Securitisation

Qualitative information (legislation in force)

Banca CARIGE carried out five securitisationⁱ transactions, of which the first – on bad loans – at the end of 2000 and another three – on performingⁱ loans – at the end of 2001, during the first half of 2004 and in December 2008, together with a covered bondⁱ transaction (secured bank bonds) which is detailed in section C.4. An additional securitisationⁱ transaction on non-performingⁱ loans was carried out by the subsidiary Cassa di Risparmio di Savona S.p.A. at the end of 2002. Banca Carige acted as servicerⁱ for all these transactions.

For the purposes of promoting the common co-ordination and monitoring of the securitisationⁱ transactions carried out by the Group, a specific operating unit was set up within the Planning - Research and Investor Relations division, which ensures the maintenance of an overview of said transactions and the associated activities, carried out transversally by a multitude of company divisions and structures.

Specifically, the gauging and control of the risks deriving from the afore-mentioned transactions are carried out within the sphere of the Carige Group’s Credit Riskⁱ Management (CRM) system, which monitors the transactions concerning performingⁱ loans and the performance of the individual transactions is constantly assessed by the General Management. Accordingly, the Board of Directors is provided with a half-yearly update.

The Bank made use of the exemption from the requirements of compliance with the IAS/IFRSⁱ standardsⁱ as set out by IFRS 1 (IG 53) on first time adoption. With regard to the transactions carried out before 1 January 2004, this exemption allowed the non-recognition in the financial statements of financial assets or liabilities sold and cancelled, based on the previous national standardsⁱ, if this cancellation did not comply with the requirements set out by IAS 39.

An overview of the said transactions is provided below.

a) securitisationⁱ of non-performingⁱ loans – 2000 – Argo Finance One S.r.l.
Banca Carige transferred without recourse to the special purpose entity (SPE) Argo Finance One Srl (company belonging to the Carige Group) non-performingⁱ loans backed fully or in part by voluntarily and/or legally imposed guarantees for € 292.5 million (carrying value: € 227.6 million). The transfer price agreed was € 165.3 million.

To finance the acquisition, Argo Finance One S.r.l. issued the following securities: Senior (class A) securities for € 40 million; Mezzanineⁱ (class B) securities for € 70 million; Juniorⁱ (class C) securities for € 56.5 million.
The class A and B securities had already been completely redeemed at the end of 2005.
Class C securities were entirely underwritten by Banca Carige. As at 31 December 2008, class C securities for € 31.8 million remained to be reimbursed (including the interest accrued).
The unredeemed value of the class C securities remains the only risk of the Bank given that, as a result of the full reimbursement of the class B securities, Banca Carige received full repayment of the limited recourse mortgage. The extinction of the mortgage meant an advance facility of € 15 million was no longer necessary and therefore the risks associated with the Interest Rate Swap contract for the hedging of rates’ fluctuation on securitised assets no longer existed.

Banca Carige is servicerⁱ for the transaction. Collections in 2008 amounted to € 13.1 million and servicing commission totalled € 0.5 million. During 2008, the Bank recognised € 9.15 million to the income statement, as additional remuneration on juniorⁱ securities held in portfolio.
The performance of the transaction is better than the forecasts made at the time it was structured.

b) securitisationⁱ of performingⁱ loans – 2001 – Argo Mortgage S.r.l.
The transaction concerned the transfer without recourse to the special purpose entity (SPE) Argo Mortgage Srl (in which Banca Carige currently has a direct holding of 60%) of 13,858 mortgage loans for a total value at the end of 2001 of € 511.5 million at a price of € 535.5 million (of which € 24.0 million equating to the deferred price calculated by means of a profit extraction mechanism which in particular, took into account the excess spreadⁱ net of the costs of the transaction as at each payment date, the riskiness of the loans transferred and the possible early discharges). As at 31 December 2008, the residual credit for the deferred price was equal to € 11.1 million.

To finance the acquisition, Argo Mortgage S.r.l. issued the following securities for € 520.7 million: class A securities for € 478 million; class B securities for € 22 million; class C securities for € 11.5 million; class D securities for € 9.2 million. Moreover, it provided the company with a cash collateral of € 10.4 million.

The class A, B and C securities are listed on the Luxemburg Stock Exchange and were underwritten exclusively by European institutional investors. Class D securities were underwritten by Banca Carige.
As at 31/12/2008, repayments relating to class A securities amounted to € 391.0 million (which increased to € 402.6 million as at 31/01/2009), compared with the initial amount of € 478.0 million.

