 
Part E - Information on risks and related hedging policies   531 
Part F - Information on capital   612 
Part G - Combinations involving Group companies or business units   619 
Part H - Related-party disclosure   620 
Part I - Share-based payment schemes   623 
Part M - Disclosure on leasing   627 

  

Contents | 5

 

 

Annexes    
Consolidated Financial Statements   632 
Parent Company’s Individual Financial Statements   639 
A - Breakdown, pursuant to Article 10 of Law No. 72 of 19 March 1983, of assets held by the Group for which revaluations were made   642 
B - Balance sheets and income statements of investments in Group undertakings (including indirect investments)   643 
C - Associated undertakings: balance sheets and income statements (as required under Article 2359 of the Italian Civil Code)   684 
D - Fees paid for auditing and sundry other services   687 

 

* * *

 

Other documents

 

Glossary    698 

 

6 | Consolidated financial statements as at 30 June 2024

 

 

CONSOLIDATED

ACCOUNTS

 

 

 

 

 

 

MEDIOBANCA GROUP REVIEW

OF OPERATIONS

AS AT 30 JUNE 2024

 

 

 

 

 

REVIEW OF OPERATIONS

 

The Mediobanca Group delivered a net profit of €1,273.4m in the twelve months ended 30 June 2024, an increase of 24.1%, laying solid foundations for delivering on the objectives contained in the 2023-26 Strategic Plan “One Brand-One Culture” (EPS in particular rose to 1.53, up 27% YoY). The increase in revenues, which were up 9.2%, to €3,606.8m, was driven by growth in fee income (up 11.5%, to €939.4m) and net interest income (up 10.2%, to €1,984.8m). The cost/income ratio was under control at 42.8%, and the cost of risk low, at 48 bps (down 4 bps YoY), both of which helped to consolidate the gross operating profit at a total of €1,812.5m (up 11.9% YoY; up 13% QoQ), with all earnings indicators increasing accordingly (ROTE 13.9%, RORWA 2.7%)(*).

 

The widespread improvement was delivered on the back of a strong commercial performance: results in Wealth Management were boosted by strong flows in terms of NNM (€8.4bn), virtually all of which in AUM/AUA, which increased from €59.8bn to €71.5bn,(1) helped by the strong inflows in 2H in particular which totalled €4.5bn (€1.5bn of which were AUM); deposits were basically flat, with the conversions to AUM being offset by healthy flows from liquidity events totalling approx. €1bn (from thirty deals), plus a promotional campaign which in 4Q generated over €1.5bn in new deposits. In Investment Banking, a trend towards growing activity levels consolidated in 4Q, with numerous deals in sectors considered to be strategic (such as Digital, Energy Transition and Mid Corporate) being closed, generating strong flows in terms of fee income (approx. €100m). Growth in Consumer Finance was again solid in terms of volumes (new loans totalled €8.4bn, €3bn of which direct personal loans), and the loan book’s profitability also improved (the ROA increased to 8.36%). Funding activity also saw record volumes of issuance which totalled €8.2bn (with the cost of funding falling to 129 bps).

 

In view of the above results, the Board of Directors has approved a resolution to submit the following proposal to shareholders at the next Annual General Meeting:

 

Distribution of the balance on the dividend for the year, of €0.56 per share, following the €0.51 per share interim dividend paid in May 2024, taking

 

(*)  To facilitate understanding of the earnings and asset trends, the same Key Performance Indicators (or KPIs) used to guide the management team in the decision-making process have been used in this document. These are Alternative Performance Measures (APMs), which are in addition to those required as part of the IFRS. Further details are provided in the Annexes (Lists of Restatements) and the Glossary.
(1)  Including market and other effects totalling €3.2bn.

 

Review of operations Mediobanca Group | 9

 

 

annual DPS to €1.07, and so corresponding to a payout ratio of 70% (and an annual increase of 25.9%);

 

Launch of a second share buyback and cancellation scheme(2)  worth a total of approx. €385m (involving some 26 million shares, equal to around 3% of the company’s share capital); the scheme approved last year (when 17 million shares were bought back, for a total outlay of €198m), was completed when the shares thus acquired were cancelled in June 2024.

 

Consolidated revenues climbed from €3,303.4m to €3,606.8m (up 9.2% YoY), with €978.6m added in 4Q alone (up 9% QoQ). The main income items performed as follows:

 

Net interest income totalled €1,984.8m (up 10.2% YoY) with the trend stable across the four quarters (4Q: €492.4m), bearing out the Group’s capability to adapt to market conditions by changing its product, volumes and pricing mixes. The factors driving growth in net interest income were: loans and advances remaining stable at approx. €52bn; a strong increase in profitability (up 162 bps, from 4.26% to 5.88%), in Consumer Finance in particular (8.36%, vs 7.48% last year); the increase in the banking book securities portfolio, in terms of both volumes and yield (up €550m and up 114 bps respectively); and the improved contributions from the trading desks (proprietary trading and Markets Division); meanwhile, the cost of funding, although higher (up 106 bps), remained lower than the ROA (by approx. 56 bps). The trend in yields also drove increases in the margin from Treasury operations (up from €98.1m to €146.9m) and those of the other divisions: Consumer Finance reported NII of €1,043.9m (up 6% YoY), Wealth Management of €425m (up 17.6% YoY), and CIB of €307m (up 6.6% YoY); the fourth-quarter trend was stable;

 

Net fee and commission income totalled €939.4m, up 11.5% on last year, following a strong recovery in 4Q (up 17.3% QoQ), driven by an impressive performance in CIB in particular (fees of €135.8m). Breaking down the total by area of activity, fees earned from Wealth Management services(3) rose to €443m (up 9% YoY; up 6% QoQ); lending fees(4) were up 4% to €256m (with a slight, 5% reduction in 4Q); and fees from investment banking and corporate services(5) increased from €202m to

 

(2)  Share buyback scheme subject to authorization by the European Central Bank.
(3)  Wealth Management services: includes management and upfront fees.
(4)  Lending services: includes fees earned from DCM, corporate lending, factoring and leasing operations.
(5)  Investment banking and corporate services: includes Corporate Finance, ECM, and NPL management.

 

10 | Consolidated financial statements as at 30 June 2024

 

 

€269m, reflecting the recovery in Italy in 4Q (€60m, more than double the total reported in the first 9M). At the divisional level, Wealth Management continued on its path towards growth, posting fee income of €489.4m, up 8.9% YoY, up 2.6% QoQ), with a stable increase in management fees (€344m, up 4% YoY and up 3% QoQ) and in upfront fees (€97m, up 25% YoY; up 8% QoQ), with banking and performance fees both soaring, the former up 10% YoY to €104.6m and the latter up 75% YoY to €14.8m, in 1H especially; fees earned by the Corporate and Investment Banking Division, as already mentioned, rose by 24.6% YoY to €360.6m, with a growing international component (approx. €140m, €66.9m of which attributable to the consolidation of Arma Partners); while the Consumer Finance Division posted fees of €145.1m (up 5.7% YoY), with a reduction in 4Q due to the higher commercial rappel fees;

 

Net treasury income totalled €172.2m (down 16.3% YoY), with €38.6m contributed in 4Q, slightly lower than in the previous quarters; the gap compared to last year (€205.7m) is concentrated in proprietary trading (down 69%, from €62.1m to €19.4m, €5.3m of which in 4Q), in part offset by the healthy contribution it made to net interest income; banking book management confirmed last year’s performance, generating income of €39.1m (€42.7m), on gains of approx. €10m in banking book securities where the HTC&S portfolio instruments recovered. Markets activity with clients improved by 4%, from €72.7m to €75.6m, €12m of which in 4Q, with a good recovery posted by the fixed-income segment (revenues up from €16.1m to €26.2m), despite income from coupons being accounted for as net interest income), the majority of which was offset by the reduction in profits from the equity segment, which declined from €55.5m to €46.7m (but recovered in 4Q: up €20.8m). Dividends and other income from Principal Investing rose from €16m to €26.6m, €14.6m of which in 4Q as a result of certain non-recurring items being collected;

 

The contribution from Assicurazioni Generali, which is equity-accounted, totalled €503m, much higher than last year (€442.8m) due to the growth reported in all business segments, despite the higher claims for damages due to catastrophic events; the investee company’s results were also boosted by non-recurring gains on the disposals of TUA Assicurazioni and Generali Deutschland Pensionskasse, plus financial effects linked to the introduction of the new IFRS 17 and IFRS 9, the application of which reduced the volatility of net equity; while the other investments in associates as defined by IAS 28 contributed €7.4m (vs €11m last year).

 

Review of operations Mediobanca Group | 11

 

 

Operating costs totalled €1,542.2m (up 9.1% YoY, up 7.6% QoQ), with labour costs accounting for €804.5m (up 10.5% YoY, up 6.3% QoQ) and administrative expenses for €737.7m (up 7.7% YoY, up 9.1% QoQ). The strong growth in headcount, with 216 staff recruited (FTEs up from 5,227 to 5,443), plus the effects of the national collective contract renewal, are reflected in the higher fixed remuneration component (up 12% YoY), compounded by an increase in the variable component (up 8% YoY), reflecting, in Corporate and Investment Banking in particular (up 15% YoY), the recovery in activity levels. The trend in administrative expenses, as in 3Q before, is attributable to IT spending (up 10.8%, from €276m to €306m), including a strong project component (up 25%, to €68m) linked to initiatives both at Group level (technology resilience plan, migration to cloud-based solutions, development of ESG platform) and the individual divisions (WM: mobile collaboration, digitalized reporting, enhancement of core systems; CF: Pagolight platforms, customer experience improvement, multi-channel approach; CIB: BTP specialist platform). There were also increases in travel and entertainment expenses, and in marketing costs (up 8%), in Wealth Management particularly (up 18%) in support of the CheBanca! rebranding. At the individual divisional level: total costs in Wealth Management amounted to €613.5m (up 10.5% YoY; up 1.1% QoQ); in Corporate and Investment Banking to €379.9m (up 16.1% YoY; up 19.4% QoQ), with Arma Partners contributing €25.5m (up 9% YoY like-for-like, i.e. net of Arma Partners); in Consumer Finance to €369.5m (up 6.4% YoY; stable QoQ); the Holding Functions’ performance, meanwhile, reflects the disposal of Revalea, with costs totalling €192.3m (up 11% YoY without Revalea).

 

Loan loss provisions decreased by 6.7% to €252.1m, entailing a cost of risk of 48 bps (down 4 bps YoY). Corporate and Investment Banking posted net writebacks of €10.6m, compared with €32.3m in writedowns last year. The higher provisioning in Consumer Finance (up from €203.9m to €249.7m) reflects both a modest increase in default and non-payment rates (which are now effectively realigned to pre-Covid levels), plus the growth in direct personal loans, which have higher profitability and cost of risk; against this backdrop, the CoR rose from 145 bps to 168 bps. The Holding Functions’ contribution (which, since Revalea was sold, consists of leasing operations only) decreased to €5.6m, while provisioning in Wealth Management totalled €7.4m, €6.7m of which in mortgage lending. The stock of overlays totalled €221.6m (30/6/23: €268m), with the uses made during the twelve months reflecting the fine-tuning of the ECL risk parameters in Consumer Finance, plus the reduced impact of inflation in the Corporate model.

 

12 | Consolidated financial statements as at 30 June 2024

 

 

Net provisions for banking book securities and other financial assets totalled €3.4m, plus upward adjustments to reflect the Fair Value of holdings in investment funds included in the banking book, which totalled €17.3m.

 

The bottom-line result was also impacted by non-recurring other losses totalling €90.2m (€185.8m) due to:

 

€50.7m in payments to the resolution funds, most of which regarded the ordinary contribution (€23.9m), and the early booking of the final payment due under the Deposit Guarantee Scheme (€24.2m, paid on 2 July 2024).

 

€31.7m in impairment charges for the RAM AI brand, to reflect its Fair Value which has been measured at €12m, using only the budget figures for FY 2024-25 (in view of the recent years’ performances);

 

€6.8m in accelerated amortization charges for software, following the revision of its useful life;

 

€1m as the net effect of adjustment of the Messier & Associés brand to its initial recognition value in the individual accounts (resulting in a charge of €10.2m being taken) mostly offset by the writebacks credited as a result of the PPA process being completed (release of upfront share and payment of the deferred share), the valuation effects for the provision for risks and charges, and the liabilities due in respect of the put-and-call agreements.

 

* * *

 

On the balance-sheet side, total assets rose from €91.6bn to €99.2bn, mostly due to the increase in treasury management activity matched by short-term liabilities, with the main items reflecting the following trends:

 

Customer loans were stable at €52.4bn, with a positive trend in Consumer Finance (up 5.1%, from €14.5bn to €15.2bn), offsetting the reduction in Corporate and Investment Banking, where customer loans decreased from €19.6bn to €19bn despite the resilience of Factoring operations (up 3.1%, to €2.9bn); customer loans in Wealth Management were unchanged at €16.8bn, while the Holding Functions’ performance was impacted by the sale of Revalea (and its customer loans of €238.8m) and the downturn in leasing operations (customer loans down 11.1%, from €1.4bn to €1.2bn);

 

Banking book securities rose from €10.5bn to €11.3bn (€4.6bn of which in the HTC portfolio, and €6.6bn of which in the HTC&S portfolio), and reflect the acquisition of government bonds totalling €4.9bn, only one-third of which Italian; the favourable market trend improved the OCI reserve from

 

Review of operations Mediobanca Group | 13

 

 

minus €73.2m to minus €9.2m, reducing the unrealized gains on the HTC portfolio from €85.4m to €44.2m;

 

Net treasury assets increased from €5bn to €6.4bn, following growth in equity and bond investments (to €3.9bn and €3.5bn respectively) in order to leverage market opportunities and improve the result, matched by repo and secured financing transactions (up €6.3bn). Cash and liquid assets deposited with the European Central Bank fell from €3.5bn to €2.6bn;

 

Funding rose by €3.2bn, to €63.7bn, due to an increase in debt securities (from €22.3bn to €27.6bn) which reflects the record new issuance (€8.2bn), against redemptions totalling €2.9bn, having regard to the planned reduction in the T-LTRO (from €5.6bn to €1.3bn). The effective strategy in terms of tapping the market and broad customer diversification (institutional/own networks/third-party networks) has enabled the cost of the new issues to be reduced to 129 bps (vs 147 bps last year), despite the higher funding (Tier 2 €300m and Senior Non-Preferred €1bn); Wealth Management deposits were basically flat at €27.9bn, even following the promotional activities, which did not impact excessively on the cost of funding. Interbank funding also increased, from €4.5bn to €6.8bn, and at competitive spreads (11 bps lower than last year).

 

Total Financial Assets (TFAs) reached €99.4bn (up 12.9% YoY; up 1.2% QoQ), on new AUM/AUA of €8.6bn, plus a positive market performance adding €3.2bn (virtually nil in 4Q). The stock of AUM/AUA totalled €71.5bn (up 19.5% YoY and up 1% QoQ), split between Private Banking (€33.8bn, up 22.7% YoY; up 1.4% QoQ) Premier Banking (€24.9bn, up 21.2% YoY; up 4.4% QoQ), and Asset Management (€28.2bn, up 9% YoY, €15.5bn of which placed by the Group’s networks). The stock of deposits, as mentioned earlier, remains close to last year’s levels (€27.9bn), split between Mediobanca Premier (€16.9bn), Mediobanca Private Banking (€5.9bn), and CMB Monaco (€5.1bn).

 

The capital ratios (CET1: 15.2%;(6) Total Capital: 17.7%) confirm a Maximum Distributable Amount (MDA) buffer(7) of approx. 510 bps, against an Overall Capital Requirement(8) of 8.25% The approx. 70 bps reduction in the CET1 ratio primarily reflects the acquisition of Arma Partners, which accounted for 55 bps (this will reduce in the future, due to the use of treasury shares to complete the

 

(6)  CET1 fully-phased pro forma, with Danish Compromise permanent (benefit approx. 100 bps).
(7) Maximum Distributable Amount (MDA): minimum level of CET1 required, which includes the shortfall on AT1 and Tier 2 capital.
(8) The Overall Capital Requirement for CET1 includes 56.25% of the P2R requirement updated following the most recent SREP (1.75%), the Conservation Capital Buffer (2.50%), the Counter-Cyclical Buffer at 30 June 2024 (0.15%), and the new O-SII requirement introduced for Mediobanca starting from 2024 equal to 0.125% (as from 2025, fully-loaded, this will rise to 0.25%). The requirements do not include the new system risk buffer recently introduced by the Bank of Italy, of 1% by end-June 2025 (phase-in 0.5% by end-December 2024).

 

14 | Consolidated financial statements as at 30 June 2024

 

 

acquisition); the organic growth in earnings in the twelve months, which added 350 bps, was helped by the lower RWAs (down approx. 7.4%) due to the reduction in lendings and to the risk mitigation measures implemented (including 15 bps in relation to the Significative Risk Transfer securitization of Consumer Finance receivables), but was offset in full, as expected, by the prudential deductions for the Assicurazioni Generali investment (which accounted for 60 bps) and by the shareholder remuneration (305 bps, including the interim dividend paid in May 2024, the first share buyback completed with the cancellation of 17 million shares, and the two proposals to be submitted to the approval of shareholders at the upcoming Annual General Meeting, for the balance due on the dividend and the new buyback tranche for a total of €385m(9) ).

 

RWAs at Group level decreased from €51.4bn to €47.6bn (down 7.4% YoY), with the share attributable to CIB totalling €14.9bn (down 23.5% YoY) and that of Consumer Finance amounting to €14.5bn. The Group’s RWA density decreased from 56.1% to 48%, while the ratio for CIB decreased from 60.8% to 38.1%, and that for Consumer Finance fell from 88.1% to 89.8%. The share of RWAs attributable to loans and advances amounted to 85.7% (€40.8bn), while the market share was 3.5% (€1.7bn).

 

The Total Capital ratio declined to 17.7%: the increase due to the new €300m subordinated issue made in January 2024 was offset by the prudential repayment of the equivalent issues falling due shortly, and to the other deductions described in more detail above.

 

The leverage ratio reduced to 7.1%, significantly higher than the 3% minimum requirement; the MREL indicator too, i.e. 43.5% of RWAs and 20.3% of LREs, is comfortably above the minimum requirements set for 2024, which were 23.57% of RWAs and 5.91% of LREs.

 

* * *

 

The divisional performances for the twelve months were as follows:

 

Wealth Management (WM): net profit totalled €208.5m (up 28.8% YoY), confirming quarter-on-quarter growth (4Q: €55.4m; 3Q: €52.9m; avg. €50m in 1Q-2Q). The main profit indicators reflect improvement in the twelve months: cost/income ratio 66.4% (67.7%); RoRWA 3.6% (3.1%); NNM €8.4bn. The growth in AUM/AUA (up 19.5%, to €71.5bn) reflects the strong

 

(9) New share buyback and cancellation, subject to authorization by shareholders in AGM and by the ECB, the amount of which is equal to the profit for the year net of the proposed dividend.

 

Review of operations Mediobanca Group | 15

 

 

 performances in Private Banking (up 22.7%YoY) and Premier Banking (up 21.2% YoY), with an acceleration in 2H (NNM of €4.7bn, €4.4bn of which in AUM/AUA and €213m in deposits, most of which were re-established in 4Q). Revenues totalled €923.6m (up 12.6% YoY, up 0.5% QoQ), on net interest income up 17.6% (from €361.5m to €425m) and net fee income up 8.9% YoY to €489.4m, with growing contributions from management fees (up 4%, to €344m, approx. €90m of which in 4Q; up 3% QoQ; ROA(10) 84 bps) and upfront fees (€96.6m, up 25% YoY and up 8% QoQ). At the same time, operating costs rose by 10.5% YoY, and by 1.1% QoQ, to reach €613.5m, reflecting the planned strengthening of the commercial network, adjustments due to the new national collective bargaining contract, the launch of Mediobanca Premier, and the digitalization initiatives:

 

Corporate and Investment Banking (CIB): this division delivered a net profit of €243.5m in the twelve months (up 8.1% YoY), following an outstanding fourth quarter (€74.5m), and reflecting the consolidation of Arma Partners since 1 October 2023 (which contributed €14.6m); RORWA rose to 1.4%, confirming the validity of the capital-light model (fees: up 23%; RWAs: down 22%). Revenues totalled €762.6m (up 7% YoY, up 17.1% QoQ), with a strong contribution from net interest income (€307m; up 6.6% YoY, down 7.9% QoQ), which offset the reduction in net treasury income (down from €135m to €95m). Net fee and commission income rose to €360.6m (€293.7m excluding Arma Partners), an increase of 24.6% YoY and of 48.6% QoQ, driven by the outstanding performance in advisory business (up 19% YoY), compared with a reduction in fees from ECM operations (down from €26.9m to €5.8m) and a resilient performance by the Debt Division (€83.9m), buoyed by the strong demand for bond placements. Operating costs of €379.9m (up 16.1% YoY and up 19.4% QoQ) pushed the cost/income ratio up to 49.8%, reflecting the addition of Arma Partners (€25.5m), plus also investments in IT (IT costs: up 14% to €64m), and the resumption of commercial expenses (up 31%, to €12m); derisking activity, while impacting on profitability, at the same time also improved credit quality, which translated to some €10.6m in net writebacks being credited;

 

Consumer Finance (CF): this division posted a net profit of €382.9m, thus beating even last year’s record result (€373.5m), despite the 4Q result (€91.3m) being lower than those recorded in the other three quarters (approx. €97.5m in each), due to the renewal of the hedge swaps, the finalization of the commercial rappel fees, and the completion of the projects for the

 

(10)   Return on AUM.

 

16 | Consolidated financial statements as at 30 June 2024

 

 

 twelve months. RORWA stood at 2.7%, with the cost/income ratio stable at 31.1%. Customer loans at the year-end totalled €15.2bn, with strongly growing profitability (up 88 bps to 8.36%), reflecting the good repricing activity, plus the loan mix being geared towards direct personal loans (these accounted for €3bn of the €8.4bn new loans in 12M). Net interest income rose to €1,043.9m (up 6% YoY, and stable QoQ), in line with the trend in fee income as well (up 5.7% YoY, to €145.1m). The cost trend was also very similar, with operating costs of €369.5m being recorded, up 6.4% YoY, and stable QoQ), reflecting the renewal of the national collective labour contract (administrative expenses: up 6% YoY), the major project activities to support the technological and international expansion, and the increased weight of credit recovery expenses. Loan loss provisions for the twelve months totalled €249.7m, with €65.6m set aside in 4Q; the CoR stood at 168 bps (versus 145 bps last year), with the 4Q level (174 bps) which, having accounted for the overlays effect, reflects increasing realignment to pre-Covid levels.

 

Insurance – Principal Investing (PI): the Insurance & PI division delivered a net profit of €522m for the twelve months, equivalent to a RORWA of 3.8%, with Assicurazioni Generali contributing €503m, including a new record performance in 4Q (€165.3m), with all business segments performing well and including the effects of the disposals of TUA Assicurazioni S.p.A and Generali Deutschland Pensionkasse. The book value of the Assicurazioni Generali investment totalled €3.7bn, compared with a market value of €4.8bn, up more than 25% on an annualized basis (stable in 4Q);

 

Holding Functions (HF): the net loss posted by the Holding Functions division halved from €95.3m to €43.8m, with the €26m net loss recorded in 4Q reflecting substantially the payment of the final instalment due to the Deposit Guarantee Scheme (€24.2m); total revenues were up 1.4% YoY to €223.5m, with net interest income increasing over the twelve months to €178m, up 22.7% YoY), but more or less stable in 2H, in line with the trend in market interest rates and the increase in the cost of funding, which was impacted by the higher beta on Wealth Management deposits. The regulatory ratios remain high (LCR: 159%; NSFR: 116.8%; MREL: 43.5%). Operating costs decreased to €192.3m, factoring in the Revalea disposal (net of which costs were up 10.9% YoY on a like-for-like basis, most of which involved labour costs), with the central costs share (€118m) representing 7.6% of the Group total. Leasing operations contributed a net profit of €4.1m, with asset quality improving (gross NPLs decreased from €107.4m to €79.8m).

 

* * *

  

Review of operations Mediobanca Group | 17

 

 

Significant events in the twelve months include the completion of many of the extraordinary operations announced in May 2023 in connection with the launch of the new three-year Strategic Plan, as follows:

 

Acquisition of a controlling interest in UK-based partnership Arma Partners LLP, an independent financial advisory firm which is a European leader in the Digital Economy sector. The company is part of the Banking Group and has been consolidated on a line-by-line basis since 2023;

 

Acquisition by Compass Banca of 100% of HeidiPay Switzerland AG, a Swiss fintech specializing in the Buy Now Pay Later (BNPL) segment. The deal strengthens the partnership with HeidiPay AG, the holding company specializing in the development of digital platforms to support BNPL in the world of e-commerce and for physical merchants;

 

Disposal of Revalea S.p.A., in return for a consideration of €100m; the company exited the Banking Group’s scope of operations in October 2023;

 

Launch of MB SpeedUp, a joint venture set up in conjunction with London-based company builder and early-stage investor Founders Factory, which will facilitate the promotion of, and investment in, fintech companies;

 

Launch of Mediobanca Premier, which has involved repositioning the bank versus a higher client bracket that can leverage on a Group-wide product offering integrated with the asset management factories, and also, for clients who are entrepreneurs, offering them the possibility of using the Group’s Corporate and Investment Banking services and the advisory services provided by both bankers and FAs of increasing seniority; the rebranding has led to an acceleration in the process of recruiting commercial staff with higher average portfolios than those already covered;

 

Mediobanca S.p.A. has been recorded in the List of BTP Specialists instituted by the Italian Ministry for the Economy and Finance with effect from 1 June 2024, meaning the Bank is now accredited as a primary dealer; this initiative, in line with the Strategic Plan drivers based on strengthening in low-capital absorption activities and expanding Mediobanca’s product offering versus institutional clients in the fixed-income space, confirms the Bank’s leading role in Markets activities within both the Italian and international panoramas.

 

The following events should also be noted:

 

Admission of Mediobanca to the co-operative compliance programme instituted by the Italian revenue authority under Title III of Italian Legislative

 

18 | Consolidated financial statements as at 30 June 2024

 

 

 Decree no. No. 128 of 5 August 2015, as amended by Italian Legislative Decree no. 221/2023, effective from the tax period ended on 30 June 2023; under the terms of the programme, the Bank is required to put in place an effective system for recording, measuring, managing and controlling tax risk (the “Tax Control Framework”), in line with the Tax Conduct Principles adopted by the Board of Directors;

 

Completion of the first securitization of Consumer Finance receivables in SRT (Significant Risk Transaction) format, in which the traditional sale of the €500m senior tranche was complemented by three mezzanine tranches worth a total of €87.5m, allowing a substantial portion of the risk associated with the underlying portfolio (approx. €815M) to be transferred; ECB authorization of the deal has enabled a saving in terms of RWAs in the region of €500m.

 

At the Annual General Meeting held on 28 October 2023, the shareholders of Mediobanca adopted several important resolutions in respect of various initiatives related to the 2023-26 Strategic Plan, in particular as follows:

 

Long-Term Incentive (LTI) Plan for senior and strategic Group staff, to be allocated upon financial and non-financial objectives being met;

 

Employee Share Ownership and Coinvestment Plan 2023-26 (“ESOP 2023-26”) for Mediobanca Group Staff who have decided to acquire Mediobanca shares on a voluntary basis and on favourable terms; participants in the scheme will receive additional shares free of charge upon the Plan targets being achieved; The subscription phase was completed in December 2023, with approx. 28% of in-scope staff taking part (for a total of 415,600 share);

 

The first share buyback programme, involving a total of 17,000,000 shares (equal to 2% of the share capital) for an outlay of €197.8m(11) which were cancelled on 11 June 2024;

 

Amendment to the Articles of Association to provide for the possibility of paying interim dividends, the first of which was paid on 22 May 2024 in an amount of €421.2m based on results for the six months ended 2023 (corresponding to a dividend per share of €0.51).

 

* * *

 

In what has been an uncertain operating scenario due to geopolitical events and the macroeconomic trend which continues to change, with frequent climate

 

(11)  In accordance with the regulations on transparency in force, the individual trades were disclosed on a monthly basis starting from the month after the one when the Programme was launched, and are published on the Mediobanca website. The purchases were made exclusively on regulated markets.

 

Review of operations Mediobanca Group | 19

 

  

and social emergencies, the Mediobanca Group is even more committed to making sustainability the focus of its strategy, by pursuing a balance between economic growth, social well-being and protection of the environment.

 

This responsible approach to banking is reflected not only in the offering of solutions, products and advisory services offered to support clients in their transition to a sustainable economy, but also in the training and awareness-raising activities implemented to promote increased sensitivity to ESG topics both inside and outside the Group.

 

As proof of its commitment to achieving its sustainability objectives, the Group has renewed its membership of some of the most important international protocols, such as the UN Global Compact, the Principles for Responsible Banking, and the Net-Zero Banking Alliance.

 

Participation in these initiatives, coupled with the integration of ESG criteria into all areas of the Group’s business, has contributed to the improvement in the Bank’s ESG rating, as assessed by: ISS (Institutional Shareholder Services), which has assigned Mediobanca its top score in all three ESG areas – Environmental, Social and Governance, and the CDP (Carbon Disclosure Project), which has improved its score from “C” to “B”, in recognition of Mediobanca’s commitment to addressing its impact on the environment.

 

The Group’s understanding of this impact has led it to strengthen its risk management in order to address the challenges deriving from climate change that could affect the growth of the business, and to support a balanced transition and adaptation process for both the Group and its clients.

 

All qualitative and quantitative ESG targets included in the Strategic Plan 2023-26 “One Brand-One Culture” are progressing in line with expectations, in particular as follows.

 

More than 84% of the Group’s staff have received training in ESG issues, with the objective being to reach 100% by end-June 2026, including 100% of Financial Advisors; while 65% of the Wealth Management advisors have received EFPA certification (with an objective of 100% by the end of the Plan time horizon).

 

More than ten million emails on environmental and financial education issues have already been sent to Compass clients, out of a target of 35 million by end-June 2026.

 

20 | Consolidated financial statements as at 30 June 2024

 

 

In connection with the Group’s priority objective to reach carbon neutrality by 2050, interim targets have been set for 2030 for all high-carbon intensity sectors, as per the commitment with the Net-Zero Banking Alliance (NZBA). The actions taken to ensure climate-related aspects are more closely integrated into the company’s strategy have been described for the first time as part of the Group’s Transition Plan.

 

The Group is also committed to limiting the impact on the environment caused by its own footprint, including by improving waste management and prior assessment of the environmental impact of new processes, systems and equipment, and of structural and organizational changes.

 

On diversity and inclusion issues, there has been an increase in all the target indicators included in the Strategic Plan, including reduction in the gender gap, to be pursued by ensuring more women are in positions of leadership and guaranteeing equal access to promotion and career advancement opportunities. It should be emphasized that delivering on such challenging objectives has been possible because of the Group’s people, who are its most important resource: it is because of them that sustainability has been confirmed as one of our Group’s founding values.

 

In order to contribute to the well-being of the Group’s people, an organizational approach is promoted based on understanding, respecting and recognizing the value of all kinds of diversity, starting with gender. As recognition of the work we have done in this area, in December 2023 gender parity certification was obtained, in accordance with the UNI/PdR 125:2022 standard required by the NRRP.

 

In the Group’s efforts to achieve such challenging objectives, it does not want anyone to be left behind, or to neglect the needs of the communities of which it forms part. The inclusion of the more socially vulnerable categories and those at the greatest risk of exclusion, especially young people, is a major issue for the Bank, and its focus on the more vulnerable groups of society has also led, among other things, to Financial Health and Inclusion being identified as one of the priority areas of the Group Sustainability Policy. Social inclusion is also a priority in view of the communities in which the Group operates. To this end it has also renewed its partnership with UNHCR, to support the integrated protection programme for female refugees and asylum seekers who at risk of gender-based violence (GBV) in Italy.

 

In the area of inclusive education, the partnership with Fondazione Mission Bambini has been confirmed, with the objective of guaranteeing free access to services for fifteen children aged 0-3 years, and also the partnership with Junior

 

Review of operations Mediobanca Group | 21

 

  

Achievement Italy, for a new programme, also run free of charge, known as “CONTA SUL FUTURO!” (Count on the Future), to provide financial education for middle-school students, with some of the Group’s staff volunteering in the classroom-based activities.

 

The Group has also supported the universally recognized values of sport, renewing and promoting the following projects:

 

INSIEME/TOGETHER: a long-term project devised in conjunction with CUS Milano Rugby and the Milan city council, to promote opportunities for sport among young people forming part of the weakest sectors of society at risk of exclusion in certain peripheral areas of Milan;

 

Mediobanca Group Sport Camp: a multi-sport camp developed in conjunction with the Milan City Council and run at the “Cesare Beccaria” Institute in Milan to give young offenders an opportunity to spend a week playing sport. The project has also involved improving the facilities, with the installation of rugby posts and new goal posts for football. The camp, which was run for the eighth year at the end of June 2024, once again with the direct involvement of some of its own staff participating, and in early July it was run outside Milan for the first time too, at the Nisida Institute for Juvenile Offenders in Naples.

 

* * *

 

Developments on capital markets

 

During the 2023-24 financial year, the global economy continued to grow at a moderate rate, against a backdrop of generally restrictive monetary policies (with the notable exception of Japan), and still high levels of geopolitical uncertainty due to the tensions in different regions (the Russia/Ukraine war and the conflict between Israel and the Palestinian armed organizations) not usually affected by such wide-ranging armed conflict.

 

Signs that global growth is consolidating began to emerge in second half-year, helped by the process of friend-shoring Asian production activities (i.e. using production and sourcing centres in countries that can guarantee the safety of the process), the Chinese authorities gaining a firmer grip on the local economy’s performance, and a relaxing of the restrictive monetary policies adopted in various jurisdictions. In the second half-year, with the ongoing deflationary process and related trend in terms of prospects for the monetary authorities’ stances, the risk orientation on growth changed from negative to

 

22 | Consolidated financial statements as at 30 June 2024

 

 

balanced, but the growth is not seen as being uniform between the advanced nations: the US economy appears to be especially resilient, while growth in the European Union is weak, there has been a pronounced slowdown in Chines growth, and the Japanese economy is at the contraction phase.

 

Indeed, in the first half of the financial year, the average changes recorded in GDP were up 1% QoQ in the United States, up 1.5% in China, down 0.1% in the Eurozone, and down 0.5% in Japan.

 

In the western economies, the action taken by the central banks to dampen economic activity in order to bring inflation back closer to the economic policy target has begun to reveal its effects, cooling US growth and keeping growth in the Eurozone to modest levels.

 

In 3Q global growth stabilized at levels in line with the pre-Covid period at around 0.9% QoQ, with a reduction in the United States (to 0.3%), China and the Eurozone basically flat (at 1.6% and 0.3% respectively), and Japanese growth, which was already negative on average during the preceding six months, weakening still further (at minus 0.7%).

 

The production sector confidence indexes confirmed the trajectories outlined above for 4Q. In the second half-year, then, growth averaged 0.5% QoQ for the United States, 1.1% for China, 0.3% for the European Union, and 0.1% for Japan, with prospects for generally modest growth in the coming quarters.

 

The deflationary process involved all geographies but at different speeds and with different characteristics. Net of the energy and food components, inflation in the Eurozone began to decline roughly three months after the high recorded in the United States and much faster, because in recent years production processes have become less sensitive to tensions in the production chains, and demand is decidedly less strong than it is in the United States (having decreased from 5.5% YoY at the start of the financial year to 2.9% at end-June 2024 for the Eurozone, compared with a reduction from 4.7% to 3.3% for the same period for the United States).

 

Against this scenario, stock market prices were weak in the first quarter (MSCI World Index down 4.3%), until it became clear that the central banks were succeeding in their efforts to bring inflation back under control in an orderly manner without causing growth to slow excessively as a result (what the economists have been referring to as the “soft landing”). Starting from 2Q, rising global stock market prices led the indexes to record performances that overall were comparable to those of the previous year (MSCI World Index up 18.4% compared

 

Review of operations Mediobanca Group | 23

 

 

with 15.2% in FY 2023-24). The Far Eastern markets as a whole have followed the trend of the global index, but the growth has been less expansive (MSCI Asia Pacific up 10.6%), and impacted by the Chinese component which has dampened the markets’ performances (MSCI China down 4.5%). The European index has reflected a similar trend, largely flat in the fourth quarter due to the economic slowdown caused by the weak international scenario.

 

The general level of government interest rates fluctuated considerably in the first half-year in both the United States and in Europe, on account of uncertainty regarding the effectiveness of the economic policy action on growth in these jurisdictions. The US 10Y government interest rate rose by 73 bps, from 3.84% to 4.57% in 1Q, before falling by 69 bps in 2Q and then beginning to reflect more stable growth in the second half-year, closing at 4.40%. A similar trend was reflected by the 10Y German yield which rose by 45 bps in 1Q (from 2.84%), before falling by 82 bps in 2Q (to 2.02%), and then ending the twelve months at 2.50% (for an overall increase of 11 bps YoY).

 

In the Chinese economy, which is struggling with the complex process of stabilization in the real estate sector and building confidence among households and companies, interest rates have generally reflected a declining trend throughout the whole twelve months, with a more pronounced change seen in 2Q. The 10Y benchmark rate fell from 2.64% to 2.20% in the year under review.

 

* * *

 

The European economy’s performance in the twelve months has been impacted by the strength of domestic demand fuelled by savings accumulated during the pandemic, the emergence of new production chains (“friend-shoring”), and the ongoing deflation process launched midway through the previous year. Towards the end of the twelve months, the results of the French Assemblée Nationale elections injected an element of political uncertainty, the first effects of which were projected onto the risk premium on the country’s sovereign debt and risk assets. The region’s growth has in any case been driven by the Next Generation EU (NGEU) programme, some of main problems in which have been borne out in the transition from project to implementation phases.

 

Price trends have been affected by adjustments on the production side that have facilitated reductions in the cost base. The most important point to note is the positive trend in wages, which, despite growing and being fuelled by the low unemployment levels, in the second half-year managed to dissipate fears that the purchasing power lost during the period of high inflation would be recovered in

  

24 | Consolidated financial statements as at 30 June 2024

 

 

full. As mentioned, the Eurozone Harmonized Index of Consumer Prices (HICP) fell in the twelve months, from 5.5% to 2.5%. By contrast, the downward trend in underlying inflation suggests that inflation fell from 5.5% to 2.9%.

 

The growth in GDP reflected a weak contraction of 0.1% QoQ on average during 1H, and the 0.3% QoQ improvement in 2H referred to earlier The growth prospects for Europe in the immediate future continue to be closely linked to the economic consequences of the Russia/Ukraine conflict, as well as to the political developments in France and the trend in Chinese growth.

 

In this scenario, the ECB has chosen to stabilize the extent of its tightening policy, with the benchmark interest rate at 4%, and to reduce the stock of sovereign debt instruments acquired during the expansive phase of the process when interest rates were rising rapidly, at a rate of €7.5bn per month. In pursuing its monetary policy, the ECB has chosen to abandon the forward guidance (its commitment to pursue a policy conduct for an established period of time or until certain conditions have been met) in favour an approach based on the information obtained in the time between meetings, which, by its very nature, is reactive and flexible.

 

The modest level of economic growth, the declining inflation, the low unemployment levels and the positive stance on risk assets have led to the following results during the period:

 

Market inflation expectations stabilizing during 2H: at 5Y and 10Y these fluctuated, with only minor misalignments between them, at around 2.5% for 1Q to between 2% and 2.2% in 2Q, and then stabilized at these levels in 2H;

 

Rising stock market prices: the Euro Stoxx 600 has risen by 10.7%, the Italian, Spanish and German indexes by between 17.4% and 12.9%, and the French index, having been impacted by the political uncertainty facing the country, ended the twelve months virtually unchanged (up 1.1%);

 

The ongoing tightening of European government security spreads, interrupted only by the emergence of political risk in France: the 10Y spread on Italian bonds narrowed by approx. 38 bps to 133 bps at the start of June 2024, before widening by 27 bps in the final month of the year, that on Spanish paper by approx. 30 bps to 73 bps, before widening to 20 bps, and that on French paper by approx. 6 bps to 47 bps, before widening to 32 bps;

 

The narrowing on the spread on high-yield credits; the Crossover index narrowed from 404 bps to around 326 bps at end-June 2024, representing a significant increase from approx. 290 bps at the start of the same month, and the equivalent US index from 429 bps to 343 bps;

 

Review of operations Mediobanca Group | 25

 

 

The stability of the Euro, the fluctuations in which ranged from between 1.05 and 1.12 versus the US dollar and between 100 and 97.7 versus the trade-weighted averages of bilateral exchange rates with foreign currencies. Overall, during the twelve months under review, the Euro lost approx. 1.1% versus the US dollar and 0.5% versus other trade partners.

 

* * *

 

It should also be noted that since the end of the financial year under review, more favourable market conditions have brought European credit assets, both government (non-French) and corporate, back to the levels seen prior to the emergence of the French political risk. For example, at end-August the spread on 10Y Italian paper had returned to the 130 bps and the Crossover index to the 290 bps area, i.e. the levels seen at the start of June.

 

* * *

 

The Italian economy reported a stabilization in growth during 1H, at unimpressive levels (the average growth rate for 6M was 0.26% QoQ), but still faster than the average QoQ growth reported during the previous financial year (0.11%). In 3Q, growth consolidated at a level higher than the potential growth (0.34% QoQ), and the guidance coming from business research suggests a similar level may be reached in 4Q as well. Growth has certainly been strengthened by the use, albeit still only partial, of the National Recovery and Resilience Plan (NRRP) funds, by the stabilization in the growth of the nation’s trade partners (European especially), and a monetary policy that remains accommodative.

 

The prospects for growth in Italy remain strongly anchored to the trend in the demand for exports, and hence, indirectly, the trend in the economies of the various end-markets. Aspects of concern chiefly involve the Russia/Ukraine conflict, the tensions in the Middle East, and the short-term prospects for the structural reforms that China is undergoing. Key factors for short-term growth and long-term prospects are the implementation of the structural reforms on which the NRRP is conditional, and the realization of the public works that are supposed to flow from them.

 

On financial markets, the Italian stock indexes have outperformed the rest of the European markets. The trend in favour of risk assets in general, not just Italian and indeed not just European ones, has developed in tandem with the awareness signalled by the leading central banks that the tightening monetary policy phase which started last year is coming to an end, and that the deflationary

 

26 | Consolidated financial statements as at 30 June 2024

 

 

process is continuing. The FTSE MIB gained 7.5% in 1H (Eurostoxx 600 up 3.5%) and 9.2% in 2H (Eurostoxx 600 up 6.8%), resulting in a 17.4% increase for the twelve months as a whole (Eurostoxx 600 up 10.7%).

 

* * *

 

Regarding the Italian consumer credit market, the Assofin data updated for 1H 2024 confirms that the positive trend which began in 4Q 2023 has continued: new loans granted in the six months ended 30 June 2024 were up 4.9% on the same period last year, totalling €28.4bn.

 

Breaking the aggregate figure down by technical form, virtually all products posted in improvements in 2024 relative to 2023:

 

Personal loans, which were up 9.3%, recovered ground as households resumed spending on projects, after posting a 1.6% loss last year; there was also an increase in average ticket size, from €12,750 to €13,000;(12) 

 

Car and motorbike finance continued to be healthy, reflecting 2.9% growth in volume terms;

 

Other special purpose loans decreased slightly (down 0.8%) following the good performance posted in 2023;

 

Salary- and pension-backed finance continued to be weak (down 2.7%), despite increasing slightly in 2Q, in the pensioners and private sector employees segments in particular;

 

Payments by credit card made up ground, increasing by 1.6%, in the instalment segment especially (15.3%).

 

   2020   2021   2022   2023   2024 (6 months) 
   €m   %   €m   %   €m   %   €m   %   €m   % 
Vehicle credit  6,664   16.6   7,896   16.6   7,416   14.0   7,812   15.0   4,240   15.0 
Specific purpose loans  4,965   12.4   5,686   12.0   6,419   12.1   6,741   13.0   3,172   11.2 
Personal loans  17,563   43.7   22,370   47.0   26,454   49.9   25,980   49.9   15,116   53.2 
Credit cards  5,516   13.7   5,347   11.2   5,664   10.7   5,454   10.5   2,676   9.4 
Salary-backed finance  5,491   13.6   6,262   13.2   7,109   13.3   6,032   11.6   3,188   11.2 
   40,199   100.0   47,561   100.0   53,060   100.0   52,019   100.0   28,392   100.0 

 

Source:  Assofin: for the car/motorbike segment, the figures refer to volumes generated by independent operators; while for credit cards, only volumes generated by pure credit cards and cards with instalment options are considered. For 2023 the Assofin adjusted figures published in May 2024 have been used.

 

* * *

 

(12)  Net of non-special purpose credit lines.

 

Review of operations Mediobanca Group | 27

 

 

With reference to mortgage loans, there has been a notable slowdown in commercial activity following the property market contraction and in view of the strong competitive pressure; indeed, in the twelve months under review a total of 8,634 mortgages were executed with total finance of €1,100.6m disbursed, compared to 15,372 mortgages worth €2,244.7m the previous year. The share of “green” mortgages (i.e. financed disbursed for the acquisition or renovation of Class A or B properties) remained virtually unchanged, at 13%.

 

The residential property sector, after several years of uninterrupted growth, posted a 9.6% reduction in 2023, from 785 million transactions the previous year to 710,000. In the same period, the mortgage market for households to acquire properties was affected by both the slowdown in the property market itself and by the rise in interest rates, and so reflected a pronounced reduction of 25.4%, from €55.3bn to €41.2bn.

 

The downward trend continued into 1Q 2024, during which property sales declined by more than 7% and new mortgage loans by 17%.

 

* * *

 

In 2023, approximately €34.8bn in new leases were granted, with almost 763,000 contracts executed; the growth versus 2022 was 8.8% in value terms, and 13% in the number of contracts. In the first six months of 2024, 390,000 new contracts were executed worth €17.2bn; compared to 1H 2023, this represents a reduction of 4.7% in value terms and of 5.4% in number.

 

   2020   2021   2022   2023   2024 (6 months) 
Leases executed  (€/mln)   %   (€/mln)   %   (€/mln)   %   (€/mln)   %   (€/mln)   % 
Automotive  11,775   51.4   13,991   48.6   15,967   50.6   21,087   60.6   11,332   66.0 
Plant and equipment  7,762   33.9   11,526   40.1   12,297   39.0   10,372   29.8   4,237   24.7 
Real estate  2,720   11.9   2,964   10.3   2,835   9.0   2,875   8.2   1,358   7.9 
Shipping  631   2.8   291   1.0   449   1.4   474   1.4   234   1.4 
   22,888   100.0   28,772   100.0   31,548   100.0   34,808   100.-   17,161   100.0 

 

Source: Dataforce data compiled by Assilea.

 

28 | Consolidated financial statements as at 30 June 2024

 

 

Consolidated profit-and-loss/balance-sheet data

 

The consolidated profit and loss account and balance sheet have been restated – including by business area – based on the structure that provides the most accurate reflection of the Group’s operations.

 

CONSOLIDATED BALANCE SHEET

 

(€m)

 

   12 mths ended   12 mths ended 
   30 June 2024   30 June 2023 (*) 
Assets          
Financial assets held for trading   15,409.5    9,546.2 
Treasury financial assets and cash   11,102.6    10,378.5 
Banking book securities   11,340.7    10,471.3 
Customer loans   52,447.4    52,549.2 
Equity Investments   4,702.7    4,367.7 
Tangible and intangible assets   1,595.0    1,327.6 
Other assets   2,628.4    2,983.3 
Total assets   99,226.3    91,623.8 
Liabilities and net equity          
Funding   63,669.9    60,506.2 
Treasury financial liabilities   10,584.1    5,470.0 
Financial liabilities held for trading   9,504.7    9,436.7 
Other liabilities   4,066.3    4,598.7 
Provisions   158.1    182.6 
Net equity   9,883.7    10,299.5 
Minority interests   86.1    104.1 
Profit for the period   1,273.4    1,026.0 
Total liabilities and net equity   99,226.3    91,623.8 

 

(*) The figures as at 30 June 2023 have been restated after Bank of Italy Circular no. 262/2005, eighth update came into force, incorporating the introduction of the new IFRS 17 – insurance contracts.

 

Review of operations Mediobanca Group | 29

 

 

Key Performance Indicators (KPIs) (*) 

 

(€m)

 

   30 June 2024   30 June 2023 
KPI          
Tier 1 capital   7,222.5    8,177.6 
Regulatory capital   8,438.0    9,217.0 
RWA (1)    47,622.0    51,431.5 
CET1 ratio (Phase-in) (2)    15.2%   15.9%
RWA density (3)    48.0%   56.1%
Regulatory capital / risk-weightes assets   17.7%   17.9%
Leverage ratio (4)    7.1%   8.4%
Gross NPL/ Gross loans ratio (5)    2.47%   2.48%
Net NPL / Net loans ratio (6)    0.79%   0.72%
No. of shares in issue (million)   832.9    849.3 

 

(*) To facilitate understanding of the earnings and asset trends, the same Key Performance Indicators (or KPIs) used to guide the management team in the decision-making process have been used in this document. These are Alternative Performance Measures (APMs), which are in addition to those required as part of the IFRS. Further details are provided in the Annexes (Lists of Restatements) and the Glossary.
(1) Risk weighted assets.
(2) CET1/RWAs.
(3) RWAs/total assets.
(4) CET1/total leveraged exposures.
(5) Gross NPLs/gross loans.
(6) Net NPLs/net loans.

 

30 | Consolidated financial statements as at 30 June 2024

 

 

CONSOLIDATED PROFIT AND LOSS ACCOUNT

 

(€m)

                   
    12 mths ended     12 mths ended      
    30 June 2024     30 June 2023 (*)     Chg (%)  
Profit-and-loss data                        
Net interest income     1,984.8       1,801.0       10.2 %
Net treasury income     172.2       205.7       -16.3 %
Net fee and commission income     939.4       842.8       11.5 %
Equity-accounted companies     510.4       453.9       12.4 %
Total income     3,606.8       3,303.4       9.2 %
Labour costs     (804.5 )     (728.3 )     10.5 %
Administrative expenses     (737.7 )     (684.8 )     7.7 %
Operating costs     (1,542.2 )     (1,413.1 )     9.1 %
Loan loss provisions     (252.1 )     (270.1 )     -6.7 %
Provisions for other financial assets     13.9       (7.3 )     n.m.  
Other income (losses)     (90.2 )     (185.8 )     -51.5 %
Profit before tax     1,736.2       1,427.1       21.7 %
Income tax for the period     (436.7 )     (394.4 )     10.7 %
Minority interest     (26.1 )     (6.7 )     n.m.  
Net profit     1,273.4       1,026.0       24.1 %

 

(*)  The figures as at 30 June 2023 have been restated after Bank of Italy Circular no. 262/2005, eighth update came into force, incorporating the introduction of the new IFRS 17 – insurance contracts.
(**)  Includes profits credited back to the category B partners of Arma Partners.

 

Key Performance Indicators (KPIs) (*) 

 

   30 June 2024   30 June 2023   Chg (%) 
KPI               
ROTE adj. (1)    13.9%   12.7%   9.4%
Cost / Income ratio (2)    43%   43%   n.m. 
CoR (bps) (3)    48    52    -7.7%
EPS (4)    1.53    1.21    26.6%

 

(*) To facilitate understanding of the earnings and asset trends, the same Key Performance Indicators (or KPIs) used to guide the management team in the decision-making process have been used in this document. These are Alternative Performance Measures (APMs), which are in addition to those required as part of the IFRS. Further details are provided in the Annexes (Lists of Restatements) and the Glossary.
(1) Return On Tangible Equity (adjusted).
(2) Cost/income ratio.
(3) Cost of Risk.
(4) Earnings Per Share.

 

Review of operations Mediobanca Group | 31

 

 

EARNINGS/BALANCE-SHEET DATA BY DIVISION (*) 

 

(€m)

 

          Corporate                          
          and           Insurance              
    Wealth     Investment     Consumer     - Principal     Holding      
12 mths ended 30 June 2024    Management     Banking     Finance     Investing     Functions        Group (1)  
Profit-and-loss                                                
Net interest income     425.0       307.0       1,043.9       (7.1 )     178.0       1,984.8  
Net treasury income     9.2       95.0       0.2       26.6       39.2       172.2  
Net fee and commission income     489.4       360.6       145.1             6.3       939.4  
Equity-accounted companies                 (0.3 )     510.7             510.4  
Total income     923.6       762.6       1,188.9       530.2       223.5       3,606.8  
Labour costs     (325.1 )     (215.0 )     (120.6 )     (4.1 )     (139.7 )     (804.5 )
Administrative expenses     (288.4 )     (164.9 )     (248.9 )     (1.1 )     (52.6 )     (737.7 )
Operating costs     (613.5 )     (379.9 )     (369.5 )     (5.2 )     (192.3 )     (1,542.2 )
Loan loss provisions     (7.4 )     10.6       (249.7 )           (5.6 )     (252.1 )
Provisions for other financial assets     1.4       (3.4 )           20.0       (4.1 )     13.9  
Other income (losses)     (3.7 )     (2.5 )     0.1             (49.4 )     (90.2 )
Profit before tax     300.4       387.4       569.8       545.0       (27.9 )     1,736.2  
Income tax for the period     (91.0 )     (121.0 )     (186.9 )     (23.0 )     (13.2 )     (436.7 )
Minority interest     (0.9 )     (22.9 )                 (2.7 )     (26.1 )
Net profit     208.5       243.5       382.9       522.0       (43.8 )     1,273.4  
Cost/Income (%)     66.4       49.8       31.1       n.m.       n.m.       42.8  
RORWA     3.6 %     1.4 %     2.7 %     3.8 %           2.7 %
Balance-sheet data                                                
Loans and advances to customers     16,853.2       18,993.3       15,197.6             1,403.3       52,447.4  
Risk-weighted assets     6,051.5       14,857.6       14,493.2       8,066.5       4,153.2       47,622.0  
No. of staff     2,259       732       1,563       9       880 (443)       5,443  

 

Notes:

 

(*) Divisions comprise:

 

-Wealth Management (WM): ): this division brings together all portfolio management services offered to the various client segments, plus asset management. It includes MB Premier; the MBPB and CMB Monaco private banking networks, and the asset management companies (Polus Capital, Mediobanca SGR, Mediobanca Management Company, and RAM Active Investments), plus Spafid;

 

-Corporate & Investment Banking (CIB): this division brings together all services provided to corporate clients in the following areas: this division brings together all services provided to corporate clients in the following areas: Investment Banking (lending, advisory, capital markets activities) and proprietary trading (businesses performed by Mediobanca and Mediobanca International, Mediobanca Securities, Messier et Associés and Arma Partners), and Speciality Finance, which in turn consists of factoring and credit management activities for third parties performed by MBFACTA and MB Credit Solutions;

 

-Consumer Finance (CF): this division provides retail clients with the full range of consumer credit products, ranging from personal loans to salary-backed finance, to the Pagolight solution (Compass Banca, Compass RE and HeidiPay Switzerland AG);

 

-Insurance – Principal Investing (PI): division that manages the Group’s portfolio of equity investments and holdings;

 

-Holding Functions: division which includes SelmaBipiemme Leasing, MIS, and other minor companies, plus the following Group units: Treasury and ALM, operations, support and control, as well as the senior management of Mediobanca S.p.A.; for further details please refer to p. 74.

 

(1) The sum of the divisional data differs from the Group total due to adjustments/differences arising on consolidation between business areas (equal to €4.9m), the RAM brand impairment charge (€31.7m), and other effects attributable to acquisitions (in particular in respect of put-and-call arrangements) that have not been allocated to any business line in particular (€3.1m).

 

32 | Consolidated financial statements as at 30 June 2024

 

 

(€m)

 

       Corporate                 
       and       Insurance         
   Wealth   Investment   Consumer   - Principal   Holding    
12 mths ended 30 June 2023  Management   Banking   Finance (*)   Investing   Functions   Group (1) (*) 
Profit-and-loss                              
Net interest income   361.5    288.0    984,9    (7.1)   145.1    1,801.0 
Net treasury income   9.4    135.0        16.0    42.8    205.7 
Net fee and commission income   449.6    289.4    137.3        32.5    842.8 
Equity-accounted companies           (0.8)   454.7        453.9 
Total income   820.5    712.4    1,121.4    463.6    220.4    3,304.4 
Labour costs   (294.2)   (183.0)   (113.8)   (4.0)   (133.4)   (728.3)
Administrative expenses   (260.9)   (144.3)   (233.6)   (1.0)   (68.6)   (684.8)
Operating costs   (555.1)   (327.3)   (347.4)   (5.0)   (202.0)   (1,413.1)
Loan loss provisions   (10.5)   (32.3)   (203.9)       (23.4)   (270.1)
Provisions for other financial assets   (1.2)   (10.1)       2.4    1.8    (7.3)
Other income (losses)   (20.9)       (14. –)        (83.5)   (185.8)
Profit before tax   232.8    342.7    556.1    461.0    (86.7)   1,427.1 
Income tax for the period   (70.0)   (113.8)   (182.6)   (21.5)   (6.5)   (394.4)
Minority interest   (0.9)   (3.7)           (2.1)   (6.7)
Net profit   161.9    225.2    373.5    439.5    (95.3)   1,026.0 
Cost/Income (%)   67.7    45.9    31. –    n.m.    n.m.    42.8 
RORWA   3.1%   1.2%   2.9%   3.2%       2.4%
Balance-sheet data                              
Loans and advances to customers   16,827.3    19,625.9    14,465. –        1,631.0    52,549.2 
Risk-weighted assets   5,959.4    19,410.2    13,516.9    8,713.9    3,831.2    51,431.5 
No. of staff   2,197    648    1,520    9    853 (430)    5,227 

 

(*) The figures as at 30 June 2023 have been restated after Bank of Italy Circular no. 262/2005, eighth update came into force, incorporating the introduction of the new IFRS 17 – insurance contracts.

 

(1) The sum of the divisional data differs from the Group total due to adjustments/differences arising on consolidation between business areas (equal to €11.6m), the net impact through profit and loss of the RAM goodwill impairment charge (€49.5m) plus the effect of the Revalea disposal on earnings under IFRS 5 (€17.7m).

 

Review of operations Mediobanca Group | 33

 

 

Balance sheet

 

The Group’s total assets rose from €91.6bn to €99.2bn, the substantial increase being mostly due to significant growth in trading activity, which involved increases in equity and bond trading, most of which was refinanced by short-term liabilities; the parent company’s contribution was 57.1%; the main balance-sheet headings show the following trends for the twelve months (comparative data as at 30 June 2023):

 

Funding – funding totalled €63.7bn, significantly higher than last year (30/6/23: €60.5bn), due to an ambitious and diversified funding strategy which involved intensive primary market activity, with new issuance of €8.2bn, including the first SRT (Significant Risk Transfer) securitization of Compass receivables, plus approx. €2.2bn in securities placed via proprietary and third-party networks. The cost of the new issues was lower than last year, at 129 bps (vs 147 bps), with an interest rate payable of 2.41%. Thus the stock of debt securities rose from €22.3bn to €27.6bn, absorbing the expected reduction in the T-LTRO share (down €4.3bn, from €5.6bn to €1.3bn) and redemptions of €2.9bn. Wealth Management deposits remained stable at €27.9bn, despite the market trend for transforming demand deposits into assets under administration (AUA); strong client promotion activity limited outflows at low cost; and the share of tied deposits in promotion or time deposits was equal to 35% of the total. Interbank funding increased from €4.5bn to €6.8bn, reflecting the inclusion of certain non-recurring transactions.

 

   30 June 2024   30 June 2023     
   (€m)   %   (€m)   %   Chg. 
Debt securities (incl. ABS)   27,619.2    43%   22,282.8    37%   23.9%
Premier Banking deposits   16,888.0    27%   16,983.6    28%   -0.6%
Private Banking deposits   11,010.6    17%   11,194.6    19%   -1.6%
LTRO   1,313.2    2%   5,586.2    9%   -76.5%
Interbank funding (+CD/CP)   6,838.9    11%   4,459.0    7%   53.4%
Total funding   63,669.9    100%   60,506.2    100%   5.2%

 

Interest rate risk hedging activity, which is used for virtually all the Bank’s funding using plain vanilla swaps with qualified market counterparties, serves to transform the funding to floating rate (for bond issues and part of the modelled WM deposits). The reduction in interest rates over the twelve months drove an increase in the Fair Value of fixed-rate funding, the value of which (€1.2bn) is perfectly offset by the valuations for the derivatives (which are booked as other liabilities).

 

34 | Consolidated financial statements as at 30 June 2024

 

  

Loans and advances to customers – these totalled €52.4bn, virtually unchanged from last year, on healthy growth in Consumer Finance (up 5.1%, from €14.5bn to €15.2bn), driven primarily by personal loans (up 5.6%, from €7.1bn to €7.5bn) which offset the anticipated reduction in Corporate and Investment Banking (down 3.2%, from €19.6bn to €19bn) which continues to reflect weak demand in the Large Corporate segment (down 4.3%, from €16.7bn to €16bn) despite the performance of factoring where customer loans totalled €2.9bn (up 3.1% YoY). In Wealth Management customer loans totalled €16.9bn (€12.6bn of which in relation to Premier Banking and €4.3bn of which to Private Banking), basically unchanged from twelve months previously. Holding Functions reported a 14% reduction in lendings, reflecting the sale of Revalea (with its €238.8m loans) and the trimming of the Leasing loan book (down 11.1%, to €1.2bn).

 

Customer loans in Consumer Finance reflect 6.6% growth in new business for the twelve months (from €7.8bn to €8.4bn), on higher personal loans (up 11.5%, from €3.5bn to €3.9bn) driven by the direct channel (up 10.5%, from €2.7bn to €3bn), which offset the decrease in automotive finance (down 11.7%, from €1.6bn to €1.4bn) and special purpose loans (down 2.2%, from €1.2bn to €1.1bn); whereas new business in BNPL increased by almost 3x (from €189.6m to €496.5m). New loans in Corporate and Investment Banking were down slightly, impacted by the 3% reduction in Wholesale Banking (to €6.9bn), with repayments totalling €2.3bn, while turnover in factoring business remained stable at €12bn. New business in leasing was down 13.1%, from €306.9m to €266.8m, while new mortgage loans more than halved, from €2.2bn to €1.1bn.

 

           (€m)
            
    30 June 2024    30 June 2023     
   (€m)   %   (€m)   %   Chg. 
Corporate and Investment Banking   18,993.3    36%   19,625.9    37%   -3.2%
Consumer Banking   15,197.6    29%   14,465.0    28%   5.1%
Wealth Management   16,853.2    32%   16,827.3    32%   0.2%
Holding Functions (leasing and NPL management)   1,403.3    3%   1,631.0    3%   -14.0%
Total loans and advances to customers   52,447.4    100%   52,549.2    100%   (0.2)%

 

Review of operations Mediobanca Group | 35

 

  

           (€m)
            
   30 June 2024   30 June 2023 
   Performing           Performing         
   Stage 1   Stage 2   NPL   Total   Stage 1   Stage 2   NPL(1)    Total 
Corporate and Investment Banking   18,692.8    277.1    23.4    18,993.3    19,279.9    323.7    22.3    19,625.9 
Consumer Banking   13,722.1    1,234.0    241.4    15,197.6    12,901.4    1,364.2    199.4    14,465.0 
Wealth Management   15,978.3    744.9    130.0    16,853.2    15,981.3    726.1    119.9    16,827.3 
Holding Functions (leasing and NPL management)   1,308.9    75.5    18.8    1,403.3    1,281.8    77.6    271.6    1,631.0 
Total loans and advances to customers   49,702.2    2,331.5    413.7    52,447.4    49,444.4    2,491.6    613.2    52,549.2 
As % of total   94.8%   4.4%   0.8%   100%   94.1%   4.7%   1.2%   100%
Total loans and advances to customers excluding POCI   49,702.2    2,331.5    413.7    52,447.4    49,444.4    2,491.6    374.3    52,310.3 
As % of total   94.8%   4.4%   0.8%   100%   94.5%   4.8%   0.7%   100%

 

(1) Figures as at 30 June 2023 include Stage 3 and POCI (NPLs purchased by Revalea).

 

                       (€m)
                        
   30 June 2024   30 June 2023 
         Coverage         Coverage 
           ratio           ratio 
   Gross   Net   %   Gross   Net   % 
Corporate and Investment Banking   51.2    23.4    54.4%   135.7    22.2    83.6%
Consumer Banking   978.0    241.4    75.3%   878.0    199.4    77.3%
Wealth Management   227.7    130.0    42.9%   218.2    119.9    45.1%
Holding Functions (leasing and NPL management)   79.8    18.8    76.4%   107.8    32.8    69.6%
Total net non-performing loans   1,336.7    413.7    69.1%   1,339.7    374.3    72.1%
– of which: bad loans   359.6    29.6         430.8    41.2      
As % of total loans and advances   2.5%   0.8%        2.5%   0.7%     

 

Gross NPLs totalled €1,336.7m, basically stable compared to last year (€1,339.7m), and account for 2.5% of total loans. Corporate and Investment Banking more than halved its gross NPLs, which declined from €135.7m to €51.2m, following disposals of certain single-name Large Corporate Items totalling €113.1m, with the gross stock for this segment amounting to €24.8m due to the arrival of three new exposures, the largest of which is secured by an insurance policy issued by a public entity; meanwhile gross NPLs in factoring business were largely stable, at €26.5m (€25.6m). Leasing operations reported gross NPLs of €79.8m, representing a further reduction from last year (€107.8m). NPLs in Consumer Finance was raised from €878m to €978m, as a result of the expected increase in default rates that have returned to their pre-Covid levels, with gross NPLs representing 5.93% of total loans (5.59%). NPLs in Wealth Management increased by approx. €10.6m due to the inclusion of certain positions in the Private Banking Division (which added €20m) which are adequately counter-guaranteed, in part offset by the reduction in the mortgage lending segment (down €9.5m) which continues to benefit from very low default rates. The slight reduction in the

 

36 | Consolidated financial statements as at 30 June 2024

 

 

coverage ratio (down from 72% to 69%) is due to the higher quality of the new additions and is reflected in the rise in net NPLs (from €374.3m to €413.7m), but the share of net bad debts is extremely low at just €29.6m (0.1% of the loan stock).

 

Net Stage 2 positions totalled €2,331.5m (4.4% of net loans), lower than last year (€2,491.6m), and were concentrated in Consumer Finance (where they decreased from €1,364.2m to €1,234m; 8% of net loans) and in mortgage lending (down from €681.7m to €671.8m), where lifetime criteria were introduced during the twelve months in connection with SICR (Significant Increase in Credit Risk); net Stage 2 positions also decreased in Corporate and Investment Banking (from €323.7m to €277.1m), helped by the reduction in the Large Corporate segment (from €269.5m to €174.4m) which was only in part offset by the rise recorded in Factoring business (from €54.2m to €102.7m) due to certain breaches that were soon dealt with; while the increase in net Stage 2 positions in Wealth Management (from €726.1m to €744.9m) regards Private Banking (from €44.4m to €73.1m), which reflects the delays reported in respect of certain appropriately secured exposures.

 

The selective lending policy adopted, coupled with prudent provisioning, has enabled the Group to keep its coverage ratios stable, both for performing loans (1.31%, versus 1.34% last year) and Consumer Finance (3.67%, versus 3.75%). The stock of overlays remains adequate (at approx. €222m, €175m of which in Consumer Finance), albeit slightly lower than last year (€268m and €209m respectively).

 

Investment holdings(13)  – these increased from €4.4bn to €4.7bn, €3.8bn of which involve the investments accounted for using the equity method, plus €256.2m in investments in funds, and €657.3m in equities (including equity-like instruments).

 

The book value of the Assicurazioni Generali investment increased from €3,472.2m to €3,698m in the twelve months, on profits of €503m, reductions in net equity totalling €15.6m, and distribution of the dividend (€261.6m). The book value as at 30 June 2024 (calculated based on the company’s net equity as at 31 March 2024 net of the dividend) was boosted by an excellent performance in all business segments, non-life insurance in particular, driven by the effects of market interest rates on reserves, which more than offset the (material) impact of natural catastrophes; the company’s result benefited from certain non-recurring

 

(13)   This heading brings together investments covered by IAS 28, joint ventures covered by IFRS 11 (MB SpeedUp), investments measured at fair value through other comprehensive income, and holdings in funds (including seed capital) measured at fair value through profit and loss; the equity-accounted investments have been allocated to the Insurance/Private Investing Division with the exception of HeidiPay (Consumer Finance) and MB SpeedUp (Holding Functions).

 

Review of operations Mediobanca Group | 37

 

 

items such as the gains generated on the disposals of TUA Assicurazioni S.p.A. and Generali Deutschland Pensionkasse.

 

The value of the investment in IEO (25.37%) was stable at €39m, reflecting only a minor loss of €0.2m; while that in Finanziaria Gruppo Bisazza S.r.l. (22.67%) was worth €6.7m (€7.1m last year), following a profit of €403,00 for the period plus the €839,000 dividend distributed; the investment in CLI Holdings II Limited reduced from €38.6m to €37m, following the collection of dividends totalling €9.1m and profits for the period of €7.5m; the value of the HeidiPay AG investment remains stable at €6.6m reflecting the €315,000 loss offset by a €337,000 increase in net equity; and the MB SpeedUp stake was worth €1.8m.

 

Holdings in funds increased from €562.9m to €657.3m, following net investments of €81.1m and upward value adjustments of €13.2m; of these holdings, €376m involve funds managed by the Group (seed capital) and €281.3m external funds, for the most part private equity.

 

Holdings in equities (including equity-like instruments) increased from €241m to €256.2m, following new investments totalling €12.5m, the effects of the adjustments to reflect Fair Value at the year-end adding €15.5m, and partial redemptions of equity-like instruments amounting to approx. €12m.

 

           (€m)
            
   30 June 2024   30 June 2023 
   Book value   HTC&S reserve    Book value   HTC&S reserve 
Equity method investments (1)    3,789.2    n.a.    3,563.8    n.a. 
Listed shares   127.5    68.5    115.1    56.8 
Other unlisted shares   128.7    82.7    125.9    90.8 
Seed capital   376.0        312.4     
Private equity   181.7        142.5     
Other funds   99.6        108.0     
Total equity holdings   4,702.7    151.2    4,367.7    147.6 

 

(1) Differs from the figure shown in the following table by just under €0.1m due to minor associate companies (30/6/23: €0.1m).

 

           (€m)
            
   % ownership   30/6/24   30/6/23 
Assicurazioni Generali   13.17    3,698.0    3,472.2 
CLI Holding II (*)    24.09(*)   37.0    38.6 
Finanziaria Gruppo Bisazza   22.67    6.7    7.1 
Istituto Europeo di Oncologia   25.37    39.0    39.1 
HeidiPay   19.45    6.6    6.6 
MB SpeedUp (JV)   50.0    1.8     
Total equity method investments        3.789.1    3.563.6 

 

(*) Percentage calculated based on the nominal value of the notes issued.

 

38 | Consolidated financial statements as at 30 June 2024

 

 

The Group’s investment in Assicurazioni Generali at 30 June 2024 had a market value of €4,759.1m (€23.29 per share), which is higher than its book value (€17 per share). As required by IAS 36 the impairment test was carried out on the investment, which it passed; the value in use too, calculated according to the Group policy, was significantly higher than the book value.

 

For further details please see the Notes to the Accounts, Assets, section 7 – Equity investments.

 

Banking book debt securities – Fixed-income securities held as part of the banking book totalled €11.3bn, split between Hold to Collect & Sell (€6.6bn) and Hold to Collect (€4.6bn). The book’s low duration facilitated turnover (approx. €2.1bn), which benefited immediately from the increase in yields.

 

Conversely, the decline in interest rates recorded during the twelve months is reflected in the stocks’ valuations: the OCI reserve has reduced the deficit reported at end-June 2023 (minus €73.2m) to minus €9.2m, due to a recovery in valuations, just over one-third of which is attributable to government securities (Italian and non-Italian) and the remainder to corporate and financial bonds. The positive market performance recorded in the summer months has enabled the OCI reserve to return to positive territory. The unrealized losses on the Hold to Collect portfolio (which are recognized at cost) reduced from €85.4m at the start of the financial year to €44.2m.

 

Approx. 78% of the banking book is made up of sovereign debt (€8.9bn), €3.2bn of which as HTC and €5.6bn as HTC&S with a very short duration (approx. 2 years); the share accounted for by Italian government securities totals €5.4bn (approx. 47% of the entire portfolio, with a duration of approx. 2 years).

 

           (€m)
            
   30 June 2024   30 June 2023 
   (€m)   %   (€m)   % 
Hold to Collect   4,550.5    40%   4,669.3    45%
Hold to Collect & Sell   6,649.5    59%   5,801.1    55%
Other (Mandatorily measured at FV)   140.7    1%   0.9    n.m. 
Total banking book securities   11,340.7    100%   10,471.3    100%

 

Review of operations Mediobanca Group | 39

 

  

                       (€m)
                        
   30 June 2024   30 June 2023 
   Book value   OCI   Book value   OCI 
   HTC   HTC&S   reserve   HTC   HTC&S   reserve 
Italian government bonds   1,985.7    3,394.1    (16.6)   2,111.1    3,020.0    (35.0)
Foreign government bonds   1,228.8    2,246.5    (3.8)   1,278.2    1,528.3    (7.7)
Bond issued by financial institutions   353.1    706.0    11.1    446.0    829.7    (16.3)
Corporate bonds   240.3    224.3    0.4    204.2    236.5    (11.8)
Asset Backet Securities (ABS)   742.6    78.6    (0.3)   629.8    186.6    (2.4)
Total banking book securities   4,550.5    6,649.5    (9.2)   4,669.3    5,801.1    (73.2)

 

Net treasury assets – net treasury assets increased by approx. €1.4bn (from €5bn to €6.4bn), while the change is much more pronounced on a gross basis, where the balance of trading activities and treasury lendings and cash rose by €6.6bn to €26.5bn. Such growth was despite the cash outflows to repay the T-LTRO (which totalled approx. €4.3bn over the twelve months), due to an increase of €5.1bn in treasury funding which totalled €10.6bn, and to the increase in market repos (up €5.7bn, to €9bn).

 

The pronounced increase in the Group’s sources of funding encouraged the increase in investments, with the equity component now standing at €3.9bn (up €2.7bn YoY), while the bond component rose by €2.1bn YoY to €3.5bn. This active funding management strategy, coupled with the reduction in cash and cash assets held on deposit with the European Central Bank (down €900m), has enabled the Group to take advantage of favourable market opportunities to improve its earnings results, by deploying the funding raised at higher interest rates.

 

   30 June 2024   30 June 2023     
   (€m)   (€m)   Chg. 
Financial assets held for trading   15,409.5    9,546.2    61.4%
Treasury financial assets and cash   11,102.6    10,378.5    7.0%
Financial liabilities held for trading   (9,504.7)   (9,436.7)   0.7%
Treasury financial liabilities   (10,584.1)   (5,470.0)   93.5%
Net treasury assets   6,423.3    5,018.0    28.0%

 

   30 June 2024   30 June 2023     
   (€m)   (€m)   Chg. 
Equities   3,880.7    1,147.5    n.m. 
Bond securities   3,507.7    1,388.1    n.m. 
Derivative contract valuations   (10.7)   (139.5)   n.m. 
Certificates   (1,728.7)   (2,290.6)   -24.5%
Trading loans   255.9    4.1    n.m. 
Financial instruments held for trading   5,904.9    109.6    n.m. 

 

40 | Consolidated financial statements as at 30 June 2024

 

 

   30 June 2024   30 June 2023     
   (€m)   (€m)   Chg. 
Cash and current accounts   1,232.0    1,495.3    -17.6%
Cash available at BCE   2,608.4    3,499.9    -25.5%
Deposits   (3,322.0)   (86.8)   n.m. 
Net treasury   518.4    4,908.4    -89.4%

 

   30 June 2024   30 June 2023 
   (€m)   (€m) 
   Assets   Liabilities   Assets   Liabilities 
Italian government bonds   5,218.2    (3,998.2)   1,999.4    (1,925.2)
Foreign government bonds   1,360.4    (734.2)   1,263.6    (2,120.8)
Bond issued by financial institutions   1,400.3    (167.8)   1,840.8    (44.0)
Corporate bonds   142.6    (1.2)   110.0     
Asset Backet Securities (ABS)   287.6        264.3     
Equities   3,930.0    (49.3)   1,187.6    (40.1)
Total securities   12,339.1    (4,950.7)   6,665.7    (4,130.1)

 

   30 June 2024   30 June 2023 
   (€m)   (€m) 
   Assets   Liabilities   Assets   Liabilities 
Interest rate swaps   572.3    (658.4)   541.9    (550.8)
Foreign exchange   309.0    (263.3)   408.3    (329.9)
Interest rate options/futures   12.1    (47.4)   7.8    (23.6)
Equity swaps e options   1,784.4    (1,787.1)   1,747.0    (1,886.3)
Credit derivatives (others)   287.6    (220.0)   158.8    (212.7)
Derivative contract valuations   2,965.3    (2,976.0)   2,863.8    (3,003.3)

 

   30 June 2024   30 June 2023 
   (€m)   (€m) 
   Assets   Liabilities   Assets   Liabilities 
Securities lending/repos deposits   5,187.0    (9,055.2)   3,006.9    (3.295.1)
Stock lending deposits   188.0    (636.8)   442.5    (584.7)
Other deposits   2,405.2    (1,410.2)   2,063.0    (1.719.4)
Deposits   7.780.2    (11.102.2)   5.512.4    (5.599.2)

 

Review of operations Mediobanca Group | 41

 

 

Tangible and intangible assets – these totalled €1.6bn (€1.3bn), with intangible assets increasing from €796.9m to €1bn, and tangible assets of €549.6m (€530.7m).

 

The trend in the twelve months was attributable to the two acquisitions, the Purchase Price Allocation process for both of which has already been concluded. In particular, the acquisition of Arma Partners has resulted in goodwill of €246.9m being recorded, after the brand was valued at €29.1m, and a client list identified worth €6.3m; while for the HeidiPay Switzerland deal, a client list worth €2.6m was matched with €5.1m in goodwill. Conversely, the RAM and Messier & Associés brand values were reduced, by €31.7m and €10.2m respectively.

 

As for software, acquisitions worth €36.5m were made during the twelve months, and €38.6m in amortization charges recognized, including the work ahead of schedule for the software used by MIS for a total of €6.8m.(14) 

 

Tangible assets rose from €530.7m to €549.6m and involve purchases of furniture and equipment totalling €35.6m, spending on capitalized improvements amounting to €18.3m, and as usual operations covered by IFRS 16 (most of which attributable to renting contracts) of €37.2m. Depreciation and amortization charges totalled €71.1m, €49.9m of which pursuant to IFRS 16 and €21.2m on properties and other tangible assets.

 

   30 June 2024   30 June 2023     
   (€m)   %   (€m)   %   Chg. 
Land and properties   456.0    29%   457.2    34%   -0.3%
– of which: core   169.5    11%   171.4    13%   -1.1%
buildings RoU ex IFRS16   229.7    14%   229.9    17%   -0.1%
Other tangible assets   93.6    6%   73.5    6%   27.3%
– of which: RoU ex IFRS16   15.6    1%   11.7    1%   33.3%
Goodwill   827.3    52%   574.6    43%   44.0%
Other intangible assets   218.1    14%   222.3    17%   -1.9%
Total tangible and intangible assets   1,595.0    100%   1,327.6    100%   20.1%

 

(14) The amortization charges have been restated in the profit and loss account shown on p. 27 under “Other income (losses)”; see below, “Other income (losses)”, for further details.

 

42 | Consolidated financial statements as at 30 June 2024

 

 

       (€m)
        
Transaction  30 June 2024   30 June 2023 
Polus Capital   57.7    57.0 
MB Private Banking   52.1    52.1 
Messier et Associés   93.2    93.2 
Arma Partners   246.9     
Consumer   377.4    372.3 
Total Goodwill   827.3    574.6 

 

An updated list of the core properties owned by the Group is provided below:

 

       Book value   Book value per squ. m 
   Squ. M   (€m)   (€/000) 
Milan:               
– Piazzetta Enrico Cuccia n. 1   9,318    16.–    1.7 
– Via Filodrammatici n. 1, 3, 5, 7 -               
Piazzetta Bossi n. 1 -               
Piazza Paolo Ferrari n. 6   13,390    61.9    4.6 
– Foro Buonaparte n. 10   2,926    8.9    3.– 
– Via Siusi n. 1-7   22,608    21.6    1.– 
Rome (*)    1,790    7.6    4.2 
Vicenza   4,239    4.3    1.– 
Luxembourg   442    3.5    7.9 
Monaco   4,721    44.9    9.5 
Other minor properties   2,911    0.5    0.2 
Total   62,345    169.2      

 

(*) The Piazza di Spagna property, carried at a book value of €23.2m, is used only in part by Mediobanca, and has therefore not been included among its core assets.

 

Reference is made to Notes to the Accounts, Assets, section 10, for further details on the Purchase Price Allocation process and the valuations of the tangible and intangible assets tested for impairment as required and provided for by IAS 36 and by the Group Impairment Policy.

 

Provisions for liabilities – these amounted to €158.1m; the reduction compared to last year (€182.6m) was primarily attributable to the provision for risks and charges (which decreased from €139.6m to €116.3m); while commitments and guarantees and the provision for statutory end-of-service payments were both largely stable, the former at €21.4m (vs €22.2m) and the latter at €20.8m (€20.4m).

 

The provision for risks and charges primarily covers the legal and tax disputes (€63.3m), plus sundry other charges (€42.8m), in part linked to human resources for guarantees and indemnities (€23m), and the specific risks such as the one entailed by the Lexitor ruling (€10m).

 

Review of operations Mediobanca Group | 43

 

 

The reduction in the heading overall is attributable mainly to the use of the provisions set aside last year to facilitate staff turnover (€14m) and to provisions being released as a result of the favourable outcome of some litigation (€11m).

 

For further details, reference is made to section 10 of the Notes to the Accounts.

 

   30 June 2024    30 June 2023     
   (€m)   %    (€m)   %   Chg. 
Commitments and financial guarantees given   21.4    14%   22.2    12%   -3.6%
Provisions for risks and charges   116.3    74%   139.6    77%   -16.7%
Staff severance indemnity provision   20.4    12%   20.8    11%   -1.9%
of which: staff severance provision discount   (0.6)   n.m.    (0.5)   n.m.    20%
Total provision   158.1    100%   182.6    100%   -13.4%

 

Net equity – net equity totalled €11.2bn, near the same level as last year (€11.3bn), with most of the profit for the twelve months (€1,273.4m) accounted for by payment of the dividend (2023 dividend: €713.4m; 2024 interim dividend: €421.2m); the €158.7m reduction in the cash flow hedge valuation reserve was partly offset by the increase in the FVOCI valuation reserve (up €40m).

 

It should be noted that the share buyback scheme authorized by shareholders at the Annual General Meeting held on 28 October 2023 was completed during the twelve months under review. A total of 17 million ordinary shares, equal to 2% of the company’s s hare capital, were acquired for a total outlay of €197.8m, and the shares were duly cancelled on 11 June 2024.

 

           (€m)
            
   30 June 2024   30 June 2023(*)   Chg. 
Share capital   444.5    444.2    0.1%
Other reserves   9,929.0    9,793.2    1.4%
Interim dividend   (421.2)       n.m. 
Valuation reserves   (68.6)   62.1    n.m. 
- of which: financial assets recognized at FVOCI   116.5    71.1    63.9%
cash flow hedge   113.7    272.4    -58.3%
equity investments   (274.4)   (277.8)   n.m. 
Profit for the period   1,273.4    1,026.    24.1%
Total Group net equity   11,157.1    11,325.5    -1.5%

 

(*) The figures as at 30 June 2023 have been restated after Bank of Italy Circular no. 262/2005, eighth update came into force, incorporating the introduction of the new IFRS 17 – insurance contracts.

 

44 | Consolidated financial statements as at 30 June 2024

 

 

Conversely, the FVOCI valuation reserve rose from €71.1m to €116.5m; the reduction in spreads related to the short duration of the debt securities enabled the Fair Value of the securities held in the portfolio to recover gradually (increasing by €72m), €12.5m of which is attributable to Italian government securities; the Fair Value was impacted at the year-end by the uncertain scenario due to the French elections. The compulsory reserve returned to positive territory in July 2024.

 

           (€m)
            
   30 June 2024   30 June 2023   Chg. 
Equity shares   151.2    147.5    2.5%
Bonds   (9.2)   (73.3)   -87.4%
of which: Italian government bonds   (16.6)   (35.0)   52.6%
Tax effect   (25.5)   (3.1)   n.m. 
Total OCI reserve   116.5    71.1    63.9%

 

Review of operations Mediobanca Group | 45

 

 

Profit and loss account

 

Net interest income – net interest income totalled €1,984.8m, up 10.2% on last year (€1,801m); the quarterly trend was stable across the twelve months, with NII in 4Q totalling approx. €493m. Total loans were unchanged for the year, at around €52bn, with a marked increase in ROA (up 162 bps, to 5.88%); funding, which grew in terms of volumes due to good diversification of the channels (retail/ institutional/promotions), saw its finite rate increase by 106 bps (CoF: 2.41%). Sovereign debt being cheap again drove a robust increase in both volumes and profit for the banking book, as did the benefit of the ALM position being favourable to rising interest rates. Consumer Finance consolidated its position as the Group’s leading contributor to net interest income, with new loans growing (to €8.4bn) which enabled the Division to break through the €1bn NII barrier for the first time (up 6%, from €984.9bn to €1,043.9m), helped by intensive repricing activity for the new business which made up almost entirely for the increase in the cost of hedges (ROA: up 88bps to 8.36%). Wealth Management reported NII of €425m, up 17.6% YoY, helped by the higher lending rate (up 175 bps; ROA: 4.23%), and the cost of funding which, while higher, still rose by less than the lending rate (up 106 bps; CoF: 1.66%). Treasury management generated net interest income of €146.9m (up €48.8m YoY): the improvement reflects a good performance by the banking book, which repriced by approx. 114 bps over the twelve months, helped by the short duration. Net interest income earned by the Corporate and Investment Banking division rose by 6.6% to €307m on the back of a higher contribution from the Markets Division and the proprietary trading desk, which benefited from coupons with higher interest rates, which resulted in the value being represented under this heading rather than as trading profits.

 

           (€m)
            
   30 June 2024   30 June 2023   Chg. 
Consumer Banking   1,043.9    984.9    6.0%
Wealth Management   425.0    361.5    17.6%
Corporate and Investment Banking   307.0    288.0    6.6%
Holding Functions e altre (incl.IC)   208.9    166.6    n.m. 
Margine d’interesse   1,984.8    1,801.0    10.2%

 

Net treasury income – this item totalled €172.2m, up 16.3% on last year (€205.7m). The proprietary trading portfolio delivered a profit of €58.5m, almost half the figure reported twelve months previously (€104.9m), due to a lower contribution from CIB trading of €19.4m (€62.1m), whereas banking book management in the Holding Functions was more or less stable at €39.2m (€42.8m), including €10.2m in gains realized on disposals of securities held in the banking book. Client trading

 

46 | Consolidated financial statements as at 30 June 2024

 

 

activity generated income of €75.6m (€72.7m), following a good performance in fixed-income trading (which improved from €16.1m to €26.2m), benefiting from operations in arbitrage and certificates (new instruments worth over €450m issued), with much of the profit, however, being accounted for as net interest income; income from equity trading totalled €46.7m, with much of the gap versus last year’s performance (€55.5m) being made up in 4Q (€20.8m), helped by the recovery in certificates trading and by managing the portfolio volatility effectively. Dividends and other income from Principal Investing/Insurance business rose from €16m to €26.6m, due to the generalized increase in flows received from assets held in the portfolio, plus a one-off contribution from Italmobiliare.

 

           (€m)
            
   30 June 2024   30 June 2023   Chg. 
Corporate Investment Banking   95.0    135.0    -29.6%
of which: client fixed income   72.8    71.6    1.7%
Principal Investing   26.6    16.0    66.3%
Holding Functions   39.2    42.8    -8.4%
Other (including Intercompany)   11.4    11.9    -4.2%
Net treasury income   172.2    205.7    -16.3%

 

Net fee and commission income – fee income totalled €939.4m, up 11.5% YoY, following an excellent 4Q performance (€279.2m) which confirms the signs of recovery in M&A activity seen during 2024. The increase was concentrated in Investment Banking and corporate services(15) (fees of €270m; up 33% YoY), which were boosted by the consolidation of Arma Partners (€68m in fees for 9M), plus organic growth in advisory business (fees up from €144m to €160m), which offset the sharp drop in demand for Equity Capital Market services (the contribution from which slipped from €27m to €6m); while the positive trend in Wealth Management continued(16)  (fees up 8%, to €441m), and also in lending activity (€257m, up 5%) driven by retail business (€159m, up 6%). Turning to the various business lines, fee income earned from Wealth Management operations continues to grow, up 8.9% (from €449.6m to €489.4m): consistent with demand still strongly geared in favour of AUA, upfront fees (soared by 25%, to €96.6m, €26.5m of which in 4Q), with growth in the recurring component less buoyant (management and banking fees up 5.7% to €449m); performance fees totalled €14.7m (approx. €9m of which in 1H). In CIB (fees up 24.6% to €360.6m), Investment Banking posted fees of €235m (up 38% YoY, €98m of which in 4Q), with approx. €140m from international business(17) , while the Debt Division

 

(15)   Investment banking and corporate services include corporate finance, ECM, and NPL management.

(16)   Asset management services include management and upfront fees.

(17)  Includes Arma Partners (€67m), Messier et Associés (€42m), and deals managed by the Spanish branch office.

 

Review of operations Mediobanca Group | 47

 

 

reported fees from bond placements and lending activity totalling €86.8m (up 4% YoY). Fees generated from Specialty Finance operations were up 9.5%, to €33.3m, while those from Consumer Finance rose by 5.7%, to €145.1m, with Pagolight’s contribution €20m.

 

           (€m)
            
   30 June 2024   30 June 2023 (*)   Chg. 
Wealth Management   489.4    449.6    8.9%
Corporate & Investment Banking   360.6    289.4    24.6%
Consumer Banking   145.1    137.3    5.7%
Holding Functions and other (including intercompany)   (55.7)   (33.5)   66.3%
Net fee and commission income   939.4    842.8    11.5%

 

(*) The figures as at 30 June 2023 have been restated after Bank of Italy Circular no. 262/2005, eighth update came into force, incorporating the introduction of the new IFRS 17 – insurance contracts.

 

Insurance sector and other equity-accounted investments – the growth in this item, from €453.9m to €510.4m (up 12.4%), was related to the positive performance by Assicurazioni Generali (contribution up from €442.8m to €503m) reported in all business segments. The company’s results were boosted by certain non-recurring items, including the gains on the disposals of TUA Assicurazioni S.p.A. and Generali Deutschland Pensionskasse, plus the financial effects deriving from introduction of the new IFRS 9 and IFRS 17. As for the other IAS 28 investments, the contribution for the twelve months, which totalled €7.4m (€11m) was due to the result posted by CLI Holdings II (€7.5m, €3.2m of which in 4Q).

 

Operating costs – operating costs were up 9.1%, from €1,413.1m to €1,542.2m, reflecting the increase in the headcount (with 216 new staff, for a total of 5,443) plus the higher IT costs; the cost/income ratio was stable at 42.8%; the main components performed as follows:

 

Labour costs rose by 10.5%, from €728.3m to €804.5m, with three-quarters of the increase regarding the fixed component, and reflecting the increase in headcount referred to above, itself concentrated in the business areas (CIB: 84 more staff, mostly in relation to Arma Partners; WM: 62 more staff; and CF: 43 more staff), plus the effects of the national collective contract renewal (approx. €10M); as for the variable components (up 8% YoY), the increase is linked to the performance and as such is also concentrated in the business areas (CIB and WM), where the retention needs are also highest. As for the individual divisions, WM posted an increase in labour costs of 10.5% (€325.1m), CIB of 17.5% YoY (€215m, €19.3m of which in relation to Arma Partners); CF of 6% (€120.6m); and the Holding Functions Division of 4.7% (€139.7m), due to the strengthening of the central units;

 

48 | Consolidated financial statements as at 30 June 2024

 

 

Administrative expenses rose by 7.7%, from €684.8m to €737.7m, the increase between split between the technology upgrade and projects (approx. €25m which accounted for 41% of the total), and growth in the business areas (approx. €20m, or 36% of the total), with around €5m attributable to inflation, with respect in particular to IT leasing instalments, operations and rent. The increase in the technology component (up 7.4% YoY, to €240m) reflects the amortization of the investments made in the previous years and the higher data processing costs (€150m; up 3% YoY) and info-provider costs (up 10% YoY, to €47.5m); new projects (up from €54m to €68m) regard certain Group-wide strategic projects (migration to cloud-based solutions and development of an ESG platform) plus activities specific to the individual divisions (Pagolight platform, adaptation of CIB markets); there were also increases in expenses linked to commercial expansion, from €68.7m to €75.5m, such as marketing, which includes the rebranding of CheBanca! as Mediobanca Premier; communications and travel-related expenses; increases in spending on offices,(18) rose by 7% YoY (to €89.4m), while costs related to operations services (€115.5m) were higher in the CF and CIB segments but were stable in WM. With regard to the individual divisions: WM accounted for €288.4m of the costs (up 10.5%); CF €248.9m (up 6.5%); and CIB €164.9m (up 14.3%, 9.7% net of Arma Partners). The Holding Functions division’s costs decreased from €68.6m to €52.6m, with the share of central costs (net of the amounts charged back to the other divisions) totalling €118m, or 7.6% of the Group total.

 

           (€m)
            
   12 mths ended   12 mths ended    
   30/6/24   30/6/23   Chg. 
Labour costs   804.5    728.3    10.5%
of which: directors   9.6    11.3    -15.0%
stock option and performance share schemes   11.6    11.2    3.6%
Sundry operating costs and expenses   737.7    684.8    7.7%
of which: depreciations and amortizations   102.9    92.3    11.5%
administrative expenses   634.8    592.5    7.1%
Operating costs   1,542.2    1,413.1    9.1%

 

(18) Includes depreciation charges for properties, both owned and leased.

 

 

Review of operations Mediobanca Group | 49

 

 

           (€m)
            
   12 mths ended   12 mths ended     
   30/6/24   30/6/23   Chg. 
Legal, tax and professional services   20.0    16.3    22.7%
Other consultancy expenses   45.4    39.0    16.4%
Credit recovery activities   43.7    55.0    -20.5%
Marketing and communication   55.4    49.2    12.6%
Rent and property maintenance   25.9    23.0    12.6%
EDP   178.5    162.2    10.0%
Financial information subscriptions   59.5    54.1    10.0%
Bank services, collection and payment commissions   31.8    32.9    -3.3%
Operating expenses   66.9    66.6    0.5%
Other labour costs   18.6    18.0    3.3%
Other costs   52.2    45.3    15.2%
Direct and indirect taxes   36.9    30.9    19.4%
Total administrative expenses   634.8    592.5    7.1%

 

Loan loss provisions – these decreased by 6.7%, from €270.1m to €252.1m, reflecting a cost of risk (CoR) at 48bps down 4 bps compared to last year. The asset quality indicators remain adequate, despite a slight deterioration recorded in Consumer Finance, but still within pre-Covid levels. Loan loss provisions in Consumer Finance increased from €203.9m to €249.7m, reflect the anticipated increase in default rates, plus the loan mix being geared more towards direct personal loans; recovery rates remain excellent, with a low stock of NPLs gross (NPL ratio: 5.93%) and adequate coverage levels (NPLs: 75.7%; performing loans: 3.67%) underpinned by the stock of overlays which, despite reducing gradually (down from €208.6m to €174.9m, following the update of the ECL models), still represent something like one year of provisions; the CoR rose from 145 bps to 168 bps (174 bps in 4Q). Corporate and Investment Banking posted net writebacks of €10.6m, representing a strong improvement on last year, when charges of €32.3m were taken, and reflecting the improvement in portfolio quality (post-derisking), the reduction in volumes, and the lower client exposure to inflation risk (which enabled an approx. €12.4m reduction in overlays). Provisioning in Wealth Management totalled €7.4m, down 30% on last year (€10.5m), with a CoR of 4 bps (7 bps); this area continues to benefit from positive risk indicators and good credit recovery performances; the stock of overlays stood at €12m.

 

           (€m)
            
   12 mths ended   12 mths ended     
   30/6/24   30/6/23   Chg. 
Corporate and Investment Banking   (10.6)   32.3    n.m. 
Consumer Banking   249.7    203.9    22.5%
Wealth Management   7.4    10.5    -29.5%
Holding Functions (leasing and NPL management)   5.6    23.4    -76.1%
Loan loss provisions   252.1    270.1    -6.7%
Cost of risk (bps)   48    52      

 

50 | Consolidated financial statements as at 30 June 2024

 

 

Provisions for other financial assets(19)  writebacks in respect of other financial assets of €13.9m were credited. Compared to last year, when charges of €7.3m were taken, holdings in investment funds being aligned to Fair Value reversed their trend on the back of the positive performance by financial markets during the financial year, recorded gains of €17.3m ,virtually all of which were due to the seed capital portfolio (the RAM funds in particular). This heading also comprises the provisioning for banking book securities (€3.4m).

 

           (€m)
            
   12 mths ended   12 mths ended     
   30/6/24   30/6/23   Chg. 
Hold-to-Collect securities   (1.4)   (2.6)   -46.2%
Hold-to-Collect & Sell securities   (2.0)   0.7    n.m. 
Financial assets mandatorily FVTPL   17.3    (5.4)   n.m. 
Provisions for other financial assets   13.9    (7.3)   n.m. 

 

Other gains (losses) – this heading reflects a net loss of €90.2m (€185.8m last year), of which:

 

€50.7m in payments to the resolution funds, primarily the ordinary payment (€23.9m) and the early booking of the final payment due under the Deposit Guarantee Scheme of €24.2m (paid on 2 July 2024); this amount was charged to the accounts as at 30 June 2024, in view of the fact that the payment is compulsory from the date on which the stock for the financial year concerned is consolidated, and paid early on in July. In addition, a final adjustment of €2.6m was also taken in respect of the Single Resolution Fund, post-restatement by the Single Resolution Board following the eight years of ramp-up;
  
€31.7m by way of adjustment for the RAM brand, established using the Fair Value methodology based on the forward-looking data at 1Y;
  
€6.8m in additional amortization charges pursuant to IAS 8 (Changes in Accounting Estimates) following the recalculation of the useful life of much of the IT software owned by MIS, in accordance with the strategy undertaken by the Group to systematically reduce obsolete technology;
  
€1m in net costs, including the adjustment of the Messier & Associés brand to its initial recognition value in the individual accounts (resulting in a charge of €17m being taken) rather than that stated in the consolidated accounts (€27.2m), most of which has been offset by the writebacks credited as a result of the PPA process being completed (release of upfront share and payment of the deferred share) and the valuation effects for the provision for risks and charges, plus the liabilities due in respect of the put-and-call agreements.

 

(19)   Under IFRS 9, the impairment process applies to all financial assets (securities, repos, deposits and current accounts) recognized at cost (the “Hold to Collect” model) and to all bonds recognized at fair value through other comprehensive income (the “Hold to Collect and Sell” model).

Review of operations Mediobanca Group | 51

 

 

Income tax – income tax for the period totalled €436.7m (30/6/23: €394.4m), equivalent to a tax rate of 25.2% (27.6%). The Mediobanca Group adheres to the consolidated tax regime provided by Articles 117ff of the Italian Income Tax Act (known also as “national tax consolidation”). Of the various effects deriving from this decision, the main benefit is being able to determine an overall amount of comprehensive income, which is equal to the algebraic sum of the tax income or losses reported by the parties that have opted into this system, which is subject to IRES taxation at 24%. It should also be noted that Mediobanca has been admitted to the co-operative compliance programme instituted by the Italian revenue authority under Title III of Italian Legislative Decree no. No. 128 of 5 August 2015, as amended by Italian Legislative Decree no. 221/2023, effective from the tax period ended on 30 June 2023, after putting in place an effective system for recording, measuring, managing and controlling tax risk (the “Tax Control Framework”), in line with the Tax Conduct Principles adopted by the Board of Directors. The Tax Control Framework was also extended to Compass Banca and to Mediobanca Premier during the twelve months, both of which had applied for admission.

  

52 | Consolidated financial statements as at 30 June 2024

 

 

Profit-and-loss figures/balance-sheet data by division

 

WEALTH MANAGEMENT

 

This division brings together all asset administration and management services offered to the following client segments:

 

Private Banking (Mediobanca Private Banking and CMB Monaco);

 

Mediobanca Premier, formerly CheBanca!;

 

Asset Management division, primarily captive business (Mediobanca SGR, Polus Capital, RAM Active Investments, Mediobanca Management Company).

 

This division also includes the results of the fiduciary business carried on by Spafid S.p.A. (Spafid Trust).

 
           (€m) 
             
   12 mths ended
30/6/24
   12 mths ended
30/6/23
   Chg. % 
Profit-and-loss               
Net interest income   425.0    361.5    17.6 
Net trading income   9.2    9.4    -2.1 
Net fee and commission income   489.4    449.6    8.9 
Total income   923.6    820.5    12.6 
Labour costs   (325.1)   (294.2)   10.5 
Administrative expenses   (288.4)   (260.9)   10.5 
Operating costs   (613.5)   (555.1)   10.5 
Loan loss provisions   (7.4)   (10.5)   -29.5 
Provisions for other financial assets   1.4    (1.2)   n.m. 
Other income (losses)   (3.7)   (20.9)   -82.3 
Profit before tax   300.4    232.8    29.0 
Income tax for the period   (91.0)   (70.0)   30.0 
Minority interest   (0.9)   (0.9)   n.m. 
Net profit   208.5    161.9    28.8 
Cost/Income (%)   66.4    67.7      

 

       (€m)         
                 
  

12 mths ended
30/6/24

  

12 mths ended
30/6/23

         
Balance-sheet data                  
Loans and advances to customers   16,853.2    16,827.3         
of which:                  
MB Premier   12,568. –    12,384.1         
Private Banking   4,285.2    4,443.2         
New loans   1,100.6    2,244.7         
Risk-weighted assets   6,051.5    5,959.4         
RORWA   3.6%   3.1%        
No. of staff   2,259    2,197         

 

Review of operations Mediobanca Group | 53

 

 
  

12 mths ended
30/6/24

  

12 mths ended
30/6/23

   Chg. % 
Commercial data               
Relationship managers   536    522    2.7%
Financial advisors   615    565    8.8%
No. of branches/agencies MB Premier   209    208    0.5%
Private Banker   155    149    4.0%

 

Net profit for totalled €208.5m (up 28.8% YoY, up 4.7% QoQ), on revenues of €923.6m (up 12.6% YoY, up 0.5% QoQ), with the cost/income ratio declining to 66.4% (67.7% last year) and the CoR at 4 bps; RORWA for the division rose to 3.6% (3.1% last year), versus the Strategic Plan target of 4%.

 

Net New Money for the twelve months totalled €8.4bn (€3.3bn in 4Q), almost all of which was AUM/AUA, given that the direct component was down slightly (by €220m), due to the conversion activity offset by the new deposits recorded in 4Q (€1.5bn), following a strong promotional campaign through the proprietary networks (Mediobanca Premier and Mediobanca Private Banking); the market effect for the twelve months was positive (€3.2bn), concentrated in the six central months of the year.

 

Assets managed on behalf of clients (TFAs) totalled €99.4bn (30/6/23: €88bn), with €71.5bn in AUM/AUA (€59.8bn) and the ROA for the AUM component stable at 84 bps; deposits were also stable at €28bn (€28.2bn); the Premier segment contributed TFAs of €41.8bn (up 11.4% YoY and up 3% QoQ), €24.9bn of which AUM/AUA (up 21.2% YoY, and up 4% QoQ) and €16.9bn deposits; Private Banking reported TFAs of €44.9bn (up 15.7% YoY and up 4% QoQ), €33.8bn of which were AUM/AUA (up 22.7% YoY and 1% QoQ) and €11.1bn deposits (approx. 35% in time depo), while Asset Management posted TFAs of €28.2bn (up 9% YoY and down 2% QoQ), €15.5bn of which placed internally within the Group.

 

               Chg. % 
Net TFA  30 June 2024   31 December 2023   30 June 2023   June 24 / June 23   June 24 / Dec 23 
Private Banking   44,867    41,980    38,788    15.7%   6.9%
Premier Banking   41,820    39,289    37,548    11.4%   6.4%
Asset Management   28,239    26,959    25,914    9.0%   4.7%
Intercompany   (15,495)   (14,673)   (14,217)   9.0%   5.6%
Wealth Management   99,431    93,555    88,033    12.9%   6.3%

 

               Chg. % 
Deposits  30 June 2024   31 December 2023   30 June 2023   June 24 / June 23   June 24 / Dec 23 
Private Banking   11,026    10,709    11,205    -1.6%   3.0%
Premier Banking   16,888    16,992    16,984    -0.6%   -0.6%
Asset Management               n.m.    n.m. 
Wealth Management   27,915    27,702    28,189    -1.0%   0.8%

 

54 | Consolidated financial statements as at 30 June 2024

 

 

               Chg. % 
AUM/AUA  30 June 2024   31 December 2023   30 June 2023   June 24 / June 23   June 24 / Dec 23 
Private Banking   33,841    31,270    27,583    22.7%   8.2%
Premier Banking   24,932    22,296    20,564    21.2%   11.8%
Asset Management   28,239    26,959    25,914    9.0%   4.7%
Intercompany   (15,495)   (14,673)   (14,217)   9.0%   5.6%
Wealth Management   71,517    65,853    59,844    19.5%   8.6%

  

   2022-2023         
Net New Money   IQ    IIQ    IIIQ    IVQ         
Private Banking   1,001    1,061    740    1.591         
Premier Banking   222    1,109    381    1.625         
Asset Management   (85)   82    (120)   (331)        
Wealth Management   1,138    2,252    1,001    2,885         

 

   2023-2024         
Net New Money   IQ    IIQ    IIIQ    IVQ         
Private Banking   624    1,649    299    1,893         
Premier Banking   163    955    679    1,261         
Asset Management   395    (82)   371    145         
Wealth Management   1,182    2,522    1,349    3,299         

 

The results delivered confirm the Group’s ambition to establish itself as a leading operator on the domestic market over the course of the Strategic Plan 2023-26 “One Brand-One Culture”, by leveraging on multiple factors, including brand strength, offering content, focus on HNWI/UHNWI clients, and developing a global advisory offering for both entrepreneurs and businesses. At Group level, the WM Division is the second contributor to results by revenues and the first in terms of fees, with growth prospects for the 2023-26 period likely to outperform the system at the level of TFAs (€115bn, 3Y CAGR: 11%), revenues (approx. €1bn) and profitability (RORWA 4%).

 

The ongoing high market interest rates have favoured investments in bond products, including corporate bonds, sovereign debt products and funds with debt securities as the underlying instrument, at the expense of wealth management products; for this reason, commercial efforts in Private Banking have focused on the offer of certificates (generating approx. €1.8bn in 12M, mainly structured instruments with credit as the underlying instrument), and in Premier Banking, on funds with bond content (Target Maturity), some of which managed by Mediobanca SGR to guarantee yields, diversification and portfolio optimization.

 

Review of operations Mediobanca Group | 55

 

 

Interaction between the Group’s distributors and product factories has been strengthened with the objective of presenting a harmonized commercial offering, structured over the various client segments, based on the specific needs and requirements of each of them, and leveraging on synergies with the CIB Division in order to consolidate the Private & Investment Banking model which relies on the liquidity events generated by Investment Banking as one of the most important growth factors for assets under management.

 

As for the Private Banking segment, in Public Markets the enrichment of the division’s core portfolio management products has continued, where, in view of the macroeconomic interest rate scenario, four new strategies have been introduced (three Buy & Hold bond strategies with different maturities and one equity strategy). The twelve months under review also saw the launch of the first two Actively Managed Certificates (AMCs), i.e. products structured through a combination of investment strategies (primarily options-based) being incorporated into a tradable security.

 

In Private Markets, the Apollo Aligned Alternatives fund has been complemented, among the semi-liquid funds offered, by the KKR fund, a product which combines the advantages of private equity strategies with higher liquidity than other funds typical of this asset class; overall private equity funds have collected some €190m in the course of the twelve months. Both the closed-end fund promoted in conjunction with Investindustrial and the international real estate initiative implemented in partnership with UBS Asset Management are now at the placement stage. The BlackRock programme investment activity has seen four new deals launched, taking the total investment for the programme to over €500m.

 

As regards club deals with Italian SMEs as the target, the first €500m investment programme (TEC) has now ended, and the funding for the commitment of the second round of the programme (TEC 2) has also been completed, with a total of €900m committed; the first investment has been made in a company operating in the tourism/hospitality sector.

 

The Private and Investment Banking model has enabled around €1bn in liquidity events to be generated in the twelve months, some €250m of which involved also participation in the CIB Division’s advisory process.

 

As for the Premier Banking segment, the rebranding of CheBanca! as Mediobanca Premier took place at the start of 2024, with the objective of repositioning the bank versus a higher- end client bracket able to benefit from an integrated Group

 

56 | Consolidated financial statements as at 30 June 2024

 

  

offering, which on the Wealth Management side also contemplates leveraging the capabilities of the Group asset management product factories, and on the CIB side, gives entrepreneurs an opportunity to call on the Group’s Corporate and Investment Banking services for both their ordinary and extraordinary financing requirements, not to mention the outstanding capabilities of the Mediobanca Securities equity research teams and the Mediobanca Research Area. During the next three years Mediobanca Premier aims to accelerate this repositioning versus Premier clients (increasing the number of Affluent clients, i.e. clients with AUM of over €500,000, by 16%, and Private clients, i.e. those with AUM of over €1m, by 50%) through the recruitment of new bankers and FAs with larger portfolios, and by expanding the wealth management products and services offered.

 

Mediobanca Premier took advantage of the high interest rate scenario during the twelve months, offering Affluent and Wealthy clients different types of bond issues diversified by duration and currency, and providing them with access to new promotions on direct funding with a view to conversion. As for investment products, securities worth a total amount of €1.4bn have been placed, almost €250m of which in certificates.

 

The range of delegated management funds has also been expanded, with the addition of two new strategies, in partnership leading international asset managers (Mediobanca Pictet New Consumer Trend, Mediobanca Schroders Diversified Income Bond), for a total amount of €129m; meanwhile, the placement of the strategies already featured in the portfolio also continues (Mediobanca Morgan Stanley Step In Global Balanced ESG Allocation, Mediobanca Fidelity World Fund, Mediobanca MFS Prudent Capital, Mediobanca Nordea World Climate Engagement), which involve a total of €141m.

 

In addition, again with a view to taking maximum advantage of the favourable market interest rates and to satisfy client demand for bond products, a total of four new Target Maturity bond funds have been placed: MB Selezione Cedola Italia 2026 and 2029 (for a combined total of €278m), MB ESG Credit Opportunities 2029 (€60m), and MB Credit Opportunities 2030 (€27m), for which the placement window ends after the end of the financial year. Both the MB ESG Credit Opportunities funds qualify as SFRD Article 8 funds.

 

Overall, the distribution structure consists of 1,306 professionals, 1,151 of whom in Premier Banking, split between bankers (536, an increase of 14) and FAs (615, an increase of 50), working out of 102 branches and 107 offices. In

 

Review of operations Mediobanca Group | 57

 

 

Private Banking the distribution structure has risen to 155 (six added), primarily as a result of strengthening the Group’s footprint in the local branches throughout Italy, such as in Bologna, Florence and Padua, through the recruitment of senior bankers; while the programme for developing young talent has also continued.

 

In Alternative Asset Management, Polus has consolidated the growth of its AUM which now total €8.7bn. In the CLO segment, the first US platform deal has been launched, which is expected to be priced by the end of 1Q FY 2024-25; while in Europe two deals have been closed (CLO XVI and XVII) raising a total of approx. €800m; and a third has been launched, which was priced in July 2024. Master Fund activity has improved its track record, enabling it to grow (AUM of over €400m), and launching a parallel activity with the closed-end Special Situation fund which has target assets of €750m, with €120m already gathered.

 

RAM AI has continued with its turnaround process by focusing on its core businesses, in view of the quality of the performances with some stabilization in terms of assets (AUM €1.5bn). The following in particular should be noted: European Market Neutral Equities (AUM: €144.3m; up 14% since the start of 2024), RAM Mediobanca Strata UCITS (AUM: €280.4m; up 5%) and RAM Emerging Markets (AUM: €498.4m; up 7%).

 

* * *

 

Customer loans totalled €16.9bn (basically unchanged), with the mortgage lending share stable at €12.6bn, despite new business halving (from €2.2bn to €1.1bn), impacted by the reduced demand and strong competition from the commercial banks; customer loans in Private Banking totalled €4.3bn, €2.9bn of which attributable to CMB Monaco, virtually stable despite the difficulties on the Lombard market due to the high interest rates.

 

Gross NPLs increased totalled €227.7m (€218.2m last year), and account for 1.3% of total loans, €155.6m of which in respect of Mediobanca Premier mortgage loans, €57.7m of which attributable to CMB Monaco, and the remainder to the Mediobanca Private Banking Division. The coverage ratio was 42.9% (73.5% for bad debts), and involves a net loan stock of €130m (0.8% of net loans), €67.9m of which were Mediobanca Premier mortgage loans (with the net bad debts totalling €24m), and €55.1m of which were attributable to CMB Monaco. Net loans classified as Stage 2 increased from €726.1m to €744.9m, and represent 4.4% of the loan stock; of these, around 90% consist of mortgages,

 

58 | Consolidated financial statements as at 30 June 2024

 

 

even though the Private Banking component is increasing (up 64.7%, from €44.4m to €73.1m), due to some delays in repayments of instalments for amply-guaranteed loans.

 

Consolidated revenues climbed from €820.5m to €923.6m (up 12.6% YoY), with €233.5m added in 4Q alone (up 0.5% QoQ). The main income items performed as follows:

 

Net interest income rose from €361.5m to €425m, an increase of 17.6% YoY, with the contribution for 4Q contribution stable at €105.1m; the increase in the cost of funding (up 106 bps, to 1.66%), due to the temporary pricing policy introduced to attract new clients, keeping AUM unchanged (in the €28bn area), was offset by the performance in lending, where, with volumes stable, profitability increased by around 175 bps (ROA: 4.23%); this heading also includes intercompany accounts versus Group Treasury, where the Group’s funding sources are centralized. NII contributed by Private Banking totalled €151.2m (up 29.8% YoY; down 3.9% QoQ); and by Premier Banking €273.8m (up 11.8% YoY; down 0.4% QoQ), growth which remains modest due to the different ALM and interest rate risk structure;

 

Net fee and commission income grew by 8.9% YoY, from €449.6m to €489.4m, with the 4Q contribution totalling €126.1m (up 2.6% QoQ); the increase compared to last year involved upfront fees (which rose from €77.1m to €96.6m; up 25% YoY) linked to the substantial placement of fixed-income products (sovereign debt securities, bonds and certificates/CLN) and Private Markets instruments (such as the major TEC 2 deal in 4Q); there was also a good performance in banking fees (up from €95.1m to €104.6m; an increase of 10% YoY), while the growth in management fees was more moderate (from €329.6m to €344.4m; up 4% YoY, up 3% QoQ), reflecting the performance in wealth management, the recovery in which only began in 2H; while performance fees doubled, from €8.4m to €14.8m (€8.5m of which were recorded during 1H). Private Banking continues to be the main contributor to the division’s fee income, generating fees of approx. €200m (up 15% YoY), while Premier Banking provided fees of €181.7m (up 5.9% YoY), and Asset Management of €98.4m (up 3% YoY).

 

Operating costs increased from €555.1m to €613.5m (up 10.5% YoY), and in 4Q totalled €156.8m (up 1.1% QoQ); labour costs rose to €325.1m (up 10.5% YoY; down 4.1%), with the growth for the year reflecting the strengthening of the workforce (with 62 new staff added), and the adjustments due to the new national collective bargaining contract, plus the increased cost of indemnities payable

 

Review of operations Mediobanca Group | 59

 

 

in relation to recruitment (the weight of which is volatile, and indeed reduced in 4Q). The increase in administrative expenses (from €260.9m to €288.4m, up 10.5% YoY; up 7.4% QoQ) was due in particular to the IT component (IT expenses: €99m; up 8% YoY, down 13% QoQ), plus investments to refurbish branch offices and premises (€49m; up 12% YoY; up 12% QoQ); the launch of Mediobanca Premier accounted for approx. €8m of the spending, mostly marketing expenses.

 

Loan loss provisions totalled €7.4m, lower than last year (€10.5m), despite the stock of overlays remaining virtually unchanged, at €12m; the reduction was enabled by the good asset quality of both the loan stock and new business (highly selective), with a low client exposure to rising interest rates through the constant/protected instalment formula.

 

60 | Consolidated financial statements as at 30 June 2024

 

 

CORPORATE AND INVESTMENT BANKING

 

This division provides services to Corporate customers in the following areas:

 

Wholesale Banking: lending, capital market activities, advisory services, and trading (client and proprietary), performed by Mediobanca, Mediobanca International, Mediobanca Securities, Messier et Associés and Arma Partners;

 

Specialty Finance: factoring, performed by MBFACTA, and credit management, performed by MBCredit Solutions and MBContact Solutions.

 

           (€m) 
  

12 mths ended

30/6/24

  

12 mths ended

30/6/23

   Chg. % 
Profit-and-loss               
Net interest income   307.0    288.0    6.6 
Net treasury income   95.0    135.0    -29.6 
Net fee and commission income   360.6    289.4    24.6 
Total income   762.6    712.4    7.0 
Labour costs   (215.0)   (183.0)   17.5 
Administrative expenses   (164.9)   (144.3)   14.3 
Operating costs   (379.9)   (327.3)   16.1 
Loan loss provisions   10.6    (32.3)   n.m. 
Provisions for other financial assets   (3.4)   (10.1)   -66.3 
Other income (losses)   (2.5)       n.m. 
Profit before tax   387.4    342.7    13.0 
Income tax for the period   (121.0)   (113.8)   6.3 
Minority interest (**)    (22.9)   (3.7)   n.m. 
Net profit   243.5    225.2    8.1 
Cost/Income (%)   49.8    45.9      

 

(**) Includes profits credited back to the category B partners of Arma Partners.

 

  

12 mths ended
30/6/24

  

12 mths ended
30/6/23

         
Balance-sheet data                  
Loans and advances to customers   18,993.3    19,625.9         
of which:  Corporate   16,042.9    16,765.2         
Factoring   2,950.2    2,860.7         
Corporate new loans   5,794.3    6,860.3         
Factoring turnover   12,009.5    12,084.1         
Risk-weighted assets   14,857.6    19,410.2         
RORWA   1.4%   1.2%        
No. of staff   732(*)    648         
Front Office Wholesale   441(*)    344         

 

(1) It involves Arma staff

 

The CIB Division posted a net profit of €243.5m, reporting a high of €74.5m in 4Q, and was 8.1% higher than last year (€225.2m) following the addition of Arma Partners (consolidated since 1 October 2023; revenues:

 

Review of operations Mediobanca Group | 61

 

  

€68.5m; the partnership’s pro rata share in the net profit: €14.6m), and boosted by the writebacks credited in respect of the loan book which came to €10.6m (compared with the €32.3m in charges taken last year). The RORWA posted by the Division grew to 1.4% (1.2%), on a cost/income ratio of 49.8% (45.9%). Wholesale Banking contributed €219.7m to the bottom line for twelve months (€70.2m in 4Q), Specialty Finance €23.8m (€4.3m).

 

The European M&A market started 2024 strongly, with a 45% increase in volumes of deals announced compared to the same period the previous year. This increase, which bucks the downward trend observed in 2023, was driven primarily by volumes of large-sized deals (with a value of more than $500m), which were up 73%. At the same time, there was a reduction in the number of deals announced, which was down 24%, driven by a 25% drop in the number of medium-/small-sized transactions; while the number of large deals was up 34%.

 

Despite an 11% drop in the number of deals announced, in the first six months of 2024 the Italian market saw volumes of deals announced increase by almost 4x compared to 1H 2023. Significant increases in volumes, above the average recorded for the European market, were also observed in the United Kingdom and Spain, up 82% and 73% respectively, whereas the German and French markets grew by 31% and 13% respectively.

 

In this market scenario, the Bank has confirmed its position as advisor of choice in Italy, taking part in the most important deals announced, and completing a total of thirty-five deals over the course of the six months.

 

Some of the main deals completed in Italy include the sale of a minority stake in IMA to BDT & MSD in the Industrial sector, the merger of UnipolSai into Unipol in the Financial Institutions sector, the acquisition of Fabbrica Italiana Sintetici by Bain Capital in the Healthcare sector, and the acquisition of SKS365 by Lottomatica in the TMT sector, plus certain deals in the Mid-Cap segment, including the acquisition of Autry International by Style Capital and the sale of Magister Group to W-Group.

 

On the French market, Messier et Associés confirmed its key position, taking part in some of the leading deals concluded in the Large Corporate segment, including the acquisition of Bolloré Logistics by CMA-CGM in the Infrastructure sector, and the acquisition of Micropole by Talan in the TMT sector.

 

In the Digital Economy sector, Arma Partners confirmed its position as one of the leading advisors in Europe, with 16 deals completed since the acquisition was

 

62 | Consolidated financial statements as at 30 June 2024

 

  

finalized. The software sector has been particularly buoyant; the most significant deals on which the company has advised in this segment include the Visma capital increase implemented by Hg, the sale of Civica to Blackstone, and the acquisition of Ellis Group by Apax Partners. The addition of Arma Partners and its integration into the Bank’s advisory platform are important steps in the Strategic Plan, serving to expand the range of specialist sectors in which Mediobanca provides advisory services, as well as to promote international diversification.

 

A gradual increase in advisory business is expected in the coming quarters, driven by the pipeline of deals announced in recent months, in both the Italian and international panoramas, including: in the TMT sector, the acquisition of TIM’s fixed line network by KKR, and the business combination between International Game Technology and Every Holdings; and, in the Financial Institutions sector, the public tender offering for Banco Sabadell launched by BBVA, helped also by the generally positive mood and more favourable borrowing conditions available in the Investment Banking market scenario.

 

Equity Capital Markets reflect investors’ extreme selectivity with regards to IPOs in particular; nonetheless, the Bank has taken part in several of the leading deals closed on the domestic market, acting as Joint Global Coordinator and Joint Bookrunner in both the two deals managed for Campari, the placement of an approx. 6% stake of its share capital through an ABB process and the issue of a convertible bond, plus the sale of 25% of Monte dei Paschi di Siena, also by means of an ABB, for the Italian Ministry for the Economy.

 

Mediobanca’s commitment to ESG issues has been a feature of the CIB Division’s activities, in line with the Strategic Plan targets, with a view to supporting clients in their energy transition strategies, and to allocating capital with a focus on ESG issues through deals that demonstrate the Bank’s commitment to projects that contribute to environmental and social sustainability.

 

With reference to advisory business, some of the main deals on the domestic market in which the Bank was involved include the joint venture between Italiana Petroli and Macquarie capital, the reserved capital increase for Eni Plenitude by Energy Infrastructure Partners, and the sale of a 49% stake in Enel Libra Flexsys by Enel to Sosteneo (Assicurazioni Generali). The Bank has also advised on some major deals at European level, including the voluntary public tender offer for Greenvolt by KKR, and the sale of Enerfín to Statkraft by Elecnor.

 

Review of operations Mediobanca Group | 63

 

 

In Debt Capital Markets, the Bank has played a crucial role in the placement of new Green, Social and Sustainability-Linked bonds issued by international issuers, which accounts for around 45% of the total placed, in line with the 2023-26 Strategic Target of 50% (including a €1,250m dual-tranche Green Senior note issued by Assicurazioni Generali, an €850m Green Hybrid Note issued by Terna, a €500m Green Bond issued by Redeia, and a €500m Sustainability Bond issued by Raiffeisen Bank Czech). At the same time, Mediobanca has taken part of some of the largest senior and subordinated bond issues both in Italy (including Ferrari, IMA, UnipolSai, Snam and Stellantis), and in some of its other core markets as well (such as Swisscom, Flutter Entertainment, Santander and Telefonica).

 

The Bank has also seen the upward trend in new ESG loans continue, with this segment at end-June 2024 accounting for approx. 38% of new business, in line with the Strategic Plan target of 40% by end-June 2026. Some of the main deals here include a €1bn syndicated sustainability-linked Term Loan to Brisa – Autoestradas De Portugal, a €600m syndicated sustainability-linked Term Loan to Pirelli, a €600m syndicated Green Loan to A2A, and a £500m syndicated sustainability-linked Term Loan to Exolum. Furthermore, in a market scenario for Lending activity marked by limited volumes, in the acquisition financing segment in particular, the Bank has consolidated its role as Italian market leader, and at the same time strengthened its pan-European footprint by assisting its clients in raising finance to support both their ordinary activities (including Enel, Eni, INWIT, and CK Hutchison) and extraordinary activities, including underwriting the financing to support the acquisition of the TIM fixed telephony network by KKR, the financing package granted to doValue for its acquisition of Gardant, and the financing to Swisscom in its acquisition of 100% of Vodafone Italy.

 

Markets activity offset the reduction in business with institutional clients by improving activities with private and professional clients, continually searching out high-yield investment instruments for customers with substantial liquidity positions exposed to inflation. Volumes of securities and equities traded have improved, despite the absence of specific trends.

 

* * *

 

Customer loans decreased by from €19.6bn to €19bn in the twelve months (down 3.2%); the reduction in the Wholesale Banking segment (down 4.3%, from €16.8bn to €16bn, €12.7bn of which attributable to Lending and Structured Finance) was to some extent countered by the resilience of factoring business

 

64 | Consolidated financial statements as at 30 June 2024

 

 

(customer loans up 3.1%, from €2,860.7m to €2,950.2m). New business in Lending and Structured Finance was slightly lower than twelve months previously (down from €6.9bn to €5.8bn, €3.5bn of which in 2H), against repayments totalling €7.6bn. Turnover in factoring business remained more or less stable at €12bn, despite some growth in the client base (up 3%, from 370 to 382), 44% of which are classified in the Large Corporate segment (which accounts for just over 90% of the turnover).

 

   12 mths ended
30/6/24
   12 mths ended
30/6/23
    
   (€m)   %   (€m)   %   Chg. 
Italy   9,250.2    48.7%   10,375.9    52.9%   -10.8%
France   2,485.1    13.1%   2,591.7    13.2%   -4.1%
Spain   1,601.9    8.4%   1,579.4    8.0%   1.4%
Germany   1,796.9    9.5%   980.0    5.0%   83.4%
U.K.   969.0    5.1%   1,124.3    5.7%   -13.8%
Other non resident   2,890.2    15.2%   2,974.6    15.2%   -2.8%
Total loans and advances to customers CIB   18,993.3    100.0%   19,625.9    100.0%   -3.2%
– of which: Specialty Finance   2,950.2    15.5%   2,860.7    14.6%   3.1%

 

Gross NPLs decreased from €135.7m to €51.2m, following the sale of three Large Corporate single-name positions, the stock of which fell from €110.1m to €24.8m, following the addition of three small exposures, the largest of which is backed by a state guarantee. The gross NPL ratio stood at 0.3% (30/6/23: 0.7%), while the coverage ratio decreased from 83.6% to 54.4%, with only a modest impact at net level (€23.3m).

 

Gross Stage 2 positions totalled €288.9m (1.5% of total loans), with the contribution of Wholesale Banking decreasing to €181.5m following repayments (most of which as part of the derisking activity) of €161.9m (resulting in €6.8m in provisions being released), transfers to Stage 3 totalling €17.9m, and new additions of €66.7m. By contrast, factoring business saw some breaches that led to the stock increasing from €58.1m to €107.4m, which, however, are in the process of being resolved. The coverage ratio for performing loans was 0.3% (0.4%), reflecting the release in overlays (the stock of which decreased accordingly, from €40m to €27.5m), in relation to the reduced impact of inflation.

 

Revenues rose from €712.4m to €762.6m (up 7% YoY; up 17.1% QoQ), confirming the positive trend in progress since year-end 2023, with €226.7m added in 4Q, higher than in 3Q (€193.6m); the contribution from Wholesale Banking totalled €686.8m (up 7% YoY), while Specialty Finance revenues totalled €75.8m (up 7.4% YoY).

 

Review of operations Mediobanca Group | 65

 

 

The main income items performed as follows:

 

Net interest income rose to €307m (from €288m, up 6.6% YoY), with €73.8m added during the month, down 7.9% QoQ, due to derisking decisions, but still in line with the QoQ performance throughout the twelve months; the expected reduction from Lending operations (€157m, down 0.6% YoY, but up 1.3% QoQ) was due to the lower lending volumes, and was offset by the good performances posted by Specialty Finance (€42.6m, up to 6% YoY) and Markets and proprietary trading helped by the higher-margin coupons (€106.6m, up 18.6% YoY, down 22.8% QoQ), but eroding net treasury income.

 

Net fee and commission income totalled €360.6m (up 24.6% YoY; up 48.6% QoQ), reflecting the addition of Arma Partners (which added fees of €66.9m in the three quarters for which it was consolidated, with an average QoQ performance of €22m), and the excellent performance by the Mid Corporate segment (fees up from €26m to €35m); the 4Q figure of €135.8m represented a particularly outstanding performance in the Spanish and French large caps M&A segment (which contributed almost €50m in 3M); overall the fees contributed by Investment Banking operations (€234m) were 40% higher YoY, fully absorbing the weak ECM market (with fees of just €5.8m), while the reduced demand for structured finance was reflected in the Lending segment’s performance (fees declining from €67.2m to €63.1m), offset at the Debt Division level by the healthy performance in DCM activity (fees up from €17m to €24m). Specialty Finance contributed €33.3m in twelve months (€8.3m in 4Q), €26.3m of which from the activities of MBCredit Solutions.

 

Net treasury income totalled €95m, behind the figure reported last year (€135m), with the proprietary trading desk in particular suffering (revenues down from €62.1m to €19.4m), impacted by the effects of secured financing activities being reorganized as part of the Treasury department, reduced opportunities in terms of equity arbitrage and interest rate volatility, and the increasing amount of coupon flows being accounted for as part of net interest income. Client trading by the Markets Division reflected an improvement in the twelve months, from €71.6m to €72.8m, despite the difference in mix: Fixed-income trading recovered (from €16.1m to €26.1m), helped by the widening spreads and the positive flows from certificates operations (new issues of over €450m); while equity trading slowed (from €55.5m to €46.7m), despite the recovery posted in 4Q (revenues of €20.8m) as a result of certain bespoke deals which were entirely absent in the first nine months of the financial year.

 

66 | Consolidated financial statements as at 30 June 2024

 

 

Revenues  12 mths ended
30/6/24
   12 mths ended
30/6/23
   Chg. % 
Capital Market   29.5    43.5    -32.2%
Lending   222.8    226.1    -1.4%
Advisory M&A   229.1    143.8    59.3%
Trading Prop   27.8    61.9    -55.1%
Market, sales and other gains   177.6    166.5    6.7%
Specialty Finance   75.8    70.6    7.4%
Total Revenues   762.6    712.4    7.0%

 

Commissions  12 mths ended
30/6/24
   12 mths ended
30/6/23
   Chg. % 
Capital Market, Sales and other gains   36.0    48.0    -25.1%
Lending   63.1    67.2    -6.1%
Advisory M&A   228.2    143.8    58.7%
Specialty Finance   33.3    30.4    9.5%
Total Commissions   360.6    289.4    24.6%

 

Operating costs grew from €327.3m to €379.9m (up 16.1% YoY), reflecting a 4Q contribution of €113.4m. The consolidation of Arma Partners (costs of €25.5m, €19.3m of which staff-related) accounts for half of the growth, with the remaining accounted for by the upgrade in technology and the project initiatives to develop the Markets Division’s products and for management of the AIRB Corporate models (up 14%). Labour costs, net of the Arma Partners effect, rose from €183m to €195.8m, due to the higher fixed costs (up 9% YoY) and an increase in the variable component (up 4%), in view especially of the excellent 4Q performance. The 14.3% YoY rise in administrative expenses (up 8.1% QoQ) involves IT costs, including info-providers (€47m; up 7% YoY), the increased spending on projects (€16m; up 26% YoY; up 35% QoQ), and other costs (€52.7m; up 11% YoY), including the higher costs related to the support and control units (27m; up 17% YoY) plus the growing commercial activity (travel and entertainment expenses: €12m, up 31% YoY).

 

   12 mths ended
30/6/24
   12 mths ended
30/6/23
   Chg. % 
CIB loans   10.4    (32.1)   n.m. 
Specialty Finance loans   0.2    (0.2)   n.m. 
Other financial assets   (3.4)   (10.1)   n.m. 
Total provisions   7.2    (42.4)   n.m. 

 

Valuations of financial assets (loans, banking book securities and holdings in funds) at the period-end resulted in net writebacks of €7.2m being credited: provisions for financial assets totalling approx. €3.4m (vs €10.1m last year) were more than offset by the €10.6m writebacks credited in respect of corporate loans (compared with the €32.3m provisions taken for the Wholesale Banking portfolio last year).

 

Review of operations Mediobanca Group | 67

 

 

CONSUMER FINANCE

 

This Division provides retail clients with the full range of consumer credit products: personal and special-purpose loans, salary- or pension-backed finance, credit cards, plus the new, innovative Buy Now Pay Later solution called “Pagolight”, which this year has expanded with the acquisition of HeidiPay Switzerland AG. Also included in Consumer Finance are Compass RE, which reinsures risks linked to insurance policies sold to clients, Compass Rent, which operates in asset rental, and Compass Link, which distributes Compass products and services via external collaborators.

 

           (€m) 
  

12 mths ended
30/6/24

  

12 mths ended
30/6/23 (*)

   Chg (%) 
Profit-and-loss               
Net interest income   1,043.9    984.9    6.0 
Treasury income   0.2        n.m. 
Net fee and commission income   145.1    137.3    5.7 
Equity-accounted companies   (0.3)   (0.8)   -62.5 
Total income   1,188.9    1,121.4    6.0 
Labour costs   (120.6)   (113.8)   6.0 
Administrative expenses   (248.9)   (233.6)   6.5 
Operating costs   (369.5)   (347.4)   6.4 
Loan loss provisions   (249.7)   (203.9)   22.5 
Provisions for other financial assets           n.m. 
Other income (losses)   0.1    (14.0)   n.m. 
Profit before tax   569.8    556.1    2.5 
Income tax for the period   (186.9)   (182.6)   2.4 
Net profit   382.9    373.5    2.5 
Cost/Income (%)   31.1    31.0      

 

(*) The figures as at 30 June 2023 have been restated after Bank of Italy Circular no. 262/2005, eighth update came into force, incorporating the introduction of the new IFRS 17 – insurance contracts.

 

   12 mths ended
30/6/24
   12 mths ended
30/6/23
         
Balance-sheet data                  
Loans and advances to customers   15,197.6    14,465.0         
- of which:                  
Personal loans   7,516.6    7,117.0         
CQS   1,728.0    1,736.4         
New loans   8,370.1    7,848.8         
Risk-weighted assets   14,493.2    13,516.9         
RORWA   2.7%   2.9%        
No. of staff   1,563    1,520         

 

  

12 mths ended
30/6/24

  

12 mths ended
30/6/23

   Chg. % 
Commercial data               
Branches Consumer   181    181    n.m. 
Agencies Consumer   85    72    18.1%

 

68 | Consolidated financial statements as at 30 June 2024

 

 

Compass delivered a net profit of €382.9m in the twelve months, improving on last year’s already high result (€373.5m), despite the 4Q result (€91.3m) representing a slight reduction QoQ due to seasonal factors affecting the fees credited back to the third-party networks plus a slight increase in the cost of risk. The RORWA(20) reported by the division was stable at 2.7% (2.9% last year). The growing trend in revenues continues, with the top line up 6% YoY, including €300.6m in 4Q, enabling the cost/income ratio to remain at 31.1%, absorbing the growth in costs (which were up 6.4% YoY) due to the major project activity implemented in relation to the expansion of both the digital and international offerings. The cost of risk was around the 174 bps area in 4Q, having been 148 bps in 4Q FY 2022-23 (and 169 bps in 3Q FY 2023-24), confirming the gradual realignment to pre-Covid levels.

 

The Italian consumer credit market posted flows of some €52bn during the 2023 calendar year, down 0.4% on 2022; the positive trend in special purpose loans (automotive: up 5.5%, other special purpose finance: up 2.5%) only partly offset the reduction in personal loans (down 1.6%) and in salary-backed finance (down 4.5%). In the first five months of 2024 flows of €24bn were recorded, up 5.6% on the same period in 2023.

 

In line with the objectives of the Strategic Plan 2023-26 “One Brand-One Culture”, the expansion and enhancement of the distribution network continued, both digital and international, as did the programme for investing in innovative products; in particular there was a rise in the number of BNPL dealers (merchants up from 20,000 to 26,000) and in the number of new BNPL loans (406,000; representing growth of 131% in the twelve months). The acquisition of HeidiPay Switzerland (€37m in turnover in 9M and 269 merchants) has been consolidated, with increased cross-selling opportunities guaranteed by these clients. In the twelve months a total of thirteen new agencies have been opened, taking the number of active POS in Italy to 327 (85 of which are agencies). The Digital Sales Hubs set up to increase the percentage of full-digital clients managed €55m of loans processed via the internet (up 26% YoY), and the share of the channel’s volumes processed in full digital mode is now 35%. The “instant lending” product is also now fully operative, enabling 900,000 Compass clients with solid track records to have a new loan approved in the space of one minute (new loans of €4m were granted in the twelve months).

 

(20) Adjusted Return On RWAs.

Review of operations Mediobanca Group | 69

 

 

New green and/or social/sustainable loans also increased progressively during the year. Such finance includes, with regard to the environmental component, loans to buy cars (CO2 emissions < 50 gr/km), solar panels, water purification instruments, biomass heating systems, high energy class domestic appliances, and mobility devices (such as electric bikes or scooters).

 

With regard to the social component, loans have been granted to finance participation in courses and training, to acquire electronic devices to support students, loans to small and medium-size enterprises that operate in disadvantaged areas (regions with GDP below the national average), and pension-backed finance granted to pensioners aged over 70 and with monthly income of up to €1,500.

 

New loans were up 6.6% in the twelve months, with more than two million transactions completed (an increase of 13.4%), despite the stricter acceptance levels adopted in order to support credit quality. The positive trend involved personal loans (up 11.5%, from €3,508m to €3,910m), helped by the growth of the direct channel (up 10.5%, from €2,774m to €3,033m), and the recovery by the third-party channels: (up 14.9%, from €763.8m to €877.3m), the banking channel in particular (up 15.1%, from €444.7m to €511.9m). New business in BNPL increased by almost three times, up from €190m to €496m, with approx. 406,000 transactions finalized. There were slight decreases in both automotive finance (down 11.7%, from €1,621m to €1,431m) and special purpose loans (down 2.2%, from €1,188m to €1,162m), whereas credit cards remained more or less stable (up 2.4%, from €933.8m to €955.9m), as did salary-backed finance (up 1.4%, from €408.3m to €414.1m), with the direct channel resilient (up 3.6%, from €199m to €206m), against a reduction in the indirect channel (down 24.7%, from €209m to €157.5m).

 

The asset quality ratios remain robust: the coverage ratio for performing loans stood at 3.67% (lower than at end-June 2023: 3.75%), following the gradual release of overlays; gross NPLs of €978m represent 5.93% of the loan stock, higher than at end-June 2023 (5.59%), due to the higher flow of defaults expected; while net NPLs rose to 1.59% (1.38%) on a slightly declining coverage ratio of 75.7% (77.3%), reflecting, following the stock disposals, the increased scope of the non-performing items to include positions with higher possibilities of recovery.

 

Revenues increased from €1,121.4m to €1,188.9m (up 6% YoY), driven by the effects of the repricing policy and by higher growth by the more remunerative

 

70 | Consolidated financial statements as at 30 June 2024

 

 

products (direct personal loans rose from 35% to 36% of the new business for the twelve months) and by Pagolight (from 2% to 5%). The main income items performed as follows:

 

Net interest income increased from €984.9m to €1,043.9m (up 6% YoY), with a 4Q contribution of €265.5m, due to growth in the final interest rate on lendings (up 88 bps in 12M, to 8.36%), reinforced by the excellent level of new loans (approx. €8.4bn) which enabled lendings to be increased by approx. €700m; at the same time, the increase in the cost of funding, primarily due to the renewal of hedges, was transferred in the offering policy;

 

Net fee and commission income rose from €137.3m to €145.1m (up 5.7%), with an increasing contribution from the new initiatives related to Pagolight, fees from which increased to over €20.5m (€10.1m), offsetting the reduction in the component deriving from sales of insurance products (down from €40.4m to €29.6m); while fees credited back to the distribution networks rose to €15.9m (€6m of which in 4Q).

 

Operating costs reflect the major product and channel development activity, up from €347.4m last year to €369.5m (up 6.4%), attributable to both labour costs rose (€120.6m; up 6% YoY, up 3.2% QoQ) and to administrative expenses (€248.9m, up 6.5% YoY); the former were impacted by the growth in the headcount (with 43 new staff added during the period, ten of whom as a result of the HeidiPay acquisition) and the effects of the renewal of the national collective labour contract (which accounts for 50% of the increase); while the latter (up 6.5% YoY; up 0.8% QoQ) reflect the increasing digitalization (IT and project expenses: up 16%, to €50m) and the increases in credit recovery expenses (which were up 6%, to €63m), and operations expenses (up 8%, to €62m); while careful management of the promotional campaigns has enabled marketing expenses to be kept stable.

 

Loan loss provisions totalled €249.7m, higher than last year (€203.9m), and reflecting a growing QoQ trend (4Q: €65.6m). The increase in the provisioning levels was due not only to the higher lending volumes but also to the higher default levels expected, reflected also in the increase in the CoR from 145 bps to 168 bps (4Q: 174 bps). The stock of overlays reduced from €209m to €175m, as result of their being reabsorbed in the ECL models.

 

Review of operations Mediobanca Group | 71

 

 

INSURANCE - PRINCIPAL INVESTING

 

The Insurance – Principal Investing (PI) division comprises the Group’s portfolio of equity investments and holdings, including the 13.17% stake in Assicurazioni Generali. The latter investment has been this division’s main component for many years, and is distinguished for its sound management, consistency of results, high profitability and contribution in terms of diversification and stabilization to the Mediobanca Group’s revenues. The new Basel III regulatory framework definition process, which concluded on 24 April 2024 with the definitive approval of the new version of the EU regulation (CRR III), has made permanent the prudential treatment currently applied to the Assicurazioni Generali investment for purposes of calculating the capital ratios (CET1 in particular). The provisional arrangement, known as the “Danish Compromise”, would have expired on 1 January 2025. The division includes the Group’s investments in funds and SPVs and/or managed by the Group’s asset management companies (seed capital) based on an approach that combines mid-term profitability for the Group with synergies between the divisions, as well as investment activity in private equity funds managed by third parties.

 

           (€m) 
  

12 mths ended
30/6/24

  

12 mths ended
30/6/23

   Chg (%) 
Profit-and-loss               
Other incomes   19.5    8.9    n.m. 
Equity-accounted companies   510.7    454.7    12.3 
Total income   530.2    463.6    14.4 
Labour costs   (4.1)   (4.0)   2.5 
Administrative expenses   (1.1)   (1.0)   10.0 
Operating costs   (5.2)   (5.0)   -4.0 
Provisions for other financial assets   20.0    2.4    n.m. 
Profit before tax   545.0    461.0    18.2 
Income tax for the period   (23.0)   (21.5)   7.0 
Net profit   522.0    439.5    18.8 

 

   12 mths ended
30/6/24
   12 mths ended
30/6/23
         
Balance-sheet data                 
Banking book equity securities   802.2    675.6         
IAS28 investments   3,780.7    3,557.1         
Risk-weighted assets   8,066.5    8,713.9         
RORWA   3.8%   3.2%        

 

72 | Consolidated financial statements as at 30 June 2024

 

 

The Insurance & PI division delivered a net profit of €522m in the twelve months, higher than last year (€439.5m), with a RORWA(21)  of 3.8% (3.2%).

 

Application of the equity method to the Group’s investments returned a profit of €510.7m, made up as follows: Assicurazioni Generali €503m; other IAS 28 investments (IEO, CLI Holdings II, Finanziaria Gruppo Bisazza) €7.7m.

 

Amounts collected from dividends and other income from holdings in funds (included under Other income) totalled €26.6m; adjustment of the value of holdings in funds to reflect Fair Value, including the Fair Value Adjustment and Independent Price Verification process which led to a €2.8m correction,(22)  added €20m (€2.4m last year), €16.9m of which involved the Group’s holdings in seed capital funds (in credit and/or fixed-income instruments especially), and €3.1m of which its holdings in private equity funds, due to the customary quarterly update of the NAV.

 

The book value of the Assicurazioni Generali investment increased from €3,472.2m to €3,698m, despite payment of the dividend as usual (€261.6m was collected in May 2024) and the slight adjustment in the percentage holding owned in the company (from 13.25% to 13.17%). The Insurance Division contributed €503m to the Group’s earnings for the twelve months, much higher than last year (€442.8m), on the back of a positive performance in all business segments, non-life insurance in particular, which benefited from lower claims, more than offsetting the (material) impact of natural catastrophes. This was compounded by certain non-recurring items such as the gains generated on the disposals of TUA Assicurazioni S.p.A. and Generali Deutschland Pensionkasse.

 

The other banking book securities increased to €802.2m (30/6/23: €675.5m): holdings in funds rose from €435.5m to €546.7m, following approx. €95.3m in net investments, and upward adjustments to reflect Fair Value of €16m; the equity component rose to €255.5m (€240.1m), on investments totalling approx. €0.3m and upward adjustments to reflect Fair Value (taken through Other Comprehensive Income) totalling €15.7m, most of which in connection with listed instruments.

 

(21)  Adjusted Return On Allocated Capital

(22)   Reference is made to sections A3 and A4 of the Notes to the Accounts for further details.

 

Review of operations Mediobanca Group | 73

 

 

HOLDING FUNCTIONS (CENTRAL, TREASURY AND LEASING)

 

The Holding Functions comprises SelmaBipiemme Leasing, MIS and other minor companies, Group Treasury and ALM(23) (with the aim of optimizing funding and liquidity management on a consolidated basis, including the securities held as part of the banking book), Group central function costs including the operations, support units (Chief Financial Office, Group Corporate Affairs, Investor Relations, Human Resources), senior management and the control units (Risk Management, Group Audit and Compliance), for the shares not attributable to the business lines. The NPL portfolio management business (Revalea S.p.A.) ceased operations at end-October 2024.

 

           (€m) 
             
  

12 mths ended
30/6/24

  

12 mths ended
30/6/23

   Chg (%) 
Profit-and-loss               
Net interest income   178.0    145.1    22.7 
Net trading income   39.2    42.8    -8.4 
Net fee and commission income   6.3    32.5    -80.6 
Total income   223.5    220.4    1.4 
Labour costs   (139.7)   (133.4)   4.7 
Administrative expenses   (52.6)   (68.6)   -23.3 
Operating costs   (192.3)   (202.0)   -4.8 
Loan loss provisions   (5.6)   (23.4)   -76.1 
Provisions for other financial assets   (4.1)   1.8    n.m. 
Other income (losses)   (49.4)   (83.5)   -40.8 
Profit before tax   (27.9)   (86.7)   -67.8 
Income tax for the period   (13.2)   (6.5)   n.m. 
Minority interest   (2.7)   (2.1)   28.6 
Net profit   (43.8)   (95.3)   -54.0 

 

   12 mths ended
30/6/24
   12 mths ended
30/6/23
        
Balance-sheet data                  
Loans and advances to customers   1,403,3    1,631,0         
Banking book securities   9,258,4    8,740,0         
No. of staff (1)    880 (443)    853 (430)         
Risk-weighted assets   4,153,2    3,831,2         

  

(1) The 880 resources are made up as follows: 91 in SelmaBipiemme Leasing (94 last year); 47 in Group Treasury and ALM (28); 155 in MIS (151), 230 in operations (219), 174 in support functions (175), 178 in control functions (159) plus 5 in management (senior management and assistants, 6 last year). Of these, the cost of approximately 443 FTEs is reallocated to the business lines (430).

 

The net loss posted by the Holding Functions division reduced to €43.8m (compared to €95.3m last year), on revenues which increased from €220.4m to

 

(23) Group Treasury finances the individual business areas’ operations, applying the funds transfer pricing (FTP) rate based on the relevant curves, with spreads varying depending on the expiries agreed for the respective use of funds.

 

74 | Consolidated financial statements as at 30 June 2024

 

 

€223.5m; net interest income rises from €145.1m to €178m, with 4Q reflecting an improvement (€39.1m; up 9.2%) but still lower than the €50m posted in 1Q and 2Q. Operating costs, net of the Revalea contribution, increased from €165.6m to €183.6m, including the central cost component (€118m, up 10% YoY) which represents 7.6% of the Group’s total costs. The division’s results, despite including the final share of the DGS payments made in July 2024 (€24.2m), reflect a reduction in other items from €83.5m to €49.4m (which last year included the final tranche of the SFR plus provisions for the staff leaving incentive scheme). The Revalea disposal also resulted in a reduction in the heading for “Other income and expenses” of €49.4m (€83.5m last year).

 

The main income items performed as follows:

 

Treasury: the net contribution from treasury management increased from €62.4m to €84.2m, on a markedly improved performance in net interest income (up from €98.1m to €146.9m), helped by the positive sensitivity to interest rates and the contribution of the securities portfolio, which delivered higher yields and volumes (up 114 bps and €550m respectively). The 4Q performance remains excellent, at €32.7m (€29.2m), driven by the banking book’s growing profitability. The MREL ratio (43.5%, compared with a requirement of 23.57%) and the liquidity ratios (LCR: 159%; NSFR: 116.8%) were higher as a result of the new debt security issuance and the resilience of the WM funding, with no impact from the higher T-LTRO repayments; the cost of funding was resilient at 2.41%.

 

Leasing: a net profit of €4.1m was earned from leasing operations in the twelve months, compared with €3.2m last year, on revenues totalling €32m (€35m; down 8.6% YoY), due to the new volumes, which contributed to the decrease in loan loss provisions of €2.7m (more than halved compared to last year); gross NPLs continued to reduce (from €107.4m to €79.8m), while net NPLs totalled €18.8m.

 

* * *

 

Review of operations Mediobanca Group | 75

 

 

The financial highlights for the other Group Legal Entities in the twelve months under review are shown below:

 

                      (€m)
                        
              Loan and         
  Percentage   Business     advanced to   Total net    
Company  shareholding   Line  Total assets   customers   equity (1)    No. of Staff 
Mediobanca Securities (dati in USDm)   100%  CIB   8.2        6.3    6 
Messier et Associés S.A.S. (*)    100%  CIB   79.8        18.3    43 
Messier et Associés L.L.C. (dati in USDm) (*)    100%  CIB   0.5        0.5    3 
Mediobanca International   100%  CIB   6,903.5    5,031.9    449.4    19 
MBFACTA   100%  CIB   3,156.7    2,952.1    238.1    50 
MBCredit Solutions   100%  CIB   51.1    0.2    34.4    162 
MB Contact Solutions   100%  CIB   1.6        0.6    6 
Arma Partnes LLP (dati in GBPm)   100%  CIB   69.3        58.5    85 
Arma Partnes CF Ltd UK (dati in GBPm)   100%  CIB   7.6        0.7     
Arma DE GmbH (dati in GBPm)   100%  CIB   1.1        0.4     
Compass Banca   100%  CF   17,225.6    15,400.9    3,070.9    1,542 
Quarzo S.r.l.   90%  CF   0.7             
Compass RE   100%  CF   305.7        172.9    1 
Compass Rent   100%  CF   10.0        2.1    14 
Compass Link   100%  CF   2.3        (1.5)   1 
Heidi Pay Switzerland AG (dati in CHFm)   100%  CF   27.0    24.8    3.1    8 
MB Premier   100%  WM   30,661.6    12,568.0    949.1    1,582 
Mediobanca Covered Bond   90%  WM   0.9        0.1     
CMB Monaco   100%  WM   8,235.8    2,895.7    767.4    262 
Spafid   100%  WM   48.5        40.7    39 
Spafid Family Office SIM   100%  WM   0.7        0.3    1 
Polus Capital Management Group Ltd (dati in GBPm) (*) - consolidato   89.07%  WM   126.5        102.9    68 
– Polus Capital Management Group Ltd   89.07%  WM   101.2        77.5    62 
– Polus Capital Management Ltd   89.07%  WM   24.3        26.8    1 
– Polus Capital Management (US) Inc.   89.07%  WM   1.0        (1.4)   5 
– Bybrook Capital Management Limited   89.07%  WM                
RAM Active Investments (dati in CHFm) (*)    98.28%  WM   15.8        13.4    31 
CMG Monaco   100%  WM   9.5        0.5    14 
Spafid Trust S.r.l.   100%  WM   1.4        1.2    3 
Mediobanca SGR S.p.A.   100%  WM   79.3    34.8    64.1    63 
Mediobanca Management Company S.A.   100%  WM   16.2        7.8    11 
CMB RED   100%  WM   50.4        49.0    1 
Mediobanca International Immobilière   100%  HF   2.1        2.1     
Mediobanca Funding Luxembourg   100%  HF   1.3        1.0     
SelmaBipiemme Leasing   60%  HF   1,350.7    1,238.1    182.4    91 
Mediobanca Innovation Services   100%  HF   89.3        35.5    154 

 

(1) Includes profit for the period.

(*) Taking into account the put and call option; see Part A1 – section 3 – Area and methods of consolidation, p. 118.

 

76 | Consolidated financial statements as at 30 June 2024

 

 

                                (€m)
                                   
Company   Percentage
Shareholding
    Business
Line
  Income     Costs     Provisions     Gain/(loss)
for the
period
 
Mediobanca Securities (dati in USDm)     100 %   CIB     3.8       (3.7 )            
Messier et Associés S.A.S. (*)      100 %   CIB     41.3       (38.4 )           2.2  
Messier et Associés L.L.C. (dati in USDm) (*)      100 %   CIB           0.2             0.2  
Mediobanca International     100 %   CIB     31.2       (11.7 )     4.5       19.7  
MBFACTA     100 %   CIB     48.3       (16.3 )     0.6       22.1  
MBCredit Solutions     100 %   CIB     27.9       (24.9 )     (0.4 )     1.6  
MB Contact Solutions     100 %   CIB     2.1       (1.9 )           0.1  
Arma Partnes LLP (dati in GBPm)     100 %   CIB     58.7       (22.0 )           36.7  
Arma Partnes CF Ltd UK (dati in GBPm)     100 %   CIB     17.0       (16.9 )           0.1  
Arma DE GmbH (dati in GBPm)     100 %   CIB     1.7       (1.6 )           0.1  
Compass Banca     100 %   CF     1,171.8       (360.4 )     (247.9 )     473.2  
Quarzo S.r.l.     90 %   CF                        
Compass RE     100 %   CF     28.7       (1.0 )           20.4  
Compass Rent     100 %   CF     1.8       (4.1 )           (1.7 )
Compass Link     100 %   CF     0.8       (1.2 )           (0.6 )
Heidi Pay Switzerland AG (dati in CHFm)     100 %   CF     1.2       (2.5 )     (1.7 )     (3.0 )
MB Premier     100 %   WM     457.2       (316.5 )     (6.3 )     58.1  
Mediobanca Covered Bond     90 %   WM     0.1       (0.1 )            
CMB Monaco     100 %   WM     185.8       (102.0 )     (1.7 )     65.0  
Spafid     100 %   WM     9.2       (8.9 )           (0.3 )
Spafid Family Office SIM     100 %   WM     0.9       (1.6 )           (0.5 )
Polus Capital Management Group Ltd (dati in GBPm) (*) – consolidato     89.07 %   WM     47.8       (36.8 )           8.0  
– Polus Capital Management Group Ltd     89.07 %   WM     7.7       (7.2 )           (0.1 )
– Polus Capital Management Ltd     89.07 %   WM     39.1       (26.3 )           9.8  
– Polus Capital Management (US) Inc.     89.07 %   WM     1.0       (3.2 )           (1.6 )
– Bybrook Capital Management Limited     89.07 %   WM           (0.1 )           (0.1 )
RAM Active Investments (dati in CHFm) (*)      98.28 %   WM     9.3       (13.9 )            
CMG Monaco     100 %   WM     4.5       (4.4 )           0.1  
Spafid Trust S.r.l.     100 %   WM     0.9       (0.8 )            
Mediobanca SGR S.p.A.     100 %   WM     33.5       (19.6 )           9.6  
Mediobanca Management Company S.A.     100 %   WM     2.2       (2.8 )           (0.6 )
CMB RED     100 %   WM           (0.5 )           (0.5 )
Mediobanca International Immobilière     100 %   HF     0.2       (0.1 )            
Mediobanca Funding Luxembourg     100 %   HF     0.5       (0.5 )            
SelmaBipiemme Leasing     60 %   HF     32.0       (19.9 )     (2.7 )     6.9  
Mediobanca Innovation Services     100 %   HF     -0.6       0.6              

 

(*) Taking into account the put and call option; see Part A1 – section 3 – Area and methods of consolidation, p. 118.

 

Review of operations Mediobanca Group | 77

 

 

Finally, it should be noted that:

 

CMB Monaco closed its local financial statements (prepared in accordance with the local reporting standards) for the twelve months ended 31 December 2023 with a net profit of €58.3m, much higher than last year (€18.6m), following transfers to the provisions for banking risks totalling €10m. Net interest income rose by 69%, from €65.3m to €110.5m), driven by the rising interest rate trend which reflects the substantial net equity and offset the slight reduction in lending volumes (customer loans were down from €2,847m to €2,816m); net fee and commission income rose by 2% (from €72.6m to €74.2m); and costs were up 14% (from €84.8m to €97m), mainly due to the increase in labour costs, which reflects the strengthening of the headcount (through staff turnover and new recruits); while other operating costs also increased, due in particular to the investments made to support growth. In the twelve months TFAs rose by 13% (from €13.9bn to €15.8bn), with the reduction in direct funding (from €6.1bn to €5.7bn) offset by the increase in AUA and assets under advisory mandates.

 

78 | Consolidated financial statements as at 30 June 2024

 

 

Other information

 

Related party disclosure

 

Financial accounts outstanding as at 30 June 2024 between companies forming part of the Mediobanca Group and related parties, and transactions undertaken between such parties during the financial year, are illustrated in Part H of the Notes to the Accounts, along with all the information required in terms of transparency pursuant to Consob resolution no. 17221 issued on 12 March 2010 (amended most recently by resolution no. 21264 of 10 December 2020). All such accounts form part of Group companies’ ordinary operations, are maintained on an arm’s length basis, and are entered into solely in the interests of the companies concerned. No atypical or irregular transactions have been entered into with such counterparties.

