Groupe MPS: Conformit? des r?sultats du premier semestre 2005 avec les nouveaux principes comptables IAS/IFRS

Bénéfice net de 372,4 millions d'euros (+53,8%) et RCP de 12,2%
La croissance du résultat d'exploitation net est significative (+53,2%) alors que la politique de maîtrise des coûts se poursuit

- La croissance des volumes d'exploitation se poursuit

- Recettes directes +5,3%

- Encours gérés +12%

- Prêts +9,5%

- Activité commerciale : bénéfice d'exploitation net = +47,4%

- Les pertes de valeur pour les prêts et les actifs financiers sont en baisse à plus de 90 millions d'euros

- Diminution supplémentaire des principaux éléments de coût

- Chute du coût/bénéfice d'environ 5% (à 62,5%)

- Charges d'exploitation en baisse de 2,8%

- Frais de gestion en chute de 0,7%

- Ratios de capital calculés selon les normes en vigueur

- Tier 1 à 6,9%, (6,4% selon les normes IAS)

- Coefficient de liquidité total de 10,1%, (9,8% selon les normes IAS)

- Le bénéfice net consolidé s'élève à 372,4 millions d'euros, en hausse de +53,8% en glissement annuel et RCP de 12,2%

***

Milan, September 29th 2005. At its meeting today, the Board of Directors of Banca Monte dei Paschi di Siena SpA, chaired by Professor Pier Luigi Fabrizi, approved the midyear report for the Group and Banca MPS as at June 30th 2005 (1H05), prepared in compliance with IAS/IFRS.

Main consolidated results[1]

In a basic scenario that has not yet featured consolidation of much-desired economic acceleration, the MPS Group has continued implementation of the strategic projects outlined in its 2003-2006 Business Plan, working on development of its operating and revenue base - building on its consolidation in the second part of 2003.

From the operating standpoint, results grew strongly as regards both (a) development of asset and commercial performance – with improved standing in business featuring high growth potential – and (b) profit performance, as demonstrated by the progress achieved in net operating profit (+53.2% vs. the first half of 2004 (1H04) – restated including an IAS 32 and 39 estimate) and net profit (+53.8%), which rose to E 372.4 million (mn).

In terms of income, the Group's total revenues (consisting of total banking and insurance income) grew by 4.1% YoY driven by:

- Net interest income, which grew to E 1,469 mn (+4% vs. 1H04 restated), thanks to the commercial segment's contribution (+3.2% fuelled both by robust growth of consumer credit and retail mortgages and by tight management of spread). In terms of quarterly performance, the YoY trend in the second quarter was substantially stable. The figure included some E 54 mn of interest on arrears for deteriorated loans.

- Net commissions progressed by +7.1% over 1H04 restated, rising to E 847.7 mn. Here commissions for conventional banking services grew by 7.5%, whilst commissions on managed assets progressed by 3.2% - benefiting from expansion of total assets under management, with acceleration to growth of +7.5% YoY in the second quarter of 2005 (2Q05).

- Net gain from realisation/valuation of financial assets of E 195.7 mn (vs. E 210 mn in 1H04), which was also positively driven by gains on sale of assets available for sale, including some minority interests.

Among the other items forming total income inclusive of finance and insurance, there were also dividends, similar income and profits/losses of equity investments, totalling E 61 mn. Overall, total consolidated income inclusive of finance and insurance amounted to E 2,380.3 mn (+4.1% YoY) with "primary" banking income (net interest income and commissions) growing by +5.1% YoY.

In terms of quarterly trend, 2Q05 featured acceleration of operating revenues by +2.5% over 1Q05, buoyed up primarily by commission income and trading activity.

Net impairment losses for loans and financial assets totalled E 240 mn with a decrease of over E 90 mn vs. E 331.4 mn in 1H04. They benefited from a downturn in flows of impaired credits and from a continuously substantial level of recoveries.

Moving on to analyse the cost trend, in 1H05 operating costs (E 1,4883. mn) once again confirmed their downward trend (-2.8%), in the presence of a return to investments in advertising, territorial expansion, and in development of businesses with high growth potential (headed by consumer credit). More specifically, administrative expenses (E 1,406.5 mn) decreased by –0.7%, with personnel costs decreasing to E 916.4 mn (-1.7% YoY) (inclusive of E 39 mn for demanning incentives and E 10 mn relating to stock granting) and other expense items increasing moderately to E 490.1 mn (+1.2%). The trend of these latter items stemmed from the initiatives mentioned above, which were set against the expense-control actions initiated some time ago in the main departments. Lastly, net write-downs of tangible and intangible assets amounted to E 81.8 mn, with a tangibly downward trend (-28.4% vs. 1H04 restated).

As a result of the trends outlined above, Net Operating Profit rose to E 652.1 mn, growing by +53.2% vs. the 1H04 restated figure, confirming the significant improvement in operating results already emerging in the second half of 2004, underpinned by growth in all segments of the MPS Group's business. The cost/income ratio, inclusive of depreciation & amortisation, thus decreased to 62.5% (with improvement of some 5% points over the restated 1H04 figure) and, net of extraordinary demanning costs, was 60.9%.

As regards the breakdown by business segment, we highlight the growing contribution of the Commercial Area, which – benefiting from the enhanced effectiveness of platforms specialised by customer segment and from a well-conceived relational policy, delivered, in total, year-over-year growth of +47.4% in terms of Net Operating Profit. More specifically:

- Retail Banking: total banking and insurance income amounted to E 928.7 mn (+3.1%). Net operating profit amounted to E 257.5 mn (+19.3%), whilst the cost income ratio was 66.6%

- Private Banking: total banking and insurance income amounted to E 58.7 mn (+8.4%). Net operating profit amounted to E 23.7 mn (+30.9%), whilst the cost income ratio was 59.6%

- Corporate Banking: total banking and insurance income amounted to E 976.9 mn (+3%). Net operating profit amounted to E 295.3 mn (+87.8%), whilst the cost income ratio was 51.9%

- Investment Banking: total banking and insurance income amounted to E 213.7 mn (+5.4%). Net operating profit amounted to E 164.5 mn (+8.2%), whilst the cost income ratio was 23%.