Banca CARIGE is servicerⁱ for the transaction. Collections in 2008 amounted to € 53.7 million and servicing commission totalled € 0.3 million.
The analysis of the collection performances shows the transaction’s regular trend.

b) securitisationⁱ of performingⁱ loans – 2004 – Argo Mortgage 2 S.r.l.
The transaction concerned the transfer without recourse to the special purpose entity (SPE) Argo Mortgage 2 S.r.l. (in which Banca Carige currently has a direct holding of 60%) of 13,272 mortgage loans for a total value as at 30 June 2004 of € 864.5 million at a price of € 925.6 million (of which € 61.1 million equating to the deferred price calculated by means of a profit extraction mechanism which in particular took into account the excess spreadⁱ net of the costs of the transaction as at each payment date, the riskiness of the loans transferred and the possible early discharges).

For these transactions, Argo Mortgage 2 S.r.l. issued securities for a total amount of € 864.4 million, of which class A securities for € 808.3 million, class B securities for € 26.8 million and class C securities for € 29.4 million, which are listed on the Luxembourg Stock Exchange, and received a subordinated loan from Banca Carige for € 22.8 million (€ 1.3 million as at December 2008).

As at 31 December 2008, repayments relating to class A securities amounted to € 439.1 million (which increased to € 475.5 million as at 31/01/2009), compared with the initial amount of € 808.3 million. The deferred price accrued as at 31 December 2008 was equal to € 39.9 million, that will be paid by the SPV following the full repayment of the said subordinated loan.

Banca CARIGE is servicerⁱ for the transaction. Collections in 2008 amounted to € 153.5 million and servicing commission totalled € 0.7 million.
The analysis of the collection performances shows the transaction’s regular trend.
Since the Argo Mortgage 2 S.r.l. securitisationⁱ transaction does not fully reflect the conditions of the essential transfer to third parties of the associated risks and benefits, it has been reclassified in the balance sheet as from 1 January 2005.

d) Cassa di Risparmio di Savona: securitisationⁱ of non performingⁱ loans – 2002 – Priamar Finance S.r.l.
At the end of 2002, the subsidiary Cassa di Risparmio di Savona SpA transferred without recourse to the special purpose entity (SPE) Priamar Finance Srl (in which Banca Carige currently holds a 100% holding, thus part of the Banking Group) secured and unsecured non-performingⁱ loans totalling € 68.8 million; carrying value € 33.7 million. The transfer price agreed was € 28.0 million.
For this transaction, Priamar Finance S.r.l. issued the following securities: class A securities for € 18.0 million (listed on the Luxembourg Stock Exchange) and class B securities for € 10.2 million underwritten by Cassa di Risparmio di Savona S.p.A.. Moreover, it received a Servicerⁱ Advance Facility from Banca Carige for € 2.5 million granted by Banca Carige and a limited recourse securities loan from Cassa di Risparmio di Savona S.p.A. for € 22 million.
As at 31 December 2008, Class A securities were fully paid, whilst Class B securities totalling € 8.2 million remained to be reimbursed.
Given the full repayment of Class A securities, the Servicerⁱ Advance Facility line of € 2.5 million issued by Banca Carige has been cancelled, as well as the restricted loan of € 22 million granted by Cassa di Risparmio di Savona S.p.A..
Banca CARIGE is servicerⁱ for the transaction. Collections in 2008 amounted to € 7.1 million and servicin commission totalled € 0.3 million. All interests accrued from the beginning of the transaction on juniorⁱ securities were paid to Cassa di Risparmio di Savona S.p.A., as well as an additional returnⁱ of € 2.2 million (including the amount accrued in the period 1/1/2009 – 26/1/2009).
The performance of the transaction is in line with the forecasts made at the time it was structured.