 

Article 15 of Consob’s market regulations

 

With reference to Article 15 (previously Article 36) of Consob resolution 16191/07 (Market Regulations) on the subject of prerequisites for listing in respect of parent companies incorporated or regulated by the laws of EU member states and relevant to the preparation of the consolidated accounts, CMB Monaco is the only Group Legal Entity affected by this provision, and adequate procedures have been adopted to ensure it is fully compliant.

 

Principal risks facing the Group

 

In addition to the customary information on financial risks (credit, market, liquidity and operational risks), the notes to the accounts contain a description of the other risks to which the Group is exposed in the course of its business, as they emerged from the ICAAP self-assessment process now required by the regulations in force. In particular, this involves concentration risk versus Italian groups in the Group’s corporate activities, financial risk on the banking book (primarily interest rate risk), strategic or business risk, risk deriving from exposure to volatility on financial markets for the equities held in the banking portfolio, and exposure to sovereign debt.

 

Review of operations Mediobanca Group | 79

 

 

Consolidated Non-Financial Statement

 

The Group publishes a Consolidated Non-Financial Statement which is drawn up in accordance with Article 4 of Italian Legislative Decree 254/16, and contains information on environmental and social issues, human resources, protection of human rights and anti-corruption measures, in order to facilitate understanding of the Group’s activities, performance, results and impact generated.

 

The Group’s Consolidated Non-Financial Statement is published annually on the Bank’s website at www.mediobanca.com (in the section entitled “Responsible Business”), and is drawn up in accordance with the provisions of Italian Legislative Decree 254/16 and based on the GRI-Sustainability Reporting Standards “in accordance” option defined in 2016 and updated in 2021 by the GRI-Global Reporting Initiatives (the “GRI Standards”). The standards developed by the Sustainability Accounting Standards Board (“SASB”) have also been taken into consideration, where applicable, and information useful for purposes of EU Taxonomy Eligibility.

 

The document is accompanied by the third TCFD Report, containing the remainder of the Group’s sectoral decarbonization objectives in accordance with the commitment to Net Zero Banking Alliance (Oil & Gas, Shipping, Steel and Chemical, in addition to those for the Energy, Automotive, Cement and Aviation sectors), and by the third report on the results achieved based on the Principles for Responsible Banking subject, for the first time, to limited assurance by the external auditors.

 

Credit rating

 

Ratings agencies Moody’s and Fitch in the spring months both confirmed the Group’s long-term rating at Baa1 and BBB respectively, and both also with stable outlook; while S&P has maintained its BBB rating unchanged, this too with stable outlook.

 

80 | Consolidated financial statements as at 30 June 2024

 

 

Research

 

Economic research is carried on by the Mediobanca Research Area. The Research Area’s catalogue includes the customary publications which have been produced for many years now (“Leading Italian Companies”, “Financial Aggregates of Italian Companies”, “Medium-Sized Industrial Companies”), plus a series of industrial economic reports on the sectors in which the Italian market is most involved internationally. Research covers the sectors of most importance to Italian manufacturing industry (e.g. “Made-in-Italy” products), and sectors at the cutting edge in technology terms. Special attention is also devoted to family business issues.

 

Other reports

 

The following reports are available on the Bank’s official website at www. mediobanca.com in the Governance section: the “Statement on corporate governance and ownership structure” and the “Group Remuneration Policy and Report” required by Article 123-bis of the Italian Legislative Decree No. 58 of 24 February 1998 (the Italian Finance Act), and the “Disclosure to the public required under Basel III pillar III” (“Pillar III”).

 

Outlook

 

While the scenario for the next twelve months continues to be affected by the growing geopolitical risks, it also reflects weak growth by the leading European economies which are expected to improve slightly, along with a slowdown in inflationary pressures and more accommodative monetary policies, with the effects to be felt from the first half of 2025 in particular.

 

The Mediobanca Group confirms its strategic vision and the trajectory outlined in the 2023-26 Strategic Plan “One Brand-One Culture” based on:

 

High and above-average growth due to the divisions’ specialized and distinctive positioning;

 

High capital generation;

 

Distribution policy at best sector levels, with low execution risk.

 

Review of operations Mediobanca Group | 81

 

 

Highlights of FY 2024-25 should include the following:

 

The ongoing strengthening of the distribution structure and the healthy commercial activity in Wealth Management (WM) will drive growth in TFAs, with NNM expected to reach €9-10bn for the year, while the selective asset growth and optimization activity will enable RWAs to remain stable, even with the introduction of the CRR III system of regulations;

 

Revenues are expected to increase, on strong, low double-digit growth in fee income driven by WM and the capital-light services offered by CIB, fuelled by the reduction in interest rates; while net interest income will maintain an improving trajectory with low single-digit growth, helped by CF which is more resilient in a declining interest rate scenario;

 

The cost/income ratio should stand at 44%, with ambitious plans to invest in digital and in distribution (in WM in particular);

 

The cost of risk is expected to be around 55 bps, helped by use of the substantial overlays set aside;

 

Earnings per share (EPS) is expected to increase by 6-8%;(24) 

 

With reference to shareholder remuneration, DPS is expected to grow, with the cash payout confirmed at 70% (with an interim dividend to be paid in May 2025 and the balance in November 2025), plus a new share buyback scheme to be implemented in an amount of €385m.(25) 

 

(24) Including the cancellation of approx. 80% of the shares to be acquired as part of the €385m buyback to be implemented in FY 2024-25.
(25) Based on the share buyback scheme included in the Strategic Plan 2023-26, to be implemented in FY 2024-25, subject to authorization from the ECB and from shareholders in Annual General Meeting.

 

82 | Consolidated financial statements as at 30 June 2024

 

 

Reconciliation of shareholders’ equity and net profit

 

       (€’000)
         
   Shareholders’ equity   Net profit (loss) 
Balance at 30/06 as per Mediobanca S.p.A. accounts   3,791,800    1,244,365 
Net surplus over book value for consolidated companies   14,822    717,565 
Differences on exchange rates originating from conversion of accounts made up in currencies other than the Euro   16,707     
Other adjustments and restatements on consolidation, including the effects of accounting for companies on an equity basis   6,060,361    (688,548)
Dividends received during the period        
Total   9,883,690    1,273,382 

 

Milan, 19 September 2024

 

The Board of Directors

 

Review of operations Mediobanca Group | 83

 

 

DECLARATION BY FINANCIAL REPORTING OFFICER

 

 

 

 

 

Declaration concerning the consolidated
financial statements pursuant to Article 81-ter of CONSOB Regulation No. 11971

of 14 May 1999, as amended

 

1.The undersigned Alberto Nagel and Emanuele Flappini, in their respective capacities as Chief Executive Officer and Financial Reporting Officer of Mediobanca, hereby, and in view inter alia of the provisions contained in Article 154-bis, paragraphs 3 and 4, of Italian Legislative Decree No. 58 of 24 February 1998,

 

declare that the administrative and accounting procedures used in the preparation of the consolidated financial statements:

 

were adequate in view of the company’s characteristics and were effectively adopted during the period 1 July 2023 - 30 June 2024.

 

2.Assessment of the adequacy of said administrative and accounting procedures for the preparation of the consolidated financial statements as at 30 June 2024 was based on a model defined by Mediobanca in accordance with benchmark standards for internal control systems which are widely accepted at international level (CoSO and CobiT frameworks).

 

3.It is further hereby declared that

 

3.1 the consolidated financial statements:

 

were drawn up in accordance with the International Financial Reporting Standards adopted by the European Union pursuant to Regulation (EC) 1606/02 issued by the European Parliament and Council on 19 July 2002;

 

correspond to the data recorded in the company’s books and accounting ledgers;

 

are adequate for the purpose of providing a true and fair view of the capital, earnings and financial situation of the issuer and of the group of companies included within its area of consolidation.

 

3.2 the review of operations includes a reliable analysis of the operating performance, data and situation of Mediobanca and of the set of companies included within the consolidation area, and contains a description of the main risks and uncertainties to which such companies are exposed.

 

Milan, 19 September 2024

 

Chief Executive Officer Financial reporting officer
   
Alberto Nagel Emanuele Flappini

 

Declaration by Head of Company Financial Reporting ½ 85

 

 

EXTERNAL AUDITORS’

REPORT

 

 

 

 

 

 

 

Mediobanca S.p.A.

 

Consolidated financial statements as at 30 June 2024

 

Independent auditor’s report pursuant to article 14 of Legislative Decree n. 39, dated 27 January 2010, and article 10 of EU Regulation n. 537/ 2014

 

(Translation from the original Italian text)

 

 

 

 

 

 

 

EY S.p.A.
Via Meravigli, 12
20123 Milano

 

 

Tel: +39 02 722121
Fax: +39 02 722122037
ey.com

 

Independent auditor’s report pursuant to article 14 of Legislative Decree no. 39/ 2010 and article 10 of Regulation (EU) no. 537/ 2014

 

(Translation from the original Italian text)

 

To the Shareholders of

Mediobanca S.p.A.

 

Report on the Audit of the Consolidated Financial Statements

 

Opinion

 

We have audited the consolidated financial statements of the Mediobanca Group (the “ Group”), which comprise the consolidated balance sheet as at 30 June 2024, the consolidated income statement, statement of consolidated comprehensive income, the statement of changes to consolidated net equity and consolidated cash flows statement for the year then ended, and notes to the accounts, including material accounting policy information.

 

In our opinion, the consolidated financial statements give a true and fair view of the financial position of the Mediobanca Group as at 30 June 2024, of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the European Union and with the regulations issued for implementing article 9 of Legislative Decree n.38, dated 28 February 2005 and article 43 of Legislative Decree n. 136, dated 18 August 2015.

 

Basis for Opinion

 

We conducted our audit in accordance with International Standards on Auditing (ISA Italia). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of Mediobanca S.p.A. (the “ Bank”) in accordance with the regulations and standards on ethics and independence applicable to audits of financial statements under Italian Laws. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

 

Key Audit Matters

 

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current year. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

 

We identified the following key audit matters:

 

EY S.p.A.

Sede Legale: Via Meravigli, 12 – 20123 Milano

Sede Secondaria: Via Lombardia, 31 – 00187 Roma

Capitale Sociale Euro 2.975.000 i.v.

Iscritta alla S.O. del Registro delle Imprese presso la CCIAA di Milano Monza Brianza Lodi

Codice fiscale e numero di iscrizione 00434000584 - numero R.E.A. di Milano 606158 - P.IVA 00891231003

Iscritta al Registro Revisori Legali al n. 70945 Pubblicato sulla G.U. Suppl. 13 - IV Serie Speciale del 17/2/1998

 

A member firm of Ernst & Young Global Limited

 

 

 

 

 

 

Key Audit Matters   Audit Response
Classification and measurement of loans to customers represented by loans measured at amortised cost    

Loans to customers (loans) recorded amongst financial assets measured at amortised cost, included in line item 40. b) of the consolidated balance sheet, amount to Euro 53.206 million as at 30 June 2024, and represent approximately 55% of total assets. The composition of such loans is included in tables 4.2 and 4.3 in Part B, section 4, of the notes to the accounts.

 

Net impairment losses for credit risk on the loans to customers (loans) measured at amortised cost are included in line item 130. a) of the consolidated income statement; the composition of such net impairment losses is included in table 8.1 in Part C, section 8, of the notes to the accounts.

 

The disclosures regarding the changes in the credit quality of the loans to customers (loans), the classification and measurement criteria adopted and the related income statement effects are provided in Part A – Accounting policies, in Part B – Notes to the consolidated balance sheet, in Part C – Notes to the consolidated income statement and in Part E Information on risks and related hedging policies of the notes to the accounts.

 

The classification in the appropriate risk staging and measurement of the loans to customers (loans) measured at amortised cost are both relevant for the audit because the amount of loans is significant to the financial statements as a whole and because the amount of the related impairment losses is determined by the directors through the use of estimates that have a high degree of complexity and subjectivity.

 

For classification purposes of the loans to customers (loans), the directors carry out analyses, which involve using internally developed models, as well as subjective elements, in order to identify exposures that show evidence of a significant increase in credit risk since the date of initial recognition or

 

 

In relation to this aspect, our audit procedures, which were performed also with the support of our risk management and information technology specialists, included amongst others:

 

·  an understanding of the policies, processes and controls applied by the Group in relation to the classification and measurement of loans to customers (loans);

 

· an assessment of the configuration and implementation of key controls, including those relating to the relevant IT applications, and the execution of tests of controls in order to assess their operational effectiveness;

 

·  an understanding of the methodology used in relation to the statistical evaluations and the reasonableness of the hypotheses adopted as well as the execution of tests of controls and substantive procedures aimed at verifying the accuracy of the determination of the relevant parameters for the purposes of determining the impairment losses;

 

·   an analysis of the changes in the composition of loans to customers (loans) compared to the previous year and a discussion of the results with management;

 

·  performing substantive procedures in order to verify, on a sample basis, the correct classification and measurement of credit exposures;

 

·  an assessment of the adequacy of the disclosures provided in the notes to the accounts.

 

2

 

 

 

 

specifically identified impairment. The processes for the classification of such loans considers both internal information about the historical performance of exposures and external information about the referenced sector.    
Measuring loans to customers (loans) is a complex activity in respect of which the directors make estimates with a high degree of uncertainty and subjectivity that consider many quantitative and qualitative factors, including historical collections, expected cash flows and related estimates on collection timing, an assessment of any guarantees, the impact of macroeconomic variables and future scenarios and risks of the sectors in which the Group’s customers operate.    
Moreover, the classification and measurement processes of the loans to customers (loans) involve considering specific factors aimed at reflecting the current uncertainty on the evolution of the macroeconomic scenario and inflation dynamics.    
Measurement of financial instruments not quoted in active markets and measured at fair value at on a recurring basis    

As at 30 June 2024 financial instruments measured at fair value on a recurring basis, classified in level 2 and level 3 of the fair value hierarchy as established by the relevant international accounting standard, amount to a total asset balance of Euro 5.488 million and a total liability balance of Euro 9.379 million. The composition of financial instruments measured at fair value on a recurring basis, classified in level 2 and level 3 of the fair value hierarchy, is included in table A.4.5.1, Part A of the notes to the accounts.

 

The disclosures on the classification and measurement of financial instruments measured at fair value on a recurring basis, classified in level 2 and level 3 of the fair value hierarchy are provided in Part A - Accounting policies, in Part B – Notes to the consolidated balance sheet, in Part C – Notes to the consolidated income statement and in Part E - Information on risks and related hedging

 

 

In relation to this aspect, our audit procedures, which were performed also with the support of our risk management and information technology specialists, included amongst others:

 

·  an understanding of the policies, processes and controls applied by the Group in relation to the classification and measurement of financial instruments measured at fair value on a recurring basis within the level 2 and level 3 fair value hierarchy categories;

 

·  an assessment of the configuration and implementation of key controls, including those relating to the relevant IT applications, and the execution of tests of controls in order to assess their operational effectiveness;

 

·  an understanding of the valuation models used for the measurement of the financial

3

 

 

 

 

policies of the notes to the accounts.

 

The measurement of these financial instruments is performed by the directors through the use of complex models, consistent with the prevailing valuation practices, which make use of directly or indirectly observable inputs or estimated internally or estimated internally based on qualitative and quantitative assumptions, when not observable in the market.

 

The measurement of such financial instruments is relevant to the audit because the amount of such financial instruments is significant to the financial statements as a whole and because of the multiplicity and complexity of the valuation models and parameters used as well as the subjective elements considered for the purposes of the estimates considered by the directors.

 

 

instruments as well as the methods used for determining the fair value hierarchy classification;

 

·  an analysis of the changes in the composition of the financial instruments’ portfolio compared to the previous year and the discussion of the results with management;

 

·  performing substantive procedures in order to verify, on a sample basis, the fair value of financial instruments through the analysis of the valuation models, the reasonableness of the qualitative and quantitative assumptions formulated, and input parameters used as well as the appropriate fair value level classification;

 

·  an assessment of the adequacy of the disclosures provided in the notes to the accounts.

 

Measurement of intangible assets with an indefinite useful life arising from business combinations    

As at 30 June 2024 the carrying amount of intangible assets with an indefinite useful life originating from business combinations amount to Euro 970 million of which Euro 281 million recorded during the year. The composition of intangible assets with an indefinite useful life is included in the tables 10.1 and 10.2 in Part B, section 10, of the notes to the accounts.

 

During the year impairments were charged for Euro 42 million; the composition of such impairments is included in table 15.1 in Part C, section 15, of the notes to the accounts.

 

The disclosures on the methods used for the measurement of intangible assets with an indefinite useful life and the set up the impairment test are provided in Part A – Accounting policies, in Part B – Notes to the consolidated balance sheet and in Part C – Notes to the consolidated income statement of the notes to the accounts.

 

The directors perform an evaluation of the recoverable amount of intangible assets with an

 

In relation to this aspect, our audit procedures, which were performed also with the support of our business valuation specialists, included amongst others:

 

·  an understanding of the methods for determining the recoverable amount used by the directors in the impairment test process and the related key controls;

 

·  verifying the consistency of the valuation methodologies used with the requirements of the international accounting standard IAS 36, taking into account of the market practice and the distinctive characteristics of the single CGU and of the assets tested independently;

 

·  verifying the mathematical accuracy and the correctness of the calculations underlying the valuation models used;

 

·  an assessment of the differences between the historical results and forecast data and of the underlying reasons in order to

 

4

 

 

 

 

indefinite useful life annually or more frequently, if indicators are found during the year that suggest the existence of a loss in value (impairment test). Such evaluation, in accordance with the international accounting standard IAS 36, is based on the comparison between the carrying amount in the consolidated financial statements and the higher of the fair value less costs to sell and the value in use of each cash generating unit (“ CGU” ) to which these intangible assets are allocated or of the assets tested independently.

 

The estimate of the recoverable amount of each CGU was performed by the directors, also with the support of third-party consultants, through an impairment process based on complex models using information, parameters and assumptions characterised by a high level of subjectivity such as expected cash flows, nominal growth rates and the cost of capital.

 

The elements described above implicate a high level of complexity and subjectivity in the estimation processes also considering the persisting uncertainty of macroeconomic scenario.

 

For the reasons described above, we have considered the recoverability of intangible assets with an indefinite useful life arising from business combinations a key audit matter for the audit of the consolidated financial statements of the Group as at 30 June 2024.

 

 

verify the reasonableness of the assumptions used by the directors;

 

·  an analysis of the reasonableness of the assumptions and parameters used by the directors for the impairment test who were assisted with the support of third-party consultants, and of the forecast used in the same, also considering the uncertainty of macroeconomic scenario as well as the related sensitivity analyses;

 

·  an assessment of the adequacy of the disclosures provided in the notes to the accounts.

 

 

Responsibilities of Directors and Those Charged with Governance for the Consolidated Financial Statements

 

The Directors are responsible for the preparation of the consolidated financial statements that give a true and fair view in accordance with International Financial Reporting Standards as adopted by the European Union and with the regulations issued for implementing article 9 of Legislative Decree n. 38/ 2005 and article 43 of Legislative Decree no. 136/ 2015 and, within the terms provided by the law, for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

 

The Directors are responsible for assessing the Group’s ability to continue as a going concern and, when preparing the consolidated financial statements, for the appropriateness of the going concern assumption, and for appropriate disclosure thereof. The Directors prepare the consolidated financial

 

5

 

 

 

 

statements on a going concern basis unless they either intend to liquidate the Bank or to cease operations or have no realistic alternative but to do so.

 

The statutory audit committee (“ Collegio Sindacale” ) is responsible, within the terms provided by the law, for overseeing the Group’s financial reporting process.

 

Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements

 

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with International Standards on Auditing (ISA Italia) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

 

As part of an audit in accordance with International Standards on Auditing (ISA Italia), we have exercised professional judgment and maintained professional skepticism throughout the audit. In addition:

 

·we have identified and assessed the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, designed and performed audit procedures responsive to those risks, and obtained audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control;
·we have obtained an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control;
·we have evaluated the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Directors;
·we have concluded on the appropriateness of Directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to consider this matter in forming our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern;
·we have evaluated the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
·we have obtained sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

 

We have communicated with those charged with governance, identified at an appropriate level as required by international standards on auditing (ISA Italia), regarding, among other matters, the

 

6

 

 

 

 

planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

 

We have provided those charged with governance with a statement that we have complied with the ethical and independence requirements applicable in Italy, and we have communicated with them all matters that may reasonably be thought to bear on our independence, and where applicable, the actions taken to eliminate the relevant risks or the related safeguards applied.

 

From the matters communicated with those charged with governance, we have determined those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We have described these matters in our auditor’s report.

 

Additional information pursuant to article 10 of EU Regulation n. 537/ 14

 

The shareholders of Mediobanca S.p.A., in the general meeting held on 28 October 2020, engaged us to perform the audits of the separate and consolidated financial statements for each of the years ending 30 June 2022 to 30 June 2030.

 

We declare that we have not provided prohibited non-audit services, referred to article 5, paragraph 1, of EU Regulation n. 537/ 2014, and that we have remained independent of the of the Group in conducting the audit.

 

We confirm that the opinion on the consolidated financial statements included in this report is consistent with the content of the additional report to the audit committee (Collegio Sindacale) in their capacity as audit committee, prepared pursuant to article 11 of the EU Regulation n. 537/ 2014.

 

Report on compliance with other legal and regulatory requirements

 

Opinion on t he compliance with Delegated Regulation (EU) 2019/ 815

 

The Directors of Mediobanca S.p.A. are responsible for applying the provisions of the European Commission Delegated Regulations (EU) 2019/ 815 for the regulatory technical standards on the specification of a single electronic reporting format (ESEF – European Single Electronic Format) (the “ Delegated Regulation”) to the consolidated financial statements, to be included in the annual financial report.

 

We have performed the procedures under the auditing standard SA Italian. 700B, in order to express an opinion on the compliance of the consolidated financial statements as at 30 June 2024 with the provisions of the Delegated Regulation.

 

In our opinion, the consolidated financial statements as at 30 June 2024 have been prepared in the XHTML format and have been marked-up, in all material aspects, in compliance with the provisions of the Delegated Regulation.

 

Due to certain technical limitations, some information included in the notes to the consolidated financial statements when extracted from the XHTML format to an XBRL instance may not be reproduced in an identical manner with respect to the corresponding information presented in the consolidated financial statements in XHTML format.

 

7

 

 

 

 

Opinion pursuant to article 14, paragraph 2, subparagraph e), of Legislative Decree n. 39 dated 27 January 2010 and of article 123-bis, paragraph 4, of Legislative Decree n. 58, dated 24 February 1998

 

The Directors of Mediobanca S.p.A. are responsible for the preparation of the Report on Operations and of the Report on Corporate Governance and Ownership Structure of Mediobanca Group as at 30 June 2024, including their consistency with the related consolidated financial statements and their compliance with the applicable laws and regulations.

 

We have performed the procedures required under audit standard SA Italian. 720B, in order to express an opinion on the consistency of the Report on Operations and of specific information included in the Report on Corporate Governance and Ownership Structure as provided for by article 123-bis, paragraph 4, of Legislative Decree n. 58, dated 24 February 1998, with the consolidated financial statements of Mediobanca Group as at 30 June 2024 and on their compliance with the applicable laws and regulations, and in order to assess whether they contain material misstatements.

 

In our opinion, the Report on Operations and the above-mentioned specific information included in the Report on Corporate Governance and Ownership Structure are consistent with the consolidated financial statements of Mediobanca Group as at 30 June 2024 and comply with the applicable laws and regulations.

 

With reference to the statement required by article 14, paragraph 2, subparagraph e), of Legislative Decree n. 39, dated 27 January 2010, based on our knowledge and understanding of the entity and its environment obtained through our audit, we have no matters to report.

 

Statement pursuant to article 4 of Consob Regulation implementing Legislative Decree n. 254, dated 30 December 2016

 

The Directors of Mediobanca S.p.A. are responsible for the preparation of the consolidated non-financial information pursuant to Legislative Decree n. 254, dated 30 December 2016. We have verified that consolidated non-financial information has been approved by Directors.

 

Pursuant to article 3, paragraph 10, of Legislative Decree n. 254, dated 30 December 2016, such consolidated non-financial information is subject to a separate compliance report signed by us.

 

Milan, 25 September 2024

 

EY S.p.A.

Signed by: Davide Lisi, Auditor

 

This independent auditor’s report has been translated into the English language solely for the convenience of international readers. Accordingly, only the original text in Italian language is authoritative.

 

8

 

  

CONSOLIDATED FINANCIAL

STATEMENTS

 

 

 

 

 

 

Consolidated Balance Sheet

 

(€’000)

 

Asset items  30 June 2024   30 June 2023 (*) 
10.  Cash and Cash Equivalents   3,361,150    4,236,982 
20.  Financial assets measured at Fair Value through profit or loss   16,787,866    10,654,399 
   a) financial assets held for trading   15,409,451    9,546,212 
   b) financial assets designated at Fair Value   719,215    538,590 
   c) other financial assets mandatorily measured at Fair Value   659,200    569,597 
30.  Financial assets measured at Fair Value through other comprehensive income   6,905,703    6,042,119 
40.  Financial assets measured at amortized cost   64,158,936    62,555,709 
   a) due from banks   5,527,291    4,478,644 
   b) due from customers   58,631,645    58,077,065 
50.  Hedging derivatives   705,549    1,321,883 
60.  Value adjustment to generic hedging financial assets (+/-)        
70.  Equity Investments   3,789,216    3,563,831 
80.  Insurance business        
   a) issued insurance contracts that constitute assets        
   a) reinsurance contracts ceded that constitute assets        
90.  Tangible assets   549,617    530,742 
100.  Intangible assets   1,045,432    796,700 
   of which:          
   goodwill   827,313    574,550 
110.  Tax assets   754,812    769,127 
   a) current   350,699    244,746 
   b) prepaid   404,113    524,381 
120.  Non-current assets and asset groups held for sale       251,987 
130.  Other assets   1,167,993    900,345 
Total assets   99,226,274    91,623,824 

 

(*) The data as at 30 June 2023 were restated following the entry into force of the eighth update of Bank of Italy Circular No. 262/2005, which transposed the new standard IFRS 17 – Insurance Contracts.

 

98½ Consolidated financial statements as at 30 June 2024

 

 

(€’000)

 

Liabilities and net equity  30 June 2024   30 June 2023 (*) 
10.  Financial liabilities measured at amortized cost   70,321,563    64,903,066 
   a) due to banks   10,962,115    13,275,089 
   b) due to customers   34,104,548    30,750,602 
   c) securities in issue   25,254,900    20,877,375 
20.  Trading financial liabilities   9,504,710    9,436,672 
30.  Financial liabilities designated at Fair Value   4,239,199    1,580,956 
40.  Hedging derivatives   1,431,642    2,069,542 
50.  Value adjustment to generic hedging financial liabilities (+/-)        
60.  Tax liabilities   749,647    867,359 
   a) current   359,882    416,935 
   b) deferred   389,765    450,424 
70.  Liabilities associated with assets held for sale       8,134 
80.  Other liabilities   1,488,427    1,050,513 
90.  Provision for statutory end-of-service payments   20,445    20,584 
100.  Provisions for risks and charges:   137,691    161,127 
   a) commitments and guarantees issued   21,396    22,166 
   b) post-employment and similar benefits        
   c) other provisions for risks and charges   116,295    138,961 
110.  Insurance liabilities   89,765    96,294 
   a) issued insurance contracts that constitute liabilities   89,765    96,294 
   a) reinsurance contracts ceded that constitute liabilities        
120.  Revaluation reserves   (68,578)   62,127 
130.  Redeemable shares        
140.  Equity instruments        
150.  Reserves   7,380,974    7,676,422 
160.  Share premium   2,195,606    2,195,606 
170.  Capital   444,515    444,169 
180.  Treasury shares (-)   (68,828)   (78,876)
190.  Equity attributable to minority interests (+/-)   86,114    104,143 
200.  Profit (loss) for the year (+/-)   1,273,382    1,025,986 
Total liabilities and net equity   99,226,274    91,623,824 

 

(*) The data as at 30 June 2023 were restated following the entry into force of the eighth update of Bank of Italy Circular No. 262/2005, which transposed the new standard IFRS 17 – Insurance Contracts.

 

Consolidated financial statements ½ 99

 

 

Consolidated Profit and Loss Account

 

(€’000)

 

Items  30 June 2024   30 June 2023(*)  
10.  Interest and similar income   3,973,022    2,834,084 
   of which: interest income calculated according to the effective interest method   3,237,324    2,394,371 
20.  Interest and similar charges   (2,025,489)   (1,026,491)
30.  Net interest income   1,947,533    1,807,593 
40.  Commission income   992,546    835,972 
50.  Commission expenses   (181,406)   (158,005)
60.  Net fee income   811,140    677,967 
70.  Dividends and similar income   138,027    78,758 
80.  Net trading income (expense)   39,684    99,411 
90.  Net hedging income (expense)   2,083    1,439 
100.  Gains (losses) on disposal/repurchase of:   8,090    4,827 
   a) financial assets measured at amortized cost   606    4,427 
   b) financial assets measured at Fair Value through other comprehensive income   6,431    (6,739)
   c) financial liabilities   1053    7,139 
110.  Net income (expense) from other financial assets and liabilities measured at          
   Fair Value through profit or loss   34,129    9,674 
   a) financial assets and liabilities designated at Fair Value   12,041    15,055 
   b) other financial assets mandatorily measured at Fair Value   22,088    (5,381)
120.  Total revenues   2,980,686    2,679,669 
130.  Net write-offs (write-backs) for credit risk:   (248,274)   (231,373)
   a) financial assets measured at amortized cost   (246,276)   (232,089)
   b) financial assets measured at Fair Value through other comprehensive income   (1,998)   716 
140.  Gains (losses) from contractual modifications without derecognition   (159)   (617)
150.  Net income (expense) from financial operations   2,732,253    2,447,679 
160.  Income (expense) from insurance services   21,365    28,978 
   a) insurance revenues from insurance contracts issued   30,851    35,536 
   b) costs for insurance services arising from insurance contracts issued   (9,486)   (6,558)
   c) insurance revenues from insurance contracts ceded        
   d) costs for insurance services arising from insurance contracts ceded        
170.  Other income / charges from insurance activities   (143)   (220)
   a) net financial costs / revenues relating to insurance contracts issued   (143)   (220)
   b) net financial costs / revenues relating to insurance contracts ceded        
180.  Net profit (loss) from financial and insurance activities   2,753,475    2,476,437 
190.  Administrative expenses:   (1,592,999)   (1,487,108)
   a) personnel costs   (807,070)   (731,643)
   b) other administrative expenses   (785,929)   (755,465)
200.  Net transfers to provisions for risks and charges   (2,968)   (35,817)
   a) commitments and guarantees issued   765    2,134 
   b) other net provisions   (3,733)   (37,951)
210.  Net value adjustments to /write-backs of tangible assets   (71,112)   (62,144)
220.  Net value adjustments to /write-backs of intangible assets   (80,474)   (30,192)
230.  Other operating expense / income   195,683    173,635 
240.  Operating costs   (1,551,870)   (1,441,627)
250.  Gains (losses) on equity investments   510,406    453,860 
260.  Net income (expense) from Fair Value measurement of tangible and intangible assets   (1,610)   (1,253)
270.  Value adjustments to goodwill       (49,536)
280.  Gains (losses) on disposal of investments   90    (14,385)
290.  Profit (loss) on ordinary operations before tax   1,710,491    1,423,496 
300.  Income tax for the year on ordinary operations   (433,972)   (394,476)
310.  Profit (loss) on ordinary operations after tax   1,276,519    1,029,020 
320.  Gains (losses) of ceded operating assets, after tax        
330.  Profit (loss) for the year   1,276,519    1,029,020 
340.  Profit (loss) for the period attributable to minority interests   (3,137)   (3,034)
350.  Net profit (loss) for the period attributable to Mediobanca   1,273,382    1,025,986 

 

(*) The data as at 30 June 2023 were restated following the entry into force of the eighth update of Bank of Italy Circular No. 262/2005, which transposed the new standard IFRS 17 – Insurance Contracts.

 

100½ Consolidated financial statements as at 30 June 2024

 

 

Statement of Consolidated Comprehensive Income

 

(€’000)

 

      30 June 2024   30 June 2023 (*) 
10.  Profit (loss) for the year   1,276,519    1,029,020 
   Other income items after tax without transfers through profit or loss   (32,081)   59,373 
20.  Equity securities designated at Fair Value through other comprehensive income   10,438    18,906 
30.  Financial liabilities designated at Fair Value through profit or loss (changes in own credit quality)   (27,509)   (6,636)
40.  Hedging of equity securities designated at Fair Value through other comprehensive income        
50.  Tangible assets        
60.  Intangible assets        
70.  Defined benefit plans   258    1,012 
80.  Non-current assets held for sale        
90.  Portion of valuation reserves of equity-accounted investments   (15,268)   46,091 
100.  Financial costs or revenues relating to insurance contracts issued        
   Other income items after tax with transfers through profit or loss   (90,705)   (367,686)
110.  Foreign investment hedges       319 
120.  Currency exchange gains/losses   6,515    1,172 
130.  Cash flow hedges   (158,734)   96,448 
140.  Hedging instruments (non-designated items)        
150.  Financial assets (other than equity securities) measured at Fair Value through other comprehensive income   42,847    (8,210)
160.  Non-current assets held for sale        
170.  Portion of valuation reserves of equity-accounted investments   18,667    (457,415)
180.  Financial costs or revenues relating to insurance contracts issued        
190.  Financial costs or revenues relating to insurance contracts ceded        
200.  Total other income items after tax   (122,786)   (308,313)
210.  ther comprehensive income (Item 10+200)   1,153,733    720,707 
220.  Consolidated comprehensive income attributable to minority interests   3,118    3,628 
230.  Consolidated other comprehensive income attributable to Mediobanca   1,150,615    717,079 

 

(*) The data as at 30 June 2023 were restated following the entry into force of the eighth update of Bank of Italy Circular No. 262/2005, which transposed the new standard IFRS 17 – Insurance Contracts.

 

Consolidated financial statements ½ 101

 

 

Statement of Changes in Consolidated Net Equity

 

 

102½ Consolidated financial statements as at 30 June 2024

 

 

Statement of Changes in Consolidated Net Equity

 

 

Consolidated financial statements | 103

 

 

Consolidated Cash Flow Statement Direct Method

 

(€’000)

 

   Amount  
   30 June 2024   30 June 2023 (*) 
A. CASH FLOWS FROM OPERATING ACTIVITIES          
1. Operating activities   1,915,072    695,630 
– interest received (+)   6,130,322    2,977,529 
– interest paid (–)   (3,367,714)   (1,359,051)
– dividends and similar income (+)   131,426    77,658 
– net fees and commission income (+/–)   437,141    507,467 
– personnel costs (–)   (620,371)   (552,436)
– net revenues collected and costs paid on insurance contracts issued and ceded (+/–)   (9,943)   (150,626)
– other costs (–)   (395,420)   (832,059)
– other revenues (+)   108,893    284,545 
– taxes and duties (–)   (499,262)   (257,397)
– expenses/income from asset groups held for sale after tax effect (+/–)        
2. Cash inflow/outflow from financial assets   (5,607,851)   (1,871,607)
– financial assets held for trading   (4,854,086)   376,596 
– financial assets designated at Fair Value   (112,950)   16,345 
– financial assets mandatorily measured at Fair Value   (70,780)   58,885 
– financial assets measured at Fair Value through other comprehensive income   (734,747)   (1,883,759)
– financial assets measured at amortized cost   1,096,627    282,581 
– other assets   (931,915)   (722,255)
3. Cash inflow/outflow from financial liabilities   4,106,320    (2,019,567)
– financial liabilities measured at amortized cost   3,339,104    (1,835,890)
– financial liabilities held for trading   (745,520)   183,423 
– financial liabilities designated at Fair Value   1,446,306    850,676 
– other liabilities   66,430    (1,217,776)
4. Cash inflow/outflow arising from insurance contracts issues and ceded   25,967    34,584 
– insurance contracts issued that constitute assets/liabilities(+/–)   25,967    34,584 
– insurance contracts ceded that constitute assets/liabilities(+/–)        
Net cash inflow/outflow from operating activities   439,508    (3,160,960)
B. CASH FLOWS FROM INVESTING ACTIVITIES          
1. Cash generated from:   371,626    253,890 
– disposal of shareholdings   100,001     
– dividends received in respect of equity investments   271,497    243,847 
– disposals of tangible assets   128    9,702 
– disposals of intangible assets       95 
– disposals of subsidiaries or business units       246 
2. Cash outflows arising from:   (352,578)   (83,598)
– purchases of shareholdings   (264,967)   (7,400)
– purchases of tangible assets   (51,161)   (39,751)
– purchases of intangible assets   (36,505)   (36,447)
– purchases of subsidiaries or business units   55     
Net cash inflow/outflow from investing activities   19,048    170,292 
C. CASH FLOWS FROM FUNDING ACTIVITIES          
– issue/purchase of treasury shares   (187,595)    
– issue/ purchase of capital instruments   6,252     
– distribution of dividends and other purposes   (1,153,045)   (633,951)
– sales/acquisition of control by minority interests        
Net cash inflow/outflow from funding activities   (1,334,388)   (633,951)
NET CASH INFLOW/OUTFLOW DURING THE PERIOD   (875,832)   (3,624,619)

 

(*) The data as at 30 June 2023 were restated following the entry into force of the eighth update of Bank of Italy Circular No. 262/2005, which transposed the new standard IFRS 17 – Insurance Contracts. This change had no impact on cash inflows / outflows during the year under review.

 

104 | Consolidated financial statements as at 30 June 2024

 

 

Reconciliation

 

(€’000)

 

  Amount 
Accounting items  30 June 2024   30 June 2023 
Cash and cash equivalents: balance at start of period   4,236,982    7,861,601 
Total cash inflow/outflow during the period   (875,832)   (3,624,619)
Cash and cash equivalents: exchange rate effect        
Cash and cash equivalents: balance at end of period   3,361,150    4,236,982 

 

Consolidated financial statements | 105

 

 

NOTES TO THE ACCOUNTS

 

 

 

 

 

NOTES TO THE ACCOUNTS

 

Part A - Accounting Policies 109
   
A.1 - General part 109
Section 1  - Statement of Compliance with IAS/IFRS 109
Section 2  - General Principles 109
Section 3  - Area and methods of consolidation 116
Section 4  - Events Subsequent to the Reporting Date 121
Section 5  - Other Aspects 122
A.2 - Significant accounting policies 122
A.3 - Information on transfers between financial asset portfolios 147
A.4 - Information on Fair Value 147
A.5 - Disclosure on “day one profit/loss” 164
   
Part B - Notes to the Consolidated Balance Sheet 166
   
Assets 166
Section 1  - Heading 10: Cash and Cash Equivalents 166
Section 2  - Heading 20: Financial Assets Measured at Fair Value through Profit or Loss 167
Section 3  - Heading 30: Financial Assets Measured at Fair Value Through Other Comprehensive income - Item 30 170
Section 4  - Heading 40: Financial Assets Measured at Amortized Cost 172
Section 5  - Heading 50: Hedging Derivatives 175
Section 7  - Heading 70: Equity Investments 176
Section 9  - Heading 90: Property, Plant and Equipment 181
Section 10 - Heading 100: Intangible Assets 185
Section 11 - Asset Heading 110 and Liability Heading 60: Tax Assets and Liabilities 197
Section 12 - Non-current assets and asset groups as held for sale and associated liabilities - Assets heading 120 and liabilities heading 70 201
Section 13 - Heading 130: Other Assets 202
   
Liabilities 203
Section 1  - Heading 10: Financial Liabilities Measured at Amortized Cost 203
Section 2  - Heading 20: Trading Liabilities 206
Section 3  - Heading 30: Financial Liabilities Designated at Fair Value 207
Section 4  - Heading 40: Hedging Derivatives 208
Section 6  - Heading 60: Tax Liabilities 209
Section 7  - Heading 70: Liabilities associated to disposal group of assets 209
Section 8  - Heading 80: Other Liabilities 209
Section 9  - Heading 90: Provision for Statutory End-of-service Payments 210
Section 10 - Heading 100: Provisions for Risks and Charges 211
Section 11 - Heading 110: Insurance Liabilities 215
Section 13 - Headings 120, 130, 140, 150, 160, 170 and 180: Net equity 220
Section 14 - Heading 190: Net equity attributable to minority interests 222
   
Other information 227

 

Consolidated Financial Statements | Notes to the accounts | 107

 

 

Part C - Notes to the Consolidated Profit and Loss Account 227
Section 1  - Headings 10 and 20: Net interest income 227
Section 2  - Headings 40 and 50: Net fee and commission income 229
Section 3  - Heading 70: Dividends and similar income 230
Section 4  - Heading 80: Net Trading Income (Expense) 231
Section 5  - Heading 90: Net Hedging Income (Expense) 232
Section 6  - Heading 100: Net Gains (Losses) on Disposals/Repurchases 232
Section 7  - Heading 110: Net Gains (Losses) on Other Financial Assets and Liabilities Measured at Fair Value through Profit or Loss 233
Section 8  - Heading 130: Net value adjustments for credit risk 234
Section 9  - Heading 140: Net gains (losses) from modifications without derecognition 234
Section 10 - Heading 160 - Income (expense) from insurance activities 235
Section 11 - Heading 170: Other Income/Charges from insurance activities 236
Section 12 - Heading 190: Administrative Expenses 238
Section 13 - Heading 200: Net Transfers to Provisions for risks and charges 239
Section 14 - Heading 210: Net Adjustments to Tangible Assets 240
Section 15 - Heading 220: Net Adjustments to Intangible Assets 241
Section 16 - Heading 230: Other Operating Income (Expense) 241
Section 17 - Heading 250: Gains (Losses) on Equity Investments 242
Section 18 - Heading 260: Net income from Fair Value measurement of tangible and intangible assets 243
Section 19 - Heading 270: Value adjustments to goodwill 243
Section 20 - Heading 280: Gains (losses) on disposal of investments 244
Section 21 - Heading 300: Income Tax on Ordinary Activities 244
Section 23 - Heading 340: Profit (loss) for the year attributable to minority interests 245
Section 25 - Earning per share 246
   
Part D - Consolidated Comprehensive Income 247
   
Part E - Information on Risks and Related Hedging Policies 248
Introduction 248
Section 1  - Consolidated accounting risks 248
Section 2  - Consolidated prudential risks 257
   
Part F - Information on Consolidated Capital 351
Section 1  - Consolidated capital 351
Section 2  - Own Funds and Banking Supervisory Ratios 352
   
Part G - Combinations Involving Group Companies or Business Units 358
   
Part H - Related Party Transactions 360
   
Part I - Share-based payment schemes 362
   
Part L - Segment reporting 366
   
Part M - Disclosure on leases 373

 

108 | Consolidated financial statements as at 30 June 2024

 

 

Part A - Accounting Policies

 

A.1 - General Part

 

SECTION 1

 

Statement of Compliance with IAS/IFRS

 

The consolidated financial statements as at 30 June 2024, as required by Italian Legislative Decree No. 38 of 28 February 2005, were drawn up in accordance with the International Financial Reporting Standards (IFRS) and International Accounting Standards (IAS) issued by the International Accounting Standards Board (IASB), and the respective interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC), which were adopted by the European Commission in accordance with the procedure laid down in Article 6 of Regulation (EC) No. 1606/2002 issued by the European Parliament and Council on 19 July 2002. In particular, account was taken of the “Instructions on preparing statutory and consolidated financial statements for banks and financial companies which control banking groups” issued by the Bank of Italy under Circular No. 262 of 22 December 2005 - eighth update of 17 November 2022,(26) which define the structure to be used in compiling and preparing the financial statements and the contents of the notes to the accounts. This report was drawn up in accordance with the provisions of Article 154-ter of Legislative Decree No. 58 of 24 February 1998 (Italian Consolidated Law on Finance).

 

SECTION 2

 

General Principles

 

These consolidated financial statements comprise:

 

consolidated balance sheet;

 

consolidated income statement;

 

consolidated statement of other comprehensive income;

 

statement of changes to consolidated net equity;

 

consolidated cash flow statement, drawn up using the direct method;

 

notes to the accounts.

 

(26) The eighth update published on 17 November 2022 transposed the regulatory changes of IFRS 17 “Insurance Contracts”.

 

Notes to the accounts | Part A - Accounting policies | 109

 

 

All the statements have been drawn up in conformity with the general principles provided for under IAS and the accounting policies illustrated in part A.2, and show data for the period under review compared with that for the previous financial year in the case of balance-sheet figures or the corresponding period of the previous financial year for profit-and-loss data.

 

* * *

 

During the year under review, the European Commission approved the following regulations, which include certain changes to accounting standards already in force:

 

Regulation 2023/2468 of 8 November 2023, published in the Official Journal of the European Union on 9 November 2023, adopted amendments to IAS 12 “Income Taxes”. These amendments added a temporary exception to account for deferred taxes resulting from the implementation of OECD Pillar II rules, as well as targeted disclosures for the entities involved.

 

In particular, the following are required:

 

temporary exception to the requirement to account for deferred taxes immediately following publication of the amendments by the IASB and retrospectively in accordance with IAS 8 - Accounting Policies, Changes in Accounting Estimates and Errors; and

 

obligation to disclose the additional information required by the Regulation from the financial statements for years starting on 1 January 2023 or later; it is not necessary to apply additional disclosure provisions to interim financial statements relating to interim periods ending on 31 December 2023 or before.

 

Regulation 2023/2579 of 20 November 2023, published in the Official Journal of the European Union on 21 November 2023, adopted amendments to IFRS 16 “Leasing”. In particular, such amendments specify how the transferor/lessee should subsequently measure the value of sale and leaseback transactions. Companies should apply these amendments at the latest from the start date of their first financial year starting on 1 January 2024 or later.

 

Regulation 2023/2822 of 19 December 2023, published in the Official Journal of the European Union on 20 December 2023, adopted amendments to IAS 1 “Presentation of Financial Statements”. These amendments improve the information a company should provide when its right to defer settlement of a liability for at least 12 months is subject to covenants. The

 

110 | Consolidated financial statements as at 30 June 2024

 

 

  required changes should, at the latest, be applied from the start date of the first financial year after 1 January 2024;

 

Commission Regulation (EU) 2024/1317 of 15 May 2024, published in the Official Journal Series L of 16 May 2024, adopted “Supply financing arrangements”, which amends IAS 7 Cash Flow Statement and IFRS Financial Instruments: Additional Information. The document introduces disclosure requirements regarding a company’s supply financing arrangements. Companies will apply the amendments at the latest from the financial statements for financial years beginning on or after 1 January 2024.

 

Furthermore, it should be remembered that as of 1 July 2023 the Mediobanca Group has been applying Regulation 2022/357 of 2 March 2022, which adopted the amendments to standards IAS 1 and IAS 8. The amendments clarify the differences between accounting principles and accounting estimates in order to ensure a consistent adoption of accounting standards and the comparability of financial statements.

 

* * *

 

The measures and statements published by regulatory and supervisory authorities in the past six months regarding the most suitable way to apply accounting standards that supplement the measures contained in the latest financial statements at 30 June 2023 are shown below. Please refer to the above financial statements for more details.

 

On 25 October 2023, ESMA published the annual statement “European Common Enforcement Priorities for 2023 Annual Financial Reports” outlining the priorities on which listed companies must focus when preparing the annual reports for December 2023. ESMA in particular recommends disclosure to be provided in the financial statements relating to any direct or indirect effects of sudden increases in interest rates on the composition of a company’s exposures between variable and fixed rates, accompanied by a sensitivity analysis, if any; the effects of the greater volatility brought by the macroeconomic scenario on Fair Value(27) estimates; any material effects on financial disclosure due to climate change(28) , while ensuring that such disclosure is provided in line with IFRS standards; and the need for clear and consistent use of alternative performance

 

(27) Reference is made to Part E, Section 2 – Prudential consolidation risk: Market risks, in particular the sections on interest rate risk and price risk. 

(28) Reference is made to Part E – ESG and Climate Change Risk.

 

Notes to the accounts | Part A - Accounting policies | 111

 

 

measures (APMs). Finally, in the same document, ESMA also focused on ESEF tagging(29) , in particular on the priority use of mandatory and previously existing elements in the taxonomy; it specified that the company may proceed with the creation of a special element only in the event that a careful analysis has found that there is no suitable tag for a certain numerical “data point”.

 

Going-concern statement

 

With reference to the requirements of the Bank of Italy, CONSOB and ISVAP under Joint Document No. 4 of 3 March 2010, the Group’s consolidated financial statements at 30 June 2024 were prepared on a going-concern basis: the Directors believe that no risks and uncertainties have arisen such as to raise doubts on the Group’s going-concern assumption. The Directors consider that the Group has a reasonable expectation of continuing to operate in the foreseeable future.

 

For information on the Group’s risks and related safeguards, please refer to the contents of “Part E - Information on risks and related hedging policies” in these Notes to the Accounts and in the Group’s Review of Operations.

 

Discretionary assessments, risks and uncertainties linked to the use of significant accounting estimates

 

In compliance with IFRS, senior management are required to formulate assessments, estimates and assumptions that may influence the adoption of the accounting standards and the amounts of assets, liabilities, costs and revenues recognized in the financial statements, as well as the disclosure relating to contingent assets and liabilities.

 

The assumptions underlying such estimates take into account all the information available at the date of preparation of the financial statements, as well as assumptions considered reasonable, including in light of past experience.

 

In this regard, it should be noted that financial estimates may, due to their very nature and insofar as reasonable, need to be revised as a result of changes in the circumstances on which they have been based, of the availability of new information or of greater experience accrued.

 

(29) Reference is made to Part A – Section 5, “Other aspects”.

 

112 | Consolidated financial statements as at 30 June 2024

 

 

The main cases requiring the use of subjective assessments and opinions on the part of senior management are as follows:

 

a)quantification of losses due to the impairment of receivables and, in general, of other financial assets;

 

b)assessment of the Fair Value of equity investments and other non-financial assets (goodwill, tangible assets, including the value in use of assets acquired under lease, and intangible assets);

 

c)use of valuation models to measure the Fair Value of financial instruments not listed on active markets;

 

d)estimates of liabilities deriving from company defined benefit retirement plans;

 

e)quantification of legal and fiscal provisions for risks and charges.

 

The above list of valuation processes is provided for the sole purpose of allowing the reader to better understand the main areas of uncertainty, but it should not be understood in any way to suggest that alternative assumptions may, at present, be more appropriate. For the most relevant items being estimated, information on the main hypotheses and assumptions used in the estimate is provided in the specific sections of the Notes to the Accounts, including a sensitivity analysis with respect to alternative hypotheses.

 

Transition to the new IFRS 17 standard

 

Starting from this financial year, the Mediobanca Group will be applying the new standard IFRS 17 “Insurance Contracts”, which has replaced the previous standard IFRS 4 for the representation of insurance contracts, providing a single and harmonized method that favours a more immediate comparison between institutions from different countries. IFRS 17 applies to all insurance contracts, including reinsurance contracts and contracts that contain an investment component as part of an insurance contract, including with discretionary profit-sharing features. IFRS 17 defines the principles to be applied for the recognition, measurement, and accounting of all insurance and reinsurance contracts. In particular, this standard has been applied by Compass RE, a company specializing in reinsurance, wholly owned by Compass Banca.

 

Notes to the accounts | Part A - Accounting policies | 113

 

 

It should be noted that based on the provisions of accounting standard IFRS 17, adoption should be made retrospectively by recalculating the comparative closing balances. As foreseen during the analysis, the entry into force of this standard did not reveal any material impacts. In particular, as at 30 June 2023 the reclassification generated an impact of €-15,189 on total assets, €-15,518 on total liabilities, and a total impact of €329 on net equity.

 

Global Minimum Tax

 

Directive (EU) 2022/2523 of 15 December 2022 was transposed in Italy under Legislative Decree No. 209 of 27 December 2023 for the “implementation of the tax reform in the field of international taxation”, aiming to ensure a minimum global tax rate of 15% for entities that are part of a multinational group of companies with annual revenues equal to or greater than €750m for at least two of the four financial years preceding the one under review.

 

Specifically, in order to achieve this objective, the legislation provides for the application of a Top-Up Tax, applicable in the event that the Effective Tax Rate (ETR) calculated within that jurisdiction is lower than 15%, up to reaching this level. Moreover, transitional Country-by-Country Reporting (CbCR) Safe Harbours have been introduced, i.e. a set of simplification rules that, under certain conditions, provide for zeroing the Top-Up Tax for the first three financial years following entry into force of such legislation.

 

Since the provisions of Legislative Decree No. 209/2023 will be coming into force starting from the financial year following the one in progress as at 31 December 2023, the first year in which such legislation will be adopted for the Mediobanca Group will be the financial year ending as at 30 June 2025. The activities necessary to verify whether the Group can pass the tests required for each relevant jurisdiction were therefore started.

 

In the financial statements for the year ended 30 June 2024, the Group carried out a simulation on the basis of final data for the year ending at 30 June 2023 concerning the tests required by the transitional CbCR Safe Harbours and applicability of any additional taxation. Specifically, the above-mentioned tests showed that all jurisdictions should benefit from the transitional regime at the date of adoption of such legislation.

 

114 | Consolidated financial statements as at 30 June 2024

 

 

BAPA (Bilateral Advance Pricing Agreements)

 

In the Transfer Pricing area, Penalty Protection rules ensure exemption from administrative penalties due to misrepresentation and apply in the event that the taxpayer is in possession of documentation that ensures verification of compliance with the transfer pricing arm’s length principle applied to cross-border intercompany transactions. In order to ensure that such rules are applied, in addition to preparing and updating their Country-Specific Documentation and Master File according to regulatory provisions, Mediobanca S.p.A. and Mediobanca International S.A. submitted an application in June for a bilateral advance pricing arrangement (BAPA) between the Italian Revenue Agency and the competent Luxembourg Authority. The application submitted to the Italian Revenue Agency was declared admissible last July.

 

Corporate Sustainability Reporting Directive (CSRD) Project

 

The continuous evolution of European legislation on sustainability reporting, together with requests to adhere to various reporting standards on an optional basis, led the Mediobanca Group to launch a multi-year project focused on Group ESG Reporting standards starting in 2021 with the aim of creating an integrated approach capable of meeting the new regulatory requirements and emerging best practices across the Group.

 

In the first two years, the project focused on:

 

definition of standard solutions for the preparation of the tables required by Article 8 of the Delegated Act of the EU Taxonomy and the quantitative tables and qualitative tables required by Pillar 3 in the ESG field;

 

industrialization of the related indicators, including GAR (in view of alignment with the taxonomy), and drafting the first off-balance sheet disclosure;

 

preparation of internal regulations for the drafting of the disclosure statement (e.g. Pillar 3, PRB Report, TCFD Report); and finally

 

definition of solutions once such activities are fully operational.

 

During the financial year under review, a gap analysis was carried out to assess the degree of alignment between the new disclosure obligations according to the ESRS and the contents of the Group’s current non-financial

 

Notes to the accounts | Part A - Accounting policies | 115

 

 

reports (in particular the DCNF) in view of the entry into force of the CSRD, whose reporting requirement should be met by the Group as of 30 June 2025. Preparatory activities for drafting / implementing the future Sustainability Statement should be noted, including: initial analyses for the implementation of double materiality and IT tool assessments for an even more solid management of data collection.

 

With specific reference to “Double Materiality” (the new analysis provided for by ESRS standards that requires the identification of impacts, risks and opportunities relevant to sustainability reporting), the Group started to refine the criteria to align its “impact materiality” with the requirements of the new standard by examining in depth the principles relating to the “financial relevance of ESG issues” (second area required for the implementation of the aforementioned analysis).

 

SECTION 3

 

Area and methods of consolidation

 

The consolidated financial statements comprise the financial position and the results of the Group Legal Entities and companies directly or indirectly controlled by them, including those operating in sectors other than the one in which the Parent Company operates.

 

Based on the combined provisions of IFRS 10 “Consolidated Financial Statements”, IFRS 11 “Joint Arrangements” and IFRS 12 “Disclosure of Interests in Other Entities”, the Group has proceeded to consolidate its Legal Entities on a line-by-line basis, and its associates and joint arrangements using the net equity method.

 

The following events in the twelve months should be noted:

 

the wholly-owned subsidiary MB INVAG S.r.l. merged into Mediobanca S.p.A. in September; such company held 1,628,150 Assicurazioni Generali shares (i.e. 0.106% of its capital) resulting from the demerger of INVAG S.r.l;

 

on 2 October, Mediobanca completed the acquisition of the controlling stake in the English company Arma Partners LLP, a leading independent financial consultancy firm in the European Digital Economy sector, which in turn holds 100% of Arma Partners Corporate Finance Ltd. (UK) and Arma

 

116 | Consolidated financial statements as at 30 June 2024

 

 

 Deutschland GmbH (Germany). In particular, Mediobanca acquired 100% of Interests A, which give it the right to receive a percentage of Arma’s distributable profit, calculated as a fixed percentage of revenues, and ensure sufficient governance rights to enable a full line-by-line consolidation and to maintain control from a legal, regulatory, and accounting standpoint; the current Partners hold Interests B, which entitle them to receive the residual percentage of Arma’s distributable profit, as well as certain governance rights having a specific impact on the Partners’ economic rights;

 

on 16 October, Compass Banca completed the 100% acquisition of HeidiPay Switzerland AG, a Swiss fintech specializing in the Buy-Now-Pay-Later (BNPL) market. This operation strengthened the partnership with Heidi Pay AG, a holding company specializing in the development of fintech platforms to support BNPL transactions in e-commerce and for brick-and-mortar stores, of which Compass has held a 19.5% share since August 2022;

 

on 24 October, the acquisition by Mediobanca Management Company of the entire stake in RAM Active Investment Europe, previously wholly owned by RAM Active Investments S.A., was completed; the operation did not lead to changes in the consolidation area. The relevant streamlining project required the subsidiary’s merger, which was completed on 30 June with the delisting from the local register of companies;

 

on 31 October, the sale of Revalea to Banca Ifis was completed with Compass receiving the agreed price (€100m). The company, whose loans will remain in place until June 2027, therefore exited the Group;

 

the merger of Soisy S.p.A. into Compass Banca S.p.A. was completed with effect from 31 January 2024.

 

During the year, the following entities were placed into liquidation and cancelled:

 

the subsidiaries of Polus Capital Management Bybrook Capital LLP and Bybrook Capital Services (UK) Limited (effective as of 9 January 2024), Bybrook Capital LLC and Bybrook Capital LP (with effect from last August), Bybrook Capital Management Limited (placed into liquidation on 25 June 2024);

 

the CMB Monaco subsidiary CMB Asset Management (delisted on 10 January 2024);

 

the Compass subsidiary Banca Quarzo CQS, a securitization vehicle pursuant to Law No. 130/99, was delisted from the register of companies on 1 February 2024.

 

Notes to the accounts | Part A - Accounting policies | 117

 

 

1. Equity Investments in Group Legal Entities

 

            Ownership     
        Type of   Controlling   %   Voting rights 
Company name  Site  relationship (1)    entity   shareholding   in % (2)  
A. COMPANIES INCLUDED IN AREA OF CONSOLIDATION             
A.1 Line-by-line method                   
1. MEDIOBANCA - Banca di Credito Finanziario S.p.A.  Milan  1          
2. SPAFID S.P.A  Milan  1   A.1.1   100.0   100.0 
3. MEDIOBANCA INNOVATION SERVICES - S.C.P.A.  Milan  1   A.1.1   100.0   100.0 
4. CMB MONACO S.A.M.  Monte Carlo  1   A.1.1   100.0   100.0 
5. CMG MONACO S.A.M.  Monte Carlo  1   A.1.4   99.92   99.92 
6. MEDIOBANCA INTERNATIONAL (LUXEMBOURG) S.A.  Luxembourg  1   A.1.1   99.0   99.0 
        1   A.1.7   1.0   1.0 
7. COMPASS BANCA S.P.A.  Milan  1   A.1.1   100.0   100.0 
8. MEDIOBANCA PREMIER S.P.A. (formerly CHEBANCA! S.P.A.)  Milan  1   A.1.1   100.0   100.0 
9. MBCREDIT SOLUTIONS S.P.A.  Milan  1   A.1.7   100.0   100.0 
10. SELMABIPIEMME LEASING S.P.A.  Milan  1   A.1.1   60.0   60.0 
11. MB FUNDING LUXEMBOURG S.A.  Luxembourg  1   A.1.1   100.0   100.0 
12. MEDIOBANCA SECURITIES USA LLC  New York  1   A.1.1   100.0   100.0 
13. MB FACTA S.P.A.  Milan  1   A.1.1   100.0   100.0 
14. QUARZO S.R.L.  Milan  1   A.1.7   90.0   90.0 
15. MEDIOBANCA COVERED BOND S.R.L.  Milan  1   A.1.8   90.0   90.0 
16. COMPASS RE (LUXEMBOURG) S.A.  Luxembourg  1   A.1.7   100.0   100.0 
17. MEDIOBANCA INTERNATIONAL IMMOBILIERE S. A R.L.  Luxembourg  1   A.1.6   100.0   100.0 
18. POLUS CAPITAL MANAGEMENT GROUP LIMITED  London  1   A.1.1   89.07(*)   63.75 
19. POLUS CAPITAL MANAGEMENT LIMITED  London  1   A.1.18   100.0   100.0 
20. POLUS CAPITAL MANAGEMENT (US) INC.  Wilmington (USA)  1   A.1.18   100.0   100.0 
21. POLUS CAPITAL MANAGEMENT INVESTMENTS LIMITED (non-operating)  London  1   A.1.18   100.0   100.0 
22. POLUS INVESTMENT MANAGERS LIMITED (non-operating)  London  1   A.1.18   100.0   100.0 
23. Bybrook Capital Management Limited (in liquidation)  Grand Cayman  1   A.1.18   100.0   100.0 
24. Bybrook Capital Burton Partnership (GP) Limited  Grand Cayman  1   A.1.23   100.0   100.0 
25. SPAFID FAMILY OFFICE SIM  Milan  1   A.1.2   100.0   100.0 
26. SPAFID TRUST S.R.L.  Milan  1   A.1.2   100.0   100.0 
27. MEDIOBANCA MANAGEMENT COMPANY S.A.  Luxembourg  1   A.1.1   100.0   100.0 
28. MEDIOBANCA SGR S.P.A.  Milan  1   A.1.1   100.0   100.0 
29. RAM ACTIVE INVESTMENTS S.A.  Geneva  1   A.1.1   98.3(**)   93.0 
30. MESSIER ET ASSOCIES S.A.S.  Paris  1   A.1.1   100.0(***)   80.04 
31. MESSIER ET ASSOCIES L.L.C.  New York  1   A.1.31   100.0(***)   50.0 
32. MBCONTACT SOLUTIONS S.R.L.  Milan  1   A.1.9   100.0   100.0 
33. COMPASS RENT S.R.L.  Milan  1   A.1.7   100.0   100.0 
34. COMPASS LINK S.R.L.  Milan  1   A.1.7   100.0   100.0 
35. RAM ACTIVE INVESTMENTS LIMITED (UK) (in liquidation)  London  1   A.1.29   100.0   100.0 
36. CMB REAL ESTATE DEVELOPMENT S.A.M.  Monte Carlo  1   A.1.4   60.0   60.0 
        1   A.1.1   40.0   40.0 
37. ARMA PARTNERS LLP  London  1   A.1.1   100.0   100.0 
38. ARMA PARTNERS CORPORATE FINANCE LTD  London  1   A.1.37   100.0   100.0 
39. ARMA DEUTSCHLAND GmbH  Munich  1   A.1.37   100.0   100.0 
40. HEIDI PAY SWITZERLAND AG  Geneva  1   A.1.7   100.0   100.0 

 

(*)  Taking into account the recently renegotiated put & call option which can be exercised for the next 3 years.
(**)  Taking into account the put and call options exercisable from the third to the tenth anniversary of the closing date of the transaction.
(***)  Taking into account the put & call option renegotiated during the year under review, which can be exercised for the next 2 years.

 

Legend

 

(1) Type of relationship: 1 = Majority of voting rights in ordinary AGMs. 

(2) Effective and potential voting rights in ordinary AGMs.

 

118 | Consolidated financial statements as at 30 June 2024

 

 

2. Considerations and significant assumptions used to determine consolidation area

 

The area of consolidation is defined on the basis of IFRS 10, “Consolidated Financial Statements”, which provides that control occurs when the following three conditions apply:

 

when the investor has power over the investee, defined as having substantive rights over the investee’s relevant activities;

 

when the investor has exposure, or rights, to variable returns from its involvement with the investee; and

 

when the investor has the ability to exert power over the investee to affect the amount of the variable returns.

 

Group Legal Entities are consolidated on a line-by-line basis, which means that the carrying amount of the parent’s investment and its share of the Group Legal Entity’s equity after minority interests are eliminated against the addition of that company’s assets and liabilities, income and expenses to the parent company’s totals. Any surplus arising following allocation of asset and liability items to the Group Legal Entity is recorded as goodwill. Any assets and liabilities, income and expenses from transactions between consolidated companies are eliminated upon consolidation.

 

Investments in associates and joint arrangements are consolidated using the equity method. Associates are companies that are subject to significant influence, a concept defined as the power to participate in activities which are significant for the company without having control of it. Significant influence is assumed to exist in cases where one company holds at least 20% of the voting rights of another. When establishing whether or not significant influence exists, account is also taken of potential rights, rights exercisable under options, warrants or conversion rights embedded in financial instruments; the ownership structure is also considered, as well as voting rights owned by other investors.

 

The definition of joint arrangement used is that provided in IFRS 11, which involves the twofold requirement of the existence of a contractual arrangement and that such an arrangement must provide joint control to two or more parties. Also in this case, the valuation method chosen is based on Net Equity, which will be applied to the newly-established company MB Speed UP starting from the financial year under review.

 

Under the equity method of accounting, any changes in the net equity of the investee company (including gains and losses) since the acquisition date should

 

Notes to the accounts | Part A - Accounting policies | 119

 

  

be included in the book value of the investment (originally recognised at cost). This value is reduced in the event that the investment distributes dividends. The gain or loss generated by the investment is recorded pro rata in the consolidated income statement, including any value impairment or write-ups; while all other changes are recognized directly in net equity.

 

The financial statements of the consolidated companies represented in currencies other than the Euro are converted by applying the exchange rate prevailing at the end of the accounting period to the balance sheet items, and the average exchange rates for the same period to the income statement items. All exchange rate differences arising as a result of the translation are recorded in a specific net equity valuation reserve which, as and when the investment is sold, is eliminated and the relevant amount is debited from or credited to the income statement as the case may be. The following Table summarizes the conversion rates into Euros used in the statement as at 30 June 2024:

 

  ITEM CHANGES   ITEM CHANGES IN PROFIT 
CURRENCY  IN BALANCE SHEET   AND LOSS ACCOUNT 
SWISS FRANC (CHF)   0.9634    0.9597 
US DOLLAR (USD)   1.0705    1.0816 
BRITISH POUND (GBP)   0.8463    0.8588 

 

With regard to the determination of the stake used for equity-based consolidation, it should be noted that it was determined as the ratio of the shares owned excluding those held for trading and/or through securities lending transactions (which transfer ownership, but not risks and benefits) and voting capital, represented by share capital after deducting treasury shares.

 

As required by paragraph 5-A of IFRS 12, the companies included within the area of consolidation, which must be disclosed in this paragraph, also include the equity investments of entities classified as held for sale (or included in a disposal group which is classified as held for sale).

 

3. Investments in Group Legal Entities with significant minority interests

 

Nothing to report.

 

120 | Consolidated financial statements as at 30 June 2024

 

 

4. Significant restrictions

 

The Group considers that no restrictions currently in force, under the terms of its Articles of Association, shareholders’ agreements or external regulations, would prevent it or otherwise limit its ability to access its assets or settle its liabilities.

 

The Group also considers that no rights are in force to protect the interest of minority or third parties.

 

5. Other Information

 

The reporting date for the consolidated financial statements is the date on which the Parent Company’s financial year ends. In cases where Group Legal Entities have reporting periods ending on different dates, these companies are consolidated based on financial and earnings situations prepared as at the reporting date for the consolidated financial statements.

 

The financial statements of all Group Legal Entities have been drawn up based on the same accounting principles used at Group level.

 

Associates which have reporting periods ending on different dates compared to the Parent Company prepare a pro-forma accounting statement as at the consolidated reporting date, or alternatively send a statement referring to a previous date as long as it is not more than three months previously. This eventuality is expressly provided for by IAS 28 (paras. 33-34) provided that due account is taken of any material transactions or events that occur between said date and the reporting date for the financial statements.

 

SECTION 4

 

Events subsequent to the reporting date

 

It should be noted that the merger of Spafid Family Office S.p.A. into Spafid S.p.A. was completed with effect from 1 July 2024.

 

No other events requiring an adjustment to be made to the data shown in the Consolidated Financial Statements at 30 June 2024 occurred after such date.

 

Notes to the accounts | Part A - Accounting policies | 121

 

 

SECTION 5

 

Other Aspects

 

In compliance with Directive (EC) 2004/109 (the “Transparency Directive”) and Delegated Regulation (EU) 2019/815 (the “ESEF Regulation”), this document was drawn up in XHTML and the consolidated financial statements were “marked up” using the integrated computer language iXBRL, approved by ESMA.(30) 

 

The entire document was lodged at the company offices and with the competent institutions as pursuant to the law.

 

The consolidated financial statements are accompanied by the Declaration by Financial Reporting Officer pursuant to Article 154-bis of the Italian Consolidated Law on Finance and are subject to a limited audit by the independent auditing firm EY S.p.A., according to the provisions of Legislative Decree No. 39 of 27 January 2010.

 

A.2 - Significant Accounting Policies

 

1 - Financial assets measured at Fair Value through profit or loss

 

These include financial assets held for trading and other financial assets mandatorily measured at Fair Value, and assets for which the Fair Value Option was modified.

 

Financial assets held for trading are assets which have been acquired principally for the purpose of being traded. This category comprises debt securities, equities, loans held for trading purposes, and the positive value of derivatives held for trading, including those embedded in complex instruments (such as structured bonds), which are recorded separately. This category also includes syndicated loan underwriting commitments in the event of a positive value.

 

(30) However, issuers may still continue to publish their Financial Statements in other formats (i.e. PDF). 

It should be noted that some information contained in the Notes to the Financial Statements when extracted from the XHTML format in an XBRL instance, due to certain technical limitations, may not be reproduced identically, compared to the corresponding information displayed in the consolidated financial statements in XHTML format.

122 | Consolidated financial statements as at 30 June 2024

 

 

Assets mandatorily measured at Fair Value include financial assets that are not held for trading but are mandatorily measured at Fair Value through profit or loss given the fact that they do not meet the requirements to be measured at amortized cost or at Fair Value through other comprehensive income. In particular, as clarified by the IFRS Interpretation Committee, this category includes units in mutual investment funds.(31) 

 

With regard to financial assets mandatorily measured at Fair Value, during the financial year the organizational model, the monitoring process and the methodology that the Bank applies in order to classify, measure and verify the value of OICs as instruments accounted for at Fair Value were defined in compliance with Community Regulations (see section A.4 for further details).

 

Initial recognition occurs at the settlement date for securities and loans and at the subscription date for derivatives. At initial recognition, such financial assets are booked at Fair Value not including any transaction expenses or income directly attributable to the asset concerned, which are taken through the profit and loss account. Following their initial recognition, they will continue to be measured at Fair Value, and any changes in Fair Value will be recognized in the profit and loss account. Interest on instruments mandatorily measured at Fair Value will be recognized according to the interest rate stipulated contractually. Dividends paid on equity instruments will be measured through profit or loss when the right to collect them becomes effective.

 

Equities and linked derivatives whose Fair Value may not be reliably measured using the methods described above are stated at cost (these too qualify as Level 3 assets). If the assets suffer impairment, they are written down to their current value.

 

Gains and losses upon disposal or redemption and the positive and negative effects of changes in Fair Value over time are recognized in the profit and loss account under the respective headings.

 

Assets held for trading mandatorily measured at Fair Value also include loans which do not guarantee full repayment of principal in the event of the counterparty’s financial difficulties and which have therefore failed the SPPI test. The process followed to write down these positions is aligned with that

 

(31)  The IFRS Interpretation Committee’s clarification rules out any possibility of such instruments being treated as equities.

 

Notes to the accounts | Part A - Accounting policies | 123

 

 

used for other loans, on the grounds that the exposure is basically attributable to credit risk, with both the gross exposure and related provisioning stated.

 

This item also includes financial assets designated at Fair Value upon initial recognition with the aim of eliminating or significantly reducing a valuation inconsistency. This case in particular concerns the related portfolio of assets and liabilities required by applying the business model for managing equity-linked certificates where changes in own credit risk and realizations are recognized through profit or loss to eliminate the accounting mismatch.

 

2 - Financial assets measured at Fair Value through other comprehensive income

 

These are financial instruments, mostly debt securities, which meet both the following conditions:

 

the instruments are held on the basis of a business model whose objective is the collection of contractual cash flows and of proceeds deriving from the sale of such instruments;

 

the contractual terms have passed the SPPI test.

 

Financial assets measured at Fair Value through other comprehensive income (FVOCI) are recognized at Fair Value, including transaction costs and income directly attributable to them. Thereafter, they will continue to be measured at Fair Value. Changes in Fair Value are measured through other comprehensive income, while interest and currency exchange gains/losses are recorded in the profit and loss account (in the same way as financial instruments measured at amortized cost).

 

Expected losses of financial assets measured at Fair Value through other comprehensive income (debt securities and loans and advances to customers) are calculated (as per the impairment process) in the same way as those of financial assets measured at amortized cost, with the resulting value adjustment recorded in the profit and loss account.

 

Retained earnings and accumulated losses recorded in other comprehensive income will be measured through profit or loss when the instrument is removed from the balance sheet.

 

124 | Consolidated financial statements as at 30 June 2024

 

 

The category also includes equities not held for trading which meet the definition provided by IAS 32, and which the Group decided to classify irrevocably in this category at the initial recognition stage. As the instruments in question are equities, they are not subject to impairment and no gains/losses on equities will be measured through profit or loss, including following the sale of the instrument. Conversely, dividends on the instruments will be measured through profit or loss when the right of collection takes effect.

 

3 - Financial assets measured at amortized cost

 

These include loans and advances to customers and banks, debt securities and repo transactions which meet the following conditions:

 

the financial instrument is held and managed according to the hold-to-collect business model, i.e. with the objective of holding it in order to collect the cash flows governed by the contract;

 

such contractual cash flows consist entirely of payment of principal amount and interest (and therefore meet the requirements set by the SPPI test).

 

This heading also includes receivables originated from finance leases, the valuation and classification rules for which are governed by IFRS 16 (cf. below), even though the impairment rules introduced by IFRS 9 apply for valuation purposes.

 

The Group’s business model should reflect the ways in which financial assets are managed at a portfolio level and not at the instrument level, on the basis of factors observable at the portfolio level and not at the instrument level, such as the following:

 

operating procedure adopted by management in the performance evaluation process;

 

risk type and procedure for managing risks taken, including indicators for portfolio rotation;

 

means for determining remuneration mechanisms for risk-takers.

 

The business model is based on expected reasonable scenarios (without considering “worst case” and “stress case” scenarios). In the event of cash flows differing from those estimated at initial recognition, the Group is not bound to

 

Notes to the accounts | Part A - Accounting policies | 125

 

  

change the classification of financial instruments forming part of the portfolio, but uses the information for deciding the classification of new financial instruments.(32) 

 

At initial recognition, the Group analyses contractual terms for the instruments to check whether the instrument, product or sub-product has passed the SPPI test. In this connection, the Group has developed a standardized testing process which involves analysing loans by using a specific tool, developed internally, which is structured in decision-making trees, at the level of the individual financial instrument or product based on their different degrees of customisation. If the test is not passed, the tool will show that the assets should be measured at Fair Value through profit or loss (FVTPL). The method by which loans are tested differs according to whether or not the asset is a retail or corporate loan: at product level for retail loans, individually for corporate loans. An external info-provider is used to test debt securities; if, however, no test results are available, the instrument is analysed using the SPPI tool. When contractual cash flows for the instrument do not represent solely payments of principal and interest on the outstanding amount, the Group mandatorily classifies the instrument at Fair Value through profit or loss.

 

At the initial recognition date, financial assets are measured at Fair Value, including any costs or income directly attributable to individual transactions that can be established from the outset even if they are actually settled at later stages. The recognition value does not, however, factor in costs with the above characteristics which are repaid separately by the borrower, or may be classified as ordinary internal administrative expenses.

 

The instrument is measured at amortized cost, i.e. the initial value less/plus the repayments of principal made, write-downs/write-ups, and amortization – calculated using the effective interest rate method – of the difference between the amount disbursed and the amount repayable at maturity, adjusted to reflect expected losses.

 

The amortized cost method is not used for short-term receivables, as the discounting effect is negligible; for this reason, such receivables are recognized at historical cost. The original effective interest rate is defined as the rate of interest which renders the discounted value of future cash flows deriving

 

(32) These considerations are stated in the internal management policies, which reiterate the link between business model and accounting treatment and introduce frequency and materiality thresholds for changes in portfolios of assets measured at amortized cost.

 

126 | Consolidated financial statements as at 30 June 2024

 

 

from the loan or receivable by way of principal and interest equal to the initial recognition value of the loan or receivable.

 

The original effective interest rate for each loan will remain unchanged in subsequent years, even if new terms are negotiated leading to a reduction to below market rates, including non-interest-bearing loans. The relevant value adjustment is recognized in the profit and loss account.

 

In accordance with the provisions of IFRS 9, the impairment model involves financial assets being classified at one of three different risk stages (Stage 1, Stage 2 and Stage 3), depending on developments in the borrower’s credit quality, to which different criteria for measuring expected losses apply. Accordingly, financial assets are split into the following categories:

 

Stage 1: this includes exposures at their initial recognition date for as long as there is no significant impairment to their credit quality; for such instruments, the expected loss should be calculated depending on default events which may occur within twelve months of the reporting date;

 

Stage 2: this includes exposures which, while not classified as non-performing as such, have nonetheless experienced significant impairment to their credit quality since the initial recognition date; in the transition from Stage 1 to Stage 2, the expected loss will be calculated for the outstanding life of the instrument;

 

Stage 3: this category consists of non-performing (impaired) exposures according to the definition provided in the regulations. In the transition to Stage 3, exposures are valued individually, that is, the value adjustment is calculated as the difference between the carrying value at the reference date (amortized cost) and the discounted value of the expected cash flows, which are calculated by applying the original effective interest rate. The expected cash flows consider the anticipated collection times, the probable net realizable value of any guarantees, and the costs which are likely to be incurred for the recovery of the credit exposure from a forward-looking perspective which factors in alternative recovery scenarios and developments in the economic cycle.

 

In the model for calculating expected losses applied by the Group, forward-looking information was taken into consideration by referring to three possible macroeconomic scenarios (baseline, mild-positive and mild-negative) that may have an impact on PD and LGD, including any sales scenarios where the

 

Notes to the accounts | Part A - Accounting policies | 127

 

 

Group’s NPL strategy considers that such assets should be recovered through sale on the market.

 

The Group’s policy to establish a significant increase in credit risk is based on qualitative and quantitative criteria and uses the 30-day past due loans or their classification as forborne as conditions to be otherwise included in Stage 2 (referred to as backstop indicators). Cases of low-risk instruments at the recording date are identified, compatible with classification as Stage 1 (low credit risk exemption), where there is a BBB- rating on the Standard & Poor’s scale, or a corresponding internal PD estimate.

 

Purchased or originated credit impaired items (POCIs) are receivables that are already non-performing at the point in time when they are acquired or disbursed, which does not preclude their being subsequently classified as performing. Writedowns are in any case calculated on a lifetime horizon.

 

Following initial recognition, all financial assets measured at amortized cost are subject to the impairment model based on the expected loss, i.e. performing as well as non-performing exposures.

 

Impairment regards losses which are expected to materialize in the twelve months following the reporting date, or losses which are expected to materialize throughout the rest of the instrument’s lifetime in the event of a significant increase in credit risk. Both the twelve-month and lifetime expected losses can be calculated on an individual or collective basis according to the nature of the underlying portfolio.

 

Expected credit losses are recorded and released only to the extent that changes have occurred. For financial instruments considered to be in default, the Group records an expected loss on the residual lifetime of the instrument (similar to Stage 2 above); value adjustments are determined for all the exposures of the different categories considering forecast information reflecting macro-economic factors (forward-looking approach).

 

128 | Consolidated financial statements as at 30 June 2024

 

 

4 - Hedging

 

With reference to hedging transactions, the Group has chosen to adopt the provisions of IFRS 9 and not to make use of the exception granted, i.e. to continue to apply the IAS 39 rules to these transactions, with the exception of the specific cases set forth in IFRS 9 (para. 6.1.3)(33)  and not governed by the same.

 

The types of hedges used by the Group are the following:

 

Fair Value hedges, which aim to offset the exposure to changes in the Fair Value of a financial item or homogeneous group of assets in terms of risk profile;

 

cash flow hedges, which are intended to offset the exposure of recognized assets and liabilities to changes in future cash flows attributable to specific risks relating to the items concerned;

 

hedges of foreign investments in currencies other than the Euro: these refer to the hedging of risks in an investment in a non-Italian company denominated in a foreign currency.

 

For the process to be effective, the item must be hedged with a counterparty from outside the Group.

 

Hedge derivatives are measured at Fair Value as follows:

 

for Fair Value hedges, a change in the Fair Value of the hedged item is offset by the change in Fair Value of the hedging instrument, both of which recognized in the profit and loss account, should a difference emerge as a result of the partial ineffectiveness of the hedge;

 

for cash flow hedges, a change in Fair Value is recognized in net equity for the effective portion of the hedge and in the profit and loss account only when, with reference to the hedged item, the change in the cash flows to be offset actually occurs.

 

Hedge accounting is permitted for derivatives where the hedging relationship is formally designated and documented and provided that the hedge is effective at its inception and is expected to be so for its entire life.

 

(33) IFRS 9 par. 6.1.3: “For a fair value hedge of the interest rate exposure of a portfolio of financial assets or financial liabilities (and only for such a hedge), an entity may apply the hedge accounting requirements in IAS 39 instead of those in this Standard. In that case, the entity must also apply the specific requirements for the fair value hedge accounting for a portfolio hedge of interest rate risk and designate as the hedged item a portion that is a currency amount (see paragraphs 81 A, 89 A and AG114–AG132 of IAS 39).”

 

Notes to the accounts | Part A - Accounting policies | 129

 

 

At inception, the Group formally designates and documents the hedging relationship, with an indication of the risk management objectives and strategy for the hedge. The documentation includes identification of the hedging instrument, the item hedged, the nature of the risk hedged and how the entity intends to assess if the hedging relationship meets the requisites for the hedge to be considered effective (including analysis of the sources of any ineffectiveness and how this affects the hedging relationship). The hedging relationship meets the eligibility criteria for accounting treatment reserved for hedges if, and only if, the following conditions are met:

 

the effect of the credit risk does not prevail over the changes in value resulting from the economic relationship;

 

the coverage provided by the hedging relationship is the same as the coverage which results from the quantity of the item hedged which the entity effectively hedges, and the quantity of the hedging instrument which the Group actually uses to hedge the same quantity of the item hedged.

 

Fair Value hedges

 

As long as the Fair Value hedge meets the qualifying criteria, the gain or loss on the hedging instrument must be recognized in the profit and loss account or under one of the other comprehensive income headings if the hedging instrument hedges another equity instrument for which the Group has chosen to measure changes in Fair Value through OCI. The hedge profit or loss on the hedged item is recorded as an adjustment to the book value of the hedge with a matching entry through profit and loss account, even in cases where the item hedged is a financial asset (or one of its components) measured at Fair Value with changes taken through OCI. However, if the hedged item is an equity instrument for which the entity has opted to measure changes in Fair Value through OCI, the amounts remain in the statement of other comprehensive income.

 

If the hedged item is an unrecognized irrevocable commitment (or a component thereof), the cumulative change in Fair Value of the hedged item resulting from its designation is recognized as an asset or liability with a corresponding gain or loss recorded in the profit (loss) for the period.

 

130 | Consolidated financial statements as at 30 June 2024

 

 

Cash flow hedges

 

As long as the cash flow hedge meets the qualifying criteria, it is accounted for as follows:

 

the gain or loss on the hedging instrument in relation to the effective portion of the hedge is measured through OCI in the cash flow reserve, whereas the ineffective part is measured through profit or loss.

 

the cash flow reserve is adjusted to the lower of:

 

the cumulative gain or loss on the hedging instrument since the hedge’s inception; and

 

the cumulative change in Fair Value (at the present value) of the hedged item (i.e. the present value of the cumulative change in the estimated future cash flows hedged) since the hedge’s inception.

 

The cumulative amount in the cash flow hedge reserve will be reclassified from the cash flow hedge reserve to profit (loss) for the period as a reclassification adjustment in the same period or periods in which the estimated future cash flows being hedged have an impact on the profit (loss) for the period (e.g. in periods when interest receivable or payable are recorded, or when the planned sale takes place). However, if the amount constitutes a loss and the entity does not expect to recover the whole loss or part of it in one or more future periods, the entity must classify the amount it does not expect to recover in the profit (loss) for the period (as an adjustment due to reclassification) immediately.

 

Foreign currency investment hedges

 

As far as it complies with eligibility criteria, a cash flow hedge is accounted for in the following ways:

 

the portion of gain or loss on the hedging instrument that results in an effective hedge is booked into Other Comprehensive Income; and

 

the ineffective share is booked through profit or loss.

 

The cumulative gain or loss on the hedging instrument related to the effective part of the hedge which had been accumulated into the foreign currency exchange rate reserve will be reclassified from net equity to profit and loss as a reclassification adjustment (see IAS 1), as required by par. 48 and 49 of IAS 21 regarding the partial or total disposal of the foreign investment.

 

Notes to the accounts | Part A - Accounting policies | 131

 

 

5 - Investments

 

This heading consists of interests(34) held in jointly-controlled entities and associates. Companies subject to joint control, otherwise known as joint ventures, are defined as entities whose control is contractually stipulated as being shared between the Group and one or more other parties, or when the unanimous consent of all parties which share control of the entity is required for decisions regarding relevant activities.

 

Companies subject to significant influence, otherwise known as associates, are defined as entities in which the Group holds at least 20% of the voting rights (including “potential” voting rights) or for which – despite holding a lower share of the voting rights – it is entitled to participate in deciding the financial and management policies of the investee company by virtue of its being represented in that company’s management bodies, without actually having control over it.

 

The Group uses the net equity method to account for these investments; hence they are initially recognized at cost and subsequently adjusted to reflect changes in the net assets attributable to the Group since the acquisition date.

 

Following application of the net equity method, if there is objective evidence that the value of an investment may have reduced, estimates are made of its recoverable value, taking into account the value of the discounted future cash flows which the investment might generate, including the final sale value of the investment itself.

 

If the recoverable value is lower than the book value, the difference is measured through profit or loss.

 

If, in a period following the year in which an impairment loss has been recorded, a change occurs in the estimates used to determine the recoverable value, the book value of the investment will be revised to reflect the recoverable value and the adjustment will give rise to a write-back.

 

(34) As specified in IAS 28, the stake in an associated company is the book value of the investment in the affiliated company calculated using the equity method together with any other long-term stake which, in substance, represents the entity’s additional net investment in the affiliated company. Any short-term transactions (trading and securities lending) are not relevant for the computation of the stake for equity-based consolidation purposes.

 

132 | Consolidated financial statements as at 30 June 2024

 

 

In cases where significant influence or joint control are lost, the Group recognizes and values any residual share still held at Fair Value. Any difference between the book value at the date on which the loss of significant influence or joint control occurs, plus the Fair Value of the share still held and the consideration received on disposal, will be recognized in the income statement.

 

6 - Tangible assets

 

This heading comprises land, core and investment properties, plant, furniture, fittings and equipment of all kinds. It also includes the R-o-U assets acquired under leases and related use of tangible assets (for lessees) and assets used under the terms of finance leases (for lessors), despite the fact that such assets remain the legal property of the lessor rather than the lessee.

 

Assets held for investment purposes refer to investments in real estate, if any (whether owned or acquired under leases), which are not core to the Group’s main activities and/or are chiefly leased out to third parties.

 

The heading also includes tangible assets classified pursuant to IAS 2 – Inventories, namely assets deriving from guarantees being enforced or acquired at an auction which the firm has the intention of selling in the near future, without carrying out any major refurbishment work and which do not fall into any of the previous categories.

 

Such assets are recognized at historical cost, which, in addition to the purchase price, includes any ancillary charges directly attributable to the purchase and/or commissioning of the asset. Extraordinary maintenance charges are accounted for by increasing the asset’s value, while ordinary maintenance charges are recorded in the profit and loss account.

 

Fixed assets are depreciated over the length of their useful life on a straight-line basis, with the exception of land, which is not depreciated on the grounds that it has unlimited useful life. Properties built on land owned by the Group are recorded separately on the basis of valuations prepared by independent experts.

 

At annual and interim reporting dates, where there is objective evidence that the value of an asset may be impaired, its carrying amount is compared to its current value, which is the higher of its Fair Value after any costs to sell and

 

Notes to the accounts | Part A - Accounting policies | 133

 

 

its related value in use. Adjustments, if any, are recognized in the profit and loss account. If the reasons for recognizing a loss in value no longer apply, the adjustment will be written back, with the proviso that the amount credited may not exceed the value which the asset would have had after depreciation, which is calculated assuming no impairment took place.

 

7 - Intangible assets

 

These chiefly comprise goodwill, long-term computer software applications and other intangible assets deriving from business combinations subject to IFRS 3R.

 

Goodwill may be recognized where this is representative of the investee company’s ability to generate future income. At each reporting date, goodwill recorded as an asset is tested for impairment.(35) Any reduction in value due to impairment is calculated as the difference between the initial recognition value of goodwill and its realizable value, the latter being equal to the higher of the Fair Value of the related cash-generating unit after any costs to sell and its value in use, if any. Any adjustments will be recognized in the profit and loss account.

 

Other intangible assets are measured at cost, adjusted to reflect ancillary charges only where it is likely that future earnings will derive from the asset and the cost of the asset itself may be reliably determined. Otherwise, the cost of the intangible asset is booked through the profit and loss account in the year in which the expense was incurred.

 

The cost of intangible assets is amortized on a straight-line basis over the useful life of the related asset, verified on an annual basis if necessary. If its useful life is indefinite the cost of the asset is not amortized, but the value at which it is initially recognized is tested for impairment on a regular basis.

 

(35) The Group has adopted a policy for the impairment testing process in line with the provisions of Organismo Italiano di Valutazione (OIV), Impairment test dell’avviamento in contesti di crisi finanziaria (Impairment test of goodwill during financial crises) of 14 June 2012, Principi Italiani di Valutazione (PIV, Italian Valuation Standards) published in 2015, Discussion Paper of 22 January 2019, Discussion Paper no. 01/2021 issued on 16 March 2021 by Organismo Italiano di Valutazione (O.I.V.) “L’uso di informazione finanziaria prospettica nella valutazione d’azienda” (Use of forward-looking financial information in company valuation), Discussion Paper no. 02/2021 issued on 16 March 2021 by Organismo Italiano di Valutazione (O.I.V.) “Linee Guida per l’Impairment Test dopo gli effetti della pandemia da Covid-19” (Guidelines for Impairment Tests after the effects of the Covid-19 pandemic), with suggestions published by ESMA, the guidelines of the joint document Bank of Italy, Consob, IVASS (document no. 4 of 3 March 2010 and no.8 of 21 December 2018) and various Consob communications and warning notices, as well as the IOSCO (International Organization Of Securities Commissions) Document containing “Recommendations on Accounting for Goodwill”, published in December 2023.

 

134 | Consolidated financial statements as at 30 June 2024

 

 

At annual and interim reporting dates, the realizable value of the asset is estimated if there is evidence of impairment.(36) The impairment is recognized in the profit and loss account as the difference between the carrying amount and the recoverable value of the asset concerned.

 

8 - Non-current assets and asset groups as held for sale (IFRS 5)

 

Under assets heading “Non-current assets and asset groups as held for sale” and under liability heading “Liabilities associated with assets held for sale” the Group classifies non-current assets or groups of assets/liabilities whose booking value will be presumably recovered by mean of a sale process. To be classified in this heading, assets or liabilities (or disposal groups) should be readily available for sale and selling plans should be identified, which are active and realistic in a way that their completion is considered highly probable. After the classification in the identified heading, these assets are measured at the lower of the booking value and the Fair Value after costs to sell, with the exception of some categories of assets (i.e. assets falling under the scope of standard IFRS 9) for which IFRS 5 requires specifically that the valuation provisions of the applicable standard should be used. In case of held-for-sale assets to be still depreciated, this process ends when assets are classified in the mentioned heading.

 

In case of discontinued operations, i.e. the sale of operating assets relating to an important business sector or geographical area, the standard requires gains and losses related thereto to be grouped together, after any tax effect, in the profit and loss heading “320. Gains (losses) of discontinued operating assets, after tax”.

 

If the Fair Value of assets and liabilities held for sale, after costs to sell, is lower than their book value, a write-off will be calculated and booked through profit or loss.

 

Non-current assets held for sale and disposal groups are derecognized from the balance sheet when the sale occurs.

 

(36) Under IAS 36, impairment testing, i.e. tests to ascertain whether or not there has been a loss in the value of individual tangible and intangible assets, must be carried out at least once a year, in conjunction with preparation of the financial statements, or more frequently if events have taken place or materialized that would indicate there has been a reduction in the value of such assets (known as “impairment indicators”).

 

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9 - Tax assets and liabilities

 

Income taxes are recorded through the profit and loss account, with the exception of tax payable on items debited or credited directly to net equity. Provisions for income tax are calculated on the basis of current, advance and deferred obligations. In particular, prepaid and deferred taxes are calculated on the basis of temporary differences – without time limits – between the value attributed to an asset or liability according to (Italian) statutory regulations and the corresponding values used for tax purposes.

 

Advance tax assets are recognized in the balance sheet based on the likelihood of their being recovered.

 

Deferred tax liabilities are recognized with the exception of tax-suspended reserves, if the size of available reserves previously subjected to taxation is such that it may be reasonably assumed that no transactions will be carried out on the Group’s own initiative that might lead to their being taxed.

 

Deferred taxes arising upon business combinations are recognized when this is likely to result in an actual charge for one of the consolidated companies.

 

Tax assets and liabilities are adjusted as and when changes occur in the regulatory framework or in applicable tax rates, inter alia to cover charges that might arise in connection with inspections by or disputes with the tax revenue authorities.

 

Contributions to Deposits Guarantee Schemes and resolution funds are accounted for according to IFRIC 21.

 

10 - Provisions for risks and charges

 

These regard risks linked to loan commitments and guarantees issued, and to the Group’s operations which could lead to expenses in the future as well as post-retirement plan provisions (cf. below).

 

In the first case (provisions for risks and charges to cover commitments and guarantees issued), the amounts set aside are quantified in accordance with the rules on impairment of financial assets measured at amortized cost.

 

136 | Consolidated financial statements as at 30 June 2024

 

 

In the other cases the rules of IAS 37 apply, i.e. the potential charge must be estimated reliably; if the time effect is material, provisions are discounted using current market rates; and the provision is recognized in the profit and loss account.

 

Provisions are reviewed on a regular basis, and where the charges that gave rise to them are deemed unlikely to crystallize, the amounts involved are written back to the profit and loss account in part or in full.

 

Withdrawals are only made from provisions to cover the expenses for which the provision was originally set aside.

 

As permitted by IAS 37, paragraph 92, no precise indication has been given of any contingent liabilities where this could compromise the company in any way.

 

11 - Financial liabilities measured at amortized cost

 

These include the items Due to banks, Due to customers and Debt securities in issue less any amounts bought back. The heading also includes payables in respect of finance lease transactions, whose valuation and classification rules are governed by IFRS 16 and which are subject to the impairment rules under IFRS 9. For a description of the rules for valuing and classifying lease receivables, see the relevant section.

 

Initial recognition takes place when funds raised are collected or debt securities are issued, and occurs at Fair Value, which is equal to the amount collected after transaction costs incurred directly in connection with the liability concerned. After initial recognition, liabilities are measured at amortized cost on the basis of the original effective interest rate, with the exception of short-term liabilities which will continue to be stated at the original amount collected.

 

Derivatives embedded in structured debt instruments are stripped out from the underlying contract and recognized at Fair Value when they are not closely correlated to the host instrument. Subsequent changes in Fair Value are recognized through the profit and loss account.

 

Notes to the accounts | Part A - Accounting policies | 137

 

 

Financial liabilities are derecognized upon expiry or repayment, even if buybacks of previously issued bonds are involved. The difference between the liabilities’ carrying value and the amount paid to repurchase them is recognized through the profit and loss account.

 

The sale of treasury shares over the market following a buyback (even in the form of repos and securities lending transactions) is treated as a new issue. The new sale price is recorded as a liability without passing through the profit and loss account.

 

12 - Trading liabilities

 

This item includes the negative value of trading derivatives and any derivatives embedded in complex instruments. Liabilities for technical overdrafts connected to securities trading activities as well as the negative value of syndicated loan underwriting commitments are also included. All trading liabilities are measured at Fair Value and changes are taken through the profit and loss account.

 

13 - Financial liabilities designated at Fair Value

 

These include the value of financial liabilities designated at Fair Value through profit or loss, on the basis of the option granted to companies (referred to as “Fair Value option”) by IFRS 9 and in compliance with the cases provided for by such legislation.

 

Such liabilities are measured at Fair Value, accounting for earnings according to the following rules laid down in IFRS 9:

 

changes in Fair Value attributable to changes in one’s credit quality must be recognized in the Statement of Other Comprehensive Income (Net Equity);

 

other changes in Fair Value must be recognized through profit or loss;

 

amounts stated in other comprehensive income will not flow through profit or loss.

 

This method cannot be adopted, however, if the recognition of the effects of the issuer’s own credit quality in net equity generates or accentuates an

 

138 | Consolidated financial statements as at 30 June 2024

 

 

accounting mismatch in profit and loss. In such cases, the profits or losses related to the liability, including those caused as the effect of the change in the issuer’s credit quality, must be measured through profit or loss.(37) 

 

In compliance with the provisions of IFRS 9, the correlation between assets and liabilities is monitored on an ongoing basis.

 

14 - Foreign currency transactions

 

Transactions in foreign currencies are recorded by applying the exchange rates as at the date of the transaction to the amount in the foreign currency concerned.

 

Assets and liabilities denominated in currencies other than the Euro are translated into Euros using exchange rates prevailing at the reference dates. Differences on cash items due to translation are recorded through the profit and loss account, whereas those on non-cash items are recorded according to the valuation criteria used in respect of the category they belong to (i.e. at cost, through profit or loss or on an equity basis).

 

The assets and liabilities of non-Italian entities consolidated on a line-by-line basis have been converted at the exchange rate prevailing at the reporting date, whereas the profit-and-loss items have been converted using the average of the average monthly exchange rate readings for the period; any differences emerging after the conversion are recognized among the Net Equity valuation reserves.

 

15 - Insurance assets and liabilities

 

Insurance assets and liabilities that fall within the scope of IFRS 17 “Insurance Contracts” are classified in this category.

 

In particular, the asset item “80. Insurance assets” or the liability item “110. Insurance liabilities” include insurance contracts, reinsurance contracts, and investment contracts with issued discretionary profit-sharing features, as defined and regulated by IFRS 17, belonging to portfolios of insurance contracts, based

 

(37) This case in particular concerns the related portfolio of assets and liabilities concerning the business model for managing the funding of equity-linked certificates aiming to eliminate the accounting mismatch.

 

Notes to the accounts | Part A - Accounting policies | 139

 

 

on the net balance of the portfolio to which they belong. Generally, insurance contracts have a negative balance (insurance liabilities), while reinsurance contracts have a positive balance (insurance assets).

 

At the time of signing the insurance contract(38) with the insured party, a liability is recognized whose amount is given by the algebraic sum of the present value of the expected contractual cash flows (Present value of future cash flow – “PVFCF”) which include the so-called Contractual Service Margin – “CSM”, i.e. the present value of expected future profits and the Risk adjustment (“RA”) to cover non-financial risks. All contracts are grouped together to identify “portfolios” that have similar risks and which can be managed in a unified manner.

 

There are two measurement models: General Model - applicable in principle to all contracts, and Variable Fee Approach (“VFA”) - applicable in particular to direct profit-sharing contracts. An optional simplified model (Premium Allocation Approach - “PAA”) is also provided for the purpose of measuring the residual coverage liability for contracts with a coverage period lasting one year or longer and for all contracts in the event that the measurement is not materially different from the one resulting from applying the General Model.

 

The insurance liability should be updated at each reporting period to verify the consistency of the estimates made with respect to market conditions. The effects of any updates detected will be recognized in the profit and loss account if the changes refer to current or previous events or to a reduction in the Contractual Service Margin if the changes are due to future events.

 

With regard to financial assumptions, the principle provides for the option of representing the effects of changes in the profit and loss account or in shareholders’ equity (referred to as Other Comprehensive Income Option - OCI).

 

Lastly, IFRS 17 provides that the insurance contract should be derecognized when, and only when, the contract is extinguished, i.e. when the obligation specified in the insurance contract expires or is discharged or cancelled.

 

(38) An insurance contract is defined as a contract under which one party (the issuer) underwrites a “significant insurance risk” from another party (the insured), agreeing to indemnify the insured in the event that the same suffers damage resulting from a specific uncertain future event (the insured event).

 

140 | Consolidated financial statements as at 30 June 2024

 

 

16 - Other Information

 

Financial liabilities recognized at present value of redemption amount

 

These consist of financial liabilities originating from agreements to buy out minorities in connection with acquisitions of controlling interests. These items, accounted for in heading “80. Other liabilities” of balance sheet, must be recognized at the present value of the redemption amount.

 

Derecognition of assets

 

A financial asset must be derecognized from the balance sheet if, and only if, the contractual rights to the cash flows deriving from it have expired, or if the asset has been transferred in accordance with the circumstances permitted under IFRS 9. In such cases the Group checks if the contractual rights to receive the cash flows in respect of the asset have been transferred, or if they have been maintained while a contractual obligation to pay the cash flows to one or more beneficiaries continues to exist. It is necessary to check that basically all risks and benefits have been transferred, and any right or obligation originated or maintained as a result of the transfer is recorded separately as an asset or liability where appropriate. If the Group retains virtually all risks and benefits, the financial asset must continue to be recorded.

 

If the Group has neither transferred nor maintained all risks and benefits, but at the same time has retained control of the financial asset, this continues to be recognized up to the residual interest retained in that asset.

 

The main forms of activity currently carried out by the Group which do not require underlying assets to be derecognized are the securitization of receivables, repo trading and securities lending. Conversely, items received as part of deposit bank activity, the return on which is collected in the form of a commission, are not recorded, as the related risks and benefits continue to accrue entirely to the end-investor.

 

When a financial asset measured at amortized cost is renegotiated, the Group derecognizes it only if the renegotiation entails a change of such magnitude that the initial instrument effectively becomes a new one. In such cases, the difference between the original instrument’s carrying value and the Fair Value of the new instrument is measured through profit or loss, taking due account of any previous write-downs. The new instrument is classified as Stage

 

Notes to the accounts | Part A - Accounting policies | 141

 

 

1 for the purpose of calculating the expected loss (save in cases where the new instrument is classified as a POCI).

 

In cases where the renegotiation does not result in substantially different cash flows, the Group does not derecognize the instrument, but the difference between the original carrying value and the estimated cash flows discounted using the original internal rate of return must be measured through profit or loss (taking due account of any provisions already set aside to cover it).

 

Leases (IFRS 16)

 

An agreement is classified as a lease(39) (or contains a lease) based on the substance of the agreement at the execution date. An agreement is, or contains, a lease if its performance depends on the use of a specific good (or goods) and confers the right to use such good (goods) – the “Right of Use” (RoU) – for an agreed period of time and in return for payment of a fee (Lease liabilities). This definition of leasing therefore also includes long-term rentals or hires.

 

Right-of-use assets are recognized among “Tangible assets”, and calculated as the sum of the current value of future payments (which corresponds to the current value of the recognized liability), the initial direct costs, any instalments received in advance or on the effective date of the lease (down payment), any incentives received from the lessor, and estimates of any costs for removing or restoring the asset underlying the lease.

 

The lease liability, which is booked under “Financial liabilities measured at amortized cost”, is equal to the discounted value of payments due in respect of the lease discounted, as required by the Standard, to the marginal financing rate, equal for the Group to the Funds Transfer Pricing rate (FTP) as at the date concerned.

 

The duration of the lease agreement must not only consider the non-cancellable period established by contract, but also the extension options if their use is considered reasonably certain; in particular, the counterparty’s past behaviour, the existence of corporate plans for the disposal of the leased business and any other circumstances indicative of the reasonable certainty of renewal must be considered when providing for automatic renewal.

 

(39) Leases in which the Group is a lessor may be divided into finance leases and operating leases. A lease is defined as a finance lease if all risks and benefits typically associated with ownership are transferred to the lessee. Such leases are accounted for by using the financial method, which involves a receivable being booked as an asset for an amount equal to the amount of the lease, after any expired instalments on principal paid by the lessee, and the interest receivable being taken through the profit and loss account.

 

142 | Consolidated financial statements as at 30 June 2024

 

 

After initial recognition, right-of-use assets are amortized over the lease duration and written down as appropriate. The liability will be increased by the interest expense accrued and progressively reduced as a result of the payment of fees; in the event of a change in payments, the liability will be recalculated against the right-of-use asset.

 

For sub-leases, i.e. when an original lease has been replicated with a counterparty, and there are grounds for classifying it as a finance lease, the liability in respect of the original lease is matched by an amount receivable from the sub-lessee rather than the value in use.

 

Provisions for statutory end-of-service payments and post-retirement schemes

 

Provisions for statutory end-of-service payment qualify as a defined-contribution retirement plan for units accruing from 1 January 2007 (the date on which the reform of supplemental retirement plans came into force under Legislative Decree No. 252 of 5 December 2005), for cases where the employee opts into a supplemental retirement plan, and also for cases where contributions are paid into the treasury fund held with Istituto Nazionale di Previdenza Sociale (INPS, Italian national social security institution). For such payments, the amount accounted for under labour costs is determined on the basis of the contributions due without using actuarial calculation methods.

 

Provision for statutory end-of-service payment accrued up to 1 January 2007 qualify as defined benefit retirement plans, and as such will be recorded depending on the actuarial value calculated in line with the projected unit method. Therefore, future payments will be estimated based on past statistical analyses (for example turnover and retirements) and on the demographic curve; these flows will then be discounted according to a market interest rate that takes the market yield of bonds of leading companies as a benchmark taking into account the average residual duration of the liability weighted on the basis of the percentage of the amount paid or advanced for each maturity with respect to the total amount to be paid or advanced until the final settlement of the entire obligation.

 

Post-retirement plan provisions have been set aside under company agreements and also qualify as defined benefit plans. In this case, the current value of the liability is adjusted by the Fair Value of any assets to be used under the terms of such plan.

 

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Actuarial gains and/or losses are recorded in the Other Comprehensive Income statement, while the interest component is recognized in the profit and loss account.

 

Stock Options, Performance Shares and Long-Term Incentives

 

Stock option, performance share and long-term incentive (LTI) schemes operated on behalf of Group staff members and collaborators are treated as a component of labour costs.

 

Schemes which involve payment through the award of shares are measured through profit or loss, with a corresponding increase in net equity, based on the Fair Value of the financial instruments allocated at the award date, thus spreading the cost of the scheme throughout the period of time in which the requirements in terms of service have been met and the performance targets, if any, have been achieved.

 

The overall cost of the scheme is recorded in each financial year up to the date on which the plan vests, so as to reflect the best possible estimate of the number of shares that will actually vest. Requirements in terms of service and performance targets are not considered in determining the Fair Value of the instruments awarded, but the probability of such targets being reached is estimated by the Group and this is factored into the decision as to the number of instruments that will vest. Conversely, market conditions will be included in establishing the Fair Value, whereas conditions unrelated to the requirements in terms of service are considered “non-vesting conditions” and are reflected in the Fair Value established for the instruments, and result in the full cost of the scheme being recorded in the profit and loss account immediately in the event that no service requirement and/or performance conditions have been met.

 

In the event of performance or service conditions not being met and the benefit failing to be allocated as a result, the cost of the scheme is written back. However, if any market conditions fail to be reached, the cost must be recorded in full if the other conditions have been met.

 

In the event of changes to the scheme, the minimum cost to be recorded is the Fair Value at the scheme award date prior to the change, if the original conditions for vesting have been met. An additional cost, established at the date on which the change is made to the scheme, must be recorded if the change has entailed an increase in the overall Fair Value of the scheme for the beneficiary.

 

144 | Consolidated financial statements as at 30 June 2024

 

 

For schemes which will involve payments in cash upon expiry, the Group records an amount payable equal to the Fair Value of the scheme measured at the award date of the scheme and at every reporting date thereafter, up to and including the settlement date, with any changes recorded as labour costs.

 

Treasury shares

 

These are deducted from net equity. Any differences between the initial disbursement upon acquisition and the revenues on disposal are also recognized in net equity.

 

Fees and commissions receivable in respect of services

 

This heading includes all revenues deriving from the provision of services to customers with the exception of those relating to financial instruments, leases and insurance contracts.

 

Revenues from contracts with customers are measured through profit or loss when control over the service is transferred to the customer, in an amount that reflects the fee to which the Group considers to be entitled in return for the service rendered.

 

For revenue recognition purposes, the Group analyses the contracts to establish whether they contain more than one obligation to provide services to which the price of the transaction should be allocated. The revenues are then recorded throughout the time horizon over which the service is rendered, using suitable methods to recognize the measurement in which the service is provided. The Group also takes into consideration the effects of any variable commissions, and whether or not a significant financial component is involved.

 

In the event of additional costs being incurred to perform or execute the contract, where such costs meet the requirements of IFRS 15, the Group will assess whether to capitalize them and then amortize them throughout the life of the contract, or to make use of the exemption provided by IFRS 15 to expense the costs immediately in cases where their amortization period would be complete within twelve months.

 

Notes to the accounts | Part A - Accounting policies | 145

 

 

Dividends

 

Dividends are recognized through profit or loss during the financial year in which their distribution is approved; they concern distributions from equity securities that are not part of affiliated investments and/or joint ventures measured according to the provisions of IAS 28.

 

Cost recognition

 

Costs are measured through profit or loss in accordance with the revenues to which they refer, except in case their capitalization requirements apply and where provided in order to determine amortized cost. Any other costs which cannot be associated with revenues are accounted for immediately in the profit and loss account.

 

Related parties

 

Related parties are defined, inter alia in accordance with IAS 24, as follows:

 

a)individuals or entities which, directly or indirectly, exercise significant influence over the Bank;

 

b)shareholders with stakes of 3% or more in the Bank’s share capital;

 

c)legal entities controlled by the Bank;

 

d)associated companies, joint ventures and entities controlled by the same;

 

e)key management personnel, that is, individuals with powers and responsibilities, directly or indirectly, for the planning, direction and control of the Parent Company’s activities, including the members of the Board of Directors and Statutory Audit Committee;

 

f)entities controlled or jointly controlled by one or more of the entities listed under the foregoing letters a), b) and e) and the joint ventures of entities referred to under letter a);

 

g)close family members of the individuals referred to in letters a) and e) above, that is, individuals who may be expected to influence them or be influenced by them in their relations with Mediobanca (this category includes children, spouses and their children, partners and their children, dependants, spouses’ dependants and their partners’ dependants), as well as any entities controlled, jointly controlled or otherwise associated with such individuals.

 

146 | Consolidated financial statements as at 30 June 2024

 

 

A.3 – Information on transfers between financial asset portfolios

 

A.3.1 Reclassification of financial assets: changes to the business model, book value and interest income

 

A.3.2 Reclassification of financial assets: changes to the business model, Fair Value and effects on other comprehensive income

 

A.3.3 Reclassification of financial assets: changes to the business model and effective interest rate

 

At 30 June 2024, there were no data to be reported for any of the three sections above.

 

A.4 – Information on Fair Value

 

QUALITATIVE INFORMATION

 

Fair Value

 

In line with the international accounting standards, the Fair Value of financial instruments stated in the financial statements is the so-called exit price, i.e. the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions, regardless of whether such price is directly observable or estimated using another valuation technique (IFRS 13, §24).

 

Fair Value, therefore, is “the price that would be received for the sale of an asset or that would be paid for the transfer of a liability in a regular transaction between market operators at the measurement date”.

 

The Fair Value hierarchy of an instrument is a direct consequence of the Fair Value estimation approach: in principle, a financial instrument is considered to be listed on an active market if its price represents its current exchange value in normal, effective and regular market operations.

 

If the market is not active, the Fair Value of the instrument being estimated is measured by using market prices for similar instruments on active markets (comparable approach) or, in the absence of similar instruments, using a valuation technique that uses market and non-observable information (observable/ unobservable inputs).

 

Notes to the accounts | Part A - Accounting policies | 147

 

 

The Group has laid down precise guidelines regarding three key aspects: independent calculation of Fair Value, conducted by the Group’s control units; the adoption of any Fair Value adjustments to consider aspects of uncertainty/ liquidity; and classification of financial instruments according to a Fair Value hierarchy based on the level of uncertainty of the valuation. In addition to the book Fair Value, which affects both the balance sheet and the income statement, the Group is required to make prudent valuation adjustments in order to calculate prudential requirements.

 

These guidelines, set out in Policies approved by the Board of Directors and related implementation Directives approved by the competent Committees, were defined in compliance with the main international regulations (IFRS 13(40) and CRR art 105(41) ); the main activities for calculating the exit price of the financial instruments in the portfolio are shown below.(42) .

 

It should be noted that a Directive was proposed and approved during the year under review to define the organizational model to be adopted by the Bank in the area of valuation and control of Collective Investment Undertakings for the purposes of Independent Price Verification, Fair Value and prudent value adjustment methodologies, as well as for classification purposes (observability and levelling).

 

The Directive provides a complete and detailed overview of the procedures and responsibilities involved, ensuring that each phase of the investment process is transparent, accurate and compliant with applicable regulations.

 

Independent Price Verification (IPV) Processes

 

Independent Price Verification (IPV) is the process through which prices and market data, used to calculate Fair Value and to measure prudent value, are subject to a verification process according to specific accuracy standards defined internally by the Group. The Independent Price Verification Policy and Directive meet the requirements laid down in Article 105, para. 8 of Regulation (EU) 575/2013, which requires institutions to perform independent price verification in addition to daily marking-to-market or marking-to-model

 

(40)  IFRS 13 establishes guidelines for identifying the exit price by using available prices, valuation models and any corrections (FVA) to consider elements of illiquidity/risk which, if not applied, would lead to overestimating the financial instrument, and the need to classify financial instruments according to the level of objectivity in the computation of fair value (FVH).

 

(41) The guiding principles of the IPV and PVA processes are defined in the CRR Directive, Article 105.

  

(42) It should be emphasized that the accuracy and consistency of these guidelines are subject to rigorous supervision by the Group Audit unit, which verifies the effectiveness and adequacy thereof. Furthermore, a specific internal validation unit has been established, within the Risk Management unit, which focuses on the validation of the quantitative methods used.

 

148 | Consolidated financial statements as at 30 June 2024

 

 

practices and establish and maintain sufficient procedures for providing valuation estimates.

 

Independent Price Verification has the following objectives: formalisation of control methodologies, definition of a market parameter validation approach, definition of the methodologies for quantifying control thresholds, methods and types of escalation and reporting to Senior Management.

 

Verification of the correctness of the valuation will be based on verification of market parameters used for the valuation of instruments that present a risk profile for the Group and individual Desks by analysing the correct import of data from info providers and the fairness of the financial value through comparison with other info providers, indicative quotations provided by brokers and implicit parameters deduced from such quotations. With regard to illiquid financial instruments, verification should also be performed as regards the valuation methodology input data.

 

IPV performs data analysis in order to ensure consistency with a comparison source to ensure a correct evaluation of the Bank’s and of individual Desks’ risk positions of the main profit and loss drivers. Any changes to the data will have an impact not only on the balance sheet but also on the Profit and Loss reporting process of the portfolio concerned. Furthermore, the decision to change the source of valuation of any market data during the Independent Price Verification process, as well as the verification method itself, may generate a different classification of the instrument being analysed with respect to the Fair Value Hierarchy.

 

For the calculation of Independent Price Verification adjustments, the Mediobanca Group uses available and reliable sources. Where possible, these are also used for the prudent valuation adjustment (PVA) process in line with the provisions of Article 3 of Delegated Regulation (EU) 2016/101. These data sources are validated in accordance with the provisions of internal documentation and/or regulations.

 

The validation process focuses on the asset classes that have a direct impact on the Group’s Income Statement, both for proprietary instruments and for guaranteed instruments. In this regard, before proceeding with the analysis of the market parameters, the scope of analysis where to perform the certification is divided into asset classes. However, materiality thresholds (at risk factor level) are established for each exposure above which to apply the calculation described below.

 

Notes to the accounts | Part A - Accounting policies | 149

 

 

IPV requires daily checks to be performed on all Group positions (trading and banking book), which include the year-by-year price of financial instruments, market curves and volatility surfaces. Furthermore, monthly checks, at the latest, are carried out for some asset classes, based on consensus services, given the nature and frequency with which valuation data is available in the systems. Finally, starting from the year under review, annual verifications of the funds (Private Equity, Debt and Real Estate) have been introduced using a leading third-party firm for the valuation of the NAVs of UCITS funds. The IPV process is divided into two levels:

 

The individual underlying assets are specifically verified and, based on the differences found compared to the valuation communicated by the manager, a valuation flag is assigned;

 

The “Documentary completeness” and “Adequacy of valuations” are analysed for each fund.

 

Fair Value Adjustment (FVA)

 

Fair Value Adjustment (FVA) plays a fundamental role in the valuation of financial instruments, as it ensures that the Fair Value reflects the price actually realizable in a practical market transaction. The guidelines defined in the Fair Value policy fully reflect the requirements defined by accounting standard IFRS 13, according to which the valuation of financial instruments should use the exit price method and allow for corrections to be made to the valuations in specific circumstances.

 

This Fair Value approach ensures that the valuations made by the Group are based on prices that are realistic and representative of current market conditions, guaranteeing adequate consideration to exit conditions and to the actual possibilities of selling or purchasing the financial instruments being valued. This ensures accurate and reliable financial information to be provided internally and to external stakeholders. In particular:

 

Inputs based on Bid and Ask Prices - §70: when measuring an asset or liability at Fair Value and having at one’s disposal both a bid and an ask price (as in the case of inputs from a market of operators), the price within the bid-ask spread that best represents Fair Value in the specific circumstances should be chosen. The Group uses bid or ask prices in order to align with the closing price.

 

150 | Consolidated financial statements as at 30 June 2024

 

 

Inputs derived from Bid and Ask Prices - §71: the standard does not prohibit the use of average market prices or other pricing conventions commonly used by market participants to measure Fair Value within the bid-ask spread. However, in the Group’s approach preference is given to the adoption of bid and ask prices in order to obtain a more precise Fair Value measurement particularly aligned with a reliable closing price.

 

Fair Value adjustments have an impact on profit or loss and take into account market liquidity, the uncertainties of parameters, the financing costs, and the complexity of the valuation models used in the absence of shared market practices.

 

The scope of Fair Value adjustments includes the following categories:

 

Market price uncertainty (MPU): this consists in uncertainties in valuations based on market quotations;(43) 

 

Closed-Out Cost (COC): this indicates uncertainties regarding the liquidity cost that the Group may incur in the event of a partial or total sale of an asset measured at Fair Value;

 

Model Risk (MR): adjustments aimed at mitigating the risk of discrepancy with respect to market practice in the valuation of a product in relation to the choice and implementation of the valuation model;

 

Concentrated Positions: this reflects uncertainties in the valuation of the exit price for positions classified as concentrated (i.e. positions whose disposal would significantly affect the market price);

 

additional investment and financing costs: investment and financing costs may be incurred for own bond issues with an early redemption clause or in the event of early closure of positions in derivative instruments. These costs may vary depending on fluctuations in financing costs.

 

Credit Value Adjustments (CVA) and Debt Value Adjustments (DVA) are incorporated into the valuation of derivatives to reflect the impact of the counterparty’s credit risk and the Group’s credit quality. CVA represents a negative amount that takes into account cases where the counterparty could go bankrupt before the Group / Bank, with a positive market value against the counterparty. DVA represents an amount that takes into account the cases in

 

(43) With regard to new corrections to UCITS funds, the FVA process is structured by applying a “Performance Simulation Model”, which uses the Monte-Carlo simulation method: the probability distribution of the discounted NAV of each fund and, consequently, the probability of having to record a discount, is found at maturity. This distribution is used to suggest a range of haircuts to apply to the NAV.

 

Notes to the accounts | Part A - Accounting policies | 151

 

 

which the Group / Bank could go bankrupt before the counterparty, with an impact for the counterparty. These adjustments are calculated taking into account any risk mitigating arrangements, such as collateral and netting arrangements for each counterparty.

 

The method used to calculate CVA/DVA is based on the following inputs:

 

Expected Positive (EPE) and Expected Negative (ENE) Exposure, derived from simulations, which reflect the positive and negative valuation exposures of derivatives;

 

Probability of Default (PD), which may be derived from historical default probabilities or implied in the market prices of Credit Default Swaps or bonds;

 

Loss Given Default (LGD) is based on the estimated value of expected recovery in the event of the counterparty’s default, as defined by specific analyses conducted by the Group, or recovery rates conventionally used for Credit Default Swap quotations.

 

Furthermore, the Fair Value of non-collateralized derivatives may be affected by the Group’s funding costs (Funding Value Adjustment). Therefore, adjustments are made for the different funding costs using a discount curve that represents the average funding level of banks operating in the European corporate derivatives market.

 

Fair Value Hierarchy (FVH) – Observability and materiality of inputs

 

The Observability Levelling and Day-one Profit Directive, as specified in IFRS 13 and referred to in Bank of Italy Circulars No. 285 and No. 262, requires a hierarchy of levels reflecting the significance of inputs used in the valuations. These inputs, called “valuation inputs,” are the market data used to estimate the Fair Value of financial instruments. The term “valuation input” refers to the market data used to estimate the Fair Value of instruments. To estimate the Fair Value of instruments, the Group uses valuation techniques that are adequate to the circumstances and for which sufficient data are available. Valuation techniques can be based on various approaches:

 

market approach, which uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities;

 

cost approach (or current replacement method), which reflects the amount that would currently be required to replace an asset’s service capacity;

 

152 | Consolidated financial statements as at 30 June 2024

 

 

income approach, which converts future amounts (e.g. cash flows or revenues and expenses) into a single discounted amount through, for example: present value methods and option pricing models.

 

These valuation methods may use different types of inputs, which may be observable or unobservable. Prices quoted in active markets are classified as “observable inputs”. In other cases, the information is considered observable when the valuation is based on market information obtained from sources independent of the Group or from actual transactions. In accordance with IFRS 13, para. B34, some examples of markets from which observable inputs can be derived include the following:

 

exchange markets: in an exchange market, closing prices are both readily available and generally representative of Fair Value. An example of such a market is the London Stock Exchange;

 

dealer markets: in a dealer market, dealers stand ready to trade (either buy or sell for their own account), thereby providing liquidity by using their capital to hold an inventory of the items for which they make a market. Typically bid and ask prices (representing the price at which a dealer is willing to buy and the price at which a dealer is willing to sell, respectively) are more readily available than closing prices. Over-the-counter markets (for which prices are publicly reported) are dealer markets. Dealer markets also exist for some other assets and liabilities, including some financial instruments, commodities and physical assets;

 

brokered markets: in a brokered market, brokers attempt to match buyers with sellers but do not stand ready to trade for their own account. Brokers do not use their own capital to hold an inventory of the items for which they make a market, but they know the prices bid and asked by the respective parties. Prices of completed transactions are sometimes available. Brokered markets include electronic communication networks, in which buy and sell orders are matched, and commercial and residential real estate markets;

 

principal-to-principal markets: in a principal-to-principal market, transactions, both originations and resales, are negotiated independently with no intermediary. Little information about those transactions may be made available publicly.

 

Notes to the accounts | Part A - Accounting policies | 153

 

 

All cases in which it is not possible to demonstrate the observability of inputs are classified as “unobservable inputs” and, in particular, when the information on which the valuation techniques are based reflects the Group’s judgement formulated using the best information available in such circumstances.

 

In accordance with L IFRS 13, para. 67, valuation techniques used to measure Fair Value should maximize the use of relevant observable inputs and minimize the use of unobservable inputs.

 

In more detail, based on their observability and considering additional criteria, inputs can be classified into three different levels.

 

Level 1 inputs:

 

Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date. A quoted price in an active market provides the most reliable evidence of Fair Value and it is the price to be used preferentially to measure financial assets and liabilities held in the portfolio. If a quoted price recorded on an active market is available, alternative valuation techniques based on quotes for comparable instruments or quantitative models cannot be used and the instrument is classified as a “Level 1 instrument” in its entirety. The objective is to reach a price at which a financial instrument would be traded at the reporting date (without altering the instrument) on an active market considered to be the main one or the most advantageous one for the Group and to which it has immediate access.

 

Level 2 inputs:

 

Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include the following:

 

quoted prices for similar assets or liabilities in active markets.

 

quoted prices for identical or similar assets or liabilities in markets that are not active.

 

Inputs other than quoted prices that are observable for the asset or liability, for example:

 

(i) Interest rates and yield curves observable at commonly quoted intervals.

 

(ii) Implied volatility.

 

(iii) Credit spread.

 

154 | Consolidated financial statements as at 30 June 2024

 

 

Market-corroborated inputs.

 

Level 2 inputs may require adjustments for example relating to:

 

the condition or location of the asset;

 

the extent to which inputs relate to items that are comparable to the asset or liability;

 

the volume or level of activity in the markets within which the inputs are observed.

 

If there is no public quotation on an active market for the price of the financial instrument as a whole, but active markets exist for its components, Fair Value will be calculated by reference to the relevant market prices for those components. In this case, valuation will not be based on active market quotations for the financial instrument in question, but on observable market inputs or through the use of inputs that are not observable but are supported and confirmed by market data. The use of this approach does not exclude the use of a calculation method, or rather, of a pricing model, through which it is possible to establish the correct price of the transaction at the reference date, in an ideal and independent trading environment justified by normal market considerations.

 

Level 3 inputs:

 

Level 3 inputs are not directly observable inputs that are used to measure the Fair Value in the event that relevant observable inputs are not available, making it possible to estimate a closing price even in situations of low market activity for the asset or liability as at the measurement date. The Group estimates unobservable inputs using the best information available in the circumstances, which could include its own data, considering all information on the assumptions of market participants that is reasonably available. Unlike Level 2 inputs, in this case the inputs must be internally estimated according to quantitative methods, such as the use of historical series and comparable underlying instruments. Both Level 2 and Level 3 inputs may be used for a certain instrument. In this case, the final classification of the instrument is defined by applying the materiality assessment.

 

There are two stages in the process of setting the levels and observability of inputs. In the first stage, a level is assigned to each input used in the instrument valuation model. Thereafter, in the second stage, the relevance of the various

 

Notes to the accounts | Part A - Accounting policies | 155

 

 

inputs used to determine the materiality of unobservable inputs is verified, thus influencing the overall valuation of the instrument. It should be noted that for some categories of instruments, such as private equity or infrastructure alternative investment funds, a more rigorous classification (Fair Value level) is automatically applied, since the relevant underlying is not listed on the market. However, for some types of instruments there is an illiquidity discount in the NAV valuation in order to bring the valuation to the exit price.

 

Materiality is a crucial step in establishing whether unobservable inputs (Level 2 or 3) are meaningful to the entire measurement of the instrument. This materiality analysis also extends to inputs used to calculate any adjustments, such as the Fair Value Adjustment (FVA) or the Credit Value Adjustment (CVA).

 

In summary, the observability and materiality process ensures that the Fair Value of financial instruments is classified correctly based on the significance of the inputs used, ensuring an adequate valuation of the Group’s financial assets and liabilities.

 

Starting from the financial year under review, a new Fair Value hierarchy framework has come into force. It provides for automatic classification into levels based on the significance and liquidity of inputs used in the valuations; in particular, the weight that unobservable inputs have compared to observable inputs will determine their classification, potentially increasing re-classifications based on available market data at the reference date.(44) 

 

Prudent Valuation Adjustment (PVA)

 

The Prudent Valuation Policy and Directive meet the regulatory requirements of Article 34 and Article 105, para. 2, of Regulation (EU) 575/2013, which, solely for prudential purposes and therefore without accounting impacts, requires prudential valuation(45) to be performed by applying adjusted inputs in order to capture stressed events. The difference between Prudent Value and Fair Value (exit price used for recording the instruments in the Group’s financial statements) is called Additional Valuation Adjustment (AVA). The aggregation of AVAs, called Prudent Value Adjustment (PVA), is deducted directly from Common Equity Tier 1 - CET1.

 

(44) The adoption of this framework for positions in place at 30 June may have resulted in a reclassification of approximately €40m to level 2.
(45) Prudential valuation is understood as an exit price with a 90% level of certainty.

 

156 | Consolidated financial statements as at 30 June 2024

 

 

The final adjustment is defined by the Regulator by aggregating nine AVAs:

 

Market Price Uncertainty (MPU): this is the valuation uncertainty based on market prices, calculated at the level of the exposure being measured;(46) 

 

Close-out Costs (CoC): these consist in the uncertainty of the exit price, calculated at the level of the exposure being measured;

 

Model Risk (MR): this refers to the valuation uncertainty arising from the uncertainty of the model used and/or of the calibration thereof used by various market participants;

 

Unearned Credit Spreads (UCS): this consists in uncertainty in the measurement necessary to include the present value of expected losses in the event of counterparty default on derivative positions;

 

Investing and Funding Costs (IFC): this is the uncertainty of the valuation of funding costs used in the valuation of the exit price in accordance with the applicable accounting standards;

 

Concentrated Positions (CP): these refer to the uncertainty of the exit price for positions defined as concentrated;

 

Future and Administrative Costs (FAC): this considers administrative costs and future hedging costs over the expected lifetime of the exposures being measured to which a direct exit price has not been applied for CoC AVAs;

 

Early Termination (ET): this considers contingent losses arising from non-contractual early terminations of the clients’ trading positions;

 

Operational Risk (OR): this considers contingent losses that may be incurred as a result of the operational risks associated with the measurement processes.

 

Positions measured at Fair Value include various categories of financial assets and liabilities, as defined by International Financial Reporting Standards (IFRS); however, some positions are excluded from the AVA calculation if a change in the valuation of their amount does not affect capital resources. These exclusions include positions available for sale (FVOCI) to the extent that valuation changes are subject to prudential filtering, perfectly matching opposite positions (back-to-back) and positions subject to hedging transactions (hedge accounting).

 

(46) In line with the regulations governing Fair Value Adjustments to UCITS funds, where the median of the identified haircut range is used to find the fund correction amount, the maximum value of the identified haircut range is applied on the prudent side.

 

Notes to the accounts | Part A - Accounting policies | 157

 

 

A.4.1 Valuation processes and sensitivity analysis

 

As required by IFRS 13, quantitative information on the significant non-observable inputs used for the assessment of Level 3 instruments is provided below.

 

Uncertainties of the inputs and impact on the Mark-to-Market method

 

    MtM +/- delta   MtM +/- delta 
Non-observable     (€’000)   (€’000) 
inputs  Quantification of parameter uncertainty  30/6/24   30/6/23 
Implied volatility  For each point on the volatility surface, this is defined as a standard deviation from consensus provided by the independent data provider. For non-contributed underlyings, a proxy is derived from the contributed underlyings.   (49.8)   (4.4)
Equity-equity correlation  For each expiry along the correlation curve, this is defined as a standard deviation from the consensus provided by the independent data provider. For non-contributed underlyings, a proxy is derived from the contributed underlyings.   (11.0)   (16.3)
Credit Spread  For financial guarantees with specific underlyings, credit spread curves are not observable. Proxy curves obtained from underlying prices are used for these instruments.   (0.5)    

 

158 | Consolidated financial statements as at 30 June 2024

 

 

Measurement techniques - Equity - receivables - interest rate - exchange rate products

 

      Fair Value (*)   Fair Value (*)   Fair Value (*)   Fair Value (*) 
       Assets   Liabilities   Assets   Liabilities 
   Measurement  Non-observable  30/6/24   30/6/24   30/6/23   30/6/23 
Product  technique  inputs  (€m)   (€m)   (€m)   (€m) 
OTC bond option  Black-Scholes model  Implied volatility (1)    0.73    (0.42)        
                           
OTC equity single name options, variance swap  Black-Scholes/Black model  Implied volatility (1)    8.60        11.70    (5.68)
                           
OTC equity basket options, best of/ worst of, equity autocallable multi-asset options  Black-Scholes model, local volatility model  Implied volatility
Equity-equity correlation (2) 
   19.10    (19.32)   7.45    (11.56)
                           
CDS on Single Names with Recovery Rate 0  Arbitrage Free Credit Spread Model  Recovery Rate   0.05        0.37     
                           
Put option a garanzia del rendimento finanziario di fondi pensione  Black-Scholes model  Projection of future premium flows and death rates of policy holders (3)    0.23    (23.58)   0.01    (29.25)
                           
Forex barrier option  Black-Scholes model  Uncertainty of valuation model (4)    0.02             
                           
Financial Guarantee  Arbitrage Free Credit Spread Model  Credit Spread and Recovery Rate (5)    0.85    (1.08)        

 

(*) The carrying amount shown above is equal to the full Fair Value of structures and includes Fair Value adjustments.

 

(1) Volatility in a financial context is a measurement of how much the price of an underlying instrument may vary over time. The higher the volatility of the underlying instrument, the greater the risk associated with it. In general, long positions in options benefit from increases in volatility, whereas short positions in options lose out from them. For equity derivatives, the implied volatility area may be obtained from the price of the call and put options, as they have regulated markets. The uncertainty of this input is attributable to one of the following scenarios: illiquidity of quoted prices (wide bid/ask spreads, typical of long maturities or moneyness far from the At-The-Money spot), concentration effects and non-observable market data (again when maturities are considered too long or moneyness far from the At-The-Money spot).

 

(2) Equity-equity correlation is a measurement of the correlation between two equity-based underlying instruments. Variations in the correlation levels may impact an instrument’s Fair Value positively or negatively, depending on the correlation type.

 

Equity-equity correlations are less observable than volatility, because correlation products are not quoted on any regulated markets. For this reason, correlations are more subject to data uncertainties.

 

(3) The contractual form has been structured as a put option with an original term of between 10 and 30 years, the valuation of which is subject to uncertainty regarding both the estimate of future premiums and the NAV level of the underlying pension funds.

 

(4) Model uncertainty is a measure of the relationship between two or more different valuation models for a derivative. Variations in valuation models used may impact an instrument’s Fair Value positively or negatively.

 

(5) The contractual form is structured as a guarantee on specific underlying assets for which there are no observable input parameters.

 

The main factors contributing to transitions between Fair Value levels include changes in market conditions and refinements in the measurement models and/or the non-observable inputs.

 

Fair Value of an instrument may transition from Level 1 to Level 2 or vice versa mainly as a result of the loss (increase) in significance of the price expressed by the active market of the instrument.

 

Conversely, transfers from Level 2 to Level 3 or vice versa mainly arise as a result of the loss (increase) in significance of inputs, in particular the predominance of non-observable inputs over observable inputs.

 

Notes to the accounts | Part A - Accounting policies | 159

 

 

A.4.4 Other information

 

The Group uses the exception provided under IFRS 13, para. 48 from measuring Fair Value of financial assets and liabilities on a net basis by offsetting market and counterparty credit risks.

 

QUANTITATIVE INFORMATION

 

A.4.5 Fair Value hierarchy

 

A.4.5.1 Assets and liabilities measured at Fair Value on a recurring basis, breakdown by Fair Value hierarchy

 

(€’000)

 

Financial assets/liabilities measured  30 June 2024   30 June 2023 
at Fair Value  Level 1   Level 2   Level 3   Level 1   Level 2   Level 3 
1. Financial assets measured at Fair Value through profit or loss   12,496,458    3,084,722    1,206,686    6,871,088    2,883,005    900,305 
a) financial assets held for trading   12,181,393    2,421,602    806,456    6,714,688    2,343,281    488,242 
b) financial assets designated at Fair Value   127,231    578,774    13,210        538,590     
c) other financial assets mandatorily measured at Fair Value   187,834    84,346    387,020    156,400    1,134    412,063 
2. Financial assets measured at Fair Value through other comprehensive income   6,414,948    284,208    206,547    5,680,235    51,050    310,834 
3. Hedging derivatives       705,549            1,321,884     
4. Tangible assets                        
5. Intangible Assets                        
Total   18,911,406    4,074,479    1,413,233    12,551,323    4,255,939    1,211,139 
1. Financial liabilities held for trading   5,796,689    3,608,630    99,391    4,968,008    4,166,238    302,426 
2. Financial liabilities designated at Fair Value       3,858,906    380,293        1,540,419    40,537 
3. Hedging derivatives       1,431,642            2,069,541     
Total   5,796,689    8,899,178    479,684    4,968,008    7,776,198    342,963 

 

The Group’s trading book is mainly concentrated on liquid transactions with a low level of uncertainty. A residual, more complex part remains which, however, even in this context of greater volatility and uncertainty, has not undergone significant changes.

 

Level 3 assets held for trading increased to €806.4m (from €488.2m), including €256m relating to repaid loans, subordinated on the market and entirely sold in early July with no impact on the profit and loss account. The remaining part is mainly represented by exposures in securitized stocks

 

160 | Consolidated financial statements as at 30 June 2024

 

 

(€345.8m against €167.1m) and by exposure in unlisted convertible preferred shares (€171.4m against €152.3m) offset by the forward sale of the same underlying and classified as Level 2.

 

As at 30 June 2024, Level 3 liabilities held for trading, which mainly concerned autocallable certificates on basket equity; decreased from €302.4m to €99.4m after repayments (€174.5m) and net reclassifications to level 2 (€26.4m).(47)  This decrease is linked to the entry into force of the new business model that provides for the Fair Value Option classification of newly issued autocallable equity certificates, which on the other hand determined an increase in Level 3 financial liabilities measured at Fair Value (from €40.5m to €380.3m); new issues of €289.5m and entries from other levels of €55.9m (relating to a delta-one certificate) were recorded during the year under review.

 

Financial assets mandatorily measured at Fair Value remained essentially steady at €387m (from €412.1m) and consisted of investments in funds (including €89.2m in Polus funds). Transfers of €138.5m to other level, offset by new purchases of €139.8m, should be noted.

 

Financial assets measured at Fair Value through other comprehensive income (bonds, shares and SFPs) decreased from €310.8m to €206.5m with sales and net redemptions of €114.1m; changes in Fair Value were positive by €9.8m.

 

(47) Due to the new fair value hierarchy framework described in the previous paragraphs.

 

Notes to the accounts | Part A - Accounting policies | 161

 

 

A.4.5.2 Annual changes in financial assets measured at Fair Value on a recurring basis (Level 3)

 

(€’000)

 

   Financial assets measured at Fair Value through profit or loss                     
   Total   of which:
a) financial
assets held
for trading (1) 
   of which:
b) financial
assets
designated at
Fair Value
   of which:
c) other
financial
assets
mandatorily
measured at Fair
Value
   Financial
assets
measured at
Fair Value
through other
comprehensive
income
   Hedging
derivatives
   Tangible
assets
   Intangible
assets
 
1. Opening balance   899,507    487,443        412,064    310,834             
2. Increases   611,997    444,783    13,210    154,004    18,160             
2.1 Purchases   550,375    397,342    13,210    139,823    7,158             
2.2 Profits recognized in:   27,942    13,761        14,181    10,721             
2.2.1 Profit and loss account   27,942    13,761        14,181    3,504             
– of which, capital gains   13,652    9,448        4,204                 
2.2.2 Net equity                   7,217             
2.3 Transfers from other levels   33,680    33,680                         
2.4 Other increases                   281             
3. Decreases   (304,865)   (125,811)       (179,054)   (122,446)            
3.1 Disposals   (131,351)   (109,919)       (21,432)   (76,012)            
3.2 Redemptions   (9,507)   (9,507)           (45,251)            
3.3 Losses recognized in:   (19,840)   (769)       (19,071)   (1,183)            
3.3.1 Profit and loss account   (19,840)   (769)       (19,071)                
– of which: capital losses   (768)   (768)                        
3.3.2 Net equity                   (1,183)            
3.4 Transfers to other levels   (138,551)           (138,551)                
3.5 Other decreases   (5,616)   (5,616)                        
4. Closing balance   1,206,639    806,415    13,210    387,014    206,548             

 

(1) After the market value of options traded (€41,000 at 30 June 2024 and €0.8m at 30 June 2023) the values of which are stated in the assets and liabilities for the same amount.

 

162 | Consolidated financial statements as at 30 June 2024

 

 

A.4.5.3 Annual changes in liabilities measured at Fair Value on a recurring basis (Level 3)

 

(€’000)

 

      Financial assets    
   Financial assets
held for trading (1) 
   designated at Fair
Value
   Hedging
derivatives
 
1. Opening balance   301,627    40,537     
2. Increases   56,300    345,445     
2.1 Issues   28,513    289,443     
2.2 Losses recognized in:   7,003    47     
2.2.1 Profit and loss account   7,003    47     
– of which, capital losses   7,003         
2.2.2 Net equity            
2.3 Transfers from other levels   18,386    55,955     
2.4 Other increases   2,398         
3. Decreases   (258,577)   (5,689)    
3.1 Redemptions   (199,305)        
3.2 Buybacks            
3.3 Profits recognized in:   (11,839)   (5,689)    
3.3.1 Profit and loss account   (11,839)   (5,689)    
– of which: capital gains   (11,839)        
3.3.2 Net equity            
3.4 Transfers to other levels   (47,433)        
3.5 Other decreases            
4. Closing balance   99,350    380,293     

 

(1) After the market value of options traded (€41,000 at 30 June 2024 and €0.8m at 30 June 2023), the values of which are stated in the assets and liabilities for the same amount.

 

Notes to the accounts | Part A - Accounting policies | 163

 

 

A.4.5.4 Assets and liabilities not measured at Fair Value or measured at Fair Value on a non-recurring basis: breakdown by Fair Value hierarchy

 
                               (€’000) 
      
Assets/liabilities not measured         
at Fair Value or measured at  30 June 2024   30 June 2023 
Fair Value on a non-recurring  Carrying            Carrying          
basis  amount   Level 1   Level 2   Level 3   amount   Level 1    Level 2   Level 3  
1. Financial assets measured at amortized cost   64,158,936    3,663,863    15,945,116    43,894,197    62,555,709    3,963,714    16,948,503    39,522,590 
2. Tangible assets held for investment purposes   47,998            125,045    50,486            125,440 
3. Non-current assets and asset groups held for sale                   251,987             
Total   64,206,934    3,663,863    15,945,115    44,019,242    62,858,182    3,963,714    16,948,503    39,648,030 
1. Financial liabilities measured at amortized cost   70,321,563    1,403,249    68,911,567    33,072    64,903,066    1,038,611    63,352,460    261,493 
2. Liabilities associated with assets held for sale                   8,134             
Total   70,321,563    1,403,249    68,911,567    33,072    64,911,200    1,038,611    63,352,460    261,493 

 

A.5 - Information on Day One Profit/Loss

 

Pursuant to IFRS 7, paragraph 28, the “Day One Profit/Loss” is understood as the difference between the Fair Value of a financial instrument at the initial recognition date (transaction price) and the amount estimated at that date using a valuation technique. This difference may be positive or negative.

 

In the event that the difference is positive (day one profit) and based on market quotations and models that almost exclusively include the use of observable market inputs, this amount can be included in the positive components of the profit and loss account. However, if the positive difference is based on non-observable market inputs, the Fair Value of the instrument must be adjusted for such difference and charged through profit or loss when the inputs become observable.

 

In the event, however, that the difference attributable to non-observable inputs is negative (day one loss), it is immediately recorded through profit or loss on a prudential basis.

 

The Group applies the day one profit suspension rule to financial instruments classified as Level 3 of the Fair Value hierarchy, i.e. instruments for which the impact of one or more non-observable inputs on the Fair Value is considered significant, as defined in paragraph 73 of IFRS 13. The day one

 

164 | Consolidated financial statements as at 30 June 2024

 

 

profit, calculated after Fair Value adjustments, is amortized over the expected period for which the input data will remain unobservable. The day one profit is not applied if the risks generated by the transaction are hedged with a market counterparty (back-to-back) and therefore there are no impacts on profit or loss due to the non-observable input.

 

During the year under review, the day one profit method was used for two types of transaction:

 

CLO financial guarantee: transactions in which the Group purchased specific hedging on CLOs in its portfolio to neutralize the credit risk for which no observable, liquid market parameters were available compared to standard CDS. As at 30 June 2024, there were 8 transactions in progress for a nominal value of approximately €171m, for which profits of €6.9m were suspended and would be released pro rata temporis taking into account a certain stability of the uncertain input;

 

certificates: as at 30 June 2024, profits of approximately €3.1m were suspended (almost entirely on autocallable equity) relating to an equivalent value of €263.9m, including former autocallable equity of €242m. They amounted to €4.2m in the previous year for a value of €224.3m.

 

Notes to the accounts | Part A - Accounting policies | 165

 

 

Part B – Notes to the Consolidated Balance Sheet (*) 

 

Assets

 

SECTION 1

 

Heading 10: Cash and cash equivalents

 

1.1 Cash and cash equivalents: breakdown

 

   Total   Total 
   30 June 2024   30 June 2023 
a) Cash   118,477    123,417 
b) Current accounts and demand deposits with Central Banks   2,603,174    3,499,866 
c) Current accounts and demand deposits with banks   639,499    613,699 
Total   3,361,150    4,236,982 

 

(*) DFigures in €’000.

 

166 | Consolidated financial statements as at 30 June 2024

 

 

SECTION 2

 

Heading 20: Financial assets measured at Fair Value (**) through profit or loss

 

2.1 Financial assets held for trading: product breakdown

 

  Total 30 June 2024    Total 30 June 2023  
Items/Values  Level 1   Level 2   Level 3   Level 1   Level 2   Level 3 
A. Cash assets                              
1. Debt securities   7,627,757    435,729    345,789    4,993,089    188,834    296,172 
1.1 Structured securities   11,722    15,892    52,252    1,310    10,625    47,821 
1.2 Other debt securities   7,616,035    419,837    293,537    4,991,779    178,209    248,351 
2. Equity securities (1)    3,753,655        171,736    1,020,812        163,498 
3. UCIT units (3)    361        4,198    25        3,258 
4. Loans           255,901    4,085         
4.1 Reverse repos                        
4.2 Other           255,901    4,085         
Total (A)   11,381,773    435,729    777,624    6,018,011    188,834    462,928 
B. Derivative instruments                              
1. Financial derivatives   799,620    1,754,764    27,981    696,678    2,001,019    19,964 
1.1 trading (2)    799,620    1,754,764    27,981    696,678    2,001,019    19,964 
1.2 related to the Fair Value option                        
1.3 other                        
2. Credit derivatives       231,109    851        153,428    5,350 
2.1 trading       231,109    851        153,428    5,350 
2.2 related to the Fair Value option                        
2.3 other                        
Total (B)   799,620    1,985,873    28,832    696,678    2,154,447    25,314 
Total (A+B)   12,181,393    2,421,602    806,456    6,714,689    2,343,281    488,242 

 

(1)  Equities include shares committed in securities lending transactions totalling €1,015,975 at 30 June 2024 and €399,599 at 30 June 2023.

(2)  This includes €41,000 (€798,000 in June 2023) relating to options traded, whose contra-item was recorded among trading liabilities.
(3)  These positions resulting from syndicated loan underwriting commitments were closed in early July 2024.
(**)  For the criteria used to determine Fair Value and the classification of financial instruments in the three Fair Value ranking levels, see Part A – Accounting Policies.

 

Notes to the accounts | Part B - Notes to the consolidated Balance Sheet | 167

 

 

2.2 Financial assets held for trading: by borrower/issuer

 

Items/Values  30 June 2024   30 June 2023 
A. Cash assets          
1. Debt securities   8,409,275    5,478,095 
a) Central Banks        
b) Public administrations   6,578,666    3,253,899 
c) Banks   1,167,423    1,514,688 
d) Other financial companies   526,748    599,285 
of which: insurance companies   2,832     
e) Non-financial companies   136,438    110,223 
2. Equity securities   3,925,391    1,184,310 
a) Banks   622,756    217,180 
b) Other financial companies   786,722    271,147 
of which: insurance companies   132,406    9,977 
c) Non-financial companies   2,515,913    695,983 
d) Other issuers        
3. UCIT units   4,559    3,283 
4. Loans   255,901    4,085 
a) Central Banks        
b) Public administrations        
c) Banks        
d) Other financial companies (1)    255,901     
of which: insurance companies        
e) Non-financial companies       4,085 
f) Households        
Total (A)   12,595,126    6,669,772 
B. Derivative instruments          
a) Central Counterparties   448,621    1,487,126 
b) Other   2,365,704    1,389,313 
Total (B)   2,814,325    2,876,439 
Total (A+B)   15,409,451    9,546,211 

 

(1) These are positions purchased as part of the underwriting activity whose syndication ended in early July 2024.

 

2.3 Financial assets designated at Fair Value: product breakdown (*) 

 

  Total    Total  
   30 June 2024    30 June 2023  
Items/Values  Level 1   Level 2   Level 3   Level 1   Level 2   Level 3 
1. Debt securities (1)    127,231        13,210             
1.1 Structured securities                        
1.2 Other debt securities   127,231        13,210             
2. Loans       578,774            538,590     
2.1 Structured                        
2.2 Other (1)        578,774            538,590     
Total   127,231    578,774    13,210        538,590     

 

(*)  For the criteria used to determine Fair Value and the classification of financial instruments in the three Fair Value ranking levels, see Part A – Accounting Policies.
(1)  These offset Fair Value Option liabilities.

 

168 | Consolidated financial statements as at 30 June 2024

 

 

2.4 Financial assets designated at Fair Value: breakdown by borrower/issuer

 

Items/Values  30 June 2024   30 June 2023 
1. Debt securities (1)    140,441     
a) Central Banks        
b) Public administrations   13,210     
c) Banks   115,282     
d) Other financial companies   2,017     
of which: insurance companies        
e) Non-financial companies   9,932     
2. Loans   578,774    538,590 
a) Central Banks        
b) Public administrations        
c) Banks        
d) Other financial companies   578,774    538,590 
of which: insurance companies   578,774    538,590 
e) Non-financial companies        
f) Households        
Total   719,215    538,590 

 

(1) These offset Fair Value Option liabilities.

 

2.5 Other financial assets mandatorily measured at Fair Value (*): product breakdown

 

  30 June 2024    30 June 2023  
Items/Values  Level 1   Level 2   Level 3   Level 1   Level 2   Level 3 
1. Debt securities       295    4    412        451 
1.1 Structured securities                        
1.2 Other debt securities       295    4    412        451 
2. Equity securities           8,554            7,474 
3. UCIT units   187,834    82,412    378,462    155,988        399,449 
4. Loans       1,639            1,134    4,689 
4.1 Reverse repos                        
4.2 Other       1,639            1,134    4,689 
Total   187,834    84,346    387,020    156,400    1,134    412,063 

 

(*)  For the criteria used to determine Fair Value and the classification of financial instruments in the three Fair Value ranking levels, see Part A – Accounting Policies.

 

Notes to the accounts | Part B - Notes to the consolidated Balance Sheet | 169

 

 

2.6 Other financial assets mandatorily measured at Fair Value: breakdown by borrower/ issuer

 

Items/Values  30 June 2024   30 June 2023 
1. Equity securities   8,554    7,474 
of which: banks        
of which: other financial companies   8,554    7,474 
of which: non-financial companies        
2. Debt securities   299    863 
a) Central Banks        
b) Public administrations   295    412 
c) Banks        
d) Other financial companies   4    451 
of which: insurance companies        
e) Non-financial companies        
3. UCIT units   648,708    555,437 
4. Loans   1,639    5,823 
a) Central Banks        
b) Public administrations        
c) Banks        
d) Other financial companies   1,639    1,134 
of which: insurance companies   1,639    1,134 
e) Non-financial companies       4,689 
f) Households        
Total   659,200    569,597 

  

SECTION 3

 

Heading 30: Financial assets measured at Fair Value( *)  through other comprehensive income - item 30

 

3.1 Financial assets measured at Fair Value through other comprehensive income: product breakdown

 

  30 June 2024   30 June 2023  
Items/Values  Level 1   Level 2   Level 3   Level 1   Level 2   Level 3 
1. Debt securities   6,286,677    284,208    78,578    5,563,499    51,050    186,571 
1.1 Structured securities                        
1.2 Other debt securities   6,286,677    284,208    78,578    5,563,499    51,050    186,571 
2. Equity securities   128,271        127,969    116,736        124,263 
3. Loans                        
Total   6,414,948    284,208    206,547    5,680,235    51,050    310,834 

 

(*)  For the criteria used to determine Fair Value and the classification of financial instruments in the three Fair Value ranking levels, see Part A – Accounting Policies.

 

170 | Consolidated financial statements as at 30 June 2024

 

 

3.2 Financial assets measured at Fair Value through other comprehensive income: by borrower/issuer

 

Items/Values  30 June 2024   30 June 2023 
1. Debt securities   6,649,463    5,801,120 
a) Central Banks        
b) Public administrations   5,651,809    4,548,278 
c) Banks   617,946    627,515 
d) Other financial companies   171,013    433,068 
of which: insurance companies   21,972    38,163 
e) Non-financial companies   208,695    192,259 
2. Equity securities   256,240    240,999 
a) Banks   122    120 
b) Other issuers:   256,118    240,879 
- other financial companies   45,289    30,530 
of which: insurance companies        
- non-financial companies   210,829    210,349 
- other        
3. Loans        
a) Central Banks        
b) Public administrations        
c) Banks        
d) Other financial companies        
of which: insurance companies        
e) Non-financial companies        
f) Households        
Total   6,905,703    6,042,119 

 

3.3 Financial assets measured at Fair Value through other comprehensive income: gross value and total accumulated impairment

 

   Gross value   Write downs     
   Stage 1   of which:
Low
credit risk
instruments
(*)
   Stage 2   Stage 3   Purchased
or
originated
credit
impaired
assets
   Stage 1   Stage 2   Stage 3   Purchased
or
originated
credit
impaired
assets
   Overall
partial
write-offs
 
Debt securities   6,637,344    845,204    19,772            6,996    657             
Loans                                        
Total 30 June 2024   6,637,344    845,204    19,772            6,996    657             
Total 30 June 2023   5,771,319    31,064    37,723            6,537    1,385             

 

(*)  As required by Bank of Italy circular no. 262, starting from its fifth amendment, the column headed “of which” must show the gross value of the low credit risk instruments as defined by IFRS 9, paras. B5.5.29. For the Mediobanca Group, the concept of “low credit risk” is equivalent to that of rating, hence low credit risk applies to the case of counterparties rated as investment grade.

  

Notes to the accounts | Part B - Notes to the consolidated Balance Sheet | 171

 

 

SECTION 4

 

Heading 40: Financial assets measured at amortized cost

 

4.1 Financial assets measured at amortized cost: product breakdown of amounts due from banks

 

 

172 | Consolidated financial statements as at 30 June 2024

 

 

4.2 Financial assets measured at amortized cost: product of amount due from customers

 

 

 

Notes to the accounts | Part B - Notes to the consolidated Balance Sheet | 173

 

 

4.3 Financial assets measured at amortized cost: by borrower / issuer of amounts due from customers

 

  Total   Total 
   30 June 2024   30 June 2023 
         Purchased         Purchased 
          or originated          or originated 
          credit impaired          credit impaired 
Transaction Type/Values  Stages 1 and 2   Stage 3   assets   Stages 1 and 2   Stage 3   assets 
1. Debt securities   4,425,814            4,471,845         
a) Public administrations   3,213,981            3,389,280         
b) Other financial                              
companies   1,040,510            880,348         
of which: insurance companies   184,242            177,265         
c) Non-financial companies   171,323            202,217         
2. Loans to:   53,714,970    374,084    116,777    53,235,519    369,701     
a) Public administrations   243,635    1,182        220,453    1,217     
b) Other financial                              
companies   7,912,073    66        6,502,771    3,554     
of which: insurance companies   439,722            299,474         
c) Non-financial companies   16,614,572    84,890    94    18,002,204    74,572     
d) Households   28,944,690    287,946    116,683    28,510,091    290,358     
Total   58,140,784    374,084    116,777    57,707,364    369,701     

 

4.4 Financial assets measured at amortized cost: gross value and total accumulated impairment

 

   Gross value   Total accumulated impairment     
   Stage 1   of which: Low
credit risk
instruments
   Stage 2   Stage 3   Purchased
or originated
credit
impaired
assets
   Stage 1   Stage 2   Stage 3   Purchased
or originated
credit
impaired
assets
   Overall
partial
write-offs
 
Debt securities   4,542,347    1,574,140    17,414            3,611    5,658             
Loans   57,164,507    360,931    2,624,304    1,208,750    218,858    301,317    369,911    834,666    102,081    961 
Total 30 June 2024   61,706,854    1,935,071    2,641,718    1,208,750    218,858    304,928    375,569    834,666    102,081    961 
Total 30 June 2023   60,007,954    614,918    2,892,045    1,328,389        329,646    384,344    958,688        3,667 

 

174 | Consolidated financial statements as at 30 June 2024

 

 

SECTION 5

 

Heading 50: Hedging derivatives

 

5.1 Hedging derivatives: by hedge type and level

 

   Fair Value      Fair Value    
   30 giugno 2024   Notional value   30 June 2023     Notional value  
   Level 1   Level 2   Level 3   30 June 2024    Level 1   Level 2   Level 3    30 June 2023  
A. Financial derivatives                                        
1. Fair Value       556,345        27,121,183        890,006        30.279.394 
2. Cash flows       149,204        9,926,000        431,877        8.556.000 
3. Foreign investments                                
B. Credit derivatives                                        
1. Fair Value                                
2. Cash flows                                
Total       705,549        37,047,183        1,321,883        38.835.394 

 

5.2 Hedging derivatives: by portfolio hedged and hedge type

 

   Fair Value   Cash flows   Foreign 
   Specific   Generic   Specific   Generic   investments 
Transaction /
Type of hedging
  debt
securities
and
interest
rates
   equity
securities
and stock
indexes
   currencies
and gold
   credit   commodities   Other                 
1. Financial assets measured at Fair Value through other comprehensive income   24,734                X    X    X    1,603    X    X 
2. Financial assets measured at amortized cost   453,800    X            X    X    X    76    X    X 
3. Portfolio   X    X    X    X    X    X        X        X 
4. Other transactions                           X        X     
Total assets   478,534                            1,679         
1. Financial Liabilities   77,811    X                    X    145,093    X    X 
2. Portfolio   X    X    X    X    X    X        X        X 
Total liabilities   77,811                            145,093    —       
1. Expected transactions   X    X    X    X    X    X    X    2,432    X    X 
2. Financial assets and liabilities portfolio   X    X    X    X    X    X        X         

 

Notes to the accounts | Part B - Notes to the consolidated Balance Sheet | 175

 

 

SECTION 7

 

Heading 70: Equity investments

 

7.1 Equity investments: disclosure on relationships

 

 

 

             Ownership    
Company Name  Registered
office
  Operating
office
  Type of
relationship
   Controlling entity  %
shareholding
   Votes
available
in %
 
A. Entities under significant influence                        
1. Assicurazioni Generali S.p.A.  Trieste  Trieste   2   Mediobanca S.p.A.   13.02    13.17 
2. Istituto Europeo di Oncologia S.r.l.  Milan  Milan   2   Mediobanca S.p.A.   25.37    25.37 
3. CLI Holdings II Ltd  London  London   2   Mediobanca S.p.A.   24.09    24.09 
4.Finanziaria Gruppo Bisazza S.r.l.  Montecchio
Maggiore (VI)
  Montecchio
Maggiore (VI)
   2   Mediobanca S.p.A.   22.67    22.67 
5. Heidi Pay AG  Geneva  Geneva   2   Compass Banca S.p.A.   19.45    19.45 
6. MB SpeedUp  London  London   1   Mediobanca S.p.A.   50.0    50.0 

 

Legend:

(1)  Joint control.
(2)  Subject to significant influence.
(3)  Exclusively controlled and not consolidated.

