Credit quality

Non-performingⁱ loans amount o € 1,317.8 million (+16.8% in the year; -1.1% from September), € 24 million of which represented by endorsement loans. They are covered by value adjustments totalling € 405.1 million which represent 30.7% of the total, against 34.8% at the end of 2007; this decrease is partly related to the fall in the share of the total (bad loans) with a greater impact of value adjustments.
Net provisions for adjustments to loans amounting to € 76.9 million were carried out during the year.
Non-performingⁱ cash loans amount to € 1,293.8 million before write-downs (+17.2% from the end of 2007; -1.2% from September 2008), € 1,277.7 million of which accounted for by customers and € 16.1 million by banks; an analysis of the individual aggregates highlights the following:

bad loans, amounting to € 621.7 million, essentially stable in 2008 (+0.2%), and written down by 53.8% (55.6% in December 2007). The bad loans/cash loan to customers ratio is equal to 2.9%, down when compared with the figures of December 2007 (3.3%);
watchlist loansⁱ amounted to € 408.7 million, an 82.9% increase over the end of year figure, and written down by 14.8% (12.1% in December 2007). The segment also showed an increase due to the introduction of a legislative amendment to the definition of substandard loans which led to a reclassification of part of these also from the performingⁱ portfolio, with positive effects on the risks of the latter.
rescheduled loans amounted to € 21.1 million, down by 6.9% compared with € 22.6 million in 2007. They were written down by 5.1% (4.6% in December 2007);
past-dueⁱ loans amounted to € 242.3 million, up by 2.3% in the year. They were written down by 1.8% (6% as at December 2007).

Non-performingⁱ endorsement loans to customers stood at € 24 million, with a decrease of 2.6% in the year. They were written down by 20.6% (in line with December 2007).
Overall, (taking into account also the performingⁱ loans), value adjustments amounted to € 481.6 million, € 472.5 million of which refer to cash loans and € 9.1 million to endorsement loans, with a level of loan portfolio hedging of 2%.
The underlying risk of the performingⁱ portfolio of cash loans and loans to customers, expressed by value adjustments of € 72.4 million, is equal to 0.3% of the reference portfolio, down due to the cited reclassification of substandard loans, and in particular, a more accurate measurement linked to the introduction of new PD and LGD parameters which allowed a more refined evaluation, of guarantees undertaken to protect credit lines in particular.

CREDIT QUALITY ⁽¹⁾

(figures in thousands of €)	31/12/08				30/09/08
	Net exposure (a)	Value adjustments (b)	Net exposure (a)-(b)	% b/a	Net exposure (a)	Value adjustments (b)	Net exposure (a)-(b)	% b/a
	Net exposure (a)	Value adjustments (b)	Net exposure (a)-(b)	Cash loans	Net exposure (a)	Value adjustments (b)	Net exposure (a)-(b)
Bad loans	621,749	334,315	287,434	53.8	662,725	365,410	297,315	55.1
- banks	-	-	-	…	-	-	-	…
- customers	621,749	334,315	287,434	53.8	662,725	365,410	297,315	55.1
Watchlist loans	408,737	60,301	348,436	14.8	297,929	36,807	261,122	12.4
- banks	241	21	220	8.7	46	40	6	87.0
- customers	408,496	60,280	348,216	14.8	297,883	36,767	261,116	12.3
Rescheduled loans	21,068	1,069	19,999	5.1	19,550	864	18,686	4.4
- banks	15,873	757	15,116	4.8	15,778	607	15,171	3.8
- customers	5,195	312	4,883	6.0	3,772	257	3,515	6.8
Past due loans	242,266	4,437	237,829	1.8	328,812	18,497	310,315	5.6
- banks	2	-	2	-	240	-	240	-
- customers	242,264	4,437	237,827	1.8	328,572	18,497	310,075	5.6
Performingⁱ loans	20,813,022	72,392	20,740,630	0.3	19,508,677	87,054	19,421,623	0.4
- banks	970,837	-	970,837	-	1,242,716	-	1,242,716	-
- customers ⁽²⁾	19,842,185	72,392	19,769,793	0.4	18,265,961	87,054	18,178,907	0.5
Total cash loans	22,106,842	472,514	21,634,328	2.1	20,817,693	508,632	20,309,061	2.4
- banks	986,953	778	986,175	0.1	1,258,780	647	1,258,133	0.1
- customers	21,119,889	471,736	20,648,153	2.2	19,558,913	507,985	19,050,928	2.6
Credit commitments
Impaired	23,974	4,933	19,041	20.6	23,694	5,946	17,748	25.1
- banks	-	-	-	…	-	-	-	…
- customers	23,974	4,933	19,041	20.6	23,694	5,946	17,748	25.1
Other loans	1,668,585	4,137	1,664,448	0.2	1,595,968	6,022	1,589,946	0.4
- banks	56,870	-	56,870	-	69,870	-	69,870	-
- customers	1,611,715	4,137	1,607,578	0.3	1,526,098	6,022	1,520,076	0.4
Total credit commitments	1,692,559	9,070	1,683,489	0.5	1,619,662	11,968	1,607,694	0.7
- banks	56,870	-	56,870	-	69,870	-	69,870	-
- customers	1,635,689	9,070	1,626,619	0.6	1,549,792	11,968	1,537,824	0.8
Total	23,799,401	481,584	23,317,817	2.0	22,437,355	520,600	21,916,755	2.3
- banks	1,043,823	778	1,043,045	0.1	1,328,650	647	1,328,003	0.0
- customers	22,755,578	480,806	22,274,772	2.1	21,108,705	519,953	20,588,752	2.5

