Looking at the recent past: the economic crisis in Italy has been deeper than other European countries The crisis in the real economy has been reflected hard on Italian banks, given their business mix traditionally oriented to lending, unlike other European banks more exposed to finance The consequence was a sharp increase in loan loss provisions (with obvious negative impact on profitability) Despite the intensity of the crisis, public interventions in favor of the banking sector in Italy were much lower than in other large European countries Looking ahead: macro environment has changed and the performance of the Italian economy has been good last year and should continue to be positive in the next years Italian banks state of health is increasing: (1) 70 billion euro of new private capital injections from 2017 ... Capitalization increase: CET1 ratio of top 11 Italians banks has increased to 13.3%, close to the EU average; net of weighting methodologies IT banks stand over the EU average Credit risk has normalized NPL stock is declining quickly NPL ratio is expected to speedily return to manageable value: under 10% in 2019 and at 6,1% at the end of 2021 NPL disposals are growing exponentially speeding up the reduction of the NPL ratio The absence of an effective coordination in the regulation process doesn’t help Despite this context, Italian banks’ profitability is increasing, close to pre-crisis level based on 1q 2018 annualized figure Market appreciation of Italian banks progresses are confirmed by the increasing presence of foreign institutional investors in banks’ capital (higher than in the rest of major European banks)... Banks’ holdings of domestic government bonds in the euro area The maturity structure of public debt matters: In Italy the average residual life of outstanding government securities is of 7.4 years

1. July 18TH, 2018
THE ITALIAN BANKING INDUSTRY:
KEY FIGURES, TRENDS, STATE OF HEALTH
Giovanni Sabatini
CEO - Italian Banking Association

2. 2
Looking at the recent past: the economic crisis in Italy has
been deeper than other European countries

3. 3
The crisis in the real economy has been reflected hard on Italian
banks, given their business mix traditionally oriented to lending,
unlike other European banks more exposed to finance
Figures referred to a sample of 80 large EU banking groups
(ABI on banks balance sheets and EBA trasparency exercize figures as at June 2017)
12% 14%
25% 26% 25%
10%
13%
7%
9%
7%
22%
27%
32%
35%
32%
ES IT FR UK DE
Financial assets/assets
60.8%
55.8%
51.3%
45.6% 42.7%
50.1%
ES IT DE FR UK EU4*
Loans/Assets
(Aggregate data; Dec ‘16)
58%
56%
42% 41% 38%
45%
0%
10%
20%
30%
40%
50%
60%
70%
ES IT FR UK DE
Loans/assets
EU 4 average
22%
8%
of which: Government securities
EU 4
average
30%
of which: Derivatives & other financialassets
(1) Loans do not include exsposure to banks.(2) Domestic exposure to sovereign plus foreign sovereign exposure (3) Note that banks and banking groups sovereign on
assets ratios are not perfectly comparable for accounting reasons ((inter-bank assets between institutions belonging to the same group are eliminated at the consolidated
financial statements level))
1
2
As at May 2018 Italian banks exposure towards domestic sovereign was 361 bln € (about 60 bln less than 2 year
before), which is 9,6% of banks total assets3

4. 4
In some limited cases, these
losses led to crisis situations
Banks crisis, unlike what
happened elsewhere in
Europe, were managed and
resolved :
▪ under a new framework of
European rules, which did
not provide for gradualness
▪ without any significant
public intervention
4,6 4,7 5,5
9,9
13,5 12,6 13,8
24,2
31,4 30,5
20,9
31,8
19,1
5,0
12,5
26,3
-
5,0
10,0
15,0
20,0
25,0
30,0
35,0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
average
average
average
Italian banks: loan loss provisions
(ABI on Bank of Italy data, bln €)
The consequence was a sharp increase in loan loss
provisions (with obvious negative impact on profitability)

5. 5
0
10
20
30
40
50
60
70
80
90
100
110
0
10
20
30
40
50
60
70
80
90
100
110
Despite the intensity of the crisis, public interventions in favor
of the banking sector in Italy were much lower than in other
large European countries
Recapitalisation measures* to support banks
(2008-2016 cumulated data, bln €)
Recapitalisation measures* to support banks
(2008-2016 cumulated data, as a % of 2017 GDP)
(*) 2008-2016 cumulated data referred to State recapitalizations used
Source: ABI on European Commission «State Aid scoreboard 2017 – Aid in the context of the financial and econoimic crisis»
26,3%
21,2%
18,1%
8,3%
7,5%
5,3%
4,8%
4,7%
4,3%
3,7%
3,2%
3,1%
2,0%
1,1%
0,7%
0,2%