Pre-tax profit from ordinary business totalled E 631.1 mn, growing by +53.1% vs. 1H04 restated. This figure included net provisions for risks and charges and other operating income/expenses resulting in a positive balance of E 8 mn (vs. a negative figure of E -10.9 mn in 1H04).

Completing the income and profit picture there were total taxes of E 249 mn (vs. E 163.2 mn in 2004) with a tax rate of approximately 39.5%. Net profit for the period thus amounted to E 372.4 mn, progressing by +53.8% vs. June 30th 2004 restated. ROE was 12.2% (whilst Return on Average Equity was 11.3%).

Asset figures

In 1H05 the MPS Group achieved major growth in all the main asset categories, increasing its market share in the main businesses. Specifically, direct funding (totalling some E 84.5 billion (bn)) grew by +5.3% YoY[2] assuming linear growth, with a 6.6% share of the domestic market (6.5% in December 2004). Indirect funding totalled E 107.8 bn. In this latter category managed assets increased by 12% YoY on an annualised basis as above, thanks to ongoing robust growth of technical underwriting reserves in the bancassurance segment.

As regards this, we note flows of sales of savings products of some E 5.6 bn (+37.4% vs. 1H04 and with new business in 2Q05 up by an impressive +11.4% vs. 2Q04). These were concentrated mainly on fixed-term products, in the form of life insurance products (featuring high embedded value) and structured/linear bonds. Specifically, insurance premiums collected amounted to E 2.7 bn (10.5% market share of the bancassurance/post-office system vs. 10.1% at 2004 year-end), structured/linear bonds totalled E 2.4 bn; and there was a net inflow of E 440 mn for discretionary managed accounts and UCITS, as compared with a net outflow of E 211 mn in 1H04.

Customer loans grew by 9.5% on a linear annualised basis vs. IAS/IFRS-compliant balances as at January 1st 2005. As regards the domestic segment (6.3% market share of cash loans vs. 6.2% at 2004 year-end), we note an increase in short-term cash loans (+2.5%) and significant growth of medium-/long-term loans (+13.9%). This result was achieved thanks above all to the issue of retail mortgages (+18.3% vs. 1H04) - which led to a market share of over 7% (vs. 6.7% in 1H04) – and of consumer credit products by Consum.it (+48% vs. 1H04) with a market share of 4.6% (3.6% in 2004).

There was a decrease vs. 1H04 of the flows of disputed/watchlist loans (respectively down by –3.3% and –27%). These benefited both from the previous year's intensive monitoring of credit quality and from full application of first-time loan models. As regards monitoring of loan risk, the incidence of doubtful outcomes on gross non-performing loans grew to 56.4% vs. 49.2% at the end of the previous year. The incidence of net impaired loans stood at 3.3% of loans (vs. 3.8% as at December 2004) whilst that of non-performing loans was 1.8% (vs. 2.1% as at December 2004).

Lastly, as regards capital ratios calculated according to current regulatory requirements, the Tier 1 ratio was 6.9% and the overall solvency ratio 10.1%. The same ratios, calculated according to IAS and on the basis of the prudential filters indicated by the Bank of Italy, were 6.4% and 9.8% respectively.

As regards the group parent company, Banca Monte dei Paschi di Siena, there was appreciable growth of key asset and operating figures, headed by net operating profit (+16.1% YoY) and net profit for the period (+16.2%).

Adoption of international accounting standards – Change in "first-time adoption"

After approval of IFRS 1 – First-Time Adoption (FTA) – on June 30th this year, the International Accounting Standards Board (IASB) approved a new version of the fair-value option (FVO) contained in IAS 39. Application of the new version is mandatory as from 2006 year-end financial statements. Companies are nevertheless allowed to apply the new rules already as from January 1st 2005. Since the new FVO version makes it possible to overcome the stringent rules envisaged for hedge accounting and leads to significant technical and administrative simplification, the Board of Directors has deemed it appropriate to apply the new rules already on occasion of first-time application, i.e. as from January 1st 2005. Application of the new rules has led to a negative adjustment of FTA figures of some E 77 mn. New shareholders' equity as at January 1st 2005, calculated according to IAS/IFRS, thus amounts to E 6,388 mn (pre-IAS = E 6,465 mn).

Top management will present these figures to the financial community today at 2.30 p.m. CET at the headquarters of Borsa Italiana SpA in Milan.

This press release will be available on the Web site at the address: www.mps.it

For further information, please contact:

Media Relations

Simone Zavatarelli

Tel: +39 02 62001843

Cell: +39 335 8268310

Fax: +39 02 29005262

Email: [email protected]

Investor Relations

Irene Vaccaro

Tel: +39 0577 296477
Fax: +39 0577 294075

Email: [email protected]

[1]Operating results as at June 30th 2005 (1H05) are later on compared with those of 1H04 restated in accordance with IAS/IFRS and also including an estimate of the effects of IAS 32 and 39. As instead regards asset data, changes in stocks as at June 30th 2005 are calculated vs. January 1st 2005 (date of transition for the MPS Group to IAS/IFRS) including IAS 32 and 39 and IFRS 4, for the purposes of uniform comparison.

[2] For the purposes of uniform comparison, changes in stocks as at June 30th 2005 are calculated vs. January 1st 2005 (date of transition for the MPS Group to IAS/IFRS) including IAS 32 and 39 and IFRS 4.