 

Table 7.1 provides the following information for each affiliated company: business name; registered office; investment; shareholding calculated as a percentage of the share capital issued by the affiliate or joint venture; and availability of votes calculated as a percentage of the actual voting shares, i.e. not including the affiliate’s treasury shares in the denominator. The latter is the percentage used for the purposes of consolidation by the Net Equity method.

 

It should be noted that any temporary transactions (such as securities lending transactions, repurchase agreements, etc.) involving shares in the affiliate are not considered for purposes of determining the consolidation percentage.

 

The criteria and methods for establishing the area of consolidation are illustrated in “Section 3 – Part A – Accounting Policies”, to which reference is made.

 

All the equity investments have been measured using the Net Equity method, as required by the reference accounting standard (IAS 28 and IFRS 11), which includes treasury shares owned in the calculation, plus the value of any shares in Mediobanca owned by the investee company. Dividends collected are not taken through the profit and loss account but are deducted from the investee company’s book value.

 

176 | Consolidated financial statements as at 30 June 2024

 

 

7.2 Significant investments: book values, Fair Values and dividends received

 

        Dividend 
Company Name   Carrying amount   Fair Value (*)   received (**)  
A. Entities under significant influence/Joint venture               
1.Assicurazioni Generali S.p.A.   3,698,013    4,759,117    261,557 
2.Istituto Europeo di Oncologia S.r.l.   38,986    n.a.    n.a. 
3.CLI Holdings II Ltd   37,003    n.a.    9,101 
4.Finanziaria Gruppo Bisazza S.r.l.   6,679    n.a.    839 
5.Heidi Pay AG   6,621    n.a.    n.a. 
6.MB SpeedUp   1,750    n.a.    n.a. 
Total (1)    3,789,052           

 

(1)  The amount stated here differs from that represented in the balance sheet for other investments, which are minor in terms of both percentage share owned and amount (€164,000).
(*)  Available only for listed Companies.
(**)  Dividends collected in the course of the financial year have been deducted from the book value of the investment (as described in Part A – Accounting Policies of the Notes to the Accounts).

 

As at 30 June 2024, the book value carried under the “Equity investments” heading totalled €3,789.2m.

 

The year under review witnessed a new investment in MB Speedup (50%, with a value of €1.8m), joint venture established together with Founders Factory UK. It will facilitate the creation and investment in fintech companies over the upcoming years.

 

The share in Assicurazioni Generali dropped from 13.10% to 13.02% taking into account the free capital increase implementing the incentive plans; if calculated on the shares in issue, the economic interest stood at 13.17% (13.25% last year). During the year, the book value increased from €3,472.2m to €3,698m after profits of €503m, changes in assets of €15.6m taking into account the ex-dividend (€-261.6m).

 

Regarding other equity investments: IEO (25.37%) remained steady at €39m, recording a slight loss (€0.2m); Finanziaria Gruppo Bisazza S.r.l. (22.67%) stood at €6.7m (€7.1m in the previous year) after period profits of €403,000 and a dividend payout of €839,000; CLI Holdings II Limited decreased from €38.6m to €37m after the collection of dividends (€9.1m) and period profits (€7.5m); Heidi Pay AG remained steady at €6.6m and suffered losses of €315,000 offset by positive equity variations of €337,000.

 

 

Notes to the accounts | Part B - Notes to the consolidated Balance Sheet | 177

 

 

Impairment test on equity investment

 

The value of equity investments has been tested for impairment as required by the accounting standards used (IAS 28, IAS 36, IFRS 10 and IFRS 11), in order to ascertain whether there is objective evidence to suggest that the initial recognition value of the investment might not be recovered in full.

 

The process involves ascertaining whether there are any indicators of impairment and, eventually, quantifying the amount of the adjustment necessary in order to reflect the value loss. Impairment indicators may be split into two main types of category:

 

Quantitative indicators: the investee company’s stock market value falling below its net asset value for stocks quoted on active markets;

 

Qualitative indicators: manifested financial difficulties, reporting negative earnings results or results which are significantly behind budget objectives or targets set in long-term business plans disclosed to the market, announcement and/or launch of composition procedures or restructuring plans, deterioration in ratings (especially if below investment grade).
  

IAS 28 paragraph 41A stipulates that:

 

impairment losses are incurred for an asset if the book value is higher than the recoverable amount, defined under IAS 36 as the higher between the asset’s Fair Value (less costs of disposal) and its value in use;
  
to measure Fair Value (governed by IFRS 13), reference must be made to:

 

stock market prices, if the investee company is listed on an active market;

 

valuation models generally recognized by the market, including market multiples for transactions, especially if deemed significant;

 

to measure value in use (as governed by IAS 28 paragraph 42), the methodologies are either:

 

  the discounted value of cash flows generated by the investee company, both as cash flows generated from the company’s assets and as income deriving from the disposal of the same assets; or

 

the discounted value of cash flows that may be assumed to derive from dividends and from the eventual sale of the investment.

 

178 | Consolidated financial statements as at 30 June 2024

 

 

For more information on the parameters used to calculate the value in use, refer to the considerations made on impairment testing for goodwill contained in the dedicated section of the Notes to the Consolidated Accounts.

 

* * *

 

Accounting data for the investee companies is shown below taken from the respective financial statements as at 31 December 2023, the most recent available.

 

7.3 Significant investments: accounting data

 

       (€m)
         
  Entities under significant influence 
   Assicurazioni   Istituto Europeo di 
Company Name  Generali S.p.A.   Oncologia S.r.l. 
Cash and Cash Equivalents   X    X 
Financial assets   466,046    108 
Non-financial assets   35,496    210 
Financial Liabilities   44,086    143 
Non-financial liabilities   433,241    81 
Total revenues   25,722    417 
Profit (loss) on ordinary operations before tax   5,574    5 
Profit/(Loss) on ordinary operations after tax   4,037    4 
Profit (loss) on held-for-sale assets after tax        
Profit/(Loss) for the period (1)   4,037    4 
Other profit/(loss) components after tax (2)   291     
Other comprehensive income (3) = (1) + (2)   4,328    4 

 

7.4 Non-significant investments: accounting data

 

   Entities under significant influence/Joint venture 
      Finanziaria Gruppo       
Company Name  CLI Holdings II Ltd   Bisazza S.r.l.   Heidi Pay AG   MB SpeedUp 
Book value of investments   37,003    6,679    6,621    1,750 
Total assets   148,381    38,032    7,228    2,400 
Total liabilities   148,377    7,880    589     
Total revenues       29,706    638     
Profit/(Loss) on ordinary operations                    
after tax   1    2,015    1,652     
Profit/(Loss) on operations after tax                
Profit/(Loss) for the year (1)   1    2,015    1,652     
Other profit/(loss) components after tax (2)                
Other comprehensive income (3)=(1) + (2)   1    2,015    1,652     

 

Notes to the accounts | Part B - Notes to the consolidated Balance Sheet | 179

 

 

 

The table below shows a reconciliation between the book value of the investments and the data used for valuation purposes.

 

                            (€m) 
Entities under significant influence         Differences arising   Consolidated 
/Joint venture  Aggregate net equity    Pro rata net equity   upon consolidation   book value 
Assicurazioni Generali S.p.A.   28,123.1(1)     3,702.6    (4.6 )(2)    3,698.0 
Istituto Europeo di Oncologia S.r.l.   153.7(3)     39.0        39.0 
CLI Holdings II Ltd   153.6(4)     37.0        37.0 
Finanziaria Gruppo Bisazza S.r.l.   29.5     6.7        6.7 
Heidi Pay AG   6.2     1.2        6.6 
MB SpeedUp   2.0     1.0        1.8 

 

(1)  Total net equity includes the dividends paid in May 2024 (€1,987m).
(2)  The differences upon consolidation refer to the Mediobanca shares held by Assicurazioni Generali as part of its securities portfolio (€34.6m, pro rata €4.6m).
(3)  Net equity as at 31 March 2024 of €141.6m (pro rata: €35.9m) was adjusted to reflect the property asset revaluations after depreciation and amortization charges accruing (pro rata: €4.5m). (4) Total net equity includes the dividends paid in April last year (€2.8m).

 

For the nature of the relationships, please refer to section 7.1 above.

 

As at 30 June 2024, the market value of the Assicurazioni Generali investment was €4,759.1m (€23.29 per share), higher than its book value (€3,689m). In line with previous financial years, the value in use of the investment was calculated in any case, resulting well above its carrying value, and aligned to the maximum target price estimated by analysts (€28.7 per share).

 

Regarding Istituto Europeo di Oncologia, this investment has a book value in line with the entity’s Net Asset Value adjusted to reflect the property values being realigned to their market values at acquisition. As at 30 June 2024, there was no (internal or external) evidence that could lead to a review of such higher value.

 

The equity investments in CLI Holdings II and Finanziaria Gruppo Bisazza (whose book value is the pro-rata share of their net equity) do not show critical issues such as to require proceeding with an impairment test.

 

Finally, the value attributed at the time of acquisition was confirmed for the equity investments in Heidi Pay and MB SpeedUp.

 

180 | Consolidated financial statements as at 30 June 2024  

 

 

7.5 Equity investments: changes during the period

 

   30 June 2024   30 June 2023 
A. Opening Balance   3,563,831    3,157,866 
B. Increases   513,019    659,655 
B.1 Purchases   1,750    7,472 
B.2 Writebacks        
B.3 Revaluations        
B.4 Other changes   511,269    652,183 
C. Decreases   287,634    253,690 
C.1 Sales        
C.2 Value adjustments        
C.3 Write-offs        
C.4 Other changes (1)    287,634    253,690 
D. Closing Balance   3,789,216    3,563,831 
E. Total revaluations        
F. Total adjustments   733,478    733,478 

 

(1) This includes dividends received.

 

SECTION 9

 

Heading 90: Property, plant and equipment

 

9.1 Core tangible assets: breakdown of assets measured at cost

 

  Total   Total 
Assets/Values  30 June 2024   30 June 2023 
1. Property assets   247,498    232,425 
a) land   116,829    100,239 
b) buildings   52,667    70,359 
c) furniture   34,588    28,405 
d) electronic systems   7,609    6,490 
e) other   35,805    26,932 
2. Right-of-use assets acquired through lease   245,266    242,458 
a) land        
b) buildings   229,664    230,702 
c) furniture        
d) electronic systems        
e) other   15,602    11,756 
Total   492,764    474,883 
of which: obtained by enforcement of collateral   67    69 

 

Notes to the accounts | Part B - Notes to the consolidated Balance Sheet | 181

 

 

9.2 Properties held for investment purposes: breakdown of assets measured at cost

 

  Total 30 June 2024  Total 30 June 2023 
   Carrying  Fair Value  Carrying  Fair Value 
Assets/Values  amount  Level 1  Level 2  Level 3  amount  Level 1  Level 2  Level 3 
1. Property assets   47,998         125,045   50,486         125,440 
a) land   25,253         59,272   25,253         58,914 
b) buildings   22,745         65,773   25,233         66,526 
2. Right-of-use assets acquired through lease                         
a) land                         
b) buildings                         
Total   47,998         125,045   50,486         125,440 
of which: obtained by enforcement of collateral   24,791         36,320   27,078         36,940 

 

9.3 Core tangible assets: breakdown of written-up assets

 

At 30 June 2024, this item was not present within the Group.

 

9.4 Tangible assets held for investment purposes: composition of activities measured at Fair Value

 

At 30 June 2024, this item was not present within the Group.

 

9.5 Inventories pursuant to IAS 2: breakdown

 

  Total   Total 
Items/Values  30 June 2024   30 June 2023 
1. Inventories of tangible assets arising from the enforcement of guarantees received   8,855    5,373 
a) land   313    313 
b) buildings   8,542    5,060 
c) furniture        
d) electronic systems        
e) other        
2. Other inventories of tangible assets        
Total   8,855    5,373 
of which: measured at Fair Value less costs to sell        

 

The above includes assets received under leasing contracts, which were originally recorded as Investment Property (under IAS 40), and have now been restated as Inventories in accordance with IAS 2 in cases where only minor amounts are involved, and where leasing the properties out is not economically feasible and sale is expected to take place in the next three years.

 

182 | Consolidated financial statements as at 30 June 2024  

 

 

9.6 Core assets: changes during the year

 

   Land   Buildings   Furniture   Electronic
systems
   Other   Total 
A. Gross opening balance   100,239    511,819    82,724    47,235    103,607    845,624 
A.1 Decreases in total net value       (210,758)   (54,319)   (40,745)   (64,919)   (370,741)
A.2 Net opening balance   100,239    301,061    28,405    6,490    38,688    474,883 
B. Increases:   16,590    60,581    12,981    3,111    30,091    123,354 
B.1 Purchases       1,673    12,972    3,111    16,121    33,877 
– of which business combinations                   966    966 
B.2 Capitalized improvement costs       18,026                18,026 
B.3 Writebacks   16,589                    16,589 
B.4 Positive changes in Fair Value allocated to                        
a) net equity                        
b) profit & loss                        
B.5 Currency exchange gains       13            19    32 
B.6 Transfers from investment properties                        
B.7 Other changes   1    40,869    9        13,951    54,830 
C. Decreases:       79,311    6,798    1,992    17,372    105,473 
C.1 Sales           5        123    128 
– of which, business combinations                        
C.2 Depreciation       47,122    6,751    1,986    13,641    69,500 
C.3 Impairment losses allocated to       16,589                16,589 
a) net equity                        
b) profit & loss (1)        16,589                16,589 
C.4 Negative changes in Fair Value allocated to                        
a) net equity                        
b) profit & loss                        
C.5 Currency exchange losses                        
C.6 Transfers to:                        
a) assets held for investment purposes                        
b) non-current assets and assets groups held for sale                        
C.7 Other changes       15,600    42    6    3,608    19,256 
D. Net closing balance   116,829    282,331    34,588    7,609    51,407    492,764 
D.1 Decreases in total net value       (215,981)   (60,324)   (42,696)   (73,559)   (392,560)
D.2 Gross closing balance   116,829    498,312    94,912    50,305    124,965    885,324 
E. Measured at cost                        

 

(1)  These refer to the property (“La Palmeraie”) in Monaco which, as part of a real estate redevelopment project, led to the demolition of the old building, the terminal value of which was attributed to land.

 

Notes to the accounts | Part B - Notes to the consolidated Balance Sheet | 183

 

 

Changes in tangible assets for core purposes also include the right of use acquired from finance leasing operations under IFRS 16. New leases executed during the year amount to €46.7m (shown in row B.7 “Other changes”), while depreciations for rights in use amount to €49.9m (stated in row C.2 “Depreciations”).

 

9.7 Assets held for investment purposes: changes during the year

 

   Total 
   Land   Buildings 
A. Opening Balance   25,253    25,233 
B. Increases       225 
B.1 Purchases        
– of which, business combinations        
B.2 Capitalized improvement costs       225 
B.3 Positive changes in Fair Value        
B.4 Writebacks        
B.5 Currency exchange gains        
B.6 Transfers from core tangible assets        
B.7 Other changes        
C. Decreases       2,713 
C.1 Sales        
– of which, business combinations        
C.2 Depreciations       1,612 
C.3 Negative changes in Fair Value       1,101 
C.4 Write-downs         
C.5 Currency exchange losses        
C.6 Transfers to:        
a) core tangible assets        
b) non-current assets and assets groups held for sale        
C.7 Other changes        
D. Closing Balance   25,253    22,745 
E. Measured at Fair Value   59,272    65,773 

 

  These consist of the following properties:      

 

     Book value Book value per sqm 
Location of Property  Sqm.    (€’000)   (€’000) 
Rome   10,015    29,319    0.3 
Lecce   21,024    12,816    1.6 
Bologna (*)    6,913    4,832    1.4 
Pavia   2,250    1,031    2.2 
Total   40,202    47,998      

 

(*) These include warehouses and office facilities.

 

184 | Consolidated financial statements as at 30 June 2024  

 

 

9.8 Inventory of tangible assets pursuant to IAS 2: changes for the year

 

   Inventories of tangible assets arising from the   Other    
   enforcement of guarantees received   inventories     
   Land   Buildings   Furniture   Electronic
systems
   Other   of tangible
assets
   Total 
A. Opening Balance   313    5,060                    5,373 
B. Increases       5,342                    5,342 
B.1 Purchases                            
B.2 Writebacks                            
B.3 Currency exchange gains                            
B.4 Other changes       5,342                    5,342 
C. Decreases       1,860                    1,860 
C.1 Sales       1,350                    1,350 
C.2 Write-downs                            
C.3 Currency exchange losses                            
C.4 Other changes       510                    510 
D. Closing Balance   313    8,542                    8,855 

 

SECTION 10

 

Heading 100: Intangible assets

 

Intangible assets with indefinite duration consist of Goodwill, Brands and Contracts acquired as part of business combinations, whereas those with definite duration are software programs and client lists similarly acquired in extraordinary transactions. For details on the methods by which Intangible Assets are measured, reference is made to Part A – Accounting Policies.

 

10.1 Intangible assets: breakdown by type of asset

 

  Total   Total 
   30 June 2024   30 June 2023 
Assets/Values  Definite life   Indefinite life   Definite life   Indefinite life 
A.1 Goodwill   X    827,313    X    574,550 
A.1.1 attributable to the group   X    827,313    X    574,550 
A.1.2 attributable to minority interests   X        X     
A.2 Other intangible assets   75,035    143,084    67,996    154,154 
of which: software   52,601        50,319     
A.2.1 Assets measured at cost:   75,035    143,084    67,996    154,154 
a) Intangible assets generated internally                
b) Other assets   75,035    143,084    67,996    154,154 
A.2.2 Assets measured at Fair Value:                
a) Intangible assets generated internally                
b) Other assets                
Total   75,035    970,397    67,996    728,704 

 

Notes to the accounts | Part B - Notes to the consolidated Balance Sheet | 185

 

 

In line with the strategy of systematic reduction of obsolescence promoted by the Group, a shorter useful life of some IT software emerged when recalculating the useful life of intangible assets with a finite duration, which resulted in additional amortization of €6.8m (under IAS 8 – Revision of Estimates).

 

10.2 Intangible assets: changes during the year

 

      Other intangible assets   Other intangible    
       generated internally   assets: other     
   Goodwill   Definite life   Indefinite life   Definite life   Indefinite life   Total 
A. Gross Opening Balance   574,550            358,234    154,154    1,086,938 
A.1 Decreases in total net value               (290,238)       (290,238)
A.2 Net opening balance   574,550            67,996    154,154    796,700 
B. Increases   252,763            46,379    30,836    329,978 
B.1 Purchases   251,964            45,404    29,065    326,433 
– of which, business combinations   251,964            8,899    29,065    289,928 
B.2 Increases of internal intangible assets   X                     
B.3 Writebacks   X                     
B.4 Positive changes in Fair Value                        
– net equity   X                     
– to P&L   X                     
B.5 Currency exchange gains   799            100    1,771    2,670 
B.6 Other changes               875        875 
C. Decreases               39,340    41,906    81,246 
C.1 Sales                        
– of which, business combinations                        
C.2 Value adjustments               38,568    41,906    80,474 
– Amortization   X            38,568        38,568 
– Write-downs                   41,906    41,906 
+ net equity   X                     
+ to P&L                   41,906    41,906 
C.3 Negative changes in Fair Value:                        
– net equity   X                     
– to P&L   X                     
C.4 Transfer to non-current assets held for sale                        
C.5 Currency exchange losses               10        10 
C.6 Other changes               762        762 
D. Net closing balance   827,313            75,035    143,084    1,045,432 
D.1 Adjustment of net total values               (317,016)       (317,016)
E. Gross closing balance   827,313            392,051    143,084    1,362,448 
F. Measurement at cost                        

 

186 | Consolidated financial statements as at 30 June 2024  

 

 

Information on intangible assets and goodwill

 

It should be noted that the purchase of a controlling stake (100% of Interest A) in the English company Arma Partners LLP was completed on 2 October. The latter, in turn, wholly owns Arma Partners Corporate Finance Ltd (UK) and Arma Deutschland GmbH (Germany).(48)  The Purchase Price Allocation process led to stating a brand value of £24.6m and a customer relationship worth £5.3m(useful life of 7 years); taking into account UK taxation (25% rate) and an initial net equity of zero (in light of the nature of the partnership), the residual goodwill amounted to £209m (converted to €246.9m).

 

Last October 16, Compass Banca S.p.A. acquired 100% of the share capital of Heidi Pay Switzerland AG, a fintech platform supporting BNPL in Switzerland, from Heidi Pay AG (of which Compass holds 19.5%). The Purchase Price Allocation process led to stating a customer relationship worth CHF2.5m (useful life of 10 years); taking into account taxation (15% rate) and net equity (€0.1m), the residual goodwill amounted to CHF4.9m (converted to €5m).

 

With regard to RAM Active Investments, in view of the uncertainties related to the company’s prospects, it was deemed appropriate to infer the brand’s recoverable value on the basis of the amount resulting from the Fair Value measurement of CHF11.5m (calculated on an annual budget rather than a multi-year plan), with a write-down of intangibles equal to CHF30.4m (€31.7m).

 

Finally, with regard to Messier & Associés, in view of contingencies arising from the end of the deferred component release period and from the revision of the Put & Call agreements with the Founding Partner, it was deemed prudent to align the brand value (carrying value of €27.2m in the consolidated statements) to the statutory value (€17m) with a write-down of the intangibles equal to €10.2m.

 

(48)  Arma was established as a Limited Liability Partnership and the contractual agreements provide for two types of shareholdings: Interest “A” - assigned to Mediobanca - which give the right to receive an initial percentage of 30% (35% from the fourth year) of Arma’s distributable profit, calculated as a fixed percentage of revenues in addition to governance rights sufficient to ensure full line-by-line consolidation and holding control from a legal, regulatory and accounting point of view; Interest “B” shares, which are held by the Partners and give them the right to receive the residual percentage of Arma’s distributable profit (gross earnings of the company after the share due to partner A), in addition to certain governance rights with a specific impact on the Partners’ economic rights.

 

Notes to the accounts | Part B - Notes to the consolidated Balance Sheet | 187

 

 

A table summarizing the effects of the PPA process for all the acquisitions carried out by the Group over years is shown below:

 

Table 1: Summary of PPA effects: ITALIAN acquisitions

 

   Linea  IFID  Spafid
Connect
  Barclays (*)  Esperia  Soisy 
Acquisition date   27 June 2008   1 August 2014   18 June 2015   26 August 2016   6 April 2017   10 October 2022 
Price paid   406,938   3,600   5,124   (240,000)  233,920   5,999 
of which: ancillary charges   2,000   200              
Liabilities            80,000       
Finite life intangible assets   (44,200)  (700)  (3,250)  (26,000)  (4,508)  (1,056)
no. of years amortization   8   7   10   5   5   5 
Trademarks   (6,300)           (15,489)   
Fair Value adjustments            84,200   11,232    
Imbalance of other assets (liabilities)   (2,659)  420   (466)  98,300   (176,585)  1,152 
Tax effects   12,155   220   934   3,500   6,613   349 
Total goodwill   365,934   3,540   2,342      55,183   6,444 

 

(*) The deal generated badwill.            

 

Table 1: Summary of PPA effects: NON-ITALIAN acquisitions

 

               Arma    
         Bybrook  Partners  Heidi Pay 
   Cairn  RAM (1)  MMA  (Cairn) (2)    LLP  Switzerland 
Acquisition date   31 December 2015   28 February 2018   11 April 2019   31 August 2021   2 October 2023   16 October 2023 
Currency   GBP   CHF   EURO   GBP   GBP   CHF 
Price consideration   24,662   164,732   107,856   66,900   220,000   3,000 
of which: ancillary charges                   
Liabilities   20,813   46,850   54,540      11,400   4,098 
Intangible assets, indefinite life            (58,903)  (24,600)   
Finite life intangible assets      (2,398)  (11,330)  (8,455)  (5,300)  (2,530)
no. of years amortization      5   8   10   7   10 
Trademarks      (37,395)  (10,230)         
Fair Value adjustments                   
Imbalance of other assets (liabilities)   (8,345)  (6,853)  (13,353)  (3,759)     (96)
Tax effects      7,163   6,684   15,934   7,500   380 
Total goodwill   37,130   172,099   134,167   11,718   209,000   4,852 

 

(1)  All amounts are calculated pro rata (89.25%) acquired at the acquisition date.

  

(2)  Bybrook’s business and shares were acquired by Polus Capital Management (formerly Cairn Capital), in which Mediobanca S.p.A. holds an 89.07% stake.

 

The situation for the Group’s other main acquisitions is as follows:

 

the Linea transaction (June 2008) generated goodwill of €365.9m, which is now the only amount still recorded in the books following the write-off of the brands with the useful life of the intangible assets having ended;

 

188 | Consolidated financial statements as at 30 June 2024  

 

 

the deal to acquire Barclays’ Italian business unit (August 2016) required the seller to pay negative goodwill of €240m, which in the purchase price allocation process was treated as a contingent liability in an amount of €59m (linked to the restructuring process) and loan loss provisions for mortgages totalling €21m, roughly half of which for non-performing exposures. Taking account intangible assets with time-limited life of €26m related to a list of clients with AUM and AUA (fully amortized), the bargain purchase generated a gain of €98.3m, most of which was absorbed by the one-off costs related to integrating the Barclays’ geographical and IT networks into CheBanca! (49) (approximately €80m);

 

the acquisition of 50% of Banca Esperia shares held by Banca Mediolanum (April 2017) through payment of €141m resulted in goodwill of €52.1m divided into the Private Banking CGU (€29.4m) and the MidCap CGU (€22.7m); the portion of goodwill for trust services transferred to Spafid (€3.1m) was subsequently written off; a trademark of €15.5m linked to the Private Banking activity should be added to this, while the customer relationship (originally valued at €4.5m) was fully amortized.

 

the acquisition of 69.4% of RAM AI (February 2018) led to a trademark with an indefinite life worth CHF41.9m and a customer relationship worth CHF2.7m (fully amortized). Residual goodwill worth CHF 172.1m included the liability in respect of the put-and-call option valued at CHF 46.9m. In the following years, goodwill was progressively written down until it was completely eliminated last year. At 30 June 2024, the brand’s recoverable value was aligned to its Fair Value using the method based on estimates of comparable brand values, i.e. CHF 11.5m (converted into €11.9m). A write-down of CHF 30.4m was thus carried out. Put&call agreements remained in place on 2% of the capital, whose value was equal to CHF 1.1m.

 

a stake of 66.4% of the share capital of Messier Maris & Associés – MMA (April 2019), was acquired at a price of €107.9m, settled with 11,600,000 Mediobanca shares in portfolio (1.3% of the share capital). A Put & Call agreement was also executed, exercisable as from the fifth year following the acquisition, that allowed the interest acquired to rise to 100%. In conjunction with the deal closing, the brand was transferred at a value of €17m, which was increased to €27.2m following the PPA process, along with a customer relationship worth €11.3m to be amortized over eight years, which reduced the goodwill to €134.2m. During financial year 21/22, the 

 

(49) Now called Mediobanca Premier

 

Notes to the accounts | Part B - Notes to the consolidated Balance Sheet | 189

 

 

company was affected by the exit of one of the two founding partners, a circumstance that, according to the original agreements, led to activating a clawback clause on escrow and Put & Call shares. Overall extraordinary income of €41m was thus generated and was fully offset by adjusting goodwill in the same amount. Last December, the deferred component Release Period ended with a recovery of approximately €3m compared to the estimated acquisition amount. The Put & Call contract with the founding partner was also renegotiated, providing for the liquidation of €7m per year for the next three years. This negotiation involved a liability adjustment, including the discounting effect of approximately €7.3m (through profit or loss). This contingency was offset by the alignment of the consolidated brand value (€27.2m) to the statutory value (€17m). As at 30 June 2024, goodwill recognized in the financial statements amounted to €93.2m while the liability amounted to €20.5m;

 

the acquisition of 51% of Cairn Capital (December 2015) at a price of £24.7m together with a Put & Call agreement on the remaining 49% valued at £20.8m, which determined a goodwill of £37.1m; subsequently the Bybrook Capital LLP transactions was finalized (August 2021). This is a manager that specializes in distressed Assets, as part of a transaction that, on the one hand, involved the takeover of the Revenue Sharing Agreement (“RSA”) in place with an institutional investor and, on the other, the acquisition from the two founding partners (consideration of £43.3m, of which £18.1m in cash and £25.2m in new Polus shares - D Shares - representing 21.86% of the company on half of which a Put & Call agreement with Mediobanca was provided). Both transactions were incorporated into the current CGU Polus Capital Management Limited, which included new intangible assets relating to asset management contracts of £67.4m (of which £58.9m with an indefinite life and £8.5m with a finite life to be amortized over 10 years, with a terminal value of £6.1m); deferred tax liabilities of £15.9m; total goodwill of £48.8m; Put & Call liabilities (relating to the remaining class B shareholders formerly Cairn and class D, formerly Bybrook) of £34.5m, including the discounting effect, remained in place.

 

the acquisition by Compass of 100% of Soisy S.p.A at a price of €6m; the Purchase Price Allocation process led to a customer relationship with a finite useful life worth €1.1m (amortization in 5 years), while the residual goodwill amounted to €6.4m.

 

190 | Consolidated financial statements as at 30 June 2024  

 

 

Finally, as mentioned above, the acquisitions of Arma Partners and HeidiPay Switzerland and related Purchase Price Allocation processes were completed during the year under review.

 

* * *

 

The tables below show a list of the intangible assets acquired as part of M&A transactions and summarizing the goodwill recognized in the accounts as broken down both by deal and cash-generating unit (CGU).

 

Table 2: Other intangible assets acquired as a result of extraordinary transactions

 

Type  Deal  30 June 2024   30 June 2023 
Customer relationship      91,911    86,304 
   CMB   2,613    3,263 
   Bybrook/Polus (1)    76,753    76,673 
   Messier et Associés   3,896    5,312 
   Soisy   634    1,056 
   HeidiPay Switzerland   2,429     
   Arma Partners LLP   5,586     
Trademarks      56,490    68,525 
   MB Private Banking   15,489    15,489 
   RAM Active Investments (1)    11,936    42,806 
   Messier et Associés       10,230 
   Arma Partners LLP   29,065     
Total PPA intangible assets      148,401    154,829 

 

(1) Increase entirely attributable to the currency exchange effect.

 

Table 3: Goodwill

 

Deal  30 June 2024   30 June 2023 
Consumer credit   377,415    372,378 
– of which Soisy   6,444    6,444 
– of which: Compass-Linea   365,934    365,934 
– of which: Heidi Pay Switzerland   5,037     
Polus Capital Management (1)    57,715    56,916 
MB Private Banking   52,103    52,103 
Messier et Associés   93,153    93,153 
Arma Partners LLP   246,927     
Total goodwill   827,313    574,550 

 

(1) Increase entirely attributable to the currency exchange effect.

 

Notes to the accounts | Part B - Notes to the consolidated Balance Sheet | 191

 

 

Table 4: Summary of Cash Generating Units

 

CGU  30 June 2024   30 June 2023 
Consumer credit   377,415    372,378 
– of which Soisy   6,444    6,444 
– of which: Compass-Linea   365,934    365,934 
– of which: Heidi Pay Switzerland   5,037     
Polus Capital Management (1)    57,715    56,916 
MB Mid corporate   22,650    22,650 
MB Private Banking   29,453    29,453 
Messier et Associés   93,153    93,153 
Arma Partners LLP   246,927     
Total goodwill   827,313    574,550 

 

(1) Increase entirely attributable to the currency exchange effect.

 

Information on impairment testing

 

As stated in the Accounting Policies section, IAS 36 requires any loss of value, or impairment, of individual tangible and intangible assets to be tested at least once a year, in preparing the annual financial statements, or more frequently if events or circumstances occur which suggest that there may have been a reduction in value.

 

If it is not realistically possible to establish the recoverable value of the individual asset directly, the standard allows the calculation to be made based on the recoverable value of the cash-generating unit, or CGU, to which the asset belongs. A CGU is defined as the smallest identifiable group of assets able to generate cash flows that do not present synergies with the other parts of the company, and may be considered separately and sold individually.

 

In order to establish the recoverable value relative to the book value at which the asset is recognized in the accounts, reference is made to the higher of the Fair Value of such asset (net of any sales costs) and its value. In particular, value in use was obtained by discounting the expected future cash flows from an asset or from a cash generating unit; cash flow projections must reflect reasonable assumptions and must therefore be based on recent budgets/forecasts approved by the Company’s governing bodies; furthermore, assets must be discounted at a rate that includes the current cost of money and the specific risks associated with the business activity.

 

192 | Consolidated financial statements as at 30 June 2024  

 

 

The Group adopted a policy, which was recently updated to refine the valuation methods of recognized intangibles, in particular with reference to the valuation of brands and intangibles with a finite life, which regulates the impairment test process and incorporates the guidelines issued by Organismo Italiano di Valutazione (OIV, Italian Valuation Body), the suggestions of the ESMA(50) and the Recommendations of national regulators.(51) 

 

The recoverable value for goodwill has been estimated using the dividend discount model methodology, with the excess capital version applied which is commonly employed by financial institutions for this purpose for capital-intensive CGUs.

 

The cash flows have been projected over a time horizon of three years, based on the Group’s strategic plans and the annual budgets formulated by the management of the individual CGUs concerned.

 

To estimate the cost of equity, which is determined via the Capital Asset Model (CAPM) in accordance with IAS 36, certain parameters common to all CGUs have been used, namely:

 

the risk-free rate which corresponds to the remuneration of exempt or minimum risk investments over a recent period of time not exceeding one year. In practice, it is generally identified with the yield on government bonds of the country in which the asset being valued resides;

 

the market risk premium, i.e. the reward which investors require in order to increase the risk on their investments. Continuing the work done in the previous financial year, management used an unseparated equity risk premium equal to the premium for the US stock market risk estimated 

 

(50)  European Security and Markets Authority (ESMA): “European common enforcement priorities for 2013 financial statements”, emphasizing the specific aspects of the impairment testing for goodwill and intangibles asset; and Public Statement of 28 October 2020, “European common enforcement priorities for 2020 annual financial reports”, in which all issuers are invited to pay particular attention to the effects of the Covid-19 pandemic.
   
(51)  Joint Bank of Italy, Consob and ISVAP (now IVASS) document no. 3, of 3 March 2010, which requires, among other things, that the financial statements of listed companies (annual and interim reports) should contain more detailed disclosure on how goodwill, other intangibles with indefinite useful life, and equity investments are valued, providing a description of the methodologies and indicators used which must be submitted to formal and deliberate approval by the Board of Directors; Joint Bank of Italy, Consob and ISVAP (now IVASS) document no. 8, containing guidance on the valuation of fund stock units to be applied in measuring holdings in funds at fair value; Consob communication no. DIE/17131 of 3 March 2014, containing guidance on the timescales for carrying out impairment testing, and the duties and responsibilities of the management body in this process; Consob communication no. 3907 of 19 January 2015, laying down guidelines with which listed companies must comply to ensure high quality disclosure on the issue of impairment; Consob “Warning notice” no. 8/20 of 16 July 2020, no. 6/20 of 9 April 2020, and no. 1/21 of 16 February 2021, concerning: “Covid-19 - Warning notice on financial reporting”, which draws the attention of the members of governing and control bodies and financial reporting officers to the need to observe the principles that govern the production process of the financial reporting taking into account of the impacts that the effects due to the pandemic may have with reference, among other things, to the valuations of non-financial assets (referred to as Impairment Test), IOSCO (International Organization of Securities Commissions) document containing “Recommendations on Accounting for Goodwill”, published in December 2023, which requires issuers: i) to support their assumptions used for impairment testing purposes (also by emphasizing external evidence), ii) maintain consistency between the assumptions used for the impairment testing purposes and the assumptions used for the purpose of drawing up non-financial plans (such as energy transition plans) and iii) enter into a commitment to provide disclosure in the financial statements as to their actions.

 

Notes to the accounts | Part B - Notes to the consolidated Balance Sheet | 193

 

 

according to a historical data series by the New York University - Stern School of Business, based on the difference between the return of the American stock market compared to return of the bond market since 1928 (geometric mean);

 

the growth rate (g), to calculate the terminal value, using the so-called “perpetuity” methodology, established taking into account the inflation rate expected over the long term in the country where the specific CGU is based; in some cases, however, other factors are also considered, such as the real growth scenario in the sector where the CGU operates;

 

the Beta parameter is different for different types of business estimated according to trends in the data series of returns for sample groups of listed companies comparable to those being valued and the respective data series of returns of market indices of the countries in which the companies are listed.

 

It should also be emphasized that in calculating the cost of equity (Ke), account must also be taken of risk specific to the CGU, if any, through an additional risk premium (alpha coefficient/factor) to take into account (specific and/or systematic) risk factors not perceived in the flows and/or not fully reflected by the underlying CAPM indicators. Senior management opted to increase the estimates of the opportunity cost of capital for all CGUs, except for the Consumer Banking CGU, by at least 1.50%. With regard to RAM and Polus, management opted to apply a higher additional risk premium of 3.20%, in consideration of the risk inherent in the Plan.

 

Table 5: Cost of equity parameters per CGU

 

30 June 2024  
     Equity risk            Expected 
   Risk-free rate    premium   Beta 2y   Coefficient   Cost of equity   growth rate 
CGU  Rf   Erp   b   a   Ke   g 
Consumer credit   3.95    5.23    1.03        9.35    2.0 
MB Private Banking   3.95    5.23    1.03    1.50    10.84    2.0 
MB Mid corporate   3.95    5.23    1.14    1.50    11.41    2.0 
Polus Capital Management   4.14    5.23    1.23    3.20    13.78    2.0 
RAM Active Investments   0.71    5.23    1.23    3.20    10.34    1.93 
Messier et Associés   3.16    5.23    1.14    1.50    10.63    1.71 
Arma Partners LLP   4.14    5.23    1.14    1.50    11.61    2.0 

 

194 | Consolidated financial statements as at 30 June 2024  

 

 

30 June 2023  
     Equity risk            Expected 
   Risk-free rate    premium   Beta 2y   Coefficient   Cost of equity   growth rate 
CCGU  Rf   Erp   b   a   Ke   g 
Consumer credit   4.08    5.06    1.13        9.79    2.0 
MB Private Banking   4.08    5.06    1.04    1.50    10.85    2.0 
MB Mid corporate   4.08    5.06    0.97    1.50    10.47    2.0 
Polus Capital Management   4.31    5.06    1.15    3.20    13.32    2.0 
RAM Active Investments   0.92    5.06    1.15    3.20    9.93    1.9 
Messier et Associés   2.92    5.06    0.97    1.50    9.32    1.6 

 

Compared to the previous year, the Cost of Equity of all CGUs, with the exception of the Consumer and Private Banking CGUs, was higher due to an increase in the Equity Risk Premium (approximately 20 bps) and the beta. Risk-free rates (calculated - in line with the previous year - as an average over 1 month at the impairment test date of the daily yields at maturity of the 10-year government benchmarks where the CGU being valued is located) remained at a high level despite restrictive monetary measures to contain inflation pursued by the main Central Banks, while suffering a slight drop; the risk-free rate in Italy went from 4.08% to 3.95%, while only for France there was an increase from 2.92% to 3.16%. With regard to the Equity Risk Premium, the reference for all the CGUs was the long-term historical average of the risk premiums observed in the US market (i.e. 5.23%) as representative of the premium associated with the global investment in the market stock. The Betas were all up except for the Consumer and Private Banking CGUs of Mediobanca, both of which stood at 1.03. Finally, the growth rate (g), equal to the expected long-term inflation rate in the countries of residence of the CGUs, was set at 2% for Italy and the UK, at 1.93% for Euro Area, and 1.71% for France.

 

The adoption of the valuation formula requires estimating the present value of the expected flows of each CGU beyond the explicit forecast period (the plan period) which defines the so-called Terminal Value. With regard to Terminal Value, it should be noted that it was obtained by capitalizing the average of distributable profits over the last two or three years of the Plan, which, on a prudential basis, was considered the value that best reflected a normalized cash flow that took into account the income prospects of individual CGUs according to an across-the-cycle approach. The only two exceptions were the Consumer CGU, for which the distributable profit in the last year of the Plan was used as it was lower than the average value, and by the CGU Messier & Associés, for which it was deemed appropriate to use the historical average in order to normalize the volatility of its business.

 

Notes to the accounts | Part B - Notes to the consolidated Balance Sheet | 195

 

 

All of the Group’s CGUs passed the impairment test as their value in use exceeded the carrying amount taking into account any account undertaken during the year.

 

This situation is borne out by the sensitivity analysis conducted on the following variables:

 

Cost of equity +/- 0.25%, with an overall increase and decrease of up to 50 bps;

 

Long-term growth rate +/- 0.20%, with an overall increase and decrease of up to 60 bps;

 

Flow distributable at terminal value +/-5%, with an overall increase and decrease of up to 10%;

 

Regarding the brands, valuations were newly made based on the royalty relief method, whereby the brand’s value is obtained from the discounted value of the income deriving from it, which in turn is estimated as the product of the royalty rate implied in the valuations of the respective brands made during the PPA process (Business Combinations under IFRS 3) and the value of the operating income. The terminal value of the Private Banking (€15.5m), RAM (€11.9m) and Messier et Associés (€17m) brands were confirmed.

 

Moreover, a further impairment test (referred to as Level 2 impairment test) was carried out by verifying whether the value in use of the various operating segments (Consumer Banking, Wealth Management and Corporate and Investment Banking), taking into account the allocation of all the corporate costs of the Holding Functions, was higher than the respective carrying amount, computed as the sum of absorbed regulatory capital integrated with goodwill and other allocated intangibles. The impairment test was passed by all three operating segments.

 

Lastly, an analysis of the fairness of the Group’s value - obtained as the sum of parts - and the stock market prices and target prices stated by financial analysts was conducted. With regard to the performance of stock market prices and the Price to Book value indicator, it should be noted that at the closing date of the financial year (30 June 2024) the stock was listed at €13.7, in line with the Group’s net equity per share.

 

* * *

 

196 | Consolidated financial statements as at 30 June 2024  

 

 

SECTION 11

 

Assets heading 110 and liabilities heading 60: Tax assets and liabilities

 

11.1 Advance tax assets: breakdown

 

   Total   Total 
   30 June 2024   30 June 2023 
– Against Profit and Loss   383,359    493,245 
– Against Net Equity   20,754    31,136 
Total   404,113    524,381 

 

All advance taxes qualifying as “ineligible” were subjected to a “probability test”, i.e. an annual assessment as to the probability of recovering them, taking into account whether they fall within the scope of the National Tax Consolidation of the companies to which they refer.

 

In this regard, it should be noted that:

 

the estimate of the forecast taxable income for the periods beyond the time horizon of individual business plans was made on a prudential basis, assuming the opening result to be substantially consistent with that of the previous financial year;

 

temporary decreases were examined by using the above period for decreases whose release period is governed by regulatory provisions, while a time horizon of 5 or 10 years was used for other cases depending on the type of item.

 

Taking into account the Group’s and the individual entities’ forward-looking plans, the above analyses confirmed the “probability of recovery” of such decreases while applying the prudential corrections described above and taking into account the large income-earning capacity demonstrated by the Group in its long history.

 

Notes to the accounts | Part B - Notes to the consolidated Balance Sheet | 197

 

 

   Total   Total 
   30 June 2024   30 June 2023 
A – Gross advance tax assets   404,113    524,381 
Loan loss provisions (*)    242,217    341,798 
Provisions for sundry risks and charges   15,194    20,531 
Goodwill and other intangible assets (**)    99,787    106,198 
Financial instruments recognized at FVOCI   22,367    30,935 
Tax losses   1,029    582 
Other   23,519    24,337 
B – Offset by deferred tax liabilities        
C – Net advance tax assets   404,113    524,381 

 

(*)  Among other figures, this item includes: i) prepaid taxes recognized on write-downs and losses on loans to customers, which will be absorbed by 30 June 2029 according to the plan pursuant to Article 16 of Law-Decree No. 83/2015, as amended; ii) prepaid taxes recognized on the components allocated to the provision for expected credit losses upon IFRS 9 FTA, which will be absorbed in tenths by 30 June 2029.

 

(**)  This figure mainly includes goodwill redemptions on the Compass / Linea merger transaction (€93.3m), of which €15.3m pursuant to Article 176 of Presidential Decree No. 917/1986 and €78m in implementation of the provisions of Article 110 of Law-Decree No. 104/2020 with an amortization period of 18 years.

 

11.2 Deferred tax liabilities: breakdown

 

   Total   Total 
   30 June 2024   30 June 2023 (*) 
– Against Profit and Loss   280,972    286,804 
– Against Net Equity   108,793    163,620 
Total   389,765    450,424 

 

(*) The data as at 30 June 2023 were restated following the entry into force of the eighth update of Bank of Italy Circular No. 262/2005, which transposed the new standard IFRS 17 – Insurance Contracts.

 

11.3 Changes in advance tax during the period (against profit and loss)

 

   Total   Total 
   30 June 2024   30 June 2023 
1. Opening balance   493,245    559,819 
2. Increases   23,950    18,432 
2.1 Prepaid taxes recorded during the year   21,543    18,127 
a) relating to prior years        
b) due to changes in accounting policies        
c) write-backs        
d) other   21,543    18,127 
2.2 New taxes or increases in tax rates        
2.3 Other increases   2,407    305 
3. Decreases   133,836    85,006 
3.1 Prepaid taxes derecognized during the year   127,563    72,178 
a) reversals   126,555    70,617 
b) write-downs due to non-recoverable items        
c) changes in accounting policies        
d) other   1,008    1,561 
3.2 Reductions in tax rates        
3.3 Other decreases:   6,273    12,828 
a) conversion into tax receivables pursuant to Italian Law No. 214/2011        
b) other   6,273    12,828 
4. Closing balance   383,359    493,245 

 

198 | Consolidated financial statements as at 30 June 2024  

 

 

11.4 Changes in prepaid taxes pursuant to Italian Law No. 214/11 (*) 

 

   Total   Total 
   30 June 2024   30 June 2023 
1. Opening balance   342,562    400,281 
2. Increases        
3. Decreases   109,671    57,719 
3.1 Reversals   103,474    49,384 
3.2 Conversion into tax receivables deriving from:        
a) losses for the year        
b) tax losses        
3.3 Other decreases   6,197    8,335 
4. Closing balance   232,891    342,562 

 

(*)  Italian Law-Decree No. 59 of 29 April 2016 on deferred tax assets pursuant to Italian Law No. 214/2011, as amended by Italian Law-Decree No. 237 of 23 December 2016, enacted with amendments as Law No. 15/2017, provides that in order to be able to retain the right to take advantage of the possibility of converting DTAs into tax credits, an irrevocable option must be specifically exercised, which involves payment of an annual instalment equal to 1.5% of the difference between the increase in advance tax assets at the reporting date since 30 June 2008 and the tax paid during the same period each year until 2029. Mediobanca has exercised this option in order to retain the possibility of converting DTAs for all companies adhering to the tax consolidation. No payment will be due in this respect, however, given that the payments made to the tax consolidation exceed the increase in DTAs recorded since 30 June 2008.

 

11.5 Changes in deferred taxes (against profit and loss)

 

   Total   Total 
   30 June 2024   30 June 2023 (*) 
1. Opening balance   286,804    302,098 
2. Increases   10,110    1,092 
2.1 Deferred taxes for the year   3,126    102 
a) relating to prior years        
b) due to changes in accounting policies        
c) other   3,126    102 
2.2 New taxes or increases in tax rates        
2.3 Other increases   6,984    990 
3. Decreases   15,942    16,386 
3.1 Deferred taxes derecognized in the year   9,125    15,842 
a) reversals   4,744    14,780 
b) due to changes in accounting policies        
c) other   4,381    1,062 
3.2 Reductions in tax rates        
3.3 Other decreases   6,817    544 
4. Closing balance   280,972    286,804 

 

(*) The data as at 30 June 2023 were restated following the entry into force of the eighth update of Bank of Italy Circular No. 262/2005, which transposed the new standard IFRS 17 – Insurance Contracts.

 

Notes to the accounts | Part B - Notes to the consolidated Balance Sheet | 199

 

 

11.6 Changes in prepaid taxes during the period (against net equity) (*) 

 

   Total   Total 
   30 June 2024   30 June 2023 
1. Opening balance   31,136    37,148 
2. Increases   87,373    161,046 
2.1 Prepaid taxes recorded during the year   87,173    160,947 
a) relating to prior years        
b) due to changes in accounting policies        
c) other   87,173    160,947 
2.2 New taxes or increases in tax rates        
2.3 Other increases   200    99 
3. Decreases   97,755    167,058 
3.1 Prepaid taxes derecognized during the year   97,568    165,537 
a) reversals   97,020    164,409 
b) write-downs due to non-recoverable items        
c) due to changes in accounting policies        
d) other   548    1,128 
3.2 Reductions in tax rates        
3.3 Other decreases   187    1,521 
4. Closing balance   20,754    31,136 

 

(*) Tax deriving from cash flow hedges and valuations of financial instruments recognized at Fair Value through Other Comprehensive Income.

 

11.7 Changes in deferred taxes (against net equity)

 

   Total   Total 
   30 June 2024   30 June 2023 (*) 
1. Opening balance   163,620    100,421 
2. Increases   169,921    147,139 
2.1 Deferred taxes for the year   161,078    135,086 
a) relating to prior years        
b) due to changes in accounting policies   86     
c) other   160,992    135,086 
2.2 New taxes or increases in tax rates        
2.3 Other increases   8,843    12,053 
3. Decreases   224,748    83,940 
3.1 Deferred taxes derecognized in the year   224,407    78,079 
a) reversals   224,407    78,079 
b) due to changes in accounting policies        
c) other        
3.2 Reductions in tax rates        
3.3 Other decreases   341    5,861 
4. Closing balance   108,793    163,620 

 

(*)  The data as at 30 June 2023 were restated following the entry into force of the eighth update of Bank of Italy Circular No. 262/2005, which transposed the new standard IFRS 17 – Insurance Contracts.

 

200 | Consolidated financial statements as at 30 June 2024  

 

 

SECTION 12

 

Assets heading 120 and Liability heading 70: Non-current assets and asset groups held for sale and related liabilities

 

12.1Non-current assets and disposal groups classified as held for sale: breakdown by asset type

 

   30 June 2024   30 June 2023 
A. Assets held for sale          
A.1 Financial assets       242,164 
A.2 Equity investments        
A.3 Tangible assets       105 
of which: obtained by enforcement of collateral        
A.4 Intangible assets       195 
A.5 Other non-current assets       9,523 
Total (A)       251,987 
of which carried at cost       251,987 
of which designated at Fair Value - level 1        
of which designated at Fair Value - level 2        
of which designated at Fair Value - level 3        
C. Liabilities associated with assets held for sale          
C.1 Debts       2,149 
C.2 Securities        
C.3 Other liabilities       5,985 
Total (C)       8,134 
of which carried at cost       8,134 
of which designated at Fair Value - level 1        
of which designated at Fair Value - level 2        
of which designated at Fair Value - level 3        

 

The figure at 30 June 2023 regarded the assets and liabilities of the subsidiary Revalea S.p.A., the sale of which was concluded in October 2023 and with which financing positions expiring in 2027 were kept in progress.

 

Notes to the accounts | Part B - Notes to the consolidated Balance Sheet | 201

 

 

SECTION 13

 

Heading 130: Other assets

 

13.1 Other assets: breakdown

 

   30 June 2024   30 June 2023 (*) 
1. Gold, silver and precious metals   695    695 
2. Accrued income other than capitalized income on the related assets   70,009    71,130 
3. Trade receivables or invoices to be issued   315,625    237,258 
4. Amounts due from tax revenue authorities (not recorded under Heading 110)   380,295    351,639 
5. Other items:   401,369    254,811 
– bills for collection   240,727    69,933 
– amounts due in respect of premiums, grants, indemnities, and other items in respect of lending transactions   7,692    23,986 
– advance payments on deposit commissions   2,447    2,475 
– other items in transit   85,149    87,850 
– sundry other items (1)    65,354    70,567 
Total other assets   1,167,993    915,533 

 

(*)  The data as at 30 June 2023 were restated following the entry into force of the eighth update of Bank of Italy Circular No. 262/2005, which transposed the new standard IFRS 17 – Insurance Contracts.

 

(1)  This includes accrued income.

 

This item, as required by the Bank of Italy/Consob/IVASS Document No. 9,(52) includes tax credits (eco-bonuses) recorded in the financial statements in compliance with the so-called Group tax ceiling. The book value was €152m (€185m as at 30 June 2023); in detail, purchases during the calendar year 2023 amounted to €20m, while receivables offset against tax liabilities of the individual entities amounted to €59m. The nominal value as at 30 June 2024 was €165m, of which €121m referable to the ‘Superbonus 110’ discount pursuant to Article 119 of Law-Decree No. 34/2020, which may be offset in the next 3 years.

 

(52)  The Bank of Italy/Consob/Ivass Document No. 9 - Coordination table between the Bank of Italy, Consob and IVASS for the purpose of adopting the IAS/IFRS Accounting treatment of tax credits connected with the “Cura Italia” and “Rilancio” Law-Decrees purchased following the transfer by the direct beneficiaries or previous purchasers indicates the item “Other assets” as the most appropriate to receive the tax credits referred to in the “Cura Italia” and “Rilancio” Law-Decrees.

 

202 | Consolidated financial statements as at 30 June 2024

 

 

Liabilities

 

SECTION 1

 

Heading 10: Financial liabilities measured at amortized cost

 

1.1Financial liabilities measured at amortized cost: product breakdown of amounts due to banks

 

      Total           Total     
   30 June 2024   30 June 2023 
   Carrying   Fair Value   Carrying   Fair Value 
Transaction Type/Values  amount   Level 1   Level 2   Level 3   amount   Level 1   Level 2   Level 3 
1. Due to Central Banks   1,313,202    X    X    X    5,634,137    X    X    X 
2. Amounts due to banks   9,648,913    X    X    X    7,640,952    X    X    X 
2.1 Current accounts and demand deposits   278,565    X    X    X    268,655    X    X    X 
2.2 Term deposits   16,493    X    X    X    68,864    X    X    X 
2.3 Loans   9,331,957    X    X    X    7,125,681    X    X    X 
2.3.1 Repos   5,342,646    X    X    X    3,467,320    X    X    X 
2.3.2 Other   3,989,311    X    X    X    3,658,361    X    X    X 
2.4 Liabilities in respect of equity commitments to repurchase own instruments       X    X    X        X    X    X 
2.5 Lease liabilities (1)    745    X    X    X    228    X    X    X 
2.6 Other liabilities   21,153    X    X    X    177,524    X    X    X 
Total   10,962,115        10,962,115        13,275,089        13,275,089     

 

(1) This item includes obligations in respect of payment of future leasing instalments as required by IFRS 16 and Bank of Italy circular no. 262 – VI Update.

 

Notes to the accounts | Part B - Notes to the consolidated Balance Sheet | 203

 

 

1.2 Financial liabilities measured at amortized cost: composition of due to customers

 

  Total 30 June 2024   Total 30 June 2023 
      Fair Value       Fair Value 
Transaction Type/Values  Book value   Level 1   Level 2   Level 3   Book value   Level 1   Level 2   Level 3 
1. Current accounts and on demand deposits   18,725,078    X    X    X    17,795,987    X    X    X 
2. Term deposits   10,290,506    X    X    X     11,712,096    X    X    X 
3. Loans   4,792,458    X    X    X    649,255    X    X    X 
3.1 Repos   4,754,334    X    X    X    614,310    X    X    X 
3.2 Other   38,124    X    X    X    34,945    X    X    X 
4. Liabilities in respect of commitments to repurchase own equity instruments       X    X    X        X    X    X 
5. Lease liabilities (1)    212,155    X    X    X    216,381    X    X    X 
6. Other liabilities (2)    84,351    X    X    X    376,883    X    X    X 
Total   34,104,548        34,104,548        30,750,602        30,750,602     

 

(1) This item includes obligations in respect of payment of future leasing instalments as required by IFRS 16 and Bank of Italy circular no. 262 – VI Update.

(2) The item included liabilities related to the purchase of MBFACTA’s unfunded loans.

 

1.3 Financial liabilities measured at amortized cost: composition of debt securities in issue

 

   30 June 2024   30 June 2023 
  Carrying   Fair Value (*)   Carrying   Fair Value (*) 
Type of security/Values  amount   Level 1   Level 2   Level 3   amount   Level 1   Level 2   Level 3 
A. Securities                                        
1. bonds   24,015,355    1,403,249    22,638,329        19,875,779    1,038,611    18,586,665     
1.1 structured   4,068,358        4,082,184        2,999,458        3,005,730     
1.2 other   19,946,997    1,403,249    18,556,146        16,876,321    1,038,611    15,580,935     
2. other securities   1,239,545        1,206,575    33,072    1,001,596        740,103    261,493 
2.1 structured                                
2.2 other   1,239,545        1,206,575    33,072    1,001,596        740,103    261,493 
Total   25,254,900    1,403,249    23,844,904    33,072    20,877,375    1,038,611    19,326,768    261,493 

 

(*)  Fair Value amounts are shown after deducting issuer risk, which at 30 June 2024 suggested a capital gain of €204.3m (€156.4m as at 30 June 2023).

 

Bonds increased from €19.9bn to €24bn after new issues of €7.3bn covered by redemptions and repurchases of €3.5bn (realizing gains of €1.1m), to which other increases of €0.4bn (exchange rate adjustment, amortized cost and effect of hedges) should be added.

 

The bonds in issue include €2.2bn (nearly all of which issued by the subsidiary Mediobanca International and guaranteed by the parent company) related to arbitrage strategies leveraging derivative basis indexes (skew) mainly linked to credit derivatives and commodity derivatives and, to a lesser extent, to interest rate arbitrage, inflation, and equity risk (underlying transaction). All

 

204 | Consolidated financial statements as at 30 June 2024

 

 

these issues involve payment of interest in the form of a coupon (including a premium – extra yield) and full repayment of capital at maturity. In case of the subscriber opting for early repayment, the issuer has the faculty, at its discretion, to choose a repayment price that takes into account the current Fair Value including that of the underlying transactions. As required by para. 4.3.3 of IFRS 9, the embedded derivative, identified by the right to include the arbitrage value within the repayment price, has been separated by the obligation measured at amortized cost and booked at Fair Value of underlying transactions through profit or loss.

 

1.4 Breakdown of subordinated debt securities

 

“Debt securities in issue” include the following six subordinated Tier 2 issues, for a total of €1,678,987. During the financial year, a subordinated loan of €300m was issued with a 10-year maturity at a mixed rate (fixed 5.25% until 22/4/2029 and variable EUSA 5Y+2.75 until maturity).

 

   30 June 2024
Issue  ISIN code  Nominal Value   Book Value 
MB SUBORDINATO TV with min 3% 2025  IT0005127508   499,265    502,866 
MB SUBORDINATO 3.75% 2026  IT0005188351   298,478    282,763 
MB SUBORDINATO 1.957% 2029  XS1579416741   50,000    50,850 
MB SUBORDINATO 2.3% 2030  XS2262077675   249,750    237,977 
MB SUBORDINATO TF 10Y Callable  XS2577528016   299,500    305,250 
MB SUBORDINATO 5.25 22 APR 2034  IT0005580573   299,800    299,280 
Total subordinated securities      1,696,793    1,678,987 

 

1.6 Lease liabilities

 

Amounts due under leases are calculated by applying the criteria set forth in IFRS 16.

 

Notes to the accounts | Part B - Notes to the consolidated Balance Sheet | 205

 

 

SECTION 2

 

Heading 20: Trading financial liabilities

 

2.1 Trading financial liabilities: product breakdown

 

   30 June 2024   30 June 2023 
   Nominal
or notional
   Fair Value  Fair   Nominal
or notional
   Fair Value   Fair 
Transaction Type/Values  value   Level 1   Level 2   Level 3   Value (*)   value   Level 1   Level 2   Level 3   Value (*) 
A. Cash liabilities                                                  
1. Amounts due to banks   1,744,377    1,696,621    3,688        1,700,309    42,854    34,173    10,552        44,725 
2. Due to customers (1)    3,337,805    3,216,770    33,759        3,250,529    4,160,964    4,085,164    205        4,085,369 
3. Debt securities                                        
3.1 Bonds                                        
3.1.1 Structured                   X                    X 
3.1.2 Other bonds                   X                    X 
3.2 Other securities                                        
3.2.1 Structured                   X                    X 
3.2.2 Other                   X                    X 
Total (A)   5,082,182    4,913,391    37,447        4,950,838    4,203,818    4,119,337    10,757        4,130,094 
B. Derivative instruments                                                  
1. Financial derivatives (2)        883,298    3,183,440    98,311            848,671    3,739,098    302,426     
1.1 Trading   X    883,298    3,183,382    98,311    X    X    848,671    3,739,040    302,426    X 
1.2 Related to the Fair Value option   X                X    X                X 
1.3 Other   X        58        X    X        58        X 
2. Credit derivatives           387,743    1,080                416,383         
2.1 Trading   X        387,743    1,080    X    X        416,383        X 
2.2 Related to the Fair Value option   X                X    X                X 
2.3 Other   X                X    X                X 
Total (B)   X    883,298    3,571,183    99,391    X    X    848,671    4,155,481    302,426    X 
Total (A+B)   X    5,796,689    3,608,630    99,391    X    X    4,968,008    4,166,238    302,426    X 

 

(*)  Fair Value computed by excluding variations due to changes in the issuer’s credit score following the date of emission.
(1)  This item contained some transactions reclassified in liability item 30.
(2)  This includes €41k (€798k in June 2023) for options traded, matching the amount recorded among assets held for trading.

 

206 | Consolidated financial statements as at 30 June 2024

 

 

SECTION 3

 

Heading 30: Financial liabilities designated at Fair Value

 

3.1 Financial liabilities designated at Fair Value: product breakdown

 

   Total 30 June 2024   Total 30 June 2023 
   Nominal   Fair Value  Fair   Nominal   Fair Value   Fair 
Transaction Type/Values  value   Level 1   Level 2   Level 3   Value(*)   value   Level 1   Level 2   Level 3   Value (*) 
1. Amounts due to banks                                        
1.1 Structured                   X                    X 
1.2 Other                   X                    X 
of which:                                                 
– loan commitments       X    X    X    X        X    X    X    X 
– financial guarantees issued       X    X    X    X        X    X    X    X 
2. Due to customers   1,269,999        1,168,714        1,168,714                     
2.1 Structured   1,269,999        1,168,714        X                    X 
2.2 Other                   X                    X 
of which:                                                 
– loan commitments       X    X    X    X        X    X    X    X 
– financial guarantees issued       X    X    X    X        X    X    X    X 
3. Debt securities   3,092,613        2,690,192    380,293    3,070,485    1,679,786        1,540,419    40,537    1,580,956 
3.1 Structured   3,011,665        2,608,292    380,293    X    1,679,786        1,540,419    40,537    X 
3.2 Other   80,948        81,900        X                    X 
Total   4,362,612        3,858,906    380,293    4,239,199    1,679,786        1,540,419    40,537    1,580,956 

 

(*)  Fair Value computed by excluding variations due to changes in the issuer’s credit score following the date of emission.

 

The item Financial liabilities designated at Fair Value increased from €1,580.9m to €4,239.2m following the reclassification of some transactions previously recorded under liability item 20 (€1,168.7m) in addition to the new operations in certificates (400 new issues for a value of €1,417.4m, including €590.6m credit linked and €798.8m with underlying shares and €28m rate).

 

At 30 June, the total amount of certificates stood at €2,888.9m (€883m at 30 June 2023), including €1,145.1m credit linked and €1,715.8m equity (€607m and €272m, respectively); this segment is completed by interest rate positions of €28m. Positions classified as level 3 amounted to €380.3m, which includes €39.8m in reference to zero recovery credit-linked products and €275m to autocallable equity.

 

This operation is in addition to the delta-one products (without Mediobanca risk) in place for €644.6m (€596.3m); finally, paper issues of €181.6m, which includes €70.6m callable, should be added.

 

Notes to the accounts | Part B - Notes to the consolidated Balance Sheet | 207

 

 

SECTION 4

 

Heading 40: Hedging derivatives

 

4.1 Hedging derivatives: by hedge type and level

 

   30 June 2024   30 June 2023 
   Fair Value  

Nominal

   Fair Value   Nominal 
   Level 1   Level 2   Level 3   value   Level 1   Level 2   Level 3   value 
A. Financial derivatives       1,431,642        46,968,086        2,069,542        49,729,652 
1) Fair Value       1,430,774        46,938,086        2,068,723        49,699,652 
2) Cash flow       868        30,000        819        30,000 
3) Foreign                                        
investments                                
B. Credit derivatives                                
1) Fair Value                                
2) Cash flow                                
Total       1,431,642        46,968,086        2,069,542        49,729,652 

 

4.2 Hedging derivatives: by portfolio hedged and hedge type

 

  Fair Value   Cash flows   Foreign 
   Specific   Generic   Specific   Generic   investments 
Transaction/Type of hedge  debt
securities
and
interest
rates
   equity
securities
and stock
indexes
   Currencies
and gold
   credit   commodities   Other                 
1. Financial assets measured at Fair Value through other comprehensive income                   X    X    X        X    X 
2. Financial assets measured at amortized cost   58,642    X            X    X    X        X    X 
3. Portfolio   X    X    X    X    X    X        X        X 
4. Other transactions                           X        X     
Total assets   58,642                                     
1.Financial Liabilities   1,372,132    X                    X    868    X    X 
2. Portfolio   X    X    X    X    X    X        X        X 
Total liabilities   1,372,132                            868         
1.Expected transactions   X    X    X    X    X    X    X        X    X 
2.Financial assets and liabilities portfolio   X    X    X    X    X    X        X         

 

208 | Consolidated financial statements as at 30 June 2024

 

 

SECTION 6

 

Heading 60: Tax liabilities

 

Please see asset section 11.

 

SECTION 7

 

Heading 70: Liabilities associated to assets held for sale

 

Please see asset section 12.

 

SECTION 8

 

Heading 80: Other liabilities

 

8.1 Other liabilities: breakdown

 

   30 June 2024   30 June 2023 (*) 
1. Working capital payables and invoices pending receipt   345,606    338,827 
2. Amounts due to revenue authorities   177,766    78,426 
3. Amounts due to staff   295,225    300,129 
4. Other items   669,830    333,131 
– bills for collection   35,426    24,838 
– coupons and dividends pending collection   71,072    3,557 
– available sums payable to third parties   435,897    90,300 
– premiums, grants, and other items in respect of lending transactions   18,508    20,552 
– sundry items (1)    108,927    193,884 
Total other liabilities   1,488,427    1,050,513 

 

(*)  The data as at 30 June 2023 were restated following the entry into force of the eighth update of Bank of Italy Circular No. 262/2005, which transposed the new standard IFRS 17 – Insurance Contracts.

 

(1)  This includes the liability in respect of the put-and-call agreements relating to Polus Capital, RAM AI and MA.

 

Notes to the accounts | Part B - Notes to the consolidated Balance Sheet | 209

 

 

SECTION 9

 

Heading 90: Provision for statutory end-of-service payments

 

9.1 Provision for statutory end-of-service payments: changes during the period

 

     Total   Total 
     30 June 2024   30 June 2023 
A. Balance at start of period     20,584    21,969 
B. Increases     12,802    9,826 
B.1 Provision for the year     6,063    7,750 
B.2 Other changes     6,739    2,076 
- of which, business combinations          
C. Decreases     12,941    11,211 
C.1 End-of-service payments     2,523    2,120 
C.2 Other changes (1)      10,418    9,091 
- of which, business combinations          
D. Balance at end of period     20,445    20,584 
Total     20,445    20,584 

 

(1) This includes €3,310 in transfers to external, defined contribution pension schemes (€5,255 at 30 June 2023).

 

The Provision for statutory end-of-service payments concerns Group companies residing in Italy; for a detailed explanation of the accounting standards adopted, please refer to Part A – Accounting policies.

 

9.2 Other information

 

The provision for statutory end-of-service payments is configured as a defined benefit plan; the actuarial model used is based on various demographic and economic assumptions. For some of the assumptions used, reference has been made directly to the Group’s own experience (e.g. estimates of disability incidence, frequency of early retirement, annual increase in rate of remuneration, frequency with which advance withdrawals from the provision are requested, etc.), while for the others, account has been taken of the relevant best practice (e.g. the mortality rate has been determined using the IPS55 life tables, whereas the retirement age has been determined taking into account the most recent legislation in this area); for the discount rate, the iBoxx Eurozone Corporate AA index as at 30 June 2024 has been used for similar companies to those being valued (equal to 3.47%, compared with 3.67% at end-June 2023), while the inflation rate is 2%.

 

210 | Consolidated financial statements as at 30 June 2024

 

 

SECTION 10

 

Heading 100: Provisions for risks and charges

 

10.1 Provisions for risks and charges: breakdown

 

Items/Components  30 June 2024   30 June 2023 
1. Provisions for credit risk related to commitments and financial guarantees given   20,791    21,581 
2. Provision to other commitments and other guarantees issued   605    585 
3. Company retirement plans        
4. Other provisions for risks and charges   116,295    138,961 
4.1 legal and tax disputes        
4.2 obligations for employees   16,932    28,235 
4.3 other   99,363    110,726 
Total   137,691    161,127 

 

IAS37 requires provisions to be set aside in cases where there is an obligation, whether actual, legal or implicit, the amount of which may be reliably determined and the resolution of which is likely to entail a cash outflow for the company. The amount of the provision is determined from the best estimate, based on experience of similar operations or the opinion of independent experts. The provisions are revised on a regular basis in order to reflect the best current estimate.

 

As at 30 June, the item “Provisions for risks and charges” amounted to €137.7m (down compared to €161.1m in the previous year) with the component of commitments and guarantees issued decreasing from €21.6m to €20.8m. The component “Other provisions for risks and charges” dropped from €139m to €116.3m: the personnel portion, a large part of which had been set aside in the previous year to encourage turnover, was reduced from €28.2m to €16.9m after withdrawals during the year under review (€13.9m, which includes €8.2m Mediobanca and €5.7m Compass); the portion to cover legal/tax disputes and other liabilities went from €110.7m to €99.4m after transfers of €11m to the profit and loss account in light of the trend in ongoing legal/tax disputes.

 

The stock at the end of the year was divided as follows: Mediobanca €51.8m (€67.3m), Mediobanca Premier €30.9m (€32m), Compass €19.9m (€29m), SelmaBPM €7.3m (€6.1m), CMB Monaco €2.6m (€2.2m), and other companies €3.7m (€2.3m).

 

Notes to the accounts | Part B - Notes to the consolidated Balance Sheet | 211

 

 

With reference to the main legal proceedings, the following should be noted:

 

with reference to the dispute regarding the reimbursement of charges following early debt repayment (the Lexitor case), it should be noted that in Official Journal No. 186 of 10 August 2023, two regulatory provisions were published with two slightly different versions of the reformulation of the “Sostegni-Bis” Decree rule declared unconstitutional: in particular, Law No. 103/23 excluded the non-restitution of up-front costs in the event of early loan repayment, while Law-Decree No. 104/23, Article 27, does not contain such an express provision. On 9 October 2023, Law No. 136/23 was published, which enacted Legislative Decree Mo. 104 without making any amendments to the aforementioned Article 27. With reference to early terminations prior to the date of publication of Ruling 263/2022 (22 December 2022), the Bank continued to reimburse upfront charges upon written request from the customers, also when managing out-of-court and judicial disputes, using the risk provisions set aside in previous years to cover this contingent liability. This provision, which amounted to €13.2m at 30 June 2023, stood at €10.2m at 30 June 2024;

 

with regard to disputes related to the hiring of bankers and financial advisors and to the indemnity policy, the current provision is equal to €15.6m (€14.7m).

 

With regard to disputes pending with the Italian Tax Authorities, the following should be noted:

 

with reference to the alleged failure to apply transparency tax rules as required by the legislation on Controlled Foreign Companies (CFC) on income earned by CMB Monaco and CMG Monaco in the three financial years 2013, 2014 and 2015 (for a total of €53.7m in disputed taxes, plus penalties and interest), three disputes were pending against the tax authorities. In detail, in the dispute relating to financial year 2013/2014 (2013 profits, tax of €21.3m, plus penalties and interest) and in the combined disputes relating to financial years 2014/2015 and 2015/2016 (respectively 2014 and 2015 profits for a total tax of €32.5m, plus penalties and interest), the Bank won the first and second instances of judgement. With regard to the first year, a hearing before the Supreme Court is pending; with regard to the combined years, on 18 June last, the Italian Revenue Agency notified an appeal before the Court of Cassation, against which Mediobanca filed a counter-appeal on 12 July;

 

212 | Consolidated financial statements as at 30 June 2024

 

 

with reference to Mediobanca’s alleged failure to withhold taxes from interest paid in the context of a secured financing transaction between the financial years 2014/2015 and 2017/2018 (for a total of €8.1m, plus penalties and interest), the filing of the ruling for 2014 is pending with regard to the first two years after losing the first instance of judgement, while with regard to 2015, following the Bank’s victory in the second instance, on 10 April last the second instance Court administration certified that the ruling had become final as the terms for filing the appeal before the Court of Cassation had expired; in the meantime, with regard to the third year, following the Bank’s victory in the first instance, the Italian Revenue Agency notified an appeal on 14 May last, against which the Bank filed a counter-appeal; the session to hear the case was set for 8 November next. Finally, with regard to the last disputed year, a hearing was held on 22 April and the ruling is pending.

 

In addition to the foregoing, the pending disputes at 30 June were as follows:

 

two minor disputes relating to failure to reimburse interest accrued on VAT credits in leasing transactions (for a value of just under €3m);

 

six disputes involving direct and indirect tax of minor amounts and at different stages of the ruling process, involving a total certified amount of €1.1m in tax.

 

Finally, with regard to the proceedings initiated before the District Court of California, pursuant to the so-called “RICO” law (Racketeer Influenced and Corrupt Organizations Act), in which CMB Monaco was involved, it should be noted that last June 13 the Court acknowledged CMB Monaco’s withdrawal from the proceedings without financial loss, with the preclusion of any further action in any jurisdiction.

 

The provisions for risks and charges set aside in the financial statements adequately cover the amount mentioned above.

 

Notes to the accounts | Part B - Notes to the consolidated Balance Sheet | 213

 

 

10.2 Provisions for risks and charges: changes during the period

 

   Provision       Other         
   to other       provisions   Other     
   commitments       for risks and    provisions     
   and other       charges:   for risks and     
   guarantees   Retirement   Obligations for   charges:     
   issued   plans   employees   Other   Total 
A. Balance at start of period   585        28,235    110,726    139,546 
B. Increases   60    1,009    2,500    23,994    27,563 
B.1 Provision for the year   60    1,009    2,500    16,430    19,999 
B.2 Changes due to the passage of time                    
B.3 Changes due to discount rate differences                    
B.4 Other changes               7,564    7,564 
of which business combinations                    
C. Decreases   40    1,009    13,803    35,357    50,209 
C.1 Use during the year   40        8,143    31,677    39,860 
C.2 Changes due to discount rate differences       690            690 
C.3 Other changes       319    5,660    3,680    9,659 
of which business combinations                    
D. Balance at end of period   605        16,932    99,363    116,900 

 

10.3 Provisions for credit risk related to commitments and financial guarantees given

 

   Provisions for credit risk related to commitments and financial guarantees issued 
   Stage 1   Stage 2   Stage 3   Purchased or
originated credit
impaired assets
   Total 
Loan commitments   15,285    2,479    602        18,366 
Financial guarantees given   2,250    175            2,425 
Total   17,535    2,654    602        20,791 

 

10.5 Defined benefit company retirement pension schemes

 

This refers to the defined benefit company retirement pension scheme operated by Caisse Bâloise on behalf of RAM AI staff as required by Swiss law. The provision is subject to actuarial quantification by an independent actuary using the Projected Unit Credit Method.(53)  The current value of the liability is adjusted by the Fair Value of any assets to be used under the terms of such plan.

 

In particular, the “technical” surplus encountered for the first time in June 2022 persisted in the year under review, albeit decreasing, and it led to an

 

(53)  This method involves future outflows being projected on the basis of historical statistical analysis and the demographic curve, and then being discounted based on market interest rates.

 

214 | Consolidated financial statements as at 30 June 2024

 

 

adjustment pursuant to IFRIC 14(54)  in the same amount and a derecognition of the net liability.

 

The following Table shows the breakdown of the net defined benefit obligation as at the most recent reporting date (30 June 2024):

 

   CHF/1000 EUR/1000 
IAS 19 Net obligation  30 June 2024   30 June 2023   30 June 202   30 June 2023 
Present value of defined benefit obligation   (17,692)   (13,267)   (18,364)   (13,554)
Present value of assets servicing the fund   17,806    14,562    18,483    14,877 
Surplus/(deficit)   115    1,295    119    1,323 
IFRIC14 adjustment   (115)   (1,295)   (119)   (1,323)
Net accounting (liability)/asset                

 

A sensitivity analysis is performed on the DBO to measure its sensitivity to changes in the main assumptions adopted.

 

SECTION 11

 

Heading 110: Insurance Liabilities

 

Starting on 1 July 2023, insurance assets and liabilities were recognized according to the new accounting standard IFRS 17. The data at 30 June 2024 were compared with the data modified at 30 June 2023.

 

As required by the eighth update to Circular No. 262/2005 of the Bank of Italy, this section contains the tables required by Resolution No. 121 of 7 June 2022 updating decisions issued by IVASS under ISVAP Regulation No. 7 of 13 July 2007 in order to incorporate the new rules introduced by accounting standard IFRS17 on insurance contracts.

 

(54)  Paragraph 64 of IAS 19 limits the measurement of an asset serving a defined benefit plan to the lower of the surplus in the defined benefit plan and the asset ceiling. Paragraph 8 of IAS 19 defines the asset ceiling as ‘the present value of any economic benefits available in the form of refunds from the plan or reductions in future contributions to the plan’. Questions arose in regard of the time in which the refunds or reductions in future contributions should be considered available. Under IFRIC 14, the IASB provided the required clarifications by establishing that an entity must determine the availability of a refund or a reduction in future contributions in compliance with the terms and conditions of the plan and the statutory provisions applicable in the jurisdiction in which the plan is in operation. In the case at issue, the independent expert did not find that a right to a refund had arisen for the employees as the amount consisted in a surplus that did not derive from “operational” changes to the fund generating a better economic condition but from changes in valuation rates that had an impact on “Actuarial Gains and Losses” resulting in the reduction and cancellation of the liability without recognizing an asset.

 

Notes to the accounts | Part B - Notes to the consolidated Balance Sheet | 215

 

 

11.2Trend in the book value of insurance contracts issued – Premium Allocation Approach (PAA) – liabilities for residual coverage and for claims incurred – Motor Non-Life Segment

 

30 June 2024

   Liabilities for residual   Liabilities for    
   coverage   claims incurred     
Items/Liabilities  after Loss   Loss   Current value
of cash flow
   Adjustment
for financial
risk
   Total 
A. initial recognition book value                         
1. Insurance contracts issued that constitute liabilities                    
2. Insurance contracts issued that constitute assets                    
3. Net book value at 1 July   86,787        9,507        96,294 
B. Insurance revenues   (30,851)               (30,851)
C. Costs for insurance services                         
1. Claims incurred and other directly attributable costs           4,416    340    4,756 
2. Changes in liabilities for claims incurred           1,821    (316)   1,505 
3. Losses and related recoveries on contracts for consideration                    
4. Amortization of contract acquisition costs   3,225                3,225 
5. Total   3,225        6,237    24    9,486 
D. Income (expense) from insurance services (B+C)   (27,626)       6,237    24    (21,365)
E. Net financial costs/revenues                         
1. Relating to insurance contracts issued           143        143 
1.1 Recorded through profit or loss           143        143 
1.2 Recorded through other comprehensive income                    
2. Effects associated with changes in exchange rates                    
3. Total           143        143 
F. Investment components                    
G. Total amount of changes recorded through profit or loss and other comprehensive income (D+E+F)   (27,626)       6,380    24    (21,222)
H. Other changes                    
I. Cash handling                         
1. Premiums collected   21,877                21,877 
2. Payments in connection with contracts acquisition costs   (1,786)               (1,786)
3. Claims paid and other cash outflows           (5,398)       (5,398)
4. Total   20,091        (5,398)       14,693 
L. Net book value at 30 June (A.3+G+H+I.4)   79,252        10,489    24    89,765 
M. Final book value                         
1. Insurance contracts issued that constitute liabilities   79,252        10,489    24    89,765 
2. Insurance contracts issued that constitute assets                    
3.Net book value at 30 June 2024    79,252        10,489    24    89,765 

 

216 | Consolidated financial statements as at 30 June 2024

 

 

30 June 2023  
   Liabilities for residual
coverage
   Liabilities for
claims incurred
     
Items/Liabilities  after Loss   Loss   Current value
of cash flow
   Adjustment
for financial

risk
   Total 
A. initial recognition book value                         
1. Insurance contracts issued that constitute liabilities                    
2. Insurance contracts issued that constitute assets                    
3. Net book value at 1 July   91,766        10,646        102,412 
B. Insurance revenues   (35,536)               (35,536)
C. Costs for insurance services                         
1. Claims incurred and other directly attributable costs           4,188        4,188 
2. Changes in liabilities for claims incurred           (1,358)       (1,358)
3. Losses and related recoveries on contracts for consideration                    
4. Amortization of contract acquisition costs   3,729                3,729 
5. Total   3,729        2,830        6,559 
D. Income (expense) from insurance services (B+C)   (31,807)       2,830        (28,977)
E. Net financial costs/revenues                         
1. Relating to insurance contracts issued           219        219 
1.1 Recorded through profit or loss           219        219 
1.2 Recorded through other comprehensive income                    
2. Effects associated with changes in exchange rates                    
3. Total           219        219 
F. Investment components                    
G. Total amount of changes recorded through profit or loss and other comprehensive income (D+E+F)   (31,807)       3,049        (28,758)
H. Other changes                    
I. Cash handling                    
1. Premiums collected   30,091                30,091 
2. Payments in connection with contracts acquisition costs   (3,263)               (3,263)
3. Claims paid and other cash outflows           (4,188)       (4,188)
4. Total   26,828        (4,188)       22,640 
L. Net book value at 30 June (A.3+G+H+I.4)   86,787        9,507        96,294 
M. Final book value                         
1. Insurance contracts issued that constitute liabilities   86,787        9,507        96,294 
2. Insurance contracts issued that constitute assets                    
3.Net book value at 30 June 2023   86,787        9,507        96,294 

 

Notes to the accounts | Part B - Notes to the consolidated Balance Sheet | 217

 

 

11.7Insurance contracts issued - Management of claims before reinsurance - Non-Life segment

 

30 June 2024 
   Year     
   30 June   30 June   30 June   30 June   30 June   30 June   30 June   30 June   30 June     
Claims/Time bands  2016   2017   2018   2019   2020   2021   2022   2023   2024   Total 
A. Cumulative claims paid and other directly attributable costs paid                                                  
1. At the end of the year of occurrence                                   1,060    X 
2. One year later                               5,246    X    X 
3. Two years later                           786    X    X    X 
4. Three years later                       180    X    X    X    X 
5. Four years later                   89    X    X    X    X    X 
6. Five years later               41    X    X    X    X    X    X 
7. Six years later           32    X    X    X    X    X    X    X 
8. Seven years later       28    X    X    X    X    X    X    X    X 
9. Eight years later   3    X    X    X    X    X    X    X    X    X 
10. Nine years later   X    X    X    X    X    X    X    X    X    X 
Total cumulative claims paid and other directly attributable costs paid (Total A)   3    28    32    41    89    180    786    5,246    1,060    7,465 
B. Estimate of final cost of cumulative claims (before reinsurance and not discounted)                                                  
1. At the end of the year of occurrence                                       X 
2. One year later                                   X    X 
3. Two years later                               X    X    X 
4. Three years later                           X    X    X    X 
5. Four years later                       X    X    X    X    X 
6. Five years later                   X    X    X    X    X    X 
7. Six years later               X    X    X    X    X    X    X 
8. Seven years later           X    X    X    X    X    X    X    X 
9. Eight years later       X    X    X    X    X    X    X    X    X 
10. Nine years later   X    X    X    X    X    X    X    X    X    X 
Estimate of final cost of cumulative claims, not discounted, at the reporting date (Total B)                                        
C. Gross liabilities for claims incurred, not discounted - year of occurrence from T to T9 (Total B - Total A)   (3)   (28)   (32)   (41)   (89)   (180)   (786)   (5,246)   (1,060)   (7,465)
D. Gross liabilities for claims incurred, not discounted - years prior to T-9   X    X    X    X    X    X    X    X    X     
E. Discounting effect   X    X    X    X    X    X    X    X    X     
E. Effect of adjustment for non-financial risks   X    X    X    X    X    X    X    X    X     
G. Gross liabilities for claims incurred in regard of insurance contracts issued   X    X    X    X    X    X    X    X    X     

 

218 | Consolidated financial statements as at 30 June 2024

 

 

30 June 2023 
   Year     
   30 June   30 June   30 June   30 June   30 June   30 June   30 June   30 June   30 June     
Claims/Time bands  2015   2016   2017   2018   2019   2020   2021   2022   2023   Total 
A. Cumulative claims paid and other directly attributable costs paid                                                  
1. At the end of the year of occurrence                                   1,124    X 
2. One year later                               5,564    X    X 
3. Two years later                           834    X    X    X 
4. Three years later                       191    X    X    X    X 
5. Four years later                   94    X    X    X    X    X 
6. Five years later               43    X    X    X    X    X    X 
7. Six years later           34    X    X    X    X    X    X    X 
8. Seven years later       30    X    X    X    X    X    X    X    X 
9. Eight years later   3    X    X    X    X    X    X    X    X    X 
10. Nine years later   X    X    X    X    X    X    X    X    X    X 
Total cumulative claims paid and other directly attributable costs paid (Total A)   3    30    34    43    94    191    834    5,564    1,124    7,917 
B. Estimate of final cost of cumulative claims (before reinsurance and not discounted)                                                  
1. At the end of the year of occurrence                                       X 
2. One year later                                   X    X 
3. Two years later                               X    X    X 
4. Three years later                           X    X    X    X 
5. Four years later                       X    X    X    X    X 
6. Five years later                   X    X    X    X    X    X 
7. Six years later               X    X    X    X    X    X    X 
8. Seven years later           X    X    X    X    X    X    X    X 
9. Eight years later       X    X    X    X    X    X    X    X    X 
10. Nine years later   X    X    X    X    X    X    X    X    X    X 
Estimate of final cost of cumulative claims, not discounted, at the reporting date (Total B)                                        
C. Gross liabilities for claims incurred, not discounted - year of occurrence from T to T9 (Total B - Total A)   (3)   (30)   (34)   (43)   (94)   (191)   (834)   (5,564)   (1,124)   (7,917)
D. Gross liabilities for claims incurred, not discounted - years prior to T-9   X    X    X    X    X    X    X    X    X     
E. Discounting effect   X    X    X    X    X    X    X    X    X     
E. Effect of adjustment for non-financial risks   X    X    X    X    X    X    X    X    X     
G. Gross liabilities for claims incurred in regard of insurance contracts issued   X    X    X    X    X    X    X    X    X     

 

Notes to the accounts | Part B - Notes to the consolidated Balance Sheet | 219

 

 

SECTION 13

 

Heading 120, 130, 140, 150, 160, 170 and 180: Group net equity

 

13.1 “Capital” and “Treasury Shares”: composition

 

For the breakdown of the Bank’s capital, please see part F of the notes to the accounts.

 

13.2 Capital – Number of parent company shares: changes for the year

 

Items/Values  Ordinary 
A. Shares in issue at the start of the period   849,257,474 
– fully paid up   849,257,474 
– partially paid up    
A.1 Treasury shares (-)   (8,454,929)
A.2 Shares in issue: opening balance   840,802,545 
B. Increases   2,846,821 
B.1 Newly issued shares   691,350 
– for consideration    
– business mergers    
– bond conversions    
exercise of warrants    
– other    
– free of charge:   691,350 
– to employees   691,350 
– to directors    
– other    
B.2 Disposals of treasury shares   2,155,471 
B.3 Other changes    
C. Decreases   (17,000,000)
C.1 Cancellation    
C.2 Purchases of treasury shares   (17,000,000)
C.3 Disposals of businesses    
C.4 Other changes    
D. Shares in issue: closing amount   826,649,366 
D.1 Treasury shares (+)   (6,299,458)
D.2 Shares held at the end of the period   832,948,824 
– fully paid up   832,948,824 
– partially paid up    

 

220 | Consolidated financial statements as at 30 June 2024

 

 

On 11 June last, an additional 17,000,000 treasury shares were cancelled, keeping in the portfolio the number needed to cover its performance share plans and other commitments. As part of the performance share plans, 1,981,127 shares were allocated during the year, 1,289,777 of which through treasury shares and 691,350 through a capital increase. The item “Disposals of treasury shares” includes shares to cover the deferred portion of the plan to acquire the shareholding in the English partnership Arma Partners LLP, which provides for the possibility of using own shares.

 

The changes in the Reserve for treasury shares during the year were as follows:

 

Items/Values  Number of shares   Value (€’000) 
Reserve for treasury shares: opening amount at 30 June 2023   8,454,929    78,876 
Increases   17,000,000    197,959 
– Newly issued shares        
– Purchases of treasury shares   17,000,000    197,959 
– Other changes        
Decreases   19,155,471    208,006 
– Cancellations   17,000,000    185,743 
– Disposals of treasury shares   2,155,471    22,263 
– Other changes        
Reserve for treasury shares: closing amount at 30 June 2024   6,299,458    68,828 

 

13.4 Profit reserves: other information

 

Items/Values  30 June 2024   30 June 2023 (*) 
Legal reserve   88,834    88,728 
Reserve under articles of association   188,163    720,073 
Treasury shares   68,828    78,876 
Other   7,035,149    6,788,745 
Total   7,380,974    7,676,422 

 

(*)  The data as at 30 June 2023 were restated following the entry into force of the eighth update of Bank of Italy Circular No. 262/2005, which transposed the new standard IFRS 17 – Insurance Contracts.

 

13.5 Equity instruments: breakdown and annual changes

 

There is no other information to be disclosed other than that already reported on this section.

 

Notes to the accounts | Part B - Notes to the consolidated Balance Sheet | 221

 

 

SECTION 14

 

Heading 190: Minority interests

 

14.1 Heading 190: Minority interests: breakdown

 

Company Name  30 June 2024   30 June 2023 
1. SelmaBipiemme S.p.A.   72,973    91,719 
2. RAM Active Investments S.A.   302    906 
3. Polus Capital Group Ltd.   12,830    11,499 
4.Other minor   9    19 
Total   86,114    104,143 

 

Other Information

 

1. Commitments and financial guarantees given

 

    Nominal value of commitments
and financial guarantees given
             
                 
    Stage 1     Stage 2     Stage 3     Purchased
or originated
credit
impaired
assets
    Total
30 June
2024
    Total
30 June
2023
 
                       
                       
                       
                       
1. Loan commitments (1)      21,646,663       153,315       3,538             21,803,516       15,531,400  
a) Central Banks                                   2,901  
b) Public administrations     7,891,710                         7,891,710       3,158,946  
c) Banks     69,822                         69,822       30,050  
d) Other financial companies     2,128,363       33,230                   2,161,593       1,544,259  
e) Non-financial companies     8,532,352       45,561       2,190             8,580,103       7,784,394  
f) Households     3,024,416       74,524       1,348             3,100,288       3,010,850  
2. Financial guarantees given     1,079,767       6,231                   1,085,998       507,739  
a) Central Banks                                    
b) Public administrations                                    
c) Banks     8,099                         8,099       500  
d) Other financial companies     781,103                         781,103       13,288  
e) Non-financial companies     267,009       5,649                   272,658       470,560  
f) Households     23,556       582                   24,138       23,391  

 

(1) As of the current financial year, the item includes syndicated underwriting commitments

 

222 | Consolidated financial statements as at 30 June 2024

 

 

2. Other commitments and guarantees given

 

   Nominal Value   Nominal Value 
   30 June 2024   30 June 2023 
1. Other guarantees given   125,989    159,776 
of which: non-performing exposures        
a) Central Banks        
b) Public administrations        
c) Banks   478    478 
d) Other financial companies   41,376    47,839 
e) Non-financial companies   21,623    25,782 
f) Households   62,512    85,677 
2. Other commitments   122,106    132,587 
of which: non-performing exposures        
a) Central Banks        
b) Public administrations        
c) Banks   33,049    32,016 
d) Other financial companies   37,264    60,774 
e) Non-financial companies   51,793    39,797 
f) Households        

 

3. Assets established as collateral to secure own liabilities and commitments

 

   Amount   Amount 
Portfolios  30 June 2024   30 June 2023 
1. Financial assets measured at Fair Value through profit or loss   6,815,242    2,957,778 
2. Financial assets measured at Fair Value through other comprehensive income   4,431,804    2,166,220 
3. Financial assets measured at amortized cost   15,621,003    22,234,273 
4. Tangible assets        
of which: tangible assets that constitute inventories        
5. Equity Investments   117,386    22,765 

 

Notes to the accounts | Part B - Notes to the consolidated Balance Sheet | 223

 

 

5. Assets managed on behalf of third parties

 

  Amount   Amount 
Type of service  30 June 2024   30 June 2023 
1. Orders execution on behalf of customers          
a) purchases   62,573,919    50,053,053 
1. settled   62,499,517    49,699,700 
2. unsettled   74,402    353,353 
b) sales   52,948,884    41,972,612 
1. settled   52,874,482    41,619,259 
2. unsettled   74,402    353,353 
2. Portfolio management          
a) Individual   8,325,977    7,856,270 
b) Collective   19,992,365    18,317,545 
3. Custody and administration of securities          
a) third-party securities deposited: relating to depositary banks activities (excluding portfolio management)   10,683,292    9,097,812 
1. securities issued by companies included in the area of consolidation   1,425,048    2,524,304 
2. other securities   9,258,244    6,573,508 
b) third-party securities deposited (excluding portfolio management): other   32,750,274    26,179,576 
1. securities issued by companies included in the area of consolidation   30,000    30,000 
2. other securities   32,720,274    26,149,576 
c) third-party securities deposited with third parties   21,063,425    16,240,406 
d) own securities deposited with third parties   9,394,684    11,893,879 
4. Other transactions   6,323,436    13,563,348 

 

6.Financial assets subject to netting arrangements or master netting or similar agreements

 

  Amount of   Net amount
of financial
  Related amounts not offset   Net amount     
Instrument type  Gross amount
of financial
assets (a)
  financial
liabilities
offset (b) (1) 
  assets stated
in the balance
sheet (c=a-b)
  Financial
instruments (d)
  Cash deposits
received as
guarantee (e)
   (f=c-d-e)
30 June
2024
   Net amount
30 June
2023
 
1. Derivatives   768,208      768,208   279,002   93,539    395,667    57,616 
2. Reverse repos   5,375,005      5,375,005   5,375,005            
3. Securities lending                        
4. Other                        
Total 30 June 2024   6,143,213      6,143,213   5,654,007   93,539    395,667    X 
Total 30 June 2023   6,714,763   1,870,581   4,844,182   4,767,739   18,827    X    57,616 

 

(1)  Relating to transactions in derivative financial instruments with a central counterparty with which a master netting agreement on a daily basis was in place.

 

224 | Consolidated financial statements as at 30 June 2024

 

 

7.Financial liabilities subject to netting arrangements or master netting or similar agreements

 

               Related amounts not offset         
Instrument type  Gross amount
of financial
liabilities (a)
   Amount of
financial
assets offset
(b)
   Net amount
of financial
liabilities
stated (c=a-b)
   Financial
instruments
(d)
   Cash deposits
established as
guarantee
(e)
   Net amount
(f=c-d-e)
30 June
2024
   Net amount
(f=c-d-e)
30 June
2023
 
1. Derivatives   2,627,838    760,539    1,867,299    628,233    1,072,585    166,481    559,112 
2. Repos   10,096,131        10,096,131    10,096,131             
3. Securities lending                            
4. Other transactions                            
Total 30 June 2024   12,723,969    760,539    11,963,430    10,724,364    1,072,585    166,481    X 
Total 30 June 2023   6,335,723        6,335,723    5,399,262    377,349    X    559,112 

 

8. Securities lending operations

 

The tables below illustrate the Group’s operations in securities lending (and borrowing), broken down by type of instrument (sovereign debt, bank bonds and others), market counterparty (banks, financial intermediaries and clients) and form (loan secured by cash, other instruments, or unsecured).

 

Securities lending transactions for which collateral is put up in the form of cash fully available to the borrower are represented in the balance sheet as amounts due to or from banks or customers under the heading “repos”. Securities lending transactions for which collateral is put up in the form of other instruments, or which are unsecured, are represented as “off-balance-sheet exposures”.

 

  Type of security 
Type of securities lending transaction  Government securities   Bank securities   Other securities 
1. Cash-collateralized securities lending received from:       97,823    173,604 
a) Banks       96,965    173,263 
b) Financial institutions       858    341 
c) Customers            
2. Cash-collateralized securities lending provided to:       (236,955)   (605,806)
a) Banks       (236,955)   (605,806)
b) Financial institutions            
c) Customers            
Total securities lending (book value)       (139,132)   (432,202)

 

Notes to the accounts | Part B - Notes to the consolidated Balance Sheet | 225

 

 

  Type of security 
Type of securities lending transaction  Government securities   Bank securities   Other securities 
1. Security-collateralized or non-collateralized securities lending received from:   86,121    888,825    559 
a) Banks   1,454    598,027    482 
b) Financial institutions   84,667    290,798     
c) Customers           77 
2. Security-collateralized or non-collateralized securities lending provided to:   (1,765,391)   (815,998)   (1,311,016)
a) Banks   (543,903)   (815,998)   (711,463)
b) Financial institutions   (1,221,488)       (599,553)
c) Customers            
Total securities lending (Fair Value)   (1,679,270)   72,827    (1,310,457)

 

226 | Consolidated financial statements as at 30 June 2024

 

 

Part C – Notes to the Consolidated Profit and Loss Account

 

SECTION 1

 

Headings 10 and 20: Net interest income

 

1.1 Interest and similar income: breakdown

 

        Other   12 mths ended    12 mths ended 
Items/Instrument type  Debt securities   Loans   transactions   30/6/24   30/6/23 
1. Financial assets measured at Fair Value through profit or loss:   94,488    23,073        117,561    94,808 
1.1 Financial assets held for trading   89,347    2,664        92,011    74,272 
1.2 Financial assets designated at Fair Value   5,097    20,409        25,506    20,460 
1.3 Other financial assets mandatorily measured at Fair Value   44            44    76 
2. Financial assets measured at Fair Value through other comprehensive income   217,787        X    217,787    129,128 
3. Financial assets measured at amortized cost:   124,695    3,502,659        3,627,354    2,601,422 
3.1 Due from banks   7,095    353,775    X    360,870    180,196 
3.2 Due from customers   117,600    3,148,884    X    3,266,484    2,421,226 
4. Hedging derivatives   X    X             
5. Other assets   X    X    10,319    10,319    8,603 
6. Financial liabilities (1)    X    X    X    1    123 
Total   436,970    3,525,732    10,319    3,973,022    2,834,084 
of which: interest income on impaired assets       38,718        38,718    50,982 
of which: interest income from finance leases   X    82,487    X    82,487    62,023 

 

(1) Heading “6. “Financial liabilities” includes interest expenses as the result of negative interest rates.

 

Notes to the accounts | Part C – Notes to the Consolidated Profit and Loss Account | 227

 

 

1.2 Interest and similar income: other information

 

As at 30 June 2024, the balance of the account includes €298.1m (€231.8m) in connection with financial assets in foreign currencies.

 

1.3 Interest expenses and similar charges: breakdown

 

        Other   12 mths ended     12 mths ended 
Items/Instrument type  Debts   Securities   transactions   30/6/24   30/6/23 
1. Financial liabilities measured at amortized cost   (1,061,994)   (709,269)       (1,771,263)   (925,370)
1.1 Due to central banks   (96,882)   X    X    (96,882)   (105,542)
1.2 Due to banks   (398,252)   X    X    (398,252)   (156,729)
1.3 Due to customers   (566,860)   X    X    (566,860)   (223,695)
1.4 Securities in issue   X    (709,269)   X    (709,269)   (439,404)
2. Trading financial liabilities                    
3. Financial liabilities designated at Fair Value   (3,820)   (26,416)       (30,236)   (22,043)
4. Other liabilities and funds   X    X    (349)   (349)   (6)
5. Hedging derivatives (2)    X    X    (223,641)   (223,641)   (77,121)
6. Financial assets (1)    X    X    X        (1,951)
Total   (1,065,814)   (735,685)   (223,990)   (2,025,489)   (1,026,491)
of which: interest expense relating to lease liabilities   (4,884)   X    X    (4,884)   (2,671)

 

(1) Item 6 “Financial assets” includes interest expense as the result of negative interest rates.

(2) Mainly to hedge deposits.

 

1.4 Interest expense and similar charges: other information

 

As at 30 June 2024, the balance of the account included €182.2m (€131.8m) in connection with financial liabilities in foreign currencies.

 

1.5 Margins on hedging transactions

 

  12 mths ended   12 mths ended 
Items  30/6/24   30/6/23 
A. Positive margins on hedging transactions   1,984,042    732,225 
B. Negative margins on hedging transactions   (2,207,683)   (809,346)
C. Net balance (A-B)   (223,641)   (77,121)

 

228 | Consolidated financial statements as at 30 June 2024

 

 

SECTION 2

 

Heading 40 and 50: Net fee and commission income

 

2.1 Fee and commission income: breakdown

 

   12 mths ended   12 mths ended 
Type of service/Values   30/6/24    30/6/23 
a) Financial instruments   288,577    260,779 
1. Placement of securities   175,197    163,858 
1.1 Underwriting commitment and/or based on an irrevocable commitment        
1.2 Without an irrevocable commitment   175,197    163,858 
2. Receipt and sending of orders and execution of orders on behalf of clients   33,574    27,332 
2.1 Receipt and sending of orders for one or more financial instruments   33,574    27,332 
2.2 Execution of orders on behalf of customers        
3. Other commissions associated with activities linked to financial instruments   79,806    69,589 
of which: trading on own account   24,767    18,464 
of which: management of individual portfolio   55,039    51,125 
b) Corporate Finance   229,058    146,974 
1. Advisory on mergers and acquisitions   229,058    146,974 
2. Treasury services        
3. Other commissions connected with corporate finance services        
c) Advisory on investments   9,730    5,034 
d) Netting and settlement        
e) Collective portfolio management   115,054    108,674 
f) Custody and administration   36,495    31,079 
1. Depository bank   7,458    7,458 
2. Other fees associated with custody and administration   29,037    23,621 
g) Central administrative services for collective portfolio management        
h) Fiduciary activities   6,141    5,648 
i) Payment services   44,664    41,488 
1. Current accounts   16,385    14,285 
2. Credit cards   16,316    15,823 
3. Debit cards and other payment cards   8,365    7,958 
4. Wire transfers and payment orders   793    523 
5. Other fees linked to payment services   2,805    2,899 
j) Distribution of third-party services   95,516    95,961 
1. Collective portfolio management   5,499    4,344 
2. Insurance products   79,565    80,765 
3. Other products   10,452    10,852 
of which: individual portfolio management   10,359    10,724 
k) Structured finance        
l) Securitization servicing   441    526 
m) Loan commitments   82,483    73,383 
n) Financial guarantees issued   5,755    6,400 
of which: credit derivatives        
o) Lending transactions   33,988    20,501 
of which: factoring services (1)    33,620    18,263 
p) Currency trading   113    119 
q) Commodities        
r) Other commission income   44,531    39,406 
of which: for the management of multilateral trading facilities        
of which: for the management of organized trading systems        
Total   992,546    835,972 

 

(1) This item includes commission income relating to Buy Now Pay Later (BNPL) transactions, which increased during the financial year.

 

Notes to the accounts | Part C – Notes to the Consolidated Profit and Loss Account | 229

 

 

The table includes the contribution of the company Arma Partners in the amount of €65.7m, mainly in the item “b.1. Advisory on mergers and acquisitions”.

 

2.2 Fee and commission expenses: breakdown

 

Services/Amounts  12 mths ended
30/6/24
   12 mths ended
30/6/23
 
a) Financial instruments   (8,877)   (9,309)
of which: securities trading   (8,010)   (8,098)
of which: financial instruments placement   (210)   (1,187)
of which: management of individual portfolio   (657)   (24)
– Own assets   (657)   (24)
– Under mandate to third parties        
b) Netting and settlement        
c) Collective portfolio management   (7,682)   (8,185)
1. Own instruments        
2. Delegated to third parties   (7,682)   (8,185)
d) Custody and administration   (5,683)   (4,861)
e) Collection and payment services   (21,810)   (18,867)
of which: credit cards, debit cards and other payment cards   (10,207)   (9,730)
f) Securitization servicing        
g) Borrowing commitments        
h) Financial guarantees received   (87)   (142)
of which: credit derivatives        
i) Off-site distribution of financial instruments, products and services   (16,935)   (15,356)
j) Currency trading        
k) Other commission expense   (120,332)   (101,285)
Total   (181,406)   (158,005)

 

SECTION 3

 

Heading 70: Dividends and similar income

 

3.1 Dividends and similar income: breakdown

 

   12 mths ended
30/6/24
   12 mths ended
30/6/23
 
Item / Income  Dividends   Similar income   Dividends   Similar income 
A. Financial assets held for trading   108,278    4    62,524    24 
B. Other financial assets mandatorily measured at Fair Value       18,191        10,654 
C. Financial assets measured at Fair Value through other comprehensive income   11,554        5,556     
D. Equity investments                
Total   119,832    18,195    68,080    10,678 

 

230 | Consolidated financial statements as at 30 June 2024

 

 

SECTION 4

 

Heading 80: Net trading income (expense)

 

4.1 Net trading income (expense): breakdown

 

               Net income 
                   (expense) 
   Capital gains   Trading   Capital losses   Trading losses   [(A+B) - 
Transactions/ Income components  (A)   income (B)   (C)   (D)   (C+D)] 
1. Financial assets held for trading   232,281    441,652    (224,123)   (300,027)   149,783 
1.1 Debt securities   76,318    186,567    (57,673)   (181,852)   23,360 
1.2 Equity securities   155,904    253,382    (166,373)   (116,892)   126,021 
1.3 UCIT units   24    1,703    (77)   (1,283)   367 
1.4 Loans   16                16 
1.5 Other   19                19 
2. Trading financial liabilities                    
2.1 Debt securities                    
2.2 Liabilities                    
2.3 Other                    
3. Financial assets and liabilities: currency exchange gains/losses   X    X    X    X    (1,339)
4. Derivative instruments   1,269,775    2,845,236    (1,760,277)   (2,450,981)   (108,760)
4.1 Financial derivatives:   943,880    2,412,539    (1,464,014)   (2,055,408)   (175,516)
- on debt securities and interest rates (1)    471,353    1,673,988    (726,794)   (1,368,136)   50,411 
- on equity securities and stock indexes   450,692    722,848    (720,257)   (669,129)   (215,846)
- on currencies and gold   X    X    X    X    (12,513)
- Other   21,835    15,703    (16,963)   (18,143)   2,432 
4.2 Credit derivatives   325,895    432,697    (296,263)   (395,573)   66,756 
of which: natural hedges related to the Fair Value option   X    X    X    X     
Total   1,502,056    3,286,888    (1,984,400)   (2,751,008)   39,684 

 

(1) Of which, gains of €33,300 on interest rate derivatives (gains of €20,805 at 30 June 2023).

 

Notes to the accounts | Part C – Notes to the Consolidated Profit and Loss Account | 231

 

 

SECTION 5

 

Heading 90: Net hedging income (expense)

 

5.1 Net hedging income (expense): breakdown

 

   12 mths ended   12 mths ended 
Income components/Amounts  30/6/24   30/6/23 
A. Income from:          
A.1 Fair Value hedging instruments   1,013,065    489,724 
A.2 Hedged asset items (Fair Value)   389,945    145,523 
A.3 Hedged liability items (Fair Value)   54,550    582,802 
A.4 Cash flow hedging derivatives       3 
A.5 Assets and liabilities denominated in foreign currency        
Total gains on hedging activities (A)   1,457,560    1,218,052 
B. Charges on:          
B.1 Fair Value hedging instruments   (735,312)   (916,297)
B.2 Hedged asset items (Fair Value)   (57,316)   (247,748)
B.3 Hedged liability items (Fair Value)   (662,849)   (52,568)
B.4 Cash flow hedging derivatives        
B.5 Assets and liabilities denominated in foreign currency        
Total losses on hedging activities (B)   (1,455,477)   (1,216,613)
C. Net income (expense) from hedging activities (A-B)   2,083    1,439 
of which: income (expense) from hedges on net positions        

 

SECTION 6

 

Heading 100: Gain (loss) on disposals/repurchases

 

6.1 Gains (losses) on disposals/repurchases: breakdown

 

   12 mths ended 30/6/24   12 mths ended 30/6/23 
           Net profit           Net profit 
Items/Income components  Profits   Losses   (loss)   Profits   Losses   (loss) 
A. Financial assets                              
1. Financial assets measured at amortized cost   16,192    (15,586)   606    21,308    (16,881)   4,427 
1.1 Due from banks   95    (201)   (106)   1,559    (1,668)   (109)
1.2 Due from customers   16,097    (15,385)   712    19,749    (15,213)   4,536 
2. Financial assets measured at Fair Value through other comprehensive income   11,940    (5,509)   6,431    7,117    (13,856)   (6,739)
2.1 Debt securities   11,940    (5,509)   6,431    7,117    (13,856)   (6,739)
2.2 Loans                        
Total assets (A)   28,132    (21,095)   7,037    28,425    (30,737)   (2,312)
B. Financial liabilities measured at amortized cost                              
1. Due to banks                        
2. Due to customers                        
3. Debt securities in issue   4,515    (3,462)   1,053    7,831    (692)   7,139 
Total liabilities (B)   4,515    (3,462)   1,053    7,831    (692)   7,139 

 

232 | Consolidated financial statements as at 30 June 2024

 

 

SECTION 7

 

Heading 110: Net income (expense) from other financial assets and liabilities measured at Fair Value through profit or loss

 

7.1 Net change in the value of other financial assets and liabilities measured at Fair Value through profit or loss: breakdown of financial assets and liabilities designated at Fair Value

 

                   Net income 
                   (expense) 
   Capital gains   Gains on   Capital losses   Losses on   [(A+B) - 
Transactions/ Income components  (A)   disposal (B)   (C)   disposal (D)   (C+D)] 
1. Financial assets   40,740    6,015    (604)   (19)   46,132 
1.1 Debt securities   507    6,015    (604)   (19)   5,899 
1.2 Loans   40,233                40,233 
2. Financial Liabilities   155,685    27    (101,534)   (87,479)   (33,301)
2.1 Debt securities in issue (1)    44,781    27    (97,307)   (87,479)   (139,978)
2.2 Due to banks                    
2.3 Due to customers (2)    110,904        (4,227)       106,677 
3. Foreign-currency denominated financial assets and liabilities: currency exchange gains / losses   X    X    X    X    (790)
Total   196,425    6,042    (102,138)   (87,498)   12,041 

 

(1) Valuation that includes any certificates issued.

 

(2) Relating to loans received linked to securities exchange transactions with insurance counterparties. Both cases are covered by derivatives and other financial instruments whose value is measured under heading 80.

 

7.2Net change in the value of other financial assets and liabilities measured at Fair Value through profit or loss: breakdown of other financial assets mandatorily measured at Fair Value

 

                   Net income 
   Capital gains   Gains on   Capital losses   Losses on   (expense) 
Transactions/ Income components  (A)   disposal (B)   (C)   disposal (D)   [(A+B) - (C+D)] 
1. Financial assets   31,332    5,570    (14,463)   (113)   22,326 
1.1 Debt securities       7    (97)   (31)   (121)
1.2 Equity securities   1,445                1,445 
1.3 UCIT units   29,887    1,308    (14,366)   (82)   16,747 
1.4 Loans       4,255            4,255 
2. Financial assets: currency exchange gains/ losses   X    X    X    X    (238)
Total   31,332    5,570    (14,463)   (113)   22,088 

 

Notes to the accounts | Part C – Notes to the Consolidated Profit and Loss Account | 233

 

 

SECTION 8

 

Heading 130: Net value adjustments (write-backs) for credit risk

 

8.1 Net value adjustments for credit risk related to financial assets measured at amortized cost: breakdown (*) 

 

 

   Value adjustments (1)   Write-backs (2)   Total   Total 
                   Impaired acquisite               Impaired   12 mths   12 mths 
Transactions/          Stage 3   o originate   Primo           acquisite o   ended   ended 
Income components  Stage 1   Stage 2   Write-off   Other   Write-off   Other   stadio   Stage 2   Stage 3   originate   30/6/24   30/6/23 
A. Due from banks   (522)                       394                (128)   445 
– Loans   (500)                       261                (239)   317 
– Debt securities   (22)                       133                111    128 
B. Due from customers   (161,551)   (213,285)   (5,655)   (293,111)   (7,412)   (29,605)   205,538    119,099    108,700    31,134    (246,148)   (232,534)
– Loans   (158,729)   (207,630)   (5,655)   (293,111)   (7,412)   (29,605)   202,887    114,278    108,700    31,134    (245,143)   (228,098)
– Debt securities   (2,822)   (5,655)                   2,651    4,821            (1,005)   (4,436)
Total   (162,073)   (213,285)   (5,655)   (293,111)   (7,412)   (29,605)   205,932    119,099    108,700    31,134    (246,276)   (232,089)

 

(*) The amounts in the table contain the contribution of the company Revalea, sold in October for approximately €5m mainly under heading “B. Loans to customers - Financing”.

 

8.2 Net value adjustments for credit risk related to financial assets measured at Fair Value through other comprehensive income: breakdown

 

   Value adjustments (1)   Write-backs (2)   Total 
                   Impaired acquisite               Impaired   12 mths   12 mths 
Transactions/          Stage 3   o originate               acquisite o   ended   ended 
Income components  Stage 1   Stage 2   Write-off   Other   Write-off   Other   Stage 1   Stage 2   Stage 3   originate   30/6/24   30/6/23 
A. Debt securities   (5,853)   (379)                   3,491    743            (1,998)   716 
B. Loans                                                
– To customers                                                
– To banks                                                
Total   (5,853)   (379)                   3,491    743            (1,998)   716 

 

SECTION 9

 

Heading 140: Gains (losses) from contractual modifications without derecognition

 

9.1 Gains (losses) from contractual modifications: breakdown

 

This heading, which reflects a loss of €-159,000, includes the impact of modifications to contracts for financial assets which, as they do not constitute substantial modifications, under IFRS 9 and the Group’s own accounting policies, do not entail derecognition of the assets but require the modifications to the cash flows provided for contractually to be taken through the profit and loss account.

 

234 | Consolidated financial statements as at 30 June 2024

 

 

SECTION 10

 

Heading 160 - Income (expense) from insurance activities

 

Section 10 contains the tables required by the eighth update to Circular No. 262/2005, which took into account similar instructions issued by IVASS for the disclosure required by IFRS 17.

 

In particular, the tables show insurance revenues and costs attributable to insurance companies, broken down by aggregation level.

 

10.1 Insurance revenues and costs arising from insurance contracts issued - Breakdown

 

   Total 12 mths ended   Total 12 mths ended 
Items/Aggregation level  30/6/24   30/6/23 
A. Insurance revenues from insurance contracts issued measured according to GMM and VFA          
A.1 Amounts related to changes in residual coverage        
1. Claims incurred and other expected insurance service costs        
2. Change in the adjustment for non-financial risks        
3. Gains on contractual services recorded through profit or loss for services provided        
4. Other amounts        
A.2 Acquisition costs of recovered insurance contracts        
A.3 Total insurance revenues from insurance contracts issued measured according to GMM and VFA        
A.4 Total insurance revenues from insurance contracts issued measured according to PAA   30,851    35,536 
– Life segment        
– Non-Life / motor segment        
– Non-Life / non-motor segment   30,851    35,536 
A.5. Total insurance revenues from insurance contracts issued   30,851    35,536 
B. Costs for insurance services from insurance contracts issued – GMM or VFA          
1. Claims incurred and other directly attributable costs        
2. Changes in liabilities for claims incurred        
3. Losses on contracts for consideration and recovery of such losses        
4. Amortization of insurance contract acquisition costs        
5. Other amounts        
B.6 Total costs for insurance services from insurance contracts issued – GMM or VFA        
B.7 Total costs for insurance services from insurance contracts issued measured according to PAA   (9,486)   (6,558)
– Life segment        
– Non-Life / motor segment        
– Non-Life / non-motor segment   (9,486)   (6,558)
C. Total net costs/revenues from insurance contracts issued (A.5+B.6+B.7)   21,365    28,978 

 

Notes to the accounts | Part C – Notes to the Consolidated Profit and Loss Account | 235

 

 

10.3 Allocation of costs for insurance services and other services

 

   12 mths ended 30/6/24                 
       Level A2                     
   Level A1 -   - without   Level A1 +           Level A3 +     
Costs/Aggregation level  with DPF   DPF   Level A2   Level A3   Level A4   Level A4   Other 
Costs attributed to the acquisition of insurance contracts               (3,225)       (3,225)   X 
Other directly attributable costs                           X 
Investment management expenses   X    X        X    X         
Other costs   X    X        X    X         
Total   X    X        X    X    (3,225)    

 

   12 mths ended 30/6/23                 
       Level A2                     
   Level A1 -   - without   Level A1 +           Level A3 +     
Costs/Aggregation level  with DPF   DPF   Level A2   Level A3   Level A4   Level A4   Other 
Costs attributed to the acquisition of insurance contracts               (3,729)       (3,729)   X 
Other directly attributable costs                           X 
Investment management expenses   X    X        X    X         
Other costs   X    X        X    X         
Total   X    X        X    X    (3,729)    

 

SECTION 11

 

Heading 170: Other Income/Charges from insurance activities

 

Section 11 contains the tables required by the eighth update to Circular No. 262/2005, which took into account similar instructions issued by IVASS for the disclosure required by IFRS 17.

 

In particular, the tables show financial revenues and costs attributable to insurance companies, broken down by aggregation level.

 

11.1 Financial costs and revenues relating to insurance contracts issued

 

   Total 12 mths ended   Total 12 mths ended 
Items/Aggregation level  30/6/24   30/6/23 
1. Interest accrued        
2. Effect of changes in interest rates and other financial assumptions        
3. Changes in the Fair Value of the assets underlying contracts measured according to VFA        
4. Effect of changes in currency exchange rates        
5. Other   (143)   (220)
6. Total financial revenues / costs relating to insurance contracts issued, recognized   (143)   (220)

 

236 | Consolidated financial statements as at 30 June 2024

 

 

11.3Insurance operations - Net financial income (expense) of investments broken down by life and non-life segment

 

    12 mths ended 30/6/24     12 mths ended 30/6/23  
    Life segment         Life segment            
        of which:     Non-Life             of which:     Non-Life      
Items/Operating segments         DPF     segment     Total         DPF     segment     Total  
A. NET FINANCIAL INCOME (EXPENSE) FROM INVESTMENTS                 7,665       7,665                   5,224       5,224  
A.1 Interest income from financial assets measured at amortized cost and at Fair Value through other comprehensive income                 7,723       7,723                   5,242       5,242  
A.2 Net gains/losses from assets measured at Fair Value through profit or loss                                                
A.3 Net value adjustments /write-backs for credit risk                 (58 )     (58 )                 (18 )     (18 )
A.4 Other net costs / revenues                                                
A.5 Net capital gains / losses from financial assets measured at Fair Value through other comprehensive income                                                
B. NET CHANGE IN INVESTMENT CONTRACTS ISSUED IFRS 9                                                
C. TOTAL NET FINANCIAL INCOME (EXPENSE) FROM INVESTMENTS                 7,665       7,665                   5,224       5,224  
of which: through profit or loss                 7,665       7,665                   5,224       5,224  
of which: through other comprehensive income                                                

 

Notes to the accounts | Part C – Notes to the Consolidated Profit and Loss Account | 237

 

 

SECTION 12

 

Heading 190: Administrative expenses

 

12.1 Personnel cost: breakdown (*) 

 

   12 mths ended   12 mths ended 
Type of expense/Sectors  30/6/24   30/6/23 
1) Employees:   (786,290)   (710,812)
a) wages and salaries   (577,413)   (526,313)
b) social security contributions   (121,667)   (112,958)
c) severance pay   (4,214)   (3,456)
d) social security costs        
e) provisions for statutory end-of-service payments   (17,505)   (16,401)
f) provisions for retirement plans and similar provisions:   260    269 
– defined-contribution        
–defined-benefit (1)    260    269)
g) payments to external pension funds:   (18,985)   (17,795)
– defined-contribution   (18,985)   (17,795)
– defined-benefit        
h) expenses resulting from share-based payments   (15,831)   (11,177)
i) other employee benefits   (30,935)   (22,981)
2) Other staff in service   (8,275)   (6,514)
3) Directors and Statutory Auditors   (9,553)   (11,309)
4) Early retirement costs   (2,952)   (3,008)
Total   (807,070)   (731,643)

 

(1)  This figure refers to the benefit deriving from the “curtailment cost” and the “Plan amendments” decided by Caisse Bâloise.

 

(*)  These amounts include the contribution of the company Revalea, sold in October, for €0.6m mainly in the item “a) wages and salaries”; these amounts also contain the contribution of Arma Partners, which contributed €19.3m mainly under the heading “a) wages and salaries”.

 

12.2 Average number of employees by category

 

   12 mths ended   12 mths ended 
   30/6/24   30/6/23 
Employees:          
a) Senior executives   519    491 
b) Middle managers   2,231    2,211 
c) Other employees   2,281    2,330 
Other staff   336    336 
Total   5,368    5,367 

 

238 | Consolidated financial statements as at 30 June 2024

 

 

12.5 Other administrative expenses: breakdown (*) 

 

  12 mths ended   12 mths ended 
Type of service/Values  30/6/24   30/6/23 
OTHER ADMINISTRATIVE EXPENSES          
– legal, tax and professional services   (70,037)   (60,369)
– loan recovery activity   (60,333)   (75,941)
– marketing and communications   (55,408)   (49,157)
– real property   (25,866)   (23,005)
– EDP   (178,501)   (162,180)
– info–providers   (59,529)   (54,104)
– bank charges, collection and payment fees   (31,777)   (32,889)
– operating expenses   (66,854)   (66,635)
– other personnel costs   (19,718)   (19,434)
– other (1)   (85,491)   (99,960)
– indirect taxes and duties   (132,415)   (111,791)
Total other administrative expenses   (785,929)   (755,465)

 

(*) The amounts in the table include the contribution of the company Revalea, sold in late October, for €9.6m mainly in the item “loan recovery activities”; these amounts also contain the contribution of Arma Partners, which contributed €6m mainly under the headings “legal, tax and professional services” and “real property expenses”.

(1) This item includes contributions of €50.7m to resolution funds (€70.4m in the previous year), including €24.2m relating to the last DGS portion accrued on the stock of deposits as at 31 March 2024 and paid out at the beginning of July.

 

SECTION 13

 

Heading 200: Net transfers to provisions for risks and charges

 

13.1Net transfers for credit risk related to commitments to disburse funds and financial guarantees given: breakdown

 

   12 mths ended 30/6/24   12 mths ended 
       Reallocation of       30/6/23 
   Provisions   surplus   Total   Total 
Loan commitments   (8,013)   10,115    2,102    1,560 
Financial guarantees given   (2,124)   807    (1,317)   622 
Total   (10,137)   10,922    785    2,182 

 

13.2 Net transfers related to other commitments and guarantees given

 

   12 mths ended 30/6/24   12 mths ended 30/6/23 
      Reallocation of         Reallocation of    
   Provisions   surplus   Total   Provisions   surplus   Total 
Other commitments                   825    825 
Other guarantees given   (60)   40    (20)   (873)       (873)
Total   (60)   40    (20)   (873)   825    (48)

 

Notes to the accounts | Part C – Notes to the Consolidated Profit and Loss Account | 239

 

 

13.3 Net transfers to other provisions for risks and charges: breakdown

 

   12 mths ended 30/6/24     
       Riattribuzioni       12 mths ended 
   Provisions   di eccedenze   Total   30/6/23 
1. Other provisions                    
1.1 Legal disputes                
1.2 Personnel expenses               (26,000)
1.3 Other   (15,756)   12,023    (3,733)   (11,951)
Total   (15,756)   12,023    (3,733)   (37,951)

 

SECTION 14

 

Heading 210: Net value adjustments to /write-backs of tangible assets

 

14.1 Net adjustments to tangible assets: breakdown

 

   Amortization   Impairment losses   Writebacks   Net profit (loss) 
Asset/Income component  (a)   (b)   (c)   (a + b - c) 
A. Property, plant, and equipment   (71,112)   (16,589)   16,589    (71,112)
1 Core   (69,500)   (16,589)   16,589    (69,500)
– Owned   (19,568)   (16,589)   16,589    (19,568)
– Right-of-use assets acquired under lease   (49,932)           (49,932)
2 Held for investment purpose   (1,612)           (1,612)
– Owned   (1,612)           (1,612)
– Right-of-use assets acquired under lease                
3 Inventories   X             
Total   (71,112)   (16, 589)   16,589    (71,112)

 

240 | Consolidated financial statements as at 30 June 2024

 

 

SECTION 15

 

Heading 220: Net value adjustments to /write-backs of intangible assets

 

15.1 Net value adjustments to /write-backs of intangible assets: breakdown

 

   Amortization   Impairment losses   Writebacks   Net profit (loss) 
Asset/Income component  (a)   (b)   (c)   (a + b - c) 
A. Intangible assets   (38,568)   (41,906)       (80,474)
of which: software   (31,730)           (31,730)
A.1 owned   (38,568)   (41,906)       (80,474)
- Generated by the company internally                
- Other   (38,568)   (41,906)       (80,474)
A.2 Right-of-use assets acquired under lease                
Total   (38,568)   (41,906)       (80,474)

 

The amortization of the item Software (€31.7m in total) includes an additional amortization component (under IAS 8 – Changes in Accounting Estimates) of €6.8m following the recalculation of the useful life of intangible assets with a finite duration and in line with the strategy of systematic reduction of obsolescence promoted by the Group.

 

The item Other in the column “Value adjustments due to impairment” shows the impairment of brands with an indefinite useful life, formerly RAM and MA, for a total of €41.9m.

 

SECTION 16

 

Heading 230: Other operating income (expense)

 

16.1 Other operating expenses: breakdown

 

   12 mths ended   12 mths ended 
Type of service/Values  30/6/24   30/6/23 
a) Leases   (8,554)   (8,797)
b) Sundry costs and expenses (1)    (46,299)   (35,335)
Total other operating expenses   (54,853)   (44,132)

 

(1) This item includes the provision for the share of ordinary and extraordinary dividends attributable to minority interests, as well as the interests (interest B) attributable to minority partners in the Partnership.

 

Notes to the accounts | Part C – Notes to the Consolidated Profit and Loss Account | 241

 

 

16.2 Other operating income: breakdown

 

   12 mths ended   12 mths ended 
Type of service/Values  30/6/24   30/6/23 
a) Amounts recovered from customers   118,094    104,164 
b) Leases   8,484    8,096 
c) Other income   123,958    105,506 
Total other operating income   250,536    217,766 

 

SECTION 17

 

Heading 250: Gains (losses) on equity investments

 

17.1 Gains (losses) on equity investments: breakdown

 

   12 mths ended   12 mths ended 
Income components/Sectors  30/6/24   30/6/23 
1) Joint ventures          
A. Income        
1. Write-ups        
2. Gains on disposal        
3. Writebacks        
4. Other gains        
B. Expenses        
1. Write-downs        
2. Impairment losses        
3. Losses on disposal        
4. Other expenses        
Net profit (loss)        
2) Companies subject to significant influence          
A. Income   510,884    454,912 
1. Write-ups   510,884    454,912 
2. Gains on disposal        
3. Writebacks        
4. Other gains        
B. Expenses   (478)   (1,052)
1. Write-downs   (478)   (1,052)
2. Impairment losses        
3. Losses on disposal        
4. Other expenses        
Net profit (loss)   510,406    453,860 
Total   510,406    453,860 

 

242 | Consolidated financial statements as at 30 June 2024

 

 

SECTION 18

 

Heading 260: Net income from Fair Value measurement of tangible and intangible assets

 

18.1 Net income from Fair Value measurement or estimated realizable value of tangible and intangible assets: Breakdown

 

           Currency exchange     
Asset/Income component  Write-back
(a)
   Write-downs
(b)
   Gains
(c)
   Losses
(d)
   Net income 
A. Tangible assets       (1,610)           (1,610)
A.1 Core:                    
- Owned                    
- Right of use assets                    
A.2 Held for investment:       (1,100)           (1,100)
- Owned       (1,100)           (1,100)
- Right of use assets                    
A.3 Inventories       (510)           (510)
B. Intangible assets                    
B.1 Owned:                    
- Generated by the company internally                    
- Other                    
B.2 Right of use assets                    
Total       (1,610)           (1,610)

 

SECTION 19

 

Heading 270: Value adjustments to goodwill

 

19.1 Value adjustments to goodwill: breakdown

 

   12 mths ended   12 mths ended 
Income components  30/6/24   30/6/23 
Value adjustments to goodwill       (49,536)

 

The amount for financial year 2022/2023 referred to the derecognition of the goodwill of the subsidiary RAM AI.

 

Notes to the accounts | Part C – Notes to the Consolidated Profit and Loss Account | 243

 

 

SECTION 20

 

Heading 280: Gain (loss) on disposal of investments

 

20.1 Gain (loss) on disposal of investments: breakdown

 

   12 mths ended   12 mths ended 
Income components/Sectors  30/6/24   30/6/23 
A. Real property       2,911 
– Gains on disposal       2,911 
– Losses on disposal        
B. Other assets   90    (17,296)
– Gains on disposal   98    423 
– Losses on disposal   (8)   (17,719)
Net profit (loss)   90    (14,385)

 

As at 30 June 2023, this item included the capital loss recorded following the agreement entered into with Banca Ifis for the sale of the subsidiary Revalea S.p.A., which was finalized in October 2023.

 

SECTION 21

 

Heading 300: Income tax for the year on ordinary activities

 

21.1 Income tax for the year on ordinary activity: breakdown

 

   12 mths ended   12 mths ended 
Income components/Sectors   30/6/24    30/6/23 
1. Current taxes (-)   (330,476)   (353,837)
2. Changes in current taxes for previous years (+/-)   (440)   3,621 
3. Reduction in current taxes for the year (+)   172    570 
3. bis Reduction in current taxes for the year due to tax credits pursuant to Law No. 214/2011 (+)       8 
4. Changes in prepaid taxes (+/-)   (109,858)   (60,138)
5. Changes in deferred taxes (+/-)   6,630    15,300 
6. Taxes on income for the year (-) (-1+/-2+3+3bis+/-4+/-5)   (433,972)   (394,746)

 

In general, for IRES (corporate income tax) purposes, the tax loss generated by a company not participating in a tax consolidation may be calculated as a decrease in the income earned in subsequent years, in an amount not exceeding 80% of the taxable income for each period. In other words, the loss incurred in a financial year will generate future tax savings which, under certain conditions, may be presented for accounting purposes through the entry of credits for deferred tax assets. Within a tax consolidation, on the other hand, the share of tax losses incurred by a member company which is covered by the income

 

244 | Consolidated financial statements as at 30 June 2024

 

 

earned by the other participating companies generates an immediate tax saving, which is recognized as income by the company that contributed the loss.

 

21.2 Reconciliation between theoretical and effective tax burden

 

   12 mths ended 30/6/24 
   Value in %   Absolute value 
Total profit or loss before tax   100.0%   1,710,491 
Theoretical tax rate   27.50%   470,385 
Dividends (-)   -0.38%   (6,451)
Gains on disposals of equity investments (PEX) (+/-)   0.03%   501 
Gains on equity-accounted investments (-)   -7.59%   (129,796)
Other tax rates (non-financial and non-Italian companies) (+/-)   0.11%   1,941 
Non-taxable income 10% IRAP and staff cost (-)   -0.06%   (1,104)
Impairment (+/–)   0.67%   11,524 
Extraordinary items   -0.07%   (1,225)
Other changes (+/-)   0.02%   424 
Total IRES   20.24%   346,199 
IRAP (regional tax on production activities)   5.13%   87,773 
Total HEADING   25.37%   433.972 

 

SECTION 23

 

Heading 340: Net profit (loss) attributable to minority interests

 

23.1 Breakdown of Heading 340, “Net profit (loss) for the year attributable to minority interests”

  

   12 mths ended   12 mths ended 
Company name  30/6/24   30/6/23 
1. SelmaBipiemme S.p.A.    (2,743)   (2,140)
2. RAM Active Investments S.A.   620    101 
3. Polus Capital Group Ltd.   (1,014)   (995)
Total     (3,137)   (3,034)

  

Notes to the accounts | Part C – Notes to the Consolidated Profit and Loss Account | 245

 

 

SECTION 25

 

Earnings per share

 

25.1 Average number of ordinary shares on a diluted basis

 

   12 mths ended   12 mths ended 
   30/6/24   30/6/23 (*) 
Net profit   1,273,382    1,025,986 
Average number of shares in issue (1)    826,608,063    840,761,242 
Average number of potentially diluted shares   6,487,718    4,561,321 
Average number of diluted shares   833,095,781    845,322,563 
Earnings per share   1.54    1.22 
Earnings per share, diluted   1.53    1.21 

 

(*)  The data as at 30 June 2023 were restated following the entry into force of the eighth update of Bank of Italy Circular No. 262/2005, which transposed the new standard IFRS 17 – Insurance Contracts.
(1) The number of shares in issue at 30 June 2024 takes into account the shares repurchased under the buyback plan.

 

246 | Consolidated financial statements as at 30 June 2024

 

 

Part D – Consolidated comprehensive income

 

Statement of consolidated comprehensive income

 

    30 June 2024   30 June 2023 (*) 
Items  Net Amount   Net Amount 
10. Profit (loss) for the year   1,276,519    1,029,020 
  Other comprehensive income not reclassified through profit or loss          
20. Equity securities designated at Fair Value through other comprehensive income:   10,438    18,906 
  a) Fair Value changes   (40,564)   (43,652)
  b) transfers to other net equity items   51,002    62,558 
30. Financial liabilities designated at Fair Value through profit or loss (change in own credit quality):   (27,509)   (6,636)
  a) Fair Value changes   (27,509)   (6,636)
  b) transfers to other net equity items        
40. Hedge accounting of equity securities designated at Fair Value through other comprehensive income:        
  a) Fair Value change (hedged instrument)        
  b) Fair Value change (hedging instrument)        
50. Tangible assets        
60. Intangible Assets        
70. Defined benefit plans   258    1,012 
80. Non-current assets and asset groups held for sale        
90. Portion of valuation reserves of equity-accounted investments   (15,268)   46,091 
100. Financial costs or revenues relating to insurance contracts issued        
110. Income taxes relating to other income items not reclassified through profit or loss        
  Other income items through profit or loss          
120. Hedging of foreign investments:       319 
  a) Fair Value changes       319 
  b) transfer to profit or loss        
  c) other changes        
130. Currency exchange gains / losses:   6,515    1,172 
  a) Fair Value changes        
  b) transfer to profit or loss        
  c) other changes   6,515    1,172 
140. Cash flow hedging:   (158,734)   96,448 
  a) Fair Value changes   (158,734)   96,448 
  b) transfer to profit or loss        
  c) other changes        
  of which: income (expense) of net positions        
150. Hedging instruments (not designated items):        
  a) Fair Value changes        
  b) transfer to profit or loss        
  c) other changes        
160. Financial assets (other than equity securities) measured at Fair Value through other comprehensive          
  income:   42,847    (8,210)
  a) Fair Value changes   28,381    (10,584)
  b) transfer to profit or loss   14,466    2,374 
  - credit risk adjustments   1,337    (480)
  - gains/losses on disposals   13,129    2,854 
  c) other changes        
170. Non-current assets and asset groups held for sale:        
  a) Fair Value changes        
  b) transfer to profit or loss        
  c) other changes        
180. Portion of valuation reserves of equity-accounted investments:   18,667    (457,415)
  a) Fair Value changes        
  b) transfer to profit or loss        
  - impairment losses        
  - gains/losses on disposals        
  c) other changes   18,667    (457,415)
190. Financial costs or revenues relating to insurance contracts issued        
  a) Fair Value changes        
  b) transfer to profit or loss        
  c) other changes        
200. Financial costs or revenues relating to insurance contracts ceded        
  a) Fair Value changes        
  b) transfer to profit or loss        
  c) other changes        
210. Income taxes relating to other income items reclassified through profit or loss        
220. Total other income items   (122,786)   (308,313)
230. Comprehensive income (Headings 10 +190)   1,153,733    720,707 
240. Consolidated comprehensive income attributable to minority interests   3,118    3,628 
250. Consolidated comprehensive income attributable to the parent company   1,150,615    717,079 

 

(*)  The data as at 30 June 2023 were restated following the entry into force of the eighth update of Bank of Italy Circular No. 262/2005, which transposed the new standard IFRS 17 – Insurance Contracts.

 

Notes to the accounts | Part D – Comprehensive consolidated profit and loss account | 247

 

 

Part E – Information on risks and related hedging policies

 

INTRODUCTION

 

As part of the Group’s risks governance process, a key role is played by the Risk Management unit, which identifies, measures and monitors all the risks to which the Banking Group (or, the “Group”) is exposed, and manages and mitigates them in co-ordination with the various business areas. The unit’s main duties and responsibilities are described below, along with its characteristics in terms of independence, plus an indication of the role of the other company units in risk management(55).

 

For the qualitative disclosure, please refer to Section 2 - Consolidated prudential risks.

 

SECTION 1

 

Consolidated accounting risks

 

The accounting consolidation area includes the line-by-line consolidation of the subsidiary Compass RE (insurance companies), of the subsidiaries excluded from the Banking Group as per the Register of Banking Groups of the Bank of Italy (Compass Rent, MBContact Solutions, and RAM UK), and minor subsidiaries (Quarzo S.r.l., MBUSA, MB Covered, MB Immobiliere, MB Funding LUX, Spafid SIM, Spafid Trust, MA USA and Compass Link), which due to immateriality, as provided for in Article 19 of the CRR, are, instead, consolidated with the equity method within the prudential scope of application.

 

(55)  For discussion of credit risk, reference is made to section 2, “Prudential consolidation risks”, sub-section 1.1, “Credit risk: Qualitative information”, § 2, “Credit risk management policies”; for discussion of market risks, reference is made to sub-section 1.2, “Market risks”; on exchange rate risks, see § 1.2.3, “Exchange rate risk”; on liquidity risk, see section 1.4, “Liquidity risk”; and on operational risks, see section 1.5, “Operational risks”.

 

248 | Consolidated financial statements as at 30 June 2024

 

 

QUANTITATIVE INFORMATION

 

A. Credit quality

 

A.1 Non-performing and performing exposures: amounts, value adjustments, trends and segmentation by earnings

 

A.1.1 Financial assets by portfolio and credit quality (book value)

 

               Overdue non-   Overdue   Other     
           Unlikely to   performing   performing   performing     
Portfolio/quality     Bad loans   pay   exposures   exposures   exposures   Total 
1. Financial assets measured at amortized cost   29,626    231,423    152,604    207,159    63,538,124    64,158,936 
2. Financial assets measured at Fair Value through other comprehensive income                   6,649,463    6,649,463 
3. Financial assets designated at Fair Value                   719,215    719,215 
4. Other financial assets mandatorily measured at Fair Value                   1,938    1,938 
5. Financial assets held for sale (*)                         
Total 30 June 2024   29,626    231,423    152,604    207,159    70,908,740    71,529,552 
Total 30 June 2023   279,711    216,091    117,421    244,388    68,283,327    69,140,938 

 

(*)  The amount of non-performing loans as at 30 June 2023 included NPLs acquired by Revalea in an amount of €238.8m.

 

Overdue performing loans concern overdue performing loans and mainly refer to factoring (€58.1m, 0.8% of total performing loans of the segment) and mortgage loans (€58.8m, i.e. 0.8%). The item also includes net exposures being renegotiated under the terms of collective agreements amounting to €91.2m, consisting primarily of mortgage loans (€90.3m). Of the overdue performing loans, the instalments actually unpaid stood at 28% (gross value of €73.1m).

 

Notes to the accounts | Part E - Information on risks and related hedging policies | 249

 

 

A.1.2 Financial assets by portfolio/credit quality (gross/net values)

 

     Non-performing   Performing     
Portfolio/quality 

Gross

exposure 

  

Overall

value

adjustments

  

Net

exposure 

  

Overall

partial

write-offs

  

Gross

exposure 

   Overall
value
adjustments
   Net
exposure
   Total (Net
exposure)
 
1. Financial assets measured at amortized cost  1,330,078   (916,425)  413,653   945   64,446,106   (700,823)  63,745,283    64,158,936 
2. Financial assets measured at Fair Value through other comprehensive income              6,657,116   (7,653)  6,649,463    6,649,463 
3. Financial assets designated at Fair Value              X   X   719,215    719,215 
4. Other financial assets mandatorily measured at Fair Value  6,636   (6,636)        X   X   1,938    1,938 
5. Financial assets held for sale                         
Total 30 June 2024  1,336,714   (923,061)  413,653   945   71,103,222   (708,476)  71,115,899    71,529,552 
Total 30 June 2023  1,582,068   (968,845)  613,223   3,662   68,709,039   (721,911)  68,527,715    69,140,938 

 

     Assets with obviously poor credit quality   Other assets 
Portfolio/quality  Minusvalenze
cumulate
   Net exposure   Net exposure 
1. Financial assets held for trading         11,622,385 
2. Hedging derivatives         560,457 
Total 30 June 2024         12,182,842 
Total 30 June 2023         9,672,011 

 

Net non-performing assets as at 30 June 2023 include €238.8m in the portfolio of Revalea sold in October of the previous year.

 

250 | Consolidated financial statements as at 30 June 2024

 

 

Information on sovereign debt exposures

 

A.1.2a Exposures to sovereign debt securities by state and portfolio (*) 

 

   Non-performing   Performing     
Portfolio/quality  Gross
exposure
  Individual
adjustments
   Portfolio
adjustments
   Net
exposure
   Gross
exposure
   Portfolio
adjustments
   Net
exposure
   Total Net
exposure (1) 
 
1. Financial assets held for trading             X   X   1,498,038   1,498,038 
  France             X   X   1,220,030   1,220,030 
  Germany             X   X   (26,761)  (26,761)
  Italy             X   X   76,928   76,928 
  Belgium             X   X   135,073   135,073 
  Other             X   X   92,768   92,768 
2. Financial assets measured at Fair Value through other comprehensive income             5,640,627      5,640,627   5,640,627 
  Italy             3,394,098      3,394,098   3,394,098 
  Germany             1,132,387      1,132,387   1,132,387 
  United States             537,473      537,473   537,473 
  Spain                 249,787       249,787   249,787 
  Other             326,882      326,882   326,882 
3. Financial assets measured at amortized cost             3,213,979      3,213,979   3,213,979 
  Italy             1,985,197      1,985,197   1,985,197 
  Germany             49,202      49,202   49,202 
  United States             506,751      506,751   506,751 
  France             640,696      640,696   640,696 
  Other             32,133      32,133   32,133 
Total 30 June 2024             8,854,606      10,352,644   10,352,644 

 

(*)  This does not include financial or credit derivatives.
(1)   The net exposure includes positions in securities (long and short) measured at Fair Value (including the outstanding accrual) except for assets held to maturity which are measured at amortized cost, whose implied Fair Value is €-47m.

 

Notes to the accounts | Part E - Information on risks and related hedging policies | 251

 

 

A.1.2b Exposures to sovereign debt securities by portfolio of financial assets (*) 

 

   Trading Book (1)    Banking Book (2)  
Portfolio/quality  Nominal Value   Book Value   Duration   Nominal Value   Book Value   Fair Value   Duration 
Italy  1,116,469   1,220,030   0.69   5,459,426   5,379,295   5,349,168   4.08 
United States  (23,731)  (26,761)  0.76   1,170,000   1,181,589   1,181,231   2.38 
Germany  83,800   76,928   3.11   1,060,000   1,044,224   1,038,474   2.11 
France           906,119   890,482   880,817   1.39 
Other  235,032   227,841      353,091   359,015   358,147    
Total 30 June 2024  1,411,570   1,498,038      8,948,636   8,854,605   8,807,837    

 

(*)  This figure does not include forward sales with a notional amount of €354m.
(1)   This item does not include sales on the Bund/Bobl/Schatz future (Germany) for €2.5m (with a negative Fair Value of €0.1m) and sales on the BTP future (Italy) for €604m (with a positive Fair Value of €3.5m); moreover, net hedging purchases of €485m, €360m of which attributable to Germany country risk, were not counted.
(2)   This item does not include the instrument linked to the appreciation of Greek GDP (referred to as “GDP Linkers Securities”) with a notional amount of €127m.

 

B. Information on structured entities

 

In accordance with the provisions of IFRS 12, the Group treats the entities it sets up in order to achieve a limited and well-defined objective regulated by contractual agreements that often impose narrow restrictions on the decision-making powers of its governing bodies as structured entities (i.e. special purpose vehicles, SPV, or special purpose entities, SPE). Such entities are structured to ensure that the voting rights (or similar) are not the main factor in establishing who controls them (the relevant activities are often governed by contractual agreements agreed when the entity itself is structured and are therefore difficult to change).

 

B.1 Consolidated structured entities

 

As stated in Part A – Section 3 of the Notes to the Accounts, the securitization SPVs instituted pursuant to Italian law 130/99, namely Quarzo S.r.l. and MB Funding Lux S.A., a company incorporated under Luxembourg law and 100%-owned by Mediobanca S.p.A., are included in the Group’s area of consolidation.

 

B.2 Structured entities not consolidated in accounting terms

 

The Group has no other interests in the capital of structured entities to report, apart from the stock units held in UCITs in connection with its activities as sponsor (Premier Mediobanca!, CMB Monaco, Polus Capital Management and RAM

 

252 | Consolidated financial statements as at 30 June 2024

 

 

Active Investments) and as investor in funds promoted by Mediobanca S.p.A., which include Seed Capital activities for funds managed by Group companies.

 

B.2.1 Structured entities consolidated prudentially

 

As at 30 June 2024 there was no disclosure to be made as no instances of this type of interest apply.

 

B.2.2 Other structured entities

 

QUALITATIVE INFORMATION

 

The Group’s operations are performed through special purpose vehicles (SPVs), as follows:

 

UCITS

 

With regard to RAM Active Investments SA funds, the Parent Company subscribed to investments for a NAV of €167.5m, which concerns RAM Global Sustainable Income Equities (€16.4m), RAM Stable Climate Global Equities (€35.1m), RAM Global Multi-Asset (€38.9m), RAM Asia Bond Total Return (€16.5m), RAM Mediobanca Strata UCITS Credit (€60.6m); all of the above investments are UCITS established under Luxembourg law with a NAV calculated daily, to which direct investments of €3m should be added.

 

With regard to Polus Capital Management, the Group had investments of €224.4m in place (€163.3m as at 30 June); specifically, the Parent Company invested €80.9m in the credit fund Polus European Loan Fund and €44.8m in the CLO vehicles called CLI Holdings I (€7.8m) and CLI Holdings II (€37m),(56)  to which the following two new investments were added starting from the year under review: €84.7m in the new Luxembourg closed-end alternative fund Polus Special Situations Fund(57) subscribed by Mediobanca International  

 

(56)   For the latter, it should be noted that during the financial year, a hedging transaction was negotiated with a major insurance company via insurance policy for an initial €25m. For further details, please refer to Section C-Securitization Transactions.
(57)   With regard to the PSSF structure, investments are made through three Feeder funds (société en commandite spéciale) denominated in various currencies (USD, EUR, GBP) and flow into a Master fund (also société en commandite spéciale) denominated in Euros which implements the investment strategy. The General Partner of the fund is Polus Special Situations Fund (GP) S.A.R.L, which is responsible for the operation of the fund, but does not make investments and has no economic interest in it. Polus Capital Management Limited is the Portfolio Manager of PSSF.

 

Notes to the accounts | Part E - Information on risks and related hedging policies | 253

 

 

Luxemburg; new CLO operations in the United States (whose first transaction in the warehousing phase), which had an outlay of €9.1m.(58)

 

With regard to the funds managed by Mediobanca SGR and Mediobanca Management Company, the Group subscribed to funds for €23.1m (€38.4m at 30 June), which included €13.6m subscribed by the Parent Company mainly in the Mediobanca Euro High Yield (€4.6m) and Mediobanca Social Impact (€8.2m) funds, in addition to investments of €7.5m subscribed by Mediobanca Premier in the Mediobanca Schroder Diversified Income Bond ESG bond fund.

 

CMB Monaco placed four segments of CMB Global Lux (a company authorized under Luxembourg law) with its clients; the SICAV is managed by CMB Monaco itself, while the management and custody of the funds is the responsibility respectively of its subsidiary CMG Monaco and CACEIS Luxembourg. As at 30 June 2024, the Parent Company held no investment in the segments referred to above.

 

Mediobanca also invests in the Negentropy RAIF fund, an alternative investment fund incorporated under Luxembourg law managed by Negentropy Capital Partners Limited, with an investment of €61.3m (€64.1m as at 30 June last).

 

The process of delegating and sub-delegating investment activities, along with the broad powers of discretion afforded to delegates and the temporary nature of the investments mean that the ability to impact on returns stipulated by IFRS 10 as a precondition for establishing control of SICAVs does not apply in these cases; hence Mediobanca does not have direct control.

 

Asset-backed SPEs

 

The entities in this case have been set up to acquire, build or manage physical or financial assets, for which the prospect of recovering the credit concerned depends largely on the cash flows to be generated by the assets.

 

As part of its ordinary lending operations, the Group finances asset-backed SPEs but without holding any form of direct equity stake or interest in them, hence this does not qualify as acting as sponsor.

 

(58)  €4.5m of which subscribed by the Parent Company and €4.7m directly by Polus.

 

254 | Consolidated financial statements as at 30 June 2024

 

 

Hold to Collect lending transactions, recorded under asset Heading 40, “Financial assets measured at amortized cost – due from customers: composition”, in which the Group is the sole lender, involve an amount of €620.6m.

 

QUANTITATIVE INFORMATION

 

Balance-sheet item/SPE type  Accounted for under asset heading  Total
assets
(A)
   Accounted
for under
liability
heading
   Total
liabilities
(B)
   Net
asset
value
(NAV)
(C=A-B)
   Maximum
exposure
to risk of
loss
(D)
   Difference
between
exposure
to risk
of loss and
NAV
(E=D-C)
 
Polus European Loan Fund  Financial assets mandatorily measured at Fair Value  80,949         80,949   80,949    
Cairn Loan Investments Holding I  Financial assets mandatorily measured at Fair Value  7,823         7,823   7,823    
Cairn Loan Investments Holding II  Investments measured using the Equity Method under IAS 28  37,003         37,003   37,003    
Polus Special Situations Fund  Financial assets mandatorily measured at Fair Value  84,734         84,734   84,734    
US CLO  Financial assets mandatorily measured at Fair Value  9,159         9,159   9,159    
Other Cairn Funds  Financial assets mandatorily measured at Fair Value  4,719         4,719   4,719    
RAM Mediobanca Strata UCITS Credit Fund  Financial assets mandatorily measured at Fair Value  60,642         60,642   60,642    
RAM — Asia Bond Total Return  Financial assets mandatorily measured at Fair Value  16,523         16,523   16,523    
RAM — Global Sustainable Income Equities  Financial assets mandatorily measured at Fair Value  16,338         16,338   16,338    
RAM — Global Multi—Asset  Financial assets mandatorily measured at Fair Value  38,852         38,852   38,852    
RAM Stable Climate Global Equities  Financial assets mandatorily measured at Fair Value  35,115         35,115   35,115    
Mediobanca Schroder Diversified Income Bond ESG  Financial assets mandatorily measured at Fair Value  7,530         7,530   7,530    
Mediobanca Social Impact  Financial assets mandatorily measured at Fair Value  8,247         8,247   8,247    
Mediobanca Fondo per le Imprese II  Financial assets mandatorily measured at Fair Value  776         776   776    
Mediobanca Euro High Yield  Financial assets mandatorily measured at Fair Value  4,586         4,586   4,586    
Negentropy RAIF Fund  Financial assets mandatorily measured at Fair Value  61,265         61,265   61,265    
CMG Funds  Financial assets mandatorily measured at Fair Value  49         49   49    
Asset-backed SPEs  Financial assets at amortized cost  620,610         620,610   620,610    

 

Notes to the accounts | Part E - Information on risks and related hedging policies | 255

 

 

B.2 Leveraged finance transactions

 

The scope of Leveraged Transactions, according to the ECB definition, concerned exposures to counterparties with sub-investment grade ratings and:

 

whose ratio between the total committed gross debt and EBITDA, at the time of disbursement, was 4 times higher (if it is 6 times higher, the transactions would be classified as “Highly Leveraged Transactions”), or;

 

Group Legal Entities (with more than 50% of the share capital) owned or possessed by a financial sponsor.

 

At 30 June 2024, the total exposure of Leveraged Transactions amounted to €2,452m,(59) a decrease of 45% on the previous year representing 16% of the total Corporate Loan portfolio, i.e. approximately 5% of the Group’s RWA.

 

The portion of “Highly Leveraged Transactions” (HLT) amounted to €1,119m (with an impact of 15% on CET1), down compared to June 2023 (respectively €1,845m); of these only €87m were “Pure LBOs” compared to an NPL share which was significantly reduced from €112m to €12m.

 

The leveraged exposure is mainly related to the Corporate (51%), Holding (33%) and Infrastructure (11%) categories.

 

During the financial year, overall new loans of €152m were recorded, offsetting terminations and net repayments of €1,793m. Exits from the Leveraged scope due to an improvement in the classification parameters amounted to €350m.

 

Compared to the previous financial year, the incidence on the Leverage Finance portfolio of exposures with a “B” rating decreased from 21% to 5%, mainly due to certain repayments.

 

(59)   This includes off-balance sheet exposures (commitments and derivatives) of €938m.

 

256 | Consolidated financial statements as at 30 June 2024

 

 

SECTION 2

 

Prudential consolidation risk (*) 

 

1.1 CREDIT RISK

 

QUALITATIVE INFORMATION

 

Although risk management is the responsibility of each individual business unit, the Risk Management Unit presides over the functioning of the Group’s risk system, defining the appropriate global methodologies for measuring risks, current and future, in conformity with the regulatory requirements and the Group’s own operating choices identified in the RAF,(60) monitoring risks, and ascertaining that the various limits established for the various business lines are complied with.

 

Risk Management is organized around local teams based at the various Group companies, in accordance with the principle of proportionality, under the co-ordination of the Risk Management unit at Parent Company Mediobanca S.p.A. (the “Group Risk Management Unit”), which also performs specific activities for the Parent Company scope of risk, in the same way that the local teams do for their own companies. The Group Risk Management unit, reporting directly to the Chief Executive Officer and under the direction of the Group Chief Risk Officer, is made up of the following organizational units:

 

i) Risk Integration, which manages relations with the Supervisory Authorities and carries out the Group’s integrated processes (ICAAP, RAF, Recovery Plan); ii) Risk Transformation, responsible for developing, coordinating, streamlining and standardizing the evolution of IT within Risk Management; iii) CIB Credit Risk Management, responsible for defining and monitoring credit strategies and quantitative methodologies for measuring and managing credit risks; iv) Credit Risk Management, which is responsible for carrying out credit risk analysis, assigning internal ratings to counterparties and loss parameter in the event of insolvency; v) Retail Credit Risk Management, for the supervision of subsidiaries

 

(*)   The companies Compass RE, Compass Rent, MBContact Solutions, RAM UK, Quarzo S.r.l., MBUSA, MB Covered, MB Immobiliere, MB Funding LUX, Spafid SIM, Spafid Trust, MA USA, Compass Link, and Soisy are not included in the prudential consolidation scope. Please see Section 1 - Consolidated Accounting Risks in this Part E.
(60)   On 27 June 2024, the Board of Directors approved the Policy update on the definition of Risk Appetite and calibration of the risk appetite statement (RAS). In this Framework, based on the strategic plan and the maximum tolerable risk, the Group defines the level and type of risks which the Bank intends to assume, plus any objectives, tolerance thresholds and operating limits to be complied with under normal operating and stress conditions.

 

Notes to the accounts | Part E - Information on risks and related hedging policies | 257

 

 

operating in retail credit; vi) Financial Risk Management, which is responsible for monitoring market and counterparty risks, asset and liability management, monitoring liquidity risks and validating Fair Value methodologies; vii) Non-Financial Risk Management, responsible for monitoring operational and fraud risks, risks related to the distribution of investment products and services to customers, IT and security risks, as well as outsourcing risks; viii) Internal Validation & Control, which defines the methodologies, processes, tools and reporting used in internal validation activities, carries out the validation of the Group’s risk measurement systems, defines and carries out control activities regarding the Parent Company’s main credit processes.

 

With regard to the authorization process for the use of internal models for the calculation of regulatory capital requirements due to credit risk, please refer to paragraph “E. Prudential consolidation – credit risk measurement models”.

 

Impacts arising from the war in Ukraine and the Middle East

 

The Group’s portfolio does not show significant direct credit exposures to the Russian Federation, Ukraine and Belarus, nor to the Middle East.