6. 6
Looking ahead: macro environment has changed and the
performance of the Italian economy has been good last year
and should continue to be positive in the next years
Confindustria 1,3 1,1
Consensus 1,3 1,1
OCSE 1,4 1,1
Istat 1,4 n.a.
Prometeia 1,2 1,2
European Commission 1,3 1,1
IMF 1,5 1,1
ABI 1,5 1,4
Bank of Italy 1,4 1,2
Real Gross Domestic Product (% change)
Economic Forecasters 20192018
1,2 1,0

7. 7
Raised €70 billions of additional private capital from 2007
CET1 ratio increased from 7% to 13.8%
Italian banks state of health is increasing: (1) 70 billion euro
of new private capital injections from 2017 …
Source: ABI on Borsa Italiana and Italian Banks website
Source: ABI on Bank of Italy
7,1%
11,5%
2207 2016
+6.7 pp
2) Core Tier1 ratio at 2008, CET1 ratio at December 2017
13.8%
7.1%
2007 2017
+70 bn €
1.8
5.8
5.8
5.7
11.0
7.5
0.1
10.8
3.8
3.8
13.9
2
8
13
19
30
38 38
48 52 56
70
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017

8. 8
… (2) Capitalization increase: CET1 ratio of top 11 Italians
banks has increased to 13.3%, close to the EU average; net of
weighting methodologies IT banks stand over the EU average
13,2%
13,6%
14,5%
11,5%
10,4%
13,3%
0,0%
1,0%
2,0%
3,0%
4,0%
5,0%
6,0%
7,0%
8,0%
9,0%
10,0%
11,0%
12,0%
13,0%
14,0%
15,0%
16,0%
2015 2016 2017
Europa Italia
5,9% 6,0%
6,3%
7,1%
6,7%
7,5%
0,0%
1,0%
2,0%
3,0%
4,0%
5,0%
6,0%
7,0%
8,0%
2015 2016 2017
Europa Italia
CET1 ratio
(Dec. 2017; CET1/Risk Weighetd Assets)
EQUITY/ASSETS ratio
(Dec. 2017)
Source: ABI on banks annual reports for 2015 & 2016 and banks press release (preliminary full year data) for 2017
14.5%
13.6%
13.2%
13.3%
10.4%
11.5%
5.9% 6.0%
6.3%
7.5%
6.7%7.1%

9. 9
0
2
4
6
8
10
12
2006,1
2006,3
2007,1
2007,3
2008,1
2008,3
2009,1
2009,3
2010,1
2010,3
2011,1
2011,3
2012,1
2012,3
2013,1
2013,3
2014,1
2014,3
2015,1
2015,3
2016,1
2016,3
2017,1
2017,3
2018,1
Total Households Firms
(*) Annualized quarterly flow of adjusted NPLs (past-due by more than 90 days, other NPLs and bad loans) in relation to the stock of loans net of adjusted NPLs at the end of the previous
quarter. Data seasonally adjusted where necessary.
.. (3) Credit risk has normalized
Loans risk evolution in Italy*
(New NPL/loans; referred to total loans to households & firms)
Source: Abi on Bank of Italy data
Total
Firms
Households
2,6%
1,7%
1,2%

10. 10
40
50
60
70
80
90
lug-15
ago-15
set-15
ott-15
nov-15
dic-15
gen-16
feb-16
mar-16
apr-16
mag-16
giu-16
lug-16
ago-16
set-16
ott-16
nov-16
dic-16
gen-17
feb-17
mar-17
apr-17
mag-17
giu-17
lug-17
ago-17
set-17
ott-17
nov-17
dic-17
gen-18
feb-18
mar-18
apr-18
mag-18
-45%
-43%
Italian net bad loans (sofferenze)
(total Italian banks; July 2015 – May 2018; bln €)
88.8
(Pick; Nov 2015) 86.8
(Dec 2016)
49.3
(May 2018)
… (4) NPL stock is declining quickly
Source: ABI on Bank of Italy data
In particular, bad loans (“sofferenze”) down to 49.3 bln € (about 2.8% as a percentage of
loans), 45% less than the pick touched at November 2015 (88.8 bln €)