	Net exposure (a)	Value adjustments (b)	Net exposure (a)-(b)	% b/a	Net exposure (a)	Value adjustments (b)	Net exposure (a)-(b)	% b/a
	31/12/07				31/12/06
Cash loans
Bad loans	620,714	345,365	275,349	55.6	616,534	311,573	304,961	50.5
- banks	-	-	-	…	17,808	360	17,448	2.0
- customers	620,714	345,365	275,349	55.6	598,726	311,213	287,513	52.0
Watchlist loans	223,443	26,988	196,455	12.1	223,131	24,750	198,381	11.1
- banks	43	40	3	93.0	131	131	-	100.0
- customers	223,400	26,948	196,452	12.1	223,000	24,619	198,381	11.0
Rescheduled loans	22,625	1,051	21,574	4.6	11,774	962	10,812	8.2
- banks	16,605	607	15,998	3.7	-	-	-	…
- customers	6,020	444	5,576	7.4	11,774	962	10,812	8.2
Past due loans	236,905	14,273	222,632	6.0	184,802	12,348	172,454	6.7
- banks	231	-	231	-	218	-	218	-
- customers	236,674	14,273	222,401	6.0	184,584	12,348	172,236	6.7
Performingⁱ loans	17,885,570	73,754	17,811,816	0.4	16,126,321	65,377	16,060,944	0.4
- banks	1,494,213	-	1,494,213	-	1,082,882	-	1,082,882	-
- customers	16,391,357	73,754	16,317,603	0.4	15,043,439	65,377	14,978,062	0.4
Total cash loans	18,989,257	461,431	18,527,826	2.4	17,162,562	415,010	16,747,552	2.4
- banks	1,511,092	647	1,510,445	0.0	1,101,039	491	1,100,548	0.0
- customers	17,478,165	460,784	17,017,381	2.6	16,061,523	414,519	15,647,004	2.6
Credit commitments
Impaired	24,615	5,068	19,547	20.6	30,532	5,760	24,772	18.9
- customers	24,615	5,068	19,547	20.6	30,532	5,760	24,772	18.9
Other loans	1,531,507	5,864	1,525,643	0.4	1,428,404	5,089	1,423,315	0.4
- banks	23,421	-	23,421	-	34,373	-	34,373	-
- customers	1,508,086	5,864	1,502,222	0.4	1,394,031	5,089	1,388,942	0.4
Total credit commitments	1,556,122	10,932	1,545,190	0.7	1,458,936	10,849	1,448,087	0.7
- banks	23,421	-	23,421	-	34,373	-	34,373	-
- customers	1,532,701	10,932	1,521,769	0.7	1,424,563	10,849	1,413,714	0.8
Total	20,545,379	472,363	20,073,016	2.3	18,621,498	425,859	18,195,639	2.3
- banks	1,534,513	647	1,533,866	0.0	1,135,412	491	1,134,921	0.0
- customers	19,010,866	471,716	18,539,150	2.5	17,486,086	425,368	17,060,718	2.4

⁽¹⁾ Net of debt securities classified as Loans & Receivables (L&R)
⁽²⁾ Balance as at 31/12/08 and 30/09/08 includes nominal € 112.9 and 110.9 million respectively relating to the reclassification of the ongoing leasing transactions and to assets pending financial lease previously recorded in Item 110 - Tangible assets. This reclassification is due to the recent explanations provided by the Bank of Italy on this matter.

Credit quality

Tools

Trading