 

The exposures as at 30 June 2024 confirmed those of the previous year and concerned approximately €13m in Corporate and Investment Banking, €366.7m in Private loans (€307m) and €92m in Retail (substantially unchanged).

 

The CIB direct exposure was provided by Mediobanca International and is classified at Stage 3 but is covered by insurance (Sace).

 

Private Banking exposures concern 65 households of CMB Monaco customers of Russian or Ukrainian nationality, most of whom reside in Europe or in any case abroad (only 5 households in reference to persons residing in the Russian Federation remain for €6.7m); however, these are largely loans secured by prestigious properties in the Monaco – Côte d’Azur area and/or by financial instruments deposited with the Bank (sureties altogether established on such exposures entail a limited Loan to Value, under 40%).

 

Retail Banking exposures concerned Compass clients (€61.8m) and Mediobanca Premier clients (€30m), classified according to their Russian and Ukrainian nationality, even though residing in Italy in nearly all cases.

 

258 | Consolidated financial statements as at 30 June 2024

 

 

2. Credit risk management policies

 

2.1 Organizational aspects

 

The Group has adopted a risk governance and control system structured across a variety of organizational units involved in the process, ensuring that all relevant risks to which the Group is or might be exposed are managed effectively, and at the same time guaranteeing that all forms of operations are consistent with their own risk appetite.

 

The Board of Directors, in view in particular of its role of strategic supervision, is responsible for approving strategic guidelines and directions of the Risk Appetite Framework (RAF), the adoption of Internal Rating Systems (IRB) at the Parent Company level and the Roll-Out Plan for gradually extending the IRB approach across the whole Group, business and financial plans, budgets, risk management and internal control policies, and the Recovery Plan drawn up in accordance with the provisions of the Bank Recovery and Resolution Directive (Directive 2014/59/EU).

 

The Risk Committee assists the Board of Directors in performing monitoring and investigation duties in respect of internal controls, risk management, and accounting infrastructure. The Statutory Audit Committee supervises the risk management and control system as defined by the RAF and the internal controls system, assessing the effectiveness of the structures and units involved in the process and coordinating them.

 

As part of the Parent Company’s risk governance system, the following managerial committees have specific responsibilities in the processes of taking, managing, measuring and controlling risks: Group Risk Management Committee, responsible for issuing guidance at the Group level in respect of all risks (not including the risk of conduct); Credit and Market Committee, with decision-making powers over credit, counterparty and market risks; New Operations Committee, for the preventive evaluation of new activities and approval of the entry into new sectors, new products and related pricing models.

 

2.2 Management, measurement and control systems

 

In the process of defining its Risk Appetite Framework (“RAF”), Mediobanca has determined the level of risk (overall and by individual type) which it intends to assume in order to pursue its own strategic objectives, and has identified the

 

Notes to the accounts | Part E - Information on risks and related hedging policies | 259

 

 

metrics to monitor and the relevant tolerance thresholds and risk limits. The RAF is the framework which links risks to the company’s strategy (translating mission and strategy into qualitative and quantitative risk variables) and risk objectives for the company’s operations (translating risk objectives into limits and incentives for each area).

 

As required by the prudential regulations, the formalization of risk objectives, through definition of the RAF, which are consistent with the maximum risk that can be taken, the business model and strategic guidance is a key factor in establishing a risk governance policy and internal controls system with the objective of enhancing the bank’s capability in terms of governing its own company risks, and also ensuring sustainable growth over the medium and long term. In this connection, the Group has developed a Risk Appetite Framework governance model which identifies the roles and responsibilities of the Corporate Bodies and units involved, with co-ordination mechanisms instituted to ensure the risk appetite is suitably incorporated into the management processes.

 

In the process of defining its Risk Appetite, the Parent Company:

 

identifies the risks which it is willing to assume;

 

defines, for each risk, the objectives and limits in normal and stressed conditions;

 

identifies the action necessary to bring the risk back within the set objective.

 

To define the RAF, based on the strategic positioning and risk profile set by the Group as its objective, the Risk Appetite statement is structured into metrics and risk thresholds, to be identified with reference to the following framework risk pillars, in line with best international practice: capital adequacy, liquidity and funding adequacy, profitability, bank-specific factors and non-financial risks. The Board of Directors has a proactive role in defining the RAF, guaranteeing that the expected risk profile is consistent with the Strategic Plan, budget, ICAAP and Recovery Plan, and structured into adequate and effective metrics and limits. For each pillar analysed, the risk assumed is set against a system of objectives and limits representative of the regulatory restrictions and the Group’s general attitude towards risk, as defined in accordance with the strategic planning, the internal capital adequacy assessment process (ICAAP), the internal liquidity adequacy assessment (ILAAP) and risk management processes.

 

260 | Consolidated financial statements as at 30 June 2024

 

 

In addition to identifying and setting the risk appetite parameters, the Bank also governs the mechanisms regulating the governance and processes for establishing and implementing the RAF, in terms of updating/reviewing, monitoring, and reporting to the Committees and Corporate Bodies. Based on its operations and the markets in which it operates, the Group has identified the relevant risks to be submitted to specific assessment in the course of the reporting for the ICAAP (Internal Capital Adequacy Assessment Process),(61) appraising its own capital adequacy from both a present and future perspective which takes into account the strategies and development of the reference scenario. As required by the provisions of the Capital Requirements Directive IV (“CRD IV”), the Group prepares an Internal Liquidity Adequacy Assessment Process document (ILAAP), describing the set of policies, processes and instruments put in place to govern liquidity and funding risks. The Group’s objective is to maintain a level of liquidity that enables it to meet ordinary and extraordinary payment obligations, while minimizing costs at the same time. The Group’s liquidity management strategy is based on the desire to maintain an appropriate balance between potential inflows and potential outflows, in the short and the medium/long term, by monitoring both regulatory and management metrics, in accordance with the risk profile defined as part of the RAF.

 

2.3 Methods for measuring expected losses

 

Under IFRS 9 “Financial Instruments”, assets not measured at Fair Value on a regular basis (i.e. financial assets and liabilities measured at amortized cost and off-balance sheet exposures) must be tested for impairment based on expected losses.

 

The internal rating models are the baseline instrument for determining the risk parameters to be used in calculating expected losses, subject to the regulatory indicators being adjusted for aspects which are not suitable to be used directly in an accounting environment (e.g. in some cases reconverting the data to reflect a “point-in-time” approach). Under IFRS 9, expected losses are calculated as the product of the PD, LGD and EAD metrics. This calculation is based on the residual life for instruments that have undergone a significant risk deterioration (referred to as “Stage 2”) or that show objective signs of deterioration (“Stage 3”) and over a 12-month horizon for instruments that do not fall into the previous categories (“Stage 1”). For off-balance sheet exposures,

 

(61)   In line with the provisions of the Bank of Italy contained in Circular No. 285 “Supervisory instructions for banks” of 17 December 2013 and subsequent updates.

 

Notes to the accounts | Part E - Information on risks and related hedging policies | 261

 

 

credit conversion factors arising from internal models are used to calculate expected losses; if there are no specific models, the factors associated with the standard EAD calculation are used.

 

The Group adopts qualitative and quantitative criteria to establish whether there has been a significant increase in credit risk (SICR), using backstop indicators, such as accounts which are thirty or more days overdue or have been classified as forborne, to assess whether or not they should be treated as Stage 2. Cases of low-risk instruments at the recording date are identified, compatible with classification as Stage 1 (low credit risk exemption), where there is a BBB-rating on the Standard & Poor’s scale, or a corresponding internal PD estimate.

 

Consistent with the options granted by IFRS 9, a change in forward-looking PD is used as the benchmark quantitative metric for measuring the Significant Increase in Credit Risk (SICR) for the purpose of identifying positions to be classified as Stage 2. The Group is transitioning to a method that involves the comparison of lifetime PDs between reference and origination dates, abandoning the use of twelve-month PDs. Compass and Mediobanca Premier applied this new method as of the year under review; with regard to Mediobanca, the preliminary assessments conducted revealed no material changes. The change in Lifetime PD selected to determine reclassification to Stage 2, and the qualitative elements observed, are specific to each Group company.

 

Provisioning reflects the sum of the expected credit losses (over a time horizon of twelve months or based on a lifetime approach(62) depending on the relevant Stage), discounted at the effective interest rate. The expected credit loss is the result of a joint assessment of three scenarios, a baseline scenario and two alternative scenarios. The scenarios, drawn up at Group level, are revised at least once every six months. In particular, scenarios are defined by the designated Group Economic and Macro Strategy (GEMS) unit, which is also responsible for assigning the relevant weights.

 

The weights of the scenarios used in determining ECL were set at 55% for the base scenario; 15% for the mild-positive scenario and 30% for the mild-negative scenario; the values represent the subjective probability of occurrence, quantified analytically by the GEMS unit based on the statistical distribution of previous estimate errors.

 

(62)  The lifetime approach considers the contractual expiry of the exposure where possible. For products which do not have a contractual expiry date (e.g. credit cards, bill repayment plans, cancellable credit lines, current accounts or overdrafts on current account), the calculation is made over a 12-month time horizon.

 

262 | Consolidated financial statements as at 30 June 2024

 

 

The Mediobanca Group uses additional provisions (overlays). Overlays were applied in the Corporate division (including Factoring and Leasing) concerning sectors particularly exposed to inflationary pressure in order to measure any risk peaks that the quantitative methodology captures only on an average basis. Overlays were maintained for retail positions (Consumer Banking and mortgage loans) against uncertainties of the macroeconomic framework, in continuity with the previous year; with reference to the Consumer Banking sector, the reduction of the overlay stock is linked to the absorption of ECLs as per the model for the rise of PD towards structural levels. The Group is reviewing the relevant internal regulations, among other things with the aim of strengthening its overlay governance in terms of both the decision-making process and possible scenarios, which will be implemented during the year 2024-2025 while addressing other areas for improvement that emerged after the ECB’s regular inspection activities.

 

With regard to the calculation of ECLs, sensitivity analyses were also carried out with respect to possible alternative macroeconomic scenarios in order to assess how the forward-looking factors could affect expected losses in different scenarios based on consistent forecasts during the evolution of the various macroeconomic factors. The number of possible interrelations between the individual macroeconomic factors is so high that a sensitivity analysis of expected losses based on one factor alone is practically meaningless. In particular, the impact resulting from applying the risk parameters obtained respectively through the adoption of a baseline scenario and two alternative scenarios, mild-positive and mild-negative, was estimated in terms of ECLs.

 

The analysis covered the exposures of the Group’s main portfolios: the Wholesale portfolio of Mediobanca S.p.A. and Mediobanca International, Mediobanca Private Banking portfolio, Mediobanca Premier mortgages, Compass consumer credit, MBFACTA factoring, Selma BPM leases.

 

The ECL calculated when the baseline scenario occurs resulted in a +0.4% change compared to the pre-overlay ECL. The ECL calculated with the mild-negative (mild-positive) scenario resulted in a +2.3% (-1.6%) change in the post-overlay ECL.

 

If one of the mild-negative, baseline and mild-positive scenarios occurs with certainty, the relative change in the Stage 2 exposure as a percentage of the

 

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performing exposure (gross carrying amount), including both on-balance-sheet and off-balance-sheet exposures, is +1%, -0.8% and -2% respectively.

 

2.4 Credit risk mitigation techniques

 

The Group has put in place a system for managing credit risk mitigation techniques, which covers the entire process of obtaining, assessing, supervising and implementing the mitigation instruments in use. The requirements for eligibility of collateral and guarantees are set out in Regulation (EU) 575/2013 of the European Parliament and of the Council as amended (the “CRR”). The Group has also compiled specific criteria by which collateral not recognized for regulatory purposes may in any case be recognized at the operating level as effective to mitigate credit risk.

 

The use of financial instruments or of moveable and immoveable assets as collateral and of personal guarantees is widespread in lending activity. In particular:

 

mortgage guarantees: when mortgages are taken out, valuations are required from independent experts; specific procedures are also in place to calculate the Fair Value of the asset and monitor it at regular intervals, based on market indicators furnished by external information providers; further valuations are also required in cases where significant departures are noted from the most recent valuation available;

 

pledges: pledges are valued according to the market value for listed financial instruments, or on the basis of their expected realizable value; prudential haircuts are then applied to the values thus calculated which differ according to the financial instruments over which the pledge has been made.

 

The Group also adopts risk mitigation policies by entering into netting and collateral agreements, verifying whether the agreements are legally valid and meet the regulatory criteria to be recognized for prudential purposes.

 

Credit Risk Mitigation activities are governed by specific Directives adopted by the Group companies concerned. The specific nature of the products originated by the individual businesses and the forms of collateral securing them, as well as the different organizational models necessarily adopted by the various Group Legal Entities, means that different CRM processes must coexist within the Group as a whole. In particular, the phases of obtaining the collateral, checking, reporting and assessing its eligibility may be performed by different

 

264 | Consolidated financial statements as at 30 June 2024

 

 

units. However, the role of Risk Management unit in setting eligibility criteria for regulatory and management purposes remains central, and the Group Risk Management unit is responsible for supervising overall consistency in this area. Controls of the mitigation instruments are included in the general risk control and management framework.

 

In Private Banking in particular, the situations most at risk have been identified, and for “Lombard” credit in particular work has begun quickly on restoring the collateral margins typically associated with this form of credit. The overall exposure reflects both portfolio diversification for the collateral and the haircuts required when the lending value is determined.

 

3. Non-performing credit exposures

 

The Group is distinguished by its prudent approach to risk, which is reflected in the fact that its overdue exposure levels (Non-performing loan - NPL) are among the lowest seen in the Italian national panorama. The Group’s management of non-performing loans also helps to keep their level low on the books, including the use of different options typically available, such as disposals (of both individual assets and portfolios), collateral enforcement, and negotiation of restructuring agreements.

 

The Group uses a single, like-for-like definition for the concepts of “default” as defined by the regulations on regulatory capital requirements, “non-performing”, used for supervisory reporting statistics, and Stage 3 assets, or “credit-impaired” assets, as defined by the accounting standards in force. In this regard, the Group has implemented the EBA Guidelines on the adoption of the definition of default (EBA/GL/2016/07), Delegated Regulation (EU) 2018/171 of the Commission of 19 October 2017, and Regulation (EU) 2018/1845 of the ECB of 21 November 2018. In line with these principles, instances of assets which qualify as “non-performing” include:

 

exposures identified using the 90 days past due principle, based on which the regulations referred to above have standardized the calculation criteria in use at EU level (in particular with reference to the applicable materiality thresholds, and the irrelevance of which instalment in particular is established as being past due for calculation purposes);

 

cases in which the credit obligation has been sold, leading to material losses in relation to the credit risk;

 

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debt restructuring which entails a cost, i.e. restructuring the debt of a borrower who is in or is about to encounter difficulties in meeting their own financial obligations, which may imply a significantly reduced financial obligation;

 

cases of insolvency or other systems of protection covering all creditors or all unsecured creditors, the terms and conditions of which have been approved by a judge in a court of law or another competent institution;

 

instances identified through other indicators of a borrower being unlikely to pay, such as the enforcement of guarantees, breach of given financial leverage ratios, negative evidence in information systems such as central credit databases, or the borrower’s sources of income suddenly becoming unavailable.

 

This approach is adopted differently within the individual Group companies, which, depending on the specific monitoring processes they have implemented, may choose to detect non-performing positions before the 90 days past due status by running individual analyses or applying automatic algorithms. Equally, the accounting measurement of non-performing exposures may reflect either the analysis of individual positions, or be based on identifying clusters of similar positions, depending on the specific nature of the Group company’s business.

 

At the monitoring stage, the write-off for credit losses on financial assets is also assessed, i.e. when in part or in whole. Those write-offs are possible even before completion of the legal action to recover the asset, and this does not necessarily entail waiving the legal right to recover the amount.

 

In order to adequately monitor the management of NPL portfolios, in recent years, several measures have been issued by the Regulator for the purpose of directing the financial sector towards minimizing their stocks of non-performing portfolios and speeding up recovery. On 26 April 2019, the European Parliament published an amendment to Regulation (EU) 575/2013 (CRR) in the Official Journal with the inclusion of rules to be applied for the coverage of NPLs (referred to as Calendar Provisioning) deriving from loans granted starting from the date of issue of the amended Regulation. For supervisory reporting purposes, Calendar Provisioning requires the full hedging of non-performing loans once they have been held in the portfolio for a defined period.

 

266 | Consolidated financial statements as at 30 June 2024

 

 

4 Financial assets subject to commercial renegotiations and forbearance measures

 

Financial assets may be subject to contractual amendments based primarily on two different needs: maintaining a mutually satisfactory commercial relationship with clients, or re-establishing/improving the credit position of customers who are facing, or about to face, difficulties in complying with the commitments they have entered into.

 

The former case, defined as commercial renegotiation, recurs when the client might want to end the relationship, as a result of its credit quality and of favourable market conditions. In a situation such as this, changes can be made at the client’s initiative or on a preventative basis in order to maintain the relationship with the client by improving the commercial terms offered, without prejudice to a satisfactory return on the risk and in compliance with the general strategic objectives (e.g. in terms of target customers).

 

The second case, which corresponds to the notion of forbearance measure, is detected in accordance with specific regulations when contractual amendments are made or refinancing arrangements are entered into.

 

For an exposure to be classified as forborne, the Group assesses whether or not such concessions (typically rescheduling expiry dates, suspending payments, refinancing operations or waivers to covenants) occur as a result of a situation of financial difficulty which can be traced to the accumulation, actual or potential (if concessions are not granted), of more than thirty days past due. Assessment of the borrower’s financial difficulties is based primarily on individual analysis carried out as part of corporate banking and leasing business, whereas certain predefined conditions apply in the case of consumer credit activities (for example, observation of deferrals granted) and real estate loans (e.g. whether the borrower has been made unemployed, cases of serious illness and/or divorce and separation).

 

Both non-performing exposures and exposures whose difficulties are still compatible with their being treated as performing may be classified as forborne. However, as described in the previous sections, a position being assigned the status of “forborne” is considered to be incompatible with its being treated as Stage 1. For this reason, based on the regulations on supervisory statistical reporting, there is a minimum period of time during which an exposure can

 

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be classified as “forborne” and this is reflected in the prudential transitions between Stages 1, 2 and 3. For instance, when concessions have been made in respect of Stage 2 exposures, these exposures cannot return to Stage 1 in less than two years, in line with the minimum duration requirement of two years provided for the “forborne performing exposure” status (during this period, the status can only be downgraded to reflect the exposure’s transition to non-performing). Similarly, exposures in Stage 3 cannot return to Stage 1 in less than three years, in line with the one-year duration requirement for “forborne non-performing exposure” status, followed (unless the non-performing status needs to be prolonged) by the two-year minimum duration requirement for the “forborne performing exposure” status.

 

To return to Stage 1, exposures must give proof of having fully recovered their credit quality and the conditions requiring them to be classified as “forborne” must have ceased to apply. Accordingly, monitoring activities over transitions to Stages 2 or 3 are the same as monitoring activities over exposures which have not moved from Stage 1. However, “forborne” exposures that have returned from Stage 3 to Stage 2 are subject to enhanced monitoring, providing that if there is a delay of more than thirty days in payment or if a new forbearance measure is applied, the exposure will immediately return to Stage 3 for prudential purposes.

 

5 Details by business segment

 

Corporate activity

 

The Bank’s internal system for managing, evaluating and controlling its credit risk exposure reflects its traditional policy based on prudence and a highly selective approach: risk assumption is based on an analytical approach grounded on an extensive knowledge of the entrepreneurial, asset and management operations of each financed company, as well as of the economic framework in which it operates. During the analysis, all the necessary documentation was acquired in order to carry out an adequate assessment of the borrower’s credit quality and define the correct remuneration of the risk assumed; the analysis included assessments of the duration and amount of credit lines, monitoring of suitable collateral and use of contractual commitments (covenants) aimed at preventing the deterioration of the counterparty’s credit quality.

 

With reference to the correct adoption of Credit Risk Mitigation techniques, specific activities are implemented to define and meet all the requirements

 

268 | Consolidated financial statements as at 30 June 2024

 

 

to ensure that the real and personal guarantees have the maximum mitigating effects on the exposures. In particular, during the year under review, these activities focused on measuring the value of financial guarantees and on insurance coverage of Factoring exposures.

 

To determine credit risk, all counterparties are analysed and an internal rating is assigned by the Risk Management unit on the basis of internal models which take into account the specific quantitative and qualitative characteristics of the counterparty. The proposed transactions are also subject to the application of LGD models where appropriate.

 

Loans originated by the business divisions are appropriately assessed by the Risk Management unit and regulated in accordance with the powers for approval and management of the most significant transactions, through screening at different operating levels.

 

The Credit Risk Management unit also carries out a review of the ratings assigned to the counterparties at least once a year. Approved loans must also be confirmed by the approving body with the same frequency.

 

Expected credit losses is calculated individually for non-performing items and based on PD and LGD indicators of the performing portfolio. For individual provisioning, valuations based on discounted cash flows and ratio analysis balance sheet are applied to businesses under the going-concern assumption, while an asset valuation is used in case of liquidation. With regard to performing loans, the PD parameters are obtained starting from the through-the-cycle rating approach used to develop the internal rating model which is then converted to the point-in-time approach. LGDs are calculated according to the modelling used for regulatory calculation, stripped of elements that are more closely attributable to the requirements for internal models, including, in particular, the 45% floor, the downturn effect, and indirect costs. The parameters used to quantify the expected credit loss (as well as the regulatory parameters) are in any case subject to regular evaluation by corporate units. The forward-looking component of the models is the result of the risk indicators applied to the macroeconomic scenarios defined internally.

 

In terms of monitoring the performance of individual credit exposures, Mediobanca has adopted an early warning system to identify a list of counterparties (known as the “watch list”) requiring in-depth analysis on account of their

 

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potential or obvious weaknesses. The exposures identified are then classified by level of alert (Amber or Red for performing accounts, Black for non-performing items) and are reviewed regularly to identify the most appropriate mitigation actions to be taken. The watch list is used to provide qualitative information regarding allocation to Stage 2, which includes counterparties classified as “Amber” or “Red”. All forborne positions are also subject to specific monitoring; it should be noted that forborne positions are also classified in the Watchlist.

 

Leases

 

Risk assessment is generally based on individual investigations carried out using methodologies similar to those required for Corporate activities. Furthermore, for small-denomination transactions, valuation and approval are required through the use of a credit-scoring model developed according to an historical series, differentiated by product type and by legal nature of the counterparty (type of requesting company).

 

The activities of analysis, disbursement, monitoring, and credit risk control are significantly supported by the Company’s Information System; the asset being leased is also subject to a technical assessment.

 

With a view to aligning risk management with the current complex financial and market scenario, the approval rights have also been revised and the measurement and control processes enhanced through the institution of regular valuations of performing loans, including from an early warning (i.e. watch list) perspective. Disputes are managed in a variety of ways which prioritize either recovery of the amount owed or the asset under lease, according to the specific risk profile of the account concerned.

 

The quantification of provisions for non-performing accounts requires individual analysis to establish the estimated loss, taking into account the protection value of the assets resulting from regularly updated expert valuations, prudentially revised downwards, and any other form of collateral. Scenarios referred to selling strategies are also factored in. The portfolio of performing assets is valued on the basis of internal PD and LGD parameters. To define the PD parameters, through-the-cycle transition matrices for the management models based on internal data are used, which are then converted to point-in-time versions. The forward-looking component is factored in by applying the macroeconomic scenarios defined internally to the PD estimates. The LGD estimates for the exposures differ according to type of product (vehicle leasing,

 

270 | Consolidated financial statements as at 30 June 2024

 

 

core goods, yachts and property), and are subjected to the same macroeconomic scenarios defined internally to obtain forward-looking data.

 

In terms of criteria for the transition of leasing transactions to Stage 2, in addition to the positions identified using the PD increase quantitative method, with regard to forborne performing positions, i.e. positions 30 days past due, the evidence deriving from the Parent Company’s watch list for Corporate customers is used (counterparties classified as “Amber” or “Red” will be included in Stage 2).

 

Consumer credit

 

Consumer credit operations are performed primarily by Compass, where applications for finance are approved on the basis of a credit scoring system tailored to individual products. The scoring grids have been developed from internal historical series, enhanced by data provided by central credit bureaux. Points of sale are linked electronically to the Company’s headquarters, to ensure that applications and credit scoring results are processed and transmitted swiftly. Under the system of powers for approval assigned by the Company’s Board of Directors, approval is required by the relevant headquarters units for increasing combinations of amount and expected loss, in accordance with the authorization levels established by the Board of Directors.

 

From the first instance of non-payment, accounts are managed using the entire range of recovery procedures, including postal and telephone reminders, external recovery agents, or legal recovery action. In the presence of minor signs such as queuing (still considered forbearance) or slight but repeated delays in association with negative evidence on external databases, the account is classified as default according to the “unlikely-to-pay” principle. After six unpaid instalments (or four unpaid instalments in particular cases, such as credit cards), the company proceeds to declare that client has lapsed from the time benefit allowed under Article 1186 of the Italian Civil Code. As from the six months after such lapse has been established, accounts for which legal action has been ruled out on the grounds of being uneconomic are sold via competitive procedures to factoring companies, for a percentage of the value of the principal outstanding, which reflects their estimated realizable value.

 

Provisioning is determined collectively on the basis of PD, LGD and CCF metrics which are estimated using internal models. To estimate PD and LGD parameters for the purpose of calculating lifetime losses, through-the-cycle transition matrices calculated separately by product type were used in line with

 

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internal operating processes (revolving / balance payment credit cards, special-purpose loans, low-risk personal loans, high-risk personal loans, small tickets and salary-backed loans to public servants, private individuals or retirees). Once the parameters not conditioned by recent historical evidence have been obtained, the forward-looking component is factored in by conditioning PDs, the transition matrices related thereto, and LGDs with specific macroeconomic models based on the Group’s internal scenarios and on recent trends in internal default and loss rates.

 

In consumer credit, in addition to the quantitative criterion based on changes in the PD on a lifetime basis, specific quality indicators are used to classify exposures as Stage 2, such as the existence of suspension measures, the existence of other non-performing accounts for the same borrower, and evidence of irregularities in payment in the recent past.

 

Purchased or originated credit impaired assets (i.e. POCI) include loans generated via the “Restructuring” product when generated as forborne non-performing loans. Restructuring is a form of facilitation granted only to “past clients” who, for the most part, had difficulties in continuing to pay their instalments regularly (not yet expired and/or previously unpaid). It consists in the consolidation of the residual debt of one or more files that the client had in place into a single new personal loan (new file) with a new repayment plan and a monthly instalment payment for an amount that is lower than the sum of the instalment payments of the “restructured” files. No additional cash is required. It is not a product provided for commercial purposes, but only for the management of existing exposures. Since the instrument was not born as a modification of an existing loan but as a replacement for one or more previous loans that have been cancelled, the derecognition thereof, combined with the creation of an instrument classified as non-performing, will result in its classification as POCI.

 

The criteria that may lead a Restructuring to be classified as POCI consider any delays on the positions being terminated, the reasons that led to the restructuring (for example, loss of employment), the “distressed restructured” test and the possibility that the instrument may terminate non-performing loans. The classification as POCI will not preclude the fact that the same loan may later return to being classified as performing according to a curing approach adopted for forborne NPE loans.

 

272 | Consolidated financial statements as at 30 June 2024

 

 

“POCI” assets are valued on the basis of Compass Banca’s IFRS 9 provisioning model, derived from appropriate calibrations of AIRB models, and which includes all the static and trend elements necessary to calculate PD and LGD parameters on a forward-looking basis. Since the value adjustments in POCI instruments are calculated on a lifetime basis, they are written down on the basis of the related LGD (including costs and discounting effect) when they are recognized. In the event of a possible transition to performing they will be still written down on a lifetime basis like Stage 2 loans. Collections will proceed according to expectations also given the relative stability of expected loss parameters confirmed after each half-yearly update.

 

Factoring

 

Factoring, a business in which MBFacta specializes, includes both traditional factoring (i.e. acquisition of short-term trade receivables, often backed by insurance cover) and instalment factoring (acquiring loans from the selling counterparty, to be repaid via monthly instalments by the borrowers whose accounts have been sold, which in virtually all cases is a retail customer).

 

For traditional factoring, the internal units appraise the solvency of the sellers and the original borrowers via individual analysis using methodologies similar to those adopted for corporate lending; whereas for instalment factoring the acquisition price is calculated following a due statistical analysis of the accounts being sold, and takes into consideration the projected recoveries, costs and expected margins.

 

Non-performing exposures to corporate counterparties are quantified analytically, while non-performing exposures to retail counterparties are based on the identification of clusters of exposures with similar characteristics. The portfolio of performing assets is valued on the basis of PD and LGD parameters. PDs estimated internally using the Corporate PD Model are used for the definition of PD parameters for counterparties belonging to the Large Corporate sector. Recalibrated PDs provided by third-party provider or estimated internally on the retail portfolio are used in case of counterparties not belonging to the Large Corporate sector.

 

For transactions valued by the Parent Company as part of its corporate business, the parameters set in the Parent Company’s process apply. The evidence obtained from the Parent Company’s watch list for corporate clients is also used as qualitative information for reclassification to Stage 2, which includes counterparties classified as “Amber” or “Red”.

 

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Premier and Private Banking

 

Premier and Private Banking operations include granting loans as a complementary activity in serving “Affluent”, “High Net Worth” and institutional clients, with the aim of providing them with Wealth Management and Asset Management services. Credit risk exposure takes various forms, such as cash loans (by granting credit on a bank account or through short-, medium-or long-term loans), authorizing overdrafts on a current account, endorsements, mortgages, and credit limits on credit cards.

 

The grant of such loans is governed through operating powers which require the proposed loan to be assessed at various levels of the organization and approved by the appointed Bodies according to the level of risk resulting from the size of the loan, the guarantees/collateral and the type of finance involved. Such loans are reviewed on a regular basis.

 

Provisioning for all non-performing contracts is calculated on an individual basis, and takes into account the value of the collateral. Instead, provisioning for the performing contracts is made based on the estimated PD and LGD values, supplied by an external provider, distinguished by counterparty and whether or not there are guarantees. The evidence obtained from the Parent Company’s watch list for corporate clients is also used as qualitative information for reclassification to Stage 2, which includes counterparties classified as “Amber” or “Red”.

 

As part of the process to monitor the performance of individual credit exposures, Mediobanca adopts an early-warning approach to identify a list of counterparties (“Watchlist”) that are worthy of in-depth analysis for potential or manifest weaknesses; the exposures identified are classified according to different alert levels (Amber, Red, for performing positions, and Black for non-performing positions) and are regularly examined in order to identify the most appropriate mitigation actions. The Watchlist is adopted as a qualitative allocation factor to Stage 2, which includes counterparties classified as “Amber” or “Red”. All forborne positions are also subject to specific monitoring; it should be noted that forborne positions are also classified in the Watchlist.

 

Mortgage lending

 

Mortgage lending is provided primarily by Mediobanca Premier, whose loan risk investigation and approval process is entirely performed centrally at the

 

274 | Consolidated financial statements as at 30 June 2024

 

 

headquarters. The applications are approved, using an internal rating model, based on individual appraisal of the applicant’s income and maximum borrowing levels, as well as the value of the property itself. A constant monitoring of the portfolio, carried out on a monthly basis, ensures control over the risks assumed.

 

Properties established as collateral are subject to a statistical revaluation process, which is carried out once a quarter. If the review shows a significant reduction in the value of the property, a new valuation is carried out by an independent expert. A new valuation is generally requested for properties established as collateral for positions which have become non-performing.

 

Accounts (both performing and non-performing) are monitored through a reporting system which allows operators to monitor the trend in the asset quality and, with the help of the appropriate indicators, to enter positions at risk, also to ensure that the necessary corrective actions to credit policies can be taken.

 

Non-performing accounts are managed, for out-of-court credit recovery procedures, by a dedicated organizational structure with the help of external collectors. In cases where a borrower becomes insolvent (or in fundamentally similar situations), the property enforcement procedures are initiated through external lawyers. Internal procedures require the following to be recorded as unlikely to pay: all cases with four or more unpaid instalments (not necessarily consecutive), cases with persistent irregularities, concessions generating a reduction of more than 1% in the financial obligation, and cases which the unit responsible assesses as unlikely to pay, based on internal or external information (e.g. central databases, public and/or private). Exposures are classified as bad loans once the ineffectiveness of the recovery actions has been certified.

 

Exposures for which concessions have been granted are defined as forborne exposures, i.e. exposures subject to tolerance measures, performing or non-performing mortgages for which Mediobanca Premier grants amendments to the original terms and conditions of the contract in the event of the borrower finding itself in a (proven or assumed) state of financial difficulty, by virtue of which it is considered to be unlikely to be able to meet its borrowing obligations fully or regularly.

 

ECLs are quantified analytically for bad loans and based on clusters of similar positions for unlikely to pay, other overdue and performing accounts. With regard to the analytical portion for bad loans, account is taken of expert

 

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valuations of the assets (prudentially deflated), as well as the timing and costs of the recovery process. Through-the-cycle transition matrices of internal models were used for the definition of PD parameters for the calculation of lifetime losses, later converting the data into point-in-time terms. The forward-looking component is factored in by applying the macroeconomic scenarios defined internally to the PD estimates. The LGD calculation is based on modelling aimed at regulatory calculation, with respect to which the downturn effect is removed; the inclusion of forward-looking elements is based on satellite models applied to macroeconomic scenarios defined internally.

 

For the purposes of Stage 2 classification of real estate mortgages, in addition to the quantitative method based on lifetime PD changes, specific qualitative indicators were used, such as the assignment to the worst internal rating class before default.

 

NPL business

 

The Group is no longer active in this business after the subsidiary Revalea was sold in October 2023. The latter operated on the NPL market through the non-recourse acquisition of non-performing loans at a price significantly lower than the nominal value.

 

6 Macroeconomic scenarios and impacts

 

The macroeconomic scenario for the first half of 2024 that governs the IFRS 9 provision at year-end in the baseline scenario is characterized by the stabilization of geopolitical frictions between the Western bloc and China. Moreover, no further escalation of the Russian-Ukrainian and Israeli-Hamas conflicts is expected.

 

With regard to energy costs and exchange rates, an evolution in line with what was previously incorporated in the forward rates is assumed. With regard to the PNRR, a low probability that the funds will be spent by the expiry date of August 2026 was assigned. The basic assumption is that the plan will be extended until December 2028 and the funds used pro-rata over the forecast horizon. Eurozone inflation is expected to decline rapidly to reach its annual target of 1.9% by the end of 2024. With regard to the Eurozone’s growth, it is expected to stagnate in the first half of 2024 and accelerate from the second half, in conjunction with growing real wages and international trade.

 

276 | Consolidated financial statements as at 30 June 2024

 

 

The macroeconomic scenario in the mild positive assumption instead foresees a significant decrease in the savings rate of consumer households in the major countries and that households will spend their savings accumulated during the pandemic period. Risk aversion among both individuals and businesses is also expected to decrease and therefore business investment is expected to increase compared to the baseline scenario. Finally, an acceleration of growth is expected for the main economies (US, UK, EZ).

 

In the alternative mild negative scenario, consumer households are expected to increase their savings rate and not to use the savings accumulated during the pandemic period. A growing aversion to risk is expected for individuals and businesses and therefore lower investments by businesses compared to the baseline scenario. Finally, with regard to public spending, current levels are expected to be maintained.

 

Table 1 - Baseline macro-economic scenario at 30 June 2024

 

GDP forecasts  2023   2024   2025   2026 
Italy   0.6%   0.5%   1.2%   0.9%
EU   0.5%   0.5%   1.8%   1.8%
USA   2.4%   3.1%   1.8%   1.8%

 

Unemployment rate  2023   2024   2024   2026 
Italy   7.7%   7.5%   7.8%   8.0%
EU   6.0%   6.0%   5.9%   5.8%
USA   3.6%   3.9%   4.1%   4.1%

 

Interest rate of government bonds (10 years)  2023   2024   2024   2026 
Italy   4.2%   3.6%   3.9%   4.2%
Germany   2.4%   2.3%   2.3%   2.6%
USA   3.6%   4.1%   4.0%   4.1%

 

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Table 2 – Mild-positive macroeconomic scenario at 30 June 2024

 

GDP forecasts  2023   2024   2025   2026 
Italy   0.6%   0.5%   2.4%   1.9%
EU   0.5%   0.5%   2.9%   2.8%
USA   2.4%   3.1%   2.6%   2.5%

 

Unemployment rate  2023   2024   2024   2026 
Italy   7.7%   7.5%   7.1%   6.8%
EU   6.0%   6.0%   5.4%   5.0%
USA   3.6%   3.9%   3.5%   3.1%

 

Interest rate of government bonds (10 years)  2023   2024   2024   2026 
Italy   4.2%   3.6%   4.2%   4.7%
Germany   2.4%   2.3%   2.7%   3.3%
USA   3.6%   4.1%   4.4%   4.9%

 

Table 3 – Mild-negative macroeconomic scenario at 30/6/2024

 

GDP forecasts  2023   2024   2025   2026 
Italy   0.6%   0.5%   -0.1%   -0.1%
EU   0.5%   0.5%   0.6%   1.0%
USA   2.4%   3.1%   0.9%   1.2%

 

Unemployment rate  2023   2024   2024   2026 
Italy   7.7%   7.5%   8.4%   9.2%
EU   6.0%   6.0%   6.4%   6.8%
USA   3.6%   3.9%   4.6%   5.2%

 

Interest rate of government bonds (10 years)  2023   2024   2024   2026 
Italy   4.2%   3.6%   3.7%   4.0%
Germany   2.4%   2.3%   2.0%   2.1%
USA   3.6%   4.1%   3.6%   3.5%

 

The Group kept additional provisions (referred to as Overlays) for the purpose of including the uncertainties of the evolution of the macroeconomic context in hedging levels. Overlays were applied in the Corporate division (including Factoring and Leasing) concerning sectors particularly exposed to inflationary pressure in order to measure any risk peaks that the quantitative methodology captures only on an average basis. Lastly, overlays on Consumer Banking positions and mortgage loans were allocated against the uncertainties of the macroeconomic scenario.

 

Overall, such overlays amounted to €221.6m (13.7% of total ECLs), split between Consumer Banking (€174.9m, impact of 13.4%), Corporate (€27.5m, which includes €14.9m in Wholesale, €12.6m in Factoring; 33.1% of ECLs), Leasing (€7.2m; 9.6%) and Wealth Management (€12m, entirely attributable to Mediobanca Premier mortgage loans; 8%).

 

The overlays have increased the level of provisioning, which for performing loans now stands at €691.2m, i.e. 1.31%.

 

278 | Consolidated financial statements as at 30 June 2024

 

 

Table 4 – Overlay Stock

 

   Overlay stock at 
   30 June 2024   30 June 2023 
Corporate and Investment Banking   27.5    39.9 
Consumer Banking   174.9    208.6 
Wealth Management   12.0    11.3 
Leasing (Holding Functions)   7.2    8.7 
Total   221.6    268.5 

 

Consumer Credit kept a high level of provisioning (with a performing coverage rate of 3.67%, in line with last June’s data) and reported a reduction in overlays from €208.6m to €174.9m, linked to the new absorption of ECLs as per the model for the rise of PD towards structural levels. In particular, the continuation of this level of conservatism is consistent with the gradual rise in default rates observed during the year under review towards structural levels and with uncertainties regarding the persistence of inflationary effects over time, which, although in the process of shrinking, could still produce volatility despite the disbursement policies having been restrictive over the last few months.

 

With reference to Corporate and Investment Banking, overlays of €27.5m were set aside (€14.9m of which in the Large Corporate segment and €12.6m in Factoring) and allocated to sectors especially exposed to inflationary pressures. Large Corporate / Factoring overlays were reduced (down €12m) compared to the previous year due to the classification of some sectors from High / Medium impact to Low impact due to inflation risk as a result of the good quality of the portfolio, normalization of energy prices, and the proven ability to contain inflationary pressure. In general, there was a smaller impact of inflation on the sectors involved. Overlays in Leasing amounted to €7.2m and include a small portion to cover the possible request for a moratorium by customers residing in areas affected by catastrophic events.

 

With reference to mortgage loans, the overlay amount was €12m (€11.3m). In general, overlays were applied to all performing exposures with a higher level of conservativeness on the portion of portfolio identified as risky following monitoring by the Monitoring and Credit Recovery Unit.

 

Notes to the accounts | Part E - Information on risks and related hedging policies | 279

 

 

QUANTITATIVE INFORMATION

 

A. Credit quality

 

A.1 Non-performing and performing exposures: amounts, value adjustments, trends and segmentation by earnings

 

A.1.1 Prudential consolidation – Financial assets by past due brackets (book value)

 

  Stage 1  Stage 2  Stage 3  Purchased or originated credit
impaired assets
 
     From More than    From More than    From More than    From More than 
   1 to 30  30 to 90    1 to 30  30 to 90    From 1 to  30 to 90    From 1 to  30 to 90   
Portfolios/risk stages  days  days  90 days  days  days  90 days  30 days  days  90 days  30 days  days  90 days 
1. Financial assets measured at amortized cost   68,029   39,969   8,053   54,041   46,032   14,253   19,838   37,321   196,374   2,059   3,187   3,584 
2. Financial assets measured at Fair Value through other comprehensive income                                     
3. Financial assets held for sale                                     
Total 30 June 2024   68,029   39,969   8,053   54,041   46,032   14,253   19,838   37,321   196,374   2,059   3,187   3,584 
Total 30 June 2023   212,493   24,483   36,409   40,779   77,399   19,578   115,134   34,951   174,758         238,833 

 

280 | Consolidated financial statements as at 30 June 2024

 

 

A.1.2 Prudential consolidation - financial assets, loan commitments and financial guarantees issued: trend in overall value adjustments and overall provisioning

 

 

Notes to the accounts | Part E - Information on risks and related hedging policies | 281

 

 

A.1.3 Prudential consolidation – Financial assets, commitments to disburse funds and financial guarantees given: transfers between different stages of credit risk (gross and nominal values)

 

  Gross value / nominal value 
   Transfers between Stage 1   Transfers between Stage 2   Transfers between Stage 1 
   and Stage 2   and Stage 3   and Stage 3 
   From Stage 1   From Stage 2   From Stage 2    From Stage 3    From Stage 1   From Stage 3 
Portfolios/risk stages  to Stage 2   to Stage 1   to Stage 3   to Stage 2   to Stage 3   to Stage 1 
1. Financial assets measured at amortized cost   1,385,445    806,004    234,010    51,680    271,439    18,727 
2. Financial assets measured at Fair Value through other comprehensive income   3,531                     
3. Financial assets held for sale                        
4. Loan commitments and financial guarantees issued   75,863    19,376    180    484    1,478    3,195 
30 June 2024   1,464,839    825,380    234,190    52,164    272,917    21,922 
30 June 2023   1,475,512    1,088,583    261,059    124,324    216,395    8,526 

 

282 | Consolidated financial statements as at 30 June 2024

 

 

A.1.4 Prudential consolidation - On- and off-balance sheet exposures to banks: gross and net values

 

  

 

Gross exposure

   Overall value adjustments and overall provisions         
                   Purchased                   Purchased         
                   or originated                   or originated         
                   credit                   credit       Overall 
                   impaired                   impaired       partial 
Types of exposure / value       Stage 1    Stage 2    Stage 3   assets        Stage 1    Stage 2    Stage 3   assets   Net exposure   write-offs 
A. On-balance sheet credit exposures                                                            
A.1 On-demand   3,232,098    3,213,840    18,258            291    169    122            3,231,807     
a) Non-performing       X                    X                     
b) Performing   3,232,098    3,213,840    18,258    X        291    169    122    X        3,231,807     
A.2 Other   7,292,964    6,010,251    8            3,727    3,727                7,289,237     
a) Bad loans       X                    X                     
– of which: forborne exposures       X                    X                     
b) Unlikely to pay       X                    X                     
– of which: forborne exposures       X                    X                     
c) Overdue exposures (NPLs)       X                    X                     
– of which: forborne exposures       X                    X                     
d) Overdue performing exposures   28    27    1    X                    X        28     
– of which: forborne exposures               X                    X             
e) Other performing exposures   7,292,936    6,010,224    7    X        3,727    3,727        X        7,289,209     
– of which: forborne exposures               X                    X             
Total (A)   10,525,062    9,224,091    18,266            4,018    3,896    122            10,521,044     
B. Off-balance sheet credit exposures                                                            
a) Non-performing       X                    X                     
b) Performing   14,204,800    77,921        X                    X        14,204,800     
Total (B)   14,204,800    77,921                                    14,204,800     
Total (A+B)   24,729,862    9,302,012    18,266            4,018    3,896    122            24,725,844     

 

Notes to the accounts | Part E - Information on risks and related hedging policies | 283

 

 

A.1.5 Prudential consolidation - On- and off-balance sheet exposures to customers: gross and net values

 

   Gross exposure   Overall value adjustments and overall provisions         
Types of exposure / value      Stage 1   Stage 2   Stage 3  

Purchased or
originated

credit

impaired

assets

       Stage 1   Stage 2   Stage 3  

Purchased or
originated

credit

impaired

assets

   Net exposure  

Overall

partial

write-
offs

(*)

 
A. On-balance sheet credit exposures                                                            
a) Bad loans   359,609    X        333,152    19,821    329,983    X        303,708    19,639    29,626    910 
– of which: forborne exposures   101,645    X        78,669    16,340    99,987    X        77,179    16,172    1,658     
b) Unlikely to pay   652,215    X        572,511    79,704    420,792    X        375,680    45,112    231,423    35 
– of which: forborne exposures   280,651    X        202,147    78,504    173,286    X        129,005    44,281    107,365    35 
c) Overdue exposures (NPLs)   324,890    X        303,087    21,803    172,286    X        155,277    17,009    152,604     
– of which: forborne exposures   61,476    X        40,891    20,585    41,773    X        25,526    16,247    19,703     
d) Overdue performing exposures   259,376    92,919    166,012    X    445    52,245    308    51,689    X    248    207,131     
– of which: forborne exposures   13,668        13,607    X    61    3,963        3,926    X    37    9,705     
e) Other performing exposures   72,645,347    61,950,811    2,495,468    X    97,085    652,377    307,769    324,534    X    20,073    71,992,970    16 
– of which: forborne exposures   556,534        510,815    X    45,719    84,762        73,761    X    11,001    471,772     
TOTAL (A)   74,241,437    62,043,730    2,661,480    1,208,750    218,858    1,627,683    308,077    376,223    834,665    102,081    72,613,754    961 
B. Off-balance sheet credit exposures                                                            
a) Non-performing   3,538    X        3,538        602    X        602        2,936     
b) Performing   30,746,164    22,664,279    159,546    X        20,792    18,140    2,653    X        30,725,372     
Total (B)   30,749,702    22,664,279    159,546    3,538        21,394    18,140    2,653    602        30,728,308     
Total (A+B)   104,991,139    84,708,009    2,821,026    1,212,288    218,858    1,649,077    326,217    378,876    835,267    102,081    103,342,062    961 

 

(*) This includes NPLs acquired by Revalea.

 

As at 30 June 2024, gross non-performing assets decreased from €1,582.1m to €1,336.7m, mainly due to the sale of NPLs managed by Revalea (€242.3m in June 2023). Therefore, the impact stood at 2.5% of cash credit exposures to customers (2.9% in June 2023). The coverage ratio increased (69.1% against 61.2%), thus leading to a reduction in net non-performing loans (from €613.2m to €413.7m). Please be reminded that as at 30 June 2023, gross non-performing assets stood at €1,339.7m, without including the former Revalea NPLs, with an impact of 2.5% on loans; the coverage ratio was 72.1%.

 

284 | Consolidated financial statements as at 30 June 2024

 

 

Finrep Gross NPL Ratio(63) 

 

       (€m) 
         
   30 June 2024   30 June 2023 
Loans   52,735.6    52,642.2 
NPLs   1,336.7    1,339.7 
Loan to customers   54,072.3    53,981.9 
NPLs purchased       242.4 
Net treasury assets (1)    10,963.4    10,229.0 
Total Loans and advances   65,035.7    64,453.3 
Finrep Gross NPL ratio in %   2.1%   2.5%

 

(1) In line with the guidelines of the EBA Risk Dashboard, this item excludes cash and includes untied deposits held with Central Banks.

 

A.1.7 Prudential consolidation – On-balance sheet exposures to customers: trend in gross NPLs

 

           Overdue non- 
           performing 
Reason/Category  Bad loans (*)   Unlikely to pay (*)   exposures 
A. Opening balance (gross amount)   672,799    635,865    273,404 
– of which: exposures sold but not derecognized   22,148    57,417    30,192 
B. Increases   104,217    434,425    245,706 
B.1 inflows from performing exposures   26,378    268,563    162,454 
B.2 inflows from purchased or originated credit impaired financial assets   14    39,479    3,136 
B.3 transfers from other categories of non-performing exposures   74,735    76,739    18,828 
B.4 contractual changes without derecognition            
B.5 other increases   3,090    49,644    61,288 
C. Decreases   417,407    418,075    194,220 
C.1 transfers to performing exposures   1,296    79,451    12,176 
C.2 write-offs   31,659    16,369    3,943 
C.3 collection   41,035    91,865    58,676 
C.4 gains on disposal   4,749    33,392    2,665 
C.5 losses on disposal       196    3 
C.6 transfers to other categories of non-performing exposures   1,746    77,467    91,089 
C.7 contractual changes without derecognition            
C.8 other decreases   336,922    119,335    25,668 
D. Closing balance of gross exposure   359,609    652,215    324,890 
– of which: exposures sold but not derecognized   20,752    56,361    29,205 

 

(1) This includes NPLs purchased by Revalea.

 

The headings “Inflows from purchased or originated credit-impaired financial assets” refer to the restructuring of Consumer files.

 

The item “Other increases” mainly includes Consumer transactions.

 

(63) In the EBA Risk Dashboard, gross NPL ratio is defined as the gross book value of NPLs (loans and advances) as a percentage of total loans and advances. Source: EBA Risk Dashboard, Risk Indicators in the Statistical Annex (AQT_3.2).

 

Notes to the accounts | Part E - Information on risks and related hedging policies | 285

 

 

The heading “Other decreases” refers to the stock of receivables sold to factoring firms in consumer credit operations.

 

A.1.7 bis Prudential consolidation – On-balance sheet exposures to customers: trend in gross forborne exposures, by credit quality

 

   Forborne non-   Forborne 
   performing   performing 
Reason/Category  exposures   exposures 
A. Opening balance (gross amount)   523,045    673,838 
– of which: exposures sold but not derecognized   41,177    53,875 
B. Increases   193,243    323,430 
B.1 inflows from not forborne performing exposures   33,276    170,381 
B.2 inflows from forborne performing exposures   61,145    X 
B.3 inflows from forborne non-performing exposures   X    57,827 
B.4 inflows from not forborne non-performing exposures   40,442    297 
B.5 other increases   58,380    94,925 
C. Decreases   272,516    427,066 
C.1 outflows to not forborne performing exposures   X    125,412 
C.2 outflows to forborne performing exposures   57,827    X 
C.3 outflows to forborne non-performing exposures   X    61,145 
C.4 write-offs   17,998    225 
C.5 collection   73,340    180,564 
C.6 gains on disposal   13,394    181 
C.7 losses on disposal   3     
C.8 other decreases   109,954    59,539 
D. Closing balance of gross exposure   443,772    570,202 
– of which: exposures sold but not derecognized   37,741    51,761 

 

As at 30 June 2024, gross impaired positions subject to forbearance(64) decreased from €523m to €443.7m. The coverage rate decreased slightly from 75.4% to 71%; the net position balance stood at €128.7m (€128.5m in the previous year).

 

Forborne performing loans have a gross value of €570.2m, down on the previous year (€673.8m) mainly following the transfer to non-forborne performing exposures (due to the end of the probation period). On a net basis, forborne performing exposures decreased from€578.1m to €481.5m with a coverage ratio of 15.6% (14.2%).

 

Net forborne non-performing positions had an impact of 0.2% on total loans to customers as in the previous financial year; performing positions, on the other hand, had an impact of 0.7% (1.1%).

 

(64)  By definition, “forbearance” is when a specific concession is offered to a client which is undergoing, or risks encountering, temporary financial difficulties in meeting their payment obligations.

 

286 | Consolidated financial statements as at 30 June 2024

 

 

A.1.9 Prudential consolidation – Non-performing on-balance sheet exposures to customers: trend in overall adjustments

 

   Bad loans   Unlikely to pay    Overdue non-performing
exposures
       of which:       of which:       of which:
       forborne       forborne       forborne
Reason/Category  Total   exposures   Total   exposures   Total   exposures
A. Opening balance of overall adjustments  393,088   163,623   419,774   182,725   155,983   48,224
– of which: exposures sold but not derecognized  21,611   7,161   40,959   18,749   20,164   6,224
B. Increases  109,884   27,164   295,642   93,150   148,930   26,261
B.1 Value adjustments to purchased or originated credit impaired assets  13   X   17,893   X   2,461   X
B.2 other value adjustments  43,681   6,265   171,880   48,165   105,853   14,452
B.3 losses on disposal        9   3   3  
B.4 transfers from other categories of non-performing exposures  58,302   18,691   59,123   19,852   11,841   6,830
B.5 contractual changes without derecognition                
B.6 other increases  7,888   2,208   46,737   25,130   28,772   4,979
C. Decreases  172,989   90,800   294,623   102,589   132,627   32,712
C.1 write-backs due to valuations  3,480   282   29,045   18,067   7,378   2,283
C.2 write-backs due to collections  29,050   7,113   26,162   10,346   18,640   4,714
C.3 gains on disposal  4,703   1,582   6,922   1,990   1,510   263
C.4 write-offs  31,659   11,115   16,369   5,206   3,943   1,677
C.5 transfers to other categories of non-performing exposures  1,809   480   57,123   25,181   70,334   21,481
C.6 contractual changes without derecognition                
C.7 other decreases  102,288   70,228   159,001   41,799   30,822   2,294
D. Closing amount of overall adjustments  329,983   99,987   420,792   173,286   172,286   41,773
– of which: exposures sold but not derecognized  20,346   6,255   39,206   16,498   19,613   5,176

 

Notes to the accounts | Part E - Information on risks and related hedging policies | 287

 

 

A.2 Classification of credit exposures by internal and external ratings

 

A.2.1 Prudential consolidation – Distribution of financial assets, loan commitments and financial guarantees issued by class of external ratings (gross values)

 

   External rating classes   Without     
Exposures  Class 1   Class 2   Class 3   Class 4   Class 5   Class 6   rating   Total 
A. Financial assets measured at amortized cost  1,493,944   5,115,255   5,124,334   1,184,973   215,313   31,406   52,319,096   65,484,321 
– Stage 1  1,489,788   5,104,663   5,115,962   1,176,657   178,850   18,438   48,330,637   61,414,995 
– Stage 2  4,156   10,592   8,372   8,316   31,791   12,968   2,565,523   2,641,718 
– Stage 3              4,672      1,204,078   1,208,750 
– Purchased or originated credit impaired assets                    218,858   218,858 
B. Financial assets measured at Fair Value through other comprehensive income  2,246,544   41,086   3,953,006   310,028         106,452   6,657,116 
– Stage 1  2,246,544   41,086   3,953,006   290,256         106,452   6,637,344 
– Stage 2           19,772            19,772 
– Stage 3                        
– Purchased or originated credit impaired assets                        
C. Financial assets held for sale                        
– Stage 1                        
– Stage 2                        
– Stage 3                        
– Purchased or originated credit impaired assets                        
Total (A+B+C)  3,740,488   5,156,341   9,077,340   1,495,001   215,313   31,406   52,425,548   72,141,437 
D. Loan commitments and financial guarantees issued  534,581   1,812,487   10,834,205   1,079,135   151,273   1,658   8,476,174   22,889,513 
– Stage 1  534,581   1,812,487   10,833,665   1,078,943   108,347   1,658   8,356,749   22,726,430 
– Stage 2        540   192   41,591      117,222   159,545 
– Stage 3              1,335      2,203   3,538 
– Purchased or originated credit impaired assets                        
Total (D)  534,581   1,812,487   10,834,205   1,079,135   151,273   1,658   8,476,174   22,889,513 
Total (A+B+C+D)  4,275,069   6,968,828   19,911,545   2,574,136   366,586   33,064   60,901,722   95,030,950 

 

The Mediobanca Group adopts the Standard & Poor’s ratings for all portfolios subject to assessment.

 

The table is compliant with the classification provided by the Bank of Italy Circular No. 262/2005 (eighth update), which requires external ratings to be divided into six different classes of credit quality.

 

288 | Consolidated financial statements as at 30 June 2024

 

 

The first three risk classes (classes 1, 2 and 3) consist of investment grade exposures, with a Standard & Poor’s rating of between AAA and BBB-, and represent 91% of the entire portfolio (the same also considering loan commitments and financial guarantees issued), excluding unrated counterparties and non-performing loans.

 

The unrated exposures refer chiefly to retail clients and to small and medium-sized enterprises.

 

A.2.2 Prudential consolidation – Distribution of financial assets, loan commitments and financial guarantees issued by class of internal ratings (gross values)

 

                       Non-         
   Internal rating classes   performing   Without     
Exposures  Class 1   Class 2   Class 3   Class 4   Class 5   Class 6   assets   Credit rating   Total 
A. Financial assets measured at amortized cost  1,845,492   10,720,977   21,586,193   14,256,674   7,635,569   1,343,469   1,238,056   6,857,891   65,484,321 
– Stage 1  1,841,336   10,708,868   21,541,487   13,723,160   6,791,691   221,488      6,586,965   61,414,995 
– Stage 2  4,156   12,109   44,703   533,470   804,071   1,064,305      178,904   2,641,718 
– Stage 3                    1,116,728   92,022   1,208,750 
– Purchased or originated credit impaired assets        3   44   39,807   57,676   121,328      218,858 
B. Financial assets measured at Fair Value through other comprehensive income  1,931,884   98,270   3,716,031   520,252            390,679   6,657,116 
– Stage 1  1,931,884   98,270   3,716,031   500,480            390,679   6,637,344 
– Stage 2           19,772               19,772 
– Stage 3                           
– Purchased or originated credit impaired assets                           
C. Financial assets held for sale                           
– Stage 1                           
– Stage 2                           
– Stage 3                           
– Purchased or originated credit impaired assets                           
Total (A+B+C)  3,777,376   10,819,247   25,302,224   14,776,926   7,635,569   1,343,469   1,238,056   7,248,570   72,141,437 
D. Loan commitments and financial guarantees issued  483,463   2,033,548   14,300,161   1,725,109   972,120   43,052   2,868   3,329,192   22,889,513 
– Stage 1  483,463   2,033,548   14,300,116   1,717,564   908,497   19,354      3,263,888   22,726,430 
– Stage 2        45   7,545   63,623   23,698      64,634   159,545 
– Stage 3                    2,868   670   3,538 
– Purchased or originated credit impaired assets                           
Total (D)  483,463   2,033,548   14,300,161   1,725,109   972,120   43,052   2,868   3,329,192   22,889,513 
Total (A+B+C+D)  4,260,839   12,852,795   39,602,385   16,502,035   8,607,689   1,386,521   1,240,924   10,577,762   95,030,950 

 

Notes to the accounts | Part E - Information on risks and related hedging policies | 289

 

 

Mediobanca uses models developed internally in the process of managing credit risk to assign ratings to each counterparty.

 

The models’ different rating scales are mapped against a single Group master scale consisting of six different rating classes based on the underlying probability of default (PD) attributable to the S&P master scale.

 

The companies within the Group which use the internal ratings and contribute to the various rating classes indicated apart from Mediobanca S.p.A. (for corporate customers) are: SelmaBPM, Compass Banca, Mediobanca Premier and MBFacta (for corporate customers).

 

290 | Consolidated financial statements as at 30 June 2024

 

 

A.3 Distribution of secured exposures by type of security

 

A.3.1 Prudential consolidation – On- and off-balance sheet secured exposures to banks

 

 

Notes to the accounts | Part E - Information on risks and related hedging policies | 291

 

 

A.3.2 Prudential consolidation – On- and off-balance sheet secured exposures to customers

 

 

292 | Consolidated financial statements as at 30 June 2024

 

 

A.4 Prudential consolidation – Financial and non-financial assets obtained from collateral enforcement

 

               Carrying amount 
   Derecognized           Of which: 
   credit       Overall value   obtained during 
   exposures   Gross value   adjustments   the period 
A. Property, plant, and equipment   55,831    53,551    (19,838)   33,713    5,342 
A.1. Core assets   82    76    (9)   67     
A.2. Held for investment purpose   45,620    44,461    (19,670)   24,791     
A.3. Inventories   10,129    9,014    (159)   8,855    5,342 
B. Equity and debt securities                    
C. Other assets                    
D. Non-current assets and asset groups being sold                    
D.1. Tangible assets                    
D.2. Other assets                    
Total 30 June 2024   55,831    53,551    (19,838)   33,713    5,342 
Total 30 June 2023   52,540    51,169    (18,649)   32,520    7,686 

 

The table includes properties originating from the enforcement of leasing contracts by SelmaBPM. Such properties are booked, to the consolidated accounts and the individual financial statements of Selma itself, on the basis of their characteristics and in accordance with the internal procedures, as tangible assets under IAS 40 or IAS 2. In very few instances are they classified as core properties, whereas IFRS 5 is not applied as the conditions provided for in this standard do not apply.

 

Notes to the accounts | Part E - Information on risks and related hedging policies | 293

 

 

B. Distribution and concentration of credit exposures

 

B.1 Prudential consolidation – Distribution of on- and off-balance sheet exposures to customers by sector

 

   Public
administrations
   Financial companies   Financial companies
(of which: insurance
companies)
   Non-financial companies   Households 
       Overall       Overall       Overall       Overall       Overall 
Exposures/  Net   value   Net   value   Net   value   Net   value   Net   value 
Counterparties  exposure   adjustments   exposure   adjustments   exposure   adjustments   exposure   adjustments   exposure   adjustments 
A. On-balance sheet credit exposures                                        
A.1 Bad loans     (145)     (6,649)        1,089   (29,541)  28,537   (293,648)
– of which, forborne exposures           (6,636)        913   (19,907)  745   (73,444)
A.2 Unlikely to pay  322   (595)  5   (308)        35,110   (39,350)  195,986   (380,539)
– of which, forborne exposures        2   (227)        12,707   (24,293)  94,656   (148,766)
A.3 Overdue non-performing exposures  860   (186)  61   (140)        48,737   (7,140)  102,946   (164,820)
– of which, forborne exposures                    260   (270)  19,443   (41,503)
A.4 Performing exposures  15,701,595   (9,402)  10,415,549   (19,439)  1,229,138   (2,286)  17,052,625   (56,007)  29,030,332   (619,774)
– of which, forborne exposures        14,080   (1,145)        142,604   (8,782)  324,793   (78,798)
Total (A)  15,702,777   (10,328)  10,415,615   (26,536)  1,229,138   (2,286)  17,137,561   (132,038)  29,357,801   (1,458,781)
B. Off-balance sheet credit exposures                                        
B.1 Non-performing exposures                    1,852   (338)  1,084   (264)
B.2 Performing exposures  7,894,333   (37)  8,189,658   (3,748)  879,592   (111)  11,464,396   (8,378)  3,176,985   (8,629)
Total (B)  7,894,333   (37)  8,189,658   (3,748)  879,592   (111)  11,466,248   (8,716)  3,178,069   (8,893)
Total (A+B) 30 June 2024  23,597,110   (10,365)  18,605,273   (30,284)  2,108,730   (2,397)  28,603,809   (140,754)  32,535,870   (1,467,674)
Total (A+B) 30 June 2023  14,577,434   (8,324)  17,603,969   (37,676)  1,976,464   (1,886)  30,242,087   (257,985)  32,088,177   (1,405,339)

 

294 | Consolidated financial statements as at 30 June 2024

 

 

B.2 Prudential consolidation – Distribution of on- and off-balance sheet exposures to customers by geography

 

           Other European             
   Italy   countries   America   Asia   Rest of the world 
       Overall       Overall       Overall       Overall       Overall 
Exposures/  Net   value   Net   value   Net   value   Net   value   Net   value 
geographical area  exposure   adjustments   exposure   adjustments   exposure   adjustments   exposure   adjustments   exposure   adjustments 
A. On-balance sheet credit exposures                                        
A.1 Bad loans  27,451   (325,895)  708   (3,247)  90   (169)  1,313   (672)  64    
A.2 Unlikely to pay  212,916   (417,114)  18,496   (3,664)  11   (14)            
A.3 Overdue non-performing exposures  96,885   (169,047)  48,373   (3,110)  7,346   (129)            
A.4 Performing exposures  54,600,870   (679,908)  14,786,036   (19,731)  2,267,745   (3,643)  262,141   (1,173)  283,309   (167)
Total (A)  54,938,122   (1,591,964)  14,853,613   (29,752)  2,275,192   (3,955)  263,454   (1,845)  283,373   (167)
B. Off-balance sheet credit exposures                                        
B.1 Non-performing exposures  1,859   (333)  1,068   (267)  9   (2)            
B.2 Performing exposures  17,057,375   (15,532)  13,180,885   (5,021)  372,058   (202)  19,852      95,202   (37)
Total (B)  17,059,234   (15,865)  13,181,953   (5,288)  372,067   (204)  19,852      95,202   (37)
Total (A+B) 30 June 2024  71,977,356   (1,607,829)  28,035,566   (35,040)  2,647,259   (4,159)  283,306   (1,845)  378,575   (204)
Total (A+B) 30 June 2023  61,627,059   (1,563,173)  29,379,798   (135,904)  2,758,432   (7,507)  130,073   (902)  616,306   (1.840)

 

Notes to the accounts | Part E - Information on risks and related hedging policies | 295

 

 

B.3 Prudential consolidation – Distribution of on- and off-balance sheet exposures to banks by geography

 

           Other European             
   Italy   countries   America   Asia   Rest of the world 
       Overall       Overall       Overall       Overall       Overall 
Exposures/  Net   value   Net   value   Net   value   Net   value   Net   value 
geographical area  exposure   adjustments   exposure   adjustments   exposure   adjustments   exposure   adjustments   exposure   adjustments 
A. On-balance sheet credit exposures                                        
A.1 Bad loans                              
A.2 Unlikely to pay                              
A.3 Overdue non-performing exposures                              
A.4 Performing exposures  8,709,353   (3,722)  1,683,408   (275)  120,762   (11)  7,357   (10)  163    
Total (A)  8,709,353   (3,722)  1,683,408   (275)  120,762   (11)  7,357   (10)  163    
B.Off-balance sheet credit exposures                                        
B.1 Non-performing exposures                              
B.2 Performing exposures  1,515,053      12,689,631      116                
Total (B)  1,515,053      12,689,631      116                
Total (A+B) 30 June 2024  10,224,406   (3,722)  14,373,039   (275)  120,878   (11)  7,357   (10)  163    
Total (A+B) 30 June 2023  7,456,857   (3,518)  19,281,730   (184)  61,588   (1)  851      2,705    

 

B.4a Credit risk indicators

 

   30 June 2024   30 June 2023 
a) Gross bad loans/total loans   0.56%   1.08%
b) Non-performing accounts receivable / on-balance sheet credit exposures   1.84%   2.33%
c) Net bad loans / Regulatory capital (1)    0.35%   3.03%

 

(1) As at 30 June 2023, net bad loans included the NPL portfolios of €238.8m acquired from Revalea, disposed of in October last year.

 

296 | Consolidated financial statements as at 30 June 2024

 

 

B.4b Large exposures

 

As at 30 June 2024, exposures (including market risks and equity investments) exceeding 10% of Tier 1 Regulatory Capital regarded ten groups of associated customers (two more than in the previous financial year) for a gross exposure of €12.6bn (€8.4bn taking into account guarantees and weightings), an increase compared to June 2023 (€9.4bn and €7.1bn, respectively). In detail, the ten positions concerned two insurance companies and eight banking groups.

 

   30 June 2024   30 June 2023 
a) Book value   12,622,572    9,360,267 
b) Weighted value   8,431,108    7,115,015 
c) Number of positions   10    8 

 

C. Securitization

 

QUALITATIVE INFORMATION

 

The Group holds a portfolio of securities arising from securitizations by other issuers totalling €1,108.8m (€1,053m as at 30 June last), €821.2m of which as part of the banking book and €287.6m as part of the trading book (respectively, €788.8m and €264.3m).

 

In the first half of 2024, European ABS continued the positive trend in line with the credit market, in some cases outperforming the adjacent sector of covered bonds. Yields showed a strong compression of spreads across the entire capital structure to the advantage of more junior classes. In particular, Italian ABS benefited from the marked narrowing of BTP and Italian financial instruments that led to new repositionings in the sector.

 

On the primary market, the new offer went well beyond expectations with placements of transactions with underlying Consumers and Auto Loans, well received by investors reassured by the more favourable macroeconomic context. Most of the books were oversubscribed with very low new issue premiums compared to the secondary curves and with particular demand for mezzanine classes.

 

The market environment should remain favourable during 2024 on expectations of a rate cut by the Central Banks.

 

Notes to the accounts | Part E - Information on risks and related hedging policies | 297

 

 

The banking book portfolio, which increased from €788.8m to €821.2m during the year, remained mainly concentrated on senior securities, which increased to €818.7m (€784.8m) after the investment in a tranche of Consumer ABS Italia (€204.7m) and the increase in investments in high-quality CLOs (€298.6m against €259.4m), partially offset by the reduced exposures to underlying NPLs (from €486.3m to €288.7m, mainly due to repayments). Positions on mezzanine tranches decreased (from €3.5m to €2.5m), while exposure on junior tranches was almost completely closed. The difference between Fair Value (derived from market platforms) and book value (amortized cost) settled at negative €8.8m.

 

The trading book stood at €287.6m (€264.3m at 30 June 2023): the senior portion amounted to €180.4m (€149.3m), €100.9m of which in the Transferable Custody Receipt transaction;(65) €44.8m (€23,9m) in performing consumer loans and consumer and €34.7m in CLOs (€24.8m). The mezzanine portion was reduced to €107.2m (€115m) divided into “negative basis” strategy of €72.7m (€66.1m), new CLOs of €10.9m (€27.4m) and performing loans and consumer of €23.6m (€21.5m). There were no junior exposures.

 

Mediobanca also has exposures to:

 

CLI Holdings I and CLI Holdings II, SPVs under English law, which respectively subscribed to the capital of Cairn Loan Investments and Cairn Loan Investments II, independent managers of European CLOs set up by Polus, which invested in the junior tranches of the CLOs they manage in order to comply with risk retention prudential regulations. As at 30 June, CLI H I and CLI H II were respectively recognized for €7.8m and €37m; it should be noted that, for CLI H I and CLI H II a hedging transaction was finalized during the year under review by taking out insurance policy with a major insurance company as the counterparty for an initial amount of €25m, which was reduced to €20m at 30/6/2024;
   
Italian Recovery Fund, a closed-end alternative investment fund (AIF) incorporated under Italian law and managed by DeA Capital Alternative Funds SGR S.p.A., which is currently invested in five securitization transactions (Valentine, Berenice, Cube, Este and Sunrise I) with Italian banks’ NPLs as the underlying instrument; the carrying amount of the €30m commitment was €18.4m at the reporting date, with a remaining commitment of approximately €1m;

 

(65) The Bank signed a note issued by the custodian bank in which three CLO positions (with underlying European corporate loans) purchased by Mediobanca and some financial guarantees on the same CLOs with which the Bank purchased hedging had been contributed in the form of a trust; TCR pays out principal and interest of the underlying CLOs after the premium of financial guarantees.

 

298 | Consolidated financial statements as at 30 June 2024

 

 

Negentropy RAIF – Debt Select Fund, an alternative investment fund instituted under Luxembourg law and managed by Negentropy Capital Partners Limited, for which Mediobanca acted as advisor; the fund has senior tranches of real estate NPLs and loans as the underlying instrument, with an aggregate NAV of €122.7m (the share of Mediobanca being €61.3m);
  
in January, Mediobanca S.p.A. entered into an equity commitment agreement with Polus Capital Management (US) Inc.,(66) a wholly-owned subsidiary of Polus, which provides for Mediobanca S.p.A. undertaking a commitment of $75m to be used, to meet regulatory obligations, for investments in the “equity” tranche (most junior unrated securities) of Collateralized Loan Obligations (CLOs) in the US and related warehousing. The CLO Portfolio Manager will be Polus Capital Management (US) Inc, while an institutional counterparty will act as arranger. As at 30 June, the Group’s investments in CLOs US I amounted to €9.2m, including €4.5m subscribed by the Parent Company and €4.7m by Polus.

 

Acting as originator, seven securitization transactions were in progress at 30 June 2024 through the vehicle Quarzo S.r.l. (Compass Banca) with performing loans granted by Compass Banca as the underlying instrument (Compass subscribed for the entire number of junior securities), which were ceded on a revolving basis for a period of between 6 and 66 months, at the end of which the amortization phase of the securitization may begin. In some of the deals the Parent Company and/or other Group’s companies have subscribed to the senior notes. The first SRT (Significant Risk Transfer) for the Mediobanca Group was completed in June last year; the disposal without recourse of the initial portfolio of performing consumer loans for €815m was financed through the issuance of seven classes of securities: two senior notes (€700.9m), three mezzanine notes (for a total of €92.1m) and two junior notes (for a total of €22.1m). In this way, the Group obtained a significant transfer of credit risk for prudential purposes, thus optimizing capital absorption, without the derecognition of the underlying loans in the accounts. Senior securities for a total of €500m and mezzanine securities for €87.5m were placed on the market, while Compass Banca subscribed to the residual securities; the benefit in terms of RWA savings at 30 June 2024 amounted to €493m, to which deductions of €13.2m relating to the junior share should be added.

 

(66)   US CLO is reported in the disclosure statement on Structured Entities not consolidated for accounting purposes.

 

Notes to the accounts | Part E - Information on risks and related hedging policies | 299

 

 

QUANTITATIVE INFORMATION

 

C.2 Prudential consolidation – Exposures from main “third-party” securitizations divided by asset type / exposure type

 

  Cash exposure 
   Senior   Mezzanine   Junior 
   Carrying   Writedowns /   Carrying   Writedowns /   Carrying   Writedowns / 
Type of underlying asset/Exposure  amount   writebacks   amount   writebacks   amount   writebacks 
A. Italy NPLs (residential mortgages and real estate properties)   288,703   2,084   1      3    
B. Consumer ABS Italy   239,591   (25)  19,456   31       
C. Performing Loans Spain   2,608   (2)  3,323   8       
D. Performing Loans Holland         801   (1)      
E. Performing Loans Ireland   7,308                
F. Performing Loans UK   26,585                
G. Other loans (*)    434,257   136   86,150   6,136       
Total 30 June 2024   999,052   2,194   109,731   6,173   3    
Total 30 June 2023   934,073   (2,473)  118,514   2,390   451   (8)

 

(*) CLO transactions, €100m of which relating to TCR.

 

C.3 Prudential consolidation – Interests in SPVs

 

Name of securitization /  Registered     Assets  Liabilities 
name of SPV  office  Consolidation  Debt securities  Other  Senior Mezzanine  Junior 
Quarzo 7 - Quarzo S.r.l.  Milan   Accounting   503,013     69,836   156,649     290,900 
Quarzo 9 - Quarzo S.r.l.  Milan   Accounting   105,431     29,040   11,211     121,622 
Quarzo 10 - Quarzo S.r.l.  Milan   Accounting   380,143     41,703   172,046     249,528 
Quarzo 11 - Quarzo S.r.l.  Milan   Accounting   284,328     39,569   241,651     72,000 
Quarzo 12 - Quarzo S.r.l.  Milan   Accounting   655,020     32,377   580,827     94,500 
Quarzo 13 - Quarzo S.r.l.  Milan   Accounting   2,773,115     227,646   2,537,500     362,500 
Quarzo 14 - Quarzo S.r.l.  Milan   Accounting   789,648     48,795   698,598  92,100   22,100 
Quarzo CQS S.r.l. Quarzo 2018  Milan   Accounting                 
MB Funding Lux  Luxembourg   Accounting   755,797  522,351      1,100,960      

 

300 | Consolidated financial statements as at 30 June 2024

 

 

C.5 Prudential consolidation – Servicing – Collecting securitized receivables and redeeming securities issued by SPVs

 

            Percentage share of securities repaid (end-of-period figure) 
    Securitized assets
(end-of-period figure)
  Receivables collected
during the year
  Senior  Mezzanine  Junior 
Servicer  Vehicle company  Non-
performing
  Performing  Non-
performing
  Performing  Non-
performing
  Performing
assets
  Non-
performing
  Performing
assets
  Non-
performing
  Performing
assets
 
Compass  Quarzo CQS (2018)   6,511   61,527      43,598      95.0             
Compass  Quarzo Srl (Q7)   63,303   906,320      739,645      46             
Compass  Quarzo Srl (Q8)            35,395      100.0             
Compass  Quarzo Srl (Q9)   20,397   206,102      170,762      84.0             
Compass  Quarzo Srl (Q10)   56,863   756,103      665,616      68             
Compass  Quarzo Srl (Q11)   17,609   494,071      316,696      9             
Compass  Quarzo Srl (Q12)   3,127   682,427      76,057                   
Compass  Quarzo Srl (Q13)   61,106   2,734,392      1,196,748                   
Compass  Quarzo Srl (Q14)   1,020   790,396      47,554                   

 

C.6 Prudential consolidation – Consolidated securitization-related SPVs

 

Quarzo S.r.l. (Compass Banca)

 

This SPV currently has seven securitizations in place with performing loans granted by Compass Banca as the underlying instrument (Compass has subscribed for the entire number of junior securities), which are ceded on a revolving basis for a period of between 6 and 66 months, at the end of which the amortization phase of the securitization may begin. In some of the deals the Parent Company and/or other Group’s companies have subscribed to the senior notes.

 

The seven deals in place are summarized in the table below:

 

              Credit 
   Senior  Mezzanine     transferred  From
Issue date  A1  A2  A1  A2  Junior  in the year  the repayment date
15 February 2017      1,215         285     15 November 2022
25 November 2019   600   183         117     15 July 2020
17 April 2020      1,760         240     15 December 2021
6 April 2022   528            72     15 May 2023
11 May 2023   450   155         95   108  17 June 2024
31 October 2023      2,538         362   3,082  15 January 2026
21 June 2024   500   201   87   5   22   815  17 March 2025

 

Legend:

 

A1: issued on the market. 

A2: subscribed to by the Parent Company and/or Group companies.

 

Notes to the accounts | Part E - Information on risks and related hedging policies |301

 

 

On 31 October last, this special purpose vehicle completed the Quarzo 13 securitization through the sale of a portfolio of performing loans for €2,900m, subsequently supplemented by revolving loans for a total of €853.7m.

 

On 21 June last, this special purpose vehicle completed the Quarzo 14 securitization through the sale of a portfolio of performing loans worth €815m.

 

Quarzo CQS S.r.l. (Compass Banca, formerly Futuro)

 

After the clean-up of the last ongoing transaction in 2018, the company Quarzo CQS S.r.l. was delisted from the register of companies.

 

MB Funding Lux S.A. (Mediobanca)

 

This SPV was set up by Mediobanca in order to execute secured transactions with a corporate syndicated loan originated by Mediobanca International (Luxembourg) SA or Mediobanca S.p.A. as the underlying instrument, of which it retains the credit risk. The notes, which form part of the Parent Company’s “Medium-Term Note” programme of issuance, have been subscribed for entirely by other Group legal entities and used as collateral for transactions on the interbank market.

 

There were no changes in the issues of MB Funding Lux S.A. subscribed by Mediobanca International Luxembourg S.A. during the financial year.

 

The transactions in progress as at 30 June 2024 are shown in the table below.

 

Company name  ISIN code  Notional amount  Issue Date  Repayment Date
BBVA – MB FINANCE LUX 2020  XS2270559367   100,000,000  11/12/2020  11/06/2026
BBVA – MB FUNDING LUX SERIES 2019 – 01  XS1937712112   200,000,000  13/10/2021  15/10/2026
BNP – MB FINANCE LUX SERIES 2017 – 01  XS1616696016   800,000,000  22/05/2017  23/12/2030
Total      1,100,000,000      

 

Transactions between the originators and the SPVs during the year under review were as follows:

 

               Additional 
  Credit    Servicing  Junior  return  
Vehicle company  disposal  Proceeds  fees  interest  accrued  
Quarzo CQS S.r.l. Quarzo 2018      7.2      0.2   3.6 
Quarzo S.r.l.   4,778.1   2,788.7   9.1   105.3   309.4 
MB Funding Lux   323,530.7   174,720.7         1.4 

 

302| Consolidated financial statements as at 30 June 2024

 

 

D. Disposals

 

A. Financial assets sold but not entirely derecognized

 

QUALITATIVE INFORMATION

 

With regard to the description of transactions represented in Tables D.1 and D.3 below, reference should be made to the descriptions found under the tables themselves. With regard, in particular, to transactions in debt securities against medium and long-term repurchase agreements, please refer to the contents of these Notes to the Accounts - Part B.

 

QUANTITATIVE INFORMATION

 

D.1 Prudential consolidation – Financial assets sold entirely recognized and related financial liabilities: book values

 

    Financial assets sold and entirely recognized   Related financial liabilities  
    Carrying
amount
    of which: subject
to securitization

transactions
    of which: subject to
repurchase
agreements
  of which
non-
performing
  Carrying
amount
    of which: subject to
securitization
transactions
    of which: subject to
repurchase
agreements
 
A. Financial assets held for trading     5,080,543             5,080,543     X     5,072,572             5,072,572  
1. Debt securities     4,629,079             4,629,079     X     4,633,059             4,633,059  
2. Equity securities     451,464             451,464     X     439,513             439,513  
3. Loans                     X                  
4. Derivatives                     X                  
B. Other financial assets mandatorily measured at Fair Value                                      
1. Debt securities                                      
2. Equity securities                     X                  
3. Loans                                      
C. Financial assets designated at Fair Value     17,037             17,037         16,718             16,718  
1. Debt securities     17,037             17,037         16,718             16,718  
2. Loans                                      
D. Financial assets measured at Fair Value through other comprehensive income     3,379,134             3,379,134         3,092,029             3,092,029  
1. Debt securities     3,379,134             3,379,134         3,092,029             3,092,029  
2. Equity securities                     X                  
3. Loans                                      
E. Financial assets measured at amortized cost     3,653,146       2,325,131       1,328,015     27,153     3,251,036       2,389,182       861,854  
1. Debt securities     1,327,315             1,327,315         861,153             861,153  
2. Loans     2,325,831       2,325,131       700     27,153     2,389,883       2,389,182       701  
Total 30 June 2024     12,129,860       2,325,131       9,804,729     27,153     11,432,355       2,389,182       9,043,173  
Total 30 June 2023     6,387,436       2,355,717       4,031,719     27,023     5,029,615       1,852,999       3,176,616  

 

Notes to the accounts | Part E - Information on risks and related hedging policies | 303

 

 

D.3 Prudential consolidation – Disposals related to financial liabilities with repayment exclusively based on assets sold and not fully derecognized: Fair Value

 

   Fully  Partially  Total 
   booked  booked  30 June 2024  30 June 2023 
A. Financial assets held for trading   5,080,543      5,080,543   1,499,821 
1. Debt securities   4,629,079      4,629,079   1,349,542 
2. Equity securities   451,464      451,464   150,279 
3. Loans             
4. Derivatives             
B. Other financial assets mandatorily measured at Fair Value             
1. Debt securities             
2. Equity securities             
3. Loans             
C. Financial assets designated at Fair Value   17,037      17,037    
1. Debt securities   17,037      17,037    
2. Loans             
D. Financial assets measured at Fair Value through other comprehensive income   3,379,134      3,379,134   1,184,230 
1. Debt securities   3,379,134      3,379,134   1,184,230 
2. Equity securities             
3. Loans             
E. Financial assets measured at amortized cost (Fair Value)   3,923,255      3,923,255   3,914,581 
1. Debt securities   1,322,907      1,322,907   1,383,584 
2. Loans   2,600,348      2,600,348   2,530,997 
Total financial assets   12,399,969      12,399,969   6,598,632 
Total associated financial liabilities   11,914,104      X   X 
Net value 30 June 2024   485,865      12,399,969   X 
Net value 30 June 2023   817,482      X   817,482 

 

B.Financial assets sold and fully derecognized with continuing involvement recorded

 

QUALITATIVE AND QUANTITATIVE INFORMATION

 

At the end of the year, there were no fully cancelled transactions in place for the sale of financial assets that led to the recognition of a continuing involvement.

 

304 | Consolidated financial statements as at 30 June 2024

 

 

C. Financial assets sold but not entirely derecognized

 

QUALITATIVE AND QUANTITATIVE INFORMATION

 

At the end of the year, there were no fully cancelled transactions in place for the sale of financial assets.

 

D. Covered bond transactions

 

Mediobanca Covered Bond S.r.l., an SPV incorporated under Article 7-bis of Italian Law 130/99, is owned as to 90% by Mediobanca Premier and as to 10% by SPV Holding.

 

At a Board meeting held in December 2020, the Bank’s Directors approved a resolution to renew the programme of covered bond issuance for a further ten years compared to the original expiry date (December 2021) for a total amount of €10bn.

 

The deal entails the involvement of:

 

Mediobanca as the issuer of covered bonds;

 

Mediobanca Premier S.p.A. as the seller (including on a revolving basis) of assets eligible for sale under the regulations in force, up to the limits on Mediobanca’s regulatory capital ratios, and servicer for the transaction;

 

Mediobanca Covered Bond S.r.l. (SPV) as non-recourse transferee of the assets and guarantor of the covered bonds.

 

The issues in this programme were attributed an AA rating by Fitch.

 

The programme includes 7 transactions in place for a value of €5,300m placed with institutional investors and secured by assets sold by Mediobanca Premier to Mediobanca Covered Bond for €7,062m (operating value), broken down as follows:

 

ISIN Code  Issue Date  Nominal Value   Rate   Expiry: 
IT0005142952  Nov-15   750    Fix: 1.375%    Nov-25 
IT0005315046  Nov-17   750    Fix: 1.25%    Nov-29 
IT0005339186  Jul-18   750    Fix: 1.125%    Aug-24 
IT0005378036  Jul-19   750    Fix: 0.5%    Oct-26 
IT0005433757  Jan-21   750    Fix: 0.01%    Feb-31 
IT0005499543  June 22   750    Fix: 2.375%    Jun-27 
IT0005579807  Jan-24   800    Fix: 3.25%    Nov-28 
       5.300           

 

Notes to the accounts | Part E - Information on risks and related hedging policies | 305

 

 

During the year under review, assets were sold by Mediobanca Premier to the special purpose vehicle Mediobanca Covered Bond in the amount of €649.5m, with the simultaneous repurchase of assets for €18.5m.

 

A Bond with a nominal value of €750m expired in October and was completely replaced by a bond issued on 15 January 2024 for a nominal value of €750m, maturing in 5 years (November 2028), with a coupon rate of 3.25% and subject to tap issuance for €50m.

 

Finally, it should be noted that on 28 August 2024, Mediobanca concluded a covered bond placement for a total amount of €750m and a 3% coupon.

 

* * *

 

E.Prudential consolidation – Credit risk management models

 

The Group was authorized by the Supervisory Authorities to calculate capital requirements using its own rating systems for the Corporate portfolio of Mediobanca and Mediobanca International (Probability of Default and Loss Given Default), for the Italian mortgage portfolio of MB Premier (Probability of Default and Loss Given Default), for consumer credit (Probability of Default and Loss Given Default) and credit card exposures (Probability of Default, Loss Given Default and Credit Conversion Factor) of Compass. In June 2024, a pre-application was also submitted for the model applicable to Corporate exposures relating to MBFACTA’s Factoring operations. For exposures for which the standardized methodology is currently used to calculate the regulatory capital requirements, the Group has nonetheless developed internal credit risk models that are used for management purposes.

 

The Group has also adopted a portfolio model in order to calculate the economic capital for credit risk, which enables geographical and sector concentration and diversification effects to be factored in.

 

306 | Consolidated financial statements as at 30 June 2024

 

 

1.2 MARKET RISKS

 

1.2.1     INTEREST RATE RISK AND PRICE RISK – REGULATORY TRADING PORTFOLIO

 

QUALITATIVE INFORMATION

 

The Bank’s operating exposure to market risks in the trading portfolio is monitored by calculating operating earnings on a daily basis and through use of the following indicators:

 

Sensitivity – mainly Delta and Vega – to the principal risk factors (interest rates, share prices, exchange rates, credit spreads, inflation and volatility, dividends, correlations, etc.); sensitivity analysis shows the increase or decrease in the value of financial assets and derivatives to local changes in these risk factors, providing a static representation of the market risk of the trading portfolio;

 

Value-at-risk calculated using a weighted historical simulation method with scenarios updated daily, assuming a liquidation horizon of one business day and a confidence level of 99%.

 

Risks are monitored daily through VaR and sensitivity analyses to ensure compliance with operating limits, managing the risk appetite established by the Bank for its trading book and, in case of VaR, also to evaluate the robustness of the model through back-testing. The expected shortfall on the set of positions subject to VaR measurement is also calculated daily by means of historical simulation; this represents the average potential losses over and beyond the level of confidence for the VaR. Moreover, stress tests are carried out monthly (on the entire portfolio) concerning the main risk factors to show, among other things, the impact which more substantial movements in the main market variables might have (e.g. share prices and interest or exchange rates) calibrated on the basis of extreme changes in market variables.

 

Other complementary risk metrics are used in order to assess trading position risks not fully measured by VaR and by sensitivity analyses more specifically. The weight of products which require such metrics to be used is in any case extremely limited compared to the overall size of Mediobanca’s trading portfolio.

 

Notes to the accounts | Part E - Information on risks and related hedging policies | 307

 

 

In the past fiscal year, market fluctuations were mainly driven by interest rates and monetary policy expectations.

 

Volatility on the stock markets remained high in the first four months of the financial year: the main stock indexes showed fluctuations in returns ranging between +6% and -6% quarter-on-quarter between July and September. The driver of this phase of uncertainty was the macroeconomic and geopolitical context: inflation data (4.3% EU, 3.7% US) - although at their lowest since October 2021 - were still above monetary policy targets. Added to this were upside pressures on oil prices, caused by lower supply from producing countries (primarily Saudi Arabia and Russia) and by tensions in the Middle East due to the rekindling of the conflict between Israel and Hamas. This situation was reflected in interbank and government interest rates: the short-term part of the curves did not undergo significant changes in the first quarter, while there was an upward remarking of long-term yields - in particular in the United States (swap and US Treasury 10Y +70 bps q/q), supporting the assumption that discount rates would remain in the 4-to-5% area for a long time. Finally, in the same period, the BTP 10Y witnessed a rise of +70 bps compared to a +30 bps of the Euro Swap 10Y and the Bund, due to a greater idiosyncratic risk for Italy.

 

In November, there was a clear change of scenario with a general decline in interest rates (e.g. -115 bps on 10y ITA). After the peak in mid-October, inflation data (-200 bps y/y EU HICP in March 2024) and a less hawkish stance by monetary policy authorities reversed market expectations, which had expected cuts in key refinancing rates in the first half of 2024. This led government bond yields to retrace to levels slightly below those recorded at the beginning of the year. At this stage, the stock market followed a general upward trend, with the US market outperforming the EU market, reaching a return of +18% (average of main indexes) compared to the beginning of the year and with volatility at its lowest, especially when compared to the month of October.

 

Finally, in June there was a partial recovery of volatility generated by tensions on French OATs and on other EU government bonds following the outcome of the European elections of 8 and 9 June and the subsequent elections to the French Parliament.

 

During the year under review, there were no breaches of the VaR and Stop Loss limits thanks to the low level of volatility, especially in the stock market.

 

308 | Consolidated financial statements as at 30 June 2024

 

 

The Value-at-Risk of the Trading aggregate fluctuated between a minimum of €3.2m in November and a maximum of €10m, as recorded in late December. The average figure (€5.9m) was 30% lower than the average of the previous year (€8.4m). After the peak, the VaR figure progressively decreased until it reached €4.6m at the end of the year, well below the average for the 12-month period.

 

The risk factors that explain the VaR trend are mainly as follows: (i) yields of Italian and core Euro Area government bonds and (ii) greater sense of direction in exposures to implied stock market volatilities, driven by particularly low levels of volatility. The contribution of other risk factors, such as share prices or exchange rates, is marginal. With respect to these, the Bank’s position is conservative or substantially neutral.

 

In line with the VaR trend, the Expected shortfall - which measures a further stress scenario on the same VaR historical series - shows a lower average figure than in the previous year (€10.7m against €12.8m).

 

Daily back-testing results (based on the comparison with the theoretical Profits and Losses) during the twelve-month observation period showed no cases of deviation from the VaR.

 

Table 1: Value-at-risk and Expected Shortfall in the trading portfolio

 

€’000

 

  FY 2023/2024   FY 2022/2023 
Risk factors (figures in €’000)  30 June   Min   Max   Average   Average 
Interest rates   1,451    1,373    7,124    3,629    7,071 
Credit   1,583    1,020    2,531    1,706    2,548 
Shares   5,343    1,078    6,490    3,741    3,609 
Exchange rates   632    591    1,631    927    904 
Inflation   223    32    684    293    365 
Volatility   3,156    2,325    6,068    3,842    6,254 
Diversification effect (*)    (7,759)   (12,098)   (4,930)   (8,277)   (12,369)
Total   4,630    3,249    10,094    5,860    8,382 
Expected Shortfall   6,995    5,258    22,817    10,745    12,846 

 

(*) Associated with a less-than-perfect correlation between risk factors.

 

Notes to the accounts | Part E - Information on risks and related hedging policies | 309

 

 

Apart from the general VaR limit on Trading positions, a system reflecting a greater degree of granularity for the individual trading desks is also in place.

 

Furthermore, each desk has sensitivity limits to changes in the various risk factors, which are monitored on a daily basis. Compared to the previous financial year, exposure was reduced across all risk classes.

 

Tab. 2: Summary of the trend in the main trading portfolio sensitivities

 

(€’000)

 

  FY 2023/2024    
Risk factors  30 June   Min   Max   Average   FY 2022/2023 
Equity delta (+1%)   (107,827)   (1,086,056)   3,928,644    258,943    418,680 
Equity vega (+1%)   (1,660,900)   (4,317,612)   1,817,130    (717,196)   757,496 
Interest rate delta (+1 bp)   (5,745)   (371,684)   473,465    104,737    218,649 
Inflation delta (+1 bp)   (37,959)   (70,991)   55,080    (17,952)   13,079 
Exchange rate delta (+1%) (*)    12,427    (364,685)   5,841,508    4,224    142,539 
Credit delta (+1 bp)   350,476    (294,922)   617,669    246,220    421,632 

 

(*) This refers to the Euro gaining versus other foreign currencies.

 

Trends in VaR of trading portfolio

 

 

 

310 | Consolidated financial statements as at 30 June 2024

 

 

Trends in VaR constituents (Trading)

 

 

 

QUANTITATIVE INFORMATION

 

1. Regulatory trading portfolio: distribution by residual maturity (repricing date) of financial cash assets and liabilities and financial derivatives

 

           From 3   From 6                 
       Up to 3   months to 6   months to 1   From 1 year   From 5 years   Over 10   Not 
Type/Residual duration  Demand   months   months   year   to 5 years   to 10 years   years   specified 
1. Cash assets   14,227   929,468   935,883   1,613,491   2,912,553   1,016,283   987,370    
1.1 Debt securities   14,227   929,468   935,883   1,613,491   2,912,553   1,016,283   987,370    
– with early redemption option                         
– other   14,227   929,468   935,883   1,613,491   2,912,553   1,016,283   987,370    
1.2 Other assets                         
2. Cash liabilities   185   248,162   554,744   493,976   2,473,543   642,040   488,856    
2.1 Repos                         
2.2 Other liabilities   185   248,162   554,744   493,976   2,473,543   642,040   488,856    
3. Financial derivatives                         
3.1 With underlying securities                         
– Options                         
+ Long positions      130,000                   
+ Short positions      130,000                   
– Other                         
+ Long positions      757,021         355,494          
+ Short positions      757,021         355,494          
3.2 Without underlying securities                         
– Options                         
+ Long positions   6,577   2,186,758   910,723   1,540,797   31,165,193   1,187,860       
+ Short positions   6,577   2,186,758   910,723   1,540,797   31,165,193   1,187,860       
– Other                         
+ Long positions   1,158,140   31,766,924   24,703,581   31,634,429   26,767,959   10,635,299   5,789,204    
+ Short positions   1,192,158   46,447,213   27,384,678   14,156,525   26,750,459   10,635,299   5,889,204    

 

Notes to the accounts | Part E - Information on risks and related hedging policies | 311

 

 

2. Regulatory trading portfolio: cash exposures in equities and UCITS units

 

   Carrying amount 
Type of exposure/Amounts  Level 1   Level 2   Level 3 
A. Equity securities (1)                
A.1 Shares   3,704,683        172,758 
A.2 Innovative equity instruments            
A.3 Other equity instruments            
B. UCITS               
B.1 Under Italian law            
– harmonized open            
– non-harmonized open            
– closed            
– reserved            
– speculative            
B.2 Under other EU states law            
– harmonized            
– non-harmonized open            
– non-harmonized closed            
B.3 Under non-EU states law            
– open            
– closed            
Total   3,704,683        172,758 

 

(1) Net imbalance between trading activities and technical overdrafts recognized as trading liabilities: over 93% of net exposure concerns EU countries.

 

1.2.2 INTEREST RATE RISK AND PRICE RISK – BANKING BOOK

 

QUALITATIVE INFORMATION

 

The Mediobanca Group monitors and manages interest rate risk through sensitivity testing of net interest income and economic value. The sensitivity of the net interest income quantifies the impact on current earnings in the worst-case scenario among those outlined in the guidelines of the Basel Committee (BCBS) transposed in the EBA document in 2022 (EBA/GL/2022/14). In this testing, the asset stocks are maintained constant, renewing the items falling due with the same financial characteristics and assuming a time horizon of twelve months.

 

Conversely, the sensitivity of economic value measures the impact of future flows on the current value in the worst-case scenario of those contemplated in the Basel Committee guidelines (BCBS).

 

312 | Consolidated financial statements as at 30 June 2024

 

 

All the scenarios present a floor set by the EBA guidelines at minus 1.5% on the demand maturity with linear progression up to 0% at the fifty-year maturity. In the current market environment, this floor has a very limited impact on sensitivity metrics.

 

For both sensitivities, balance sheet items have been treated based on their contractual profile, except for the items related to current account deposits for retail clients (which have been treated on the basis of proprietary behavioural models) and consumer credit items and mortgages (which reflect the possibility of early repayment).

 

To determine the discounted value of cash flows, various benchmark curves were used to discount and compute future rates based on the value date on which the balance sheet item itself was traded (multi-curve). The credit component has been stripped out of the cash flows for the economic value sensitivity only.

 

With reference to the Group’s banking book positions at 30 June, in the event of a parallel decrease in the curve (“parallel down”), the expected interest income would undergo a negative change of €52m, representing an improvement with respect to the previous year (€-142m). The sharply declining sensitivity mainly concerned the large capital endowment (referred to as free capital) and moreover the end-of-year figure was partially contained over the 12-month period; in fact, it settled around a value of approximately €-100m (Parallel Down scenario).

 

With reference to the analysis of the present value of future cash flows in the Group’s banking book, the shock that may cause the worst change would occur if the short part of the interest rate curve rose (“Short Up”), which is currently an unlikely scenario.

 

The change would in fact be negative by €74m, mainly due to the impact of Mediobanca (€-23m) and Compass (€-25m). In the previous year, the maximum change amounted to €76m in the “Flattener” scenario.

 

Notes to the accounts | Part E - Information on risks and related hedging policies| 313

 

 

(€m)

 

   Banking Book 
Data at 30 June 2024  Maximum
level
scenario
  Group Mediobanca MB Premier
S.p.A.
   Compass   Other 
Net interest income sensitivity  Parallel Down  (52)  11   (20)  (20)  (23)
Sensitivity of discounted value of expected cash flows  Flattener  (74)  (23)   (3)  (25)  (23)

 

At Group level, the values obtained for the net interest income sensitivity are lower than the Group RAF limit of 4.5% (Group net interest income/TIER 1), while the economic value sensitivity was lower than the Group RAF limit by 6% (Economic Value sensitivity/Group TIER 1).

 

The SOT regulatory indicator is 0.7% (net interest income/Tier 1 Capital sensitivity) and well below the 5% regulatory threshold.

 

In addition to the scenarios envisaged from a regulatory standpoint, the +50 bps scenario is continuously monitored:

 

(€m)

 

      Average amount for    
   30 June 2023   the year 2023/2024   30 June 2024 
Group  36   28   15 
Mediobanca S.p.A  17   14   (1)

 

Hedging

 

Hedges are intended to neutralize possible losses that may be incurred on a given asset or liability, due to the volatility of certain financial risk factors (interest rate, exchange rate, credit or some other risk parameter) through the gains that may be realized on a hedging instrument that is capable of offsetting changes in Fair Value or cash flows of the hedged instrument. For Fair Value hedges in particular, the Group seeks to minimize the financial risk on interest rates by bringing the entire interest-bearing exposure in line with Euribor (generally Euribor 3 months).(67) 

 

(67) This target is maintained even in the presence of hedging contracts with market counterparties with which netting agreements and CSAs (collateralized standard agreements) have been entered into and whose valuation is carried out at Ester interest rates.

 

314 | Consolidated financial statements as at 30 June 2024

 

 

A. Fair Value hedging

 

Fair Value hedges are used to neutralize exposure to interest rate or price risk for specific asset or liability positions, via derivative contracts entered into with leading market counterparties with high credit rating. In particular, with regard to interest rate risk, the Group applies specific hedges to individual items or clusters of like-for-like assets and liabilities in terms of interest rate risk. The objective of these hedges is to reduce the interest rate risk through swaps that convert fixed-rate into floating rate assets and/or liabilities. The items being mainly hedged are fixed-rate or structured liabilities issued by Mediobanca, investments in fixed-rate securities under assets held in the HTC and HTCS portfolio, the portfolio of fixed-rate mortgage loans, the floors implicit in the floating-rate loans of the Lending division and floating-rate mortgage loans granted by Mediobanca Premier and the deposits of Mediobanca Premier for which the behavioural model is being taken into account at the effective maturity.

 

Some structured bond issues remain in the portfolio without causing any risks correlated to the main risk, broken down into the interest rate component (hedged) and other risks which are represented in the trading book and are usually covered by external positions of the opposite sign; for structured bonds issued during the year, mostly interest rate, the Bank applied the Fair Value option in the initial recognition phase of the liability and the related risks were hedged with derivatives measured at Fair Value Through Profit or Loss in order to deal with the impacts on the P&L account.

 

Fair Value hedges are also used by the Parent Company to mitigate the price risk of an equity investment recorded within the portfolio of assets measured at Fair Value through other comprehensive income.

 

The Mediobanca Premier mortgage loan book is hedged via amortizing swaps, the notional and maturity profile of which follows the mortgage repayment plan and the expected prepayment rate for the loan book based on the model developed by Risk Management (subject to internal approval, considering a prudential margin).

 

Notes to the accounts | Part E - Information on risks and related hedging policies | 315

 

 

B. Cash flow hedging

 

This form of hedging is mainly used in the context of some Group companies’ operations (in particular with reference to consumer credit and leasing), where provisions at a floating rate are set aside for a significant amount against a large number of transactions for a negligible amount, generally at a fixed rate. The hedge is made in order to transform these positions into fixed-rate positions, correlating the relevant cash flows with investments. Normally, the Group uses derivatives to fix the expected cost of deposits over the reference period to cover floating-rate loans in place and future transactions linked to systematic renewals of such loans upon expiry.

 

C. Foreign investment hedging activities

 

This involves hedging an exposure to a controlling interest in a company and the goodwill associated with it (including any intangibles identified as a result of the Purchase Price Allocation process) in currencies other than the Euro. The exposure may be hedged via derivatives or other financial instruments in different currencies, such as bond issues. The exchange rate effect of the hedge is taken through the net equity reserve to cover the effects of the hedged instrument.

 

D.Hedging instruments

  

E.Hedged items

 

As for hedged items and hedging instruments, they have been exhaustively described in the previous paragraphs and throughout the document.

 

Counterparty risk

 

Counterparty risk generated by market transactions with institutional customers or counterparties is measured in terms of expected potential future exposure. With regard to derivatives and collateralized short-term loan products (repos and securities lending), the calculation is based on determining the

 

316 | Consolidated financial statements as at 30 June 2024

 

 

maximum potential exposure (assuming a 95% likelihood) at various points in time up to 30 years. The scope of application regards all groups of counterparties which have relations with the Bank, taking into account the presence of netting (e.g. ISDA, GMSLA or GMRA) and collateralization agreements (e.g. CSA), if any. Exposures deriving from transactions on the interbank market should be added to these. For these three types of transactions, different exposure limits are granted to each counterparty and/or group subject to internal analysis and approval by the Credit and Market Committee.

 

With regard to derivative transactions, as required by IFRS 13, the Fair Value incorporates the effects of the counterparty credit risk (referred to as CVA) and Mediobanca credit risk (referred to as DVA) based on the future exposure profile of the set of contracts in place.

 

Notes to the accounts | Part E - Information on risks and related hedging policies | 317

 

 

QUANTITATIVE INFORMATION

 

1. Banking book by outstanding maturity (repricing date) of financial assets and liabilities

 

Type/Residual duration  Demand  Up to 3
months
  From 3
months to
6 months
  From 6
months to
1 year
  From
1 year to
5 years
  From
5 years to
10 years
  Over 10
years
  Indefinite
duration
 
1. Cash assets   16,339,236   21,438,629   8,336,459   5,170,422   16,250,391   4,757,488   4,404,702   10 
1.1 Debt securities      1,598,261   2,255,486   2,330,580   3,360,338   1,047,788   453,252    
– with early redemption option                         
– other      1,598,261   2,255,486   2,330,580   3,360,338   1,047,788   453,252    
1.2 Loans to banks   4,444,953   4,187,418   938,589   292,741   635,563      198,966   10 
1.3 Loans to customers   11,894,283   15,652,950   5,142,384   2,547,101   12,254,490   3,709,700   3,752,484    
– current accounts   1,422,580                      
– other loans   10,471,703   15,652,950   5,142,384   2,547,101   12,254,490   3,709,700   3,752,484    
– with early redemption option   3,961,469   2,382,769   1,176,419   2,175,869   10,421,065   3,595,747   3,717,446    
– other   6,510,234   13,270,181   3,965,965   371,232   1,833,425   113,953   35,038    
2. Cash liabilities   24,122,540   22,577,961   4,797,741   9,089,333   12,194,068   1,205,749   3,604,629    
2.1 Due to customers   21,648,149   6,447,197   3,202,521   2,849,587   461,443   50,914   124,276    
– current accounts   16,725,369   1,432,017                   
– other liabilities   4,922,780   5,015,180   3,202,521   2,849,587   461,443   50,914   124,276    
– with early redemption option                         
– other   4,922,780   5,015,180   3,202,521   2,849,587   461,443   50,914   124,276    
2.2 Due to banks   2,472,950   7,739,987   400,510   296,034   2,190,167   313,228   591,462    
– current accounts   325,221                      
– other liabilities   2,147,729   7,739,987   400,510   296,034   2,190,167   313,228   591,462    
2.3 Debt securities   1,441   8,390,777   1,194,710   5,943,712   9,542,458   841,607   2,888,891    
– with early redemption option                         
– other   1,441   8,390,777   1,194,710   5,943,712   9,542,458   841,607   2,888,891    
2.4 Other liabilities                         
– with early redemption option                         
– other                         
3. Financial derivatives                                 
3.1 With underlying securities                                 
– Options                                 
+ long positions                         
+ short positions                         
– Other derivatives                                 
+ long positions            155,000             
+ short positions            155,000             
3.2 Without underlying securities – Options                                 
+ long positions      18,381   25,900   145,989   137,881      758,798    
+ short positions      18,381   25,900   145,989   137,881      758,798    
– Other derivatives                                 
+ long positions   254,717   38,421,822   6,347,004   11,358,742   16,081,766   5,346,068   4,963,200    
+ short positions   254,717   52,180,038   1,964,011   2,073,520   16,091,766   5,346,068   4,863,200    
4. Other off-balance sheet transactions   16,836,715   12,289,081   3,795,681   3,115,491   26,252,284   4,786,922   2,280491    
+ long positions   7,820,203   8,194,987   1,598,992   1,680,666   12,532,629   1,964,512   886,344    
+ short positions   9,016,512   4,094,094   2,196,689   1,434,825   13,719,655   2,822,410   1,394,147    

 

318 | Consolidated financial statements as at 30 June 2024

 

 

2. Banking book: cash exposures in equities and UCITS units

 

  Carrying amount 
Type of exposure/Amounts  Level 1   Level 2   Level 3 
A. Equity securities (1)                
A.1 Shares   127,548        133,085 
A.2 Innovative equity instruments            
A.3 Other equity instruments            
B. UCITS               
B.1 Under Italian law   20,363        186,860 
– harmonized open   15,777         
– non–harmonized open            
– closed           186,084 
– reserved            
– speculative   4,586        776 
B.2 Under other EU states law   176,865    80,949    187,825 
– harmonized            
– non–harmonized open           61,265 
– non–harmonized closed   176,865    80,949    126,560 
B.3 Under non–EU states law            
– open            
– closed            
Total   324,776    80,949    507,770 

 

(1) Of which 54% Italian and 46% from other EU member states.

 

1.2. 3 EXCHANGE RATE RISK

 

QUALITATIVE INFORMATION

 

A.General aspects, operating processes and measurement techniques of exchange rate risk

 

B.Exchange rate risk hedging

 

The trend in the exchange rate component of VaR shown on page 307 is an effective representation of changes in the risks taken on the forex market, because exposure to exchange rate risk is managed globally.

 

Notes to the accounts | Part E - Information on risks and related hedging policies | 319

 

 

QUANTITATIVE INFORMATION

 

1. Assets, liabilities and derivatives by currency

 

  Currencies 
      Great Britain   Japanese   Swedish   Swiss   Other 
Items  US Dollar   Pound   Yen   Krona   Franc   currencies 
A. Financial assets   3,894,692    1,542,123    3,473    44,381    462,137    102,012 
A.1 Debt securities   1,057,055    296,527            19,273     
A.2 Equity securities   347,399    462,460            234,797     
A.3 Due from banks   827,931    367,870    2,067    10,145    50,180    44,054 
A.4 Due from customers   1,653,419    398,970    1,242    34,182    157,824    57,757 
A.5 Other financial assets   8,888    16,296    164    54    63    201 
B. Other assets                   234     
C. Financial liabilities   3,672,255    1,430,744    112,972    6,981    287,547    63,986 
C.1 Due to banks   112,021    472,367    1    6,627    4,059    376 
C.2 Due to customers   2,211,872    825,203    9,955    347    96,507    51,391 
C.3 Debt securities   1,347,022    14,605    103,016        186,881    12,219 
C.4 Other financial liabilities   1,340    118,569        7    100     
D. Other liabilities   16,923    2,142            11,715     
E. Financial derivatives                              
– Options                              
+ Long positions   122,154    58,873    90,578    876    94,087    120,266 
+ Short positions   50,367        73,610    2,612    282,237    85,218 
– Other derivatives                              
+ Long positions   5,156,763    1,033,901    550,018    74,555    633,490    649,276 
+ Short positions   5,413,553    1,177,904    414,129    108,625    653,077    668,025 
Total assets   9,173,609    2,634,897    644,069    119,812    1,189,948    871,554 
Total liabilities   9,153,098    2,610,790    600,711    118,218    1,234,576    817,229 
Difference (+/-)   20,511    24,107    43,358    1,594    (44,628)   54,325 

 

2. Internal models and other methodologies used for sensitivity analysis

 

During the year under review, the Euro-dollar rate moved around the average value of 1.08, with a minimum of 1.05 and a maximum of 1.13, to close at 1.07, i.e. near the values recorded at the beginning of the year. The overall Forex VaR remained relatively steady at 900,000 with short-lived peaks at 2.4m.

 

320 | Consolidated financial statements as at 30 June 2024

 

 

1.3 DERIVATIVE INSTRUMENTS AND HEDGING POLICIES

 

1.3.1 TRADING DERIVATIVES

 

A. Financial derivatives

 

A.1 Trading financial derivatives: reporting-date notional values

 

  30 June 2024  30 June 2023 
  Over the counter    Over the counter   
     Without central counterparties      Without central counterparties   
     With  Without       With  Without    
Underlying assets /  Central   offsetting  offsetting  Established  Central  offsetting  offsetting  Established 
Type of derivatives  counterparties   arrangements  arrangements  markets  counterparties  arrangements  arrangements  markets 
1. Debt securities and interest rate   102,874,596   48,042,208   1,443,456   1,535,643   94,215,475   22,556,759   1,258,298   2,115,793 
a) Options      31,919,433   277,500   492,747      4,802,779   613,240   1,269,393 
b) Swap   102,874,596   13,634,787   1,165,956      94,215,475   13,709,595   645,058    
c) Forwards      355,494            277,076       
d) Futures            1,042,896            846,400 
e) Other      2,132,494            3,767,309       
2. Equity securities and stock      14,776,409   2,045,702   19,872,720      14,285,141   3,047,327   18,361,567 
a) Options      12,991,255   150,517   19,077,052      13,792,650   744,742   17,860,244 
b) Swap      1,785,154   241,620         492,491       
c) Forward                         
d) Futures            795,668            501,323 
e) Other (1)          1,653,565            2,302,585    
3. Currencies and gold      16,268,177   531,887         20,148,517   789,845    
a) Options      2,295,736            3,604,697       
b) Swap      6,165,851            6,601,337   504,598    
c) Forward      7,806,590   531,887         9,942,483   285,247    
d) Futures                         
e) Other                         
4. Commodities      453,296   145,665         1,750,000   169,947    
5. Other                         
Total   102,874,596   79,540,090   4,166,710   21,408,363   94,215,475   58,740,417   5,265,417   20,477,360 

 

(1) This exclusively regards Certificates issued.

 

Notes to the accounts | Part E - Information on risks and related hedging policies | 321

 

 

A.2 Trading financial derivatives: gross positive and negative Fair Values by product

 

  Total 30 June 2024  Total 30 June 2023 
   Over the counter     Over the counter    
      Without central counterparties        Without central counterparties    
      With  Without        With  Without    
   Central  offsetting  offsetting  Established  Central  offsetting  offsetting  Established 
Types of derivatives  counterparties  arrangements  arrangements  markets  counterparties  arrangements  arrangements  markets 
1. Positive Fair Value                                 
a) Options      554,206   310,818   784,767      616,293   270,054   688,152 
b) Interest rate swaps   164,019   169,507   79,057      242,613   239,367   59,887    
c) Cross currency swaps      171,438            238,334       
d) Equity swaps      191,886   2,053         172,525       
e) Forward      125,415   17,142         148,770   21,239    
f) Futures            12,055            7,826 
g) Other (1)                      12,602    
Total   164,019   1,212,452   409,070   796,822   242,613   1,415,289   363,782   695,978 
2. Negative Fair Value                                 
a) Options      648,467   344,601   832,156      724,524   325,764   833,108 
b) Interest rate swap   19,242   409,556   15,657      21,750   510,238   18,861    
c) Cross currency swaps      165,188            198,055   22,994    
d) Equity swaps      4,415   8         2,875       
e) Forward      92,744   8,741         104,804   4,089    
f) Futures            47,352            23,631 
g) Other (1)          1,576,925            2,099,503    
Total   19,242   1,320,370   1,945,932   879,508   21,750   1,540,496   2,471,211   856,739 

 

(1) This exclusively regards Certificates issued.

 

322 | Consolidated financial statements as at 30 June 2024

 

 

A.3 OTC trading financial derivatives: notional values, gross positive and negative Fair Values by counterparty

 

   Central       Other financial     
Underlying assets  counterparti   Banks   companies   Other entities 
Contracts not included in offsetting arrangements                    
1) Debt securities and interest rates (1)                     
– notional value   X    315,921    433,923    693,611 
– positive Fair Value   X    28,297    55,066    1,727 
– negative Fair Value   X    122    7,641    26,337 
2) Equity securities and stock indexes                    
– notional value   X    1,653,565    392,112    24 
– positive Fair Value   X    306,600    2,402    636 
–Negative Fair Value (1)    X    1,883,483    23,321    115 
3) Currencies and gold                    
– notional value   X    288,254    238,028    5,605 
– positive Fair Value   X    55    11,385    82 
– negative Fair Value   X    4,854    58     
4) Commodities                    
– notional value   X    145,665         
– positive Fair Value   X    2,820         
– negative Fair Value   X             
5) Other                    
– notional value   X             
– positive Fair Value   X             
– negative Fair Value   X             
Contracts included in offsetting arrangements                    
1) Debt securities and interest rates                    
– notional value   102,874,596    38,438,159    5,576,736    4,027,311 
– positive Fair Value   164,019    214,898    141,643    6,418 
– negative Fair Value   19,242    198,494    237,424    138,976 
2) Equity securities and stock indexes                    
– notional value       7,861,559    4,832,973    2,081,878 
– positive Fair Value       125,032    247,172    164,544 
– negative Fair Value       311,380    113,393    30,973 
3) Currencies and gold                    
– notional value       11,420,905    1,926,041    2,921,232 
– positive Fair Value       178,685    29,990    85,042 
– negative Fair Value       215,876    46,916    26,920 
4) Commodities                    
– notional value       400,000    53,297     
– positive Fair Value       19,028         
– negative Fair Value       1    16     
5) Other                    
– notional value                
– positive Fair Value                
– negative Fair Value                

 

(1) Of which certificates with a nominal value of €1,653,565 and Fair Value of € -1,576,925.

 

Notes to the accounts | Part E - Information on risks and related hedging policies | 323

 

 

A.4 Outstanding life of OTC financial derivatives: notional amounts

 

       From 1 year         
Underlying / Outstanding life  Up to 1 year   to 5 years   Over 5 years   Total 
A.1 Financial derivative contracts on debt securities and interest rates   43,362,645    78,751,766    30,245,849    152,360,260 
A.2 Financial derivative contracts on equity securities and stock indexes   8,802,236    7,790,298    229,577    16,822,111 
A.3 Financial derivatives on currencies and gold   13,313,407    3,019,586    467,071    16,800,064 
A.4 Financial derivatives on commodities   360,001    238,960        598,961 
A.5 Other financial derivatives                
Total 30 June 2024   65,838,289    89,800,610    30,942,497    186,581,396 
Total 30 June 2023   68,914,364    67,236,795    22,070,151    158,221,310 

 

B. Credit derivatives

 

B.1 Trading credit derivatives: reporting-date notional values

 

   Trading derivatives 
       With more than 
   with a single   one counterparty 
Categorie di operazioni  counterparty   (basket) 
1. Hedge purchases          
a) Credit default products   2,089,371    15,942,262 
b) Credit spread products        
c) Total rate of return swap        
d) Other (1)    166,675     
Total 30 June 2024   2,256,046    15,942,262 
Total 30 June 2023   4,464,319    23,081,608 
2. Hedging sales          
a) Credit default products   1,923,844    15,710,906 
b) Credit spread products        
c) Total rate of return swap        
d) Other (1)         
Total 30 June 2024   1,923,844    15,710,906 
Total 30 June 2023   2,834,997    23,071,967 

 

(1)  This exclusively regards Certificates issued.

 

The column headed “Basket” includes the positions in credit indexes matched by positions on single names which go to make up the same index for the skew issues.(68)  The arbitrage structures have a notional value of €12.4bn (€18bn in the previous year). The embedded derivative of the issues consists in purchases of hedges of €1.7bn(69) (€1.4bn) on individual entities.

 

(68)   Please refer to “Part B - Liabilities - Liabilities at amortized cost” herein.

(69)   Embedded items with underlying commodities (€146m) and related derivatives (€453m) are shown in Table A.3.

 

324 | Consolidated financial statements as at 30 June 2024

 

 

B.2 Trading credit derivatives: gross positive and negative Fair Values by product

 

Types of derivatives  30 June 2024   30 June 2023 
1. Positive Fair Value          
a) Credit default products   214,402    158,778 
b) Credit spread products        
c) Total rate of return swap        
d) Other (1)    17,558     
Total   231,960    158,778 
2. Negative Fair Value          
a) Credit default products   219,517    212,650 
b) Credit spread products        
c) Total rate of return swap        
d) Other (1)    169,307    203,733 
Total   388,824    416,383 

 

(1) This exclusively regards Certificates issued.

 

B.3 OTC trading credit derivatives: notional values and gross positive/negative Fair Value, by counterparty

 

   Central       Other financial   Other 
   counterparties   Banks   companies   entities 
Contracts not included in offsetting arrangements                    
1) Hedging purchases                    
− notional value (1)    X    1,867,340    90,683     
− positive Fair Value   X    19,987    851     
− Negative Fair Value (1)    X    169,307    1,080     
2) Hedging sales                    
− notional value   X    12,251         
− positive Fair Value   X    5,476         
− negative Fair Value   X             
Contracts included in offsetting arrangements                    
1) Hedging purchases                    
− notional value   4,841,696    1,410,590    9,987,999     
− positive Fair Value       669    7,598     
− negative Fair Value       33,404    145,561     
2) Hedging sales                    
− notional value   4,584,755    2,005,489    11,032,255     
− positive Fair Value       47,459    149,920     
− negative Fair Value   11,923    10,772    16,778     

 

(1) Of which certificates with a nominal value of €166,675 and a Fair Value of €-151,749.

 

Notes to the accounts | Part E - Information on risks and related hedging policies | 325

 

 

B.4 Outstanding life of OTC trading credit derivatives: notional values

 

Underlying / Outstanding life  Up to 1 year       From 1 year to 5 years   Over 5 years   Total 
1 Hedging sales   4,563,109    12,588,482    483,159    17,634,750 
2 Hedging purchases   4,957,050    13,072,123    169,135    18,198,308 
Total 30 June 2024   9,520,159    25,660,605    652,294    35,833,058 
Total 30 June 2024   20,036,194    32,270,037    1,146,660    53,452,891 

 

1.3.2 ACCOUNTING HEDGES

 

QUANTITATIVE INFORMATION

 

A. Financial hedging derivatives

 

A.1 Financial hedging derivatives: reporting-date notional value

 

   30 June 2024  30 June 2023 
   Over the counter     Over the counter    
      Without central counterparties        Without central counterparties    
Underlying assets /
Type of derivatives
  Central
counterparties
  With offsetting
arrangements
  Without
offsetting
arrangements
  Established
markets
  Central
counterparties
  With offsetting
arrangements
  Without offsetting
arrangements
  Established
markets
 
1. Debt securities and interest rate   58,185,737   25,457,251   10,000      59,316,375   28,878,165   10,000    
a) Options      1,086,949            1,711,945       
b) Swaps   58,185,737   24,215,302   10,000      59,316,375   27,166,220   10,000    
c) Forwards      155,000                         
d) Futures                         
e) Other                         
2. Titoli di capitale e indici azionari                         
a) Options                         
b) Swaps                         
c) Forwards                         
d) Futures                         
e) Other                         
3. Valute e oro      362,280               360,506         
a) Options                         
b) Swaps      362,280               360,506         
c) Forwards                         
d) Futures                         
e) Other                         
4. Commodities                         
5. Other                         
Total   58,185,737   25,819,531   10,000       59,316,375   29,238,671   10,000     

 

326 | Consolidated financial statements as at 30 June 2024

 

 

A.2 Financial hedging derivatives: gross positive and negative Fair Values by product

 

   Positive and negative Fair Value    
   30 June 2024  30 June 2023  Change in the value used 
   Over the counter     Over the counter     to calculate the hedge 
      Without central counterparties        Without central counterparties     effectiveness 
Types of derivatives  Central
counterparties
  With offsetting
arrangements
  Without
offsetting
arrangements
  Established
markets
  Central
counterparties
  With offsetting
arrangements
  Senza accordi di compensazione  Established
markets
  30 June
2024
  30 giugno
2023
 
1. Positive Fair Value                                         
a) Options      25,537            27,932             
b) Interest rate swaps   596,520   79,811         1,207,709   84,865         1,009,091   299,123 
c) ) Cross currency swaps      1,251            1,377             
d) Equity swaps                               
e) Forwards      2,432                         
f) Futures                               
g) Other                               
Total   596,520   109,031         1,207,709   114,174         1,009,091   299,123 
2. Fair Value  negativo                               
a) Options      1,243            6,461             
b) Interest rate swaps   1,259,955   169,739   131      1,870,620   191,934   61      731,675   905,674 
c) ) Cross currency swaps      575            466             
d) Equity swaps                               
e) Forwards                               
f) Futures                               
g) Other                               
Total   1,259,955   171,557   131      1,870,620   198,861   61      731,675   905,674 

 

Notes to the accounts | Part E - Information on risks and related hedging policies | 327

 

 

A.3 OTC financial hedging derivatives: notional values, gross positive and negative Fair Values by counterparty

 

   Central       Other financial     
Underlying assets  counterparties   Banks   companies   Other entities 
Contracts not included in offsetting arrangements                    
1) Debt securities and interest rates                    
– notional value   X    10,000         
– positive Fair Value   X             
– negative Fair Value   X    131         
2) Equity securities and stock indexes                    
– notional value   X             
– positive Fair Value   X             
– negative Fair Value   X             
3) Currencies and gold                    
– notional value   X             
– positive Fair Value   X             
– negative Fair Value   X             
4) Commodities                    
– notional value   X             
– positive Fair Value   X             
– negative Fair Value   X             
5) Other                    
– notional value   X             
– positive Fair Value   X             
– negative Fair Value   X             
Contracts included in offsetting arrangements                    
1) Debt securities and interest rates                    
– notional value   58,185,737    22,754,171    2,703,080     
– positive Fair Value   596,520    86,172    21,607     
– negative Fair Value   1,259,955    167,414    3,568     
2) Equity securities and stock indexes                    
– notional value                
– positive Fair Value                
– negative Fair Value                
3) Currencies and gold                    
– notional value       321,568    40,712     
– positive Fair Value       1,251         
– negative Fair Value       474    101     
4) Commodities                    
– notional value                
– positive Fair Value                
– negative Fair Value                
5) Other                    
– notional value                
– positive Fair Value                
– negative Fair Value                

 

328 | Consolidated financial statements as at 30 June 2024

 

 

A.4 Outstanding life of OTC financial hedging derivatives: notional values

 

Underlying / Outstanding life  Up to 1 year   From 1 year to
5 years
   Over 5 years   Total 
A.1 Financial derivative contracts on debt securities and interest rates   8,734,313    42,555,957    32,362,718    83,652,988 
A.2 Financial derivative contracts on equity securities and stock indexes                
A.3 Financial derivative contracts on currencies and gold   21,466    300,102    40,712    362,280 
A.4 Financial derivatives on commodities                
A.5 Other financial derivatives                
Total 30 June 2024   8,755,779    42,856,059    32,403,430    84,015,268 
Total 30 June 2023   11,267,564    40,985,740    36,311,742    88,565,046 

 

C. Non-derivative hedging instruments

 

C.1 Hedging instruments other than derivatives: breakdown by accounting portfolio and hedge type

 

      Change in value used to calculate the hedge 
   Carrying amount   ineffectiveness 
           Foreign           Foreign 
   Fair Value   Cash flow   investment   Fair Value   Cash flow   investment 
   hedges   hedges   hedges   hedges   hedges   hedges 
Financial assets other than derivatives                        
of which: trading activities                        
of which: other assets mandatorily measured at Fair Value                        
of which: assets designated at Fair Value                        
Total 30 June 2024                        
Total 30 June 2023                        
Financial liabilities other than derivatives                        
Trading liabilities                        
Liabilities designated at Fair Value                        
Liabilities measured at amortized cost   X    X                 
Total 30 June 2024                        
Total 30 June 2023                       320 

 

Notes to the accounts | Part E - Information on risks and related hedging policies | 329

 

 

D. Hedged instruments

 

D.1 Fair Value hedges

 

      Specific hedges  Coperture specifiche    
      - net positions:  Accumulated  Ending of  Changes in    
      balance sheet  changes in  hedge: residual  value used  Generic 
   Specific  value of assets or  Fair Value of  accumulated  to calculate  hedges: 
   hedges:  liabilities (before  the hedged  changes in Fair  the hedge  Carrying 
   book  offsetting)  instrument  Value  ineffectiveness  amount 
A. Assets                         
1. Financial assets measured at Fair Value through other comprehensive income - hedges of:   1,175,058      3,267      20,925    
1.1 Debt securities and interest   rate   1,175,058      3,267      20,925   X 
1.2 Equity securities and stock   indexes                  X 
1.3 Currencies and gold                  X 
1.4 Receivables                  X 
1.5 Other                  X 
2. Financial assets measured at amortized cost - hedges of:   10,325,353      189,273      275,633    
1.1 Debt securities and interest rate 2,693,485      40,135      60,054   X     
1.2 Equity securities and stock   indexes                  X 
1.3 Currencies and gold                  X 
1.4 Receivables 7,631,868      149,138      215,579   X     
1.5 Other                  X 
Total 30 June 2024   11,500,411      192,540      296,558    
Total 30 June 2023   11,874,071      534,954      219,830    
B. Liabilities                         
1. Financial liabilities measured at amortized cost - hedges of:   27,448,491      1,208,739      615,790    
1.1 Debt securities and interest   rate   27,448,491      1,208,739      615,790   X 
1.2 Currencies and gold                  X 
1.3 Other                  X 
Total 30 June 2024   27,448,491      1,208,739      615,790    
Total 30 June 2023   26,574,907      1,788,619      526,817    

 

330 | Consolidated financial statements as at 30 June 2024

 

 

D.2 Hedging of cash flows and foreign investments

 

   Changes in the value
used to calculate the
hedge ineffectiveness
   Hedge reserves   Ending of hedge:
residual value of
hedging reserves
 
A. Cash flow hedging               
1.  Assets   2.719    1,820     
1.1 Debt securities and interest rate   2,719    1,820     
1.2 Equity securities and stock indexes            
1.3 Currencies and gold            
1.4 Receivables            
1.5 Other            
2.  Liabilities   234,417    111,848     
1.1 Debt securities and interest rate   234,417    111,848     
1.2 Currencies and gold            
1.3 Other            
Total (A) 30 June 2024   237,136    113,668     
Total (A) 30 June 2023   143,221    272,383     
B. Hedging of foreign investments   X        (15.947)
Total (A+B) 30 June 2024   237,136    113,668    (15.947)
Total (A+B) 30 June 2023   143,221    256,436     

 

E. Effects of hedging through net equity

 

E.1 Reconciliation of net equity components

 

   Cash flow hedging reserve  Foreign investment hedging reserve 
       Equity              Equity          
   Debt   securities           Debt  securities          
   securities   and stock           securities  and stock          
   and interest   price  Currencies        and interest  price  Currencies       
   rate   indexes  and gold  Receivables  Other  rate  indexes  and gold  Receivables  Other 
Opening balance   272,383                             
Changes in Fair  Value (effective portion)   (158,715)                            
Transfers to P&L                                
Of which: future  transactions no longer expected                   X   X   X   X   X 
Other changes                                
Of which: transfers of hedged instruments at book value                   X   X   X   X   X 
Closing balance   113,668                             

 

Notes to the accounts | Part E - Information on risks and related hedging policies | 331

 

 

1.3.3 OTHER INFORMATION ON DERIVATIVE INSTRUMENTS (TRADING AND HEDGING)

 

A. Financial and credit derivatives

 

A.1 OTC financial and credit derivatives: net Fair Value by counterparty

 

   Central
counterparties
  Banks       Other financial companies  Other entities 
A. Financial derivatives                 
1) Debt securities and interest rates                 
– notional value   161,060,333   61,518,251   8,713,739   4,720,922 
– net positive Fair Value   760,539   329,367   216,135   8,145 
– net negative Fair Value   1,279,197   366,161   246,452   165,313 
2) Equity securities and stock indexes                 
– notional value      9,515,124   5,225,085   2,081,902 
– net positive Fair Value      431,632   249,574   165,180 
– net negative Fair Value      2,194,863   136,714   31,088 
3) Currencies and gold                 
– notional value      12,030,727   2,204,781   2,926,837 
– net positive Fair Value      179,991   41,375   85,124 
– net negative Fair Value      221,204   47,075   26,920 
4) Commodities                 
– notional value      545,665   53,297    
– net positive Fair Value      21,848       
– net negative Fair Value      1   16    
5) Other                 
– notional value             
– net positive Fair Value             
– net negative Fair Value             
B. Credit derivatives                 
1) Hedging purchases                 
– notional value   4,841,696   3,277,930   10,078,682    
– net positive Fair Value      20,656   8,449    
– net negative Fair Value      202,711   146,641    
2) Hedging sales                 
– notional value   4,584,755   2,017,740   11,032,255    
– net positive Fair Value      52,935   149,920    
– net negative Fair Value   11,923   10,772   16,778    

 

332 | Consolidated financial statements as at 30 June 2024

 

 

1.4 LIQUIDITY RISK

 

QUALITATIVE INFORMATION

 

A.General aspects, operating processes and measurement techniques of liquidity risk

 

Banks are naturally exposed to the liquidity risk inherent in the maturity transformation process that is typical of banking operations.

 

Liquidity risk is distinguished according to its timing profile:

 

the current or potential risk of the bank not being able to manage its own liquidity needs in the short term (“liquidity risk”);

 

the risk of the bank not having stable funding sources in the medium or long term, resulting in its inability to meet its financial obligations without incurring an excessive increase in the cost of financing (“funding risk”).

 

An adequate liquidity and funding risk management system is fundamental to ensure the stability of the Group and the financial system in general, given that a single bank’s difficulties would affect the system as a whole. The liquidity and funding risk management system is developed as part of the Risk Appetite Statement and the risk tolerance levels contained in it. In particular, one of the management objectives contained in the Risk Appetite Statement is to maintain a liquidity position in the short and long term which is adequate to cope with a period of prolonged stress (combining Bank-specific and systemic stress factors).

 

The Group Liquidity Risk Management Policy (the “Policy”) approved by the Parent company’s Board of Directors defines the target amount in terms of highly liquid assets in order to hedge the anticipated cash flows to be maintained in the short and medium/long term.

 

The Policy also sets out the roles and responsibilities of the company units and governing bodies, the risk measurement metrics used, the guidelines for carrying out the stress testing process, the funds transfer pricing system and the Contingency Funding Plan.

 

To ensure that liquidity risk is managed according to an integrated and consistent approach within the Group as a whole, strategic decisions are taken by the Parent Company’s Board of Directors, to which the Policy assigns several

 

Notes to the accounts | Part E - Information on risks and related hedging policies | 333

 

 

important duties, including: definition and approval of the guidelines and strategic direction, responsibility for ensuring that the risk governance system is fully reliable, and monitoring of trends in the Group’s liquidity and funding risk and Risk Appetite Framework.

 

Moreover, the Group’s ALM Committee discusses the most significant liquidity risk issues, defining the asset and liability structure and the related acceptance of the risk of mismatches between assets and liabilities and managing them in line with the commercial and financial objectives set out in the budget and in the Group’s Risk Appetite Framework.

 

In application of Article 86 of Directive 2013/36/EU, the Mediobanca Group identifies, measures, manages and monitors liquidity risk as part of its internal liquidity adequacy assessment process (ILAAP). In this process, which constitutes an integral part of the Supervisory Authority’s activities (Supervisory Review and Evaluation Process, or SREP), the Mediobanca Group performs a self-assessment of the adequacy of its overall framework for liquidity risk management and measurement from a qualitative and a quantitative perspective. The findings of the risk profile adequacy assessment and overall self-assessment are presented to the Governing Bodies annually.

 

The Mediobanca Group’s liquidity governance process is centralized at the Parent Company level by setting the strategy and guidelines for Group Legal Entities, thereby ensuring that the liquidity position is managed and controlled at the consolidated level.

 

The Parent Company’s units that are responsible for ensuring that the Policy is applied correctly are:

 

Group Treasury, responsible at Group level for the management of liquidity, funding, collateral, internal transfer pricing system and for the preparation of the Group Funding Plan in line with budget objectives;

 

Risk Management which, in accordance with the principles of separation and independence, is responsible for the Group’s integrated, second-level control system for current and future risks, in accordance with the Group’s regulations and governance strategies.

 

The Group Audit Unit is responsible for evaluating the functioning and reliability of the control system for liquidity risk management and for reviewing its adequacy and compliance with the requirements laid down in the regulations.

 

334 | Consolidated financial statements as at 30 June 2024

 

 

The findings of such reviews are submitted to the Governing Bodies at least once a year.

 

The Group’s objective is to maintain a level of liquidity that will enable it to meet its ordinary and extraordinary payment obligations at the established expiry dates, while at the same time keeping costs to a minimum and hence without incurring losses. The Mediobanca Group’s short-term liquidity policy aims to verify whether the mismatch between expected or unexpected cash inflows and outflows remains sustainable in the short term, including within an intra-day time horizon.

 

The Group, through its Group Treasury Unit, manages its own liquidity position actively, with the objective of being able to meet its own clearing obligations within the time frame required.

 

Intra-day liquidity risk is the risk of a mismatch in terms of timing within a single day between payments made by Mediobanca and those received from other market counterparties. Management of this risk requires careful and ongoing monitoring of cash flows exchanged, and, more importantly, adequate liquidity reserves. To mitigate this risk, the Group has implemented a system of indicators and monitoring to check the availability of reserves at the start of the day and their capacity to meet possible situations of stress that could involve other market counterparties or the value of the assets used in the risk mitigation.

 

The monitoring metric adopted over time horizons longer than intra-day is the net liquidity position, obtained from the sum of the counterbalancing capacity (defined as the cash, bonds traded on the market, receivables eligible for refinancing with the ECB available post-haircut) and cumulative net cash flows.

 

The system of limits is structured on the basis of the normal course of business up to a time horizon of three months, a 1-month systemic stress and a combined stress scenario of 45 days, thus effectively functioning as an early warning system if the limit is approached in normal conditions.

 

Notes to the accounts | Part E - Information on risks and related hedging policies | 335

 

 

The short-term and intra-day liquidity monitoring is supplemented by stress testing which assumes three scenarios:

 

Systemic Scenario: this scenario represents a pandemic crisis inspired by the events observed during the spread of the SARS-CoV-2 virus, influenced by a deep economic recession over a twelve-month time horizon which leads to effects such as the deterioration of the loan portfolio and related contraction in volumes (mainly for the consumer loan component), increase in perceived risk with impacts on the values of liquidity reserves and increase in netting requests, reduction in the supply of capital on the financial markets for the Group but also for customers who have been granted credit lines, which they will consequently be forced to use.

 

Idiosyncratic Scenario: this scenario starts with a specific cyber-attack event that affects the Group’s internal systems with a resulting limitation in operations on the market. On the one hand, this leads to an operational loss, on the other, to reputation damage. The latter component causes retail and wholesale customers to withdraw their deposits. In this context, the rating agencies initiate a downgrade of the issuer Mediobanca compromising even more its ability to access financial markets thus causing an increase in the cost of funding and impacts on liquidity reserves with regard to self-retained assets, having an impact on initial margins and outflows from triggers linked to downgrade events.

 

Combined: a combined scenario between Systemic and Idiosyncratic Scenario.

 

In addition to the above, the Group prepares a report on its liquidity position on a weekly basis, as required by the Bank of Italy; the Maturity Ladder report, compiled according to the instructions of the Supervisory Authority, in addition to highlighting the main transactions maturing within the three months following the reference date, is supplemented by a summary of the Group’s assets that can be allocated to the Central Bank.

 

Furthermore, on a weekly basis the Group prepares the SSM reporting, a set of metrics whose preparation is required by the European Central Bank, with the aim of monitoring the Group’s exposure to liquidity risk and of incorporating additional information that allows it to understand other phenomena which may affect the Group’s financial balance; in addition to the Maturity Ladder report and the LCR indicator, detailed information is provided on the evolution of funding sources, collateral and a qualitative assessment of the bank’s liquidity position.

 

336 | Consolidated financial statements as at 30 June 2024

 

 

Monitoring structural liquidity, on the other hand, is intended to ensure that the structure has an adequate financial balance for maturities of more than twelve months. Maintaining an appropriate ratio between assets and liabilities in the medium/long term also serves the purpose of avoiding future pressures in the short term. The operating methods adopted involve analysing the maturity profiles for both assets and liabilities over the medium and long term checking that on average the cumulative inflows cover the cumulative outflows for maturities of more than one, three and five years.

 

Throughout the financial year under review, both indicators, short- and long- term, have shown that the Group maintained an adequate level of liquidity at all times.

 

The Group complied with the minimum requirement in terms of Net Stable Funding Ratio (NSFR)(70)  and short-term Liquidity Coverage Ratio (LCR).(71) In line with the Group Risk Appetite Framework, they remained above internal and regulatory limits at all times.

 

In detail, the LCR figure at 30 June stood at 159% (compared to 179.5% at the beginning of the year), including the prudential estimate of the “additional outflows for other products and services” in compliance with Article 23 of Delegated Regulation (EU) 2015/61. This indicator showed limited variability around its average value of 164%, the latter slightly up compared to the average annual figure recorded in the year (161%). The positioning above management’s target value allowed Group Treasury to keep the Group’s Funding and liquidity position steady, ensuring the early repayment of approximately €4bn in TLTRO during the year. In a still uncertain context, threatened by geopolitical risk and by rising interest rates, Group Treasury managed highly liquid assets by trying to combine commercial strategies with the need to always have an adequate instrument, in terms of quantity and quality.

 

(70)  Directive (EU)/878 (referred to as CRD V) and Regulation (UE) 2019/876 (referred to as CRR2)

(71)  Commission Delegated Regulation (EU) 2015/61, as supplemented and amended.

 

Notes to the accounts | Part E - Information on risks and related hedging policies | 337

 

 

The NSFR indicator, calculated according to Regulation (EU) 2019/876, stood at 116.8%, slightly dropping compared to the figure recorded in the previous year (119.3%) but still in line with the Group’s targets. This trend was determined by an increase in lending (mainly linked to the secured lending and securities in position), which was greater than the increase in funding which witnessed the increase in debt securities offsetting the reduction in secured funding at the Central Bank.

 

As the above indicators are included in Group Risk Appetite Framework, their sustainability is also analysed in preparing the Group Funding Plan, through future analysis over a time horizon of at least three years, with monitoring and half-yearly updates. A multi-risk stress test is also run as part of the same framework based on the scenario analysis. A stress scenario is defined which may involve the Group, and its simultaneous impacts are assessed, taking into account the inter-relations between risks and the capability to adapt the business strategies defined in the budget to the changed scenario.

 

In addition to the risk measurement system described above, an event governance model has been devised, known as the Contingency Funding Plan (described in the Policy), to be implemented in the event of a crisis by following a procedure approved by the Board of Directors.

 

The objective pursued by the Contingency Funding Plan is to ensure prompt implementation of effective action to tackle a liquidity crisis through precise identification of stakeholders, powers, responsibilities, communication procedures and related reporting criteria in order to increase the likelihood of coming through the state of emergency successfully. This objective is achieved primarily by activating an extraordinary operational and liquidity governance model, supported by consistent internal and external disclosures and a number of specific indicators.

 

In order to identify a “contingency” state in a timely manner, a system of early warning indicators (EWIs) has been prepared to monitor situations that could lead to deterioration in the Group’s liquidity position deriving from external factors and/or situations which are specific to the Group itself.

 

The foregoing sections show how stress testing is a fundamental instrument in managing liquidity risk. Liquidity risk materializes less frequently but it may have a significant impact. Instruments are needed to diagnose the Group’s

 

338 | Consolidated financial statements as at 30 June 2024

 

 

vulnerabilities over different time horizons. The findings of the stress tests are therefore used principally in order to:

 

define the funding strategies for the Funding Plan and planning activities more generally (liquidity profile of assets and liabilities);

 

assess the adequacy of the system of limits, and establish significant events for the purpose of the regular process of revising the limits themselves;

 

provide support in assigning the actions to be taken in managing states of operating crisis or stress.

 

The liquidity risk mitigation factors adopted by the Mediobanca Group are as follows:

 

an adequate level of high-quality, highly liquid assets to address any liquidity imbalances, even prolonged over time;

 

accurate short-term and long-term liquidity planning, alongside careful forecasting and monitoring activities;

 

a robust and constantly updated stress testing framework;

 

an efficient Contingency Funding Plan to identify crisis states and the actions to be taken in such circumstances, through a reliable early warning indicator system.

 

The counterbalancing capacity at 30 June amounted to €18.3bn, an increase compared to the previous year (€16.6bn); TLTRO repayments freed up credit assets falling with the counterbalancing capacity. The amount of available securities eligible for spot refinancing with the ECB to immediately obtain liquidity stood at €15.2bn (€12.5bn). The balance of collateral allocated to the Central Bank amounted to €12.1bn (€12bn one year ago). Out of the collateral, the amount of €10.8bn approximately was allocated to the Central Bank free and immediately available (€6.4bn) and was, therefore, included in the Group’s counterbalancing capacity.

 

Notes to the accounts | Part E - Information on risks and related hedging policies | 339

 

 

QUANTITATIVE INFORMATION

 

1. Financial assets and liabilities by residual contract term

 

Items / maturities  Demand   From 1 day
to 7 days
   From 7 days
to 15 days
   From 15
days to 1
month
   From 1
month to 3
months
   From 3
months to 6
months
   From 6
months to 1
year
   From 1 year
to 5 years
   Over
5 years
   Not specified 
Cash assets  8,641,864   719,504   906,254   2,286,760   4,781,573   6,058,539   8,134,102   32,636,647   20,361,451   20,266 
A.1 Government securities  28,783   71,800   125,242   202,011   156,465   1,121,279   2,678,034   4,966,109   4,214,280    
A.2 Other debt securities  1,256   3,123   1,945   8,181   181,859   50,450   446,310   3,005,781   1,869,534    
A.3 UCIT units  16,875                            
A.4 Loans  8,594,950   644,581   779,067   2,076,568   4,443,249   4,886,810   5,009,758   24,664,757   14,277,637   20,266 
– Banks  4,387,972   420,699   243,672   968,500   901,566   839,642   333,720   963,517   1,169,379   20,266 
– Customers  4,206,978   223,882   535,395   1,108,068   3,541,683   4,047,168   4,676,038   23,701,240   13,108,258    
Cash liabilities  16,319,196   2,390,708   964,874   1,752,650   5,408,916   4,593,076   10,264,216   20,762,185   8,475,813   22,393 
B.1 Deposits and current accounts  13,640,383   1,577,793   81,555   615,373   1,575,876   2,719,003   2,608,704   491,510   5,000    
– Banks  325,107                     24,242       
– Customers  13,315,276   1,577,793   81,555   615,373   1,575,876   2,719,003   2,608,704   467,268   5,000    
B.2 Debt securities  1,427   39   234,584   12,165   1,630,505   449,925   2,309,331   14,661,757   6,897,997    
B.3 Other liabilities  2,677,386   812,876   648,735   1,125,112   2,202,525   1,424,148   5,346,181   5,608,918   1,572,816   22,393 
Off-balance sheet transactions                                        
C.1 Financial derivatives with exchange of principal                                        
– long positions  743,649   862,955   206,334   722,445   2,850,464   7,446,609   2,551,703   18,426,051   7,280,303    
– short positions  359,406   789,830   207,599   798,521   2,567,273   692,835   1,918,328   2,863,398   347,406    
C.2 Financial derivatives without exchange of principal                              
– long positions  3,853,199   4,856   34,213   180,258   328,263   515,693   859,857          
– short positions  3,946,681   11,822   27,763   207,737   364,427   539,838   1,095,180          
C.3 Deposits and loans for collection                              
– long positions  6,747,425   2,473,003   28,817   208,935   55,862   455,303   62,500   629,978       
– short positions        241,754   409,948   433,105   873,594   1,328,238   4,911,048   2,464,136    
C.4 Irrevocable loan commitments                                        
– long positions  3,511      125,032   396,371   589,107   1,383,179   1,663,062   6,058,914   4,899,977    
– short positions  8,009,216   3,169,109   503,691   508,585   386,357   402,686   329,091   843,651   966,763    
C.5 Financial guarantees issued  71,114                            
C.6 Financial guarantees received                              
C.7 Credit derivatives with exchange of principal                              
– long positions              60,000   100,600   63,200   1,038,672   977,828    
– short positions              60,000   208,444   145,731   1,272,334   553,792    
C.8 Credit derivatives without exchange of principal                              
– long positions  808,495                            
– short positions  822,150                            

 

340 | Consolidated financial statements as at 30 June 2024

 

 

1.5 OPERATIONAL RISK

 

Definition

 

Operational risk is the risk of incurring losses as a result of the inadequacy or malfunctioning of procedures and IT systems, human error or external events.

 

Capital requirement

 

Mediobanca has adopted the Basic Indicator Approach (“BIA”) to calculate its capital requirement for operational risk by applying the regulatory coefficient of 15% of the three-year average of the relevant indicator. Based on the calculation method mentioned above, the capital requirement at 30 June 2024 amounted to €409.3m (€374.7m at 30 June 2023); the increase reflects the good performance of total revenues over the past 12 months (including extraordinary acquisition and sale transactions), having an impact on the three-year average.

 

Risk mitigation

 

The Group’s Non-Financial Risks Committee, with the task of guiding, monitoring and mitigating non-financial risks (including IT & security risk, fraud risk, third-party/outsourcing risk, reputation risk) and the Conduct Committee, with the task of guiding, supervising and making decisions on the Group’s conduct risks, operate within the scope of risk management.

 

Operational risks are supervised, at the level of Parent Company and main subsidiary companies, by a specific Operational Risk Management team within the Non-Financial Risk Management unit.

 

Based on the Group’s operational risk management policy and in line with the principle of proportionality, the processes for identifying operational risks, including through the collection and analysis of data concerning operational risk loss, assessment and estimation, and the processes for identifying and initiating the related mitigation actions, are defined and implemented within the Parent Company and main subsidiaries. Actions to mitigate the most relevant operational risks were proposed, implemented and monitored according to the evidence obtained.

 

Notes to the accounts | Part E - Information on risks and related hedging policies | 341

 

 

The operating losses recorded during the year under review impacted the Bank’s total revenues by approximately 0.33% (1.2% in the previous year).

 

With regard to the different classes of operational risk, the Group’s percentage composition of the various Basel II event types is shown below.

 

   % su Total Loss 
Event Type  30 June 2024   30 June 2023 
Clients, products and business practices   39%   55%
Execution, delivery and process management   28%   23%
External fraud   19%   19%
Employment practices and workplace safety   6%   3%
Other   6%   0%

 

Most of the Group’s operating losses arose from the Event Type “Clients, products and business practices”, which includes costs deriving from disputes or litigation with Consumer Banking and Retail customers concerning financial terms and conditions or interest rates applied to financing products. The second category of losses in terms of amount, “Execution, delivery and process management”, includes litigation provisions and expenses with other banks following the recruitment of Financial Advisors. The category “External Fraud” includes losses resulting from numerous thefts/attempted thefts of safes in Compass branches, a phenomenon that practically disappeared in the last months of the financial year and for which insurance reimbursements are continuing to be collected, thus covering a large part of such losses.

 

Losses from operational risks were greater in the Consumer Banking and Wealth Management Business Lines. In terms of potential risks, despite an adequate system of controls, businesses characterized by non-standard and large-scale transactions, such as Corporate and Investment Banking and partly Wealth Management, were subject to ‘low frequency and high severity’ events.

 

Furthermore, although they did not generate significant losses, there was an increase in some cases (classes) of operational risk, such as IT & Cyber Risk and Outsourcing Risk both at Industry and Group level.

 

In view of the foregoing, the Group completed a Non-Financial Risk Management project in order to strengthen and evolve specific frameworks for each risk class (such as IT & Cyber risk, third-party risk, fraud risk and reputation risk), while providing an overview of the risks themselves.

 

342 | Consolidated financial statements as at 30 June 2024

 

 

In particular, ICT and Security risks, characterized by rapidly evolving components, are potentially relevant for the Group’s financial position and business model in the medium term.

 

ICT and Security Risk

 

Starting from the year under review, the Mediobanca Group set up a new second-level control unit called “ICT and Security Risk” within the Non-Financial Risks Unit, which is part of the Group Risk Management unit. The first-level security control remains under the responsibility of a separate Organizational Unit.

 

This organizational structure complies with the general principles of the Group’s Internal Control System, i.e. independence and separation of second-level controls from operating units, and meets the requirements specified with the 40th update of Circular No. 285 of the Bank of Italy.

 

The ICT & Security Risk Unit is responsible for monitoring and controlling ICT and security risks, as well as verifying compliance of IT operations with the IT and security risk management system.

 

Security risk (including cyber risk) is understood as the risk of incurring financial, reputation and market share losses due to:

 

any unauthorized access or attempted access to the Group’s IT system or to the data and digital information contained therein;

 

any (malicious or involuntary) event fostered or caused by the use of, or connected to, technology that has or could have an adverse impact on the integrity, availability, confidentiality and/or authenticity of company data and information, or on the continuity of corporate processes;

 

improper use and/or dissemination of data and information, including if not directly produced and managed by the Group.

 

IT or technological risk is understood as the risk of incurring financial loss, reputation damage and market share loss in relation to the incorrect use of ICT processes supporting maintenance and management of the company’s information system or in connection with malfunctions in the hardware, software or technical components.

 

Notes to the accounts | Part E - Information on risks and related hedging policies | 343

 

 

These risks, which did not generate significant phenomena for the Group during the financial year under review, are affected, in terms of exposure, by increases in:

 

dependence on IT systems;

 

number of users of virtual channels and thus interconnected devices;

 

amount of managed data that must be protected;

 

use of IT services offered by third parties.

 

Additional external events, such as the evolution of the cyber-geopolitical environment (e.g. Russia-Ukraine and Israel-Palestine conflicts), as well as the adoption of new technological systems (e.g. cloud) that extend the attack surface by introducing new specific threats, should be added to the above factors.

 

In consideration of such context, ICT and Security risk is subject to increasing regulatory attention (e.g. DORA) and to the attention of Supervisors (e.g. Cyber Resilience Stress Testing), which require the continuous development of Internal Control Systems.

 

Over the last few years, the Group has constantly strengthened its ICT and security strategy, based on which the system of policies and rules identifying and measuring the ICT & security risks, the assessment of safeguards in place, the identification of the appropriate methods to handle such risks and technological skills needed to face new types of threats have been improved.

 

In particular, the IT and security risk management framework includes:

 

definition and maintenance of specific policies, methodologies and procedures (e.g. ICT and security risk management policy, information security policy, IT and security risk management methodological manual);

 

analysis of IT and security risk, regularly carried out for the Group’s Banks and Companies, as well as for the Banks’ payment services;

 

analysis of IT and security risk of relevant projects and/or arising from third parties;

 

constant monitoring through indicators and related reporting;

 

study and analysis of the Cyber environment in the Finance sector;

 

training on IT and security risk at all levels of the company organization.

 

344 | Consolidated financial statements as at 30 June 2024

 

 

IT and security incidents detected during the financial year under review, which concerned some outsourced services in part, were managed effectively by containing any possible operational disruptions and slowdowns.

 

* * *

 

Other risks

 

As part of the process of assessing the current and future capital required to perform its internal capital adequacy assessment process (ICAAP), the Group has identified the following main types of risk as relevant, in addition to the risks described above (credit and counterparty, market, interest rate, liquidity and operational risk):

 

concentration risk, understood as the risk arising from concentration of exposures to single counterparties or groups of connected counterparties (referred to as “single name” concentration risk) and to counterparties belonging to the same business sector or that carry out the same activity or operate in the same geographical area (geo-sector concentration risk);

 

strategic risk, i.e. exposure to current and future changes in profitability compared to the volatility in volumes or changes in customer behaviour (business risk), and current and future risk of reductions in profits or capital deriving from disruption to business as a result of adopting new strategic choices, making wrong management decisions or inadequately executing decisions taken (pure strategic risk);

 

risk from equity investments held as part of the “Hold to collect and sell” banking book (“HTC&S”), deriving from the potential reduction in value of the equity investments, listed and unlisted, which are held as part of the HTC&S portfolio, due to unfavourable movements in financial markets or to the downgrade of counterparties (where these are not already included in other risk categories);

 

sovereign risk, in regard to the potential downgrade of countries or national central banks to which the Group is exposed;

 

compliance risk, attributable to the possibility of incurring penalties, significant financial losses or damages to the Bank’s reputation as a result of breaches of laws and regulations or internal self-imposed regulations;

 

reputation risk, due to reductions in profits or capital deriving from a negative perception of the Bank’s image by customers, counterparties, shareholders, investors or regulatory authorities.

 

Notes to the accounts | Part E - Information on risks and related hedging policies | 345

 

 

Risks are monitored and managed via the respective internal units (risk management, planning and control, compliance and Group audit units) and by specific management committees.

 

ESG and Climate Change

 

The effective management of ESG risks is a crucial aspect for maintaining a medium/long-term economic, social, and environmental balance. These risks, which include negative impacts on the environment, people, and communities, are integrated into our overall Risk Management framework. This includes assessing not only the impact of such risks on the Bank’s organization, but also the consequences on our stakeholders and on the environment as a result of our operations. The Mediobanca Group considers ESG risks not as separate components, but as factors that have a dynamic interaction with traditional risk categories, such as credit, market, operational, liquidity, strategic and reputation risks.

 

Among ESG risks, climate risk, i.e. the financial risk deriving from exposure to physical(72) and transition(73)  risk associated with climate change, is of particular importance. Furthermore, nature-related risks, i.e. the financial impact resulting from the relationship of dependence that the financed entities may have with ecosystem services provided by natural assets, or from impacts that may arise on the same natural assets through the financed entities, should be emphasized.

 

The integration of ESG risks and, in particular, climate risk, into the Group’s risk management framework is divided into:

 

materiality assessment, which aims to identify and evaluate the relevance of climate and environmental risk factors with respect to various portfolios and risk categories;

 

exposure to climate and environmental risks considered material, which has been monitored through specific key risk indicators (KRI) defined in the Risk Appetite Statement (RAS);

 

climate and environmental risks in the material components, which are subject to stress tests aiming to assess the impacts of adverse scenarios for ICAAP purposes in the short, medium and long term;

 

(72)  Physical risks represent the negative financial impact resulting from climate change, including more frequent extreme weather events and gradual climate changes.

(73)  Transition risks consist in adverse financial impacts that a company may, directly or indirectly, incur as a result of the process of adaptation to a low-carbon and more environmentally sustainable economy.

 

346 | Consolidated financial statements as at 30 June 2024

 

 

structuring of ESG risk management, climate risk in particular, in the various risk families, using appropriate tools:

 

Credit risk: this integrate ESG assessments into the loan approval process and in loan pricing by monitoring customer credit quality and tracking ESG risks with tools such as the “Heatmap”.

 

Market risk: this uses the “Heatmap” and volatility analysis. In the latter case, in order to monitor transition and physical risks, carbon-intensive sector indexes and government bond yields are compared with market benchmarks.

 

Operational risk: this includes integrating climate risk into business continuity processes, incident tracking, and stress testing framework.