11. 11
10,7%
9,2%
7,9%
6,1%
6,8%
18,1%
17,3%
14,5%
9,9%
4%
5%
6%
7%
8%
9%
10%
11%
12%
13%
14%
15%
16%
17%
18%
19%
Dec2008
Dec2009
Dec2010
Dec2011
Dec2012
Dec2013
Dec2014
Dec2015
Dec2016
Dec2017
Dec2018
Dec2019
Dec2020
Dec2021
Abi (July 2018 forecast) Actual figures* Abi (June 2016 forecast)
NPL ratio of Italian banks
Abi June 2016 forecast1 vs Abi July 2018 forecast2 vs actual data updated to December 20173
(referred to Italian Significant and Less Significant banks)
1) Abi baseline estimates released on June 2016, based on 2015 year-end figure; 2) further acceleration in NPL disposals not considered; 3) December figure estimated on ABI own data 4) December
2017 figure adjusted to considered NPLs disposals of MPS (closed in 2018)
.. (5) NPL ratio is expected to speedily return to manageable
value: under 10% in 2019 and at 6,1% at the end of 2021
❑ Our estimates (released on June 2016 and
based on 2015 year-end figure) forecasted a
fast reduction in the NPL ratio.
❑ Latest official figures (December 2017) show
an acceleration over our forecasts due to
massive sales of NPL portfolios
❑ NPL ratio as at December 2017 stood at
around 14.5%; it was 13,4% once included one
relevant deal in the pipeline4
❑ In 2019 NPL is expected under 10%
❑ At year end 2021 the NPL ratio to 6.1%
Source: ABI based on own calculation and Bank of Italy figures
13,4%4
December 2017 data
adjusted including pending deals
June ‘16 forecast
July ‘18 forecast

12. 12
NPL disposals are growing exponentially speeding up the
reduction of the NPL ratio
Source: Abi calculations and estimates on PWC data, Banca IFIS data
and banks’ statements.
(*) NPLs disposals of MPS, BPV & Veneto Banca (total of €42 bln) included in 2017 figures
Amount of disposals of NPLs in Italy
(billions of euros; NPLs gross figures)
5 4
9
19
17
75
24
2012 2013 2014 2015 2016 2017* June 2018

13. 13
20 Mar2017
Draft guidance to banks on
non-performing loans
(ECB/SSM)
Guidance on the
management of non-
performing loans
for Italy’s ‘less significant
institutions
(Bank of Italy)
Calendar provisioning
(Proposal for a
REGULATION)
(EU Commission)
Addendum NPL
(Calendar provisioning)
(ECB/SSM)
Draft Guidelines
on management of non-
performing and forborne
exposures
(EBA)
EC proposal for a Directive on credit servicers,
credit purchasers and the recovery of collateral
(Proposal for a DIRECTIVE )
(EU Commission)
Launched
Status:
Implementation date
12 Sep 2016
In force
- 30 Jan 2018 -23 Mar2018 - -
11 July 2017
Under development
29 Sep 2017
In force
04 Oct2017
In force
10 Oct2017
Consultation Closed
26.05.2018
8 Mar 2018
Consultation Closed
8.6.2018
14 Mar2018 14 Mar2018
Consultation Closed
8.06.2018
-
Action Plan NPL
(EU Commission)
Blueprint on the set-up of national asset
management companies (AMCs)
(EU Commission)
-
The absence of an effective coordination in the regulation
process doesn’t help
Overall, we recognize the need for:
• ensure consistency between primary regulations, secondary
regulations and guidelines on NPLs (Addendum SSM vs
Provisioning EC; EBA Guidelines vs SSM Guidance on NPL)
• protect consistency between supervisory and accounting rules
• ensure transparency choices (i.e. calendar provisioning thresholds)
• cost–benefit analysis to minimize economic costs
• Ensure a Level playing field (i.e EU vs USA)
NPL PACKAGE: MAIN REGULATORY AND SUPERVISORY MEASURES
11 July 2018
-
-

14. 14
Adjusted* ROE of largest European banking groups**
(Income net of extraordinary costs & revenues; FY data, 1q 2018 annualized)
(*) (profit & loss account result net of extraordinary costs & revenues)/Equity
(**) 100 EU banks, of which 11 Italian groups (corresponding to 14 groups untill 2015)
Despite this context, Italian banks’ profitability is increasing,
close to pre-crisis level based on 1q 2018 annualized figure
Source: ABI on banks annual reports
11,8%
10,3%
2,2%
3,0%
6,4%
1,4% 1,6%
3,4%
4,9%
5,6%
5,0%
6,7% 6,7%
8,9%
-8%
-6%
-4%
-2%
0%
2%
4%
6%
8%
10%
12%
14%
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
1Q*
Europe Italy

15. 15
Percentage of banking capital held by foreign funds
(main 4 banking groups by country*)
Market appreciation of Italian banks progresses are confirmed by
the increasing presence of foreign institutional investors in
banks’ capital (higher than in the rest of major European banks)…
Source: Abi calculation on Reuters data
19,6%
21,7% 21,5%
13,7%
31,3%
27,7%
26,4%
21,8%
12
6
5
8
-
2
4
6
8
10
12
14
0%
5%
10%
15%
20%
25%
30%
35%
Italy Germany Spain France
Percentage of banking capital held by foreign funds
(main 4 banking groups by country)
2011 September 2017 Variation 2017/2011 (percentage points)
pp%
(*) weighted average by banking groups for each country
31.3%
19.6%
27.7%
21.7% 21.5%
26.4%
21.8%
13.7%