e) securitisationⁱ of performingⁱ loans – 2008 – Argo Mortgage 3 S.r.l.
At the end of 2008, Banca CARIGE carried out another securitisationⁱ transaction concerning a performingⁱ, property and commercial mortgage loans' portfolio for a total amount of approximately € 845 million, in order to create assets (collateral) eligible to be used for repurchase agreements at the European Central Bank or another third party.
On 16 December 2008, an agreement was signed with the SPV Argo Mortage 3 S.r.l. for the transfer of the selected portfolio, for an amount of € 852.6 million. In the same month, the SPV issued 2 classes of senior securities (class A and class B) for a total amount of € 525.2 million (class A securities for € 482.6 million and class B securities for € 42.6 million), as well as a class of juniorⁱ securities (class J) for € 327.4 million, against a transfer price of € 852.6 million (equal to the book value of loans plus the interests accrued as at the effective date of the transfer). The issued securities were fully underwritten by Banca CARIGE.
As servicerⁱ, Banca CARIGE collected € 16.7 million, thus accruing servicing commissions for € 0.03 million.
Pursuant to the IAS/IFRSⁱ standardsⁱ, this transaction cannot be considered as a transfer without recourse (the so-called "no derecognition"), since Banca CARIGE mainly carries all risks and benefits underlying transferred assets. As a consequence, the financial statements of Banca CARIGE as at 31 December 2008 include securitised loans among assets sold and not cancelled.
Securitisations effected by the Bank in which it subscribed all securities issued by the relevant vehicle company (Argo Mortgage 3 S.r.l.) or by same (Covered Bonds) have not been disclosed in the tables of the Explanatory Notes, part E, Section C “Asset securitisations and disposals”.

Quantitative information

Loans deriving from securitisations according to the quality of underlying assets (legislation in force)

G.P. = Gross exposure
N.E. = Net Exposure

The figures shown in the above table were calculated on the basis of the following criteria:

1) with regards to the securitisationⁱ of non-performingⁱ loans in 2000, via the special purpose entity (SPE)Argo Finance One S.r.l., the carrying value of Juniorⁱ securities held by the Bank, inclusive of accruedinterest (in total € 37,305 thousand) was included.

2) with regards to the securitisationⁱ of performingⁱ loans in 2001, via the special purpose entity (SPE) ArgoMortgage S.r.l., the carrying value of Juniorⁱ securities held by the Bank, inclusive of accrued interest (intotal € 9,303 thousand) was included in addition to the credit for the deferred price totalling € 11,104thousand. These amounts are stated in the line "with own impaired underlying assets" up to the extentof the underlying assets classified as impaired as at 31/12/08.

3) with regards to the securitisationⁱ of non-performingⁱ loans of the subsidiary Cassa di Risparmio diSavona S.p.A. in 2002, via the special purpose entity (SPE) Priamar Finance S.r.l., the carrying value ofJunior securities held by the subsidiary, inclusive of accrued interest (in total € 8,424 thousand) wasincluded.

4) with regards to the securitisationⁱ of performingⁱ loans in 2004 via the SPE Argo Mortgage 2 Srl, theassets of which have been recorded in full among the balance sheet assets, the carrying value of thesubordinated loan granted by Banca Carige at the transfer date of 30 June 2004 totalling € 22,753thousand was recognised as a gross exposure in accordance with reporting provisions, whilst the valueas at 31 December 2008 (€ 1,322 thousand) was recognised as a net exposure, again in accordancewith the same provisions. Furthermore, the credit for the deferred price accrued as at 31 December2008 (€ 39,902 thousand) was stated, whose initial value amounting to € 61 million was fully reversedwith a matching balance under shareholders' equity as at 1 January 2005 as a result of the applicationof IAS 39. These amounts are stated in the line "with own impaired underlying assets" up to the extentof the underlying assets classified as impaired as at 31 December 2008 These values have beendisclosed to provide more information, even though in the consolidated financial statements, bothsubordinated loans and credit for the deferred price accrued were netted off in the consolidationprocess using the line-by-line method of vehicle company Argo Mortgage 2 Srl.

Loans deriving from main "own" securitisations by securitised asset type and by exposure type

V.A. = Value  adjustments/write-backs

In line with the information shown in the first table, the exposures of Banca Carige to the Argo Mortgage 2 securitisationⁱ have also been disclosed, despite that fact they were netted off in the consolidation process.

Loans deriving from the main "third party" securitizations by securitized asset type and by exposure type

V.A.= Value adjustements/write-backs

Exposures towards securitisationⁱ transactions analysed by financial asset portfolio and type

Total securitised assets underlying juniorⁱ securities and other asset-backed forms

SPV interests (legislation in force)

On 18/01/2008, Banca Carige S.p.A. purchased the entire equity investment in Priamar Finance S.r.l..

Servicerⁱ assets - securitised credit collections and repayment of SPV-issued securities (legislation in force)