 

Special attention was paid to materiality analysis, a structured process to evaluate the impact of climate and environmental risks on the Group.

 

The materiality assessment in the risk driver identification phase made it possible to find the physical and transition drivers of climate and environmental risks which could have an impact on the Group taking into account the business context and corporate strategy. Subsequently, in the exposure identification phase, the transmission channels through which the climate and environmental risk drivers identified in the previous phase may cause financial impacts on the Group and its risk profile were found and, consequently, key risk indicators (KRIs) were identified to measure such impacts. The definition of materiality thresholds made it possible to establish the materiality of each risk factor and to set up actions aimed at managing the relevant areas identified.

 

During the year under review, an in-depth analysis was incorporated into the Group’s materiality assessment to verify the extent of risks associated with nature. Following this analysis using the ENCORE methodology, it was found that the non-financial entities being financed generated no significant dependencies or impacts on natural assets on the part of the Mediobanca Group.

 

The Risk Appetite Framework integrates and translates the material climate and environmental risk areas into specific controls. During the year, exposures to climate and environmental risks linked to credit risk considered material were monitored. Specific Key Risk Indicators (KRI), included in the Risk Appetite Statement (RAS), were adopted for the physical climate risk components of

 

Notes to the accounts | Part E - Information on risks and related hedging policies | 347

 

 

loans guaranteed by real estate granted by Mediobanca Premier and for the transition climate risk of non-financial companies for Large Corporate loans.

 

Aware of the challenges posed by climate change and, more generally, by ESG risk factors, the Mediobanca Group actively manages the latter by seizing any intrinsic opportunities. As part of the 2023-2026 “One Brand - One Culture” Strategic Plan, the Mediobanca Group asserted its commitment to Climate and Environmental issues, setting itself the objective of supporting customers in their ESG transition strategies with ad-hoc advisory activities and allocating capital with an ESG focus. The new strategic plan contains specific targets relating to ESG factors. With regard to the “E - Environmental” factor, the intention to achieve carbon neutrality by 2050 has been confirmed, in addition to reducing the carbon intensity of loans by 18% by the end of 2026 and by 35% by the end of 2030.

 

These commitments are consistent with the Group’s Sustainability and ESG Policies, which transpose detailed business sector guidelines by introducing restrictions on operators with a negative impact on the climate.(74) The achievement of the above strategic objectives will also be ensured by the inclusion of ESG metrics in the Group’s RAF, aiming to promote responsible business activities, while maintaining a low profile in terms of exposure to climate risk. The path undertaken provides for greater and continuous integration, which, to date, includes the offering of ESG products and the adoption of ESG policies, including exclusion rules.

 

The number of sectors in which to formalize the goals of reducing greenhouse gas emissions is expanding after joining the Net-Zero Banking Alliance, the initiative promoted by the United Nations with the aim of accelerating the sustainable transition of the international banking sector and with the adhesion to the Principles for Responsible Banking (PRB), promoted by the United Nations Environment Programme Finance Initiative (UNEP FI).

 

Mediobanca has decided to incorporate any consequences related to exposure to climate risk factors arising from specific climate scenarios into its capital planning process and in particular into its adequacy assessment process (Internal Capital Adequacy Assessment Process, ICAAP). In particular, based on the findings of the materiality analysis, the Mediobanca Group has

 

(74)  For further information, please refer to the Group’s ESG Policy published on the corporate website https://www.mediobanca.com/static/upload_ new/pol/politica-esg.pdf.

 

348 | Consolidated financial statements as at 30 June 2024

 

 

applied an approach to assess the impacts of transition and physical risks on the portfolios of loans granted to non-financial entities and loans secured by real estate. With regard to transition risk, the effects on the non-financial counterparties’ accounts and on the energy efficiency of the relevant real properties are analysed. With regard to physical climate risk, the geo-location of the non-financial companies’ properties and production sites is considered, assessing the impact of various severe and/or chronic climate events that may be found to be relevant in materiality analyses (droughts, heat waves, floods, landslides, earthquakes and coastal erosion). These assessments are based on a forward looking approach that involves three time horizons: short, medium and long term. The reference scenarios are those of Phase IV of the Network for Greening the Financial System (NGFS), such as “Current Policies”, “Delayed Transition” and “Net Zero 2050”, which have been appropriately integrated to adopt a forward-looking approach. For example, with regard to physical risk, the frequency and intensity of severe climate events are projected over time through econometric estimates based on the historical correlation calculated with EM-DAT data and other sources (IMF, BIS, etc.), compared to the temperature level expected by the specific NGFS scenario.

 

This year, in addition to integrating climate and environmental risks into capital adequacy assessments, adequacy analyses of liquidity reserves will also be introduced as part of the Group’s Internal Liquidity Adequacy Assessment Process (ILAAP). These forward-looking analyses of climate and environmental risks are aimed at assessing the impact on the Group’s liquidity over a 1-3 year time frame.

 

With reference to asset management, the Principal Adverse Impact (PAI) calculation for Mediobanca S.p.A. and Mediobanca SGR was implemented and disclosed on the website as per regulatory request. During the financial year, the review of the product lines continued in order to transpose the RTS provisions for financial products classified as ESG under Articles 8/9 of Regulation (EU) 2019/2018 with the definition of minimum thresholds for sustainable investments. In relation to consultancy activities, the adequacy model and product governance processes were updated to implement the provisions laid down in legislation.

 

It should be noted that the Group has no significant exposures to counterparties with high climate and environmental risk. The exposure to high-risk counterparties (including Services, Energy, and Metals) for the CIB credit

 

Notes to the accounts | Part E - Information on risks and related hedging policies | 349

 

 

and investment portfolio was under 1% (data as at 30 June 2024), as shown by the analysis conducted in the recalibrated ESG heatmap.

 

For more information, please refer to the Pillar III Disclosure section on ESG Risk, to the Consolidated Non-Financial Disclosure, and to the Task Force on Climate-Related Financial Disclosure (TCFD) Report, all of which published at the same time as this Annual Report and available on the website www.mediobanca.com.

 

350 | Consolidated financial statements as at 30 June 2024

 

 

Part F - Information on consolidated capital

 

SECTION 1

 

Consolidated capital

 

QUANTITATIVE INFORMATION

 

B.1 Consolidated net equity: breakdown by type of compan (*) 

 

Net equity items  Prudential
consolidation
   Insurance
companies
   Other
companies
   Consolidation
adjustments and
eliminations
   Total   of
which:
Third
parties
 
1. Share capital  461,144            461,144   16,629 
2. Share premium  2,197,454            2,197,454   1,848 
3. Reserves  7,445,490            7,445,490   64,516 
4. Equity instruments                  
5. (Treasury shares)  68,828)           (68,828)   
6. Valuation reserves:  (68,601)     7      (68,594)  (16)
- Equity securities designated at Fair Value through other comprehensive income  122,618            122,618    
- Hedging of equity securities designated at Fair Value through other comprehensive income                  
- Financial assets (other than equity securities) measured at Fair Value through other comprehensive income  (6,153)           (6,153)   
- Tangible assets                  
- Intangible assets                  
- Hedging of foreign investments  (15,947)           (15,947)   
- Hedging of cash flows  113,782            113,782   114 
- Hedging instruments [not designated instruments]                  
- Currency exchange gains/losses  16,701      7      16,708    
- Non-current assets and asset groups held for sale                  
- Financial liabilities designated at Fair Value through profit or loss (change in own credit quality)  (33,315)           (33,315)   
- Actuarial gains (losses) on defined-benefit re-tirement plans  (1,538)           (1,538)  (130)
- Portion of valuation reserves of equity-accounted interests  (274,381)           (274,381)   
- Extraordinary revaluation laws  9,632            9,632    
- Financial costs or revenues relating to insurance contracts issued                  
- Financial costs or revenues relating to insurance contracts ceded                  
7. Profit (loss) for the period (+/-) attributable to the Group and to minority interests  1,276,519            1,276,519   3,137 
Total  11,243,178      7      11,243,185   86,114 

 

(*) The companies Compass RE (insurance companies), Compass Rent, MBContact Solutions, RAM UK, Quarzo S.r.l., MBUSA, MB Covered, MB Immobiliere, MB Funding LUX, Spafid SIM, Spafid Trust, MA USA, Compass Link (other companies) are not included in the prudential consolidation scope. Please see Section 1 - Consolidated Accounting Risks in Part E.

 

Notes to the accounts | Part F - Information on consolidated capital | 351

 

 

B.2 Valuation reserves for financial assets measured at Fair Value through other comprehensive income: breakdown

 

  Prudential
consolidation
   Insurance
companies
   Other
companies
   Consolidation
adjustments and
eliminations
   Total 
Assets/Values  Positive
reserve
   Negative
reserve
   Positive
reserve
   Negative
reserve
   Positive
reserve
   Negative
reserve
   Positive
reserve
   Negative
reserve
   Positive
reserve
   Negative
reserve
 
1. Debt securities  21,769   (27,922)                    21,769   (27,922)
2. Equity securities  129,171   (6,553)                    129,171   (6,553)
3. Loans                              
Total 30 June 2024  150,940   (34,475)                    150,940   (34,475)
Total 30 June 2023  128,475   (57,357)                    128,475   (57,357)

 

B.3 Valuation reserves for financial assets measured at Fair Value through other comprehensive income: changes during the period

 

     Debt securities   Equity securities   Loans   Total 
1. Opening balance   (49,000)   120,118        71,118 
2. Increases   55,565    20,365        75,930 
2.1  Increases in Fair Value   38,507    20,356        58,863 
2.2  Value adjustments for credit risk   2,263            2,263 
2.3  Profit and loss reversal of negative reserves: from disposals   14,795    9        14,804 
2.4  Transfers to other equity components (equity instruments)                
2.5  Other changes                
3. Decreases   (12,718)   (17,865)       (30,583)
3.1  Decreases in Fair Value   (10,126)   (6,759)       (16,885)
3.2  Writebacks for credit risk   (926)           (926)
3.3  Profit and loss reversal from positive reserves: from disposals   (1,666)   (11,106)       (12,772)
3.4  Transfers to other equity components (equity instruments)                
3.5  Other changes                
4. Closing balance   (6,153)   122,618        116,465 

 

SECTION 2

 

Own funds and supervisory capital requirements for banks

 

The Mediobanca Group confirmed its great capital soundness with ratios well above the regulatory thresholds, as evidenced, among other things, by the Group’s results in stress tests conducted by the Supervisor in recent years, by the large margin found in the Internal Capital Adequacy Assessment Process (ICAAP) and by the SREP assessment process performed by the Supervisor.

 

352 | Consolidated financial statements as at 30 June 2024

 

 

Starting on 1 January 2024, the new additional 1.75% Pillar 2 requirement (P2R) came into force (2023 SREP Decision); therefore, the Mediobanca Group will be required to have a CET1 ratio of 8.25% (MDA 10.08%)(75) on a consolidated basis, including a 2.50% capital conservation buffer, 0.15 counter-cyclical buffer, 0.125% O-SII buffer,(76) and 0.98% additional Pillar 2 requirement, i.e. 56.25% of the total. The Overall Capital Requirement (OCR) is equal to 12.52% while the OCR requirement will be equal to 10.08% on Tier 1.(77) 

 

2.1 Scope of application for regulations

 

During the financial year, AIRB models were applied to the Consumer portfolio. This resulted in an increase of approximately €900m in RWA (about -30 bps of CET1 ratio), previously largely reabsorbed as a result of the securitization of Significant Risk Transfer (SRT) loans and destined to be completely recovered under CRR3.

 

The first Significant Risk Transfer transaction for the Mediobanca Group was completed in June 2023: sale without recourse of a portfolio of performing consumer loans for €815m. In this way, the Group achieved the objective of the significant transfer of credit risk for prudential purposes (with RWA savings of approximately €500m and a deduction of €13.2m, with an overall impact of +13 bps on the CET1 ratio), without entailing the accounting derecognition of loans.

 

During the year under review, the AIRB model applied to the portfolio of Mediobanca Premier mortgages was revised, resulting in an increase of approximately €200m in RWA.

 

On the other hand, new risk mitigation measures were applied to the CIB portfolio (with an overall effect of approximately 45 bps on the CET1 ratio), including insurance coverage of Factoring, extension of the fourth ECAI Modefinance to the standard scope of the Corporate portfolio and refining of the value of large corporate collateralized positions.

 

(75)  CET1 ratio of 15.2% at 30 June 2024. Therefore, compared to the MDA requirement, a threshold that incorporates the absence of AT1 instruments with the use of 1.83% of CET1 instruments, the buffer was approximately 500 bps. This requirement does not take into account the systemic risk buffer recently introduced by the Bank of Italy (50 bps of relevant exposures by 31 December 2024 and 100 bps by 30 June 2025)
(76)  Following the inclusion of Mediobanca among the systemically important banks, this specific requirement applies as of 2024, which, starting from 2025, will be 0.25% when fully operational.
(77)   The requirements do not include the countercyclical capital buffer, which as at 30 June 2024 amounted to 0.15%.

 

Notes to the accounts | Part F - Information on consolidated capital | 353

 

 

2.2 Bank equity

 

QUALITATIVE INFORMATION

 

Common Equity Tier 1 (CET1) reflects the Group’s share of paid-up capital and reserves, and the share attributable to minority interests, and includes net income for the year (€1,273.4,) after dividends (€885.2m, representing a 70% payout, taking into account the advance paid last May and the balance to be paid next November) and the entire deduction of the second treasury share buyback plan to be carried out in financial year 2024/2025 (€385m);(78) it also includes the positive reserve relating to securities measured at Fair Value through other comprehensive income of €18m, despite the liability (€-98.5m) found from the equity-accounted consolidation of Assicurazioni Generali.

 

Deductions (€3,149m) mainly concerned:

 

Treasury shares of €68.8m, taking into account that the disbursement of €198m relating to the purchase of 17 million, approved by the shareholders’ meeting in October 2023 and carried out in the financial year under review, was recorded as a reduction of reserves after the cancellation of shares;

 

intangible assets of €182.2m and goodwill of €827.3m, increasing due to the acquisitions for the year (in particular Arma Partners); on the other hand, the write-down of the RAM AI and Messier & Associés brands should be emphasized;

 

prudential changes relating to valuations of financial instruments (referred to as AVA and DVA) for €56.7m;

 

and other investments of €95.3m (mainly in the CLO special purpose vehicle taking into account some insurance coverage), deduction of €13.2m relating to the SRT junior share and interests in Assicurazioni Generali for a total of €1,899.9m

 

No Additional Tier 1 (AT1) instruments were issued. AT1).

 

Tier 2 capital includes subordinated liabilities, up from €966.6m to €1,096.6m after last January’s nominal issue of €300m, which more than absorbed the amortization for the year (€159m).

 

(78)  Share buyback plan subject to authorization by the European Central Bank and by the Shareholders’ Meeting, with a negative impact of 90 bps on CET1 ratio.

 

354 | Consolidated financial statements as at 30 June 2024

 

 

   30 June 2024 
Issue  ISIN code  Nominal Value   Computed value* 
MB SUBORDINATO TV with min 3% 2025  IT0005127508   499,265    116,585 
MB SUBORDINATO 3.75% 2026  IT0005188351   298,478    113,664 
MB SUBORDINATO 1.957% 2029  XS1579416741   50,000    45,868 
MB SUBORDINATO 2.3% 2030  XS2262077675   249,750    240,014 
MB SUBORDINATO TF 10Y Callable  XS2577528016   299,500    291,480 
MB SUBORDINATO 5.25 22 APR 2034  IT0005580573   299,800    289,013 
Total subordinated securities      1,696,793    1,096,623 

 

(*)  The computed value differs from the book value because of Fair Value and amortized cost components and buyback commitments.

 

QUANTITATIVE INFORMATION

 

   30 June 2024   30 June 2023 
A. Common equity tier 1 (CET1) prior to application of prudential filters   10,346,257    10,653,459 
of which CET1 instruments subject to phase-in regime        
B. CET1 prudential filters (+/-)   (208,686)   (290,846)
C. CET1 before items to be deducted and effects of phase-in regime (A +/- B)   10,137,572    10,362,612 
D. Items to be deducted from CET1   (4,191,962)   (3,551,325)
E. Phase-in regime - impact on CET1 (+/-), including minority interests subject to phase-in regime (*)   1,276,872    1,366,352 
F. Total Common Equity Tier 1 (CET1) (C-D+/-E)   7,222,482    8,177,639 
G. Additional tier 1 (AT1) gross of items to be deducted and effects of phase-in regime        
of which AT1 instruments subject to phase-in regime        
H. Items to be deducted from AT1        
I. Phase-in regime - impact on AT1 (+/-), including instruments issued by branches and included in AT1 as a result of phase-in provisions        
L. Total Additional Tier 1 (AT1) (G-H+/-I)        
M. Tier 2 (T2) before items to be deducted and effects of phase-in regime   1,215,546    1,039,389 
of which T2 instruments subject to phase-in regime        
N. Items to be deducted from T2        
O. Phase-in regime - Impact on T2 (+/-), including instruments issued by branches and included in T2 as a result of phase-in provisions        
P. Total T2 Capital (M-N+/-O)   1,215,546    1,039,389 
Q. Total own funds (F+L+P)   8,438,028    9,217,028 

 

(*)  Adjustments include increased deductions for the adoption of Calendar Provisioning-

 

Notes to the accounts | Part F - Information on consolidated capital | 355

 

 

2.3 Capital adequacy

 

QUALITATIVE INFORMATION

 

The Common Equity Ratio phase-in – ratio of Common Equity Tier 1 Capital to total assets weighted with the adoption of the Danish Compromise(79) – stood at 15.2%. The decrease compared to the previous year (15.9%) concerned higher Arma Partners deductions (down 55bps, which will decrease to 30 bps in the next few years due to the use of treasury shares in completing the acquisition). The organic growth of the year (+310 bps), on the one hand, was affected by lower investments and, on the other, was absorbed almost entirely by the remuneration paid to shareholders (-305 bps), which, in addition to dividends (interim dividends paid in May and balance to be paid in November), included the buyback plans (i.e. purchases of €198m during the year and new tranche of up to €385m to be submitted to the shareholders’ meeting and ECB).(80) Finally, prudential deductions linked to the increase in the Assicurazioni Generali stake (-60 bps) and effects of the AIRB Consumer model (-30 bps) largely absorbed by other effects (+70bps), in particular the use of SRT and CRM, should be noted.

 

Conversely, the Total Capital Ratio was slightly down to 17.7%(81) although attenuated by the new subordinated issue of €300m.

 

The other indicators performed as follows:

 

the Leverage ratio dropped to 7.1% (8.4% last June), in addition to the reduction in Tier1 capital due to increased exposures (mainly attributable to increased deposits at the Bank of Italy);

 

the MREL ratio, calculated according to the hybrid approach, remained steady, standing at 43.5% of RWAs(82) and 20.3% of LREs, both considerably higher than the minimum requirement set by the Single Resolution Board, i.e. respectively 23.57% and 5.91%. This good position will have no impacts even after 2025, when Mediobanca will be subject to the subordination requirement.

 

(79) Benefit of ~100bps, made permanent at the session of 24 April in which the European Parliament approved the new CRR Regulation.

(80) New share purchase plan with cancellation, subject to the authorization of the Shareholders’ Meeting and the ECB, and whose maximum value may be the net income for the financial year after the proposed dividend.

(81) Total Capital Ratio without adopting the Danish compromise stood at 16.94%
(82) Ratio calculated using the hybrid approach introduced by the Regulator, which takes into consideration consolidated own funds and eligible liabilities (other than own funds) issued by the resolution entity to entities outside the resolution group.

 

356 | Consolidated financial statements as at 30 June 2024

 

 

QUANTITATIVE INFORMATION

 

   Unweighted amounts   Weighted amounts/requirements 
Categories/Amounts  30 June 2024   30 June 2023   30 June 2024   30 June 2023 
A. RISK ASSETS                
A.1 Credit and counterpart risk  81,893,174   81,616,495   40,498,513   44,254,236 
1. Standard methodology  37,559,932   50,437,658   20,510,353   32,028,909 
2. Internal rating methodology  43,511,131   30,824,323   19,820,465   12,123,625 
2.1 Basic            
2.2 Advanced  43,511,131   30,824,323   19,820,465   12,123,625 
3. Securitization  822,111   354,514   167,695   101,702 
B. REGULATORY CAPITAL REQUIREMENTS                
B.1 Credit and counterpart risk          3,239,881   3,540,339 
B.2 Credit valuation adjustment risk          26,034   32,028 
B.3 Settlement risk              
B.4 Market risk          134,510   167,426 
1. Standard methodology          134,510   167,426 
2. Internal models              
3. Concentration risk              
B.5 Other prudential requirements          409,333   374,731 
1. Basic Indicator Approach (BIA)          409,333   374,731 
2. Standard method              
3. Advanced method              
B.6 Other calculation items              
B.7 Total prudential requirements          3,809,758   4,114,524 
C. RISK ASSETS AND REGULATORY RATIOS                
C.1 Risk-weighted assets          47,621,975   51,431,549 
C.2 CET1 capital/risk-weighted assets (CET1 capital ratio)          15.17%  15.90%
C.3 Tier 1 capital/risk-weighted assets (Tier 1 capital ratio)          15.17%  15.90%
C.4 Regulatory capital/risk-weighted assets (total capital ratio)          17.72%  17.92%

 

For more details on the disclosure concerning own funds and capital adequacy, please refer to the Basel 3 Third Pillar file at 30 June 2024, published on the Bank’s website in the section “Capital adequacy”.

 

Notes to the accounts | Part F - Information on consolidated capital | 357

 

 

Part G - Combinations involving Group companies or business units

 

SECTION 1

 

Transactions completed during the period

 

Two important extraordinary transactions announced at the end of the previous year were concluded during the financial year under review, namely:

 

on 2 October, Mediobanca completed the purchase of a controlling stake in the English company Arma Partners LLP, a leading independent financial consultancy firm in Europe in the Digital Economy sector; at the end of the Purchase Price Allocation process, a brand worth of £24.6m, customer relationship worth £5.3m and residual goodwill of £209m, were found.

 

on 16 October, Compass completed the acquisition of 100% of HeidiPay Switzerland AG, a Swiss fintech specializing in the Buy-Now-Pay-Later (BNPL) market. This transaction strengthened the partnership with the affiliate Heidi Pay AG, in which Compass already held a 19.5% stake as of August 2022. The related Purchase Price Allocation process led to finding a customer relationship worth CHF 2.5m and residual goodwill of CHF 4.9m.

 

Moreover, the following merger transactions were completed over the 12 months:

 

MB INVAG S.r.l. into Mediobanca S.p.A. (27 September 2023);

 

Soisy S.p.A. into Compass Banca S.p.A. (31 January 2024);

 

RAM Lux into Mediobanca Management Company, previously acquired by RAM Geneva (effective 30 June 2024 and accounting date 31 March 2024).

 

Finally, the subsidiaries of Polus Capital Management Group were put into liquidation and delisted over the twelve months: Bybrook Capital LLC and Bybrook Capital LP (effective as of 11 August 2023), Bybrook Capital LLP and Bybrook Capital Services (UK) Limited (with effect from 9 January 2024), Bybrook Capital Management Limited (placed into liquidation on 25 June 2024).

 

358 | Consolidated financial statements as at 30 June 2024

 

 

For more details, please refer to “Section 3 – Area and methods of consolidation” in Part A - Accounting Policies and “Section 10 - Intangible assets” in part B - Assets of the Notes to the Accounts.

 

SECTION 2

 

Transactions completed since the reporting date

 

With regard to transactions completed after the reporting date, the following should be noted:

 

merger deed of Spafid SIM into Spafid with the consequent delisting of the company from the register of companies. The merger, which took place on July 18, will have retrospective accounting and tax effects as at 1 July 2024.

 

SECTION 3

 

Retrospective adjustments

 

No adjustments were made to the accounts in connection with previous business combinations for the year under review.

 

Notes to the accounts | Part G - Combinations involving Group companies or business units | 359

 

 

Part H - Related-Party Transactions

 

1. Information on remuneration for key management personnel

 

With regard to the disclosure on compensation paid to key management personnel, reference should be made to the “Report on remuneration and compensation paid” or the relevant section of the Mediobanca website at www. mediobanca.com, where the following are disclosed (with reference to the Mediobanca Group):

 

the analytical detail of compensation paid to members of Governing and Supervisory Bodies and other Key Management Personnel;

 

the detail and the evolution of Performance Shares schemes awarded to members of the Board of Directors, other Key Management Personnel and Long-Term Incentive Schemes.

 

Group compensation includes amounts paid to managers of Group Legal Entities not listed in the Table published in the Review of Operations (for a total of €0.9m in the half-year under review).

 

2. Disclosure on related-party transactions

 

The Regulation on Related-Party Transactions, implementing CONSOB Regulation No. 17221 of 12 March 2010, as most recently amended by Resolution No. 21264 of 10 December 2020, was introduced in 2011 aiming to ensure the transparency and substantial correctness of transactions with related parties carried out directly or through subsidiary companies. Having received favourable opinions from the Bank’s Related Parties and Statutory Audit Committees, the Board of Directors incorporated the Bank of Italy’s most recent instructions on this subject, which introduce prudential limits for risk activities with Related Parties; this Regulation came into force during December 2012, and was updated most recently in June 2024. The full document is available on the Bank’s website at www.mediobanca.com.

 

For the definition of related parties adopted, please see Part A Accounting Policies of the Notes to the Accounts.

 

Transactions with related parties fall within the ordinary operations of the Group companies, are maintained on an arm’s length basis, and are entered into in the interests of the individual companies concerned. Details of the compensation paid to Directors and key management personnel are provided in a footnote to the table.

 

360 | Consolidated financial statements as at 30 June 2024

 

 

2.1 Regular financial disclosure: Most significant transactions

 

There are no transactions to report for the period under review.

 

2.2 Quantitative information

 

During the financial year under review, the Arma Group and the company Heidi Pay Switzerland AG entered the scope of related parties following the respective acquisitions of 100% of their share capital, completed by Mediobanca S.p.A and Compass during the period under review.

 

The overall credit exposure to related parties remained low and showed a decreasing trend.

 

Statement as at 30 June 2024

 

               (€m) 
   Directors and key management personnel   Associated
companies
   Others related
parties
   Total 
Assets   2.6    0.8    71.5    74.9 
of which: other assets           65.2    65.2 
Loans   2.6    0.8    6.3    9.7 
Liabilities   12.2        262.0(3)     274.2 
Guarantees and commitments           130.0(3)     130.0 
Interest income   0.1        2.2    2.3 
Interest expense   (0.2)       (1.2)   (1.4)
Net fee income       5.0    41.7    46.7 
Sundry income (costs)   (51.2) (1)   0.1    (56.6) (2) (3)   (107.7)

 

(1)  Of which: short-term benefits amounting to (€42.2m) and performance shares worth (€8.8m). This figure includes resources considered Key Management Personnel during the period under review. Please note that a Board member waived the emolument approved.
(2) This item also includes the valuation of derivative contracts, including bond forwards with underlying government securities.
(3) Starting from the year under review, the collateral exchange transaction with the AG Group will no longer be represented by its nominal value (€250m among commitments) but using equity effects (liabilities covering the forward purchase of government securities).

 

Statement as at 30 June 2023

 

               (€m) 
   Directors and key
management personnel
   Associated
companies
   Others related
parties
   Total 
Assets   3.1    12.0    129.4    144.5 
of which: other assets           109.2    109.2 
Loans   3.1    12.0    20.2    35.3 
Liabilities   20.6        31.1    51.7 
Guarantees and commitments           390.0    390.0 
Interest income       0.3    1.6    1.9 
Interest expense   (0.1)       (0.6)   (0.7)
Net fee income       1.0    50.7    51.7 
Sundry income (costs)   (51.4 ) (1)  (0.1)   (26.7 )(2)  (78.2)

 

(1) Of which: short-term benefits amounting to (€42.4m) and performance shares worth (€8.8m). This figure includes resources considered Key Management Personnel during the period under review.

 

(2) This item also includes the valuation of derivative contracts, including bond forwards with underlying Government securities.

 

Notes to the accounts | Part H - Related party disclosure | 361

 

 

Part I – Share-based payment schemes

 

A. QUALITATIVE INFORMATION

 

1. Summary of share-based payment schemes approved by the Shareholders’ Meeting.

 

In the area of equity instruments used for the remuneration of its personnel, Mediobanca decided to adopt a performance shares scheme, with the two-fold aim of:

 

adapting to banking regulations that require a portion of variable remuneration to be paid out in the form of equity instruments over a time horizon of several years, subject to performance conditions and hence consistent with positive results sustainable over time;

 

aligning the interests of Mediobanca’s management with those of its shareholders in order to create value over the medium / long term.

 

The Group therefore offered performance share plans that, under certain conditions, provided for the free assignment of Mediobanca shares at the end of a vesting and/or holding period and long-term incentive plans (LTI) linked to the achievement of the strategic plan’s objectives.

 

The plans currently in effect are as follows:

 

performance share plan approved by the Shareholders’ Meeting of 28 October 2015 (and updated by the Shareholders’ Meeting of 28 October 2019), valid for variable remuneration for financial years 2018 - 2020 paid out to Group personnel in a maximum number of 20,000,000 Mediobanca shares to be attributed by capital increase or alternatively with the use of treasury shares in the Bank’s portfolio;

 

long-term incentive plan (LTI) for the CEO and General Manager of Mediobanca, as well as for the CEO of Compass and Mediobanca Premier, linked to the achievement of the targets set in the 2019/2023 plan by assigning them Mediobanca shares by capital increase pursuant to the Plan as mentioned in the preceding paragraph;

 

performance share plan approved by the Shareholders’ Meeting of 28 October 2020, valid for variable remuneration for financial years 2021 - 2025 paid out to Group personnel in a maximum number of 20,000,000 Mediobanca shares to be attributed by capital increase or alternatively with the use of treasury shares in the Bank’s portfolio;

 

362 | Consolidated financial statements as at 30 June 2024

 

 

performance share plan approved by the Shareholders’ Meeting of 28 October 2021 (partially revoking the previous Plan in order to transition to a system of resolutions to be taken annually), valid for variable remuneration for financial year 2021-2022 paid out to Group personnel by attributing a maximum number of 4,000,000 Mediobanca shares through the use of treasury shares in the Bank’s portfolio;

 

performance share plan approved by the Shareholders’ Meeting of 28 October 2022, valid for variable remuneration for financial year 2022-2023 paid out to Group personnel by attributing a maximum number of 3,000,000 Mediobanca shares through the use of treasury shares in the Bank’s portfolio.

 

performance share plan approved by the Shareholders’ Meeting of 28 October 2023, valid for variable remuneration for financial year 2023-2024 paid out to Group personnel by attributing a maximum number of 3,000,000 Mediobanca shares through the use of treasury shares in the Bank’s portfolio.

 

a new long-term incentive plan for the period 2023-2026 (“2023 -2026 LTI Plan”) approved by the Shareholders’ Meeting held on 28 October 2023, linked to the underlying 2023-2026 Strategic Plan approved in May 2023. For the purpose of the initiative, the Shareholders’ Meeting of 28 October 2023 approved the issue of a maximum number of 3,000,000 new Mediobanca shares with dividend rights by capital increase, or through the use of treasury shares in the Bank’s portfolio alternatively.

 

As at 30 June 2024, the number of performance shares assigned in relation to the above plans amounted to 6,487,718 (4,561,321 at 30 June 2023).

 

It should be noted that the Shareholders’ Meeting held on 28 October last also approved:

 

a widespread share ownership and co-investment plan (“2023-2026 ESOP”) for the Group’s personnel within the 2023-26 Strategic Plan’s period. This provides investment opportunities in Mediobanca shares on a voluntary basis at favourable conditions (10% discount). Achievement of the Plan targets by 2026 will ensure an additional bonus to participants in the ESOP Plan, consisting in an additional package of shares assigned free of charge by the Mediobanca Group to supplement the initial investment made by the employee. The maximum number of shares (referred to as matching) that can be assigned by the plan is 1,000,000 shares to be issued by capital increase. Alternatively, freely available treasury shares in the Bank’s portfolio not allocated for other purposes may also be used for the plan’s purposes;

 

Notes to the accounts | Part I - Share-based payment schemes | 363

 

 

The program took place during the month of December and recorded a participation of 28% of personnel within scope (415,600 shares subscribed with a maximum number of 166,240 matching shares attributable).

 

In addition, other Group companies have equipped themselves with incentive plans based on equity instruments:

 

Messier et Associés approved a plan of free-of-charge shares for up to 10% of the share capital to be attributed to employees (at the time of promotions and/or for retention purposes) which, after the vesting period (not exceeding 2 years) and a further holding period of one year, are resold to the Parent Company which settles the price with Mediobanca shares. As at 30 June 2024, 31,925 shares were assigned under 7 plans, which included 13,825 that concluded their holding period (12,995 were repurchased by the Parent Company), 7,050 that were recovered by the company for early exits, 6,000 that were subject to a holding period and the remaining 5,050 shares that were still in a vesting period;

 

Polus Capital Management Group has an investment plan in place for employees (for retention purposes), which allows them to purchase special shares of the company (C shares) which, after a vesting period (maximum 3 years) and the achievement of certain results (hurdle), they can sell to the Parent Company which will liquidate them through Mediobanca shares. As at 30 June 2024, 35,633 C shares were assigned, which included 16,838 already exercisable.

 

QUANTITATIVE INFORMATION

 

Changes in performance share schemes during the year

 

As part of the variable remuneration for financial year 2023, 1,403,351 performance shares, drawn from the Plan approved in the October 2022 Shareholders’ Meeting, were awarded on 27 September 2023. The shares, the award of which is conditional upon performance targets being met over a five-year period or less, will be made available in tranches in November 2024 (up to 619,191), November 2025 (up to 211,397), November 2026 (up to 329,932), November 2027 (up to 122,465), and November 2028 (up to 120,366).

 

As part of the performance share plans, 1,841,073 shares were attributed on

 

364 | Consolidated financial statements as at 30 June 2024

 

 

24 November 2023, 1,160,647 of which through treasury shares and 680,426 by capital increase.

 

Between January and February 2024, 2,514,786 shares were assigned, including 2,177,135 for the 2023-2026 LTI Plan; 140,054 shares were allocated and 10,613 shares were recovered.

 

Starting on 30 June 2024, in connection with the variable remuneration for financial year 2024, a total of 1,197,962 performance shares were awarded at a figurative cost of €13m, as part of the variable remuneration component only. These shares, the award of which is conditional upon performance targets being achieved over a five-year period or less, will be made available in tranches as follows: November 2025 (up to 546,583), November 2026 (up to 186,775), November 2027 (up to 277,773), November 2028 (up to 94,293), and November 2029 (up to 92,538).

 

   30 June 2024   30 June 2023 
Items/Performance shares  No. of performance
shares
   Average price   No. of performance
shares
   Average price 
A. Balance at start of period   4,561,321    6.32    4,131,090    7.03 
B. Increases   3,918,137        2,238,659     
B.1 Newly issued shares   3,918,137    6.50    2,238,659    6.08 
B.2 Other changes                
C. Decreases   1,991,740        1,808,428     
C.1 Cancelled                
C.2 Exercised   1,981,127    6.83    1,786,374    7.62 
C.3 Expired                
C.4 Other changes   10,613    8    22,054    7.76 
D. Balance at end of period   6,487,718    6.93    4,561,321    6.32 

 

Notes to the accounts | Part I - Share-based payment schemes | 365

 

 

Part L – Segment Reporting

 

INTRODUCTION

 

Under IFRS 8, an entity must disclose information to enable users of its financial statements to evaluate the nature and financial effects of the different business activities in which it engages and the different economic environments in which it operates (referred to as “operating segments”).

 

The aggregation of the “operating segments” illustrated in this section is consistent with the means adopted by the Group’s management to take business decisions, and is based on the internal reporting used in order to allocate resources to the various segments, and to analyse their respective performances as described in the Review of Operations, to which reference is made for detailed and exhaustive analysis of the individual business lines’ earnings and financial performances.

 

A. PRIMARY SEGMENT REPORTING

 

At Group level the following business lines have been identified:

 

Wealth Management (WM): This division brings together all portfolio management services offered to the various client segments, plus asset management. This division includes Mediobanca Premier, which targets the Premier client bracket; the MBPB and CMB Monaco private banking networks and the Asset Management companies (Polus Capital, Mediobanca SGR, Mediobanca Management Company and RAM Active Investment), in addition to the fiduciary activities of Spafid;

 

Corporate and Investment Banking (CIB): this includes services for corporate customers in the Wholesale Banking areas (loans, Capital Market activities, Advisory, Client and proprietary trading carried out by Mediobanca, Mediobanca International, Mediobanca Securities, Messier et Associés and Arma Partners) and Specialty Finance or Factoring carried out by MBFACTA, and Credit Management referring only to the management on behalf of third parties carried out by MBCredit Solutions and MBContact Solutions.

 

Consumer Finance (CF): this provides retail customers with a complete range of consumer credit products: personal loans, special purpose loans,

 

366 | Consolidated financial statements as at 30 June 2024

 

 

salary-backed loans, credit cards, in addition to the new and innovative Buy Now Pay Later solution called “Pagolight”, which grew during the year also thanks to the newly acquired company HeidiPay Switzerland AG. The division also includes Compass RE, (which provides reinsurance against risks linked to insurance policies sold to clients), Compass Rent, (which operates in the goods lease market), and Compass Link (which distributes Compass products and services via third-party collaborators).

 

Insurance - Principal Investing (PI): This includes the Group’s portfolio of equity investments and stocks. In particular, the investment in Assicurazioni Generali has been this division’s main constituent for many years, and stands apart for its sound management, consistency of results, high profitability and contributions in terms of diversification and stabilization of the Mediobanca Group’s revenues. Investments in funds and vehicles promoted and managed by the Group’s asset management companies (referred to as seed capital) also contribute to the division, with a view to combining medium-term profitability for the Group and a synergistic approach between the divisions, as well as investment activities in private equity funds managed by third parties.

 

Holding Functions comprise SelmaBPM Leasing, MIS and other minor companies, Group Treasury and ALM (with the aim of minimizing the cost of funding and optimizing liquidity management on a consolidated basis, including the securities held as part of the banking book), all costs relating to central Group departments, including Operations, support units (such as Chief Financial Officer, Group Corporate Affairs, Investor Relations, Human Resources etc.), senior management and control units (Risk Management, Internal Audit and Compliance Unit) for the part that cannot be allocated to the business lines.

 

A.1 Profit-and-loss figures by business segment

 

A list of the main points requiring attention with regard to the allocation of earnings results is provided below:

 

Net interest income(83) is obtained by applying the internal funds transfer pricing (FTP) rates consistent with the financial characteristics of the products concerned. Notional interest is allocated using a centralized FTP model which assigns volumes, costs and revenues of liquidity based on

 

(83)  The Mediobanca Group only reports net interest income based on the requirements of IFRS 8, which specifies that an institution must record interest income and interest expense separately for each reporting segment, unless the majority of the revenue generated by that segment derives from interest and unless management base their evaluations primarily on net interest income in order to assess the segment’s results and take decisions regarding the resources to be allocated to the segment. In this case, an institution may refer to the segment’s interest revenue net of interest expense, provided it specifies this [IFRS 8.23].

 

Notes to the accounts | Part L - Segmental reporting | 367

 

 

durations, without distinction between lending and funding (referred to as “bid-ask” difference) with the same maturity;

 

The 880 resources of the Holding Functions (853 last year) are divided as follows: 91 in Selma BPM (94 last year), 47 in the Group treasury and ALM (28, the growth includes 10 resources from the Securities Finance desk relocated from CIB Trading and 4 resources centralized from other Group companies), 155 in MIS (151), 230 in Operations (219), 174 in staff support units (175), 178 in control units (159) in addition to 5 in Management (senior management and assistants, 6 last year);

 

Intercompany items were netted out only if they involved companies belonging to the same segment; items involving different segments were cross-checked and recorded as adjustments, along with the consolidation entries regarding companies belonging to different segments;

 

valuation actions that had an impact on acquisition operations were included among the reconciliation items to be stated in the “adjustments” column, i.e. in the column that indicates differences between the total business lines and the consolidated figure, both with reference to the economic effect and therefore to the performance of the individual divisions and to the balance sheet data. Although attributable to a company or a CGU, these items were not linked to their performance and the flows they generated and, among the various factors, were conditioned by market performance, which affected discounting and growth rates and therefore were not attributable to the operations of the divisions to which they belong and to the related profitability. This category includes the impairment of goodwill and other intangibles resulting from company valuations carried out on an annual basis and the valuations of/adjustments to the value of liabilities for put & call transactions through profit or loss.

 

368 | Consolidated financial statements as at 30 June 2024

 

 

A.1 Profit-and-loss figures by business segment

 

                          (€m) 
Profit-and-loss  Wealth
Management
   Corporate and
Investment Banking
   Consumer
Finance
   Insurance - Principal Investing   Holding
Functions
   Adjustments (1)    Group 
Net interest income  425.0   307.0   1.043.9   (7.1)  178.0   38.0   1.984.8 
Net treasury income  9.2   95.0   0.2   26.6   39.2   2.0   172.2 
Net fee and commission                            
income  489.4   360.6   145.1      6.3   (62.0)  939.4 
Equity-accounted company        (0.3)  510.7         510.4 
Total income  923.6   762.6   1,188.9   530.2   223.5   (22.0)  3,606.8 
Labour costs  (325.1)  (215.0)  (120.6)  (4.1)  (139.7)     (804.5)
Administrative expenses  (288.4)  (164.9)  (248.9)  (1.1)  (52.6)  18.2   (737.7)
Operating costs  (613.5)  (379.9)  (369.5)  (5.2)  (192.3)  18.2   (1,542.2)
Loan loss provisions  (7.4)  10.6   (249.7)     (5.6)     (252.1)
Provisions for other                            
financial assets  1.4   (3.4)     20.0   (4.1)     13.9 
Other income (losses)  (3.7)  (2.5)  0.1      (49.4)  (34.7)  (90.2)
Profit (loss) before tax  300.4   387.4   569.8   545.0   (27.9)  (38.5)  1,736.2 
Income taxes for the period  (91.0)  (121.0)  (186.9)  (23.0)  (13.2)  (1.6)  (436.7)
Minority interest  (0.9)  (22.9)        (2.7)  0.4   (26.1)
Net profit  208.5   243.5   382.9   522.0   (43.8)  (39.7)  1,273.4 
Cost/income ratio (%)  66.4   49.8   31.1   n.m.   n.m.   n.m.   42.8 

 

(1) The sum of data differs by business area differs from the Group total amount due to net consolidation adjustments/differences between business areas (€4.9m), to the write-down of the RAM brand (€31.7m) and to other effects attributable to acquisitions (in particular put&call agreements) which were not attributed to any Business Line (€3.1m).  

 

A.1 Balance-sheet data by business segment

 

The balance-sheet items shown below represent each business area’s contribution to the consolidated balance sheet, hence no adjustments have been made between the sum of the components and the Group total.

 

                           (€m) 
Balance-sheet data  Wealth
Management
   Corporate &
Investment Banking
   Consumer
Finance
   Principal
Investing
   Holding
Functions
   Adjustments   Group 
Banking book securities  725.3   927.1   289.2      9.399.1      11.340.7 
Customer loans  16.853.3   18.993.3   15.197.6      1.403.3      52.447.4 
Funding  27.896.6      2.731.6      33.041.7      63.669.9 

 

Notes to the accounts | Part L - Segmental reporting | 369

 

 

B. SECONDARY SEGMENT REPORTING

 

B.1 Profit-and-loss figures by geography

 

           (€m) 
Profit-and-loss data  Italy   International (1)    Group 
Net interest income   1,831.5    153.3    1,984.8 
Net treasury income   161.8    10.4    172.2 
Net fee and commission income   561.2    378.2    939.4 
Equity-accounted companies   510.4        510.4 
Total income   3,064.9    541.9    3,606.8 
Labour costs   (597.9)   (206.6)   (804.5)
Administrative expenses   (694.4)   (43.3)   (737.7)
Operating costs   (1,292.3)   (249.9)   (1,542.2)
Net (Value adjustments) write-backs   (239.4)   1.2    (238.2)
Other income (losses)   (47.5)   (42.7)   (90.2)
Profit (loss) before tax   1,485.7    250.5    1,736.2 
Income taxes   (404.1)   (32.6)   (436.7)
Minority interest   (26.1)       (26.1)
Net profit   1,055.5    217.9    1,273.4 
Cost/income ratio (%)   42.2%   46.1%   42.8%

 

(1) This item includes the P&L data of the companies Mediobanca International, CMB Monaco, Compass RE, MB USA, Polus Capital Management, Mediobanca Management Company, RAM Active Investments and Messier et Associés and Arma Partners, in addition to the foreign branches (Paris, Madrid and London).

 

B.2 Balance-sheet data by geography

 

           (€m) 
Balance-sheet data  Italy   International   Group 
Banking book securities   10,186.5    1,154.2    11,340.7 
Loan to customers   44,495.1    7,952.3    52,447.4 
Funding   (50,329.5)   (13,340.4)   (63,669.9)

 

370 | Consolidated financial statements as at 30 June 2024

 

 

Information required under letters a), b) and c) of Annex A, First Part, Title III, Section 2 of Bank of Italy Circular No. 285 of 17 December 2013.

 

Statement as at 30 June 2024

 

Business     Heading 120 Total revenues*   Heading 290 Profit (loss)
before taxes
   Heading 300
Income taxes
   Full Time Employees1  
Line  Breakdown  Italy   International   Group   Italy   International   Group   Italy   International   Group   Italy   International   Group 
Wholesale Banking  This includes: lending, capital market activities, advisory services, and client and proprietary trading performed by Mediobanca, Mediobanca International, Mediobanca Securities and Messier et Associés and Arma Partners  560   125   685   387   (35)  352   (103)  (7)  (110)  261   250   511 
Specialty Finance  This includes: factoring performed by MBFACTA and credit management on behalf of third parties only performed by MBCredit Solutions and MBContact Solutions  76      76   35      35   (12)     (12)  216      216 
Consumer Finance  This includes a complete range of consumer cred-it products: personal loans, special purpose loans, salary-backed loans, credit cards, in addi-tion to the innovative Buy Now Pay Later solu-tion, which grew during the year also thanks to the newly acquired company HeidiPay Switzerland AG. Compass RE, Compass Rent and Compass Link fall within this segment  1,066   9   1,075   545   25   570   (180)  (7)  (187)  1,468   10   1,478 
Premier  This includes deposit-taking, mortgage lending and retail banking services addressed by MBPremier  454      454   133      133   (44)     (44)  1,510      1,510 
Private Banking & Asset Management  This includes asset management activities, ad-dressed in Italy by the division Mediobanca Private Banking and Spafid and in Monaco by CMB Monaco; it also includes Polus Capital Management, CMG Monaco and RAM Active Investments (Alternative Asset Management activities)  201   263   464   72   96   168   (26)  (21)  (47)  280   382   662 
Insurance - Principal Investing  This manages the Group’s portfolio of equity investments and holdings, as well as investments in funds and special purpose vehicles set up and managed by the Group’s asset management companies (referred to as seed capital)  39      39   538   7   545   (23)     (23)  9      9 
Holding Functions  This encompasses the Group’s Treasury and ALM units; and continues to include leasing operations (headed up by SelmaBPM), services and minor companies.  140   68   208   (92)  64   (28)  (13)     (13)  842   23   865 
Adjustments2   (20)     (20)  (65)     (65)  2      2          
Group total  2,516   465   2,981   1,553   157   1,710   (399)  (35)  (434)  4,586   665   5,251 

 

(*) This refers to P&L heading 120 pursuant to Bank of Italy Circular No. 262/2005. The figure here differs from the amount stated as “Total revenues” in the statements found on pages 369 and 370, which provide a more accurate reflection of the Group’s operations. Heading 120 “Total revenues” under Circular No. 262/2005 of the bank of Italy does not include income from insurance activities or other operating income.
(1)  Full-time employees at Group level.
(2)  The column headed “Adjustments” includes various adjustments in connection with differences arising on consolidation (e.g. inter-company elisions) between the different business segments.

 

Notes to the accounts | Part L - Segmental reporting | 371

 

 

Statement as at 30 June 2023

 

Business      Heading 120 Total revenues*   Heading 290 Profit
(loss) before taxes
   Heading 300
Income taxes
   Full Time
Employees1 
 
Line  Breakdown  Italy   International   Group   Italy   International   Group   Italy   International   Group   Italy   International   Group 
Wholesale Banking  This includes: lending, capital market activi-ties, advisory services, and client and proprietary trading performed by Mediobanca, Mediobanca International, Mediobanca Securities and Messier et Associés  558   107   665   219   87   306   (99)  (4)  (103)  267   154   421 
Specialty Finance  This includes: factoring performed by MBFACTA and credit management on behalf of third parties only performed by MBCredit Solutions and MBContact Solutions   70      70   37      37   (12)     (12)  222      222 
Consumer Finance  This includes a complete range of consumer credit products: personal loans, special purpose loans, salary-backed loans, credit cards, in addition to the innovative Buy Now Pay Later solution, which grew during the year also thanks to the newly acquired company HeidiPay Switzerland AG. Compass RE, Compass Rent and Compass Link fall within this segment  1,005   5   1,010   523   34   557   (174)  (9)  (183)  1,415   1   1,416 
Premier  This includes deposit-taking, mortgage lending and retail banking services addressed by MBPremier  414      414   100      100   (34)     (34)  1,482      1,482 
Private Banking & Asset Management  This includes asset management activities, addressed in Italy by the division Mediobanca Private Banking and Spafid and in Monaco by CMB Monaco; it also includes Polus Capital Management, CMG Monaco and RAM Active Investments (Alternative Asset Management activities)  163   233   396   44   88   132   (20)  (20)  (40)  269   360   629 
Insurance - Principal Investing  This manages the Group’s portfolio of equi-ty investments and holdings, as well as investments in funds and special purpose vehicles set up and managed by the Group’s asset management companies (referred to as seed capital)  9      9   461      461   (22)     (22)  9      9 
Holding Functions  This encompasses the Group’s Treasury and ALM units; and continues to include leasing operations (headed up by SelmaBPM), services and minor companies.  156      156   (87)     (87)  (6)     (6)  829   23   852 
Adjustments2   (40)     (40)  (81)     (81)  3   2   5          
Group total  2,335   345   2,680   1,216   209   1,425   (364)  (31)  (395)  4,493   538   5,031 

 

(*) This refers to P&L heading 120 pursuant to Bank of Italy Circular No. 262/2005. Heading 120 “Total revenues” under Circular No. 262/2005 of the Bank of Italy does not include income from insurance activities or other operating income.
(1)  Full-time employees at Group level.
(2)  The column headed “Adjustments” includes various adjustments in connection with differences arising on consolidation (e.g. inter-company elisions) between the different business segments.

 

372 | Consolidated financial statements as at 30 June 2024

 

 

Part M – Disclosure on Leases

 

SECTION 1

 

Lessee

 

QUALITATIVE INFORMATION

 

With reference to the transactions governed by IFRS 16 and the contracts which fall within its scope of application, virtually the only leases the Mediobanca Group has in place in this connection are for properties and company cars, plus some hardware leases for only a residual amount. The property leases mostly involve premises used as offices. Such leases normally have durations of more than twelve months, and typically contain renewal or termination clauses which both lessor and lessee can exercise in accordance with the provisions of law and/ or specific contractual arrangements, if any. Generally, such leases do not contain an option to buy at expiry or entail substantial reinstatement costs for the Group. As for the car leases, these are long-term agreements for the fleet of company cars available for use by staff members for work-related purposes in accordance with Group policy in this area.

 

When the standard was adopted, some simplifications were made and are still applied; in particular, contracts with a duration of less than or equal to 12 months (referred to as “short-term”), those with a value of less than €5,000 (referred to as “low-value”) and those relating to intangible assets were excluded. It was also decided not to strip out the service component from the lease proper; hence the full contract was recognized as a lease. The discount rate used has been derived from the Funds Transfer Pricing curve used in treasury management by the Group Treasury unit.

 

In cases where the original lease has been replicated with another counterparty (i.e., sub-leased), the related lease liability is matched by an amount receivable from the counterparty at the date rather than by its value in use. Sub-leasing arrangements involve only negligible amounts.

 

Notes to the accounts | Part M - Disclosure on leasing | 373

 

 

QUANTITATIVE INFORMATION

 

For quantitative information on the impact on the Group’s financial and earnings situation, reference is made to the contents of the following sections of the Notes to the Accounts:

 

Information on rights of use acquired, in “Part B Notes to the Consolidated Balance Sheet - Assets - Section 9”;

 

Information on amounts due under leases, in “Part B Notes to the Consolidated Balance Sheet - Liabilities - Section 1”;

 

for the effects on earnings, “Part C Notes to the Profit and Loss Account”, in particular the headings for interest income and expense and value adjustments to tangible assets.

 

The value in use recorded in the balance sheet at 30 June 2024 was €245.3m, broken down as follows:

 

value in use of properties: €229.7m

 

value in use of vehicles: €15.5m

 

value in use of other assets: €0.1m.

 

SECTION 2

 

Lessor

 

QUALITATIVE INFORMATION

 

The Group has finance lease agreements in place through its subsidiary Selma BPM Leasing. These mostly involve leases of real property, core goods and registered moveable assets. The contracts are represented in the accounts by the amount receivable under the finance lease being recorded under Heading 40, Financial assets measured at amortized cost, the income received under Heading 10, Interest and similar income, the related proceeds determined by accrual and, under Heading 130, Net write-offs (write-backs) for credit risk, provisions for expected loan losses.

 

374 | Consolidated financial statements as at 30 June 2024

 

 

QUANTITATIVE INFORMATION

 

In relation to quantitative information regarding the impact on the Group’s financial position and earnings, reference should be made to the contents of the relevant sections in the Notes to the Accounts. In particular, the book value of leases is found in Part B - Notes to the Consolidated Balance Sheet - Assets - Section 4 - Heading 40: Financial assets measured at amortized cost. During the year under review, these leases generated interest income as shown in Part C - Notes to the Consolidated income statement - Section 1 - Headings 10 and 20: Net interest income and Section 14 - Heading 210: Net adjustments to tangible assets of the Notes to the Consolidated Accounts.

 

1.Balance-sheet and earnings data

 

2.Finance leases

 

2.1Maturity analysis of lease payments receivable by time band and reconciliation with lease loans recognized under assets

 

   30 June 2024   30 June 2023 
Time bands  Lease payments to
be received
   Lease payments to
be received
 
Up to 1 year   357,996    384,424 
From 1 year to 2 years   273,999    304,337 
From 2 year to 3 years   195,462    228,455 
From 3 year to 4 years   140,307    182,838 
From 4 year to 5 years   80,385    98,426 
Over 5 years   154,509    203,522 
Total lease payments to be received   1,202,658    1,402,002 
Reconciliation with loans   (8,742)   (26,158)
Not accrued financial gains (-)   (193,972)   (221,046)
Unguaranteed residual value (-)   185,230    194,888 
Lease loans   1,193,916    1,375,844 

 

Notes to the accounts | Part M - Disclosure on leasing | 375

 

 

The table provides a maturity analysis of the lease payments receivable by time band, and a reconciliation of payments to be received and lease payments, as required by IFRS 16, paragraph 94. In particular, it should be noted that the payments receivable under the lease, which consist of the sum of minimum payments due by way of principal and interest, are stated net of any provisions and the discounted unguaranteed residual value due to the lessor. These are reconciled with the lease loan, recognized in the balance sheet under financial assets measured at amortized cost, by subtracting financial gains not accrued and adding the unguaranteed residual value. Non-performing leases acquired are not included.

 

2.4 Other Information

 

In finance lease transactions, the credit risk associated with the contract is managed in accordance with the principles described in Part E – Information on risks and related hedging policies - Section 2 – Prudential consolidated risk - 1.1. Credit quality in the Notes to the Consolidated Accounts to which reference is made.

 

Contracts are classified as finance leases based on whether the risks and benefits associated with ownership of the asset in question are transferred to the lessee throughout the duration of the contract, whether the contract itself contains a final option to acquire the asset on terms that would make its failure to exercise such an option uneconomic, and whether the contract has a duration which is basically the same as the economic lifetime of the asset itself. The same may also apply in cases where the contracts do not contain options to buy or have a duration which is significantly shorter than the asset’s economic lifetime, but are accompanied by arrangements with third party buyers that guarantee the asset will be bought when the lease expires.

 

3. Operating leases

 

The Group had no operating leases in place at the reporting date.

 

376 | Consolidated financial statements as at 30 June 2024

 

 

ACCOUNTS OF THE BANK

 

 

 

 

 

 

INDIVIDUAL REVIEW OF OPERATIONS 

FOR TWELVE MONTHS 

ENDED 30 JUNE 2024

 

 

 

 

 

INDIVIDUAL REVIEW OF OPERATIONS 

FOR TWELVE MONTHS 

ENDED 30 JUNE 2024

 

Overview

 

Mediobanca S.p.A. posted a net profit for the twelve months of €1,244m, representing a sharp increase on last year’s performance (30/6/23: €606.5m) following a major contribution from dividends received from the Group Legal Entities (which almost doubled, from €527.3m to €1,041.2m), and strong growth by other revenues (up 8.5% YoY), roughly in line with the rise in costs (up 9.5% YoY); the positive contribution made by writebacks (€5m) and valuations of other financial assets (€12.3m) offset some of the impairment charges taken in respect of equity investments (which accounted for €35.2m).

 

The twelve months under review saw a recovery in the European M&A market, in 2H in particular, which led to Mediobanca taking part in some of the most important deals, confirming its position as advisor of choice in Italy; commercial activity in private banking was also very positive, with a healthy flow of NNM in the twelve months (30/6/24: €3.5bn, up 44%).

 

Core revenues net of the dividends from equity investments rose from €860.6m to €934.1m, with the main items performing as follows:

 

Net interest income rose from €333.2m to €401.7m, due mainly to the increased profitability of the proprietary trading portfolio which absorbed the increase in the cost of funding, which, however, was limited as a result of the diversified sources and ALM positioning;

 

Net treasury income declined by 18.8%, from €207.5m to €168.4m, after the result posted by the proprietary trading portfolio reduced by almost half (€58.2m), while client solutions activity was basically stable (€70.6m); and dividends and other income from holdings in funds increased from €28.9m to €39.6m;

 

Net fee and commission income improved, from €319.9m to €364m (up 13.8%), due to a higher contribution from Private Banking (up 19.6%, from €110.6m to €132.3m), from Advisory/M&A (up 19.3%, from €100.1m to €119.4m), and from the Markets Division (up from €11.5m to €31.2m), which offset the reductions posted by Capital Markets (fees down 32.2%, from €43.5m to €29.5m) and Lending business (down 4.8%, from €54.2m to €51.6m).

 

 Review of Operations | 379

 

 

Dividends from investments amounted to €1,041.2m, higher than the €527.3m reported last year, with a considerable share due to one-off distributions (CMB Monaco €320m, SelmaBipiemme Leasing €30m), plus a general increase by all the Group Legal Entities.

 

Operating costs totalled €545.6m (up 9.5% YoY), with the cost/income ratio reducing from 36% to 28% (stable considering only core revenues); the labour cost component accounted for €309.9m (up 7.3% YoY), while administrative expenses totalled €235.7m (up 12.5% YoY).

 

Customer loans, after provisions of €36.3m were taken last year, reflected writebacks totalling €5m linked primarily to repayments made for certain exposures in the Large Corporate segment, and to the reduction in the stock of overlays as a result of the inflationary pressure abating in certain sectors.

 

Net writebacks for other financial assets totalled €12.3m (€7m of writedowns last year) due to upward adjustments to holdings in funds of €15.5m (compared with downward adjustments of €4.5m last year), with new provisions in respect of the higher banking book positions totalling €3.2m (€2.5m).

 

Impairment charges were taken in respect of the Bank’s investment in RAM AI during the twelve months, for a total of €35.2m; the carrying amount for the investment has been aligned to the company’s net equity, net of the new brand value which has been recognized at fair value.

 

Other income (losses) reflects a positive balance of €0.2m (compared with a €50.4m loss last year), due to the absence of payments to the Single Resolution Fund (versus payments of €35.5m made last year).

 

Income taxes amounted to €168m and reflect a tax rate of 11.9%, lower than last year (18.2%), due to the higher incidence of dividends subject to a lower tax rate.

 

On the balance-sheet side, the Bank’s total assets increased from €81.3bn to €87.3bn, on higher treasury assets (which rose from €10.5m to €15.4m), offset by the growth in short-term funding (from €6.6bn to €11.6bn).

 

AUM/AUA in Private Banking were up 19%, from €19.2bn to €22.9bn (AUM up 6% from €10.3bn to €10.8bn, and AUA up 35%, from €8.9bn to €12bn), with a positive market effect of €137m.

 

380 | Individual financial statements as at 30 June 2024

 

 

The Bank’s capital ratios remain at high levels; the Common Equity Ratio phase-in was 13.22%, higher than last year (12.78%), due to the substantial reduction in RWAs during the twelve months (down €2.4bn, as a result of the increasing selectivity in lending, plus the launch of risk mitigation measures) and the higher net profit delivered, as a result of the increased dividend distribution by the Group Legal Entities to cover the outgoings to shareholders.

 

Similarly, the Total Capital Ratio rose from 15.6% to 17.0%,

 

* * *

 

Earnings and financial data

 

The profit and loss account and balance sheet have been restated to provide the most accurate reflection of the Bank’s operations. The results are also presented in the format recommended by the Bank of Italy.

 

RESTATED PROFIT AND LOSS ACCOUNT

 

           (€m) 
             
   12 mths to 30/6/24   12 mths to 30/6/23   Change (%) 
Earnings data               
Net interest income   401.7    333.2    20.6%
Net treasury income   168.4    207.5    -18.8%
Net fee and commission income (expense)   364.–    319.9    13.8%
Dividend on investments   1,041.2    527.3    n.m, 
Total income   1,975.3    1,387.9    42.3%
Labour costs   (309.9)   (288.8)   7.3%
Administrative expenses   (235.7)   (209.6)   12.5%
Operating costs   (545.6)   (498.4)   9.5%
Loan loss provisions   5.–    (36.3)   n.m. 
Provisions for other financial assets   12.3    (7.–)   n.m. 
Impairment charges in respect of equity investments   (35.2)   (54.3)   -35.2%
Other income (losses)   0.2    (50.4)   n.m. 
Profit before tax   1,412.–    741.5    n.m. 
Income tax for the period   (168.–)   (135.–)   24.4%
Profit (loss) for the period   1,244.–    606.5    n.m. 

 

 Review of Operations | 381

 

 

Key Performance Indicators (KPIs)

 

   30/6/24   30/6/23   Change (%) 
ROTE adj. (1)    20.2%   13.9%   45.3%
Cost / Income ratio (2)    28%   36%   -23.3%
CoR (bps) (3)    (1.–)   9.–    n.m. 
DPS (4)    0.56    0.85    -34.1%

 

(1)  Return On Tangible Equity: obtained as (net income adjusted for extraordinary items) / (average tangible net equity). Tangible net equity obtained as equity net of dividends and intangible assets.

(2)  Cost/income ratio.

(3)  Cost of Risk.

(4)  Dividend Per Share.

 

RESTATED BALANCE SHEET

 

       (€m) 
         
Balance-sheet data  30/6/24   30/6/23 
Assets          
Financial assets held for trading   15,437.9    10,509.4 
Net treasury assets   13,949.5    12,790.5 
Banking book securities   11,231.6    11,118.7 
Customer loans   40,282.–    41,446.9 
Equity investments   4,836.2    4,542.9 
Tangible and intangible assets   170.8    169.3 
Other assets   1,387.3    690.2 
Total assets   87,295.3    81,267.9 
Liabilities and net equity          
Funding   58,292.2    55,893.– 
Treasury financial liabilities   11,588.1    6,585.1 
Financial liabilities held for trading   9,666.7    10,592.2 
Other liabilities   2,637.1    3,041.4 
Provisions   79.4    102.8 
Shareholders’ equity   3,787.8    4,446.9 
Profit (loss) for the period   1,244.–    606.5 
Total liabilities and net equity   87,295.3    81,267.9 

 

382 | Individual financial statements as at 30 June 2024

 

 

Key Performance Indicators (KPIs)

 

   30/6/24   30/6/23 
CET1 capital   3,879.1    4,056.6 
Regulatory capital   4,989.2    4,940.8 
RWA (1)    29,334.8    31,738.4 
CET1 ratio phase-in (2)    13.22%   12.78%
RWA Density (3)    33.6%   39.1%
Regulatory capital/RWAs   17.01%   15.57%
Leverage ratio (4)    5.3%   6.–% 
Gross NPLs / Gross loans ratio (5)    0.1%   0.3%
Net NPLs /net loans ratio (6)    0.04%   0.05%
No. of shares in issue (millions)   832.9    849.3 

 

(1)  Risk Weighted Assets.

(2)  CET1/RWAs.

(3)  RWAs/total assets.

(4)  CET1/total leveraged exposures.

(5)  Gross NPLs/gross loans.

(6)  Net NPLs/net loans.

 

Review of key items

 

Funding – Funding increased from €55.9bn to €58.3bn: the material reduction in the T-LTRO (from €5.6bn to €1.3bn) was offset by the rise in funding from debt securities (from €20bn to €24.1bn). Wealth Management deposits also increased, from €23.8bn to €25.4bn, despite the intensive client conversion activity in favour of AUA, as did funding obtained through the interbank channel (from €6.5bn to €7.5bn).

 

   30/6/24   30/6/23     
   (€ m)   %   (€ m)   %   Change (%) 
Debt securities   24,076.9    41%   20,025.7    36%   20.2%
Interbank funding   7,510.6    13%   6,458.–    11%   16.3%
ECB (T-LTRO/LTRO)   1,313.2    2%   5,586.2    10%   -76.5%
Other funding   25,391.5    44%   23,823.1    43%   6.6%
- of which: intercompany MB Premier   16,833.–    29%   17,407.8    31%   -3.3%
- of which private banking   5,989.–    10%   5,247.–    9%   14.1%
Total funding   58,292.2    100%   55,893.–    100%   4.3%

 

Loans and advances to customers – customer loans decreased by €1.1bn, or 2.8% (from €41.4bn to €40.3bn), in all areas: loans to Group Legal Entities (down from €26.3bn to €25.7bn), corporate loans (down from €13.6bn to €13.2bn), and loans in Private Banking (down from €1.5bn to €1.4bn).

 

 Review of Operations | 383

 

 

   30/6/24   30/6/23     
   (€m)   %   (€m)   %   Change (%) 
Corporate clients   13,192.7    33%   13,591.5    33%   -2.9%
Private Banking clients   1,390.5    3%   1,507.9    3%   -7.8%
Group Legal Entities   25,698.8    64%   26,347.5    64%   -2.5%
Total loans and advances to customers   40,282.–    100%   41,446.9    100%   -2.8%
– of which: non-performing   15.1         18.9         -20.–%

 

   30/6/24   30/6/23     
   (€m)   %   (€m)   %   Change (%) 
Italy   8,850.–    61%   9,489.5    63%   -6.7%
France   1,904.9    13%   2,132.5    14%   -10.7%
Spain   1,445.7    10%   1,351.3    9%   7.–% 
Germany   1,576.9    11%   751.9    5%   n.m. 
UK   500.1    3%   500.–    3%   n.m. 
Other non-resident   305.6    2%   874.2    6%   -65.–%
Total loans and advances to customers   14,583.2    100%   15,099.4    100%   -3.4%

 

   30/6/24   30/6/23     
   (€m)   %   (€m)   %   Change (%) 
Compass Banca   8,160.1    32%   8,114.6    31%   0.6%
MB Premier   12,318.6    48%   12,672.6    48%   -2.8%
CMB   1,882.8    7%   1,631.6    6%   15.4%
Mediobanca International   1,842.5    7%   2,096.7    8%   -12.1%
Others   1,494.9    6%   1,832.1    7%   -18.4%
Total loans and advances to Group Legal Entities   25,698.8    100%   26,347.5    100%   -2.5%

 

Gross non-performing loans fell from €118.3m to €26.2m, following the disposal of a couple of single-name Large Corporate positions (one of which had been classified among bad loans), causing the gross NPL ratio to decrease to 0.1% (0.8%); while net NPLs fell from €18.9m to €15.1m, with the share of total loans decreasing to virtually nil (0.1% last year), despite the reduction in the coverage ratio which stood at 42.3% (84%) following the release of the provisioning for the disposals referred to above. Gross bad loans totalled €6.6m (€62.4m) and refer to a single exposure in the Private Banking area.

 

The net balance of positions classified as Stage 2 decreased from €173.4m to €159.7m (stable at 0.4% of total net customer loans), principally due to Large Corporate activity (down from €157.3m to €149.4m), reflecting the repayments plus one exposure being reclassified as Stage 3. The lower risk level is reflected in the reduction in the performing loan coverage ratio (which decreased from 0.15% to 0.12%), which in turn drove a reduction in overlays (from €23.1m to €15.1m).

 

384 | Individual financial statements as at 30 June 2024

 

 

Investment holdings – this item includes controlling interests and investments in associates, plus any equity instruments issued by Group Legal Entities, shares held as part of the banking book (FVOCI) and holdings in funds, which, under IFRS 9, must be recognized at fair value through profit and loss.

 

               (€m) 
                 
   30/6/24   30/6/23 
   Book value   HTC&S
reserve
   Book value   HTC&S
reserve
 
Controlling interests and investments in associates   3,771.5    n.m.    3,528.5    n.m. 
Listed equities   127.5    68.5    115.1    56.8 
Unlisted equities   128.–    82.3    125.1    90.1 
Other equity-like instruments   258.–    (6.2)   244.3    (19.7)
Seed capital   274.3        283.7     
Holdings in private equity funds   177.4        138.2     
Holdings in other funds   99.5        108.–     
Total equity investments   4,836.2    144.6    4,542.9    127.2 

 

Investments in associated companies increased from €1,185.5m to €1,219.9m, to take account of the new Assicurazioni Generali shares (1,628,150, equal to 0.106% of the share capital) deriving from MB INVAG S.r.l. being merged into Mediobanca, plus the investment in MB SpeedUp (€1.8m), the joint venture set up in conjunction with Founders Factory, company builder and early-stage investor based in London; while the other investments were unchanged, as follows:

 

Istituto Europeo di Oncologia (25.4% of the ordinary share capital), carried at a book value of €39m;

 

Finanziaria Gruppo Bisazza S.r.l. (22.67%) carried at a book value of €6.9m; and

 

CLI Holdings II Limited, carried at a book value of €43.3m.

 

The book value of the investments in the Group Legal Entities increased from €2,343m to €2,556.9m: reflecting, on the one hand, the exit of MB INVAG S.r.l (€15.4m) and the impairment charges taken in respect of RAM AI (€35.2m) to reflect the brand fair value revision, and, on the other, the acquisition of Arma Partners LLP (€259.7m), the UK-based partnership specializing in independent financial advisory services, and European leader in the Digital Economy sector.

 

Equities (listed and unlisted) and equity-like instruments increased from €484.6m to €513.5m, with new investments of approx. €12m, further redemption of the Burgo equity-like instrument (€12m), and the portfolio’s valuation being adjusted to reflect fair value resulting in a €29m adjustment.

 

 Review of Operations | 385

 

 

Investments in funds increased from €529.9m to €551.2m; approx. €274.3m (€283.7m) of these concerned assets managed by the Group (seed capital), which declined following sales of €30m and adjustments to reflect fair value at the year-end (€18m); the other holdings in funds (chiefly private equity) totalled €276.9m (€246.2m), on new investments of €33.9m and downward adjustments totalling €1.8m.

 

   % of share capital   30/6/24   30/6/23 
Associates               
Assicurazioni Generali   13.11    1,123.7    1,096.3 
Istituto Europeo di Oncologia   25.37    39.–    39.– 
Bisazza   22.67    6.9    6.9 
CLI Holdings   24.09    43.3    43.3 
MB SpeedUp   50.–    1.7      
Total associates        1,214.6    1,185.5 
Total Group Legal Entities        2,556.9    2,343.– 
Total equity investments        3,771.5    3,528.5 

 

Banking book debt securities – this item includes both securities recognized at cost (Hold to collect – HTC) and securities recognized at FVOCI (Hold to Collect and Sell – HTC&S), as well as debt securities which have not passed the SPPI test required by IFRS 9, and so must be recognized at FVPL.

 

   30/6/24   30/6/23 
   (€m)   %   (€m)   % 
Hold to Collect   4,441.4    39.5%   5,316.7    47.8%
Hold to Collect & Sell   6,649.5    59.2%   5,801.1    52.2%
Financial assets recognized at fair value   140.4    1.3%        
Other (mandatorily recognized at fair value)   0.3        0.9     
Total banking book debt securities   11,231.6    100%   11,118.7    100%

 

This heading totalled €11.2bn, split between Hold to Collect (€4.4bn) and Hold to Collect & Sell (€6.6bn).

 

The favourable market trend improved the OCI reserve, reducing the deficit from €73.2m to €9.2m (on gains of €21.9m), with the corporate and financial segment passing from a negative balance of €30.6m to a positive balance of €11m; while the unrealized losses on Hold to Collect securities declined to €27.8m (€89.4m).

 

Approx. 73% of the banking book is made up of sovereign debt (€8.1bn), split between HTC (€2.5bn) and HTC&S (€5.6bn) with a very short duration (approx. 2 years); the share accounted for by Italian government securities totals €5bn (approx. 50% of the entire portfolio, with a duration of approx. 2 years).

 

386 | Individual financial statements as at 30 June 2024

 

   30/6/24   30/6/23 
   Book value           Book value      
   HTC   HTC&S   OCI
reserve
   HTC   HTC&S   OCI
reserve
 
Italian government securities   1,641.4    3,405.3    (16.5)   1,767.3    3,020.–    (35.–)
Other government securities   847.5    2,246.5    (3.7)   1,012.3    1,528.3    (7.7)
Financial bonds   1,872.4    784.–    10.2    2,433.3    1,016.3    (18.8)
- of which Consumer Finance ABS   742.6    78.6    (0.3)   1,282.1    186.6    (2.4)
Corporate bonds   80.–    213.6    0.8    103.8    236.5    (11.8)
Total banking book debt securities   4,441.3    6,649.4    (9.2)   5,316.7    5,801.1    (73.2)

 

Net treasury assets – these totalled €8.1bn, higher than last year (€6.1bn) despite the T-LTRO repayment (€4.3bn). The growth in equity and bond investments (from €6.6bn to €12.2bn) in order to take advantage of market opportunities was covered by repo and secured finance transactions totalling €9.7bn (€5.8bn).

 

   30/6/24   30/6/23   Change (%) 
   (€m)   (€m)   % 
Financial assets held for trading   15,437.9    10,509.4    46.9%
Net treasury assets   13,949.5    12,790.5    9.1%
Financial liabilities held for trading   (9,666.7)   (10,592.2)   -8.7%
Treasury financial liabilities   (11,588.1)   (6,585.1)   76.–%
Total net treasury assets   8,132.6    6,122.6    32.8%

 

   30/6/24   30/6/23   Change (%) 
   (€m)   (€m)   % 
Loan trading   255.9    4.1    n.m. 
Derivatives valuations   (85.8)   (271.1)   -68%
Certificates   (1,722.3)   (2,285.–)   -25%
Equities   3,877.5    1,144.4    n.m. 
Bonds   3,445.9    1,324.8    n.m. 
Financial instruments held for trading   5,771.2    (82.8)   n.m. 

 

   30/6/24   30/6/23   Change (%) 
   (€m)   (€m)   % 
Cash and current account balances   512.4    488.2    5%
Liquid assets on deposit with ECB   2,376.4    3,273.8    -27%
Deposits   (527.4)   2,443.4    n,m, 
Net sources and applications of funds   2,361.4    6,205.4    -61.9%

 

 Review of Operations | 387

 

   30/6/24   30/6/23 
   (€m)   (€m) 
   Assets   Liabilities   Assets   Liabilities 
Italian government bonds   5,218.2    (3,998.3)   1,999.4    (1,925.2)
Foreign government bonds   1,360.4    (734.2)   1,263.6    (2,120.8)
Bond issued by financial institutions   1,417.5    (168.1)   1,844.–    (44.–)
Corporate bonds   136.4    (1.–)   110.–     
Asset Backet Securities (ABS)   214.9        198.1     
Equities   3,926.8    (49.2)   1,184.6    (40.1)
Total securities   12,274.2    (4,950.8)   6,599.7    (4,130.1)

 

   30/6/24   30/6/23 
   (€m)   (€m) 
   Assets   Liabilities   Assets   Liabilities 
Interest rate swaps   572.3    658.4    1,631.2    (1,756.–)
Foreign exchange   309.–    263.3    374.6    (297.7)
Interest rate options/futures   12.1    47.4    7.8    (23.6)
Equity swaps and options   1,784.4    1,787.1    1,727.2    (1,873.9)
Credit derivatives   212.5    220.–    152.5    (213.2)
Derivatives valuations   2,890.2    2,976.–    3,893.3    (4,164.4)

 

   30/6/24   30/6/23 
   (€m)   (€m) 
   Assets   Liabilities   Assets   Liabilities 
Deposits for securities lending(repos   5,197.–    (9,227.–)   3,016.9    (3,706.–)
Deposits for stock lending   178.–    (465.–)   432.4    (172.9)
Other deposits   5,685.7    (1,896.1)   5,579.2    (2,706.2)
Deposits   11,060.7    (11,588.1)   9,028.5    (6,585.1)

 

Tangible and intangible assets – this item stood at €170.8m, basically unchanged compared to last year (€169.3m), after depreciation and amortization charges totalling €9.7m, against new investments in other tangible assets (furniture and equipment).

 

   30/6/24   30/6/23     
   (€m)   %   (€m)   %   Change (%) 
Land and property   125.5    74%   128.5    75%   -2%
- of which: core   86.4    51%   85.5    51%   1%
Value in use of properties under IFRS 16   15.8    9%   19.6    12%   -19%
Other tangible assets   16.–    9%   11.1    7%   44%
- of which value in use under IFRS 16   6.–    4%   4.1    2%   47%
Other intangible assets   29.4    17%   29.7    18%   -1%
- of which: goodwill   12.5    7%   12.5    7%   n.m. 
- of which: brands   15.5    9%   15.5    9%   n.m. 
Total tangible and intangible assets   170.8    100%   169.3    100%   1%

 

388 | Individual financial statements as at 30 June 2024

 

A list of the Bank’s core properties is provided below:

 

   squ.m   Book value
(€m)
   30/6/24
Book value per
squ.m (€’000)
 
Milan:               
– Piazzetta Enrico Cuccia 1   9,318    16.–    1.7 
– Via Filodrammatici 1, 3, 5, 7 - Piazzetta Bossi 1 - Piazza Paolo Ferrari 6   13,390    61.9    4.6 
– Foro Buonaparte 10   2,926    8.9    3.– 
Total core properties   25,634    86.8      

 

Provisions for liabilities – these amounted to €79.4m, lower than last year (€102.8m) due to the reduction in provisions for commitments to disburse loans and guarantees issued (down from €30.4m to €22.8m). Other provisions for risks and charges totalled €51.8m, lower than last year (€67.3m), following reversals and withdrawals totalling €18m, in part offset by €2.7m in new provisions. The portion of the statutory end-of-service payment declined from €5.1m to €4.8m

 

   30/6/24   30/6/23     
   (€m)   %   (€m)   %   Change (%) 
Commitments and guarantees issued   22.8    29%   30.4    30%   -25.–%
Other provisions and charges   51.8    65%   67.3    65%   -23.–%
Provision for statutory end-of service payments   4.8    6%   5.1    5%   -6.1%
of which: discounting of end-of-service provision   (0.3)       (0.3)       -6.3%
Total, provisions for liabilities   79.4    100%   102.8    100%   -22.7%

 

Net equity – net equity totalled €5,031.8m (€5,053.4m), with most of the profit for the twelve months accounted for by payment of the dividend (2023 share: €713.4m; 2024 share: €421.2m.

 

The share capital stands at €444.5m, the slight increase compared to last year (€444.2m), reflecting as usual the issue of new shares for use in connection with the performance share scheme. As at 30 June 2024 the number of treasury shares held by the Bank had fallen to 6,299,458, after the uses made during the period (2,155,471 shares). The shares acquired as part of the share buyback scheme approved by shareholders at the Annual General Meeting held on 28 October 2023 (17,000,000 shares worth €198m) were cancelled in June 2024.

 

 Review of Operations | 389

 

           (€m) 
             
   30/6/24   30/6/23   Change (%) 
Share capital   444.5    444.2    0.1%
Other reserves   3,675.6    3,943.5    -6.8%
Interim dividend   (421.2)          
Valuation reserves   89-    59.2    50.3%
- of which: Other Comprehensive Income reserve   112.–    57.4    n.m. 
of which: cash flow hedge reserve   1.8        n.m. 
Profit for the period   1,244.–    606.5    n.m. 
Total net equity   5,031.8    5,053.4    -0.4%

 

The OCI reserve is in positive territory at €112m, and higher than last year (€57.4m); by component, the equity reserve stood at €144.7m (€127.3m), following positive valuations adding €29m in part offset by the reduction in redemptions (€12m); while the bond reserve closed in negative territory, at €9.2m, but still recovering compared to last year (minus €73.2m): the reduction in spreads related to the short duration of the debt securities led to a gradual recovery in the fair value of the securities held in the portfolio.

 

           (€m) 
             
   30/6/24   30/6/23   Change (%) 
Equities   144.7    127.3    13.7%
Bonds   (9.2)   (73.2)   -87.4%
of which: Italian government securities   (16.5)   (35.–)   -53.7%
Tax effect   (23.5)   3.4    n.m. 
Total OCI reserve   112.–    57.4    1.– 

 

Profit and loss account

 

Net interest income – net interest income totalled €401.7m, up 20.6% on last year (€333.2m). The increase in sovereign debt securities facilitated the redeployment of the liquidity from the securities portfolio, both the banking book (up 45% YoY, contributing €399m) and the trading book (up 27% YoY, contributing €89m). The ALM position being favourable to the rise in interest rates also impacted positively, by keeping the anticipated increase in the cost of funding below that of the assets, helped also in this respect by the Wealth Management Component and the good diversification of funding sources.

 

390 | Individual financial statements as at 30 June 2024

 

           (€m) 
             
   30/6/24   30/6/23   Change (%) 
Interest income   2,806.7    1,734.4    61.8%
Interest expense   (2,405.–)   (1,401.2)   71.6%
Net interest income   401.7    333.2    20.6%

 

Net treasury income – was down 18.8% (from €207.5m to €168.4m), primarily as a result of the performance in trading, the contribution from which fell from €62.1m to €19.5m) on a resilient performance from the banking book (which declined from €47.1m to €38.7m) including gains of €10m on disposals; client trading was largely stable (at €70.6m) due to a good performance in fixed-income trading (up from €13m to €20.8m), despite the increased contribution to net interest income, and absorbed the slowdown in equity trading (from €55.6m to €46.7m); dividends and other income from holdings in funds increased from €28.9m to €39.6m.

 

           (€m) 
             
   30/6/24   30/6/23   Change (%) 
Dividends   31.6    28.9    37.–%
Profit (loss) from fixed-income trading   74    98.2    -24.6%
Profit (loss) from equities trading   54.8    80.4    -31.8%
Total net trading income   168.4    207.5    -18.8%

 

Net fee and commission income – totalled €364m, improving further on last year’s excellent result (up 13.8%, from €319.9m). Private Banking fees totalled €132.3m, up 19.6% YoY, on management fees of €71m (up 7.6%), upfront fees of €54m (up 28.6%), and performance fees which recovered to €3.1m. Advisory M&A fees totalled €119.4m, up 19.3% (with an equivalent increase in Mid Corporate fees, which rose from €25m to €35m), and fees from Markets, sales and other income increased from €11.5m to €31.2m, offsetting the reductions in Capital Markets (fees down 32.2%, from €43.5m to €29.5m, due to the weak ECM market) and Lending (down 4.8%, from €54.2m to €51.6m, due to the reduced demand for structured finance).

 

           (€m) 
             
   12 mths to 30/6/24   12 mths to 30/6/23   Change (%) 
Lending fees   51.6    54.2    -4.8%
Advisory M&A fees   119.4    100.1    19.3%
Capital Market fees   29.5    43.5    -32.2%
Private Banking fees   132.3    110.6    19.6%
of which: performance fees   3.1    0.7    n.m. 
Markets, sales and other fee income   31.2    11.5    n.m. 
Net fee and commission income   364.–    319.9    13.8%

 

 Review of Operations | 391

 

 

Dividends and other income – totalled €1,041.2m, higher than last year (€527.3m), because of the one-off distributions received in the twelve months from CMB Monaco (€320m, due to the tax relief on reserves approved last year) and SelmaBipiemme Leasing (30m). The ordinary share was increased by the good results posted by the Group Legal Entities and associate companies, and driven by the need to make up the dividends distributed by Mediobanca S.p.A. itself. In detail, the contribution for the twelve months (€691m) regards Compass (up from €275m to €330m), Assicurazioni Generali (up from €235m to €262m), plus the first distributions made by MB Premier (€33m), Mediobanca International (€18m), Arma Partners (€13m), MBFACTA (€11m), Mediobanca SGR (€8m), Messier & Associés (€4m), and other minor companies (€12m).

 

Operating costs – operating costs rose by 9.5%, from €498.4m to €545.6m, with the cost/income ratio declining from 36% to 28% (considering only core revenues). Labour costs were up 7.3% (from €288.8m to €309.9m), reflecting the collective contract renewal and the increase in headcount (which drove up fixed costs), plus the increase in the variable remuneration in relation to the Bank’s good performance. Administrative costs also rose, by 12.5% (from €209.6m to €235.7m, as a result of the increases due to project activities, IT investments, and higher data processing and info-provider costs.

 

           (€m) 
             
   12 mths to 30/6/24   12 mths to 30/6/23   Change (%) 
Labour costs   309.9    288.8    7.3%
of which: Directors   4.9    4.7    5.3%
Stock option and performance share schemes   12.3    11.3    8.6%
Operating costs and sundry other expenses   235.7    209.6    12.4%
of which: Amortization   10.4    9.6    8.8%
Administrative expenses   225.2    200.3    12.4%
Operating costs   545.6    498.4    9.5%

 

392 | Individual financial statements as at 30 June 2024

 

The following table provides a breakdown of other administrative expenses by type:

 

           (€ milioni) 
             
   12 mths to
30/6/24
   12 mths to
30/6/23
   Change (%) 
Legal, tax and other professional expenses   12.2    11.5    6.1%
Other consultancy costs   29.–    24.–    20.8%
Marketing and communication   7.3    5.6    30.4%
Property rental and maintenance   5.6    4.9    14.3%
Data processing   93.8    87.–    7.8%
Info-providers   30.9    27.8    11.2%
Bank services and collection and payment commissions   1.2    1.4    -14.3%
Operating expenses   7.5    6.9    8.7%
Other labour costs   7.4    5.8    27.6%
Other costs   21.4    19.6    9.2%
Indirect and direct taxes (net of withholding tax)   8.9    5.8    53.4%
Total administrative expenses   225.2    200.3    12.4%

 

Loan loss provisions – net writebacks of €5m were credited for the twelve months, compared with writedowns of €36.3m last year, due to the lower provisioning as a result of the reduction in volumes and improvement in the credit quality of the performing loan book. The balance was also helped by the reduction in overlays (from €23.1m to €15.1m) as the inflationary pressure in certain sectors had less of an impact.

 

Provisions for other financial assets – net writebacks of €12.3m were credited for the twelve months compared with writedowns of €7m last year, reflecting the positive valuations of financial assets mandatorily recognized at fair value (investments in Group funds and other private equity and real estate funds) totalling €15.5m (compared with writedowns of €4.4m) and the increase in provisioning for banking book activity (€3.2m, vs €2.4m).

 

           (€m) 
             
   12 mths to
30/6/24
   12 mths to
30/6/23
   Change (%) 
Hold-to-Collect portfolio   (1.2)   (3.3)   -63.6%
Hold-to-Collect & Sell portfolio   (2.–)   0.7    n.m. 
Other   15.5    (4.4)   n.m. 
Provisions/writebacks for other financial assets   12.3    (7.–)   n.m. 

 

Impairment charges for equity investments – totalled €35.2m and were attributable to RAM, due to the revision of the carrying amount which reflects a fair value for the RAM brand calculated based on the single-year budget rather than on projections across several years.

 

 Review of Operations | 393

 

Other gains (losses) – this heading reflects a net gain of €0.2m (versus a €50.4m net loss last year), representing the balance between:

 

€3.9m in costs attributable to the payments to the resolution funds, which, compared to last year (€36.2m), includes only the adjustment payable in relation to the to the Single Resolution Fund (€2.6m) following the restatement requested for previous years’ payments, plus the €1.3m payment to the Deposit Guarantee Scheme, which includes the final instalment (actually paid at the start of July 2024);

 

Higher IT costs (€6.8m), due to the extra amortization charges for software owned by MIS as a result of the reduction in its estimated useful life;

 

Extraordinary income (€10.9m) linked to the release of provisions (€7.8m) following the successful conclusion of certain legal/tax disputes, plus the effects of the Messier & Associés acquisition, which after five years entailed an amount of €2.9m being collected.

 

Income tax – this heading totalled €168m (€135m, including €19.2m in tax relief on the CMB Monaco reserves pursuant to the 2023 Budget Law art. 1, paragraphs from 87 to 95, L. 197/2002), with a tax rate of 11.9% (18.2%; 15.6% normalized).

 

* * *

 

Significant events in the twelve months include the following:

 

Acquisition of a controlling interest in UK-based partnership Arma Partners LLP, an independent financial advisory firm which is a European leader in the Digital Economy sector; the company is part of the Banking Group and is consolidated on a line-by-line basis;

 

Launch of MB SpeedUp, a joint venture set up in conjunction with London-based company builder and early-stage investor Founders Factory, which will facilitate the promotion of, and investment in, fintech companies;

 

Mediobanca has been recorded in the List of BTP Specialists instituted by the Italian Ministry for the Economy and Finance with effect from 1 June 2024, meaning the Bank is now accredited as a primary dealer; this initiative, in line with the Strategic Plan drivers based on strengthening in low-capital absorption activities and expanding Mediobanca’s product offering versus institutional clients in the fixed-income space, confirms the Bank’s leading role in Markets activities within both the Italian and international panoramas;

 

394 | Individual financial statements as at 30 June 2024

 

Admission of Mediobanca to the co-operative compliance programme instituted by the Italian revenue authority under Title III of Italian Legislative Decree no. No. 128 of 5 August 2015, as amended by Italian Legislative Decree no. 221/2023, effective from the tax period ended on 30 June 2023; under the terms of the programme, the Bank is required to put in place an effective system for recording, measuring, managing and controlling tax risk (the “Tax Control Framework”), in line with the Tax Conduct Principles adopted by the Board of Directors.

 

At the Annual General Meeting held on 28 October 2023, the shareholders of Mediobanca adopted several important resolutions in respect of various initiatives related to the 2023-26 Strategic Plan, in particular as follows:

 

Long-Term Incentive (LTI) Plan for senior and strategic Group staff, to be allocated upon financial and non-financial objectives being met;

 

Employee Share Ownership and Coinvestment Plan 2023-26 (“ESOP 2023-26”) for Mediobanca Group Staff who have decided to acquire Mediobanca shares on a voluntary basis and on favourable terms; participants in the scheme will receive additional shares free of charge upon the Plan targets being achieved; The subscription phase was completed in December 2023, with approx. 28% of in-scope staff taking part (for a total of 415,600 share);

 

The first share buyback programme, involving a total of 17,000,000 shares (equal to 2% of the share capital) for an outlay of €198m(1)  which were cancelled on 11 June 2024;

 

Amendment to the Articles of Association to provide for the possibility of paying interim dividends, the first of which was paid on 22 May 2024 in an amount of €421.2m based on results for the six months ended 2023 (corresponding to a dividend per share of €0.51).

 

* * *

 

Related party disclosure

 

Financial accounts outstanding as at 30 June 2024 between companies forming part of the Mediobanca Group and related parties, and transactions undertaken between such parties during the financial year, are illustrated in Part H of the Notes to the Accounts, along with all the information required in terms of transparency pursuant to Consob resolution no. 17221 issued on 12 March 2010 (amended most recently by resolution no. 21264 of 10 December 2020).

 

(1) In accordance with the regulations on transparency in force, the individual trades were disclosed on a monthly basis starting from the month after the one when the Programme was launched, and are published on the Mediobanca website. The purchases were made exclusively on regulated markets. 

 

 Review of Operations | 395

 

All such accounts form part of Group companies’ ordinary operations, are maintained on an arm’s length basis, and are entered into solely in the interests of the companies concerned. No atypical or irregular transactions have been entered into with such counterparties.

 

Other information

 

As part of the Bank’s securities transactions on behalf of customers, a total of 30 million Mediobanca shares were bought and sold for a value of €364.1m.

 

The information on corporate governance and ownership structures pursuant to Article 123-bis of Legislative Decree No. 58/98 is included in the Report on Corporate Governance, attached hereto and available on the Bank’s website (Governance section).

 

The assets for which monetary revaluations were made, as recognized in the financial statements, are detailed in Table A.

 

Further information on research and analysis can be found on p. 81 of the consolidated report.

 

Section 10, Liabilities also contains information regarding the most significant pending legal proceedings and tax disputes

 

Outlook

 

Mediobanca, in line with the objectives contained in its 2023-26 Strategic Plan, confirms its capability to deliver growth in revenues from capital-light businesses, at a cost of risk which is expected to remain low; substantial investments in technology and staff will continue to be made, some of which to support the expansion of Mid Corporate activity. The Bank’s capital solidity, and the Group Legal Entities’ distribution capabilities, will enable the shareholder remuneration to be absorbed, with the cash payout ratio confirmed at 70% (interim dividend payable in May 2025, balance payable in November 2025), and a new share buyback scheme to be implemented.

 

Milan, 19 September 2024

 

The Board of Directors

 

396 | Individual financial statements as at 30 June 2024

 

Financial year ended 30 June 2024: proposal to approve financial statements and allocation of profit

 

Dear shareholders,

 

The net profit for the year was € 1,243,992,400.81 to be allocated as follows:

 

€ 69,135.00To the Legal reserve, which accordingly would amount € 88,903,028.50, or 20% of the Bank’s share capital;
  
€ 124,330,105.08To the Statutory reserve;
  
€ 320,000,000.00To the Unavailable reserve (2023 Budget Law – art. 1, paragraphs from 87 to 95, L. 197/2022);
  
€ 16,288,256.97To the Non-distributable reserve (Art. 6 D.Lgs. 28/02/05 n. 38).
  
€ 783,304,903.76Profit remaining

  

We therefore propose to distribute a €1.07 dividend on each of the shares entitling their holders to such rights, composed as such: gross €0.51 as interim dividend referred to the 12 months ended 30 June 2024, to be paid on the 22nd May 2024 (for an amount of €421,150,316.34); gross €0.56, as difference, on the number of shares entitling this right (as of today, no. 828,654,655), for an amount of €464,046,606.80, considering €101,892,019.38 to be taken from the Statutory Reserve, as shown in the table below.

 

It is to be noted that the unit amount of the dividend will remain unchanged also in case the Bank owning, at the record date, a different amount of treasury shares. In this case, the total amount of the distributed profit would be reduced accordingly, with the difference taken to the Statutory Reserve.

 

 Review of Operations | 397

 

Accordingly, you are invited to approve the financial statements for the year ended 30 June 2024, including the balance sheet, profit and loss account and accompanying schedules, plus the following profit allocation:

 

Net profit for the year  1,243,992,400.81 
To the Legal Reserve  69,135.00 
To the Statutory Reserve  124,330,105.08 
To the Unavailable reserve (2023 Budget Law – art. 1, paragraphs from 87 to 95, L. 197/2022)  320,000,000.00 
To the Non-distributable reserve (Art. 6 D.Lgs. 28/02/05 n. 38).  16,288,256.97 
Remaining profit  783,304,903.76 
From the Statutory Reserve  101,892,019.38 
Total dividend  885,196,923.14 
Interim dividend of €0.51 to no. 825,784,934 of shares  421,150,316.34 
Final dividend of €0.56 to no. 828,654,655 of shares  464,046,606.80 

 

The final dividend will be paid on 20 November 2024, with the shares going ex-rights on 18 November 2024

 

Milan, 19 September 2024

 

The Board of Directors

 

398 | Individual financial statements as at 30 June 2024

 

DECLARATION BY FINANCIAL REPORTING OFFICER

 

 

 

 

 

DECLARATION CONCERNING THE FINANCIAL STATEMENTS

pursuant to Article 81-ter of CONSOB Regulation No. 11971 of 14 May 1999, as amended

 

 

 

1.The undersigned Alberto Nagel and Emanuele Flappini, in their respective capacities as Chief Executive Officer and Head of Company Financial Reporting of Mediobanca, hereby, and in view inter alia of the provisions contained in Article 154-bis, paragraphs 3 and 4, of Italian Legislative Decree No. 58 of 24 February 1998, declare that the administrative and accounting procedures used in the preparation of the financial statements:

  

Were adequate in view of the company’s characteristics; and

 

Were effectively adopted during the period from 1 July 2023 to 30 June 2024.

 

2.Assessment of the adequacy of said administrative and accounting procedures for the preparation of the financial statements at 30 June 2024 was based on a model defined by Mediobanca in accordance with benchmark standards for internal control systems which are widely accepted at international level (CoSO and CobiT frameworks).

 

3.It is further hereby declared that

 

3.1 The financial statements:

 

Were drawn up in accordance with the International Financial Reporting Standards adopted by the European Union pursuant to Regulation (EC) 1606/2002 issued by the European Parliament and Council on 19 July 2002;

 

Correspond to the data recorded in the company’s books and accounting ledgers;

 

Are adequate for the purpose of providing a true and fair view of the capital, earnings and financial situation of the issuer.

 

3.2The review of operations includes a reliable analysis of the performance and operating result and position of Mediobanca, together with a description of the main risks and uncertainties to which it is exposed

 

Milan, 19 September 2024

Chief Executive Officer Head of Company
  Financial Reporting
   
Alberto Nagel Emanuele Flappini

  

400 | Individual financial statements as at 30 June 2024

 

EXTERNAL AUDITORS’

REPORT

 

 

 

 

 

 

 

 

Mediobanca S.p.A.

 

Financial st at ement s as at 30 J une 2024

 

Independent audit or’s report pursuant t o art icle 14 of Legislat ive Decree n. 39, dat ed 27 January 2010, and art icle 10 of EU Regulat ion n. 537/ 2014

 

(Translat ion from the original It alian text)

 

 

 

EY S.p.A.

Via Meravigli, 12

20123 Milano 

Tel: +39 02 722121

Fax: +39 02 722122037

ey.com 

 

Independent auditor’s report pursuant to article 14 of Legislative Decree no. 39/ 2010 and art icle 10 of Regulation (EU) no. 537/2014

 

(Translation from the original Italian text)

 

To the Shareholders of

Mediobanca S.p.A.

 

Report on the Audit of the Financial Statements

 

Opinion

 

We have audited the financial statements of the Mediobanca S.p.A. (the “Bank” ), which comprise the balance sheet as at 30 June 2024, the income statement, statement of comprehensive income, the statement of changes to net equity and cash flows statement for the year then ended, and notes to the accounts, including material accounting policy information.

 

In our opinion, the financial statements give a true and fair view of the financial position of the Bank as at 30 June 2024, of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the European Union and with the regulations issued for implementing article 9 of Legislative Decree n.38, dated 28 February 2005 and article 43 of Legislative Decree n. 136, dated 18 August 2015.

 

Basis for Opinion

 

We conducted our audit in accordance with International Standards on Auditing (ISA Italia). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Bank in accordance with the regulations and standards on ethics and independence applicable to audits of financial statements under Italian Laws. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

 

Key Audit Matters

 

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current year. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

 

We identified the following key audit matters:

 

EY S.p.A.

Sede Legale: Via Meravigli, 12 – 20123 Milano

Sede Secondaria: Via Lombardia, 31 – 00187 Roma

Capitale Sociale Euro 2.975.000 i.v.

Iscritta alla S.O. del Registro delle Imprese presso la CCIAA di Milano Monza Brianza Lodi

Codice fiscale e numero di iscrizione 00434000584 - numero R.E.A. di Milano 606158 - P.IVA 00891231003

Iscritta al Registro Revisori Legali al n. 70945 Pubblicato sulla G.U. Suppl. 13 - IV Serie Speciale del 17/2/1998

 

A member firm of Ernst & Young Global Limited

 

 

 

 

 

Key Audit Matters   Audit Response

Classification and measurement of loans to customers represented by loans measured at amortised cost

 

Loans to customers (loans) recorded amongst financial assets measured at amortised cost, included in line item 40. b) of the balance sheet, amount to Euro 20.179 million as at 30 June 2024, and represent approximately 23% of total assets. The composition of such loans is included in tables 4.2 and 4.3 in Part B, section 4, of the notes to the accounts.

 

Net impairment losses for credit risk on the loans to customers (loans) measured at amortised cost are included in line item 130. a) of the income statement; the composition of such net impairment losses is included in table 8.1 in Part C, section 8, of the notes to the accounts.

 

The disclosures regarding the changes in the credit quality of the loans to customers (loans), the classification and measurement criteria adopted and the related income statement effects are provided in Part A – Accounting policies, in Part B – Notes to the balance sheet, in Part C – Notes to the income statement and in Part E Information on risks and related hedging policies of the notes to the accounts.

 

The classification in the appropriate risk staging and measurement of the loans to customers (loans) measured at amortised cost are both relevant for the audit because the amount of loans is significant to the financial statements as a whole and because the amount of the related impairment losses is determined by the directors through the use of estimates that have a high degree of complexity and subjectivity.

 

For classification purposes of the loans to customers (loans), the directors carry out analyses, which involve using internally developed models, as well as subjective elements, in order to identify exposures that show evidence of a significant increase in credit risk since the date of initial recognition or specifically identified impairment. The processes for the classification of such loans considers both

 

 

 

 

In relation to this aspect, our audit procedures, which were performed also with the support of our risk management and information technology specialists, included amongst others:

 

●     an understanding of the policies, processes and controls applied by the Bank in relation to the classification and measurement of loans to customers (loans);

 

●     an assessment of the configuration and implementation of key controls, including those relating to the relevant IT applications, and the execution of tests of controls in order to assess their operational effectiveness;

 

●     an understanding of the methodology used in relation to the statistical evaluations and the reasonableness of the hypotheses adopted as well as the execution of tests of controls and substantive procedures aimed at verifying the accuracy of the determination of the relevant parameters for the purposes of determining the impairment losses;

 

●     an analysis of the changes in the composition of loans to customers (loans) compared to the previous year and a discussion of the results with management;

 

●     performing substantive procedures in order to verify, on a sample basis, the correct classification and measurement of credit exposures;

 

●     an assessment of the adequacy of the disclosures provided in the notes to the accounts.

 2

 

 

 

 

●     internal information about the historical performance of exposures and external information about the referenced sector.

 

Measuring loans to customers (loans) is a complex activity, in respect of which the directors make estimates with a high degree of uncertainty and subjectivity that consider many quantitative and qualitative factors, including historical collections, expected cash flows and related estimates on collection timing, an assessment of any guarantees, the impact of macroeconomic variables and future scenarios and risks of the sectors in which the Bank’s customers operate.

 

Moreover, the classification and measurement processes of the loans to customers (loans) involve considering specific factors aimed at reflecting the current uncertainty on the evolution of the macroeconomic scenario and inflation dynamics.

 

   

Measurement of financial instruments not quoted in active markets and measured at fair value at on a recurring basis

 

As at 30 June 2024 financial instruments measured at fair value on a recurring basis, classified in level 2 and level 3 of the fair value hierarchy as established by the relevant international accounting standard, amount to a total asset balance of Euro 5.530 million and a total liability balance of Euro 9.494 million. The composition of financial instruments measured at fair value on a recurring basis, classified in level 2 and level 3 of the fair value hierarchy, is included in table A.4.5.1, Part A of the notes to the accounts.

 

The disclosures on the classification and measurement of financial instruments measured at fair value on a recurring basis, classified in level 2 and level 3 of the fair value hierarchy are provided in Part A - Accounting policies, in Part B – Notes to the balance sheet, in Part C – Notes to the sheet, in Part C – Notes to the income statement and in Part E - Information on risks and related hedging policies of the notes to the accounts.

 

 

 

 

 

In relation to this aspect, our audit procedures, which were performed also with the support of our risk management and information technology specialists, included amongst others:

 

●     an understanding of the policies, processes and controls applied by the Bank in relation to the classification and measurement of financial instruments measured at fair value on a recurring basis within the level 2 and level 3 fair value hierarchy categories;

 

●     an assessment of the configuration and implementation of key controls, including those relating to the relevant IT applications, and the execution of tests of controls in order to assess their operational effectiveness;

 

●     an understanding of the valuation models used for the measurement of the financial instruments as well as the methods used for determining the fair value hierarchy  

 

 3

 

 

 

 

The measurement of these financial instruments is performed by the directors through the use of complex models, consistent with the prevailing valuation practices, which make use of directly observable inputs or estimated internally based on qualitative and quantitative assumptions, when not observable in the market.

 

The measurement of such financial instruments is relevant to the audit because the amount of such financial instruments is significant to the financial statements as a whole and because of the multiplicity and complexity of the valuation models and parameters used as well as the subjective elements considered for the purposes of the estimates considered by the directors.

 

 

classification;

 

●     an analysis of the changes in the composition of the financial instruments’ portfolio compared to the previous year and the discussion of the results with management;

 

●     performing substantive procedures in order to verify, on a sample basis, the fair value of financial instruments through the analysis of the valuation models, the reasonableness of the qualitative and quantitative assumptions formulated, and input parameters used as well as the appropriate fair value level classification;

 

●     an assessment of the adequacy of the disclosures provided in the notes to the accounts. 

     

Measurement of equity investments in subsidiary and associated entities

   
     

As at 30 June 2024 the carrying amount of equity investments amount to Euro 3.771 million of which Euro 2.559 million and Euro 1.213 million. The composition of equity investments is included in the table 7.2 in Part B, section 7, of the notes to the accounts.

 

The disclosures on the methods used for the measurement of equity investments are provided in Part A – Accounting policies, in Part B – Notes to the balance sheet and in Part C – Notes to the income statement of the notes to the accounts.

 

The directors perform an evaluation of the recoverable amount of equity investments recognised in the financial statements annually, or more frequently, if indicators are found during the year that suggest the existence of a loss in value (impairment test). Such evaluation, in accordance with the international accounting standard IAS 36, is based on the comparison between the carrying amount in the financial statements and the higher of the fair value less costs to sell and the value in use.

 

The estimate of the recoverable amount of each equity investment was performed by the

 

 

In relation to this aspect, our audit procedures, which were performed also with the support of our business valuation specialists, included amongst others:

 

●     an understanding of the methods for determining the recoverable amount used by the directors in the impairment test process and the related key controls;

 

●     verifying the consistency of the valuation methodologies used with the requirements of the international accounting standard IAS 36, taking into account of the market practice and the distinctive characteristics of the single equity investments;

 

●     verifying the mathematical accuracy and the correctness of the calculations underlying the valuation models used;

 

●     an assessment of the differences between the historical results and forecast data and of the underlying reasons in order to verify the reasonableness of the assumptions used by the directors;

 

●     an analysis of the reasonableness of the assumptions and parameters used by the

 

 4

 

 

 

 

 

directors, also with the support of third-party consultants, through an impairment process based on complex models using information, parameters and assumptions characterised by a high level of subjectivity such as expected cash flows, nominal growth rates and the cost of capital.

 

The elements described above implicate a high level of complexity and subjectivity in the estimation processes, also considering the persisting uncertainty of macroeconomic scenario.

 

For the reasons described above, we have considered the measurement of equity investments in subsidiary and associated entities a key audit matter for the audit of the financial statements of the Bank as at 30 June 2024.

 

 

 

directors for the impairment test who were assisted with the support of third-party consultants, and of the forecast used in the same, also considering the uncertainty of macroeconomic scenario as well as the related sensitivity analyses;

 

●     an assessment of the adequacy of the disclosures provided in the notes to the accounts.

 

 

Responsibilities of Directors and Those Charged with Governance for the Financial Statements

 

The Directors are responsible for the preparation of the financial statements that give a true and fair view in accordance with International Financial Reporting Standards as adopted by the European Union and with the regulations issued for implementing article 9 of Legislative Decree n. 38/ 2005 and article 43 of Legislative Decree no. 136/ 2015 and, within the terms provided by the law, for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

 

The Directors are responsible for assessing the Bank’s ability to continue as a going concern and, when preparing the financial statements, for the appropriateness of the going concern assumption, and for appropriate disclosure thereof. The Directors prepare the financial statements on a going concern basis unless they either intend to liquidate the Bank or to cease operations or have no realistic alternative but to do so.

 

The statutory audit committee (“Collegio Sindacale” ) is responsible, within the terms provided by the law, for overseeing the Bank’s financial reporting process.

 

Auditor’s Responsibilities for the Audit of the Financial Statements

 

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with International Standards on Auditing (ISA Italia) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

 5

 

 

 

 

As part of an audit in accordance with International Standards on Auditing (ISA Italia), we have exercised professional judgment and maintained professional skepticism throughout the audit. In addition:

 

we have identified and assessed the risks of material misstatement of the financial statements, whether due to fraud or error, designed and performed audit procedures responsive to those risks, and obtained audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control;

we have obtained an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Bank’s internal control;

we have evaluated the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Directors;

we have concluded on the appropriateness of Directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Bank’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to consider this matter in forming our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Bank to cease to continue as a going concern;

we have evaluated the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

 

We have communicated with those charged with governance, identified at an appropriate level as required by international standards on auditing (ISA Italia), regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

 

We have provided those charged with governance with a statement that we have complied with the ethical and independence requirements applicable in Italy, and we have communicated with them all matters that may reasonably be thought to bear on our independence, and where applicable, the actions taken to eliminate the relevant risks or the related safeguards applied.

 

From the matters communicated with those charged with governance, we have determined those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We have described these matters in our auditor’s report.

 

Additional information pursuant to article 10 of EU Regulation n. 537/14

 

The shareholders of Mediobanca S.p.A., in the general meeting held on 28 October 2020, engaged us to perform the audits of the separate and consolidated financial statements for each of the years ending 30 June 2022 to 30 June 2030.

 

We declare that we have not provided prohibited non-audit services, referred to article 5, paragraph 1, of EU Regulation n. 537/ 2014, and that we have remained independent of the of the Bank in conducting the audit.

 6

 

 

 

 

We confirm that the opinion on the financial statements included in this report is consistent with the content of the additional report to the audit committee (Collegio Sindacale) in their capacity as audit committee, prepared pursuant to article 11 of the EU Regulation n. 537/ 2014.

 

Report on compliance with other legal and regulatory requirements

 

Opinion on the compliance with Delegated Regulation (EU) 2019/815

 

The Directors of Mediobanca S.p.A. are responsible for applying the provisions of the European Commission Delegated Regulations (EU) 2019/ 815 for the regulatory technical standards on the specification of a single electronic reporting format (ESEF – European Single Electronic Format) (the “Delegated Regulation”) to the financial statements, to be included in the annual financial report.

 

We have performed the procedures under the auditing standard SA Italia n. 700B, in order to express an opinion on the compliance of the financial statements as at 30 June 2024 with the provisions of the Delegated Regulation.

 

In our opinion, the financial statements as at 30 June 2024 have been prepared in the XHTML format in compliance with the provisions of the Delegated Regulation.

 

Opinion pursuant to article 14, paragraph 2, subparagraph e), of Legislative Decree n. 39 dated 27 January 2010 and of article 123-bis, paragraph 4, of Legislat ive Decree n. 58, dated 24 February 1998

 

The Directors of Mediobanca S.p.A. are responsible for the preparation of the Report on Operations and of the Report on Corporate Governance and Ownership Structure of the Bank as at 30 June 2024, including their consistency with the related financial statements and their compliance with the applicable laws and regulations.

 

We have performed the procedures required under audit standard SA Italia n. 720B, in order to express an opinion on the consistency of the Report on Operations and of specific information included in the Report on Corporate Governance and Ownership Structure as provided for by article 123-bis, paragraph 4, of Legislative Decree n. 58, dated 24 February 1998, with the financial statements of Mediobanca S.p.A. as at 30 June 2024 and on their compliance with the applicable laws and regulations, and in order to assess whether they contain material misstatements.

 

In our opinion, the Report on Operations and the above-mentioned specific information included in the Report on Corporate Governance and Ownership Structure are consistent with the financial statements of Mediobanca S.p.A. as at 30 June 2024 and comply with the applicable laws and regulations.

 

With reference to the statement required by article 14, paragraph 2, subparagraph e), of Legislative Decree n. 39, dated 27 January 2010, based on our knowledge and understanding of the entity and its environment obtained through our audit, we have no matters to report.

 7

 

 

 

Statement pursuant to article 4 of Consob Regulation implementing Legislative Decree n. 254, dated 30 December 2016

 

The Directors of Mediobanca S.p.A. are responsible for the preparation of the consolidated non-financial information pursuant to Legislative Decree n. 254, dated 30 December 2016. We have verified that consolidated non-financial information has been approved by Directors.

 

Pursuant to article 3, paragraph 10, of Legislative Decree n. 254, dated 30 December 2016, such consolidated non-financial information is subject to a separate compliance report signed by us.

 

Milan, 25 September 2024

 

EY S.p.A. 

Signed by: Davide Lisi, Auditor

 

This independent auditor’s report has been translated into the English language solely for the convenience of international readers. Accordingly, only the original text in Italian language is authoritative.

 8

 

INDIVIDUAL FINANCIAL STATEMENTS (*) 

 

 

 

(*)  Figures in Euros.

 

 

Mediobanca Balance Sheet

 

Asset items  30 June 2024   30 June 2023 
10. Cash and Cash Equivalents  3,280,657,357   4,426,851,422 
20. Financial assets measured at fair value through profit or loss  16,708,653,643   11,578,775,208 
  a) financial assets held for trading  15,437,936,067   10,509,409,892 
  b) financial assets designated at fair value  719,214,834   538,590,262 
  c) other financial assets mandatorily measured at fair value  551,502,742   530,775,054 
30. Financial assets measured at fair value through other comprehensive income  7,163,003,473   6,285,647,040 
40. Financial assets measured at amortized cost  54,813,498,424   54,588,649,643 
  a) due from banks  31,098,007,300   30,114,592,653 
  b) due from customers  23,715,491,124   24,474,056,990 
50. Hedging derivatives  561,851,168   245,954,010 
60. Value adjustment to generic hedging financial assets (+/-)      
70. Equity Investments  3,771,532,964   3,528,481,749 
80. Tangible assets  141,448,826   139,642,079 
90. Intangible Assets  29,392,331   29,662,462 
  of which:        
  Goodwill  12,514,145   12,514,145 
100. Tax assets  353,453,961   277,484,768 
  a) current  287,099,344   182,106,141 
  b) prepaid  66,354,617   95,378,627 
110. Non-current assets and asset groups held for sale      
120. Other assets  471,836,296   166,765,825 
Total assets  87,295,328,443   81,267,914,206 

 

412 | Individual financial statements as at 30 June 2024  

 

Liabilities and net equity  30 June 2024   30 June 2023 
10. Financial liabilities measured at amortized cost  65,738,171,569   60,979,649,706 
  a) due to banks  31,805,460,944   34,324,113,115 
  b) due to customers  13,370,228,825   8,770,681,018 
  c) securities in issue  20,562,481,800   17,884,855,573 
20. Trading financial liabilities  9,666,709,825   10,592,249,162 
30. Financial liabilities designated at fair value  4,164,870,677   1,524,041,446 
40. Hedging derivatives  1,458,737,774   2,116,466,694 
50. Value adjustment to generic hedging financial liabilities (+/-)      
60. Tax liabilities  488,344,615   521,354,135 
  a) current  255,772,790   298,185,828 
  b) deferred  232,571,825   223,168,307 
70. Liabilities associated with assets held for sale      
80. Other liabilities  667,328,161   377,990,584 
90. Provision for statutory end-of-service payments  4,787,338   5,049,967 
100. Provisions for risks and charges:  74,636,549   97,730,658 
  a) commitments and guarantees issued  22,813,991   30,405,631 
  b) post-employment and similar benefits      
  c) other provisions for risks and charges  51,822,558   67,325,027 
110. Revaluation reserves  88,981,557   59,188,850 
120. Redeemable shares     
130. Equity instruments      
140. Reserves  1,127,475,614   1,826,802,801 
150. Share premium  2,195,605,653   2,195,605,653 
160. Capital  444,515,143   444,169,468 
170. Treasury shares (-)  (68,828,433)  (78,875,697)
180. Profit (loss) for the year (+/-)  1,243,992,401   606,490,779 
Total liabilities and net equity 87,295,328,443   81,267,914,206 

 

 Mediobanca S.p.A. Financial Statements | 413

 

Mediobanca Profit and Loss Account

 

Items  30 June 2024   30 June 2023 
10. Interest and similar income   2,786,658,035    1,740,230,742 
  of which: interest income calculated according to the effective interest method   2,102,031,812    1,372,632,946 
20. Interest and similar charges   (2,424,740,652)   (1,407,695,291)
30. Net interest income   361,917,383    332,535,451 
40. Commission income   411,029,898    355,647,161 
50. Commission expenses   (66,478,722)   (59,965,423)
60. Net fee income   344,551,176    295,681,738 
70. Dividends and similar income   1,191,853,933    618,793,528 
80. Net trading income (expense)   28,668,148    95,331,702 
90. Net hedging income (expense)   662,166    3,711,934 
100. Gains (losses) on disposal/repurchase of:   12,510,931    8,334,693 
  a) financial assets measured at amortized cost   5,481,037    8,271,179 
  b) financial assets measured at fair value through other comprehensive income   6,430,579    (6,738,593)
  c) financial liabilities   599,315    6,802,107 
110. Net income (expense) from other financial assets and liabilities measured at fair value through profit or loss   28,920,611    9,123,942 
  a) financial assets and liabilities designated at fair value   12,910,275    13,562,153 
  b) other financial assets mandatorily measured at fair value   16,010,336    (4,438,211)
120. Total revenues   1,969,084,348    1,363,512,988 
130. Net write-offs (write-backs) for credit risk:   (4,997,744)   (53,311,167)
  a) financial assets measured at amortized cost   (3,000,036)   (54,027,631)
  b) financial assets measured at fair value through other comprehensive income   (1,997,708)   716,464 
140. Gains (losses) from contractual modifications without derecognition        
150. Net income (expense) from financial operations   1,964,086,604    1,310,201,821 
160. Administrative expenses:   (570,127,519)   (543,300,136)
  a) personnel costs   (309,935,447)   (288,799,716)
  b) other administrative expenses   (260,192,072)   (254,500,420)
170. Net transfers to provisions for risks and charges   14,693,273    12,760,571 
  a) commitments and guarantees issued   6,870,905    14,683,885 
  b) other net provisions   7,822,368    (1,923,314)
180. Net value adjustments to/write-backs of tangible assets   (9,740,402)   (8,908,072)
190. Net value adjustments to/write-backs of intangible assets   (705,755)   (665,530)
200. Other operating expense / income   48,964,976    25,665,634 
210. Operating costs   (516,915,427)   (514,447,533)
220. Gains (losses) on equity investments   (35,178,776)   (54,262,649)
230. Net income (expense) from fair value measurement of tangible and intangible assets        
240. Value adjustments to goodwill        
250. Gains (losses) on disposal of investments       (860)
260. Profit (loss) on ordinary operations before tax   1,411,992,401    741,490,779 
270. Income tax for the year on ordinary operations   (168,000,000)   (135,000,000)
280. Profit (loss) on ordinary operations after tax   1,243,992,401    606,490,779 
290. Gains (losses) of ceded operating assets, after tax        
300. Profit (loss) for the year   1,243,992,401    606,490,779 

 

414 | Individual financial statements as at 30 June 2024  

 

Other Comprehensive Income

 

Items  30 June 2024   30 June 2023 
10. Profit (loss) for the year   1,243,992,401    606,490,779 
  Other income items after tax without transfers through profit or loss   (7,302,108)   12,005,200 
20. Equity securities designated at fair value through other comprehensive income   19,640,628    18,101,102 
30. Financial liabilities designated at fair value through profit or loss (change in own credit risk)   (26,984,253)   (6,273,934)
40. Hedging of equity securities designated at fair value through other comprehensive income        
50. Tangible assets        
60. Intangible Assets        
70. Defined benefit plans   41,517    178,032 
80. Non-current assets and asset groups held for sale        
90. Portion of valuation reserves of equity-accounted investments        
  Other income items after tax with transfers through profit or loss   44,667,558    (8,672,544)
100. Foreign investment hedges        
110. Currency exchange gains/losses        
120. Cash flow hedges   1,819,677    (462,516)
130. Hedging instruments (non-designated items)        
140. Financial assets (other than equity securities) measured at fair value through other comprehensive income   42,847,881    (8,210,028)
150. Non-current assets and asset groups held for sale        
160. Portion of valuation reserves of equity-accounted investments        
170. Total other income items after tax   37,365,450    3,332,656 
180. Other comprehensive income (Item 10+170)   1,281,357,851    609,823,435 

 

 Mediobanca S.p.A. Financial Statements | 415

 

Statement of Changes in Mediobanca Net Equity

 

       Allocation of profit (loss)   Changes for
the year
     
       for the previous year   Net equity transactions       Other      
   Net equity at
30/6/23
   Reserves   Dividends and
other
allocations
   Changes in
reserves
   Newly issued
shares
   Treasury shares
purchased
   Advances on
dividends
   Extraordinary
dividend
payouts
   Changes
to equity
instruments
   Treasury share
derivatives
   Stock options (1 )   comprehensive
income for the
year 2023/2024
   Total net equity at
30/6/24
 
Capital:  444,169,468            345,675                        444,515,143 
a) ordinary shares  444,169,468            345,675                        444,515,143 
b) other shares                                       
Share premium  2,195,605,653                                    2,195,605,653 
Reserves:  1,826,802,801   606,490,779   (713,360,547)  11,884,174   (345,675)  (198,548,198)  (421,150,316)           15,702,596      1,127,475,614 
a) retained earnings  1,981,087,691   606,490,779   (713,360,547)  16,746,751   (345,675)     (421,150,316)                 1,469,468,683 
b) other  (154,284,890)        (4,862,577)     (198,548,198)              15,702,596      (341,993,069)
Revaluation reserves  59,188,850         (7,572,743)                       37,365,450   88,981,557 
Equity instruments                                       
Treasury shares  (78,875,697)              10,047,264  (2)                      (68,828,433)
Profit (loss) for the year  606,490,779   (606,490,779)                             1,243,992,401   1,243,992,401 
Total net equity  5,053,381,854      (713,360,547)  4,311,431      (188,500,934)  (421,150,316)           15,702,596   1,281,357,851   5,031,741,935 

 

(1) Represents the effects of the performance shares related to the ESOP schemes.
(2) Concerns the cancellation (on 11 June 2024, by resolution dated 28 June 2023) of 17,000,000 treasury shares without reduction of the share capital.

 

416 | Individual financial statements as at 30 June 2024  

 

Statement of Changes in Mediobanca Net Equity

 

       Allocation of profit (loss) for the   Changes for
the year
     
       previous year   Net equity transactions       Other     
   Net equity at
30/6/22
   Reserves   Dividends and
other
allocations
   Changes in
reserves
   Newly issued
shares
   Treasury shares
purchased
   Extraordinary
dividend
payouts
   Changes
to equity
instruments
   Treasury
share
derivatives
   Stock options (1)    comprehensive
income for the
year 2022/2023
   Total net equity at
30/6/23
 
Capital:  443,640,007            529,461                     444,169,468 
a) ordinary shares  443,640,007            529,461                     444,169,468 
b) other shares                                    
Share premium  2,195,605,653                                 2,195,605,653 
Reserves:  2,032,800,953   513,087,171   (629,164,205)  57,738,810   (529,461)  (160,713,601)           13,583,134      1,826,802,801 
a) retained earnings  2,102,513,639   513,087,171   (629,164,205)  (4,819,453)  (529,461)                    1,981,087,691 
b) other  (69,712,686)        62,558,263      (160,713,601)           13,583,134      (154,284,890)
Revaluation reserves  118,414,457         (62,558,263)                    3,332,656   59,188,850 
Equity instruments                                    
Treasury shares  (240,807,324)              161,931,627(2)                  (78,875,697)
Profit (loss) for the year  513,087,171   (513,087,171)                          606,490,779   606,490,779 
Total net equity  5,062,740,917      (629,164,205)  (4,819,453)     1,218,026            13,583,134   609,823,435   5,053,381,854 

 

(1) Represents the effects of performance shares related to the ESOP schemes.
(2) Concerns the cancellation (on 2 September 2022, by resolution dated 28 October 2021) of 16,500,000 treasury shares without reduction of the share capital.

 

 Mediobanca S.p.A. Financial Statements | 417

 

Mediobanca Cash Flow Statement Direct Method

 

   Amount 
   30 June 2024   30 June 2023 
A.CASH FLOW FROM OPERATING ACTIVITIES          
1.Operating activities   (669,861,829)   (377,489,913)
- interest received (+)   3,165,076,766    1,025,321,483 
- interest paid (-)   (3,231,223,073)   (1,117,930,723)
- dividends and similar income (+)   144,393,165    90,610,894 
- net fees and commission income (+/-)   180,035,401    270,657,494 
- personnel costs (-)   (241,464,422)   (207,478,385)
- other costs (-)   (485,754,630)   (506,235,968)
- other revenues (+)   21,657,238    15,231,346 
- taxes and duties (-)   (222,582,274)   52,333,946 
- expenses/income from asset groups held for sale after tax effect (+/-)        
2.Cash inflow/outflow from financial assets   (3,917,089,641)   (783,995,131)
- financial assets held for trading   (4,882,422,738)   468,285,607 
- financial assets designated at fair value   (111,839,790)   20,460,000 
- financial assets mandatorily measured at fair value   (3,657,329)   50,334,366 
- financial assets measured at fair value through other comprehensive income   (734,746,675)   (1,884,434,791)
- financial assets measured at amortized cost   1,314,351,026    332,236,876 
- other assets   501,225,865    229,122,811 
3.Cash inflow/outflow from financial liabilities   4,220,258,499    (1,338,514,866)
- financial liabilities measured at amortized cost   3,214,570,014    (887,099,119)
- financial liabilities held for trading   (698,783,503)   250,415,531 
- financial liabilities designated at fair value   1,670,967,887    866,112,267 
- other liabilities   33,504,101    (1,567,943,545)
Net cash inflow/outflow from operating activities   (366,692,971)   (2,499,999,910)
B.CASH FLOW FROM INVESTING ACTIVITIES          
1.Cash generated from:   808,006,722    527,759,408 
- disposal of shareholdings   2,090     
- dividends received in respect of equity investments   808,004,632    527,323,408 
- disposals of tangible assets       427,000 
- disposals of intangible assets       9,000 
- disposals of business units        
2.Cash outflows arising from:   (269,322,771)   (21,600,061)
- purchases of shareholdings   (261,798,771)   (16,251,061)
- purchases of tangible assets   (7,086,000)   (3,714,000)
- purchases of intangible assets   (438,000)   (1,635,000)
- purchases of business units        
Net cash inflow/outflow from investing activities   538,683,951    506,159,347 
C.CASH FLOW FROM FUNDING ACTIVITIES   (1,318,185,045)   (629,088,810)
- issue/purchase of treasury shares   (187,594,810)    
- issue/purchase of equity instruments        
- distribution of dividends and other purposes   (1,130,590,235)   (629,088,810)
Net cash inflow/outflow from funding activities   (1,318,185,045)   (629,088,810)
NET CASH INFLOW/OUTFLOW DURING THE PERIOD   (1,146,194,065)   (2,622,929,373)

 

418 | Individual financial statements as at 30 June 2024  

 

Reconciliation

 

  Amount 
Accounting items  30 June 2024   30 June 2023 
Cash and cash equivalents: balance at start of period   4,426,851,422    7,049,780,795 
           
Total cash inflow/outflow during the period   (1,146,194,065)   (2,622,929,373)
           
Cash and cash equivalents: exchange rate effect        
           
Cash and cash equivalents: balance at end of period   3,280,657,357    4,426,851,422 

 

 Mediobanca S.p.A. Financial Statements | 419

 

NOTES TO THE ACCOUNTS

 

 

 

 

 

NOTES TO THE ACCOUNTS

 

Part A - Accounting Policies 423
A.1 - General part 423
Section   1 - Statement of Compliance with IAS/IFRS 423
Section   2 - General Principles 423
Section   3 - Events Subsequent to the Reporting Date 429
Section   4 - Other Aspects 429
A.2 - Significant accounting policies 430
A.3 - Information on transfers between financial asset portfolios 455
A.4 - Information on fair value 456
A.5 - Information on “Day One Profit/Loss” 473
   
Part B - Notes to the Balance Sheet 474
   
Assets 474
     
Section   1 - Heading 10: Cash and Cash Equivalents 474
Section   2 - Heading 20: Financial Assets Measured at Fair Value through Profit or Loss 475
Section   3 - Heading 30: Financial Assets Measured at Fair Value through Other Comprehensive Income 479
Section   4 - Heading 40: Financial Assets Measured at Amortized Cost 480
Section   5 - Heading 50: Hedging Derivatives 484
Section   7 - Heading 70: Equity Investments 485
Section   8 - Heading 80: Property, Plant and Equipment 488
Section   9 - Heading 90: Intangible Assets 492
Section 10 - Asset Heading 100 and Liability Heading 60: Tax Assets and Liabilities 494
Section 12 - Heading 120: Other Assets 497
     
Liabilities   498
     
Section   1 - Heading 10: Financial Liabilities Measured at Amortized Cost 498
Section   2 - Heading 20: Trading Liabilities 501
Section   3 - Heading 30: Financial Liabilities Designated at Fair Value 502
Section   4 - Heading 40: Hedging Derivatives 503
Section   6 - Heading 60: Tax Liabilities 504
Section   8 - Heading 80: Other Liabilities 504
Section   9 - Heading 90: Provision for Statutory End-of-service Payments 504
Section 10 - Heading 100: Provisions for Risks and Charges 505
Section 12 - Headings 110, 130, 140, 150, 160, 170 and 180: Net Equity 508
     
Other information 511

 

Mediobanca S.p.A. Financial Statements | 421

 

Part C - Notes to the Profit and Loss Account 515
   
Section   1 - Headings 10 and 20: Net Interest Income 515
Section   2 - Headings 40 and 50: Net fee and commission income 517
Section   3 - Heading 70: Dividends and Similar Income 519
Section   4 - Heading 80: Net Trading Income (Expense) 519
Section   5 - Heading 90: Net Hedging Income (Expense) 520
Section   6 - Heading 100: Net Gains (Losses) on Disposals/Repurchases 521
Section   7 - Heading 110: Net Gains (Losses) on Other Financial Assets and Liabilities Measured at Fair Value through Profit or Loss 522
Section   8 - Heading 130: Net value adjustments for credit risk 523
Section 10 - Heading 160: Administrative Expenses 524
Section 11 - Heading 170: Net Transfers to Provisions for Risks and Charges 525
Section 12 - Heading 180: Net value adjustments to/write-backs of tangible assets 526
Section 13 - Heading 190: Net value adjustments to/write-backs of intangible assets 527
Section 14 - Heading 200: Other Operating Income (Expense) 527
Section 15 - Heading 220: Gains (Losses) on Equity Investments 528
Section 19 - Heading 270: Income Tax on Ordinary Activities 528
Section 22 - Earning per share 529

 

Part D - Other Comprehensive Income 530
   
Part E - Information on Risks and Related Hedging Policies 531
Section   1 - Credit Risk 532
Section   2 - Market Risk 576
Section   3 - Derivative Instruments and Hedging Policies 591
Section   4 - Liquidity Risk 604
Section   5 - Operational Risk 608

 

Part F - Information on Capital 612
   
Section  1 - Capital of the Company 612
Section  2 - Own Funds and Banking Supervisory Ratios 614
     
Part G - Combinations Involving Group Companies or Business Units 619
   
Part H - Related Party Transactions 620
   
Part I - Share-Based Payment Schemes 623
   
Part M - Disclosure on Leases 627

 

 422 | Individual financial statements as at 30 June 2024

 

Part A - Accounting Policies

 

A.1 - General Part

 

SECTION 1

 

Statement of Compliance with IAS/IFRS

 

The Bank’s financial statements as at 30 June 2024, as required by Italian Legislative Decree No. 38 of 28 February 2005, were drawn up in accordance with the International Financial Reporting Standards (IFRS) and International Accounting Standards (IAS) issued by the International Accounting Standards Board (IASB), and the respective interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC), which were adopted by the European Commission in accordance with the procedure laid down in Article 6 of Regulation (EC) No. 1606/2002 issued by the European Parliament and Council on 19 July 2002. In particular, account was taken of the “Instructions on preparing statutory and consolidated financial statements for banks and financial companies which control banking groups” issued by the Bank of Italy under Circular No. 262 of 22 December 2005 - eighth update of 17 November 2022(2) - which define the structure to be used in compiling and preparing the financial statements and the contents of the notes to the accounts. This report was drawn up in accordance with the provisions of Article 154-ter of Legislative Decree No. 58 of 24 February 1998 (Italian Consolidated Law on Finance).

 

SECTION 2

 

General Principles

 

These individual financial statements comprise:

 

individual balance sheet;

 

individual income statement;

 

individual statement of other comprehensive income;

 

(2)  The eighth update published on 17 November 2022 transposed the regulatory changes of IFRS 17 “Insurance Contracts”.

 

Notes to the accounts | Part A - Accounting policies | 423

 

statement of changes in individual net equity;

 

individual cash flow statement, drawn up using the direct method;

 

notes to the accounts.

 

All the statements have been drawn up in conformity with the general principles provided for under IAS and the accounting policies illustrated in part A.2, and show data for the period under review compared with that for the previous financial year in the case of balance-sheet figures or the corresponding period of the previous financial year for profit-and-loss data.

 

* * *

 

During the year under review, the European Commission approved the following regulations, which include certain changes to accounting standards already in force:

 

Regulation 2023/2468 of 8 November 2023, published in the Official Journal of the European Union on 9 November 2023, adopted amendments to IAS 12 “Income Taxes”. These amendments added a temporary exception to account for deferred taxes resulting from the implementation of OECD Pillar II rules, as well as targeted disclosures for the entities involved.

 

In particular, the following are required:

 

temporary exception to the requirement to account for deferred taxes immediately following publication of the amendments by the IASB and retrospectively in accordance with IAS 8 - Accounting Policies, Changes in Accounting Estimates and Errors; and

 

obligation to disclose the additional information required by the Regulation from the financial statements for years starting on 1 January 2023 or later; it is not necessary to apply additional disclosure provisions to interim financial statements relating to interim periods ending on 31 December 2023 or before;

 

Regulation 2023/2579 of 20 November 2023, published in the Official Journal of the European Union on 21 November 2023, adopted amendments to IFRS 16 “Leasing”. In particular, such amendments specify how the transferor/lessee should subsequently measure the value of sale and leaseback transactions. Companies should apply these amendments at the latest from the start date of their first financial year starting on 1 January 2024 or later;

 

 424 | Individual financial statements as at 30 June 2024

 

Regulation 2023/2822 of 19 December 2023, published in the Official Journal of the European Union on 20 December 2023, adopted amendments to IAS 1 “Presentation of Financial Statements”. These amendments improve the information a company should provide when its right to defer settlement of a liability for at least 12 months is subject to covenants. The required changes should, at the latest, be applied from the start date of the first financial year after 1 January 2024;

 

Regulation (EU) 2024/1317 of the Commission of 15 May 2024, published in the Official Journal Series L of 16 May 2024, adopts “Supplier finance arrangements” amending IAS 7 Statement of cash flows and IFRS Financial instruments: additional information. The document introduces disclosure requirements on a company’s supplier finance arrangements. Companies will apply the amendments at the latest from the financial statements for years beginning on or after 1 January 2024.

 

Furthermore, it should be remembered that as of 1 July 2023 the Mediobanca Group has been applying Regulation 2022/357 of 2 March 2022, which adopted the amendments to standards IAS 1 and IAS 8. The amendments clarify the differences between accounting principles and accounting estimates in order to ensure a consistent adoption of accounting standards and the comparability of financial statements.

 

* * *

 

Notes to the accounts | Part A - Accounting policies | 425

 

The measures and statements published by regulatory and supervisory authorities in the past twelve months regarding the most suitable way to apply accounting standards that supplement the measures contained in the latest financial statements at 30 June 2023 are shown below. Please refer to the above financial statements for more details.

 

On 25 October 2023, ESMA published the annual statement “European Common Enforcement Priorities for 2023 Annual Financial Reports” outlining the priorities on which listed companies must focus when preparing the annual reports for December 2023. ESMA in particular recommends disclosure to be provided in the financial statements relating to any direct or indirect effects of sudden increases in interest rates on the composition of a company’s exposures between variable and fixed rates, accompanied by a sensitivity analysis, if any; the effects of the greater volatility brought by the macroeconomic scenario on fair value estimates; any material effects on financial disclosure due to climate change, while ensuring that such disclosure is provided in line with IFRS standards; and the need for clear and consistent use of alternative performance measures (APMs). Finally, in the same document, ESMA also focused on ESEF tagging, in particular on the priority use of mandatory and previously existing elements in the taxonomy; it specified that the company may proceed with the creation of a special element only in the event that a careful analysis has found that there is no suitable tag for a certain numerical “data point”.

 

Going-concern statement

 

With reference to the requirements of the Bank of Italy, CONSOB and ISVAP under Joint Document No. 4 of 3 March 2010, the Group’s consolidated financial statements at 30 June 2024 were prepared on a going-concern basis: the Directors believe that no risks and uncertainties have arisen such as to raise doubts on the Group’s going-concern assumption. The Directors consider that the Bank has a reasonable expectation of continuing to operate in the foreseeable future.

 

For information on the Bank’s risks and related safeguards, please refer to the contents of “Part E - Information on risks and related hedging policies” in these Notes to the Accounts and in the Bank’s Review of Operations.

 

 426 | Individual financial statements as at 30 June 2024

 

Discretionary assessments, risks and uncertainties linked to the use of significant accounting estimates

 

In compliance with IFRS, senior management are required to formulate assessments, estimates and assumptions that may influence the adoption of the accounting standards and the amounts of assets, liabilities, costs and revenues recognized in the financial statements, as well as the disclosure relating to contingent assets and liabilities.

 

The assumptions underlying such estimates take into account all the information available at the date of preparation of the financial statements, as well as assumptions considered reasonable, including in light of past experience.

 

In this regard, it should be noted that financial estimates may, due to their very nature and insofar as reasonable, need to be revised as a result of changes in the circumstances on which they have been based, of the availability of new information or of greater experience accrued.

 

The main cases requiring the use of subjective assessments and opinions on the part of senior management are as follows:

 

a)quantification of losses due to the impairment of receivables and, in general, of other financial assets;

 

b)assessment of the fair value of equity investments and other non-financial assets (goodwill, tangible assets, including the value in use of assets acquired under lease, and intangible assets);

 

c)use of valuation models to measure the fair value of financial instruments not listed on active markets;

 

d)estimates of liabilities deriving from company defined benefit retirement plans;

 

e)quantification of legal and fiscal provisions for risks and charges.

 

The above list of valuation processes is provided for the sole purpose of allowing the reader to better understand the main areas of uncertainty, but it should not be understood in any way to suggest that alternative assumptions may, at present, be more appropriate. For the most relevant items being estimated, information on the main hypotheses and assumptions used in the estimate is provided in the specific sections of the Notes to the Accounts, including a sensitivity analysis with respect to alternative hypotheses.

 

Notes to the accounts | Part A - Accounting policies | 427

 

BAPA (Bilateral Advance Pricing Agreements)

 

In the Transfer Pricing area, Penalty Protection rules ensure exemption from administrative penalties due to misrepresentation and apply in the event that the taxpayer is in possession of documentation that ensures verification of compliance with the transfer pricing arm’s length principle applied to cross-border intercompany transactions. In order to ensure that such rules are applied, in addition to preparing and updating their Country-Specific Documentation and Master File according to regulatory provisions, Mediobanca S.p.A. and Mediobanca International S.A. submitted an application in June for a bilateral advance pricing arrangement (BAPA) between the Italian Revenue Agency and the competent Luxembourg Authority. The application filed with the Italian Revenue Agency was declared admissible last July.

 

Corporate Sustainability Reporting Directive (CSRD) Project

 

The continuous evolution of European legislation on sustainability reporting, together with requests to adhere to various reporting standards on an optional basis, led the Mediobanca Group to launch a multi-year project focused on Group ESG Reporting standards starting in 2021 with the aim of creating an integrated approach capable of meeting the new regulatory requirements and emerging best practices across the Bank.

 

In the first two years, the project focused on:

 

definition of standard solutions for the preparation of the tables required by Article 8 of the Delegated Act of the EU Taxonomy and the quantitative tables and qualitative tables required by Pillar 3 in the ESG field;

 

industrialization of the related indicators, including GAR (in view of alignment with the taxonomy), and drafting the first off-balance sheet disclosure;

 

preparation of internal regulations for the drafting of the disclosure statement (e.g. Pillar 3, PRB Report, TCFD Report); and finally;

 

definition of solutions once such activities are fully operational.

 

During the financial year under review, a gap analysis was carried out to assess the degree of alignment between the new disclosure obligations according to the ESRS and the contents of the Group’s current non-financial reports (in particular the DCNF) in view of the entry into force of the CSRD, whose reporting

 

 428 | Individual financial statements as at 30 June 2024

 

 

requirement should be met by the Group as of 30 June 25. Preparatory activities for drafting / implementing the future Sustainability Statement should be noted, including: initial analyses for the implementation of double materiality and IT tool assessments for an even more solid management of data collection.

 

With specific reference to “Double Materiality” (the new analysis provided for by ESRS standards that requires the identification of impacts, risks and opportunities relevant to sustainability reporting), the Group started to refine the criteria to align its “impact materiality” with the requirements of the new standard by examining in depth the principles relating to the “financial relevance of ESG issues” (second area required for the implementation of the aforementioned analysis).

 

SECTION 3

 

Events subsequent to the reporting date

 

No other events requiring an adjustment to be made to the data shown in the individual Financial Statements at 30 June 2024 occurred after such date.

 

SECTION 4

 

Other Aspects

 

In compliance with Directive (EC) 2004/109 (Transparency Directive) and Delegated Regulation (EU) 2019/815 (the “ESEF Regulation”), this document was drawn up in XHTML and the consolidated financial statements were “marked up” using the integrated computer language iXBRL, approved by ESMA.(3) The entire document was lodged at the company offices and with the competent institutions as pursuant to the law.

 

(3) However, issuers may still continue to publish their Financial Statements in other formats (i.e. PDF). Finally, it should be noted that some information contained in the Notes to the Financial Statements when extracted from the XHTML format in an XBRL instance, due to certain technical limitations, may not be reproduced identically, compared to the corresponding information displayed in the consolidated financial statements in XHTML format.

 

Notes to the accounts | Part A - Accounting policies | 429

 

The Bank’s individual financial statements are accompanied by the Declaration of the Financial Reporting Officer pursuant to Article 154-bis of the Italian Law on Finance and are subject to audit by the independent auditing firm EY S.p.A., according to the provisions of Legislative Decree No. 39 of 27 January 2010.

 

A.2 – Significant Accounting Policies

 

1 - Financial assets measured at fair value through profit or loss

 

These include financial assets held for trading and other financial assets mandatorily measured at fair value, and assets for which the Fair Value Option has been adopted.

 

Financial assets held for trading are assets which have been acquired principally for the purpose of being traded. This category comprises debt securities, equities, loans held for trading purposes, and the positive value of derivatives held for trading, including those embedded in complex instruments (such as structured bonds), which are recorded separately. This category also includes syndicated loan underwriting commitments in the event of a positive value.

 

Assets mandatorily measured at fair value include financial assets that are not held for trading but are mandatorily measured at fair value through profit or loss given the fact that they do not meet the requirements to be measured at amortized cost or at fair value through other comprehensive income. In particular, as clarified by the IFRS Interpretation Committee, this category includes units in mutual investment funds.(4) 

 

With regard to financial assets mandatorily measured at fair value, the organizational model, the monitoring process and the method that the Bank applies in order to classify, measure and verify the valuation of OICs as instruments accounted for at Fair Value were defined during the financial year under review in compliance with Community Regulations (see section A.4 for further details).

 

Initial recognition occurs at the settlement date for securities and loans and at the subscription date for derivatives. At initial recognition, such financial assets are booked at fair value not including any transaction expenses or income

 

(4) The IFRS Interpretation Committee’s clarification rules out any possibility of such instruments being treated as equities.

 

 430 | Individual financial statements as at 30 June 2024

 

 

directly attributable to the asset concerned, which are taken through the profit and loss account. Following their initial recognition, they will continue to be measured at fair value, and any changes in fair value will be recognized in the profit and loss account. Interest on instruments mandatorily measured at fair value will be recognized according to the interest rate stipulated contractually. Dividends paid on equity instruments will be measured through profit or loss when the right to collect them becomes effective.

 

Equities and linked derivatives whose fair value may not be reliably measured using the methods described above are stated at cost (these too qualify as Level 3 assets). If the assets suffer impairment, they are written down to their current value.

 

Gains and losses upon disposal or redemption and the positive and negative effects of changes in fair value over time are recognized in the profit and loss account under the respective headings.

 

Assets held for trading mandatorily measured at fair value also include loans which do not guarantee full repayment of principal in the event of the counterparty’s financial difficulties and which have therefore failed the SPPI test. The process followed to write down these positions is aligned with that used for other loans, on the grounds that the exposure is basically attributable to credit risk, with both the gross exposure and related provisioning stated.

 

This item also includes financial assets designated at fair value upon initial recognition with the aim of eliminating or significantly reducing a valuation inconsistency. This case in particular concerns the related portfolio of assets and liabilities required by applying the business model for managing equity-linked certificates where changes in own credit risk and realizations are recognized through profit or loss to eliminate the accounting mismatch.

 

Notes to the accounts | Part A - Accounting policies | 431

 

2 - Financial assets measured at fair value through other comprehensive income

 

These are financial instruments, mostly debt securities, which meet both the following conditions:

 

the instruments are held on the basis of a business model whose objective is the collection of contractual cash flows and of proceeds deriving from the sale of such instruments;

 

the contractual terms have passed the SPPI test.

 

Financial assets measured at fair value through other comprehensive income (FVOCI) are recognized at fair value, including transaction costs and income directly attributable to them. Thereafter, they will continue to be measured at fair value. Changes in fair value are measured through other comprehensive income, while interest and currency exchange gains/losses are recorded in the profit and loss account (in the same way as financial instruments measured at amortized cost).

 

Expected losses of financial assets measured at fair value through other comprehensive income (debt securities and loans and advances to customers) are calculated (as per the impairment process) in the same way as those of financial assets measured at amortized cost, with the resulting value adjustment recorded in the profit and loss account.

 

Retained earnings and accumulated losses recorded in other comprehensive income will be measured through profit or loss when the instrument is removed from the balance sheet.

 

The category also includes equities not held for trading which meet the definition provided by IAS 32, and which the Bank decided to classify irrevocably in this category at the initial recognition stage. As the instruments in question are equities, they are not subject to impairment and no gains/losses on equities will be measured through profit or loss, including following the sale of the instrument. Conversely, dividends on the instruments will be measured through profit or loss when the right of collection takes effect.

 

 432 | Individual financial statements as at 30 June 2024

 

3 - Financial assets measured at amortized cost

 

These include loans and advances to customers and banks, debt securities and repo transactions which meet the following conditions:

 

the financial instrument is held and managed according to the hold-to-collect business model, i.e. with the objective of holding it in order to collect the cash flows provided for in the contract;

 

such contractual cash flows consist entirely of payment of principal amount and interest (and therefore meet the requirements set by the SPPI test).

 

This heading also includes receivables originated from finance leases, the valuation and classification rules for which are governed by IFRS 16 (cf. below), even though the impairment rules introduced by IFRS 9 apply for valuation purposes.

 

The Bank’s business model should reflect the ways in which financial assets are managed at a portfolio level and not at the instrument level, on the basis of factors observable at the portfolio level and not at the instrument level, such as the following:

 

operating procedure adopted by management in the performance evaluation process;

 

risk type and procedure for managing risks taken, including indicators for portfolio rotation;

 

means for determining remuneration mechanisms for risk-takers.

 

The business model is based on expected reasonable scenarios (without considering “worst case” and “stress case” scenarios). In the event of cash flows differing from those estimated at initial recognition, the Bank is not bound to change the classification of financial instruments forming part of the portfolio, but uses the information for deciding the classification of new financial instruments.(5) 

 

At initial recognition, the Bank analyses contractual terms for the instruments to check whether the instrument, product or sub-product has passed the SPPI test. In this connection, the Group has developed a standardized testing process

 

(5) These considerations are stated in the internal management policies, which reiterate the link between business model and accounting treatment and introduce frequency and materiality thresholds for changes in portfolios of assets measured at amortized cost.

 

Notes to the accounts | Part A - Accounting policies | 433

 

 

which involves analysing loans by using a specific tool, developed internally, which is structured in decision-making trees, at the level of the individual financial instrument or product based on their different degrees of customisation. If the test is not passed, the tool will show that the assets should be measured at fair value through profit or loss (FVTPL). The method by which loans are tested differs according to whether or not the asset is a retail or corporate loan: at product level for retail loans, individually for corporate loans. An external info-provider is used to test debt securities; if, however, no test results are available, the instrument is analysed using the SPPI tool. When contractual cash flows for the instrument do not represent solely payments of principal and interest on the outstanding amount, the Bank mandatorily classifies the instrument at fair value through profit or loss.

 

At the initial recognition date, financial assets are measured at fair value, including any costs or income directly attributable to individual transactions that can be established from the outset even if they are actually settled at later stages. The recognition value does not, however, factor in costs with the above characteristics which are repaid separately by the borrower, or may be classified as ordinary internal administrative expenses.

 

The instrument is measured at amortized cost, i.e. the initial value less/plus the repayments of principal made, write-downs/write-ups, and amortization – calculated using the effective interest rate method – of the difference between the amount disbursed and the amount repayable at maturity, adjusted to reflect expected losses.

 

The amortized cost method is not used for short-term receivables, as the discounting effect is negligible; for this reason, such receivables are recognized at historical cost. The original effective interest rate is defined as the rate of interest which renders the discounted value of future cash flows deriving from the loan or receivable by way of principal and interest equal to the initial recognition value of the loan or receivable.

 

The original effective interest rate for each loan will remain unchanged in subsequent years, even if new terms are negotiated leading to a reduction to below market rates, including non-interest-bearing loans. The relevant value adjustment is recognized in the profit and loss account.

 

 434 | Individual financial statements as at 30 June 2024

 

In accordance with the provisions of IFRS 9, the impairment model involves financial assets being classified at one of three different risk stages (Stage 1, Stage 2 and Stage 3), depending on developments in the borrower’s credit quality, to which different criteria for measuring expected losses apply. Accordingly, financial assets are split into the following categories:

 

Stage 1: this includes exposures at their initial recognition date for as long as there is no significant impairment to their credit quality; for such instruments, the expected loss should be calculated depending on default events which may occur within twelve months of the reporting date;

 

Stage 2: this includes exposures which, while not classified as non-performing as such, have nonetheless experienced significant impairment to their credit quality since the initial recognition date; in the transition from Stage 1 to Stage 2, the expected loss will be calculated for the outstanding life of the instrument;

 

Stage 3: this category consists of non-performing (impaired) exposures according to the definition provided in the regulations. In the transition to Stage 3, exposures are valued individually, that is, the value adjustment is calculated as the difference between the carrying value at the reference date (amortized cost) and the discounted value of the expected cash flows, which are calculated by applying the original effective interest rate. The expected cash flows consider the anticipated collection times, the probable net realizable value of any guarantees, and the costs which are likely to be incurred for the recovery of the credit exposure from a forward-looking perspective which factors in alternative recovery scenarios and developments in the economic cycle.

 

In the model for calculating expected losses applied by the Bank, forward-looking information was taken into consideration by referring to three possible macroeconomic scenarios (baseline, mild-positive and mild-negative) that may have an impact on PD and LGD, including any sales scenarios where the Group’s NPL strategy considers that such assets should be recovered through sale on the market.

 

The Group’s policy to establish a significant increase in credit risk is based on qualitative and quantitative criteria and uses the 30-day past due loans or their classification as forborne as conditions to be otherwise included in Stage

 

Notes to the accounts | Part A - Accounting policies | 435

 

 

2 (referred to as backstop indicators). Cases of low-risk instruments at the recording date are identified, compatible with classification as Stage 1 (low credit risk exemption), where there is a BBB- rating on the Standard & Poor’s scale, or a corresponding internal PD estimate.

 

Purchased or originated credit impaired items (POCIs) are receivables that are already non-performing at the point in time when they are acquired or disbursed. At the initial recognition date they are measured at amortized cost on the basis of an internal rate of return which is calculated using an estimate of the recovery flows expected for the item; recovery flows are periodically updated in light of new evidence and discounted using the above-mentioned internal rate of return.

 

Following initial recognition, all financial assets measured at amortized cost are subject to the impairment model based on the expected loss, i.e. performing as well as non-performing exposures.

 

Impairment regards losses which are expected to materialize in the twelve months following the reporting date, or losses which are expected to materialize throughout the rest of the instrument’s lifetime in the event of a significant increase in credit risk. Both the twelve-month and lifetime expected losses can be calculated on an individual or collective basis according to the nature of the underlying portfolio.

 

Expected credit losses are recorded and released only to the extent that changes have occurred. For financial instruments considered to be in default, the Group records an expected loss on the residual lifetime of the instrument (similar to Stage 2 above); value adjustments are determined for all the exposures of the different categories considering forecast information reflecting macro-economic factors (forward-looking approach).

 

4 - Hedging

 

With reference to hedging transactions, the Bank has chosen to adopt the provisions of IFRS 9 and not to make use of the exception granted, i.e. to continue

 

 436 | Individual financial statements as at 30 June 2024

 

to apply the IAS 39 rules to these transactions, with the exception of the specific cases set forth in IFRS 9 (para. 6.1.3)(6) and not governed by the same.

 

The types of hedges used by the Bank are the following:

 

fair value hedges, which aim to offset the exposure to changes in the fair value of a financial item or homogeneous group of assets in terms of risk profile;

 

cash flow hedges, which are intended to offset the exposure of recognized assets and liabilities to changes in future cash flows attributable to specific risks relating to the items concerned;

 

hedges of foreign investments in currencies other than the Euro: these refer to the hedging of risks in an investment in a non-Italian company denominated in a foreign currency.

 

For the process to be effective, the item must be hedged with a counterparty from outside the Group.

 

Hedge derivatives are measured at fair value as follows:

 

for fair value hedges, a change in the fair value of the hedged item is offset by the change in fair value of the hedging instrument, both of which recognized in the profit and loss account, should a difference emerge as a result of the partial ineffectiveness of the hedge;

 

for cash flow hedges, a change in fair value is recognized in net equity for the effective portion of the hedge and in the profit and loss account only when, with reference to the hedged item, the change in the cash flows to be offset actually occurs.

 

Hedge accounting is permitted for derivatives where the hedging relationship is formally designated and documented and provided that the hedge is effective at its inception and is expected to be so for its entire life.

 

At inception, the Bank formally designates and documents the hedging relationship, with an indication of the risk management objectives and strategy for the hedge. The documentation includes identification of the hedging instrument, the item hedged, the nature of the risk hedged and how the entity

 

(6) IFRS 9 par. 6.1.3: “For a fair value hedge of the interest rate exposure of a portfolio of financial assets or financial liabilities (and only for such a hedge), an entity may apply the hedge accounting requirements in IAS 39 instead of those in this Standard. In that case, the entity must also apply the specific requirements for the fair value hedge accounting for a portfolio hedge of interest rate risk and designate as the hedged item a portion that is a currency amount (see paragraphs 81 A, 89 A and AG114–AG132 of IAS 39).”

 

Notes to the accounts | Part A - Accounting policies | 437

 

intends to assess if the hedging relationship meets the requisites for the hedge to be considered effective (including analysis of the sources of any ineffectiveness and how this affects the hedging relationship). The hedging relationship meets the eligibility criteria for accounting treatment reserved for hedges if, and only if, the following conditions are met:

 

the effect of the credit risk does not prevail over the changes in value resulting from the economic relationship;

 

the coverage provided by the hedging relationship is the same as the coverage which results from the quantity of the item hedged which the entity effectively hedges, and the quantity of the hedge instrument which the Bank actually uses to hedge the same quantity of the item hedged.

 

Fair value hedges

 

As long as the fair value hedge meets the qualifying criteria, the gain or loss on the hedging instrument must be recognized in the profit and loss account or under one of the other comprehensive income headings if the hedging instrument hedges another equity instrument for which the Bank has chosen to measure changes in fair value through OCI. The hedge profit or loss on the hedged item is recorded as an adjustment to the book value of the hedge with a matching entry through the profit and loss account, even in cases where the item hedged is a financial asset (or one of its components) measured at fair value with changes taken through OCI. However, if the hedged item is an equity instrument for which the entity has opted to measure changes in fair value through OCI, the amounts remain in the statement of other comprehensive income.

 

If the hedged item is an unrecognized irrevocable commitment (or a component thereof), the cumulative change in fair value of the hedged item resulting from its designation is recognized as an asset or liability with a corresponding gain or loss recorded in the profit (loss) for the period.

 

 438 | Individual financial statements as at 30 June 2024

 

Cash flow hedges

 

As long as the cash flow hedge meets the qualifying criteria, it is accounted for as follows:

 

the gain or loss on the hedging instrument in relation to the effective portion of the hedge is measured through OCI in the cash flow reserve, whereas the ineffective part is measured through profit or loss.

 

the cash flow reserve is adjusted to the lower of:

 

the cumulative gain or loss on the hedge instrument since the hedge’s inception; and

 

the cumulative change in fair value (at the present value) of the hedged item (i.e. the present value of the cumulative change in the estimated future cash flows hedged) since the hedge’s inception.

 

The cumulative amount in the cash flow hedge reserve will be reclassified from the cash flow hedge reserve to profit (loss) for the period as a reclassification adjustment in the same period or periods in which the estimated future cash flows being hedged have an impact on the profit (loss) for the period (e.g. in periods when interest receivable or payable are recorded, or when the planned sale takes place). However, if the amount constitutes a loss and the entity does not expect to recover the whole loss or part of it in one or more future periods, the entity must classify the amount it does not expect to recover in the profit (loss) for the period (as an adjustment due to reclassification) immediately.

 

Foreign currency investment hedges

 

As far as it complies with eligibility criteria, a cash flow hedge is accounted for in the following ways:

 

the portion of gain or loss on the hedging instrument that results in an effective hedge is booked into Other Comprehensive Income; and

 

the ineffective share is booked through profit or loss.