16. 16
AT; 3,2%
DE; 2,3%
FLN; 0,7%
FR; 1,6%
NL; 1,4%
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
1997Sep
1998May
1999Jan
1999Sep
2000May
2001Jan
2001Sep
2002May
2003Jan
2003Sep
2004May
2005Jan
2005Sep
2006May
2007Jan
2007Sep
2008May
2009Jan
2009Sep
2010May
2011Jan
2011Sep
2012May
2013Jan
2013Sep
2014May
2015Jan
2015Sep
2016May
2017Jan
2017Sep
2018May
PT; 9,0%
IT; 9,6%
GR; 3,7%
ES; 7,4%
IRL; 1,6%
BE; 3,4%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
22%
24%
26%
28%
1997Sep
1998May
1999Jan
1999Sep
2000May
2001Jan
2001Sep
2002May
2003Jan
2003Sep
2004May
2005Jan
2005Sep
2006May
2007Jan
2007Sep
2008May
2009Jan
2009Sep
2010May
2011Jan
2011Sep
2012May
2013Jan
2013Sep
2014May
2015Jan
2015Sep
2016May
2017Jan
2017Sep
2018May
Banks’ holdings of domestic government bonds in the euro area
(as a percentage of total assets; monthly data; Sep. 1997 – May 2018)
• The increase in banks’ holdings of government bonds during the crisis was
mainly a consequence, rather than a cause, of the crisis
• In stressed periods banks acted as shock absorbers
430
364
300
320
340
360
380
400
420
440
2015May
2015Aug
2015Nov
2016Feb
2016May
2016Aug
2016Nov
2017Feb
2017May
2017Aug
2017Nov
2018Feb
2018May
Italian banks’ holdings of domestic
government bonds (bln €)

17. 17
The maturity structure of public debt matters: In Italy the
average residual life of outstanding government securities
is of 7.4 years
Source: Will Rising Interest Rates Lead to Fiscal Crises? Olivier J. Blanchard and Jeromin Zettelmeyer July 2017; Peterson Institute for International Economics
Governments will have
time to adjust to rising
interest rates:
- because the rise in rates
is expected to be slow
- due to the maturity
structure of public debt
(In Italy the average
residual life of
outstanding
government securities is
of 7.4 years)

18. 18
1. ITALIAN BANKING SECTOR ON A RECOVERY PATH. Following the precautionary recapitalisation of MPS and the
orderly liquidation of Banca Popolare di Vicenza and Veneto Banca, headline risks have been removed. Favourable macro environment is
supporting improvments in credit quality and banks soundness & profitability.
2.LENDING TO PRIVATE SECTOR GROWING AS OF 2016. In May 2018 loans to households and firms (net of repos
and taking into account securitisation of NPLs) grew at around 2.5% YoY (loans to firms +1.2% YoY)
3.CREDIT RISK BELOW THE PRE-CRISIS LEVEL. The flow of new non-performing loans (NPLs) has been decreasing
since 2014. It is now about 1.7% of total loans, below the pre-crisis average.
4.NPL STOCK DIMINISHING AT A REMARKABLE PACE. Banks are selling large amounts of NPLs in the market.
Including the sales that will be completed in the next months, by mid-2018 the volume of NPLs net of provisions will amount to around €120
billion (6,8% of total loans). The gross NPL ratio stands at 13.4%, against over 18% in 2016.
5.NPL RATIO EXPECTED TO DECLINE AT ACCELERATED PACE: in our June 2016 forecasts (based on 2015
year-end data) we expected NPL ratio at 2020 lower than 10%. Latest actual figures (Dec. 2017) show the ratio is declining more quickly
than we expected. In our updated forecasts (July 2018), gross NPL ratio is expected to fall below 10% by mid 2019 and at around 6% by
year end 2021.
6.COVERAGE RATIO INCREASING: it now stands at 54% for total NPLs and 65% for bad loans; the implict recovery rate on
bad loans is 35%, well above the effective recovery rates (about 43% in average for all the NPL position closed between 2006 and 2015).
7.PRUDENTIAL CAPITALIZATION LEVELS CONTINUE TO RISE: common equity tier 1 ratio standed at around
13.8% at year end 2017, up from 10.4% in 2016.
8. EXPOSURE TO THE DOMESTIC SOVEREIGN AROUND 9,5% OF TOTAL ASSETS
9.PROFITABILITY GROWING: ROE increased to 4% in 2017 net of extraordinary costs and revenues (reported ROE was over
7%). Annualized 1Q 2018 ROE increased at around 9%
10.RESTRUCTURING & CONSOLIDATION GOING ON: 300 cooperative banks will soon form 3 large banking groups.
The largest «banche popolari» were transformed into joint stock companies. All in all, the sector is less fragmented than often claimed:
around 110 groups and independent banks in total
Final remarks

19. 19
Thank you for you attention