 

The cumulative gain or loss on the hedging instrument related to the effective part of the

 

Notes to the accounts | Part A - Accounting policies | 439

 

 

hedge which had been accumulated into the foreign currency exchange rate reserve will be reclassified from net equity to profit and loss as a reclassification adjustment (see IAS 1), as required by par. 48 and 49 of IAS 21 regarding the partial or total disposal of the foreign investment.

 

5 - Investments

 

This heading includes investments in:

 

Subsidiaries;

 

Affiliated companies, i.e. companies in which at least 20% of voting rights are held and companies in which the size of the investment is sufficient to ensure an influence in the investee’s governance;

 

Jointly-controlled companies;

 

Other investments of negligible value.

 

These are measured at cost. If there is evidence that the value of an equity investment may have decreased, the updated value is estimated, where possible, taking into account market prices and the present value of the future cash flows that the investment may generate, including the closing value. If the value thus determined is lower than the book value, the difference is recognized in the profit and loss account.

 

6 - Tangible assets

 

This heading comprises land, core and investment properties, plant, furniture, fittings and equipment of all kinds. It also includes the R-o-U assets acquired under leases and related use of tangible assets (for lessees) and assets used under the terms of finance leases, despite the fact that such assets remain the legal property of the lessor rather than the lessee.

 

Assets held for investment purposes refer to investments in real estate, if

 

 440 | Individual financial statements as at 30 June 2024

 

 

any (whether owned or acquired under leases), which are not core to the Bank’s main activities and/or are chiefly leased out to third parties.

 

The heading also includes tangible assets classified pursuant to IAS 2 – Inventories, namely assets deriving from guarantees being enforced or acquired at an auction which the firm has the intention of selling in the near future, without carrying out any major refurbishment work and which do not fall into any of the previous categories.

 

Such assets are recognized at historical cost, which, in addition to the purchase price, includes any ancillary charges directly attributable to the purchase and/or commissioning of the asset. Extraordinary maintenance charges are accounted for by increasing the asset’s value, while ordinary maintenance charges are recorded in the profit and loss account.

 

Fixed assets are depreciated over the length of their useful life on a straight-line basis, with the exception of land, which is not depreciated on the grounds that it has unlimited useful life. Properties built on land owned by the Bank are recorded separately on the basis of valuations prepared by independent experts.

 

At annual and interim reporting dates, where there is objective evidence that the value of an asset may be impaired, its carrying amount is compared to its current value, which is the higher of its fair value after any costs to sell and its related value in use. Adjustments, if any, are recognized in the profit and loss account. If the reasons for recognizing a loss in value no longer apply, the adjustment will be written back, with the proviso that the amount credited may not exceed the value which the asset would have had after depreciation, which is calculated assuming no impairment took place.

 

7 - Intangible assets

 

These chiefly comprise goodwill, long-term computer software applications and other intangible assets deriving from business combinations subject to IFRS 3R.

 

Goodwill may be recognized where this is representative of the investee

 

Notes to the accounts | Part A - Accounting policies | 441

 

company’s ability to generate future income. At each reporting date, goodwill recorded as an asset is tested for impairment.(7) Any reduction in value due to impairment is calculated as the difference between the initial recognition value of goodwill and its realizable value, the latter being equal to the higher of the fair value of the related cash-generating unit after any costs to sell and its value in use, if any. Any adjustments will be recognized in the profit and loss account.

 

Other intangible assets are measured at cost, adjusted to reflect ancillary charges only where it is likely that future earnings will derive from the asset and the cost of the asset itself may be reliably determined. Otherwise, the cost of the intangible asset is booked through the profit and loss account in the year in which the expense was incurred.

 

The cost of intangible assets is amortized on a straight-line basis over the useful life of the related asset, which is verified annually and reviewed if necessary. If its useful life is indefinite the cost of the asset is not amortized, but the value at which it is initially recognized is tested for impairment on a regular basis.

 

At annual and interim reporting dates, the realizable value of the asset is estimated if there is evidence of impairment.(8)  The impairment is recognized in the profit and loss account as the difference between the carrying amount and the recoverable value of the asset concerned.

 

8 - Non-current assets and asset groups as held for sale (IFRS 5)

 

Under assets heading “Non-current assets and asset groups as held for sale” and under liability heading “Liabilities associated with assets held for sale” the Group classifies non-current assets or groups of assets/liabilities whose booking value will be presumably recovered by mean of a sale process. To be classified in

 

(7) The Bank has adopted a policy for the impairment testing process in line with the provisions of Organismo Italiano di Valutazione (OIV, Italian Valuation Board), Impairment test dell’avviamento in contesti di crisi finanziaria (Impairment test of goodwill during financial crises) of 14 June 2012, Principi Italiani di Valutazione (PIV, Italian Valuation Standards) published in 2015, Discussion Paper of 22 January 2019, Discussion Paper no. 01/2021 issued by Organismo Italiano di Valutazione (OIV) on 16 March 2021. “L’uso di informazione finanziaria prospettica nella valutazione d’azienda” (Use of forward-looking financial information in company valuation), Discussion Paper no. 02/2021 issued by Organismo Italiano di Valutazione (OIV) on 16 March 2021. “Linee Guida per l’Impairment Test dopo gli effetti della pandemia da Covid-19” (Guidelines for Impairment Tests after the effects of the Covid-19 pandemic), with suggestions published by ESMA, the guidelines of the joint document Bank of Italy, Consob, IVASS (document no.4 of 3 March 2010 and no.8 of 21 December 2018) and various Consob communications and warning notices, as well as with the IOSCO (International Organization of Securities Commissions) Document relating to “Recommendations on Accounting for Goodwill”, published in December 2023.

 

(8) Under IAS 36, impairment testing, i.e. tests to ascertain whether or not there has been a loss in the value of individual tangible and intangible assets, must be carried out at least once a year, in conjunction with preparation of the financial statements, or more frequently if events have taken place or materialized that would indicate there has been a reduction in the value of such assets (known as “impairment indicators”).

 

 442 | Individual financial statements as at 30 June 2024

 

 

this heading, assets or liabilities (or disposal groups) should be readily available for sale and selling plans should be identified, which are active and realistic in a way that their completion is considered highly probable. After the classification in the identified heading, these assets are measured at the lower of the booking value and the fair value after costs to sell, with the exception of some categories of assets (i.e. assets falling under the scope of standard IFRS 9) for which IFRS 5 requires specifically that the valuation provisions of the applicable standard should be used. In case of held-for-sale assets to be still depreciated, this process ends when assets are classified in the mentioned heading.

 

In case of discontinued operations, i.e. the sale of operating assets relating to an important business sector or geographical area, the standard requires gains and losses related thereto to be grouped together, after any tax effect, in the profit and loss heading “320. Gains (losses) of discontinued operating assets, after tax”.

 

If the fair value of assets and liabilities held for sale, after costs to sell, is lower than their book value, a write-off will be calculated and booked through profit or loss.

 

Non-current assets held for sale and disposal groups are derecognized from the balance sheet when the sale occurs.

 

9 - Tax assets and liabilities

 

Income taxes are recorded through the profit and loss account, with the exception of tax payable on items debited or credited directly to net equity. Provisions for income tax are calculated on the basis of current, advance and deferred obligations. In particular, prepaid and deferred taxes are calculated on the basis of temporary differences – without time limits – between the value attributed to an asset or liability according to (Italian) statutory regulations and the corresponding values used for tax purposes.

 

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Advance tax assets are recognized in the balance sheet based on the likelihood of their being recovered.

 

Deferred tax liabilities are recognized with the exception of tax-suspended reserves, if the size of available reserves previously subjected to taxation is such that it may be reasonably assumed that no transactions will be carried out on the Bank’s own initiative that might lead to their being taxed.

 

Deferred taxes arising upon business combinations are recognized when this is likely to result in an actual charge for one of the consolidated companies.

 

Tax assets and liabilities are adjusted as and when changes occur in the regulatory framework or in applicable tax rates, inter alia to cover charges that might arise in connection with inspections by or disputes with the tax revenue authorities.

 

Contributions to Deposits Guarantee Schemes and resolution funds are accounted for according to IFRIC 21.

 

10 - Provisions for risks and charges

 

These regard risks linked to loan commitments and guarantees issued, and to the Bank’s operations which could lead to expenses in the future as well as post-retirement plan provisions (cf. below).

 

In the first case (provisions for risks and charges to cover commitments and guarantees issued), the amounts set aside are quantified in accordance with the rules on impairment of financial assets measured at amortized cost.

 

In the other cases the rules of IAS 37 apply, i.e. the potential charge must be estimated reliably; if the time effect is material, provisions are discounted using current market rates; and the provision is recognized in the profit and loss account.

 

Provisions are reviewed on a regular basis, and where the charges that gave rise to them are deemed unlikely to crystallize, the amounts involved are written back to the profit and loss account in part or in full.

 

 444 | Individual financial statements as at 30 June 2024

 

Withdrawals are only made from provisions to cover the expenses for which the provision was originally set aside.

 

As permitted by IAS 37, paragraph 92, no precise indication has been given of any contingent liabilities where this could compromise the company in any way.

 

11 - Financial liabilities measured at amortized cost

 

These include the items Due to banks, Due to customers and Debt securities in issue less any amounts bought back. The heading also includes payables in respect of finance lease transactions, whose valuation and classification rules are governed by IFRS 16 and which are subject to the impairment rules under IFRS 9. For a description of the rules for valuing and classifying lease receivables, see the relevant section.

 

Initial recognition takes place when funds raised are collected or debt securities are issued, and occurs at fair value, which is equal to the amount collected after transaction costs incurred directly in connection with the liability concerned. After initial recognition, liabilities are measured at amortized cost on the basis of the original effective interest rate, with the exception of short-term liabilities which will continue to be stated at the original amount collected.

 

Derivatives embedded in structured debt instruments are stripped out from the underlying contract and recognized at fair value when they are not closely correlated to the host instrument. Subsequent changes in fair value are recognized through the profit and loss account.

 

Financial liabilities are derecognized upon expiry or repayment, even if buybacks of previously issued bonds are involved. The difference between the liabilities’ carrying value and the amount paid to repurchase them is recognized through the profit and loss account.

 

The sale of treasury shares over the market following a buyback (even in the form of repos and securities lending transactions) is treated as a new issue. The new sale price is recorded as a liability without passing through the profit and loss account.

 

Notes to the accounts | Part A - Accounting policies | 445

 

12 - Trading liabilities

 

This item includes the negative value of trading derivatives and any derivatives embedded in complex instruments. Liabilities for technical overdrafts connected to securities trading activities as well as the negative value of syndicated loan underwriting commitments are also included. All trading liabilities are measured at fair value and changes are taken through the profit and loss account.

 

13 - Financial liabilities designated at fair value

 

These include the value of financial liabilities designated at fair value through profit or loss, on the basis of the option granted to companies (referred to as “fair value option”) by IFRS 9 and in compliance with the cases provided for by such legislation.

 

Such liabilities are measured at fair value, accounting for earnings according to the following rules laid down in IFRS 9:

 

changes in fair value attributable to changes in one’s credit quality must be recognized in the Statement of Other Comprehensive Income (Net Equity);

 

other changes in fair value must be recognized through profit or loss;

 

amounts stated in other comprehensive income will not flow through profit or loss.

 

This method cannot be adopted, however, if the recognition of the effects of the issuer’s own credit quality in net equity generates or accentuates an accounting mismatch in profit and loss. In such cases, the profits or losses related to the liability, including those caused as the effect of the change in the issuer’s credit quality, must be measured through profit or loss.(9) 

 

In compliance with the provisions of IFRS 9, the correlation between assets and liabilities is monitored on an ongoing basis.

 

(9) This case in particular concerns the related portfolio of assets and liabilities concerning the business model for managing the funding of equity-linked certificates aiming to eliminate the accounting mismatch.

 

 446 | Individual financial statements as at 30 June 2024

 

14 - Foreign currency transactions

 

Transactions in foreign currencies are recorded by applying the exchange rates as at the date of the transaction to the amount in the foreign currency concerned.

 

Assets and liabilities denominated in currencies other than the Euro are translated into Euros using exchange rates prevailing at the reference dates. Differences on cash items due to translation are recorded through the profit and loss account, whereas those on non-cash items are recorded according to the valuation criteria used in respect of the category they belong to (i.e. at cost, through profit or loss or on an equity basis).

 

The assets and liabilities of non-Italian entities consolidated on a line-by-line basis have been converted at the exchange rate prevailing at the reporting date, whereas the profit-and-loss items have been converted using the average of the average monthly exchange rate readings for the period; any differences emerging after the conversion are recognized among the Net Equity valuation reserves.

 

15 - Insurance assets and liabilities

 

Insurance assets and liabilities that fall within the scope of IFRS 17 “Insurance Contracts” are classified in this category.

 

In particular, the asset item “80. Insurance assets” or the liability item “110. Insurance liabilities” include insurance contracts, reinsurance contracts, and investment contracts with issued discretionary profit-sharing features, as defined and regulated by IFRS 17, belonging to portfolios of insurance contracts, based on the net balance of the portfolio to which they belong. Generally, insurance contracts have a negative balance (insurance liabilities), while reinsurance contracts have a positive balance (insurance assets).

 

At the time of signing the insurance contract(10) with the insured party, a liability is recognized whose amount is given by the algebraic sum of the present value of the expected contractual cash flows (Present value of future cash flow

 

(10) An insurance contract is defined as a contract under which one party (the issuer) underwrites a “significant insurance risk” from another party (the insured), agreeing to indemnify the insured in the event that the same suffers damage resulting from a specific uncertain future event (the insured event).

 

Notes to the accounts | Part A - Accounting policies | 447

 

 

– “PVFCF”) which include the so-called Contractual Service Margin – “CSM”, i.e. the present value of expected future profits and the Risk adjustment (“RA”) to cover non-financial risks. All contracts are grouped together to identify “portfolios” that have similar risks and which can be managed in a unified manner.

 

There are two measurement models: General Model - applicable in principle to all contracts, and Variable Fee Approach (“VFA”) - applicable in particular to direct profit-sharing contracts. An optional simplified model (Premium Allocation Approach - “PAA”) is also provided for the purpose of measuring the residual coverage liability for contracts with a coverage period lasting one year or longer and for all contracts in the event that the measurement is not materially different from the one resulting from applying the General Model.

 

The insurance liability should be updated at each reporting period to verify the consistency of the estimates made with respect to market conditions. The effects of any updates detected will be recognized in the profit and loss account if the changes refer to current or previous events or to a reduction in the Contractual Service Margin if the changes are due to future events.

 

With regard to financial assumptions, the principle provides for the option of representing the effects of changes in the profit and loss account or in shareholders’ equity (referred to as Other Comprehensive Income Option - OCI).

 

Lastly, IFRS 17 provides that the insurance contract should be derecognized when, and only when, the contract is extinguished, i.e. when the obligation specified in the insurance contract expires or is discharged or cancelled.

 

 448 | Individual financial statements as at 30 June 2024

 

16 – Other Information

 

Financial liabilities measured at present value of redemption amount

 

These consist of financial liabilities originating from agreements to buy out minorities in connection with acquisitions of controlling interests. These items, accounted for in heading “80. Other liabilities” of balance sheet, must be recognized at the present value of the redemption amount.

 

Derecognition of assets

 

A financial asset must be derecognized from the balance sheet if, and only if, the contractual rights to the cash flows deriving from it have expired, or if the asset has been transferred in accordance with the circumstances permitted under IFRS 9. In such cases, the Bank checks if the contractual rights to receive the cash flows in respect of the asset have been transferred, or if they have been maintained while a contractual obligation to pay the cash flows to one or more beneficiaries continues to exist. It is necessary to check that basically all risks and benefits have been transferred, and any right or obligation originated or maintained as a result of the transfer is recorded separately as an asset or liability where appropriate. If, on the other hand, the Bank retains virtually all risks and benefits, the financial asset must continue to be recorded.

 

If the Bank has neither transferred nor maintained all risks and benefits, but at the same time has retained control of the financial asset, this continues to be recognized up to the residual interest retained in that asset.

 

The main forms of activity currently carried out by the Bank which do not require underlying assets to be derecognized are the securitization of receivables, repo trading and securities lending. Conversely, items received as part of deposit bank activity, the return on which is collected in the form of a commission, are not recorded, as the related risks and benefits continue to accrue entirely to the end-investor.

 

Notes to the accounts | Part A - Accounting policies | 449

 

When a financial asset measured at amortized cost is renegotiated, the Bank derecognizes it only if the renegotiation entails a change of such magnitude that the initial instrument effectively becomes a new one. In such cases, the difference between the original instrument’s carrying value and the fair value of the new instrument is measured through profit or loss, taking due account of any previous write-downs. The new instrument is classified as Stage 1 for the purpose of calculating the expected loss (save in cases where the new instrument is classified as a POCI).

 

In cases where the renegotiation does not result in substantially different cash flows, the Bank will not derecognize the instrument, but the difference between the original carrying value and the estimated cash flows discounted using the original internal rate of return must be measured through profit or loss (taking due account of any provisions already set aside to cover it).

 

Leases (IFRS 16)

 

An agreement is classified as a lease(11) (or contains a lease) based on the substance of the agreement at the execution date. An agreement is, or contains, a lease if its performance depends on the use of a specific good (or goods) and confers the right to use such good (goods) – the “Right of Use” (RoU) – for an agreed period of time and in return for payment of a fee (Lease liabilities). This definition of leasing therefore also includes long-term rentals or hires.

 

Right-of-use assets are recognized among “Tangible assets”, and calculated as the sum of the current value of future payments (which corresponds to the current value of the recognized liability), the initial direct costs, any instalments received in advance or on the effective date of the lease (down payment), any incentives received from the lessor, and estimates of any costs for removing or restoring the asset underlying the lease.

 

(11) Leases in which the Bank is a lessor may be divided into finance leases and operating leases. A lease is defined as a finance lease if all risks and benefits typically associated with ownership are transferred to the lessee. Such leases are accounted for by using the financial method, which involves a receivable being booked as an asset for an amount equal to the amount of the lease, after any expired instalments on principal paid by the lessee, and the interest receivable being taken through the profit and loss account.

 

 450 | Individual financial statements as at 30 June 2024

 

The lease liability, which is booked under “Financial liabilities measured at amortized cost”, is equal to the discounted value of payments due in respect of the lease discounted, as required by the Standard, to the marginal financing rate, equal for the Bank to the Funds Transfer Pricing rate (FTP) as at the date concerned.

 

The duration of the lease agreement must not only consider the non-cancellable period established by contract, but also the extension options if their use is considered reasonably certain; in particular, the counterparty’s past behaviour, the existence of corporate plans for the disposal of the leased business and any other circumstances indicative of the reasonable certainty of renewal must be considered when providing for automatic renewal.

 

After initial recognition, right-of-use assets are amortized over the lease duration and written down as appropriate. The liability will be increased by the interest expense accrued and progressively reduced as a result of the payment of fees; in the event of a change in payments, the liability will be recalculated against the right-of-use asset.

 

For sub-leases, i.e. when an original lease has been replicated with a counterparty, and there are grounds for classifying it as a finance lease, the liability in respect of the original lease is matched by an amount receivable from the sub-lessee rather than the value in use.

 

Provisions for statutory end-of-service payments and post-retirement schemes

 

Provisions for statutory end-of-service payment qualify as a defined-contribution retirement plan for units accruing from 1 January 2007 (the date on which the reform of supplemental retirement plans came into force under Legislative Decree No. 252 of 5 December 2005), for cases where the employee opts into a supplemental retirement plan, and also for cases where contributions are paid into the treasury fund held with Istituto Nazionale di Previdenza Sociale (INPS, Italian national social security institution). For such payments, the amount accounted for under labour costs is determined on the basis of the contributions due without using actuarial calculation methods.

 

Notes to the accounts | Part A - Accounting policies | 451

 

Provision for statutory end-of-service payment accrued up to 1 January 2007 qualify as defined benefit retirement plans, and as such will be recorded depending on the actuarial value calculated in line with the projected unit method. Therefore, future payments will be estimated based on past statistical analyses (for example turnover and retirements) and on the demographic curve; these flows will then be discounted according to a market interest rate that takes the market yield of bonds of leading companies as a benchmark taking into account the average residual duration of the liability weighted on the basis of the percentage of the amount paid or advanced for each maturity with respect to the total amount to be paid or advanced until the final settlement of the entire obligation.

 

Post-retirement plan provisions have been set aside under company agreements and also qualify as defined benefit plans. In this case, the current value of the liability is adjusted by the fair value of any assets to be used under the terms of such plan.

 

Actuarial gains and/or losses are recorded in the Other Comprehensive Income statement, while the interest component is recognized in the profit and loss account.

 

Stock Options, Performance Shares and Long-Term Incentives

 

Stock option, performance share and long-term incentive (LTI) schemes operated on behalf of Group staff members and collaborators are treated as a component of labour costs.

 

Schemes which involve payment through the award of shares are measured through profit or loss, with a corresponding increase in net equity, based on the fair value of the financial instruments allocated at the award date, thus spreading the cost of the scheme throughout the period of time in which the requirements in terms of service have been met and the performance targets, if any, have been achieved.

 

The overall cost of the scheme is recorded in each financial year up to the date on which the plan vests, so as to reflect the best possible estimate of the number of shares that will actually vest. Requirements in terms of service and performance targets are not considered in determining the fair

 

 452 | Individual financial statements as at 30 June 2024

 

 

value of the instruments awarded, but the probability of such targets being reached is estimated by the Group and this is factored into the decision as to the number of instruments that will vest. Conversely, market conditions will be included in establishing the fair value, whereas conditions unrelated to the requirements in terms of service are considered “non-vesting conditions” and are reflected in the fair value established for the instruments, and result in the full cost of the scheme being recorded in the profit and loss account immediately in the event that no service requirement and/or performance conditions have been met.

 

In the event of performance or service conditions not being met and the benefit failing to be allocated as a result, the cost of the scheme is written back. However, if any market conditions fail to be reached, the cost must be recorded in full if the other conditions have been met.

 

In the event of changes to the scheme, the minimum cost to be recorded is the fair value at the scheme award date prior to the change, if the original conditions for vesting have been met. An additional cost, established at the date on which the change is made to the scheme, must be recorded if the change has entailed an increase in the overall fair value of the scheme for the beneficiary.

 

For schemes which will involve payments in cash upon expiry, the Group records an amount payable equal to the fair value of the scheme measured at the award date of the scheme and at every reporting date thereafter, up to and including the settlement date, with any changes recorded as labour costs.

 

Treasury shares

 

These are deducted from net equity. Any differences between the initial disbursement upon acquisition and the revenues on disposal are also recognized in net equity.

 

Fees and commissions receivable in respect of services

 

This heading includes all revenues deriving from the provision of services to customers with the exception of those relating to financial instruments, leases and insurance contracts.

 

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Revenues from contracts with customers are measured through profit or loss when control over the service is transferred to the customer, in an amount that reflects the fee to which the Bank considers to be entitled in return for the service rendered.

 

For revenue recognition purposes, the Bank analyses the contracts to establish whether they contain more than one obligation to provide services to which the price of the transaction should be allocated. The revenues are then recorded throughout the time horizon over which the service is rendered, using suitable methods to recognize the measurement in which the service is provided. The Bank also takes into consideration the effects of any variable commissions, and whether or not a significant financial component is involved.

 

In the event of additional costs being incurred to perform or execute the contract, where such costs meet the requirements of IFRS 15, the Bank will assess whether to capitalize them and then amortize them throughout the life of the contract, or to make use of the exemption provided by IFRS 15 to expense the costs immediately in cases where their amortization period would be complete within twelve months.

 

Dividends

 

Dividends were recognized through profit or loss in the year in which their distribution was approved.

 

Recognition of costs

 

Costs are measured through profit or loss in accordance with the revenues to which they refer, except in case their capitalization requirements apply and where provided in order to determine amortized cost. Any other costs which cannot be associated with revenues are accounted for immediately in the profit and loss account.

 

 454 | Individual financial statements as at 30 June 2024

 

Related parties

 

Related parties are defined, inter alia in accordance with IAS 24, as follows:

 

a)individuals or entities which, directly or indirectly, exercise significant influence over the Bank;

 

b)shareholders with stakes of 3% or more in the Bank’s share capital;

 

c)legal entities controlled by the Bank;

 

d)associated companies, joint ventures and entities controlled by them;

 

e)key management personnel, that is, individuals with powers and responsibilities, directly or indirectly, for the planning, direction and control of the Parent Company’s activities, including the members of the Board of Directors and Statutory Audit Committee;

 

f)entities controlled or jointly controlled by one or more of the entities listed under the foregoing letters a), b) and e) and the joint ventures of entities referred to under letter a);

 

g)close family members of the individuals referred to in letters a) and e) above, that is, individuals who may be expected to influence them or be influenced by them in their relations with Mediobanca (this category includes children, spouses and their children, partners and their children, dependants, spouses’ dependants and their partners’ dependants), as well as any entities controlled, jointly controlled or otherwise associated with such individuals.

 

A.3 – Information on transfers between financial asset portfolios

 

A.3.1Reclassification of financial assets: changes to the business model, book value and interest income

 

A.3.2Reclassification of financial assets: changes to the business model, Fair Value and effects on other comprehensive income

 

A.3.3Reclassification of financial assets: changes to the business model and effective interest rate

 

At 30 June 2024, there were no data to be reported for any of the three sections above.

 

Notes to the accounts | Part A - Accounting policies | 455

 

A.4 – Information on fair value

 

QUALITATIVE INFORMATION

 

Fair Value

 

In line with the international accounting standards, the Fair Value of financial instruments stated in the financial statements is the so-called exit price, i.e. the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions, regardless of whether such price is directly observable or estimated using another valuation technique (IFRS 13, §24).

 

Fair value, therefore, is “the price that would be received for the sale of an asset or that would be paid for the transfer of a liability in a regular transaction between market operators at the measurement date”.

 

The Fair Value hierarchy of an instrument is a direct consequence of the Fair Value estimation approach: in principle, a financial instrument is considered to be listed on an active market if its price represents its current exchange value in normal, effective and regular market operations.

 

If the market is not active, the Fair Value of the instrument being estimated is measured by using market prices for similar instruments on active markets (comparable approach) or, in the absence of similar instruments, using a valuation technique that uses market and non-observable information (observable/ unobservable inputs).

 

The Bank has laid down precise guidelines regarding three key aspects: independent calculation of Fair Value, conducted by the control units; the adoption of any Fair Value adjustments to consider aspects of uncertainty/ liquidity; and classification of financial instruments according to a Fair Value hierarchy based on the level of uncertainty of the valuation. In addition to the book fair value, which affects both the balance sheet and the profit and loss account, the Bank is required to make prudent valuation adjustments in order to calculate prudential requirements.

 

 456 | Individual financial statements as at 30 June 2024

 

These guidelines, set out in Policies approved by the Board of Directors and related implementation Directives approved by the competent Committees, were defined in compliance with the main international regulations (IFRS 13(12) and CRR art 105(13) ); the main activities for calculating the exit price of the financial instruments in the portfolio are shown below.(14) 

 

It should be noted that a Directive was proposed and approved during the year under review to define the organizational model to be adopted by the Bank in the area of valuation and control of Collective Investment Undertakings for the purposes of Independent Price Verification, fair value and prudent value adjustment methodologies, as well as for classification purposes (observability and levelling). The Directive provides a complete and detailed overview of the procedures and responsibilities involved, ensuring that each phase of the investment process is transparent, accurate and compliant with applicable regulations.

 

Independent Price Verification (IPV)

 

Independent Price Verification (IPV) is the process through which prices and market data, used to calculate Fair Value and to measure prudent value, are subject to a verification process according to specific accuracy standards defined internally by the Bank. The Independent Price Verification Policy and Directive meet the requirements laid down in Article 105, para. 8 of Regulation (EU) 575/2013, which requires institutions to perform independent price verification in addition to daily marking-to-market or marking-to-model practices and establish and maintain sufficient procedures for providing valuation estimates.

 

IPV, Independent Price Verification, has the following objectives: formalisation of control methodologies, definition of a market parameter validation approach, definition of the methodologies for quantifying control thresholds, methods and types of escalation and reporting to Senior Management.

 

(12) IFRS 13 establishes guidelines for identifying the exit price by using available prices, valuation models and any corrections (FVA) to consider elements of illiquidity/risk which, if not applied, would lead to overestimating the financial instrument, and the need to classify financial instruments according to the level of objectivity in the computation of fair value (FVH).
(13) The guiding principles of the IPV and PVA processes are defined in the CRR Directive, Article 105.
(14) It should be emphasized that the accuracy and consistency of these guidelines are subject to rigorous supervision by the Group Audit unit, which verifies the effectiveness and adequacy thereof. Furthermore, a specific internal validation unit has been established, i.e. the Quantitative Risk Methodologies (QRM), which focuses on the validation of the quantitative methods used.

 

Notes to the accounts | Part A - Accounting policies | 457

 

Verification of the correctness of the valuation will be based on verification of market parameters used for the valuation of instruments that present a risk profile for the Bank and individual Desks by analysing the correct import of data from info providers and the fairness of the financial value through comparison with other info providers, indicative quotations provided by brokers and implicit parameters deduced from such quotations. With regard to illiquid financial instruments, verification should also be performed as regards the valuation methodology input data.

 

IPV performs data analysis in order to ensure consistency with a comparison source to ensure a correct evaluation of the Bank’s and of individual Desks’ risk positions of the main profit and loss drivers. Any changes to the data will have an impact not only on the balance sheet but also on the Profit and Loss reporting process of the portfolio concerned. Furthermore, the decision to change the source of valuation of any market data during the IPV process, as well as the verification method itself, may generate a different classification of the instrument being analysed with respect to the Fair Value Hierarchy.

 

For the calculation of IPV adjustments, the Bank uses available and reliable sources. Where possible, these are also used for the Prudent Valuation Adjustment (PVA) process in line with the provisions of Article 3 of Delegated Regulation (EU) 2016/101. These data sources are validated in accordance with the provisions of internal documentation and/or regulations.

 

The validation process focuses on the asset classes that have a direct impact on the Bank’s Profit and Loss Account, both for proprietary instruments and for guaranteed instruments. In this regard, before proceeding with the analysis of the market parameters, the scope of analysis where to perform the certification is divided into asset classes. However, materiality thresholds (at risk factor level) are established for each exposure above which to apply the calculation described below.

 

IPV requires daily checks to be performed on all Bank positions (trading book and banking book), which include the year-by-year price of financial instruments, market curves and volatility surfaces. Furthermore, monthly checks, at the latest, are carried out for some asset classes, based on consensus services, given the nature and frequency with which valuation data is available in the systems. Finally, starting from the year under review, annual verifications of the funds (Private Equity, Debt and Real Estate) have been introduced using

 

 458 | Individual financial statements as at 30 June 2024

 

a leading third-party firm for the valuation of the NAVs of UCITS funds. The IPV process is divided into two levels:

 

the individual underlying assets are specifically verified and, based on the differences found compared to the valuation communicated by the manager, a valuation flag is assigned;

 

the “Documentary completeness” and “Adequacy of valuations” are analysed for each fund.

 

Fair Value Adjustment (FVA)

 

Fair Value Adjustment (FVA) plays a fundamental role in the valuation of financial instruments, as it ensures that the fair value reflects the price actually realizable in a practical market transaction. The guidelines defined in the Fair Value policy fully reflect the requirements defined by accounting standard IFRS 13, according to which the valuation of financial instruments should use the exit price method and allow for corrections to be made to the valuations in specific circumstances.

 

This fair value approach ensures that the valuations made by the Group are based on prices that are realistic and representative of current market conditions, guaranteeing adequate consideration to exit conditions and to the actual possibilities of selling or purchasing the financial instruments being valued. This ensures accurate and reliable financial information to be provided internally and to external stakeholders. In particular:

 

Inputs based on Bid and Ask Prices: when measuring an asset or liability at fair value and having at one’s disposal both a bid and an ask price (as in the case of inputs from a market of operators), the price within the bid-ask spread that best represents fair value in the specific circumstances should be chosen. The Group uses bid or ask prices in order to align with the closing price.

 

Inputs derived from Bid and Ask Prices: the standard does not prohibit the use of average market prices or other pricing conventions commonly used by market participants to measure fair value within the bid-ask spread. However, in the Group’s approach preference is given to the adoption of bid and ask prices in order to obtain a more precise fair value measurement particularly aligned with a reliable closing price.

 

Notes to the accounts | Part A - Accounting policies | 459

 

Fair value adjustments have an impact on profit or loss and take into account market liquidity, the uncertainties of parameters, the financing costs, and the complexity of the valuation models used in the absence of shared market practices.

 

The scope of fair value adjustments includes the following categories:

 

Market Price Uncertainty (MPU): this consists in uncertainties in valuations based on market quotations;(15) 

 

Closed-Out Cost (COC): this indicates uncertainties regarding the liquidity cost that the Group may incur in the event of a partial or total sale of an asset measured at fair value;

 

Model Risk (MR): adjustments aimed at mitigating the risk of discrepancy with respect to market practice in the valuation of a product in relation to the choice and implementation of the valuation model;

 

Concentrated Positions: this reflects uncertainties in the valuation of the exit price for positions classified as concentrated (i.e. positions whose disposal would significantly affect the market price);

 

additional investment and financing costs: investment and financing costs may be incurred for own bond issues with an early redemption clause or in the event of early closure of positions in derivative instruments. These costs may vary depending on fluctuations in financing costs.

 

Credit Value Adjustments (CVA) and Debt Value Adjustments (DVA) are incorporated into the valuation of derivatives to reflect the impact of the counterparty’s credit risk and the Group’s credit quality. CVA represents a negative amount that takes into account cases where the counterparty could go bankrupt before the Group / Bank, with a positive market value against the counterparty. DVA represents an amount that takes into account the cases in which the Group / Bank could go bankrupt before the counterparty, with an impact for the counterparty. These adjustments are calculated taking into account any risk mitigating arrangements, such as collateral and netting arrangements for each counterparty.

 

(15) with regard to new corrections to UCITS funds, the FVA process is structured by applying a “Performance Simulation Model”, which uses the Monte-Carlo simulation method: the probability distribution of the discounted NAV of each fund and, consequently, the probability of having to record a discount, is found at maturity. This distribution is used to suggest a range of haircuts to apply to the NAV.

 

 460 | Individual financial statements as at 30 June 2024

 

The method used to calculate CVA/DVA is based on the following inputs:

 

Expected Positive (EPE) and Expected Negative (ENE) Exposure, derived from simulations, which reflect the positive and negative valuation exposures of derivatives;

 

Probability of Default (PD), which may be derived from historical default probabilities or implied in the market prices of Credit Default Swaps or bonds;

 

Loss Given Default (LGD) is based on the estimated value of expected recovery in the event of the counterparty’s default, as defined by specific analyses conducted by the Group, or recovery rates conventionally used for Credit Default Swap quotations.

 

Furthermore, the fair value of non-collateralized derivatives may be affected by the Group’s funding costs (Funding Value Adjustment). Therefore, adjustments are made for the different funding costs using a discount curve that represents the average funding level of banks operating in the European corporate derivatives market.

 

Fair Value Hierarchy (FVH) – Observability and materiality of inputs

 

The Observability Levelling and Day one Profit Directive, as specified in IFRS 13 and referred to in Bank of Italy Circulars No. 285 and No. 262, requires a hierarchy of levels reflecting the significance of inputs used in the valuations. These inputs, called “valuation inputs,” are the market data used to estimate the fair value of financial instruments. To estimate the fair value of instruments, the Bank uses valuation techniques that are adequate to the circumstances and for which sufficient data are available. Valuation techniques can be based on various approaches:

 

market approach, which uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities;

 

Notes to the accounts | Part A - Accounting policies | 461

 

cost approach (or current replacement method), which reflects the amount that would currently be required to replace an asset’s service capacity;

 

income approach, which converts future amounts (e.g. cash flows or revenues and expenses) into a single discounted amount through, for example: present value methods and option pricing models.

 

These valuation methods may use different types of inputs, which may be observable or unobservable. Prices quoted in active markets are classified as “observable inputs”. In other cases, the information is considered observable when the valuation is based on market information obtained from sources independent of the Bank or from actual transactions. Under IFRS 13, paragraph B34, some examples of markets from which observable inputs can be derived include the following:

 

exchange markets: in an exchange market, closing prices are both readily available and generally representative of fair value. An example of such a market is the London Stock Exchange;

 

dealer markets: in a dealer market, dealers stand ready to trade (either buy or sell for their own account), thereby providing liquidity by using their capital to hold an inventory of the items for which they make a market. Typically bid and ask prices (representing the price at which a dealer is willing to buy and the price at which a dealer is willing to sell, respectively) are more readily available than closing prices. Over-the-counter markets (for which prices are publicly reported) are dealer markets. Dealer markets also exist for some other assets and liabilities, including some financial instruments, commodities and physical assets;

 

brokered markets: in a brokered market, brokers attempt to match buyers with sellers but do not stand ready to trade for their own account. Brokers do not use their own capital to hold an inventory of the items for which they make a market, but they know the prices bid and asked by the respective parties. Prices of completed transactions are sometimes available. Brokered markets include electronic communication networks, in which buy and sell orders are matched, and commercial and residential real estate markets;

 

principal-to-principal markets: in a principal-to-principal market, transactions, both originations and resales, are negotiated independently with no intermediary. Little information about those transactions may be made available publicly.

 

 462 | Individual financial statements as at 30 June 2024

 

All cases in which it is not possible to demonstrate the observability of inputs are classified as “unobservable inputs” and, in particular, when the information on which the valuation techniques are based reflects the Bank’s judgement formulated using the best information available in such circumstances.

 

Under IFRS 13, para. 67, valuation techniques used to measure fair value should maximize the use of relevant observable inputs and minimize the use of unobservable inputs.

 

In more detail, based on their observability and considering additional criteria, inputs can be classified into three different levels.

 

Level 1 inputs:

 

Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date. A quoted price in an active market provides the most reliable evidence of Fair Value and it is the price to be used preferentially to measure financial assets and liabilities held in the portfolio. If a quoted price recorded on an active market is available, alternative valuation techniques based on quotes for comparable instruments or quantitative models cannot be used and the instrument is classified as a “Level 1 instrument” in its entirety. The objective is to reach a price at which a financial instrument would be traded at the reporting date (without altering the instrument) on an active market considered to be the main one or the most advantageous one for the Bank and to which it has immediate access.

 

Level 2 inputs:

 

Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include the following:

 

quoted prices for similar assets or liabilities in active markets.

 

quoted prices for identical or similar assets or liabilities in markets that are not active.

 

Notes to the accounts | Part A - Accounting policies | 463

 

Inputs other than quoted prices that are observable for the asset or liability, for example:

 

(i)Interest rates and yield curves observable at commonly quoted intervals;

 

(ii)Implied volatility;

 

(iii)Credit spread;

 

(iv)Market-corroborated inputs.

 

Level 2 inputs may require adjustments for example relating to:

 

the condition or location of the asset;

 

the extent to which inputs relate to items that are comparable to the asset or liability;

 

the volume or level of activity in the markets within which the inputs are observed.

 

If there is no public quotation on an active market for the price of the financial instrument as a whole, but active markets exist for its components, Fair Value will be calculated by reference to the relevant market prices for those components. In this case, valuation will not be based on active market quotations for the financial instrument in question, but on observable market inputs or through the use of inputs that are not observable but are supported and confirmed by market data. The use of this approach does not exclude the use of a calculation method, or rather, of a pricing model, through which it is possible to establish the correct price of the transaction at the reference date, in an ideal and independent trading environment justified by normal market considerations.

 

Level 3 inputs:

 

Level 3 inputs are not directly observable inputs that are used to measure the Fair Value in the event that relevant observable inputs are not available, making it possible to estimate a closing price even in situations of low market activity for the asset or liability as at the measurement date. The Group estimates unobservable inputs using the best information available in the circumstances,

 

 464 | Individual financial statements as at 30 June 2024

 

 

which could include its own data, considering all information on the assumptions of market participants that is reasonably available. Unlike Level 2 inputs, in this case the inputs must be internally estimated according to quantitative methods, such as the use of historical series and comparable underlying instruments. Both Level 2 and Level 3 inputs may be used for a certain instrument. In this case, the final classification of the instrument is defined by applying the materiality assessment.

 

There are two stages in the process of setting the levels and observability of inputs. In the first stage, a level is assigned to each input used in the instrument valuation model. Thereafter, in the second stage, the relevance of the various inputs used to determine the materiality of unobservable inputs is verified, thus influencing the overall valuation of the instrument. It should be noted that for some categories of instruments, such as private equity or infrastructure alternative investment funds, a more rigorous classification (fair value level) is automatically applied, since the relevant underlying is not listed on the market. However, for some types of instruments there is an illiquidity discount in the NAV valuation in order to bring the valuation to the exit price.

 

Materiality is a crucial step in establishing whether unobservable inputs (Level 2 or 3) are meaningful to the entire measurement of the instrument. This materiality analysis also extends to inputs used to calculate any adjustments, such as the Fair Value Adjustment (FVA) or the Credit Value Adjustment (CVA).

 

In summary, the observability and materiality process ensures that the Fair Value of financial instruments is classified correctly based on the significance of the inputs used, ensuring an adequate valuation of the Bank’s financial assets and liabilities.

 

Starting from the financial year under review, a new fair value hierarchy framework has come into force. It provides for automatic classification into levels based on the significance and liquidity of inputs used in the valuations; in particular, the weight that unobservable inputs have compared to observable inputs will determine their classification, potentially increasing re-classifications based on available market data at the reference date.(16) 

 

(16)  The adoption of this framework for positions in place at 30 June 2023 may have resulted in a reclassification of approximately €40m to level 2.

 

Notes to the accounts | Part A - Accounting policies | 465

 

Prudent Valuation Adjustment (PVA)

 

The Prudent Valuation Policy and Directive meet the regulatory requirements of Article 34 and Article 105, para. 2, of Regulation (EU) 575/2013, which, solely for prudential purposes and therefore without accounting impacts, requires prudential valuation(17)  to be performed by applying adjusted inputs in order to capture stressed events. The difference between Prudent Value and Fair Value (exit price used for recording the instruments in the Group’s financial statements) is called Additional Valuation Adjustment (AVA). The aggregation of AVAs, called Prudent Value Adjustment (PVA), is deducted directly from Common Equity Tier 1 - CET1.

 

The final adjustment is defined by the Regulator by aggregating nine AVAs:

 

Market Price Uncertainty (MPU): this is the valuation uncertainty based on market prices, calculated at the level of the exposure being measured;(18) 

 

Close-out Costs (CoC): these consist in the uncertainty of the exit price, calculated at the level of the exposure being measured;

 

Model Risk (MR): this refers to the valuation uncertainty arising from the uncertainty of the model used and/or of the calibration thereof used by various market participants;

 

Unearned Credit Spreads (UCS): this consists in uncertainty in the measurement necessary to include the present value of expected losses in the event of counterparty default on derivative positions;

 

Investing and Funding Costs (IFC): this is the uncertainty of the valuation of funding costs used in the valuation of the exit price in accordance with the applicable accounting standards;

 

Concentrated Positions (CP): these refer to the uncertainty of the exit price for positions defined as concentrated;

 

Future and Administrative Costs (FAC): this considers administrative costs and future hedging costs over the expected lifetime of the exposures being measured to which a direct exit price has not been applied for CoC AVAs;

 

Early Termination (ET): this considers contingent losses arising from non-contractual early terminations of the clients’ trading positions;

 

(17) Prudential valuation is understood as an exit price with a 90% level of certainty.

 

(18) In line with the regulations governing Fair Value Adjustments to UCITS funds, where the median of the identified haircut range is used to find the fund correction amount, the maximum value of the identified haircut range is applied on the prudent side.

 

 466 | Individual financial statements as at 30 June 2024

 

Operational Risk (OR): this considers contingent losses that may be incurred as a result of the operational risks associated with the measurement processes.

 

Positions measured at Fair Value include various categories of financial assets and liabilities, as defined by International Financial Reporting Standards (IFRS); however, some positions are excluded from the AVA calculation if a change in the valuation of their amount does not affect capital resources. These exclusions include positions available for sale (FVOCI) to the extent that valuation changes are subject to prudential filtering, perfectly matching opposite positions (back-to-back) and positions subject to hedging transactions (hedge accounting).

 

A.4.1 Valuation processes and sensitivity analysis

 

As required by IFRS 13, quantitative information on the significant non-observable inputs used for the assessment of Level 3 instruments is provided below.

 

Uncertainties of the inputs and impact on the Mark-to-Market

 

Non-observable inputs  Quantification of parameter uncertainty  MtM +/- delta
(€’000)
30/6/24
   MtM +/- delta
(€’000)
30/6/23
 
Implied volatility  For each point on the volatility surface, this is defined as a standard deviation from consensus provided by the independent data provider. For non-contributed underlyings, a proxy is derived from the contributed underlyings.  (49.8)  (4.4)
Equity-equity correlation  For each expiry along the correlation curve, this is defined as a standard deviation from the consensus provided by the independent data provider. For non-contributed underlyings, a proxy is derived from the contributed underlyings.  (11.0)  (16.3)
Credit Spread  For financial guarantees with specific underlyings, credit spread curves are not observable. Proxy curves obtained from underlying prices are used for these instruments  (0.5)   

 

Notes to the accounts | Part A - Accounting policies | 467

 

Measurement techniques - Equity - receivables - interest rate - exchange rate products

  

Product  Measurement technique  Non-observable inputs  Fair value (*)
Assets 30/6/24 (€m)
   Fair value (*) Liabilities 30/6/24 (€m)   Fair value (*)
Assets 30/6/23 (€m)
   Fair value (*)
Liabilities 30/6/23 (€m)
 
OTC bond option  Black-Scholes model  Implied volatility1    0.73    (0.42)        
OTC equity single name options, Variance swap  Black-Scholes model  Implied volatility1    8.60        11.70    (5.68)
OTC equity basket options, best of / worst of, equity autocallable multi-asset options  Black-Scholes model, local volatility model  Implied volatility Equity-equity correlation2    19.10    (19.32)   7.45    (11.56)
CDS on Single Names with Recovery Rate 0  Arbitrage Free Credit Spread Model  Recovery Rate   0.05        0.37     
Put options securing the financial yield of pension funds  Black-Scholes model  Projection of future premium flows and death rates of policy holders3    0.23    (23.58)   0.01    (29.25)
Forex barrier option  Black-Scholes model  Uncertainty of Valuation Model4    0.02             
Financial Guarantee  Arbitrage Free Credit Spread Model  Credit Spread and Recovery Rate5    0.85    (1.08)        

 

(*) The carrying amount shown above is equal to the full fair value of structures and includes fair value adjustments.

 

1 Volatility in a financial context is a measurement of how much the price of an underlying instrument may vary over time. The higher the volatility of the underlying instrument, the greater the risk associated with it. In general, long positions in options benefit from increases in volatility, whereas short positions in options lose out from them. For equity derivatives, the implied volatility area may be obtained from the price of the call and put options, as they have regulated markets. The uncertainty of this input is attributable to one of the following scenarios: illiquidity of quoted prices (wide bid/ask spreads, typical of long maturities or moneyness far from the At-The-Money spot), concentration effects and non-observable market data (again when maturities are considered too long or moneyness far from the At-The-Money spot).

 

2 Equity-equity correlation is a measurement of the correlation between two equity-based underlying instruments. Variations in the correlation levels may impact an instrument’s fair value positively or negatively, depending on the correlation type.

Equity-equity correlations are less observable than volatility, because no correlation products are quoted on any regulated markets. For this reason, correlations are more subject to data uncertainties. 

 

3 The contractual form has been structured as a put option with an original term of between 10 and 30 years, the valuation of which is subject to uncertainty regarding both the estimate of future premiums and the NAV level of the underlying pension funds.

 

4 Model uncertainty is a measure of the relationship between two or more different valuation models for a derivative. Variations in the valuation models used may impact an instrument’s fair value positively or negatively.

 

5 The contractual form is structured as a guarantee on specific underlying assets for which there are no observable input parameters.

 

The main factors contributing to transitions between fair value levels include changes in market conditions and refinements in the measurement models and/ or the non-observable inputs.

 

Fair value of an instrument may transition from Level 1 to Level 2 or vice versa mainly as a result of the loss (increase) in significance of the price expressed by the active market of the instrument.

 

Conversely, transfers from Level 2 to Level 3 or vice versa mainly arise as a result of the loss (increase) in significance of inputs, in particular the predominance of non-observable inputs over observable inputs.

 

 468 | Individual financial statements as at 30 June 2024

 

A.4.4 Other information

 

The Bank uses the exception provided under IFRS 13, paragraph 48 from measuring fair value of financial assets and liabilities on a net basis by offsetting market and counterparty credit risks.

 

QUANTITATIVE INFORMATION

 

A.4.5 Fair value hierarchy

 

A.4.5.1 Assets and liabilities measured at fair value on a recurring basis, breakdown by fair value hierarchy

 

                       (€’000) 
                 
   30 June 2024   30 June 2023 
Financial assets/liabilities measured at fair value  Level1   Level2   Level3   Level1   Level2   Level3 
1. Financial assets measured at fair value through profit or loss   12,488,927    3,182,164    1,037,563    6,846,149    3,916,806    815,820 
a) financial assets held for trading   12,181,392    2,522,146    734,398    6,714,688    3,378,216    416,506 
b) financial assets designated at fair value   127,231    578,774    13,210        538,590     
c) other financial assets mandatorily measured at fair value   180,304    81,244    289,955    131,461        399,314 
2. Financial assets measured at fair value through other comprehensive income   6,414,224    284,208    464,571    5,679,367    51,050    555,230 
3. Hedging derivatives       561,851            245,954     
4. Tangible assets                        
5. Intangible assets                        
Total   18,903,151    4,028,223    1,502,134    12,525,516    4,213,810    1,371,050 
1. Financial liabilities held for trading   5,796,689    3,760,855    109,166    4,968,008    5,319,418    304,823 
2. Financial liabilities designated at fair value       3,812,823    352,048        1,497,845    26,196 
3. Hedging derivatives       1,458,738            2,116,467     
Total   5,796,689    9,032,419    461,214    4,968,008    8,933,730    331,019 

  

The Bank’s trading book is mainly concentrated on liquid transactions with a low level of uncertainty. A residual, more complex part remains which, however, even in this context of greater volatility and uncertainty, has not undergone significant changes.

 

Level 3 assets held for trading increased from €416.5m to €734.4m, including €256m relating to underwriting loans entirely sold in early July with no impact on the profit and loss account. The remaining part is mainly represented by exposures in securitized stocks (€276.9m versus €101m) and by exposure in unlisted convertible preferred shares (€171.4m versus €152.3m) offset by the forward sale of the same underlying and classified as Level 2.

 

Notes to the accounts | Part A - Accounting policies | 469

 

As at 30 June 2024, Level 3 liabilities held for trading, which mainly concerned autocallable certificates on basket equity, decreased from €304.8m to €109.2m after repayments (€174.5m) and net reclassifications to level 2 (€26.4m). This decrease is linked to the entry into force of the new business model that provides for the Fair Value Option classification of newly issued autocallable equity certificates, which on the other hand determined an increase in Level 3 financial liabilities measured at Fair Value (from €26.2m to €352m); new issues of €270.2m and entries from other levels of €55.9m, relating to a delta-one certificate, were recorded during the year under review.

 

Financial assets mandatorily measured at Fair Value decreased to approximately €290 (from €399.3m) and consisted of investments in funds (including €4.5m in Polus funds). The reduction is mainly due to transfers of €138.5m to other levels (including €108.5m relating to a Polus fund) partially offset by widespread net purchases of €33.7m.

 

Financial assets measured at Fair Value through other comprehensive income (bonds, shares and SFPs) decreased from €555.2m to €464.6m with sales and redemptions of €114.1m; changes in Fair Value were positive by €23.5m.

 

 470 | Individual financial statements as at 30 June 2024

 

A.4.5.2 Annual changes in assets measured at fair value on a recurring basis (Level3 assets)

 

                               (€’000) 
  

Financial assets measured at fair value through

profit or loss 

                 
   Total  

of which:

a) financial

assets held

for trading (1) 

  

of which:

b) financial

assets

designated at

fair value

  

of which:

c) other

financial assets

mandatorily

measured at

fair value

  

Financial assets

measured

at fair value

through other

comprehensive

income

  

Hedging

derivatives

  

Tangible

assets

  

Intangible

assets

 
1. Opening balance   815,022    415,708        399,314    555,230             
2. Increases   524,199    445,923    13,210    65,066    31,787             
2.1 Purchases   465,468    397,169    13,210    55,089    7,158             
2.2 Profits recognized in:   23,738    13,761        9,977    24,292             
  2.2.1 Profit and loss   23,738    13,761        9,977    3,504             
- of which: capital gains   9,448    9,448                         
  2.2.2 Net equity       X    X    X    20,788             
2.3 Transfers from other levels   34,993    34,993                         
2.4 Other increases                   337             
3. Decreases   301,699    127,274        174,425    122,446             
3.1 Disposals   131,352    109,920        21,432    76,012             
3.2 Redemptions   9,507    9,507            45,251             
3.3 Losses recognized in:   15,211    769        14,442    1,183             
  3.3.1 Profit and loss   15,211    769        14,442                 
- of which: capital losses   768    768                         
  3.3.2 Net equity       X    X    X    1,183             
3.4 Transfers to other levels   139,864    1,313        138,551                 
3.5 Other decreases   5,765    5,765                         
4. Closing balance   1,037,522    734,357    13,210    289,955    464,571             

 

(1) After the market value of options traded (€41,000 at 30 June 2024 and €798,000 at 30 June 2023) the values of which are stated in the assets and liabilities for the same amount.

 

Notes to the accounts | Part A - Accounting policies | 471

 

A.4.5.3 Annual changes in liabilities measured at fair value on a recurring basis (Level3)

 

           (€’000) 
             
   Financial liabilities held for trading (1)    Financial liabilities designated at fair value   Hedging derivatives 
1. Opening balance   304,025    26,196     
2. Increases   53,902    326,121     
2.1 Issues   28,513    270,166     
2.2 Losses recognized in:   7,003         
  2.2.1 Profit and loss   7,003         
- of which: capital losses   7,003         
  2.2.2 Net equity   X         
2.3 Transfers from other levels   18,386    55,955     
2.4 Other increases            
3. Decreases   248,803    269     
3.1 Redemptions   189,531         
3.2 Buybacks            
3.3 Profits recognized in:   11,839    269     
  3.3.1 Profit and loss account   11,839    269     
- of which: capital gains   11,839         
  3.3.2 Net equity   X         
3.4 Transfers to other levels   47,433         
3.5 Other decreases            
4. Closing balance   109,124    352,048     

 

(1) After the market value of options traded (€41,000 at 30 June 2024 and €798,000 at 30 June 2023) the values of which are stated in the assets and liabilities for the same amount.

 

A.4.5.4 Assets and liabilities not measured at fair value or measured at fair value on a non-recurring basis: breakdown by fair value hierarchy

 

                               (€’000) 
                                 
Assets/liabilities not measured  30 June 2024   30 June 2023 
at fair value or measured at fair value on a non-recurring basis  Carrying amount   Level1   Level2   Level3   Carrying amount   Level1   Level2   Level3 
1. Financial assets measured at amortized cost   54,813,498    2,656,078    43,069,484    8,532,024    54,588,650    3,073,365    41,655,476    9,623,462 
2. Tangible assets held for investment purposes   23,207            88,854    23,408            88,500 
3. Non-current assets and asset groups held for sale                                
Total   54,836,705    2,656,078    43,069,484    8,620,878    54,612,058    3,073,365    41,655,476    9,711,962 
1. Financial liabilities measured at amortized cost   65,738,172        65,570,835    33,071    60,979,650        60,507,403    261,493 
2. Liabilities associated with assets held for sale                                
Total   65,738,172        65,570,835    33,071    60,979,650        60,507,403    261,493 

 

 472 | Individual financial statements as at 30 June 2024

 

A.5 - Information on Day One Profit/Loss

 

Pursuant to IFRS 7, paragraph 28, the “Day One Profit/Loss” is understood as the difference between the fair value of a financial instrument at the initial recognition date (transaction price) and the amount estimated at that date using a valuation technique. This difference may be positive or negative.

 

In the event that the difference is positive (day one profit) and based on market quotations and models that almost exclusively include the use of observable market inputs, this amount can be included in the positive components of the profit and loss account. However, if the positive difference is based on non-observable market inputs, the fair value of the instrument must be adjusted for such difference and charged through profit or loss when the inputs become observable.

 

In the event, however, that the difference attributable to non-observable inputs is negative (day one loss), it is immediately recorded through profit or loss on a prudential basis.

 

The Group applies the day one profit suspension rule to financial instruments classified as Level 3 of the Fair Value hierarchy, i.e. instruments for which the impact of one or more non-observable inputs on the fair value is considered significant, as defined in paragraph 73 of IFRS 13. The day one profit, calculated after fair value adjustments, is amortized over the expected period for which the input data will remain unobservable. The day one profit is not applied if the risks generated by the transaction are hedged with a market counterparty (back-to-back) and therefore there are no impacts on profit or loss due to the non-observable input.

 

During the financial year, the day one profit was only applied to certificates for an amount of €2.7m in profits on autocallable equity relating to a value of €234.6m (last year they amounted to €4.1m for a value of €215.8m).

 

Notes to the accounts | Part A - Accounting policies | 473

 

Part B - Notes to the Individual Balance Sheet(*) 

 

Assets

 

SECTION 1

 

Heading 10: Cash and cash equivalents

 

1.1 Cash and cash equivalents: breakdown

  

   Total   Total 
   30 June 2024   30 June 2023 
a) Cash   258    566 
b) Current accounts and demand deposits with Central Banks   2,376,436    3,273,797 
c) Current accounts and demand deposits with banks (1)   903,963    1,152,488 
Total   3,280,657    4,426,851 

 

(*) Figures in €’000.

 

 474 | Individual financial statements as at 30 June 2024

 

SECTION 2

 

Heading 20: Financial assets measured at fair value through profit or loss

 

2.1 Financial assets held for trading: product breakdown(*) 

  

   Total   Total 
   30 June 2024   30 June 2023 
Items/Values  Level1   Level2   Level3   Level1   Level2   Level3 
A. Cash assets                              
1. Debt securities   7,627,756    442,742    276,977    4,993,088    189,264    232,440 
1.1 Structured securities   11,722    19,100        1,310    10,625     
1.2 Other debt securities   7,616,034    423,642    276,977    4,991,778    178,639    232,440 
2. Equity securities(1)    3,753,655        171,736    1,020,812        163,498 
3. UCIT units   361        1,021    25        230 
4. Loans           255,901(3)     4,085         
4.1 Reverse repos                        
4.2 Other           255,901    4,085         
Total (A)   11,381,772    442,742    705,635    6,018,010    189,264    396,168 
B. Derivative instruments                              
1. Financial derivatives   799,620    1,849,376    28,708    696,678    3,036,813    19,964 
1.1 trading   799,620    1,849,376    28,708(2)     696,678    3,036,813    19,964(2)  
1.2 related to the fair value option                        
1.3 other                        
2. Credit derivatives       230,028    55        152,139    374 
2.1 trading       230,028    55        152,139    374 
2.2 related to the fair value option                        
2.3 other                        
Total (B)   799,620    2,079,404    28,763    696,678    3,188,952    20,338 
Total (A+B)   12,181,392    2,522,146    734,398    6,714,688    3,378,216    416,506 

 

(*) For the criteria used to determine fair value and classification of financial instruments within the three fair value ranking levels, see Part A – Accounting Policies.
(1) Equity securities include shares committed in securities lending transactions totalling €1,015,975 (€399,599 in the previous year).
(2) This includes €41,000 (€798,000 in June 2023) relating to options traded, whose contra-item was recorded among trading liabilities.
(3) These positions were acquired as part of loan underwriting commitments whose syndication concluded in early July 2024.

 

Notes to the accounts | Part B - Notes to the Individual Balance Sheet | 475

 

2.2 Financial assets held for trading: breakdown by borrower/issuer/counterparty

  

Items/Values  30 June 2024   30 June 2023 
A. CASH ASSETS          
1. Debt securities   8,347,475    5,414,792 
a) Central Banks        
b) Public administrations   6,578,665    3,253,899 
c) Banks   1,178,323    1,517,530 
d) Other financial companies   454,049    533,140 
of which: insurance companies   2,832     
e) Non-financial companies   136,438    110,223 
2. Equity securities   3,925,391    1,184,310 
a) Banks   622,756    217,180 
b) Other financial companies   786,722    271,147 
of which: insurance companies   132,406    9,977 
c) Non-financial companies   2,515,913    695,983 
d) Other issuers        
3. UCIT units   1,382    255 
4. Loans   255,901    4,085 
a) Central Banks        
b) Public administrations        
c) Banks        
d) Other financial companies (1)    255,901     
of which: insurance companies        
e) Non-financial companies       4,085 
f) Households        
Total (A)   12,530,149    6,603,442 
B. DERIVATIVE INSTRUMENTS          
a) Central Counterparties   448,621    1,487,126 
b) Other   2,459,166    2,418,842 
Total (B)   2,907,787    3,905,968 
Total (A+B)   15,437,936    10,509,410 

 

(1) These positions were acquired as part of loan underwriting commitments whose syndication concluded in early July 2024..

 

 476 | Individual financial statements as at 30 June 2024

 

2.3 Financial assets designated at fair value: product breakdown(*)

  

   Total   Total 
   30 June 2024   30 June 2023 
Voci/Valori  Level1   Level2   Level3   Level1   Level2   Level3 
1. Debt securities (1)    127,231        13,210             
1.1 Structured securities                        
1.2 Other debt securities   127,231        13,210             
2. Loans       578,774            538,590     
2.1 Structured                        
2.2 Other (1)        578,774            538,590     
Total   127,231    578,774    13,210        538,590     

 

(*) For the criteria used to determine fair value and classification of financial instruments within the three fair value ranking levels, see Part A – Accounting Policies.

(1) In relation to FVO liabilities.

 

2.4 Financial assets designated at fair value: breakdown by borrower/issuer

  

Items/Values  30 June 2024   30 June 2023 
1. Debt securities (1)    140,441     
a) Central Banks        
b) Public administrations   13,210     
c) Banks   115,282     
d) Other financial companies   2,017     
of which: insurance companies        
e) Non-financial companies   9,932     
2. Loans   578,774    538,590 
a) Central Banks        
b) Public administrations        
c) Banks        
d) Other financial companies   578,774    538,590 
of which: insurance companies   578,774    538,590 
e) Non-financial companies        
f) Households        
Total   719,215    538,590 

 

(1) In relation to FVO liabilities.

 

Notes to the accounts | Part B - Notes to the Individual Balance Sheet | 477

 

2.5 Other financial assets mandatorily measured at fair value: product breakdown

  

   30 June 2024   30 June 2023 
Items/Values  Level1   Level2   Level3   Level1   Level2   Level3 
1. Debt securities       295    4    412        451 
1.1 Structured securities                        
1.2 Other debt securities       295    4    412        451 
2. Equity securities           4,206            3,187 
3. UCIT units   180,304    80,949    285,745    131,049        395,676 
4. Loans                        
4.1 Reverse repos                        
4.2 Other                        
Total   180,304    81,244    289,955    131,461        399,314 

 

2.6 Other financial assets mandatorily measured at fair value: breakdown by borrower/issuer

  

Items/Values  30 June 2024   30 June 2023 
1. Equity securities   4,206    3,187 
of which: banks        
of which: other financial companies   4,206    3,187 
of which: non-financial companies        
2. Debt securities   299    863 
a) Central Banks        
b) Public administrations   295    412 
c) Banks        
d) Other financial companies   4    451 
of which: insurance companies        
e) Non-financial companies        
3. UCIT units   546,998    526,725 
4. Loans        
a) Central Banks        
b) Public administrations        
c) Banks        
d) Other financial companies        
of which: insurance companies        
e) Non-financial companies        
f) Households        
Total   551,503    530,775 

 

 478 | Individual financial statements as at 30 June 2024

 

SECTION 3

 

Heading 30: Financial assets measured at fair value through other comprehensive income

 

3.1Financial assets measured at fair value through other comprehensive income: product breakdown(*) 

  

   30 June 2024   30 June 2023 
Items/Values  Level1   Level2   Level3 (1)    Level1   Level2   Level3(1)  
1. Debt securities   6,286,677    284,208    78,578    5,563,499    51,050    186,571 
1.1 Structured securities                        
1.2 Other debt securities   6,286,677    284,208    78,578    5,563,499    51,050    186,571 
2. Equity securities   127,547        385,993    115,868        368,659 
3. Loans                        
Total   6,414,224    284,208    464,571    5,679,367    51,050    555,230 

 

(*) For the criteria used to determine fair value and classification of financial instruments within the three fair value ranking levels, see Part A – Accounting Policies.
(1) These include AT1 instruments of Mediobanca Premier (€159.2m), MB International (€94.7m) and Polus Capital Management Group (€4.1m), as well as equity-like financial instruments.

 

3.2Financial assets measured at fair value through other comprehensive income: breakdown by borrower/issuer

  

Items/Values  30 June 2024   30 June 2023 
1. Debt securities   6,649,463    5,801,120 
a) Central Banks        
b) Public administrations   5,651,809    4,548,278 
c) Banks   617,946    627,515 
d) Other financial companies   171,013    433,068 
of which: insurance companies   21,972    38,163 
e) Non-financial companies   208,695    192,259 
2. Equity securities   513,540    484,527 
a) Banks   254,072    240,520 
b) Other issuers:   259,468    244,007 
- other financial companies   48,639    33,658 
of which: insurance companies        
- non-financial companies   210,829    210,349 
- other        
3. Loans        
a) Central Banks        
b) Public administrations        
c) Banks        
d) Other financial companies        
of which: insurance companies        
e) Non-financial companies        
f) Households        
Total   7,163,003    6,285,647 

 

Notes to the accounts | Part B - Notes to the Individual Balance Sheet | 479

 

3.3Financial assets measured at fair value through other comprehensive income: gross value and overall value adjustments

 

   Gross value   Overall value adjustments     
   First stage   of which:
Low
credit risk
instruments (*)
   Second
stage
   Third
stage
   Purchased
or
originated
credit
impaired
assets
   First
stage
   Second
stage
   Third
stage
   Purchased
or
originated
credit
impaired
assets
   Overall
partial
write-offs
 
Debt securities   6,637,344    845,204    19,772            6,996    657             
Loans                                        
Total 30 June 2024   6,637,344    845,204    19,772            6,996    657             
Total 30 June 2023   5,771,319    31,064    37,723            6,537    1,385             

 

(*) As required by Bank of Italy circular no. 262, fifth amendment, the column headed “of which” must show the gross value of the low credit risk instruments as defined by IFRS 9, paras. B5.5.29. For the Mediobanca Group, the concept of “low credit risk” is equivalent to that of rating, hence low credit risk applies to the case of counterparties rated as investment grade.

 

SECTION 4

 

Heading 40: Financial assets measured at amortized cost

 

4.1Financial assets measured at amortized cost: product breakdown of amounts due from banks (30/6/24) (*)

  

   Total 
   30 June 2024 
   Carrying amount    Fair value (*)  
Transaction Type/Values  Stages 1
and 2
   Stage 3   Purchased
or originated
credit
impaired

assets
   Level1   Level2   Level3 
A. Due from Central Banks   257,949                257,949     
1. Term deposits               X    X    X 
2. Compulsory reserves   257,949            X    X    X 
3. Reverse repos               X    X    X 
4. Other               X    X    X 
B. Due from banks   30,840,058                30,044,758    88,568 
1. Loans   29,934,697                29,127,801    88,568(1)  
1.1 Current accounts               X    X    X 
1.2. Term deposits   1,250,116            X    X    X 
1.3. Other loans:   28,684,581            X    X    X 
   - Reverse repos   2,165,150            X    X    X 
   - Finance leases               X    X    X 
   - Other   26,519,431            X    X    X 
2. Debt securities   905,361                916,957     
2.1 Structured securities                        
2.2 Other debt securities   905,361                916,957     
Total   31,098,007                30,302,707    88,568 

 

(*) For the criteria used to determine fair value and classification of financial instruments within the three fair value ranking levels, see Part A – Accounting Policies.

(1) Items in transit.

 

 480 | Individual financial statements as at 30 June 2024

 

4.1Financial assets measured at amortized cost: product breakdown of amounts due from banks (30/6/23) (*)

  

   Total 
   30 June 2023 
   Carrying amount    Fair value* 
Transaction Type/Values  Stages 1
and 2
   Stage 3   Purchased
or originated
credit
impaired
assets
   Level1   Level2   Level3 
A. Due from Central Banks   255,059                255,059     
1. Term deposits               X    X    X 
2. Compulsory reserves   255,059            X    X    X 
3. Reverse repos               X    X    X 
4. Other               X    X    X 
B. Due from banks   29,859,534            58,649    29,520,376    35,792 
1. Loans   28,900,888                28,631,075    35,792 
1.1 Current accounts               X    X    X 
1.2. Term deposits   333,879            X    X    X 
1.3. Other loans:   28,567,009            X    X    X 
  - Reverse repos   1,796,987            X    X    X 
  - Finance leases               X    X    X 
  - Other   26,770,022            X    X    X 
2. Debt securities   958,646            58,649    889,301     
2.1 Structured securities                        
2.2 Other debt securities   958,646            58,649    889,301     
Total   30,114,593            58,649    29,775,435    35,792 

 

(*) For the criteria used to determine fair value and classification of financial instruments within the three fair value ranking levels, see Part A – Accounting Policies.

 

Notes to the accounts | Part B - Notes to the Individual Balance Sheet | 481

 

4.2Financial assets measured at amortized cost: product breakdown of amounts due from customers (30/6/24) (*)

 

   Total 
   30 June 2024 
   Carrying amount   Fair value (*)  
Transaction Type/Values  Stages 1
and 2
   Stage 3  

Purchased
or originated
credit

impaired
assets

   Level1   Level2   Level3 
1. Loans   20,164,346    15,096            12,491,319    7,877,118 
1.1 Current accounts   1,242,502            X    X    X 
1.2 Reverse repos   3,209,855            X    X    X 
1.3 Mortgages   12,622,695    14,730        X    X    X 
1.4 Credit cards, personal loans and salary-backed finance               X    X    X 
1.5 Finance leases   1,391            X    X    X 
1.6 Factoring               X    X    X 
1.7 Other loans   3,087,903    366        X    X    X 
2. Debt securities   3,536,049            2,656,078    275,459    566,338 
2.1 Structured securities                        
2.2 Other debt securities   3,536,049            2,656,078    275,459    566,338 
Total   23,700,395    15,096        2,656,078    12,766,778    8,443,456 

 

(*) For the criteria used to determine fair value and classification of financial instruments within the three fair value ranking levels, see Part A – Accounting Policies.

 

4.2Financial assets measured at amortized cost: product breakdown of amounts due from customers (30/6/23) (*)

 

   Total 
   30 June 2023 
   Carrying amount   Fair value* 
Transaction Type/Values  Stages 1
and 2
   Stage 3   Purchased
or originated
credit
impaired
assets
   Level1   Level2   Level3 
1. Loans   20,097,040    18,928            11,861,011    8,334,466 
1.1 Current accounts   1,353,073            X    X    X 
1.2 Reverse repos   1,652,332            X    X    X 
1.3 Mortgages   14,141,038    18,562        X    X    X 
1.4 Credit cards, personal loans and salary-backed finance               X    X    X 
1.5 Finance leases   2,580            X    X    X 
1.6 Factoring               X    X    X 
1.7 Other loans   2,948,017    366        X    X    X 
2. Debt securities   4,358,089            3,014,716    19,030    1,253,204 
2.1 Structured securities                        
2.2 Other debt securities1    4,358,089            3,014,716    19,030    1,253,204 
Total   24,455,129    18,928        3,014,716    11,880,041    9,587,670 

 

(*) For the criteria used to determine fair value and classification of financial instruments within the three fair value ranking levels, see Part A – Accounting Policies.
(1) Of which, 652,314 relating to the Group’s securitizations (Compass Banca).

 

 482 | Individual financial statements as at 30 June 2024

 

4.3Financial assets measured at amortized cost: breakdown by borrower/issuer of amounts due from customers

  

   Total 30 June 2024   Total 30 June 2023 
Transaction Type/Values  Stages 1
and 2
   Stage 3   Purchased or originated credit impaired assets   Stages 1
and 2
   Stage 3   Purchased or originated credit impaired assets 
1. Debt securities   3,536,049            4,358,089         
a) Public administrations   2,488,926            2,779,579         
b) Other financial companies   967,083            1,440,016         
of which: insurance companies   184,242            177,265         
c) Non-financial companies   80,040            138,494         
2. Loans to:   20,164,346    15,096        20,097,040    18,928     
a) Public administrations   102,619            104,776         
b) Other financial companies   10,683,557    29        9,192,574    2,142     
of which: insurance companies   336,622            185,673         
c) Non-financial companies   8,637,385    8,085        9,938,174    15,692     
d) Households   740,785    6,982        861,516    1,094     
Total   23,700,395    15,096        24,455,129    18,928     

 

4.4Financial assets measured at amortized cost: gross value and overall value adjustments

  

   Gross value   Overall value adjustments          
   Stage 1   of which: Low credit risk instruments   Stage 2   Stage 3   Purchased or originated credit impaired assets   Stage 1   Stage 2   Stage 3   Purchased or originated credit impaired assets   Overall partial write-offs 
Debt securities   4,434,328    1,574,140    17,206            4,469    5,655             
Loans   50,239,711    100,573    166,428    19,530        42,412    6,735    4,434         
Total 30 June 2024   54,674,039    1,674,713    183,634    19,530        46,881    12,390    4,434         
Total 30 June 2023   54,450,570    216,333    190,525    111,714        60,445    10,928    92,786         

 

Notes to the accounts | Part B - Notes to the Individual Balance Sheet | 483

 

SECTION 5

 

Heading 50: Hedging derivatives

 

5.1 Hedging derivatives: by hedge type and level

  

   Fair Value   Notional   Fair Value   Notional 
   30 June 2024   value   30 June 2023   value 
   Level1   Level2   Level3   30 June 2024   Level1   Level2   Level3   30 June 2023 
A. Financial derivatives                                        
1. Fair value       557,740        27,970,253        245,954        16,569,403 
2. Cash flows       4,111        305,000                 
3. Foreign investments                                
B. Credit derivatives                                        
1. Fair value                                
2. Cash flows                                
Total       561,851        28,275,253        245,954        16,569,403 

 

5.2 Hedging derivatives: breakdown by portfolio hedged and hedge type

  

   Fair Value   Cash flows     
   Specific                 
Transaction / Type of  debt
securities
and interest
   equity
securities
and stock
   currencies                      Foreign 
hedging  rates   indexes   and gold   credit   commodities   other   Generic   Specific   Generic   investments 
1. Financial assets measured at fair value through other comprehensive income   24,734                

X

    

X

    

X

    1,603    

X

    

X

 
2. Financial assets measured at amortized cost   454,276    

X

            

X

    

X

    

X

    76    

X

    

X

 
3. Portfolio   X    X    X    X    X    X        X        X 
4. Other transactions                           X        X     
Total assets   479,010                            1,679         
1. Financial liabilities   78,730    X                    X        X    X 
2. Portfolio   X    X    X    X    X    X        X        X 
Total liabilities   78,730                                      
1. Expected transactions   X    X    X    X    X    X    X    2,432    X    X 
2. Financial assets and liabilities portfolio   X    X    X    X    X    X        X         

  

 484 | Individual financial statements as at 30 June 2024

 

SECTION 7

 

Heading 70: Equity investments

 

At 30 June 2024, the book value of the item “Equity investments” amounted to €3,771.5m.

 

7.1 Equity investments: disclosure on relationships

   

Company Name  Registered
office
  Operating
office
  Shareholding
in %
   Available Voting
rights in %
 
A. Wholly controlled entities                
  Polus Capital Management Group Limited                
  Capital GBP 527 in shares worth GBP 0.005 each  London  London   63.75(*)   63.75 
  Mediobanca Premier S.p.A.                
  Capital €506.3m in shares worth €0.50 each  Milan  Milan   100.0    100.0 
  CMB MONACO S.A.M.                
  Capital €111.1m in shares worth €200 each  Monte Carlo  Monte Carlo   100.0    100.0 
  Compass Banca S.p.A.                
  Capital €587.5m in shares worth €5 each  Milan  Milan   100.0    100.0 
  Mediobanca Innovation Services - MIS S.c.p.A.                
  Capital €35m in shares worth €5 each  Milan  Milan   100.0    100.0 
  Mediobanca Management Company                
  Capital €500,000 in shares worth €10 each  Luxembourg  Luxembourg   100.0    100.0 
  Mediobanca SGR                
  Capital €10.3m in shares worth €51.65 each  Milan  Milan   100.0    100.0 
  Messier et Associés Sas                
  Capital €50,000 in shares worth €0.1 each  Paris  Paris   80.04(**)   80.04 
  MB Facta S.p.A.                
  Capital €120m in shares worth €1 each  Milan  Milan   100.0    100.0 
  MB Funding Lux S.A.                
  Capital €831,000 in shares worth €1 each  Luxembourg  Luxembourg   100.0    100.0 
  MB International (Luxembourg) S.A.                
  Capital €10m in shares worth €10 each  Luxembourg  Luxembourg   100.0    100.0 
  MB Securities USA LLC                
  Capital $2.25m  New York  New York   100.0    100.0 
  RAM Active Investments S.A. Capital CHF1m in                
  shares worth CHF10 each  Geneva  Geneva   93.0(***)   93.0 
  SelmaBipiemme Leasing S.p.A.                
  Capital €41.3m in shares worth €0.50 each  Milan  Milan   60.0    60.0 
  CMB Real Estate Development                
  Capital €75.2m in shares worth €75,200 each  Monte Carlo  Monte Carlo   40.0    40.0 
  Spafid S.p.A.                
  Capital €6.1m in shares worth €10 each  Milan  Milan   100.0    100.0 
  Arma Partners LLP (****)  Milan  Milan   100.0    100.0 
B. Entities under common control                
  MBSpeedUP Limited                
  Capital €100 in shares worth €1 each  London  London   50.0    50.0 
C. Entities under significant influence                
  Assicurazioni Generali S.p.A.                
  Capital €1,592.4m in shares worth €1 each  Trieste  Trieste   13.11    13.11 
  Istituto Europeo di Oncologia S.r.l.                
  Capital €80.6m  Milan  Milan   25.37    25.37 
  Finanziaria Gruppo Bisazza                
  Capital €100,000  Vicenza  Vicenza   22.67    22.67 
  CLI Holdings II (fund units)  London  London   24.09    24.09 

 

(*)The percentage rises to 89.07% if account is taken of the put & call option agreements concluded at the time of acquisition.
(**)The percentage rises to 100% if account is taken of the put & call option agreements concluded at the time of acquisition.
(***)The percentage rises to 98.28% if account is taken of the put & call option agreements concluded at the time of acquisition.
(****) Arma Partners was established as a Limited Liability Partnership. This corporate form does not require share capital but rather contributions from participating partners.

 

Notes to the accounts | Part B - Notes to the Individual Balance Sheet | 485

 

7.2 Significant investments: carrying amount, fair values and dividends received

  

Company Name  Book Value   Fair Value   Dividends received 
A. Wholly controlled entities               
  Polus Capital Management Group Limited   89,908    n.a.     
  Mediobanca Premier S.p.A.   666,503    n.a.    33,000 
  CMB MONACO S.A.M.   374,901    n.a.    320,000 
  Compass Banca S.p.A.   769,516    n.a.    330,000 
  Mediobanca Innovation Services - MIS S.c.p.A.   35,076    n.a.     
  Mediobanca Management Company   3,993    n.a.    8,106 
  Mediobanca SGR   38,145    n.a.     
  Messier et Associés Sas   94,095    n.a.    3,703 
  MBFACTA S.p.A.   120,502    n.a.    11,050 
  MB Funding Lux   831    n.a.     
  MB International (Luxembourg) S.A.   6,172    n.a.    18,403 
  MB Securities USA LLC   211    n.a.     
  RAM Active Investments S.A.   25,352    n.a.     
  SelmaBipiemme Leasing S.p.A.   33,013    n.a.    32,246 
  CMB Real Estate Development   30,060    n.a.     
  Spafid S.p.A.   8,890    n.a.     
  Arma Partners LLP   259,731    n.a.    13,174 
B. Entities under joint control               
  MBSpeedUP Limited   1,750    n.a.     
C. Entities under significant influence               
  Assicurazioni Generali S.p.A.   1,123,715    4,759,117    261,556 
  Istituto Europeo di Oncologia S.r.l.   38,995    n.a.     
  Finanziaria Gruppo Bisazza   6,879    n.a.    839 
  CLI Holding II   43,295    n.a.    9,101 
Total   3,771,533         1,041,178 

 

The description of the reasons why an investee is subject to joint control or significant influence is contained in “Section 3 - Part A - Accounting Policies”, to which reference should be made.

 

 486 | Individual financial statements as at 30 June 2024

 

7.3 Significant investments: accounting data(*)  

 

Company name  Cash and
Cash
Equivalents
   Financial
assets 
   Non-financial
assets 
   Financial
Liabilities 
   Non-financial
liabilities 
   Total
revenues
(**) 
   Net interest
income 
   Adjustments
and
write-backs
of tangible
and intangible
assets 
   Profit (loss)
on ordinary
operations
before tax 
   Profit (loss)
on ordinary
operations
after tax 
   Profit (loss) on
held-for-sale
assets after tax 
   Profit (loss)
for the
period (1)
   Other
profit (loss)
components
after tax (2)
   Other
comprehensive
income (3) =
(1) + (2)
 
A. Wholly controlled entities                                                                      
Polus Capital Management Group Limited   32,247    9,422    107,848    58    27,941    55,772    658    (1,179)   12,952    9,275        9,275        9,275 
Mediobanca Premier S.p.A.   903,832    29,238,783    519,028    29,340,236    372,311    454,014    273,795    (33,116)   86,804    58,124        58,124    227    58,351 
CMB MONACO S.A.M.   1,498,008    6,627,319    110,456    7,191,515    276,848    183,817    115,085    (16,808)   82,428    65,024        65,024        65,024 
Compass Banca S.p.A.   618,401    15,555,125    1,052,110    13,769,107    391,592    1,081,272    1,034,160    (15,273)   654,448    473,166        473,166    (184,511)   288,655 
Mediobanca Innovation Services - MIS S.c.p.A.   233        89,099    28,418    25,370    (704)   (704)   (24,706)   (23)   2        2    8    10 
Mediobanca Management Company   8,054        8,121    17    8,363    2,227    250    (155)   (559)   (560)       (560)       (560)
Mediobanca SGR   8,609    48,996    21,660    1,214    13,961    33,546    1,857    (374)   13,604    9,571        9,571    1    9,572 
Messier et Associés Sas   4,648    801    74,327    24,242    37,236    41,233    (921)   (1,107)   2,925    2,193        2,193        2,193 
MBFACTA S.p.A.   29,608    2,952,090    175,044    2,891,132    27,517    48,174    41,430    (240)   32,638    22,111        22,111    14    22,125 
MB Funding Lux   966        287        243                36    24        24        24 
MB International (Luxembourg) S.A.   596,508    6,292,934    14,010    6,432,330    21,691    33,952    31,893    (215)   23,728    19,701        19,701    (1,630)   18,071 
MB Securities USA LLC   6,324        1,352        1,799    3,484        (24)   22    22        22        22 
RAM Active Investments S.A.   5,789    3,177    7,484    18    2,493    9,670    14    (336)   (2,489)   (2,618)       (2,618)       (2,618)
SelmaBipiemme Leasing S.p.A.   19,054    1,238,075    93,606    1,136,258    32,033    29,934    27,897    (1,968)   12,952    9,275        9,275    (45)   9,230 
CMB Real Estate Development           50,392    916    439    (19)   (1)   (1,046)   (486)   (486)       (486)       (486)
Spafid S.p.A.   14,663    1,653    32,172    1,063    6,677    9,068    746    (565)   (264)   (339)       (339)   (5)   (344)
Arma Partners LLP   62,181    26    19,657        12,699    67,295    1,716    (236)   42,772    42,772        42,772        42,772 
B. Companies under common control                                                                      
MBSpeed UP   X    1,750    650                                             
C. Entities under significant influence                                                                      
Assicurazioni Generali S.p.A.   X    477,256,000    24,286,000    465,241,000    12,086,000    52,873,000    5,862,000    -342,000    5,574,000    4,037,000    84,000    4,037,000    163,000    4,200,000 
Istituto Europeo di Oncologia S.r.l.   X    108,177    179,472    148,865    75,242    417,265    X    X    5,457    3,685        3,685        3,685 
Finanziaria Gruppo Bisazza   X    6,384    19,074    5,168    2,932    29,707    X    X    2,637    1,813        1,813        1,813 
CLI Holding II   X    145,400    2,729    148,329    48    X    102    X    2    1        1        1 

 

(*)  All data are in Euros, including for foreign subsidiaries.

(**)  This is understood as interim earnings: Total revenues stated in the accounting statements.

 

Notes to the accounts | Part B - Notes to the Individual Balance Sheet | 487

 

7.5 Equity investments: changes during the period

 

   30 June 2024   30 June 2023 
A. Balance at start of period   3,528,482    3,563,039 
B. Increases   293,659    20,025 
B.1 Purchases   263,353    20,025 
B.2 Write-backs        
B.3 Write-ups        
B.4 Other changes   30,306     
C. Decreases   50,608    54,582 
C.1 Sales   2     
C.2 Value adjustments   35,179    54,263 
C.3 Other changes   15,427    319 
D. Balance at end of period   3,771,533    3,528,482 
E. Total revaluations       
F. Total adjustments   981,371   946,192 

 

SECTION 8

 

Heading 80: Property, plant and equipment

 

8.1 Core tangible assets: breakdown of assets measured at cost

 

   Total   Total 
Assets/Values  30 June 2024   30 June 2023 
1. Property assets   96,372    92,498 
a) land   67,896    67,896 
b) buildings   18,875    17,611 
c) furniture   2,371    1,551 
d) electronic systems   3,272    2,448 
e) other   3,958    2,992 
2. Leased assets   21,870    23,736 
a) land        
b) buildings   15,829    19,617 
c) furniture        
d) electronic systems        
e) other   6,041    4,119 
Total   118,242    116,234 
of which: obtained by enforcement of collateral        

 

 488 | Individual financial statements as at 30 June 2024

 

8.2 Properties held for investment purposes: breakdown of assets measured at cost

 

   Total   Total 
   30 June 2024   30 June 2023 
   Carrying    Fair value   Carrying    Fair value 
Assets/Values  amount   Level1   Level2   Level3   amount   Level1   Level2   Level3 
1. Property assets   23,207            88,854    23,408            88,500 
a) land   20,350            52,148    20,350            52,148 
b) buildings   2,857            36,706    3,058            36,352 
2. Rights-of-use assets                                
a) land                                
b) buildings                                
Total   23,207            88,854    23,408            88,500 
of which: obtained by enforcement of collateral                                

 

Notes to the accounts | Part B - Notes to the Individual Balance Sheet | 489

 

8.6 Core assets: changes during the year

 

   Land   Buildings   Furniture   Electronic
systems
   Other   Total 
A. Gross opening balance 30 June 2023   67,896    76,759    9,751    12,070    35,754    202,230 
A.1 Decreases in total net value       (39,531)   (8,200)   (9,622)   (28,643)   (85,996)
A.2 Net opening balance 30 June 2023   67,896    37,228    1,551    2,448    7,111    116,234 
B. Increases:       2,606    1,202    1,474    6,087    11,369 
B.1 Purchases           1,202    1,474    1,775    4,451 
- of which, business combinations                        
B.2 Capitalized improvement costs       2,411                2,411 
B.3 Write-backs                        
B.4 Positive changes in fair value allocated to                        
a) net equity                        
b) profit & loss                        
B.5 Currency exchange gains                        
B.6 Transfers from investment properties           X    X    X     
B.7 Other changes       195            4,312    4,507 
C. Decreases:       5,130    382    650    3,199    9,361 
C.1 Sales                        
- of which, business combinations                        
C.2 Depreciation       5,128    340    647    3,199    9,314 
C.3 Impairment losses allocated to                        
a) net equity                        
b) profit & loss                        
C.4 Negative changes in fair value allocated to                        
a) net equity                        
b) profit & loss                        
C.5 Currency exchange losses                        
C.6 Transfers to:                        
a) assets held for investment purposes           X    X    X     
b) non-current assets and assets groups held for sale                        
C.7 Other changes       2    42    3        47 
D. Net closing balance   67,896    34,704    2,371    3,272    9,999    118,242 
D.1 Decreases in total net value       (44,623)   (7,930)   (10,273)   (30,024)   (92,850)
D.2 Gross closing balance   67,896    79,327    10,301    13,545    40,023    211,092 
E. Measured at cost                        

 

 490 | Individual financial statements as at 30 June 2024

 

Changes in tangible assets for core purposes also include the right of use acquired from finance leasing operations under IFRS 16. New leases executed during the year amount to €4.5m (shown in row B.7 “Other changes”), while depreciation for rights in use amount to €6.4m (stated in row C.2 “Depreciation”).

 

8.7 Assets held for investment purposes: changes during the year

 

   Total 
   Land   Buildings 
A. Gross opening balance   20.350    3.058 
B. Increases       225 
B.1 Purchases        
- of which, business combinations        
B.2 Capitalized improvement costs       224 
B.3 Positive changes in fair value        
B.4 Write-backs        
B.5 Currency exchange gains        
B.6 Transfers from core tangible assets        
B.7 Other changes       1 
C. Decreases       426 
C.1 Sales        
- of which, business combinations        
C.2 Depreciation       426 
C.3 Negative changes in fair value        
C.4 Write-downs        
C.5 Currency exchange losses        
C.6 Transfers to:        
a) core tangible assets        
b) non-current assets and assets groups held for sale        
C.7 Other changes        
D. Balance at end of period   20,350    2,857 
D.1 Decreases in total net value        
D.2 Gross closing balance   20,350    2,857 
E. Measured at fair value   52,148    36,706 

 

Notes to the accounts | Part B - Notes to the Individual Balance Sheet | 491

 

SECTION 9

 

Heading 90: Intangible assets

 

9.1 Intangible assets: breakdown by type of asset

 

   Total   Total 
   30 June 2024   30 June 2023 
Assets/Values   Definite life    Indefinite life    Definite life    Indefinite life 
A.1 Goodwill   X    12.514    X    12.514 
A.2 Other intangible assets   1,389    15,489    1,659    15,489 
of which: software   1,389        1,659     
A.2.1 Assets measured at cost:   1,389    15,489    1,659    15,489 
  a) Intangible assets generated internally                
   b) Other assets   1,389    15,489    1,659    15,489 
A.2.2 Assets measured at fair value:                
   a) Intangible assets generated internally                
   b) Other assets                
Total   1,389    28,003    1,659    28,003 

 

The values of the brand and of goodwill were tested for impairment. No write-downs were found to be needed.

 

 492 | Individual financial statements as at 30 June 2024

 

9.2 Intangible assets: changes during the year

 

      Other intangible assets   Other intangible    
         generated internally    assets: other      
   Goodwill    Definite    Indefinite    Definite    Indefinite   Total 
A. Balance at start of period   12,514            98,738    15,489    126,741 
A.1 Decreases in total net value               (97,079)       (97,079)
A.2 Net opening balance   12,514            1,659    15,489    29,662 
B. Increases               438        438 
B.1 Purchases               438        438 
B.2 Increases of internal intangible assets                        
B.3 Write-backs   X                     
B.4 Positive changes in fair value   X                     
- net equity                        
- to P&L   X                     
B.5 Currency exchange gains   X                     
B.6 Other changes                        
C. Decreases               708        708 
C.1 Sales                        
C.2 Value adjustments               706        706 
- Amortization   X            706        706 
- Write-downs                        
+ net equity   X                     
+ to P&L                        
C.3 Negative changes in fair value                        
- net equity   X                     
- to P&L   X                     
C.4 Transfer to non-current assets held for sale                        
C.5 Currency exchange losses                        
C.6 Other changes               2        2 
D. Net closing balance   12,514            1,389    15,489    29,392 
D.1 Adjustment of net total values               (97,793)       (97,793)
E. Gross closing balance   12,514            99,182    15,489    127,185 
F. Measurement at cost                        

 

Notes to the accounts | Part B - Notes to the Individual Balance Sheet | 493

 

SECTION 10

 

Assets heading 100 and liabilities heading 60: Tax assets and liabilities

 

10.1 Advance tax assets: breakdown

 

   Total   Total 
   30 June 2024   30 June 2023 
- Against Profit and Loss   49,918    62,050 
- Against Net Equity   16,437    33,329 
Total   66,355    95,379 

 

The above amounts were subjected to a sustainability test as required by IAS 12, taking into account the economic projections foreseeable for future financial years in order to verify whether any future taxable income against which to offset these tax assets had emerged.

 

10.2 Deferred tax liabilities: breakdown

 

   Total   Total 
   30 June 2024   30 June 2023 
- Against Profit and Loss   189,930    191,400 
- Against Net Equity   42,642    31,768 
Total   232,572    223,168 

 

 494 | Individual financial statements as at 30 June 2024

 

10.3 Changes in advance tax during the period (against profit and loss)

 

   Total   Total 
   30 June 2024   30 June 2023 
1. Opening balance   62,050    70,964 
2. Increases   6,446    4,190 
2.1 Prepaid taxes recorded during the year   6,446    4,190 
a) relating to prior years        
b) due to changes in accounting policies        
c) write-backs        
d) other   6,446    4,190 
2.2 New taxes or increases in tax rates        
2.3 Other increases        
3. Decreases   18,578    13,104 
3.1 Prepaid taxes derecognized during the year   18,578    13,104 
a) reversals   18,578    13,104 
b) write-downs due to non-recoverable items        
c) changes in accounting policies        
d) other        
3.2 Reductions in tax rates        
3.3 Other decreases:        
a) conversion into tax receivables pursuant to Italian Law No. 214/2011        
b) other        
4. Closing balance   49,918    62,050 

 

10.3 bis Changes in prepaid taxes pursuant to Italian Law No. 214/2011(*) 

 

   Total   Total 
   30 June 2024   30 June 2023 
1. Opening balance   31,947    36,814 
2. Increases        
- of which, business combinations        
3. Decreases   10,538    4,867 
3.1 Reversals   10,538    4,867 
3.2 Conversion into tax receivables deriving from:        
a) losses for the year        
b) tax losses        
3.3 Other decreases        
4. Closing balance   21,409    31,947 

 

(*) Italian Law-Decree No. 59 of 29 April 2016 on deferred tax assets pursuant to Italian Law No. 214/2011, as amended by Italian Law-Decree No. 237 of 23 December 2016, enacted with amendments as Law No. 15/2017, provides that in order to be able to retain the right to take advantage of the possibility of converting DTAs into tax credits, an irrevocable option must be specifically exercised, which involves payment of an annual instalment equal to 1.5% of the difference between the increase in advance tax assets at the reporting date since 30 June 2008 and the tax paid during the same period each year until 2029. Mediobanca has exercised this option in order to retain the possibility of converting DTAs for all companies adhering to the tax consolidation. No payment will be due in this respect, however, given that the payments made to the tax consolidation exceed the increase in DTAs recorded since 30 June 2008.

 

Notes to the accounts | Part B - Notes to the Individual Balance Sheet | 495

 

10.4 Changes in deferred taxes (against profit and loss)

 

   Total   Total 
   30 June 2024   30 June 2023 
1. Opening balance   191,400    206,070 
2. Increases   3,126    102 
2.1 Deferred taxes for the year   3,126    102 
a) relating to prior years        
b) due to changes in accounting policies        
c) other   3,126    102 
2.2 New taxes or increases in tax rates        
2.3 Other increases        
3. Decreases   4,596    14,772 
3.1 Deferred taxes derecognized in the year   4,596    14,772 
a) reversals   4,596    14,772 
b) due to changes in accounting policies        
c) other        
3.2 Reductions in tax rates        
3.3 Other decreases        
4. Closing balance   189,930    191,400 

 

10.5 Changes in prepaid taxes (against net equity)

 

   Total   Total 
   30 June 2024   30 June 2023 
1. Opening balance   33,329    34,529 
2. Increases   83,018    161,445 
2.1 Prepaid taxes recorded during the year   83,018    161,445 
a) relating to prior years        
b) due to changes in accounting policies        
c) other   83,018    161,445 
2.2 New taxes or increases in tax rates        
2.3 Other increases        
- of which, business combinations        
3. Decreases   99,910    162,645 
3.1 Prepaid taxes derecognized during the year   99,910    162,645 
a) reversals   99,910    162,645 
b) write-downs due to non-recoverable items        
c) due to changes in accounting policies        
d) other        
3.2 Reductions in tax rates        
3.3 Other decreases        
4. Closing balance   16,437    33,329 

 

 496 | Individual financial statements as at 30 June 2024

 

10.6 Changes in deferred taxes (against net equity)        
         
   Total   Total 
   30 June 2024   30 June 2023 
1. Opening balance   31,768    21,281 
2. Increases   157,999    81,819 
2.1 Deferred taxes for the year   157,999    81,819 
a) relating to prior years        
b) due to changes in accounting policies        
c) other   157,999    81,819 
2.2 New taxes or increases in tax rates        
2.3 Other increases        
3. Decreases   147,125    71,332 
3.1 Deferred taxes derecognized in the year   147,125    71,332 
a) reversals   147,125    71,332 
b) due to changes in accounting policies        
c) other        
3.2 Reductions in tax rates        
3.3 Other decreases        
4. Closing balance   42,642    31,768 

 

SECTION 12

 

Heading 120: Other assets

 

Heading 120: Other assets

 

   30 June 2024   30 June 2023 
1. Accrued income other than capitalized income on the related assets   3,033    3,707 
2. Trade receivables or invoices to be issued   120,913    71,364 
3. Amounts due from tax revenue authorities (not recorded under Heading 100)   59,957    31,478 
4. Other items:   287,934    60,217 
- transactions in futures and other security transactions   166    1,352 
- other items in transit   273,511    42,928 
- amounts due from staff   324    142 
- leasehold improvements       262 
- tax consolidation        
- group VAT   5,444    7,060 
- sundry other items (1)    8,489    8,473 
Total other assets   471,837    166,766 

 

(1)   These include deferred liabilities of €7,775 (€8,039 at 30 June 2023).

 

Notes to the accounts | Part B - Notes to the Individual Balance Sheet | 497

 

Liabilities

 

SECTION 1

 

Heading 10: Financial liabilities measured at amortized cost

 

1.1 Financial liabilities measured at amortized cost: product breakdown of amounts due to banks 

 

   Total   Total 
   30 June 2024   30 June 2023 
   Carrying    Fair Value   Carrying    Fair Value 
Transaction Type/Values  amount   Level1   Level2   Level3   amount   Level1   Level2   Level3 
1. Due to Central Banks   1,313,202    X    X    X    5,634,137    X    X    X 
2. Amounts due to banks   30,492,259    X    X    X    28,689,976    X    X    X 
2.1 Current accounts and demand deposits   18,301,240    X    X    X    19,208,919    X    X    X 
2.2 Term deposits   3,576,837    X    X    X    3,870,089    X    X    X 
2.3 Loans   8,601,449    X    X    X    5,433,196    X    X    X 
 2.3.1 Repos   5,342,646    X    X    X    3,467,320    X    X    X 
 2.3.2 Other   3,258,803    X    X    X    1,965,876    X    X    X 
2.4 Liabilities in respect of commitments to repurchase own equity instruments        X    X    X        X    X    X 
2.5 Lease liabilities (1)        X    X    X        X    X    X 
2.6 Other liabilities   12,733    X    X    X    177,772    X    X    X 
Total   31,805,461        31,805,461        34,324,113        34,324,113     

 

(1)  This item includes obligations in respect of payment of future leasing instalments as required by IFRS 16 and Bank of Italy circular no. 262 – VI Update.

  

 498 | Individual financial statements as at 30 June 2024

 

1.2 Financial liabilities measured at amortized cost: product breakdown of amounts due to customers 

 

   Total   Total 
   30 June 2024   30 June 2023 
   Carrying    Fair Value   Carrying    Fair Value 
Transaction Type/Values  amount   Level1   Level2   Level3   amount   Level1   Level2   Level3 
1. Current accounts and on demand deposits   6.431.575    X    X    X    4.221.625    X    X    X 
2. Term deposits   2.089.511    X    X    X    3.840.437    X    X    X 
3. Loans   4.826.594    X    X    X    681.703    X    X    X 
3.1 Repos   4.753.485    X    X    X    613.522    X    X    X 
3.2 Other   73.109    X    X    X    68.181    X    X    X 
4. Liabilities in respect of commitments to repurchase own equity instruments       X    X    X        X    X    X 
5. Lease liabilities (1)    22.549    X    X    X    25.245    X    X    X 
6. Other payables       X    X    X    1.671    X    X    X 
Total   13.370.229        13.370.229        8.770.681        8.770.681     

 

(1)  This item includes obligations in respect of payment of future leasing instalments as required by IFRS 16 and Bank of Italy circular no. 262 – VI Update.

  

1.3 Financial liabilities measured at amortized cost: product breakdown of debt securities in issue 

 

   30 June 2024   30 June 2023 
   Carrying    Fair value*   Carrying    Fair value* 
 Transaction Type/Values  amount   Level1   Level2   Level3   amount   Level1   Level2   Level3 
A. Securities                                
1. bonds   20,529,411        20,395,145        17,623,363        17,412,609     
1.1 structured   4,019,942        4,033,632        2,982,862        3,004,731     
1.2 other   16,509,468        16,361,513        14,640,501        14,407,878     
2. other securities   33,072            33,072    261,493            261,493 
2.1 structured                                
2.2 other (1)    33,072            33,072    261,493            261,493 
Total   20,562,482        20,395,145    33,072    17,884,856        17,412,609    261,493 

 

(*)  Fair value amounts are shown after deducting issuer risk, which at 30 June 2024 suggested a capital gain of €59.3m (up €136.5m as at 30 June 2023).

 

Debt securities in issue increased from €17.6bn to €20.5bn, on new issuance of €4.8bn, which offset redemptions and buybacks of €2.3bn (generating gains of €0.6m) and other increases (exchange rates, amortized cost and hedging effects) amounting to €0.4bn.

 

The bonds in issue include €61m (€94m in the previous year) related to arbitrage leveraging strategies on derivative basis indexes (skew) mainly linked to credit derivatives, and a minority to interest rate arbitrage, inflation and equity

 

Notes to the accounts | Part B - Notes to the Individual Balance Sheet | 499

 

 

risk (underlying transactions). All these issues involve payment of interest in the form of a coupon (including a premium – extra yield) and full repayment of capital at maturity. In case of the subscriber opting for early repayment, the issuer has the faculty, at its discretion, to choose a repayment price that takes into account the current fair value including that of the underlying transactions. As required by para. 4.3.3 of IFRS 9, the embedded derivative, identified by the right to include the arbitrage value within the repayment price, has been separated by the obligation measured at amortized cost and booked at fair value of underlying transactions through profit or loss.

 

1.4 Breakdown of subordinated debt securities

 

“Outstanding securities” include the following six subordinated Tier 2 issues, for a total of €1,678,987. During the financial year, a subordinated loan of €300m was issued with a 10-year maturity at a mixed rate (fixed 5.25% until 22/4/2029 and variable EUSA 5Y+2.75 until maturity).

 

   30 June 2024 
      Nominal    Carrying 
Issue  ISIN code   Value    amount 
MB SUBORDINATO TV with min 3% 2025  IT0005127508   499,265    502,867 
MB SUBORDINATO 3.75% 2026  IT0005188351   298,478    282,763 
MB SUBORDINATO 1.957% 2029  XS1579416741   50,000    50,850 
MB SUBORDINATO 2.3% 2030  XS2262077675   249,750    237,977 
MB SUBORDINATO TF 10Y Callable  XS2577528016   299,500    305,250 
MB SUBORDINATO 5.25 22 APR 2034  IT0005580573   299,800    299,280 
Total subordinated securities      1,696,793    1,678,987 

 

 500 | Individual financial statements as at 30 June 2024

 

SECTION 2

 

Heading 20: Trading financial liabilities

 

2.1 Trading financial liabilities: product breakdown 

 

   30 June 2024   30 June 2023 
   Nominal or   Fair Value   Fair    Nominal or   Fair Value   Fair 
Transaction Type/Values  notional value   Level1   Level2   Level3   value*   notional value   Level1   Level2   Level3   Value* 
A. Cash liabilities                                        
1. Amounts due to banks   1,744,377    1,696,621    3,688        1,700,309    42,854    34,173    10,552        44,725 
2. Due to customers1    3,337,805    3,216,770    33,759        3,250,529    4,160,964    4,085,164    205        4,085,369 
3. Debt securities                                        
3.1 Bonds                                        
3.1.1 Structured                   X                    X 
3.1.2 Other bonds                   X                    X 
3.2 Other securities                                        
3.2.1 Structured                   X                    X 
3.2.2 Other                   X                    X 
Total (A)   5,082,182    4,913,391    37,447        4,950,838    4,203,818    4,119,337    10,757        4,130,094 
B. Derivative instruments                                                  
1. Financial derivatives       883,298    3,334,236    109,046            848,671    4,891,728    304,823     
1.1 Trading   X    883,298    3,334,236    109,046(2)     X    X    848,671    4,891,670    304,823(2)     X 
1.2 Related to the fair value option   X                X    X                X 
1.3 Other   X                X    X        58        X 
2. Credit derivatives           389,172    120                416,933         
2.1 Trading   X        389,172    120    X    X        416,933        X 
2.2 Related to the fair value option   X                X    X                X 
2.3 Other   X                X    X                X 
Total (B)   X    883,298    3,723,408    109,166    X    X    848,671    5,308,661    304,823    X 
Total (A+B)   X    5,796,689    3,760,855    109,166    X    X    4,968,008    5,319,418    304,823    X 

 

*Fair value calculated excluding changes in value due the issuer’s different credit quality.
1 This item contained some transactions reclassified in liability item 30.

2 This includes €41,000 (€798,000 in June 2023) relating to options traded whose contra-entry was recorded among financial assets held for trading.

 

Notes to the accounts | Part B - Notes to the Individual Balance Sheet | 501

 

SECTION 3

 

Heading 30: Financial liabilities designated at fair value

 

3.1 Financial liabilities designated at fair value: product breakdown

 

 

  Total 30 June 2024   Total 30 June 2023 
   Nominal   Fair value   Fair    Nominal   Fair value   Fair  
Tipologia operazioni/Valori   Value   Level1   Level2   Level3   value*   Value   Level1   Level2   Level3   value* 
1. Amounts due to banks   8,751            9,532    9,532    7,857            7,857    7,857 
1.1 Structured   8,751            9,532    X    7,857            7,857    X 
1.2 Other                   X                    X 
of which:                                                 
- loan commitments       X    X    X    X        X    X    X    X 
- financial guarantees issued       X    X    X    X        X    X    X    X 
2. Due to customers   1,269,999        1,168,714        1,168,714                     
2.1 Structured   1,269,999        1,168,714        X                    X 
2.2 Other                   X                    X 
of which:                                                
- loan commitments       X    X    X    X        X    X    X    X 
- financial guarantees issued       X    X    X    X        X    X    X    X 
3. Debt securities   3,013,913        2,644,109    342,516    2,986,625    1,615,014        1,497,845    18,339    1,516,184 
3.1 Structured   2,932,965        2,562,209    342,516    X    1,615,014        1,497,845    18,339    X 
3.2 Other   80,948        81,900        X                    X 
Total   4,292,663        3,812,823    352,048    4,164,871    1,622,871        1,497,845    26,196    1,524,041 

 

*Fair value calculated excluding changes in value due the issuer’s different credit quality.

 

The item Financial liabilities designated at fair value increased from €1,524m to €4,164.9m following the reclassification of some transactions previously recorded under liability item 20 (€1,168.7m) in addition to the new operations in certificates (390 new issues for a value of €1,398.4m, including €581.8m credit linked and €788.5m with underlying shares).

 

At 30 June, the total amount of certificates stood at €2,848.9m (€867.6m at 30 June 2023), including €1,122.9m credit linked and €1,698m equity (€591.9m and €266.6m, respectively). The positions classified at level 3 amounted to €380.3m, which include €268.2m in autocallable equity.

 

This operation is in addition to the delta-one products (without Mediobanca risk) in place for €635m (€588.4m); finally, paper issues of €137.7m, which includes €67.9m callable, should be added.

 

 502 | Individual financial statements as at 30 June 2024

 

SECTION 4

 

Heading 40: Hedging derivatives

 

4.1 Hedging derivatives: breakdown by hedge type and hierarchy level 

 

   Fair value   30 June 2024   Nominal
Value 30
   Fair value   30 June 2023   Nominal
Value 30 June
 
   Level1   Level2   Level3   June 2024   Level1   Level2   Level3   2023 
A. Financial derivatives       1,458,738        48,087,224        2,116,467        45,417,637 
1) Fair value       1,458,738        48,087,224        2,116,467        45,417,637 
2) Cash flow                                
3) Foreign investments                                
B. Credit derivatives                                
1) Fair value                                
2) Cash flow                                
Total       1,458,738        48,087,224        2,116,467        45,417,637 

 

4.2 Hedging derivatives: breakdown by portfolio hedged and hedge type

   

   Fair Value         
   Specific                 
Transaction / Type of  debt securities and interest   equity securities and stock   currencies                   Cash flows   Foreign 
hedging  rates   indexes   and gold   credit   commodities   other   Generic   Specific   Generic   investments 
1. Financial assets measured at fair value through other comprehensive income                          X      X   X 
2. Financial assets measured at amortized cost   59.757    X            X    X    X        X    X 
3. Portfolio   X    X    X    X    X    X        X        X 
4. Other transactions                           X        X     
Total assets   59.757                                     
1. Financial liabilities   1.398.981    X                    X        X    X 
2. Portfolio   X    X    X    X    X    X                X 
Total liabilities   1.398.981                                    - 
1. Expected transactions   X    X    X    X    X    X    X        X    X 
2. Financial assets and liabilities portfolio   X    X    X    X    X    X        X         

 

Notes to the accounts | Part B - Notes to the Individual Balance Sheet | 503

 

SECTION 6

 

Heading 60: Tax liabilities

 

Please see asset section 10.

 

SECTION 8

 

Heading 80: Other liabilities

 

8.1 Other liabilities: breakdown

  

   30 June 2024   30 June 2023 
1. Payment agreements classified as liabilities under IFRS 2        
2. Core liabilities or invoices to be received   59,265    44,851 
3. Accrued income other than capitalized income on the related financial assets   4,810    3,026 
4. Amounts due to revenue authorities   72,949    35,216 
5. Amounts due to staff   171,229    182,508 
6. Other items   359,072    112,390 
- coupons and dividends pending collection   26,414    3,557 
- available sums payable to third parties   273,028    36,070 
- tax consolidation   59,560    27,301 
- miscellaneous items   70    45,462 
Total   667,325    377,991 

 

SECTION 9

 

Heading 90: Provision for statutory end-of-service payments

 

9.1 Provision for statutory end-of-service payments: changes during the period

  

   Total   Total 
   30 June 2024   30 June 2023 
A. Balance at start of period   5.050    5.400 
B. Increases   775    853 
B.1 Provision for the year   304    209 
B.2 Other changes   471    644 
C. Decreases   1.038    1.203 
C.1 End-of-service payments   672    489 
C.2 Other changes1    366    714 
D. Balance at end of period   4.787    5.050 
Total   4.787    5.050 

 

1  This consists in the transfer to Provision for statutory end-of-service payments held at the INPS treasury.

 

 504 | Individual financial statements as at 30 June 2024

 

9.2 Other information

 

The Provision for statutory end-of-service payments calculated according to the rules laid down in the Italian Civil Code amounted to €5,068,000 (€5,332,000). No new accruals were recorded during the year under review (service cost).

 

The Provision for statutory end-of-service payments is a defined benefit scheme, and the actuarial model used to account for it relies on a series of assumptions, both demographic and economic in nature.

 

For some of the assumptions used, reference has been made directly to the Group’s own experience (e.g. estimates of disability incidence, frequency of early retirement, annual increase in rate of remuneration, frequency with which advance withdrawals from the provision are requested, etc.), while for the others, account has been taken of the relevant best practice (e.g. the mortality rate has been determined using the IPS55 life tables, whereas the retirement age has been determined taking into account the most recent legislation in this area); for the discount rate, the iBoxx Eurozone Corporate AA index of 3.47% as at 30 June 2024 has been used for similar companies to those being valued (3.67% as at 30 June 2023), while the long-term inflation rate went from 2.5% to 2%.

 

SECTION 10

 

Heading 100: Provisions for risks and charges

 

10.1 Provisions for risks and charges: breakdown

  

Items/Values  30 June 2024   30 June 2023 
1. Provisions for credit risk related to commitments and financial guarantees issued   22,814    30,406 
2. Provision to other commitments and other guarantees issued        
3. Company retirement plans        
4. Other provisions for risks and charges   51,823    67,325 
4.1 legal and tax disputes        
4.2 personnel expenses   4,338    10,981 
4.3 Other   47,485    56,344 
Total   74,637    97,731 

 

IAS37 requires provisions to be set aside in cases where there is an obligation, whether actual, legal or implicit, the amount of which may be reliably determined and the resolution of which is likely to entail a cash outflow for the

 

Notes to the accounts | Part B - Notes to the Individual Balance Sheet | 505

 

 

company. The amount of the provision is determined from the best estimate, based on experience of similar operations or the opinion of independent experts. The provisions are revised on a regular basis in order to reflect the best current estimate.

 

As at 30 June, the item “Provisions for risks and charges” amounted to €74.6m (down compared to €97.7m in the previous year) with the component of commitments and guarantees issued decreasing from €30.4m to €22.8m. The component “Other provisions for risks and charges” dropped from €67.3m to €51.8m: in the personnel portion (from €11m to €4.3m) after withdrawals to encourage turnover (€8.2m); the portion to cover legal/tax disputes and other liabilities went from €56.3m to €47.5m after transfers of €9m to the profit and loss account in light of the trend in ongoing legal/tax disputes.

 

With regard to disputes pending with the Italian Tax Authorities, the following should be noted:

 

with reference to the alleged failure to apply transparency tax rules as required by the legislation on Controlled Foreign Companies (CFC) on income earned by CMB Monaco and CMG Monaco in the three financial years 2013, 2014 and 2015 (for a total of €53.8m in disputed taxes, plus penalties and interest), three disputes were pending against the tax authorities. In detail, in the dispute relating to financial year 2013/2014 (2013 profits, tax of €21.3m, plus penalties and interest) and in the combined disputes relating to financial years 2014/2015 and 2015/2016 (respectively 2014 and 2015 profits for a total tax of €32.5m, plus penalties and interest), the Bank won the first and second instances of judgement. With regard to the first year, a hearing before the Court of Cassation is pending; with regard to the combined years, on 18 June last, the Italian Revenue Agency notified an appeal before the Court of Cassation, against which Mediobanca filed a counter-appeal on 12 July;

 

with reference to Mediobanca’s alleged failure to withhold taxes from interest paid in the context of a secured financing transaction between the financial years 2014/2015 and 2017/2018 (for a total of €8.1m, plus penalties and interest), the filing of the ruling for 2014 is pending with regard to the first two years after losing the first instance of judgement, while with regard to 2015, following the Bank’s victory in the second instance, on 10 April last the second instance Court administration certified that the ruling had become final as the terms for filing the appeal before the Court of Cassation

 

 506 | Individual financial statements as at 30 June 2024

 

 

had expired; in the meantime, with regard to the third year, following the Bank’s victory in the first instance, the Italian Revenue Agency notified an appeal on 14 May last, against which the Bank filed a counter-appeal; the session to hear the case was set for 8 November next. Finally, with regard to the last disputed year, a hearing was held on 22 April and the ruling is pending.

 

The provisions for risks and charges set aside in the financial statements adequately cover the amount mentioned above.

 

10.2 Provisions for risks and charges: changes during the period

  

   Provision
to other
commitments and
other guarantees
issued
   Retirement plans   Other provisions
for risks and
charges
   Total 
A. Balance at start of period           67,325    67,325 
B. Increases           2,585    2,585 
B.1 Provision for the year           2,585    2,585 
B.2 Changes due to the passage of time                
B.3 Changes due to discount rate differences                
B.4 Other changes                
  - of which, business combinations                
C. Decreases           18,087    18,087 
C.1 Use during the year           18,087    18,087 
C.2 Changes due to discount rate differences                
C.3 Other changes                
  - of which, business combinations                
D. Balance at end of period           51,823    51,823 

 

10.3 Provisions for credit risk related to commitments and financial guarantees issued

  

   Provisions for credit risk related to commitments and financial
guarantees issued
 
   Stage 1   Stage 2   Stage 3   Purchased
or originated
credit impaired
   Total 
1. Loan commitments   6,612    2,072    334        9,018 
2. Financial guarantees issued   12,732    1,064            13,796 
Total   19,344    3,136    334        22,814 

 

Notes to the accounts | Part B - Notes to the Individual Balance Sheet | 507

 

SECTION 12

 

Headings 110, 130, 140, 150, 160, 170 and 180: Net equity

 

12.1 “Capital” and “treasury shares”: breakdown

 

For the breakdown of the Bank’s capital, please see part F of the notes to the accounts.

 

12.2 Capital – Number of shares: annual changes

 

Item/Type  Ordinary 
A. Shares in issue at the start of the period   849,257,474 
- fully paid up   849,257,474 
- partially paid up    
A.1 Treasury shares (-)   (8,454,929)
A.2 Shares in issue: opening balance   840,802,545 
B. Increases   2,846,821 
B.1 Newly issued shares   691,350 
- for consideration    
- business mergers    
- bond conversions    
- exercise of warrants    
- other    
- free of charge:   691,350 
- to employees   691,350 
- to directors    
- other    
B.2 Disposals of treasury shares   2,155,471 
B.3 Other changes    
C. Decreases   (17,000,000)
C.1 Cancellation    
C.2 Purchases of treasury shares   (17,000,000)
C.3 Disposals of businesses    
C.4 Other changes    
D. Shares in issue: closing amount   826,649,366 
D.1 Treasury shares (+)   (6,299,458)
D.2 Shares held at the end of the period   832,948,824 
- fully paid up   832,948,824 
- partially paid up    

 

On 11 June last, an additional 17,000,000 treasury shares were cancelled, keeping in the portfolio the number needed to cover its performance share plans and other commitments. As part of the performance share plans, 1,981,127 shares were allocated during the year, 1,289,777 of which through treasury

 

 508 | Individual financial statements as at 30 June 2024

 

 

shares and 691,350 through a capital increase. The item “Disposals of treasury shares” includes shares to cover the deferred portion of the plan to acquire the shareholding in the English partnership Arma Partners LLP.

 

The changes in the Reserve for treasury shares during the year were as follows:

 

Items/Values  Number of shares   Value (€’000) 
Reserve for treasury shares: opening amount at 30 June 2023   8,454,929    78,876 
Increases   17,000,000    197,959 
- Newly issued shares        
- Purchases of treasury shares   17,000,000    197,959 
- Other changes        
Decreases   19,155,471    208,006 
- Cancellations   17,000,000    185,743 
- Disposals of treasury shares   2,155,471    22,263 
- Other changes        
Reserve for treasury shares: closing amount at 30 June 2024   6,299,458    68,828 

 

12.4 Net equity: availability and permitted distribution of reserves (Article 2427 of the Italian Civil Code, paragraph 7-bis)

 

When allocating the 2022/23 profits, €210m were set aside to a specific equity reserve pursuant to Law No. 136/2023 “Extra-profits”; the amount was calculated as a multiple (x 2.5) of the calculated tax.

 

Last May 7, the Shareholders’ Meeting of CMB approved an extraordinary payout of €320m, included in the item Dividends; this operation fell within the option under Article 1 of Law No. 197/2022, which in the previous year had led to the allocation of a substitute tax of €19.2m (paid in January) calculated at the reduced rate of 6%. Such tax relief provides for the creation, when allocating the 2023/24 profits, of a specific equity reserve that will be unavailable for at least two financial years.

 

Notes to the accounts | Part B - Notes to the Individual Balance Sheet | 509

 

            Summary of uses in the three 
           Available   previous financial years 
   Amount   Permitted use   portion   to cover losses   Other 
Share capital   444,515                 
Share premium   2,195,606    A – B – C    2,195,606         
Reserves                         
- Legal reserve   88,834    B    88,834         
- Reserve under the articles of association   188,163    A – B – C    188,163        1,062,031 
- Treasury shares reserve   68,828                 
- Other reserves   966,713    A – B – C    966,713         
- Reserve under Article 26 of Law-Decree No. 104 of 10/8/23   210,000                 
- Unavailable reserves under Article 6 of Legislative Decree No. 38 of 28/2/05   26,088                 
Revaluation reserves                         
- FVOCI revaluation reserve   111,985                 
- Financial liabilities measured at FV through profit or loss   (32,142)                
- Hedging of cash flows   1,820                 
- Extraordinary revaluation laws   9,632    A – B – C    9,632           
- Provision for statutory end-of-service payments   (2,313)                
- Treasury shares   (68,828)                
Interim dividend   (421,150)                    
Total   3,787,751        3,448,948        1,062,031 
Non-distributable portion           88,834         
Residual distributable portion           3,360,114         

 

Legend:

 

A: to increase capital

 

B: to cover losses

 

C: to be distributed to shareholders

 

 510 | Individual financial statements as at 30 June 2024

 

Other Information

 

1. Commitments and financial guarantees issued (other than those designated at fair value)

 

   Nominal value of commitments and financial        
   guarantees issued        
   Stage 1   Stage 2   Stage 3    Purchased
or originated
credit
impaired
    Total
30 June 2024
    Total
30 June 2023
 
1. Loan commitments1    18,375,214    54,779    1,515        18,431,508    12,664,536 
a) Central Banks                       2,901 
b) Public administrations   7,891,708                7,891,708    3,158,938 
c) Banks   289,898                289,898    537,139 
d) Other financial companies   1,911,242    33,230            1,944,472    1,392,761 
e) Non-financial companies   7,766,095    21,549    1,515        7,789,159    7,055,803 
f) Households   516,271                516,271    516,994 
2. Financial guarantees issued   8,046,664    57,416            8,104,080    6,376,637 
a) Central Banks                        
b) Public administrations   40,000                40,000    120,000 
c) Banks   3,385,544                3,385,544    2,209,846 
d) Other financial companies   2,603,635    52,418            2,656,053    1,404,880 
e) Non-financial companies   2,001,814    4,998            2,006,812    2,626,997 
f) Households   15,671                15,671    14,914 

 

1  As of the current financial year, the item includes syndicated underwriting commitments.

 

2. Other commitments and guarantees issued

 

   Nominal Value 
   Total   Total 
   30 June 2024   30 June 2023 
1. Other guarantees issued   103,278    140,692 
of which: non-performing        
a) Central Banks        
b) Public administrations        
c) Banks   864    2,690 
d) Other financial companies   41,245    47,708 
e) Non-financial companies   19,071    24,803 
f) Households   42,098    65,491 
2. Other commitments        
of which: non-performing        
a) Central Banks        
b) Public administrations        
c) Banks        
d) Other financial companies        
e) Non-financial companies        
f) Households        

 

Notes to the accounts | Part B - Notes to the Individual Balance Sheet | 511

 

3. Assets established as collateral to secure own liabilities and commitments

 

  Amount   Amount 
Portfolios  30 June 2024   30 June 2023 
1. Financial assets measured at fair value through profit or loss   6,815,242    2,957,778 
2. Financial assets measured at fair value through other comprehensive income   4,495,654    2,278,435 
3. Financial assets measured at amortized cost   5,980,491    9,978,489 
4. Tangible assets        
of which: tangible assets that constitute inventories        
5. Equity Investments   117,386    22,765 

 

4. Assets managed on behalf of third parties

 

  Amount   Amount 
Type of service  30 June 2024   30 June 2023 
1. Orders execution on behalf of customers          
a) purchases   62,573,919    50,053,053 
1. settled   62,499,517    49,699,700 
2. unsettled   74,402    353,353 
b) sales   52,948,884    41,972,612 
1. settled   52,874,482    41,619,259 
2. unsettled   74,402    353,353 
2. Individual asset management1    10,846,156    10,259,551 
3. Custody and administration of securities          
a) third-party securities deposited: relating to depositary banks activities (excluding portfolio management)   10,683,292    9,097,812 
1. securities issued by the bank that prepares the financial statements   1,425,048    2,524,304 
2. other securities   9,258,244    6,573,508 
b) third-party securities deposited (excluding portfolio management): other   13,132,130    11,098,885 
1. securities issued by the bank that prepares the financial statements        
2. other securities   13,132,130    11,098,885 
c) third-party securities deposited with third parties   1,475,281    1,189,715 
d) own securities deposited with third parties   14,055,972    15,476,042 
4. Other transactions        

 

(1)  Entirely attributable to the Private Banking division.

 

 512 | Individual financial statements as at 30 June 2024

 

5. Financial assets subject to netting arrangements or master netting or similar agreements

 

       Amount of   Net amount of Related amounts not offset       
   Gross amount   financial   financial      Cash deposits   Net amount   Net amount 
   of financial   liabilities   assets   Financial   received as   (f=c-d-e)   30 June 
Instrument type  assets (a)   offset (b) (1)   stated (c=a-b)   instruments (d)   guarantee (e)   30 June 2024   2023 
1. Derivatives   869,567        869,567    316,588    138,729    414,250     
2. Reverse repos   5,375,005        5,375,005    5,375,005             
3. Securities lending                            
4. Other                            
Total 30 June 2024   6,244,572        6,244,572    5,691,593    138,729    414,250    X 
Total 30 June 2023   6,888,957    1,870,581    5,018,376    4,839,117    76,675    X    102,584 

 

(1) Relating to transactions in derivative financial instruments with a central counterparty with which there is a master netting agreement in place with daily income computation.

 

6. Financial liabilities subject to netting arrangements or master netting or similar agreements

 

       Amount of    Net amount of   Related amounts not offset        Net amount  
   Gross amount   financial    financial            Cash deposits   Net amount     (f=c-d-e)  
Instrument type  of financial
liabilities (a)
   assets
offset (b)
   liabilities
stated (c=a-b)
   Financial
instruments (d)
   established as guarantee (e)   (f=c-d-e)
30 June 2024
   30 June
2023
 
1. Derivatives   2,869,832    760,539    2,109,293    647,224   1,292,215    169,854    568,163 
2. Reverse repos   10,096,131        10,096,131    10,096,131            
3. Securities lending                           
4. Other                           
Total 30 June 2024   12,965,963    760,539    12,205,424    10,743,355   1,292,215    169,854    X 
Total 30 June 2023   7,630,701        7,630,701    5,470,640   1,591,898    X    568,163 

 

Notes to the accounts | Part B - Notes to the Individual Balance Sheet | 513

 

7. Securities lending transactions1 

 

  Type of security 
   Government   Bank   Other 
Type of securities lending transaction  securities   securities   securities 
1. Cash-collateralized securities lending received from:       97,823    173,604 
a) Banks       96,965    173,263 
b) Financial institutions       858    341 
c) Customers            
2. Cash-collateralized securities lending provided to:       (236,955)   (605,806)
a) Banks       (236,955)   (605,806)
b) Financial institutions            
c) Customers            
Total securities lending (book value)       (139,132)   (432,202)

 

  Type of security 
   Government   Bank   Other 
Type of securities lending transaction  securities   securities   securities 
1. Security-collateralized or non-collateralized securities lending received from:   86,121    888,825    3,847,512 
a) Banks   1,454    598,027    3,847,435 
b) Financial institutions   84,667    290,798     
c) Customers           77 
2. Security-collateralized or non-collateralized securities lending provided to:   (1,928,711)   (965,917)   (1,640,134)
a) Banks   (707,223)   (965,917)   (1,040,581)
b) Financial institutions   (1,221,488)       (599,553)
c) Customers           —- 
Total securities lending (fair value)   (1,842,590)   (77,092)   2,207,378 

 

(1) The tables below illustrate the Bank’s operations in securities lending (and borrowing), broken down by type of instrument (government securities, bank securities and others), market counterparty (banks, financial intermediaries and clients) and form (loan secured by cash, other instruments, or unsecured).

Securities lending transactions for which collateral is put up in the form of cash fully available to the borrower are represented in the balance sheet as amounts due to or from banks or customers under the heading “repos”. Securities lending transactions for which collateral is put up in the form of other instruments, or which are unsecured, are represented as “off-balance-sheet exposures”.

 

 514 | Individual financial statements as at 30 June 2024

 

Part C - Notes to the Profit and Loss Account

 

SECTION 1

 

Headings 10 and 20: Net interest income

 

1.1 Interest and similar income: breakdown

 

           12 mths   12 mths 
   Debt       Other   ended   ended 
Items/Instrument type  securities   Loans   transactions   30/6/24   30/6/23 
1. Financial assets measured at fair value through profit or loss:   88,700    23,073        111,773    90,829 
1.1 Financial assets held for trading   83,559    2,664        86,223    70,188 
1.2 Financial assets designated at fair value   5,097    20,409        25,506    20,460 
1.3 Other financial assets mandatorily measured at fair value   44            44    181 
2. Financial assets measured at fair value through other com-prehensive income   217,787        X    217,787    129,128 
3. Financial assets measured at amortized cost:   146,282    2,310,670        2,456,952    1,519,122 
3.1 Due from banks   48,548    1,409,471    X    1,458,019    896,094 
3.2 Due from customers   97,734    901,199    X    998,933    623,028 
4. Hedging derivatives   X    X             
5. Other assets   X    X    145    145    396 
6. Financial liabilities (1)    X    X    X    1    756 
Total   452,769    2,333,743    145    2,786,658    1,740,231 
of which: interest income on impaired assets       875        875    2,443 
of which: interest income from finance leases   X    7    X    7    1 

 

(1)  Heading 6 “Financial liabilities” includes interest expense accrued as a result of negative rates.

 

1.2 Interest and similar income: other information

 

1.2.1. Interest income on financial assets in foreign currencies

 

As at 30 June 2024, the balance of the account included €145.7m in connection with financial assets in foreign currencies.

 

Notes to the accounts | Part C – Notes to the Profit and Loss Account | 515

 

1.3 Interest expenses and similar charges: breakdown

 

           12 mths   12 mths 
           Other   ended   ended 
Items/Instrument type  Payables   Account   transactions   30/6/24   30/6/23 
1. Financial liabilities measured at amortized cost   (1,342,227)   (559,610)       (1,901,837)   (1,092,909)
1.1 Due to central banks   (96,882)   X    X    (96,882)   (105,542)
1.2 Due to banks   (982,133)   X    X    (982,133)   (494,729)
1.3 Due to customers   (263,212)   X    X    (263,212)   (96,332)
1.4 Securities in issue   X    (559,610)   X    (559,610)   (396,306)
2. Trading financial liabilities                    
3. Financial liabilities designated at Fair Value   (3,820)   (24,637)       (28,457)   (21,418)
4. Other liabilities and funds   X    X    (350)   (350)    
5. Hedging derivatives (1)    X    X    (494,097)   (494,097)   (290,974)
6. Financial assets (2)    X    X    X        (2,394)
Total   (1,346,047)   (584,247)   (494,447)   (2,424,741)   (1,407,695)
of which: interest expense relating to lease liabilities   (350)   X    X    (350)   (253)

 

(1) Mostly hedges of funding.

(2) The heading “6 Financial assets” includes interest expense accrued as a result of negative rates.

 

1.4 Interest expense and similar charges: other information

 

As at 30 June 2024, the balance of the account included €121m in connection with financial liabilities in foreign currencies.

 

1.5 Margins on hedging transactions

 

  12 mths ended   12 mths ended 
Items  30/6/24   30/6/23 
A. Positive margins on hedging transactions   2,032,509    744,426 
B. Negative margins on hedging transactions   (2,526,606)   (1,035,400)
C. Net balance (A-B)   (494,097)   (290,974)

 

 516 | Individual financial statements as at 30 June 2024

 

SECTION 2

 

Heading 40 and 50: Net fee and commission income

 

2.1 Fee and commission income: breakdown

 

   12 mths ended   12 mths ended 
Type of service/Values  30/6/24   30/6/23 
a) Financial instruments   141.470    134.289 
1. Placement of securities   75.015    78.675 
1.1 Underwriting commitment and/or based on an irrevocable commitment        
1.2 Without an irrevocable commitment   75.015    78.675 
2. Receipt and sending of orders and execution of orders on behalf of clients   85    73 
2.1 Receipt and sending of orders for one or more financial instruments   85    73 
2.2 Execution of orders on behalf of customers        
3. Other commissions associated with activities linked to financial instruments   66.370    55.541 
of which: trading on own account   27.148    20.167 
of which: management of individual portfolio   39.222    35.374 
b) Corporate Finance   121.444    103.760 
1. Advice on mergers and acquisitions   121.444    103.760 
2. Treasury services        
3. Other fees associated with corporate finance services        
c) Advice on investments   8.508    4.343 
d) Netting and settlement        
e) Custody and administration   19.883    16.497 
1. Depository bank   7.458    7.458 
2. Other fees associated with custody and administration   12.425    9.039 
f) Central administrative services for collective portfolio management        
g) Fiduciary activities        
h) Payment services   437    469 
1. Current accounts   421    457 
2. Credit cards        
3. Debit cards and other payment cards        
4. Wire transfers and payment orders   16    12 
5. Other fees linked to payment services        
i) Distribution of third-party services   13.088    14.119 
1. Collective portfolio management   5.927    5.056 
2. Insurance products   5.192    6.520 
3. Other products   1.969    2.543 
of which: individual portfolio management   1.969    2.543 
j) Structured finance        
k) Securitization servicing        
l) Loan commitments   76.819    65.630 
m) Financial guarantees issued   10.034    8.272 
of which: credit derivatives        
n) Financing transactions        
of which: factoring services        
o) Currency negotiation        
p) Commodities        
q) Other fee and commission income   19.347    8.268 
of which: for the management of multilateral trading facilities        
of which: for the management of organized trading systems        
Total   411.030    355.647 

 

Notes to the accounts | Part C – Notes to the Profit and Loss Account | 517

 

2.2 Fee and commission income: product and service distribution channels

 

   12 mths ended   12 mths ended 
Channel/Amounts  30/6/24   30/6/23 
a) at own branches:   127,325    128,168 
1. portfolio management   39,222    35,374 
2. placement of securities   75,015    78,675 
3. services and products of third parties   13,088    14,119 
b) off-site supply:        
1. portfolio management        
2. placement of securities        
3. services and products of third parties        
c) other distribution channels:        
1. portfolio management        
2. placement of securities        
3. services and products of third parties        

 

2.3 Fee and commission expenses: breakdown

 

   12 mths ended   12 mths ended 
Services/Amounts  30/6/24   30/6/23 
a) Financial instruments   (29,300)   (21,875)
of which: securities trading   (6,998)   (5,810)
of which: financial instruments placement   (8,039)   (4,265)
of which: management of individual portfolio   (14,263)   (11,800)
- Own assets   (14,263)   (11,800)
- Under mandate to third parties        
b) Netting and settlement        
c) Custody and administration   (2,980)   (2,690)
d) Collection and payment services   (9,320)   (7,292)
of which: credit cards, debit cards and other payment cards        
e) Securitization servicing        
f) Borrowing commitments        
g) Financial guarantees received        
of which: credit derivatives        
h) Off-site distribution of financial instruments, products and services        
i) Currency negotiation        
j) Other fee and commission expense   (24,879)   (28,108)
Total   (66,479)   (59,965)

 

 518 | Individual financial statements as at 30 June 2024

 

SECTION 3

 

Heading 70: Dividends and similar income

 

3.1 Dividends and similar income: breakdown

 

   12 mths ended 30/6/24   12 mths ended 30/6/23 
Items/Income  Dividends   Similar income   Dividends   Similar income 
A. Financial assets held for trading   108,278    4    62,524    24 
B. Other financial assets mandatorily measured at fair value       17,914        10,451 
C. Financial assets measured at fair value through other comprehensive income   24,480        18,472     
D. Equity investments   1,041,178        527,323     
Total   1,173,936    17,918    608,319    10,475 

 

SECTION 4

 

Heading 80: Net trading income

 

4.1 Net trading income: breakdown

 

   Capital   Trading   Capital   Trading   Net income 
Transactions/Income components  gains (A)   income (B)   losses (C)   losses (D)   [(A+B) - (C+D)] 
1. Financial assets held for trading   226,103    438,357    (224,123)   (300,027)   140,310 
1.1 Debt securities   70,183    186,567    (57,673)   (181,852)   17,225 
1.2 Equity securities   155,904    250,087    (166,373)   (116,892)   122,726 
1.3 UCIT units       1,703    (77)   (1,283)   343 
1.4 Loans   16                16 
1.5 Other                    
2. Trading financial liabilities                    
2.1 Debt securities                    
2.2 Liabilities                    
2.3 Other                    
3. Financial assets and liabilities: currency exchange gains/losses   X    X    X    X    7,482 
4. Derivative instruments   2,290,369    2,918,346    (1,790,686)   (3,532,962)   (119,124)
4.1 Financial derivatives:   1,963,172    2,485,649    (1,498,980)   (3,138,902)   (193,252)
- On debt securities and interest rates1    1,481,728    1,690,151    (757,807)   (2,365,715)   48,357 
- On equity securities and stock indexes   459,609    779,795    (724,210)   (755,044)   (239,850)
- On currencies and gold   X    X    X    X    (4,191)
- Other   21,835    15,703    (16,963)   (18,143)   2,432 
4.2 Credit derivatives   327,197    432,697    (291,706)   (394,060)   74,128 
of which: natural hedges related to the fair value option   X    X    X    X     
Total   2,516,472    3,356,703    (2,014,809)   (3,832,989)   28,668 

 

(1)  Of which €35,069 in positive margins on interest rate derivatives (a negative €4,776 at 30 June 2023).

 

Notes to the accounts | Part C – Notes to the Profit and Loss Account | 519

 

SECTION 5

 

Heading 90: Net hedging income (expense)

 

5.1 Net hedging income (expense): breakdown

  

   12 mths ended   12 mths ended 
Income components/Amounts  30/6/24   30/6/23 
A. Gains from:          
A.1 Fair value hedging instruments   1,049,562    305,565 
A.2 Hedged asset items (fair value)   389,945    145,523 
A.3 Hedged liability items (fair value)   56,581    615,009 
A.4 Cash flow hedging derivatives        
A.5 Assets and liabilities denominated in foreign currency        
Total gains on hedging activities (A)   1,496,088    1,066,417 
B. Losses on:          
B.1 Fair value hedging instruments   (738,386)   (947,924)
B.2 Hedged asset items (fair value)   (57,316)   (64,485)
B.3 Hedged liability items (fair value)   (699,724)   (50,296)
B.4 Cash flow hedging derivatives        
B.5 Assets and liabilities denominated in foreign currency        
Total losses on hedging activities (B)   (1,495,426)   (1,062,705)
C. Net income (expense) from hedging activities (A-B)   662    3,712 
of which: income (expense) from hedges on net positions        

 

 520 | Individual financial statements as at 30 June 2024

 

SECTION 6

 

Heading 100: Gains (losses) on disposals/repurchases

 

6.1 Gains (losses) on disposals/repurchases: breakdown

  

   12 mths ended 30/6/24   12 mths ended 30/6/23 
Items/Income components  Gains   Losses   Net gain (loss)   Gains   Losses   Net gain (loss) 
A. Financial assets                              
1. Financial assets measured at amortized cost   6,992    (1,511)   5,481    8,309    (37)   8,272 
1.1 Due from banks   5        5             
1.2 Due from customers   6,987    (1,511)   5,476    8,309    (37)   8,272 
2. Financial assets measured at fair value through other comprehensive income   11,940    (5,509)   6,431    7,117    (13,856)   (6,739)
2.1 Debt securities   11,940    (5,509)   6,431    7,117    (13,856)   (6,739)
2.2 Loans                        
Total assets (A)   18,932    (7,020)   11,912    15,426    (13,893)   1,533 
B. Financial liabilities measured at amortized cost                              
1. Due to banks                        
2. Due to customers                        
3. Securities in issue   3,889    (3,290)   599    7,489    (687)   6,802 
Total liabilities (B)   3,889    (3,290)   599    7,489    (687)   6,802 

 

Notes to the accounts | Part C – Notes to the Profit and Loss Account | 521

 

SECTION 7

 

Heading 110: Net income (expense) from other financial assets and liabilities measured at fair value through profit or loss

 

7.1Net change in the value of other financial assets and liabilities measured at fair value through profit or loss: breakdown of financial assets and liabilities designated at fair value

  

Transactions/ Income components  Capital gains
(A)
   Gains on disposal
(B)
   Capital losses
(C)
   Losses on disposal
(D)
   Net income
(expense)
[(A+B) - (C+D)]
 
1. Financial assets   40,740    6,015    (604)   (19)   46,132 
1.1 Debt securities   507    6,015    (604)   (19)   5,899 
1.2 Loans   40,233                40,233 
2. Financial liabilities   153,185    23    (100,195)   (85,971)   (32,958)
2.1 Securities in issue (1)    42,218    23    (95,341)   (85,971)   (139,071)
2.2 Due to banks   62        (627)       (565)
2.3 Due to customers (2)    110,905        (4,227)       106,678 
3. Foreign-currency denominated financial assets and liabilities: currency exchange gains/losses   X    X    X    X    (263)
Total   193,925    6,038    (100,799)   (85,990)   12,911 

 

(1)  Valuation that includes any certificates issued.

(2) Relating to financing linked to securities exchange transactions with insurance counterparties.

 

Both cases are covered by derivatives and other financial instruments whose value is measured under heading 80.

 

7.2Net change in the value of other financial assets and liabilities measured at fair value through profit or loss: breakdown of other financial assets mandatorily measured at fair value

  

Transactions/Income components  Capital gains
(A)
   Gains on disposal
(B)
   Capital losses
(C)
   Losses on disposal
(D)
   Net income
(expense)
[(A+B) - (C+D)]
 
1. Financial assets   30,876    67    (14,463)   (96)   16,384 
1.1 Debt securities       7    (97)   (31)   (121)
1.2 Equity securities   1,020                1,020 
1.3 UCIT units   29,856    60    (14,366)   (65)   15,485 
1.4 Loans                    
2. Foreign-currency denominated financial assets: currency exchange gains/losses   X    X    X    X    (374)
Total   30,876    67    (14,463)   (96)   16,010 

 

 522 | Individual financial statements as at 30 June 2024

 

SECTION 8

 

Heading 130: Net value adjustments (write-backs) for credit risk

 

8.1Net value adjustments for credit risk related to financial assets measured at amortized cost: breakdown

  

   Value adjustments1    Write-backs2          
Transactions/Income          Stage 3   Purchased or originated credit impaired assets               Purchased or originated credit impaired    12 mths ended   12 mths ended 
Components  Stage 1   Stage 2   Write-offs   Other   Write-offs   Other   Stage 1   Stage 2   Stage 3   assets   30/6/24   30/6/23 
A. Due from banks   (10,441)                       10,318                (123)   (583)
- Loans   (9,632)                       9,383                (249)   (719)
- Debt securities   (809)                       935                126    136 
B. Due from customers   (9,386)   (16,532)       (3,351)           16,232    8,735    1,425        (2,877)   (53,444)
- Loans   (6,690)   (10,877)       (3,351)           13,535    3,914    1,425        (2,044)   (50,257)
- Debt securities   (2,696)   (5,655)                   2,697    4,821            (833)   (3,187)
Total   (19,827)   (16,532)       (3,351)           26,550    8,735    1,425        (3,000)   (54,027)

 

8.2Net value adjustments for credit risk related to financial assets measured at fair value through other comprehensive income: breakdown

 

   Value adjustments1    Write-backs2          
Transactions/Income          Stage 3   Purchased or originated credit impaired assets               Purchased or originated credit impaired    12 mths ended   12 mths ended 
Components  Stage 1   Stage 2   Write-offs   Other   Write-offs   Other   Stage 1   Stage 2   Stage 3   assets   30/6/24   30/6/23 
A. Debt securities   (5,853)   (379)                   3,491    743            (1,998)   716 
B. Loans                                                
- To customers                                                
- To banks                                                
Total   (5,853)   (379)                   3,491    743            (1,998)   716 

 

Notes to the accounts | Part C – Notes to the Profit and Loss Account | 523

 

SECTION 10

 

Heading 160: Administrative expenses

 

10.1 Personnel costs: breakdown

  

   12 mths ended   12 mths ended 
Type of expense/Amounts  30/6/24   30/6/23 
1) Employees:   (298,000)   (278,433)
a) wages and salaries   (220,789)   (204,054)
b) social security contributions   (45,481)   (47,184)
c) end-of-service payments   (304)   (209)
d) social security costs        
e) provision for statutory end-of-service payments   (8,294)   (8,765)
f) provision for retirement plans and similar provisions:        
- defined-contribution        
- defined-benefit        
g) payments to external supplemental pension funds:   (7,431)   (7,445)
- defined-contribution   (7,431)   (7,445)
- defined-benefit        
h) expenses resulting from share-based payments   (12,271)   (7,264)
i) other employees’ benefits   (3,430)   (3,512)
2) Other staff in service   (5,053)   (4,088)
3) Directors and Statutory Auditors   (4,948)   (4,666)
4) Early retirement costs   (2,952)   (3,042)
5) Recoveries of expenses for employees seconded to other companies   1,018    1,429 
6) Reimbursements of expenses for third-party employees seconded to the company        
Total   (309,935)   (288,800)

 

10.2 Average number of employees by category

 

   12 mths ended   12 mths ended 
   30/6/24   30/6/23 
Employees:          
a) Senior executives   327    299 
b) Middle managers   683    650 
c) Other employees   145    139 
Other staff   115    111 
Total   1,270    1,199 

 

 524 | Individual financial statements as at 30 June 2024

 

10.5 Other administrative expenses: breakdown

  

   12 mths ended   12 mths ended 
Type of service/Values  30/6/24   30/6/23 
OTHER ADMINISTRATIVE EXPENSES          
- legal, tax and professional services   (41,791)   (35,800)
- loan recovery activity        
- marketing and communications   (7,309)   (5,629)
- real property expenses   (5,628)   (4,893)
- EDP   (100,663)   (87,046)
- info-providers   (30,898)   (27,785)
- bank charges, collection and payment fees   (1,169)   (1,372)
- operating expenses   (7,512)   (6,851)
- other personnel costs   (7,365)   (5,754)
- other (1)    (22,184)   (53,575)
- indirect taxes and duties   (35,674)   (25,795)
Total other administrative expenses   (260,193)   (254,500)

 

(1) This item includes contributions to the various resolution funds: €3.9m (€36.2m as at 30 June 2023), which includes €0.7m relating to the last DGS instalment accrued on the account stock as at 31 March 2024 and deposited in early July.

 

SECTION 11

 

Heading 170: Net transfers to provisions for risks and charges

 

11.1Net transfers for credit risk related to commitments to disburse funds and financial guarantees given: breakdown

 

   12 mths ended 30/6/24     
   Provisions   Reallocation of surplus   Total   12 mths ended
30/6/23
Total
 
Loan commitments   (3,294)   4,595    1,301    1,833 
Financial guarantees issued   (9,388)   14,958    5,570    12,851 
Total   (12,682)   19,553    6,871    14,684 

 

Notes to the accounts | Part C – Notes to the Profit and Loss Account | 525

 

11.3 Net transfers to other provisions for risks and charges: breakdown

 

   12 mths ended 30/6/24     
   Provisions   Reallocation of surplus   Total   12 mths ended
30/6/23
Total
 
1. Other provisions                
1.1 Legal disputes            
1.2 Personnel expenses               (10,000)
1.3 Other   (1,085)   8,907    7,822    8,077 
Total   (1,085)   8,907    7,822    (1,923)

 

SECTION 12

 

Heading 180: Net value adjustments to/write-backs of tangible assets

 

12.1 Net value adjustments to/write-backs of tangible assets: breakdown

  

   Depreciation   Impairment losses   Write-backs   Net profit (loss) 
Asset/Income component  (a)   (b)   (c)   (a + b - c) 
A. Property, plant, and equipment                    
1 Core   (9,314)           (9,314)
- Owned   (2,944)           (2,944)
- Right-of-use assets   (6,370)           (6,370)
2 Held for investment purpose   (426)           (426)
- Owned   (426)           (426)
- Right-of-use assets                
3 Inventories   X             
Total   (9,740)           (9,740)

  

 526 | Individual financial statements as at 30 June 2024

 

SECTION 13

 

Heading 190: Net value adjustments to/write-backs of intangible assets

 

13.1 Net value adjustments to/write-backs of intangible assets: breakdown

  

   Amortization   Impairment losses   Write-backs   Net profit (loss) 
Asset/Income component  (a)   (b)   (c)   (a + b - c) 
A. Intangible assets                    
of which: software   (706)           (706)
A.1 owned   (706)           (706)
- Generated by the company internally                
- Other   (706)           (706)
A.2 Right-of-use assets                
Total   (706)           (706)

 

SECTION 14

 

Heading 200: Other operating income (expense)

 

14.1 Other operating expenses: breakdown

  

Type of service/Values  12 mths ended 30/6/24   12 mths ended 30/6/23 
a) Leases        
b) Sundry costs and expenses   (4,026)   (16,193)
Total other operating expenses   (4,026)   (16,193)

 

14.2 Other operating income: breakdown

 

Type of service/Values  12 mths ended 30/6/24   12 mths ended 30/6/23 
a) Amounts recovered from customers   27,439    20,229 
b) Other income   25,553    21,628 
Total other operating income   52,992    41,857 

 

Notes to the accounts | Part C – Notes to the Profit and Loss Account | 527

 

SECTION 15

 

Heading 220: Gains (losses) on equity investments

 

15.1 Gains (losses) on equity investments: breakdown

  

Income components/Amounts  12 mths ended 30/6/24   12 mths ended 30/6/23 
A. Income      
1. Write-ups      
2. Gains on disposal      
3. Write-backs      
4. Other gains      
B. Expenses   (35,179)   (54,263)
1. Write-downs        
2. Impairment losses   (35,179)   (54,263)
3. Losses on disposal        
4. Other expenses        
Net profit (loss)   (35,179)   (54,263)

 

SECTION 19

 

Heading 270: Income tax for the year on ordinary activities

 

19.1 Income tax for the year on ordinary activity: breakdown

  

  12 mths ended   12 mths ended 
Income components/Amounts  30/6/24   30/6/23 
1. Current taxes (-)   (157.338)   (140.758)
2. Changes in current taxes for previous years (+/-)        
3. Reduction in current taxes for the year (+)        
3. bis Reduction in current taxes for the year due to tax credits pursuant to Law No. 214/2011 (+)        
4. Changes in prepaid taxes (+/-)   (12.132)   (8.912)
5. Changes in deferred taxes (+/-)   1.470    14.670 
6. Taxes on income for the year (-) (-1+/-2+3+3bis+/-4+/-5)   (168.000)   (135.000)

 

 528 | Individual financial statements as at 30 June 2024

 

19.2 Reconciliation between theoretical and effective tax burden

 

   12 mths ended 30/6/24 
   Value in %   Absolute value 
Total profit before taxes        1,411,992 
IRES (corporate income tax)          
Theoretical rate and theoretical tax   27.5%   388,298 
Dividends (-)   -19.8%   (279,465)
Gains (losses) on disposals of equity investments (PEX) (+/-)   -0.1%   (805)
Other tax rates (non-financial and non-Italian companies) (+/-)   0.2%   3,293 
Non-taxable income 10% IRAP and staff cost (-)   -0.1%   (977)
Impairment (+/–)   0.7%   9,674 
Extraordinary items (tax assessments, request for IRES refunds, rate adjustments, …)   0.1%   1,470 
Other changes (+/-)   0.1%   1,512 
TOTAL IRES   8.7%   123,000 
TOTAL IRAP   3.2%   45,000 
TOTAL TAXES   11.9%   168,000 

 

SECTION 22

 

Earnings per share

 

22.1 Average number of ordinary shares on a diluted basis

 

   12 mths ended   12 mths ended 
   30/6/24   30/6/23 
Profit (loss) for the year   1,243,992    606,491 
Average number of shares in issue   826,608,063    840,761,242 
Average number of potentially diluted shares   6,487,718    4,561,321 
Average number of diluted shares   833,095,781    845,322,563 
Earnings per share   1.50    0.72 
Earnings per share, diluted   1.49    0.72 

 

 

Notes to the accounts | Part C – Notes to the Profit and Loss Account | 529

 

 

Part D – Other Comprehensive Income

 

Breakdown of Other Comprehensive Income

 

  30 June 2024   30 June 2023 
  Items  Net amount   Net amount 
10. Profit (loss) for the year   1,243,992    606,491 
  Other comprehensive income not reclassified through profit or loss          
20. Equity securities designated at fair value through other comprehen-sive income:   19,640    18,101 
  a) fair value changes   11,702    (44,457)
  b) transfers to other net equity items   7,938    62,558 
30. Financial liabilities designated at fair value through profit or loss (own credit quality changes):   (26,985)   (6,274)
  a) fair value changes   (26,619)   (6,274)
  b) transfers to other net equity items   (366)    
40. Hedge accounting of equity securities designated at fair value through other comprehensive income:        
  a) fair value change (hedged instrument)        
  b) fair value change (hedging instrument)        
50. Tangible assets        
60. Intangible assets        
70. Defined benefit plans   41    178 
80. Non-current assets and asset groups held for sale        
90. Portion of valuation reserves of equity-accounted investments        
100. Income taxes relating to other income items not reclassified through profit or loss          
  Other income items through profit or loss        
110. Hedging of foreign investments:        
  a) fair value changes        
  b) transfer to profit or loss        
  c) other changes        
120. Currency exchange gains/losses:        
  a) fair value changes        
  b) transfer to profit or loss        
  c) other changes        
130. Cash flow hedging:   1,820    (462)
  a) fair value changes   1,820    (462)
  b) transfer to profit or loss        
  c) other changes        
  of which: income (expense) of net positions        
140. Hedging instruments (not designated items):        
  a) fair value changes        
  b) transfer to profit or loss        
  c) other changes        
150. Financial assets (other than equity securities) measured at fair value through other comprehensive income:   42,847    (8,210)
  a) fair value changes   28,382    (10,585)
  b) transfer to profit or loss   14,465    2,375 
  - credit risk adjustments   1,337    (479)
  - gains/losses on disposals   13,128    2,854 
  c) other changes        
160. Non-current assets and asset groups held for sale:        
  a) fair value changes        
  b) transfer to profit or loss        
  c) other changes        
170. Portion of valuation reserves of equity-accounted investments:        
  a) fair value changes        
  b) transfer to profit or loss        
  - impairment losses        
  - gains/losses on disposals        
  c) other changes        
180. Income taxes relating to other income items reclassified through profit or loss        
190. Total other income items   37,363    3,333 
200. Other comprehensive income (Headings 10 +190)   1,281,355    609,824 

 

 530 | Individual financial statements as at 30 June 2024

 

Part E – Information on risks and related hedging policies

 

INTRODUCTION

 

As part of the Bank’s risk governance process, a key role is played by the Risk Management unit, which identifies, measures and monitors all the risks to which the Bank is exposed, and manages and mitigates them in co-ordination with the various business areas. The unit’s main duties and responsibilities are described below, along with its characteristics in terms of independence, plus an indication of the role of the other company units in risk management(19).

 

(19) For discussion of credit risk, reference is made to section 1, sub-section 1.1, “Credit risk: Qualitative information”, § 2, “Credit risk management policies”; for discussion of market risks, reference is made to sub-section 2, “Market risks”; on exchange rate risks, see § 2.3, “Exchange rate risk”; on liquidity risk, see section 4, “Liquidity risk”; and on operational risks, see section 5, “Operational risks”.

 

Notes to individual accounts | Part E - Information on risks and related hedging policies | 531

 

SECTION 1

 

1.1CREDIT RISK

 

QUALITATIVE INFORMATION

 

1.General aspects

 

Although risk management is the responsibility of each individual business unit, the Risk Management unit presides over the functioning of the Bank’s risk system, defining the appropriate global methodologies for measuring risks, current or future, in conformity with regulatory requirements and the Group’s own operating choices identified in the RAF,(20)  monitoring risks and ascertaining that the various limits established for the various business lines are complied with.

 

The Group Risk Management unit, reporting directly to the Chief Executive Officer and under the direction of the Group Chief Risk Officer, is made up of the following organizational units:

 

i) Risk Integration, which manages relations with the Supervisory Authorities and carries out the Group’s integrated processes (ICAAP, RAF, Recovery Plan); ii) Risk Transformation, responsible for developing, coordinating, streamlining and standardizing the evolution of IT within Risk Management; iii) CIB Credit Risk Management, responsible for defining and monitoring credit strategies and quantitative methodologies for measuring and managing credit risks; iv) Credit Risk Management, which is responsible for carrying out credit risk analysis, assigning internal ratings to counterparties and loss parameter in the event of insolvency; v) Retail Credit Risk Management, for the supervision of subsidiaries operating in retail credit; vi) Financial Risk Management, which is responsible for monitoring market and counterparty risks, asset and liability management, monitoring liquidity risks and validating fair value methodologies; vii) Non-financial Risk Management, responsible for monitoring operational and fraud risks, risks related to the distribution of investment products and services to customers, IT and security risks, as well as outsourcing risks; viii) Internal Validation & Control, which defines the methodologies, processes, tools and reporting used in internal validation activities, carries out the validation of

 

(20)  On 27 June 2024, the Board of Directors approved the Policy update on the definition of Risk Appetite and calibration of the risk appetite statement (RAS). In this Framework, based on the Strategic Plan and the maximum tolerable risk, the Group defines the level and type of risks that the Institute intends to assume, plus objectives, any tolerance thresholds and operating limits to be complied with under normal operating and/or stress conditions.

 

 532 | Individual financial statements as at 30 June 2024

 

 

the Group’s risk measurement systems, defines and carries out control activities regarding the Parent Company’s main credit processes.

 

The Bank has been authorized by the supervisory authorities to calculate its capital requirements using its own internal rating system (based on the Probability of Default and Loss Given Default indicators) for its Corporate portfolio, currently being revised.

 

Notes to individual accounts | Part E - Information on risks and related hedging policies | 533

 

2. Credit risk management policies

 

2.1 Organizational aspects

 

The Bank has adopted a risk governance and a control system structured across a variety of organizational units involved in the process, ensuring that all relevant risks to which the Bank is or might be exposed are managed effectively, and at the same time guaranteeing that all forms of operations are consistent with their own risk appetite.

 

The Board of Directors, in view in particular of its role of strategic supervision, is responsible for approving strategic guidelines and directions of the risk appetite framework (RAF), the Internal Rating Systems (IRB) at the Parent Company level and the Roll-Out Plan for gradually extending the IRB approach across the whole Group, business and financial plans, budgets, risk management and internal control policies, and the Recovery Plan drawn up in accordance with the provisions of the Bank Recovery and Resolution Directive (Directive 2014/59/EU).

 

The Risk Committee assists the Board of Directors in performing monitoring and investigation duties in respect of internal controls, risk management, and accounting infrastructure. The Statutory Audit Committee supervises the risk management and control system as defined by the RAF and the internal controls system, assessing the effectiveness of the structures and units involved in the process and coordinating them.

 

Within the Parent Company’s risk governance system, the following Management Committees have specific responsibilities within the processes of taking, managing, measuring and controlling risks: Group Risk Management Committee, responsible for issuing guidance at the Group level in respect of all risks (not including the risk of conduct); Credit and Market Committee, with decision-making powers over credit, counterparty and market risks; New Operations Committee, for the preventive evaluation of new activities and approval of the entry into new sectors, new products and related pricing models.

 

 534 | Individual financial statements as at 30 June 2024

 

2.2 Management, measurement and control systems

 

In the process of defining its Risk Appetite Framework (“RAF”), the Bank has determined the level of risk (overall and by individual type) which it intends to assume in order to pursue its own strategic objectives, and has identified the metrics to monitor and the relevant tolerance thresholds and risk limits. The RAF is the framework which links risks to the company’s strategy (translating mission and strategy into qualitative and quantitative risk variables) and risk objectives for the company’s operations (translating risk objectives into limits and incentives for each area).

 

As required by the prudential regulations, the formalization of risk objectives, through definition of the RAF, which are consistent with the maximum risk that can be taken, the business model and strategic guidance is a key factor in establishing a risk governance policy and internal controls system with the objective of enhancing the Bank’s capability in terms of governing its own company risks, and also ensuring sustainable growth over the medium and long term. In this connection, the Bank has developed a Risk Appetite Framework governance model which identifies the roles and responsibilities of the corporate bodies and units involved, with co-ordination mechanisms instituted to ensure the risk appetite is suitably incorporated into the management processes.

 

In the process of defining its Risk Appetite, the Bank:

 

identifies the risks which it is willing to assume;

 

defines, for each risk, the objectives and limits in normal and stressed conditions;

 

identifies the action necessary to bring the risk back within the set objective.

 

To define the RAF, based on the strategic positioning and risk profile set, the Risk Appetite statement is structured into metrics and risk thresholds, to be identified with reference to the following framework risk pillars, in line with the best international practices: capital adequacy; liquidity and funding; profitability; bank-specific factors; and non-financial risks. The Board of Directors has a proactive role in defining the RAF, guaranteeing that the expected risk profile is consistent with the Strategic plan, budget, ICAAP and Recovery Plan, and structured into adequate and effective metrics and limits. For each pillar analysed, the risk assumed is set against a system of objectives and limits

 

Notes to individual accounts | Part E - Information on risks and related hedging policies | 535

 

 

representative of the regulatory restrictions and the general attitude towards risk, as defined in accordance with the strategic planning, the internal capital adequacy assessment process (ICAAP) and the risk management processes.

 

In addition to identifying and setting the Risk Appetite parameters, the Bank also governs the mechanisms regulating the governance and processes for establishing and implementing the RAF, in terms of updating/reviewing, monitoring, and reporting to the Committees and corporate bodies. Based on its operations and the markets in which it operates, the Bank has identified the relevant risks to be submitted to specific assessment in the course of the reporting for the ICAAP (Internal Capital Adequacy Assessment Process), in accordance with the Bank of Italy instructions contained in circular no. 285 issued on 17 December 2013, “Supervisory instructions for banks” as amended, appraising its own capital adequacy from both a present and future perspective which takes into account the strategies and development of the reference scenario. As required by the provisions of the Capital Requirements Directive IV (“CRD IV”), the Bank prepares an Internal Liquidity Adequacy Assessment Process document (ILAAP), describing the set of policies, processes and instruments put in place to govern liquidity and funding risks. The Bank’s objective is to maintain a level of liquidity that enables it to meet ordinary and extraordinary payment obligations, while minimizing costs at the same time. The Bank’s liquidity management strategy is based on the desire to maintain an appropriate balance between potential inflows and potential outflows, in the short and the medium/long term, by monitoring both regulatory and management metrics, in accordance with the risk profile defined as part of the RAF.

 

 536 | Individual financial statements as at 30 June 2024

 

2.3 Methods for measuring expected losses

 

Under IFRS 9, financial assets not measured at fair value, such as debt securities and loans as well as off-balance sheet exposures (i.e. loan commitments and financial guarantees) must be tested for impairment based on expected losses.

 

The internal rating models are the baseline instrument for determining the risk parameters to be used in calculating expected losses, subject to the regulatory indicators being adjusted for aspects which are not suitable to be used directly in an accounting environment (e.g. in some cases reconverting the data to reflect a “point-in-time” approach). Under IFRS 9, expected losses are calculated as the product of the PD, LGD and EAD metrics. This calculation is based on the residual life for instruments that have undergone a significant risk deterioration (referred to as “Stage 2”) or that show objective signs of deterioration (“Stage 3”) and over a 12-month horizon for instruments that do not fall into the previous categories (“Stage 1”).

 

The Bank adopts qualitative and quantitative criteria to establish whether there has been a significant increase in credit risk, using backstop indicators, such as accounts which are thirty or more days overdue or have been classified as forborne, to assess whether or not they should be treated as Stage 2. Cases of low-risk instruments at the recording date are identified, compatible with classification as Stage 1 (low credit risk exemption), where there is a BBB-rating on the Standard & Poor’s scale, or a corresponding internal PD estimate. Consistent with the options granted by IFRS 9, a change in forward-looking PD is used as the benchmark quantitative metric for the purpose of identifying positions to be classified as Stage 2. During 2022, the Supervisory Authority conducted a specific assessment of the Parent Company’s Corporate portfolio by analysing, among other things, the SICR valuation. The Group is therefore transitioning to a method that involves the comparison of lifetime PDs between reference and origination dates, abandoning the use of twelve-month PDs. The preliminary evaluations made revealed no material changes.

 

The provisioning reflects the sum of the expected credit losses (over a time horizon of twelve months or, based on the contractual expiry of the exposure, depending on the Stage classification), discounted at the effective interest rate. The expected credit loss is the result of a joint assessment of three scenarios, a baseline scenario and two alternative scenarios. The scenarios, drawn up at Group level, are revised at least once every six months.

 

Notes to individual accounts | Part E - Information on risks and related hedging policies | 537

 

In particular, scenarios are defined by the designated Group Economic and Macro Strategy (GEMS) unit, which is also responsible for assigning the relevant weights.

 

The weights of the scenarios used in determining ECL were set at 55% for the base scenario; 15% for the mild-positive scenario and 30% for the mild-negative scenario; values represent the probabilities of each scenarios taking place, analytically determined by the GEMS area on the basis of past forecasting errors statistical distribution.

 

Continuing the work done in the previous year, the Bank decided to adopt additional provisions (“overlays”) with respect to the impairment estimates resulting from the adoption of models on the basis of specific aspects that cannot be incorporated and assessed through modelling.(21) Overlays were applied to sectors particularly exposed to inflationary pressure in order to measure any peaks in risk that the quantitative methodology detects only on average. The Bank is reviewing the relevant internal regulations, among other things with the aim of providing itself with a more structured overlay governance, in terms of both the decision-making process and possible scenarios; the process, already at an advanced stage, will be completed within the expected time frame for addressing other related areas of improvement that emerged after the ECB’s regular inspection activities.

 

(21) The approach adopted is consistent with the ECB recommendations made to banks in recent months, such as in the letters of 1 April 2020 (“IFRS 9 in the context of the coronavirus (COVID-19) pandemic”) and 4 December 2020 (“Identification and measurement of credit risk in the context of the coronavirus (COVID-19) pandemic”).

 

 538 | Individual financial statements as at 30 June 2024

 

2.4 Credit risk mitigation techniques

 

The Bank has put in place a system for managing credit risk mitigation techniques, which covers the entire process of obtaining, assessing, supervising and implementing the mitigation instruments in use. The requirements for eligibility of collateral and guarantees are set out in Regulation (EU) 575/2013 of the European Parliament and of the Council as amended (the “CRR”). The Bank has also compiled specific criteria by which collateral not recognized for regulatory purposes may in any case be recognized at the operating level as effective to mitigate credit risk.

 

The Bank also adopts risk mitigation policies by entering into netting and collateral agreements, verifying whether the agreements are legally valid and meet the regulatory criteria to be recognized for prudential purposes.

 

Credit risk mitigation activities are governed by specific Directives. In particular, the phases of obtaining the collateral, checking, reporting and assessing its eligibility may be performed by different units. However, the role of the Risk Management unit in setting eligibility criteria for regulatory and management purposes remains central. Controls of the mitigation instruments are included in the general risk control and management framework.

 

With reference to the Private Banking portfolio, the high diversification of guarantees, a conservative approach in the origination phase and in determining the lending value of financial instruments allowed the Bank to keep sufficient guarantees with limited margin call situations.

 

Notes to individual accounts | Part E - Information on risks and related hedging policies | 539

 

3. Non-performing credit exposures

 

The Bank is known for its prudent approach to risk, which is reflected in the fact that its overdue exposure levels are among the lowest in the Italian national panorama. The Bank’s management of non-performing loans also helps to keep their level low on the books, including the use of different options typically available, such as disposals, collateral enforcement and negotiation of restructuring agreements.

 

The Bank uses a single, like-for-like definition for the concepts of “default” as defined in the regulations on regulatory capital requirements, “non-performing”, used for supervisory reporting statistics, and Stage 3 assets (“credit-impaired” assets), as defined by the accounting standards in force. In this regard, the Group has implemented the EBA Guidelines on the adoption of the definition of default (EBA/GL/2016/07), Delegated Regulation (EU) 2018/171 of the Commission of 19 October 2017, and Regulation (EU) 2018/1845 of the ECB of 21 November 2018.

 

The quantification of provisions must be analytical through the valuation of discounted cash flows and specific ratio analysis under the going-concern assumption or a valuation of assets in case of company liquidation.

 

At the monitoring stage, the write-off for credit losses on financial assets is also assessed, i.e. when in part or in whole. Those write-offs are possible even before completion of the legal action to recover the asset, and this does not necessarily entail waiving the legal right to recover the amount.

 

In order to adequately monitor the management of NPL portfolios, in recent years, several measures have been issued by the Regulator for the purpose of directing the financial sector towards minimizing their stocks of non-performing portfolios and speeding up recovery. On 26 April 2019, the European Parliament published an amendment to Regulation (EU) 575/2013 (CRR) in the Official Journal with the inclusion of rules to be applied for the coverage of NPLs (referred to as Calendar Provisioning) deriving from loans granted starting from the date of issue of the amended Regulation. Calendar Provisioning requires the full write-down of non-performing loans according to pre-established maturities.

 

 540 | Individual financial statements as at 30 June 2024

 

4. Financial assets subject to commercial renegotiations and forbearance measures

 

Financial assets may be subject to contractual amendments based primarily on two different needs: maintaining a mutually satisfactory commercial relationship with clients, or re-establishing/improving the credit position of customers who are facing, or about to face, difficulties in complying with the commitments they have entered into.

 

The former case, defined as commercial renegotiation, recurs when the client might want to end the relationship, as a result of its credit quality and of favourable market conditions. In a situation such as this, changes can be made at the client’s initiative or on a preventative basis in order to maintain the relationship with the client by improving the commercial terms offered, without prejudice to a satisfactory return on the risk and in compliance with the general strategic objectives (e.g. in terms of target customers).

 

The second case, which corresponds to the notion of forbearance measure, is detected in accordance with the specific regulations when contractual amendments are made, refinancing arrangements entered into, or when clauses provided for in the contract are exercised by the client.

 

For an exposure to be classified as forborne, the Bank assesses whether or not such concessions (typically rescheduling expiry dates, suspending payments, refinancing or waivers of covenants) occur as a result of a situation of financial difficulty, actual or potential (if concessions are not granted), of more than thirty days past due. Assessment of the borrower’s financial difficulties is based primarily on individual analysis.

 

Both non-performing exposures and exposures whose difficulties are still compatible with their being treated as performing may be classified as forborne. However, as described in the previous sections, a position being assigned the status of “forborne” is considered to be incompatible with its being treated as Stage 1. For this reason, based on the regulations on supervisory statistical reporting, there is a minimum period of time during which an exposure can be classified as “forborne” and this is reflected in the prudential transitions between Stages 1, 2 and 3. For instance, when concessions have been made in respect of Stage 2 exposures, these exposures cannot return to Stage 1 in less than two years, in line with the minimum duration requirement of two years

 

Notes to individual accounts | Part E - Information on risks and related hedging policies | 541

 

 

provided for the “forborne performing exposure” status (during this period, the status can only be downgraded to reflect the exposure’s transition to non-performing). Similarly, exposures in Stage 3 cannot return to Stage 1 in less than three years, in line with the one-year duration requirement for “forborne non-performing exposure” status, followed (unless the non-performing status needs to be prolonged) by the two-year minimum duration requirement for the “forborne performing exposure” status.

 

To return to Stage 1, exposures must give proof of having fully recovered their credit quality and the conditions requiring them to be classified as “forborne” must have ceased to apply. Accordingly, monitoring activities over transitions to Stages 2 or 3 are the same as monitoring activities over exposures which have not moved from Stage 1. However, “forborne” exposures that have returned from Stage 3 to Stage 2 are subject to enhanced monitoring, providing that if there is a delay of more than thirty days in payment or if a new forbearance measure is applied, the exposure will immediately return to Stage 3 for prudential purposes.

 

 542 | Individual financial statements as at 30 June 2024

 

5. Details by business segment

 

Corporate activity

 

The Bank’s internal system for managing, evaluating and controlling its credit risk exposure reflects its traditional policy based on prudence and a highly selective approach: risk assumption is based on an analytical approach grounded on an extensive knowledge of the entrepreneurial, asset and management operations of each financed company, as well as of the economic framework in which it operates. During the analysis, all the necessary documentation was acquired in order to carry out an adequate assessment of the borrower’s credit quality and define the correct remuneration of the risk assumed; the analysis included assessments of the duration and amount of credit lines, monitoring of suitable collateral and use of contractual commitments (covenants) aimed at preventing the deterioration of the counterparty’s credit quality.

 

With reference to the correct adoption of Credit Risk Mitigation techniques, specific activities are implemented to define and meet all the requirements to ensure that the real and personal guarantees have the maximum mitigating effects on the exposures. In particular, during the year under review, these activities focused on measuring the value of financial guarantees.

 

To determine credit risk, all counterparties are analysed and an internal rating is assigned by the Risk Management unit on the basis of internal models which take into account the specific quantitative and qualitative characteristics of the counterparty. The proposed transactions are also subject to the application of LGD models where appropriate.

 

Loans originated by the business divisions are appropriately assessed by the Risk Management unit and regulated in accordance with the powers for approval and management of the most significant transactions, through screening at different operating levels.

 

The Credit Risk Management unit also carries out a review of the ratings assigned to the counterparties at least once a year. Approved loans must also be confirmed by the approving body with the same frequency.

 

Provisions are calculated individually for non-performing items and based on PD and LGD indicators of the performing portfolio. For individual

 

Notes to individual accounts | Part E - Information on risks and related hedging policies | 543

 

 

provisioning, valuations based on discounted cash flows and ratio analysis balance sheet are applied to businesses under the going-concern assumption, while an asset valuation is used in case of liquidation. With regard to performing loans, the PD parameters are obtained starting from the through-the-cycle rating approach used to develop the internal rating model which is then converted to the point-in-time approach. LGDs are calculated according to the modelling used for regulatory calculation, stripped of elements that are more closely attributable to the requirements for internal models, including, in particular, the 45% floor, the downturn effect, and indirect costs. The parameters used to quantify the expected credit loss (as well as the regulatory parameters) are in any case subject to regular evaluation by corporate units. The forward-looking component of the models is the result of the risk indicators applied to the macroeconomic scenarios defined internally.

 

In terms of monitoring the performance of individual credit exposures, the Bank has adopted an early warning system to identify a list of counterparties (“Watchlist”) requiring in-depth analysis on account of their potential or obvious weaknesses. The exposures identified are then classified by level of alert (Amber or Red for performing accounts, Black for non-performing items) and are reviewed regularly to identify the most appropriate mitigation actions to be taken. The watchlist is also used to provide qualitative information regarding allocation to Stage 2, which includes counterparties classified as “Amber” or “Red”. All forborne positions are also subject to specific monitoring; it should be noted that forborne positions are also classified in the Watchlist.

 

 544 | Individual financial statements as at 30 June 2024

 

Private Banking operations

 

Private Banking operations include granting loans as an ancillary activity in serving “High Net Worth” and institutional categories of clients, with the aim of providing them with wealth management and asset management services. Credit risk exposure takes various forms, such as cash loans (by granting credit on a bank account or through short- or medium-term loans), authorizing overdrafts on a current account, endorsements and credit limits on credit cards.

 

As a rule, credit loans are guaranteed risks, i.e. backed by a real guarantee (pledge on the customer’s financial instruments in an administered deposit or on an asset management mandate or credits arising from an insurance policy).

 

The grant of such loans is governed through operating powers which require the proposed loan to be assessed at various levels of the organization and approved by the appointed Bodies according to the level of risk resulting from the size of the loan, the guarantees/collateral and the type of finance involved. Such loans are reviewed on a regular basis.

 

Provisioning for all non-performing contracts is calculated on an individual basis, and takes into account recovery forecasts. The provisions made on the performing portfolio are based on PD and LGD estimates differentiated according to the type of counterparty and presence of guarantees.

 

Notes to individual accounts | Part E - Information on risks and related hedging policies | 545

 

6. Macroeconomic scenario and impacts

 

The macroeconomic scenario for the first half of 2024 that governs the IFRS 9 provision at year-end in the baseline scenario is characterized by the stabilization of geopolitical frictions between the Western bloc and China. Moreover, no further escalation of the Russian-Ukrainian and Israeli-Hamas conflicts is expected. With regard to energy costs and exchange rates, an evolution in line with what was previously incorporated in the forward rates is assumed. With regard to the PNRR, a low probability that the funds will be spent by the expiry date of August 2026 was assigned. The basic assumption is that the plan will be extended until December 2028 and the funds used pro-rata over the forecast horizon. Eurozone inflation is expected to decline rapidly to reach its target of 1.9% per annum by December 2024. With regard to the Eurozone’s growth, it is expected to stagnate in the first half of 2024 and accelerate from the second half of 2024 onwards, in conjunction with growing real wages and international trade.

 

The macroeconomic scenario in the mild positive assumption instead foresees a significant decrease in the savings rate of consumer households in the major countries and that households will spend their savings accumulated during the pandemic period. Risk aversion among both individuals and businesses is also expected to decrease and therefore business investment is expected to increase compared to the baseline scenario. Finally, an acceleration of growth is expected for the main economies (US, UK, EZ).

 

In the alternative mild negative scenario, consumer households are expected to increase their savings rate and not to use the savings accumulated during the pandemic period. A growing aversion to risk is expected for individuals and businesses and therefore lower investments by businesses compared to the baseline scenario. Finally, with regard to public spending, current levels are expected to be maintained.

 

The Bank kept the additional provisions (referred to as overlays) with the aim of including the uncertainties of the evolution of the macroeconomic context in hedging levels. Continuing the work done in the previous year, Corporate overlays were applied to sectors particularly exposed to inflationary pressure in order to measure any peaks in risk that the quantitative methodology detects only on average. More specifically, overlays of €16.1m were allocated (intercompany positions amounted to €2.8m).

 

 546 | Individual financial statements as at 30 June 2024

 

Compared to the previous financial year (€25.2m), overlays were reduced due to the classification of some sectors from High/Medium impact to Low impact due to inflation risk, good quality of the portfolio, normalization of energy prices and proven ability to contain inflationary pressure and, in general, lower impact of inflation on the sectors involved.

 

Notes to individual accounts | Part E - Information on risks and related hedging policies | 547

 

Table 1 – Macroeconomic baseline scenario parameters as at 30/6/24(22) 

 

GDP forecasts  2023   2024   2025   2026 
Italy   0.60%   0.50%   1.20%   0.90%
UE   0.50%   0.50%   1.80%   1.80%
USA   2.40%   3.10%   1.80%   1.80%

 

Unemployment rate  2023   2024   2025   2026 
Italy   7.70%   7.50%   7.80%   8.0%
UE   6.0%   6.0%   5.90%   5.80%
USA   3.60%   3.90%   4.10%   4.10%

 

Interest rate of government bonds (10 years)  2023   2024   2025   2026 
Italy   4.20%   3.60%   3.90%   4.20%
Germany   2.40%   2.30%   2.30%   2.60%
USA   3.60%   4.10%   4.0%   4.10%

 

Table 2 – Mild-positive macroeconomic scenario at 30/6/2024

 

GDP forecasts  2023   2024   2025   2026 
Italy   0.60%   0.50%   2.40%   1.90%
UE   0.50%   0.50%   2.90%   2.80%
USA   2.40%   3.10%   2.60%   2.50%

 

Unemployment rate  2023   2024   2025   2026 
Italy   7.70%   7.50%   7.10%   6.80%
UE   6.0%   6.0%   5.40%   5.0%
USA   3.60%   3.90%   3.50%   3.10%

 

Interest rate of government bonds (10 years)  2023   2024   2025   2026 
Italy   4.20%   3.60%   4.20%   4.70%
Germany   2.40%   2.30%   2.70%   3.30%
USA   3.60%   4.10%   4.40%   4.90%

 

Table 3 – Mild-negative macroeconomic scenario at 30/6/2024

 

GDP forecasts  2023   2024   2025   2026 
Italy   0.60%   0.50%   -0.10%   -0.10%
UE   0.50%   0.50%   0.60%   1.0%
USA   2.40%   3.10%   0.90%   1.20%

 

Unemployment rate  2023   2024   2025   2026 
Italy   7.70%   7.50%   8.40%   9.20%
UE   6.0%   6.0%   6.40%   6.80%
USA   3.60%   3.90%   4.60%   5.20%

 

Interest rate of government bonds (10 years)  2023   2024   2025   2026 
Italy   4.20%   3.60%   3.70%   4.0%
Germany   2.40%   2.30%   2.0%   2.10%
USA   3.60%   4.10%   3.60%   3.50%

 

(22) As described in Section 2.3, the Bank sets the estimates for the baseline scenario, compiling the economic variables using an external macroeconomic model which factors in the internal expectations for interest rates.

 

 548 | Individual financial statements as at 30 June 2024

 

QUANTITATIVE INFORMATION

 

A. Credit quality

 

A.1Non-performing and performing exposures: amounts, value adjustments, trends and segmentation by earnings

 

A.1.1 Financial assets by portfolio and credit quality (book value)

 

Portfolio/quality 

Bad

loans

 

Unlikely

to pay

 

Overdue

non-

performing

exposures

 

Overdue

performing

exposures

 

Other

performing

exposures*

  Total 
1. Financial assets measured at amortized cost      8,519   6,577   34,518   54,763,884   54,813,498 
2. Financial assets measured at amortized cost               6,649,463   6,649,463 
3. Financial assets designated at fair value               719,215   719,215 
4. Other financial assets mandatorily measured at fair value               299   299 
5. Financial assets held for sale                   
Total 30 June 2024      8,519   6,577   34,518   62,132,861   62,182,475 
Total 30 June 2023      18,081   847   47,149   60,863,146   60,929,223 

 

* There are no overdue performing exposures being renegotiated under collective agreements.

 

Notes to individual accounts | Part E - Information on risks and related hedging policies | 549

 

A.1.2 Financial assets by portfolio/credit quality (gross/net values) 

 

   Non-performing  Performing        
Portfolio/quality 

Gross

 exposure

 

Overall

value

adjustments

  

Net

 exposure

 

Overall

partial

write-offs

 

Gross

exposure 

 

Overall

value

adjustments

  

Net

exposure

 

Total (net

exposure)

 
1. Financial assets measured at amortized cost   19,530   (4,434)   15,096      54,857,673   (59,271)   54,798,402   54,813,498 
2. Financial assets measured at fair value through other comprehensive income                6,657,116   (7,653)   6,649,463   6,649,463 
3. Financial assets designated at fair value                X   X    719,215   719,215 
4. Other financial assets mandatorily measured at fair value   6,636   (6,636)         X   X    299   299 
5. Financial assets held for sale                           
Total 30 June 2024   26,166   (11,070)   15,096      61,514,789   (66,924)   62,167,379   62,182,475 
Total 30 June 2023   118,350   (99,422)   18,928      60,450,137   (79,295)   60,910,295   60,929,223 

  

     Assets with obviously poor credit quality   Other assets 
Portfolio/quality 

Accumulated

capital losses

  

Net

exposure

  

Net

exposure

 
1. Financial assets held for trading           11,511,163 
2. Hedging derivatives           561,851 
Total 30 June 2024           12,073,014 
Total 30 June 2023           9,570,799 

 

 550 | Individual financial statements as at 30 June 2024

 

Information on sovereign debt exposures

 

A.1.2a Exposures to sovereign debt securities by state and portfolio*

 

     Non-performing  Performing    
Portfolio/quality 

Gross

exposure

 

Individual

adjustments

 

Portfolio

adjustments

 

Net

exposure

 

Gross

exposure

 

Portfolio

adjustments 

 

Net

exposure 

  

Total net
exposure1 

 
1. Financial assets held for trading               X   X   1,498,038    1,498,038 
  France               X   X   1,220,030    1,220,030 
  Germany               X   X   (26,761)   (26,761)
  Italy               X   X   76,928    76,928 
  Belgium               X   X   135,073    135,073 
  Other               X   X   92,768    92,768 
2. Financial assets measured at fair value through other comprehensive income               5,640,627      5,640,627    5,640,627 
  Italy               3,394,098      3,394,098    3,394,098 
  Germany               1,132,387      1,132,387    1,132,387 
  United States               537,473      537,473    537,473 
  Spain               249,787      249,787    249,787 
  Other               326,882      326,882    326,882 
                                    
3. Financial assets measured at amortized cost               2,488,925      2,488,925    2,488,925 
  Italy               1,641,400      1,641,400    1,641,400 
  Germany               49,202      49,202    49,202 
  United States               308,699      308,699    308,699 
  France               457,491      457,491    457,491 
  Other               32,133      32,133    32,133 
Total 30 June 2024               8,129,552      9,627,590    9,627,590 

 

* This does not include financial or credit derivatives.

 

1 The net exposure includes (long and short) positions in securities measured at fair value (including the outstanding accrual), except for assets held to maturity which are measured at amortized cost, whose implied fair value is €-47m.

 

Notes to individual accounts | Part E - Information on risks and related hedging policies | 551

 

A.1.2b Exposures to sovereign debt securities by portfolio*

 

   Trading Book1    Banking Book2  
Portfolio/quality 

Nominal

Value

   Book Value  

Contract

duration

  

Nominal

Value

   Book Value   Fair Value  

Contract

duration

 
Italy   1,116,469    1,220,030    0.69    5,114,426    5,035,498    5,005,282    4.12 
Germany   (23,731)   (26,761)   0.76    1,170,000    1,181,589    1,181,231    2.38 
France   83,800    76,928    3.11    860,000    846,172    840,418    2.31 
United States               719,290    707,278    697,612    1.35 
Other   235,032    227,841        353,091    359,015    358,147     
Total 30 June 2024   1,411,570    1,498,038         8,216,807    8,129,552    8,082,690      

 

*  This figure does not include forward sales with a notional amount of €354m

 

1 This item does not include sales on the Bund/Bobl/Schatz future (Germany) for €2.5m (with a negative fair value of €0.1m) and sales on the BTP future (Italy) for €604m (with a positive fair value of €3.5m); moreover, net hedging purchases of €485m, €360m of which attributable to Germany country risk, were not counted.

 

2 This item does not include the instrument linked to the appreciation of Greek GDP (referred to as “GDP Linkers Securities”) with a notional amount of €127m. 

 

A.1.3 Financial assets by past due brackets (book value)

  

    Stage 1  Stage 2  Stage 3 

Purchased or

originated credit

impaired assets

 
Portfolios/risk stages  

From

1 to

30 

days

 

From

30 to

90

days

 

More

than

90

days

 

From

1 to

30 

days

 

From

30 to

90 

days

 

More

than

90

days

 

From

1 to

30

days

 

From

30 to

90

days

 

More

than

90

days

 

From

1 to

30

days

 

From

30 to

90

days

 

More

than

90

days 

 
1. Financial assets measured at amortized cost    3,382   30,970   157      9      1   3   5,499          
2. Financial assets measured at fair value through other comprehensive income                                      
3. Financial assets held for sale                                      
Total 30 June 2024    3,382   30,970   157      9      1   3   5,499          
Total 30 June 2023    17,534   3,876   19,242   899   3,050   2,548         3,257          

 

 552 | Individual financial statements as at 30 June 2024

 

A.1.4 Financial assets, loan commitments and financial guarantees issued: trend in overall value adjustments and overall provisioning

                                                                                       
    Overall value adjustments                
    Stage 1 assets  Stage 2 assets  Stage 3 assets  Purchased or originated credit impaired financial assets  Overall provisions for loan commitments and financial guarantees issued   
Reasons/risk stages   On-demand loans to banks and Central Banks  Financial assets measured at amortized cost  Financial assets measured at fair value through other comprehensive income  Financial assets held for sale  of which: individual write-downs  of which: collective write-downs  On-demand loans to banks and Central Banks  Financial assets measured at amortized cost  Financial assets measured at fair value through other comprehensive income  Financial assets held for sale  of which: individual write-downs  of which: collective write-downs  On-demand loans to banks and Central Banks  Financial assets measured at amortized cost  Financial assets measured at fair value through other comprehensive income  Financial assets held for sale  of which: individual write-downs  of which: collective write-downs  Financial assets measured at amortized cost  Financial assets measured at fair value through other comprehensive income  Financial assets held for sale  of which: individual write-downs  Of which: collective write-downs  Stage 1  Stage 2  Stage 3  Purchased or originated credit-impaired loan commitments and financial guarantees issued  Total 
Opening amount of overall adjustments   855  60,445  6,537      67,837    10,928  1,385      12,313    92,786      92,786              24,199  6,207      203,342 
                                                                                       
Increases due to purchased or originated financial assets   38  18,311  5,910      24,259    8,080  133      8,213    24      24    X  X  X  X  X  6,604  91      39,191 
                                                                                       
Derecognitions other than write-offs     (20,814) (5,200)     (26,014)   (13,349) (983)     (14,332)   (91,702)     (91,702)             (8,182) (5,342)     (145,572)
Net value adjustments/write-backs for credit risk   (290) (11,061) (251)     (11,602) 122  6,731  122      6,975    3,326      3,326              (3,279) 2,180  334    (2,066)
                                                                                       
Contractual changes without derecognition                                                          
                                                                                       
Changes in estimation methods                                                          
                                                                                       
Write-offs not directly recognized through profit or loss                                                          
                                                                                       
Other changes                                                 2        2 
                                                                                       
Closing amount of overall adjustments   603  46,881  6,996      54,480  122  12,390  657      13,169    4,434      4,434              19,344  3,136  334    94,897 
                                                                                       
Recoveries for collections of written-off financial assets                                                          
                                                                                       
Write-offs directly recognized through profit or loss                                                          

 

Notes to individual accounts | Part E - Information on risks and related hedging policies | 553

 

A.1.5Financial assets, loan commitments and financial guarantees issued: transfers between different stages of credit risk (gross and nominal values)

 

   Gross value/nominal value 
   Transfers between Stage 1
and Stage 2
   Transfers between Stage 2
and Stage 3
   Transfers between Stage 1
and Stage 3
 
Portfolios/risk stages  From
Stage 1 to
Stage 2
   From
Stage 2 to
Stage 1
   From
Stage 2 to
Stage 3
   From
Stage 3 to
Stage 2
  

From

Stage 1 to
Stage 3

   From
Stage 3 to
Stage 1
 
1. Financial assets measured at amortized cost   75,540    1,270    11,346        6,248    805 
2. Financial assets measured at fair value through other comprehensive income   3,531                     
3. Financial assets held for sale                        
4. Loan commitments and financial guarantees issued   97,069        180        1,335     
Total 30 June 2024   176,140    1,270    11,526        7,583    805 
Total 30 June 2023   141,482    148,631    50,305        773    1,162 

 

Transfers from Stage 1 to Stage 2, mainly in the Large Corporate area, were affected by reclassifications due to the worse ratings of six counterparties (two of which related to off-balance sheet exposures) as well as by the inclusion in the watchlist of four counterparties (two of which related to off-balance sheet exposures); on the other hand, the second stage was mainly influenced by reimbursements.

 

The transitions from Stage 2 to Stage 3 were influenced by the transition of a position to UTP.

 

Finally, the transition from Stage 1 to Stage 3 of a Large Corporate position due to classification as UTP should be noted.

 

 554 | Individual financial statements as at 30 June 2024

 

A.1.6On- and off-balance sheet exposures to banks: net and gross values

 

   Gross exposure   Overall value adjustments and overall provisions         
Types of exposure/Values      Stage 1   Stage 2   Stage 3   Purchased or originated credit impaired assets       Stage 1   Stage 2   Stage 3   Purchased or originated credit impaired assets   Net exposure   Overall partial write-offs 
A. On-balance sheet credit exposures                                                            
A.1 On-demand   3,281,124    3,262,866    18,258            725    603    122            3,280,399     
a) Non-performing       X                    X                     
b) Performing   3,281,124    3,262,866    18,258    X        725    603    122    X        3,280,399     
A.2 Other   33,034,648    31,741,043                25,090    25,090                33,009,558     
a) Bad loans       X                    X                     
- of which: forborne exposures       X                    X                     
b) Unlikely to pay       X                    X                     
of which: forborne exposures       X                    X                     
c) Overdue non-performing exposures       X                    X                     
- of which: forborne exposures       X                    X                     
d) Overdue performing exposures               X                    X             
- of which: forborne exposures               X                    X             
e) Other performing exposures   33,034,648    31,741,043        X        25,090    25,090        X        33,009,558     
- of which: forborne exposures               X                    X             
Total (A)   36,315,772    35,003,909    18,258            25,815    25,693    122            36,289,957     
B. Off-balance sheet credit exposures                                                           
a) Non-performing       X                    X                     
b) Performing   18,840,719    3,675,442        X        2,799    2,799        X        18,837,920     
Total (B)   18,840,719    3,675,442                2,799    2,799                18,837,920     
Total (A+B)   55,156,491    38,679,351    18,258            28,614    28,492    122            55,127,877     

 

Notes to individual accounts | Part E - Information on risks and related hedging policies | 555

 

A.1.7On- and off-balance sheet exposures to customers: gross and net values

 

   Gross exposure   Overall value adjustments and overall provisions         
Types of exposure/Values      Stage 1   Stage 2   Stage 3   Purchased or originated credit impaired assets       Stage 1   Stage 2   Stage 3   Purchased or originated credit impaired assets   Net exposure   Overall partial write-offs 
A. On-balance sheet credit exposures                                                            
a) Bad loans   6,636    X                6,636    X                     
- of which: forborne exposures   6,636    X                6,636    X                     
b) Unlikely to pay   12,408    X        12,408        3,889    X        3,889        8,519     
- of which: forborne exposures   6,110    X        6,110        2,153    X        2,153        3,957     
c) Overdue non-performing exposures   7,122    X        7,122        545    X        545        6,577     
- of which: forborne exposures   5,236    X        5,236        293    X        293        4,943     
d) Overdue performing exposures   34,522    34,513    9    X        4    4        X        34,518     
- of which: forborne exposures               X                    X             
e) Other performing exposures   37,768,509    29,535,827    203,397    X        41,830    28,783    13,047    X        37,726,679     
- of which: forborne exposures   137,148        137,148    X        6,434        6,434    X        130,714     
TOTAL (A)   37,829,197    29,570,340    203,406    19,530        52,904    28,787    13,047    4,434        37,776,293     
B. Off-balance sheet credit exposures                                                            
a) Non-performing   1,515    X        1,515        334    X        334        1,181     
b) Performing   30,773,831    22,746,435    112,194    X        19,681    16,545    3,136    X        30,754,150     
Total (B)   30,775,346    22,746,435    112,194    1,515        20,015    16,545    3,136    334        30,755,331     
Total (A+B)   68,604,543    52,316,775    315,600    21,045        72,919    45,332    16,183    4,768        68,531,624     

 

As at 30 June 2024, gross non-performing assets decreased (from €118.3m to €26.2m, including €14.4m from the Private segment) following the sale of a couple of single names in the Large Corporate segment. On a net basis, they decreased from €18.9m to €15.1m with an almost zero impact on cash credit exposures. The coverage ratio stood at 42.3%, down compared to the previous year (84%) due to the disposals made and extensive guarantees covering exposures, especially in the Private segment.

 

 556 | Individual financial statements as at 30 June 2024

 

Finrep Gross NPL Ratio (23) 

 

       (€m) 
   30 June 2024   30 June 2023 
   Amounts before value adjustments 
Loans   40,315.1    41,489.8 
NPLs   26.2    118.3 
Loan to customers   40,341.3    41,608.1 
NPLs purchased        
Net Treasury assets*   13,950.9    12,790.8 
Total Loans and advances   54,292.2    54,398.9 
Finrep Gross NPL ratio in %       0.2%

 

* In line with the instructions of the EBA Risk Dashboard, the calculation excludes cash and includes untied deposits held with Central Banks.

 

(23) In the EBA Risk Dashboard, the gross NPL ratio is defined as the ratio of gross book value of NPLs (loans and advances) to total loans and advances. Source: EBA Risk Dashboard, Risk Indicators in the Statistical Annex (AQT_3.2).

 

Notes to individual accounts | Part E - Information on risks and related hedging policies | 557

 

A.1.9On-balance sheet exposures to customers: trend in gross NPLs

 

Reasons/Category  Bad loans   Probability of default   Overdue non-performing exposures 
A. Opening balance (gross amount)   62,422    54,900    1,028 
- of which: exposures sold but not derecognized            
B. Increases       11,030    10,648 
B.1 inflows from performing exposures       9,762    9,689 
B.2 inflows from purchased or originated credit impaired financial assets            
B.3 transfers from other categories of non-performing exposures            
B.4 contractual changes without derecognition            
B.5 other increases       1,268    959 
C. Decreases   55,786    53,522    4,554 
C.1 transfers to performing exposures           755 
C.2 write-offs            
C.3 collection   476    3,021    3,799 
C.4 gains on disposal   5    15,118     
C.5 losses on disposal       187     
C.6 transfers to other categories of non-performing exposures            
C.7 contractual changes without derecognition            
C.8 other decreases   55,305    35,196     
D. Closing balance of gross exposure   6,636    12,408    7,122 
- of which: exposures sold but not derecognized            

 

 558 | Individual financial statements as at 30 June 2024

 

A.1.9 bis On-balance sheet exposures to customers: trend in gross forborne exposures, by credit quality

 

Reasons/Category  Forborne
non-performing
exposures
   Forborne
performing
exposures
 
A. Opening balance (gross amount)   60,763    145,127 
- of which: exposures sold but not derecognized        
B. Increases   11,542    84,249 
B.1 inflows from not forborne performing exposures       26,994 
B.2 inflows from forborne performing exposures   11,355    X 
B.3 inflows from forborne non-performing exposures   X     
B.4 inflows from not forborne non-performing exposures        
B.5 other increases   187    57,255 
C. Decreases   54,323    92,228 
C.1 outflows to not forborne performing exposures   X     
C.2 outflows to forborne performing exposures       X 
C.3 outflows to forborne non-performing exposures   X    11,355 
C.4 write-offs        
C.5 collection   180    80,873 
C.6 gains on disposal   5     
C.7 losses on disposal        
C.8 other decreases   54,138     
D. Closing balance of gross exposure   17,982    137,148 
- of which: exposures sold but not derecognized        

 

As at 30 June 2024, forborne(24) gross non-performing positions fell to €18m (€60.8m in the previous year) with a coverage rate of 50.5%.

 

Forborne performing positions had a gross value of €137.1m (€145.1m in the previous financial year), with a coverage ratio of 4.7% (3.6%); on a net basis, forborne performing positions dropped to €130.7m (€139.9m).

 

Overall, gross forborne non-performing positions concerned approximately 0.1% (0.2%) of total loans to customers, while forborne performing were steady at 0.4%.

 

(24) By definition, “forbearance” is when a specific concession is offered to a client who is undergoing, or risks encountering, temporary financial difficulties in meeting their payment obligations.

 

Notes to individual accounts | Part E - Information on risks and related hedging policies | 559

 

A.1.11On-balance sheet non-performing exposures to customers: trend in overall value adjustments

 

   Bad loans   Unlikely to pay Overdue non-performing
exposures
 
Reasons/Category  Total   of which: forborne exposures   Total   of which: forborne exposures   Total   of which: forborne exposures 
A. Opening balance of overall adjustments   62,422    60,763    36,819        181     
- of which: exposures sold but not derecognized                        
B. Increases           3,086    2,153    400    293 
B.1 value adjustments to purchased or originated credit impaired financial assets       X        X        X 
B.2 other value adjustments           3,086    2,153    400    293 
B.3 losses on disposal                        
B.4 transfers from other categories of non-performing exposures                        
B.5 contractual changes without derecognition                        
B.6 other increases                        
C. Decreases   55,786    54,127    36,016        36     
C.1 write-backs due to valuations           122        33     
C.2 write-backs due to collections   476        894             
C.3 gains on disposal   5    5                 
C.4 write-offs                        
C.5 transfers to other categories of non-performing exposures                        
C.6 contractual changes without derecognition                        
C.7 other decreases   55,305    54,122    35,000        3     
D. Closing amount of overall adjustments   6,636    6,636    3,889    2,153    545    293 
- of which: exposures sold but not derecognized                        

 

 560 | Individual financial statements as at 30 June 2024

 

A.2Distribution of financial assets, loan commitments and financial guarantees issued by class of external and internal ratings

 

A.2.1Distribution of financial assets, loan commitments and financial guarantees issued by class of external ratings (gross values)

 

   External rating classes   Without     
Exposures  Class 1   Class 2   Class 3   Class 4   Class 5   Class 6   rating   Total 
A. Financial assets measured at amortized cost   1,180,437    4,472,042    33,856,341    733,056    82,451        14,552,876    54,877,203 
- Stage 1   1,180,437    4,472,042    33,856,341    733,056    55,979        14,376,184    54,674,039 
- Stage 2                   21,800        161,834    183,634 
- Stage 3                   4,672        14,858    19,530 
- Purchased or originated credit impaired assets                                
B. Financial assets measured at fair value through other comprehensive income   2,246,544    41,086    3,953,006    310,028            106,452    6,657,116 
- Stage 1   2,246,544    41,086    3,953,006    290,256            106,452    6,637,344 
- Stage 2               19,772                19,772 
- Stage 3                                
- Purchased or originated credit impaired assets                                
C. Financial assets held for sale                                
- Stage 1                                
- Stage 2                                
- Stage 3                                
- Purchased or originated credit impaired assets                                
Total (A+B+C)   3,426,981    4,513,128    37,809,347    1,043,084    82,451        14,659,328    61,534,319 
D. Loan commitments and financial guarantees issued   1,413,515    1,884,734    14,706,012    1,210,227    199,555    1,658    7,119,887    26,535,588 
- Stage 1   1,413,515    1,884,734    14,706,012    1,210,227    149,983    1,658    7,055,749    26,421,878 
- Stage 2                   48,237        63,958    112,195 
- Stage 3                   1,335        180    1,515 
- Purchased or originated credit impaired assets                                
Total (D)   1,413,515    1,884,734    14,706,012    1,210,227    199,555    1,658    7,119,887    26,535,588 
Total (A+B+C+D)   4,840,496    6,397,862    52,515,359    2,253,311    282,006    1,658    21,779,215    88,069,907 

 

The Bank has adopted Standard & Poor’s ratings for all asset portfolios within the scope of the report.

 

The table is compliant with the classification provided by the Bank of Italy Circular No. 262/2005 (sixth update), which requires external ratings to be divided into six different classes of credit quality.

 

The first three risk classes (classes 1, 2 and 3) consist of investment grade exposures, with a Standard & Poor’s rating of between AAA and BBB-, and represent 96% of the entire portfolio, excluding counterparties without rating and non-performing loans.

 

Notes to individual accounts | Part E - Information on risks and related hedging policies | 561

 

A.2.2Distribution of financial assets, loan commitments and financial guarantees issued by class of internal ratings (gross values)

 

   Internal rating classes   Non-   Without      
Exposures  Class 1   Class 2   Class 3   Class 4   Class 5   Class 6   performing   rating   Total 
A. Financial assets measured at amortized cost   1,783,078    6,111,201    42,366,423    2,414,014    108,363        11,768    2,082,356    54,877,203 
- Stage 1   1,783,078    6,111,201    42,366,423    2,315,560    44,410            2,053,367    54,674,039 
- Stage 2               98,454    63,953            21,227    183,634 
- Stage 3                           11,768    7,762    19,530 
- Purchased or originated credit impaired assets                                    
B. Financial assets measured at fair value through other comprehensive income   1,931,884    98,270    3,716,031    520,252                390,679    6,657,116 
- Stage 1   1,931,884    98,270    3,716,031    500,480                390,679    6,637,344 
- Stage 2               19,772                    19,772 
- Stage 3                                    
- Purchased or originated credit impaired assets                                    
C. Financial assets held for sale                                    
- Stage 1                                    
- Stage 2                                    
- Stage 3                                    
- Purchased or originated credit impaired assets                                    
Total (A+B+C)   3,714,962    6,209,471    46,082,454    2,934,266    108,363        11,768    2,473,035    61,534,319 
D. Loan commitments and financial guarantees issued   1,380,141    2,270,223    18,792,319    1,975,241    653,762        1,515    1,462,387    26,535,588 
- Stage 1   1,380,141    2,270,223    18,792,319    1,924,494    594,147            1,460,554    26,421,878 
- Stage 2               50,747    59,615            1,833    112,195 
- Stage 3                           1,515        1,515 
- Purchased or originated credit impaired assets                                    
Total (D)   1,380,141    2,270,223    18,792,319    1,975,241    653,762        1,515    1,462,387    26,535,588 
Total (A+B+C+D)   5,095,103    8,479,694    64,874,773    4,909,507    762,125        13,283    3,935,422    88,069,907 

 

 562 | Individual financial statements as at 30 June 2024

 

Mediobanca uses models developed internally in the process of managing credit risk to assign ratings to each counterparty.

 

The models’ different rating scales are mapped against a single Group master scale consisting of six different rating classes based on the underlying probability of default (PD) attributable to the S&P master scale.

 

Notes to individual accounts | Part E - Information on risks and related hedging policies | 563

 

A.3 Distribution of secured exposures by type of security

 

A.3.1 On- and off-balance sheet secured exposures to banks

 

           Collateral guarantees (1)                       Personal guarantees (2)     
           Credit derivatives   Unsecured loans     
                               Other derivatives                     
   Gross
exposure
   Net
exposure
   Property
mortgages
   Property
finance
leases
   Securities   Other
collateral
guarantees
   CLN   Central
counterparties
   Banks   Other
financial
companies
   Other
entities
   Public
administrations
   Banks   Other
financial
companies
   Altri
soggetti
   Total
(1)+(2)
 
1. Secured on-balance sheet credit exposures:   3,455,669    3,455,617            2,828,425    489,491                              —                3,317,916 
1.1. totally secured   2,654,240    2,654,216            2,027,573    489,491                                        2,517,064 
- of which, non-performing                                                                
1.2. partially secured   801,429    801,401            800,852                                            800,852 
- of which, non-performing                                                                
2. Secured off-balance sheet credit exposures:                                                                
2.1 totally secured                                                                
- of which, non-performing                                                                
2.2. partially secured                                                                
- of which, non-performing                                                                

 

 564 | Individual financial statements as at 30 June 2024

 

A.3.2 On- and off-balance sheet secured exposures to customers

 

           Collateral guarantees (1)                       Garanzie personali (2)     
           Credit derivatives   Unsecured loans     
                               Other derivatives                     
   Gross
exposure
   Net
exposure
   Property
mortgages
   Property
finance
leases
   Securities   Other
collateral
guarantees
   CLN   Central
counterparties
   Banks   Other
financial
companies
   Other
entities
   Public
administrations
   Banks   Other
financial
companies
   Other
entities
   Total
(1)+(2)
 
1. Secured on-balance sheet credit exposures:   8,122,197    8,111,854    379,166        4,497,872    1,721,224                        315,122    100,000    300,803    323,142    7,637,329 
1.1. totally secured   6,590,311    6,586,221    223,355        4,435,698    1,209,214                        287,266        62,878    184,265    6,402,676 
- of which, non-performing   7,228    6,753    3,658        2,104    991                                        6,753 
1.2. partially secured   1,531,886    1,525,633    155,811        62,174    512,010                        27,856    100,000    237,925    138,877    1,234,653 
- of which, non-performing   6,110    3,957            241                                            241 
2. Secured off-balance sheet credit exposures:   1,067,036    1,066,166            364,479    373,329                                94,875    117,142    949,825 
2.1. totally secured   838,015    837,601            363,166    372,314                                60,792    16,017    812,289 
- of which, non-performing                                                                
2.2. partially secured   229,021    228,565            1,313    1,015                                34,083    101,125    137,536 
- of which, non-performing   180    113                                                         

 

Notes to individual accounts | Part E - Information on risks and related hedging policies | 565

 

B. Distribution and concentration of credit exposures

 

B.1 Distribution of on- and off-balance sheet exposures to customers by sector

 

   Public administrations   Financial companies   Financial companies(of which:
insurance companies)
   Non-financial companies   Households 
Exposures/Counterparties  Net
exposure
   Overall
value
adjustments
   Net
exposure
   Overall
value
adjustments
   Net exposure   Overall
value
adjustments
   Net
exposure
   Overall
value
adjustments
   Net
exposure
   Overall
value
adjustments
 
A. On-balance sheet credit exposures                                                  
A.1 Bad loans               (6,636)                        
- of which, forborne exposures               (6,636)                        
A.2 Unlikely to pay                           8,061    (3,707)   458    (182)
- of which, forborne exposures                           3,957    (2,153)        
A.3 Overdue non-performing exposures           29    (108)           24    (63)   6,524    (374)
- of which, forborne exposures                                   4,943    (293)
A.4 Performing exposures   14,835,524    (3,028)   13,112,398    (18,112)   1,124,442    (1,514)   9,072,490    (20,342)   740,785    (352)
- of which, forborne exposures           13,966    (1,142)           116,081    (5,292)   667     
Total (A)   14,835,524    (3,028)   13,112,427    (24,856)   1,124,442    (1,514)   9,080,575    (24,112)   747,767    (908)
B. Off-balance sheet credit exposures                                                  
B.1 Non-performing exposures                           1,181    (334)        
B.2 Performing exposures   7,934,309    (59)   9,841,907    (9,383)   1,926,632    (1,177)   12,403,870    (10,239)   574,064     
Total (B)   7,934,309    (59)   9,841,907    (9,383)   1,926,632    (1,177)   12,405,051    (10,573)   574,064     
Total (A+B) 30 June 2024   22,769,833    (3,087)   22,954,334    (34,239)   3,051,074    (2,691)   21,485,626    (34,685)   1,321,831    (908)
Total (A+B) 30 June 2023   13,970,730    (1,915)   22,111,325    (38,224)   2,379,010    (1,928)   23,466,878    (142,019)   1,460,012    (640)

 

 566 | Individual financial statements as at 30 June 2024

 

B.2 Distribution of on- and off-balance sheet exposures to customers by geography

 

   Italy Other European countries   America   Asia   Rest of the world 
Exposures/Geographical area  Net exposure   Overall value adjustments   Net exposure   Overall value adjustments   Net exposure   Overall value adjustments   Net exposure   Overall value adjustments   Net exposure   Overall value adjustments 
A. On-balance sheet credit exposures                                                  
A.1 Bad loans       (6,636)                                
A.2 Unlikely to pay   4,780    (2,956)   3,739    (933)                        
A.3 Overdue non-performing exposures   6,575    (543)   2    (2)                        
A.4 Performing exposures   27,720,215    (32,328)   9,277,410    (9,452)   748,421    (54)   14,099        1,052     
Total (A)   27,731,570    (42,463)   9,281,151    (10,387)   748,421    (54)   14,099        1,052     
B. Off-balance sheet credit exposures                                                 
B.1 Non-performing exposures   113    (67)   1,068    (267)                        
B.2 Performing exposures   15,147,595    (7,778)   14,672,530    (10,301)   885,388    (1,600)   48,389    (2)   248     
Total (B)   15,147,708    (7,845)   14,673,598    (10,568)   885,388    (1,600)   48,389    (2)   248     
Total (A+B) 30 June 2024   42,879,278    (50,308)   23,954,749    (20,955)   1,633,809    (1,654)   62,488    (2)   1,300     
Total (A+B) 30 June 2023   33,648,061    (54,646)   25,422,184    (122,236)   1,887,573    (5,912)   49,490    (2)   1,637    (2)

 

Notes to individual accounts | Part E - Information on risks and related hedging policies | 567

 

B.3 Distribution of on- and off-balance sheet exposures to banks by geography

 

   Italy Other European countries   America   Asia   Rest of the world 
Exposures/Geographical area  Net exposure   Overall value adjustments   Net exposure   Overall value adjustments   Net exposure   Overall value adjustments   Net exposure   Overall value adjustments   Net exposure   Overall value adjustments 
A. On-balance sheet credit exposures                                                  
A.1 Bad loans                                        
A.2 Unlikely to pay                                        
A.3 Overdue non-performing exposures                                        
A.4 Performing exposures   26,714,433    (21,497)   9,464,164    (4,308)   111,168    (10)   191        1     
Total (A)   26,714,433    (21,497)   9,464,164    (4,308)   111,168    (10)   191        1     
B. Off-balance sheet credit exposures                                                  
B.1 Non-performing exposures                                        
B.2 Performing exposures   1,732,481    (44)   17,105,323    (2,755)   116                     
Total (B)   1,732,481    (44)   17,105,323    (2,755)   116                     
Total (A+B) 30 June 2024   28,446,914    (21,541)   26,569,487    (7,063)   111,284    (10)   191        1     
Total (A+B) 30 June 2023   31,226,060    (21,194)   26,527,115    (5,985)   46,237    (1)   466        2,902     

 

 568 | Individual financial statements as at 30 June 2024

 

B.4a Credit risk indicators

 

   30 June 2024   30 June 2023 
a) Gross bad loans/Total loans   0.02%   0.10%
b) Non-performing accounts receivable/On-balance sheet credit exposures   0.07%   0.18%
c) Net bad loans/Regulatory capital        

 

B.4b Large exposures

 

   30 June 2024   30 June 2023 
a) Book value   22,545,270    18,127,117 
b) Weighted value   14,792,703    13,597,321 
c) Number of positions   30    26 

 

At the end of the period, exposures (including market risks and equity investments) exceeding 10% of Tier 1 Regulatory Capital regarded thirty groups of associated customers (four more than in the previous financial year) for a gross exposure of €22.5bn (€14.8bn taking into account guarantees and weightings), an increase compared to June 2023 (€18.1bn and €13.6bn, respectively). In detail, the thirty positions concerned nine industrial groups, four financial companies, three insurance companies and fourteen banking groups.

 

Notes to individual accounts | Part E - Information on risks and related hedging policies | 569

 

C. Securitization

 

QUALITATIVE INFORMATION

 

The Bank holds a securities portfolio that derives from third-party securitizations of €1,036.1m (€986.9m at 30 June 2023), of which €821.2m as part of the banking book and €214.9m as part of the trading book (respectively €788.8m and €198.1m).

 

The Group's senior transaction was reset to zero after the repayment of the Quarzo bond (with underlying performing loans of Compass Banca) held almost entirely in the banking portfolio (€654.3m as at 30 June 2023).

 

In the first half of 2024, European ABS continued the positive trend in line with the credit market, in some cases outperforming the adjacent sector of covered bonds. Yields showed a strong compression of spreads across the entire capital structure to the advantage of more junior classes. In particular, Italian ABS benefited from the marked narrowing of BTP and Italian financial instruments that led to new repositionings in the sector.

 

On the primary market, the new offer went well beyond expectations with placements of transactions with underlying Consumers and Auto Loans, well received by investors reassured by the more favourable macroeconomic context. Most of the books were oversubscribed with very low new issue premiums compared to the secondary curves and with particular demand for mezzanine classes.

 

The market environment should remain favourable during 2024 on expectations of a rate cut by the Central Banks.

 

The banking book portfolio, which increased from €788.8m to €821.2m during the financial year, was mainly concentrated on senior securities which increased from €784.8m to €818.7m with investments in high-quality CLOs (€298.6m against €259.4m) and declining exposures to underlying NPLs (from €486.3m to €288.7m). Positions on mezzanine tranches went from €3.5m to €2.5m. The difference between fair value (derived from market platforms) and book value (amortized cost) settled at negative €8.8m.

 

The trading book stood at €214.9m (€198.1m at 30 June 2023): the senior portion amounted to €180.4m (€149.3m), €100.9m of which in the Transferable Custody

 

 570 | Individual financial statements as at 30 June 2024

 

 

Receipt transaction(25), €44.8m in performing consumer loans and €34.7m in CLOs. The mezzanine portion was reduced to €34.5m (€48.9m as at 30 June 2023).

 

Mediobanca also has exposures to:

 

In January, Mediobanca S.p.A. entered into an equity commitment agreement with Polus Capital Management (US) Inc.,(26) a wholly-owned subsidiary of Polus, which provides for the Mediobanca Group undertaking a commitment of $75m to be used, among other things, to meet regulatory obligations, for investments in the “equity” tranche (most junior unrated securities) of Collateralized Loan Obligations (CLOs) in the US and related warehousing. The Portfolio Manager will be Polus Capital Management (US) Inc, while an institutional counterparty will act as arranger. As at 30 June, the Group’s investments in US I CLOs amounted to €9.2m, including €4.5m subscribed by the Parent Company and €4.7m by Polus;

Italian Recovery Fund, a closed-end alternative investment fund (AIF) incorporated under Italian law and managed by DeA Capital Alternative Funds SGR S.p.A., which is currently invested in five securitization transactions (Valentine, Berenice, Cube, Este and Sunrise I) with Italian banks’ NPLs as the underlying instrument; the €30m commitment has to date been drawn as to €18.4m;

Negentropy RAIF – Debt Select Fund, an alternative investment fund instituted under Luxembourg law and managed by Negentropy Capital Partners Limited, for which Mediobanca acted as advisor; the fund has senior tranches of real estate NPLs and loans as the underlying instrument, with an aggregate NAV of €122.7m (the share of Mediobanca being €61.3m);

in January, Mediobanca entered into an equity commitment agreement with Polus Capital Management (US) Inc.,(27) a wholly-owned subsidiary of Polus, which provides for Mediobanca S.p.A. undertaking a commitment of $75m to be used, to meet regulatory obligations, for investments in the “equity” tranche (most junior unrated securities) of Collateralized Loan Obligations (CLOs) managed in the US by Polus Capital Management (US) Inc. with an institutional counterparty acting as arranger. As at 30 June, the Group’s investments in CLOs US I amounted to €9.2m, including €4.5m subscribed by the Parent Company.

 

(25) The Bank signed a note issued by the custodian bank in which three CLO positions (with underlying European corporate loans) purchased by Mediobanca and some financial guarantees on the same CLOs with which the Bank purchased hedging had been contributed in the form of a trust; TCR pays out principal and interest of the underlying CLOs after the premium of financial guarantees.

 

(26) CLI H I is reported in the disclosure on structured entities not consolidated for accounting purposes, while CLI H II is an investment consolidated using the equity method pursuant to IAS 28.

 

(27) US CLO is reported in the disclosure statement on Structured Entities not consolidated for accounting purposes.

 

Notes to individual accounts | Part E - Information on risks and related hedging policies | 571

 

QUANTITATIVE INFORMATION

 

C.2 Exposures from main third-party securitizations by asset type and exposure

 

     Cash exposure 
     Senior   Mezzanine   Junior 
Type of underlying assets/Exposure 

Carrying

amount

  

Value

adjustments/

 write-backs

  

Carrying

 amount

  

Value

adjustments/

 write-backs

  

Carrying

 amount

  

Value

adjustments/

 write-backs

 
A. Italy NPLs (residential mortgages and real estate properties)   288,703    2,084    1        3     
B. Italy Consumer ABS   239,591    (25)   19,456    31         
D. Spain Consumer ABS   2,608    (2)   3,323    8         
D. Holland Consumer ABS           801    (1)        
F. Ireland Performing Loan   7,308                     
F. UK Performing Loan   26,585                     
G. Other Group company loans                        
H. Other loans*   434,257    136    13,451    1         
Total 30 June 2024  999,052    2,194   37,031    38    3     
Total 30 June 2023  1,588,328    (2,473)  52,370    (288)   451    (8)

  

*  CLO transactions, €100m of which relating to TCR7.

 

C.4 Non-consolidated securitization vehicles

 

This information is omitted herein as it has already been provided in the Consolidated Notes to the Accounts.

 

 572 | Individual financial statements as at 30 June 2024

 

D.Information on structured entities not consolidated in accounting terms (other than securitization vehicles)

 

QUALITATIVE INFORMATION

 

This information is omitted herein as it has already been provided in the Consolidated Notes to the Accounts

 

QUANTITATIVE INFORMATION

 

This information is omitted herein as it has already been provided in the Consolidated Notes to the Accounts.

 

Notes to individual accounts | Part E - Information on risks and related hedging policies | 573

 

E. Disposals

 

A. Financial assets sold but not entirely derecognized

 

E.1 Financial assets sold entirely recognized and related financial liabilities: book values

 

   Financial assets sold and entirely recognized   Related financial liabilities 
   Carrying amount   of which: subject to securitization transactions   of which: subject to repurchase agreements   of which non- performing   Carrying amount   of which: subject to securitization transactions   of which: subject to repurchase agreements 
A. Financial assets held for trading   5.080.543        5.080.543    X    5.072.572        5.072.572 
1. Debt securities   4.629.079        4.629.079    X    4.633.059        4.633.059 
2. Equity securities   451.464        451.464    X    439.513        439.513 
3. Loans               X             
4. Derivatives               X             
B. Other financial assets mandatorily measured at fair value                            
1. Debt securities                            
2. Equity securities               X             
3. Loans                            
C. Financial assets designated at fair value   17.037        17.037        16.718        16.718 
1. Debt securities   17.037        17.037        16.718        16.718 
2. Loans                             
D. Financial assets measured at fair value through other comprehensive income   3.379.134        3.379.134        3.092.029        3.092.029 
1. Debt securities   3.379.134        3.379.134        3.092.029        3.092.029 
2. Equity securities               X             
3. Loans                            
E. Financial assets measured at amortized cost   1.328.015        1.328.015        861.854        861.854 
1. Debt securities   1.327.315        1.327.315        861.153        861.153 
2. Loans   700        700        701        701 
Total 30 June 2024   9.804.729        9.804.729        9.043.173        9.043.173 
Total 30 June 2023   4.031.719        4.031.719        3.176.616        3.176.616 

 

 574 | Individual financial statements as at 30 June 2024

 

E.3Disposals related to liabilities with repayment exclusively based on assets sold and not fully derecognized: fair value

 

           Total 
   Fully booked   Partially booked   30 June 2024   30 June 2023 
A. Financial assets held for trading   5,080,543        5,080,543    1,499,821 
1. Debt securities   4,629,079        4,629,079    1,349,542 
2. Equity securities   451,464        451,464    150,279 
3. Loans                
4. Derivatives                
B. Other financial assets mandatorily measured at fair value                
1. Debt securities                
2. Equity securities                
3. Loans                
C. Financial assets designated at fair value   17,037        17,037     
1. Debt securities   17,037        17,037     
2. Loans                
D. Financial assets measured at fair value through other comprehensive income   3,379,134        3,379,134    1,184,230 
1. Debt securities   3,379,134        3,379,134    1,184,230 
2. Equity securities                
3. Loans                
E. Financial assets measured at amortized cost (fair value)   1,323,613        1,323,613    1,389,770 
1. Debt securities   1,322,907        1,322,907    1,383,584 
2. Loans   706        706    6,186 
Total financial assets   9,800,327        9,800,327    4,073,821 
Total associated financial liabilities   9,520,272        X    X 
Net value 30 June 2024   280,055        9,800,327    X 
Net value 30 June 2023   143,008        X    4,073,821 

 

F. Models for managing credit risk

 

The Bank uses the IRB Advanced method (PD and LGD parameters) in order to quantify the capital requirement for credit risk on the Corporate loan book. For exposures for which the standardized methodology is currently used to calculate the regulatory capital requirements, the Bank has nonetheless developed internal credit risk models that are used for management purposes. The Bank has also adopted a portfolio model in order to calculate the economic capital for credit risk, which enables geographical and sector concentration and diversification effects to be factored in. For further information, please refer to the information provided in “Section 1.1 Credit Risks” of this Part of the Notes to the Accounts.

 

Notes to individual accounts | Part E - Information on risks and related hedging policies | 575

 

2 MARKET RISKS

 

2.1 INTEREST RATE RISK AND PRICE RISK – REGULATORY TRADING PORTFOLIO

 

QUALITATIVE INFORMATION

 

The Bank’s operating exposure to market risks in the trading portfolio is monitored by calculating operating earnings on a daily basis and through use of the following indicators:

 

sensitivity - mainly Delta and Vega – to the principal risk factors (interest rates, share prices, exchange rates, credit spreads, inflation and volatility, dividends, correlations, etc.); sensitivity analysis shows the increase or decrease in the value of financial assets and derivatives to local changes in these risk factors, providing a static representation of the market risk of the trading portfolio;

 

Value-at-risk calculated using a weighted historical simulation method with scenarios updated daily, assuming a liquidation horizon of one business day and a confidence level of 99%.I

 

Risks are monitored daily through VaR and sensitivity analyses to ensure compliance with operating limits, managing the risk appetite established by the Bank for its trading book and, in case of VaR, also to evaluate the robustness of the model through back-testing. The expected shortfall on the set of positions subject to VaR measurement is also calculated daily by means of historical simulation; this represents the average potential losses over and beyond the level of confidence for the VaR. Moreover, stress tests are carried out monthly (on the entire portfolio) concerning the main risk factors to show, among other things, the impact which more substantial movements in the main market variables might have (e.g. share prices and interest or exchange rates) calibrated on the basis of extreme changes in market variables.

 

Other complementary risk metrics are used in order to assess trading position risks not fully measured by VaR and by sensitivity analyses more specifically. The weight of products which require such metrics to be used is in any case extremely limited compared to the overall size of Mediobanca’s trading portfolio.

 

In the past fiscal year, market fluctuations were mainly driven by interest rates and monetary policy expectations.

 

 576 | Individual financial statements as at 30 June 2024

 

Volatility on the stock markets remained high in the first four months of the financial year: the main stock indexes showed fluctuations in returns ranging between +6% and -6% quarter-on-quarter between July and September. The driver of this phase of uncertainty was the macroeconomic and geopolitical context: inflation data (4.3% EU, 3.7% US) - although at their lowest since October 2021 - were still above monetary policy targets. Added to this were upside pressures on oil prices, caused by lower supply from producing countries (primarily Saudi Arabia and Russia) and by tensions in the Middle East due to the rekindling of the conflict between Israel and Hamas. This situation was reflected in interbank and government interest rates: the short-term part of the curves did not undergo significant changes in the first quarter, while there was an upward remarking of long-term yields - in particular in the United States (swap and US Treasury 10Y +70 bps q/q), supporting the assumption that discount rates would remain in the 4-to-5% area for a long time. Finally, in the same period, the BTP 10Y witnessed a rise of +70 bps compared to a +30 bps of the Euro Swap 10Y and the Bund, due to a greater idiosyncratic risk for Italy.

 

In November, there was a clear change of scenario with a general decline in interest rates (e.g. -115 bps on 10y ITA). After the peak in mid-October, inflation data (-200 bps y/y EU HICP in March 2024) and a less hawkish stance by monetary policy authorities reversed market expectations, which had expected cuts in key refinancing rates in the first half of 2024. This led government bond yields to retrace to levels slightly below those recorded at the beginning of the year. At this stage, the stock market followed a general upward trend, with the US market outperforming the EU market, reaching a return of +18% (average of main indexes) compared to the beginning of the year and with volatility at its lowest, especially when compared to the month of October.

 

Finally, in June there was a partial recovery of volatility generated by tensions on French OATs and on other EU government bonds following the outcome of the European elections of 8 and 9 June and the subsequent elections to the French Parliament.

 

Notes to individual accounts | Part E - Information on risks and related hedging policies | 577

 

Over the 12 months, there were no breaches of the VaR and Stop Loss limits thanks to the low level of volatility, especially in the stock market.

 

The Value-at-Risk of the Trading aggregate fluctuated over the year under review between a minimum of €3.2m in November and a maximum of €10m, as recorded in late December. The average figure (€5.9m) was 30% lower than the average of the previous year (€8.4m). After the peak, the VaR figure progressively decreased until it reached €4.6m at the end of the year, well below the average for the year.

 

The risk factors that explain the VaR trend are mainly as follows: (i) yields of Italian and core Euro Area government bonds and (ii) greater sense of direction in exposures to implied stock market volatilities, driven by particularly low levels of volatility. The contribution of other risk factors, such as share prices or exchange rates, is marginal. With respect to these, the Bank’s position is conservative or substantially neutral.

 

In line with the VaR trend, the Expected shortfall - which measures a further stress scenario on the same VaR historical series - shows a lower average figure than in the previous period (€10.7m against €12.8m).

 

Daily back-testing results (based on the comparison with the theoretical Profits and Losses) during the twelve-month observation period showed no cases of deviation from the VaR.

 

Table 1: Value-at-risk and Expected Shortfall in the trading portfolio

 

                   €m 
                     
   FY 2023-2024   FY 2022-2023 
Risk factors  30 June   Min   Max   Average   Average 
Interest rates   1,451    1,373    7,124    3,629    7,071 
Credit   1,583    1,020    2,531    1,706    2,548 
Shares   5,343    1,078    6,490    3,741    3,609 
Exchange rates   632    591    1,631    927    904 
Inflation   223    32    684    293    365 
Volatility   3,156    2,325    6,068    3,842    6,254 
Diversification effect*   (7,759)   (12,098)   (4,930)   (8,277)   (12,389)
Total   4,630    3,249    10,094    5,860    8,382 
Expected Shortfall   6,995    5,258    22,817    10,745    12,846 

  

* Associated with a less-than-perfect correlation between risk factors.

 

 578 | Individual financial statements as at 30 June 2024

 

Apart from the general VaR limit on Trading positions, a system reflecting a greater degree of granularity for the individual trading desks is also in place.

 

Furthermore, each desk has sensitivity limits to changes in the various risk factors, which are monitored on a daily basis. Compared to the previous financial year, exposure was reduced across all risk classes.

 

Tab. 2: Summary of the trend in the main trading portfolio sensitivities

 

                   €m 
                     
   FY 2023-2024   FY 2022-2023 
Risk factors  30 June   Min   Max   Average   Average 
Equity delta (+1%)   (107,827)   (1,086,056)   3,928,644    258,943    418,680 
Equity vega (+1%)   (1,660,900)   (4,317,612)   1,817,130    (717,196)   757,496 
Interest rate delta (+1 bp)   (5,745)   (371,684)   473,465    104,737    218,649 
Inflation delta (+1 bp)   (37,959)   (70,991)   55,080    (17,952)   13,079 
Exchange rate delta (+1%)*   12,427    (364,685)   5,841,508    4,224    142,539 
Credit delta (+1 bp)   350,476    (294,922)   617,669    246,220    421,632 

 

* Refers to the Euro gaining versus other foreign currencies.

 

Notes to individual accounts | Part E - Information on risks and related hedging policies | 579

 

Trends in VaR of trading portfolio

 

 

Trends in VaR constituents (Trading)

 

 

 

 580 | Individual financial statements as at 30 June 2024

 

QUANTITATIVE INFORMATION

 

1.Regulatory trading portfolio: distribution by residual maturity (repricing date) of financial cash assets and liabilities and financial derivatives

 

Type/Residual duration 

On

demand

 

Up to 3

months

 

From 3

months to 6

months

 

From 6

months to 1

year

 

From 1

year to 5

years

  

From 5

years to 10

years

 

Over 10

years

 

Indefinite

duration

 
1. Cash assets   14,227   862,198   935,885   1,613,990   2,914,003    1,016,283   990,889    
  1.1 Debt securities   14,227   862,198   935,885   1,613,990   2,914,003    1,016,283   990,889    
  – with early redemption option                          
  – other   14,227   862,198   935,885   1,613,990   2,914,003    1,016,283   990,889    
  1.2 Other assets                          
2. Cash liabilities   185   248,162   554,744   493,976   2,473,543    642,040   488,856    
  2.1 Repos                          
  2.2 Other liabilities   185   248,162   554,744   493,976   2,473,543    642,040   488,856    
3. Financial derivatives                                  
  3.1 With underlying securities                                  
  – Options                                  
  + Long positions      130,000      8,673              
  + Short positions      130,000      8,673              
  – Other derivatives                                  
  + Long positions      757,021         355,494           
  + Short positions      757,021         355,494           
  3.2 Without underlying securities                                  
  – Options                                  
  + Long positions   995   760,392   1,211,253   2,609,227   31,501,824    1,685,435       
  + Short positions   995   760,392   1,211,253   2,609,227   31,501,824    1,685,435       
  – Other derivatives                                  
  + Long positions   2,195,509   40,809,539   24,555,920   32,258,239   34,123,570    11,503,604   5,789,204    
  + Short positions   2,229,527   55,266,968   27,459,877   14,780,335   34,106,070    11,503,604   5,889,204    

 

Notes to individual accounts | Part E - Information on risks and related hedging policies | 581

 

2. Regulatory trading portfolio: cash exposures in securities and UCITS units

 

     Carrying amount 
Type of exposure/Values  Level1   Level2   Level3 
A. Equity securities1                
  A.1 Shares   3,704,683        172,758 
  A.2 Innovative equity instruments            
  A.3 Other equity securities            
B. UCITS               
  B.1 Under Italian law            
  - harmonized open            
  - non-harmonized open            
  - closed            
  - reserved            
  - speculative            
  B.2 Under other EU states law            
  - harmonized            
  - non-harmonized open            
  - non-harmonized closed            
  B.3 Under non-EU states law            
  - open            
  - closed            
Total   3,704,683        172,758 

 

1 Mismatch between trading assets and technical shortfalls booked as trading liabilities: over 93% of the net exposure is related to EU member states.

 

 582 | Individual financial statements as at 30 June 2024

 

2.2 INTEREST RATE RISK AND PRICE RISK – BANKING BOOK

 

QUALITATIVE INFORMATION

 

The Bank monitors and manages interest rate risk through sensitivity testing of net interest income and economic value. The sensitivity of the net interest income quantifies the impact on current earnings in the worst-case scenario among those outlined in the guidelines of the Basel Committee (BCBS) transposed in the EBA document in 2022 (EBA/GL/2022/14). In this testing, the asset stocks are maintained constant, renewing the items falling due with the same financial characteristics and assuming a time horizon of twelve months.

 

Conversely, the sensitivity of economic value measures the impact of future flows on the current value in the worst-case scenario of those contemplated in the Basel Committee guidelines (BCBS).

 

All the scenarios present a floor set by the EBA guidelines at minus 1.5% on the demand maturity with linear progression up to 0% at the fifty-year maturity. In the current market environment, this floor has a very limited impact on sensitivity metrics.

 

For both sensitivities, balance sheet items have been treated based on their contractual profile, except for the items related to current account deposits for retail clients (which have been treated on the basis of proprietary behavioural models) and consumer credit items and mortgages (which reflect the possibility of early repayment).

 

To determine the discounted value of cash flows, various benchmark curves were used to discount and compute future rates based on the value date on which the balance sheet item itself was traded (multi-curve). The credit component has been stripped out of the cash flows for the economic value sensitivity only.

 

With reference to the Bank’s banking book positions at 30 June, in the event of a parallel increase in the curve (“parallel up”), the expected net interest income would undergo a negative change of €3m.

 

As for the analysis of the discounted value of future cash flows of the banking book, a shock “short-up” scenario would result in a negative change of €23m (€46m in the previous year).

 

Notes to individual accounts | Part E - Information on risks and related hedging policies | 583

 

Hedging

 

Hedges are intended to neutralize possible losses that may be incurred on a given asset or liability, due to the volatility of certain financial risk factors (interest rate, exchange rate, credit or some other risk parameter) through the gains that may be realized on a hedging instrument that is capable of offsetting changes in fair value or cash flows of the hedged instrument. For fair value hedges in particular, the Group seeks to minimize the financial risk on interest rates by bringing the entire interest-bearing exposure in line with Euribor (generally Euribor 3 months).(28) 

 

A. Fair value hedging

 

Fair value hedges are used to neutralize exposure to interest rate or price risk for specific asset or liability positions, via derivative contracts entered into with leading market counterparties with high credit rating. In particular, with regard to interest rate risk, the Group applies specific hedges to individual items or clusters of like-for-like assets and liabilities in terms of interest rate risk. The objective of these hedges is to reduce the interest rate risk through swaps that convert fixed-rate into floating rate assets and/or liabilities. The items being mainly hedged are fixed-rate or structured liabilities issued by Mediobanca, investments in fixed-rate securities under assets held in the HTC and HTCS portfolio, the portfolio of fixed-rate mortgage loans, fixed rate loans granted to Mediobanca Premier (replication of the mortgage portfolio granted by Mediobanca Premier to customers), the floors implicit in the floating-rate loans of the Lending division and floating-rate mortgage loans granted by Mediobanca Premier and the deposits of Mediobanca Premier for which the new behavioural model is being taken into account with a benefit on the effective maturity.

 

Some structured bond issues remain in the portfolio without causing any risks correlated to the main risk, broken down into the interest rate component (hedged) and other risks which are represented in the trading book and are usually covered by external positions of the opposite sign; for structured bonds issued during the year, mostly interest rate, the Bank applied the fair value option in the initial recognition phase of the liability and the related risks were

 

(28) This target is maintained even in the presence of hedging contracts with market counterparties with which netting agreements and CSAs (collateralized standard agreements) have been entered into and whose valuation is carried out at Ester interest rates.

 

 584 | Individual financial statements as at 30 June 2024

 

 

hedged with derivatives measured at Fair Value Through Profit or Loss in order to deal with the impacts on the P&L account.

 

Fair value hedges are also used by the parent company to mitigate the price risk of an equity investment recorded within the portfolio of assets measured at fair value through other comprehensive income.

 

B. Cash flow hedging

 

This form of hedging is mainly used in the context of some Group companies’ operations (in particular with reference to consumer credit and leasing), where provisions at a floating rate are set aside for a significant amount against a large number of transactions for a negligible amount, generally at a fixed rate. The hedge is made in order to transform these positions into fixed-rate positions, correlating the relevant cash flows with investments. Normally, the Group uses derivatives to fix the expected cost of deposits over the reference period to cover floating-rate loans in place and future transactions linked to systematic renewals of such loans upon expiry.

 

C.Hedging instruments

 

D.Hedged items

 

As for hedged items and hedging instruments, they have been exhaustively described in the previous paragraphs and throughout the document.

 

Notes to individual accounts | Part E - Information on risks and related hedging policies | 585

 

Counterparty risk

 

Counterparty risk generated by market transactions with institutional customers or counterparties is measured in terms of expected potential future exposure. With regard to derivatives and collateralized short-term loan products (repos and securities lending), the calculation is based on determining the maximum potential exposure (assuming a 95% likelihood) at various points in time up to 30 years. The scope of application regards all groups of counterparties which have relations with the Bank, taking into account the presence of netting (e.g. ISDA, GMSLA or GMRA) and collateralization agreements (e.g. CSA), if any. Exposures deriving from transactions on the interbank market should be added to these. For these three types of transactions, different exposure limits are granted to each counterparty and/or group subject to internal analysis and approval by the Lending and Underwriting Committee.

 

With regard to derivative transactions, as required by IFRS 13, the fair value incorporates the effects of the counterparty credit risk (referred to as CVA) and Mediobanca credit risk (referred to as DVA) based on the future exposure profile of the set of contracts in place.

 

 586 | Individual financial statements as at 30 June 2024

 

QUANTITATIVE INFORMATION

 

1.Banking book by outstanding maturity (repricing date) of financial assets and liabilities

 

Type/Residual duration  On demand 

Up to 3

months

 

From 3  

months to 6
months
 

From 6

months to 1

year

 

From 1

year to 5

years

 

From 5

years to 10

years

 

Over 10

years

 

Indefinite

duration

 
1. Cash assets   11,600,783   29,827,419   6,833,918   3,098,128   8,191,179   3,202,692   3,232,243    
  1.1 Debt securities      2,389,209   2,052,940   2,347,792   2,930,439   1,047,788   453,250    
  - with early redemption option                         
  - other      2,389,209   2,052,940   2,347,792   2,930,439   1,047,788   453,250    
  1.2 Loans to banks   6,630,918   16,886,757   1,220,047   420,577   3,699,340   2,106,996   2,751,144    
  1.3 Loans to customers   4,969,865   10,551,453   3,560,931   329,759   1,561,400   47,908   27,849    
  – current accounts   1,242,503                      
  - other loans   3,727,362   10,551,453   3,560,931   329,759   1,561,400   47,908   27,849    
  – with early redemption option                         
  – other   3,727,362   10,551,453   3,560,931   329,759   1,561,400   47,908   27,849    
2. Cash liabilities   30,923,182   14,656,439   2,364,716   6,647,569   11,753,907   1,163,391   3,558,813    
  2.1 Due to customers   10,133,101   2,149,523   492,406   339,514   226,474      118,529    
  – current accounts   6,561,662                      
  – other liabilities   3,571,439   2,149,523   492,406   339,514   226,474      118,529    
  – with early redemption option                         
  – other   3,571,439   2,149,523   492,406   339,514   226,474      118,529    
  2.2 Due to banks   20,788,640   7,856,448   753,611   1,016,215   2,202,067   322,979   591,398    
  – current accounts   18,881,791                      
  - other liabilities   1,906,849   7,856,448   753,611   1,016,215   2,202,067   322,979   591,398    
  2.3 Debt securities   1,441   4,650,468   1,118,699   5,291,840   9,325,366   840,412   2,848,886    
  – with early redemption option                         
  – other   1,441   4,650,468   1,118,699   5,291,840   9,325,366   840,412   2,848,886    
  2.4 Other liabilities                         
  – with early redemption option                         
  – other                         
3. Financial derivatives                                 
  3.1 With underlying securities                                 
  – Options                                 
  + long positions                         
  + short positions                         
  – Other                                 
  + long positions            155,000             
  + short positions            155,000             
  3.2 Without underlying securities                                 
  – Options                                 
  + long positions      18,381   25,900   145,989   137,881      758,798    
  + short positions      18,381   25,900   145,989   137,881      758,798    
  – Other                                 
  + long positions   254,717   39,021,943   6,049,664   11,112,742   9,059,194   4,659,068   4,963,200    
  + short positions   254,717   53,292,819   1,664,011   1,327,520   9,059,194   4,659,068   4,863,200    
4. Other off-balance sheet transactions                                 
  + long positions   7,800,067   5,982,016   1,596,565   1,358,527   12,719,085   1,960,453   842,778    
  + short positions   6,749,757   3,754,439   2,194,965   1,440,733   13,906,239   2,819,210   1,394,147    

 

Notes to individual accounts | Part E - Information on risks and related hedging policies | 587

 

2. Banking book: cash exposures in securities and UCITS units

 

     Carrying amount 
Type of exposure/Values   Level1    Level2    Level3 
A. Equity securities1                
  A.1 Shares   127,548        127,969 
  A.2 Innovative equity instruments            
  A.3 Other equity securities           258,023 
B. UCITS               
  B.1 Under Italian law   12,833        186,860 
  - harmonized open   8,247         
  - non-harmonized open            
  - closed           186,084 
  - reserved            
  - speculative   4,586        776 
  B.2 Under other EU states law   167,470    80,949    103,091 
  - harmonized            
  - non-harmonized open           61,265 
  - non-harmonized closed   167,470    80,949    41,826 
  B.3 Under non-EU states law            
  - open            
  - closed            
Total   307,851    80,949   675,943 

 

1 Of which 56% Italian and 44% from other EU member states.

 

 588 | Individual financial statements as at 30 June 2024

 

2.3 EXCHANGE RATE RISK

 

QUALITATIVE INFORMATION

 

A.General aspects, operating processes and measurement techniques of exchange rate risk

 

B.Exchange rate risk hedging

 

The trend in the exchange rate component of VaR shown on page 576 is an effective representation of changes in the risks taken on the forex market, because exposure to exchange rate risk is managed globally.

 

Notes to individual accounts | Part E - Information on risks and related hedging policies | 589

 

QUANTITATIVE INFORMATION

 

1. Assets, liabilities and derivatives by currency

 

     Currencies 
Items  US Dollar  

Great

Britain

Pound

  

Japanese

Yen

  

Swedish

Krona

  

Swiss

Franc

  

Other

currencies

 
A. Financial assets   3,495,352    1,480,846    2,059    44,276    313,900    78,198 
  A.1 Debt securities   873,877    296,527            19,273     
  A.2 Equity securities   346,675    466,533            234,797     
  A.3 Loans to banks   1,825,002    542,383    2,052    10,140    36,101    25,766 
  A.4 Loans to customers   447,162    158,975        34,134    23,652    52,388 
  A.5 Other financial assets   2,636    16,428    7    2    77    44 
B. Other assets                        
C. Financial liabilities   3,286,773    1,449,970    103,019    6,840    234,039    47,902 
  C.1 Due to banks   2,037,065    822,771    3    6,823    217,583    35,416 
  C.2 Due to customers   466,346    509,120        10    15,447    267 
  C.3 Debt securities   781,765        103,016        644    12,219 
  C.4 Other financial liabilities   1,597    118,079        7    365     
D. Other liabilities                        
E. Financial derivatives   184,788    29,137    (158,197)   35,806    126,505    (14,101)
  - Options                              
  + Long positions   121,871    58,873    160,277    876    166,736    120,266 
  + Short positions   50,367        138,016    2,612    354,886    84,989 
  - Other derivatives                              
  + Long positions   5,234,743    1,092,976    550,018    74,555    699,506    634,587 
  + Short positions   5,491,035    1,180,986    414,082    108,625    637,861    655,763 
Total assets  8,851,966   2,632,695    712,354    119,707    1,180,142   833,051 
Total liabilities  8,828,175   2,630,956    655,117    118,077    1,226,786   788,654 
Difference (+/-)   23,791    1,739    57,237    1,630    (46,644)   44,397 

 

2. Internal models and other methodologies used for sensitivity analysis

 

During the year under review, the Euro-dollar rate moved around the average value of 1.08, with a minimum of 1.05 and a maximum of 1.13, to close at 1.07, i.e. near the values recorded at the beginning of the year. The overall Forex VaR remained relatively steady at 900,000 with short-lived peaks at 2.4m.

 

 590 | Individual financial statements as at 30 June 2024

 

3 DERIVATIVE INSTRUMENTS AND HEDGING POLICIES

 

3.1 Trading derivatives

 

A. Financial derivatives

 

A.1 Trading financial derivatives: reporting-date notional values

 

   30 June 2024   30 June 2023 
   Over the counter       Over the counter     
       Without central counterparties           Without central counterparties     
Underlying
assets/Types
of derivatives
  Central counterparties   With offsetting arrangements   Without offsetting arrangements   Established markets   Central counterparties   With offsetting arrangements   Without offsetting arrangements   Established markets 
1. Debt securities and interest rate   112,714,096    60,792,562    1,027,535    1,535,643    116,827,575    47,637,922    1,070,386    2,115,793 
a) Options       34,315,206    277,500    492,747        7,122,189    525,328    1,269,393 
b) Swap   112,714,096    23,951,536    750,035        116,827,575    36,471,348    545,058     
c) Forward       355,494                277,076         
d) Futures               1,042,896                846,400 
e) Other       2,170,326                3,767,309         
2. Equity securities and stock price indexes       14,686,342    2,038,952    19,872,720        14,292,821    3,042,128    18,361,567 
a) Options       12,901,188    150,517    19,077,052        13,800,330    744,742    17,860,244 
b) Swap       1,785,154    241,620            492,491         
c) Forward                                
d) Futures               795,668                501,323 
e) Other1            1,646,815                2,297,386     
3. Currencies and gold       13,665,725    520,340            17,454,932    779,920     
a) Options       642,020                1,928,085         
b) Swap       5,056,506                5,883,267    504,598     
c) Forward       7,967,199    520,340            9,643,580    275,322     
d) Futures                                
e) Other                                
4. Commodites       598,961                1,919,947         
5. Other                                
Total   112,714,096    89,743,590    3,586,827    21,408,363    116,827,575    81,305,622    4,892,434    20,477,360 

 

1 This exclusively regards certificates issued.

 

Notes to individual accounts | Part E - Information on risks and related hedging policies | 591

 

A.2 Trading financial derivatives: gross positive and negative fair values by product

 

   30 June 2024   30 June 2023 
   Over the counter       Over the counter     
       Without central counterparties           Without central counterparties     
Underlying
assets/Types
of derivatives
  Central counterparties   With offsetting arrangements   Without offsetting arrangements   Established markets   Central counterparties   With offsetting arrangements   Without offsetting arrangements   Established markets 
1. Positive fair value                                        
a) Options       499,168    306,516    784,767        596,513    270,042    688,152 
b) Interest rate swaps   309,112    208,092    55,064        1,321,280    253,324    56,589     
c) Cross currency swaps       165,135                212,050         
d) Equity swaps       191,886    2,053            172,525         
e) Forward       129,560    14,295            154,861    7,693     
f) Futures               12,055                7,826 
g) Other1                            12,602     
Total   309,112    1,193,841    377,928    796,822    1,321,280    1,389,273    346,926    695,978 
2. Negative fair value                                        
a) Options       605,884    344,601    832,156        712,130    325,764    833,108 
b) Interest rate swaps   19,242    623,575    15,545        21,750    1,715,613    18,604     
c) Cross currency swaps       161,006                170,640    22,994     
d) Equity swaps       4,415    8            2,875         
e) Forward       93,575    8,683            99,939    4,089     
f) Futures               47,352                23,631 
g) Other1            1,570,541                2,094,087     
Total   19,242    1,488,455    1,939,378    879,508    21,750    2,701,197    2,465,538    856,739 

 

1 This exclusively regards certificates issued.

 

 592 | Individual financial statements as at 30 June 2024

 

A.3OTC trading financial derivatives: notional values, gross positive and negative fair values by counterparty

 

Underlying assets  Central counterparties   Banks   Other financial companies   Other entities 
Contracts not included in offsetting arrangements                    
1) Debt securities and interest rates                    
- notional value   X        333,923    693,611 
- positive fair value   X    2    55,066    1,727 
- negative fair value   X    122    7,529    26,337 
2) Equity securities and stock indexes                    
- notional value1    X    1,646,815    392,112    24 
- positive fair value   X    306,600    2,402    636 
- negative fair value1    X    1,877,099    23,321    115 
3) Currencies and gold                    
- notional value   X    288,254    226,481    5,605 
- positive fair value   X    55    11,358    82 
- negative fair value   X    4,854         
4) Commodities2                     
- notional value   X             
- positive fair value   X             
- negative fair value   X             
5) Other                 
- notional value   X             
- positive fair value   X             
- negative fair value   X             
Contracts included in offsetting arrangements                    
1) Debt securities and interest rates                    
- notional value   112,714,096    51,153,514    5,611,736    4,027,311 
- positive fair value   309,112    267,838    139,647    6,418 
- negative fair value   19,242    414,751    238,162    138,976 
2) Equity securities and stock indexes                    
- notional value       8,456,682    4,832,973    1,396,688 
- positive fair value       137,055    247,172    102,846 
- negative fair value       307,822    113,393    6,695 
3) Currencies and gold                    
- notional value       10,576,296    1,926,041    1,163,388 
- positive fair value       182,991    29,990    58,035 
- negative fair value       204,377    46,916    17,346 
4) Commodities2                     
- notional value       545,665    53,297     
- positive fair value       21,848         
- negative fair value           16     
5) Other                   
- notional value                
- positive fair value                
- negative fair value                

 

1 Of which, certificates with a nominal value of €1,646,815 and fair value of €-1,570,541.
2 This heading includes derivative instruments with MBInternational as counterparty, hedging their skew issues and the derivatives of the related arbitrage structures.

 

Notes to individual accounts | Part E - Information on risks and related hedging policies | 593

 

A.4 Outstanding life of OTC trading financial derivatives: notional amounts

 

Underlying/Outstanding life  Up to 1 year   From 1 year to
5 years
   Over
5 years
   Total 
A.1 Financial derivatives on debt securities and interest rates   48,962,923    92,683,357    32,887,913    174,534,193 
A.2 Financial derivatives on equity securities and stock indexes   8,707,104    7,781,111    237,079    16,725,294 
A.3 Financial derivatives on currencies and gold   10,807,657    2,911,337    467,071    14,186,065 
A.4 Financial derivatives on commodities   360,001    238,960        598,961 
A.5 Other financial derivatives                
Total 30 June 2024   68,837,685    103,614,765    33,592,063    206,044,513 
Total 30 June 2023   74,505,901    82,316,374    46,203,356    203,025,631 

 

 594 | Individual financial statements as at 30 June 2024

 

B. Credit derivatives

 

B.1 Trading credit derivatives: reporting-date notional values

 

   Trading derivatives 
Type of transaction  with a single counterparty   with more than one counterparty (basket) 
1. Hedge purchases          
a) Credit default products   2,032,620    15,942,262 
b) Credit spread products        
c) Total rate of return swaps        
d) Other*   166,675     
Total 30 June 2024   2,199,295    15,942,262 
Total 30 June 2023   4,409,374    23,081,608 
2. Hedging sales          
a) Credit default products   1,923,844    15,710,906 
b) Credit spread products        
c) Total rate of return swaps        
d) Other*        
Total 30 June 2024   1,923,844    15,710,906 
Total 30 June 2023   2,834,997    23,071,967 

 

* This exclusively regards certificates issued

 

The column headed “Basket” includes the positions in credit indexes matched by positions on single names which go to make up the same index for the skew issues.(29) The arbitrage structures have a notional value of €12.4bn (€18bn in the previous year). The derivative embedded in own issues and derivatives with MBInternational to hedge their issues are represented in hedge buys on single entities in the amount of €1.7bn (€1.4bn as at 30 June 2023).(30)

 

(29)  Please see “Part B - Liabilities - Liabilities at amortized cost” of the present report

(30) Embedded items with underlying commodities (€146m) and related derivatives (€453m) are shown in Table A.3. 

 

Notes to individual accounts | Part E - Information on risks and related hedging policies | 595

 

B.2 Trading credit derivatives: gross positive and negative fair values by product

 

Types of derivatives  30 June 2024   30 June 2023 
1. Positive fair value          
a) Credit default products   212,525    152,513 
b) Credit spread products        
c) Total rate of return swaps        
d) Other1    17,558     
Total   230,083    152,513 
2. Negative fair value          
a) Credit default products   219,985    213,200 
b) Credit spread products        
c) Total rate of return swaps        
d) Other1    169,307    203,733 
Total   389,292    416,933 

 

1 This exclusively regards certificates issued.

 

B.3 OTC credit trading derivatives: notional values and gross positive/negative fair value, by counterparty

 

   Central
counterparties
   Banks   Other
financial companies
   Other entities 
Contracts not included in offsetting arrangements                    
1) Hedging purchases                    
- notional value1    X    178,926         
- positive fair value   X    17,558         
- negative fair value1    X    169,307         
2) Hedging sales                    
- notional value   X    12,251         
- positive fair value   X             
- negative fair value   X             
Contracts included in offsetting arrangements                    
1) Hedging purchases                    
- notional value   4,841,696    3,132,936    9,987,999     
- positive fair value       6,749    7,598     
- negative fair value       34,953    145,561     
2) Hedging sales                    
- notional value   4,584,755    2,005,489    11,032,255     
- positive fair value       48,258    149,920     
- negative fair value   11,923    10,771    16,778     

 

1 Of which, certificates with a notional value of €166,675 and a fair value of €-151,749.

 

 596 | Individual financial statements as at 30 June 2024

 

B.4 Outstanding life of OTC trading credit derivatives: notional values

 

Underlying/Outstanding life  Up to 1 year   From 1 year
to 5 years
   Over 5 years   Total 
1. Hedging sales   4,563,109    12,588,482    483,159    17,634,750 
2. Hedging purchases   4,543,622    13,486,629    111,306    18,141,557 
Total 30 June 2024   9,106,731    26,075,111    594,465    35,776,307 
Total 30 June 2023   20,036,194    32,258,037    1,103,715    53,397,946 

 

3.2 Accounting hedges

 

A. Financial hedging derivatives

 

A.1 Financial hedging derivatives: reporting-date notional value

 

   30 June 2024   30 June 2023 
   Over the counter       Over the counter     
       Without central
counterparties
           Without central
counterparties
     
Underlying assets/
Types of derivatives
  Central
counterparties
   With
offsetting
arrangements
   Without
offsetting
arrangements
   Established
markets
   Central
counterparties
   With
offsetting
arrangements
   Without
offsetting
arrangements
   Established
markets
 
1. Debt securities and interest rate   48,346,237    27,653,960            36,704,275    24,922,259         
a) Options       1,086,949                1,711,945         
b) Swaps   48,346,237    26,412,011            36,704,275    23,210,314         
c) Forwards       155,000                         
d) Futures                                
e) Other                                
2. Equity securities and stock price indexes                                
a) Options                                
b) Swaps                                
c) Forwards                                
d) Futures                                
e) Other                                
3. Currencies and gold       362,280                360,506         
a) Options                                
b) Swaps       362,280                360,506         
c) Forwards                                
d) Futures                                
e) Other                                
4. Commodities                                
5. Other                                
Total   48,346,237    28,016,240            36,704,275    25,282,765         

 

Notes to individual accounts | Part E - Information on risks and related hedging policies | 597

 

A.2 Financial hedging derivatives: gross positive and negative fair values by product

 

  Positive and negative Fair Value    
   30 June 2024   30 June 2023   Change in the value used 
   Over the counter       Over the counter       to calculate the hedge 
       Without central counterparties           Without central counterparties       effectiveness 
Types of
derivatives
  Central
counterparties
   With
offsetting
arrangements
   Without
offsetting
arrangements
   Established
markets
   Central
counterparties
   With
offsetting
arrangements
   Without
offsetting
arrangements
   Established
markets
   30 June
2024
   30 June
2023
 
1. Positive fair value                                       
a) Options       25,537                27,932                 
b) Interest rate swaps   451,427    81,205            129,042    87,602            1,049,562    305,565 
c) Cross currency swaps       1,251                1,377                 
d) Equity swaps                                        
e) Forwards       2,432                                 
f) Futures                                        
g) Other                                        
Total   451,427    110,425            129,042    116,911            1,049,562    305,565 
2. Negative fair value                                                
a) Options       1,243                6,461                 
b) Interest rate swaps   1,259,955    196,965            1,870,620    238,920            738,386    947,924 
c) Cross currency swaps       575                466                 
d) Equity swaps                                        
e) Forwards                                        
f) Futures                                        
g) Other                                        
Total   1,259,955    198,783            1,870,620    245,847            738,386    947,924 

 

 598 | Individual financial statements as at 30 June 2024

 

A.3 OTC financial hedging derivatives: notional values, gross positive and negative fair values by counterparty

 

Underlying assets  Central
counterparties
   Banks   Other financial
companies
   Other entities 
Contracts not included in offsetting arrangements                
1) Debt securities and interest rates                
- notional value  X          
- positive fair value  X          
- negative fair value  X          
2) Equity securities and stock indexes             
- notional value  X          
- positive fair value  X          
- negative fair value  X          
3) Currencies and gold             
- notional value  X          
- positive fair value  X          
- negative fair value  X          
4) Commodities             
- notional value  X          
- positive fair value  X          
- negative fair value  X          
5) Other             
- notional value  X          
- positive fair value  X          
- negative fair value  X          
Contracts included in offsetting arrangements                
1) Debt securities and interest rates                    
- notional value   48,346,237    24,970,880    2,683,080     
- positive fair value   451,427    87,566    21,607     
- negative fair value   1,259,955    197,559    649     
2) Equity securities and stock indexes                   
- notional value                
- positive fair value                
- negative fair value                
3) Currencies and gold                   
- notional value       321,568    40,712     
- positive fair value       1,251         
- negative fair value       474    101     
4) Commodities                   
- notional value                
- positive fair value                
- negative fair value                
5) Other                   
- notional value                
- positive fair value                
- negative fair value                

 

Notes to individual accounts | Part E - Information on risks and related hedging policies | 599 

 

A.4 Outstanding life of OTC financial hedging derivatives: notional values

 

Underlying/Outstanding life  Up to 1 year   From 1 year
to 5 years
   Over
5 years
   Total 
A.1 Financial derivatives on debt securities and interest rates   7,189,313    37,120,926    31,689,958    76,000,197 
A.2 Financial derivatives on equity securities and stock indexes                
A.3 Financial derivatives on currencies and gold   21,466    300,102    40,712    362,280 
A.4 Financial derivatives on commodities                
A.5 Other financial derivatives                
Total 30 June 2024   7,210,779    37,421,028    31,730,670    76,362,477 
Total 30 June 2023   8,252,919    33,320,584    20,413,537    61,987,040 

 

C. Non-derivative hedging instruments

 

C.1 Hedging instruments other than derivatives: breakdown by accounting portfolio and hedge type

 

   Carrying amount   Changes in the value used to calculate the
hedge ineffectiveness
 
   Fair value
hedges
   Cash flow
hedges
   Foreign
investment
hedges
   Fair value
hedges
   Cash flow
hedges
   Foreign
investment

hedges
 
Financial assets other than derivatives                        
of which: trading activities                        
of which: other assets mandatorily measured at fair value                        
of which: assets designated at fair value                        
Total                        
Total                        
Financial liabilities other than derivatives                        
Trading liabilities                        
Liabilities designated at fair value                        
Liabilities measured at amortized cost   X    X                 
Total 30 June 2024                        
Total 30 June 2023               320         

 

600 | Individual financial statements as at 30 June 2024

 

D. Hedged instruments

 

D.1 Fair value hedges

 

           Specific hedges     
   Specific
hedges:
book value
   Specific
hedges - net
positions:
book value
of assets or
liabilities
(before
offsetting)
  

Accumulated

changes in
fair value of
the hedged
instrument

   Ending
of hedge:
residual
accumulated
value
changes in
fair value
   Changes in
the value used
to calculate
the hedge
ineffectiveness
   Generic
hedges:
Carrying
amount
 
A. Assets                        
1. Financial assets measured at fair value through other comprehensive income - hedges of:   1,175,058        3,267        20,925     
1.1 Debt securities and interest rate   1,175,058        3,267        20,925    X 
1.2 Equity securities and stock indexes                       X 
1.3 Currencies and gold                       X 
1.4 Receivables                       X 
1.5 Other                       X 
2. Financial assets measured at amortized cost - hedges of:   10,437,889        189,273        275,633     
1.1 Debt securities and interest rate   2,806,021        40,135        60,054    X 
1.2 Equity securities and stock indexes                       X 
1.3 Currencies and gold                       X 
1.4 Receivables   7,631,868        149,138        215,579    X 
1.5 Other                       X 
Total 30 June 2024   11,612,947        192,540        296,558     
Total 30 June 2023   4,733,285        88,736        36,246    X 
B. Liabilities                              
1. Financial liabilities measured at amortized cost - hedges of:   27,472,738        1,234,010        650,594     
1.1 Debt securities and interest rate   27,472,738        1,234,010        650,594    X 
1.2 Currencies and gold                       X 
1.3 Other                       X 
Total 30 June 2024   27,472,738        1,234,010        650,594     
Total 30 June 2023   26,315,775        1,858,927        564,714     

 

Notes to individual accounts | Part E - Information on risks and related hedging policies | 601 

 

D.2 Hedging of cash flows and foreign investments

 

   Changes in the value
used to calculate the
hedge ineffectiveness
   Hedge reserves   Ending of hedge:
residual value of
hedging reserves
 
A. Cash flow hedging            
1. Assets   2,719    1,820     
1.1 Debt securities and interest rate   2,719    1,820     
1.2 Equity securities and stock indexes            
1.3 Currencies and gold            
1.4 Receivables            
1.5 Other            
2. Liabilities            
1.1 Debt securities and interest rate            
1.2 Currencies and gold            
1.3 Other            
Total (A) 30 June 2024   2,719    1,820     
Total (A) 30 June 2023            
B. Hedging of foreign investments   X         
Total (A+B) 30 June 2024   2,719    1,820     
Total (A+B) 30 June 2023            

 

E. Effects of hedging operations recognized at net equity

 

E.1 Reconciliation of net equity components

 

   Cash flows hedging reserve   Foreign investments hedging reserve 
   Debt
securities
and interest
rates
   Equity
securities
and stock
indexes
    Gold
and
currencies
   Receivables   Others   Debt
securities
and
interest
rates
   Equity
securities
and stock
indexes
   Gold
and
currencies
   Receivables   Others 
Opening balance                                        
Fair value variations (effective share)   1,820                                     
P&L attributions                                        
Of which: future transactions no more expected                       X    X    X    X    X 
Other variations                                        
Of which: tranfers at initial book value of hedged items                       X    X    X    X    X 
Closing balance   1,820                                     

 

 602 | Individual financial statements as at 30 June 2024

 

3.3 OTHER INFORMATION ON DERIVATIVE INSTRUMENTS (TRADING AND HEDGING INSTRUMENTS)

 

A. Financial derivatives

 

A.1 OTC financial and credit derivatives: net fair value by counterparty

 

    

Central

counterparties

   Banks  

Other

financial

companies

  

Other

entities

 
A. Financial derivatives                
1) Debt securities and interest rates                
  - notional value   161,060,333    76,124,394    8,628,739    4,720,922 
  - net positive fair value   760,539    355,406    216,320    8,145 
  - net negative fair value   1,279,197    612,432    246,340    165,313 
2) Equity securities and stock indexes                    
  - notional value       10,103,497    5,225,085    1,396,712 
  - net positive fair value       443,655    249,574    103,482 
  - net negative fair value       2,184,921    136,714    6,810 
3) Currencies and gold                    
  - notional value       11,186,118    2,193,234    1,168,993 
  - net positive fair value       184,297    41,348    58,117 
  - net negative fair value       209,705    47,017    17,346 
4) Commodities                    
  - notional value       545,665    53,297     
  - net positive fair value       21,848         
  - net negative fair value           16     
5) Other                    
  - notional value                
  - net positive fair value                
  - net negative fair value                
B. Credit derivatives                    
1) Hedging purchases                    
  - notional value   4,841,696    3,311,862    9,987,999     
  - net positive fair value       24,307    7,598     
  - net negative fair value       204,260    145,561     
2) Hedging sales                    
  - notional value   4,584,755    2,017,740    11,032,255     
  - net positive fair value       48,258    149,920     
  - net negative fair value   11,923    10,771    16,778     

 

Notes to individual accounts | Part E - Information on risks and related hedging policies | 603 

 

4 LIQUIDITY RISK

 

QUALITATIVE INFORMATION

 

Banks are naturally exposed to the liquidity risk inherent in the maturity transformation process that is typical of banking operations.

 

Liquidity risk is distinguished according to its timing profile:

 

the current or potential risk of the bank not being able to manage its own liquidity needs in the short term (“liquidity risk”);

 

the risk of the bank not having stable funding sources in the medium or long term, resulting in its inability to meet its financial obligations without incurring an excessive increase in the cost of financing (“funding risk”).

 

An adequate liquidity and funding risk management system is fundamental to ensure the stability of the Group and the financial system in general, given that a single bank’s difficulties would affect the system as a whole. The liquidity and funding risk management system is developed as part of the Risk Appetite Framework and the risk tolerance levels contained in it. In particular, one of the management objectives contained in the Risk Appetite Framework is to maintain a liquidity position in the short and long term which is adequate to cope with a period of prolonged stress (combining Bank-specific and systemic stress factors).

 

The Group Liquidity Risk Management Policy (the “Policy”) approved by the Parent Company’s Board of Directors defines the target in terms of the level of highly liquid assets to maintain in order to cover the anticipated cash flows in the short and medium/long term.

 

The Policy also sets out the roles and responsibilities of the company units and governing bodies, the risk measurement metrics used, the guidelines for carrying out the stress testing process, the funds transfer pricing system and the Contingency Funding Plan.

 

To ensure that liquidity risk is managed according to an integrated and consistent approach within the Bank, strategic decisions are taken by the Parent Company’s Board of Directors, to which the Policy assigns several important duties, including: definition and approval of the guidelines and strategic direction, responsibility for ensuring that the risk governance system is fully reliable, and

 

 604 | Individual financial statements as at 30 June 2024

 

 

monitoring of trends in liquidity and funding risk over time and of the Group’s Risk Appetite Framework.

 

Moreover, the Group’s ALM Committee discusses the most significant liquidity risk issues, defining the asset and liability structure and the related acceptance of the risk of mismatches between assets and liabilities and managing them in line with the commercial and financial objectives set out in the budget and in the Group’s Risk Appetite Framework.

 

In application of Article 86 of Directive 2013/36/EU, the Mediobanca Group identifies, measures, manages and monitors liquidity risk as part of its internal liquidity adequacy assessment process (ILAAP). In this process, which constitutes an integral part of the Supervisory Authority’s activities (Supervisory Review and Evaluation Process, or SREP), the Mediobanca Group performs a self-assessment of the adequacy of its overall framework for liquidity risk management and measurement from a qualitative and a quantitative perspective. The findings of the risk profile adequacy assessment and overall self-assessment are presented to the Governing Bodies annually.

 

The Mediobanca Group’s liquidity governance process is centralized at the Parent company level by setting the strategy and guidelines for Group Legal Entities, thereby ensuring that the liquidity position is managed and controlled at the consolidated level.

 

The Parent Company’s units that are responsible for ensuring that the Policy is applied correctly are:

 

Group Treasury, which is responsible at Group level for managing liquidity, funding, collateral and transfer pricing system;

 

Business & Capital Planning, which supports Risk Management and Group Treasury in drawing up the Group Funding Plan in compliance with the budget objectives;

 

Risk Management which, in accordance with the principles of separation and independence, is responsible for the Group’s integrated, second-level control system for current and future risks, in accordance with the Group’s regulations and governance strategies.

 

The Group Audit Unit is responsible for evaluating the functioning and reliability of the control system for liquidity risk management and for reviewing its adequacy and compliance with the requirements laid down in the regulations.

 

Notes to individual accounts | Part E - Information on risks and related hedging policies | 605 

 

The findings of such reviews are submitted to the Governing Bodies at least once a year.

 

The Bank’s objective is to maintain a level of liquidity that will enable it to meet its ordinary and extraordinary payment obligations at the established expiry dates, while at the same time keeping costs to a minimum and hence without incurring losses. The Mediobanca Group’s short-term liquidity policy aims to verify whether the mismatch between expected or unexpected cash inflows and outflows remains sustainable in the short term, including within an intra-day time horizon.

 

The Bank, through the Group Treasury unit, manages its own liquidity position actively, with the objective of meeting its own clearing obligations within the time frame required.

 

For a description of the metrics used to monitor short and medium/long-term liquidity, reference is made to Part E of the Consolidated Notes to the Accounts.

 

Mediobanca was granted a waiver of liquidity requirements on the part of the European Central Bank on an individual basis under Article 8 of the CRR.

 

The Contingency Funding Plan (described in the “Regulations”) is an event governance model to be activated in case of a crisis following a procedure approved by the Board of Directors. For further information on the governance of states of emergency and risk mitigation policies, please refer to the consolidated report.

 

 606 | Individual financial statements as at 30 June 2024

 

QUANTITATIVE INFORMATION

 

1. Financial assets and liabilities by residual contract term

 

Items/Maturities  On demand   From 1 day
to 7 days
   From 7 days
to 15 days
   From 15 days
to 1 month
   From 1 month
to 3 months
   From 3 months
to 6 months
   From 6 months
to 1 year
   From 1 year
to 5 years
   Over 5 years   Indefinite
duration
 
Cash assets   6,258,147    655,325    614,020    2,205,081    3,060,694    5,030,873    7,749,332    31,679,954    15,965,228    11,425 
A.1 Government securities   14,559    71,800    125,242    202,011    156,465    1,122,208    2,739,720    5,170,150    4,113,080     
A.2 Other debt securities   1,256    30,658    1,955    8,181    185,244    75,494    542,000    3,455,796    2,369,534     
A.3 UCIT units                                        
A.4 Loans   6,242,332    552,867    486,823    1,994,889    2,718,985    3,833,171    4,467,612    23,054,008    9,482,614    11,425 
– Banks   4,229,635    399,029    378,074    1,237,275    669,531    1,568,855    3,120,440    13,743,398    8,826,092    11,425 
– Customers   2,012,697    153,838    108,749    757,614    2,049,454    2,264,316    1,347,172    9,310,610    656,522     
Cash liabilities   23,145,645    839,201    1,045,163    1,728,452    4,346,602    1,761,815    7,176,057    18,518,457    8,141,754     
B.1 Deposits and current accounts   20,765,944                                     
– Banks   18,881,698                                     
– Customers   1,884,246                                     
B.2 Debt securities   1,427    39    225,885    12,153    1,007,552    367,350    1,529,964    15,282,147    5,462,128     
B.3 Other liabilities   2,378,274    839,162    819,278    1,716,299    3,339,050    1,394,465    5,646,093    3,236,310    2,679,626     
Off-balance sheet transactions                                                  
C.1 Financial derivatives with exchange of principal                                                  
– long positions   728,741    825,565    297,401    592,604    2,289,343    7,401,323    2,353,273    18,483,454    7,285,254     
– short positions   344,499    752,441    131,222    844,346    1,987,909    606,643    1,704,984    2,841,126    351,158     
C.2 Financial derivatives without exchange of principal                                                  
– long positions   865,341    4,838    34,185    179,574    326,323    512,167    854,374             
– short positions   947,257    11,803    27,629    207,133    361,224    536,354    1,089,439             
C.3 Deposits and loans for collection                                                  
– long positions   6,747,425    2,473,003    28,817    208,935    55,862    455,303    62,500    629,978         
– short positions           241,754    409,948    433,105    873,594    1,328,238    4,911,048    2,464,136     
C.4 Irrevocable loan commitments*                                                  
– long positions           123,833    339,707    381,146    1,381,960    1,333,278    5,847,453    3,874,262     
– short positions   7,797,735    3,169,109    503,162    452,133    325,193    401,467        632,840         
C.5 Financial guarantees issued                                        
C.6 Financial guarantees received                                        
C.7 Credit derivatives with exchange of principal                                                  
– long positions                   60,000    100,600    63,200    1,051,750    907,998     
– short positions                   60,000    208,444    145,731    1,273,412    495,962     
C.8 Credit derivatives without exchange of principal                                                  
– long positions   177,690                                     
– short positions   193,412                                     

 

*  This item includes hedge sales perfectly matched by purchases for the same amount.

 

Notes to individual accounts | Part E - Information on risks and related hedging policies | 607 

 

5 OPERATIONAL RISK

 

QUALITATIVE INFORMATION

 

Definition

 

Operational risk is the risk of incurring losses as a result of the inadequacy or malfunctioning of procedures and IT systems, human error or external events

 

Capital requirement

 

To manage operational risk, Mediobanca has adopted the Basic Indicator Approach (BIA) in order to calculate the related capital requirement applying a 15% coefficient, as per regulations, to the three-year average for the relevant indicator. Based on this calculation method, the capital requirement as at 30 June 2024 was €199.3m (€174.3m in the previous year).

 

Risk mitigation

 

The Group’s Non-Financial Risks Committee, with the task of guiding, monitoring and mitigating non-financial risks (including IT risks, fraud risk, outsourcing risk, legal risks, reputation risks), and the Conduct Committee, with the task of guiding, supervising and making decisions on the Group’s conduct risks, operate within the scope of risk management.

 

Operational risks are supervised by a specific Operational Risk Management team within the Non-Financial Risk Management unit.

 

The processes for identifying operational risks, including through the collection and analysis of data concerning operational risk loss, assessment and estimation, and the processes for identifying and initiating the related mitigation actions, are defined and implemented according to the Group’s operational risk management policy and in line with the principle of proportionality. Actions to mitigate the most relevant operational risks were proposed, implemented and monitored according to the evidence obtained.

 

 608 | Individual financial statements as at 30 June 2024

 

The operating losses recorded during the year under review had a minimal impact on the Bank’s total revenues, i.e. approximately 0.04%.

 

With regard to the different classes of operational risk, the Group’s percentage composition of the various Basel II event types is shown below.

 

Event Type  % of Total Loss 30/6/2024   % of Total Loss 30/6/2023 
External Fraud   31%   92%
Clients, products and business practices   27%   4%
Employment practices and workplace safety   20%   2%
Execution, delivery and process management   18%   2%
Other   4%    
Total  100%  100%

 

Most of the operating losses for the year, which were very limited, were due to “Employment practices and workplace safety” relating to contributions and penalties for managing social security positions following changes in seniority contributions. “Execution, delivery and process management” concerned normally higher costs/penalties in the settlement of transactions, while “Clients, products and business practices” include costs for managing limited disputes with customers.

 

In terms of Business Lines, losses from operational risks were greater in Wealth Management. Very limited losses were recorded in CIB and Holding Function.

 

In terms of potential risks, the business lines Wealth Management and CIB were exposed to low-frequency and high-severity events due to their nature as they are characterized by non-standard transactions of a high amount.

 

Furthermore, although they did not generate significant losses, there was an increase in some cases (classes) of operational risk, such as IT & Cyber Risk and Outsourcing Risk.

 

Notes to individual accounts | Part E - Information on risks and related hedging policies | 609 

 

In particular IT & Cyber Risks, which during the twelve months under review did not generate relevant issues at Group level, in terms of exposure are influenced by the following increases:

 

Dependency on IT systems;

 

Number of users which use virtual channels and thus of connected devices;

 

Quantity of managed data which should be protected;

 

Use of third-party-offered IT services.

 

Further external elements should be added to those just mentioned, like the evolution of the cyber-geopolitical context (i.e. Russia – Ukraine and Israel – Palestine conflicts), as well as the adoption of new technological models (i.e. cloud) which contribute to the possible attack surface being increased thus introducing new threats.

 

Due to the foregoing, safeguards for specific risk classes, such as IT & Cyber risk, third-party risk, fraud risk and reputation risk, were increased as part of the Non-Financial Risk Management project while providing an overview of such risks.

 

 610 | Individual financial statements as at 30 June 2024

 

Litigation risk: Risks deriving from pending proceedings

 

For a description of the claims currently pending against the Parent Company, please see Part B – Liabilities - section 10 - Provisions for risks and charges.

 

Other risks

 

For a more in-depth description of the other risks, reference is made to Part E – Market Risks – Other Risks in the Consolidated Notes to the Accounts.

 

Notes to individual accounts | Part E - Information on risks and related hedging policies | 611 

 

Part F – Information on Capital

 

SECTION 1

 

Company capital

 

QUANTITATIVE INFORMATION

 

B.1 Company capital: breakdown

 

Items/Values 

30 June

2024

  

30 June

2023

 
1. Capital   444,515    444,169 
2. Share premium   2,195,606    2,195,606 
3. Reserves   1,127,476    1,826,803 
  - retained earnings   1,469,469    1,981,088 
  a) legal   88,834    88,728 
  b) under articles of association   188,163    720,073 
  c) treasury shares   68,828    78,876 
  d) other   1,123,644    1,093,411 
  - other   (341,993)   (154,285)
4. Equity instruments        
5. (Treasury shares)   (68,828)   (78,876)
6. Valuation reserves:   88,982    59,189 
  - Equity securities designated at fair value through other comprehensive income   118,138    106,435 
  - Hedging of equity securities designated at fair value through other comprehensive income        
  Financial assets (other than equity securities) measured at fair value through other comprehensive income   (6,153)   (49,000)
  - Tangible assets        
  - Intangible assets        
  - Hedging of foreign investments        
  - Hedging of cash flows   1,820     
  - Hedging instruments (not designated instruments)        
  - Currency exchange gains/losses        
  - Non-current assets and asset groups held for sale        
  - Financial liabilities designated at fair value through profit or loss (change in own credit quality)   (32,142)   (5,524)
  - Actuarial gains (losses) on defined benefits pension schemes   (2,313)   (2,354)
  - Valuation reserves share of equity-accounted interests        
  - Extraordinary revaluation laws   9,632    9,632 
7. Profit (loss) for the year   1,243,992    606,491 
Total   5,031,743   5,053,382 

 

For more information, please refer to section 12 “Company capital - Items 110, 130, 140, 150, 160, 170 and 180”.

 

 612 | Individual financial statements as at 30 June 2024

 

B.2 Valuation reserves for financial assets measured at fair value through other comprehensive income: breakdown

 

     30 June 2024   30 June 2023 
Assets/Values   Positive reserve    Negative reserve    Positive reserve    Negative reserve 
1. Debt securities   21,769    (27,922)   4,418    (53,418)
2. Equity securities   128,741    (10,603)   123,492    (17,057)
3. Loans                
Total    150,510    (38,525)  127,910   (70,475)

 

B.3 Valuation reserves for financial assets measured at fair value through other comprehensive income: changes during the period

 

    

Debt

securities

  

Equity

securities

   Loans   Total 
1. Opening balance   (49,000)   106,435        57,435 
2.Increases   55,566    29,494        85,060 
 2.1 Increases in fair value   38,508    29,494        68,002 
 2.2 Value adjustments for credit risk   2,263    X        2,263 
 2.3 P&L recycling of negative reserves due to realization   14,795    X        14,795 
 2.4 Transfers to other net equity components (equity securities)                
 2.5 Other changes                
3.Decreases   12,719    17,791        30,510 
 3.1 Decreases in fair value   10,127    9,853        19,980 
 3.2 Credit risk write-backs   926            926 
 3.3 P&L recycling of positive reserves:   1,666    X        1,666 
   -due to realization                
 3.4 Transfers to other net equity components (equity securities)       7,938        7,938 
 3.5 Other changes                
4.Closing balance   (6,153)   118,138        111,985 

 

Notes to individual accounts | Part F - Information on Capital | 613 

 

SECTION 2

 

Own funds and supervisory capital requirements

 

The Bank, as the Group, stands out for its great capital soundness, as it always keeps its capital ratios above the regulatory thresholds retaining the capital surplus for operations to be carried out on the corporate market.

 

2.1 Own funds

 

Scope of regulations

 

No regulatory changes affected the Bank during the financial year under review.

 

QUALITATIVE INFORMATION

 

Common Equity Tier 1 (CET1) is made up of paid-up capital, reserves (including €112m of positive reserves on securities measured at fair value through other comprehensive income) and profit for the year (€1,244m), after the proposed dividend (€885.2m calculated on consolidated profits) and the entire deduction of the second share buyback plan to be carried out in financial year 2024/2025 (€385m)(31).

 

Deductions (€-402.7m) mainly regarded:

 

treasury shares of €68.8m, taking into account that the €195m disbursement relating to the purchase of 17 million shares, approved by the Shareholders’ Meeting in October 2023 and executed during the financial year, was recognized as a decrease in reserves following cancellation of such shares;

 

intangible assets (including goodwill) of €28.5m;

 

prudential changes of €55m relating to valuations of financial instruments (referred to as AVA and DVA);

 

interests of €159m in financial companies (corresponding in fact to the investment in Assicurazioni Generali) and other investments (mainly in the CLO special purpose vehicle) of €95.3m (taking into account some insurance coverage).

 

(31)  Share buyback plan subject to authorization by the European Central Bank and by the Shareholders' Meeting.

 

 614 | Individual financial statements as at 30 June 2024

 

No Additional Tier 1 (AT1) instruments were issued.

 

Tier 2 capital includes subordinated liabilities, up from €966.6m to €1,096.6m after last January’s nominal issue of €300m, which more than absorbed the amortization for the year (€159m).

 

   30 June 2024 
Issue  ISIN code  Nominal Value   Computed value (*) 
MB SUBORDINATO TV             
with min 3% 2025  IT0005127508   499,265    116,585 
MB SUBORDINATO 3.75% 2026  IT0005188351   298,478    113,664 
MB SUBORDINATO 1.957% 2029  XS1579416741   50,000    45,868 
MB SUBORDINATO 2.3% 2030  XS2262077675   249,750    240,014 
MB FIX TO FLOAT FEB 2033  XS2577528016   299,500    291,480 
MB 5.25 22 APR 2034  IT0005580573   299,800    289,013 
Total subordinated securities      1,696,793    1,096,624 

 

(*)  The computed value differs from the book value due to the items measured at fair value and amortized cost and to buyback commitments entered into.

 

Tier 2 also includes the difference of €13.5m between higher accounting adjustments compared to prudential expected losses calculated by using the advanced models (referred to as "buffer"), down compared to the previous financial year (€22.5m), computing the maximum admissible amount corresponding to 0.6% of risk-weighted exposure amounts calculated by using advanced models (under Article 159 CRR).

 

Notes to individual accounts | Part F - Information on Capital | 615 

 

QUANTITATIVE INFORMATION

 

     30 June 2024   30 June 2024 
A. Common equity tier 1 (CET1) before applying prudential filters   4,183,376    4,338,700 
  of which CET1 instruments subject to phase-in regime        
B. CET1 prudential filters (+/-)   (116,642)   (117,395)
C. CET1 before items to be deducted and effects of phase-in regime (A +/- B)   4,066,734    4,221,306 
D. Items to be deducted from CET1   (748,457)   (752,644)
E. Phase-in regime - impact on CET1 (+/-)*   560,852    587,950 
F. Total common equity tier 1 (CET1) (C-D+/-E)  3,879,129    4,056,612 
G. Additional Tier 1 (AT1) before items to be deducted and effects of phase-in regime        
  of which AT1 instruments subject to phase-in regime        
H. Items to be deducted from AT1        
I. Phase-in regime - impact on AT1 (+/-)        
L. Total additional tier 1 (AT1) (G-H+/-I)        
M. Tier 2 (T2) before items to be deducted and effects of phase-in regime   1,109,989    989,108 
  of which T2 instruments subject to phase-in regime        
N. Items to be deducted from T2       (104,920)
O. Phase-in regime - impact on T2 (+/-)        
P. Total Tier 2 (M-N+/-O)  1,109,989   884,188 
Q. Total own funds (F+L+P)  4,989,118   4,940,800 

 

*  Adjustments include greater deductions for the adoption of Calendar Provisioning.

 

 616 | Individual financial statements as at 30 June 2024

 

2.2 Capital adequacy

 

A. QUALITATIVE INFORMATION

 

As at 30 June 2024, the phased-in Common Equity Ratio – the ratio of Common Equity Tier 1 Capital to total risk-weighted assets applying the Danish Compromise – stood at 13.2%, up compared to the previous financial year (12.8%) due to a significant drop in RWA (€-2.4bn) after greater selectivity of investments and a simultaneous launch of risk mitigation measures.

 

The total capital ratio also rose from 15.6% to 17.0%.

 

The Leverage ratio stood at 5.3% (6.0% at 30 June last), in any case above the regulatory limit of 3%.

 

Notes to individual accounts | Part F - Information on Capital | 617 

 

B. QUANTITATIVE INFORMATION

 

     Unweighted amounts (*)   Weighted amounts/requirements 
Categories/Values   30 June 2024   30 June 2023   30 June 2024   30 June 2023 
A. RISK ASSETS                    
A.1 Credit and counterpart risk   80,205,399    79,294,244    24,853,136    26,979,359 
  1. Standard methodology   63,723,965    60,623,547    17,144,543    16,440,421 
  2. Internal rating methodology   15,875,728    18,361,770    7,565,469    10,447,070 
  2.1 Basic                
  2.2 Advanced   15,875,728    18,361,770    7,565,469    10,447,070 
  3. Securitization   605,706    308,927    143,124    91,869 
B. REGULATORY CAPITAL REQUIREMENTS                    
  B.1 Credit and counterpart risk                 1,988,251    2,158,349 
  B.2 Credit valuation adjustment risk                 24,719    38,948 
  B.3 Settlement risk                      
  B.4 Market risk                 134,510    167,426 
  1. Standard methodology                   134,510    167,426 
  2. Internal models                        
  3. Concentration risk                        
  B.5 Operational risk                 199,305    174,348 
  1. Basic Indicator Approach (BIA)                   199,305    174,348 
  2. Standard method                        
  3. Advanced method                        
  B.6 Other calculation items                      
  B.7 Total prudential requirements                 2,346,785   2,539,071 
C. RISK ASSETS AND REGULATORY RATIOS                          
  C.1 Risk-weighted assets                 29,334,807    31,738,389 
  C.2 CET1 capital/risk-weighted assets (CET1 capital ratio)                 13.22%   12.78%
  C.3 Tier 1 capital/risk-weighted assets (Tier 1 capital ratio)                 13.22%   12.78%
  C.4 Total own funds/risk-weighted assets (total capital ratio)                 17.01%  15.57%

 

(*) For the standardized methodology, the “unweighted amounts”, as provided by the regulations in force, correspond to the value of the exposure taking into account the prudential filters, risk mitigation techniques and credit conversion factors. For the AIRB ratings methodology, the “unweighted amounts” correspond to the “exposure at default” (EAD). For guarantees issued and loan commitments, credit conversion factors are also included in the EAD calculation

 

 618 | Individual financial statements as at 30 June 2024

 

Part G - Combinations Involving Group Companies or Business Units

 

SECTION 1: TRANSACTIONS COMPLETED DURING THE FINANCIAL YEAR

 

It should be noted that the purchase of a controlling stake in the English company Arma Partners LLP, a leading independent financial consultancy firm in Europe in the Digital Economy sector was completed on 2 October; at the end of the Purchase Price Allocation process, a brand worth of £24.6 million, customer relationship worth £5.3 million and residual goodwill of £209 million, after tax of £7.5 million, were found.

 

The merger of the wholly-owned subsidiary MB INVAG S.r.l. took place on 27 September last.

 

SECTION 2: TRANSACTIONS COMPLETED AFTER THE REPORTING DATE

 

No transactions were completed after the reporting date.

 

SECTION 3: RETROSPECTIVE ADJUSTMENTS

 

No adjustments were made to the accounts in connection with previous business combinations for the year under review.

 

Notes to individual accounts | Part G - Combinations Involving Group Companies or Business Units | 619 

 

Part H – Related-party Transactions

 

1. Information on remuneration for key management personnel

 

Compensation paid to members of governing and supervisory bodies and to key management personnel (Drawn up pursuant to CONSOB Decision No. 18049 of 23 December 2011)

 

   Compensation 
  

Emoluments

payable in

connection to

the office

  

Non-cash

benefits*

  

Bonuses and

other incentives

  

Other

compensation

 
BOARD OF DIRECTORS1    3,271.0    782.4    1,467.8    3,300.0 
of which: management   1,125.0    782.4    1,467.8    3,300.0 
Key MANAGEMENT personnel2        360.7    2,583.4    4,744.6 
STATUTORY AUDIT COMMITTEE3    460.2             

 

* This includes the amount of fringe benefits (on a taxable basis) including any insurance policies and supplemental pension schemes. Therefore, equity-based compensation costs of €4.6m are excluded.

1 There were 15 people in office at 30 June 2024.

2 There were 8 people in office at 30 June 2024.

3 There were 3 people in office at 30 June 2024.

 

2. Disclosure on related-party transactions

 

The Regulation on Related-Party Transactions, implementing CONSOB Regulation No. 17221 of 12 March 2010, as most recently amended by Resolution No. 21264 of 10 December 2020, was introduced in 2011 aiming to ensure the transparency and substantial correctness of transactions with related parties carried out directly or through subsidiaries. Having received favourable opinions from the Bank’s Related Parties and Statutory Audit Committees, the Board of Directors incorporated the Bank of Italy’s most recent instructions on this subject, which introduce prudential limits for risk activities with Related Parties; this Regulation came into force during December 2012, and was updated most recently in June 2024. The full document is available on the Bank’s website at www.mediobanca.com.

 

For the definition of related parties adopted, please see Part A Accounting Policies of the Notes to the Accounts.

 

 620 | Individual financial statements as at 30 June 2024

 

Transactions with related parties fall within the ordinary operations of the Group companies, are maintained on an arm’s length basis, and are entered into in the interests of the individual companies concerned. Details of the compensation paid to Directors and key management personnel are provided in a footnote to the table.

 

1.1Regular financial disclosure: Most significant transactions

 

There were no such transactions to report during the period under review.

 

1.2Quantitative information

 

The Arma Group and the company HeidiPay Switzerland AG entered the scope of related parties following the respective acquisitions of 100% of their share capital, completed by Mediobanca S.p.A and Compass Banca S.p.A. during the period under review.

 

The overall exposure to related parties remained low, with a decreasing trend.

 

Notes to individual accounts | Part H - Related-party Transactions | 621 

 

Statement as at 30 June 2024

 

                    (€m) 
                      
 Subsidiaries

   Directors
and key
management
personnel

   

Associated

companies

 

Other

related party

    Total 
Assets  29,887.0         36.6    29,923.6 
of which: other assets  4,838.6            36.6     4,875.2 
Loans  25,048.4                 25,048.4 
Liabilities  25,591.6            247.83      25,839.4 
Guarantees and commitments  8,663.0            130.03      8,793.0 
Interest income  1,287.4            1.6     1,289.0 
Interest expense  (775.3)           (0.8)    (776.1)
Net fee income  17.6         4.9   2.1     24.6 
Sundry income (costs)  (164.6)   (24.3)1     0.1   (52.8)2 3    (241.6)

 

1  Of which, short-term benefits of €(19.7)m and performance shares of €(4.6)m; the figure includes 8 key management personnel.

2  This item also includes the valuation of derivative contracts, including bond forwards with underlying Government securities.

3  Starting from the year under review, the collateral exchange transaction with the AG Group will no longer be represented by its nominal value (€250m among commitments) but using equity effects (liabilities covering the forward purchase of government securities).

 

Statement as at 30 June 2023

 

                     (€m) 
                       
   Subsidiaries  

Directors

and key

management

personnel

   

Associated

companies

  

Other

related party

    Total 
Assets   30,775.3             84.4     30,859.7 
of which: other assets   5,351.9             72.0     5,423.9 
Loans   25,423.4             12.4     25,435.8 
Liabilities   26,441.5             12.9     26,454.4 
Guarantees and commitments   7,823.2             390.0     8,213.2 
Interest income   837.5             1.1     838.6 
Interest expense   (421.4)                 (421.4)
Net fee income   10.2         1.0    0.1     11.3 
Sundry income (costs)   (619.5)   (26.8)1    (0.1)   (24.1)2    (670.5)

 

1  Of which, short-term benefits of €(17.3)m and performance shares of €(5.7)m; the figure includes 8 key management personnel.

2  This item also includes the valuation of derivative contracts, including bond forwards with underlying Government securities.

 

 622 | Individual financial statements as at 30 June 2024

 

Part I – Share-based payment schemes

 

A. QUALITATIVE INFORMATION

 

1. Summary of share-based payment schemes approved by the Shareholders’ Meeting.

 

In the area of equity instruments used for the remuneration of its personnel, Mediobanca decided to adopt a performance shares scheme, with the two-fold aim of:

 

adapting to banking regulations that require a portion of variable remuneration to be paid out in the form of equity instruments over a time horizon of several years, subject to performance conditions and hence consistent with positive results sustainable over time;

 

aligning the interests of Mediobanca’s management with those of its shareholders in order to create value over the medium / long term.

 

Performance share plans are therefore in place which, under certain conditions, provided for the free assignment of Mediobanca shares at the end of a vesting and/or holding period and long-term incentive plans (LTI) linked to the achievement of the strategic plan’s objectives.

 

The plans currently in effect are as follows:

 

performance share plan approved by the Shareholders' Meeting of 28 October 2015 (and updated by the Shareholders' Meeting of 28 October 2019), valid for variable remuneration for financial years 2018 - 2020 paid out to Group personnel in a maximum number of 20,000,000 Mediobanca shares to be attributed by capital increase or alternatively with the use of treasury shares in the Bank’s portfolio;

 

long-term incentive plan (LTI) for the CEO and General Manager of Mediobanca, linked to the achievement of the targets set in the 2019/2023 plan by assigning them Mediobanca shares by capital increase pursuant to the Plan as mentioned in the preceding paragraph;

 

performance share plan approved by the Shareholders' Meeting of 28 October 2020, valid for variable remuneration for financial years 2021 - 2025 paid out to Group personnel in a maximum number of 20,000,000

 

|

Notes to individual accounts | Part I - Share-based payment schemes | 623 

 

 

Mediobanca shares to be attributed by capital increase or alternatively with the use of treasury shares in the Bank’s portfolio;

 

performance share plan approved by the Shareholders' Meeting of 28 October 2021 (partially revoking the previous Plan in order to transition to a system of resolutions to be taken annually), valid for variable remuneration for financial year 2021-2022 paid out to Group personnel by attributing a maximum number of 4,000,000 Mediobanca shares through the use of treasury shares in the Bank’s portfolio;

 

performance share plan approved by the Shareholders' Meeting of 28 October 2022, valid for variable remuneration for financial year 2022-2023 paid out to Group personnel by attributing a maximum number of 3,000,000 Mediobanca shares through the use of treasury shares in the Bank’s portfolio;

 

performance share plan approved by the Shareholders' Meeting of 28 October 2023, valid for variable remuneration for financial year 2023-2024 paid out to Group personnel by attributing a maximum number of 3,000,000 Mediobanca shares through the use of treasury shares in the Bank’s portfolio;

 

a new long-term incentive plan for the period 2023-2026 (“2023-2026 LTI Plan”) approved by the Shareholders’ Meeting held on 28 October 2023, linked to the underlying 2023-2026 Strategic Plan approved in May 2023. For the purpose of the initiative, the Shareholders’ Meeting of 28 October 2023 approved the issue of a maximum number of 3,000,000 new Mediobanca shares with dividend rights by capital increase, or through the use of treasury shares in the Bank’s portfolio alternatively.

 

As at 30 June 2024, the number of performance shares assigned in relation to the above plans amounted to 5,137,970 (3,757,373 at 30 June 2023).

 

 624 | Individual financial statements as at 30 June 2024

 

It should be noted that the Shareholders' Meeting held on 28 October last also approved:

 

a widespread share ownership and co-investment plan (“2023 -2026 ESOP”) for the Group’s personnel within the 2023-26 Strategic Plan’s period. This provides investment opportunities in Mediobanca shares on a voluntary basis at favourable conditions (10% discount). Achievement of the Plan targets by 2026 will ensure an additional bonus to participants in the ESOP Plan, consisting in an additional package of shares assigned free of charge by the Mediobanca Group to supplement the initial investment made by the employee. The maximum number of shares (referred to as matching) that can be assigned by the plan is 1,000,000 shares to be issued by capital increase. Alternatively, freely available treasury shares in the Bank’s portfolio not allocated for other purposes may also be used for the plan’s purposes; The program took place during the month of December and recorded a participation of 28% of personnel within scope (415,600 shares subscribed with a maximum number of 166,240 matching shares attributable).

 

Notes to individual accounts | Part I - Share-based payment schemes | 625 

 

B. QUANTITATIVE INFORMATION

 

Changes in performance share schemes during the year

 

As part of the variable remuneration for financial year 2023, 1,227,029 performance shares, drawn from the Plan approved in the October 2022 Shareholders’ Meeting, were awarded on 27 September 2023. The shares, the award of which is conditional upon performance targets being met over a five-year period or less, will be made available in tranches in November 2024 (up to 532,243), November 2025 (up to 185,868), November 2026 (up to 293,462), November 2027 (up to 107,862), and November 2028 (up to 107,594).

 

As part of the performance share plans, 1,606,525 shares were attributed on 24 November 2023, 979,084 of which through treasury shares and 627,441 by capital increase.

 

Between January and February 2024, 1,797,293 shares were assigned, including 1,736,296 for the 2023-2026 LTI Plan; 26,587 shares were allocated and 10,613 shares were recovered.

 

Starting on 30 June 2024, in connection with the variable remuneration for financial year 2024, a total of 1,037,732 performance shares were awarded at a figurative cost of €11.2m, as part of the variable remuneration component only. These shares, the award of which is conditional upon performance targets being achieved over a five-year period or less, will be made available in tranches as follows: November 2025 (up to 471,041), November 2026 (up to 155,837), November 2027 (up to 240,771), November 2028 (up to 85,149), and November 2029 (up to 84,934).

 

     30 June 2024   30 June 2023 
Items/Performance shares  

No. of performance

shares

   Avg. price  

No. of performance

shares

   Avg. price 
A. Balance at start of period   3,757,373    6.32    3,453,025    7.01 
B. Increases   3,024,322         1,843,041      
B.1 Newly issued shares   3,024,322    6.40    1,843,041    5.89 
B.2 Other changes                    
C. Decreases   1,643,725         1,538,693      
  C.1 Cancelled                
  C.2 Exercised   1,633,112    6.76    1,516,639    7.59 
  C.3 Expired                
  C.4 Other changes   10,613    7.90    22,054    7.76 
D. Balance at end of period   5,137,970    6.15    3,757,373    6.32 

 

 626 | Individual financial statements as at 30 June 2024

 

Part M – Disclosure on Leases

 

SECTION 1

 

Lessee

 

QUALITATIVE INFORMATION

 

With reference to IFRS 16 coming into force and the contracts which fall within its scope of application, the Bank’s lease agreements essentially include real property leases and company car leases. There are some hardware leases only for a residual amount. The property leases mostly involve premises used as offices. Such leases normally have durations of more than twelve months, and typically contain renewal or termination clauses which both lessor and lessee can exercise in accordance with the provisions of law and/or specific contractual arrangements, if any. Generally, such leases do not contain an option to buy at expiry or substantial reinstatement costs for the Bank. As for the car leases, these are long-term agreements for the fleet of company cars available for use by staff members for work-related purposes. The lease agreements in place other than those relating to real properties and cars are of an insignificant amount.

 

It should be recalled that when adopting the standard it was decided to make some simplifications as provided for by the standard itself, excluding contracts with a duration less than or equal to 12 months (referred to as “short-term”), those with a value of less than €5,000 (referred to as “low-value”) and those relating to intangible assets. It was also decided not to separate the service component from the lease proper; hence the full contract was recognized as a lease. The discount rate used was derived from the internal rate of return curve used in treasury management by the Group Treasury unit.

 

In cases where the original lease has been replicated with another counterparty (i.e. sub-leased), the related lease liability is matched by an amount receivable from the counterparty rather than by its value in use. Sub-leasing arrangements involve only negligible amounts.

 

Notes to individual accounts | Part M - Disclosure on Leases | 627 

 

QUANTITATIVE INFORMATION

 

For quantitative information on the impact on the Bank’s financial and earnings situation, reference is made to the contents of the following sections of the Notes to the Accounts:

 

information on right-of-use assets acquired, “Part B Notes to the balance sheet - Assets - Section 8”;

 

information on amounts due under leases, “Part B Notes to the balance sheet - Liabilities - Section 1”;

 

for the effects on earnings, “Part C Notes to the profit and loss account”, in particular the headings for interest income and expense and value adjustments to tangible assets.

 

The value in use recorded in the balance sheet at 30 June 2024 was €21,870,000, broken down as follows:

 

value in use of properties: €15,829,000;

 

value in use of vehicles: €5,970,000;

 

value in use of other assets: €71,000.

 

 628 | Individual financial statements as at 30 June 2024

 

SECTION 2 - LESSOR

 

QUALITATIVE INFORMATION

 

With regard to agreements within the scope of IFRS 16, only real property sub-lease agreements are relevant for the Bank. These agreements, relating to finance lease transactions, are non-recurring and for insignificant amounts (€1.4m in June 2024).

 

QUANTITATIVE INFORMATION

 

For quantitative information on the impact on the Bank’s financial and earnings situation, reference is made to the contents of the following sections of the Notes to the Accounts:

 

for receivables deriving from sub-lease agreements, “Part B Notes to the balance sheet - Assets - Section 4”;

 

for the effects on earnings, “Part C Notes to the profit and loss account”, in particular the headings for interest income and expense and value adjustments to tangible assets.

 

Notes to individual accounts | Part M - Disclosure on Leases | 629 

 

1.Balance-sheet and earnings data

 

2.Finance leases

 

2.1 Maturity analysis of lease payments receivable by time band and reconciliation with lease loans recognized under assets

 

Time bands 

30 June 2024

Lease payments to be

received

  

30 June 2023

Lease payments to be

received

 
Up to 1 year   1,118    1,158 
From 1 year to 2 years   275    1,143 
From 2 year to 3 years       288 
From 3 year to 4 years        
From 4 year to 5 years        
Over 5 years        
Total lease payments to be received   1,393    2,589 
Reconciliation with loans   (2)   (9)
Not accrued financial gains (-)   (2)   (9)
Unguaranteed residual value (-)        
Lease loans   1,391    2,580 

 

The table provides a maturity analysis of the lease payments receivable, and a reconciliation of the undiscounted lease payments to the net investment in the lease, as required by IFRS 16, paragraph 94. In particular, it should be noted that the payments receivable under the lease, which consist of the sum of minimum payments due by way of principal and interest, are stated net of any provisions and of the unguaranteed residual value due to the lessor. These are reconciled with the lease loan, recognized in the balance sheet under financial assets measured at amortized cost, by subtracting financial gains not accrued and adding the unguaranteed residual value.

 

3. Operating leases

 

The Bank had no operating leases in place at the reporting date.

 

 630 | Individual financial statements as at 30 June 2024

 

ANNEXED TABLES

 

 

 

 

 

Consolidated financial statements 

Comparison between the restated Balance Sheet and the template contained in Bank of Italy Circular No. 262/2005, eighth update

 

Regarding Assets, the balance sheet shown in the consolidated Review of Operations reflects the following restatements:

 

The closing amount of “Treasury financial assets” includes “Cash and cash equivalents” (heading 10); receivables in respect of current accounts and untied deposits, reverse repos and other deposits in connection with securities lending operations and derivatives recognized as “Financial assets measured at amortized cost: loans to banks and loans to customers” (headings 40a and 40b, respectively), plus certain items booked as “Other assets” (heading 130);

 

the amount of “Banking book debt securities” includes the debt securities of the following items: “Financial assets measured at fair value through other comprehensive income” (heading 30), “Financial assets measured at amortized cost” (heading 40c) and “Financial assets measured at fair value through profit or loss”, either designated at fair value or mandatorily classified at fair value (headings 20b and 20c);

 

the amount of “Equity investments” includes equities recognized as “Financial assets measured at fair value through other comprehensive income” (heading 30), “Equity investments” (heading 70), and funds mandatorily recognized under heading 20c “Financial assets measured at fair value through profit or loss”;

 

The closing amount of “Loans to customers” includes loans and receivables recognized as “Financial assets measured at amortized cost: loans to banks and loans to customers” (headings 40a and 40b, respectively), including those recognized mandatorily at fair value through profit or loss booked under heading 20c after any “Adjustments of hedging financial assets” (heading 60) relating to loans and receivables;

 

the amount of “Other assets” includes the headings 130 “Other assets”, 110 “Tax assets” and 50 “Hedging derivatives”, and sundry debtor items recognized as “Financial assets measured at amortized cost: loans to banks and loans to customers” (headings 40a and 40b) and Non-current assets and asset groups held for sale, if any.

 

 632 | Individual financial statements as at 30 June 2024

 

Regarding Liabilities:

 

The closing amount of “Funding” includes amounts due to banks, amounts due to customers and securities in issue recognized under “Financial liabilities measured at amortized cost” (under headings 10a, 10b and 10c, respectively), other than amounts recognized under “Treasury funding” and under “Other liabilities”, in addition to “Financial liabilities measured at fair value” (heading 30);

 

the amount of “Treasury deposits” includes amounts payable in respect of current accounts and untied deposits, repos and other deposits in connection with securities lending operations and derivatives recognized as “Financial liabilities measured at amortized cost – Due to banks” and “Due to customers” (headings 10a and 10b, respectively);

 

The amount of “Other liabilities” includes the headings 40 “Hedging derivatives”, 60 “Tax liabilities” and 110 “Insurance liabilities”, plus sundry creditor items recognized as “Financial liabilities measured at amortized cost”.

 

Annexed tables | 633 

 

Balance sheet as at 30 June 2024 – Assets

 

RECLASSIFIED STATEMENTS  
   
(€m)  

 

Asset items  Financial
assets held
for trading
   Treasury
financial
assets and
cash
   Banking
book
securities
   Customers
Loans
   Equity
Investments
   Tangible and
intangible
assets
   Other
assets
   Total
assets
 
10. Cash and Cash Equivalents       3,361.2                        3,361.2 
20. Financial assets measured at fair value through profit or loss   15,409.5        140.7    580.4    657.3            16,787.9 
a) financial assets held for trading   15,409.5                            15,409.5 
b) assets designated at fair value           140.4    578.8                719.2 
c) other financial assets mandatorily measured at fair value           0.3    1.6    657.3            659.2 
30. Financial assets measured at fair value through other comprehensive income           6,649.5        256.2            6,905.7 
40. Financial assets measured at amortized cost       7,741.4    4,550.5    51,867.0                64,158.9 
50. Hedging derivatives                           705.5    705.5 
60. Value adjustment to generic hedging financial assets                                
70. Equity Investments                   3,789.2            3,789.2 
80. Reinsured portion of technical reserve                                
a) issued insurance contracts that constitute assets                                
b) reinsurance contracts ceded that constitute assets                                
90. Tangible assets                       549.6        549.6 
100. Intangible assets                       1,045.4        1,045.4 
110. Tax assets                           754.8    754.8 
120. Non-current assets and asset groups held for sale                                
130. Other assets                           1,168.1    1,168.1 
Total assets   15,409.5    11,102.6    11,340.7    52,447.4    4,702.7    1,595.0    2,628.4    99,226.3 

  

TEMPLATE RECOMMENDED BY BANK OF ITALY CIRCULAR NO. 262/2005 EIGHT UPDATE

 

 634 | Annual Accounts and Report as at 30 June 2024

 

Balance sheet as at 30 June 2024 – Liabilities

 

RECLASSIFIED STATEMENTS  
   
(€m)  

 

Liabilities and net equity  Funding   Treasury
financial
liabilities
   Financial
liabilities
held for
Trading
   Other
liabilities
   Provisions   Net
Equity
   Total
liabilities
and net
equity
 
10. Financial liabilities measured at amortized cost   59,430.7    10,584.1        306.7            70,321.5 
a) due to banks   5,868.4    5,083.7        10.0            10,962.1 
b) due to customers   28,307.6    5,500.4        296.5            34,104.5 
c) securities in issue   25,254.7            0.2            25,254.9 
20. Trading financial liabilities           9,504.7                9,504.7 
30. Financial liabilities designated at fair value   4,239.2                        4,239.2 
40. Hedging derivatives               1,431.6            1,431.6 
50. Value adjustment to generic hedging financial liabilities                            
60. Tax liabilities               749.6            749.6 
70. Liabilities associated with assets held for sale                            
80. Other liabilities               1,488.6            1,488.6 
90. Provision for statutory end-of-service payments                   20.4        20.4 
100. Provisions for risks and charges                   137.7        137.7 
110. Insurance reserves               89.8            89.8 
a) issued insurance contracts that constitute liabilities               89.8            89.8 
b) reinsurance contracts ceded that constitute liabilities                            
120. Revaluation reserves                       (68.6)   (68.6)
130. Redeemable shares                            
140. Equity instruments                            
145. Interim dividends                            
150. Reserves                       7,381.0    7,381.0 
160. Share premium                       2,195.6    2,195.6 
170. Capital                       444.5    444.5 
180. Treasury shares (-)                       (68.8)   (68.8)
190. Equity attributable to minority interests (+/-)                       86.1    86.1 
200. Profit/(loss) for the period                       1,273.4    1,273.4 
Total liabilities and net equity   63,669.9    10,584.1    9,504.7    4,066.3    158.1    11,243.2    99,226.3 

 

TEMPLATE RECOMMENDED BY BANK OF ITALY CIRCULAR NO. 262/2005 EIGHT UPDATE

 

Annexed tables | 635 

 

 

Comparison between the restated Profit and Loss Account and the template contained in Bank of Italy Circular No. 262/2005, eighth update

 

The profit and loss account shown in the Review of Operations reflects the following restatements:

 

“Net interest income” includes the items stated under headings 10 “Interest and similar income”, 20 “Interest and similar expense”, Financial Guarantee Fees, gains/losses on derivatives trading stated under heading 80 “Net trading income (expense)”, and the net gains or losses on hedges of customer loans and funding stated under heading 90 “Net hedging income”. The portion of interest relating to securities lending collateral (loss of €5.3m) was reclassified in “Treasury income”;

 

“Net treasury income” contains the amounts stated under heading 70 “Dividends and similar income”, heading 80 “Net trading income (expense)” (except for amounts recognized as Net interest income), Banking Book result under heading 100 “Net gains (losses) on disposals/repurchases”, the share of securities lending transactions stated under headings 40 “Fee and commission income”, 50 “Fee and commission expense” and respective collaterals (€1.3m), and lastly, the portion stated under heading 110 “Net result from other financial assets and liabilities measured at fair value through profit or loss” related to securities under the fair value option;

 

the heading “Net fee and commission income and other net income (expense)” contains the amounts stated under heading 60 “Net fee and commission income”, the operating income stated under heading 230 “Other operating income (expense)”, the write-backs due to collections on NPLs acquired (referring to a 4-month operating period of Revalea) stated under heading 130 “Net write-offs (write-backs) for credit risk” and the “Net profit (loss) from insurance activities” of headings 160 and 170;

 

the heading “Loan loss provisions” contains the amounts relating to loans stated under headings 130 “Net write-offs (write-backs) for credit risk ” (after write-backs of €6.3m on NPLs), 100 “Net gains (losses) on disposals/ repurchases” (€-5.8m), 110 “Net result from other financial assets and

 

636 | Annual Accounts and Report as at 30 June 2024

 

 

liabilities measured at fair value through profit or loss” (€4.3m) and 140 “Gain (losses) from contractual amendments without derecognition” (€-0.2m), and 200 “Net provisions for risks and charges” relating to commitments and sureties (€0.8m).

 

the heading “Provisions for other financial assets” includes the valuations of securities and provisions recognized under item 110 “Net result from financial assets and liabilities mandatorily measured at fair value through profit or loss” and adjustments and write-backs for credit risk relating to assets measured at fair value through OCI and other financial assets stated under item 130 (€-3.4m);

 

the heading “Operating costs” includes amounts stated under heading 190 “Administrative expenses” (after the item reclassified under Loan loss provisions), net transfers to provisions stated under heading 200 (after the amounts stated under the heading Loan loss provisions of €0.8m, and Other gains and losses), Net adjustments to tangible and intangible assets stated under headings 210 and 220 and Other operating income or charges stated under heading 230 “Other operating income / charges”, after recoveries stated under Net fee and commission income;

 

the item “Other income/losses” includes the non-recurring costs under heading 190 “Administrative expenses”, in particular the contributions to the deposit protection funds (€50.7m), impairment of the RAM trademark (€31.7m) for the financial year, early amortization applied to some software (€6.8m) and non-recurring charges, if any, relating to other items (including the increase in risk provisions, adjustments to assets, net effects relating to the valuation and discounting of liabilities for put & call options, as well as the adjustment of the Messier & Associés trademark to the value recorded in the individual financial statements);

 

the positive effect of the release of SelmaBPM’s deferred tax provision (€2.7m) from item 230 “Other operating expenses/income” also flowed into the item “Income taxes”;

 

the item “minority interests” also includes the Interest B portion attributable to Arma’s minority partners under heading 230 “Other operating expenses/ income”.

 

Annexed tables | 637

 

 

Comparison between the restated Profit and Loss Account and the template contained in Bank of Italy Circular No. 262/2005, eighth update Profit and Loss Account as at 30 June 2024

 

RECLASSIFIED STATEMENTS

 

TEMPLATE RECOMMENDED BY BANK OF ITALY CIRCULAR NO. 262/2005, EIGHTH UPDATE

 

(€m)

 

Profit and loss account  Net
interest
income
   Net
treasury
income
   Net fee and
commission
income
   Equity-
accounted
valuations
   Operating
costs
   Loans loss
provisions
   Provisions for
other financial
assets
   Other
income
(losses)
   Income
taxes
   Minority
interests
   Net
profit
 
10.     Interest and similar income   3,952.4    20.6                                    3,973.0 
20.     Interest and similar charges   (1,999.6)   (25.9)                                   (2,025.5)
30.     Interest margin   1,952.8    (5.3)                                   1,947.5 
40.     Commission income   2.1    7.0    983.4                                992.5 
50.     Commission expenses   (5.5)   (0.4)   (175.6)                               (181.5)
60.     Net fee income   (3.4)   6.6    807.8                                811.0 
70.     Dividends and similar income       138.0                                    138.0 
80.     Net trading income (expense)   33.3    6.4                                    39.7 
90.     Net hedging income (expense)   2.1                                        2.1 
100.   Gains (losses) on disposal or repurchase       13.9                (5.8)                   8.1 
110.   Net income (expense) from other financial assets and liabilities measured at fair value through profit or loss       12.6                4.3    17.3                34.2 
120.   Total revenues   1,984.8    172.2    807.8            (1.5)   17.3                2,980.6 
130.   Net value adjustments (write-backs) for credit risk           6.3            (251.2)   (3.4)               (248.3)
140.   Gains (losses) from contractual modifications without derecognition                       (0.2)                    (0.2)
150.   Net income (expense) from financial operations   1,984.8    172.2    814.1            (252.9)   13.9                2,732.1 
160.   Income (expenses) from insurance services           21.4                                21.4 
170.   Other income / charges from insurance activities                                            
180.   Net profit from financial and insurance activities   1,984.8    172.2    835.5            (252.9)   13.9                2,753.5 
190.   Administrative expenses                   (1,532.9)           (60.1)           (1,593.0)
200.   Net transfers to provisions for risks and charges                   (8.6)   0.8        4.8            (3.0)
210.   Net value adjustments to/write-backs of tangible assets                   (71.1)                       (71.1)
220.   Net adjustments to/write-backs of intangible assets                   (38.6)           (41.9)           (80.5)
230.   Other operating expense / income           103.9        109.0            8.5    (2.7)   (23.0)   195.7 
240.   Operating costs           103.9        (1,542.2)   0.8        (88.7)   (2.7)   (23.0)   (1,551.9)
250.   Gains (losses) on equity investments               510.4                            510.4 
260.   Net income (expense) from fair value measurement of tangible and intangible assets                               (1.6)           (1.6)
270.   Value adjustments to goodwill                                            
280.   Gains (losses) on disposal of investments                               0.1            0.1 
290.   Profit/(Loss) on ordinary operations before tax   1,984.8    172.2    939.4    510.4    (1,542.2)   (252.1)   13.9    (90.2)   (2.7)   (23.0)   1,710.5 
300.   Income tax for the year on ordinary activities                                   (434.0)       (434.0)
310.   Profit (loss) on ordinary operations after tax   1,984.8    172.2    939.4    510.4    (1,542.2)   (252.1)   13.9    (90.2)   (436.7)   (23.0)   1,276.5 
320.   Gains (losses) of ceded operating assets, after tax                                            
330.   Profit (loss) for the period   1,984.8    172.2    939.4    510.4    (1,542.2)   (252.1)   13.9    (90.2)   (436.7)   (23.0)   1,276.5 
340.   Profit (loss) for the period attributable to minority interests                                       (3.1)   (3.1)
350.   Profit (loss) for the period attributable to the Parent Company   1,984.8    172.2    939.4    510.4    (1,542.2)   (252.1)   13.9    (90.2)   (436.7)   (26.1)   1,273.4 

 

638 | Annual Accounts and Report as at 30 June 2024

 

 

Individual financial statement

 

Balance Sheet as at 30 June 2024 — Assets

 

RECLASSIFIED STATEMENTS

 

TEMPLATE RECOMMENDED BY BANK OF ITALY CIRCULAR NO. 262/2005, EIGHTH UPDATE

 

                               (€m) 
                                 
Asset items  Financial
assets held
for trading
   Treasury
assets
   Banking
book debt
securities
   Customer
loans
   Investments
Securities
   Tangible and
intangible
assets
   Other
assets
   Total
assets
 
10.   Cash and Cash Equivalents       2,630.9        649.7                3,280.7 
Financial assets measured                                        
20.   at fair value through profit or loss   15,437.9        140.7    578.8    551.2            16,708.7 
a) financial assets held for trading   15,437.9                            15,437.9 
b) assets designated at fair value           140.4    578.8                719.2 
c) other financial assets mandatorily measured at fair value           0.3        551.2            551.5 
30.   Financial assets measured at fair value through other comprehensive income           6,649.5        513.5            7,163.0 
40.   Financial assets measured at amortized cost       11,318.6    4,441.4    39,053.5                54,813.5 
50.   Hedging derivatives                           561.9    561.9 
60.  Value adjustment to generic hedging of financial assets                                
70.   Equity Investments                   3,771.5            3,771.5 
80.   Tangible assets                       141.4        141.4 
90.   Intangible Assets                        29.4        29.4 
100. Tax assets                           353.5    353.5 
110. Non-current assets and asset groups held for sale                                
120. Other assets                           471.8    471.8 
Total assets   15,437.9    13,949.5    11,231.6    40,282.0    4,836.2    170.8    1,387.3    87,295.3 

 

Annexed tables | 639

 

 

Balance Sheet as at 30 June 2024 — Liabilities

 

RECLASSIFIED STATEMENTS

 

TEMPLATE RECOMMENDED BY BANK OF ITALY CIRCULAR NO. 262/2005, EIGHTH UPDATE

 

                           (€m) 
                             
Liabilities and net equity  Funding   Treasury
liabilities
   Liabilities held
for trading
   Other
liabilities
   Provisions   Net
Equity
   Total liabilities
and net equity
 
10.   Financial liabilities measured at amortized cost   54,127.3    11,588.1        22.8            65,738.2 
a) due to banks   25,656.9    6,148.7                    31,805.6 
b) due to customers   7,908.2    5,439.4        22.6            13,370.2 
c) securities in issue   20,562.2            0.2            20,562.4 
20.   Trading financial liabilities           9,666.7                9,666.7 
30.   Financial liabilities designated at fair value   4,164.9                        4,164.9 
40.   Hedging derivatives               1,458.7            1,458.7 
50.   Value adjustment to generic hedging of financial liabilities                            
60.   Tax liabilities               488.3            488.3 
70.   Liabilities associated with assets held for sale                            
80.   Other liabilities               667.3            667.3 
90.   Provision for statutory end-of-service payments                   4.8        4.8 
100. Provisions for risks and charges                   74.6        74.6 
110. Revaluation reserves                       89.0    89.0 
120. Redeemable shares                            
130. Equity instruments                            
140. Reserves                       1,127.5    1,127.5 
150. Share premium                       2,195.6    2,195.6 
160. Capital                       444.5    444.5 
170. Treasury shares (-)                       (68.8)   (68.8)
180. Profit/(loss) for the period                       1,244.0    1,244.0 
Total liabilities and net equity   58,292.2    11,588.1    9,666.7    2,637.1    79.4    5,031.8    87,295.3 

 

640 | Annual Accounts and Report as at 30 June 2024

 

 

Comparison between the restated Profit and Loss Account and the template contained in Bank of Italy Circular No. 262/2005, eighth update

 

Profit and Loss Account as at 30 June 2024

 

RECLASSIFIED STATEMENTS

 

TEMPLATE RECOMMENDED BY BANK OF ITALY CIRCULAR NO. 262/2005, EIGHTH UPDATE

 

Profit and loss account  Net interest
income
   Net treasury
income
   Net fee and
commission
income
   Dividends on
investments
   Operating
costs
   Loans loss
provisions
   Provisions for
other financial
assets
   Impairment
Charges
in respect
of equity
investments
   other
income
(losses)
   Income
taxes
   Profit
(loss) for
the period
 
10.      Interest and similar income   2,766.1    20.6                                    2,786.7 
20.      Interest and similar charges   (2,398.9)   (25.9)                                   (2,424.7)
30.      Interest margin   367.2    (5.3)                                   361.9 
40.      Commission income   6.7    6.9    397.4                                411.0 
50.      Commission expenses   (7.9)   (3.5)   (55.1)                               (66.5)
60.      Net fee income   (1.2)   3.4    342.3                                344.6 
70.      Dividends and similar income       150.7        1,041.2                            1,191.9 
80.       Net trading income (expense)   35.1    (6.4)                                   28.7 
90.       Net hedging income (expense)   0.7                                        0.7 
100.    Gains (losses) on disposal or repurchase       12.5                                    12.5 
110.   Net income (expense) from other financial assets and liabilities measured at fair value through profit or loss       13.4                    15.5                28.9 
120.   Total revenues   401.7    168.4    342.3    1,041.2            15.5                1,969.1 
130.   Net value adjustments (write-backs) for credit risk                       (1.9)   (3.2)               (5.0)
140.   Gains (losses) from contractual modifications without derecognition                                            
150.    Net income (expense) from financial operations   401.7    168.4    342.3    1,041.2        (1.9)   12.3                1,964.1 
160.    Administrative expenses                   (559.4)               (10.7)       (570.1)
170.    Net transfers to provisions for risks and charges                       6.9            7.8        14.7 
180.    Net value adjustments to/write-backs of tangible assets                   (9.7)                       (9.7)
190.    Net adjustments to/write-backs of intangible assets                   (0.7)                       (0.7)
200.    Other operating expense / income           21.7        24.2                3.1    —     49.0 
210.    Operating costs           21.7        (545.6)   6.9            0.2        (516.9)
220.    Gains (losses) on equity investments                               (35.2)           (35.2)
230.    Net income (expense) from fair value measurement of tangible and intangible assets                                            
240.   Value adjustments to goodwill                                            
250.    Gains (losses) on disposal of investments                                            
260.     Profit/(Loss) on ordinary operations before tax   401.7    168.4    364.0    1,041.2    (545.6)   5.0    12.3    (35.2)   0.2        1,412.0 
270.    Income tax for the year on ordinary activities                                       (168.0)   (168.0)
280.    Profit (loss) on ordinary operations after tax   401.7    168.4    364.0    1,041.2    (545.6)   5.0    12.3    (35.2)   0.2    (168.0)   1,244.0 
290.    Gains (losses) of ceded operating assets, after tax                                            
300.    Profit (loss) for the period   401.7    168.4    364.0    1,041.2    (545.6)   5.0    12.3    (35.2)   0.2    (168.0)   1,244.0 

 

Annexed tables | 641

 

 

Table A

 

Details, as required by Article 10, Italian Law No. 72 of 19 March 1983, of assets still owned by the Bank for which the following revaluations were made

 

           (Figures in €) 
             
  Original   Decrease due to    Current 
Revalued assets    revaluation     disposal or writedown   revaluation 
– property in Piazzetta Enrico Cuccia 1               
(formerly Via Filodrammatici 6-8-10)               
revaluation effected under Law no. 576 of 2 december 1975   2,609,651.24        2,609,651.24 
revaluation effected under Law no. 72 of 19 march 1983   11,620,280.23        11,620,280.23 
revaluation effected under Law no. 413 of 30 december 1991   4,174,707.04        4,174,707.04 
              18,404,638.51 
– property in Piazza Paolo Ferrari 6               
revaluation effected under Law no. 72 of 19 march 1983   815,743.67        815,743.67 
              815,743.67 

 

642 | Annual Accounts and Report as at 30 June 2024

 

 

Balance sheet and profit and loss account of investments in Group undertakings (including indirect investments)

 

Banks (IAS/IFRS) Table B
   
BALANCE SHEET  

 

     CMB MONACO   MEDIOBANCA   COMPASS 
     S.A.M. (*)   PREMIER   BANCA 
     (€/000)   (€/000)   (€/000) 
ASSETS               
10. Cash and cash equivalents   1,498,008    384,606    248,441 
20. Financial assets measured at fair value through profit or loss   127,199    9,175     
  a) financial assets held for trading   122,806         
  b) financial assets designated at fair value            
  c) other financial assets mandatorily measured at fair value   4,393    9,175     
30. Financial assets measured at fair value through other comprehensive income           724 
40. Financial assets measured at amortized cost   6,453,676    29,748,766    15,611,964 
  a) due from banks   2,934,112    16,560,354    678 
  b) due from customers   3,519,564    13,188,412    15,611,286 
50. Hedging derivatives   641        237,692 
60. Value adjustment to generic hedging financial assets (+/-)            
70. Equity investments   45,803    69    74,706 
80. Tangible assets   40,807    159,629    69,071 
90. Intangible assets   22,422    7,025    362,326 
  of which:               
  goodwill           360,477 
100. Tax assets       46,284    335,162 
  a) current       9,244    44,698 
  b) prepaid       37,040    290,464 
110. Non-current assets and asset groups held for sale            
120. Other assets   47,227    306,089    285,550 
TOTAL ASSETS   8,235,783    30,661,643    17,225,636 

 

(*) Table compiled in accordante with the regulation provided under the Article 15 of CONSOB Market Regulation and Article 2, 6, 2 Italian stock exchange regulation (pro-forma, as at 30 June 2024, drawn up for the Group financial statements purpose).

 

Annexed tables | 643

 

 

Banks (IAS/IFRS) Table B
   
BALANCE SHEET  

 

     CMB MONACO   MEDIOBANCA   COMPASS 
     S.A.M. (*)   PREMIER   BANCA 
     (€/000)   (€/000)   (€/000) 
LIABILITIES               
10. Financial liabilities measured at amortized cost   7,063,772    29,340,236    13,756,867 
  a) due to banks   1,938,877    12,330,412    12,189,515 
  b) due to customers   5,124,895    17,009,824    1,467,237 
  c) securities in issue           100,115 
20. Trading financial liabilities   122,592         
30. Financial liabilities designated at fair value            
40. Hedging derivatives   5,151        12,239 
50. Value adjustment to generic hedging financial liabilities (+/-)            
60. Tax liabilities   447    11,593    107,750 
  a) current       11,593    36,615 
  b) deferred   447        71,135 
70. Liabilities associated with assets held for sale            
80. Other liabilities   273,408    327,324    248,201 
90. Provision for statutory end-of-service payments       1,966    7,100 
100. Provisions for risks and charges   2,997    31,428    28,541 
  a) commitments and financial guarantees   376    542    8,610 
  b) post-employment and similar benefits            
  c) other provisions for risks and charges   2,621    30,886    19,931 
110. Revaluation reserves       (295)   128,876 
120. Redeemable shares            
130. Equity instruments       160,000     
140. Reserves   586,709    (8,733)   1,875,396 
150. Share premium   4,573    233,750     
160. Capital   111,110    506,250    587,500 
170. Treasury shares (-)            
180. Profit (loss) for the year (+/-)   65,024    58,124    473,166 
TOTAL LIABILITIES AND NET EQUITY   8,235,783    30,661,643    17,225,636 

 

(*) Table compiled in accordante with the regulation provided under the Article 15 of CONSOB Market Regulation and Article 2, 6, 2 Italian stock exchange regulation (pro-forma, as at 30 June 2024, drawn up for the Group financial statements purpose).

 

644 | Annual Accounts and Report as at 30 June 2024

 

 

Banks (IAS/IFRS)   continued Table B
     
PROFIT AND LOSS ACCOUNT      

 

     CMB MONACO   MEDIOBANCA   COMPASS 
     S.A.M. (*)   PREMIER   BANCA 
     (€/000)   (€/000)   (€/000) 
10. Interest and similar income   347,534    939,775    1,635,090 
  of which: interest income calculated according to the effective interest method   29,522    939,402    1,356,953 
20. Interest and similar charges   (232,449)   (665,980)   (600,931)
30. Net interest income   115,085    273,795    1,034,159 
40. Commission income   67,490    261,882    58,288 
50. Commission expenses   (6,595)   (84,641)   (21,221)
60. Net fee and commission   60,895    177,241    37,067 
70. Dividends and similar income   24    1    15,186 
80. Net trading income (expense)   7,387    1,723     
90. Net hedging income (expense)           8 
100. Gains (losses) on disposal/repurchase of:       (8)   (5,149)
  a) financial assets measured at amortized cost       (8)   (5,149)
  b) financial assets measured at fair value through other comprehensive income            
  c) financial liabilities            
110. Net income from other financial assets and liabilities measured at fair value through profit or loss   426    1,261     
  a) financial assets and liabilities designated at fair value            
  b) other financial assets mandatorily measured at fair value   426    1,261     
120. Total revenues   183,817    454,013    1,081,271 
130. Value adjustments (write-backs) for credit risk relating to:   (1,895)   (6,114)   (243,075)
  a) financial assets measured at amortized cost   (1,895)   (6,114)   (243,075)
  b) financial assets measured at fair value through other comprehensive income            
140. Gains (losses) from contractual modifications without derecognition       (263)    
150. Net income from financial operations   181,922    447,636    838,196 
160. Administrative expenses:   (83,748)   (379,491)   (373,968)
  a) personnel costs   (54,677)   (157,321)   (118,295)
  b) other administrative expenses   (29,071)   (222,170)   (255,673)
170. Net transfers to provisions for risks and charges   (753)   (8,184)   (332)
  a) commitments and guarantees issued   100    12    327 
  b) other net provisions   (853)   (8,196)   (659)
180. Net value adjustments to /write-backs of tangible assets   (7,620)   (29,579)   (14,122)
190. Net value adjustments to /write-backs of intangible assets   (9,188)   (3,537)   (1,151)
200. Other operating expense / income   1,817    59,959    114,824 
210. Operating costs   (99,492)   (360,832)   (274,749)
220. Gains (losses) on equity investments           91,001 
230. Net income from fair value measurement of tangible and intangible assets            
240. Goodwill write-offs            
250. Gains (losses) on disposal of investments   (2)        
260. Profit (loss) on ordinary operations before tax   82,428    86,804    654,448 
270. Income tax for the year on ordinary operations   (17,404)   (28,680)   (181,282)
280. Profit (loss) on ordinary operations after tax   65,024    58,124    473,166 
290. Gains (losses) of ceded operating assets, after tax            
300. Profit (loss) for the year   65,024    58,124    473,166 

 

(*) Table compiled in accordante with the regulation provided under the Article 15 of CONSOB Market Regulation and Article 2, 6, 2 Italian stock exchange regulation (pro-forma, as at 30 June 2024, drawn up for the Group financial statements purpose).

 

Annexed tables | 645

 

 

Banks (IAS/IFRS) continued Table B
   
BALANCE SHEET  

 

     MEDIOBANCA 
     INTERNATIONAL 
     (LUXEMBOURG) 
     (€/000) 
ASSETS     
10. Cash and cash equivalents   596,508 
20. Financial assets measured at fair value through profit or loss   235,424 
  a) financial assets held for trading   141,158 
  b) financial assets designated at fair value   9,532 
  c) other financial assets mandatorily measured at fair value   84,734 
30. Financial assets measured at fair value through other comprehensive income    
40. Financial assets measured at amortized cost   6,049,971 
  a) due from banks   3,030,777 
  b) due from customers   3,019,194 
50. Hedging derivatives   3,389 
60. Value adjustment to generic hedging financial assets (+/-)    
70. Equity investments   4,150 
80. Tangible assets   1,119 
90. Intangible assets    
  of which:     
  goodwill    
100. Tax assets   2,601 
  a) current   2,601 
  b) prepaid    
110. Non-current assets and asset groups held for sale    
120. Other assets   10,289 
TOTAL ASSETS   6,903,451 
LIABILITIES     
10. Financial liabilities measured at amortized cost   6,250,831 
  a) due to banks   1,919,872 
  b) due to customers   62,274 
  c) securities in issue   4,268,685 
20. Trading financial liabilities   53,902 
30. Financial liabilities designated at fair value   124,643 
40. Hedging derivatives   2,955 
50. Value adjustment to generic hedging financial liabilities (+/-)    
60. Tax liabilities   12,094 
  a) current   12,094 
  b) deferred    
70. Liabilities associated with assets held for sale    
80. Other liabilities   8,797 
90. Provision for statutory end-of-service payments    
100. Provisions for risks and charges   801 
110. Revaluation reserves   (1,912)
120. Redeemable shares    
130. Equity instruments   100,000 
140. Reserves   321,642 
150. Share premium    
160. Capital   10,000 
170. Treasury shares (-)    
180. Profit (loss) for the year (+/-)   19,698 
TOTAL LIABILITIES AND NET EQUITY   6,903,451 

 

646 | Annual Accounts and Report as at 30 June 2024

 

 

Banks (IAS/IFRS) continued Table B
   
PROFIT AND LOSS ACCOUNT  

 

     MEDIOBANCA 
     INTERNATIONAL 
     (LUXEMBOURG) 
     (€/000) 
10. Interest and similar income   319,633 
  of which: interest income calculated according to the effective interest method    
20. Interest and similar charges   (287,741)
30. Net interest income   31,892 
40. Commission income   18,613 
50. Commission expenses   (18,228)
60. Net fee and commission   385 
70. Dividends and similar income    
80. Net trading income (expense)   (3,025)
90. Net hedging income (expense)   158 
100. Gains (losses) on disposal/repurchase of:   555 
  a) financial assets measured at amortized cost   316 
  b) financial assets measured at fair value through other comprehensive income    
  c) financial liabilities   239 
110. Net income from other financial assets and liabilities measured at fair value through profit or loss   3,985 
  a) financial assets and liabilities designated at fair value   3,985 
  b) other financial assets mandatorily measured at fair value    
120. Total revenues   33,950 
130. Net value adjustments (write-backs) for credit risk relating to:   (115)
  a) financial assets measured at amortized cost   (115)
  b) financial assets measured at fair value through other comprehensive income    
140. Gains (losses) from contractual modifications without derecognition    
150. Net income from financial operations   33,835 
160. Administrative expenses:   (11,412)
  a) personnel costs   (3,307)
  b) other administrative expenses   (8,105)
170. Net transfers to provisions for risks and charges   38 
180. Net value adjustments to /write-backs of tangible assets   (215)
190. Net value adjustments to /write-backs of intangible assets    
200. Other operating expense / income   1,480 
210. Operating costs   (10,109)
220. Gains (losses) on equity investments    
230. Net income from fair value measurement of tangible and intangible assets    
240. Goodwill write-offs    
250. Gains (losses) on disposal of investments    
260. Profit (loss) on ordinary operations before tax   23,726 
270. Income tax for the year on ordinary operations   (4,028)
280. Profit (loss) on ordinary operations after tax   19,698 
290. Gains (losses) of ceded operating assets, after tax     
300. Profit (loss) for the year   19,698 

 

Annexed tables | 647

 

 

Financial companies (IAS/IFRS) continued Table B
   
BALANCE SHEET  

 

     MBCREDIT SOLUTIONS 
     (€/000) 
ASSETS     
10. Cash and cash equivalents   33,520 
20. Financial assets measured at fair value through profit or loss    
30. Financial assets measured at fair value through other comprehensive income    
40. Financial assets measured at amortized cost   161 
  a) due from banks    
  b) due from financial companies    
  c) due from customers   161 
50. Hedging derivatives    
60. Value adjustment to generic hedging financial assets (+/-)    
70. Equity investments   500 
80. Tangible assets   3,208 
90. Intangible assets   285 
100. Tax assets   3,343 
  a) current   1,266 
  b) prepaid   2,077 
110. Non-current assets and asset groups held for sale    
120. Other assets   10,101 
TOTAL ASSETS   51,118 
LIABILITIES     
10. Financial liabilities measured at amortized cost   3,156 
  a) due to   3,156 
20. Trading financial liabilities    
30. Financial liabilities designated at fair value    
40. Hedging derivatives    
50. Value adjustment to generic hedging financial liabilities (+/-)    
60. Tax liabilities   482 
  a) current   482 
  b) deferred    
70. Liabilities associated with assets held for sale    
80. Other liabilities   7,336 
90. Provision for statutory end-of-service payments   3,311 
100. Provisions for risks and charges   2,473 
  a) commitments and financial guarantees   605 
  b) post-employment and similar benefits    
  c) other provisions for risks and charges   1,868 
110. Capital   32,500 
120. Treasury shares (-)    
130. Equity instruments    
140. Share premium    
150. Reserves   (290)
160. Revaluation reserves   555 
180. Profit (loss) for the year (+/-)   1,595 
TOTAL LIABILITIES AND NET EQUITY   51,118 

 

648 | Annual Accounts and Report as at 30 June 2024

 

 

Financial companies (IAS/IFRS) continued Table B
   
PROFIT AND LOSS ACCOUNT  

 

     MBCREDIT SOLUTIONS 
     (€/000) 
10. Interest and similar income   1,310 
  of which: interest income calculated according to the effective interest method    
20. Interest and similar charges   (111)
30. Net interest income   1,199 
40. Commission income   35,394 
50. Commission expenses   (8,657)
60. Net fee and commission   26,737 
70. Dividends and similar income    
80. Net trading income (expense)    
90. Net hedging income (expense)    
100. Gains (losses) on disposal/repurchase of:   226 
  a) financial assets measured at amortized cost   226 
  b) financial assets measured at fair value through other comprehensive income    
  c) financial liabilities    
110. Net income from other financial assets and liabilities measured at fair value through profit or loss      
120. Total revenues   28,162 
130. Net value adjustments (write-backs) for credit risk relating to:   (624)
  a) financial assets measured at amortized cost   (624)
140. Gains (losses) from contractual modifications without derecognition    
150. Net income from financial operations   27,538 
160. Administrative expenses:   (24,539)
  a) personnel costs   (13,023)
  b) other administrative expenses   (11,516)
170. Net transfers to provisions for risks and charges   (19)
  a) commitments and guarantees issued   (20)
  b) other net provisions   1 
180. Net value adjustments to /write-backs of tangible assets   (670)
190. Net value adjustments to /write-backs of intangible assets   (394)
200. Other operating income (expense)   721 
210. Operating costs   (24,901)
220. Gains (losses) on equity investments    
230. Net income from fair value measurement of tangible and intangible assets    
240. Goodwill write-offs    
250. Gains (losses) on disposal of investments    
260. Profit (loss) on ordinary activity before tax   2,637 
270. Income tax for the year on ordinary operations   (1,042)
280. Profit (loss) on ordinary activities after tax   1,595 
290. Gains (losses) of ceded operating assets, after tax    
300. Profit (loss) for the year   1,595 

 

Annexed tables | 649

 

 

Financial companies (IAS/IFRS) continued Table B
   
BALANCE SHEET  

 

     SELMABIPIEMME 
     LEASING 
     (€/000) 
ASSETS     
10. Cash and cash equivalents   19,054 
20. Financial assets measured at fair value through profit or loss    
30. Financial assets measured at fair value through other comprehensive income    
40. Financial assets measured at amortized cost   1,238,076 
  a) due from banks   157 
  b) due from financial companies   21,857 
  c) due from customers   1,216,062 
50. Hedging derivatives    
60. Value adjustment to generic hedging financial assets (+/-)    
70. Equity investments    
80. Tangible assets   41,781 
90. Intangible assets    
100. Tax assets   19,918 
  a) current   982 
  b) prepaid   18,936 
110. Non-current assets and asset groups held for sale    
120. Other assets   31,906 
TOTAL ASSETS   1,350,735 
LIABILITIES     
10. Financial liabilities measured at amortized cost   1,135,954 
  a) due to   1,135,954 
20. Trading financial liabilities    
30. Financial liabilities designated at fair value    
40. Hedging derivatives   304 
50. Value adjustment to generic hedging financial liabilities (+/-)    
60. Tax liabilities   1,850 
  a) current   1,085 
  b) deferred   765 
70. Liabilities associated with assets held for sale    
80. Other liabilities   21,884 
90. Provision for statutory end-of-service payments   905 
100. Provisions for risks and charges   7,399 
  a) commitments and financial guarantees   106 
  b) post-employment and similar benefits    
  c) other provisions for risks and charges   7,293 
110. Capital   41,305 
120. Treasury shares (-)    
130. Equity instruments    
140. Share premium   4,620 
150. Reserves   129,784 
160. Revaluation reserves   (127)
180. Profit (loss) for the year (+/-)   6,857 
TOTAL LIABILITIES AND NET EQUITY   1,350,735 

 

650 | Annual Accounts and Report as at 30 June 2024

 

 

 

Financial companies (IAS/IFRS) continued Table B
   
PROFIT AND LOSS ACCOUNT  

 

     SELMABIPIEMME 
     LEASING 
     (€/000) 
10. Interest and similar income   83,621 
  of which: interest income calculated according to the effective interest method   83,621 
20. Interest and similar charges   (55,723)
30. Net interest income   27,898 
40. Commission income   2,375 
50. Commission expenses   (337)
60. Net fee and commission   2,038 
70. Dividends and similar income    
80. Net trading income (expense)    
90. Net hedging income (expense)   (1)
100. Gains (losses) on disposal/repurchase of:    
  a) financial assets measured at amortized cost    
  b) financial assets measured at fair value through other comprehensive income    
  c) financial liabilities    
110. Net income from other financial assets and liabilities measured at fair value through profit or loss    
  a) financial assets and liabilities designated at fair value    
  b) other financial assets mandatorily measured at fair value    
120. Total revenues   29,935 
130. Net value adjustments (write-backs) for credit risk relating to:   (2,789)
  a) financial assets measured at amortized cost   (2,789)
  b) financial assets measured at fair value through other comprehensive income    
140. Gains (losses) from contractual modifications without derecognition   104 
150. Net income from financial operations   27,250 
160. Administrative expenses:   (18,302)
  a) personnel costs   (10,690)
  b) other administrative expenses   (7,612)
170. Net transfers to provisions for risks and charges   (1,400)
  a) commitments and guarantees issued   3 
  b) other net provisions   (1,403)
180. Net value adjustments to /write-backs of tangible assets   (1,968)
190. Net value adjustments to /write-backs of intangible assets    
200. Other operating income (expense)   2,798 
210. Operating costs   (18,872)
220. Gains (losses) on equity investments    
230. Net income from fair value measurement of tangible and intangible assets   (1,610)
240. Goodwill write-offs    
250. Gains (losses) on disposal of investments    
260. Profit (loss) on ordinary activity before tax   6,768 
270. Income tax for the year on ordinary operations   89 
280. Profit (loss) on ordinary activities after tax   6,857 
290. Gains (losses) of ceded operating assets, after tax    
300. Profit (loss) for the year   6,857 

 

Annexed tables | 651

 

 

Financial companies (IAS/IFRS) continued Table B
   
BALANCE SHEET  

 

     MEDIOBANCA         POLUS CAPITAL 
     INTERNATIONAL   MB FUNDING   MANAGEMENT 
     IMMOBILIERE   LUX   GROUP (*) 
     (€/000)   (€/000)   (€/000) 
ASSETS               
10. Cash and cash equivalents   503    966    27,293 
20. Financial assets measured at fair value through profit or loss           7,975 
  a) financial assets held for trading           23 
  b) financial assets designated at fair value            
  c) other financial assets mandatorily measured at fair value           7,952 
30. Financial assets measured at fair value through other comprehensive income            
40. Financial assets measured at amortized cost       1,100,000     
  a) due from banks       1,100,000     
  b) due from financial companies            
  c) due from customers            
50. Hedging derivatives            
60. Value adjustment to generic hedging financial assets (+/-)            
70. Equity investments            
80. Tangible assets   1,604        209 
90. Intangible assets           76,680 
  of which:               
  goodwill            
100. Tax assets   4         
  a) current   4         
  b) prepaid            
110. Non-current assets and asset groups held for sale            
120. Other assets   18    1,176    14,391 
TOTAL ASSETS   2,129    1,102,142    126,548 
LIABILITIES               
10. Financial liabilities measured at amortized cost       1,100,889     
  a) due to            
  b) securities in issue       1,100,889     
20. Trading financial liabilities           49 
30. Financial liabilities designated at fair value            
40. Hedging derivatives            
50. Value adjustment to generic hedging financial liabilities (+/-)            
60. Tax liabilities   23        16,429 
  a) current   23        16,429 
  b) deferred            
70. Liabilities associated with assets held for sale            
80. Other liabilities       244    7,220 
90. Provision for statutory end-of-service payments            
100. Provisions for risks and charges            
  a) commitments and financial guarantees            
  b) post-employment and similar benefits            
  c) other provisions for risks and charges            
110. Capital   40    831     
120. Treasury shares (-)            
130. Equity instruments           3,500 
140. Share premium           79,344 
150. Reserves   2,021    154    12,039 
160. Revaluation reserves            
180. Profit (loss) for the year (+/-)   45    24    7,967 
TOTAL LIABILITIES AND NET EQUITY   2,129    1,102,142    126,548 

 

(*) Pro-forma scheme as at 30 June 2024, used for the Consolidated Financial Statements preparation.

 

652 | Annual Accounts and Report as at 30 June 2024

 

 

Financial companies (IAS/IFRS) continued Table B
   
PROFIT AND LOSS ACCOUNT  

 

     MEDIOBANCA       POLUS CAPITAL 
   INTERNATIONAL   MB FUNDING   MANAGEMENT 
   IMMOBILIERE   LUX   GROUP (*) 
   (€/000)   (€/000)   (€/000) 
10. Interest and similar income       29,737    565 
  of which: interest income calculated according to the effective interest method            
20. Interest and similar charges       (29,737)    
30. Net interest income           565 
40. Commission income            47,135 
50. Commission expenses             
60. Net fee and commission           47,135 
70. Dividends and similar income           238 
80. Net trading income (expense)           (148)
90. Net hedging income (expense)            
100. Gains (losses) on disposal/repurchase of:            
  a) financial assets measured at amortized cost            
  b) financial assets measured at fair value through other comprehensive income            
  c) financial liabilities            
110. Net income from other financial assets and liabilities measured at fair value through profit or loss           111 
  a) financial assets and liabilities designated at fair value            
  b) other financial assets mandatorily measured at fair value           111 
120. Total revenues           47,901 
130. Net value adjustments (write-backs) for credit risk relating to:            
  a) financial assets measured at amortized cost            
  b) financial assets measured at fair value through other comprehensive income            
140. Gains (losses) from contractual modifications without derecognition            
150. Net income from financial operations           47,901 
160. Administrative expenses:   (54)   (479)   (35,764)
  a) personnel costs           (26,397)
  b) other administrative expenses   (54)   (479)   (9,367)
170. Net transfers to provisions for risks and charges            
  a) commitments and guarantees issued            
  b) other net provisions            
180. Net value adjustments to /write-backs of tangible assets   (70)       (156)
190. Net value adjustments to /write-backs of intangible assets           (856)
200. Other operating income (expense)   185    515     
210. Operating costs   61    36    (36,776)
220. Gains (losses) on equity investments            
230. Net income from fair value measurement of tangible and intangible assets            
240. Goodwill write-offs            
250. Gains (losses) on disposal of investments            
260. Profit (loss) on ordinary activity before tax   61    36    11,125 
270. Income tax for the year on ordinary operations   (16)   (12)   (3,158)
280. Profit (loss) on ordinary activities after tax   45    24    7,967 
290. Gains (losses) of ceded operating assets, after tax            
300. Profit (loss) for the year   45    24    7,967 

 

(*) Pro-forma scheme as at 30 June 2024, used for the Consolidated Financial Statements preparation.

 

Annexed tables | 653

 

 

Financial companies (IAS/IFRS) continued Table B
   
BALANCE SHEET  

 

         RAM ACTIVE 
     CMG MONACO   INVESTMENTS 
     S.A.M. (*)   S.A. (*) 
     (€/000)   (CHF/000) 
ASSETS          
10. Cash and cash equivalents   5,936    5,577 
20. Financial assets measured at fair value through profit or loss       3,061 
  a) financial assets held for trading       3,061 
  b) financial assets designated at fair value        
  c) other financial assets mandatorily measured at fair value        
30. Financial assets measured at fair value through other comprehensive income        
40. Financial assets measured at amortized cost        
  a) due from banks        
  b) due from financial companies        
  c) due from customers        
50. Hedging derivatives        
60. Value adjustment to generic hedging financial assets (+/-)        
70. Equity investments        
80. Tangible assets       871 
90. Intangible assets       29 
  of which:          
  Goodwill        
100. Tax assets       104 
  a) current       104 
  b) prepaid        
110. Non-current assets and asset groups held for sale        
120. Other assets   3,568    6,205 
TOTAL ASSETS   9,504    15,847 
LIABILITIES          
10. Financial liabilities measured at amortized cost       17 
  a) due to        
  b) securities in issue       17 
20. Trading financial liabilities        
30. Financial liabilities designated at fair value        
40. Hedging derivatives        
50. Value adjustment to generic hedging financial liabilities (+/-)        
60. Tax liabilities       55 
  a) current       55 
  b) deferred        
70. Liabilities associated with assets held for sale        
80. Other liabilities   9,001    2,347 
90. Provision for statutory end-of-service payments        
100. Provisions for risks and charges        
  a) commitments and financial guarantees        
  b) post-employment and similar benefits        
  c) other provisions for risks and charges        
110. Capital   600    1,000 
120. Treasury shares (-)       (4,424)
130. Equity instruments       500 
140. Share premium        
150. Reserves   (186)   18,866 
160. Revaluation reserves        
180. Profit (loss) for the year (+/-)   89    (2,514)
TOTAL LIABILITIES AND NET EQUITY   9,504    15,847 

 

(*) Pro-forma scheme as at 30 June 2024, used for the Consolidated Financial Statements preparation.

 

654 | Annual Accounts and Report as at 30 June 2024

 

 

Financial companies (IAS/IFRS) continued Table B
   
PROFIT AND LOSS ACCOUNT  

 

         RAM ACTIVE 
     CMG MONACO   INVESTMENTS 
     S.A.M. (*)   S.A. (*) 
     (€/000)   (CHF/000) 
10. Interest and similar income       14 
  of which: interest income calculated according to the effective interest method        
20. Interest and similar charges       (1)
30. Net interest income       13 
40. Commission income   12,402    12,179 
50. Commission expenses   (7,902)   (2,906)
60. Net fee and commission   4,500    9,273 
70. Dividends and similar income        
80. Net trading income (expense)       (7)
90. Net hedging income (expense)        
100. Gains (losses) on disposal/repurchase of:        
  a) financial assets measured at amortized cost        
  b) financial assets measured at fair value through other comprehensive income        
  c) financial liabilities        
110. Net income from other financial assets and liabilities measured at fair value through profit or loss            
  a) financial assets and liabilities designated at fair value        
  b) other financial assets mandatorily measured at fair value        
120. Total revenues   4,500    9,279 
130. Net value adjustments (write-backs) for credit risk relating to:        
  a) financial assets measured at amortized cost        
  b) financial assets measured at fair value through other comprehensive income        
140. Gains (losses) from contractual modifications without derecognition        
150. Net income from financial operations   4,500    9,279 
160. Administrative expenses:   (4,617)   (13,936)
  a) personnel costs   (3,097)   (10,092)
  b) other administrative expenses   (1,520)   (3,844)
170. Net transfers to provisions for risks and charges        
  a) commitments and guarantees issued        
  b) other net provisions        
180. Net value adjustments to /write-backs of tangible assets       (280)
190. Net value adjustments to /write-backs of intangible assets       (42)
200. Other operating income (expense)   211    382 
210. Operating costs   (4,406)   (13,876)
220. Gains (losses) on equity investments        
230. Net income from fair value measurement of tangible and intangible assets        
240. Goodwill write-offs        
250. Gains (losses) on disposal of investments       2,207 
260. Profit (loss) on ordinary activity before tax   94    (2,390)
270. Income tax for the year on ordinary operations   (5)   (124)
280. Profit (loss) on ordinary activities after tax   89    (2,514)
290. Gains (losses) of ceded operating assets, after tax        
300. Profit (loss) for the year   89    (2,514)

 

(*) Pro-forma scheme as at 30 June 2024, used for the Consolidated Financial Statements preparation.

 

Annexed tables | 655

 

 

Financial companies (IAS/IFRS) continued Table B
   
BALANCE SHEET  

 

     Messier et   Messier et 
     Associés S.C.A.   Associés L.L.C. 
     (*)   (*) 
     (€/000)   (USD/000) 
ASSETS          
10. Cash and cash equivalents   4,648    83 
20. Financial assets measured at fair value through profit or loss        
  a) financial assets held for trading        
  b) financial assets designated at fair value        
  c) other financial assets mandatorily measured at fair value        
30. Financial assets measured at fair value through other comprehensive income        
40. Financial assets measured at amortized cost        
  a) due from banks        
  b) due from financial companies        
  c) due from customers        
50. Hedging derivatives        
60. Value adjustment to generic hedging financial assets (+/-)        
70. Equity investments   801     
80. Tangible assets   6,525     
90. Intangible assets   17,000     
  of which:          
  goodwill        
100. Tax assets   909     
  a) current   909     
  b) prepaid        
110. Non-current assets and asset groups held for sale        
120. Other assets   49,893    429 
TOTAL ASSETS   79,776    512 
LIABILITIES          
10. Financial liabilities measured at amortized cost   24,242     
  a) due to   24,242     
  b) securities in issue        
20. Trading financial liabilities        
30. Financial liabilities designated at fair value        
40. Hedging derivatives        
50. Value adjustment to generic hedging financial liabilities (+/-)        
60. Tax liabilities   5,590     
  a) current   5,590     
  b) deferred        
70. Liabilities associated with assets held for sale        
80. Other liabilities   31,646     
90. Provision for statutory end-of-service payments        
100. Provisions for risks and charges        
  a) commitments and financial guarantees        
  b) post-employment and similar benefits        
  c) other provisions for risks and charges        
110. Capital   50     
120. Treasury shares (-)        
130. Equity instruments        
140. Share premium   17,732     
150. Reserves   (1,677)   348 
160. Revaluation reserves        
180. Profit (loss) for the year (+/-)   2,193    164 
TOTAL LIABILITIES AND NET EQUITY   79,776    512 

 

(*) Pro-forma scheme as at 30 June 2024, used for the Consolidated Financial Statements preparation.

 

656 | Annual Accounts and Report as at 30 June 2024

 

 

Financial companies (IAS/IFRS) continued Table B
   
PROFIT AND LOSS ACCOUNT  

 

     Messier et associés   Messier et associés 
     S.C.A. (*)   L.L.C. (*) 
     (€/000)   (USD/000) 
10. Interest and similar income        
  of which: interest income calculated according to the effective interest method        
20. Interest and similar charges   (921)    
30. Net interest income   (921)    
40. Commission income   41,930     
50. Commission expenses        
60. Net fee and commission   41,930     
70. Dividends and similar income        
80. Net trading income (expense)   224     
90. Net hedging income (expense)        
100. Gains (losses) on disposal/repurchase of:        
  a) financial assets measured at amortized cost        
  b) financial assets measured at fair value through other comprehensive income        
  c) financial liabilities        
110. Net income from other financial assets and liabilities measured at fair value through profit or loss        
  a) financial assets and liabilities designated at fair value        
  b) other financial assets mandatorily measured at fair value        
120. Total revenues   41,233     
130. Net value adjustments (write-backs) for credit risk relating to:        
  a) financial assets measured at amortized cost        
  b) financial assets measured at fair value through other comprehensive income        
140. Gains (losses) from contractual modifications without derecognition        
150. Net income from financial operations   41,233     
160. Administrative expenses:   (33,296)   (2,716)
  a) personnel costs   (26,858)   (1,449)
  b) other administrative expenses   (6,438)   (1,267)
170. Net transfers to provisions for risks and charges        
  a) commitments and guarantees issued        
  b) other net provisions        
180. Net value adjustments to /write-backs of tangible assets   (1,107)    
190. Net value adjustments to /write-backs of intangible assets        
200. Other operating income (expense)   (3,905)   2,880 
210. Operating costs   (38,308)   164 
220. Gains (losses) on equity investments        
230. Net income from fair value measurement of tangible and intangible assets        
240. Goodwill write-offs        
250. Gains (losses) on disposal of investments        
260. Profit (loss) on ordinary activity before tax   2,925    164 
270. Income tax for the year on ordinary operations   (732)    
280. Profit (loss) on ordinary activities after tax   2,193    164 
290. Gains (losses) of ceded operating assets, after tax        
300. Profit (loss) for the year   2,193    164 

 

(*) Pro-forma scheme as at 30 June 2024, used for the Consolidated Financial Statements preparation.

 

Annexed tables | 657

 

 

Financial companies (IAS/IFRS) continued Table B
   
BALANCE SHEET  

 

     Arma Partners   Arma Partners   Arma Partners 
     LLP (*)   Ltd. (*)   Gmbh (*) 
     (£/000)   (£/000)   (£/000) 
ASSETS               
10. Cash and cash equivalents   52,629    659    64 
20. Financial assets measured at fair value through profit or loss            
  a) financial assets held for trading            
  b) financial assets designated at fair value            
  c) other financial assets mandatorily measured at fair value            
30. Financial assets measured at fair value through other comprehensive income                  
40. Financial assets measured at amortized cost            
  a) due from banks            
  b) due from financial companies            
  c) due from customers            
50. Hedging derivatives            
60. Value adjustment to generic hedging financial assets (+/-)            
70. Equity investments   22         
80. Tangible assets   626        1 
90. Intangible assets            
  of which:               
  goodwill            
100. Tax assets       565    42 
  a) current           40 
  b) prepaid       565    2 
110. Non-current assets and asset groups held for sale            
120. Other assets   16,011    6,370    953 
TOTAL ASSETS   69,288    7,594    1,060 
LIABILITIES               
10. Financial liabilities measured at amortized cost            
  a) due to            
  b) securities in issue            
20. Trading financial liabilities            
30. Financial liabilities designated at fair value            
40. Hedging derivatives            
50. Value adjustment to generic hedging financial liabilities (+/-)            
60. Tax liabilities   236    21    46 
  a) current   236    21    46 
  b) deferred            
70. Liabilities associated with assets held for sale            
80. Other liabilities   10,512    6,915    617 
90. Provision for statutory end-of-service payments            
100. Provisions for risks and charges            
  a) commitments and financial guarantees            
  b) post-employment and similar benefits            
  c) other provisions for risks and charges            
110. Capital            
120. Treasury shares (-)            
130. Equity instruments            
140. Share premium            
150. Reserves   21,804    572    311 
160. Revaluation reserves            
180. Profit (loss) for the year (+/-)   36,736    86    86 
TOTAL LIABILITIES AND NET EQUITY   69,288    7,594    1,060 

 

(*) Pro-forma scheme as at 30 June 2024, used for the Consolidated Financial Statements preparation.

 

658 | Annual Accounts and Report as at 30 June 2024

 

 

Financial companies (IAS/IFRS) continued Table B
   
PROFIT AND LOSS ACCOUNT  

 

     Arma Partners   Arma Partners   Arma Partners 
     LLP (*)   Ltd. (*)   Gmbh (*) 
     (£/000)   (£/000)   (£/000) 
10. Interest and similar income   1,474         
  of which: interest income calculated according to the effective interest method            
20. Interest and similar charges            
30. Net interest income   1,474         
40. Commission income   56,414         
50. Commission expenses            
60. Net fee and commission   56,414         
70. Dividends and similar income            
80. Net trading income (expense)   (90)        
90. Net hedging income (expense)            
100. Gains (losses) on disposal/repurchase of:            
  a) financial assets measured at amortized cost            
  b) financial assets measured at fair value through other comprehensive income            
  c) financial liabilities            
110. Net income from other financial assets and liabilities measured at fair value through profit or loss                  
  a) financial assets and liabilities designated at fair value            
  b) other financial assets mandatorily measured at fair value            
120. Total revenues   57,798         
130. Net value adjustments (write-backs) for credit risk relating to:            
  a) financial assets measured at amortized cost            
  b) financial assets measured at fair value through other comprehensive income            
140. Gains (losses) from contractual modifications without derecognition            
150. Net income from financial operations   57,798         
160. Administrative expenses:   (21,760)   (16,885)   (1,555)
  a) personnel costs   (16,618)   (16,778)   (1,289)
  b) other administrative expenses   (5,142)   (107)   (266)
170. Net transfers to provisions for risks and charges            
  a) commitments and guarantees issued            
  b) other net provisions            
180. Net value adjustments to /write-backs of tangible assets   (203)        
190. Net value adjustments to /write-backs of intangible assets            
200. Other operating income (expense)   901    16,951    1,673 
210. Operating costs   (21,062)   66    118 
220. Gains (losses) on equity investments            
230. Net income from fair value measurement of tangible and intangible assets            
240. Goodwill write-offs            
250. Gains (losses) on disposal of investments            
260. Profit (loss) on ordinary activity before tax   36,736    66    118 
270. Income tax for the year on ordinary operations       20    (32)
280. Profit (loss) on ordinary activities after tax   36,736    86    86 
290. Gains (losses) of ceded operating assets, after tax            
300. Profit (loss) for the year   36,736    86    86 

 

(*) Pro-forma scheme as at 30 June 2024, used for the Consolidated Financial Statements preparation.

 

Annexed tables | 659

 

 

Other Financial companies (IAS/IFRS) continued Table B
   
BALANCE SHEET  

 

             SPAFID       MEDIOBANCA 
             FAMILY   SPAFID   MANAGEMENT 
     MBFACTA   SPAFID   OFFICE SIM   TRUST   COMPANY 
     (€/000)   (€/000)   (€/000)   (€/000)   (€/000) 
ASSETS                         
10. Cash and cash equivalents   29,607    14,662    40    775    8,054 
20. Financial assets measured at fair value through profit or loss                    
  a) financial assets held for trading                    
  b) financial assets designated at fair value                    
  c) other financial assets mandatorily measured at fair                         
  value                    
30. Financial assets measured at fair value through other comprehensive income                    
40. Financial assets measured at amortized cost   2,952,090    7,295        566    7,930 
  a) due from banks   2,605    3,192             
  b) due from financial companies   220,286    6        566    7,930 
  c) due from customers   2,729,199    4,097             
50. Hedging derivatives                    
60. Value adjustment to generic hedging financial assets (+/-)                    
70. Equity investments       1,651             
80. Tangible assets   1,011    1,061    72        98 
90. Intangible assets       286    87         
  of which:                         
  goodwill                    
100. Tax assets   4,131    783    271    63     
  a) current   3,040        17    6     
  b) prepaid   1,091    783    254    57     
110. Non-current assets and asset groups held for sale                    
120. Other assets   169,903    22,750    246    12    127 
TOTAL ASSETS   3,156,742    48,488    716    1,416    16,209 
LIABILITIES                         
10. Financial liabilities measured at amortized cost   2,891,132    1,062    74    123    8,111 
  a) due to   2,891,132    1,062    74    123    8,111 
  b) securities in issue                    
20. Trading financial liabilities                    
30. Financial liabilities designated at fair value                    
40. Hedging derivatives                    
50. Value adjustment to generic hedging financial liabilities (+/-)                    
60. Tax liabilities   3,148    10    1    15     
  a) current   3,101    10        15     
  b) deferred   47        1         
70. Liabilities associated with assets held for sale                    
80. Other liabilities   22,991    5,891    341    88    254 
90. Provision for statutory end-of-service payments   183    775        38     
100. Provisions for risks and charges   1,195                61 
  a) commitments and financial guarantees   180                 
  b) post-employment and similar benefits                    
  c) other provisions for risks and charges   1015                61 
110. Capital   120,000    6,100    1,000    500    500 
120. Treasury shares (-)                    
130. Equity instruments                    
140. Share premium       3,500             
150. Reserves   95,893    31,501    (156)   605    7,827 
160. Revaluation reserves   89    (12)   4         
170. Profit (loss) for the year (+/-)   22,111    (339)   (548)   47    (544)
TOTAL LIABILITIES AND NET EQUITY   3,156,742    48,488    716    1,416    16,209 

 

660 | Annual Accounts and Report as at 30 June 2024

 

 

Other Financial companies (IAS/IFRS) continued Table B
   
PROFIT AND LOSS ACCOUNT  

 

           SPAFID       MEDIOBANCA 
           FAMILY   SPAFID   MANAGEMENT 
   MBFACTA   SPAFID   OFFICE SIM   TRUST   COMPANY 
   (€/000)   (€/000)   (€/000)   (€/000)   (€/000) 
10. Interest and similar income   135,331    774    2         
  of which: interest income calculated according to the effective interest method   135,331                 
20. Interest and similar charges   (93,902)   (28)   (3)        
30. Net interest income   41,429    746    (1)        
40. Commission income   15,356    8,417    918    910    11,414 
50. Commission expenses   (8,556)   (95)   (20)        
60. Net fee and commission   6,800    8,322    898    910    11,414 
70. Dividends and similar income                    
80. Net trading income (expense)   (56)                
90. Net hedging income (expense)                    
100. Gains (losses) on disposal/repurchase of:                    
  a) financial assets measured at amortized cost                    
  b) financial assets measured at fair value through other comprehensive income                    
  c) financial liabilities                    
110. Net income from other financial assets and liabilities measured at fair value through profit or loss                    
  a) financial assets and liabilities designated at fair value                    
  b) other financial assets mandatorily measured at fair value                    
120. Total revenues   48,173    9,068    897    910    11,414 
130. Net value adjustments (write-backs) for credit risk relating to:   700    29    (35)        
  a) financial assets measured at amortized cost   700    29    (35)        
  b) financial assets measured at fair value through other comprehensive income                    
140. Gains (losses) from contractual modifications without derecognition                    
150. Net income from financial operations   48,873    9,097    862    910    11,414 
160. Administrative expenses:   (15,763)   (8,335)   (1,529)   (855)   (10,634)
  a) personnel costs   (5,961)   (4,893)   (1,015)   (242)   (1,178)
  b) other administrative expenses   (9,802)   (3,442)   (514)   (613)   (9,456)
170. Net transfers to provisions for risks and charges   (609)                
  a) commitments and guarantees issued   (109)                
  b) other net provisions   (500)                
180. Net value adjustments to /write-backs of tangible assets   (239)   (271)   (25)       (9)
190. Net value adjustments to /write-backs of intangible assets       (294)   (27)        
200. Other operating income (expense)   376    88        13    (1,313)
210. Operating costs   (16,235)   (8,812)   (1,581)   (842)   (11,956)
220. Gains (losses) on equity investments       (549)            
230. Net income from fair value measurement of tangible and intangible assets                    
240. Goodwill write-offs                    
250. Gains (losses) on disposal of investments                    
260. Profit (loss) on ordinary activity before tax   32,638    (264)   (719)   68    (542)
270. Income tax for the year on ordinary operations   (10,527)   (75)   171    (21)   (2)
280. Profit (loss) on ordinary activities after tax   22,111    (339)   (548)   47    (544)
290. Gains (losses) of ceded operating assets, after tax                    
300. Profit (loss) for the year   22,111    (339)   (548)   47    (544)

 

Annexed tables | 661

 

 

Other Financial companies (IAS/IFRS) continued Table B
   
BALANCE SHEET  

 

     MEDIOBANCA 
     SGR S.p.A 
     (€/000) 
ASSETS     
10. Cash and cash equivalents   8,608 
20. Financial assets measured at fair value through profit or loss    
  a) financial assets held for trading    
  b) financial assets designated at fair value    
  c) other financial assets mandatorily measured at fair value    
30. Financial assets measured at fair value through other comprehensive income    
40. Financial assets measured at amortized cost   63,407 
  a) due from banks    
  b) due from financial companies    
  c) due from customers   63,407 
50. Hedging derivatives    
60. Value adjustment to generic hedging financial assets (+/-)    
70. Equity investments    
80. Tangible assets   1,159 
90. Intangible assets   51 
  of which:     
  Goodwill    
100. Tax assets   28 
  a) current    
  b) prepaid   28 
110. Non-current assets and asset groups held for sale    
120. Other assets   6,012 
TOTAL ASSETS   79,265 
LIABILITIES     
10. Financial liabilities measured at amortized cost   6,715 
  a) due to   6,715 
  b) securities in issue    
20. Trading financial liabilities    
30. Financial liabilities designated at fair value    
40. Hedging derivatives    
50. Value adjustment to generic hedging financial liabilities (+/-)    
60. Tax liabilities   161 
  a) current   73 
  b) deferred   88 
70. Liabilities associated with assets held for sale    
80. Other liabilities   7,990 
90. Provision for statutory end-of-service payments   309 
100. Provisions for risks and charges    
  a) commitments and financial guarantees    
  b) post-employment and similar benefits    
  c) other provisions for risks and charges    
110. Capital   10,330 
120. Treasury shares (-)    
130. Equity instruments    
140. Share premium    
150. Reserves   44,039 
160. Revaluation reserves   150 
170. Profit (loss) for the year (+/-)   9,571 
TOTAL LIABILITIES AND NET EQUITY   79,265 

 

662 | Annual Accounts and Report as at 30 June 2024

 

 

Other Financial companies (IAS/IFRS) continued Table B
   
PROFIT AND LOSS ACCOUNT  

 

     MEDIOBANCA 
     SGR S.p.A 
     (€/000) 
10. Commission income   50,646 
20. Commission expenses   (18,956)
30. Net fee and commission   31,690 
40. Dividends and similar income    
50. Interest and similar income   1,913 
  of which: interest income calculated according to the effective interest method    
60. Interest and similar charges   (56)
70. Net trading income (expense)    
80. Net hedging income (expense)    
90. Gains (losses) on disposal/repurchase of:    
  a) financial assets measured at amortized cost    
  b) financial assets measured at fair value through other comprehensive income    
  c) financial liabilities    
100. Net income from other financial assets and liabilities measured at fair value through profit or loss    
  a) financial assets and liabilities designated at fair value    
  b) other financial assets mandatorily measured at fair value    
110. Total revenues   33,547 
120. Net value adjustments (write-backs) for credit risk relating to:   (331)
  a) financial assets measured at amortized cost   (331)
  b) financial assets measured at fair value through other comprehensive income    
130. Net income from financial operations   33,216 
140. Administrative expenses:   (19,255)
  a) personnel costs   (10,787)
  b) other administrative expenses   (8,468)
150. Net transfers to provisions for risks and charges   50 
160. Net value adjustments to /write-backs of tangible assets   (348)
170. Net value adjustments to /write-backs of intangible assets   (26)
180. Other operating income (expense)   (33)
190. Operating costs   (19,612)
200. Gains (losses) on equity investments    
210. Net income from fair value measurement of tangible and intangible assets    
220. Goodwill write-offs    
230. Gains (losses) on disposal of investments    
240. Profit (loss) on ordinary activities before tax   13,604 
250. Income tax for the year on ordinary operations   (4,033)
260. Profit (loss) on ordinary activities after tax   9,571 
270. Gains (losses) of ceded operating assets, after tax    
280. Profit (loss) for the year   9,571 

 

Annexed tables | 663

 

 

Other Financial companies (IAS/IFRS) continued Table B
   
BALANCE SHEET  

 

     MEDIOBANCA     
     COVERED BOND   QUARZO S.r.l. 
     (€/000)   (€/000) 
ASSETS          
10. Cash and cash equivalents   103    10 
20. Financial assets measured at fair value through profit or loss        
  a) financial assets held for trading        
  b) financial assets designated at fair value        
  c) other financial assets mandatorily measured at fair value        
30. Financial assets measured at fair value through other comprehensive income        
40. Financial assets measured at amortized cost        
  a) due from banks        
  b) due from financial companies        
  c) due from customers        
50. Hedging derivatives        
60. Value adjustment to generic hedging financial assets (+/-)        
70. Equity investments        
80. Tangible assets        
90. Intangible assets        
  of which:          
  goodwill        
100. Tax assets       1 
  a) current       1 
  b) prepaid        
110. Non-current assets and asset groups held for sale        
120. Other assets   806    669 
TOTAL ASSETS   909    680 
LIABILITIES          
10. Financial liabilities measured at amortized cost        
  a) due to        
  b) securities in issue        
20. Trading financial liabilities        
30. Financial liabilities designated at fair value        
40. Hedging derivatives        
50. Value adjustment to generic hedging financial liabilities (+/-)        
60. Tax liabilities        
  a) current        
  b) deferred        
70. Liabilities associated with assets held for sale         
80. Other liabilities   830    667 
90. Provision for statutory end-of-service payments        
100. Provisions for risks and charges        
  a) commitments and financial guarantees        
  b) post-employment and similar benefits        
  c) other provisions for risks and charges        
110. Capital   100    10 
120. Treasury shares (-)        
130. Equity instruments        
140. Share premium        
150. Reserves   (24)   3 
160. Revaluation reserves        
170. Profit (loss) for the year (+/-)   3     
TOTAL LIABILITIES AND NET EQUITY   909    680 

 

664 | Annual Accounts and Report as at 30 June 2024

 

 

Other Financial companies (IAS/IFRS) continued Table B
   
PROFIT AND LOSS ACCOUNT  

 

     MEDIOBANCA     
     COVERED BOND   QUARZO S.r.l. 
     (€/000)   (€/000) 
10. Interest and similar income   4     
  of which: interest income calculated according to the effective interest method        
20. Interest and similar charges        
30. Net interest income   4     
40. Commission income        
50. Commission expenses        
60. Net fee and commission        
70. Dividends and similar income        
80. Net trading income (expense)        
90. Net hedging income (expense)        
100. Gains (losses) on disposal/repurchase of:        
  a) financial assets measured at amortized cost        
  b) financial assets measured at fair value through other comprehensive income        
  c) financial liabilities        
110. Net income from other financial assets and liabilities measured at fair value through profit or loss        
  a) financial assets and liabilities designated at fair value        
  b) other financial assets mandatorily measured at fair value        
120. Total revenues   4     
130. Net value adjustments (write-backs) for credit risk relating to:        
  a) financial assets measured at amortized cost        
  b) financial assets measured at fair value through other comprehensive income        
140. Gains (losses) from contractual modifications without derecognition        
150. Net income from financial operations   4     
160. Administrative expenses:   (78)   (242)
  a) personnel costs       (36)
  b) other administrative expenses   (78)   (206)
170. Net transfers to provisions for risks and charges        
  a) commitments and guarantees issued        
  b) other net provisions        
180. Net value adjustments to /write-backs of tangible assets        
190. Net value adjustments to /write-backs of intangible assets        
200. Other operating income (expense)   78    244 
210. Operating costs       2 
220. Gains (losses) on equity investments        
230. Net income from fair value measurement of tangible and intangible assets        
240. Goodwill write-offs        
250. Gains (losses) on disposal of investments        
260. Profit (loss) on ordinary activities before tax   4    2 
270. Income tax for the year on ordinary operations   (1)   (2)
280. Profit (loss) on ordinary activities after tax   3     
290. Gains (losses) of ceded operating assets, after tax        
300. Profit (loss) for the year   3     

 

Annexed tables | 665

 

 

Banks continued Table B
   
BALANCE SHEET  

 

     CMB MONACO S.A.M 
     31.12.2023 
     (€/000) 
ASSETS     
10. Cash and cash equivalents   163,805 
20. Financial assets measured at fair value through profit or loss    
  a) financial assets held for trading    
  b) financial assets designated at fair value    
  c) other financial assets mandatorily measured at fair value    
30. Financial assets measured at fair value through other comprehensive income   976,384 
40. Financial assets measured at amortized cost   7,457,387 
  a) due from banks   4,641,576 
  b) due from customers   2,815,811 
70. Equity investments   55,530 
80. Tangible assets   91,892 
90. Intangible assets   19,628 
100. Tax assets    
  a) current    
  b) prepaid    
110. Non-current assets and asset groups held for sale    
120. Other assets   123,328 
TOTAL ASSETS   8,887,954 
LIABILITIES     
10. Financial liabilities measured at amortized cost   7,607,668 
  a) due to banks   1,920,375 
  b) due to customers   5,687,293 
  c) securities in issue    
20. Trading financial liabilities    
30. Financial liabilities designated at fair value    
40. Hedging derivatives    
60. Tax liabilities    
  a) current    
  b) deferred    
80. Other liabilities   170,131 
90. Provision for statutory end-of-service payments    
100. Provisions for risks and charges   29,402 
  a) commitments and financial guarantees    
  b) post-employment and similar benefits    
  c) other provisions for risks and charges   29,402 
110. Revaluation reserves    
120. Redeemable shares    
130. Equity instruments    
140. Reserves   907,656 
150. Share premium   4,573 
160. Capital   111,110 
170. Treasury shares (-)    
180. Profit (loss) for the year (+/-)   57,414 
TOTAL LIABILITIES AND NET EQUITY   8,887,954 

 

666 | Annual Accounts and Report as at 30 June 2024

 

 

Banks Table B
   
PROFIT AND LOSS ACCOUNT  

 

     CMB MONACO 
     S.A.M 31.12.2023 
     (€’000) 
10. Interest and similar income   314,381 
  of which: interest income calculated according to the effective interest method    
20. Interest and similar charges   (203,834)
30. Net interest income   110,547 
40. Commission income   72,772 
50. Commission expenses   (4,421)
60. Net fee and commission   68,351 
70. Dividends and similar income   24 
80. Net trading income (expense)   378 
90. Net hedging income (expense)    
100. Gains (losses) on disposal/repurchase of:    
  a) financial assets measured at amortized cost    
  b) financial assets measured at fair value through other comprehensive income    
  c) financial liabilities    
110. Net income from other financial assets and liabilities measured at fair value through profit or loss    
  a) financial assets and liabilities designated at fair value     
  b) other financial assets mandatorily measured at fair value     
120. Total revenues   179,300 
130. Net value adjustments (write-backs) for credit risk relating to:   (2,330)
  a) financial assets measured at amortized cost   (2,330)
  b) financial assets measured at fair value through other comprehensive income    
140. Gains (losses) from contractual modifications without derecognition    
150. Net income from financial operations   176,970 
160. Administrative expenses:   (81,836)
  a) personnel costs   (52,410)
  b) other administrative expenses   (29,426)
170. Net transfers to provisions for risks and charges   (11,378)
  a) commitments and guarantees issued    
  b) other net provisions   (11,378)
180. Net value adjustments to /write-backs of tangible assets   (4,702)
190. Net value adjustments to /write-backs of intangible assets   (11,378)
200. Other operating expense / income   9,129 
210. Operating costs   (100,165)
220. Gains (losses) on equity investments    
230. Net income from fair value measurement of tangible and intangible assets    
240. Goodwill write-offs    
250. Gains (losses) on disposal of investments    
260. Profit (loss) on ordinary operations before tax   76,805 
270. Income tax for the year on ordinary operations   (19,391)
280. Profit (loss) on ordinary operations after tax   57,414 
290. Gains (losses) of ceded operating assets, after tax    
350. Profit (loss) for the year   57,414 

 

Annexed tables | 667

 

 

Financial companies   Table B 
      
BALANCE SHEET     

 

   MEDIOBANCA
SECURITIES LLC
($’000)
 
ASSETS    
10. Cash and cash equivalents    
20. Financial assets measured at fair value through profit or loss    
a) financial assets held for trading    
b) financial assets designated at fair value    
c) other financial assets mandatorily measured at fair value    
30. Financial assets measured at fair value through other comprehensive income    
40. Financial assets measured at amortized cost   300 
a) due from banks   300 
b) due from financial companies    
c) due from customers    
50. Hedging derivatives    
60. Value adjustment to generic hedging financial assets (+/-)    
70. Equity investments    
80. Tangible assets   78 
90. Intangible assets    
of which:     
goodwill    
100. Tax assets   155 
a) current    
b) prepaid   155 
110. Non-current assets and asset groups held for sale    
120. Other assets   7,684 
TOTAL ASSETS   8,217 
LIABILITIES     
10. Financial liabilities measured at amortized cost   37 
a) due to   37 
b) securities in issue    
20. Trading financial liabilities    
30. Financial liabilities designated at fair value    
40. Hedging derivatives    
50. Value adjustment to generic hedging financial liabilities (+/-)    
60. Tax liabilities    
a) current    
b) deferred    
70. Liabilities associated with assets held for sale    
80. Other liabilities   1,889 
90. Provision for statutory end-of-service payments    
100. Provisions for risks and charges    
a) commitments and financial guarantees    
b) post-employment and similar benefits    
c) other provisions for risks and charges    
110. Capital   2,250 
120. Treasury shares (-)    
130. Equity instruments    
140. Share premium    
150. Reserves   4,018 
160. Revaluation reserves    
180. Profit (loss) for the year (+/-)   23 
TOTAL LIABILITIES AND NET EQUITY   8,217 

 

668 | Annual Accounts and Report as at 30 June 2024

 

 

Financial companies   Table B 
      
PROFIT AND LOSS ACCOUNT     

 
  

MEDIOBANCA
SECURITIES LLC

($’000

 
10. Interest and similar income   
of which: interest income calculated according to the effective interest method   
20. Interest and similar charges   
30. Net interest income   
40. Commission income   2,965 
50. Commission expenses    
60. Net fee and commission   2,965 
70. Dividends and similar income   165 
80. Net trading income (expense)    
90. Net hedging income (expense)    
100. Gains (losses) on disposal/repurchase of:    
a)  financial assets measured at amortized cost    
b)  financial assets measured at fair value through other comprehensive income    
c)  financial liabilities    
110. Net income from other financial assets and liabilities measured at fair value through profit or loss    
a)  financial assets and liabilities designated at fair value    
b)  other financial assets mandatorily measured at fair value    
120. Total revenues   3,130 
130. Net value adjustments (write-backs) for credit risk relating to:    
a)  financial assets measured at amortized cost    
b)  financial assets measured at fair value through other comprehensive income    
140. Gains (losses) from contractual modifications without derecognition    
150. Net income from financial operations   3,130 
160. Administrative expenses:   (3,747)
a)  personnel costs   (2,465)
b)  other administrative expenses   (1,282)
170. Net transfers to provisions for risks and charges    
a)  commitments and guarantees issued    
b)  other net provisions    
180. Net value adjustments to /write-backs of tangible assets    
190. Net value adjustments to /write-backs of intangible assets    
200. Other operating income (expense)   640 
210. Operating costs   (3,107)
220. Gains (losses) on equity investments    
230. Net income from fair value measurement of tangible and intangible assets    
240. Goodwill write-offs    
250. Gains (losses) on disposal of investments    
260. Profit (loss) on ordinary activities before tax   23 
270. Income tax for the year on ordinary operations    
280. Profit (loss) on ordinary activities after tax   23 
290. Gains (losses) of ceded operating assets, after tax    
350. Profit (loss) for the year   23 

 

Annexed Tables | 669

 

 

Financial companies   Table B 
      
BALANCE SHEET     

 

   CMG MONACO
S.A.M. 31.12.2023
(€’000)
 
ASSETS    
10. Cash and cash equivalents   7,545 
20. Financial assets measured at fair value through profit or loss    
a) financial assets held for trading    
b) financial assets designated at fair value    
c) other financial assets mandatorily measured at fair value    
30. Financial assets measured at fair value through other comprehensive income   389 
40. Financial assets measured at amortized cost    
a) due from banks    
b) due from financial companies    
c) due from customers    
50. Hedging derivatives    
60. Value adjustment to generic hedging financial assets (+/-)    
70. Equity investments    
80. Tangible assets    
90. Intangible assets    
of which:     
goodwill    
100. Tax assets   839 
a) current   839 
b) prepaid    
110. Non-current assets and asset groups held for sale    
120. Other assets   2,758 
TOTAL ASSETS   11,531 
LIABILITIES     
10. Financial liabilities measured at amortized cost    
a) due to    
b) securities in issue    
20. Trading financial liabilities    
30. Financial liabilities designated at fair value    
40. Hedging derivatives    
50. Value adjustment to generic hedging financial liabilities (+/-)    
60. Tax liabilities    
a) current    
b) deferred    
70. Liabilities associated with assets held for sale    
80. Other liabilities   10,858 
90. Provision for statutory end-of-service payments    
100. Provisions for risks and charges    
a) commitments and financial guarantees    
b) post-employment and similar benefits    
c) other provisions for risks and charges    
110. Capital   600 
120. Treasury shares (-)    
130. Equity instruments    
140. Share premium    
150. Reserves   58 
160. Revaluation reserves    
180. Profit (loss) for the year (+/-)   15 
TOTAL LIABILITIES AND NET EQUITY   11,531 

 

670 | Annual Accounts and Report as at 30 June 2024

 

 

Financial companies  Table B
    
PROFIT AND LOSS ACCOUNT   

 
   CMG MONACO
S.A.M. 31.12.2023
(€’000)
 
10. Interest and similar income   
of which: interest income calculated according to the effective interest method   
20. Interest and similar charges   
30. Net interest income   
40. Commission income   5,917 
50. Commission expenses    
60. Net fee and commission   5,917 
70. Dividends and similar income    
80. Net trading income (expense)    
90. Net hedging income (expense)    
100. Gains (losses) on disposal/repurchase of:    
a)  financial assets measured at amortized cost    
b)  financial assets measured at fair value through other comprehensive income    
c)  financial liabilities    
110. Net income from other financial assets and liabilities measured at fair value through profit or loss    
a)  financial assets and liabilities designated at fair value    
b)  other financial assets mandatorily measured at fair value    
120. Total revenues   5,917 
130. Net value adjustments (write-backs) for credit risk relating to:    
a)  financial assets measured at amortized cost    
b)  financial assets measured at fair value through other comprehensive income    
140. Gains (losses) from contractual modifications without derecognition    
150. Net income from financial operations   5,917 
160. Administrative expenses:   (5,875)
a)  personnel costs   (2,673)
b)  other administrative expenses   (3,202)
170. Net transfers to provisions for risks and charges    
a)  commitments and guarantees issued    
b)  other net provisions    
180. Net value adjustments to /write-backs of tangible assets    
190. Net value adjustments to /write-backs of intangible assets    
200. Other operating income (expense)   (22)
210. Operating costs   (5,897)
220. Gains (losses) on equity investments    
230. Net income from fair value measurement of tangible and intangible assets    
240. Goodwill write-offs    
250. Gains (losses) on disposal of investments    
260. Profit (loss) on ordinary activities before tax   20 
270. Income tax for the year on ordinary operations   (5)
280. Profit (loss) on ordinary activities after tax   15 
290. Gains (losses) of ceded operating assets, after tax    
350. Profit (loss) for the year   15 

 

Annexed Tables | 671

 

 

Financial companies   Table B
     
BALANCE SHEET    

 
   POLUS CAPITAL 
MANAGEMENT 
GROUP LTD 
31.12.2023 
(£’000)
   POLUS CAPITAL 
MANAGEMENT 
LTD 31.12.2023 
(£’000)
 
ASSETS        
Non-Current Assets        
Intangible assets   61,915     
Tangible assets   239     
Equity investments   3,047     
Total Non-Current Assets   65,201     
Current Assets          
Trade Receivables   19,684    11,517 
Cash and cash equivalents   28,117    19,419 
Other assets        
Total Current Assets   47,801    30,936 
TOTAL ASSETS   113,002    30,936 
LIABILITIES          
Share capital       13,200 
Share-premium reserve   82,858     
Legal reserve        
Reserves   2,778     
Gains (losses) carried forward   5,769    4,272 
Gain/(loss) for the period   (4,863)   7,397 
Total net equity   86,542    24,869 
Trade and tax payables   13,703    5,067 
Financial liabilities       1,000 
Other liabilities and provisions   12,757     
Total Current Liabilities   26,460    6,067 
TOTAL LIABILITIES AND NET EQUITY   113,002    30,936 

 

672 | Annual Accounts and Report as at 30 June 2024

 

 

Financial companies   Table B
     
PROFIT AND LOSS ACCOUNT    

 
   POLUS CAPITAL 
MANAGEMENT 
GROUP LTD 
31.12.2023 
(£’000)
   POLUS CAPITAL 
MANAGEMENT 
LTD 31.12.2023 
(£’000)
 
Commission income   7,141    35,468 
Dividends and similar income   192     
Revenues   7,333    35,468 
Administrative expenses   (5,030)   (25,923)
a) personnel costs   (4,068)    
b) other administrative expenses   (962)   (25,923)
Other operating income (expense)   34    (107)
Net trading income (expense)   (8,099)    
Operating income   (5,762)   9,438 
Interest and similar income   235    319 
Interest and similar charges       (100)
Profit (loss) before taxes   (5,527)   9,657 
Current income tax for the year   664    (2,260)
Profit (loss) for the period   (4,863)   7,397 

 

Annexed Tables | 673

 

 

Financial companies Table B
   
BALANCE SHEET  

 
   RAM ACTIVE
INVESTMENTS S.A.
31/12/2023
(CHF’000)
 
ASSETS    
Non-Current Assets    
Intangible assets   45 
Tangible assets   1,024 
Equity investments   3,046 
Total Non-Current Assets   4,115 
Current Assets     
Trade Receivables   5,537 
Cash and cash equivalents   6,967 
Other assets   2,556 
Total Current Assets   15,060 
TOTAL ASSETS   19,175 
LIABILITIES     
Share capital   1,000 
Retained earnings under articles of association   500 
Treasury shares   (4,424)
Revaluation reserve    
Legal reserve    
Reserves   1,021 
Equity instruments   500 
Profit (loss) carried forward   20,248 
Profit (loss) for the period   (2,940)
Total net equity   15,905 
Trade payables   600 
Due to Group companies    
Tax liabilities   37 
Other liabilities   2,633 
Total Current Liabilities   3,270 
TOTAL LIABILITIES AND NET EQUITY   19,175 

 

674 | Annual Accounts and Report as at 30 June 2024

 

 

Financial companies Table B
   
PROFIT AND LOSS ACCOUNT  

 
   RAM ACTIVE
INVESTMENTS S.A.
31/12/2023
(CHF’000)
 
Revenues   11,196 
Personnel costs   (10,016)
Other administrative expenses   (3,579)
Operating income   (2,399)
Depreciation of tangible assets and other adjustments   (196)
Interest and similar income   17 
Interest and similar charges   (281)
Other non-operating income   60 
Other non-operating costs   2,207 
Profit (loss) before taxes   (2,799)
Current income tax for the year   (141)
Profit (loss) for the period   (2,940)

 

Annexed Tables | 675

 

 

Financial companies   Table B
     
BALANCE SHEET    

 

   Messier et Associés
S.C.A. 31/12/2023
(€’000)
   Messier et Associés
L.L.C. 31/12/2023
(USD ’000)
 
ASSETS        
Non-Current Assets        
Intangible assets   17,050     
Tangible assets   1,511     
Equity investments   1,268     
Total Non-Current Assets   19,829     
Current Assets          
Trade Receivables   36,374     
Cash and cash equivalents   3,413    51 
Financial assets held for trading   5,544     
Other assets   818    400 
Total Current Assets   46,149    451 
TOTAL ASSETS   65,978    451 
LIABILITIES          
Share capital   17,782    243 
Treasury shares        
Revaluation reserve        
Legal reserve   5     
Reserves        
Equity instruments        
Profit (loss) carried forward       7 
Profit (loss) for the period   4,660    191 
Total net equity   22,447    441 
Due to employees       10 
Trade receivables (current accounts)   25,555     
Due to Group companies        
Tax liabilities   13,950     
Other liabilities   4,026     
Total Current Liabilities   43,531    10 
TOTAL LIABILITIES AND NET EQUITY   65,978    451 

 

676 | Annual Accounts and Report as at 30 June 2024

 

 

Financial companies   Table B
     
PROFIT AND LOSS ACCOUNT    

 

   Messier et Associés   Messier et Associés 
   S.C.A.   L.L.C. 
   31/12/2023   31/12/2023 
   (€’000)   (USD’000) 
Revenues   39,004    2,696 
Personnel costs   (11,729)   (1,881)
Other administrative expenses   (20,846)   (624)
Operating income   6,429    191 
Depreciation of tangible assets and other adjustments        
Interest and similar income   165     
Interest and similar charges   (772)    
Foreign exchange gains (losses)        
(Provisions) write-backs   160     
Gains (losses) on disposal of equity investments   81     
Other gains (losses)   188     
Profit (loss) before taxes   6,251    191 
Current income tax for the year   (1,591)    
Profit (loss) for the period   4,660    191 

 

Annexed Tables | 677

 

 

Non-financial companies     Table B
       
BALANCE SHEET      

 

       Arma Partners   Arma 
   Arma   Corporate   Deutschland 
   Partners LLP   Finance Ltd.   Gmbh 
   31/03/2024   31/03/2024   31/03/2024 
   (£’000)   (£’000)   (£’000) 
ASSETS            
Non-Current Assets            
Intangible assets            
Tangible assets   667        1 
Other non-current financial assets   22         
Advance tax assets   689        1 
Total Non-Current Assets               
Current Assets   31,440    8,147     
Inventories   32,494    570    32 
Trade Receivables            
Other receivables       565    1,655 
Current tax assets   63,934    9,282    1,687 
Other non-current financial assets   64,623    9,282    1,688 
Cash and cash equivalents            
Total Current Assets   667        1 
TOTAL ASSETS   22         
LIABILITIES               
A) Net equity   6,200        25 
Capital            
Reserves            
Share premium reserve            
Profit (loss) carried forward   (373)   (25)    
Legal reserve            
Profit (loss) for the period       597    321 
Total net equity   47,695    25    101 
Non-current liabilities   53,522    597    447 
Provisions for risks and charges             1,090 
Provision for statutory end-of-service payments   11,101    8,685    45 
Deferred tax liabilities            
Other non-current liabilities           105 
Total non-current liabilities           1 
Current liabilities   11,101    8,685    1,241 
Due to banks   64,623    9,282    1,688 

 

678 | Annual Accounts and Report as at 30 June 2024

 

 

Financial companies     Table B
       
PROFIT AND LOSS ACCOUNT      

 

       Arma Partners   Arma 
   Arma   Corporate   Deutschland 
   Partners LLP   Finance Ltd.   Gmbh 
   31/03/2024   31/03/2024   31/03/2024 
   (£’000)   (£’000)   (£’000) 
Revenues   74,332    20,455    2,229 
Personnel costs   (28,950)   (20,135)   (1,605)
Other administrative expenses           (411)
Operating income   45,382    320    213 
Depreciation of tangible assets and other adjustments   (274)        
Interest and similar income   2,227         
Interest and similar charges            
Foreign exchange gains (losses)   (267)        
(Provisions) write-backs            
Gains (losses) on disposal of equity investments            
Other gains (losses)   619    (314)   (62)
Profit (loss) before taxes   47,687    6    151 
Current income tax for the year   8    19    (50)
Profit (loss) for the period   47,695    25    101 

 

Annexed Tables | 679

 

 

Non-financial companies         Table B
           
BALANCE SHEET          

 

   MEDIOBANCA               CMB REAL 
   INNOVATION               ESTATE 
   SERVICES   MB  CONTACT   COMPASS   COMPASS   DEVELOPMENT 
   S.C.p.A.   SOLUTIONS   RENT   LINK   31.12.2023 
   (€’000)   (€’000)   (€’000)   (€’000)   (€’000) 
ASSETS                    
Non-Current Assets                    
Intangible assets   22,525    28    7    1    1,298 
Tangible assets   33,499    41    120         
Other non-current financial assets       18             
Advance tax assets   2,220        7,280    2     
Total Non-Current Assets   58,244    87    7,407    3    1,298 
Current Assets                         
Inventories                    
Trade Receivables   19,981    356    198    1,110    72,419 
Other receivables   10,874    17    5,500    93    664 
Current tax assets   182    63             
Other non-current financial assets                    
Cash and cash equivalents   233    489    861    1,100    2,598 
Total Current Assets   31,270    925    6,559    2,303    75,681 
TOTAL ASSETS   89,514    1,012    13,966    2,306    76,979 
LIABILITIES                         
A) Net equity                         
Capital   35,000    500    400    500    75,150 
Reserves           6,692    1     
Share premium reserve                    
Profit (loss) carried forward   541    (38)   (3,231)   88    721 
Legal reserve               11    38 
Profit (loss) for the period   2    121    (1,697)   504    921 
Total net equity   35,543    583    2,164    1,104    76,830 
Non-current liabilities                         
Provisions for risks and charges   820        15    41     
Provision for statutory end-of-service payments   1,489    30    40         
Deferred tax liabilities   556                 
Other non-current liabilities                    
Total non-current liabilities   2,865    30    55    41     
Current liabilities                         
Due to banks                    
Trade payables   16,771    252    1,593    1,161    149 
Due to parent companies / affiliates       82             
Current tax liabilities   2,072    65             
Current financial liabilities   28,418        2,010         
Other current liabilities   3,845        8,144         
Total Current Liabilities   51,106    399    11,747    1,161    149 
TOTAL LIABILITIES AND NET EQUITY   89,514    1,012    13,966    2,306    76,979 

 

680 | Annual Accounts and Report as at 30 June 2024

 

 

Non-financial companies         Table B
           
PROFIT AND LOSS ACCOUNT          

 
   MEDIOBANCA               CMB REAL 
   INNOVATION               ESTATE 
   SERVICES   MB CONTACT   COMPASS   COMPASS   DEVELOPMENT 
   S.C.p.A.   SOLUTIONS   RENT   LINK   31.12.2023 
   (€’000)   (€’000)   (€’000)   (€’000)   (€’000) 
Revenues   157,987    2,112    3,989    7,282    1,018 
Production costs   (102,647)   (1,616)   (4,697)   (6,422)    
Employees' costs   (15,428)   (252)   (1,119)   (116)   (97)
Other operating costs   (14,627)                
Sundry costs           (299)   (35)    
Adjustments to tangible assets   (19,842)   (20)       (24)    
Adjustments to intangible assets   (4,864)       (28)        
Other writedowns                    
Writedowns of current receivables           (14)        
Operating result   579    224    (2,168)   685    921 
Financial gains   114            17     
Financial expenses   (815)       (84)        
Other gains   99    11    8         
Other expenses       (6)            
Profit (loss) before taxes   (23)   229    (2,244)   702    921 
Fiscal gain (expense)   25    (108)   547    (198)    
Taxes for the period   (1,854)   (108)   536    (27)    
Deffered and advance taxes   1,879        11    (171)    
Net profit (loss) for the period   2    121    (1,697)   504    921 

 

Annexed Tables | 681

 

 

Insurance companies Table B
   
BALANCE SHEET  

 

   COMPASS RE S.A.
(€’000)
 
ASSETS    
A) Amounts due from shareholders by way of unpaid amounts on capital call   
B) Intangible assets   
C) Investments   292,778 
I) Land and buildings (total)    
II) Investments in affiliated undertakings and participating interests    
3) Loans to enterprises   278,778 
a) belonging to parent company    
e) other   278,778 
III) Other financial investments   14,000 
6) banks deposits   14,000 
D) Investments for the benefit of insured parties (life)    
E) Sundry receivables   4,804 
II Receivables arising out of reinsurance operations   4,804 
III Other receivables    
F) Other assets   1,454 
II Cash at bank and in hand   1,454 
G) Accruals and deferrals   11,206 
1. Due to interest   1,839 
3. Other accruals and deferrals   9,367 
TOTAL ASSETS   310,242 
LIABILITIES     
A) Net equity   82,443 
I Share capital   15,000 
IV Legal reserve   1,500 
VIII Profit (loss) carried forward   32,386 
IX Profit (loss) for the period   33,557 
B) Subordinated liabilities    
C) Technical reserves   216,560 
I Non-life business     
1. Premiums reserve   93,246 
2. Claims reserve   10,083 
3. Equalization reserve   113,231 
D) Technical reserves where risk is borne by insured party    
E) Provisions for risks and charges   34 
2) Tax-related provisions   34 
F) Deposits received from reinsurers    
G) Accounts payable and other liabilities   10,794 
VII Other payables     
3. Due to social security and retirement institutions   10,794 
H) Accruals and deferrals   411 
3. Other accruals and deferrals   411 
TOTAL LIABILITIES AND NET EQUITY   310,242 

 

682 | Annual Accounts and Report as at 30 June 2024

 

 

  

Insurance companies Table B
   
PROFIT AND LOSS ACCOUNT  

 

   COMPASS RE S.A.
(€’000)
 
I) TECHNICAL ACCOUNT    
Gross premiums for the year   25,654 
Change in premium reserves   8,649 
Total net premiums for the year   34,303 
Gains arising from non-technical accounts investments    
1) TOTAL REVENUES   34,303 
Claims incurred, after reinsurance (Gross amount)   (7,465)
Change in provisions for claims (Gross amount)   (639)
Acquisition costs   (2,478)
Acquisition costs accrued to future years   (747)
Management and administration expenses   (956)
2) TOTAL COSTS   (12,285)
Change in equalization reserve   12,441 
Technical-account profit (loss)   34,459 
II) NON-TECHNICAL ACCOUNT     
Interest income   5,231 
Gains on the realisation of investments   7,745 
Investment management charges   427 
Interest expense   (264)
Value adjustments on investments    
Losses on the realisation of investments   (2,367)
Underwriting profit (loss)   10,772 
PROFIT (LOSS) FOR THE PERIOD BEFORE TAX   45,231 
Income taxes for the period   (11,321)
Other taxes not shown under the preceding items   (353)
NET PROFIT (LOSS) FOR THE PERIOD   33,557 

  

Annexed Tables | 683

 

 

Associate companies Table C
   
BALANCE SHEET  

 

   Assicurazioni
Generali S.p.A.
31.12.2023
(€’000)
 
ASSETS    
A) Amounts due from shareholders by way of unpaid amounts on capital call   
B) Total intangible assets   26,179 
C) Investments     
I) Land and buildings (total)   62,522 
II) Investments in Group and other undertakings (total)   34,281,986 
III) Other financial investments     
1) Shares and stock units   27,396 
2) Mutual fund units   3,500,896 
3) Bonds and other fixed-income securities   3,140,597 
4) Loans   632 
6) Deposits with banks   309,144 
7) Sundry financial investments   2,661 
Total other financial investments   6,981,326 
IV) Deposits with reinsurers   6,034,614 
Total investments (C)   47,360,448 
D) Investments for the benefit of life policyholders who carry the risk and deriving from pension fund management (total)   8,303 
Dbis) Reinsurers’ share of technical reserves     
I) Non-life business (total)   2,202,510 
II) Life business (total)   680,985 
Total reinsurers’ share of technical reserves (Dbis)   2,883,495 
E) Accounts receivable     
I) Amounts due in respect of primary insurances (total)   461,245 
II) Amount due in respect of reinsurance transactions (total)   791,800 
III) Other accounts receivable   1,590,628 
Total accounts receivable (E)   2,843,673 
F) Other assets     
I) Tangible assets and inventories (total)   2,832 
II) Cash (total)   729,007 
IV) Other assets (total)   161,989 
Total other assets (F)   893,828 
G) Accrued income and deferred liabilities (total)   99,005 
TOTAL ASSETS (A+B+C+D+Dbis+E+F+G)   54,114,931 

  

684 | Annual Accounts and Report as at 30 June 2024

 

 

Associate companies continued Table C
   
BALANCE SHEET  

 

   Assicurazioni
Generali S,p,A,
31.12.2023
(€’000)
 
LIABILITIES AND SHAREHOLDERS' EQUITY    
A) Net equity     
I) Share capital or equivalent fund   1,592,383 
II-VII) Reserves (total)   14,788,215 
IX) Profit (loss) for year   1,446,281 
X) Negative reserve for treasury shares in portfolio   266,912 
Total net equity (A)   18,093,791 
B) Subordinated liabilities   8,354,238 
C) Technical reserves     
I) Non-life business (total)   9,005,262 
II) Life business (total)   4,041,381 
Total technical reserves (C)   13,046,643 
D) Technical reserves where investment risk is carried by policyholders and reserves arising from pension fund management (total)   20,124 
E) Provisions for risks and charges (total)   304,945 
F) Deposits received from reinsurers   665,730 
G) Accounts payable and other liabilities     
I) Amounts payable in respect of primary insurances   89,247 
II) Amounts payable in respect of reinsurance   600,789 
III) Bond issues   2,692,000 
IV) Amounts payable to banks and financial institutions   976,319 
VI) Loans and other debt   5,450,829 
VII) Provision for statutory end-of-service payments   1,213 
VIII) Other accounts payable   3,329,546 
IX) Other liabilities   229,588 
Total accounts payable and other liabilities (G)   13,369,531 
H) Accrued liabilities and deferred income (total)   259,929 
TOTAL LIABILITIES AND NET EQUITY (A+B+C+D+E+F+G+H)   54,114,931 

 

Annexed Tables | 685

 

 

Affiliated companies Table C
   
PROFIT AND LOSS ACCOUNTS (non-technical account)  

 

   Assicurazioni
Generali S.p.A.
31.12.2023
(€’000)
 
1) Underwriting profit (loss) from non-life business   760,556 
2) Underwriting profit (loss) from life business   (49,150)
3) Investment income in non-life business     
a) Income from shares and stock   1,565,043 
b) Other investment income (total)   202,896 
c) Write-backs in book value of investments   18,218 
d) Gains on disposal of investments   39,772 
Total investment income in non-life business (3)   1,825,929 
4) (+) Portion of investment income transferred from technical accounts of life business   596,599 
5) Operating and financial expenses in non-life business     
a) Investment management expenses and interest paid   8,102 
b) Value adjustments to investments   45,751 
c) Loss on disposal of investments   244 
Total Operating and financial expenses in non-life business (5)   54,097 
6) (-) Portion of investment income transferred from technical accounts of non-life business   455,574 
7) Other income   374,678 
8) Other expenditure   1,714,859 
9) Profit (loss) on ordinary operations   1,284,082 
10) Extraordinary income   41,656 
11) Extraordinary expenses   30,217 
12) Net extraordinary income (expenses) (10-11)   11,439 
13) Earnings before tax   1,295,521 
14) Taxation for the year   (150,760)
15) Profit (loss) for the year (13-14)   1,446,281 

 

686 | Annual Accounts and Report as at 30 June 2024

 

 

Affiliated companies Table C
   
BALANCE SHEET  

 

   Finanziaria Gruppo
Bisazza S.r.l,
31.12.2023
(€’000)
 
ASSETS     
B) Fixed assets:     
I) Intangible    
II) Tangible    
III) Financial   5,528 
Total B   5,528 
C) Current assets:     
II) Receivables:     
Due within 12 months   576 
Due over 12 months    
Total receivables   576 
IV) Cash and cash equivalents   341 
Total C   917 
TOTAL ASSETS   6,445 
LIABILITIES     
A) Net equity:     
I) Share capital   100 
II) Share-premium reserve    
IV) Legal reserve   45 
VII) Other reserves   1,513 
IX) Profit (loss) for the period   4,202 
Total A   5,860 
D) Payables:     
Due within 12 months   575 
Due over 12 months   10 
Total payables   585 
Total D   585 
TOTAL LIABILITIES AND NET EQUITY   6,445 

  

Annexed Tables | 687

 

 

Affiliated companies Table C
   
PROFIT AND LOSS ACCOUNTS (non-technical account)  

 

   Finanziaria Gruppo
Bisazza S,r,l,
31.12.2023
(€’000)
 
A) Revenues:    
Other revenues and gains    
Total production value (A)   
B) Production costs:     
7) Services-related   56 
14) Sundry operating expenses   5,– 
Total production costs (B)   61 
Difference between production value and production costs (A-B)   (61)
C) Financial gains (expenses):     
15) Proceeds from investments   4,300 
16) Interest and similar income    
17) Interest and similar charges    
Total financial gains (expenses) (C)   4,300 
Profit (loss) before taxes (A - B ± C ± D)   4,239 
20) Income tax for the year (current, deferred and prepaid)   37 
Profit (loss) for the period   4,202 

 

688 | Annual Accounts and Report as at 30 June 2024

 

 

Associate companies Table C
   
BALANCE SHEET  

 

  

Istituto Europeo di

Oncologia S.r.l,
31.12.2023
(€’000)

 
ASSETS    
A) SUBSCRIBED CAPITAL UNPAID     
B) FIXED ASSETS     
I - INTANGIBLE ASSETS     
3) Industrial patents rights and rights to use intellectual property    
4) Concessions, licences, trademarks, and similar rights   4,760 
6) Work-in-progress and advances   762 
7) Other   506 
TOTAL INTANGIBLE ASSETS   6,028 
II - TANGIBLE ASSETS     
1) Land and buildings   28,363 
2) Plants and equipment   14,959 
3) Industrial and commercial machineries   50,191 
4) Other goods   5,581 
5) Work-in-progress and advances   18,097 
TOTAL TANGIBLE ASSETS   117,191 
III - FINANCIAL ASSETS     
1) Investments in:     
a) Subsidiary companies   60,121 
d-bis) Other   672 
Total investments   60,793 
2) Receivables     
d-bis) Other   1,054 
Total receivables   1,054 
3) Other securities     
Total other securities   9,000 
TOTAL FINANCIAL ASSETS   70,847 
TOTAL FIXED ASSETS (B)   194,066 
C) CURRENT ASSETS     
I – INVENTORIES     
1) Raw-materials, supplies, and consumables   9,670 
Goods held for resale   780 
TOTAL INVENTORIES   10,450 
II – RECEIVABLES     
1) From customers   54,788 
2) From subsidiary companies   107 
3) From affiliated companies    
5-bis) Tax-related receivables   3,845 
5-ter) Deferred tax asset receivables   2,842 
5-quater) Other   1,155 
TOTAL RECEIVABLES   62,737 
III - CURRENT FINANCIAL ASSETS     
6) Other securities   29,875 
TOTAL CURRENT FINANCIAL ASSETS   29,875 
IV - CASH AND CASH EQUIVALENTS     
1) Bank and postal deposits   28,096 
3) Cash in hand   78 
TOTAL CASH AND CASH EQUIVALENTS   28,174 
TOTAL CURRENT ASSETS (C)   131,236 
D) ACCRUALS AND DEFERRALS   4,807 
TOTAL ACCRUALS AND DEFERRALS (D)   4,807 
TOTAL ASSETS (A + B + C + D)   330,109 

  

Annexed Tables | 689

 

 

Affiliated companies Table C
   
BALANCE SHEET  

 

   Istituto Europeo di
Oncologia S.r.l,
31.12.2023
(€’000)
 
LIABILITIES    
A) NET EQUITY     
I - Capital   80,579 
IV - Legal reserve   8,069 
V - Reserve under the articles of association     
- Provisions for research and development   51,429 
IX - Profit (loss) for the period   3,685 
TOTAL NET EQUITY (A)   143,762 
PROVISIONS FOR RISKS AND CHARGES     
- Deferred tax provisions   519 
- Provisions for other risks   10,446 
TOTAL PROVISIONS FOR RISKS AND CHARGES (B)   10,965 
PROVISION FOR STATUTORY END-OF-SERVICE PAYMENTS (C)   5,188 
D) PAYABLES     
7) Trade payables   69,715 
9) Payables to subsidiary companies   32,753 
10) Payables to associated companies    
12) Tax liabilities   4,258 
13) Payables to social security and pension institutions   4,837 
14) Other payables   22,011 
TOTAL PAYABLES (D)   133,574 
D) ACCRUALS AND DEFERRALS   36,620 
TOTAL ACCRUALS AND DEFERRALS (D)   36,620 
TOTAL LIABILITIES AND NET EQUITY (A+B+C+D+E+F+G+H)   330,109 

 

690 | Annual Accounts and Report as at 30 June 2024

 

 

Affiliated companies Table C
   
PROFIT AND LOSS ACCOUNT  

 

   Istituto Europeo di
Oncologia S.r.l,
31.12.2023
(€’000)
 
A) PRODUCTION VALUE     
1) Revenues from sales and services   241,851 
5) Other gains:   48,804 
- Grants received for research programmes   26,532 
- Other proceeds   22,272 
TOTAL PRODUCTION VALUE (A)   290,655 
B) PRODUCTION COSTS   77,778 
6) Raw-materials, supplies, consumables and goods for resale   63,480 
7) Services   6,578 
8) Leasehold goods   102,055 
9) Personnel expenses:   80,896 
a) Wages and salaries   16,989 
b) Social security charges   4,016 
c) Provision for statutory end-of-service payments   154 
e) Other costs   15,139 
10) Depreciation, amortization and write-downs:   2,245 
a) Amortization of intangible fixed assets   11,322 
b) Depreciation of tangible fixed assets   1,572 
d) Write-downs of current financial assets and other liquid assets   (1,519)
11) Change in inventory of raw-materials, supplies, consumables, and goods for resale (±)   6,404 
12) Contributions to provisions   17,535 
14) Sundry operating expenses   287,450 
TOTAL PRODUCTION COSTS (B)   77,778 
DIFFERENCE BETWEEN PRODUCTION VALUE AND PRODUCTION COSTS (A - B)   3,205 
C) FINANCIAL GAINS (EXPENSES)     
15) Proceeds from investments     
- dividends and other income from other entities   341 
16) Other financial gains     
d) gains other than the above     
- interest on current accounts and other deposits   1,113 
17) Interest and similar charges     
- other   930 
17-bis) Foreign exchange gains and losses (±)   (11)
TOTAL FINANCIAL GAINS (EXPENSES) (C)   513 
D) VALUE ADJUSTMENTS TO FINANCIAL ASSETS     
18) Write-ups of:     
a) equity investments   1,043 
19) Write-downs of:     
a) equity investments   7 
TOTAL ADJUSTMENTS (D)   1,036 
PROFIT (LOSS) BEFORE TAXES (A - B +/- C +/- D +/- E)   4,754 
22) Taxes for the period (current, deferred and prepaid)     
- Current taxes   1,438 
- Deferred and prepaid taxes   (369)
Profit (loss) for the period   3,685 

 

Annexed Tables | 691

 

 

Associate companies Table C
   
BALANCE SHEET  

 

   CLI HOLDINGS 
   II LTD 
   31.12.2023 
   (£’000) 
ASSETS     
Non-Current Assets     
Intangible assets     
Tangible assets    
Equity investments    
Total Non-Current Assets   145,400 
Current Assets   145,400 
Trade Receivables     
Cash and cash equivalents   2,550 
Other assets   252 
Total Current Assets   179 
TOTAL ASSETS   2,981 
LIABILITIES     
Share capital    
Share-premium reserve    
Legal reserve    
Reserves    
Profit (loss) carried forward   3 
Profit (loss) for the period   1 
Total net equity   4 
Trade and tax payables   1 
Financial liabilities   148,328 
Other liabilities and provisions   48 
Total Current Liabilities   148,377 
TOTAL LIABILITIES AND NET EQUITY   148,381 

 

692 | Annual Accounts and Report as at 30 June 2024

 

 

Affiliated companies Table C
   
PROFIT AND LOSS ACCOUNT  

 

   CLI HOLDINGS 
   II LTD 
    31,12,2023 
   (£/000)
Commission income   16,288 
Dividends and similar income    
Revenues   16,288 
Administrative expenses   (99)
a)  personnel costs   (99)
b)  other administrative expenses    
Other operating income (expense)    
Net trading income (expense)    
Net value adjustments to /write-backs of tangible assets    
Operating income   16,189 
Interest and similar income    
Interest and similar charges   (16,187)
Profit (loss) before taxes   2 
Current income tax for the year   (1)
Profit (loss) for the period   1 

 

Annexed Tables | 693

 

 

Associate companies Table C
   
BALANCE SHEET  

 

   HEIDI PAY AG 
   31.12.2023 
   (CHF’000) 
ASSETS     
Non-Current Assets     
Intangible assets    
Tangible assets   3,559 
Equity investments   288 
Total Non-Current Assets   3,847 
Current Assets     
Trade Receivables   623 
Cash and cash equivalents   2,012 
Other assets   210 
Total Current Assets   2,845 
TOTAL ASSETS   6,692 
LIABILITIES     
Share capital   944 
Share-premium reserve   9,503 
Legal reserve   412 
Reserves   (45)
Profit (loss) carried forward   (6,243)
Profit (loss) for the period   1,576 
Total net equity   6,147 
Trade and tax payables   164 
Financial liabilities    
Other liabilities and provisions   381 
Total Current Liabilities   545 
TOTAL LIABILITIES AND NET EQUITY   6,692 

 

694 | Annual Accounts and Report as at 30 June 2024

 

 

Affiliated companies Table C
   
PROFIT AND LOSS ACCOUNT  

 

   HEIDI PAY AG 
   31.12.2023 
   (CHF’000) 
Commission income   465 
Dividends and similar income    
Revenues   465 
Administrative expenses   (817)
a) personnel costs   (696)
b) other administrative expenses   (121)
Other operating income (expense)   (249)
Net trading income (expense)   (204)
Net value adjustments to /write-backs of tangible assets   2,881 
Operating income   2,076 
Interest and similar income    
Interest and similar charges   (496)
Profit (loss) before taxes   1,580 
Current income tax for the year   (4)
Profit (loss) for the period   1,576 

 

Annexed Tables | 695

 

 

Entities under common control continued Table C
   
BALANCE SHEET  

 

   MBSpeedUP 
   Limited* 
   31/12/2023 
   (€’000) 
ASSETS     
10. Cash and cash equivalents    
20. Financial assets at fair value with impact taken to profit and loss    
a) Financial assets held for trading    
b) Financial assets designated at fair value    
c) Other financial assets mandatorily at fair value    
30. Financial assets at fair value with impact taken to comprehensive income    
40. Financial assets at amortized cost   1,750 
a) Due from banks   1,750 
b) Due from financial companies    
c) Due from customers    
50. Hedging derivatives    
60. Adjustment of hedging financial assets (+/-)    
70. Equity investments    
80. Property, plant and equipments    
90. Intangible assets    
of which:     
goodwill    
100. Tax assets    
a) current    
b) deferred    
110. Assets classified as held for sale    
120. Other assets   650 
TOTAL ASSETS   2,400 
LIABILITIES     
10. Financial liabilities at amortized cost    
a) Due to    
b) titoli in circolazione    
20. Trading financial liabilities    
30. Financial liabilities designated at fair value    
40. Hedging derivatives    
50. Adjustment of hedging financial liabilities (+/-)    
60. Tax liabilities    
a) current    
b) deferred    
70. Liabilities included in disposal groups classified as held for sale    
80. Oher liabilities    
90. Staff severance indemnity provision    
100. Provisions    
a) commitments and financial guarantees    
b) post-employment and similar benefits    
c) other provisions    
110. Share capital    
120. Treasury shares (-)    
130. Equity instruments    
140. Share premium reserve    
150. Reserves   2,400 
160. Valuation reserves    
170. Profit (loss) for the period    
TOTAL LIABILITIES AND NET EQUITY   2,400 

 

+  Pro-forma scheme as at 30 June 2024, used for the Consolidated Financial Statements preparation.

 

696 | Annual Accounts and Report as at 30 June 2024

 

 

Table D

 

FEES PAID FOR AUDITING AND SUNDRY OTHER SERVICES

(pursuant to Article 149-duodecies of Consob resolution 11971/99)

 

               (m) 
Type of service  Mediobanca   Group companies (*) 
   Pricewaterhouse   Pricewaterhouse   Pricewaterhouse   Pricewaterhouse 
    Coopers S.p.A.    Coopers S.p.A.    Coopers S.p.A.    Coopers S.p.A. 
         network         network 
Auditing   622    28    1,198    1,077 
Certification services (**)    205        99    29 
Other services (***)    329             
of which: observation and analysis of the administrative/accounting internal control system                
of which: other   329             
Total   1,156    28    1,297    1,106 

 

(*)Group companies consolidated line-by-line.
(**)Certification services concerning the Parent Company include fees for comfort letters on bond issue programs, activities related to the annual Basel III Pillar 3 public disclosure document and to the NFD.
(***)The other services provided to the parent company Mediobanca S.p.A. include the fees payable in connection with the release of the comfort letters for the bond issuance programmes.

 

Figures shown above include the ISTAT adjustment, while do not include VAT, expenses and the supervisory fee paid to CONSOB.

 

Annexed Tables | 697

 

 

GLOSSARY

 

 

 

 

GLOSSARY 

 

The definitions of some of the technical terminology and translations used in the Review of Operations and Notes to the Accounts are provided below.

 

Additional Tier 1 (AT1): Additional Tier 1 Capital. The AT1 category generally includes capital instruments apart from ordinary shares (which are included in common equity, see definition) which meet the regulatory requirements for inclusion in this level of own funds.

 

Additional Valuation Adjustment (AVA): This item represents the difference between the prudential value of an asset (or liability) and the fair value of that asset (or liability) recorded in a bank’s financial statements.

 

Adjusted Consolidated Net Income: Calculated as Gross Operating Profit (GOP) after Loan Loss Provisions (LLPs), minority interest and taxes. Then, it is applied a normalized taxation.

 

Adjusted Individual Net Income: Net profit adjusted for any extraordinary intercompany dividends.

 

Advanced Internal Ratings-Based (AIRB) Models: The Basel II Accord sets forth three methods for the calculation of credit risk: the Standard method, the Foundation Internal Ratings-Based (FIRB) method and the Advanced Internal Ratings-Based (AIRB) method. Using the AIRB method, a bank develops its own internal models with which to estimate the PD (Probability of Default), LGD (Loss-Given Default) and EAD (Exposure At Default) indicators necessary in order to calculate the capital requirement.

 

Advisory: Activity performed by a financial intermediary assisting a client in corporate finance transactions, the duties covered by which may range from preparing valuations to drawing up documents and providing general consultancy services regarding the specific transaction.

 

Alternative Fund, Private Equity and Hedge Fund: Alternative investments comprise a vast range of different forms of investment, including those in private equity and hedge funds:

 

Glossary | 699

 

 

Private equity investments: investments in the venture capital of companies, generally unlisted but with high growth potential and the capability to generate cash flows which are constant and stable over time;

 

Hedge funds: generic term to refer to funds which use complex and sophisticated strategies to deliver returns which are higher on average than other funds.

 

Amortized Cost (financial assets measured at amortized cost): This is one of the categories for financial assets and liabilities provided for in IFRS 9 (paragraph 4.1.2). A financial asset is measured at amortized cost when both the following conditions are met

 

The instrument is held according to a business model consisting of collection of the contractual cash flows (Hold to collect, see definition);

 

The contractual terms of the instrument are such that the contractual cash flows are provided at defined maturities and represent solely payments of principal and interest.

 

Asset and Liability Management (ALM): Integrated management of assets and liabilities to optimize allocation of resources on a risk/return basis.

 

Asset-Backed Securities (ABS): Financial instruments whose returns and redemptions are guaranteed by a portfolio of (collateral) assets of the issuer, exclusively allocated to satisfy the rights attached to those financial instruments.

 

Assets Under Administration (AUA): Assets under administration represent the market value of the aggregate of securities held by a financial institution received on deposit from its clients and managed on behalf of them. Management of such securities involves their custody, collection of interest/dividends, verifying draws for the attribution of premiums or for capital repayment, arranging repayments on behalf of the clients, and generally checking that all rights pertaining to the securities have been respected. Sums collected must then be credited to the client.

 

Assets Under Custody (AUC): Assets under custody represent the market value of financial instruments and securities in general (equities, bonds, government securities, shares held in mutual investment funds, etc.) in paper or dematerialized from, held by a financial institution on behalf of clients.

 

700 | Annual Accounts and Report as at 30 June 2024

 

 

Assets Under Management (AUM): Assets under management constitute the total market value of all funds managed by a financial institution on behalf of its clients or investors, including mutual funds, asset management in funds or securities, insurance products and funds under administration.

 

Backstops: Indicators used to understand whether the financial instrument has experienced a significant increase in credit risk since the date of initial recognition. For the Group, backstop indicators include the 30-days past due period and the existence of forbearance measures.

 

Bail-In: Procedure to resolve banking crises via the exclusive and direct involvement of the shareholders, bond holders and current account holders of the bank itself with deposits of over €100,000. In 2016, this procedure (Directive (EU) 2014/59, referred to as BRRD) replaced the so-called bail-out procedure (rescue through the use of public resources). The basic principle underpinning the bail-in procedure is “no creditor worse off” (NCWO), i.e. no shareholder, current account holder or creditor should incur greater losses than they would have incurred if the institution had been wound up under normal insolvency proceedings.

 

Banking Book: The banking book consists of proprietary financial assets held for purposes other than short-term trading.

 

Bank Recovery and Resolution (BRRD) Directive: This directive introduces harmonized rules in all EU Countries to prevent and manage crises at credit institutions and investment firms. The BRRD confers on the authorities powers and instruments in order for them to be able to: plan management of the crisis; intervene in good time before the crisis fully occurs; and manage the “resolution” stages in optimal fashion.

 

Basel Accords: Guidelines on capital requirements for banks, compiled by the Basel Committee with a view to establishing standard, harmonized regulation of banking supervision at supranational level. The first accord published by the Basel Committee was in 1988, and introduced a set of minimum capital requirements for banks to reduce credit and market risk deriving from the possibility of assets losing their value excessively.

 

Glossary | 701

 

 

a)Basel II: The short name given to the document entitled International Convergence of Capital Measurement and Capital Standards signed in Basel in 2004 which came into force in 2008.

 

b)Basel III: This name refers to the new prudential requirements introduced at European level by the CRD IV/CRR package (see definition).

 

c)Basel IV: New regulatory framework which includes a revision of Basel III provisions and standards; it will enter into force by different stages.

 

Basel Committee on Banking Supervision (BCBS): This is the central body for the international harmonization of banking regulations and acts as a platform for cooperation on banking supervision issues. Its mandate is to strengthen banking supervision, thereby promoting financial stability.

 

Basic Indicator Approach (BIA): This is a set of operational risk measurement techniques contained in the Basel II rules on the capital adequacy of banking institutions.

 

Benchmark Test: A qualitative and quantitative analysis, to be carried out to verify whether the conditions of the SPPI test (see definition) are met, according to paragraphs B4.1.9Aff. of IFRS 9 standard; it regards those financial instruments which show an interest rate mismatch between the duration and the interest rate, thus for them it results in a modified remuneration related to the time value of money. In order to carry out the benchmark test, a hypothetical instrument is considered (the “benchmark” instrument), identical to the instrument for which the test is carried out apart from the characteristic which modifies the interest rate. Then, it is necessary to compare the undiscounted contractual cash flows of the instrument subject of the analysis with those of the benchmark instrument; the SPPI test is considered not to be met, whether the difference arising is significant.

 

Beta (ß): Indicator representing the correlation between the expected return on an equity instrument and the overall return on the benchmark market. Beta can show readings which are above zero (positive correlation) or below zero (negative correlation). It is used in the Capital Asset Pricing Model (see definition).

 

Bid-Ask Spread: Margin between the price at which an intermediary commits to sell stocks (“ask”; letter) and the price at which it commits to buy them (“bid”; cash). On the interbank market this takes the form of the margin between the

 

702 | Annual Accounts and Report as at 30 June 2024

 

 

interest rate at which funds are offered on a given maturity (letter) and the rate at which the funds are requested on the same maturity (cash).

 

Book Value Per Share (BVPS): Book Value of net equity defines the net value of a company or asset according to its financial status. For companies, it consists in the total value of tangible assets minus liabilities.

 

Business Combination: A business combination comprises a set of assets or accounts which jointly may serve for the performance of an economic activity.

 

Business Model: The business model regards the way in which an entity manages its financial assets in order to generate cash flows (that is, it determines whether the cash flows derive from collection of cash flows stipulated contractually, from the sale of financial assets, or from both). The business model is not defined for individual assets but on the basis of like-for-like portfolios of assets. The classification of financial assets is based on the business model concept. Three types of business model are contemplated: Hold to collect, Hold to collect and sell, and Other.

 

Capital Absorption: Absorbed capital is the amount of capital which the Group has to hold in order to cover potential losses and which is needed to support its business activities and the positions held. It consists of regulatory capital plus internal capital. Regulatory capital is obtained by multiplying risk- weighted assets by the target Common Equity Tier 1 ratio. Internal capital is obtained from the sum of economic capital estimated internally to cover the Pillar I and Pillar II (see Basel Accords) risks to which the Bank is exposed.

 

Capital Asset Pricing Model (CAPM): Mathematical model used to determine the price of a security based on its riskiness, as expressed by beta (see definition).

 

Capital Requirement Directive (CRD): Directives (EU) 2006/48 and 2006/49, transposed by the Bank of Italy in its circular no. 263/06 as amended, which introduced the decisions taken as part of the Basel III agreements (see definition) to the European regulatory framework. The CRD IV package in particular supersedes the foregoing Directives, and consists of Directive (EU) 2013/36 on access to the activity of credit institutions and the prudential supervision, and Regulation (EU) 575/2013 on prudential requirements, transposed by the Bank of Italy in its circular no. 285 of 17 December 2013 as amended.

 

Glossary | 703

 

 

Capital Requirement Regulation (CRR/CRR2): Regulation (EU) 575/2013, and subsequent updates, on prudential requirements for credit institutions and investment firms. The regulation was adopted in response to the financial crisis which broke out in 2007, and is intended to reduce the likelihood of financial institutions failing by increasing their equity, reducing their exposure to risk and reducing the financial leverage used by them.

 

Cash Flow Hedge: One of the types of contract permitted under IFRS 9 to neutralize the exposure to changes in future cash flows attributable to particular risks associated with given balance-sheet items.

 

Cash-Generating Unit (CGU): According to the definition provided in IAS 36, paragraph 6, a cash-generating unit is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets. The notion of CGU is used in the impairment test procedure (see definition).

 

Certificates: Certificates are financial instruments which in contractual terms are equivalent to derivatives with an option component, and which replicate the performance of an underlying asset. In acquiring a certificate the investor obtains the right to receive a sum linked to the value of the underlying instrument at a given date.

 

Collateralized Debt Obligation (CDO): CDOs are fixed-income securities which have a portfolio of bonds, loans and other debt instruments as their collateral.

 

Collateralized Loan Obligation (CLO): A particular type of CDO (see definition), in which the collateral is made up by receivables.

 

Commercial Paper: Short-term financing instrument with duration generally of one year or less.

 

Common Equity: Common equity consists of the highest-quality components of a Bank’s capital, such as: ordinary shares in issue, every share premium (for ordinary shares), retained earnings, and every adjustment or prudential filter (see definition) applied to the foregoing categories for regulatory or supervisory purposes.

 

704 | Annual Accounts and Report as at 30 June 2024

 

 

Common Equity Tier 1 (CET1) ratio: The CET1 ratio is the ratio of a bank’s core equity capital to its total risk-weighted assets or RWAs (see definition).

 

Compound Annual Growth Rate (CAGR): Annual compound growth rate of an investment over a given period of time.

 

Contingency Funding Plan: Set of operating procedures developed internally by a bank in order to manage liquidity crisis (short-term and/or medium-/long-term).

 

Contractual Service Margin (CSM): Under the new IFRS 17 standard, this item represents gains not yet realized from a group of contracts which will be recognized during the period of the insurance coverage.

 

Corporate Exposures: Class of credit exposures to companies which include also the following categories:

 

– Exposures to SMEs;

 

– Leveraged finance (see definition);

 

– Specialized lending.

 

Corporate Sustainability Reporting Directive (CSRD): The Corporate Sustainability Reporting Directive is a new EU law that lays down stricter requirements for the preparation of companies’ sustainability reports. It amends the NFRD Directive on disclosure of non-financial information and aims to increase the transparency and comparability of information on the environmental, social and governance (ESG) performance of companies. It provides for the introduction of a specific section within the Report on Operations (Financial Disclosure) dedicated to sustainability and adhering to the EFRAG sustainability principles that will replace the current non-financial reporting.

 

Cost/Income Ratio: Operating costs (i.e. labour costs, overheads, administrative expenses and depreciation/amortization) as a percentage of total revenues.

 

Cost of Risk (CoR): Ratio between loan loss provisions and average net volumes of loans to customers.

 

Glossary | 705

 

 

Counterbalancing Capacity (CBC): This is defined as the total liquidity reserves from which potential cash flows to meet expected or unexpected cash demands may arise. CBC is compared to cumulative net cash flow to monitor short-term liquidity management.

 

Covenants: Covenants are contractual clauses which entitle the lender to renegotiate or revoke credit upon the occurrence of certain events defined in said clauses, the purpose of which being to formalize the undertakings entered into by the lender in terms of management and earnings/financial performance, and at the same time provide an instrument with which to record any differences relative to expectations to be noted.

 

Covered Bonds: Covered bonds are debt securities covered by assets that, in the event of failure by the issuer, serve to meet the claims of the bond-holders on a priority basis.

 

Credit Conversion Factor (CCF): Percentage applied to convert an off-balance-sheet exposure (e.g. a guarantee) into its equivalent balance-sheet amount. This factor is applied in the procedure used to calculate the EAD (see definition).

 

Credit Default Swap (CDS): Derivative contract whereby one party (the protection seller) undertakes, in return for payment of an amount of money, to pay another party (the protection buyer) an agreed amount if a given event occurs in relation to the deterioration in the credit of a third counterparty or reference entity.

 

Credit Risk Mitigation (CRM): Set of techniques, ancillary contracts to credit or other instruments (such as financial assets and guarantees) which enables a reduction in the capital requirements to cover credit risk.

 

Credit Risk Stage: Credit risk stage refers to the classification of financial assets valued at FVOCI or at amortized cost, commitments to disburse funds and financial guarantees issued subject to the impairment rules of IFRS 9 according to changes in their credit risk (paragraph 5.5 of IFRS 9). There are three risk stages:

 

a)Stage 1 comprises:

 

a. Credit exposures originated or acquired;

 

b. Exposures with no significant increase in credit risk compared to their initial recognition;

 

c. Exposures subject to the low credit risk exemption.

 

706 | Annual Accounts and Report as at 30 June 2024

 

 

b)Stage 2: significant increase in credit risk compared to initial recognition;

 

c)Stage 3: impaired exposures.

 

Credit Value Adjustment (CVA): The adjustment of a portfolio’s value to incorporate the counterparty credit risk into transaction prices. CVA has been explicitly introduced by the Basel III framework, and is mainly applied to over- the-counter (OTC) derivatives, i.e. derivatives not subject to specific regulations.

 

Debt Valuation Adjustment (DVA): This indicator reflects the credit risk incurred by a bank that has entered into a contract; it is often considered as the opposite of Credit Valuation Adjustment (CVA), that is, the DVA of a bank is the CVA of its counterparty. It mainly applies to unsecured derivative liabilities and reflects the benefit that a bank would derive from a deterioration in its credit quality.

 

Default: The condition, either expected or already occurred, of failing to repay a debt.

 

Deposit Guarantee Scheme (DGS): The DGS (Directive (EU) 2014/49) operate at national level, financed by the national credit institutions, and their principal aim is to ensure repayment of a share of bank deposits. Currently two such schemes operate in Italy: the FITD (see definition) and the FGD (Fondo di garanzia dei Depositanti del Credito Cooperativo). At the EU level, the third pillar of the European banking union, referred to as EDIS, aimed at creating a single fund (Deposit Insurance Fund, DIF) into which the resources of the various national DGS will flow, is in the process of being created.

 

Direct Funding (retail): Cash amounts due to customers, resident or otherwise, in respect of sight or term deposits or with notice, current accounts, bonds, certificates of deposits, repos and subordinated liabilities. The definition does not include amounts due to other banks, third-party funds held under administration (received from governments, regions or public institutions), liabilities in respect of bankers’ drafts and other securities.

 

Discounted Cash Flow Model: This is a valuation method, alternative to the Dividend Discount Model (see definition), suited for those companies which do not have to comply with capital strength requirements, and based on the assumption that the value of asset depends on cash flows generated by the asset, by the time horizon and by their riskiness. Also in this valuation model, cash flows are discounted using the Ke rate (determined pursuant to the CAPM

 

Glossary | 707

 

 

methodology, see definition) over a time horizon forecast by the company into its plans and budgets, and taking also into account a terminal value obtained by using a constant growth rate “g”.

 

Dividend Discount Model, Excess Capital version: This model is used in order to estimate the intrinsic value of a share based on the sum of its future dividends discounted back to their present value: in this version the dividend flows, taking into account the minimum capital limits set by the regulatory authorities, are discounted back using the cost of own capital Ke (calculated according to the CAPM method (see definition)) as the discount rate, while the period of time consists of the first years of explicit estimates and the terminal value (calculated via the capitalization at constant perpetual growth rate g).

 

Dividend per Share (DPS): This indicator is used by investors to evaluate the performance of an investment in stocks. DPS is calculated by dividing the total dividend amount by the number of shares in issue.

 

Do No Significant Harm (DNSH): The DNSH Principle is a European environmental policy principle that requires avoiding or minimizing any significant harm caused by human activities to the environment. It is a central principle of the EU National Recovery and Resilience Plan, which aims to ensure the environmental sustainability of funded projects, acting as a fundamental pillar to guide responsible investments.

 

Duration: Duration is a synthetic indicator of the interest rate risk of a bond, as bond prices have an inverse relation to interest rates. It is defined as the average maturity of expected cash flows, weighted by the contribution which the present value of each cash flow makes to the price. Duration is expressed in years.

 

Earnings per share (EPS): The ratio between the net income and the average number of shares outstanding during the period, possibly adjusted for taking into account potential equity instruments such as options and convertible bonds.

 

Effective Interest Rate: The rate of interest which renders the discounted value of future cash flows deriving from the loan or receivable by way of principal and interest equal to the amount disbursed, including costs/income attributable to the loan. This method of accounting enables the effect of the costs/income to be distributed over the expected outstanding life of the loan.

 

708 | Annual Accounts and Report as at 30 June 2024

 

 

Embedded Derivative: An embedded derivative is a component of a hybrid security that is embedded in a non-derivative instrument (or “host”), and cannot be stripped out from its host. For an embedded derivative to be defined as such, a portion of the cash flows from the host contract must vary in relation to changes in an external variable (such as an interest rate, credit rating, the price of a commodity, or some other).

 

ENCORE methodology: it is a tool helping financial institutions to define their exposures to risks related to nature and to understand their connections and impacts on the environmental capital. The latter represents the value of natural resources and services provided by ecosystems that are essential to life and economy.

 

Environmental, Social, Governance (ESG): The definition indicates non-financial criteria used to assess and measure the environmental, social and governance impact of corporations. Considering these parameters, it is also possible to rank corporations according to their degree of adaptation to these criteria.

 

Euro Interbank Offered Rate (EURIBOR): This means the short-term interbank rate, calculated on a daily basis, at which the most important banks exchange among them euro-denominated funds.

 

Euro OverNight Index Average (EONIA): Interest rate applied to interbank loans denominated in Euros with a duration of one day (overnight), calculated daily as the weighted average of lending transactions undertaken by a sample of banks with high credit standing selected on a regular basis by the European Banking Federation.

 

Euro Short-Term Rate: This rate measures the cost of wholesale unsecured one-day funding for a sample of banks in the Euro area. The rate is calculated based on data collected as part of the Money Market Statistical Reporting (MMSR), introduced in 2016 for all money market transactions carried out by the largest banks in the Euro area.

 

European Banking Authority (EBA): The EBA is an independent regulatory agency of the European Union set up in 2011 and forming part of the European System of Financial Supervisors (ESFS, a group of authorities and supervisors which since 2008 has constituted the new European micro- and macro- prudential supervisory framework). The EBA has the objective of ensuring an effective and uniform level of regulation and prudential supervision in the European banking

 

Glossary | 709

 

 

sector, thereby ensuring financial stability within the EU and guaranteeing the integrity, efficiency and proper functioning of the banking.

 

European Securities and Markets Authority (ESMA): ESMA is a European Union institution which is responsible for supervising the functioning of financial markets in Europe, ensuring the stability of the EU financial system and safeguarding its integrity, transparency and proper functioning, and strengthening investor protection.

 

European Single Electronic Format (ESEF): This acronym indicates the name of the new harmonized reporting format across the entire EU.

 

European Sustainability Reporting Standards (ESRS): The ESRS are the new European standards for corporate sustainability reporting, adopted by the European Commission on a final basis in July 2023. They were drafted by the advisory body called European Financial Reporting Advisory Group (EFRAG) and define the methods, general requirements and disclosure obligations that companies should fulfil for the purpose of ESG sustainability reporting. In addition to two general standards, the new ESRS reporting standards comprise ten topical standards relating to the environment (five), social responsibility (four) and governance (one).

 

European Systemic Risk Board (ESRB): European committee for systemic risk which is part of the European System of Financial Supervision. It is tasked with the macro-prudential oversight of the financial system within the European Union and is responsible for preventing and mitigating systemic risks that could originate within the European financial system.

 

Expected Loss: The expected loss is an estimate of the loss which a bank expects to incur in respect of a position or of a portfolio of assets. This amount, which by definition is predictable, in practice does not constitute a concrete risk for the Bank, and is already considered to be a component of the cost to be debited to the client when the interest rate is finalized in the loan contract.

 

Expected Shortfall: The expected shortfall represents the expected amount of losses over and above the VaR limit (see definition).

 

Exposure At Default (EAD): The amount to which the bank is exposed at the point in time upon the default of an obligor.

 

710 | Annual Accounts and Report as at 30 June 2024

 

 

Extensible Business Reporting Language (XBRL): This is an XML-based language, mainly used for the electronic communication and exchange of accounting and financial information.

 

Extensible HyperText Markup Language (XHTML): This is a markup language based on the HTML 4.01 format. XHTML ensures the structuring and semantic markup of content in documents, such as text, images and hyperlinks.

 

External Credit Assessment Institution (ECAI): Third-party agency in charge of assessing credit risk.

 

Fair Value: Fair value is the price at which an asset (or liability) can be traded (or paid off) in a free transaction between conscious and willing parties.

 

Fair Value Hedge: Type of hedge provided for by IFRS 9 to neutralize exposure to changes in a balance-sheet item’s fair value.

 

Fair Value Option (FVO): An FVO is an option for classifying a financial instrument. By exercising this option a non-derivative instrument not held for trading purposes may also be recognized at fair value through being recorded in the profit and loss account.

 

Fair Value through Other Comprehensive Income (FVOCI): FVOCI is one of the methods used for classifying financial assets contemplated by IFRS 9 (paragraph 4.1.2A). A financial asset must be recognized at FVOCI when all the following conditions are met:

 

The asset is held according to a business model, the objective of which involves both collecting contractual cash flows and selling the financial asset (Hold to collect and sell; see definition);

 

The contractual terms of the asset are such that at given dates, the cash flows consist solely of payments of principal and interest on the principal amount for repayment.

 

Fair Value Through Profit or Loss (FVTPL): FVTPL is one of the methods used for classifying financial assets contemplated by IFRS 9 (paragraph 4.1.4). It is a residual category, given that assets are measured as FVTPL only if they do not meet the criteria for being recognized at amortized cost: it is not an instrument which pays only principal and interest and which is held for purposes other than

 

Glossary | 711

 

 

the collection of contractual cash flows (e.g. for trading purposes). This category includes instruments for which the entity has chosen to apply the fair value option (see definition), derivative instruments and those which fail the SPPI test.

 

Fairness/Legal opinion: This means an opinion, given at request, by professionals of sure and certain competence and professionalism, in order to ensure the correctness of economic conditions and/or of the legitimacy and/or of technical aspects of a certain operation at a certain moment.

 

Financial Reporting Standards (FINREP): A document issued by the CEBS (Committee of European Banking Supervisors), a body which provides advisory services to the European Commission on banking regulations. The CEBS also promotes co-operation and convergence of regulatory practices within the European Union. In 2011 the EBA (European Banking Authority – see definition) began to define harmonized supervisory reporting schemes with statistical content. FINREP itself came into force in 2014.

 

Financial Stability Board (FSB): An international body (set up following the G20 London summit in April 2009) to monitor and supervise the global financial system. Its mission is to promote international financial stability through extended co-ordination of national financial authorities and other global standard-setters.

 

First-Time Adoption (FTA): Governed by IFRS 1, FTA refers to entities applying IAS/IFRS for the first time and also in the event of material changes in standards already adopted. With reference to IFRS 9 coming into force, first adopters must provide adequate disclosure of the effects of applying the standard to allow users of financial statements to understand the impact on the entity’s financial situation and net equity. First adopters are exempted from providing comparative information.

 

Fondo Interbancario di Tutela dei Depositi (FITD): This is the fund to which Italian banks contribute to guarantee depositors up to the limits provided (€100,000). The Fund intervenes on the Bank of Italy’s authorization in cases of insolvency or extraordinary administration; participant banks pay funds in after the crisis has occurred, at the Fund’s request.

 

Forborne Exposures: Forborne exposures are defined as debt contracts in which concessions have been granted to a borrower which is in, or is shortly to find itself in, a situation where it is unable to meet its financial commitments (referred

 

712 | Annual Accounts and Report as at 30 June 2024

 

 

to as “financial difficulties”). This situation may apply to both performing and non-performing contracts.

 

Forward-looking information: According to the new impairment model introduced by IFRS 9, writedowns must be recorded on the basis of expected future losses in value which have not occurred yet. These expectations must incorporate forward-looking information, to anticipate the effects of possible future loss events. The expected loss calculation model applied for the Mediobanca Group considers three possible macroeconomic scenarios (baseline, mild-positive and mild-negative) which impact on PD (see definition) and LGD (see definition), including any sale scenarios where the Group’s NPL strategy (see definition) envisages the possibility of recovering the loss through sale on the market.

 

Foundation Internal Rating-Based (FIRB) Models: This is one of the three methods used to calculate credit risk under Basel II. Unlike the AIRB model (see definition), with the FIRB model the Bank only estimates PD internally, and uses regulatory values for the other parameters (LGD and EAD) needed to calculate the capital requirement.

 

Funding: Sourcing in various forms of the funds required to perform a corporate activity or particular financial transactions.

 

Funds Transfer Pricing (FTP): FTP is the rate to which each branch of the Institution resells the gathered funds to the central treasury; mirror-like it can also be the rate to which branches buy funds required to finance their own loans. FTP scheme aims to rebalance the profitability among each branch/area of the Institution, rebalancing both funding and loans rates.

 

Futures: Standardized contracts with which the parties undertake to exchange currencies, securities or assets at an agreed price on a future date. Future contracts are traded on regulated markets, where their execution is guaranteed.

 

Global Systemically Important Banks (G-SIBs): These are larger banks which as such are subject to stricter or additional requisites and specific methods of supervision.

 

Global Systematically Important Institutions (G-SIIs): This term refers to the Bank of Italy’s annual identification of Italian financial institutions that have a global systemic importance.

 

Glossary | 713

 

 

Goodwill: Goodwill is defined as the surplus in the purchase price over and above net equity (obtained as the difference between acquired assets and assumed liabilities, both valued at fair value) at the acquisition date. Goodwill is thus the premium which a buyer pays in view of future economic benefits deriving from synergies or intangible assets which cannot be recorded separately.

 

Grand-fathering: In general terms, grand-fathering refers to any clause in a new regulation that exempts facts or behaviour put in place prior to the said regulation coming into force from application of the new provisions.

 

Greenhouse Gases (GHG): The term GHG refers to emissions that are generated by human activities and are characterized by a particular aspect: they “trap” heat in the atmosphere causing the so-called “greenhouse effect”, which is the origin of the increase in average global temperature.

 

Harmonized Mutual Funds: Mutual funds covered by the provisions of Directive (EEC) 1985/611, as amended, which are open-ended, allow stock units to be offered to the public and have certain limits on investments, one of which is the obligation, among other things, to primarily invest in listed financial instruments.

 

Hold to Collect: A business model whose objective is to hold the financial assets for the purpose of collecting its contractual cash flows. Assets treated according to this model must undergo an SPPI test (see definition), and if they pass it, are recognized at amortized cost (see definition).

 

Hold to Collect and Sell: A business model whose objective is both to collect contractual cash flows and to sell the instrument. This business model should not be confused with the held for trading model, whereby assets are acquired chiefly for the purpose of selling them in a short period of time. Assets treated according to this model must undergo an SPPI test (see definition), and if they pass it, are recognized at FVOCI (see definition).

 

Impairment Test: Test aimed at checking the book value of each financial assets: in case of a permanent reduction in the value, the value of the assets should be reduced (with impact taken to profit and loss). This test should take place once a year both for intangible assets with indefinite life and for goodwill originated by a business combination (see definition); in all other cases, the entity should check, at the end of each reporting date, whether there are evidences of permanent reduction in value.

 

714 | Annual Accounts and Report as at 30 June 2024

 

 

Indirect Funding: Equities and other value items not issued by the deposit bank but received by it to hold as a deposit under custody, administration or in connection with asset management activity. For purposes of financial reporting, the category consists of: Assets Under Management (see definition); Assets Under Custody; and Assets Under Administration (see definition): i.e. the sum of funds under administration (shares, bonds, mutual funds and government securities) and funds under management (policies, insurances and pension schemes).

 

Inline eXtensible Business Reporting Language (iXBRL): This is the evolution of the XBRL language. It enables inserting an XBRL document into an HTML document so that it can be viewed in Web browsers with the typical HTML formatting.

 

Interest Rate Swap (IRS): A contract which falls within the category of derivative contracts, and in particular that of swaps, in which counterparties exchange streams of payments which may or may not be indexed to interest rates calculated based on a notional benchmark capital.

 

Internal Capital Adequacy Assessment Process (ICAAP): Pillar II of the Basel Accord requires all intermediaries to put in place a process for ongoing assessment of the adequacy of their internal capital (ICAAP). The process must be formalized, documented and approved by the relevant bodies and submitted to internal review on a regular basis.

 

Internal Dealing: Trades involving the shares of issuers listed in Italy or elsewhere which are executed by “relevant parties” of the issuer itself or by persons closely related to them. The subject is governed by the Italian Banking Act and by CONSOB, with the parties involved being obliged to make disclosure to the market in timely fashion of any purchase or sale of securities in their company.

 

Internal Liquidity Adequacy Assessment Process (ILAAP): Directive (EU) 2013/36 stipulates that all intermediaries must put in place sound strategies, policies, processes and systems to identify, measure, manage and monitor liquidity risk, to ensure that adequate liquidity reserves are maintained.

 

Internal Rating Board (IRB): Internal rating system.

 

International Accounting Standards Board (IASB): An independent body of experts which, as part of the IFRS (International Financial Reporting Standards)

 

Glossary | 715

 

 

Foundation, has since 2001 replaced the IASC (International Accounting Standards Committee) in issuing international accounting standards. The Board is a group of independent experts with an appropriate mix of recent practical experience in setting accounting standards, in preparing, auditing, or using financial reports, and in accounting education.

 

International Organization of Securities Commission (IOSCO): IOSCO is the International body that brings together the world’s securities regulators and is recognized as the global standard setter for the securities sector. IOSCO develops, implements and promotes adherence to internationally recognized standards for securities regulation. It works intensively with the G20 and the Financial Stability Board (FSB) on the global regulatory reform agenda.

 

Investment Grade: Term used to refer to counterparties and/or bonds which are highly reliable and have received a medium/high rating (see definition), e.g. not lower than BBB- on the Standard & Poor’s scale.

 

Joint Venture (JV): Agreement pursuant to which two or more parties, usually companies, undertake to work together to pursue a joint project (industrial or commercial) or decide to jointly leverage their synergies, expertise or capital.

 

Junior: In a securitization (see definition), the junior tranche is the lowest-ranking of all securities issued, and is the first to incur the losses which may crystallize the course of recovering the underlying assets.

 

Key Performance Indicator (KPI): Measurable value showing how effective a company is in achieving its objectives.

 

Key Risk Indicator (KRI): This indicator predicts unfavourable events that might have an adverse impact on the organization. It is used to monitor changes in risk exposure levels and helps to provide early warnings to the company in order to prevent possible crises and mitigate problems in time.

 

Large Institution: Definition introduced by CRR2 regulation (see definition). A corporation falls under the definition of Large Institution when it meets one of the following conditions:

 

it is a G-SII;

 

it has been identified as an O-SII (systemically-important institution), according to article 131, point 1 and 3 of Directive (EU) 2013/36 (CRD, see definition);

 

716 | Annual Accounts and Report as at 30 June 2024

 

 

in the EU Member State it is incorporated in, it represents one of the three major corporations in terms of total assets;

 

its total assets, at individual level or (when applicable) at consolidated level, amount to or exceed at least €30bn.

 

Leverage Ratio: This is the ratio between Tier 1 capital and the financial leverage ratio’s overall exposure amount, including off-balance sheet assets and items.

 

Liquidity Coverage Ratio (LCR): This ratio has been proposed by Basel III and aims to ensure that a bank maintains an adequate level of unencumbered high-quality liquid assets that can be converted into cash to meet its liquidity needs over a 30-calendar day period during a particularly severe liquidity stress scenario specified by the supervisory authorities. It is obtained by dividing the bank’s high-quality liquid assets by their total net cash flows over a specific 30-day stress test period.

 

Loan To Value (LTV) Ratio: Obtained as the ratio between the loan amount granted and the value of the asset which is supposed to be bought with this amount. The LTV Ratio is commonly used by banks as an indicator of credit risk.

 

London InterBank Offered Rate (LIBOR): It represents a reference rate for the interbank market transactions, calculated on a daily basis by the British Bankers’ Association, and represents the rate at which most important English and European banks exchange funds with short term horizon.

 

Loss-Given Default (LGD): The loss that the lender incurs if the borrower defaults. In order to calculate capital requirements using the internal ratings- based method, the LGD value may be calculated using the approach set by the regulator (the FIRB method) or determined internally by the Bank using its own model (the AIRB model).

 

Low Credit Risk Exemption: In accordance with IFRS 9 (para. 5.5.10ff), a company can assume that for a certain instrument the credit risk has not experienced a significant increase when this instruments shows, at the reporting date, a low credit risk. This definition is met for Stage 1 exposures, which show a low insolvency risk since they can be qualified as investment grade instruments.

 

Macroeconomic Scenario: Description of the economic system at aggregate level, which factors in expected projections of material economic indicators.

 

Glossary | 717

 

 

Mark to Market: Valuation used in the futures and options markets, whereby the value of the net position for each operator is established daily on the basis of the most recent market prices.

 

Markets in Financial Instruments Directive (MiFID): Directive (EC) 2004/39 (transposed into Italian law under Legislative Decree 164/07) which has the objective of creating a single market for investment services and activities across the EU. It has recently been amended by Directive (EU) 2014/65 (“MiFID II”).

 

Maturity: It indicates the reimbursement date or the expiring date of the instrument.

 

Mezzanine: In a securitization (see definition), the mezzanine tranche is the one with intermediate ranking between the junior and senior tranches.

 

Minimum Requirement for Own Funds and Eligible Liabilities (MREL): MREL is a requirement introduced by the BRRD Directive (see definition), the purpose of which is to ensure that the bail-in mechanism (see definition) works smoothly by increasing the Bank’s capacity to absorb losses. The MREL indicator is calculated as follows:

 

(Own funds + eligible liabilities) / total liabilities and own funds. New regulatory provisions require a MREL ratio of 21.85% on risk-weighted assets (RWAs, see definition) and of 5.91% on the leverage exposure.

 

Net Asset Value (NAV): NAV is the value assigned to a fund’s net equity: it is calculated by dividing the value of all assets, securities and liquidity held in the portfolio by the number of stock units in issue. For mutual investment NAV is calculated and disclosed at different intervals: daily for open-ended funds, monthly for closed-end funds.

 

Net New Money (NNM): Term used to define new sources of income obtained in a given period of time, after any writeoffs or other losses.

 

Net Stable Funding Ratio (NSFR): The amount of available stable funding (ASF) relative to the amount of required stable funding (RSF). The ASF is defined as the portion of equity and liabilities considered to be reliable over the time horizon considered by the NSFR, i.e. one year. The amount of RSF required for a specific bank depends on its liquidity characteristics and the outstanding maturities of the various on- and off-balance-sheet assets held by it. The ratio must remain at a level of at least 100% on an ongoing basis.

 

718 | Annual Accounts and Report as at 30 June 2024

 

 

Network for Greening the Financial System (NGFS): A global network of central banks and supervisory authorities that promotes the sharing of experiences and best practices on how to manage climate-related and environmental risks in the financial sector.

 

Net-Zero Banking Alliance (NZBA): Initiative launched by the United Nations Environment Programme Finance Initiative, the section of the UN Environment Programme dedicated to financial institutions. As a signatory of the Agreement, Mediobanca has undertaken the specific obligation to align its proprietary investment and lending portfolios with the goal to reach net-zero emissions by 2050, in line with the targets set by the Paris Climate Agreement.

 

Non-Financial Disclosure (NFD): Document, drawn up in accordance with the provisions of Article 4 of Italian Legislative Decree 254/16, which contains information on environmental, social and staff-related issues and on human rights and measures to tackle bribery and corruption, of use to provide an understanding of the activities performed by the Group, its performance, results and the impact produced by it on the social and environmental point of view.

 

Non-Financial Reporting Directive (NFRD): The “Non-Financial Reporting Directive (NFRD)” was drawn up for the purpose of making the social and environmental performance of large companies more transparent. The Directive sets out specific rules on the types of companies that should disclose non-financial information and the guidelines to be followed.

 

Non-Performing Loans (NPL): A loan whose collection is uncertain both in terms of expiry and amount of the exposure.

 

On-Site Inspection (OSI): Activity included in supervisory regulation carried out by different regulator (ECB, for instance) to better analyse particular aspects of the corporation under scrutiny. These inspections are carried out at the headquarter of the Bank or institution subject to the supervisory process.

 

Options: Derivative contracts which include the right, but not the obligation, for the option holder, by paying a premium, to acquire (call option) or sell (put option) a financial instrument at a given price (strike price) by (US-type option) or at (European-type option) a future date.

 

Glossary | 719

 

 

Outsourcing: Outsourcing is when a given company process and/or corporate function held to be non-core is contracted to a supplier external to the company.

 

Over-The-Counter (OTC): OTC refers to markets with no contracts or standardized trading methods which are not linked to a series of regulations (admission, controls, disclosure obligations, etc.) such as those regulating official markets.

 

Over Time (OVT) and Point in Time (PIT): According to IFRS 15, OVT and PIT are the two possible methods by which a performance obligation (see definition) can be realized. In particular, OVT is when one of these conditions is met:

 

The client simultaneously receives and uses the benefits deriving from the entity’s performance in the process of its being made;

 

The entity’s performance creates or enhances the activity (e.g. work in progress) which the client is able to monitor in the process of its being created or enhanced; or

 

The activity created by the entity’s performance does not have an alternative use, and the entity has the enforceable right to receive payment for the performance completed to date.

 

If none of these conditions is met, then the PIT method is applicable.

 

Overlay Adjustment: The term overlay adjustment indicates a provision outside the IFRS 9 model for the purpose of calculating value adjustments on loans. As per the instructions of accounting standard IFRS 9 and the recommendations of the various competent Authorities (ECB, EBA and IASB), in addition to having to consider historical, current and prospective information, the quantification of expected losses admits the possibility of using post-business model adjustments (referred to as “post-model overlays or adjustments”), if the models are unable to fully reflect the effects of the Covid-19 crisis, and related government support measures.

 

Past due: This definition includes exposures, other than those classified as non-performing or unlikely to pay, which at the reference date have expired and/or are more than 90 days past due and which exceed a given materiality threshold. This limit is established with reference either to each individual borrower, or for retail exposures only, for each individual transaction.

 

Payout Ratio: The payout ratio is the percentage of net profit distributed to shareholders in the form of a dividend. This share depends chiefly on the company’s need to retain earnings in order to finance its own activities and the returns expected by the shareholders on their investment.

 

720 | Annual Accounts and Report as at 30 June 2024

 

 

Performance Obligation: Definition laid down in IFRS 15, which indicates: “a commitment to deliver:

 

A distinct good or service (or a combination of both) to a customer; or

 

A series of distinct goods/services which are substantially similar and which follow the same transfer method to the client”.

 

Performance Shares: In share-based payment schemes, performance shares are shares in the company itself which are granted to certain categories of staff contingent upon previously defined performance objectives being met.

 

Pillar III: Disclosure document that came into force under Regulation (EU) 575/2013 (CRR, see definition) which introduces into European Union the bank supervisory rules of Basel Committee (see definition) known as “Basel 3”. This includes both capital adequacy (Pillar I) and disclosure to the public (Pillar III). These disclosures enable market operators to make a more accurate assessment of banks’ capital solidity and exposure to risks.

 

Plain Vanilla (derivatives): Plain vanilla derivatives are the simplest and least complex form of derivative instrument. The prices of such products depend on the price of their underlying instrument which is listed on regulated markets.

 

Pricing: In a broad sense, pricing generally refers to methods for calculating the yields and/or costs of products and services offered by the Bank. In a narrower sense, it refers to the process of calculating the price of a financial asset.

 

Principal Adverse Impact (PAI): These are material adverse effects, or effects that could be material, on sustainability factors caused, worsened by or directly linked to investment decisions made or advice given by a legal entity. The European authorities have identified 64 PAI indicators. Financial intermediaries are required to provide a report (“mandatory disclosure”) on 18 of them, while they may make disclosures on a voluntary basis on the other 46 indicators.

 

Principles for Responsible Banking (PRB): Six free commitments launched during the United Nations general Assembly of September 2019 which, - within the political and institutional framework of the Paris Accords and Agenda 2030 for Sustainable Development - propose to integrate socio-environmental issues into the banking sector, incentivizing banks to set sustainable development goals and promoting the measurement of the impacts of banking activities on people and the planet.

 

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Probability of Default (PD): PD expresses the likelihood of a counterparty being unable to fully repay a loan at its expiry. The probability of the borrower defaulting within one year is estimated and a rating assigned to the counterparty accordingly.

 

Provisioning (loans): This term refers to transfer to provisions made in order to cover the expected credit loss. In particular:

 

if at the reporting date there is no significant increase in the financial asset credit risk since its initial recognition, the corresponding provision should be valued for 12-months expected losses;

 

if at the reporting date there is a significant increase in the financial asset credit risk since its initial recognition, the corresponding provision should be valued for its lifetime expected losses.

 

Prudential Filters: These are adjustments made to accounting items in calculating regulatory capital, with a view to safeguarding the quality of the capital and reducing the potential volatility brought about by application of IAS/IFRS.

 

Purchase Price Allocation (PPA): PPA refers to the process of allocating the purchase price of the assets and liabilities of an acquired entity, which must be performed by the acquiring company, within the scope of application for IFRS 3 (Business combinations).

 

Purchased or Originated Credit-Impaired (POCI) assets: POCI refers to financial assets that were already credit-impaired when they were purchased or originated. POCI assets are usually recognized as Stage 3 exposures.

 

Return On Allocated Capital (ROAC): Ratio between net profit and average capital allocated/absorbed for the period under review. In percentage form it expresses earnings capacity per unit of capital allocated/absorbed.

 

Return On Equity (ROE): The return on equity is a measure of the profitability of a company’s own equity, as expressed through the formula of net profit divided by average net equity for the period (excluding minority interest and dividends proposed and/or paid).

 

Return On Risk-Weighted Assets (RORWA): Indicator calculated as the ratio between adjusted net profit and risk-weighted assets.

 

722 | Annual Accounts and Report as at 30 June 2024

 

 

Return On Tangible Equity (ROTE): ROTE is calculated by dividing adjusted net profit by average “tangible” net equity (excluding minority interest and dividends proposed and/or paid as well as goodwill and other intangible assets).

 

Right-of-Use Asset (under IFRS 16): According to IFRS 16 (Appendix A) it is defined as “an asset that represents a lessee’s right to use an underlying asset for the lease term”.

 

Risk Adjustment (RA): Under the new standard IFRS 17, this item represents the remuneration that an entity requires in order to incur the uncertainty about the amount and timing of cash flows arising from non-financial risk during the insurance coverage period.

 

Risk Appetite Framework (RAF): This is an entity’s risk objective or risk propensity, understood as the level of risk (overall and/or by type) that the Bank intends to assume in order to pursue its strategic objectives before it is deemed necessary to take action to reduce such risk.

 

Risk-Weighted Asset (RWA): Summary of principal risk factors attributable to a given financial asset. The asset’s nominal value is “adjusted” in order to express a more accurate measurement of its value. The riskier the asset, the higher the risk-weighting assigned to it (i.e. as the risk increases, so too do RWAs).

 

Royalty Relief Method: This is a valuation method used for an intangible asset (such as brands or patents), which is based on the assumption that the company that owns the asset does not have to license it from a third party and therefore does not have to pay any royalties. The value of the intangible asset is equal to the net present value of all potentially payable royalties.

 

RWA Density: This indicator is the ratio between total risk-weighted assets (RWA) and total balance sheet assets.

 

Sale with Recourse: Transfer of a receivable where the selling party guarantees payment for the third party. The selling party thus guarantees both the existence of the receivable and the borrower’s solvency to the recipient.

 

Sale without Recourse: Transfer of a receivable without the selling party offering any guarantee in the event of the borrower not meeting its obligations. Only the existence

 

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of the receivable being sold is guaranteed by the selling party to the recipient, and nothing else, not even the borrower’s solvency.

 

Senior: In a securitization (see definition), the senior tranche is the one which ranks highest in terms of priority of remuneration and repayment.

 

Sensitivity Analysis: Analysis carried out in order to estimate the changes in a given indicator according to the changes in one or more of the parameters which determine it (interest rates, exchange rates, market prices etc.), in order to establish the relations between the two of them.

 

Servicer: Intermediary regulated by the Bank of Italy (included in the special register instituted pursuant to Article 107 of the Italian Banking Act; see definition), responsible, under the provisions of Italian Law 130/99, for checking that “securitizations are compliant with the provisions of the law and the contents of the information prospectus”, and for collecting receivables sold and the related cash and payment services.

 

Short term (under IFRS 16): According to para. 5 of IFRS 16, this represents one of the two cases when the lessee can decide not to apply the requirements of the principle itself. The standard states that a lessee can make use of this right if the lease has a term of 12 months or less.

 

Significant Bank: Regulation (EU) 1024/2013 (this regulation establishes the Single Supervisory Mechanism, see definition) states three criteria to define whether a financial institution can be considered significant (if even one of these requirements is met):

 

Total assets over €30bn;

 

The ratio between total assets and GDP of the EU state in which it resides is more than 20%, unless total assets value is below €5bn;

 

The ratio between total assets/liabilities of the institution and total assets/ liabilities of at least another EU state is more than 20%.

 

A financial institution is also considered to be significant when it has applied for or has received financial aid. Significant Banks are subject to direct supervision of the ECB (see definition).

 

724 | Annual Accounts and Report as at 30 June 2024

 

 

Significant Increase in Credit Risk (SICR): Pursuant to paragraph 5.5.3ff of IFRS 9, it is necessary to assess at each reporting date whether an instrument has experienced a significant increase in credit risk since the date of initial recognition. This assessment has to take into account qualitative as well as quantitative factors, typical of each facility. The granting of forbearance measures as well as the failing of the 30-days past-due period criterion are considered backstop events. Exposures showing a significant increase in credit risk at the reference date are classified into Stage2.

 

Single Resolution Board (SRB): The SRB is an authority which has been operational since January 2015 with the aim of bringing resolution to banking crises as part of the SRM (see definition) and the European Banking Union. The authority’s objective is the effective resolution of banks in difficulty, with minimal impact on the real economy and public finances in countries which are member states of the European Union.

 

Single Resolution Mechanism (SRM): The SRM is the second pillar in the process of European Banking Union. It was established pursuant to Regulation (EU) 806/2014 of 15 July 2014, and consists of two related entities: the Single Resolution Board (SRB, see definition), which is the central authority, and the Single Resolution Fund (or SRF), the supranational fund.

 

Società di Gestione del Risparmio (SGR): SGRs are limited companies which are authorized to provide collective and individual asset management services jointly. In particular they are authorized to set up mutual investment funds, manage mutual funds (on a proprietary basis or other parties’ instructions) and assets held as part of SICAVs, and to provide investment portfolio management services on an individual basis.

 

Società di Intermediazione Mobiliare (SIM): SIMs are entities which are not banks or regulated financial intermediaries which are authorized to provide investment services as defined in the Italian Finance Act (see definition). SIMs are subject to supervision by the Bank of Italy as far as regards risk management and capital solidity and to regulation by CONSOB on issues of transparency and proper conduct.

 

Solely Payments of Principal and Interest (SPPI) test: The SPPI test is the test required by the new IFRS 9 in order to classify financial instruments according to the business model (see definition) in which they have been categorized by the bank. The test is carried out at the initial recognition stage, and for it to be passed, the

 

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contractual cash flows provided for must involve only the regular interest payments and repayment of the principal amount. If the test is failed, the instrument is recognized at FVTPL (see definition).

 

Special Purpose Vehicle (SPV): This means a company set up to pursue specific objectives, such as to ring-fence financial risk or obtain special regulatory or tax treatment for different portfolios of financial assets. SPVs do not normally have operating or management structures of their own, but use those of the other stakeholders involved in the transaction.

 

Speculative Grade: Term used to refer to counterparties and/or bonds with a low rating (see definition), e.g. lower than BBB- on the Standard & Poor’s scale; bonds of this type are often referred to as high-yield bonds.

 

Spline: Mathematical function consisting of a series of curve arcs used to interpolate a series of points so that the resulting function is continuous and smooth.

 

Sponsor: The sponsor of a securitization, unlike the deal’s originator, institutes and manages the SPV used to acquire the assets to be securitized from third parties.

 

Spread: The spread is the difference in return, expressed in basis points, between two debt securities: such difference is usually due to the fact that the bonds belong to different rating classes, but also to considerations regarding the risk inherent in the bonds themselves. The comparison may be between debt securities of different sovereign states or issued by the same state but with different maturities, or between bonds issued by companies operating in different sectors.

 

Steepener: With reference to interest rates, a Steepener is a phenomenon in which the interest rate curve becomes steeper through a simultaneous decrease in short-term rates and an increase in long-term interest rates.

 

Stress Test: A stress test is a simulation procedure used to measure the impact of extreme market scenarios on the Bank’s total exposure to risk, to allow the Bank’s capital adequacy and liquidity profile to be assessed accordingly.

 

Sublease: According to IFRS 16 (Appendix A) it is “a transaction for which an underlying asset is re-leased by a lessee (‘intermediate lessor’) to a third party, and the lease (‘head lease’) between the head lessor and the lessee remains in effect”.

 

726 | Annual Accounts and Report as at 30 June 2024

 

 

Supervisory Review and Evaluation Process (SREP): SREP is the regular assessment and measurement of risks at the individual bank level. In SREP decisions, the supervisory authority can require each bank to hold additional capital and/or set qualitative requisites (known as Pillar II). SREP is performed by the Single Supervisory Mechanism, on the basis of the regulations contained in the Capital Requirement Directive (see definition).

 

Swap: Transaction in which cash flows are exchanged between market operators in accordance with specific contractual provisions. Such contracts may have different underlying instruments, including interest rates (the parties to such interest rates undertake to pay cash flows calculated according to different interest rates, typically one party fixed and the other floating interest rates), exchange rates, inflation and so forth.

 

Targeted Long-Term Refinancing Operation (T-LTRO): The T-LTRO is a non-conventional monetary policy action implemented by the European Central Bank (ECB - see definition) in order to tackle the financial crisis. Through this action, long-term liquidity is provided to banks.

 

Task Force on Climate-Related Financial Disclosures (TCFD): Organization created by the Financial Stability Board in 2015 to improve the dissemination of climate-related financial information for the benefit of investors, shareholders and the public. It has drafted a number of recommendations in the form of voluntary guidelines to help companies and financial institutions identify, and provide reports on, the risks, opportunities and potential financial impacts they may face due to climate change.

 

Tax Rate: This refers to the effective tax rate, as expressed by the ratio between income tax and profit before tax.

 

Taxonomy: A classification system for identifying and structuring information. ESEF uses the standard elements of the ESEF / IFRS taxonomy. The EU Taxonomy for sustainable finance is a classification system that lists environmentally-sustainable economic activities and provides an accurate definition of what can be considered as such.

 

Testo Unico Bancario (TUB): The Italian Banking Act, i.e. Italian Legislative Decree 385/93 as amended.

 

Glossary | 727

 

 

Testo Unico dell’Intermediazione Finanziaria (TUF): The Italian Finance Act, i.e. Legislative Decree No. 58/98 (on financial intermediation, also known as “Draghi” Act), as amended.

 

Tier 2: Tier 2 capital is the secondary component of bank capital and consists mainly of subordinated liabilities which in turn may be split between Upper Tier 2 (bonds with an original duration of more than ten years which may be used to cover losses deriving from the entity’s operations which would make it unable to continue its activities), and Lower Tier 2 (bonds with an original duration of more than five years).

 

Total Capital Ratio: A capitalization ratio referring to the aggregate of constituent elements which go to make up Own Funds (Tier 1 and Tier 2). It is expressed by the ratio between total regulatory capital (i.e. Tier 1 + Tier 2 capital consisting of equity instruments other than ordinary shares meeting the regulatory requirements) and the value of RWAs (see definition).

 

Total Loss-Absorbing Capacity (TLAC): TLAC represents the prudential standard defined by the Financial Stability Board (see definition) in 2015. It serves the same purpose as MREL (see definition), namely, to ensure that the banks involved (G-SIBs – see definition) have sufficient securities in issue to be able to absorb losses.

 

Trading Book: The term “trading book” usually refers to securities or financial instruments in general which go to make up a portfolio of assets for use in trading activities.

 

Transaction Price: Under IFRS 15, the transaction price is “the amount to which the entity deems itself to be entitled in exchange for the transfer of the promised goods or services to the customer, excluding amounts collected on behalf of third parties”. IFRS 15 stipulates four elements that can create difficulties in its valuation: variable fees (and limits on them), contractual provision for a significant financial component, non-monetary fees, and fees to be paid to the customer.

 

Undertakings for Collective Investment in Transferable Securities (UCITS): As defined by the Italian Banking Act, there are two types of UCITS:

 

Mutual investment funds, i.e. vehicles which group the financial resources of numerous investors to form a single, indistinguishable equity for investment in financial assets; and

 

728 | Annual Accounts and Report as at 30 June 2024

 

 

SICAVs (Società d’Investimento a Capitale Variabile; or investment companies with variable capital), i.e. companies whose sole purpose is to invest their own equity, which is raised by selling their shares to the general public.

 

United Nations Environment Programme Finance Initiative (UNEP FI): Partnership between the United Nations Environment Programme (UNEP) and the global financial sector to encourage the financial system’s actions to align economies with sustainable development.

 

Unlikely to Pay (UTP): UTP is one of the categories of impaired or non-performing loans (see definition). These are exposures for which the bank thinks the borrower will be unlikely to be able to fully comply with its contractual obligations without recourse to actions such as the enforcement of collateral.

 

Value at Risk (VaR): Value at Risk is the maximum loss possible on a portfolio as a result of market performance, measured with a given confidence level and over a given time horizon, based on the assumption that the positions require a certain period of time to be sold.

 

Warrant: A warrant is a tradable instrument that entitles the holder to buy or sell fixed-income securities or shares from or to the instrument’s issuer.

 

Writeoff: A writeoff is an event that entails an item being deleted from the accounts when there is no longer any reasonable expectation of being able to recover the amount receivable. It may refer to the entire amount or only a portion of the receivable. An item may be written off before legal action to recover the amount has been completed, and does not necessarily imply that the company has waived its legal right to recover it.

 

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Mercurio GP - Milan